scotts garments limited - Securities and Exchange Board of India
scotts garments limited - Securities and Exchange Board of India
scotts garments limited - Securities and Exchange Board of India
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SECTION TABLE OF CONTENTS Page No.Definitions <strong>and</strong> AbbreviationsiPresentation <strong>of</strong> Financial Information <strong>and</strong> Use <strong>of</strong> Market DataviiiForward Looking Statements <strong>and</strong> Market DataI RISK FACTORS 1IIIIIIVVVIVIIVIIIINTRODUCTIONPART ISummary <strong>of</strong> the Industry & Business <strong>of</strong> the Company 12Summary <strong>of</strong> Financial Data 19The Issue 24General Information 25Capital Structure 34Objects <strong>of</strong> the Issue 44Basis <strong>of</strong> Issue Price 64Statement <strong>of</strong> Tax Benefits 66ABOUT THE ISSUER COMPANYIndustry Overview 75Business Overview 86Regulations <strong>and</strong> Policies 123History <strong>and</strong> Other Corporate Matters 129Management 139Promoter <strong>and</strong> its Background 153Promoter Group 154Dividend Policy 165FINANCIAL STATEMENTSPART IIReport <strong>of</strong> the Peer Review Auditor, M/s G Anantha & Co, Chartered Accountants 166Management Discussion <strong>and</strong> Analysis <strong>of</strong> Financial Conditions <strong>and</strong> Results <strong>of</strong>OperationsLEGAL AND REGULATORY INFORMATIONOutst<strong>and</strong>ing Litigations, Material Developments <strong>and</strong> Other Disclosures 205Government/Statutory <strong>and</strong> Business Approvals 208Other Regulatory <strong>and</strong> Statutory Disclosures 219OFFERING INFORMATIONTerms <strong>of</strong> the Issue 231Issue Structure 233Issue Procedure 238MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THECOMPANYMain Provisions <strong>of</strong> the Articles <strong>of</strong> Association <strong>of</strong> the Company. 279OTHER INFORMATIONMaterial Contracts <strong>and</strong> Documents for Inspections 315PART IIIDeclaration 317ix198
Scotts Garments LimitedCONVENTIONAL OR GENERAL TERMSTERMCompaniesActFCNR AccountFinancial Year/ Fiscal/ FY<strong>India</strong>n GAAPInsurance ActIT ActIT RulesDESCRIPTIONThe Companies Act, 1956, as amended from time to time.Foreign Currency Non ResidentAccountThe period <strong>of</strong> twelve months ended March 31<strong>of</strong> that particular year.Generally AcceptedAccountingPrinciples in<strong>India</strong>.Insurance Act, 1938, as amendedd from time totime.The Income Tax Act, 1961, as amended from time to time.The Income Tax Rules, 1962, as amended fromtime to time, except as statedotherwise.SCRASCRRSEBISEBI Act<strong>Securities</strong> Contract (Regulation) Act, 1956, as amended from time to time.<strong>Securities</strong> Contracts (Regulation) Rules, 1957,as amended from time totime.<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> constituted under the SEBI Act.<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> Act, 1992, as amended from time to time.SEBI Regulation/SEBI The SEBI (Issue <strong>of</strong> Capital <strong>and</strong> Disclosure Requirements) Regulations, 2009.(ICDR) RegulationsSEBI Insider TradingRegulationsThe SEBI (Prohibition <strong>of</strong> InsiderTrading) Regulations, 1992, as amended fromtime totime, including instructions <strong>and</strong> clarifications issued by SEBI from timeto time.ISSUE RELATED TERMSDEFINITIONS AND ABBREVIATIONSTERMAllotment/AllotmenttDESCRIPTION<strong>of</strong> Unlesss the context otherwise requires, issue <strong>of</strong> Equity Shares pursuant to thisEquity SharesAllotteeASBA/ ApplicationsIssue.A successful Bidder to whom the Equity Shares are allottedAn application for subscribing to an issue, containing an authorizationto blockSupportedAmountby Blockedthe application money in a bankaccount.ASBA AccountAccount maintained by an ASBAA Bidder witha SCSB which will be blocked bysuch SCSB to the extent <strong>of</strong> the Bid Amount <strong>of</strong>the ASBA BidderASBA Investor/ASBA Prospective Investors in this Issue who intendto Bid/apply through ASBABiddersASBA FormBid cum Application form for ASBA Investor intending to subscribe throughASBAABasis <strong>of</strong> AllotmentThe basis on whichh Equity Shares will be Allotted to Bidders under the Issue<strong>and</strong> which is described in sectiontitled “IssueProcedure” on page no.238BidAn indication to make an <strong>of</strong>fer, made during the Bidding Period by aprospective investor to subscribe to the Equity Shares at a price within thePrice B<strong>and</strong>, including all revisions <strong>and</strong> modifications thereto.Bid AmountThe highest value <strong>of</strong> the optional Bids indicated in the Bid-cum-ApplicationForm <strong>and</strong> payable by the Bidderon submission <strong>of</strong> the Bid for this Issue.Bid/ Issue Closing DateThe date after which the members <strong>of</strong> the Syndicate will not accept anyBids forthis Issue, which shall be notified in a widely circulated English nationalnewspaper, a Hindi national newspaper <strong>and</strong> a regional newspaper.Bid/ Issue Opening DateThe date on whichh the members <strong>of</strong> the Syndicate shall start acceptingBids forthis Issue, which shall be the date notified in a widely circulatedEnglishnational newspaper, a Hindi national newspaper <strong>and</strong> a regional newspaper.Bid-cum-ApplicationForm/ApplicationBidding FormcumThe form in terms <strong>of</strong> which theBidder shalll make an <strong>of</strong>fer to subscribe to theEquityShares <strong>of</strong> the Company <strong>and</strong> which will be considered as the applicationfor allotment in terms <strong>of</strong> the RedHerring Prospectus.i
Scotts Garments LimitedTERMBidderDESCRIPTIONAny prospective investor who makes a Bid pursuant to the terms <strong>of</strong>the RedHerring Prospectuss <strong>and</strong> the Bid-cum-Application Form.Book Building Process asprovided under Schedule XI <strong>of</strong> the SEBIBook building mechanismRegulations, in terms <strong>of</strong> which this Issue is made.BRLMBook Running Lead Managerto this Issue, in this case being KeynoteCorporate Services Limited.CAN/ Confirmation <strong>of</strong>Allotment NoteThe note or advice or intimation <strong>of</strong> allotment <strong>of</strong> Equity Shares sent to theBidders who have been allocatedEquity Shares after discovery <strong>of</strong> IssuePrice inthe Book Building Process.Cap PriceThe upper end <strong>of</strong> the Price B<strong>and</strong>, above which the Issue Price will not befinalized <strong>and</strong> abovewhich no Bids will be accepted.Co-BRLMThe Co-Book Running Lead Manager to this Issue, in this case beingCanaraBank Merchant Banking DivisionCut-<strong>of</strong>fThe Issue Price finalised by theCompany inconsultationn with the BRLM <strong>and</strong>Co-BRLM. Only Retail Individual Bidders <strong>and</strong> Employees applying underEmployee Reservation Portion who are applying for a maximum bidamountnot exceeding ` 2, ,00,000/- are entitled to Bid at the Cut-<strong>of</strong>f Price, for a bidamount not exceeding ` 2,00,000/-. QIBs <strong>and</strong>Non Institutional Bidders are notentitled to Bid at the Cut-<strong>of</strong>f Price. A Bid submitted at Cut-<strong>of</strong>f Price is a validBid at all price levels within the Price B<strong>and</strong>DepositoryA depository registered withSEBI under the SEBI (Depositories <strong>and</strong>Participant) Regulations, 1996, as amended from time to time.Depositories ActDepositoryParticipantThe Depositories Act, 1996, as amended fromtime to time.A depository participant as defined under the Depositories Act.Such branches <strong>of</strong> the SCSBs which shall collect the ASBAA Forms <strong>and</strong>a list <strong>of</strong>DesignatedBranches whichh is available on http://www.sebi.gov.in/pmd/scsb.html or at such otherwebsite as may be prescribed bySEBI from time to timeDesignatedDateThe date on which funds are transferred fromthe Escrow Account to the PublicIssue Account after the Prospectus is filed with the Registrar <strong>of</strong> Companies,Bangalore, Karnataka, followingwhich the <strong>Board</strong> <strong>of</strong> Directors shall allot EquitySharesto successful Bidders.DesignatedStock <strong>Exchange</strong>In thiscase being the Bombay Stock <strong>Exchange</strong> Limited.Draft Red Herring The Draft Red Herring Prospectus filed with SEBI, which does not haveProspectus/DRHPcomplete particulars on the price at which the Equity Shares are <strong>of</strong>fered <strong>and</strong>size <strong>of</strong>the IssueEligible NRI’sNRI from such jurisdiction outside <strong>India</strong> where it is not unlawful to make an<strong>of</strong>fer or invitation under the Issue <strong>and</strong> in relation to whom the Red HerringProspectus constitutes an invitation to subscribe or purchase the Equity Shares<strong>of</strong>feredtherebyEmployee, Employees orEligible Employees (in the“Employee” meansa permanent <strong>and</strong> full-time employee, working in <strong>India</strong> orabroad, <strong>of</strong> the issuer or <strong>of</strong> the holding company or subsidiary company or <strong>of</strong>Employee Reservation that material associate(s) <strong>of</strong> the issuer whose financial statements arePortion)consolidated with the issuer’s financial statements as per Accounting St<strong>and</strong>ard21, or a director <strong>of</strong>the issuer, whether whole time or part time <strong>and</strong> does notinclude promoters <strong>and</strong> an immediate relative <strong>of</strong> the promoter (i.e., anyspouse<strong>of</strong> that person, or any parent, brother, sisteror child <strong>of</strong> that person or <strong>of</strong> thespouse)Employee Reservation The portion <strong>of</strong> the Issue, being a maximum <strong>of</strong> 4,50,000 Equity Shares which isPortionnot exceeding 5% <strong>of</strong> the post issue capital <strong>of</strong> the Company, available forallocation to the Employees, as per Regulation 42 <strong>of</strong> the SEBI(ICDR)Regulations, 2009.Equity SharesEquityShares <strong>of</strong> the Company<strong>of</strong> face value <strong>of</strong> ` 10 each unless otherwisespecified in the context there<strong>of</strong>.ii
Scotts Garments LimitedTERM/ ABBREVIATION DESCRIPTION/FULL FORMcategories.CDRContinuous Dyeing RangeCVCFLCanbank Venture Capital Fund LimitedDEPBDuty Entitlement Pass BookEUEuropean UnionsGATTGeneralAgreement on Tariff <strong>and</strong> TradeKgKilogramMFAMulti Fibre AgreementM HaMillion HectaresSq. MtsSquare MetersTUFSTechnology Upgradation Fund SchemeABBREVIATIONSABBREVIATIONAGMAMBIASASBAAYBSEBG/LCCAGRCDSLDPECSEGMEPSESOPFCNR AccountFEMAFIIFIsFIPBFVCIGDPGIR NumberGoI/ GovernmentHUF`/INR / Rs./ RupeesIPOI.T. ActNAVNECSFULL FORMAnnual General MeetingAssociation <strong>of</strong> Merchant Bankers <strong>of</strong> <strong>India</strong>Accounting St<strong>and</strong>ards issued by the Institute <strong>of</strong> Chartered Accountants <strong>of</strong> <strong>India</strong>.Application Supported by BlockedAmountAssessment YearBombayStock <strong>Exchange</strong> Limited.Bank Guarantee/ Letter <strong>of</strong> CreditCompounded Annual Growth Rate.Central Depository Services (<strong>India</strong>) Limited.Depository ParticipantElectronic Clearing SystemExtra Ordinary General Meeting <strong>of</strong> the shareholders.Earnings per Equity Share.Employee Stock Option PlanForeign Currency Non Resident Account.Foreign <strong>Exchange</strong> Management Act, 1999, as amended fromtime to time<strong>and</strong> theregulations issued thereunder.Foreign Institutional Investor (as defined under SEBI (Foreign InstitutionalInvestors) Regulations, 1995, as amended fromtime to time)registered with SEBIunder applicable laws in <strong>India</strong>.Financial Institutions.Foreign Investment Promotion <strong>Board</strong>, Department <strong>of</strong> Economic Affairs, Ministry<strong>of</strong> Finance, Government <strong>of</strong> <strong>India</strong>Foreign Venture Capital Investorss registered with SEBI under the SEBI (ForeignVenturee Capital Investor) Regulations, 2000.Gross Domestic ProductGeneralIndex Registry Number.Government <strong>of</strong> <strong>India</strong>.Hindu Undivided Family.<strong>India</strong>n Rupees, the legal currency <strong>of</strong> the Republic <strong>of</strong> <strong>India</strong>.Initial Public OfferThe Income Tax Act, 1961, as amended from time to timeNet Asset Value.National Electronic Clearing Servicevi
Scotts Garments LimitedABBREVIATIONNEFTNRNRE AccountNRI/Non-Resident<strong>India</strong>nNRO AccountNSDLNSEP/E RatioPANRBIRBI ActRoC/Registrar <strong>of</strong>CompaniesRoNWRTGSUSD/ $/ US$FULL FORMNational Electronic Fund TransferrNon ResidentNon Resident External Rupee AccountA person resident outside <strong>India</strong>, as defined under FEMA <strong>and</strong> who is a citizen <strong>of</strong><strong>India</strong> ora person <strong>of</strong> <strong>India</strong>n origin, each such term as defined under theFEMA(Deposit) Regulations, 2000, as amended.Non Resident Ordinary Rupee AccountNational <strong>Securities</strong> Depository Limited.National Stock <strong>Exchange</strong> <strong>of</strong> <strong>India</strong> Limited.Price/Earnings Ratio.Permanent Account Number.The Reserve Bank <strong>of</strong> <strong>India</strong>.The Reserve Bank <strong>of</strong> <strong>India</strong> Act, 1934, as amended from timeto time.Registrar <strong>of</strong> Companies, Bangalore, KarnatakaReturn on Net Worth.Real Time Gross SettlementThe United States Dollar, the legall currency <strong>of</strong> the United States <strong>of</strong> America.Notwithst<strong>and</strong>ing the foregoing:a. In the section titled“Financial Statements” on page 166 <strong>of</strong> this Offer Document, defined terms shall havethe meaning given to such termsin that section.b. In the section titled“Main Provisions <strong>of</strong> the Articles <strong>of</strong> Association <strong>of</strong> the Company” on page 279 <strong>of</strong> thisOffer Document, defined terms have the meaning given tosuch terms in the Articles <strong>of</strong> Association <strong>of</strong> theCompany.vii
Scotts Garments LimitedPRESENTATION OF FINANCIALINFORMATION AND USE OF MARKET DATAAUnless statedotherwise, the financialinformationn used in this Red Herring Prospectus is derived from theCompany’s restated financial statements as <strong>of</strong> October 31, 2012, March31, 2012, 2011, 2010, 2009, <strong>and</strong>2008preparedin accordance with <strong>India</strong>n GAAP <strong>and</strong> the Companies Act <strong>and</strong>restated in accordance with SEBIRegulations, as stated in the report <strong>of</strong> the statutory Auditors.Our fiscal year commences on April 1 <strong>and</strong> ends on March 31<strong>of</strong> a particular year. Unless stated otherwise,references herein to a fiscal year (e.g., fiscal 2012), are to the fiscal year ended March 31 <strong>of</strong> a particular year.In this Red Herring Prospectus, any discrepancies in any table between thetotal <strong>and</strong> the sum <strong>of</strong> theamountslisted are dueto rounding-<strong>of</strong>f.All references to ` or ‘Rupees’ or ‘Rs.’are to <strong>India</strong>nn Rupees, the<strong>of</strong>ficial currency <strong>of</strong> the Republic <strong>of</strong> <strong>India</strong>. Onecrore is the unit in the <strong>India</strong>n numbering system representing 10million or 100 lac <strong>and</strong> one lac is the unit in the<strong>India</strong>n numbering systemrepresenting100,000; thus, for example, ` 10 crore equals ` 100 million. All referencesto ‘$’, ‘US$’ or ‘U.S. Dollars’ are to United States Dollars, the <strong>of</strong>ficial currency <strong>of</strong> the UnitedStates <strong>of</strong> America.Market data used in thisRed HerringProspectus has been obtained from industry publications <strong>and</strong>internalCompany reports. Industry publications generally state that the information contained in those publications hasbeen obtained from sources believed to be reliable but that theiraccuracy <strong>and</strong> completeness are not guaranteed<strong>and</strong> their reliability cannot be assured. Although theCompany believes the market data used in this RedHerringProspectus is reliable, ithas not been independently verified. Similarly, internal Company reports, whilebelieved to be reliable, have not been verified by any independent source.viii
Scotts Garments LimitedFORWARD-LOOKINGSTATEMENTS AND MARKET DATAWe have included statements in this Red Herring Prospectus which containn words or phrases such as “will”,“aim”, “is likely to result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”,“contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” <strong>and</strong>similarexpressions or variations <strong>of</strong> such expressions, that are “forward-looking statements”.All forward-lookinactual resultss to differ materially from those contemplated by therelevant forward-lookingstatement. Importantstatements are subject to risks, uncertainties <strong>and</strong> assumptions about us that could causefactors that could cause actual results to differ materially from the expectations include, among others:• General economic <strong>and</strong>business conditions in the markets inwhich we operate <strong>and</strong> in the local, regional <strong>and</strong>national <strong>and</strong> international economies;• Changesin laws <strong>and</strong> regulations relating to the industries inwhich we operate;• Increasedcompetitionin these industries;• The Company’s ability to successfully implement the growth strategy <strong>and</strong> expansion plans, <strong>and</strong> tosuccessfully launch <strong>and</strong> implement various projects <strong>and</strong> business plansfor which funds are being raisedthrough this Issue;• Our ability to meet capital expenditure requirements;• Fluctuations in operating costs;• Unanticipated variations in the duration, size <strong>and</strong> scope <strong>of</strong> the projects;• Our ability to attract <strong>and</strong> retain qualified personnel;• The effect <strong>of</strong> wage pressures, seasonal hiring patterns <strong>and</strong> the time required to train <strong>and</strong> productively utilizenew employees;• Changesin political <strong>and</strong> social conditions in <strong>India</strong> or in other countries that we may enter, the monetary <strong>and</strong>interest rate policies <strong>of</strong> <strong>India</strong> <strong>and</strong> other countries, inflation, deflation, unanticipated turbulence in interestrates, equity prices or other rates or prices;• Any adverse outcomein the legal proceedings in which we are involved.For a further discussion <strong>of</strong> factors that could cause our actual results to differ, see the sections titled “RiskFactors” “Business Overview” <strong>and</strong> “Management’sDiscussion <strong>and</strong> Analysis” beginning on pages 1, 86 <strong>and</strong> 198<strong>of</strong> this Red Herring Prospectus respectively. By their nature, certain market risk disclosures are only estimates<strong>and</strong> could bematerially different fromwhat actually occurs inthe future. As a result, actual futuregains orlosses could materially differ from those that have been estimated. Neither we nor theBook Running LeadManager, nor any <strong>of</strong> its respective affiliates have any obligation to update or otherwise revise any statementsreflecting circumstances arising after the date here<strong>of</strong> or to reflectthe occurrence <strong>of</strong> underlying events, even if theunderlying assumptionsdo not cometo fruition.In accordance with SEBI requirements, we <strong>and</strong> the BookRunning Lead Manager will ensure that investorss in <strong>India</strong> areinformed <strong>of</strong>material developments until suchtime as the grant <strong>of</strong> listing<strong>and</strong> trading permission by the Stock <strong>Exchange</strong>s.ix
Scotts Garments LimitedSECTION I - RISK FACTORSAn investment in Equity Shares involves a high degree <strong>of</strong> risk. You should carefullyconsider all <strong>of</strong> the information in thisRed Herring Prospectus, ncluding the risks <strong>and</strong> uncertainties described below, before makingan investment in theCompany’s Equity Shares. If any <strong>of</strong> the following risks occur, the business <strong>of</strong> the Company, financial condition <strong>and</strong> results<strong>of</strong> operations could suffer, the trading price <strong>of</strong> the Equity Shares could decline, <strong>and</strong> you may lose all or part <strong>of</strong> yourinvestment. The financial <strong>and</strong> other relatedimplications <strong>of</strong> risks concerned, whereverr quantifiable have been disclosed in therisk factors mentioned below. There are certain risk factors mentioned where the effect is not quantifiable <strong>and</strong>hence notdisclosed.RISK FACTORS INTERNAL TO THE COMPANY1. Contingent liabilities not providedd for, which if materializes may have an adverse effect on our financialconditionn <strong>and</strong> future financial performance.The contingent liabilities not provided for as on 31/10/2012 are as follows:ParticularsLetter <strong>of</strong>Credits issued by banker <strong>of</strong> the CompanyLiability on account <strong>of</strong> export obligationEstimated Amount <strong>of</strong>Capital CommitmentTotalAmount(` in lacs)2213.4015580.301875.0019668.70In the event, any <strong>of</strong> theabove contingent liabilities crystallizes it may have an adverse effect on ourfinancialcondition <strong>and</strong> future financial performance.2. We shall be applying for licenses <strong>and</strong> approvalsto various statutory <strong>and</strong>regulatory bodies for the proposedfactory unit to be set up at Kagal for which part <strong>of</strong> the issue proceeds shall be utilized at an appropriatetime. Further, for the project at Doddaballapurour companyis yet to obtain certain approvals. In the eventthere is delay in obtaining the licenses <strong>and</strong> approvals it may affect the commencement <strong>of</strong> operation <strong>and</strong>financials<strong>of</strong> the Company.As a part <strong>of</strong> expansionn strategy we have set up new factory at Doddaballapur for manufacturing <strong>of</strong> <strong>garments</strong><strong>and</strong> propose to set up another factory at Kagal for knitting <strong>and</strong> fabric processing for which the issueproceedsshall be utilized. We shall be applying for licenses <strong>and</strong> approvals to various statutory <strong>and</strong> regulatory bodiesfor the proposed factory unit at Kagal at an appropriate time. Further, for the project at Doddaballapur ourcompany is yet to obtain certain approvals for which applications have already beenmade. The details <strong>of</strong>which areas under:1. Approval fromChief Inspector <strong>of</strong> Factories, Karnataka State, No.3, 1st Cross Road, G<strong>and</strong>hinagar,Bangalore – 560 009 for license under Factories Act 1948 <strong>and</strong> its rules;2. Approval fromDepartmentt <strong>of</strong> Ecology <strong>and</strong> Environment; KarnatakaOur Company shall apply forTradeat an appropriate time.registrationwith Central Excise <strong>and</strong>Joint Director General <strong>of</strong> ForeignFor the knitting <strong>and</strong> processingunit to be set up at Kagal the following licenses <strong>and</strong> approvalsare to beobtained. Presently, the Company has not been allotted l<strong>and</strong> <strong>and</strong> hence we shall make applications forthe requisite approvals post allotment <strong>of</strong> l<strong>and</strong>.1 Approvalfrom Maharashtra Pollution Control <strong>Board</strong>2 License under Factories Act3 License under Shops <strong>and</strong> Establishment Act4 Other Commercial registrations under the indirect tax authorities.1
Scotts Garments LimitedOur Company shall also applyfor any other licenses <strong>and</strong> approvals as required for commencement <strong>of</strong>operations. In the event <strong>of</strong> delay in obtaining the licensess or approvals, it may affect the commencement<strong>of</strong> factory operations <strong>and</strong> the financials <strong>of</strong> theCompany.3. We have business relationship <strong>and</strong>association with Bombay Rayon Fashions Limited (BRFL) forlast fewyears. We<strong>and</strong> BRFL have cross investments inthe shares <strong>of</strong> our Companies <strong>and</strong> enjoy trade relationshipwith eachother. Our Promoter Mr.Naseer Ahmed is one <strong>of</strong> the non-executive <strong>and</strong> non-independent memberon the <strong>Board</strong> <strong>of</strong> BRFL. Our proposed Project <strong>of</strong>Knitting <strong>and</strong> Fabric processing at Kagal Industrial TextileTechnology Park, developed by Kagal Industrial Textile Technology Park Private Limited isan SPVpromotedby BRFL. Further, B.R.Machine Tools Pvt. Ltd, a group company <strong>of</strong> BRFL has also invested in theequity shares <strong>of</strong> our Company. Also some <strong>of</strong> the promoters & Promoter Group Companies <strong>of</strong> BRFL areshareholders/directorsin few <strong>of</strong> ourgroup companies.Our Company enjoys business relationship withBombay Rayon Fashionss Limited for last few years. DuringF.Y.2011-12, our Company has entered into various purchase<strong>and</strong> sales transaction with BRFL aggregating to`7864.02 lacs. Our Promoter Mr. Naseer Ahmedis Joint Vice Chairman (non executive <strong>and</strong> non-independent)in BRFL. Our Company holds 12,61,397 equity shares i.e. 0.94% <strong>of</strong> the paid up capital<strong>of</strong> BRFL. BRFL holds20,00,000 equity shares i.e. 7.48% <strong>of</strong>the present paid up equity capital <strong>of</strong> our Company. Our proposed Project<strong>of</strong> Knitting <strong>and</strong> Fabric processingis at KagalIndustrial Textile Technology Park,developed by KagalIndustrialTextile Technology Park Private Limited, an SPV promoted by BRFL. Further, B.R. Machine ToolsPrivate Limited, a group company also holds 30, ,05,500 equityshares i.e. 11.24% <strong>of</strong> the present paid up equitycapital <strong>of</strong>our Company. Also some <strong>of</strong> the promoters & Promoter Group Companies <strong>of</strong> BRFL areshareholders/directorss in few <strong>of</strong> our group companies. The details <strong>of</strong> shareholding <strong>of</strong> BRFL related entities ordirectorships in our group companies are appearing between page no.155 to 163 under the section titled“Promoter Group”.4. Our Company <strong>and</strong> BRFL have entered into a joint Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ing (MOU) with Government<strong>of</strong> Karnataka for setting up <strong>of</strong> textile units at12 locationsin Karnataka. Our Company <strong>and</strong> BRFL havemutually agreed to independently set up textile units at 5 <strong>and</strong>7 locations respectively. The present project atDoddaballapur is one <strong>of</strong> the locations forming part <strong>of</strong> MOU.Our Company <strong>and</strong> BRFL had submitted a joint proposal to Karnatakaa Udyog Mitra (KUM, a Govt. OfKarnatakaa undertakingresponsiblee to facilitate investment <strong>and</strong> assist investors in the state) for setting up <strong>of</strong>units at 12locations. On acceptance <strong>of</strong> the proposal, a joint MOU was entered by ourCompany, BRFL <strong>and</strong>Govt. <strong>of</strong> Karnataka at Global Investors Meet on 3 rd /4 th June 2010. For details <strong>of</strong> MOU, please see section titled“History <strong>and</strong> Other Corporate Matters” appearing on page no.133. These locations include 2 units atDoddaballapur <strong>and</strong> one each at Hassan, Thippans<strong>and</strong>ra Village – Kolar, KGF Apparel Park, Gowribidanur,Chikkaballapur, Chitradurga, Shimoga, Mudhol, Siddlaghatta <strong>and</strong> Srinivaspura. OurCompany <strong>and</strong> BRFLhave mutually agreedon setting up independent projects at 5 <strong>and</strong> 7 locations respectively <strong>of</strong> the said 12locations. Our Company has proposed to set up units at Doddaballapur, Hassan, Thippas<strong>and</strong>ra village-Kolar,K.G.F. Apparel Park <strong>and</strong> Sidlaghatta whereas BRFL is planning to set up units at other seven locations. Therewould not be any investment by our Company inthe units to be set up by BRFL <strong>and</strong> vice-versa.5. Our export revenue has contributed more than90% <strong>of</strong> the total revenue in last fewfinancial years. Oursubstantial portion <strong>of</strong>sales revenue is concentrated in European Region. In the event <strong>of</strong> any economicturmoil inthese regions our revenuee would be substantially impacted.Our business model primarily focuses on the export <strong>of</strong> manufactured Ready Made Garments to European<strong>and</strong> otherregions <strong>of</strong> the world. Inthe last fewyears we have earned more than 90%<strong>of</strong> revenuee from theexports <strong>of</strong>our <strong>garments</strong> to international clients <strong>of</strong> other countries especially in Europe. We believe that thefactors like, sound underst<strong>and</strong>ing <strong>of</strong> European fashion trend, diligent in providing the quality product, timelydelivery schedule <strong>and</strong> customer relationship hashelped us toincrease ourcustomer base at European region.In F.Y.2011-12, European region contributed around ` 32373. .00 lacs valuing around 76% <strong>of</strong> total export saleswhich include countries like, Germany, UK, France, Spain, Denmark <strong>and</strong> others. Our business model couplesus with the global economy that provides opportunities to tap the different market segment <strong>and</strong> atthe sametime also links us withthe risk <strong>of</strong> economic downturn <strong>and</strong> the volatility inglobal financial marketsthat may2
Scotts Garments Limitedhave an adverse impact on our business. In theevent we are unable to sustain or insulate the business orhedge thefinancial position, the adverse economic <strong>and</strong> geopolitical conditions may result in large impact onour financial st<strong>and</strong>ing.6. Our major portion <strong>of</strong>the sales in F.Y.2011-12 was from top ten customers. Any loss <strong>of</strong> order from thesecustomerss may have adverse impact on the financials <strong>of</strong> the Company.Our sales revenue is dependent ontop 10 customers who accounted for approx 80.66% <strong>of</strong> total sales in F.Y.2011-12. The major contributor <strong>of</strong> sales for F.Y. .2011-12 was Best Seller – Denmark, contributing 62.60%, <strong>of</strong>total revenue from operations whereas the other major contributor was BRFL with 7.79% <strong>and</strong> Old Navy, USAwith 4.44% %. We presently do not have any long term contractt or agreement with our customers <strong>and</strong> hence thesale to each customer is dependent on our ability to manufacturequality products that meet theirspecification <strong>and</strong> delivery schedule. In the eventwe are unable to meet their requirements or expectations forreasons beyond our control it may lead to loss <strong>of</strong> orders from these customers <strong>and</strong> affect the revenues <strong>and</strong>pr<strong>of</strong>itability <strong>of</strong> the Company.7. Raw materials constitute a significant percentage <strong>of</strong> our total expenses. Any increase in raw material prices<strong>and</strong> any decrease in thesupply <strong>of</strong> raw materials could materially affect our business.Raw material cost constituted 67.72% <strong>and</strong> 51.78%<strong>of</strong> our total expenses <strong>of</strong>` 42852.14 lacs <strong>and</strong> ` 42704.84 lacsin F.Y.2012 <strong>and</strong> F.Y.2011 respectively. Our primary raw material is cotton, polyester <strong>and</strong> denim fabrics formanufacturing <strong>of</strong> the<strong>garments</strong>. Presently, we purchase raw material from the domestic market <strong>and</strong>international market. Though the prices <strong>of</strong> raw material have been stablein the recentpast but there can beno assurance that the prices <strong>of</strong> our raw materials will remainat same levels. Any upward trend inprices <strong>of</strong>raw material would have adverse effect on the business <strong>and</strong> financials.Any material shortageor interruption in the supply or decrease in the quality <strong>of</strong> raw material due to factorsbeyond our control could result in increased production costss that we maynot successfully be able to pass onto customers, which inturn would have a material adverse effect on our business.8. The cost <strong>of</strong> the knitting <strong>and</strong> fabricprocessing project at Kagal is basedon the estimates as given by theTechnicalconsultant – Gherzi Eastern Ltd. The deployment <strong>of</strong> the issue proceeds is entirely atthe solediscretion<strong>of</strong> the company.The fund requirement for the proposed project at Kagal is based on the estimates as given by Gherzi EasternLtd. There is no guarantee that theestimates will prove to be accurate <strong>and</strong> any significant deviation in theestimates could adversely impact the operations<strong>and</strong> sustainability <strong>of</strong> the company. Deployment <strong>of</strong>the issueproceeds is entirely at the sole discretion <strong>of</strong> the company <strong>and</strong>no independent agency has been appointed tomonitor its deployment.9. We have not yet placedorders for part <strong>of</strong> the plant & machinery <strong>and</strong> miscellaneous fixed assets requirementsfor our project at Doddaballapur <strong>and</strong> for the entire plant & machinery for the proposed project atKagal asspecified in the Objects <strong>of</strong> the Issue except for the second h<strong>and</strong> machineries. Any delay in procurement <strong>of</strong>plant & machinery, equipment, etc. may delay the implementation schedule which may also lead toincreasein prices <strong>of</strong> these equipments, futureaffecting our costs, revenue <strong>and</strong> pr<strong>of</strong>itability.We propose to purchase plant & machinery worth ` 17204. .15 lacs <strong>and</strong> miscellaneous fixed assetss worth `2612.50 lacs from theproceeds <strong>of</strong>this Issue. We have already commenced the purchase <strong>of</strong> plant <strong>and</strong>machinery<strong>and</strong> miscellaneous fixedasset for Doddaballapur Project. As regards the project at Kagal, we havenot yet placed orders for plant & machinery & miscellaneous fixed assetss as specified in the section‘Objects<strong>of</strong> the Issue’ except forthe second h<strong>and</strong> machineries. We may be required to obtain fresh quotations at thetime <strong>of</strong> placement <strong>of</strong> orders withthe suppliers <strong>and</strong> the same may delay the process <strong>of</strong> ordering <strong>and</strong>procurement <strong>of</strong> plant & machinery, equipment, etc. Subsequently it may also delay the implementationschedule. We may alsobe subject torisks on price escalation <strong>of</strong> plant & machinery <strong>and</strong> other equipments that3
Scotts Garments Limitedwe require. Hence ourproject could face time <strong>and</strong> cost over-run which could have anadverse effect on theoperations <strong>of</strong> our Company.10. We have not tied up ormade any arrangementsin respect <strong>of</strong> incremental working capital requirement for theobjects <strong>of</strong>the issue.We have not tied up for incremental working capital requirement for proposed expansion as stated in thechapter “ Objects <strong>of</strong> the Issue” beginning on page no. 44 <strong>of</strong> this RHP. We shall approach our banks forenhanced limits at anappropriatetime. If we are unable to tie up for working capital requirement, ouroperations <strong>and</strong> financial performance will be adversely affected.11. We have issued EquityShares under Pre-IPO placement prior to the date <strong>of</strong> the Red Herring Prospectus at aprice thatt is lower thanthe Issue Price.We have issued 17,39, 130 equity shares <strong>of</strong> ` 10/ /- at an issueprice <strong>of</strong> ` 115/- per equity share to Emerging<strong>India</strong> Growth Fund CVCF V underPre-IPO placement priorr to the date <strong>of</strong> the Red Herring Prospectus. Theprice at which equity shares were allotted to CVCFL which is lower than the Issue Price.The funds raised by way <strong>of</strong> the Pre-IPO Placement shall be utilized towards the objects <strong>of</strong> the Issue. Forfurther details, please see “Objects <strong>of</strong> the Issue” on page 44.12. If we are unable to obtain requiredapprovals <strong>and</strong> licenses in timely manner, our business <strong>and</strong> operationsmay be adversely affected.We may from time to time, require certain approvals, licenses, registrations <strong>and</strong> permissions for undertakingour business for whichh we are required to make applications to the respective statutory body. If we fail toobtain any <strong>of</strong> the required approvals or licenses, or renewals there<strong>of</strong>, in a timely manner, or at all, ourbusiness could be adversely affected. For further details please see section titled “Government/Statutory<strong>and</strong> Business Approvals” beginning on page no. 208 <strong>and</strong> paragraph w.r.tApprovals/ /Certification/Licensesrequired for the proposed project appearing on page no. 217 & 218 <strong>of</strong> this Red Herring Prospectus.13. We may not be able to implement our business <strong>and</strong> growth strategy according to our current plansThe success <strong>of</strong> our business largely depends on our ability toeffectively implement <strong>and</strong>execute ourbusiness<strong>and</strong> growth strategy. We plan to grow relationships with existing clients <strong>and</strong> develop relations with newclients who are seekingto fill volume orders on an ongoing basis. This will reflect a change from our currentpractice <strong>of</strong> taking orders on a non-permanent basis. Providedd that this strategy is successfully implemented,these newclient relationships may help grow our business, however, they may also prove to be difficult forus to effectively manage. We do not have previous experience in filling high volume orders on anon-goingbasis. If we are unable to effectively managelong-term relationshipss based on large orders, we mayexperience an adversee impact on our efforts to grow our business. Further, lengthy qualification processesrequired by large U.S. <strong>and</strong> European value retailers maylimit our ability to secure new value retailcustomers. Further, if we are unableto secure new customerss in the futureas a result <strong>of</strong> our not meeting suchqualification requirements, our business, financial condition <strong>and</strong> results <strong>of</strong>operations could be materially <strong>and</strong>adverselyaffected.14. We have been allottedL<strong>and</strong> in Plot No. D-3, D-4, A-3, A-10, A-11, S-43, S-44 <strong>and</strong> S-45 (P) admeasuring57567.00 sq meters at Apparel ParkIndustrial Area, I Phase,Doddaballapur by Karnataka Industrial AreasDevelopment <strong>Board</strong> (KIADB) on lease cum sale arrangementfor a period<strong>of</strong> ten years (10 years). Interms <strong>of</strong>agreementdated 28/02/ 2/2011 between our Company <strong>and</strong> KIADB we are required to export 100% <strong>of</strong>the totalproduction in value terms, per annum starting from the third year from date <strong>of</strong> taking possession i.e.13/12/2010. In the event we do not comply with the covenant then KIADB may take appropriate actionagainst usor levy a penalty as fixedby Government <strong>of</strong> Karnataka under the applicablelaws <strong>and</strong> regulations.We are raising resources to set up new manufacturing units at Apparel Park Industrial Area,I Phase,Doddaballapur. We have been allotted l<strong>and</strong> onplot no. D-3, D-4, A-3, A-10, A-11, S-43, S-44 <strong>and</strong>S-45 (P)admeasuring 57567 sq. meters for total consideration <strong>of</strong> ` 619.00 lacs by KIADB. This l<strong>and</strong> was initially4
Scotts Garments Limitedbelow expected levels<strong>of</strong> output or efficiency, obsolescence, labour disputes, strikes, lock-outs, continuedavailability <strong>of</strong> services <strong>of</strong> our external contractors, earthquakes <strong>and</strong> other natural disasters, industrialaccidents <strong>and</strong> the needto comply with the directives <strong>of</strong> relevant government <strong>and</strong> judicial authorities.Due to environmentalconcerns the Hon’ble High Court <strong>of</strong> Tamil Nadu passed an order to shut down all theprinting <strong>and</strong> dyeing units located at Tirupur. This order led to the temporary shutdown <strong>of</strong> our twoprinting<strong>and</strong> dyeing units at Tirupur from February 2011 to August2011- Our units re-commenced the activity oncomplying with the conditions <strong>of</strong>Tamil Nadu Pollution Control <strong>Board</strong>. The saidclosure affected thefinancials <strong>of</strong> the Company to a certain extent. No assurance can be giventhat such closure/shut down maynot occur in future. Our business, financial condition <strong>and</strong> results <strong>of</strong> operations may beadversely affected byany disruption <strong>of</strong> operations at our facilities, including due toany <strong>of</strong> the factors mentioned above.18. We had made an application dated 26/11/2007 for registration <strong>of</strong> whichh was refused by TheRegistrar <strong>of</strong> Trade Marks, Chennaiunder section 11 <strong>of</strong> the Trade Mark Act, 1999 because similar trademarkwas already on the record <strong>of</strong> the registrar for the same/ similar goods/ services. Therefore, we have movedanother application dated 08/06/2012 with our new logo . The sameis yet to be registered in the name<strong>of</strong> the Company. In case our new trademark is not registered in the name <strong>of</strong> the company <strong>and</strong> the same isrefused onany groundsby the Registrar <strong>of</strong> Trade Marks it may be susceptible to be used by any third partieswhich may affect the business.We had made an application datedd 26/11/2007for registration <strong>of</strong> our logo under the class 18, 22, 23, 24, 25<strong>and</strong> 26 <strong>of</strong> the Trade Marks Act 1999. The Registrar <strong>of</strong> Trade Marks, Chennai issued an order dated19/12/2008 objecting the application on the relative grounds <strong>of</strong> refusal under section11 <strong>of</strong> the Trade MarkAct, 1999 because similar trademark is already on the record <strong>of</strong> the registrar for the same/ similar goods/services. In view <strong>of</strong> this, we have filed a new application vide application dated 08/06/ 2012 for registration <strong>of</strong>our new logo . In case our new trademark is not registered in the name <strong>of</strong> company <strong>and</strong> the same isrefused onany grounds by the Registrar <strong>of</strong> Trade Marks it may be susceptible to be used by any third partieswhich may affect the business.19. We may not be able to fulfil our export obligations.We have obtained licenses under Export Promotion Capital Goods Scheme (EPCG) to benefit from theconcessionn given on the duty levied by the Government. As per the licensing requirement underthe saidscheme, we are required to export goods <strong>of</strong> a defined amount within eight years failing which it may lead topayment <strong>of</strong> waived duty alongwith the interest <strong>and</strong> penalty. As on 31/ /10/2012 our export obligation is `15580.30 lacs.20. We have entered into related party transaction aggregating to ` 54302.50 lacs during FY 2011-12. For details<strong>of</strong> the same please refer to “Prominent Notes” appearing on page no.10. There can be no assurance that suchtransactions will not have an adverse effect on our business, s, financial conditions, results <strong>of</strong> operations <strong>and</strong>prospects.Our Promoter, Directors <strong>and</strong> Key ManagementPersonnel maybe deemed to be interested to the extent <strong>of</strong>equity shares held by them or theirfriends <strong>and</strong> relatives. Our Promoter maybe interested in the transactionsentered into between our Company<strong>and</strong> themselves as well asbetween our Company <strong>and</strong> our GroupEntities.We have entered <strong>and</strong> may continueto enter intorelated partytransactions. During F.Y.2011-12, the aggregaterelated party transaction was `54302.50 lacs <strong>of</strong> which `48040.00 lacs pertains to Corporate Guaranteee given byKMP, `198.00 lacs towards remuneration to KMP <strong>and</strong> the balance <strong>of</strong> `6064.50 lacs pertains to transactionswith Associate Companies. The details <strong>of</strong> the same are appearing on page no.10 under “Prominent Notes”.While we believe that all our relatedparty transactions have been conducted on arm’s length basis, we cannot6
assure youthat we could have achieved more favourable terms had such transactions been entered into withunrelated parties. There can be no assurance that such transactions will not have anadverse effect on ourbusiness, financial conditions, results <strong>of</strong> operations <strong>and</strong> prospects21. Some <strong>of</strong> our group companies have made losses in past threee financial years. Any prolonged lossess by groupcompanies could resultin reduction<strong>of</strong> reputation <strong>of</strong> our Company.Our groupcompanies which have made losses inpast 3 financial years aretabulated below:Sr. Name <strong>of</strong> the company2009-10 2010-11No.1. Scotts Fashionciti <strong>India</strong> Limited(0.53)(0.47)2. Scotts Plantations Private Limited(93.74)(63.07)3. Scotts Metals <strong>and</strong> Mines Private Limited (0.41)(0.11)4. Scotts Infrastructure <strong>and</strong> Development PrivateLimited(0.18)(0.25)5. GFIInfrastructureDevelopmentPrivate (0.05)(0.27)Limited6. Coppers Coin Realty PrivateLimited(0.33)(0.26)8. Scotts ApparelsPrivate Limited(0.17)(0.15)9. Scotts Fashionss Private Limited(0.21)(0.18)10. Scotts Wears Private Limited(0.25)(0.18)11. Scotts Knits Private Limited(0.26)(0.20)12. Inmark Retail Private Limited(0.25)(7.16)22. We have experienced negative Operating Cash Flow in the Financial Year 2010-11 <strong>and</strong> 2007-08 <strong>and</strong> cannotrule out the possibility<strong>of</strong> such negative cash flows in future.We have reported negative cash flow from operating activities for the financial year ending March31, 2011<strong>and</strong> March 31, 2008 to the tune <strong>of</strong> ` 5.90 lacs<strong>and</strong> ` 1,080.30 lacs respectively <strong>and</strong>cannot rule out thepossibility<strong>of</strong> such negative cash flows in future. In the event <strong>of</strong> negative cash flow, the Company will berequired to arrange thefunds at a cost to meet the shortfall.23. There are restrictive covenants in the agreementswith the Banks/Institutions from whom we have borrowed,which among other things, require the Companyto obtain prior permission from them for certain acts whichmay limitCompany’s discretion in these matters.We have entered intovarious loan agreements with Canara Bank, EXIM Bank <strong>and</strong>State Bank<strong>of</strong> <strong>India</strong>towards long term borrowings <strong>and</strong> workingcapital facility. There are restrictive covenants in theseagreements with the Banks/ Institutions from whom we have borrowed,which among other things requirethe Company to obtain prior permission fromthem for change in Management, declaring dividend <strong>and</strong>undertaking <strong>of</strong> new project etc. which may limit Company’s discretion in these matters.24. Our inability to upgrade to the latest technologymay adversely affect ourgrowth, market position <strong>and</strong>pr<strong>of</strong>itabilityAdvancement in technology may require us to make additional capital expenditure for upgrading ourmanufacturing facilities so as to compete with our various competitors. In the event that we are not able torespond to such technological advancement in a timely manner, we maylose our competitive edge therebyadverselyaffecting ourpr<strong>of</strong>its.25. We may be subject to industrial unrest, slowdowns <strong>and</strong> increased employee costScotts Garments Limited2011-12(` in lacs)(0.05)N.A.(0.11)(0.14)(0.06)(0.15)(0.22)(0.27)(0.19)(0.37)(89.39)<strong>India</strong> has stringent labour legislation that protects the interests <strong>of</strong> workers,including legislation that sets forthdetailed procedures for dispute resolution <strong>and</strong> employee removal <strong>and</strong> legislationthat imposes certain7
Scotts Garments Limitedfinancial obligations on employers during employment <strong>and</strong> upon retrenchment. Under <strong>India</strong>n law,employees also have a right to establish trade unions. Although our employees are not currently unionized,we cannot assure you that they will not unionize in the future. If some orall <strong>of</strong> our employees unionize or ifwe experience unrest or slowdowns, it may become difficult for us to maintain flexible labour policies <strong>and</strong> wemay experience increased wage costs <strong>and</strong> employee numbers resulting an impact on our financials.26. Inability to visualize the dynamic <strong>and</strong> changingg trend <strong>of</strong> fashion may hamper the dem<strong>and</strong> <strong>and</strong> growth <strong>of</strong> theCompany.We procure order fromdifferent customers on the merit <strong>of</strong> our design <strong>and</strong> quality which are synchronizedwith the dynamics <strong>and</strong>changing trend <strong>of</strong> fashionindustry. We are subjectto uncertainties that are associatedto fashionindustry <strong>and</strong>any inability on our partto underst<strong>and</strong> the prevailing trend <strong>of</strong> our target market mayhamper our growth prospects.EXTERNAL RISK FACTORS27. Disruption in services <strong>of</strong> third partytransport providers mayaffect our business operationsOur Company is dependent on third-party transport providers for the supply <strong>of</strong> raw materials to ourmanufacturing units <strong>and</strong> delivery <strong>of</strong> our products to our customers. Transport strikes by members <strong>of</strong> various<strong>India</strong>n truckers’ unions have takenplace in the past, <strong>and</strong> could take place in future, thereby causing anadverse effect on our timely receipt <strong>of</strong> supplies <strong>of</strong> raw materials <strong>and</strong> our ability todeliver ourfinishedproducts to our customers on time, thereby adversely impacting our business. Further, any increase in oilprices, may lead to the increase in the transportation cost resulting in an impact on our pr<strong>of</strong>itability.28. Industry is prone to frequent changes in government policies, any material changes in the duty structure mayadverselyimpact our financialsOur industry is proneto changes in government policies inrespect <strong>of</strong> taxes, levies, <strong>and</strong> excise duty. Anymaterial changes in theduty structure may adversely impact our financials.29. Competition from other domesticposition <strong>and</strong> our pr<strong>of</strong>itabilityproducers / unorganizedsector mayadversely affect our competitiveWe face competition from other existing domestic producers<strong>and</strong> potential entrants to the industryin whichwe operate that may adversely affect our competitive position. Loss <strong>of</strong> market share <strong>and</strong> competition mayadverselyaffect our pr<strong>of</strong>itability. We also face competition for customers from other players in the organized<strong>and</strong> unorganized markets. We expect competition could increase with newentrants coming into thisindustry<strong>and</strong> existing players consolidatingtheir positions. Some <strong>of</strong> our competitors may have access to significantlygreater resources <strong>and</strong> hence the ability to compete more effectively.30. Environmental regulation imposes additional costs <strong>and</strong> may affect the results <strong>of</strong> our operationsWe, like other producers, are subject to various central, state <strong>and</strong> local environmental,health <strong>and</strong> safety laws<strong>and</strong> regulations concerning issues such as damage caused byair emissions, wastewater discharges, solid <strong>and</strong>hazardous waste h<strong>and</strong>ling <strong>and</strong> disposal, <strong>and</strong> theinvestigationn <strong>and</strong> remediation <strong>of</strong> contamination. These laws<strong>and</strong> regulations are increasingly becoming stringent <strong>and</strong> may in the future create substantial environmentalcompliance or remediation liabilities <strong>and</strong> costs. These lawscan imposeliability for non-compliance withhealth <strong>and</strong>safety regulations or clean up liabilityon generators <strong>of</strong> hazardous waste <strong>and</strong>other substances thatare disposed <strong>of</strong> either on or <strong>of</strong>f-site, regardless <strong>of</strong>fault or the legality <strong>of</strong> thedisposal activities.31. A slowdown in economic growth in <strong>India</strong> could materially<strong>and</strong> adversely affect the Company’s results <strong>of</strong>operations <strong>and</strong> financial conditionOur performance <strong>and</strong> the quality <strong>and</strong> growth <strong>of</strong> our business are dependent on thehealth <strong>of</strong> the overall<strong>India</strong>n economy. There have been periods <strong>of</strong> slowdown in the economicc growth <strong>of</strong> <strong>India</strong> during the 1990s.8
Scotts Garments Limited- Significant development in <strong>India</strong>’s Fiscal<strong>and</strong> environmental regulations.- General market conditions; <strong>and</strong>- Domestic <strong>and</strong> international economic, legal <strong>and</strong> regulatory factors unrelated to our performance.There canbe no assurance that an active trading market forour equity shares will develop or be sustainedafter this Issue or the price at whichh the Equity Shares <strong>of</strong> our Company are initially traded will correspond tothe pricesat which the Equity Shares <strong>of</strong> our Company will trade in the market subsequent to this Issue.Prominent Notes1. Thenet worth <strong>of</strong>SGL as per its audited restated financial statementt for seven months period ended on31/ 10/2012 is ` 24,323.38 lacs<strong>and</strong> as on 31/03/2012 is ` 22784.25 lacs.2. Book value per equity share <strong>of</strong> the Company as per its audited restated financial statement for sevenmonths period ended on 31/10/2012 is `90.98 <strong>and</strong> as at 31/03/20122 is ` 85.22/-3. Theaverage cost<strong>of</strong> acquisition <strong>of</strong> the equity Shares <strong>of</strong> ` 10 each by the Promoter is ` 1.46 per share4. On 26/12/2012 our Companyhas, by way<strong>of</strong> a Pre-IPOPlacement, allotted 17,39,130 Equity Shares <strong>of</strong>` 10each to Emerging <strong>India</strong> Growth FundCVCF V, foran aggregatee consideration <strong>of</strong> `1999.999 lacs, at apremium <strong>of</strong> `105.00 per Equity Share5. Investors are advised to referr the paragraph on “Basiss <strong>of</strong> Issue Price” on page 64 <strong>of</strong> this RedHerringProspectus before making an investment inthe Issue.6. Except as mentioned in the sections titled “Capital Structure” beginning on page 34 <strong>of</strong> this RedHerringProspectus, we have not issued any EquityShares in thelast twelve months.7. Thedetails <strong>of</strong> related party transactions for seven months period ended on 31/10/2012 <strong>and</strong> for the lastfivefinancial year is hereunder:ParticularsRemuneration to keymanagerial personnelGuarantees Givenbykey managerialpersonnelLoans given toassociate companies31stOctober2012115.0048040.00 48040.00 45030.00 20530.00160.20- 162.00-Investments madeinassociatesSale <strong>of</strong> investments inAssociatesSale <strong>of</strong>Garments676.00-1299.303008.702413.70319.801.00--1.00--31 stMarch2012198.0031 st March 31 st March2011 2010198.00 198.00(` In lacs)31 st March 31March2009 2008144.00 144.006760.00 4660.00--1.00 1.00----Receivable fromassociates979.20322.30----8. Presently we donot have business interest in our group companies except for Inmark Retail PrivateLimited to whomour Company has madesale <strong>of</strong> readymade <strong>garments</strong> aggregating to ` 1299.30 lacs asat 31/10/2012 <strong>and</strong> ` 319.80 lacs in F.Y.2011-12.9. Investors are free to contact the BRLM <strong>and</strong> Co-BRLM for any complaints, clarification or informationpertaining to thisIssue. For contact details<strong>of</strong> the BRLM<strong>and</strong> Co-BRLM, please refer to the cover page <strong>of</strong>thisRed HerringProspectus.10
Scotts Garments Limited10. All information shall be made available by the BRLM,Co-BRLM <strong>and</strong> the Company to the public <strong>and</strong>investors at large<strong>and</strong> no selective or additional information would be available only to a section <strong>of</strong> theinvestors in any manner whatsoever.11. In addition to the BRLM <strong>and</strong>Co-BRLM, the Companyshall be obliged to update the Offer Document<strong>and</strong>keep the public informedabout any material changes till listing<strong>and</strong> tradingcommences in respect<strong>of</strong> the shares issued through this issue.12. For interest <strong>of</strong> promoter/directors, pleasee refer to the section titled“Promoters<strong>and</strong> its Background”beginning on page no. 153 <strong>of</strong> this Red Herring Prospectus.13. There are no financing arrangements whereby the promoter group, the directors <strong>of</strong> the Company whichis a promoter <strong>of</strong> the issuer, the directors <strong>of</strong>the issuers <strong>and</strong> their relatives have financed the purchase byanyother person<strong>of</strong> securitiess <strong>of</strong> the issuerother than in the normalcourse <strong>of</strong> business <strong>of</strong> the financingentity during theperiod <strong>of</strong> six months immediately preceding the date <strong>of</strong> filingdraft <strong>of</strong>fer documentwiththe <strong>Board</strong>.14. There has been no change in the name <strong>of</strong> the issuer company duringthe last threee years11
Scotts Garments LimitedThe information in this section is derived from a combination <strong>of</strong>various <strong>of</strong>ficial <strong>and</strong> un<strong>of</strong>ficial publicly availablematerials <strong>and</strong> sources <strong>of</strong> information. It has not been independentlyverified by the Company, the Book Running LeadManager or their respective legal advisors, <strong>and</strong> no representation ismade as to theaccuracy <strong>of</strong> this information, whichmay be inconsistent withinformation available or compiled from other sources.Overview<strong>of</strong> the Global Textile IndustryIn the year 2011, the global trade in textile <strong>and</strong> clothing industry was at USD 706 billion. Exports by <strong>India</strong>ntextile <strong>and</strong>clothing industry accounted for USD15.0 billion<strong>and</strong> USD 14.40 billion respectively. Worldexports <strong>of</strong>textiles <strong>and</strong> clothing grew by 17 per cent in 2011. The top ten exporters each registered 13 percent growth or more. Bangladesh recorded the highest increase (27 per cent) while thelowest among thetop ten was recorded by the United States with 13 per cent. The order for the top ten exporters remains thesame as in2010. Chinawas the leading exporter <strong>of</strong> textiles <strong>and</strong> clothing in2011 with a 32 per cent share inworld exports <strong>of</strong> textiles <strong>and</strong> 37 per cent in clothing. The European Union <strong>and</strong> the United States are themajor markets for clothing, accounting for 45 percent <strong>and</strong> 21 per cent respectively <strong>of</strong> world imports.(Source: WTO – International Trade Statistics, 2012) ).Overview<strong>of</strong> <strong>India</strong>n Textile IndustryPART ISECTION III – INTRODUCTIONSUMMARYOF THE INDUSTRY<strong>India</strong>n textile industrycontributes about 14 per cent to Industrial Production, 4 per cent to the country’sGross Domestic Product (GDP), 17per cent toexport earnings <strong>and</strong> provides direct employmentto 35million people whichh includes substantial number <strong>of</strong> SC/ /ST <strong>and</strong> women. Textilee & ClothingsalesgeneratedUSD 55 Billion in 2008-09 bifurcated as USD 33.4 billion from domestic market <strong>and</strong> US $ 21.60billion from exports. Exports <strong>of</strong> Textiles & Clothing grew to US$ 22.41 billion in 2009-10 <strong>and</strong> has touchedUS$ 26.822 billion in 2010-11. In the financial year i.e. 2011-12,exports <strong>of</strong> textiles <strong>and</strong> clothing, as perlatestavailable data coveringApril-October, 2011, hasgrown by 28.94% over the corresponding period <strong>of</strong> 2010-11.During the year 2010-11, Readymade Garments account for almost 40% <strong>of</strong> the total textiles exports.Apparel <strong>and</strong> cotton textiles products together contribute nearly 70% <strong>of</strong> the total textiles exports. Theexports basket comprise a wide range <strong>of</strong> items including readymade <strong>garments</strong>, cottontextiles, h<strong>and</strong>loomtextiles, man-made fibre textiles, wool <strong>and</strong> woolen products, silk, jute <strong>and</strong> h<strong>and</strong>icraftsincluding carpets.<strong>India</strong>’s textiles products, includingh<strong>and</strong>looms <strong>and</strong> h<strong>and</strong>icrafts, are exported to more than a hundredcountries.However, the USA <strong>and</strong> the EU, account for about two-thirds<strong>of</strong> <strong>India</strong>’s textiles exports. Theother major export destinations are China, U.A.E., Sri Lanka, Saudi Arabia, Republic <strong>of</strong> Korea, Bangladesh,Turkey, Pakistan, Brazil, Hong Kong, Canada, Egypt etc.(Source: Annual Report 2011-12 <strong>of</strong> Ministry <strong>of</strong> Textile)In the post-quota period, <strong>India</strong> has emerged as a major sourcing destination for new buyers. As a measure<strong>of</strong> growing interest inthe <strong>India</strong>n textile <strong>and</strong> clothing sector a number <strong>of</strong> buyers have openedtheirsourcing/ /liaison <strong>of</strong>ficein <strong>India</strong>. Commercially,the buoyant retailers across the world are looking foroptions <strong>of</strong> increasing their sourcing from the <strong>India</strong>n markets. The <strong>India</strong>n textiles industry is extremelyvaried, with the h<strong>and</strong>-spun mill sector at the other. The decentralized power looms/hosiery <strong>and</strong> knitting sectors form<strong>and</strong> h<strong>and</strong>-woven sector at one end <strong>of</strong> the spectrum, <strong>and</strong> the capital intensive,sophisticatedthe largest section <strong>of</strong> textiles sector. The closelinkage <strong>of</strong> the Industry to agriculture <strong>and</strong> the ancient12
Scotts Garments Limitedcultures, <strong>and</strong> traditions <strong>of</strong> the country make the <strong>India</strong>n textilee sector unique in comparison with the textileindustry <strong>of</strong> other countries. This also providesthe industrywith the capacity to produce a variety <strong>of</strong>products suitable to the different market segments, both within <strong>and</strong> outside the country.Global exports <strong>of</strong> Ready Made Garments (RMG)• Global exports <strong>of</strong> RMG during2008-09 were <strong>of</strong> the order <strong>of</strong> USD 10.38 billion,which recorded amarginal decrease to USD 10.06 billion during 2009-10. However, exports <strong>of</strong> RMGgrew by 5.60% toUS$ 10.63 Billion in2010-11.• As per latest available statistics, exports <strong>of</strong> RMG during April- October, 2011 was <strong>of</strong> the order <strong>of</strong> USD7088.74 million as against USD 5512.15 million during thesame periodlast year, indicating an increase<strong>of</strong> over 28.60% in US$ terms this year.• EU was the biggest destinationn for RMG exports, with over USD 5.3 billion worth<strong>of</strong> exports duringthe year ending March, 2011, recording a growth <strong>of</strong> over 1% comparedto exports in2009-10.• US was the secondbiggest destination for RMG, with exports <strong>of</strong> USD2.85 billion for the year endingMarch,11, recording a growth <strong>of</strong> 7.29% over the last financial year.• UAE was the thirdbiggest destination with over a billion dollar worth<strong>of</strong> exports tothat group.(Source: Annual Report 2011-122 <strong>of</strong> Ministry <strong>of</strong> Textiles)The majorsub-sectors that comprise the textiles sector include the- Organized Cotton/Man-Made Fibre TextilesMill Industry,- Man-made Fibre/ Filament Yarn Industry,- Wool <strong>and</strong> WoollenTextiles Industry,- Sericulture <strong>and</strong> SilkTextiles Industry,- Jute <strong>and</strong> Jute Textiles Industry, <strong>and</strong>- Textiles Exports(Source: Annual Report 2009-10, Ministry <strong>of</strong> Textiles)<strong>India</strong>n Textile ExportsThe textile export basket consists <strong>of</strong> wide range<strong>of</strong> items containing cotton yarn <strong>and</strong> fabrics, man-madeyarn <strong>and</strong> fabrics, wool <strong>and</strong> silk fabrics, made-ups <strong>and</strong> variety <strong>of</strong> <strong>garments</strong>. <strong>India</strong>’s textile products,includingh<strong>and</strong>looms <strong>and</strong> h<strong>and</strong>icrafts, are exported to more than a hundred countries.<strong>India</strong>’s textiles <strong>and</strong> clothing industry is one <strong>of</strong> the mainstays <strong>of</strong> the national economy. It is also one<strong>of</strong> thelargest contributing sectors <strong>of</strong> <strong>India</strong>’s exports worldwide. Thereport <strong>of</strong> theWorking Group constituted bythe Planning Commission on boosting <strong>India</strong>’s manufacturingexports during 12th Five Year Plan (2012-17),envisagess <strong>India</strong>’s exports <strong>of</strong> Textiles<strong>and</strong> Clothing at US$ 32.35 billion by the end <strong>of</strong> XIthFive Year plan, asagainst <strong>of</strong>US$ 55 billion envisaged in the Report<strong>of</strong> Working Group on Textiles for the XIth Five Year Plan<strong>and</strong> basedon historic growth rate <strong>of</strong> 10% (CAGR), a business as usual approach, will result in exports <strong>of</strong>US$ 52 billion by theend <strong>of</strong> XI Plan. An export target <strong>of</strong>US$ 65 billion <strong>and</strong> creation <strong>of</strong> 25 millionadditional jobs has been proposed with a CAGR<strong>of</strong> 15% during the XII Plan. At current prices the <strong>India</strong>ntextiles industry is pegged at US$ 555 billion, 64%<strong>of</strong> which services domestic dem<strong>and</strong>. The textiles industryaccounts for 14% <strong>of</strong> industrial production, which is 4% <strong>of</strong> GDP; employs 35 million people <strong>and</strong> accountsfor nearly12% share <strong>of</strong>the country’ ’s total exports basket.Union Budget 2012-13Highlights• St<strong>and</strong>ard rate <strong>of</strong> Central Excise duty has been increased from 10% to 12%. Excise duty on Cottontextiles covered under Tariff heading 5204 to5212 increased from 4% to 6%.13
Scotts Garments Limited• Automatic shuttleless looms fully exempted from basic customs duty <strong>of</strong> 5%.• Automatic silk reeling <strong>and</strong> processing machinery as well as its parts exempted from basic customsduty.• Second h<strong>and</strong> machinery to attract basic duty<strong>of</strong> 7.5%.• Basic customs dutyon wool waste <strong>and</strong> wool tops reducedd from 15% to5%.• Basic customs dutyon Titaniumdioxide reduced from 10% to 7.5%.• Aramid yarn <strong>and</strong> fabric used for the manufacture <strong>of</strong> bullet pro<strong>of</strong> helmets exempted fully frombasiccustoms duty.• Financial package <strong>of</strong> ` 3,884 crore announced for waiver <strong>of</strong> loans <strong>of</strong> h<strong>and</strong>loom weavers <strong>and</strong>theircooperative societies.• Two more mega h<strong>and</strong>loom clusters, one to cover Prakasam <strong>and</strong> Guntur districts in Andhra Pradesh<strong>and</strong> another for Godda <strong>and</strong> neighbouring districts in Jharkh<strong>and</strong> to be set up.• Threee Weaver’s Service Centres one each in Mizoram, Nagal<strong>and</strong> <strong>and</strong> Jharkh<strong>and</strong> to be set up forproviding technical support to poor h<strong>and</strong>loom weavers.• ` 500 crore pilot scheme announced for promotion <strong>and</strong> application <strong>of</strong> Geotextiles inthe North EasternRegion.• A powerloom mega cluster to be set up in Ichalkaranji in Maharashtraa with a budget allocation <strong>of</strong> ` 70crore.• Exciseduty <strong>of</strong> 10%is applicable to br<strong>and</strong>ed readymadee <strong>garments</strong> with abatement <strong>of</strong> 55% from theRetailSales Price. Along with increase in duty to 12% theabatement enhanced to 70%. As a result, theincidence <strong>of</strong> duty as a percentage <strong>of</strong> the Retail Sales price would come down from 4.5% to 3.6%.Growth Prospects for <strong>India</strong>n Textile <strong>and</strong> Clothing IndustryThe Confederation <strong>of</strong> <strong>India</strong>n Textile Industry envisages the <strong>India</strong>n Textile <strong>and</strong> Clothing market toreachUSD 100 billion by year 2015. Textile & Clothing sales generated USD 555 Billion in 2008-09 bifurcated asUSD 33.4 billion from domestic market <strong>and</strong> US $ 21.6 billion from exports.14
Scotts Garments LimitedBUSINESS OVERVIEWWe are a Company with state <strong>of</strong> the artfacilities for manufacturing the hi-fashion Ready Made Garments. Wehave domain expertise in providing sampling <strong>and</strong> design <strong>and</strong> have additional facilities such as embroidery,printing, dyeing <strong>and</strong> washing. Presently, we are largely engaged in manufacturing <strong>and</strong> export <strong>of</strong> ReadyMadeGarments (RMG).From a modest beginning involving taking up job works, SGL started exploring the market for direct exports,<strong>and</strong> has in course <strong>of</strong> time established a status for production <strong>of</strong> quality <strong>garments</strong> <strong>and</strong> dependability in deliveryschedules in the export market. Our operations <strong>and</strong> facilities enable us to manufacture readymade apparel byspanning various aspects <strong>of</strong> the apparel production chain, from managing the design to delivery <strong>and</strong> qualityassurance processes involved in producing readymade apparels.SGL is one <strong>of</strong> the competitive manufacturer<strong>and</strong> exporter <strong>of</strong> readymade <strong>garments</strong> with modern manufacturing facilities, fully backed by facilities forproduct development, design studio <strong>and</strong> efficient sampling infrastructure toprovide quality servicess to itscustomers. During F.Y. 2011-12, we exported our readymade apparel amounting to ` 45,741.38 lacs. OurCompany manufactured 180.80 lacs pieces for woven<strong>and</strong> knitted <strong>garments</strong> in F.Y.2011-12.During September 2012, Credit Analysis & Research Limited (CARE) has assigned CAREBBB rating to ourlong term bank facilities amounting to ` 229.70 crores <strong>and</strong> CARE A3+ toour short term bank facilitiesamounting to ` 227.40 crores. The instruments with CARE BBB <strong>and</strong> A3+ ratinghave moderate degree <strong>of</strong>safetyregarding timely servicing<strong>of</strong> financialobligations. We have been accorded the status <strong>of</strong>Trading House inaccordance with the provisions <strong>of</strong> Foreign Trade Policy 2009-14 by Office <strong>of</strong> the Joint Director General <strong>of</strong>Foreign Trade. We are also a registered member<strong>of</strong> ApparelExport Promotion Council (sponsored byGovernment <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Textiles).Competitive StrengthsWe are into the business <strong>of</strong>manufacturing readymade <strong>garments</strong> for last two decades. We believe that we havethe following competitive strengths to maintain <strong>and</strong>enhance our position as a leading multi- product ready-to-wear fashion apparel business house. Our principal competitive strengths are hereunder:-1. Multiple Product Capability: We have developed a range <strong>of</strong> product <strong>of</strong>ferings in order to address thevaried<strong>and</strong> exp<strong>and</strong>ing requirements <strong>of</strong> our customers. Our product <strong>of</strong>ferings include woven,knits,sweats, jerseys <strong>and</strong>woven trousers (cotton <strong>and</strong> denim) for both genders across all ages. We believethat our broad range <strong>of</strong> apparel products <strong>and</strong> hi fashion garment experience allows our customers tosource most <strong>of</strong> their product categories froma single vendor <strong>and</strong> enables us to exp<strong>and</strong> our businessfrom existing customers, as well as address a larger base<strong>of</strong> potential new customers. We believe ourbusiness model <strong>and</strong> product diversificationprovides ourcustomer One Stop Solution for all apparelrequirements.2. StrongManagement Team: We benefit from the leadership <strong>of</strong> our management team, which hasextensive experience in the apparel industry. Our Promoter has adequate experience in the textileindustry <strong>and</strong> we have successfully implemented expansion projects inthe past. Our Key ManagementPersonnel are largely responsible for successful execution <strong>of</strong> our growth strategyby exp<strong>and</strong>ing ourmanufacturing facilities, developing newcustomer base <strong>and</strong> strengthening our customerrelationships. In addition to our senior management team, we believe that our middle managementteam <strong>and</strong> skilled work force comprising <strong>of</strong> designers, tailors, merch<strong>and</strong>isers <strong>and</strong> marketing personnelprovide us with depth needed to manage our growth.Our emphasis on creating <strong>and</strong> sharing valuehave not only retained but attracted people to be part <strong>of</strong>the Company, which we believe to be an important competitive advantage as we enter new markets<strong>and</strong> exp<strong>and</strong> our product <strong>of</strong>ferings.15
Scotts Garments Limited3. Relationship withbig sized players in international market: Our customers include value retailers aswell as higher-endfashion br<strong>and</strong> retailers, such as Best Seller, Old Navy, H& M Hennes & Mauritz,Rhodie Suppliers, C & A, S. Oliver, Jules, No Excess, Mayoral Moda,Infinil S.A., etc. We supply ourmulti product <strong>of</strong>ferings to Bestsellers for their 5 sub-br<strong>and</strong>s viz, Veromoda, Jack <strong>and</strong> Jones, Only, EXIT<strong>and</strong> SELECTED. We focus onmaintaininglong-term relationships with our customers. Wehavestrongrelationshipwith some <strong>of</strong> our leadingcustomers, <strong>and</strong> have a decade old business relation withBest Seller, who is one <strong>of</strong> our largest customers in terms <strong>of</strong> revenues.We believe that our ability to address the varied <strong>and</strong> exp<strong>and</strong>ing requirements <strong>of</strong> global customers overlong periods enables us to obtain additional businesss from existing customers as well as newcustomers. We serve most <strong>of</strong> our customers across all streams <strong>of</strong> our business model, which we believeincreases their loyalty to us.4. We produce products at Competitive pricing: Our automated designing <strong>and</strong> sampling facilities enableus to produce quality products throughout the year. We have modernscanning <strong>and</strong> quality assuranceequipment, benefitting our manufacturingprocess significantly in terms <strong>of</strong> reducing wastage <strong>and</strong>enabling us to dem<strong>and</strong> a premium for our products. We believe that our fair customer service policies<strong>and</strong> consistently high quality products have earned ussignificant good will from our customers,whichh has resultedin repeat orders from many <strong>of</strong> them.5. Stringent quality check: The Company believes in providing the best possible quality to the customers.Theree are quality checks in place that prevent any defective material from reaching the customer.Quality control measures are inplace at every step in the manufacturing process. The Company alsohas a well-equipped quality control department.6. Designing Capabilities: We have two dedicated <strong>and</strong> well-equipped design studios in Tirupur <strong>and</strong> inBangalore with Qualified, skilled <strong>and</strong> experienced employees preparing designs. There is also aninformation systemin place that keeps a database <strong>of</strong> all the designs created for future reference. Thestudios are equipped with latest design s<strong>of</strong>tware ncluding CAD/CAM. Our designers travelextensively to our target markets to study the latest trends in those countries. We encourage them tovisit fashion shows to help them in their study <strong>of</strong> fashion. This practical exposure helps the designteam come out with new designs <strong>and</strong> ideas based on the current trends <strong>and</strong> fashion in theinternational market. The new designs are then sent out to the laboratory for various testing <strong>of</strong> the<strong>garments</strong> before the designs are released to the sampling unit for the further marketing <strong>and</strong>salespurposes. These design studioss generate various styles for garment business <strong>and</strong>at the sametime,enables us to workon designs supplied by the customers. The designstudio takesfeedback from thecustomers on thesamples already sent <strong>and</strong> modifies the designaccording to the customer’ssuggestions.7. Sampling Capabilities: Our Company has capabilities to produce garment samples as per designsdeveloped by our design studios in Tirupurr <strong>and</strong> Bangalore. Our design <strong>and</strong> sampling department iswell equipped with facilities like sample dyeing, sampleprinting, washing <strong>and</strong> processing facilities.We have two garment sampling units, onein Tirupur <strong>and</strong> one in Bangalore. These units providesamples to the customer for selection. These finished garment samples are sent to the customer forapproval. Availability <strong>of</strong> the sampling unit helps the company in providing the customer with a widevariety <strong>of</strong> choices at the minimal possible cost to the company. Thegarment making processs startsonly after the samples are approved. Different processes <strong>of</strong> sampling are involved for productsgoingto different market segments. Our above-mentioned capabilities give us an advantage overothergarment manufacturers.8. Strategic LocationAdvantage: We have strategically located our operations. All our woven garmentfacilities are located at Karnataka with major productionat Bangalore <strong>and</strong> knitted garment facilitiesare located in Tirupur, Tamil Nadu <strong>and</strong> Bangalore & Bagepalli in Karnataka. Webelieve location <strong>of</strong>our units gives ussignificant savings in production, labour <strong>and</strong> transportationcosts. Our knitted16
Scotts Garments Limitedoperations in Tamil Nadu are within a 10-kilometer radius <strong>of</strong> Tirupur, which is regarded as one <strong>of</strong>Asia’ss largest apparel manufacturing clusters. Our locations provide us convenient access to airports,ports <strong>and</strong> are also within close proximity <strong>of</strong> our domestic suppliers.Product Portfolio:Our product portfolio comprises <strong>of</strong> theWoven <strong>garments</strong> <strong>and</strong> Knitted <strong>garments</strong> that includes Shirts (Cotton,Denim) Tops,Skirts, Trouser (Cotton, Denim), Shorts, Cargos, T-Shirts (Basic<strong>and</strong> Embroidered), Sweats <strong>and</strong>JerseysExportThe major customers <strong>of</strong> the Company are located atEurope <strong>and</strong> USA. Our exports <strong>and</strong> net sales have shownCAGR <strong>of</strong> 7% <strong>and</strong> 8% respectively for last three years.YearExports*Net Sales*Exports as a percentage to(` In Lacs)(` In Lacs)Net Sales (%)2009-10039,451.83343,017.0791.712010-11148,207.38849,527.7397.332011-12245,741.3850,025.4691.44*Includes Export Incentive received by the company on account <strong>of</strong> export salessBusiness Strategy1. Strengthening Apparel designing <strong>and</strong> ProductDevelopment Process: We operate in a highly creative<strong>and</strong> dynamic fashion industry that requires keeping up pace with ever-changing market trends. Ourstrategy is to focus onthe development <strong>of</strong> newdesigns <strong>and</strong> samples for our <strong>garments</strong>. Our in housestudios are equipped with latest design s<strong>of</strong>tware including CAD/CAM thus enablingus to successfullyconvert our designs into samples into final products. We plan to strengthen our capabilities in designingby continuously upgrading our design studios both in terms <strong>of</strong> human resources <strong>and</strong> technology. We planto tap thehi-end readymade garment segment which will help us in maintaining higher sales realizationfor our final products.2. Strengthening Product Portfolio <strong>and</strong> enhancing capacities to meet client dem<strong>and</strong>s: Presently ourproduct portfolio comprises <strong>of</strong> Ready Made Garments which includes the export <strong>of</strong> specific <strong>garments</strong>. Ourstrategy isto increase the product portfolio shalll include the addition <strong>of</strong> diversified high fashion <strong>garments</strong><strong>and</strong> catering the same to other largesized players that are specifically into sale <strong>of</strong> these <strong>garments</strong>. We shallalso target enhancing the capacities <strong>of</strong> our existing manufacturing capacities to meet the incremental clientdem<strong>and</strong> for our products.3. IntegratedOperations: We presently focus onthe manufacturing <strong>of</strong> Ready Made Garments from thesourced fabrics <strong>and</strong> raw materials. Our long term objective is to integratee our operations <strong>and</strong> develop inhouse facilities from yarn dyeing to garment manufacturing. The integrated operations <strong>of</strong> our companyshall derive the benefits <strong>of</strong> economies <strong>of</strong> scale <strong>and</strong> increase thequality control on our final product.4. Controlling Operational Cost: We believe that to sustain thecompetitiveness <strong>of</strong> the industry we have tocontinuously focus oncontrolling the cost incurred for various operational activities. Our strategy tocontrol the cost shall include the controlling raw material cost through negotiations with the suppliers,increasingfocus on quality control to reduce the wastage <strong>and</strong> identifying the highh cost areas <strong>of</strong> theCompany.5. Tap domestic market<strong>and</strong> exp<strong>and</strong>ing geographic reach: Our major portion <strong>of</strong> export income isfromEuropeannations. Though we have high exposure in this region, we weren’t vastlyaffected from theglobal meltdown. However, to insulate ourselves from any future economic slowdown, we plan toincrease our presence in domestic market <strong>and</strong> also tap the other regions across the globe. Our Company17
Scotts Garments Limitedwill also continue exploring opportunities in various countries where it can supply value added textileproducts to enhance itsgeographic reach. This shall help us tomitigate therisk linked to different markets<strong>and</strong> widenthe growth prospects.18
Scotts Garments LimitedSUMMARY OF FINANCIAL DATAANNEXURE ISUMMARY STATEMENT OF ASSETS AND LIABILITIES,AS RESTATEDParticularsNon-current assetsFixed assetsTangibleassetsIntangible assetsCapital work-in-Non-currentInvestmentsInvestments in EquityinstrumentsLong term loans <strong>and</strong>progresssadvances31st 31st31st31st31stOctober,March,March,March,March,2012 20122201120102009(` in lacs)31stMarch,200816403.71 1045.12 4975.40 16,346.42 1,475.46 2,453.48 11,890.56 2,213.18 1,645.63 11,242.26 2,950.92 16.788,777.11 3,688.65 50.827,441.883,688.65112.935,069.64 5,018.84 2,665.00 1,665.00 1,665.00 887.00-598.73 581.23 629.17 502.65 472.69 338.83Total non-currentassetsCurrent assetsInventoriesTrade ReceivablesCash <strong>and</strong>cashequivalentsShort-term loans <strong>and</strong>advancesOther current assetsTotal current assets28092.61 22268.66 6804.47 620.66 2027.21 2531.06 34252.05 25,875.43 21,688.99 7,592.33 552.76 2,048.68 2,917.94 34,800.70 19,043.54 16,576.29 7,996.17 738.53 2,467.62 2,420.48 30,199.09 16,377.61 11,148.51 7,898.89 484.32 3,511.07 1,829.95 24,872.74 14,654.27 8,134.25 8,496.53 602.21 1,719.08 797.90 19,749.97 12,469.294,947.807,691.05579.071,817.21846.8315,881.96Non-current liabilitiesLong-term borrowings Deferredtax liabilities(net)Other long termliabilitiesTotal non-currentliabilitiesCurrent liabilitiesShort term borrowings Trade payablesOther current liabilities 8414.27 1233.26 289.12 9936.65 19104.08 3645.96 3746.80 7,326.63 1,208.02 224.99 8,759.64 18,079.52 6,852.18 3,033.95 5,305.53 775.17 228.38 6,309.08 17,335.64 6,708.40 2,525.85 5,143.58 876.20 174.94 6,194.72 11,886.67 6,235.85 2,366.85 4,586.01 388.01108.635,082.65 9,529.61 5,255.91 2,198.05 7,306.1197.4739.427,443.006,964.423,591.721,182.6319
Scotts Garments LimitedParticulars31stOctober,201231stMarch,2012231stMarch,201131stMarch,201031stMarch,200931stMarch,2008Short-term provisionss 1587.79 1,166.59 934.88 1,581.00 1,077.46 1,728.35Total current liabilities 28084.63 29,132.24 27,504.77 22,070.37 18,061.03 13,467.12Net Worth24323.38 22,784.25 15,428.78 12,985.26 11,260.56 7,441.13Net worth representedby:Shareholders FundsShare CapitalEquity share capital 2,673.83 2,673.83 2,673.83 2,673.83 2,673.83 2,473.83Reservess & surplus<strong>Securities</strong> premium 2,496.96 2,496.96 2,496.96 2,496.96 2,496.96 1,296.96Amalgamation reserve 40.00 40.00 40.00 40.00 40.00 40.00Pr<strong>of</strong>it <strong>and</strong> loss account 19112.59 17,573.46 10,217.99 7,774.47 6,049.77 3,630.34Net worth24323.38 22,784.25 15,428.78 12,985.26 11,260.56 7,441.1320
Scotts Garments LimitedANNEXURE IISUMMARY STATEMENT OF PROFIT AND LOSSES, AS RESTATED(` in lacs)Particulars31stOctober,201231stMarch,201231stMarch,201131stMarch,201031stMarch,200931stMarch,2008Revenuee from operations 32939.88 50,025.46 49,527.73 43,017.07 36,387.70 33,113.23Other income593.43 6,587.83 847.14 418.91 1,055.86 162.72Total revenue33533.31 56,613.29 50,374.88 43,435.98 37,443.56 33,275.95EXPENSESCost <strong>of</strong> raw material <strong>and</strong>components consumed 17846.07 29,019.10 22,112.77 22,142.10 20,232.41 17,651.62Changedin inventories <strong>of</strong>finished goods <strong>and</strong>traded goods395.78 (3,538.98) 569.44 (2,517.85) (2,117.39) (750.28)Other expenses10027.39 17,372.02 20,022.64 16,602.70 13,381.50 11,161.83Total expenditure28269.23 42,852.13 42,704.85 36,226.95 31,496.52 28,063.17Earningsbefore interest,tax, depreciation <strong>and</strong>amortization (EBITDA) 5264.08 13,761.16 7,670.02 7,209.03 5,947.04 5,212.78Depreciation1158.90 1,442.12 1,452.06 1,239.81 990.34 851.87Finance charges1114.98 2,082.23 1,491.41 1,644.61 1,236.19 851.28Pr<strong>of</strong>it before tax2990.20 10,236.81 4,726.55 4,324.61 3,720.51 3,509.63Less: TaxexpenseCurrent tax expense923.93 1,400.00 1,334.53 1,052.18 708.09 1,097.50Deferredtax (credit)/charge25.23 432.85 (101.03) 488.19 290.54 187.42Total taxexpense949.15 1,832.85 1,233.50 1,540.37 998.63 1,284.92Pr<strong>of</strong>it after taxation 2041.05 8,403.95 3,493.06 2,784.24 2,721.88 2,224.7121
Scotts Garments LimitedANNEXURE IIISUMMARY STATEMENT OF CASH FLOWS AS RESTATEDParticularsA. Cash flow operatingactivitiesNet Pr<strong>of</strong>it before priorperiod item, tax <strong>and</strong>extraordinary itemsAdjustment for:Depreciation/amortisationFinance charges & loss onvariationon foreignexchangee rates31stOctober,201231stMarch,201231stMarch,201131stMarch,201031stMarch,20092990.20 10,236.81 4, 726.55 4,324.61 3,720.51 3, ,509.631158.90 1,442.12 1,452.06 1,239.81 1,014.261114.98 1,643.91 1,491.41 1,644.61 1,236.20(`in lacs)31stMarch,2008851.88851.28Bad debts written <strong>of</strong>fPr<strong>of</strong>it onsale <strong>of</strong> fixedassetsLoss on Sale <strong>of</strong> investmentDividendd income/capitalgainOperating pr<strong>of</strong>it beforeworkingcapital changesAdjustment for:Increase in inventoriesIncrease / ( decrease ) intrade payablesDecreasee / ( increase ) intrade receivables(Increase)/Decrease inloans & advancesIncome taxes paid ( net <strong>of</strong>refund)Net cashgenerated /(utilized) from operatingactivitiesB. Cash flow frominvesting activitiesPurchase<strong>of</strong> fixed assets Purchase<strong>of</strong> non-currentinvestmentSale <strong>of</strong> non-currentinvestmentDividendd ReceivedCapital SubsidyNet cashutilized---5264.08(579.66)(2798.01)(787.87)390.85(205.10)2860.03(3766.92) (50.80)--28.36(3789.36) 0.42--(5,998.07) 7,325.19(5,112.70) 341.66140.74232.52(1,028.12) 1,899.29(6,785.09) (4,972.06)8,359.2848.9078.29(3,270.68) ---(49.80)7, 620.22(5,427.78) 744.16(679.19) (832.14) (1,431.17) (5.90)(3,728.18) --49.80-(3,678.38) 15.26(49.80) 7,174.49 (3,014.27) 1,078.93 (805.08) (1,265.63) (740.44) 2,428.00 (3,730.71) 49.80-(3,680.91) (1.55)(869.43)(60.00) 5,039.99 (3,186.44) 879.43128.12 (1,006.92)(745.56) 1,108.62 (2,751.39) 91.4360.00-(2,599.96) 2.27(20.02)(184.88)5, ,010.16(1,376.39)369.92(3,664.72)25.00(1,444.26)(1,080.29)(2,437.45)(5,433.98)24.88-(7,846.55)22
Scotts Garments LimitedPublic Issueaggregatingg to ` [•] lacs:Which comprises <strong>of</strong> freshissue <strong>of</strong>Of which:Employee Reservation Portion #Net Issue to the PublicTHE ISSUE1,05,06,954 Equity Shares <strong>of</strong> `10/- eachUp to 4,50,000 Equity Shares*1,00,56,954 Equity SharesOf which:A) QIB Portion: #Of which 5% is available for Allocationto MutualFunds [the unsubscribed portion, if any, in theMutual Fundreservation will be available to QIBs]Balance for all QIBs including Mutual FundsB) Non- Institutional Portion: #C) Retail Portion: #Equity Shares outst<strong>and</strong>ingprior to the Issue:Equity Shares outst<strong>and</strong>ingpost the Issue:Use <strong>of</strong> Proceeds25,14,238* Equity Shares <strong>of</strong> ` 10/- each, constituting 25%<strong>of</strong> the Net Issue.1,25,712 Equity Shares<strong>of</strong> ` 10/- each23,88,526Equity Shares <strong>of</strong> `10/- eachNot less than 40,22,782* Equity Shares <strong>of</strong> ` 10/- each,constituting 40% <strong>of</strong> the Net Issue that will be availablefor allocation to Non-Institutionathan 35,19,934* Equity Shares <strong>of</strong> ` 10/- eachBidders.Not lessconstituting 35% <strong>of</strong> the Net Issue that will be availablefor allocation to RetailIndividual Bidders.2,84,77,380 Equity Shares <strong>of</strong> `10/- each3,89,84,334 Equity Shares <strong>of</strong> ` 10/- eachPlease refer to chapter titled “Objects <strong>of</strong> the Issue” onpage 44 <strong>of</strong> this Red Herring Prospectus for additionalinformation.Notes:• *In the event <strong>of</strong> over-subscription, Allotment shall be made ona proportionate basis, subject to valid Bidsbeing received at or above the Issue Price.• **Allotmentt to each Retail Individual Bidder shall not be less than theminimum Bid lot, subject toavailability <strong>of</strong> Equity Shares in the Retail Portion. The remaining availableEquity Shares, if any, inRetailPortion shall be allotted on a proportionate basis toRetail Individual Bidder.• #Subject to valid Bids being receivedat or abovethe Issue Price, under-subscription,if any, in theNon-or aInstitutionalPortion <strong>and</strong> Retail Portion would be allowed to be met with spill-over from other categoriescombinationn <strong>of</strong> categories at the discretion <strong>of</strong> our Company, in consultation with the BRLMs <strong>and</strong> theDesignated Stock <strong>Exchange</strong>. However, under-subscription, if any, in the QIB Portion will not be allowed tobe met withspill-over from other categories or a combination <strong>of</strong>categories. Under-subscription, if any,in theEmployee Reservation Portion will beadded to theNet Issue. Incase <strong>of</strong> under-subscription in the NetIssue,spill-over tothe extent <strong>of</strong>under-subscription shall be permittedto the Employee Reservation Portion subjectto the Net Issue constituting at least 25% <strong>of</strong> the fully diluted post-Issue paid up capital <strong>of</strong> our Company.• Our Company has, by way <strong>of</strong> a Pre-IPO Placement, allotted 17,39,130 Equity Sharesto CVCFL, for anaggregate consideration <strong>of</strong> `1999.99 lacs, at a premium <strong>of</strong> `105.00 per Equity Share24
Scotts Garments LimitedGENERAL INFORMATIONINCORPORATIONScotts Garments was formed on 01/12/1992 as partnership firmunder the <strong>India</strong>n Partnership Act, 1932. Thepartners <strong>of</strong> Scotts Garments promoted a Private Limited Company under Companies Act, 1956 as ‘ScottsGarments Private Limited’ vide Certificate <strong>of</strong> Incorporation dated 01/03/2002 issued by the Registrar <strong>of</strong>Companies, Bangalore, Karnataka with the main object to acquire the business <strong>of</strong> “Scotts Garments”. TheCompany was subsequently convertedinto a publiccompany <strong>and</strong> the name was changed to ‘Scotts GarmentsLimited’, <strong>and</strong>received a Certificate <strong>of</strong>Change <strong>of</strong> Name on 19/ /06/2007. TheCorporate Identity Number <strong>of</strong>the Companyis U18101KA2002PLC030185.ADDRESS OF THE COMPANYRegistered & Corporate Office:Company Identificationn NumberPAN481-B, IV Phase, PeenyaIndustrial Area, Peenya, Bangalore – 560 058;Tel.: +91-080-41179001/41179002/41179003/40858585; Fax: +91-080-28362452 / 41179007; Website: www.<strong>scotts</strong><strong>garments</strong>.comU18101KA2002PLC030185AAFCS9703CADDRESS OF REGISTRAR OF COMPANIESRegistrar <strong>of</strong> Companies, Bangalore, KarnatakaE-Wing, 2 nd Floor, Kendriya Sadana, Koramangala, Bangalore – 560 034BOARD OF DIRECTORS:Our <strong>Board</strong> <strong>of</strong>Directors comprises <strong>of</strong> the following:Sr. NoName <strong>of</strong> the directorDesignationStatus1. Mr. Naseer AhmedManaging DirectorExecutive <strong>and</strong> Non-Independent2. Mrs. Nuzhat Aisha NaseerDirectorExecutive <strong>and</strong> Non-Independent3. Mr. A. ArumughamDirectorNon-Executivee <strong>and</strong> Independent4. Mr. B.S.PatilDirectorNon-Executivee <strong>and</strong> Independent5. Mr. M.M. ChopraDirectorNon-Executivee <strong>and</strong> Independent6. Mr.AzeezullaBaigDirectorNon-Executivee <strong>and</strong> Independent7. Mr. C.R.MuraliDirectorNon-Executivee <strong>and</strong> Independent8. Mr. S. ThiruvadiNominee DirectorNon-Executivee <strong>and</strong> IndependentFor further details on the <strong>Board</strong> <strong>of</strong> Directors <strong>of</strong> our Company, please refer to the section titled “Management”beginning onpage 139 <strong>of</strong> this Red Herring ProspectusCOMPANY SECRETARYAND COMPLIANCE OFFICERMr. S. Guruswamy BabuCompany Secretary & Compliance Officer481-B, IV Phase, Peenya Industrial Area, PeenyaBangalore – 560 058;Tel.: +91-080-41179001/41179002/41179003/40858585;Fax: +91-080-41179007/28362452;E-mail: cs@<strong>scotts</strong><strong>garments</strong>.com25
LEGAL ADVISORS TO THE ISSUEDSK LEGALAdvocates1203, One <strong>India</strong>bulls Centre,Tower 2, Floor 12 B841, Senapati Bapat MargElphinstone Road, Mumbai-400 013Tel : +91-22-66588000,Fax : +91-22-66588001E mail : dkvasal@dsklegal.comContact Person : Mr. D. .K.VasalBANKERSTO THE COMPANYSTATUTORY AUDITORSSiddaiah & Ram,Chartered AccountantsNo.32/2, First Floor, Lalbagh Main Road,Bangalore - 560 027Tel: +91-80-22221590/22242540;Fax: +91-80-41145464Email: siddaiah<strong>and</strong>ram@airtelmail.inFirm Registration No.: 003860SScotts Garments LimitedPEERREVIEW AUDITORG Anantha & Co.,Chartered AccountantsSrinidhi, No.36 & 36/1, 1 st Floor,MallikarjunaTempleStreet,Basavanagudi, Bangalore - 560004Tel: +91-80-41204245Email: ganatha.co@gmail.comFirm Registration No.: 005160SCANARA BANKPrime Corporate branch,Shankarnarayana Bldg. 25, M.G. Road ;Bangalore – 560 001Tel: +91-80–25599105;Fax: +91-80-25599108;Email: parmeshwarkd@@canbank.co.in;Contact Person: Mr. ParmeshwarEXIM BANKCentre One Bldg., Floor 21, World Trade Complex,Cuffe Parade ; Mumbai – 400 005Tel:+91-22–22172600;Fax:+91-22-22183238;Email: eximoif@vsnl.com;Contact Person: Mr. PraneshSTATE BANK OF INDIAPeenya Industrial Estate,B-96, 2 nd Cross, Peenya, 1st Stage,Bangalore – 560 058 ;Tel: +91-80–25943260/25943263;Fax: +91-80-28394005;Email: sbi. 03024@sbi.co.in;Contact Person: Mr. Bh<strong>and</strong>arkarBOOK RUNNING LEAD MANAGERTO THE ISSUEKEYNOTE CORPORATE SERVICES LIMITEDThe Ruby, 9 th Floor,Senapati Bapat Marg,Dadar (w), Mumbai – 400028Tel: +91–22– 30266000-3;Fax: +91–22– 30266088E-mail : mbd@keynoteindia.netWebsite: www.keynoteindia.netContact person: Mr. Girish SharmaSEBI Reg No: INM 000003606CO- BOOK RUNNING LEADMANAGERTO THE ISSUECANARABANKMERCHANTBANKINGDIVISIONHimalaya House, 407,4th Floor,79, Mata Ramabai Ambedkar Marg, Mumbai - 400001Tel. : +91–22-22677405/05/06 ;Fax : +91–22-22677404E-mail : mbdcomcity@canarabank.comWebsite: www.canarabank.comContact person: Mr. Vasant SapkaleSEBIReg No: INM00000255826
Scotts Garments LimitedREGISTRAR TO THE ISSUELink Intime <strong>India</strong> Pvt. Ltd.C-13, Pannalal Silk Mills Compound,L.B.S. Marg, Bh<strong>and</strong>up (West), Mumbai 400078Tel : +91–22-25963838/25946970Fax: + 91–22-25946969E-mail: sgl.ipo@linkintime.co.inWebsite: www.linkintime.co.inContact Person: Mr. Sachin AcharSEBI RegnNo.: INR000004058Investors can contact the Compliance Officer or the Registrar in case <strong>of</strong> any pre-Issue or post-Issue relatedproblems such as non-receipt <strong>of</strong> letters <strong>of</strong> allocation, credit <strong>of</strong> allotted Equity Shares in the respectivebeneficiaryaccount or refund orders, etc.BANKERSTO THE ISSUE AND ESCROW COLLECTION BANKSAxis BankLimitedCanara Bank*Universal Insurance Building,Capital Market Services Branch,Sir P.M. Road, Fort,407, Himalaya House, 79,Mumbai – 400 001Mataa Ramabai Ambedkar Marg, Mumbai – 400 0051Tel: +91-22–40867299/40867371;Tel: +91-22–22661618/22692973;Fax: +91-22-40867327;Fax: +91-22-22664140;Email: rajesh.kh<strong>and</strong>elwal@axisbank..com;Email: cb2422@canarabank.com;Website: www.axisbank.comWebsite: www.canarabank.comContact Person: Mr.Rajesh Kh<strong>and</strong>elwalContact Person: Mr. Arvind N. PawarSEBI Reg: INBI00000017SEBI Reg: INBI00000019HDFC Bank LimitedHDFC Bank Ltd, FIG – OPS DepartmentLoadha, I Think TechnoCampus, O-3 Level,Next to Kanjurmarg Railway Station,Kanjurmarg (E), Mumbai – 400 042Tel: +91-22–30752928; Fax: +91-22-25799801;Email: uday.dixit@hdfcbank.com;Website: www.hdfcbank.comContact Person: Mr. Uday DixitSEBI Reg: INBI00000063IDBI Bank LimitedUnit No.2, Corporate Park, nearSwastik Chambers,Sion – Trombay Road, ChemburMumbai – 400 071Tel: +91-22–66908402; Fax: +91-22-66908424;Email: v.jayananthan@idbi.co.in;Website: www.idbibank.comContact Person: Mr. V JayananthanSEBI Reg: INBI00000076IndusInd Bank LimitedCash Management Services,Solitaire Corporate Park, No.1001,Building No.10, Gr. Floor, Guruhargovindji Marg,Andheri (E), Mumbai – 400 093Tel: +91-22–67723901 to3917; Fax: +91-22-6772 3998;Email: sanjay.vasarkar@@indusind.comWebsite: www.indusind.comContact Person: Mr. Sanjay VasarkarrSEBI Reg: INBI00000002*Canara Bank registrationwas valid till 15/11/2012. Canara Bankhas made application to SEBI for renewal <strong>and</strong>grant <strong>of</strong> permanent registration vide letter dated 04/08/2012.27
Scotts Garments LimitedSYNDICATE MEMBERKEYNOTEE CAPITALS LIMITEDThe Ruby, 9 th Floor,Senapati Bapat Marg,Dadar (w),Mumbai – 400028Tel: +91–22– 30266000/ /48;Fax: +91–22– 30266088E-mail : kcl@keynoteindia.netWebsite: www.keynotecapitals.comContact person: Mr. Ankur MestrySEBI Reg No: BSE - INB010930556, NSE - INB 230930539SELF CERTIFIED SYNDICATE BANKSThe list <strong>of</strong> banks that have been notified by SEBIto act as SCSBs for the ASBA processs is provided on thewebsite <strong>of</strong> SEBI at http:/ //www.sebi.gov.in/sebiweb/home/list/5/33/0/0/Recognised-Intermediaries. Application Forms submittedby ASBA Bidders, please refer to the above-mentioned link.Fordetails <strong>of</strong> the Designated Branches <strong>of</strong> the SCSBs which shall collect Bid cumThe list <strong>of</strong> banks where syndicate/sub syndicate membercan submit ASBA forms is available onhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1350298477356.htmlSTATEMENT OF INTER SE ALLOCATION OFRESPONSIBILITYThe following table sets forth the distribution <strong>of</strong> responsibility <strong>and</strong> co-ordination for various activitiesamong Keynote Corporate Services Limited (Keynote) (Book Running Lead Manager to the Issue/BRLM)<strong>and</strong> Canara Bank Merchant Banking Division (Canara Bank) (Co-Book Running Lead Manager to theIssue/Co-BRLM).Sr.ActivityNo.1. CapitalStructuringwith the relative components <strong>and</strong>formalities such as type <strong>of</strong> instruments, etc.2. Conducting a duediligence <strong>of</strong> theCompany’soperations/management/businessplans/ /legal, etc.Drafting <strong>and</strong> designing the DraftRed HerringProspectus /Red Herring Prospectus / Prospectus. Ensuring compliancewith the SEBI (ICDR) Regulations 2009 <strong>and</strong> other stipulatedrequirements <strong>and</strong> completion <strong>of</strong> prescribed formalities withthe Stock <strong>Exchange</strong>s, RoC <strong>and</strong> SEBI3. Primary co-ordination with SEBI, RoC <strong>and</strong> Stock <strong>Exchange</strong>sup to bidding <strong>and</strong> coordinatinginterface with lawyers foragreements4. Primary co-ordination <strong>of</strong> drafting/pro<strong>of</strong>ing <strong>of</strong> the design <strong>of</strong>theRed HerringProspectus, bid formsincludingmemor<strong>and</strong>um containing salientfeatures <strong>of</strong> the Prospectuswith the printers. Primary coordination <strong>of</strong> the drafting <strong>and</strong>approving the statutory advertisement.5. Drafting <strong>and</strong> approving all publicity material other thanstatutory advertisement as mentioned in (4) aboveResponsibilityKeynoteKeynotee & Canara BankKeynotee & Canara BankKeynoteKeynoteCo-ordinatorKeynoteKeynoteKeynoteKeynoteKeynote28
Scotts Garments LimitedSr.No.Activityincluding corporate advertisement, brochure, etc.ResponsibilityCo-ordinator6. Appointing the Registrars, Appointing Bankers to the Issue,Appointingother intermediariesviz., printers <strong>and</strong>advertising agency7. Marketing <strong>of</strong> the Issue, which will cover inter alia:• Formulatingmarketingstrategies,preparation<strong>of</strong>publicity budget,• Finalising media & public relations strategy,• Finalising centers for holdingconferencesfor press <strong>and</strong>brokers etc,• Finalising collection centers,• Following-up ondistribution <strong>of</strong> publicity <strong>and</strong> Issuematerial including form, prospectus <strong>and</strong> deciding on thequantum <strong>of</strong> the Issue material,• Preparing all road show presentations,• Appointment <strong>of</strong> brokers to theissue, <strong>and</strong>• Appointment<strong>of</strong>underwriters <strong>and</strong> entering intounderwriting agreement.8. Coordinating institutional investor meetings, coordinatingpricingdecisions <strong>and</strong> institutional allocation in consultationwith the Company9. Finalising the Prospectus <strong>and</strong> RoC filing10. Co-ordinatingpostbiddingactivitiesincludingmanagement <strong>of</strong> Escrow accounts, coordinating withregistrar <strong>and</strong> dispatch <strong>of</strong> refundsto Bidders, etc.11. Follow-up with the bankers to the issue to get quickestimates <strong>of</strong> collection <strong>and</strong> advising the issuerabout closure<strong>of</strong> the issue, based on the correct figures.12. The Post-Issue activities for the Issue will involve essentialfollow up steps, which include finalizing basis <strong>of</strong> allotment/ weeding out <strong>of</strong>multiple applications,the listing <strong>of</strong>instruments <strong>and</strong> dispatch <strong>of</strong> certificates <strong>and</strong> dematerializeddelivery <strong>of</strong> shares with the various agencies connected withthe work such as the Registrars to the Issue <strong>and</strong> Bankers tothe Issue <strong>and</strong> the bank h<strong>and</strong>ling refund business.The BRLM <strong>and</strong> Co-BRLM agencies fulfill their functions <strong>and</strong> enable it toshall be responsible for ensuringthat thesedischarge this responsibility through suitable agreementswith the Company.KeynoteKeynoteKeynoteKeynoteKeynotee & Canara BankKeynoteKeynotee & Canara BankKeynoteKeynoteKeynoteKeynoteKeynoteCanara BankCanara BankCREDIT RATINGAs this is anIssue <strong>of</strong> Equity Shares, there is no requirement <strong>of</strong> credit rating for this Issue.29
Scotts Garments LimitedIPO GRADINGCredit Analysis <strong>and</strong> Research Limited(CARE) has been appointed for grading <strong>of</strong> the issue.CARE has assigned a ‘CARE IPO Grade 3’ [GradeThree] to the proposed Initial Public Offer (IPO) <strong>of</strong>ScottsGarments Limited. CAREIPO Grade 3 indicates average fundamentals. CARE assigns IPO grades on a scale<strong>of</strong> Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals<strong>and</strong> Grade 1 indicatingpoorfundamentals. CARE’s IPO grading assigned represents relative assessment <strong>of</strong> the ‘fundamentals’<strong>of</strong> theissuer.The gradingg takes into account experienced promoter <strong>and</strong> management team, company’s long <strong>and</strong>goodoperational track record, established <strong>and</strong> long st<strong>and</strong>ing relation with reputed clients spread across globalmarkets, stable income growth, relatively stable margins <strong>and</strong> strong return on networth.The gradingg assigned isconstrainedby SGL’s customer <strong>and</strong> business concentration risk with 50-60% <strong>of</strong>revenue being derived from a single client <strong>and</strong> significant share <strong>of</strong> revenuee derived from Europe which isfaced with extended economic downturn, working capital intensive nature <strong>of</strong> operation owing tohighinventory days, project implementation risk on account <strong>of</strong> significant capex in next one year.TRUSTEESSAs this is anIssue <strong>of</strong> Equity Shares, the appointment <strong>of</strong> trusteess is not required.MONITORING AGENCYNo agency has been appointed to monitor the utilization <strong>of</strong> funds.APPRAISING AGENCYThe Project has not been appraised byany Bank orFinancial Institution.BOOK BUILDING PROCESSThe Book Building Process, with reference to the Issue, refers tothe process <strong>of</strong> collection <strong>of</strong> Bids on the basis<strong>of</strong> the Red Herring Prospectus withinthe Price B<strong>and</strong>. The IssuePrice is finalised after theBid/Issue ClosingDate. The principal parties involved inthe Book Building Process are:• The Company;• The Book Running Lead Manager, in this casebeing Keynote Corporate Services Limited <strong>and</strong> CanaraBank Merchant Banking Division• Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/NSE<strong>and</strong> eligible to act as Underwriters. The Syndicate Members are appointed by the Book RunningLeadManager;• Registrarr to the Issue;• Escrow Collection Banks <strong>and</strong>• Self Certified Syndicate BanksThe Issue isbeing made through the 100% Book Building Process where 25%<strong>of</strong> the Issueto the public shallbe allocatedon a proportionate basis to eligiblee Qualified Institutional Buyers (“QIBs”). 5% <strong>of</strong> the QIBPortion shall be availablefor allocation on a proportionate basiss to Mutual Funds only. The remainderr <strong>of</strong> theQIB Portionshall be available for allocation on a proportionate basis to all other eligible QIBs, includingMutual Funds, subject tovalid Bids being receivedat or above the Issue Price. Further, not less than 40% <strong>of</strong>the Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders<strong>and</strong> not lesss than 35% <strong>of</strong>the Issue to the public shall be available for allocation on a proportionate basis toRetail Individual Bidders, subject to valid Bids being received at or above theIssue Price.30
Scotts Garments LimitedIn accordance with theSEBI Regulations, QIBs are not allowed to withdraw their Bid(s) after theBid/Issue Closing Date.In additionQIBs are now required to pay full 100% <strong>of</strong> the Bid Amountuponsubmission<strong>of</strong> the Bid cum Application Form during the Bid/ /Issue Period<strong>and</strong> allocation to QIBs will beon a proportionate basis. For furtherr details, see section “Terms <strong>of</strong> the Issue” on page no. 231 <strong>of</strong> this RedHerring Prospectus.Allocation to QIBs will be on proportionate basis.The Company shall comply with the SEBI Regulations <strong>and</strong> anyother ancillary directionsissued by SEBI forthis Issue. In this regard, the Company has appointed the Keynote Corporate Services Limited <strong>and</strong> CanaraBank Merchant Banking Division as the Book Running Lead Manager to manage the Issue.The processs <strong>of</strong> Book Building underthe SEBI Regulations is subject to change from time to time <strong>and</strong> theinvestors are advised to make their own judgment about investment through this process prior to makinga Bid or application in the Issue.Illustration<strong>of</strong> Book Building <strong>and</strong> Price Discovery Process (Investors shouldnote that thisexample is solely forillustrative purposes <strong>and</strong> isnot specific tothe Issue)Bidders canbid at any price within the price b<strong>and</strong>.For instance, assuming a price b<strong>and</strong> <strong>of</strong>` 40/- to `48/- pershare, issuesize <strong>of</strong> 6,0000 equity shares <strong>and</strong> receipt<strong>of</strong> nine bidsfrom bidders, details <strong>of</strong> which are shown inthe table below, the illustrative bookwould be as below. A graphical representation <strong>of</strong> the consolidateddem<strong>and</strong> <strong>and</strong> price would be madeavailable at the bidding centres’ during the bidding period. Theillustrative book as shown below indicates the dem<strong>and</strong> for the shares <strong>of</strong> theCompany atvarious prices <strong>and</strong>is collated from bids fromvarious investors.Bid Quantity5007001,0004005002002,7008001,200Bid Price484746454443424140(`)Cumulative Quantity5001,2002,2002,6003,1003,3006,0006,8008,000Subscription8.33%20.00%36.67%43.33%51.67%55.00%100.00%113.33%133.33%The price discovery is a function <strong>of</strong> dem<strong>and</strong> at various prices. The highest price at which the issuer is able toissue the desired quantum <strong>of</strong> shares is the price atwhich the book cuts <strong>of</strong>f i.e. ` 42/- in the above example.The issuer, in consultation with the BRLM <strong>and</strong> Co-BRLM at or abovethis issue price <strong>and</strong> cut-<strong>of</strong>f bids are valid bids <strong>and</strong> arewill finalize the issue price at orbelow such cut-<strong>of</strong>fprice i.e. at or below ` 42/-. All bidsconsidered for allocationin respectivee category.Steps to be taken by theBidders for Bidding1. Check eligibility for making a Bid (see section titled “Issue Procedure - Who Can Bid?”on page no. 263 <strong>of</strong>this Red Herring Prospectus);2. Ensure that you have a active dematerialised account <strong>and</strong> the dematerialised account details are correctlymentioned in the Bid cum Application Form;3. Ensure that you havementioned your PAN (see “Issue Procedure – PAN” on page no. 263 <strong>of</strong> this RedHerring Prospectus); <strong>and</strong>31
Scotts Garments Limited4. Ensure that the Bid cum Application Form is duly completed as perinstructionss given in this RedHerring Prospectus <strong>and</strong> in the Bid cum Application Form;5. Ensure the correctness <strong>of</strong> your demographic details givendetails recorded with your Depository Participantsin the Bid cum Application Form, with the6. Bids by QIBs <strong>and</strong> Non-Institutional Investors shall be submitted only through the ASBA process; <strong>and</strong>7. ASBA Bidders will have to submit their Bids (physical form) to the Designated Branches except for theASBA Bids in the Specified Cities. In case <strong>of</strong> theSpecified Cities, the ASBA Bids may either be submittedwith theDesignated Branches orwith the Syndicate. ASBA Bidders should ensure that the ASBAAccount has adequate credit balance at the time <strong>of</strong> submission <strong>of</strong> the Bid cum Application Formto theSCSB to ensure that the Bid is not rejected.Withdrawal <strong>of</strong> the IssueThe Company, in consultation with the BRLM <strong>and</strong> Co-BRLM, reserves the right not toproceed with theissue after the bidding <strong>and</strong> if so, the reason there<strong>of</strong> shall be given as a public notice within two days<strong>of</strong> theclosure <strong>of</strong> the issue. The public notice shall beissued in the same newspapers where the pre-issueadvertisement had appeared. The stock exchangeswhere the specified securities were proposed to belistedshall also beinformed promptly. If the Company withdraws the Issue after the Bid/Issue Closing Date <strong>and</strong>thereafter determines that it will proceed with aninitial public <strong>of</strong>fering <strong>of</strong>its Equity Shares, it shall file afresh draft red herring prospectus with the SEBI.Bid/Issue ProgrammeBidding Period/Issue PeriodBID/ISSUE OPENS ONBID/ISSUE CLOSES ONApril 25, 2013April 29, 2013Bids <strong>and</strong> any revision inBids shall be accepted only between10.00 a.m. <strong>and</strong> 3.00 p.m. (<strong>India</strong>n St<strong>and</strong>ardTime) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cumApplicationForm. On the Bid/IssueClosing Date, Bids (excluding the ASBA Bidders)shall be uploadeduntil (i) 4.000 p.m. in case<strong>of</strong> Bids by QIB Bidders, Non- Institutional Bidders <strong>and</strong> (ii) until 5.00 p.m. or suchextended time as permitted by the NSE <strong>and</strong> theBSE, in case<strong>of</strong> Bids by Retail Individual Bidders. It isclarified that Bids not uploaded in thebook, would be rejected. Bids by ASBA Bidders shall be uploaded bythe SCSB in the electronic system to be provided bythe NSE <strong>and</strong>the BSE.In case <strong>of</strong> discrepancy inthe data entered in the electronic book vis-à-vis the data contained in the physicalBid form, for a particularr bidder, the details as perphysical application form<strong>of</strong> that Bidder may be taken asthe final data for the purpose <strong>of</strong> allotment. In case<strong>of</strong> discrepancy in the data entered in the electronic bookvis-à-vis thedata contained in the physical or electronic Bid cum Application Form submitted through theASBA process, for a particular ASBAA Bidder, the Registrar to the Issue shall ask for rectified data from theSCSB.Due to limitation <strong>of</strong> time available for uploadingthe Bids on the Bid/Issue Closing date, the bidders areadvised to submit their Bids one day prior to the Bid/Issue Closing Date <strong>and</strong>, in any case, no later than thetimes mentioned above on the Bid/ Issue ClosingDate. All times are <strong>India</strong>n St<strong>and</strong>ardd Time. Bidders arecautioned that in the event a large number <strong>of</strong> Bids are received on the Bid/Issue Closing Date, as is typicallyexperiencedin public <strong>of</strong>ferings, someBids may not get uploaded due to lack <strong>of</strong> sufficient time. Such Bidsthat cannot be uploaded will not be considered forallocation under the Issue. If such Bids are not uploaded,32
the Issuer, BRLM <strong>and</strong> Co-BRLM <strong>and</strong> Syndicate members will not be responsible. Bids will be accepted onlyon Businesss Days, i.e., Monday to Friday (excluding any public holidays).The Company reserves the right to revise the PriceB<strong>and</strong> duringthe Bid/Issue Period in accordance with theSEBI Regulations provided that the Cap Price is less than or equal to 20% <strong>of</strong>the Floor Price. The Floor Pricecan be revised up or down to a maximum <strong>of</strong> 20% <strong>of</strong> the Floor Price advertised at least oneday before the Bid/Issue Opening Date.In case <strong>of</strong> revision <strong>of</strong> the Price B<strong>and</strong>,the Issue Period will be extended forthree additional working daysafter revision <strong>of</strong> the Price B<strong>and</strong> subject to the total Bid /Issue Period not exceeding 10 working days. Anyrevision in the Price B<strong>and</strong> <strong>and</strong> therevised Bid/Issue, if applicable, will be widelydisseminated bynotification to the BSE <strong>and</strong> the NSE, by issuing a press release <strong>and</strong> also by indicating the changes on the websites <strong>of</strong> the BRLM <strong>and</strong> Co-BRLM <strong>and</strong> at the terminals <strong>of</strong> the Syndicate.Underwriting AgreementAfter the determination<strong>of</strong> the Issue Price but prior to filing <strong>of</strong> the Prospectus with Registrar <strong>of</strong> Companies,Bangalore, Karnataka the Company will enter into an Underwriting Agreement with the Underwriters forthe Equity Shares proposed to be issued through this Issue. It is proposed that pursuantto the terms<strong>of</strong> theUnderwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in theeventthat the Syndicate Members do not fulfil their underwritingobligations. Pursuant to the terms <strong>of</strong> theUnderwriting Agreement, the obligations <strong>of</strong> the Underwriters are several <strong>and</strong> not joint, <strong>and</strong> are subject tocertain conditions as specified in suchagreement.The Underwriters have indicated their intention tounderwrite the followingnumber <strong>of</strong> Equity Shares:(This portionhas been intentionally leftblank <strong>and</strong> will be filled in before filing <strong>of</strong> the Prospectus with Registrar <strong>of</strong>Companies, Bangalore, Karnataka)Name <strong>and</strong> Address <strong>of</strong> the Underwriters[•][•]TotalIndicated Number <strong>of</strong> EquityShares to be Underwritten[•][•][•]Scotts Garments LimitedAmount Underwritten(` in lacs)[•][•][•]The above-mentioned amount is an indicative underwriting <strong>and</strong> would be finalized afterpricing <strong>and</strong> actualallocation. The above underwriting agreement is dated [•]. In the opinion <strong>of</strong> the <strong>Board</strong> <strong>of</strong> Directors <strong>of</strong> theCompany (based on a certificate given by the Underwriters) ), the resources <strong>of</strong> all theabove mentionedUnderwriters are sufficient to enable them to discharge their respective underwriting obligations in full. Allthe above-mentioned Underwriters are registered with SEBI <strong>and</strong> are eligiblee to underwrite as per applicableguideline.Allocation among Underwriters maynot necessarily be in proportion to their underwriting commitments.Notwithst<strong>and</strong>ing the above table, theBRLM <strong>and</strong> the SyndicateMembers shall be severally responsible forensuring payment with respect to Equity Shares allocated to investors procured by them.In the event <strong>of</strong> anydefault, therespective underwriterin addition to other obligations to be defined inthe UnderwritingAgreement,will also be required to procure/subscribe to the extent <strong>of</strong> thedefaulted amount. For furtherdetails about allocation please refer to “Other Regulatory <strong>and</strong>Statutory Disclosures” on page 219 <strong>of</strong> thisOffer Document.33
Scotts Garments LimitedCAPITAL STRUCTUREThe share capital <strong>of</strong> the Company as on the date <strong>of</strong> filing <strong>of</strong> this Red Herring Prospectuss with SEBI isas setforth below:Share CapitalA. Authorized Capital:4,40,00,000 Equity Shares <strong>of</strong> Facevalue <strong>of</strong> `10. eachB. Issued,Subscribed <strong>and</strong> Paid Up Capital before this Issue:2,84,77,380Equity Shares <strong>of</strong> the FaceValue <strong>of</strong> `100 /- eachC. PresentIssue in terms <strong>of</strong> this Red Herring Prospectus:*1,05,06,954 Equity Shares <strong>of</strong> the Face Value <strong>of</strong>`10 /- eachOf WhichEmployee Reservation Portion includes 4,50,000 EquityShares <strong>of</strong>the Face Value `10 /- each (1)D. Net Issue to public1,00,56,954 Equity Share <strong>of</strong> the Face Value <strong>of</strong> `10 /- eachOf whichi) QIBportion <strong>of</strong> 25,14,238 Equity Sharesii) NonInstitutional Portion not less than 40,22,782 EquityShares (2)iii) Retail Portion <strong>of</strong> not less than35,19,934 Equity Shares (2)E. Issued, Subscribed <strong>and</strong> Paid-Up Capital after this Issue3,89,84,334 Equity Shares <strong>of</strong> the Face Value <strong>of</strong> `10/- each<strong>Securities</strong> Premium AccountBefore this IssueAfter this IssueAggregateAggregateeValue atValue atIssue PriceNominal Price.(Amount in(Amount in`)`)44,00,00,000 44,00,00,00028,47,73,800 [•]10,50,69,540 [•]45,00,000 [•]10,05,69,540 [•]2,51,42,380[•]4,02,27,820[•][•]3,51,99,34038,98,43,340 [•]` Lacs4323.05[•](1) The aggregate <strong>of</strong> reservation for employees shall not exceed five per cent <strong>of</strong> the post issue capital <strong>of</strong> theCompany. Further, under subscription, if any, inthe Reservation for Eligible Employees, shall be addedback to the Net Issue <strong>and</strong>will be considered for allotment only on a proportionate basis(2) Subject tovalid Bids being received at or above the Issue Price, under-subscription,if any, in theNon-orInstitutional Portion <strong>and</strong>Retail Portion would be allowed to bemet with spill-over fromother categoriesa combination <strong>of</strong> categories at the discretion <strong>of</strong> our Company, in consultation with the BRLMs <strong>and</strong> theDesignated Stock <strong>Exchange</strong>. However, under-subscription, if any, in the QIB Portion will not be allowed tobe met withspill-over from other categories or a combination <strong>of</strong>categories. Under-subscription, if any,in theEmployee Reservation Portion will beadded to theNet Issue. In case <strong>of</strong> under-subscription in the NetIssue,spill-over tothe extent <strong>of</strong>under-subscription shall be permittedto the Employee Reservation Portion subjectto the Net Issue constituting at least 25% <strong>of</strong> the fully diluted post-Issue paid up capital <strong>of</strong> our Company.34
Scotts Garments Limited• Our Company has, by way <strong>of</strong> a Pre-IPO Placement, allotted 17,39,130 Equity Sharesto CVCFL,aggregate consideration <strong>of</strong> `1999.99 lacs, at a premium <strong>of</strong> `105.00 per Equity Sharefor anDetails <strong>of</strong>increase in the authorizedshare capital, since incorporation, areas follows:Sr.No.Details <strong>of</strong> increase in authorized share capitalDate<strong>of</strong> Resolution1. Incorporationn ` 10.00 Lacsdivided into 1,00,000 Equity Shares <strong>of</strong> ` Memor<strong>and</strong>um <strong>of</strong>10/- each.Association2. Increased to ` 100.00 Lacsdivided into10,00,000 Equity Shares <strong>of</strong> ` 31/03/200310/- each.3. Increased to `200.00 Lacs divided into20,00,000 Equity Shares <strong>of</strong> ` 03/10/200510/- each.4. Increased to ` 2000.00 Lacs divided into 2,00,00,000 Equity Shares <strong>of</strong> 27/03/2006` 10/- each.5. Increased to ` 4000.00 Lacs divided into 4,00,00,000 Equity Shares <strong>of</strong> 01/09/2007` 10/- each.6. Increased to ` 4400.00 Lacs divided into 4,40,00,000 Equity Shares <strong>of</strong> Pursuant to Scheme <strong>of</strong>`10/- each.amalgamation**Increase inauthorized capital pursuant to Scheme <strong>of</strong> Amalgamation between Arora Fashions Limited(Transferor)<strong>and</strong> Scotts Garments Limited (Transferee) as approved by theHonourableHigh Court <strong>of</strong>Karnataka. For details <strong>of</strong>the Scheme <strong>of</strong> Amalgamation please refer page no. 132 <strong>of</strong> this RHPNotes to capital structure1. Share capital history <strong>of</strong> the companyEquity Share capital historyDate <strong>of</strong>Allotment01/03/0231/03/0304/10/0528/03/0614/03/0720/04/0712/10/0712/12/07Number<strong>of</strong> EquitySharesFaceValue (`)IssuePrice(`)Consideration(cash, bonus,considerationother than cash)10,000 10 10.00 Cash9,90,0001,0001,20,12,0003006,00,00063,85,0003,55,00010 10.00 Cash10 33.00 Cash10 Nil10 10.00 Cash10 N..A. (1)Bonus @ 12:1Scheme <strong>of</strong>Amalgamation10 10.00 Cash10 10.00 CashReasons for allotmentCumulative Equity(bonus, swap etc.) Share Capital(no. <strong>of</strong> shares)Initial subscription at the10,000time <strong>of</strong> incorporationAllotment toPromoter10,00,000<strong>and</strong> Promoter GroupAllotment to Promoter10,01,000GroupAllotment to Promoter 1,30,13,000<strong>and</strong> Promoter GroupAllotment to Promoter 1,30,13,300Group <strong>and</strong>Non-Allotment to members <strong>of</strong> 1,36,13,300Scotts ClothingPvt. Ltd.Pursuant to approval <strong>of</strong>promotersschemee <strong>of</strong>amalgamation*Allotment to Promoter & 1,99,98,300Promoter Group <strong>and</strong>Non-PromotersAllotment to Promoter 2,03,53,30035
Date <strong>of</strong>AllotmentNumber<strong>of</strong> EquitySharesFaceValue (`)IssuePrice(`)Consideration(cash, bonus,considerationReasons for allotment(bonus, swap etc.)Cumulative EquityShare Capital(no. <strong>of</strong> shares)other than cash)Group12/12/07 15,000 10 20.00 CashAllotment to PromoterGroup <strong>and</strong>Non-2,03,68,300Promoter12/12/07 1,05,000 10 40.00 Cash Allotment to Non-Promoters2,04,73,30012/12/07 2,89,000 10 50.00 Cash Allotment to Non-Promoters2,07,62,30002/02/08 98,500 10 20.00 Cash Allotment to Non-Promoters2,08,60,80010/03/08 71,000 10 20.00 Cash Allotment to Non-Promoters2,09,31,80031/03/08 30,20,000 10 30.00 Cash Allotment to Non-Promoters2,39,51,80031/03/08 75,000 10 50.00 Cash Allotment to Non-Promoters2,40,26,80031/03/08 3000 10 60.00 Cash Allotment to Non-Promoter2,40,29,80031/03/08 7,08,450 10 80.00 Cash Allotment to Non-Promoter2,47,38,25031/03/09 20,00,000 10 70.00 Cash Allotment to Non-Promoter2,67,38,25026/12/12 17,39,130 10 115.00 CashAllotment to Emerging<strong>India</strong> Growth Fund2,84,77,380CVCF V under Pre IPOplacement*Allotment pursuant to the scheme <strong>of</strong>amalgamation between Scotts Clothing Pvt. Ltd. (Transferor) <strong>and</strong>Scotts Garments Limited(Transferee) as approved by Hon’ble High Court <strong>of</strong> Karnataka vide orderdated 02/04/2007 with effect from 01/04/2006. For details <strong>of</strong> the Scheme <strong>of</strong>Amalgamation please referpage no. 1311 <strong>of</strong> this RHP.(1) Six Shares <strong>of</strong> Scotts Garments Limited <strong>of</strong> face value <strong>of</strong> ` 10.00 each were allotted against one share <strong>of</strong>Scotts Clothing Private Limited <strong>of</strong> facevalue <strong>of</strong> ` 100.00 eachThe details <strong>of</strong> the allotment pursuant to scheme <strong>of</strong> amalgamation are as follows:Scotts Garments LimitedSr. NoName <strong>of</strong> the Allottees1 Mr. Naseer Ahmed2 Mrs. Nuzhat Aisha Naseer3 Mr. Loganathan4 Mr. PalanisamyTotalNo. <strong>of</strong> Shares <strong>of</strong> theCompanyAllotted4185001500900009000060000036
Scotts Garments Limited2. Promoter Holding:History <strong>of</strong> Share Capital held by the promoter:Name <strong>of</strong> Date <strong>of</strong>Nature <strong>of</strong>the Conside-PromoterrAllotmentIssueration/Transfer(Allotment/Transfer)Number<strong>of</strong>SharesFaceValue(`)Issue/TransferPrice(`)% age <strong>of</strong>PreIssueCapital% age <strong>of</strong>PostIssueCapitalInitial01/03/2002Subscription to Cash9, ,000 10 10.00 0.03 0.02MOA31/03/2003 AllotmentCash 8,91, ,000 10 10.00 3.13 2.2904/10/2005 TransferCash1, ,000 10 10.00NegliNegligible gibleMr. NaseerAhmed28/03/2006 AllotmentSchemee <strong>of</strong>BonusOtherthan1,08,12, ,000 10 Nil 37.97 27.7320/04/2007Amalgamationcash 4,18, ,500 10 N.A (1) 1.47 1.0712/10/2007 AllotmentCash 4,20, ,000 10 10.00 1.47 1.0826/09/2008 TransferCash3, ,000 10 10.00 0.01 0.0127/08/2010 Transfer*Cash 90, ,000 10 10.00 0.32 0.23Total1,26,44, ,500 1044.40 32.43(1) Six Shares <strong>of</strong> Scotts Garments Limited <strong>of</strong> face value <strong>of</strong> ` 10.00 each were allotted against one share <strong>of</strong>Scotts Clothing Pvt Limited <strong>of</strong> face value <strong>of</strong> ` 100.00 each*Mr. Loganathan transferred 90,000 equity shares on 27/08/2010 to Mr. Naseer Ahmed.These shares wereallotted to Mr. Loganathan pursuant to the Scheme <strong>of</strong> Amalgamation between Scotts Clothing PrivateLimited <strong>and</strong>Scotts Garments Pvt. Ltd. on 20/04/2007. The equity shares were transferred at the facevalueon request <strong>of</strong> the transferor.3. Promoterr contributionn locked-in for three years:The eligiblee shares for Lock-in as per Chapter IV<strong>of</strong> ICDR Regulations, 2009 for a period <strong>of</strong> 3 years is asunder:Name <strong>of</strong> Date <strong>of</strong>Nature <strong>of</strong>the Conside-Number<strong>of</strong> Face Issue/ % age <strong>of</strong> % age <strong>of</strong>PromoterrAllotmentIssuerationSharesValue Transfer PrePost/Transfer(Allotment/(`) Price Issue IssueTransfer)(`) Capital CapitalMr. NaseerAhmedTOTAL27/08/2010 Transfer26/09/2008 Transfer12/10/2007 AllotmentSchemee <strong>of</strong>20/04/2007Amalgamation28/03/2006 AllotmentCash 90, ,000 10Cash3, ,000 10Cash 4,20, ,000 10Otherthancash 4,18, ,500 10Bonus68,65, ,500 1077,97, ,00010.0010.0010.00Specific written consent has been obtained from the Promoter for inclusion <strong>of</strong> the Equity Shares for ensuringlock-in <strong>of</strong> three years to the extent <strong>of</strong> minimum 20% <strong>of</strong> post-Issue paid-up equity share capital from the date<strong>of</strong> allotmentt in the proposed public issue. Promoters’ contribution does not consist <strong>of</strong> anyprivate placementmade by solicitation <strong>of</strong> subscription from unrelatedpersons either directly orthrough anyintermediary.N.ANil0.32 0.230.01 0.011.47 1.081.47 1.0724.11 17.6127.38 20.0037
Shares heldby the person other thanthe Promoter, prior to this Issue, which are subject to lock in as perRegulation 37 <strong>of</strong> SEBI (ICDR) Regulations 2009, may be transferred to any other person holding shareswhich are locked in, subject to continuation <strong>of</strong> lock –in in the h<strong>and</strong>s <strong>of</strong> transferees for the remaining period<strong>and</strong> compliance <strong>of</strong> <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> (Substantial Acquisition <strong>of</strong> Shares <strong>and</strong> Takeovers)Regulations, 1997 as applicable.Shares heldby Promoter(s) which arelocked in asper the relevant provisions <strong>of</strong> Regulation 36 <strong>of</strong> the SEBIRegulations, may be transferred to <strong>and</strong> amongst Promoter/Promoter group or to a new promoter or personsin control <strong>of</strong> the Company, subject tocontinuationn <strong>of</strong> lock –in in the h<strong>and</strong>s <strong>of</strong> transferees for the remainingperiod <strong>and</strong> compliance <strong>of</strong> <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> (Substantial Acquisition <strong>of</strong> shares <strong>and</strong>Takeovers) Regulations, 1997, as applicable. As per Regulation 39 <strong>of</strong> SEBI (ICDR) Regulations, 2009, thelocked-in Equity Shares held by the Promoter(s) can be pledged only with banks or financial institutions ascollateral security for loans granted by such banksor financial institutions, provided thepledge <strong>of</strong> shares isone <strong>of</strong> the terms <strong>of</strong> sanction <strong>of</strong> such loan. Provided that if securities are locked in as minimum promoters’contributionn under Regulation 36 <strong>of</strong> the SEBI Regulations, the same may bepledged, only if, in addition t<strong>of</strong>ulfilling therequirements <strong>of</strong> this clause, the loan has been granted by such banks or financial institutions forthe purpose<strong>of</strong> financingone or more <strong>of</strong> the objects<strong>of</strong> the issue.Other than those shares that are locked in aspromoter’s contribution for three years, the entire pre-issue share capital will be locked infor a period <strong>of</strong> oneyear from the date <strong>of</strong> allotment in thispublic issue.4. The shareholding pattern <strong>of</strong> the Company before <strong>and</strong> after the Issue is as follows:Scotts Garments LimitedCategory <strong>of</strong>Shareholder(A) Shareholding<strong>of</strong> Promoter <strong>and</strong>Promoter Group<strong>India</strong>nIndividuals/Hindu UndividedFamilyCentralGovernment/ StateGovernmentBodies CorporateFinancialInstitutions/ BanksAnyOthers(Specify)SubTotal (A)(1)ForeignIndividuals (Non-Individuals/ForeignIndividuals)Bodies CorporateResidentInstitutionsAnyOther(Specify)SubTotal (A)(2)No. <strong>of</strong>Shareholders14Nil1NilNil15NilNilNilNilNilTotal No.<strong>of</strong> Shares1,55,11,100Nil48,31,250NilNil2,03,42,350NilNilNilNilNilPre-IssueTotal No.<strong>of</strong> Sharesheld inDematerialized FormNilNilNilNilNilNilNilNilNilNilNilTotal Shareholdingasa % <strong>of</strong> total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)As a %<strong>of</strong>(A+B+C)54.46 54.46 1,55,11,100 39.799 39.79NilNil16.97 16. 97 48,31,250 12.3912.39NilNilNilNil71.43 71.43 2,03,42,350 52.1852.18NilNilNilNilNilNilNilNilNilNilTotal No. <strong>of</strong>SharesPost-IssueTotal Shareholdingas a % <strong>of</strong>total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)- - -- - -- - ------As a %<strong>of</strong>(A+B+C)-----Shares Pledgedor otherwiseencumberedNumber<strong>of</strong>sharesNil-Nil--NilAs a% <strong>of</strong>TotalNo. <strong>of</strong>SharesNil-Nil--Nil38
Scotts Garments LimitedCategory <strong>of</strong>ShareholderTotalShareholding <strong>of</strong>Promoter <strong>and</strong>Promoter Group(A) =(A)(1)+(A)(2)(B) PublicShareholdingInstitutionsMutual Funds/UTIFinancialInstitutions/ BanksCentralGovernment/ StateGovernmentVenture CapitalFundsInsuranceCompaniesForeignInstitutionalInvestorsForeign VentureCapital InvestorsAnyOthers(Specify)SubTotal (B)(1)Non-InstitutionsBody CorporateIndividuals:Individuals – i.Individualshareholdersholding nominalshare capital up to` 1 Lakhii. Individualshareholdersholding nominalshare capital inexcess <strong>of</strong> ` 1 LakhAnyOther(Specify)Non-Resident<strong>India</strong>ns(OCBs)Hindu UndividedFamilyDemat – ClearingMemberSub-Total (B)(2)Total PublicShareholdingNo. <strong>of</strong>Shareholders15NilNilNil1NilNilNilNil11210611NilNilNil1Nil130131Total No.<strong>of</strong> Shares2,03,42,350NilNilNil17,39,130NilNilNilNil17,39,13055,04,5505,01,6003,64,750NilNilNil25,000Nil63,95,00081,35,030Pre-IssueTotal No.<strong>of</strong> Sharesheld inDematerialized FormNilNilNilNil17,39,130NilNilNilNil17,39,130Nil29,500NilNilNilNilNilNil29,50017,68,630Total Shareholdingasa % <strong>of</strong> total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)As a %<strong>of</strong>(A+B+C)71.43 71.43 2,03,42,350 52.1852.18NilNilNilNilNilNil6.11 6.11NilNilNilNilNilNilNilNil6.11 6.1119.33 19. 331.76 1. 761.28 1. 28NilNilNilNilNilNil0.09 0. 09NilNilTotal No. <strong>of</strong>SharesPost-IssueTotal Shareholdingas a % <strong>of</strong>total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)1,86,41,984 47.82As a %<strong>of</strong>(A+B+C)22.46 22.46 1,86,41,984 47.8247.8228.57 28. 57 1,86,41,984 47.8247.82Shares Pledgedor otherwiseencumberedNumber<strong>of</strong>sharesNilNilNilNilNilNilNilAs a% <strong>of</strong>TotalNo. <strong>of</strong>SharesNilNilNilNilNilNilNil39
Scotts Garments LimitedCategory <strong>of</strong>Shareholder(B)= =(B)(1)+(B)(2)TOTAL (A)+(B)Shares held byCustodians <strong>and</strong>against whichDepositoryReceipts have beenissued (C)GRAND TOTAL(A) +(B)+(C)No. <strong>of</strong>Shareholders146Nil146Total No.<strong>of</strong> Shares2,84,77,380Nil2,84,77,380Pre-IssueTotal No.<strong>of</strong> Sharesheld inDematerialized FormTotal Shareholdingasa % <strong>of</strong> total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)17,68,630 100.00 100. 00 3,89,84,334 100.000 100.00NilNilAs a %<strong>of</strong>(A+B+C)NilTotal No. <strong>of</strong>SharesPost-IssueTotal Shareholdingas a % <strong>of</strong>total No.<strong>of</strong> SharesAs a% <strong>of</strong>(A+B)As a %<strong>of</strong>(A+B+C)- - -17,68,630 100.00 100. 00 3,89,84,334 100.000 100.00Shares Pledgedor otherwiseencumberedNumber<strong>of</strong>sharesNilNilAs a% <strong>of</strong>TotalNo. <strong>of</strong>SharesNilNil5. There are no transactions in the Company’s Equity Shares by the Promoter & their relatives or the directors<strong>of</strong> the Company duringa period <strong>of</strong> six months preceding the date <strong>of</strong> filing <strong>of</strong> Draft Red Herring Prospectuswith SEBI except the following:Date <strong>of</strong> Transfer Transferor27/08/2010 Mr. LoganathanTransferee No. <strong>of</strong> sharesMr. Naseer Ahmed 90,000Issue Price10.0006. Equity Shares held by the top ten shareholders:6a. Top tenshareholders as on the date <strong>of</strong> filing this Red Herring Prospectus with ROC:Sr.No.Name <strong>of</strong> the Shareholderr1. Mr.Naseer Ahmed2. Pedigree Construction Pvt. Ltd.3. B.R.Machine Tools Pvt. Ltd.4. Bombay Rayon Fashions Ltd.5. Canbank Venture Capital Fund Ltd.6. Mrs. Nuzhat Aisha Naseer7. Mr.Awaiz Ahmed8. Master Faiz Ahmed (Held byMr. Naseer Ahmed as Father<strong>and</strong>natural guardian)9. Ashwell TextilesPvt. Ltd.10. Best View Infrabuild Private LimitedTotalNo. <strong>of</strong> Shares1,26,44,50048,31,25030,05,50020,00,00017,39,1307,64,5006,43,5006,43,5001,99,8001,16,0002,65,87,680% to PaidupCapital(face value ` 10/-)44.4016.9710.557.026.112.682.262.260.700.4193.366b. Top tenshareholders ten days prior to filing this Red Herring Prospectus with ROC:Sr.No.1. Mr.Naseer AhmedName <strong>of</strong> the ShareholderrNo. <strong>of</strong> Shares1,26,44,500% to PaidupCapital(face value ` 10/-)44.4040
Scotts Garments LimitedSr.No.Name <strong>of</strong> the Shareholderr2. Pedigree Construction Pvt. Ltd.3. B.R.Machine Tools Pvt. Ltd.4. Bombay Rayon Fashions Ltd.5. Canbank Venture Capital Fund Ltd.6. Mrs. Nuzhat Aisha Naseer7. Mr.Awaiz Ahmed8. Master Faiz Ahmed (Held byMr. Naseer Ahmed as Father<strong>and</strong>natural guardian)9. Ashwell TextilesPvt. Ltd.10. Best View Infrabuild Private LimitedTotalNo. <strong>of</strong> Shares48,31,25030,05,50020,00,00017,39,1307,64,5006,43,5006,43,5001,99,8001,16,0002,65,87,680% to PaidupCapital(face value ` 10/-)16.9710.557.026.112.682.262.260.700.4193.366c. Top tenshareholders two years prior to filingthis Red Herring Prospectus with ROCSr.No.Name <strong>of</strong> the Shareholder1 Mr.Naseer Ahmed2 Pedigree Construction Pvt. Ltd.3 B.R.Machine Tools Pvt. Ltd.4 Bombay Rayon Fashions Ltd.5 Mrs. Nuzhat Aisha Naseer6 Mr.Awaiz Ahmed7 Master Faiz Ahmed (Held byMr. Naseer Ahmed asFather <strong>and</strong> natural guardian)8 Ashwell TextilesPvt. Ltd.9 Mr.Mukhtar Ahmed10 Mr.Aslam AhmedMs.Zareena BegumMs.Jabeen SultanaMs.Yasmeen SultanaMs.Nazneen IshrathMs.Thaseen SultanaMs.Kasthuri BegumMs.Parvathi A.Mr.Pranav VermaTotalNo. <strong>of</strong> Shares % to PaidupCapital(face value ` 10/-)1,26,44,50048,31,25030,05,50020,00,0007,64,50047.2918.0711.247.482.866,43,5002.416,43,5002.412,80,7001.051,00,1000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.371,00,0000.372,57,23,55096.547. Till date Company hasnot introduced any Employees Stock Option Schemes/ Employees Stock PurchaseSchemes.8. There is no “buy back” or “st<strong>and</strong> by” arrangement for purchase <strong>of</strong> Equity Shares by SGL, our Promoter,Directors,BRLM <strong>and</strong> Co-BRLM for the equity shares <strong>of</strong>fered through this Red Herring Prospectus.9. The Company has not raised any bridge loan against the proceeds <strong>of</strong> the issue.41
Scotts Garments Limited10. The company has 146 Shareholdersas on the date <strong>of</strong> filing this Red Herring Prospectus with SEBI.11. We have allotted 17,39,130 equity shares <strong>of</strong> `10/ /- at an issueprice <strong>of</strong> `115/- per equityshare to CanbankVenture Capital Fund (CVCFL), through its Trustee <strong>and</strong> Investment Manager under Pre-IPO placementprior to the date <strong>of</strong> theRed HerringProspectus. The price at which equityshares weree allotted to CVCFLmay be lower than the Issue Price. The funds raised by way <strong>of</strong> the Pre-IPO “Objects <strong>of</strong> the Issue” on page 44.12. An over-subscriptionto the extent <strong>of</strong> 10% <strong>of</strong> the net issueto public can be retained for purposes <strong>of</strong>Placement shall be utilizedtowards the objects <strong>of</strong> the Issue. Forfurther details, please seeerounding <strong>of</strong>f to the nearest multiple<strong>of</strong> minimumm allotment lot.13. There would be no further issue <strong>of</strong> capital whether by way <strong>of</strong>issue <strong>of</strong> bonus shares, preferential allotment,<strong>and</strong> rights issue or inany other manner during the periodcommencing from submission <strong>of</strong> the RedHerring Prospectus with SEBI until the Equity Shares to be issued pursuant to the Issuehave been listed.14. A total <strong>of</strong> 4,50,000 Equity Shareshave beenreserved for allocation to the Eligible Employees oncompetitive basis, subject to valid bids being received at orabove the issue price. Employees can alsomake Bids in the Net Issue to Public <strong>and</strong> such Bids shall not be treated asmultiple Bids. The aggregate <strong>of</strong>reservations for employees shall notexceed five per cent <strong>of</strong> the post issue capital <strong>of</strong> the Company.15. Under-subscription, if any, in the Reservation for Eligible Employees shalll be added back to the Netissue.In case <strong>of</strong>under-subscription in Non Institutional Portion <strong>and</strong> Retail Portion, spill over to the extent <strong>of</strong>under subscription shall be permitted from othercategories.16. We presently do not intend or propose to alter our capital structure for a period <strong>of</strong> six months from theBid/IssueOpening Date, by way <strong>of</strong>split or consolidation <strong>of</strong> the denomination <strong>of</strong> Equity Shares or furtherissue <strong>of</strong> Equity Shares (including issue <strong>of</strong> securities convertible into or exchangeable, directly or indirectlyfor EquityShares) whether preferential or otherwise.17. SGL has not revalued its assets since its incorporation.18. SGL has not made anypublic issue since its incorporation.19. We undertake that at any given time, there shall be only one denomination for the Equity Shares <strong>of</strong> theCompany<strong>and</strong> that it shall comply with such disclosure <strong>and</strong> accounting norms as specified by SEBI fromtime to time.20. As on thedate <strong>of</strong> thisRed HerringProspectus, there are nooutst<strong>and</strong>ing warrants, options or rights toconvert debentures, loans or other financial instruments intothe Equity Shares. The shares lockedin bythe Promoter are not subject to any pledge.21. No payment, direct orindirect, in the nature <strong>of</strong> discount, commission allowance or otherwise shall bemade either by the issuer companyor the promoter in any public issue to the persons who receive firmallotment in the publicissue.22. The Equity Shares <strong>of</strong>fered through this Issue willl be fully paidup.23. As on date <strong>of</strong> this RHP there are no equity shares held byBRLM <strong>and</strong> Co-BRLM. However, CVCFL, awholly owned subsidiary <strong>of</strong> Canara Bank is holding 17,39,130 equity shares <strong>of</strong> `10/- through its Trustee<strong>and</strong> Investment Manager.42
Scotts Garments Limited24. The Issueis being made through the 100% BookBuilding Process wherein 25% <strong>of</strong> theNet Issue shall beallocated on a proportionate basis toeligible Qualified Institutional Buyers. Further, 5%<strong>of</strong> the QIB Portionshall be available for allocation ona proportionate basis to Mutual Funds only <strong>and</strong> the remaining QIBportion shall be available for allocation on a proportionatebasis to all QIB Bidders, including MutualFunds, subject to validBids being received at or above the Issue Price. If the aggregate dem<strong>and</strong> by MutualFunds is less than 5% <strong>of</strong> the QIB portion, the balance Equity Shares available for allocation in the MutualFund portion will be added to the QIB portion <strong>and</strong> be available for allocation proportionately to the QIBBidders. Further, not less than 40% <strong>of</strong> the Net Issue shall be madeavailable for allocationon aproportionate basis toNon-Institutional Bidders <strong>and</strong> not less than 35% <strong>of</strong> the Net Issue shall bemadeavailable for allocationon a proportionate basiss to Retail Individual Bidders, subject to valid Bidsbeingreceived at or above the Issue Price.43
Scotts Garments LimitedOBJECTS OF THE ISSUEThe Objects<strong>of</strong> the Issue is to raise resources to finance:• Setting up <strong>of</strong> unit for Trouser manufacturing at Doddaballapur, Karnataka <strong>and</strong>Processing Unit at Kagal - Kolhapur, Maharashtra• Margin Money for working capital<strong>of</strong> new units• General corporate purpose• Issue expensesKnitting &FabricIn addition,our companyexpects to receive the benefits <strong>of</strong> listing <strong>of</strong> equity shares on the Stock <strong>Exchange</strong>.The main object clause <strong>of</strong> our Memor<strong>and</strong>um <strong>of</strong> Association <strong>and</strong> objects incidental to the attainment <strong>of</strong> themain objects enables usto undertake the existing activities <strong>and</strong> the activities for which funds arebeingraised by usthrough thisIssue.The net proceeds <strong>of</strong> the Issue after deducting the expenses for the Issue are estimated at ` [•] Lacs. TheFundrequirement is based onthe current business plan. In view <strong>of</strong>the competitive <strong>and</strong> dynamic nature <strong>of</strong> theindustry in which we operate, we may have to revise our business plan fromtime to time <strong>and</strong> consequentlythe fund requirement may change.Requirement <strong>of</strong> Funds <strong>and</strong> Means <strong>of</strong>FinanceRequirement <strong>of</strong> FundsWe intend to utilize net issue proceeds for financing the abovementioned objects. The details <strong>of</strong> utilization<strong>of</strong> Proceeds are as per thetable set forth below:(`In Lacs)Sr. NoParticularsAmount1 Setting up <strong>of</strong> unit for Trouser manufacturingat Doddaballapur,Karnataka <strong>and</strong> Knitting <strong>and</strong> Fabric Processing at Kagal – Kolhapur,Maharashtra1.1 L<strong>and</strong> & Site Development1316.001.2 Building <strong>and</strong> Civil Works7286.411.3 Machineries <strong>and</strong> Equipments17204.151.4 Miscellaneouss Fixed Assetss2612.501.5 Preliminary <strong>and</strong> pre Operative Expensess1289.981.6 Provisions for Contingencies1168.732 Margin Moneyfor WorkingCapital1116.803 Issue Expensess[•]4 General Corporate PurposeTOTAL[•][•]Means <strong>of</strong> FinanceParticularsTerm Loanfor Doddaballapur Project from Canara BankTerm Loanfor Kagal Project from Canara BankPublic Issue <strong>of</strong> equity shares44Amount(`In lacs)6000.009000.00Gr<strong>and</strong> Total15000.000[•]
ParticularsInternal Accruals*Total Means <strong>of</strong> FinanceAmount(`In lacs)Scotts Garments LimitedGr<strong>and</strong> Total[•][•]*The amount other than IPO proceeds <strong>and</strong> Term Loan proceeds required towards the ‘Objects <strong>of</strong> theIssue’shall be funded from internal accruals. Any funds deployedd from internal accruals over <strong>and</strong> above therequired amount shall beadjusted with the IPO proceeds <strong>and</strong> ploughed backin the Company.Firm ArrangementWe undertake that firm arrangements <strong>of</strong> finance through verifiable means towards hundred percent<strong>of</strong> thestated means <strong>of</strong> financeexcluding the amount raised through proposed issue <strong>and</strong> existing identifiableinternal accruals have been made.Our Company has beensanctionedproject at Doddaballapur<strong>and</strong> Kagal.term loans from CanaraBank aggregating to `15000.00 lacs for theThe important terms <strong>and</strong>conditions <strong>of</strong> the sanctionn for Doddaballapur <strong>and</strong> Kagal project are as follows:Nature <strong>of</strong> LoanDate <strong>of</strong> SanctionLetterAmountMarginRate <strong>of</strong> InterestPurposeTerm Loan for Doddaballapur22/09/2010`60.00 crores41.18%1. Base Rate+ 4% p.a. (i. e. 12% p.a.)2. To part fund expansion projecti.e. setting up <strong>of</strong> garment units toproduce 30,000 pieces <strong>of</strong>trousers/ /day <strong>and</strong> 40,000 kgs/day<strong>of</strong> Knittedfabrics*atDoddaballapurTerm Loanfor Kagal under RTUFS12/04/2013` 90.00 Crores60.34%Base Rate +3.00% p. a. (i.e. presently13.25%, floating)Towards part fundingknitted processfabric unit at KITTPL at Kagal, KolhapurTenorRepayment*Presently the Knitting Fabricunit has been shifted to Kagal,Kolhapur, MaharashtraDoor to Door-11 years3. In 95 monthly instalments <strong>of</strong> `1.30 Crores each <strong>and</strong> the lastinstalment being ` 1.50 Crores.Interest to be paid as <strong>and</strong> whendue.Initial repayment holiday<strong>of</strong> 3 yearsincluding implementationn period.SecurityExclusive Charge on project assets.Personal Guarantee 1. Mr. Naseer Ahmed – net worth `Door to Door - 6 1/2 years6 1/2 years including initial moratorium <strong>of</strong>1 ½ years.Repaymentin 20 equal quarterlyinstalmentss <strong>of</strong> `4.50 crores each.Repaymentto commence on completion<strong>of</strong> 21 months from the date <strong>of</strong> firstdisbursementExclusive Charge on project assets1. Mr. Naseer Ahmed– net worth `45
Nature <strong>of</strong> LoanTerm Loan for Doddaballapur6.43 Crores.2. Mrs. Nuzhat Aisha Naseer – NetWorth ` 1.06 Crores.Scotts Garments LimitedTerm Loanfor Kagal under RTUFS14.44 Crores.2. Mrs. Nuzhat Aisha Naseer – NetWorth ` 0.50 Crores.The other important terms <strong>and</strong> conditions for Sanction <strong>of</strong> loan for the Projectare as under:Doddaballapur Project:1. Auditor’scertificate to the effect that there are no arrears in the payment <strong>of</strong> statutory dues by thecompany shall be submitted.2. Companyto undertakee for the following:a. Not to divert the bank borrowings/Working Capital Fundsb. Undertaking any new project/scheme <strong>of</strong> modernization unless such an expenditure on expansion iscoveredby company’s net cash accruals after providingfor Dividends, etc., or for long termuseswithoutt NOC from the bank.c. Invest by way <strong>of</strong> Share capital in or lend or advance funds toor place deposits with anyassociates/allied/sister/any other concerns. Normal trade credit or security depositss in usual course <strong>of</strong>business or advancesto employees are not covered under this covenant.d. To enter into any borrowing arrangements either secured or unsecured with any other banks/FinancialInstitutions/Company3. The decision on merger, amalgamation, reconstruction take over, shifting<strong>of</strong> premises,shall be done onlywith priorr permission <strong>of</strong> the bank. An undertaking to this effect should be given.4. The company should submit the periodical information like OCC, StockStatements cum MSOD, BookDebt Statement, Financial Statements, Quarterly Operating Statements from time to time failing which thebank will charge additional interestt not exceeding 2% on the outst<strong>and</strong>ing liability.5. Bank mayat its discretion entrust the job <strong>of</strong> periodical valuation <strong>of</strong> securities charged, to a valuerapprovedby the bank <strong>and</strong> such expenses shall beborne by the borrower.6. Copies <strong>of</strong> ITAO or statement <strong>of</strong> return/auditor’scertificate regarding submission <strong>of</strong> upto date Tax returns<strong>of</strong> company/partner/guarantor shall be submitted.7. If Firm/Company is reconstituted,continuationn <strong>of</strong> Credit facilities will be subject to obtention <strong>of</strong> banksspecific permission.8. Assets (Current/Fixed) charged to the bank shall be adequately insured for all risks as per norms.Our companyhad availed a term loan <strong>of</strong> Rs.46.70 crores for our Doddaballapur project out <strong>of</strong> a total sanction<strong>of</strong> Rs.60 crores from Canara Bank. Our company had also made an application to StateBank <strong>of</strong> <strong>India</strong> forsanctioning <strong>of</strong>term loan facility for the Doddaballapur project forbetter terms <strong>and</strong> interest rates. State Bank <strong>of</strong><strong>India</strong> has sanctioned an amount <strong>of</strong> Rs.55.40 crores term loan for the said project. The interest rate as per thesanction <strong>of</strong> State Bank <strong>of</strong> <strong>India</strong> is 12.40% p.a. as against rate <strong>of</strong> interest <strong>of</strong> 13.75% p.a. sanctioned <strong>and</strong> availedfrom Canara Bank. We propose to repay the outst<strong>and</strong>ing term loan <strong>of</strong> Canara Bank in order to save on interestcost. The loansanctioned by State Bank <strong>of</strong> <strong>India</strong> is also eligible for benefits under RTUFS<strong>of</strong> Government <strong>of</strong><strong>India</strong>. In themeantime we have alsoavailed a short term loan <strong>of</strong> Rs.19 crores from IndusInd Bank on09/04/2013 torepay portion <strong>of</strong> term loan availed from Canara Bank. The period <strong>of</strong> loan <strong>of</strong>IndusInd Bank is 1year <strong>and</strong> rate <strong>of</strong> interest is 11%.We are in the process <strong>of</strong> availing the term loan sanctioned by State Bank <strong>of</strong> <strong>India</strong> by completing the necessarydocumentation. We propose to repay the outst<strong>and</strong>ing loan <strong>of</strong> Canara Banksanctioned for Doddaballapurproject <strong>and</strong> avail the new loan sanctioned by State Bank <strong>of</strong> <strong>India</strong> as mentioned above. Balance <strong>of</strong> Rs.4.60croresrequired to part finance theDoddaballapur project would be met through internal accruals.46
Scotts Garments LimitedThe details <strong>of</strong> term loan sanctioned by State Bank <strong>of</strong> <strong>India</strong> are as underNature <strong>of</strong> LoanDate <strong>of</strong>LetterAmountTerm Loan for Doddaballapur Project from SBISanction 02/01/2013` 55.40 croresMarginRate <strong>of</strong> InterestPurposeTenorRepaymentSecurityPersonal Guarantee33.53% <strong>of</strong> the Project CostBase Rate (9.75%) + 2.65% p.a. (i.e. 12.40% p.a.)To part fund expansion project i.e. setting up <strong>of</strong>garment units to produce 30,000 pieces <strong>of</strong>trousers/day<strong>and</strong> 40,0000 kgs/day <strong>of</strong> Knittedfabrics* at Doddaballapur78 months including moratorium period <strong>of</strong> 6monthsIn 60 monthly instalmentss <strong>of</strong> ` 0.75 Crores each<strong>and</strong> 11 monthly instalment <strong>of</strong> ` 0.85 Crores <strong>and</strong>last installment <strong>of</strong> ` 1.05 croresExclusive Charge on project assetsMr. Naseer AhmedMrs. Nuzhat Aisha NaseerTERMS & CONDITIONS:1) To Submit NOC from KIADB <strong>and</strong> Canara Bank fo mortgagingg <strong>of</strong> leaseholdrights beforee disbursement2) To Submit closure letter from Canara Bank for the existing term loan outst<strong>and</strong>ings3) Company's Statutory Auditor's certificate to beobtained for Company'sinvestmentss in Doddaballapurproject before disbursement4) All statutory approvalsincluding PCB Clearancee to be submitted before disbursement <strong>of</strong> the loan5) Processing fee <strong>and</strong> upfront fee, besides penal interest as per previous sanction terms asapplicable have tobe recovered before disbursement <strong>of</strong> credit facilities6) Security Documentation <strong>and</strong> formalities <strong>of</strong> EM creation / extension have to be completed before disbursal<strong>of</strong> the enhanced / newloan limits7) Bank's charge on theimmovable properties should be noted with the Sub-Registrar <strong>of</strong> Assurancesconcerned/ CERSAI, before disbursement8) Promotersto bring inthe stipulated margins upfront / proportionatelybefore disbursal <strong>of</strong> limits. Acertificatee to this effect should be obtained from the Statutory Auditors<strong>of</strong> the unit/ Companyto besubmittedon record9) Up-to-date nil encumbrance certificates should be obtained <strong>and</strong> submitted for all the propertiesmortgaged to the Bank, before disbursement <strong>and</strong>thereafter every 12 months as per extant instructions47
Scotts Garments Limited10) Limits are to be disbursed only after completion<strong>of</strong> all formalities including:A) Security DocumentationB) Mortgage creation / Extension / Regn. Of E.MC) Filing <strong>of</strong> charge withROC / CERSAI11) Bank's charge on the assets <strong>of</strong> theCompany should be registered with the ROC concerned within them<strong>and</strong>atory period <strong>and</strong>fresh search report shouldbe obtained<strong>and</strong> placed on record.12) To submit list <strong>of</strong> machineries hypothecated to the Bank to other Banks / F.I.s separately.13) The unit to furnish an undertaking that any escalation in project cost shalll be borne by the borrower.Kagal Project:The following permissions / approvals should be in palce <strong>and</strong> produced for verification :1. Pollution controlCertificate from State Government / Pollution Control <strong>Board</strong>.2. Consent from Directorate <strong>of</strong> Factories for Operations for Textiles Manufaturing facilities.The company will keep the bank informed <strong>of</strong> the happening <strong>of</strong> any event likely to have a substantialadverse effect on theiroperations, sales, pr<strong>of</strong>itsetc <strong>and</strong> the remedial steps proposed to be taken by thecompany.Non compliance <strong>of</strong> any<strong>of</strong> the sanction terms/ conditions is liable to attract penal interest @ 2% over <strong>and</strong>above applicable ROIThe bank reserves the right to call up the loan upon the happening <strong>of</strong> any <strong>of</strong> the under noted orotherevents considered likely to jeopardise the interest <strong>of</strong> the bank.1. Any instalments remainingunpaid on the due date2. The company committing any breach or default in theperformance or observance <strong>of</strong> the covenantsother documents executed by them or any other terms <strong>and</strong> conditions relating to the loan’3. Execution or distress beingenforced orlevied against the wholeor any part <strong>of</strong> the company`sproperty4. The company ceasing or threatening to cases to carry on their businessThe security for this term loan is extendable to working capital facilities enjoyed with our bank (presentlyaggregating to Rs. 170 crore as regular facility) ascollateral securitySubmission <strong>of</strong> monthly PIPR by the LIE <strong>and</strong> certificate frompractising Chartered Accountant (CA) forexpenditure incurred on the projectfor review <strong>of</strong>progress on the project bythe bankThe company should furnish detailsregarding break up <strong>of</strong> the miscellaneous fixed assets estimatedunderthe total project costThe disbursement shall be madedocuments including CA certificatebased on the purchase orders/ quotations <strong>and</strong> othe supporting48
Scotts Garments LimitedThe project margin is proposed to be met out <strong>of</strong>IPO proceeds / internal accruals. Hence the proceeds <strong>of</strong>IPO shall be pooled ina no-lien account with us or otherwise our lien shall be got marked on the IPOproceeds amount withother banks to the extentt <strong>of</strong> equity money requiredfor this project. Company shallconfirm <strong>and</strong> ensure compliance <strong>of</strong> this requirement without fail <strong>and</strong> shall notify the Merchant Bankers <strong>and</strong>Managers/ Bankers tothe IPO issue in this regard as may be required.TUF eligibility to be got establishedfrom TUF cell as per new R-TUFSPenal interest <strong>of</strong> 2 % p.a. on the outst<strong>and</strong>ing liability shall be collected if the audited financial statement isnot submitted before 31 st October <strong>of</strong> every yearor within a fortnight fromthe date <strong>of</strong>audit <strong>of</strong> financialsaccounts <strong>of</strong> the company whicheveris earlierDETAILS OF THE OBJECTS OF THE ISSUE1. Setting up <strong>of</strong> unit for Trouser manufacturingat Doddaballapur, Karnataka <strong>and</strong> Knitting <strong>and</strong> FabricProcessing at Kagal – Kolhapur, MaharashtraOur company proposed to set up Readymade Garment units for exports at different locations in Karnatakatowards forwhich we have enteredinto a tripartite MOU with Government <strong>of</strong> Karnataka <strong>and</strong> BombayRayon Fashions Limited(BRFL). Thetrouser manufacturing unit at Doddaballapur is one <strong>of</strong> the locationsforming part <strong>of</strong> the saidtripartite MOU. For thedetails <strong>of</strong> MOU please refer page no. 133 <strong>of</strong> the<strong>of</strong>ferdocument. The trouser manufacturingunit at Doddaballapur isone <strong>of</strong> the locations forming part <strong>of</strong> tripartiteMOU. We propose to utilize part <strong>of</strong> the issue proceeds for setting up manufacturing unitat Doddaballapur.Presently, we are in the advanced stage <strong>of</strong> completion <strong>of</strong> setting up <strong>of</strong>trouser manufacturing unit atDoddaballapur <strong>and</strong> the same is beingindependently executed by us.We had appointed Gherzi Eastern Limited (GEL) a firm specialized as consultants, engineers <strong>and</strong> architectsfor designing <strong>and</strong> execution <strong>of</strong> the Project. Gherzi was foundedd in 1960 <strong>and</strong> focuses on the dynamic needs <strong>of</strong>various industries <strong>and</strong> provides comprehensiveconsulting services. GELis an ISO 9001/2008 certifiedorganizationn for providing consultancy servicess in Architectural & Engineering Designs <strong>and</strong> ProjectManagement <strong>and</strong> has successfully completed over 1800 projects across different sectors like textile,industrial plants, commercial complexes, etc.Presently it has been proposed to set up the knitting & fabric processing unitfrom Doddaballapur to Kagal –Kolhapur, Maharashtra. A Techno Economic Feasibility Report (TEFR) dated 09/07/2012 from Gherzi forthe execution <strong>of</strong> the Kagal Project has been obtained. The additional benefits that will be available to thecompany inview <strong>of</strong> thechange in the location <strong>of</strong> the Knitting <strong>and</strong> Fabric Processing unit is as detailedhereinunderr :The following benefits will be available to the Company by shifting the project to Kagal:• 10% Capital Subsidy <strong>and</strong> 5% Interest Subsidyfrom Ministry <strong>of</strong> Textilesunder RTUFS.• Maharashtra State Governmentto provide assistance in a manner thatt effective rate<strong>of</strong> interest payablewill be 2% after taking into account assistance from all the sources. The applicable interest rate will betakenas either 12. 5% or Banks prime lending rate or therate <strong>of</strong> interest actually charged, whicheverrate isless.• Benefits those are eligible for Scheme for Integrated Textile Park (SITP) by Ministry <strong>of</strong> Textiles (MoT)including subsidy for development <strong>of</strong> Park resulting savings in infrastructure <strong>and</strong>common facilities,ETP etc.49
Scotts Garments Limited1.1 L<strong>and</strong> <strong>and</strong> Site DevelopmentTrouser Manufacturing Unit at Doddaballapur, KarnatakaWe have set up trouser manufacturing unit at D-3, D-4, A-3, A-10, A-11, S-43, S-44 <strong>and</strong>S-45 (P), ApparelPark Industrial Area, I Phase, Doddaballapur, Karnataka allotted by Karnataka Industrial Areas <strong>Board</strong>(KIADB) which is proposed to be completely functional by December 2012. The allotted l<strong>and</strong> admeasures57,567 sq meters. . This l<strong>and</strong> was initially allotted on lease-cum-sale entered into a lease cum sale arrangement withbasis forperiod <strong>of</strong> 6 years vide allotmentletter datedd 25/03/2010. Subsequently, our CompanyKIADB vide agreementdated 28/02/2011 withrevised period <strong>of</strong> ten years (10 years). During thesubsistence <strong>of</strong> the lease period <strong>and</strong> also therafter, that is during the interregnum between the expiry<strong>of</strong> thelease period<strong>and</strong> the execution <strong>of</strong> thesale deed, the lessee shall pay to the lessor yearlyy rent <strong>of</strong> ` 14,225/-(Rupees Fourteen thous<strong>and</strong> two hundred <strong>and</strong> twenty five only) <strong>and</strong> maintenance charges <strong>of</strong> ` 1,06,688/-(Rupees One Lakh six thous<strong>and</strong> six hundred <strong>and</strong> eighty eight only). We have incurred total cost <strong>of</strong> ` 693.00lacs for acquisition <strong>of</strong> l<strong>and</strong> on lease cum sale basis <strong>and</strong> for the site development.Knitting & Fabric Processing Unit at Kagal – Kolhapur, MaharashtraThe location<strong>of</strong> knitting & fabric processing unit has been shifted to Kagal Industrial Textile Technology Parkpromoted by Kagal Industrial Textile Technology Park Private Limited ( KITTP). It is located at T-53/2,Kagal-Hatkanangale FiveStar Indl. Area, Kagal – Dist Kolhapur, Maharashtra.KITTP has been formed under the “Scheme for Integrated Textile Park” promoted by Government <strong>of</strong><strong>India</strong>,Ministry <strong>of</strong> Textiles. The total l<strong>and</strong> allotted to KITTP at Kagal is2,00,000 sq meters on lease basis initially fora period <strong>of</strong> 5 years by Maharashtra Industrial Development Corporation (MIDC). Our Company proposes toacquire 40,000 sq. Meter <strong>of</strong> l<strong>and</strong> on leave <strong>and</strong> license basis fromKITTP. Forthe purpose<strong>of</strong> allotmentt <strong>of</strong> thesaid l<strong>and</strong> we have entered into Share Subscription Agreement (SSA) dated 18/01/2012 with KITTP tosubscribe to50,00,000 equity sharess <strong>of</strong> face value `10/- each. KITTP has vide letter dated 15/09/2012indicated the allocation <strong>of</strong> 40,000 sq meter <strong>of</strong> l<strong>and</strong>to our Company on advance payment <strong>of</strong> `10.00 lacs. Interms <strong>of</strong> theSSA <strong>and</strong> theletter dated 15/09/2012, the said l<strong>and</strong>shall be allotted to our Company on receipt<strong>of</strong> `500.00 lacs towards the allotmentt <strong>of</strong> 50,00,0000 equity shares <strong>of</strong> KITTPL<strong>of</strong> the face value <strong>of</strong> `10/ /- each<strong>and</strong> the Company entering into a leave <strong>and</strong> licensee agreement by paying anamount <strong>of</strong> `100.00 lacs asa nonrefundable deposit. Theother terms <strong>and</strong> conditions shall be finalized at thetime <strong>of</strong> entering into leave <strong>and</strong>license agreement.Our company has madeadvance payment <strong>of</strong> `10.00 lacs towards the allocation <strong>of</strong> l<strong>and</strong><strong>of</strong> 40,000 sqmeter<strong>and</strong> have been allocated the said l<strong>and</strong>vide letter dated 01/10/2012 from KITTP. The total cost estimated forl<strong>and</strong> <strong>and</strong> site development is ` 623.00 lacs.1.2 Buildings <strong>and</strong> Civil WorksWe have commenced theconstructionn <strong>of</strong> factory building, for a total built uparea <strong>of</strong> 34,203 sq.meter with anestimated total cost <strong>of</strong> ` 3777.52 lacs for setting up trouser manufacturing unit at Doddaballapur, Karnataka.50
Scotts Garments LimitedThe following are details<strong>of</strong> buildings <strong>and</strong> civil works at Doddaballapur:DescriptionType <strong>of</strong>ConstructionArea(Sq.Meter)Rate perSq. Meter(`)Amount(`In Lacs)Garments SectionProductionHall (Ground Floor)ProductionHall (First Floor)ProductionHall (Second Floor)Garment Printing HallR.C.C. Columns,Brick walls, SteelStruss, KotahStoneetc.375037503750375010800108001080010800405.00405.00405.00405.00Washing UnitGround FloorFirst FloorSecond FloorThird FloorR.C.C. Columns,Brick Walls, SteelStruss, KotahStoneetc.375037503750375010800108001080010800405.00405.00405.00405.00MiscellaneousBoilerWater TankSecurity RoomStore AreaUnderground Water TankTOTALR.C.C. ConstructionR.C.C. ConstructionR.C.C. ConstructionR.C.C. ConstructionR.C.C. Construction50253150024001080010800108001080054.0027.32259.20162.0035.003777.52In terms <strong>of</strong> Techno Economic Feasibility Report <strong>of</strong> Gherzi dated 09/07/2012 (TEFR) the total constructioncost <strong>of</strong> Knitting & Fabricprocessing unit at Kagal, Kolhapur is estimated at ` 3509.02 lacsfor a total built uparea <strong>of</strong> 33,700 sq. meter. The following are details <strong>of</strong> buildings <strong>and</strong> civil works to be executed at Kolhapur asprovided inTEFR <strong>of</strong> Gherzi:DescriptionTypeConstructionnMain Production Hall – Knitting/ProcessingYarn StoreR.C.C. Columns,Knitting section – ProductionHallGrey Fabric StoreBrick Walls,SteelStruss, KotahStoneetc.Processing - Production HallFinish Fabric Store<strong>of</strong>Area(Sq.Meter)2,5004,4002,5009,6002,500Rate perSq. Meter(`)10,00010,00010,00010,00010,000Amount(` In Lacs)250.00440.00250.00960.00250.00Utility AreaHumidification for Knitting &Flat KnittingMezzanineFloor in KnitProcessing SectionWare HouseCanteenR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.1100120030001,2001000010,00010,0008,000110.00120.00300.0096.0051
Scotts Garments LimitedDescriptionUtility buildingsBoiler HouseTypeConstructionnConstructionnR.C.C.ConstructionnR.C.C.Constructionn<strong>of</strong>Area(Sq.Meter)50005000Rate perSq. Meter(`)8,0008,000Amount(` In Lacs)40.0040.00MiscellaneousAdministration Building withtraining centrePump House (including watertreatment)Gate House/SecurityGeneral StoreUnderground Water TankCivil Work for ETPCycle St<strong>and</strong>/Car Bus St<strong>and</strong>ShedSeptic TankR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.ConstructionnR.C.C.ConstructionnShedR.C.C.Constructionn120010,0002508,0002508,0003,0008,000For9,50,556 litres120.0020.0020.00240.0037.89200.005.0010.00TOTAL3508.891.3 Plant <strong>and</strong> MachineryThe break up <strong>of</strong> cost <strong>of</strong> plant <strong>and</strong> machinery for Trouser manufacturing <strong>and</strong> for Knitting <strong>and</strong> FabricProcessing is given under:(Amount ` In lacs)Sr. no1.3.11.3.21.3.3ParticularsTrouser Manufacturing/Garment Manufacturing (Imported)Knitting <strong>and</strong>Fabric Processing (Imported)Knitting <strong>and</strong>Fabric Processing (Indigenous)Amount2,733.6112,967.851502.69Total Plant <strong>and</strong> Machinery cost17,204.151.3.1 Detailed break Up <strong>of</strong> Trouser/Garment Manufacturing Plant <strong>and</strong> MachinerySr. No Description1 Manufacturing<strong>of</strong> TrouserClass Feed <strong>of</strong>ff the ArmManufacturer/SupplierJuki SingaporeCurrency*QuantityUSD 50UnitPrice2500Amount(QuantityX UnitPrice)125000(` in lacs)Amountin `(including Duty& CIF)52
Scotts Garments LimitedSr. NoDescriptionIndustrialSewingMachineButtonMachineHoleSewingComputerisedButtonStitch MachineFeed <strong>of</strong>f the arm – 3needleMachineChainStitchAutomaticMachineBeltloop2 needle AutomaticPocket Hemming chainstitchLaser Machine table & 3MannequinAutomatic Spray RobotRecording ModuleBackUnitPocket HemmingBelt Loop Fusing UnitFeed <strong>of</strong>f the ArmManufacturer/SupplierPTE Ltd(Invoice dated31/03/2012)VI.BE.MAC.S.P.A.(Pr<strong>of</strong>ormaInvoice dated08/06/2012)FG TEKSTILKONFEKSIYON SAN VE TICLTD, STI(Pr<strong>of</strong>ormaInvoice dated05/06/2012)SingaporeIndustrialProduct (PTE)Ltd. (Pr<strong>of</strong>ormaInvoice dated21/05/2012)Currency*QuantityUSD 50USD 30Euro 45Euro 15Euro 1Euro 1Euro 1Euro 1Euro 4Euro 5Euro 76UnitPrice450032005500155001650029000020000020000970032004700Amount(QuantityX UnitPrice)2250009600024750023250016500290000200000200003880016000357200Amountin `(including Duty& CIF)72.19129.9455.44181.91170.8912.13213.15147.0014.7028.5211.76262.54Decorative StitchBelt Loop SetterCompleteSetFDMSingle NeedleDirect Drive MachineEuro 11Euro 15RongdeInternationalTrading Co.Ltd. (Pr<strong>of</strong>ormaInvoice dated25/05/2012) USD500sets105001560042111550023400021050084.89171.99121.56Sub Total1678.612 Garment LaundryStone & Enzyme washingMachineTumbler Dryer MachinesHigh Speed EcoDyeing &TGS DISTICARET A.S.VEKILII(Invoice dated27/03/2012)Euro 5Euro 1Euro 132500650014300162500650014300119.444.7853
Scotts Garments LimitedSr. NoDescriptionWashing MachinesHigh Speed WashingMachinesHigh Speed EcoDyeing &Washing MachinesStone & Enzyme washingMachineTumbler Dryer MachinesTumbler Dryer MachinesHydro ExtractorManufacturer/SupplierTGS DISTICARET A.S.VEKILII(Invoice dated27/04/2012)TGS DISTICARET A.S.VEKILII(Invoice dated19/03/2012)Currency*QuantityEuro 2Euro 5Euro 2Euro 1Euro 6Euro 1UnitPrice12675539501975065001852519825Amount(QuantityX UnitPrice)2535026975039500650011115019825Amountin `(including Duty& CIF)10.5118.63198.2729.034.7881.7014.57Sub Total3 Garment PrintingLaserPrintingMachinewith AccessoriesLaserPrintingMachinewith AccessoriesJenologia S.L.(Invoice dated14/12/2011 &13/01/2012) FG TEKSTILKONFEKSIYONSAN VE TICLTD, STI(Invoice dated04/01/2012) Euro Euro 4495000100000380000400000481.70279.30294.00SUB TOTAL573.30GRAND TOTAL (1+2+3)* Currency Rate: USD = `55, Euro = `702733.611.3.2 Detailed breakUp <strong>of</strong> Knitting <strong>and</strong> Fabric ProcessingPlant <strong>and</strong> MachineryThe details <strong>of</strong> the plant <strong>and</strong> machineryto be purchased in terms<strong>of</strong> TEFR are as follows:Sr. No1DescriptionKnittingSingleDia/GGSinglejerseyJersey30/2434/28Dia/GG – Open widthInterlock 30/24 Dia/GGQuantity26234Currency#EuroEuroEuroUnit Price60,00070,00072,000AmountAmount(Quantity XUnit Price)15,60,00016,10,0002,88,000Amount(` In Lacs)1092.001127.00201.6054
Scotts Garments LimitedSr. NoDescriptionFleece 30/20 Dia/GGAutostripper30/20Dia/GGAutostripper30/28Dia/GGShimaSeiki Cuff &Collar Flat KnittingMeasuringinspectionSubTotal (1)&GreyQuantity698159Currency#EuroEuroEuroYenEuroUnit Price55,00090,00090,00038,00,00010,000AmountAmount(Quantity XUnit Price)3,30,0008,10,0007,20,0005,70,00,00090,000Amount(` In Lacs)231.00567.00504.00313.5063.004099.102. Fabric ProcessingReversing MachineProcessing RouteTubularMachine– TubularmercerizeDyeing Machines- S<strong>of</strong>t Flow-750Kg- S<strong>of</strong>t Flow-500Kg- S<strong>of</strong>t Flow-250Kg- S<strong>of</strong>t Flow-125Kg- S<strong>of</strong>t Flow-50KgColorDispenser&Solution MakerCutOpening MachineRelax Dryer Machines2155646112USDEuroEuroEuroEuroEuroEuroEuroCHFCHF25,0004,00,0003,74,9442,98,1842,50,0022,31,7001,50,0001,51,8001,78,2107,27,17050,0004,00,00018,74,72014,90,92015,00,0129,26,8009,00,0001,51,8001,78,21014,54,34027.50280.001312.301043.641050.01648.76630.00106.2681.39664.20Processing – Openwidth RouteCutOpeningBleaching RangeCold Pad BatchRotary PrintingDye<strong>and</strong> print WasherContinuousTumbleDryerStenter Drying MachineCompacting Machine –Open widthDispensing<strong>and</strong>Engraving System forDyeing <strong>and</strong> PrintingSubTotal (2)311211541CHFEuroEuroEuroEuroEuroEuroEuroEuro1,78,21027,51,2204,93,0404,80,0003,25,4507,00,00011,25,4807,03,8403,50,0005,34,63027,51,2204,93,0404,80,0003,25,4507,00,00056,27,40028,15,3603,50,000244.171925.85345.13336.00227.82490.003939.181970.75245.0015567.953 Other Equipments55
Scotts Garments LimitedSr. NoDescriptionLaboratoryComputerColorMatching SystemAHIBA lab EquipmentsOther Lab equipmentsSubTotal (3)Quantity11LotCurrency#USDUSDUSDUnit Price46,00092,61420,000AmountAmount(Quantity XUnit Price)46,00092,61420,000Amount(` In Lacs)25.3050.9411.0087.24Total Cost <strong>of</strong> Machinery(Sub Total 1 + Sub Total2 + Sub Total 3)19754.29Estimated Discount @40%Import Duty @ 5.05% onmachinery costEducation Cess on ImportDuty @ 3%TotalL<strong>and</strong>ed Cost <strong>of</strong>MachineryTransport, Erection <strong>and</strong>other Expenses @ 4%7901.72598.5517.9512,469.07498.76TotalImported<strong>and</strong>MachineryPlant12967.85#Currency Conversion rate: a) USD= `55 b) Euro = `70 c) 1CHF= `45.67 d) 1Yen = `0.551.3.3 Detailed break Up <strong>of</strong> Indigenous Knitting <strong>and</strong> Fabric Processing Plant <strong>and</strong> MachinerySr. NoDescriptionQuantityUnit price(` In lacs)Amount(` In lacs)1.Knitting2.3Cone Rewinding MachineProcessingChecking MachinesTotalAdd: Excise Duty @ 16%Add: Sales Tax @ 4%Add: Insurance,LocalTransport @ 4%Add: Erection<strong>and</strong>Commissioning@ 3%Total (1+2)276.754.5013.5031.5045.007.201.801.801.3557.1556
Scotts Garments LimitedSr. No4Description*Other Machineries includinginterlock machines, s<strong>of</strong>twindling machine, knittingmachine, washing/soapingmachine, tumble dyer, hydroextractor with panel board,automatic dispensing systemcolor service,printingmachines, shearing machine,etc.Quantity-Unit price(` In lacs)LumpsumAmount(` In lacs)1445.54Total (3+4)1502.69*Certain machineries required for the Knitting <strong>and</strong> Fabric processing unit had beenidentified by ourcompany asavailable with Britannia Industries Limited (BIL). BIL had bought these machineries fromStateBank <strong>of</strong> <strong>India</strong> through tender cum auction notice dated 02/07/2011. We have purchased the entiree set <strong>of</strong>machineriesfrom them vide tax invoice dated 01/10/2011. These machineries were originally owned byCuthberts Textiles Private Limited, BangaloreOther than the above, none <strong>of</strong> the machineries used by us are second h<strong>and</strong> machines. The Promoter,Directors, Key Managerial Personnel<strong>and</strong> the Group Companies do not have any interest in the proposedacquisition <strong>of</strong> the equipment <strong>and</strong> machineries.1.4 Miscellaneous Fixed AssetsThe Company requires electrical installation, additional machinery, equipments, generators, trolleys etc forfunctioning<strong>of</strong> the unit at Doddaballapur <strong>and</strong> Kolhapur. The total cost estimated for both the units is` 2612.50approx. Thebreak up <strong>of</strong> the miscellaneous assets tobe purchased is given under1.4.1 The detail <strong>of</strong> miscellaneous fixedassets required for Doddaballapur Unit is as under:Sl. NoParticulars1 Electrical power 3000 Kva2Power Transformers 1500 Kva3 500 Kva4 250 Kva5 Screw compressors 40 Hp,E-30,7.5-191 Cfm6 Air Dryer, ELRD 4507 Air Receiver, 2000 ltrs 7 Kgs8 Pre filter set - PF 5009Goods elevators 2 Ton capacity with 4 Stops10 - Fire fighting systems,As perNational code, BOQ preparedbychief fire <strong>of</strong>ficer, Karnataka- Fire pump room equipmentSupplier/ContractorQuotationsMonarch ElectricalsVivekan<strong>and</strong>Electrical IndustriesPvt. Ltd.Powerica LimitedQuantity1 set352ELGILtd.Equipments 5323 setsOrientElevatorCompany2N.A.Amount(` in lacs)10.0024.70116.4722.7522.309.762.100.8015.1194.9757
Scotts Garments LimitedSl. NoParticulars- Hydrant system both for Internal &External- Addressable fire detection & Alarmsystem- Fire Extinguishers- Signages- Fire NOC- Sprinkler system11 IBR - Boiler- 5 TPH- 2 TPH- Chimney to suit 10- 12 TPH12100% steam condensate recovery systemasper specifications13 - Steamaccessories erection charges- IBR Pipe line, IBR Formalities,NON-IBpipe Pipe line & Insulation <strong>of</strong>line.- Water& Air line14 Electrification & other <strong>of</strong>fice equipmentsSUB TOTALSupplier/ContractorQuotationsTotal Solutions Inc.MaxthermTechonologiesPvt.Ltd.Calmax CombustionIncArmstrongInternationalPvt.Ltd.MeeraEngineersQuantityAmount(` in lacs)25.8013.2646.7175.00400.00879.731.4.2 The detail <strong>of</strong> miscellaneous fixedassets required for Knitting & Fabric processing unit is as under:Sr. No1.2.3.4.5.6.7.8.9.10.11.12.13.14.15.16.17.18.DescriptionElectrical Installation (HT & LT distribution, Lighting etc.)Effluent Treatment PlantCaustic Recovery Plant – UNITOPHumidification for KnittingAir H<strong>and</strong>ling Unit for Flat KnittingAir Compressor (500 CFM X 2) with pipingD.G. SetBoiler (1W+ +1S)- 12 TonCoal h<strong>and</strong>ling PlantChemical tank, Oil Storage tankSteam piping & Condensate PipingThermopack with piping& insulationnVentilationn for processingWater Supply with pipingDrainage pipingWater S<strong>of</strong>tening PlantFire Fighting EquipmentsElectronic Weighing scalesAmount(` In lacs)490.77500.0050.0072.0025.0050.0090.00150.0025.0015.0040.0050.005.0020.0010.0015.0020.0015.0058
Scotts Garments LimitedSr. No19.20.21.22.23.24.Workshop EquipmentFork LiftFurniture <strong>and</strong> FixturesOffice EquipmentsComputerswith s<strong>of</strong>twaresVehiclesTotalDescriptionAmount(` In lacs)10.0015.0020.0015.0015.0015.001732.771.5 Preliminary <strong>and</strong> Pre-Operativee ExpensesA) The details <strong>of</strong> the preliminary <strong>and</strong> pre operative expenses to be incurred on the trouser manufacturingunit are as under:Sr. No1.2.Interest during constructionDeposits & OthersTotalDescriptionAmount(` In lacs)300.00155.86455.86B) The details <strong>of</strong> thepreliminary<strong>and</strong> pre operative expenses to be incurred on the Knitting& Fabricprocessing are as under:Sr. NoDescriptionAmount(` In lacs)1.2.Establishment <strong>and</strong> Project Management ExpensesInterest during construction on Rupee Loan after TUF benefit for 9Months25.000506.323.4.5.6.7.8.Up Front Fees for total term loanL/C charges for imported machineryInsuranceStart up ExpensesEngineering/Consultant FeesDocumentation Appraisal Fee & Other Deposits4.8229.6348.7549.53100.00070.077Total834.121.6 Provision for Contingency/EscalationThe Company has madea provision for contingencies <strong>of</strong> ~5% <strong>of</strong> the capitalexpendituree to be deployed forDoddaballapur <strong>and</strong> Kagal Project. It includes L<strong>and</strong><strong>and</strong> Building, Plant <strong>and</strong> Machinery, Miscellaneouss FixedAssets <strong>and</strong> Preliminary <strong>and</strong> Pre-operative Expenses that amounts to `1168.733 lacs2 Margin Money requirement for Working Capital for Trouser manufacturing/Garment Manufacturingunit <strong>and</strong> for Knitting <strong>and</strong> Fabric Processing UnitWe have estimated working capital requirement <strong>of</strong> ` 5389.75 lacs for Doddaballapur unit<strong>and</strong> ` 5013. 87 lacsfor Kolhapur Unit for the first year. We shall utilize an amount <strong>of</strong> ` 502.04lacs for trouser manufacturingunit at Doddaballapur <strong>and</strong> ` 614.76 lacs for knitting <strong>and</strong> fabric processingunit at Kolhapur from the netissue proceeds towards the margin money <strong>of</strong> working capital <strong>and</strong> balance shall be fundedd through Banks.59
Scotts Garments LimitedSl.NoParticulars1 (A) Current AssetsExistingOperations(F.Y.2011-12)Estimates forfirstfullyear <strong>of</strong>completion <strong>of</strong> newunitatDoddaballapur(` in lacs)Estimatesfor firstfulllyear <strong>of</strong>completion <strong>of</strong> newunit at KagalInventoriesRawmaterialsFinished goods11,821.334,190.991,291.932,315.251,366.59947.28Work in progress5,676.661,800.751,878.07Receivables9,840.001,388.332,376.91Total Current Assets (A)2 (B) Current LiabilitiesProvisionsSundry Creditors&31,528.983,591.426,796.261,406.516,568.851,554.99Total Current Liabilities (B)3 Working Capital(A-B)4 To be Financed by3,591.4227,937.561,406.515,389.751,554.995,013.86Bank/Internal AccrualsPublic IssueTotal27,937.56-4,887.71502.044,399.12614.751116.79Assumptions for working capital requirementsSr.NoParticulars1. Inventories2. Finished goods3. Work in progresss4. Receivables5. Sundry CreditorsExistingOperations4.5 Months1.5 Months2.5 Months4.5 Months1.5 MonthsDoddaballapurUnit(First Year)1 Month3.5 Weeks3 Weeks1 Month1 MonthKagal Unit(First Year)1 Month15 Days1 Month1 Month1 MonthThe Company has fund based working capital limit <strong>of</strong> ` 15500.00 lacs sanctioned from Canara Bank<strong>and</strong> `4700.00 lacssanctioned from State Bank <strong>of</strong> <strong>India</strong> for existing operations. The Company has presentlyreceived sanction <strong>of</strong> ` 3000.00 lacs from State Bank <strong>of</strong> <strong>India</strong> vide their letter dated 02/01/2013 towardsworking capital requirement <strong>of</strong> DoddaballapurProject. TheCompany shall approach the bankers atappropriatetime to avail the additional credit facilities/creditfacilities for working capital requirement <strong>of</strong>aforesaid Units.Estimated Issue ExpensesThe Management estimates an expense or ` [●] Lacs towardsissue expense. The expenses <strong>of</strong> this Issueinclude, among others, underwriting<strong>and</strong> management fees, selling commission, printing<strong>and</strong> distributionexpenses, legal fees, statutory advertisement expenses <strong>and</strong> listing fees. The estimated Issue expenses are asfollows:60
(` in Lacs)Sr. No.Nature <strong>of</strong> ExpensesAmount*% to theTotal% to theIssueExpenses1. Lead Management Fee, Underwriting Commissions<strong>and</strong> SellingCommissions[●] [●][●]2. SCSB Commission/processing fee to SCSBs for [●] [●][●]processing ASBA Bidcum Application Formsprocured by members <strong>of</strong> syndicate <strong>and</strong> non-syndicate members**3. Commission to Non-SyndicateMembers on [●] [●][●]procurement <strong>of</strong> eligiblee applicationsconsidered forpurpose <strong>of</strong> allotment***4.5.6.Advertising<strong>and</strong> Marketing ExpensessPrinting <strong>and</strong> StationeryOthers (Registrar’s Fee, Legal Fee, Grading Fee,Service Tax, etc.)[●][●][●][●][●][●][●][●][●]Total[●] [●][●]* Will be incorporated after finalisation <strong>of</strong> Issue Price**SCSBs would be entitledto a processing fee <strong>of</strong> `100 per Bid-cum-ApplicationForm, for processing the Bid-cumApplication Forms procured by the members <strong>of</strong> the Syndicate <strong>and</strong> submitted to SCSBs.***Non-Syndicate Members would be entitled to a commission <strong>of</strong> `200 per valid bid cum application form procured <strong>and</strong>consideredd for basis <strong>of</strong> allotmentGeneral Corporate PurposesThe Company intends to set apart some funds for meetingcertain unplanned expenditure which arenecessary for conductingthe Businesss which are sourced through the head General Corporate Purposes.Schedule <strong>of</strong>implementationScotts Garments LimitedSlNo.ActivityDoddaballapurCommencementCompletionKolhapurCommencementCompletion1 L<strong>and</strong>#CompletedCommencedMay '20132 Site DevelopmentCompletedMay’ 2013 June’ 20133 Construction <strong>of</strong> BuildingAugust '2011 March’ 2013 June’ 2013 March’ 2014Purchase<strong>of</strong> Plant &4 MachineryMarch '2012 March’ 2013--5Identifying <strong>and</strong> Purchase <strong>of</strong>Plant & Machinery--CommencedMarch’ 20146Purchase <strong>of</strong> MiscellaneousFixedAssetsMarch '2012 March’ 2013 August ‘2013 February’ 2014April/May’7 TrialRunsOctober '2012*2013April’ 2014 May ‘20148 Commercial ProductionMay’ 2013June’ 2014# L<strong>and</strong> atDoddaballapur has already been allotted on Lease cum sale basis by KIADB whereas l<strong>and</strong> atKolhapur shall been taken on lease from Kagal Industrial Textile Technology Park (P) Ltd.61
Scotts Garments Limited*Our company has already started trial runs on certain machineries that have been installed at the site <strong>and</strong>we expectthe commencement <strong>of</strong> commercial production by May 2013.Year wise break up <strong>of</strong> the proceeds tobe usedThe year wise break up <strong>of</strong> funds to beincurred on the Project under various heads is as follows:ParticularsAmount spent till31/03/2013(Amount ` in lacs)Amount to bespent during theTotalyear 2013-14AmountL<strong>and</strong> & Site DevelopmentFactory Building & othercivil workPlant & MachineryMiscellaneous Fixed AssetsPreoperative ExpensesContingenciesWorking CapitalIssue expensesGeneral Corporate PurposesTotal702.633,756.342,379.74713.38-451.75-79.96-8,083.80613.003,530.1814,824.411,899.121,168.73838.161,116.80[●][●][●]1,315.637,286.5217,204.152,612.501,168.731,289.911,116.80[●][●][●]Sources & deployment <strong>of</strong> FundsAs per the Certificate dated March 25, 2013 from Siddaiah & Ram, CharteredAccountants the Company hasupto deployed an amount aggregating ` 8083.80 lacs as on February 28, 2013 towards the proposed projectat Doddaballapur <strong>and</strong> Kagal. Details<strong>of</strong> the sources <strong>and</strong> deployment <strong>of</strong> funds as per the certificate are asfollows:ParticularsDEPLOYMENT OF FUNDSL<strong>and</strong> <strong>and</strong> Site DevelopmentBuilding <strong>and</strong> Civil WorksMachineries<strong>and</strong> Equipments & Miscellaneous Fixed AssetsPreliminary& Pre-operative ExpensessIssue ExpensesTotalSOURCES OF FUNDSInternal Accruals* & Pre-IPfrom Canara BankEquityTerm LoanTotal(`In lacs)Amount702.633,756.343093.12451.7579.968083.803413.754670.058083.8062
Scotts Garments Limited*The amount other than IPO proceeds <strong>and</strong> Term Loan proceeds required towards the ‘Objects <strong>of</strong> theIssue’shall be funded from internal accruals. Any funds deployedd from internal accruals over <strong>and</strong> above therequired amount shall beadjusted with the IPO proceeds <strong>and</strong> ploughed backin the Company.Interim Use<strong>of</strong> FundsThe management, in accordance withthe policies set up by the<strong>Board</strong>, will have flexibility in deploying theproceeds received fromthe Issue. Pending utilization for the purposes described above, the Companyintends to temporarily invest the funds in high quality interest or dividend bearing liquid instrumentsincluding deposits with banks for the necessary duration. Such investments would be in accordance withany investment criteria approved by the <strong>Board</strong> <strong>of</strong> Directors fromtime to time.Monitoring<strong>of</strong> Utilization <strong>of</strong> FundsThe management <strong>of</strong> theCompany will monitor the utilization <strong>of</strong> funds raised throughh this publicissue.Pursuant toClause 49 <strong>of</strong>the Listing Agreement, our Company shall on quarterly basis disclose to theAuditCommittee the Applications <strong>of</strong> the proceeds <strong>of</strong> theIssue. On anannual basis, our Company shall prepare astatement <strong>of</strong> funds utilized for purposes other thanstated in this Red Herring Prospectuss <strong>and</strong> place it beforethe Audit Committee. Such disclosures shall be made only until such time that all the proceeds <strong>of</strong> theIssuehave been utilized in full. The statement will be certified by the Statutory Auditors <strong>of</strong> our Company.Our Company shall be required to inform the material deviations in the utilization <strong>of</strong> the issue proceeds tothe Stock <strong>Exchange</strong>s <strong>and</strong> shall also be required to simultaneously make the material deviation/ adversecomments <strong>of</strong> the Audit Committee public through advertisement in newspaper.Basic terms<strong>of</strong> the issueThe Equity shares being <strong>of</strong>fered are subject to the provision <strong>of</strong> the Companies Act, 1956,our Memor<strong>and</strong>um<strong>and</strong> Articles <strong>of</strong> Association, the terms <strong>of</strong> this <strong>of</strong>fer document<strong>and</strong> other terms <strong>and</strong> conditions as may beincorporated in the Allotment advice<strong>and</strong> other documents /certificates that may be executed in respect <strong>of</strong>the issue. The Equity shares shall also be subjected to laws as applicable, guidelines, notifications <strong>and</strong>regulations relating to the issue <strong>of</strong> capital <strong>and</strong> listing <strong>and</strong> trading <strong>of</strong> securities issued from time to time bySEBI, Government <strong>of</strong> <strong>India</strong>, RBI, ROC<strong>and</strong> /or other authorities as in forceon the date <strong>of</strong> issue <strong>and</strong> to theextent applicable.63
Scotts Garments LimitedQUALITATIVE FACTORSBASIS OF ISSUE PRICE1. Multiple Product Capability2. StrongManagement Team3. Relationship with big sized players in International Market4. High quality products5. Stringent Quality Norms6. Designing Capabilities7. Sampling Capabilities8. Strategic Location AdvantageQUANTITATIVE FACTORSInformation presented in this section is derived from the restated audited financial statements1. Earnings Per Share (EPS) (on ` 10 /- per share)Year EndedMarch 31, 2010March 31, 2011March 31, 2012Weighted Average EPSEPS (`)10.4113.0631.4321.80Weight123-The EPS <strong>of</strong> the Company based on the financials for seven months period ended October 31, 2012 is `6.62.2. Price/ Earning (P/E) RatioOn the cap price <strong>of</strong> ` 132/- per equity shareParticularsP/E based on pre-issue weighted average EPS <strong>of</strong> ` 21.80P/E based on pre-issue EPS <strong>of</strong> FY 2011-12 <strong>of</strong> ` 31.436.064.20On the floor price <strong>of</strong> ` 130/- per equity shareParticularsP/E based on pre-issue weighted average EPS <strong>of</strong> ` 21.80P/E based on pre-issue EPS <strong>of</strong> FY 2011-12 <strong>of</strong> ` 31.435.964.143. Return onNet Worth (RONW)Year EndedMarch 31, 2010March 31, 2011March 31, 2012Weighted Average RONWRONW (%)21.4422.6436.8829.56Weight123-The Return on Net Worth<strong>of</strong> the Company based on seven months period ended October 31, 2012 is 8.39%.4. Minimumm Return on Increased Net Worth required to maintain pre-issue EPS: [•]64
Scotts Garments Limited5. Net AssetValue (NAV) per sharePre-Issuee as on March31, 2012 (`)Pre –Issue as on October 31, 2012 (`)Post Issue (`)85.2290.98[•]6. Industry Average P/EName <strong>of</strong> the CompanyP/E Multiple based onprice as on 11/04/2013Highest Bombay Rayon Fashion Limited 15.70LowestIndustry AverageM<strong>and</strong>hana Industries Limited10.9715.70**Source for Industry Average: : April 01 - April14, 2013, Capital Market Magazine, Textile Products7. Comparison with PeerGroupName <strong>of</strong> theCompanyEquity (`` inCrores)FaceValueTotalIncomeRONW(%)BookValuePAT (`In(Per from(`) Crores)equityOperatshares)ionsas on31/03/2012(` InCrores)Audited St<strong>and</strong>alone Financials forF.Y.2011-12M<strong>and</strong>hana Industries Limited33.12 10.00 980.14Bombay Rayon 134.60 10.00 2734.96Fashion LimitedK P R Mill Ltd.37.68 10.00 1198.14GokaldasLimitedExports 17.19 5.00 1002.06Source: Audited Financial Statements filed on BSE websiteScottsLimitedGarments 26.73 10.00 500.25EPS(`)17.51 126.02 73. 10 22.078.78 201.65 206.51 15.505.13 156.11 31.23 7.96(58.29) 66.25 (132.76) (38.62)36.88 85.22 84. 03 31.43P/EMultiplebased onPrice ason11/04/201310.9715.7015.03N.A.N.A.8. The face value <strong>of</strong> Equity Shares <strong>of</strong> Scotts Garments Limitedis ` 10 <strong>and</strong> the Issue Price is [•] time <strong>of</strong> theFace Value.The IssuePrice <strong>of</strong> ` [•] has been determined byus in consultation with the BRLM <strong>and</strong>Co-BRLM, on thebasis <strong>of</strong> assessment <strong>of</strong> market dem<strong>and</strong> from investors through the Book- Building Process <strong>and</strong> is justifiedbased on the above factors. The facevalue <strong>of</strong> theEquity Shares is ` 10 each. The Issue Price is 13 times theface valueat the lowerend <strong>of</strong> the price b<strong>and</strong> <strong>and</strong> 13.2 times the face value at the higher end <strong>of</strong> thePriceB<strong>and</strong>.On the basis <strong>of</strong> the above parameters the Issue Price <strong>of</strong> ` [•] per share is justified.65
Scotts Garments LimitedSTATEMENTT OF TAX BENEFITSToThe <strong>Board</strong> <strong>of</strong> DirectorsSCOTTS GARMENTS LTD# 481-B, IVth Phase, Peenya Industrial Area,Bangalore – 560 058.We, M/s Siddaiah & Ram, Chartered Accountants are the Statutory Auditors <strong>of</strong> M/ /s Scotts GarmentsLimited having its registered <strong>of</strong>fice at 481-B, IV Phase, Peenya Industrial Area, Bangalore – 560 058. Wehereby certify that under the currenttax laws, thefollowing tax benefits inter-alia, willl be available to theCompany <strong>and</strong> the members <strong>of</strong> the Company. However a member is advisedd to consider in his/her/its owncase the taximplications<strong>of</strong> an investment in the Equity Shares, particularlyin view <strong>of</strong> the fact that certainrecently enacted legislation may not have direct legal precedentor may havea different interpretationon thebenefits, which an investor can avail.As per the existing provisions <strong>of</strong> the Income Tax Act 1961 <strong>and</strong> other laws asapplicable for the time being inforce, the following tax benefits <strong>and</strong>deductions are <strong>and</strong> will, inter-alia be available to Scotts GarmentsLimited <strong>and</strong>its shareholders.We believe that there areno special tax benefits available to the Company <strong>and</strong> its shareholders.General taxbenefits available:A. Benefits to the company under Act1. Dividends exempt under section 10(34) <strong>and</strong> 10(35) <strong>of</strong> the IT Act.Dividend (whether interim or final) received by the company from its investment inshares <strong>of</strong> anotherdomestic company would be exempted in the h<strong>and</strong>s <strong>of</strong> the company as per the provisions <strong>of</strong> section10(34) read with section 115-O <strong>of</strong> the IT Act. Interms <strong>of</strong> section 10(35) <strong>of</strong>the IT Act, any income receivedfrom units <strong>of</strong> a Mutual Fund specified under section 10(23D) <strong>of</strong> the IT Act is exempt from tax, subject tosuch income not arising from the transfer <strong>of</strong> units in such Mutual Fund.2. Computation <strong>of</strong> capital gainsCapital assets are to be categorised into short-terassets exceptshares held in a companyor any othersecurity listed in acapital assets <strong>and</strong> long-term capital assets based onthe period <strong>of</strong> holding. All capitalrecognised stock exchange in <strong>India</strong> or units <strong>of</strong> Unit Trust <strong>of</strong><strong>India</strong> (‘UTI’) or Mutual Fund units specifiedunder section 10(23D) <strong>of</strong> the IT Act or zero coupon bonds are consideredd to be long-term capital assets, ifthey areheld for a period exceeding thirty-sixmonths. Shares held in a company orany other securitylisted ina recognised stock exchange in <strong>India</strong> or UTI or Mutual Fund units specified under section10(23D)<strong>of</strong> the IT Act or zero coupon bonds are consideredd as long-termcapital assets, if these are heldfor a period exceeding twelve months.As per the provisions <strong>of</strong> section 10(38) <strong>of</strong> the IT Act, long term capital gain arising tothe companyfromtransferr <strong>of</strong> a long term capital asset being anequity sharein a company listed on a recognizedstockexchange in <strong>India</strong>, shall be exempt from tax, ifsuch sale is entered into on or after October 1, 2004, <strong>and</strong>the transaction is chargeable to <strong>Securities</strong> Transaction Tax (‘STT’).As per the provisions <strong>of</strong> section 112 <strong>of</strong> the IT Act, long-term capital gains other than those coveredunder section 10(38) <strong>of</strong> the IT Act are subject totax at a rate<strong>of</strong> 20% (plusapplicable surcharge <strong>and</strong>cess).66
Scotts Garments LimitedHowever, proviso tosection 112( 1) specifies that if the long-term capital gains other than those coveredunder section 10(38) <strong>of</strong> the IT Act arising on transfer <strong>of</strong> listed securities or units or zero couponbond,calculated at the rate<strong>of</strong> 20% withindexation benefit exceeds the capital gains computed at the rate <strong>of</strong>10% without indexation benefit, then such capital gains arechargeable to tax at the rate <strong>of</strong> 10% withoutindexation benefit (plus applicable surcharge <strong>and</strong> educationcess).However, from Assessment Year 2007-2008, such long-terpayment <strong>of</strong> Minimum Alternate Tax (“MAT”) under thecapital gains will be included whilecomputing book pr<strong>of</strong>its for the purpose <strong>of</strong> provisions <strong>of</strong> section115JB <strong>of</strong> the IT Act.As per provisions <strong>of</strong>section 111A<strong>of</strong> the IT Act, short termcapital gains arising fromtransfer <strong>of</strong> shortterm capital asset, being an equityshare in a company or a unit <strong>of</strong> an equity orientedmutual fund shallbe taxable at the rate<strong>of</strong> 15% (plus applicable surcharge <strong>and</strong>education cess), if such sale is entered intoon or after October 1, 2004 <strong>and</strong> thetransaction is chargeablee to STT.3. <strong>Securities</strong> Transaction TaxIn terms<strong>of</strong> STT, transactions for purchase <strong>and</strong>sale <strong>of</strong> the securities in the recognizedstock exchange bythe shareholder will be chargeable to STT. As per the said provisions, any delivery based purchase <strong>and</strong>sale <strong>of</strong> equity sharein a company throughh the recognized stock exchange is liable to securitiestransaction tax @ 0.1% <strong>of</strong> the value payable by both buyer <strong>and</strong> seller individually.The non-delivery based sale transactions are liable to tax @ 0.025% <strong>of</strong> thevalue payable by the seller.4. Exemption <strong>of</strong> capitalgains arisingfrom income taxAs per the provisions <strong>of</strong> section 54EC <strong>of</strong> the ITAct <strong>and</strong> subject to the conditions specified therein capitalgains arising to a company on transfer <strong>of</strong> a long-term capital asset other than those covered undersection 10(38) <strong>of</strong> the IT Act shall not be chargeable to tax tothe extent such capital gains are invested inNational Highway Authority <strong>of</strong> <strong>India</strong> (NHAI) or Rural Electrification Corporation (REC) notified bondswithin six months from the date <strong>of</strong> transfer. Ifonly part <strong>of</strong>such capitalgain is invested, the exemptionshall beproportionately reduced.The IT Act has restrictedthe maximum investment in such bonds upto ` 5 million per assessee during any financialyear.5. Where the long-term specified asset is transferred or converted into money at any time within a period <strong>of</strong>three years from the date <strong>of</strong> its acquisition, theamount <strong>of</strong> capital gains exempted earlier would becomechargeable to tax as long term capital gainsin the yearin which the long-termspecified asset istransferred or converted into money.6. In accordance with <strong>and</strong> subject tothe provisions <strong>of</strong> section32 <strong>of</strong> the Income tax Act, the Company willbe allowed to claim depreciationon specifiedtangible <strong>and</strong>intangible assets as per the rates specified.Besides normal depreciation, theCompany, in terms <strong>of</strong> section 32(1) )(iia), shall be entitled toclaimAdditional depreciation @ 20% <strong>of</strong> actual cost on new plant <strong>and</strong> machinery for the period <strong>of</strong> one yearafter acquired on or after 31st March, 2005.7. In accordance with <strong>and</strong> subject tothe provisions <strong>of</strong> section 35D <strong>of</strong> the Income tax Act,the Company willbe entitled to amortise, over a period <strong>of</strong> fiveyears, all expenditure inconnection with the proposedpublic issue subject to the overall limit specified in the said section.8. Under Section 115 JAA (1A) <strong>of</strong> the Act, tax credit shall be allowed <strong>of</strong> any tax paid (MAT) under Section115 JB <strong>of</strong> the Act. Credit eligiblee for carry forward is thedifference between MATpaid <strong>and</strong> the tax67
computed as per thenormal provisions <strong>of</strong> the Act. Such MAT credit shall not be available for set-<strong>of</strong>fbeyond 10 years succeeding the year in which the MAT becomes allowable.9. Unabsorbed depreciation if any, for an Assessment Year (AY) can be carried forward<strong>and</strong> set <strong>of</strong>f againstany source <strong>of</strong> incomein subsequent AYs, as per section 32 <strong>of</strong> the Act, subject to the (2) <strong>of</strong> section 72 <strong>and</strong>sub-section (3) <strong>of</strong> section 73 <strong>of</strong> theAct.Carry forward <strong>and</strong> Set <strong>of</strong>f <strong>of</strong> Businesss Loss10. Businesss losses if any, for any AYcan be carried forward <strong>and</strong> set <strong>of</strong>f against business pr<strong>of</strong>its for eightsubsequent AYs.11. Section 48 <strong>of</strong> the Act,which prescribes the mode <strong>of</strong> computation <strong>of</strong> capital gains, provides for deduction<strong>of</strong> cost <strong>of</strong> acquisition/improvement <strong>and</strong> expenses incurredin connection with the transfer <strong>of</strong> a capitalasset, from the sale considerationn to arrive at the amount <strong>of</strong> capital gains. However, in respect <strong>of</strong> longterm capital gains, it <strong>of</strong>fers a benefit by permitting substitution <strong>of</strong> cost <strong>of</strong> acquisition / improvementwith theindexed cost <strong>of</strong> acquisition/improvement, which adjusts the cost <strong>of</strong> acquisition / improvementby a cost inflation index as prescribed from time to time.12. As per section 71 read with section 74, Short-term capital loss arising during a year is allowed to be set-be<strong>of</strong>f against short-termas well as long-term capital gains <strong>of</strong> the said year. Balance loss, if any, shouldcarried forward <strong>and</strong> set-<strong>of</strong>f against short-term as well as long-term capital gains for subsequent 8 years.13. As per section 71 read with section 74, Long-term capital loss arising during a year is allowed to<strong>of</strong>f onlyagainst long-term capital gains. Balance loss, if any, should be carried forward <strong>and</strong>against subsequent year’s long-term capital gains for subsequent 8 years.B. Benefits to the Resident shareholders <strong>of</strong> the company under the IT Act1. Dividends exempt under section 10(34) <strong>of</strong> the ITActDividendd (whether interim or final) received bya resident shareholder from its investment in shares <strong>of</strong> adomesticcompany would be exempt in the h<strong>and</strong>s <strong>of</strong> the resident shareholder as per the provisions <strong>of</strong>section 10(34) read with section 115-O <strong>of</strong> the IT Act.2. Any income <strong>of</strong> minor children (Maximum twochildren) clubbed with the total income <strong>of</strong> the parentunder section 64(1A) <strong>of</strong> the Income Tax Act 1961, will be exempt from tax to the extent <strong>of</strong> ` 1500 perminor child under section 10(32) <strong>of</strong>the Income Tax Act 1961.3. Computation <strong>of</strong> capital gainsScotts Garments Limitedbe setset-<strong>of</strong>fCapital assets are to be categorised into short-term capital assets <strong>and</strong> long-term capital assets based onthe period <strong>of</strong> holding. All capital assets [exceptshares held in a companyor any other security listed ina recognised stock exchange in <strong>India</strong> or units<strong>of</strong> UTI or Mutual Fundunits specified under section10(23D) <strong>of</strong> the IT Act<strong>and</strong> zero coupon bonds] are considered to be long-term capital assets, if they areheld for a period exceeding thirty-six in <strong>India</strong>or units <strong>of</strong> UTI or Mutual Fund units specified under section 10(23D)<strong>of</strong> the ITAct <strong>and</strong> zero coupon bonds are considered as long-term capital assets, if these are heldfor amonths. Shares held ina company or any other security listed in arecognised stock exchangeperiod exceeding twelve months.68
Scotts Garments LimitedAs per the provisions <strong>of</strong> section 48 <strong>of</strong> the ITAct, the amount <strong>of</strong> capital gain shall be computed bydeducting from the sale consideration, the cost<strong>of</strong> acquisition <strong>and</strong> expenses incurred in connectionn withthe transfer <strong>of</strong> a capital asset. However, in respect <strong>of</strong> long-term capital gains arising to a residentshareholder, a benefitis permittedto substitute the cost <strong>of</strong> acquisition/ improvement with the indexedcost <strong>of</strong> acquisition/ improvementt. The indexed cost <strong>of</strong> acquisition/ improvement,adjusts the cost <strong>of</strong>acquisition/ improvement by a cost inflation index, as prescribed from time to time.As per the provisions <strong>of</strong> section10(38) <strong>of</strong> the IT Act, long term capital gain arising to a residentshareholder from transfer <strong>of</strong> a long term capital asset being an equity share in a company listedon arecognized stock exchange in <strong>India</strong>, shall be exempt from tax, if such sale is entered into on orafterOctober 1, 2004, <strong>and</strong> the transactionn is chargeable to STT.As per the provisions <strong>of</strong> section 112 <strong>of</strong> the ITAct, long-term capital gains [other than those coveredunder section 10(38) <strong>of</strong> the IT Act] are subject totax at a rate<strong>of</strong> 20% (plusapplicable surcharge <strong>and</strong>cess).However, proviso to section 112(1) specifies that if the long-tertransfer <strong>of</strong> listed securitiess or units or zero coupon bond,capital gains [other than those coveredunder section 10(38) <strong>of</strong> the IT Act] arising on calculated at the rate <strong>of</strong> 20% withindexation benefit exceeds the capital gains computed at the rate <strong>of</strong>10% without indexation benefit, then such capital gains are chargeable to tax at the rate <strong>of</strong> 10% withoutindexation benefit (plus applicablesurcharge <strong>and</strong> education cess).As per provisions <strong>of</strong> section 111A<strong>of</strong> the IT Act, short termcapital gains arising fromtransfer <strong>of</strong>shortterm capital asset, being an equityshare in a company or a unit <strong>of</strong> an equity orientedmutual fundshallbe taxable @ 15% (plus applicable surcharge <strong>and</strong> educationcess), if suchsale is entered into on or afterOctober 1, 2004 <strong>and</strong> the transactionn is chargeable to STT.4. Exemption <strong>of</strong> capital gains arising from income taxAs per the provisionss <strong>of</strong> section 54EC <strong>of</strong> the IT Act <strong>and</strong> subject to the conditions specified therein capitalgains arising to a resident shareholder on transfer <strong>of</strong> a long-term capitalasset other than those coveredunder section 10(38) <strong>of</strong> the IT Act shall not be chargeablee to tax to the extent suchcapital gains areinvested in certain notified bonds within six months from the date <strong>of</strong> transfer. If only part <strong>of</strong> such capitalgain is invested, the exemption shall be proportionately reduced.However, if the resident shareholder transfers or converts the notified bonds into money (as stipulatedtherein) within a period <strong>of</strong> three years from the date <strong>of</strong> their acquisition, the amount <strong>of</strong> capitalgainsexempted earlier would become chargeable in such year. The bonds specified for thissection are bondsissued onor after April 1, 2006 by NHAI <strong>and</strong> REC. The IT Act has restricted the maximum investment insuch bonds up to ` 5 million per assessee duringany financial year.Further, as per the provisions <strong>of</strong> section 54F <strong>of</strong> the IT Act <strong>and</strong> subject to conditionsspecified therein,long-termcapital gains other thana capital gains arising on sale <strong>of</strong> resident house <strong>and</strong> those coveredunder section 10(38) <strong>of</strong> the IT Act arising to an individual or Hindu Undivided Family (‘HUF’) ontransfer <strong>of</strong> shares <strong>of</strong> the company will be exempted from capital gains tax, if the net considerationn fromsuch shares are used for either purchase <strong>of</strong> residential houseproperty within a period<strong>of</strong> one year beforeor two years after the date on which the transfer took place, or for construction <strong>of</strong> residential housepropertywithin a period <strong>of</strong> three years after thedate <strong>of</strong> transfer.However, if the resident shareholder transferss the residential house property withina period <strong>of</strong>threeyears from the date <strong>of</strong> their acquisition, the amount <strong>of</strong> capital gains exempted earlier would becomechargeable in such year.69
Scotts Garments LimitedC. Benefits to the Non-resident Venture Capital Investors1. Dividends exempt under section 10(34) <strong>of</strong> the ITActshareholders <strong>of</strong> the companyother than Foreign Institutional Investors<strong>and</strong> ForeignDividendd (whether interim or final) received bya non-resident shareholder from its investment in shares<strong>of</strong> a domestic company would be exempt inthe h<strong>and</strong>s <strong>of</strong> the non-resident shareholder as per theprovisions <strong>of</strong> section 10(34) read with section 115-O <strong>of</strong> the ITAct.2. Any income <strong>of</strong> minor children (Maximum twochildren) clubbed with the total income <strong>of</strong> the parentunder Section 64(1A) <strong>of</strong> the Income Tax Act 1961 will be exempt from tax to the extent <strong>of</strong> ` 1,500 perminor child per year in accordancewith the provisions <strong>of</strong> section 10(32) <strong>of</strong> the Income Tax Act 1961.3. Computation <strong>of</strong> capital gainsCapital assets are to be categorised into short-terassets [except shares held ina company or any other security listed in acapital assets <strong>and</strong> long-term capital assets based onthe period <strong>of</strong> holding.All capital recognised stock exchange in <strong>India</strong>or units <strong>of</strong> UTI or Mutual Fund units specified under section 10(23D)<strong>of</strong> the IT Act <strong>and</strong> zerocoupon bonds] are considered to be long-term capital assets, ifthey are heldfor aperiod exceeding thirty-six months. Shares held in a company or any other security listedin arecognised stock exchange in <strong>India</strong>or units <strong>of</strong> UTI or Mutual Fund units specified under section 10(23D)<strong>of</strong> the ITAct <strong>and</strong> zero coupon bonds are considered as long-term capital assets, if these are heldfor aperiod exceeding twelve months.As per the provisions <strong>of</strong> section 48 <strong>of</strong> the ITAct, the amount <strong>of</strong> capital gain shall be computed bydeducting from the sale the consideration, thecost <strong>of</strong> acquisition <strong>and</strong> expenses incurred in connectionwith the transfer <strong>of</strong> a capital asset. Under first proviso to section 48 <strong>of</strong> theIT Act, the taxable capitalgainsarising on the transfer <strong>of</strong> capital assets being shares or debentures <strong>of</strong> an <strong>India</strong>n company needto becomputed by converting the cost <strong>of</strong> acquisition, expenditure in connection with such transfer <strong>and</strong> fullvalue <strong>of</strong> the consideration receivedor accruingas a result <strong>of</strong> the transferr into the same foreign currencyin whichh the shares were originallypurchased. The resultantt gains thereafter need to be reconverted into<strong>India</strong>n currency. The conversion needs to be done at the prescribed ratesprevailing on dates stipulated.Hence, incomputing such gains, the benefit <strong>of</strong> indexation is not available to non-resident shareholders.As per the provisions <strong>of</strong> section 10(38) <strong>of</strong> the IT Act, longterm capitalgain arisingto a non-residentshareholder from transfer <strong>of</strong> a long term capital asset being an equity share in a company listedon arecognized stock exchange in <strong>India</strong>, shall be exempt from tax, if such sale is entered into on orafterOctober 1, 2004, <strong>and</strong> the transactionn is chargeable to STT.As per the provisions <strong>of</strong> section 112 <strong>of</strong> the ITAct, long-term capital gains (other than those coveredunder section 10(38) <strong>of</strong> the IT Act) are subject totax at a rate<strong>of</strong> 20% (plusapplicable surcharge <strong>and</strong>cess).However, proviso to section 112(1)specifies that if the long-term capital gains [other than those coveredsecond proviso to section 48 <strong>and</strong> under section 10(38) <strong>of</strong> the IT Act] arising on transferr <strong>of</strong> listed securitiesor units or zero coupon bond, calculated at therate <strong>of</strong> 20%with indexation benefit exceeds the capitalgains computed at the rate <strong>of</strong> 10% without indexation benefit, then suchcapital gains are chargeable totax at therate <strong>of</strong> 10% without indexation benefit (plus applicable surcharge <strong>and</strong> education cess).As per provisions <strong>of</strong> section 111A<strong>of</strong> the IT Act, short termcapital gains arising from transfer <strong>of</strong>shortterm capital asset, being an equityshare in a company or a unit <strong>of</strong> an equity orientedmutual fundshallbe taxable @ 15% (plus applicable surcharge <strong>and</strong> educationcess), if suchsale is entered into on or afterOctober 1, 2004 <strong>and</strong> the transactionn is chargeable to STT.70
Scotts Garments Limited4. Exemption <strong>of</strong> capital gain from income-taxAs per the provisionss <strong>of</strong> section 54EC <strong>of</strong> the IT Act <strong>and</strong> subject to the conditions specified therein capitalgains arising to a non-resident shareholder ontransfer <strong>of</strong> a long-term capital asset(other than thosecovered under section10(38) <strong>of</strong> the IT Act) shall not be chargeable to taxto the extentt such capitalgainsare invested in certain notified bonds within six months from the date <strong>of</strong> transfer. Ifonly part <strong>of</strong> suchcapital gain is invested, the exemption shall be proportionately reduced.However, if the non-resident shareholder transfers or converts the notified bonds into money (asstipulated therein) within a period<strong>of</strong> three years from the date <strong>of</strong> their acquisition, theamount <strong>of</strong> capitalgains exempted earlier would become chargeable in such year. The bonds specified for this section arebonds issued on or after April 1, 2006 by NHAI <strong>and</strong> REC. The IT Act has restricted the maximuminvestment in such bonds up to ` 5 million per assessee during any financial year.Further, as per the provisions <strong>of</strong> section 54F <strong>of</strong> the IT Act <strong>and</strong> subject to conditionsspecified therein,long-termcapital gains (other thana capital gains arising on sale <strong>of</strong> resident house <strong>and</strong> those coveredunder section 10(38) <strong>of</strong> the IT Act) arising to anindividual or HUF on transfer <strong>of</strong> shares <strong>of</strong> the companywill be exempted from capital gains tax, if thenet consideration from such shares are used for eitherpurchase<strong>of</strong> residential house property (subjectto prior approval from Reserve Bank<strong>of</strong> <strong>India</strong>) within aperiod <strong>of</strong>one year before or two years after the date on which the transfer took place, or for construction<strong>of</strong> residential house property within a period <strong>of</strong>three years after the date <strong>of</strong> transfer.5. Non-resident taxationUnder section 115-I <strong>of</strong> the IT Act, the non-resident <strong>India</strong>n shareholder has an option to be governed bythe provisions <strong>of</strong> Chapter XIIA <strong>of</strong> the IT Act viz. “Special Provisions Relating to Certain Incomes <strong>of</strong>NontoinResidents” which are as follows:Under section 115E <strong>of</strong> the IT Act, where shares in the company areacquired or subscribedconvertible foreign exchange by a non-resident <strong>India</strong>n, capital gains arising to thenon-resident ontransfer <strong>of</strong> shares heldfor a periodexceeding 12 months, will [in cases not covered under section 10(38)<strong>of</strong> the ITAct], be concessionallytaxed at theflat rate <strong>of</strong>10% (plus applicable surcharge <strong>and</strong>cess)(withoutt indexation benefit but with protection against foreign exchange fluctuation)Under provisions <strong>of</strong> section 115F<strong>of</strong> the IT Act, long-termcapital gains [in cases not covered undersection 10(38) <strong>of</strong> the IT Act] arising to a non-resident <strong>India</strong>nn from the transfer <strong>of</strong> shares <strong>of</strong> the companysubscribed to in convertible foreign exchange will be exempt from income tax, if the net consideration isreinvested in specified assets within six months <strong>of</strong> the date <strong>of</strong> transfer. If only part <strong>of</strong> the netconsideration is so reinvested, theexemption will be proportionately reduced. However the amount soexempted will be chargeable to taxsubsequently, if the specified assets are transferredor converted intomoney within three years from thedate <strong>of</strong> theiracquisition.6. In accordance with the provisions <strong>of</strong> Section 115G <strong>of</strong> the Income Tax Act 1961, Non Resident <strong>India</strong>ns arenot obliged to file a return <strong>of</strong> income under Section 139(1) <strong>of</strong> the Income TaxAct 1961 if theironly source <strong>of</strong> incomeis income from investments or long term capital gains earned on transfer <strong>of</strong>suchinvestments or both, provided tax has been deducted at source from such income as per the provisions<strong>of</strong> Chapter XVII-B <strong>of</strong> the Income Tax Act 1961.7. In accordance with the provisionss <strong>of</strong> Section 115H <strong>of</strong> the Income Tax Act 1961, when a Non Resident<strong>India</strong>n become assessable as a resident in <strong>India</strong>,he may furnish a declaration in writing to the AssessingOfficer along with hisreturn <strong>of</strong> income for that year under Section 139 <strong>of</strong>the Income Tax Act 1961 to the71
Scotts Garments Limitedeffect that the provisions <strong>of</strong> Chapter XII-A shall continue to apply to himin relation to such investmentincome derived from the specified assets for that year <strong>and</strong> subsequent assessment years until such assetsare converted into money.8. As per the provisions <strong>of</strong> section 115 I <strong>of</strong> the I.T. Act, a Non-Resident <strong>India</strong>n may elect not to be governedby the provisions <strong>of</strong> Chapter XII-Afor any assessment yearby furnishing his return <strong>of</strong> income for thatyear under Section 139 <strong>of</strong> the Income Tax Act 1961, declaring therein that the provisions <strong>of</strong> Chapter XII-year willl be computedin accordance with the other provisions <strong>of</strong> the Income Tax Act 1961.A shall not apply to him for that assessment year <strong>and</strong> accordingly his total income for that assessment9. Tax Treaty BenefitsAs per the provisionss <strong>of</strong> Section 90(2) <strong>of</strong> the Income Tax Act 1961, the provisions <strong>of</strong> the Income Tax Act1961 would prevail over the provisions <strong>of</strong> the tax treaty to the extent theyare more beneficial to theNon-companywould be exempt in theh<strong>and</strong>s <strong>of</strong> the FII as per the provisions <strong>of</strong> section10(34) readwithResident.D. Benefits to Foreign Institutional Investors (‘FII’)1. Dividends exempt under section 10(34) <strong>of</strong> the ActDividendd (whether interim or final) receivedby a FII from its investment in shares <strong>of</strong> a domesticsection 115-O <strong>of</strong> the Act.2. Long termcapital gains exempt under section 10(38) <strong>of</strong> the Act.As per the provisions <strong>of</strong> section 10(38) <strong>of</strong> the Act, long term capital gain arising to the FII from transfer <strong>of</strong>a long term capital asset being an equity sharein a company listed on a recognized stock exchange in<strong>India</strong>, shall be exemptfrom tax, if such sale is entered into onor after October 1, 2004, <strong>and</strong> the transactionis chargeable to STT.3. Capital gainsAs per the provisions <strong>of</strong> sectionfollowingrates:Rate <strong>of</strong> tax115AD <strong>of</strong> the Act, FIIs are taxed on the capital gains incomeat theNature <strong>of</strong> Income(%)*Long-term capital gains10Short-term capital gains30* Plus applicable surcharge <strong>and</strong> cessThe benefits <strong>of</strong> foreign currency fluctuation protection <strong>and</strong> indexation as provided by section 48 <strong>of</strong> theAct are not available to a FII.As per the provisionss <strong>of</strong> section 10(38) <strong>of</strong> the Act, long termcapital gain arising to FIII from transfer <strong>of</strong> along termcapital asset being an equity share in a company listed on a recognized stock exchange in<strong>India</strong>, shall be exemptfrom tax, if such sale is entered into onor after October 1, 2004, <strong>and</strong> the transactionis chargeable to STT.72
Scotts Garments LimitedAs per provisions <strong>of</strong> section 111A <strong>of</strong> the Act, short term capital gains arising from transfer <strong>of</strong> short termcapital asset, being anequity share in a company or a unit<strong>of</strong> an equityoriented mutual fund shall betaxable at the rate <strong>of</strong> 15% (plus applicable surcharge <strong>and</strong> education cess), if such sale isentered intoon orafter October 1, 2004<strong>and</strong> is chargeable to STT.4. Tax Treaty BenefitsAs per section 90(2) <strong>of</strong> the Act, the provisionss <strong>of</strong> the Act would prevail over the provisions <strong>of</strong> the taxtreaty to the extent they are more beneficial to the FII. Thus,an FII can opt to be governed by provisions<strong>of</strong> the Act or the applicable tax treaty whicheveris more beneficial.E. Benefits to the Mutual Funds1. Dividends exempt under section 10(34) <strong>of</strong> the ActDividendd (whether interim or final) received by a Mutual Fund fromits investment in shares <strong>of</strong> adomesticcompany would be exempt in the h<strong>and</strong>s <strong>of</strong> the Mutual Fund as per the provisions <strong>of</strong> section10(34) read with section 115-O <strong>of</strong> the Act.2. As per the provisions <strong>of</strong> section 10(23D) <strong>of</strong> the ActAny income <strong>of</strong> Mutual Funds registered under the <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> Act, 1992(‘SEBI’) or regulationsmade there under, Mutual Funds set up by public sector banks or public financialinstitutions or Mutual Funds authorised by theReserve Bank <strong>of</strong> <strong>India</strong>, would be exempt from incometax, subject to the prescribed conditions.F. Benefits to the Venture Capital Companies / Funds1. Dividends exempt under section 10(34) <strong>of</strong> the ActDividendd (whether interim or final) received by a Venture Capital Company (‘VCC’)/ Venture CapitalFunds (‘VCF’) from its investment in shares <strong>of</strong> another domestic companywould be exempt in the h<strong>and</strong>s<strong>of</strong> the VCC/VCF as per the provisions <strong>of</strong> section10(34) read with section 115-O <strong>of</strong> the Act.2. In case <strong>of</strong> a shareholder being a Venture Capital Company/ Fund, as per the provisions <strong>of</strong> Section10(23FB) <strong>of</strong> the Income Tax Act 1961, any income <strong>of</strong> Venture Capital Companies/ Funds registered withthe SEBI,would be exempt from Income Tax, subject to the conditions specified in the said subsection.G. Benefits under the Wealth Tax Act, 1957Asset as defined under section 2(ea) <strong>of</strong> the Wealth-tax Act,1957 does not include shares in companies<strong>and</strong> hence, shares are not liable to wealth tax.H. Benefits under the Gift Tax ActAs no Gift tax is leviable in respect <strong>of</strong> gifts made on or afterOctober 1, 1998, but before April 1, 2006.Asper amended section56 (2) (vi) any gift received in money, the aggregate value <strong>of</strong> which exceeds `50,000/- is received without consideration, the whole <strong>of</strong> the aggregate value <strong>of</strong> such sum will bechargeable to tax. As per newly inserted section 56 (2) (vii) value <strong>of</strong>sum <strong>of</strong> money / immovableproperty/ movable property received without considerationn or for inadequate consideration is in exceed73
Scotts Garments Limited<strong>of</strong> ` 50,000/- than the whole <strong>of</strong> the aggregatee value <strong>of</strong> such sum will be chargeablee to tax with effectfrom Dt: 01.10.2009.Notes1. All the above benefits are as per the current tax laws as amended by the Finance Act, 2011 &Finance Bill, 2012 <strong>and</strong> will beavailable only to the sole/ first named holder in case the shares areheldby joint holders.2. In respect <strong>of</strong> non-residents,the tax rates<strong>and</strong> the consequent taxation mentioned above shall befurther subject to any benefits available under the double taxationavoidance agreements, if any,between <strong>India</strong> <strong>and</strong> the country in which the non-resident has fiscal domicile.3. In view <strong>of</strong> the individual nature <strong>of</strong> tax consequences,each investor is advised to consult his/ herowntax advisor with respect to specific taxconsequences <strong>of</strong> his/ herparticipationin the scheme.4. Taximplications<strong>of</strong> an investment in the Equity Shares, particularlyin view <strong>of</strong> the fact that certainrecently enactedlegislationss may not have direct legal precedent or mayhave a differentinterpretation onthe benefits which an investor can avail.5. Ourviews expressed herein are based on the facts <strong>and</strong>assumptionss indicated above. No assuranceis given that the revenue authorities/courts will concurwith the views expressedherein. Ourviewsare based on theexisting provisions <strong>of</strong> law<strong>and</strong> its interpretation, which are subject to change fromtime to time. Wedo not assume responsibility to updatethe views consequent to such changes.Place: BangaloreDate: 28th June 2012For Siddaiah <strong>and</strong> Ram,Chartered AccountantsSd/-PartnerMembership No.: 2373174
The information in this section is derived from a combination <strong>of</strong>various <strong>of</strong>ficial <strong>and</strong> un<strong>of</strong>ficial publicly availablematerials <strong>and</strong> sources <strong>of</strong> information. Ithas not been independently verified by theCompany, the Book Running LeadManager or their respective legal advisors, <strong>and</strong> no representationn is made as tothe accuracy<strong>of</strong> this information,which maybe inconsistent with information availableor compiled from the other sourcesOverview<strong>of</strong> the Global Textile IndustrySECTION III – ABOUT THE ISSUER COMPANYINDUSTRY OVERVIEWScotts Garments LimitedIn the year 2011, the global trade in textile <strong>and</strong> clothing industry was at USD 706 billion. Exports by <strong>India</strong>ntextile <strong>and</strong> clothing industry accounted for USD15.0 billion<strong>and</strong> USD 14.40 billion respectively. Worldexports <strong>of</strong>textiles <strong>and</strong> clothing grew by 17 per cent in 2011. The top ten exporters each registered 13 percent growth or more. Bangladesh recorded the highest increase (27 per cent) while thelowest among thetop ten was recorded by the United States with 13 per cent. The order for the top ten exporters remains thesame as in2010. Chinawas the leading exporter <strong>of</strong> textiles <strong>and</strong> clothing in2011 with a 32 per cent share inworld exports <strong>of</strong> textiles <strong>and</strong> 37 per cent in clothing. The European Union <strong>and</strong> the United States are themajor markets for clothing, accounting for 45 percent <strong>and</strong> 21 per cent respectively <strong>of</strong> world imports.(Source: WTO – International Trade Statistics, 2012) ).The global projectionsfor Textile <strong>and</strong> ClothingTrade as estimated by WTO <strong>and</strong> CITI are representedbelow:Source: Presentation on <strong>India</strong>n Textile <strong>and</strong> Clothing Industry by Confederation <strong>of</strong><strong>India</strong>n Textile Industry (CITI)Overview<strong>of</strong> <strong>India</strong>n Textile Industry<strong>India</strong>n textile industrycontributes about 14 per cent to Industrial Production, 4 per cent to the country’sGross Domestic Product (GDP), 17per cent toexport earnings <strong>and</strong> provides direct employmentto 35million people whichh includes substantial number <strong>of</strong> SC/ /ST <strong>and</strong> women. Textilee & ClothingsalesgeneratedUSD 52 Billion in 2008-09 bifurcated as USD 33.4 billion from domestic market <strong>and</strong> US $ 21.60billion from exports. Exports <strong>of</strong> Textiles & Clothing grew to US$ 22.41 billion in 2009-10 <strong>and</strong> has touchedUS$ 26.822 billion in 2010-11. In the financial year i.e. 2011-12,exports <strong>of</strong> textiles <strong>and</strong> clothing, as perlatestavailable data coveringApril-October, 2011, hasgrown by 28.94% over the corresponding period <strong>of</strong> 2010-11.75
Scotts Garments LimitedDuring the year 2010-11, Readymade Garments account for almost 40% <strong>of</strong> the total textiles exports.Apparel <strong>and</strong> cotton textiles products together contribute nearly 70% <strong>of</strong> the total textiles exports. Theexports basket comprise a wide range <strong>of</strong> items including readymade <strong>garments</strong>, cottontextiles, h<strong>and</strong>loomtextiles, man-made fibre textiles, wool <strong>and</strong> woolen products, silk, jute <strong>and</strong> h<strong>and</strong>icraftsincluding carpets.<strong>India</strong>’s textiles products, includingh<strong>and</strong>looms <strong>and</strong> h<strong>and</strong>icrafts, are exported to more than a hundredcountries.However, the USA <strong>and</strong> the EU, account for about two-thirds<strong>of</strong> <strong>India</strong>’s textiles exports. Theother major export destinations are China, U.A.E., Sri Lanka, Saudi Arabia, Republic <strong>of</strong> Korea, Bangladesh,Turkey, Pakistan, Brazil, Hong Kong, Canada, Egypt etc.(Source: Presentation by Confederation <strong>of</strong> <strong>India</strong>nn Textile <strong>and</strong> Annual Report 2011-12 <strong>of</strong> Ministry <strong>of</strong> Textile)In the post-quota period, <strong>India</strong> has emerged as a major sourcing destination for new buyers. As a measure<strong>of</strong> growing interest inthe <strong>India</strong>n textile <strong>and</strong> clothing sector a number <strong>of</strong> buyers have openedtheirsourcing/ /liaison <strong>of</strong>ficein <strong>India</strong>. Commercially,the buoyant retailers across the world are looking foroptions <strong>of</strong> increasing their sourcing from the <strong>India</strong>n markets. The <strong>India</strong>n textiles industry is extremelyvaried, with the h<strong>and</strong>-spun mill sector at the other. The decentralized power looms/hosiery <strong>and</strong> knitting sectors form<strong>and</strong> h<strong>and</strong>-woven sector at one end <strong>of</strong> the spectrum, <strong>and</strong> the capital intensive,sophisticatedthe largest section <strong>of</strong> textiles sector. The closelinkage <strong>of</strong> the Industry to agriculture <strong>and</strong> the ancientcultures, <strong>and</strong> traditions <strong>of</strong> the country make the <strong>India</strong>n textilee sector unique in comparison with the textileindustry <strong>of</strong> other countries. This also providesthe industrywith the capacity to produce a variety <strong>of</strong>products suitable to the different market segments, both within <strong>and</strong> outside the country.Global exports <strong>of</strong> Ready Made Garments (RMG)• Global exports <strong>of</strong> RMG during2008-09 were <strong>of</strong> the order <strong>of</strong> USD 10.38 billion,which recorded amarginal decrease to USD 10.06 billion during 2009-10. However, exports <strong>of</strong> RMGgrew by 5.60% toUS$ 10.63 Billion in2010-11.• As per latest available statistics, exports <strong>of</strong> RMG during April- October, 2011 was <strong>of</strong> the order <strong>of</strong> USD7088.74 million as against USD 5512.15 million during thesame periodlast year, indicating an increase<strong>of</strong> over 28.60% in US$ terms this year.• EU was the biggest destinationn for RMG exports, with over USD 5.3 billion worth<strong>of</strong> exports duringthe year ending March, 2011, recording a growth <strong>of</strong> over 1% comparedto exports in2009-10.• US was the secondbiggest destination for RMG, with exports <strong>of</strong> USD2.85 billion for the year endingMarch,11, recording a growth <strong>of</strong> 7.29% over the last financial year.• UAE was the thirdbiggest destination with over a billion dollar worth<strong>of</strong> exports tothat group.(Source: Annual Report 2011-122 <strong>of</strong> Ministry <strong>of</strong> Textiles)Major sub-sectors thatt comprise the textiles sector include the- OrganizedCotton/ Man-Made Fibre Textiles Mill Industry,- Man-made Fibre/ Filament Yarn Industry,- Wool <strong>and</strong>Woollen Textiles Industry,- Sericulture <strong>and</strong> Silk Textiles Industry,- Jute <strong>and</strong> Jute Textiles Industry, <strong>and</strong>- Textiles Exports(Source: Annual Report 2011-12, Ministry <strong>of</strong> Textiles)OrganisedCotton/ Man-Made Fibre Textiles IndustryThe Cotton/ Man-made fibre textile industry is the largest organized industry in the country in terms <strong>of</strong>employment (nearly 1 million workers) <strong>and</strong> number <strong>of</strong> units. Besides, there are a large number <strong>of</strong>76
Scotts Garments Limitedsubsidiaryindustries dependent on this sector, such as those manufacturing machinery, accessories,stores, ancillaries, dyes& chemicals. As on 30.11.2011, there were 1946 cotton/manmade fibre textile mills(non-SSI) in the country with an installed capacity <strong>of</strong> 43.13 million spindles, 5,20,0000 rotors <strong>and</strong> 52,000looms. The capacity utilization in the spinning sector <strong>of</strong> the organized textile mill industry ranged between80 to 90% while the capacity utilization in the weaving sector<strong>of</strong> the organized textile mill industry rangedbetween 41 to 62%.Man-made Staple Fibre/ Filament Yarn IndustryThe <strong>India</strong>n textile industry consumes a diversee range <strong>of</strong> fibres <strong>and</strong> yarn, but is predominantlycottonbased. The ratio <strong>of</strong> theuse <strong>of</strong> cotton to manmade fibres <strong>and</strong>filament yarns by the domestic industry isabout 56: :46. The production <strong>of</strong> man-made fibre during 2010-11 amounted to 1284.64 million kg. ascomparedto 1268.04 million kgs during the previous year constituting an increase <strong>of</strong> 1.31% %. Thepercentage increase / decrease in production <strong>of</strong> polyester staple fibre, acrylicc staple fibre <strong>and</strong>polypropylene staple fibre during 2010-11 were 2.77%, (-) 12. .74% <strong>and</strong> 11.28% respectively as compared to2009-10. The production <strong>of</strong> man-made filamentyarn during2010-11 amounted to 1549.80 millionkg incomparison to 1522.72 million kgduring theprevious year constituting an increase <strong>of</strong> 1.78% %. Thepercentage increase / decrease <strong>of</strong> nylon filamentyarn, polyester filament yarn <strong>and</strong> polypropylene filamentyarn during the periodwere 10.25% %, 1.91% <strong>and</strong> (-) 11.16%.Wool <strong>and</strong>Woollen Textiles Industry<strong>India</strong>n Wool <strong>and</strong> Woollen Textiles Industry isa rural based, export oriented industry in which theorganizedsector, the decentralizedsector, <strong>and</strong> the rural sector complement each other. The countryis theseventh largest producer <strong>of</strong> wool <strong>and</strong> contributes 1.8% to total world production. Wool is the only naturalfibre in which the country is deficient.There are958 woollenunits in the organized sector, majority <strong>of</strong> which are in the small scale sector. Theindustry has the potential to generate employment in far-flung <strong>and</strong> diverse regions <strong>and</strong> at presentprovides employment in the organised wool sector to about12 lakh persons, with anadditional 12 lakhpersons associated in the sheep rearing <strong>and</strong> farming sector. Further, there are 3.2 lakh weavers in thecarpet sector. Ludhianaa alone accounts for 225-240 units in the decentralized hosiery <strong>and</strong> shawl sector. Theinstalled capacity <strong>of</strong> the industry is about 6.04 lakh worsted spindles, <strong>and</strong> 4.37 lakh non-worsted spindles.Wool combing capacity is around 30 million kg., whereas, the syntheticfibre combing capacity is 3.57million kg. There are approximately7,228 powerlooms in thisindustry.Jute <strong>and</strong> Jute Textiles IndustryGlobally, <strong>India</strong> is the largest producer <strong>and</strong> second largest exporter <strong>of</strong> jutegoods <strong>and</strong> this sector supportsthe livelihood <strong>of</strong> about 40 lakh farm families, <strong>and</strong> provides direct <strong>and</strong> indirect employment to 4 lakhworkers. There are 83 Jute mills in the country. Of these 64 are in West Bengal, 3 eachin Bihar <strong>and</strong>UttarPradesh, 7 in Andhra Pradesh, two each in Chhattisgarh & Orissa <strong>and</strong> one each in Assam & Tripura.Ownership- wise division is:- 6 mills are underGovernment <strong>of</strong> <strong>India</strong>’s P.S.U., 1 milll (Tripura) is underState Government, 2 mills (Assam& New Central) are in the co-operative sector <strong>and</strong> 74 are privatelyowned mills. In the jute growing states, the share<strong>of</strong> jute crop is nearly 1.4 per cent <strong>of</strong> the total crop area.Jute, the golden fibre, meets all thest<strong>and</strong>ards for ‘safe’ packaging in view<strong>of</strong> being a natural, renewable,biodegradable <strong>and</strong> eco-friendly product. Production <strong>of</strong> raw jute <strong>and</strong> mestahas witnessed a steady increasesince 1951-52. It was 13.2 lakh M.T. in Jute year1990-91 (July-June), which rose to 14. .76 lakh M.T. in theJute year 2008- 09.77
Scotts Garments LimitedSericulture <strong>and</strong> Silk Textiles Industry<strong>India</strong> continues to be the Second largest producer <strong>of</strong> silk in the World. Sericulture is animportant labour-inintensive <strong>and</strong> agro-based cottage industry, providing gainfuloccupation to around 6.3million personsrural <strong>and</strong> semi-urban areas in <strong>India</strong>. Of these, a sizeable number <strong>of</strong> workers belong to the economicallyweaker sections <strong>of</strong> society. Among the four varieties <strong>of</strong> silk produced, Mulberry accounts for 85% (15610MT), Eri 11.1% (2038 MT), Tasar 3.3% (603 MT) <strong>and</strong> Muga 0.6% (119MT) <strong>of</strong> the total rawsilk production inthe country.Source:Annual Report 2011-122 <strong>of</strong> Ministry <strong>of</strong> Textileshttp://www.texmin.nic.in/sector/Note_Woollen_Sector_wwt_skbabbar.pdfhttp://www.texmin.nic.in/sector/sector_mmf_mmfy.pdfStatisticalDetails <strong>of</strong> <strong>India</strong>n Textilee IndustryItemUnits2003-042004-052005-06 2006-07 2007-082008-09 2009-10 2010-11 2011-12(Ason Dec2011) (P)Textile Mills (Non SSI)Spinning MillsNo. 156415661570 1608 15971653 1673 17577 1759Composite MillsExclusive WeavingMills (Non-SSI)Spinning Mills (SSI)No. 223No. 206No. 11352232021161210 2000 176204 2041791173 1236 1219177 180 183184 183 1741941711247 1260 13333 1326Powerloom UnitsLakh no. 4.134.264.34 4.40 4.694.64 5.05 5.185.19Capacity InstalledSpindles (SSI+NonSSI)Rotors (SSI+Non SSI)Looms (OrganisedSector)PoowerloomH<strong>and</strong>loomMan made FibresMillionno. 37.03Lakh no. 4.82Lakh no. 1.05Lakh no. 18.37Lakh no. 38.91MillionKg. 110137.475.001.0319.0338.91118937.51 39. 50 39.075.20 6.01 6.210.92 0.69 0.5619.44 19. 90 21.0638.91 38. 91 38.911191 1663.35 1659.2241.30 41.27 40.9841.266.57 6.75 6.740.57 0.71 0.526.700.5222.05 22.46 22.9122.9738.91 38.91 38.9138.911763.11 1763.11 1765.10 1765.10Man made FilamentMillionKg. 122813371374 2053.43 2101.332143.22 2143.22 2192.75 2193.87WorstedSpindles(woolen)Non-worstedspindles(woolen)Thous<strong>and</strong> 604no.Thous<strong>and</strong> 437no.604437604 604604437 437437604 604 604437 437 437604437Production <strong>of</strong> FibresRaw CottonManmade FibreRaw woolRaw SilkLakhbalesMillionKg.MillionKg.MillionKg.179.00953.0048.5015.74243.001023.0044.6016.50241.00 280.00 315.00968.00 1139.47 1244.1744.90 45. 20 45.2017.31 18.47 18.32290.00 305 3251067.33 1268 128545.20 45.20 45.2018.37 19.69 20.4135681945.2020.4178
Scotts Garments LimitedItemUnits2003-042004-052005-06 2006-07 2007-082008-09 2009-10 2010-11 2011-12(Ason Dec2011) (P)Production <strong>of</strong> YarnCotton YarnOther Spurn YarnManmade FilamentYarnMillionKg.MillionKg.MillionKg.2121.00931.001118.002272.00951.001109.002521.00 2823.59 2948.36937.00 989.70 1054.861179.00 1370.48 1509.342898.42 3,079 34902328.001015.84 1,114 1223832.001416.01 1,522.71 1549.80 959Fabric ProductionCottonBlended100%Noncotton(includingkhadi, wool & silk)Millionsq. mtr.Millionsq. mtr.Millionsq. mtr.180406068182752065560321869123873 26238 271966298 6882 688819406 19545 2117326898 28,914 31742 195586766 7,767 82788 552520534 23,652 22522 14329* Figures up to October, 2009 # Figures up to November, 2009(Source: Ministry <strong>of</strong> Textiles)<strong>India</strong>n Textile ExportsThe textile export basket consists <strong>of</strong> wide range<strong>of</strong> items containing cotton yarn <strong>and</strong> fabrics, man-madeyarn <strong>and</strong> fabrics, wool <strong>and</strong> silk fabrics, made-ups <strong>and</strong> variety <strong>of</strong> <strong>garments</strong>. <strong>India</strong>’s textile products,includingh<strong>and</strong>looms <strong>and</strong> h<strong>and</strong>icrafts, are exported to more than a hundred countries.<strong>India</strong>’s textiles <strong>and</strong> clothing industry is one <strong>of</strong> the mainstays <strong>of</strong> the national economy. It is also one<strong>of</strong> thelargest contributing sectors <strong>of</strong> <strong>India</strong>’s exports worldwide. Thereport <strong>of</strong> theWorking Group constituted bythe Planning Commission on boosting <strong>India</strong>’s manufacturingexports during 12th Five Year Plan (2012-17),envisagess <strong>India</strong>’s exports <strong>of</strong> Textiles<strong>and</strong> Clothing at US$ 32.35 billion by the end <strong>of</strong> XIthFive Year plan, asagainst <strong>of</strong>US$ 55 billion envisaged in the Report<strong>of</strong> Working Group on Textiles for the XIth Five Year Plan<strong>and</strong> basedon historic growth rate <strong>of</strong> 10% (CAGR), a business as usual approach, will result in exports <strong>of</strong>US$ 52 billion by theend <strong>of</strong> XI Plan. An export target <strong>of</strong>US$ 65 billion <strong>and</strong> creation <strong>of</strong> 25 millionadditional jobs has been proposed with a CAGR<strong>of</strong> 15% during the XII Plan. At current prices the <strong>India</strong>ntextiles industry is pegged at US$ 555 billion, 64%<strong>of</strong> which services domestic dem<strong>and</strong>. The textiles industryaccounts for 14% <strong>of</strong> industrial production, which is 4% <strong>of</strong> GDP; employs 35 million people <strong>and</strong> accountsfor nearly12% share <strong>of</strong>the country’ ’s total exports basket.Overall ExportsThe total textile exports during April,11 to October,11 (P) were valued at ` 78034.133 crore as against `60594.53 crore during the corresponding period<strong>of</strong> financial year 2010-11,registering an increase <strong>of</strong> 28.78percent inrupee terms.In US dollar terms, thesame was valued at US$17053.71 million as against US$ 13225.722 million during thecorresponding period <strong>of</strong> previous financial year registering anincrease <strong>of</strong> 28.94 percent in US$ terms.However,the share <strong>of</strong> textiles in <strong>India</strong>’s total exports <strong>of</strong> all commodities has declined to10.03 percent from10.74 per cent during April- October, 2011 as against April- October, 2010.79
Scotts Garments LimitedIn the global market exports <strong>of</strong> clothing, <strong>India</strong> ranked as the sixth largest exporter as per WTO data – 2010(latest), trailing Turkey, Bangladesh, Hong Kong, EU-27 <strong>and</strong> China. In theglobal exports <strong>of</strong> Textiles, <strong>India</strong>ranked asthe third largest exporter,trailing EU-27 <strong>and</strong> China, as per WTOdata – 2010 (latest).Since August, 2008, the major markets for <strong>India</strong>’s exports <strong>of</strong> T&C products viz. USA, EU <strong>and</strong> Japanhavewitnessedrecessionaryconditions <strong>and</strong> financial crisis, <strong>and</strong>textiles sector was amongst the worst hit.However these adverse economic conditions appeared to have abated somewhat since 2010 with theUSA,the singlelargest importer <strong>of</strong> textiles <strong>and</strong> clothing items, observing a positive growth <strong>of</strong> 14.22% <strong>and</strong>17.03% inits import <strong>of</strong> T&C from the world <strong>and</strong> <strong>India</strong> respectively during the calendar year 2010. Thistrend has continued during 2011 when USA observed a positive growth <strong>of</strong>8.90% <strong>and</strong> 10.32% in its imports<strong>of</strong> T&C from the world<strong>and</strong> <strong>India</strong> respectively. Almost all major T&C exporting countries showed positivetrend in the US marketduring the first nine month <strong>of</strong> calendar year 2011.<strong>India</strong>’s Textile Exports (Principal Commodities) – 2010-11(P)(Source: Annual Report 2011-12, Ministry <strong>of</strong> Textiles; P - provisional)A sector-wise analysis <strong>of</strong> textile exports is given below:(i)Readymade Garments: Readymadee Garments include RMG <strong>of</strong> cotton including accessories, RMG <strong>of</strong> ManMade Fibres, RMG <strong>of</strong> other textile material which accounted for approximately 40% <strong>of</strong>the country’ ’s totaltextiles exports for F.Y.2010-11. During 2010-11 the RMG exports in <strong>India</strong>nn currency amounted ` 48, ,355.57crores an increase <strong>of</strong> 1.57% over the exports during 2009-10 whereas inUSD it amounted to 10627.99million registering an growth <strong>of</strong> 5.60% as compared to 2009-10.(ii)Cotton Textiles including H<strong>and</strong>looms: CottonTextiles includes raw cotton, cottonyarn, fabrics <strong>and</strong>made-ups. During 2010-11 the Cotton textiles exports in <strong>India</strong>n currency amounted to` 38,038.19 crores,an increase <strong>of</strong> 40.80% over the exports during 2009-10 whereas in USD it amountedto 8360.35 millionregistering an growth <strong>of</strong> 46.38% as compared to 2009-1080
(iii) Man-made Textiles: Man Made Textiles includes Manmade staple fibres, manmade yarns, fabrics &madeups.During 2010-11 the ManMade textiles exports in <strong>India</strong>n currency amounted to ` 21, ,125.13crores, anincrease <strong>of</strong> 12.47% over the exports during 2009-10 whereas in USD it amounted to 4643.06million registering an growth <strong>of</strong> 16. 93% as compared to 2009-10.(iv) Silk Textiles: Silk Textiles includes RMG <strong>of</strong> silk,Natural silk yarn, fabrics & madeups. During 2010-11 thesilk textiles exports in <strong>India</strong>n currency amountedto ` 2708.022 crores, an decrease <strong>of</strong> 3.95% over the exportsduring 2009-10 whereas in USD it amounted to 595.19 million an decrease <strong>of</strong> 0.14% ascompared to2009-10.(v) Wool & Woollen Textiles: Woollen Textiles includes RMG <strong>of</strong> wool, woollen yarn, fabrics & madeups.During 2010-11 the woollen textilesexports in <strong>India</strong>n currency amountedto ` 1955.31 crores, an decrease<strong>of</strong> 12.09% over the exports during 2009-10 whereas in USD it amounted to 429.75 million an decrease <strong>of</strong>8.60% as compared to 2009-10.(Source: Annual Report 2011-12, Ministry <strong>of</strong> Textiles)Government Initiatives/PoliciesPost liberalization, the <strong>India</strong>n government has removed many <strong>of</strong> the barriers hinderingthe textile sector’sgrowth. To fulfill thepotential <strong>of</strong> the country’s apparel-exporthe lack <strong>of</strong> scale <strong>and</strong> pooroperational <strong>and</strong> organizationalperformance <strong>of</strong> locall manufacturers <strong>and</strong> that discourage investments, particularly foreign directindustry, the government needs toeliminate remaining restrictions that perpetuateinvestment. Some <strong>of</strong> the important initiatives taken by theGovernment <strong>of</strong> <strong>India</strong> inthis sector are asfollows:New Textile PolicyThe Government <strong>of</strong> <strong>India</strong> in November 2000 announced the National Textile Policy – 2000 i.e. NTXP–2000,thereby replacing the previous Textile Policy <strong>of</strong> 1985. The main objective <strong>of</strong> the NTXP–2000 is to enable theindustry to attain <strong>and</strong> sustain a pre-eminent global st<strong>and</strong>ingin the manufacture <strong>and</strong> export <strong>of</strong> clothing,enable the industry to build world class state-<strong>of</strong>-art manufacturing capabilities in conformitywithenvironmental st<strong>and</strong>ards, for this purpose encourage both Foreign DirectInvestment as well as research<strong>and</strong> development sector. The policy also de-reserved the <strong>garments</strong> sector from the Small Scale Industryreservation list. The NTXP–2000 took note <strong>of</strong> the new challenges <strong>and</strong> opportunities presented by thechanging global environment, particularly theinitiation <strong>of</strong> the process <strong>of</strong> gradual phasing out <strong>of</strong>quantitative restrictions on imports<strong>and</strong> the lowering <strong>of</strong> tarifff levels for anintegration <strong>of</strong> the world textile<strong>and</strong> clothing markets.Vide the NTXP–2000 the Government has conveyed it’s commitment towards providing a conduciveenvironment to enablee the <strong>India</strong>n textile industryto realise itsfull potential, achieve global excellence, <strong>and</strong>fulfil its obligation to different sections <strong>of</strong> the society.(Source: Ministry <strong>of</strong> Textiles)Technology Upgradation Fund Scheme (TUFS)TUFS is the “flagship”Scheme <strong>of</strong> the Ministry <strong>of</strong> Textiles which aims at making available funds to thedomestic textile industry for technology upgradation <strong>of</strong> existing units as well as to setup new units withstate-<strong>of</strong>-the-art technology to enhance their viability <strong>and</strong> competitiveness in the domestic as well asinternational markets. To meet the challenges <strong>of</strong> the post quota regime, the industry is required to becomecompetitive, cost effective <strong>and</strong> quality oriented. With this background, Government <strong>of</strong> <strong>India</strong> has launcheda Technology Upgradation Fund Scheme (TUFS) for Textiles <strong>and</strong> Jute Industries, with effectfrom01.04.19999 for a period<strong>of</strong> 5 years, i.e., up to 31. .03.2004. Further the samewas continued in the EleventhFive Yearplan (as mentioned in the budget speech for the year 2007-08).The Benefitsunder the schemeare as follows:- 5% interest reimbursement <strong>of</strong> the normal interest charged bythe lending agency on RTL.81Scotts Garments Limited
Scotts Garments LimitedOr- 5% exchange fluctuation (interest & repayment) from the base rate on FCL.Or- 15% credit linked capital subsidy for SSI sector.Or- 20% credit linked capital subsidyfor powerloom sector (An option for ‘front ended’ subsidy providedw.e.f. 1 st October, 2005) ).Or- 5% interest reimbursement plus 10% capital subsidy for specified processing machinery.Restructured TUFS (R-TUFS) was launched w.e.f. 28.04.2011. Under thescheme, there was an overallsubsidy cap <strong>of</strong> ` 1972 crores from the date <strong>of</strong> the Resolution, i.e., 28.04.2011 to 31.03.2012. UnderRestructured TUFS, it was providedd UID to 1936applications with total project cost <strong>of</strong>` 25030 crore* <strong>and</strong>subsidy requirement <strong>of</strong> `256 crore for the 11th Five Year Plan (upto 31.03.2012), ` 2618 crore for the 12thFive Year Plan (Financial Year 2013 to 2017), ` 352 crore for the 13th Five Year Plan (Financial Year 2018 to2022). According to a circular dated 15.06.2012 issued by the Office <strong>of</strong> the Textile Commissioner,the R-TUFS for the textile sector will continue for 2012-13.(Source: Ministry <strong>of</strong> Textiles)The table below presents the amount sanctioned <strong>and</strong> disbursed in last decade under theTUFS:Source: Annual Report2011-12, Ministry <strong>of</strong> TextilesScheme for IntegratedTextiles Parks (SITP)The ‘Scheme for Integrated Textile Parks (SITP)’ was launched by mergingg two schemes, namely, ApparelParks for Exports Scheme (APES) <strong>and</strong> the Textiles Centre InfrastructureDevelopment Scheme (TCIDS).82
Scotts Garments LimitedPrimary objective <strong>of</strong> the SITP is to provide the industry with world-class infrastructurefacilities for settingup their textile units. The scheme would facilitate textile units to meet international environmental <strong>and</strong>social st<strong>and</strong>ards. SITPwould create new textile parks <strong>of</strong> internationalst<strong>and</strong>ards at potential growthcentres. This scheme envisages engaging <strong>of</strong> a panel <strong>of</strong> pr<strong>of</strong>essional agencies for project identification <strong>and</strong>execution. Each Integrated Textile Park (ITP) would normallyhave 50 units. The number <strong>of</strong> entrepreneurs<strong>and</strong> the resultant investments in each ITP could vary from project to project. However, aggregateinvestment in l<strong>and</strong>, factory buildings <strong>and</strong> Plant<strong>and</strong> Machinery by the entrepreneursin a Park shall beatleast twice the cost <strong>of</strong> common infrastructure proposed for the Park. The ITPs may also be set upin theSpecial Economic Zones (SEZs), in which case the special provisions <strong>of</strong> SEZs would be applicable forthem.In case these are set up outside SEZs, proposal may be pursued with the Ministry <strong>of</strong> Commerce <strong>and</strong>Industry to declare theITP as SEZ, if it is so desired. (Source: Ministry <strong>of</strong> Textiles)Foreign Direct Investment Policy<strong>India</strong> hasa liberal <strong>and</strong> transparent policy in Foreign Direct Investment (FDI). <strong>India</strong> is a promisingdestination for FDI in the textile sector. 100% FDI is allowed inthe textile sector under the automaticroute.FDI in sectors to the extent permitted under automatic route does not require any priorr approval either bythe Government <strong>of</strong> <strong>India</strong> or Reserve Bank <strong>of</strong> <strong>India</strong> (RBI). The investors are only required to notify theRegional Office concerned <strong>of</strong> RBI within 30 days <strong>of</strong> receipt <strong>of</strong> inwardremittance.The below graphrepresentss the amount <strong>of</strong> FDI approved in <strong>India</strong>nn Textile Sector from 2005 to Oct 2011(Source: Ministry <strong>of</strong> Textiles)Union Budget 2012-13Highlights• St<strong>and</strong>ard rate <strong>of</strong> Central Excise duty has been increased from 10% to 12%. Excise duty on Cottontextiles covered under Tariff heading 5204 to5212 increased from 4% to 6%.• Automatic shuttleless looms fully exempted from basic customs duty <strong>of</strong> 5%.• Automatic silk reeling <strong>and</strong> processing machinery as well as its parts exempted from basic customsduty.• Second h<strong>and</strong> machinery to attract basic duty<strong>of</strong> 7.5%.• Basic customs dutyon wool waste <strong>and</strong> wool tops reducedd from 15% to5%.• Basic customs dutyon Titaniumdioxide reduced from 10% to 7.5%.83
Scotts Garments Limited• Aramid yarn <strong>and</strong> fabric used for the manufacture <strong>of</strong> bullet pro<strong>of</strong> helmets exempted fully frombasiccustoms duty.• Financial package <strong>of</strong> ` 3,884 crore announced for waiver <strong>of</strong> loans <strong>of</strong> h<strong>and</strong>loom weavers <strong>and</strong>theircooperative societies.• Two more mega h<strong>and</strong>loom clusters, one to cover Prakasam <strong>and</strong> Guntur districts in Andhra Pradesh<strong>and</strong> another for Godda <strong>and</strong> neighbouring districts in Jharkh<strong>and</strong> to be set up.• Threee Weaver’s Service Centres one each in Mizoram, Nagal<strong>and</strong> <strong>and</strong> Jharkh<strong>and</strong> to be set up forproviding technical support to poor h<strong>and</strong>loom weavers.• ` 500 crore pilot scheme announced for promotion <strong>and</strong> application <strong>of</strong> Geotextiles inthe North EasternRegion.• A powerloom mega cluster to be set up in Ichalkaranji in Maharashtraa with a budget allocation <strong>of</strong> ` 70crore.• Exciseduty <strong>of</strong> 10%is applicable to br<strong>and</strong>ed readymadee <strong>garments</strong> with abatement <strong>of</strong> 55% from theRetailSales Price. Along with increase in duty to 12% theabatement enhanced to 70%. As a result, theincidence <strong>of</strong> duty as a percentage <strong>of</strong> the Retail Sales price would come down from 4.5% to 3.6%.(Source: The Cotton Textiles Export Promotion Council -http://www.texprocil.org/doc/HIGHLIGHTS%%20OF%20THE%20UNION%20BUDGET%202012-13.pdf)Growth Prospects for <strong>India</strong>n Textile <strong>and</strong> Clothing IndustryThe Confederation <strong>of</strong> <strong>India</strong>n Textile Industry envisages the <strong>India</strong>n Textile <strong>and</strong> Clothing market toreachUSD 100 billion by year 2015. Textile & Clothing sales generated USD 555 Billion in 2008-09 bifurcated asUSD 33.4billion fromdomestic market <strong>and</strong> US $ 21.6 billion from exports. Nearly 40 per cent <strong>of</strong> thetextiles produced in the country areexported. <strong>India</strong>n manufacturers are also pro-actively working towardsenhancingtheir capacities to fulfill this increaseddem<strong>and</strong>. <strong>India</strong>’s textiles & clothing (T&C) export in2006-07 were USD 19.15 billion. <strong>India</strong>’s T&C exports in 2007-08 were USD 22.40 billion showing robust growth<strong>of</strong> around16% in US dollar terms compared to previous year.ProjectedMarket for <strong>India</strong>n Textile <strong>and</strong> Clothing products<strong>India</strong>nn T & C Industry envisages to reach US$ 100 Billionby 201584
Scotts Garments LimitedSource: Presentation on <strong>India</strong>n Textile <strong>and</strong> Clothing Industry by Confederation <strong>of</strong><strong>India</strong>n Textile Industry (CITI)Some key points depicting the reasons for growthare as follows:Expansionn <strong>of</strong> Ready-to-Wear MarketThe market for readymade segment is rapidly exp<strong>and</strong>ing in<strong>India</strong> especially in menswear section. Thepreferencee <strong>of</strong> <strong>India</strong>n consumers has also undergone a majorshift as they just prefer to go out <strong>and</strong> buyrather than opting for stitching.Rising UrbanizationUrbanization is a trendthat everyone has to contend with. The urban population is set to increasee up to42% by 2030 accordingto census figures. This is due to the fact that people migrate to cities to look forbetter jobopportunities <strong>and</strong> living st<strong>and</strong>ards. Therefore, organized retail is set to witness a majorexpansionn to fulfil the needs <strong>of</strong> growing population.Demographic Structure<strong>India</strong> is home to 17% <strong>of</strong> the world’s population. Being one <strong>of</strong> the youngest countriesin the world, it istipped to have one <strong>of</strong> the largest work forces for years to come. At 24 years, it has the lowest medianage <strong>of</strong>population in the world, with 50% <strong>of</strong> the population less than 25 years <strong>and</strong> 70% less than 35 years <strong>of</strong> age.Also, as more <strong>and</strong> more women become part <strong>of</strong> the workforce, the dem<strong>and</strong> for women wear includingaccessories is set for expansion.Growing prosperity<strong>India</strong> has the second largest working population with approx 700 millionpeople between 20-60 years <strong>of</strong>age. In addition, corporate salaries have grown at 14% p.a. which is fastest globally. Also, the salaries forfreshers have gone up by 2-3 times over thelast decade. These all factors contribute to increasingdisposable incomes in the h<strong>and</strong>s <strong>of</strong>individuals. With a consumption rate<strong>of</strong> around 34%, the appetite forhigh value br<strong>and</strong>ed products is everincreasing.Changingg Consumer Lifestyle <strong>and</strong>Preferences<strong>India</strong>n consumer has become more dem<strong>and</strong>ing, as a result, there is a continuous shift in the dem<strong>and</strong>pattern from basic necessities to spending on thelifestyle products <strong>and</strong> service, largely because <strong>of</strong>:‣ Higher Income levels‣ Increasing knowledge <strong>and</strong> awareness levels‣ Higher adaptability to technology‣ Greater participation <strong>of</strong> women<strong>and</strong> childrenin household decision making‣ Increasing dem<strong>and</strong>d for better products <strong>and</strong> service experience85
Scotts Garments LimitedBUSINESS OVERVIEWWe are a garment manufacturing company in <strong>India</strong> with state <strong>of</strong> the artfacilities formanufacturing <strong>of</strong>quality hi fashion <strong>garments</strong>. We firmly believe that we have built the domain expertise in designing <strong>and</strong>sampling <strong>of</strong>garment fora period <strong>of</strong> about two decades that has been a significant contributor in procuringorders fromthe international market especially Europe. Our manufacturingfacilities <strong>and</strong> additional facilitiessuch as embroidery, printing, dyeing <strong>and</strong> washing have enabled us to enhance ourproduct portfoliocatering to different classs <strong>of</strong> customers in the international market.From a modest beginning involvingtaking up job works, SGL started exploring themarket for directexports, <strong>and</strong>has in course <strong>of</strong> time established a status for production <strong>of</strong> quality <strong>garments</strong><strong>and</strong> dependabilityin deliveryschedules in the export market. Our operations <strong>and</strong> facilities enable us to manufacturereadymade apparel by spanning various aspects <strong>of</strong> the apparel production chain, from managing the designto delivery <strong>and</strong> quality assurance processes involved in producing readymade apparels. SGL is one <strong>of</strong> thecompetitivee manufacturer <strong>and</strong> exporter <strong>of</strong> readymade <strong>garments</strong> with modern manufacturing facilities, fullybacked by facilities for product development, design studio <strong>and</strong>efficient sampling infrastructure to providequality services to its customers.We have positioned ourselves as a player focusing largely to changing needs <strong>and</strong> trends <strong>of</strong> fashion in thereadymade garment. We export ourquality products to several international clientsacross the Globe.During the year ended March 31, 2012, we have exported 91.44% <strong>of</strong> our totalsales <strong>of</strong> readymade knitted <strong>and</strong>woven apparel to international clients. It includesamong others, Best Seller – Denmark, Old Navy – USA,C& A Buying - Germany, H&M Hennes & Mauritz - USA, Vila A/s – Denmark, Rhodi Suppliers Limited -UK, Mayoral Moda Infanil S.A.U, Spain, The S Group Inc– USA, etc. These exports have been made tocountries such as Denmark, USA, United Kingdom, Spain, Germany, China, Italy, Sweden, Turkey,Netherl<strong>and</strong>,U.A.E., Canada, Russia, Pol<strong>and</strong>, HongKong, Japan, etc.During the current financial year we have exported our products to 69international customerss in 41countries. Our Company has addedd new customers such Carrefour (France), United Colors <strong>of</strong> Benetton(Italy), VOI Jeans (Italy), The S GroupInc., Prime Mark (UK), House <strong>of</strong> Fraser (UK), GAP(USA), Perry Ellis(USA), Abercrombie & Fitch (USA ), GANT(USA ),Arcadia Group (UK).The manufacturing capacity <strong>of</strong> our Company as on31/03/20122 is around 217.08 lacs pieces per annumbothin woven <strong>and</strong> knit divisions. Our workforce as on 30/09/2012 is12,504 employees.The company has a 2.1 M.W capacitywindmill at Bellary, Karnataka <strong>and</strong> three windmills in TamilNaduwith a totalcapacity <strong>of</strong> 1.95 M.W. The company has entered into Wheeling <strong>and</strong> Banking agreement withGulbarga Electricity Supply Company Limited <strong>and</strong> TamilnaduElectricity <strong>Board</strong> for thesale <strong>of</strong> the powergenerated through the wind mill. During F.Y.2011-12, the total incomefrom wind power generationamounted to ` 347.89 lacs.During September 2012, Credit Analysis & Research Limited (CARE) has assigned CAREBBB rating to ourlong term bank facilities amounting to ` 229.70 crores <strong>and</strong> CARE A3+ toour short term bank facilitiesamounting to ` 227.40 crores. The instruments with CARE BB BB <strong>and</strong> A3+ rating have moderate degree <strong>of</strong>safety regarding timely servicing <strong>of</strong> financial obligations. Wehave been accorded thestatus <strong>of</strong> TradingHouse in accordance with the provisions <strong>of</strong> Foreign Trade Policy 2009-14by Office <strong>of</strong> the Joint DirectorGeneral <strong>of</strong> Foreign Trade. We are also a registered member <strong>of</strong> Apparel Export Promotion Council(sponsored by Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Textiles).86
Scotts Garments LimitedBusiness ModelA brief snapshot <strong>of</strong> our business model is hereunder:Designing <strong>and</strong>SampleDevelopmentforpotential customersApproval fromcustomer <strong>and</strong>Procurement <strong>of</strong>OrderManufacturing <strong>of</strong>garment as percustomerspecificationDispatch to theCustomersPackaging <strong>of</strong><strong>garments</strong>Our designing team conceives the different style, pattern <strong>and</strong> trend followed<strong>and</strong> acceptable in internationalmarket <strong>and</strong> manufactures the garment samples. These sampless are presented to the potential customers bythe marketing team to procure the order. The samples are modified based on the customers’ specific design<strong>and</strong> cost requirements.Our marketing team then sends the details <strong>of</strong> the selected samples <strong>and</strong> other customer requirements to ourin-house manufacturingfacilities for feedback on the estimated cost <strong>of</strong> production. The in-housemanufacturing facilities compete for orders based on cost estimates <strong>and</strong> other factors, including quality, pastperformance <strong>and</strong> turn-around time. On receipt <strong>of</strong> the cost estimates from our in-house manufacturingfacilities themarketing team evaluates the feasibility <strong>of</strong> thesee cost estimates <strong>and</strong> quotes the competitiveestimate to the customer.Once our samples are approved <strong>and</strong> the price,delivery schedule <strong>and</strong> other material components arenegotiated, the customerreleases a purchase orderr containing the order details to our marketing <strong>of</strong>fice.The availability <strong>of</strong> sampling unit <strong>and</strong> design studio helps the company in providing diverse productsto thepotential <strong>and</strong> existing customers. Sampling unit produces sample <strong>garments</strong>for approval<strong>of</strong> customers. Thisnot only gives the customer a wide variety <strong>of</strong> choices but alsohelps in keeping the costunder control <strong>and</strong>the turnaround time is short. In order to facilitate our customers we have set up anexclusive displayshowroom at Apparel Export Promotion Council in Gurgaon. The marketing <strong>of</strong>fice regularly monitors theprogress <strong>of</strong> the orders. Once the order is executed, based on the terms <strong>of</strong> delivery <strong>of</strong> theorder, the finishedproducts aredelivered tothe customer/buying houses on an FOB basis.Design <strong>and</strong>developmentWe are committed to design innovation in order to respond to current consumer preferences <strong>and</strong> anticipatefuture fashion trends. Further, dedicated development <strong>and</strong>sampling centres regularly monitor newdevelopments <strong>and</strong> feed these developments into our marketing<strong>and</strong> manufacturing facilities. The Companyhas in housedesign teamstrength <strong>of</strong> over 50 persons who design styles based on current fashion trends. OurCompany has also appointed pr<strong>of</strong>essional consultants at London to promote businesss <strong>of</strong> our Company.These teams adapt the new design<strong>and</strong> garment developments to caterto fashion trends, while alsoreflecting the price <strong>and</strong> quality requirements <strong>of</strong> the target customer. Our design teams are supported by87
Scotts Garments Limitedsophisticated computerized design systems including CAD/CAM. We plan to strengthenn our capabilities indesigning by continuously upgradingg our design studios both interms <strong>of</strong> human resources <strong>and</strong> machinery.Present Manufacturing FacilityWe own approximately 5196 sewing machines, 15 computerizedembroiderymachines <strong>and</strong> a variety <strong>of</strong> othersophisticated equipmentfor our Woven garmenting facilities <strong>and</strong> approximately 2682 sewing machines, 17computerized embroidery machines<strong>and</strong> a variety <strong>of</strong> othersophisticated equipment for our knittedgarmentingg facilities.Some <strong>of</strong> ourkey equipment supplierss include Jeanologia S L, FG Texstil Konfeksiyon, TGS Dis Ticaret A.S,Juki Singapore Pte Limited, Melco Inc, Baruden Corp Japan, Tonello, Italy, Mayer GmbH, Germany, BrotherInternational, Singapore,Typical International, China, Modsu Corporation FZE, UAE. We work closely withthese suppliers to ensure that equipment <strong>and</strong> machinery aredelivered on time <strong>and</strong> meet our stringentperformance specifications. The average working life <strong>of</strong> our sewing machines is approximately sevenyears,which we believe is comparable tothe industry st<strong>and</strong>ard. Our in-house technicians conduct routinemaintenance <strong>and</strong> repair work, with technical support provided by suppliers.As on date,we have 24 manufacturinng units/factory at Karnataka <strong>and</strong> Tamil Nadu including sampling unitat Karnataka <strong>and</strong> Tamil Nadu. The details <strong>of</strong> the same are as under:Sl. NoUnit Nos.AddressKarnataka1. UNIT - I 481/A, & B, IVPhase, Peenya IndustrialArea, Bangalore2. UNIT - II A) 292/B, Patel Chennapa Estate, Andrahalli Main Road, Peenya 2ndStage, ,BangaloreB) Annex, 422&422A Patel Channappa Indl Area, Yeshwanthpur, Bangalore3. UNIT – III 108/B, 3rd Stage 3rd Phase, Peenya Industrial Area, Bangalore - 560 0584. UNIT - IV B-66 3rd StagePeenya IndlArea, Bangalore5. UNIT - V 1028/1, Irudayapuram, Pattepalli Road,Robertson Pet, K.G.F6. UNIT - VI Plot No. V 27,III Stage, Peenya Industrial Area, Peenya 2nd Stage, Bangalore7. UNIT - VII 22, BangarpetIndustrial Area, KGF Road, Bangarpet, Kolar District.8. UNIT-VIIIPlot No. 1 & 2, Survey No. 10, NH4 Near Bharathh Petrol Bunk, SathyamangalaIndustrial Area, Tumkur9. UNIT- IX 5/1 Madanayakanahalli, Tumkur Road,Bangalore10. UNIT-X 5F2, 1st Phase, Peenya Indl Area, Near Ayyappaa Temple, Opp Canara Bank,Jalahalli West,S.M Road, Bangalore11. UNIT-XI Plot A 353 (a),8th Main, Peenya II nd Stage, Peenya Industrial Area, Bangalore12. UNIT-XVI No.36/6, Byraweshwara Industrial Area, Hegganahalli Village,Andrahalli MainRoad, Vishwaneedam Post, Bangalore13. UNIT-XVIIS.No. 61 Narepally Village Kasaba Hobli, Bagepally ( Taluk ), Chikkaballapura,Karnataka14. UNIT-XVIII7/1, Gummanahalli Road, Byadgi, KarnatakaTamil Nadu15. Unit - I No 226/1, Pudur Pirivu, Dharapuram Road, Tirupurr16. Unit -III SF No.295, I.GColony, S<strong>and</strong>aimedu, Murugampalayam Post Tirupur17. Unit - IV 1/805, Near Lakshmi Theater, Dharapuram Road, PalavanchipalayamPost,88
Scotts Garments LimitedSl. NoUnit Nos.AddressKarnatakaTirupur18. Unit - V SF.No: 137/1A - Dhanalakshmi Rice Mill Compound, KaraipudhurArulpuram, Palladam Road, Tirupur19. Unit - VI SF No 368,Nochipalayam Road, LashmiGarden, Veerap<strong>and</strong>i, Tirupur20. Unit -VII 699/2 RM Brothers Ind.Complex, Kamaraj Road, Tirupur (Sampling Unit)21. Unit - VIII No.2/785-B,Mahalakshmi Nagar, Tirupur MainRoad, NaranapuramPalladam (tk),Palladam22. Unit - IX SF 536/5 Veerap<strong>and</strong>i, Veerap<strong>and</strong>i Village, Tirupur23. Unit - X SF No.643, kolathupalayam, Veerap<strong>and</strong>i Post, Tirupur24. Unit - XI SF No 262, Nallur Village, Tirupur(po),Post,Our ongoing Projects:Other than above, we have commenced setting up <strong>of</strong> manufacturing units at following locations1. Doddaballapur & KolhapurThe project at Doddaballapur <strong>and</strong> Kolhapur is proposed to be part funded from the IPO proceeds. Thecomplete details <strong>of</strong> these projects are appearingunder section titled “Objects <strong>of</strong> the Issue” on Page no.442. KolarThe Company is also setting up manufacturing facility forstitching <strong>of</strong> woven <strong>garments</strong> at Sy. No. 30/1 &32/11, Sangondahalli in an area 38,000 Sq. Feet <strong>and</strong> knitted <strong>garments</strong> at Sy. No. 60, Sultan Thippas<strong>and</strong>raadmeasuring 35,000 Sq.Feet. In terms <strong>of</strong> the application <strong>and</strong> project report submitted to Canara Bank videletter dated 17/01/2011 the Company proposes to install 1200 importedsewing machines with a capacity toproduce9600 pcs <strong>of</strong> woven <strong>garments</strong> per day <strong>and</strong> 800 imported sewing machines with a capacity to produce8,000 pcs <strong>of</strong> knitted <strong>garments</strong> per day. The addition in annual capacity will be 52,80,000 pcs from bothWoven & Knitts Garments. The Company expects to commence the commercial production by April 2013.The total cost <strong>of</strong> the project has been estimatedat `7800.00 lacs.EquipmentsOur main production equipment for the manufacturing <strong>of</strong> <strong>garments</strong> includesthe following:• Laser Dry Processing Machines• Feed <strong>of</strong> Arm Machines• Back Pocket Decorative Machines• Single Needle Lock Stitch Machine• Flock Powder Machine• Color Mixing Machine• Exposing Table• Printing Machine• Heater Machine• Hydro Extractor Machine 100 Kgs• Vertical Dyeing Machine 430 Kgs• Weighing Scale Machine• Gerber CuttingMachine89
Scotts Garments Limited• Cut & Fit B<strong>and</strong>Knife Machine• Straight Knife Cutting Machine 6"• Straight Knife Cutting Machine 8"• ComputerizedQuilting Machine• Cuff Iron Machine• Water Machine• Fusing Machine• Needle Detector Machine• Multi Needle m/c• Straight Knife m/c• Fab-panching m/c• Bartack m/cInfrastructure FacilitiesRaw MaterialWe require different kind <strong>of</strong> fabrics for manufacturing <strong>of</strong> <strong>garments</strong> in concurrence with our customers. Theraw materials used for the manufacturing <strong>of</strong> different <strong>garments</strong> are 100% cotton yarn dyed fabrics, cottonhigh twist yarn dyed fabrics, Linen Fabric, Cottonorganic dyed & printed fabric, cottongrey fabric, cottonorganic grey fabric, cotton dyed fabrics <strong>and</strong> cotton printed fabrics. The company alsosources polyesterchiffon printed fabrics, polyester cotton burnout print, polyester chiffon jacquard print, cotton lycra greyfabric, cotton lycra dyed fabric, cottonlycra print fabric, polyster cotton lycra dyed fabric <strong>and</strong> denim fabric.The Company procuresraw material from different suppliers located domestically <strong>and</strong> internationallydepending on the quality <strong>and</strong> price benefits. We do not have any long termcontract with our suppliers <strong>of</strong>raw material that restricts our capability to tap the economical <strong>and</strong> quality raw material from anyothersupplier. However, strong relationships with our suppliers have helped to avoid disruption in supply <strong>of</strong> rawmaterial forour manufacturing process.Our Top Ten Suppliers <strong>of</strong> Raw Materials viz Yarn<strong>and</strong> Fabricsfor Financial Year 2011-12 are:Sl.No.Company Name1. Bombay Rayon Fashions Ltd.2. Arthanari Loom Centre (Textile) Pvt Ltd.3. RSWM Ltd.4. Arvind Ltd.5. Arthanari Clothing Pvt Ltd.6. A New Vission(BOMBAY)7. Raymond UcoDenim Private Ltd8. K.G. Denim Ltd9. Mahalakshmi Textiles10. A-Tex (<strong>India</strong>) Pvt.ltd.% <strong>of</strong>PurchasesTotal11.965.273.313.042.422.252.062.021.781.4890
Scotts Garments LimitedOur Top Ten Customerss for Financial Year 2011-12 are:Sl. No.Buyer1. Best Seller A/ s2. Bombay Rayon Fashions Limited3. Old Navy4. Rhodi Suppliers Ltd5. Best Seller A/ s6. Best Seller7. Kaufl<strong>and</strong> Warenh<strong>and</strong>el GMBH+Co8. Mayoral ModaInfanil S.A.U9. Best Seller Fashion Group(Tianjin)10. H&M Hennes & Mauritz LogistikCountryDenmark<strong>India</strong>USAUnitedKingdomNorwayCanadaGermanySpainChinaGermany% to total revenue62.607.794.443.802.111.591.451.240.840.80Our Top Ten Creditors for supplies for Financial Year 2011-122 are:Sl.No.Company Name1. A New Vision(Bombay)2. VSM Weaves <strong>India</strong> Limited3. K G Denim Ltd.4. S S M Fine Yarns5. Color Chemicals6. Sri Sarvana Spinning Mills7. A Tex <strong>India</strong> Pvt. Ltd.8. Sulochana Cotton SpinningMills9. Arthanari Loom Centre10. Jayavishnu Spintex Pvt. Ltd.Utilities% <strong>of</strong>CreditorsSuppliesTotalfor7.463.042.842.842.402.221.811.741.561.50The existingutilities for the various divisions <strong>of</strong> our Company are tabulated below:Sl.NoAddress1 481/ /A, & B, IV Phase, PeenyaIndustrial Area, Bangalore - 560 0582 A) 292/B, Patel Chennapa Estate,Andrahalli Main Road, Peenya2nd Stage, Bangalore - 560 091B) Annexe, 4222 & 422A PatelChannappa Indl. Area,PowerSanctioned750 KVA250 KVA85 HP Bescom40 HP Bescom10 HP BescomWaterRequirementon dailybasis100000 Lts. /per day700000 Lts. /per day4000 LtsPer day/CompressedDGSetAir40 HP * 2 500 KVA * 315 HP 250 KVA * 22 HP250 KVA1 HP91
Scotts Garments LimitedSl.NoAddressYeshwanthpur, Bangalore-5600223 108/ /B, 3rd Stage 3rd Phase, PeenyaIndustrial Area, Bangalore - 560 0584 B-666 3rd Stage Peenya Indl Area,Bangalore - 560 058.5 1028/1, Irudayapuram, PattepalliRoad, Robertson Pet, K.G.F6 Plot No. V 27, III Stage, PeenyaIndustrial Area, Peenya 2nd Stage,Bangalore - 560 058.7 22, Bangarpet Industrial Area, KGFRoad, Bangarpet, Kolar District8. Plot No. 1 & 2, Survey No. 10, NH4NearBharath Petrol Bunk,SathyamangalaTumkurIndustrial Area,9 5/1 Madanayakanahalli, TumkurRoad, Bangalore - 562 123.10 5F2, 1st Phase, Peenya Indl. Area,Jalahalli West, S M Road, Bangalore- 560058.11 S.F. No. 226/1 - DharapuramRoad,Pudhur Pirivu, Tirupur - 641 60812 SF No.262, NallurVillage, Tirupur13 S.F No. 295, IG Colony.,Sundamedu,Murugampalayam(po),Vidhalayamstop, Tirupur –64168714 D No. 1/805 - Near Lakshanatheatre., Palavanchipalayam(po).,Dharapuram641608Road.,Tirupur –15 SF.No: 137/1A - Dhanalakshmmi RiceMill Compound, Karaipudhurr (po),Arulpuram,Tirupur-5PalladamRoad,16 SF. No-368 – Nochipalayamroad,Lakshmi garden,Veerap<strong>and</strong>i(po),Tirupur17 No.2/785-B, Mahalakshmi Nagar,Tirupur Main Road, NaranapuramPost, Palladam (tk), Palladam– 641664PowerSanctioned67 HP Bescom60 HP Bescom65 HP Bescom350 KVA ( HT)250 KVA (HT)200 KVA (HT)500 KVA96 HP65*2 HP150 HP120 HP60 HP55 HP50 HP370 HP150 HPWaterRequirementon dailybasis1500 LtsPer day1500 LtsPer day1500 LtsPer day5000 Lts.Per day4000 Lts.Per day5000 Lts.Per day6000 Lts.Per day2000 LtsPer day24000 LtsPer day1000 LtsPer day24000 LtsPer day24000 LtsPer day1000 Lts /days once24000 LtsPer day12000 Lts /Two daysonceCompressedAir/ 2 HP/ 1 HP2 HP/ 1 HP2 HP/ 10 HP/ 7.50 HP1 HP/ 1 HP * 210 HP/ 50 HP/ 15 HP/ 15 HP/ 10 HP/ 10 HP/ 10 HP3 NIL/ 10 HP25 HP * 215 HPDGSet100 KVA100 KVA125 KVA500 KVA250 KVA380 KVA500 KVA250 KVA200 KVA125 KVA125 KVA110KVA35 KVA200KVA100KVA125KVA125KVA200KVA92
Scotts Garments LimitedSl.NoAddress18 SF. No. 536/5, Veerap<strong>and</strong>i(po),Tirupur – 641 60519 (Sample Unit), No.699/2-R. .M &Bros., Industrial Complex, KamarajRoad., Tirupur – 641 604.20 S.FNo.643,TelephoneNearVeerap<strong>and</strong>i<strong>Exchange</strong>,Kulathupalayam,Veerap<strong>and</strong>i (p.o),Tirupur – 641 605.21 Plot A – 353 (a),8 th Main, PeenyaIndustrial Area, Peenya 2 nd Stage,B’lore – 560 05822 No.36/6, Byraweshwara IndustrialArea, HegganahalliVillage,AndrahalliMain Road,Vishwaneedam Post, Bangalore23 S.No. 61 Narepally Village KasabaHobli,Bagepally ( Taluk ),Chikkaballapura,Karnataka24 7/1, Gummanahalli Road, Byadgi,KarnatakaPowerSanctioned950KVA65HP165HP150 KVA (HT)50 HP180 KVA150 KVAWaterRequirementCompressedAiron dailybasis200000 Lts / 171 HPper day1000 Lts / 7.5 HPWeek12000 Lts /Four daysonce3000 Lts.per day3000 Ltrs perday10,000 Ltrsper day10,000 Ltrsper day15HP/ 5 HP5 HP10HP10HPDGSet1860 KVA62.5 KVA250KVA125 KVA40 KVA125 KVA125 KVAWe have arrangement with various governmental bodies depending on the location <strong>of</strong> our facilities for thesupply <strong>of</strong> power.ProductsWe specializee in tailor made products for men, women <strong>and</strong> kids<strong>and</strong> manufacture these ready to wear<strong>garments</strong>depending onthe specifications <strong>of</strong> our customers. These products are sold to our customers who in turn sell it tothe end users.The different products manufactured by our Company include the following.Woven Garments• Shirts (Cotton, Denim)• Tops• Skirts• Trouser (Cotton, Denim)• Shorts• CargosKnitted Garments• T-Shirts (Basic <strong>and</strong> Embroidered)• Sweats• JerseysWoven GarmentsWe have specialized ourselves into manufacturing<strong>of</strong> woven <strong>garments</strong> especially shirts for our esteemclientele.The <strong>garments</strong> manufactured by us assist in comm<strong>and</strong>ing a premium on our product. We manufacture woven93
Scotts Garments Limited<strong>garments</strong> formen, women <strong>and</strong> kids that include shirts, cargos, trousers, denims, skirts, shorts etc. Our wovenproducts have earned usrevenue <strong>of</strong> `35074 lacs for the F.Y.2011-12 as compared to `28,998 lacs lacs in theF.Y.2010-11.Knitted GarmentsWe manufacture knitted <strong>garments</strong> that include t-shirts, sweats <strong>and</strong> jerseys. Our knitted products haveearned usrevenue <strong>of</strong> `14951 lacs forthe F.Y.2011-12 as compared to `20,5299 lacs in the F.Y.2010-11.CompetitorsThe garmentmanufacturing industry, globally <strong>and</strong>in <strong>India</strong>, is highly fragmented, with a large number <strong>of</strong> small<strong>and</strong> mediumm sized manufacturers having a local presence in Western Europe, China <strong>and</strong> <strong>India</strong>. Our competitorsin our manufacturing operations in <strong>India</strong> include, among others, M<strong>and</strong>hana Industries Limited, GokaldasExports Limited, House <strong>of</strong> Pearl Fashion Limited, KPR Mills Limited, Indus Fila <strong>and</strong> Mudra Lifestyle Limited.Further we also face competition from regional players located inChina, Bangladesh <strong>and</strong> Vietnam.We believe that our manufacturing facilities, designing <strong>and</strong> sampling capabilities <strong>and</strong> diversificationin productmix i.e. catering to Woven <strong>and</strong> Knit segment differentiates us from our competitors. We intend to continue toleverage ourscalable <strong>and</strong>cost efficient production<strong>and</strong> operational capabilities, focus onproviding innovativedesigns to our customers <strong>and</strong> maintainn strong relationships withour customers.Marketing <strong>and</strong> DistributionMarketing involves managing relationships withour existing customerss <strong>and</strong> meeting the needs <strong>of</strong> newcustomers. Our Marketing <strong>and</strong> Merch<strong>and</strong>izing teaminteracts face-to-face with our customers <strong>and</strong> play a criticalrole in showcasing our designs <strong>and</strong> products, managing the distribution <strong>of</strong> our products <strong>and</strong> providingcustomerspecific solutions to existing <strong>and</strong> potential customers.Competitivee StrengthsWe are into the business <strong>of</strong> manufacturing readymade <strong>garments</strong> for last two decades. We believe that we havethe followingcompetitivee strengths tomaintain <strong>and</strong> enhance our position as a leading multi- product ready-tothevariedwear fashionapparel business: Our principal competitive strengths are hereunder:-1. Multiple Product Capability: We have developed a range <strong>of</strong>product <strong>of</strong>ferings in order to address<strong>and</strong> exp<strong>and</strong>ing requirements <strong>of</strong> our customers. Our product <strong>of</strong>ferings include woven, knits, sweats, jerseys<strong>and</strong> woven trousers (cotton <strong>and</strong> denim) for bothgenders across all ages. We believe that our broad range <strong>of</strong>apparel products <strong>and</strong> hi fashion garment experience allowsour customers to sourcemost <strong>of</strong> their productcategoriesfrom a single vendor <strong>and</strong> enables usto exp<strong>and</strong> our business from existingcustomers, as well asaddress a larger base <strong>of</strong> potential new customers. We believee our business model <strong>and</strong> product diversificationprovides our customerOne Stop Solution for all apparel requirements.2. Strong Management Team: We benefit from the leadership <strong>of</strong> our management team, which hasextensiveexperience in the apparel industry. Our Promoter has adequate experiencee in the textilee industry <strong>and</strong> we havesuccessfully implemented expansion projects in the past.Our Key Management Personnel are largelyresponsible for successful execution <strong>of</strong> our growth strategy by exp<strong>and</strong>ing our manufacturingfacilities,developing new customer base <strong>and</strong> strengthening our customer relationships. In addition to our seniormanagement team, we believe that our middle management team <strong>and</strong>skilled work force comprising <strong>of</strong>designers, tailors, merch<strong>and</strong>isers <strong>and</strong> marketing personnel provide us with depth needed to manage ourgrowth.94
Our emphasis on creating <strong>and</strong> sharing value have not onlyretained but attracted people to be part <strong>of</strong> theCompany, which we believe to be an importantt competitive advantage aswe enter new markets <strong>and</strong> exp<strong>and</strong>our product <strong>of</strong>ferings.3. Relationship with big sized playersin international market:Our customers include value retailersas well ashigher-end fashion br<strong>and</strong> retailers, such as Best Seller, Old Navy, H& M Hennes & Mauritz, RhodieSuppliers,C & A, S.Oliver, Jules, No Excess,Mayoral Moda, Infinil S.A., The S Group Inc., etc. We supplyour multiproduct <strong>of</strong>ferings to Bestsellers for their 5 sub-br<strong>and</strong>s viz, Veromoda, Jack <strong>and</strong> Jones, Only, EXIT <strong>and</strong>SELECTED. We focus on maintaining long-term customers, <strong>and</strong> have a decade oldbusiness relation with Best Seller,relationships with our customers. We have strongrelationship with some <strong>of</strong> our leadingwho is one <strong>of</strong> our largest customer in terms <strong>of</strong> revenues.We believe that our ability to address the varied<strong>and</strong> exp<strong>and</strong>ing requirements <strong>of</strong> global customerss over longperiods enables us to obtain additional businesss from existing customers as well as new customers. We servemost <strong>of</strong> our customers across all streams <strong>of</strong> our business model, which we believe increases their loyalty to us.4. We produce products at competitive price: Our automateddesigning <strong>and</strong> samplingfacilities enable us toproduce quality products throughout the year. We have modern scanning <strong>and</strong> qualityassurance equipment,benefitting our manufacturing process significantly in terms <strong>of</strong> reducing wastage <strong>and</strong> enabling us todem<strong>and</strong> apremium for our products. We believe that ourfair customer service policies <strong>and</strong> consistently high qualityproducts have earned us significant good will from our customers, whichh has resultedin repeat orders frommany <strong>of</strong> them.5. Stringent quality check: The Company believes in providingthe best possible quality to the customers. Thereare quality checks in place that prevent any defective material from reaching the customer. Quality controlmeasures are in place at every step in the manufacturing process. The Company also has a well-equippedquality control department.6. Designingg Capabilities: We have two dedicated <strong>and</strong> well-equippeddesign studios in Tirupur <strong>and</strong> inBangalorewith Qualified, skilled <strong>and</strong> experienced employeespreparing designs. Theree is also an informationsystem inplace that keeps a database <strong>of</strong> all the designs created for future reference. The studios areequippedwith latest design s<strong>of</strong>tware including CAD/CAM. Our designers travel extensively toour target markets tostudy thelatest trendsin those countries. We encourage them to visit fashion shows to help them in theirstudy <strong>of</strong> fashion. This practical exposure helps the design teamcome out with new designs <strong>and</strong> ideas based onthe current trends <strong>and</strong> fashion in the international market. The new designs are then sent out to the laboratoryfor various testing <strong>of</strong>the <strong>garments</strong> before thedesigns arereleased tothe sampling unit for the furthermarketing<strong>and</strong> sales purposes. These design studios generate various styles for garment business <strong>and</strong> at thesame time, enables us to work on designs supplied by the customers. Thedesign studio takes feedback fromthe customers on the samples already sent <strong>and</strong> modifies the design according to the customer’s suggestions.7. SamplingCapabilities: Our Company has capabilities to produce garment samples asper designs developedby our design studios in Tirupur <strong>and</strong> Bangalore. Our design <strong>and</strong> sampling department is well equipped withfacilities like sample dyeing, sample printing,washing <strong>and</strong> processing facilities. We have two<strong>garments</strong>ampling units, one in Tirupur <strong>and</strong> one in Bangalore. These units provide samples to the customer forselection. These finished garment samples are sent to the customer for approval. Availability <strong>of</strong> thesamplingunit helpsthe company in providing the customer with a wide variety <strong>of</strong> choices at the minimal possible costto the company. The garment making process starts only after the samples are approved. Differentprocesses<strong>of</strong> sampling are involved for products going to different market segments. Our above-mentioned capabilitiesgive us anadvantage over other garment manufacturers.8. Strategic Location Advantage: We have strategically located our operations. All our woven garment facilitiesare located in Karnataka with major production at Bangalore <strong>and</strong> knitted garment facilities are located in95Scotts Garments Limited
Tirupur, Tamil Nadu <strong>and</strong> Bangalore & Bagepalli in Karnataka. We believe location<strong>of</strong> our units gives ussignificant savings in production, labour <strong>and</strong> transportationcosts. Our knitted operations in TamilNadu arewithin a 10-kilometer radius <strong>of</strong> Tirupur, whichh is regardedd as one <strong>of</strong> Asia’s largest apparel manufacturingclusters. Our locationsprovide us convenient access to airports, ports <strong>and</strong> are also within close proximity <strong>of</strong>our domestic suppliers.ExportOur major customers are located at Europe <strong>and</strong> USA. Given below are export figures for the last three years.YearExports(` In Lacs)*Revenue FromOperationsExports as a percentageto Net Sales (%)(` In Lacs)*2009-102010-112011-1239,451.8348,207.3845,741.3843,017.0749,527.7350,025.4691.7197.3391.44*Includes Export Incentive receivedby the company on account <strong>of</strong> export salesExport ObligationsOur export obligation for the year ended 31/10/2012 stood at ` 15580.30 lacsClientIn last three years we have received repeated orders from renowned international clients like Best Seller,G<strong>and</strong>er Mountain, S.Oliver, C&A, Vila A/s, H&MHennes & Mauritz, Rhodi SuppliersLimited, MayoralModa, Kaufl<strong>and</strong> etc. During the current year our Company has added new customers such Carrefour(France), United Colors <strong>of</strong>Benetton (Italy), VOI Jeans (Italy), TheS Group Inc., Prime Mark(UK), River Isl<strong>and</strong>(UK), House<strong>of</strong> Fraser (UK), GAP (USA), Perry Ellis (USA), Abercrombie & Fitch (USA ), GANT(USA ),Arcadia Group (UK).Business StrategyScotts Garments Limited1. Strengthening Apparel designing <strong>and</strong> ProductDevelopment Process: We operate ina highly creative <strong>and</strong>dynamic fashion industry that requires keeping up pace withever-changing market trends. Our strategy is t<strong>of</strong>ocus on the development <strong>of</strong> new designs <strong>and</strong> samples for our <strong>garments</strong>.Our in house studios areequippedwith latest design s<strong>of</strong>tware including CAD/CAM thus enabling us to successfully convert our designs intosamples into final products. We plan to strengthen our capabilities in designing by continuously upgradingour design studios both in terms <strong>of</strong> human resources <strong>and</strong> technology. We plan to tapthe hi-end readymadegarment segment which will help us in maintaining higher sales realizationfor our final products.2. Strengthening Product Portfolio <strong>and</strong> enhancing capacities to meet client dem<strong>and</strong>s:Presently our productportfolio comprises <strong>of</strong> Ready MadeGarments which includes the export <strong>of</strong> specific <strong>garments</strong>. Our strategy isto increase the product portfolio shall include the addition <strong>of</strong> diversified high fashion<strong>garments</strong> <strong>and</strong> cateringthe same to other large sized players that are specifically into sale <strong>of</strong> these <strong>garments</strong>. We shall also targetenhancingthe capacities <strong>of</strong> our existing manufacturing capacities to meet the incremental client dem<strong>and</strong> forour products.3. IntegratedOperations: We presently focus on the manufacturing <strong>of</strong> Ready Made Garments from the sourcedfabrics <strong>and</strong> raw materials. Our longterm objective is to integrate our operations <strong>and</strong> develop in house facilities96
Scotts Garments Limitedfrom yarndyeing to garment manufacturing.The integrated operations <strong>of</strong> our company shallbenefits <strong>of</strong> economies <strong>of</strong> scale <strong>and</strong> increase the quality controlon our final product.derive the4. Controlling Operational Cost: Webelieve that to sustain the competitiveness <strong>of</strong> the industry we have tocontinuously focus oncontrolling the cost incurred for various operational activities. Our strategyto controlthe cost shall include the controlling raw material cost through negotiations with the suppliers, increasingfocus on quality control to reduce the wastage <strong>and</strong> identifyingthe high cost areas <strong>of</strong> theCompany.5. Tap domestic market <strong>and</strong> exp<strong>and</strong>ing geographic reach: Our major portion<strong>of</strong> export income is fromEuropeannations. Though we have high exposure in this region, we weren’t vastlyaffected fromthe global meltdown.However,to insulate ourselves from any future economic slowdown, we plan to increase our presence indomestic market <strong>and</strong> also tap the other regions across the globe. Our Company will also continueexploringopportunities in various countries where it can supply value added textilee products to enhance its geographicreach. This shall help us to mitigate the risk linked to different markets <strong>and</strong>widen the growth prospects.CapacityOur Companynormally operates in either one shiftor two shifts dependingon the orders in h<strong>and</strong>. The presentcapacity <strong>of</strong> our company for all the units is stated below:Existing Installed CapacityParticularsInstalledCapacityCapacityUtilizationCapacityUtilization (%)InstalledCapacityCapacityUtilizationCapacityUtilization (%)2010Knitted Garments1,15,00,0001,13,57,95598.76Woven Garments96,63, ,00058,65, ,93660.71Financial Year20111,15,00,0000 1,17,36,0001,01,83,19581,70,62588.5569.6296,63,00080,45,85183.26(Pieces Per annum)201299,72,00099,09,00299.37Proposed Capacity UtilisationParticularsInstalledCapacityCapacityUtilizationCapacityUtilization (%)InstalledCapacityCapacityUtilizationCapacityUtilization (%)E – Estimated2013(E)Knitted Garments1,71,92,0001,46,00,00084. .92Woven Garments1,20,61,0001,12,12,50092. .96Financial Year20141,99,92,0001704000085.231,48,66,0001,36,44,00091.78(Pieces Per annum)20151,99,92,00001728000086.431,48,66,00001,38,78,000093.3597
Scotts Garments LimitedProposed Project - Capacity Utilisation‣ DoddaballapurParticularsInstalledCapacity*CapacityUtilizationCapacityUtilization (%)*300 operating daysFirst year90,00,00063,00,00070. .00Second year90,00,00072,00,00080.00(No. <strong>of</strong> pieces/Annum)Third Year90,00,00076,50,00085.00‣ KagalParticularsInstalledCapacity#CapacityUtilizationCapacityUtilization (%)#350 operating daysFirst year1,40,00,00084,00,00060. .00Second year1,40,00,00098,00,00070.00(Kgs/Annum)Third Year1,40,00,0001,19,00,00085.00Intellectual Property Rights:We had madean application dated 26/ 11/2007 for registration <strong>of</strong>our erstwhile logo underthe class 18, 22, 23,24, 25 <strong>and</strong> 26 <strong>of</strong> the Trade Marks Act 1999. The Registrar <strong>of</strong> Trade Marks, Chennai has issued an orderr dated19/12/2008 objecting the application on the relative grounds <strong>of</strong>refusal under section 11 <strong>of</strong> the TradeMarkAct, 1999 because similar trademark isalready on the record <strong>of</strong>the registrar for the same/ similar goods/services. The application was ab<strong>and</strong>oned for lack <strong>of</strong> prosecution under section132 <strong>of</strong> the Trade Mark act, 1999.Subsequently,we have filed a new application datedd June 08, 20122 for registration <strong>of</strong> our new logo.PropertiesOwned Property:The details <strong>of</strong> the immovable propertieswhich are registered in the name <strong>of</strong> the Company are given below:Sl.NoType <strong>of</strong>ArrangementVendorPurposeLocation<strong>of</strong>PropertySq.mtAreaOriginalunits1 Deed <strong>of</strong> Sale datedNovember 18,2004.2 Deed <strong>of</strong> Sale datedMay 9,2002.TheKarnatakaIndustrial AreasDevelopment<strong>Board</strong> representedby Shri N. NagarajaNaik (“Vendor”).TheKarnatakaIndustrial AreasDevelopment<strong>Board</strong> representedby Shri N. NagarajaFactoryFactoryPlot No. 481-A <strong>of</strong>Peenya, 4 th Phase,Industrial Area,situated inSy.No. 88 <strong>of</strong>Nallakadaranahalli VillagePlot No. 481-B <strong>of</strong>Peenya, 4 th Phase,Industrial Area,situated inSy.No. 46 <strong>of</strong>4146sq.mt1874Sq.mt4146 sq.mt1874 Sq.mt98
Scotts Garments LimitedSl.NoType <strong>of</strong>ArrangementVendorNaik (“Vendor”).PurposeLocation<strong>of</strong>PropertyNallakadaranahalliVillage,YeshwanthpurHobliSq.mtAreaOriginalunits3 Deed <strong>of</strong> Sale datedApril 28, 2007.Smt. Muniyamma(“Vendor”).FactorySy. No. 127 <strong>of</strong>NallakadaranahalliVillage,YeshwanthpurHobli, BangaloreNorth Taluka1534.35Sq.mtbuilding<strong>and</strong>l<strong>and</strong>measuring1012.77sq.mt10 gunthal<strong>and</strong><strong>and</strong>10890sq.ftbuilding4 Deed <strong>of</strong> Sale datedMay 26, 2008 <strong>and</strong>RegistrationNo.BBE/3919/2008.Mindwest (<strong>India</strong>)Industries Limited(“Vendor”).Office10 th Floor in theBuildingknownas Mittal TowersC- Wing <strong>and</strong> allother internal <strong>and</strong>externalfittingsat Flat No. 210,Block No. III CF,BackbayReclamationScheme, NarimanPoint, Mumbai105. .65sq.mt1136 sq.ft5 Deed <strong>of</strong> Sale datedDecember 2, 2005.Karnataka StateFinancialCorporationrepresentedbyAssistant Gen.Manager Shri. D.Basavaih(“Vendor”).FactoryNew No. 1028/1,<strong>of</strong> CTS No. 1568(part) situated atPattepalli Road,Robertsonpet,K.G.F. BangarpetTaluka,874. .1sq.mt9200 sq.ft6 Deed <strong>of</strong> Sale datedDecember 2, 2005.Smt. Sonal S. Arora<strong>and</strong> Smt. NamithaR. Arora(“Vendors”)FactoryJoint- II SubRegistrationDistrict) TripurTaluk,Veerap<strong>and</strong>iVillage G. S. No.536/5 measuringAcre 1.62.6562.81sq.mt1.62 Acre7 Sale Deed datedDecember 2, 1994KumaraswamiGounderJaganathann(“Vendors”)<strong>and</strong>Factory1) SubDistrict, PalladamTaluk,GanapathipalyamVillage S. F. No.218/1A, Hec.11,832sq.mtapprox2.92 Acre99
Scotts Garments LimitedSl.NoType <strong>of</strong>ArrangementVendorPurposeLocation<strong>of</strong>Property2.46.0 (Ac.6.08)Sq.mtAreaOriginalunits2) S.F.218/1B.0.10.5. Ac.No.Hec.0.253) Total extent <strong>of</strong>Ac. 2.92 with awell in thesoutheastern corner <strong>of</strong>S. F. 218/1A8 Sale Deed datedDecember 4, 2003Sarjan Realities Pvt.Ltd. (“Vendors”)Wind FarmPalladam Taluk,EdayarpalayamVillage in S. F.No. 321/ (Part)admeasuringAcres 0.98.16204sq.mt4 Acre2) PalladamTaluk,EdayarpalayamVillage in S. F.No. 322/ (Part)admeasuringAcres 1.02.3) PalladamTaluk,EdayarpalayamVillage in S. F.No. 316/ (Part)admeasuringAcres 2.00.9 Sale Deed datedMarch7, 2007Tiripur AroraTextile ProcessPrivate Limited(“Vendor”)FactoryTiruppur Taluk,Veerap<strong>and</strong>iVillage, S. F. No.535, Ac. 10.76 –in this a specificextent <strong>of</strong>Ac.1.56As per Re-survetheproperty is inS.F.No. 535/3Hec. 0.61Patta No. 6346319.74Sq.mt1.56 Acre10 Sale Deed datedJuly 1, 1991Sri S. SubramaniamCompany(“Vendor”)Guest houseTirpurTirupurTaluk, 445. .33sq.mt <strong>of</strong>4788. 75sq.ftl<strong>and</strong> <strong>and</strong>100
Scotts Garments LimitedSl.NoType <strong>of</strong>ArrangementVendorPurposeLocation<strong>of</strong>PropertyMunicipal Town,Old Ward No. 10,New WardNo.17, Rayapuram S.F. No. 765Sq.mtl<strong>and</strong>,R.C.C.buildingmeasuring 217.5Sq. mt<strong>and</strong>114. .75Sq. mt.AreaOriginalunits217.5 sq.mt11 Sale Deed datedJanuary 12, 2009Shubh Reality(South) PrivateLimited (“Vendor”)Wind FarmIn TirunelveliRegistrtionDistrict,RadhapuramSub- RegistrationDistrict,RadhapuramTaluk,RadhapuramVillage,SF No. 594/ /20SF No. 594/ /24SF No. 594/ /25SF No. 594/ /26SF No. 594/ /27SF No. 594/ /28SF No. 594/ /29SF No. 594/ /30SF No. 594/ /31SF No. 594/ /32SF No. 594/ /37SF No. 594/ /38SF No. 594/ /39SF No. 594/ /40SF No. 594/ /41SF No. 594/ /42SF No. 594/ /438102.23sq.mt2 acre12 Sale Deed datedSeptember 15,2008Mr. Subramaniam(“Vendor”)PresentlyVacantl<strong>and</strong>InTirupurRegistrationDistrict, NallurSub RegistrationDistrict, TirupurTaluk,Veerap<strong>and</strong>iVillage,16488.04sq.mt4.07 Acre101
Scotts Garments LimitedSl.NoType <strong>of</strong>ArrangementVendorPurposeLocation<strong>of</strong>PropertySq.mtAreaOriginalunitsS. F. No. 536/1Punjai Ac. 3.09. inthis an extent <strong>of</strong>Punjai Hec.Boundaries:-Admeasuring onpunjai hec.0.39.5(Punjai Ac. 0.98)<strong>of</strong> agriculturall<strong>and</strong> PattaaNo.1230, Pattaa passbook No. 30852813 Sale Deed datedMay 12, 2010Mr. K.V.Jayaram(“Vendor”)PresentlyVacant L<strong>and</strong>Sy. No. 60admeasuring –dully convertedvie ALN-SR-255/2009-10 atSultanTippas<strong>and</strong>raVillageKasabaHobli,Taluka,KolarKolarDistrict.3241.12Sq.mt32 Guntha14 Sale Deed datedAugust 22, 2005Sushil S Arora &Rajesh S AroraFactorySy. No 536/6,Veerap<strong>and</strong>iVillagee, Nallur,SubRegisteration,Tirupur District6969.93 1.72 acres15 Sale Deed datedNovember 8, 2010Abdulla KhanFactorySy No.30/ 1, <strong>and</strong>32/1,SangondanahallyVillage,ChikkaballapurRoad, Kolar9251.67sq mt1 acre 22gunthas<strong>and</strong> 32gunthasrespectively16 Sale Deed datedJanuary 24, 2012Abdulla KhanFactorySy No.32/2, <strong>and</strong>30/2SangondanahallyVillage,ChikkaballapurRoad, Kolar1519.27sq.mt15 gunthas17 Sale Deed DatedJanuary 29, 2010NeoluxLimited &Baroda<strong>India</strong>Bank <strong>of</strong>FactoryPlot no. E-2 <strong>and</strong>E-3, MIDCTarapur15,600sq.meters15,600 sq.meters102
Scotts Garments LimitedSl.NoType <strong>of</strong>ArrangementVendorPurposeLocation<strong>of</strong>PropertyIndustrial Area,SalwadTaluka,Dist Thane,MaharashtraSq.mtAreaOriginalunitsLeased propertiesType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/LesseeProperty/PremisesOriginalUnitsAreaSq.mtRent/SecurityDepositPeriod <strong>of</strong>AgreementAllotmentletter dateddAugust 28,2007 No.HO/PO/ALLT-17512/7258/07-08 <strong>and</strong>March 25,2010 No.KIADB-HO/ALLOT-17512/164664/09-10issued byKIADBKAIDB(“Lessor”).ScottsGarmentsPrivateLimited(“Lessee”).L<strong>and</strong> in Plot No. D-3,D-4, A-3, A-10, A-11,S-43, S-44 & S-45 (P) atApparelParkIndustrialPhase,Area,IDoddaballapuraa57567sqmeters575677 The Companyhas paidconsideration<strong>of</strong>`619.08 lacs forallotmentt <strong>of</strong> l<strong>and</strong>The yearly rentpayable is`14,225/-TheCompanyshall alsopayyearlymaintenance<strong>of</strong>`1.06 lacs10YearsLease cumsaleagreementdatedFebruary28, 2011Leave <strong>and</strong>LicenseAgreementdated July10, 2007.ApparelExportPromotionCouncil(“Licensor”).ScottsGarmentsPrivateLimited(“Licensee”).Premises/Showroombearing No. 312-313located on 3 rd Floor inthe‘Apparel House’ atSector-44, InstitutionalArea,Gurgaon,Haryana.543.37sq.ft50.53Fixed LicenseFees:`33,96,120/ /-Monthlymaintenance <strong>of</strong> `8,151/-InterestSecurityFreeDeposit10years103
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/LesseeProperty/PremisesOriginalUnitsAreaSq.mtRent/SecurityDeposit<strong>of</strong> ` 1,00,000/-Period <strong>of</strong>AgreementLeaseAgreementdatedDecember19, 2007.KarnatakaIndustrialAreaDevelopment<strong>Board</strong>(“Lessor”).M/s.ScottsGarmentsLimited.(“Lessee”).Alll that piece <strong>of</strong> l<strong>and</strong>known as Plot No. 22in Sy No. 141 <strong>and</strong> 120part in the BangarpetIndustrial Area TalukaBangarpet,DistrictKolar4033sq.mtrs40333 The Lessee haspaid the Lessorthe sum<strong>of</strong> `1,36,032/-towards theallotmenttconsideration.The Lessee shallpay to the Lessora sum <strong>of</strong> ` 1008/-towards theyearly rent <strong>and</strong>maintenancecharges1495/-<strong>of</strong> `10yearleasecum salearrangementLeaseAgreementdatedJanuary 12,2008.KarnatakaCoirComplexPrivateLimited(“Lessor”).ScottsGarmentsLimited(“Lessee”).Plot No. 1 & 2 inSurveyNo. 10,SathyamangalaIndustrialArea,SathyamangalaHobli,KasabaTumkurTaluka,Districtcovered by A C Street.27000sq.ft.superbuiltup25111 The leaserentpayable by theLesseefor theProperty shall beat ` 6/- per sq.ft.per month <strong>and</strong>the rentalshall beincreased by 10%ever threee years.5 YearsWe are intheprocess<strong>of</strong>renewingthe same.10 months rent ispayable asinterest freesecurity depositby the Lessee.LeaseAgreementdatedDecember1, 2008.AndAddendumAgreementdatedAugust 13,2012M/s.KasturiIndustrialEstate(“Lessor”).ScottsGarmentsLimited(“Lessee”).GroundFloor,FirstFloor<strong>and</strong> SecondFloor, situated at No.5/1,Madanayakanahalli,TumkarRoad,Bangalore-562123measuringabout75, 000 sq.ft. <strong>of</strong> builduparea with 5000 KVApower <strong>and</strong>75, ,000sq.ft.6975The monthly rentpayable by theLessee to theLessor shall be `4,14,000/-exclusive <strong>of</strong>service tax fromJanuary 01, 2012to March 2012.From April 01,2012 to December3 yearseffectivefromJanuary01, 2012104
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/LesseeProperty/PremisesAreaOrigiSq.mtnalUnitsRent/SecurityDeposit31, 2014 will be`4,91,000 permonth exclusive<strong>of</strong> service taxPeriod <strong>of</strong>AgreementThe rent shall beenhancedby 15%every 3 yearsannually.Thedepositsecuritypayableby the Lesseeshall be `46,28,000/ /-,which shallbeinterest free.LeaseAgreementdatedSeptember18, 2009.Mrs.G. H.Nirmala(“Lessor”).M/s.ScottsGarments Ltd.(“Lessee”).19200sq.ft.#5F2, 1 st Phase, PeenyaIndustrialArea,JalahgalliWest,S.M.Road, Bangalore-560058,1785.6The Lessee shallpay the monthlyrent <strong>of</strong> `1,50,000/-subjectto deduction onTDS.5 YearsThe rent will beenhancedby 10%on existing rentafter 3 years.The Lessee shallpay a sum <strong>of</strong> `15,00,000/ /- assecurity deposit.LeaseAgreementdated Junel 1, 2011Mr.SaudNazir,ProprietorJ.K.EngineeringServices(“LessMr.NaseerAhmed,ManagingDirector, ScottsGarments Pvt.Ltd.(“LesseNo. B-108, PeenyaIndustrial Estate, IIIrdstage, Bangalore526.22sq.mt526.222 The lessee shallpay ` 30,000/-every month <strong>and</strong>the tenancy shallbegin from thefirst <strong>of</strong> everymonth <strong>of</strong> theEnglish calendarterminating withthe last day <strong>of</strong>every month.5 Years105
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/Lessoror”).Licensee/Lesseee”).Property/PremisesOriginalUnitsAreaSq.mtRent/SecurityDepositThe Lessee haspaid a sum <strong>of</strong> `520,500 assecurity deposit.Period <strong>of</strong>AgreementLeaseAgreementdated April1, 2005.Mr.ArifButt,HeritageGarments(“Lessor”).Mr.NaseerAhmed,ManagingDirector, ScottsGarments Pvt.Ltd.(“Lessee”).No. B-66, PeenyaIndustrial Estate, IIIrdstage, Bangalore461.49sq.mt461.49The lessee shallpay ` 4,750/-every month <strong>and</strong>the tenancy shallbegin from thefirst <strong>of</strong> everymonth <strong>of</strong> theEnglish calendarterminating withthe last day <strong>of</strong>every month.20YearsLeaseAgreementdatedOctober 24,2007 <strong>and</strong>letterextensiondatedFebruary,13, 2013<strong>of</strong>AgroChemIndustries(“Lessor”).ScottsGarmentsLimited(“Lessee”).Plot No. V-27, PeenyaIndustrial Estate, IIndstage,Bangalore-560058,1496sqm1496The leaserentpayable by theLesseefor theProperty shall beat ` 3, 25,000/-per month <strong>and</strong>the rentalshall beincreased by 5%ever threee years.Extension validtillOctober23, 201310 months rent ispayable asinterest freesecurity depositby the Lessee.LeaseAgreementdatedFebruary13, 2006.Addendumto the LeaseeDeed dateddJanuary 01,2012Mr.Suresh(“Lessor”).Mr.NaseerAhmed,ManagingDirector, ScottsGarments Pvt.Ltd.(“LesseKhaneshumari No. 535(Old No. 422), situatedat Patel Channappa’sIndustrialEstate,Hegganahalli,Yeshwanthpuraa Hobli,BangaloreTaluka,NorthBangalore(MeasuringEasttoWest 68.00 feet <strong>and</strong>North to South 36.00).2448sq.ft227.666 The Lessee shallpay the rent <strong>of</strong> `40,000/- everymonth.The Lessee haspaid the Lessor asum<strong>of</strong>`4,00,000/ /- asinterest freesecurity deposit.5 Years106
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/Lesseee”).Property/PremisesOriginalUnitsAreaSq.mtRent/SecurityDepositPeriod <strong>of</strong>AgreementLeaseAgreementdatedFebruary13, 2006Addendumto the LeaseeDeed dateddJanuary 01,2012Mr.Srinivas(“Lessor”).Mr.NaseerAhmed,ManagingDirector, ScottsGarments Pvt.Ltd.(“Lessee”).No. 422/A, situated atPatelChannappa’sIndustrialEstate,Hegganahalli,Yeshwanthpuraa Hobli,BangaloreNorthTaluka, Bangalore1904sq.ft177.077 The Lessee shallpay the rent <strong>of</strong> `10,000 everymonth.The Lessee shallincrease the rentamount 10% onagreed rent (i.e. `11,424/-) once in2 years.The Lessee shallpay the Lesser asum <strong>of</strong> `2,00,000/-interestasfreedeposit.5 yearsLeaseAgreementdated April1, 2000.Addendumto the LeaseeDeed dateddJanuary 01,2012.Smt.Venkatalakshmamma(“Lessor”).M/s.ScottsGarments(“Lessee”).No. 78/2, bearingKhaneshumariNo.108/292-B, situated atPatelChannappa’sIndustrialEstate,Hegganahalli,Yeshwanthpuraa Hobli,BangaloreNorthTaluka, Bangalore4680sq.ft435.244 The Lessee shallpay the rent <strong>of</strong>`30,000/- everymonth.The Lessee haspaid the Lessor asum<strong>of</strong>`3,00,000/ /- asinterest freesecurity deposit.5 yearsLeaseAgreementdated April1, 2000Addendumto the LeaseeDeed dateddJanuary 01,2012Smt.Jayalakshmamma(“Lessor”).M/s.ScottsGarments(“Lessee”).Property in survey No.78/ /2, bearingKhaneshumari No. 538(Old No-425) situatedat Patel Channappa’sIndustrialEstate,Hegganahalli,Yeshwanthpuraa Hobli,BangaloreNorthTaluka, Bangalore4680sq.ft435.244 The Lessee shallpay the rent <strong>of</strong>`30,000/- everymonth.The Lessee haspaid the Lessor asum<strong>of</strong>`3,00,000/ /- asinterest freesecurity deposit.5 YearsLease DeedMr. M/s.No.A-353a situated at 859.57 859.57The Lessee shall 3 years107
Scotts Garments LimitedType <strong>of</strong>ArrangemeentdatedSeptember20, 2010Licensor/LessorAminappaGoudaSanganaGoudaPatil(“Lessor”)Licensee/LesseeScottsGarmentsLimited.(“Lessee”)Property/PremisesIndustrialEstate,Peenya 2 nd Stage <strong>of</strong>PeenyaIndustrialEstate Area within thelimits<strong>of</strong>NallakadernahalliVillage,Yeshwanthpuraa Hobli,Bangalore NorthTalukFactory Shed st<strong>and</strong>ingthereonOriginalUnitssq.mtl<strong>and</strong>comprising<strong>of</strong> anindustrialfactory shedadmesuring491.37sq.mtAreaSq.mtsq.mtl<strong>and</strong>comprising <strong>of</strong>anindustrialshedadmesuring491.37sq.mtRent/SecurityDepositpay the Lessorthe sum<strong>of</strong> `7,50,000/-permonth ncludingthe rent for theleasedpremises<strong>and</strong> the plant <strong>and</strong>machineries.The Lessee haspaid a sum <strong>of</strong> `75,00,000/ /- assecuritywhichdepositisrepayableewithoutinterest onanythetermination<strong>of</strong>the lease.Period <strong>of</strong>AgreementLease deedd Shri B.dated YogesNovember h24, 2011ScottsGarmentsLimitedL<strong>and</strong> <strong>and</strong> buildinghaving groundfloor,first floor <strong>and</strong> secondfloorsituatedatNo.36/6,BhyraveshwaraIndustrialArea,Hegganahalli Village,AndhrahalliMainRoad, VishwaneedamPost, Bangalore– 56009119500sq. ft1813.50sq m` 9,50,000/- asinterest freedeposit` 95,000 as rentper month5 yearsLease deedd Shri V.dated VenkatNovember a26, 2011 ShivaReddyScottsGarmentsLimitedL<strong>and</strong> <strong>and</strong> buildinghaving groundfloorsituated at S. no. 61,NarepallyKasabaBagepally Village,Hobli,(Taluk),Chikkaballapura – 56210712, ,000sq.ft1116` 6,00,000/- asinterest freedeposit` 40,000 as rentper month5 yearsLease cumRentAgreementdatedNovember16, 2011M/s.PragathiAgrotechIndustScottsGarmentsLimitedIndustrialshedsituated at D-427, 10 thMain Road, 2 ndStage,PeenyaIndustrialArea, Bangalore– 56005810, ,400sq ft` 8,00,000/- asinterest freedeposit` 90,000 as rentper month10months108
Scotts Garments LimitedType <strong>of</strong>ArrangemeentAddendumdated June11, 2012Licensor/LessorriesLicensee/LesseeProperty/PremisesOriginalUnitsAreaSq.mtRent/SecurityDepositPeriod <strong>of</strong>AgreementSub Leaseddeed dateddSeptember17, 2010KarnatakaRenewableEnergyDevelopmentLimitedScottsGarmentsLimitedL<strong>and</strong>bearing SerialNo-77,SindigereVillage, BellaryTaluk,Bellary District2acres` 6,14,000/- asinterest freedeposit` 55,000 as rentper monthUptoMarch29, 2040LeaseAgreementdated May12, 2006.StateIndustriesPromotionCorporation<strong>of</strong>TamilnaduLimited(“Lessor”).M/s.ScottsGarmentsPrivateLimited(“Lessee”).No. R-4 in the SIPCOTIndustrialCentre,GrowthPerunduraiwithin the limits <strong>of</strong>Ingur,Taluka<strong>of</strong>PerunduraiSub-<strong>of</strong>Registration DistrictPerundurai5.59acre22645.7The Lessee shall5 pay ` 14, 98,120/-towardsrefundableplotdeposit,` 29, 73,880/-towardsdevelopmentcharges <strong>and</strong>` 100/- towardsLeaserent asadvance being100% payment infull.ThePropertyshallbeallottedforthelonglease<strong>of</strong>999 years.Letter forExtension<strong>of</strong> RentAgreementdated May23, 2012.Lease Deeddated May07, 2008Mr.M.Karuppusamy<strong>and</strong>Mr. K.Krishnasamy(“Lessor”).M/s.ScottsGarmentsLimitedThe building rented isfacing towardsScottsClothing(P) Ltd.,S.F.No.226/1-DharapuramPudhurRoad,Privu,Tirupur-641608.20, ,000sq ft1860The leaseshall be80,000/-month.rent`perThe Lessee haspaid ` 5, 00,000/-as advance to theLessor, which isrefundable.1 yearfromMay 23,2012.LeaseAgreementdatedAugust 13,Smt.PremaRani(“LessM/s.ScottsGarmentsInTirupurRegistrationDistrict,NallurSubRegistration District, at11, ,701.49sq.ft1088.23The leaseshall be90,000/-month.rent`perThe leaseperiod isagreedwith109
Scotts Garments LimitedType <strong>of</strong>Arrangemeent2011.Licensor/Lessoror”).Licensee/LesseeLimited(“Lessee”).Property/PremisesTirupurTaluka,Veerap<strong>and</strong>y Village inS.F. 295.OriginalUnitsAreaSq.mtRent/SecurityDepositAsum <strong>of</strong>lakh isadvanceLesseeLessor.refundable` 13.50paid asby theto thePeriod <strong>of</strong>AgreementeffectfromAugust13, 2011,to March31, 2013.We are intheprocess<strong>of</strong>renewingthe sameRentalAgreementdatedMarch 23,2011Mr.M.Nithyannadhan(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).CoimbatoreTirupurDistrict,Taluka,PalavanchipalayamVillage, Near LakshnaTheatre,1/805.DoorNo.-31, ,846sq.ft2961.67The monthly rentfor thesaidproperty shall be` 56,700/ /- witheffect fromMarch23 2011 <strong>and</strong> theinterest freeadvance shall be` 15,00,000/-3 yearsLetter forExtension<strong>of</strong> RentAgreementdated May14, 2012.RentalAgreementdated April1, 2009.Mr.S.Venkatesh(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden, S.F.No.- 368, Veerap<strong>and</strong>i(po), Tirupur.12000sq. ft.111.6The monthly rentfor thesaidproperty shall be` 10,000/- <strong>and</strong>the interest freeadvance shall be` 4,20,000/-Theduration<strong>of</strong> rent isfor1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> thepartiesLetter forExtension<strong>of</strong> RentAgreementdated May14, 2012.Mrs. S.Balamani(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden S.F.No.-368,Veerap<strong>and</strong>i(po),Tirupur.7, ,068sq. ft.657.32The monthly rentfor thesaidproperty shall be` 9,000/- <strong>and</strong> theinterest freeadvance shall be` 4,00,000/-1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> the110
Scotts Garments LimitedType <strong>of</strong>ArrangemeentRentalAgreementdated April1, 2009.Licensor/LessorLicensee/LesseeProperty/PremisesOriginalUnitsAreaSq.mtRent/SecurityDepositPeriod <strong>of</strong>Agreementparties.Letter forExtension<strong>of</strong> RentAgreementdated May14, 2012.RentalAgreementdated April1, 2009.Ms. V.N<strong>and</strong>hini(“Lessor”).M/s.ScottsGarmentsLimitedrepresented byMr.SayedSafiulla(“Lessee”).CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden S.F.No.-368,Veerap<strong>and</strong>i(po),Tirupur.Godown <strong>and</strong> Buildingmeasuring area-6, ,820sq. ft.634.266 The monthly rentfor thesaidproperty shall be` 10,000/- <strong>and</strong>the interest freeadvance shall be` 4,20,000/-1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.Letter forExtension<strong>of</strong> RentAgreementdated May14, 2012.RentalAgreementdatedJanuary 10,2009.Mr. K.Subbiyan(“Lessor”).M/s.ScottsGarmentsLimitedrepresented byMr.SayedSafiulla(“Lessee”).10,080sq. ft937.44CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden S.F.No.-368,Veerap<strong>and</strong>i(po),Tirupur.The monthly rentfor thesaidproperty shall be`10,000/- <strong>and</strong> theinterest freeadvance shall be`4,00,000/ /-1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.Letter forExtension<strong>of</strong> RentAgreementdated May14, 2012.RentalAgreementdatedJanuary 10,2009RentalAgreementdatedMr. S.Lakshmi(“Lessor”).M/s.ScottsGarmentsLimitedUnit 1represented byMr.K.Loganathan<strong>and</strong> Mr.R.Palanisamy(“Lessee”).CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden S.F.No.-368,Veerap<strong>and</strong>i(po),Tirupur.12, ,524sq. ft.1164.73The monthly rentfor thesaidproperty shall be`10,000/- <strong>and</strong> theinterest freeadvance shall be`4,00,000/ /-1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.111
Scotts Garments LimitedType <strong>of</strong>ArrangemeentDecember4, 2007.Licensor/LessorLicensee/LesseeProperty/PremisesAreaOrigiSq.mtnalUnitsRent/SecurityDepositPeriod <strong>of</strong>AgreementLetter forExtension<strong>of</strong> RentAgreementdated May14, 2012.RentalAgreementdatedSeptember01, 2009Smt.S.Surekha(“Lessor”)M/s.ScottsGarmentsLimited(“Lessee”).CoimbatoreDistrict,TirupurTaluka,NochipalayamRoad,Lakshmi Garden S.F.No.-368,Veerap<strong>and</strong>i(po),Tirupur.Godown <strong>and</strong> Buildingmeasuring area3321sq ft308.85sq mThe monthly rentfor thesaidproperty shall be`10,000/- <strong>and</strong> theinterest freeadvance shall be`3,00,000/ /-1 year<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.RentalAgreementdatedAugust 10,2012RentalAgreementdatedNovember2, 2009.Mr. R.K<strong>and</strong>hasamy(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).Building at No. 699/2-R.M. & Bros.,IndustrialKamarajComplex,Road,Tirupur- 641604.7200.00 sqft.669.60The monthly rentfor thesaidproperty shall be`10,000/- <strong>and</strong> theinterest freeadvance shall be`1,00,000/ /-Theduration<strong>of</strong> rent isfor2years <strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.Letter forExtension<strong>of</strong> RentAgreementdatedAugust 01,2012LeaseAgreementdated June24, 2009.Smt.S.Pushpalatha(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).TheSecond Floormeasuring 15,000 sq.ft.in the three storeyRCC building bearingD.No. 643/1, InS.F.No. 643/1A, Hec0.36, Ac 0.90,Veerap<strong>and</strong>iVillage,TirupurTaluka,<strong>of</strong>NallurTirupurSub-District,RegistrationDistrict.0.90acre3646.000sq mThe Lessee shallpay a monthlyrent <strong>of</strong> `8,500/-for the first year.For the second<strong>and</strong> third year,the rent shall beincreased by 5 %on the monthlyrent i.e. `8,925/-.The leaseis for theperiod <strong>of</strong>1 yearcommencing fromAugust 1,2012.The Lessee haspaid to the Lessorrefundable112
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/LesseeProperty/PremisesAreaOrigiSq.mtnalUnitsRent/SecurityDepositdeposit <strong>of</strong> `5,00,000/-without interest.Period <strong>of</strong>AgreementLetter forExtension<strong>of</strong> RentAgreementdatedAugust 01,2012LeaseAgreementdated June24, 2009.Smt.KanchanaDevi(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).TheGround Floormeasuring 15,000 sq.ft.in the three storeyRCC building bearingD.No. 643/1, In S.F.No. 643/1A, Hec 0.36,Ac 0.90, Veerap<strong>and</strong>iVillage,TirupurTaluka, <strong>of</strong> Nallur Sub-District,TirupurRegistration District.0.90acre3646.000sq mThe Lessee shallpay a monthlyrent <strong>of</strong> ` 8,500/-for the first year.For the second<strong>and</strong> third year,the rent shall beincreased by 5 %on the monthlyrent i.e. ` 8,925/-.The Lessee haspaid to the Lessorrefundabledeposit5,00,000/-<strong>of</strong> `without interest.The leaseis for theperiod <strong>of</strong>1 yearcommencing fromAugust 1,2012.Letter forExtension<strong>of</strong> RentAgreementdatedAugust 01,2012LeaseAgreementdated June24, 2009.Mr. S.Parameswaran(“Lessor”).M/s.ScottsGarmentsLimited(“Lessee”).TheFirst Floormeasuring 15,000 sq.ft.in the three storeyRCC building bearingD.No. 643/1, In S.F.No. 643/1A, Hec 0.36,Ac 0.90, Veerap<strong>and</strong>iVillage,TirupurTaluka, <strong>of</strong> Nallur Sub-District,TirupurRegistration District.0.90Acre3646.0The Lessee shallpay a monthlyrent <strong>of</strong> `8,500/-for the first year.For the second<strong>and</strong> third year,the rent shall beincreased by 5 %on the monthlyrent i.e. `8,925/-.The Lessee haspaid to the Lessorrefundabledeposit <strong>of</strong>`5,00,000/ /-without interest.The leaseis for theperiod <strong>of</strong>1 yearcommencing fromAugust 1,2012.RentalAgreementdatedMarch 24,Mr. P.Mallika(“LessM/s.ScottsGarmentsL<strong>and</strong> <strong>and</strong> Buildingmeasuring about 2600sq. ft. situated at DoorNo. 4, Jawahar Nagar,2600sq ft241.80The monthly rentfor thesaidproperty shall be`16,775/- <strong>and</strong> theTheduration<strong>of</strong> rent isfor3113
Scotts Garments LimitedType <strong>of</strong>Arrangemeent2011Licensor/Lessoror”).Licensee/LesseeLimitedrepresentedbyMr.SayedSafiulla(“Lessee”).Property/PremisesSundamedu,Induvampalayam(PO), Tirupur.OriginalUnitsAreaSq.mtRent/SecurityDepositinterest freeadvance shall be`50,000/-Period <strong>of</strong>Agreementyears tillJanuary2014 <strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.RentalAgreementdatedMarch 23,2011.Mr. K.Lakshmi(“Lessor”).M/s.ScottsGarmentsLimitedrepresented byMr. K.Loganathan(“Lessee”).L<strong>and</strong> <strong>and</strong> terracedBuildingmeasuring1700 sq.ft. situated atFirst Floor No. 355,356, DharapuramRoad, Tirupur.1700sq ft158.10The monthly rentfor thesaidproperty shall be`8,250/-The interest freeadvance shall be`50,000/-3 yearsLetter forExtension<strong>of</strong> RentAgreementdatedAugust 01,2012RentalAgreementdatedFebruary15, 2010.Mr. T.Santhalingam(“Lessor”).M/s.ScottsGarmentsLimitedrepresented byMr.SayedSafiulla(“Lessee”).Door No. D 7, DSKNagar,NearValampuri VinayagarLovil, 60 Feet Road,Tirupur.2616sq.ft.243.29The monthly rentfor thesaidproperty shall be`8,500/- <strong>and</strong> theinterest freeadvance shall be`30,000/-Theduration<strong>of</strong> rent isfor1 yearfromAugust01, 2012<strong>and</strong>theagreement can beextendedbythemutualconsent<strong>of</strong> theparties.RentalAgreementdate March24, 2011P.MuthukumaraswamyScottsGarmentsLimited(“TenaGodownat,DhanalakshamiRiceMillsCompound,Karaipudhur(po),Arulpuram, palladam1acre<strong>and</strong>50cents6077.54approxMonthly`20,000/Interestadvance`4,00,000/ /Rent <strong>of</strong><strong>and</strong> anfree<strong>of</strong>3 Years.Theagreement can beextended114
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/Lessor(“Owner”)Licensee/Lesseent”)Property/PremisesRoad, Tirpur-5OriginalUnitsAreaSq.mtRent/SecurityDepositPeriod <strong>of</strong>Agreementbythemutualconsent<strong>of</strong> theOwners<strong>and</strong>TenantRentalAgreementdatedMarch 24,2011Ansuya Devi(“owner”)ScottsGarmentsLimited(“Tenant”)GodownatDhanalakshamiRiceMillsCompound,Karaipudhur(po),Arulpuram, palladamRoad, Tirpur-51acre<strong>and</strong>50cents6077.54approxMonthly`10,000/Interestadvance`1,30,000Rent <strong>of</strong><strong>and</strong> anfree<strong>of</strong>3 years.Theagreement can beextendedbythemutualconsent<strong>of</strong> theOwners<strong>and</strong>TenantLease Deeddated July10, 2010Mr.M.Shanmugasundaram(PartyNo. 1orOwner)ScottsGarmentsLimited(PartyNo. 2orTenant)The building rented isfacingtowardsNaranapuram Village,Palladam MainRoad,Palladam436/2A,Door(po),No.2/785 C, 2/785 B-13334sqm3334Rent <strong>of</strong>`1,20,000/ /-(Effective fromJuly 2010 to June2011)Rent <strong>of</strong>`1,30,000/ /-(EffectiveJuly 20112012)fromto JuneRent <strong>of</strong>`1,40,000/ /-(Effective fromJuly 2012 to June2013)The term<strong>of</strong> theleasedeedisfor3yearsfrom July10, 2010.A sum<strong>of</strong>`18,00,000/ asrefundableinterest freeAdvance.LeaseAgreementdated July03, 2009P.Moorthi(“Lessor”)AroraFashionsLimitedL<strong>and</strong> bearing S.F. No262, Nallur Village,TirupurCoimbatoreTaluk,District2.00acres8104.57The Lessee shallpay the rent <strong>of</strong>`22,000/- everymonthfor theLease <strong>of</strong>the l<strong>and</strong>shallbeforthe115
Scotts Garments LimitedType <strong>of</strong>ArrangemeentLicensor/LessorLicensee/Lessee(“Lessee”)Property/Premisesadmeasuring 2 acres.AreaOrigiSq.mtnalUnitsRent/SecurityDepositfirst year. From2 nd year onwardsthe rent shall beincreased by 5%every year.Period <strong>of</strong>Agreementperiod <strong>of</strong>6 yearstillJuly03, 2015.Security Deposit:`7,50,000LeaseagreementdatedSeptember03, 2012B.D.P.Apparels Pvt.Ltd.(Lessor)ScottsGarmentsLimited(Lessee)Factory at Sy No.7/1,GummanahalliRoad,Byadgi8797.50meters8797.50metersThe Lessee shallpay factory rent<strong>of</strong> Rs.1,25,000 permonth + Taxesfromcommencementdate upto30/09/2013 <strong>and</strong>subsequentlyRs.1,50,000/- permonth +applicabletaxestill 30/09/ /2015Period <strong>of</strong>Leasefrom01/10/2012to30/09/2015The Lessee shallalso payRs.1,50,000 permonth +applicabletaxestowardsmachineriestaken on rentSecurity DepositRs.30,00,000/-Manufacturing ProcessOur manufacturing facilities receive orders directly from our customers. On receipt<strong>of</strong> the productionorder, a production plan is adoptedd to coordinate the manufacturing process <strong>and</strong> to ensure adherence todelivery schedules. Weplace orders for our rawmaterial requirements, which comprise <strong>of</strong> finishedfabric(made <strong>of</strong> natural fibers, such as cotton,), accessories <strong>and</strong> trims, such as fasteners, buttons, labels, <strong>and</strong>otherconsumables. We purchase the finished fabric <strong>and</strong> other raw materials froma variety <strong>of</strong> suppliers, some <strong>of</strong>which aredesignated by our customers. On receipt <strong>of</strong> the fabric <strong>and</strong> raw materials, our quality assuranceteam conducts a pre-production inspection. Following the approval <strong>of</strong> the quality assurance team, ourmanufacturing facilitycommences production, which involves cutting, sewing, finishing, washing <strong>and</strong>116
Scotts Garments Limitedironing. Each stage <strong>of</strong> production is monitored by our quality assurance team to ensure conformity withour strict quality, cost <strong>and</strong> deliveryrequirements. Cutting <strong>of</strong>the fabric requires a highh level <strong>of</strong> precision.To ensuree minimum wastage, automated cutting tools are used for pattern grading <strong>and</strong> marker making.We have also installedcomputerized design systems in some <strong>of</strong> our manufacturing facilities to improvelead times <strong>and</strong> productivity. Quality initiativesin the cutting room include pre-cut fabric checking <strong>and</strong>100% panel ticketing <strong>and</strong> checking. The stitchingprocess takes place in anassembly line, which comprises<strong>of</strong> different stitching machines, eachfor a specific purpose. Our manufacturing facilities are also equippedwith embroidery machines for the high-end apparel orders. We also have in house printing <strong>and</strong> dyeingfacilities for both woven <strong>and</strong> knitted<strong>garments</strong>. We perform a range <strong>of</strong> finishing processes on our <strong>garments</strong>using specialized equipment including thread checking, ironing, steam pressing, collar pressing,accessories attachmentt <strong>and</strong> folding prior to packaging <strong>and</strong> delivery to customers.117
Scotts Garments LimitedSteps Involved in Garment ManufacturingPROCESS FLOW CHARTFABRICRECEIVEDFABRICINSPECTION4 Point SystemFABRIC LAYED.MARKED ANDCUTCUTTINGDEPARTMENTSEWINGDEPARTMENTQUALITYINSPECTION OFSPREADING <strong>and</strong>CUTTING (AQL 2.5)NUMBERINGAND SORTINGCUTTING LOADED INTO PART SECTIONSCOLLARPREPARATIONFRONTS <strong>and</strong>BACKSPREPARATIONSLEEVESPREPARATIONIN-LINEQUALITY AUDITFOR ALLOPERATIONS.(AQL 2.5)INSPECT100%COLLARSINSPECT 100%FRONTS ANDBACKSPARTSASSEMBLYINSPECT100%SLEEVESBUTTONMARKINGANDATTACHINGRANDOMQUALITYAUDIT(AQL2.5)100%INSPECT 100%GARMENTSPACKINGALTERATIONCONTROL /RANDOMQUALITY AUDITIRONINGFINAL QUALITYAUDIT(AQL 2.5 / AQL4.0)118FINISHINGDEPARTMENT
Scotts Garments LimitedProcurement <strong>of</strong> fabricWe procure fabric based on the order, design <strong>and</strong> type <strong>of</strong> garment to be manufactured.We have a team <strong>of</strong>skilled pr<strong>of</strong>essionals who makes this assessment before purchasing the raw material from the suppliers.Presently, we source majority <strong>of</strong> the fabric requiredfrom fabric weaving plants located in<strong>and</strong> aroundTamilNadu <strong>and</strong> Maharashtra <strong>and</strong> remaining fabric is imported from Indonesia <strong>and</strong> China.Pattern Making <strong>and</strong> GradingWe utilize pattern making s<strong>of</strong>tware for creating the patterns according to the various sizes as per order details.These patterns <strong>and</strong> the marker plan are sent to the cutting department for cutting the fabric.Fabric Laying<strong>and</strong> CuttingThe fabric procured from the source <strong>of</strong> supply by themerch<strong>and</strong>iser is sent to the factory Manager for stitching.The fabric is first inspectedfor any fabric defects on the inspectionn table. The fabric rolls arethen spread on thecutting table manually orby the automatic spreading machine. The patterns cut on the pattern makingmachine are then placed on the spreadfabric layersaccording tothe marker plan. The fabric layers are thencut according to the marker plan with the straight knife cutting machine. The b<strong>and</strong> knife is used for cutting thesmaller parts. The cut fabric is then bundled according to the sizess <strong>and</strong> sent forstitching.SewingIn the sewingsection themachines are set according to the machine layout <strong>and</strong> operation bulletin. Thebundles <strong>of</strong> the fabrics fromcutting section are fed in the stitching lines for sewing where each machine ish<strong>and</strong>led by a sewing operator. The fabric is stitched as initial assembly <strong>and</strong> then the final assembly. There aren-line checkers <strong>and</strong> line supervisors in the stitching department. The completely stitched fabric is then sent forthread cutting<strong>and</strong> end-linee checking <strong>and</strong> finally sentin the finishing department.FinishingIn the finishing department, <strong>garments</strong> from the sewing are pressed by the steam irons <strong>and</strong>then these are sentfor the final checking. In the finishing department the other tasks such as inserting Hang Tag, Price labels, <strong>and</strong>Hangers insertion are carried out. Thenthe <strong>garments</strong> are packedin the polythene bags <strong>and</strong> are packedin thecartons according to the sets <strong>of</strong> sizes.InspectionThe final inspection <strong>and</strong> quality audits are carried out in the finishing section. In the final inspection is done byfinal checkers<strong>and</strong> QualityAudit is done by the Quality Controller (Q.C.). The rejected pieces are then sentback to the stitching for alteration.PackingThe <strong>garments</strong>are to be packed according to the ratio <strong>of</strong> the given sizes. The <strong>garments</strong>are packed in thepolythene bags <strong>and</strong> are packed in the cartons according to the setss <strong>of</strong> sizes.119
Scotts Garments LimitedQuality CertificationWehave obtained certain quality certificates, detailed hereunder:CertificateCertificateNo.RegistrationNo.Issue Date <strong>of</strong>CertificateIssuing bodyDescriptionValidity <strong>of</strong>CertificateTextileCertification– Organic<strong>Exchange</strong> 100St<strong>and</strong>ard (OE100)CU808682OE100-01.2013CU 808682 30/01/201328/12/2013Control UnionCertificationsCertificate <strong>of</strong> Compliance forOrganic<strong>Exchange</strong> 1000St<strong>and</strong>ard (OE 100) Version 1.3TextileCertificationGlobalOrganicTextileSt<strong>and</strong>ard(GOTS-IN)CU808682GOTS-01.2013CU 808682 02/02/201328/12/2013Control UnionCertifications“GlobalOrganicTextileeSt<strong>and</strong>ard – GOTS” st<strong>and</strong>ardssfor the processing <strong>of</strong> fibresfromcertifiedorganicagriculture version 3.0 March20111Quality Control Process (QC):Wehave separate quality control department with uniform procedure across alll our factory units to achieve thesuperior quality<strong>of</strong> product. The QC process ensures that the required quality is achieved at each stage <strong>of</strong>manufacturingfrom fabric inspection t<strong>of</strong>inished <strong>garments</strong>. The procedure on quality check can be brieflyexplained below:Fabric & Trims Inspection:The fabrics received are checked by using the fabric checking machine or Table. Any defects in the fabric areimmediately displayed under st<strong>and</strong>ard procedure as “ Acceptable” <strong>and</strong> “Not Acceptable”. In case the fabric rolls/ bales gets rejected due to defects, shadevariation orshrinkage variation morethan allowed limits it is storedin the specified rack marked as “Rejected Items”.‘Goods Inspection Note’ is raised for the passed items. The fabric is then stored with the proper IdentificationTagcontaining P.O No., date <strong>of</strong> receipt, Delivery Note No., Quantity Received, Type <strong>of</strong> Fabric <strong>and</strong> Supplierdetails.The Trims items are checkedfor quantitywhether it is as per theorder, visual check for shade, colour,Type,Style etc as per the specification sheet. The ‘Trim Card’ is made onsets which is approved by Marketing Staff<strong>and</strong>the same is issued to user section. If there are variations with specification, appropriate action will betakenimmediately.120
Scotts Garments LimitedQuality Control in Sewing Line:There is In-Linechecking <strong>of</strong> all the operations by R<strong>and</strong>om Sampling method <strong>and</strong>additional care is taken for thecritical operations. There are two charts done namely “Attribute Control Charts”for visual defects <strong>and</strong> “VariableControl Charts”for measurements. These charts are closely monitored at regular intervals <strong>and</strong> necessarycorrection actionis taken immediately.Quality Checkson Garments:Alll the Garments are checkedfor the visual defects related to stitching, fabric, trims etc. The rejected garment arerectified immediately or attached with Follow up Cardthat details,the nature <strong>of</strong> defect <strong>and</strong> the remedial actionto be taken. Record is maintained for the percentage <strong>of</strong> <strong>garments</strong> sent for alteration / rectification <strong>and</strong> similarlythere is separatee record for the percentagee <strong>of</strong> garment that underwent spot washing.The measurement check is done on at least 10% <strong>of</strong> the <strong>garments</strong> to ensure that itis as per the measurement chartgiven by the buyer. Garment sent for alteration/rectification is tracked by a follow–up card <strong>and</strong> record ismaintained for the alterationpercentage.Garment packing is done inaccordance with the packing st<strong>and</strong>ard duly signed by the merch<strong>and</strong>iser / buyerrepresentatives.Presentationn inspection isconducted before the <strong>garments</strong> are put into poly bags. Price Tags, BarCode tags, <strong>and</strong> other such tags is stored in separate pigeon hole shelf / box with dividers toavoid mix up. Thefirst garment packed is approved by factory manager.ManpowerOur employee strength as on30/09/2012 was 12,504. The department wise strength <strong>of</strong> our company is as under:BANGALORE UNITSSr. No1.ParticularsAdministrationn & Human Resource2. Accounts & finance3. IT4. Logistics5. Merch<strong>and</strong>ising6. Design7. Production8. Quality Control9. Sampling10. Sewing machine operator & tailor11. IED12. OthersTotalTIRUPUR UNITSSr. No1.ParticularsAdministrationn & Human Resource2. Accounts & Finance3. IT4. Logistics5. Merch<strong>and</strong>ising6. Design7. ProductionNo. <strong>of</strong> employees80271221392646202152853774184279544No. <strong>of</strong> employees29266544101957121
Scotts Garments LimitedTIRUPUR UNITSSr. NoParticulars8. Quality Control9. Sampling10. Sewing machine operator & tailor11. IED12. OthersTotalNo. <strong>of</strong> employees9210580151862960We propose to add the following staff after expansion <strong>and</strong> shall take the necessary stepss for recruitment <strong>of</strong>additional manpower.Sr. noCategory1. Labour2. Factory Supervisor <strong>and</strong> Technical Staff3. AdministrativeStaffTotalNo. <strong>of</strong> employees3,352179263,557SWOT AnalysisStrengths• Talent pool <strong>and</strong> design capabilities• Availability <strong>of</strong> relatively inexpensive <strong>and</strong> skilledwork force• Repeat orders from the customers on regular basis• Total solutions to Customers bothwoven <strong>and</strong> knits<strong>garments</strong>Opportunities• Thrust by the government to promote textile sectoras it is one <strong>of</strong> the largest employment generator forthe economy.• Potentialto add capacity in the existing facility.• Increaseddisposableincome inthe h<strong>and</strong>s <strong>of</strong>consumerRecruitmentt strategy, training programs & retention strategyWe have a pr<strong>of</strong>essional set-up <strong>and</strong> a competent human resources division. We have a policy to felicitate ourworkers for their dedication <strong>and</strong> commitment towards the work. We constantly attempt to devise employee-friendly policies to retain key management personnel <strong>and</strong> motivate our workforce.Weakness• Dependency oneconomic growth• Lack <strong>of</strong> presence in entire textile value chain• Lack <strong>of</strong> Domestic presence• Labour intensive industryThreats• Industry is prone to change in governmentpolicies, any material changes in the duty mayadversely impact our financials.• The raw material prices are prone topricefluctuations which may adversely impact ourpr<strong>of</strong>itability <strong>and</strong>financials.• Competition from large as well as smallorganized sector.INSURANCEThe company has adequately insured its plant <strong>and</strong> machinery at thevarious locations against fire,burglary etc.122
Scotts Garments LimitedThe following descriptionis a summary <strong>of</strong> the relevant regulations <strong>and</strong> policies as prescribed by the central/ stategovernments that are applicable to our Company in <strong>India</strong>. The information detailed in this chapter has been obtainedfrom publications available in the public domain. The regulationsset out beloware not exhaustive, <strong>and</strong> are onlyintended toprovide general information to the investors <strong>and</strong> are neither designedd nor intended to be a substitute forpr<strong>of</strong>essional legal advice.The Companies Act, 1956The Act deals with laws relating to companies <strong>and</strong> certainother associations. It was enacted by theparliament in 1956. The Companies Act primarily regulates the formation, financing, functioning <strong>and</strong>winding up <strong>of</strong> companies. The Act prescribes regulatory mechanism regarding all relevant aspectsincludingorganizational, financial <strong>and</strong> managerial aspects <strong>of</strong> companies. Regulation <strong>of</strong> the financial <strong>and</strong>management aspects constitutes the main focus <strong>of</strong> the Act. In the functioning <strong>of</strong> the corporate sector,although freedom <strong>of</strong> companies isimportant, protection <strong>of</strong>the investors <strong>and</strong> shareholders, on whosefunds they flourish, is equally important. The Companies Act plays the balancing rolebetween these twocompetingfactors, namely, management autonomy <strong>and</strong> investor protection.Regulation <strong>of</strong> ForeignInvestment in <strong>India</strong>Foreign investment in <strong>India</strong> is primarily governed by the provisions <strong>of</strong> theForeign <strong>Exchange</strong> ManagementAct, 1999 (“FEMA”) <strong>and</strong> the rules <strong>and</strong> regulations promulgated there under. The RBI, in exercisee <strong>of</strong> itspowers under FEMA, has notified the Foreign <strong>Exchange</strong> Management (Transfer or Issue <strong>of</strong> Security by aPerson Resident Outside <strong>India</strong>) Regulations, 2000 (“FEMARegulations”) which prohibit, restrict <strong>and</strong>regulate, transfer or issue <strong>of</strong> securities, to a person resident outside <strong>India</strong>. Pursuant to the FEMARegulations, no prior consent or approval is required from the RBI for foreign direct investment under the“automatic route” within the specified sectoral caps prescribed for various industrial sectors. In respect <strong>of</strong>all industries not specified under the automatic route, <strong>and</strong>in respect <strong>of</strong> investments in excess <strong>of</strong> thespecified sectoral limits under the automatic route, approval for such investment may be requiredfromthe FIPB <strong>and</strong>/or the RBI. Further,FIIs may purchase shares <strong>and</strong> convertible debentures <strong>of</strong> an <strong>India</strong>ncompany under the portfolio investment scheme through registeredbrokers onrecognized stockexchangesin <strong>India</strong>. Regulation 1 (4) <strong>of</strong> Schedule II <strong>of</strong> theFEMA Regulations provides that the totalholding by each FII or SEBI approved sub-account <strong>of</strong> an FII shall not exceed 10% <strong>of</strong> the total paid-upequity capital <strong>of</strong> an <strong>India</strong>n company or 10% <strong>of</strong> the paid-up value <strong>of</strong> each series <strong>of</strong> convertible debenturesissued byan <strong>India</strong>n company <strong>and</strong> the total holdings <strong>of</strong> all FIIs <strong>and</strong> sub accounts <strong>of</strong> FIIs added togethershall not exceed 24%<strong>of</strong> the paid-up equity capital or paid-up value<strong>of</strong> each series <strong>of</strong> convertibledebentures. However, this limit <strong>of</strong> 24% may be increased upto the statutory ceiling as applicable, by the<strong>India</strong>n company concerned passinga resolution by its board <strong>of</strong> directors followed by the passing <strong>of</strong> aspecial resolution to the same effectby its shareholders.Environment (Protection) Act, 1986REGULATIONS AND POLICIESThe Environment (Protection) Act, 1986 was enacted as a general legislation to safeguard the environmentfrom all sources <strong>of</strong> pollution by enabling coordination <strong>of</strong> theactivities <strong>of</strong> the various regulatory agenciesconcerned, to enable creation <strong>of</strong> an authority with powers for environmental protection, regulation <strong>of</strong>discharge<strong>of</strong> environmental pollutants etc. The purpose <strong>of</strong> the Act is to act as an “umbrella” legislationdesigned to provide a frame work for Central government co-ordination <strong>of</strong> the activities <strong>of</strong> various central<strong>and</strong> state authorities established under previouslaws, such as Water Act & Air Act. Itincludes water, air<strong>and</strong> l<strong>and</strong> <strong>and</strong> the inter-relationships which existamong water, air <strong>and</strong> l<strong>and</strong>, <strong>and</strong> human beings <strong>and</strong>otherliving creatures, plants, micro-organisms <strong>and</strong> property.123
Scotts Garments LimitedConsent for operation<strong>of</strong> the plantunder the Air (Prevention <strong>and</strong> Control <strong>of</strong> Pollution) Act 19811 (“AirAct”)The Air (Prevention <strong>and</strong> Control <strong>of</strong> Pollution) Act 1981 has been enactedto provide for the prevention,control <strong>and</strong> abatementt <strong>of</strong> air pollution. The statute was enacted with a view to protect the environment<strong>and</strong> surroundings from any adverse effects <strong>of</strong>the pollutants that mayemanate from any factory ormanufacturing operation or activity. It lays down the limits with regard to emissions <strong>and</strong> pollutants thatare a direct result <strong>of</strong> any operation or activity. Periodic checkson the factories are m<strong>and</strong>ated in the form <strong>of</strong>yearly approvals <strong>and</strong> consents fromthe corresponding Pollution Control <strong>Board</strong>s in the state.Consent for operation<strong>of</strong> the plant under the Water (Prevention <strong>and</strong> Control <strong>of</strong> Pollution) Act, 1974(“Water Act”)The Water Act was enacted in 1974in order to provide for the preventionn <strong>and</strong> control<strong>of</strong> water pollutionby factories <strong>and</strong> manufacturing industries <strong>and</strong> for maintaining or restoring the wholesomeness <strong>of</strong> water.In respectto an Industrial Undertaking it applies to the (i) Occupier (theowner <strong>and</strong> management<strong>of</strong> theundertaking) (ii) Outlet (iii) Pollution <strong>and</strong> (iv) Trade effluents. The Act requires that approvals be obtainedfrom the corresponding Pollution Control <strong>Board</strong>s in the state.Water (Prevention <strong>and</strong>Control <strong>of</strong> Pollution) Cess Act, 1977The Water Cess Act is a legislation providing for the levy <strong>and</strong> collection <strong>of</strong> a cess on local authorities <strong>and</strong>industriess based on the consumption <strong>of</strong> water by such local authorities<strong>and</strong> industries so as to enableimplementation <strong>of</strong> the Water Act bythe regulatory agencies concerned.Trade Marks Act, 19999The <strong>India</strong>n law on trademarks is enshrined in the Trade Marks Act, 1999. Under the existing legislation, atrademarkis a mark used in relationto goods soas to indicate a connection in the course <strong>of</strong> trade betweenthe goods<strong>and</strong> some person having the right as proprietor to use the mark.A ‘mark’ may consist <strong>of</strong> a wordor invented word, signature, device, letter, numeral, br<strong>and</strong>, heading, label, name written in a particularstyle <strong>and</strong> so forth. Thetrademark once applied for, is advertised in the trademarks journal, oppositions, ifany are invited <strong>and</strong> after satisfactory adjudications <strong>of</strong> the same, a certificate <strong>of</strong> registration is issued. Theright to use the mark can be exercised either by the registeredproprietor or a registered user. The presentterm <strong>of</strong> registration <strong>of</strong> a trademark is ten years, which may be renewed for similar periods on payment <strong>of</strong>prescribedrenewal fee.Copyright Act, 1957The Copyright Act, 1957 came into effect from January 1958. Copyright is an exclusive right. The statutorydefinitionn <strong>of</strong> Copyright is the exclusive right todo or authorizes others to do certainacts in relation toLiterary, dramatic or musical works, Artistic work Cinematograph film; <strong>and</strong> Sound recording. Thepurpose <strong>of</strong> recognizingg & protecting the copyright <strong>of</strong> an author is to statutorily protectt his work & inspirehim to exercise his creative faculties. Copyright is granted for a specific period <strong>of</strong> time. Whether anact isan infringement or not would depend on the fact whether copyright is subsisting in the work or not. Incase the copyright has expired, the work falls inthe public domain & anyact <strong>of</strong> reproduction <strong>of</strong> theworkby any person other than then the author would not amount to infringement.Income-tax Act, 1961The Income Tax Act, 1961 deals with the taxation <strong>of</strong> individuals, corporates, partnership firms <strong>and</strong> others.As per theprovisions <strong>of</strong> this Act therates at which they are required to pay tax is calculated on the incomedeclared by them or assessed by the authorities, after availing the deductions <strong>and</strong> concessions accordedunder theAct. The maintenance <strong>of</strong>Books <strong>of</strong> Accounts <strong>and</strong> relevant supporting documents <strong>and</strong> registersare m<strong>and</strong>atory under the Act. Filing<strong>of</strong> returns <strong>of</strong>Income is compulsory forall assesses.124
Scotts Garments LimitedService TaxChapter V <strong>of</strong> the Finance Act 1994 (as amended), <strong>and</strong> Chapter V-A <strong>of</strong> theFinance Act 2003 requires thatwhere provision <strong>of</strong> certain listed services, whole taxable services exceeds ` 400,000, a service tax withrespect tothe same must be paid. Every personwho is liableto pay service tax must register himself forthe sameCentral Sales Tax Act (CST)The mainobject <strong>of</strong> this act is to formulate principles for determining (a)when a saleor purchasetakesplace in the course <strong>of</strong> trade or commerce (b) When a sale or purchase takesplace outside a State (c) When asale or purchase takes place in the course <strong>of</strong> imports intoor export from <strong>India</strong>, toprovide forlevy,collection<strong>and</strong> distribution <strong>of</strong> taxes on sales <strong>of</strong> goods in the course <strong>of</strong> tradeor commerce, to declare certaingoods to be <strong>of</strong> special importance trade or commerce <strong>and</strong> specify the restrictions <strong>and</strong> conditions to whichState lawsimposing taxes on sale or purchase <strong>of</strong> such goods <strong>of</strong> specialimportance (called as declaredgoods) shall be subject. CST Act imposes thetax on inter state saless <strong>and</strong> states the principles <strong>and</strong>restrictions as per the powers conferred by Constitution.ElectricityAct, 2003The Electricity Act, 2003 has been recently introduced with a view to rationalize electricity tariff, <strong>and</strong> tobring about transparent policies in the sector. The Act provides for private sector participation ingeneration, transmission <strong>and</strong> distribution <strong>of</strong> electricity, <strong>and</strong> provides forthe corporatization <strong>of</strong> the stateelectricityboards. The related Electricity Regulatory Commissions Act, 1998 has been enacted with a viewto confer on these statutory Commissions the responsibility <strong>of</strong>regulating this sector.Value Added Tax (“VAT”)VAT is a system <strong>of</strong> multi-point levyon each <strong>of</strong> the purchases in the supplychain with the facility <strong>of</strong> set-<strong>of</strong>finput tax on sales whereby tax is paid at the stage <strong>of</strong> purchase<strong>of</strong> goods by a trader <strong>and</strong> on purchase <strong>of</strong> rawmaterials by a manufacturer. VAT is based on the value addition <strong>of</strong> goods, <strong>and</strong> the related VAT liability <strong>of</strong>the dealeris calculated by deducting input taxcredit for tax collected on the sales during a particularperiod. VAT is a consumption tax applicable to all commercial activities involving the production <strong>and</strong>distribution <strong>of</strong> goods <strong>and</strong> the provisions <strong>of</strong> services, <strong>and</strong> each state that has introduced VAT has its ownVAT Act,under which, persons liable to pay VAT must register <strong>and</strong> obtain a registration number fromSales Tax Officer <strong>of</strong> therespective State.Approvals from Local AuthoritiesSetting up<strong>of</strong> a Factory or Manufacturing/Housing unit entails the requisite Planning approvalsto beobtained from the relevant Local Panchayat(s) outside the city limits <strong>and</strong> appropriate MetropolitanDevelopment Authority within thecity limits. Consents from the state Pollution Control <strong>Board</strong>( (s), therelevant state Electricity <strong>Board</strong>(s), the State Excise Authorities, Sales Tax, are required to be obtainedbefore commencing thebuilding <strong>of</strong> a factory or the start <strong>of</strong> manufacturingoperations.Industrial (Development <strong>and</strong> Regulation) Act, 1955The Industrial (Development <strong>and</strong> Regulation) Act, 1951 hasbeen liberalized under the New IndustrialPolicy dated July 24, 1991, <strong>and</strong> all industrial undertakings are exempt from licensingexcept for certainindustriess such as distillation <strong>and</strong>brewing <strong>of</strong>alcoholic drinks, cigars <strong>and</strong> cigarettes <strong>of</strong> tobacco <strong>and</strong>manufactured tobaccoo substitutes, all types <strong>of</strong> electronic aerospace <strong>and</strong>defence equipment, industrialexplosivess including detonating fuses, safetyfuses, gunpowder, nitrocellulose<strong>and</strong> matches <strong>and</strong>hazardous chemicals <strong>and</strong> those reserved for the small scalesector. An industrial undertaking, which is125
exempt from licensing, is requiredto file an Industrial Entrepreneurs Memor<strong>and</strong>umm (“IEM”) with theSecretariat for Industrial Assistance, Department <strong>of</strong> Industrial Policy<strong>and</strong> Promotion, Ministry <strong>of</strong>Commerce <strong>and</strong> Industry, Government <strong>of</strong> <strong>India</strong>, <strong>and</strong> no further approvals are required.Foreign Trade (Development <strong>and</strong> Regulation) Act, 1992This statute seeks to increase foreign trade by regulating the imports <strong>and</strong>exports to <strong>and</strong> from <strong>India</strong>. Thislegislationread with the <strong>India</strong>n Foreign Trade Policy provides that no export or import can be made by aperson orcompany without an importer exporter code number unless such person or company isspecifically exempt. Anapplicationfor an importer exporter code number has to be made to the <strong>of</strong>fice <strong>of</strong>the Joint Director General <strong>of</strong> Foreign Trade, Ministry <strong>of</strong> Commerce. An importer-exporter code numberallotted toan applicantis valid for all its branches, divisions, units <strong>and</strong> factories.The Factories Act, 1948The Factories Act, 1948 is a social legislation which has beenenacted to regulate the occupational safety,health <strong>and</strong> welfare <strong>of</strong>workers at work places. This legislation is being enforced by the Governmentthrough <strong>of</strong>ficers appointed under the Act i.e. Inspectors <strong>of</strong> Factories, Deputy Chief Inspectors <strong>of</strong> Factorieswho work under thecontrol <strong>of</strong> the Chief Inspector <strong>of</strong> Factories <strong>and</strong> overall control <strong>of</strong> the LabourCommissioner. The ambit <strong>of</strong> operation <strong>of</strong> this Act includes the approval <strong>of</strong> Factory Building Plans beforeconstruction/extension, investigation <strong>of</strong> complaints with regard to health, safety, welfare <strong>and</strong> workingconditions <strong>of</strong> the workers employedin a factory,the maintenance <strong>of</strong> registers <strong>and</strong> the submission <strong>of</strong> yearly<strong>and</strong> half-yearly returns.Payment <strong>of</strong> Wages Act, 1936 (“Wages Act”)Wages Act applies to the persons employed in the factories <strong>and</strong> to personss employed inindustrial orotherestablishments where the monthly wages payable to such persons is less than ` 10,000/-. The Act conferson the person(s) responsible for payment <strong>of</strong> wages certain obligations with respect to the maintenance <strong>of</strong>registers <strong>and</strong> the display in such factory/establishment, <strong>of</strong> the abstracts <strong>of</strong> this Act <strong>and</strong>Rules madethereunder.The Minimum Wages Act, 1948 (“Minimum Wages Act”)Minimumm Wages Act was enacted to provide forminimum wages in certain employments. Under this Act,the Central <strong>and</strong> the State Governments are the authorities tostipulate thescheduled employment <strong>and</strong> t<strong>of</strong>ix minimum wages. The Act contains list <strong>of</strong> Agricultural <strong>and</strong> Non Agricultural employment where theprescribedminimum rate <strong>of</strong> wagesis to be paidto the workers. The minimum wagesare calculated <strong>and</strong>fixed based on the basic requirement <strong>of</strong> food, clothing, housing required byan average <strong>India</strong>n adult.Employees (ProvidentFund <strong>and</strong> Miscellaneouss Provisions) Act, 1952Scotts Garments LimitedThe Act is applicableto factoriesemploying more than 20 employees<strong>and</strong> may also apply tosuchestablishments <strong>and</strong> industrial undertakings as notified by the Government from time to time. All theestablishments under the Act are required to be registered with the Provident Fund Commissionerss <strong>of</strong> theState. Also, in accordance with the provisions <strong>of</strong> the Act theemployers are required to contribute to theEmployees’ ProvidentFund the prescribed percentage <strong>of</strong> the basic wages, dearness allowances <strong>and</strong>remainingallowance (if any) payable to the employees. The employee shall also be required to make theequal contribution to the fund. As per the provision <strong>of</strong> the Act, employers are to contribute 12% <strong>of</strong> thebasic wages, dearnesss allowances <strong>and</strong> remaining allowances (if any) payable for thetime being to the126
Scotts Garments Limitedemployees. A monthlyreturn in Form 12 A is required to be submitted to the commissioner in addition tothe maintenance <strong>of</strong> registers by the employers.Payment <strong>of</strong> Gratuity Act, 1972A terminal lump sum benefit paid to a worker when he or sheleaves employment afterhaving worked forthe employer for a prescribed minimum number<strong>of</strong> years is referred to as “gratuity”. The provisionss <strong>of</strong> theAct are applicable toall the factories. The Act provides that within 30 days <strong>of</strong> opening <strong>of</strong> theestablishment, it has to notify the controlling authority in Form A <strong>and</strong> thereafter whenever there is anychange inthe name, address or change in the nature <strong>of</strong> the business <strong>of</strong> theestablishment a notice inFormB has to be filed with the authority. The Employer is also required to display an abstract <strong>of</strong> the Act <strong>and</strong> therules made there-under in Form U to be affixed at the or near the main entrance. Further, every employerhas to obtain insurance for his liability towards gratuity payment to be made under Payment <strong>of</strong> GratuityAct 1972, with Life Insurance Corporation or anyother approved insurance fund.Payment <strong>of</strong> Bonus Act, 1965The Payment <strong>of</strong> BonusAct, 1965 isapplicable to every establishment employing 20 or more employees.The said Act providesfor payment <strong>of</strong> the minimum bonus to the employees specified under the Act. Itfurther requires the maintenance <strong>of</strong>certain books <strong>and</strong> registers such as the register showing computation<strong>of</strong> the allocable surplus; the register showing the set on & set <strong>of</strong>f <strong>of</strong> the allocable surplus <strong>and</strong> registershowing the details <strong>of</strong> the amount <strong>of</strong> Bonus due to the employees. Further it also require for thesubmission <strong>of</strong> Annual Return in theprescribed form (FORM D) to be submitted by the employer within 30days <strong>of</strong> payment <strong>of</strong> thebonus to theInspector appointed under the Act.Contract Labour (Regulation <strong>and</strong> Abolition) Act, 1970The purpose <strong>of</strong> Contract Labour (Regulation <strong>and</strong> Abolition) Act 1970, is to regulate the employment <strong>and</strong>protect the interests <strong>of</strong> the workers who arehired on the basis <strong>of</strong> individual contracts in certainestablishments. In theevent that any activity is outsourced, <strong>and</strong> is carried out by labourers hired oncontractual basis, thencompliance with the Contract Labour (Regulation<strong>and</strong> Abolition) Act, includingregistration will be necessary <strong>and</strong> the principal employer will be held liable in the event <strong>of</strong> default by thecontractorr to make requisite payments towards provident fund etc.Employment (St<strong>and</strong>ing Orders) Act, 1950The Industrial Employment (st<strong>and</strong>ing orders) Act requiresemployers in industrialestablishments t<strong>of</strong>ormally define conditions <strong>of</strong> employment under them. It applies to every industrial establishmentwherein 100 (reduced to 50 by the Central Government in respect <strong>of</strong> the establishments for which itis theAppropriate Government) or moreworkmen are employed. The Act calls for the submission <strong>of</strong> suchconditions <strong>of</strong> work to the relevant authorities fortheir approval.The Equal Remuneration Act, 1976(“Equal Remuneration Act”) <strong>and</strong> Equal Remuneration Rules, 1976The Constitution <strong>of</strong> <strong>India</strong> provides for equal payfor equal work for both men <strong>and</strong> women. To giveeffectto this provision, theEqual Remuneration Act, 1976 was implemented. The Actprovides that nodiscrimination shall be shown on the basis <strong>of</strong> sex for performing similar works <strong>and</strong> that equalremuneration shall be paid to both men <strong>and</strong> women when thesame work is being done.127
Scotts Garments LimitedEmployees State Insurance Act, 1948All the establishmentss to which the Employees State Insurance (ESI) Act applies are requiredto beregisteredunder the Act with theEmployees State Insurance Corporation. The Act applies tothoseestablishments where 20 or more persons are employed. The Act requires all the employees <strong>of</strong> the factories<strong>and</strong> establishments to which the Act applies to be insured in the manner provided under the Act. Further,employer <strong>and</strong> employees both are required to make contribution tothe fund. The return <strong>of</strong> thecontribution made is required to be filed with theESI department.The Maternity BenefitAct, 1961 (“Maternity Act”)The purpose <strong>of</strong> Maternity Act 1961 is to regulate the employment <strong>of</strong> pregnant women<strong>and</strong> to ensure thatthey get paid leave for a specifiedperiod during <strong>and</strong> aftertheir pregnancy. It provides, inter-alia forpayment <strong>of</strong> maternity benefits, medical bonus <strong>and</strong> enacts prohibition ondismissal, reduction <strong>of</strong> wagespaid to pregnant women etc.Registrations under the applicableShops & Commercial Establishmentss Acts <strong>of</strong> the respective States inwhich our Company has an established place <strong>of</strong> business/ <strong>of</strong>fice (“ShopsAct”)The Shops Act provides for the regulation <strong>of</strong> conditions <strong>of</strong>work in shops, commercial establishments,restaurants, theatres <strong>and</strong> other establishments. The Act is enforced by theChief Inspector <strong>of</strong> Shops (CIS)<strong>and</strong> various inspectorss under the supervision <strong>and</strong> control <strong>of</strong> Deputy/Assistant LabourCommissioners <strong>of</strong>the concerned District, who in turn functions under the supervision <strong>of</strong> Labour Commissioner.128
Scotts Garments LimitedHISTORY AND OTHER CORPORATE MATTERSWe were formed on 01/12/1992 under <strong>India</strong>n Partnership Act, 1932 as a Scotts Garments, with Mr. NaseerAhmed, Mrs. Refath Jehan Begum <strong>and</strong> Mr. Saifulla Sayed as the partners. In January, 2002 Mr. SaifullaSayed resigned from the partnership firm <strong>and</strong>the other partners continued the partnership firm. Thepartners <strong>of</strong> the firm decided that for furtherancee <strong>of</strong> business the constitution should be a Private LimitedCompany<strong>and</strong> accordingly incorporated Scotts Garments Pvt. Ltd. On 01/ /03/2002 withthe main object toacquire the business <strong>of</strong> partnership firm <strong>and</strong> continue thepartnershipp business <strong>of</strong> manufacturer <strong>and</strong>exporter. A takeover agreement was executed between Scotts Garments <strong>and</strong> ScottsGarments PrivateLimited on 01/03/2002 pursuantto which the partnership deed was dissolvedd with effectfrom05/04/2002. Subsequently, we commenced ourbusiness activity with the manufacturing <strong>and</strong> export <strong>of</strong>Ready Made Garments.With a view to consolidate business, Scotts Clothing Private Limited, a company incorporated on12/04/2004, in the business <strong>of</strong> manufacture <strong>of</strong> knitted <strong>garments</strong>, was amalgamated with our company,with effect from 01/04/2006. Our Company was convertedto a <strong>limited</strong> company on 19/06/2007. T<strong>of</strong>urther strengthen the business, Arora Fashions Ltd, a company incorporated on 01/01/1991, into ReadyMade Garments having manufacturing facilities at Tirupur, became a wholly owned subsidiaryas on01/02/2008 <strong>and</strong> subsequently was amalgamatedwith SGL pursuant to the approval <strong>of</strong> HonourableHighCourt <strong>of</strong> Karnataka vide its order dated 6 th February, 2010.Major events in the History <strong>of</strong> the Company:YearEvent1992 Scotts Garments incorporated as a partnership firmon 1 st December, 1992, withNaseer Ahmed, Refath Jehan Begum <strong>and</strong> Saifulla Sayed as partners.1994 Commencemeent <strong>of</strong> business in partnership concern.2002 Incorporation<strong>of</strong> Scotts Garments Private Limited forcontinuing the business <strong>of</strong> thepartnership firm.2004 Allotment <strong>of</strong> the l<strong>and</strong> at 481 A, Peenya, by KIADB.2004 Incorporation<strong>of</strong> Scotts Clothing Private Limited inApril 2004, to commence themanufacturingfacility for knitted <strong>garments</strong> at Tirupur.2004 Acquired 99.80% stake in Pedigree Construction Private Limited by virtue <strong>of</strong> whichitbecame subsidiary <strong>of</strong> theCompany.2006 - Commenced commercial operations from the new facility constructed on plot 481A, Peenya, Bangalore.- Application made to Hon’ ble High Court for the merger <strong>of</strong> Scotts Clothing PrivateLimited with Scotts Garments Private Limited.- Cessation <strong>of</strong> Pedigree Construction Private Limited as subsidiary2007 - Sanction <strong>of</strong> the Hon’ble High Court <strong>of</strong> Karnataka approving the merger <strong>of</strong> ScottsClothing Private Limited with Scotts Garments Private Limited.- Conversion <strong>of</strong> the company to a <strong>limited</strong> company.2008 - Acquisition <strong>of</strong> Arora Fashions Ltd, a Company having its registered <strong>of</strong>fice atMumbai <strong>and</strong>into manufacturing <strong>of</strong> knitted Ready Made Garments.- Filing <strong>of</strong> scheme <strong>of</strong> amalgamation at Hon’ble High Court <strong>of</strong> Bombay <strong>and</strong> Hon’bleHigh Court <strong>of</strong> Karnataka, Bangalore2009 - Sanction byHon’ble High Court <strong>of</strong> Bombayapproving the schemee <strong>of</strong>amalgamation between Arora Fashionss Ltd with Scotts Garments Ltd.2010 - Sanction byHon’ble High Court<strong>of</strong> Karnataka approving schemee <strong>of</strong>amalgamation between Arora Fashionss Ltd with Scotts Garments Ltd.129
YearEvent2010 - Signed a tripartite MOUbetween Our Company, Bombay Rayon FashionsLimited <strong>and</strong> the Government <strong>of</strong> Karnataka.2011 - Hon’ble Tamil Nadu High Court order leading to temporarysuspension <strong>of</strong> aprinting & dyeing unit at Tirupur- Commencement <strong>of</strong> construction <strong>of</strong> factory unit at Doddaballapur- Recommencement <strong>of</strong> the printing & dyeing unit which was suspended- Expansion <strong>of</strong>production facilities at Kolar by setting up new units2012 - Entered intoShare Subscription Agreement with Kagal Industrial TextileTechnology Park (P) Ltd for allotment <strong>of</strong> l<strong>and</strong> for setting up knitting <strong>and</strong> fabricprocessing unit at Kagal inKolhapur, Maharashtra- Setting up <strong>of</strong>additional garment manufacturing unit at Bagepally, Karnataka- CARE assigns ‘BBB’ rating to long term bank facilities amounting to ` 229.70crores <strong>and</strong> ‘A3+’ rating toshort term bank facilities amounting to` 227.40 crores.- Canara BankVenture Capital Fund inits status <strong>and</strong> as Trusteee <strong>and</strong> InvestmentManager <strong>of</strong>Emerging <strong>India</strong> Growth Fund invested ` 20 crores under Pre-IPOplacementMain Objects <strong>of</strong> the Company:1. To acquire the existing partnership business <strong>of</strong> “SCOTTS GARMENTS”, a partnership firm carryingon thebusiness <strong>of</strong>manufacture<strong>and</strong> export <strong>of</strong> Ready Made Garments, with its goodwill, all runningcontracts, licenses, permits, all its assets <strong>and</strong> liabilities.2. To carry on the business <strong>of</strong> manufacturers,importers <strong>and</strong> exporters,wholesale <strong>and</strong> retail dealers <strong>of</strong><strong>and</strong> in mens, womens <strong>and</strong> childrens clothing <strong>and</strong> wearing apparel <strong>of</strong> everykind, nature <strong>and</strong>description including shirts, bush-shirts, pyjama suits, vests, underwears, suits , foundation <strong>garments</strong>for ladies dresses, brasseries, maternity belts, knee caps, coats, panties,nighties <strong>and</strong>so on.3. To carry on the business <strong>of</strong> manufacturers,importers <strong>and</strong> exporters,wholesale <strong>and</strong> retail dealers <strong>of</strong><strong>and</strong> inhosiery goods <strong>of</strong> every kind, nature <strong>and</strong> description for men,women <strong>and</strong>children includingvests,underwear, socks, stockings, sweaters, laces <strong>and</strong> so on <strong>and</strong> <strong>of</strong> all or anything which is used inhosiery goods.4. To carry on all or any <strong>of</strong> the business <strong>of</strong> dealers <strong>and</strong> manufacturers <strong>of</strong> all kinds <strong>of</strong> carpets, durries,mats, rugs, namdas, blankets, shawls, tweeds, linens, flannels <strong>and</strong> all other articles <strong>of</strong> woolen <strong>and</strong>worsted materials <strong>and</strong> <strong>of</strong> all articles similar to the foregoing or any <strong>of</strong> them or connected therewith.5. To carry on the business <strong>of</strong> manufacturers,importers <strong>and</strong> exporters,wholesale <strong>and</strong> retail dealers <strong>of</strong>leather goods <strong>of</strong> every kind.Changes in RegisteredOffice <strong>of</strong> the CompanyThere hasbeen no change in the registered <strong>of</strong>fice<strong>of</strong> our Company.Changes in the Memor<strong>and</strong>um <strong>of</strong> AssociationScotts Garments LimitedDate <strong>of</strong>shareholders’approval31/03/0303/10/0527/03/06Type <strong>of</strong> change/ Reasons for changeIncreasee in the authorized share capital to `100 lakhs consisting <strong>of</strong> 1,000,000equity shares <strong>of</strong> `10 each.Increasee in the authorized share capital to `200 lakhs consisting <strong>of</strong> 2,000,000equity shares <strong>of</strong> `10 each.Increasee in the authorized share capital to `2000 lakhs consisting <strong>of</strong> 20,000,000equity shares <strong>of</strong> `10 each.130
Scotts Garments LimitedDate <strong>of</strong>shareholders’approval18/05/0701/09/0719/06/2007Scheme <strong>of</strong>AmalgamationType <strong>of</strong> change/ Reasons for changeAdoption <strong>of</strong> new set <strong>of</strong> Articles<strong>of</strong> Association for conversion to a PublicLimitedCompany.Increasee in the authorized share capital to` 4000 lakhs consisting <strong>of</strong>40,000,000 equity shares <strong>of</strong> `10 each.Conversion into Public LimitedIncreasee in the authorized share capital to` 4400 lakhs consisting <strong>of</strong>4,40,00,000 equity shares <strong>of</strong> `10 each pursuant to schemee <strong>of</strong> amalgamationbetweenScotts Garments Ltd. <strong>and</strong>Arora Fashions Ltd. approved by Hon’bleHigh Court <strong>of</strong> Bombay <strong>and</strong> Hon’ble High Court <strong>of</strong> Karnataka at BangaloreDetails <strong>of</strong>Scheme <strong>of</strong> Amalgamatioon1.) Amalgamation <strong>of</strong> M/s. Scotts Clothing Private Limited with the CompanyThe Company filed a Company Petition No. 130<strong>of</strong> 2006 <strong>and</strong>M/s. Scotts Clothing Private Limited filed aCompanyPetition No. 131 <strong>of</strong> 2006 in the High Court <strong>of</strong> Karnataka undersections 391to 394 <strong>of</strong> the Act..The fair value for theexchange ratio under the scheme was arrived atbased on the valuation reportprepared by M/s. Siddiah & Ram, Chartered Accountants. Based on the valuation theswap ratio <strong>of</strong> “SixEquity Shares <strong>of</strong> `10/-- each fully paid up <strong>of</strong> Scotts Garments Private Limited for every one equity share <strong>of</strong>the face value <strong>of</strong> `100/ /- each fully paid up held in Scotts Clothing Private Limited” wasfixed. The Scheme<strong>of</strong> Amalgamation was sanctioned by the High Court <strong>of</strong> Karnataka whereunder the business <strong>of</strong> theM/s.Scotts Clothing Private Limited was transferred to the Company witheffect from April 1, 2006 <strong>and</strong>accordingly, 6,00,000 equity shares <strong>of</strong> `10/- each<strong>of</strong> Scotts Garments Private Limited were allottedto themembers <strong>of</strong> the Scotts Clothing Private Limited against the paid up sharecapital <strong>of</strong> `1,00,00,000/- <strong>of</strong> `100each per equity share. The amalgamation <strong>of</strong> Scotts clothing Private Limitedwith Scotts Garments Ltd., hasled to increased production facilities, improved turnover <strong>and</strong>overall reduction in the operating cost apartfrom tax benefits.Features <strong>of</strong> the Schemee <strong>of</strong> ArrangementUnder theScheme the Undertaking <strong>of</strong> the Transferor Company is transferred to the Transferee Company.Undertaking under thescheme is defined to mean <strong>and</strong> include all the assets <strong>of</strong> the Transferor Company onApril 1, 2006 (“Appointed Date”) <strong>and</strong> all secured <strong>and</strong> unsecured debts (whether in Rupees or in foreigncurrency) , all liabilities, duties <strong>and</strong> obligations <strong>of</strong> the Transferor Company alongwith any charge,encumbrance, lien <strong>and</strong>security thereon as on the Appointed Date <strong>and</strong> without prejudiced to the abovegeneral clause undertaking <strong>of</strong> the Transferor Company shall include alll preliminary<strong>and</strong> pre-operativeexpenses, assets, investments, claims, powers, authorities, allotments, approvals, contracts, enactments,arrangements, rights, titles, interests, benefits, advantages, lease-hold rights <strong>and</strong> other intangible rights,hire-purchase contracts <strong>and</strong> assets, lending contracts, benefit <strong>of</strong> any security arrangements, reversionsThe Salient features <strong>of</strong> the Scheme are as follows:(i) The Scheme is operative from the appointed date i.e. April 1, 2006.(ii) The Scheme shall come intoeffect fromthe effective date i.e. . the last <strong>of</strong> dates on whichsanctions/approvals or orders etc have been obtained <strong>and</strong> the date on which all necessary certifiedcopies<strong>of</strong> the orderr under section 391 <strong>and</strong> 394are duly filed with ROC Karnataka, Bangalore.(iii) The undertaking <strong>of</strong> the Transferor Companyshall without any further act, instrument or deedd st<strong>and</strong>transferred to <strong>and</strong>/or vested in or deemedd to have been <strong>and</strong> st<strong>and</strong>transferred to or vested in the131
Scotts Garments LimitedTransferred Company as a going concern soas to becomee as <strong>and</strong> fromthe Appointed Date, the estate,rights, titles <strong>and</strong> interests <strong>and</strong> authorities <strong>of</strong> the Transferee Company pursuant to the provisionss <strong>of</strong> thesection 394 <strong>and</strong> other applicableprovisions <strong>of</strong> the Act.The transfer <strong>and</strong>/or vesting shall be subject to the existing charges, hypothecation <strong>and</strong>mortgages, if any,over or inrespect <strong>of</strong> all the aforesaid assets orany part there<strong>of</strong> <strong>of</strong> the Transferor Company. Providedhowever, that any reference on any securitydocuments or arrangements to which the TransferorCompanyis a party to the assets <strong>of</strong>fered or agreed to be <strong>of</strong>fered as security to financial services orobligations shall be construed as reference onlyto the assets pertainingto the assets <strong>of</strong> the TransferorCompanyas are vestedin the Transferee Company.2.) Amalgamation <strong>of</strong> M/s. Arora Fashions Limited with the CompanyPetition before High Court <strong>of</strong> BombayArora Fashions Limited (AFL) having its registered <strong>of</strong>fice at #214, Regal Industrial Estate, A.D. Marg,Sewree, Mumbai – 400 015, was incorporatedon 01/01/1991 as private <strong>limited</strong> company under theCompanies Act, 1956 <strong>and</strong> subsequently converted to a <strong>limited</strong> company on 10/04/1997. The Companyacquired 100% stake inAFL on 01/02/2008 through a negotiated deal with the promoters <strong>of</strong> AFLfor atotal consideration <strong>of</strong> `5411.00 lacs.Subsequently, the Company filed a Company Application No. 942 <strong>of</strong>2009 in the High Court<strong>of</strong> Bombay under sections 391 to 394 <strong>of</strong> the Act. The Scheme <strong>of</strong> Amalgamation wassanctionedby the HighCourt <strong>of</strong> Bombay <strong>and</strong> High Court <strong>of</strong> Karnataka byorder datedd December 18, 2009<strong>and</strong> February 6, 2010 respectively.The said order stated that the shares <strong>of</strong> M/s. Arora Fashions Limitedstood cancelled <strong>and</strong> that no sharess <strong>of</strong> the Company shall beallotted to the shareholders <strong>of</strong> M/s. AroraFashions Limited sincethe Company is a 100% holding company <strong>of</strong> the M/s. Arora Fashions Limited. Theeffective date <strong>of</strong> amalgamation is 02/02/2008 asper the scheme <strong>of</strong> amalgamation sanctioned. As per thescheme the differencee between the net identifiable assets <strong>of</strong> Arora Fashions Limited <strong>and</strong> the cost <strong>of</strong>investment on takeover has been accounted as Goodwill in the books <strong>of</strong> accounts <strong>of</strong> SGL in terms<strong>of</strong> theAccounting St<strong>and</strong>ard no. 14 <strong>of</strong> “Accounting for Amalgamation” issuedby The Institute <strong>of</strong> CharteredAccountants <strong>of</strong> <strong>India</strong>. As per the accounting st<strong>and</strong>ard, Goodwill amountshall be amortized <strong>and</strong> written<strong>of</strong>f over a period <strong>of</strong> five years. The amalgamation <strong>of</strong> Arora Fashionss Limited with Scotts GarmentsLimited led to increased number <strong>of</strong>manufacturing units <strong>of</strong> SGL at Tirupur thereby leading to increase inturnover <strong>of</strong> the Company alongwithreduction inoperating cost.Features <strong>of</strong> the Schemee <strong>of</strong> ArrangementUnder theScheme the Undertaking <strong>of</strong> the Transferor Company is transferred to the Transferee Company.Undertaking under thescheme is defined to mean <strong>and</strong> include all the assets <strong>of</strong> the Transferor Company ason Appointed Date i. .e. 02/02/2008 (as defined in the Scheme <strong>of</strong> Arrangement) <strong>and</strong> all secured <strong>and</strong>unsecureddebts (whether in Rupees or in foreign currency) ), all liabilities, duties <strong>and</strong>obligations <strong>of</strong> theTransferor Company along with any charge, encumbrance, lien <strong>and</strong> security thereon as on the AppointedDate <strong>and</strong> without prejudiced to the above general clause undertaking <strong>of</strong> the Transferor Companyshallinclude all preliminary <strong>and</strong> pre-operative expenses, assets, investments, claims, powers, authorities,allotments, approvals, contracts, enactments, arrangements,rights, titles,interests, benefits, advantages,lease-holdrights <strong>and</strong> other intangible rights, hire-purchase contracts <strong>and</strong> assets, lending contracts, benefit<strong>of</strong> any security arrangements, reversions.132
Scotts Garments LimitedThe salient features <strong>of</strong> the scheme are as follows;1. The Scheme is operative from the Effective Date (as definee in the Scheme);2. The Undertaking <strong>of</strong> the Transferor Company shall, without any further act, instrument or deed, be<strong>and</strong> shall st<strong>and</strong> transferred to <strong>and</strong>/ or vested in or deemed to have been <strong>and</strong> st<strong>and</strong> transferredto orvestedin the Transferee Company as a going concern so as to become as <strong>and</strong> from the AppointedDate, the estate, rights, titles <strong>and</strong> interests <strong>and</strong> authorities<strong>of</strong> the Transferee Company to the provisions<strong>of</strong> Section 394 <strong>and</strong> other applicable provisions <strong>of</strong> the Act;3. The transfer <strong>and</strong>/ or vesting asaforesaid shall be subject to the existing charges, hypothecation <strong>and</strong>mortgages, if any, over or in respect <strong>of</strong> all theaforesaid assets;4. The assets <strong>of</strong> movable nature will be transferred by theTransferor Company, <strong>and</strong> shall become theproperty <strong>of</strong> the Transferee Company in pursuance <strong>of</strong> the provisions <strong>of</strong> Section 394 <strong>and</strong>otherapplicable provisions <strong>of</strong> the saidAct;5. With effect from the AppointedDate, <strong>and</strong> subject to the provisions <strong>of</strong> this scheme all the Employees <strong>of</strong>the Transferor Company shall also be <strong>and</strong> shall st<strong>and</strong> transferred without any further act, instrumentor deed <strong>of</strong> the Transferee Company, pursuant to the provisions <strong>of</strong> Section 394 <strong>of</strong> the Act, soas tobecome as <strong>and</strong> fromthe Appointed Date, theemployees <strong>of</strong> the Transferee Company<strong>and</strong> furtherr that itshall not be necessary to obtain consent <strong>of</strong> any third partyor other person in order to give effect to thisprovision;6. Subject to all theprovisions <strong>of</strong> this Scheme, all contracts, deeds,bonds, agreements <strong>and</strong>otherinstruments <strong>of</strong> whatsoever nature to whichh the Transferor Companyis a party or to the benefits <strong>of</strong>whichh the Transferor Companymay be eligible <strong>and</strong> which are subsisting or havingeffect immediatelybeforee the effective Date, shall be in full force <strong>and</strong> effect against or in favour<strong>of</strong> the TransfereeCompany as the case may be<strong>and</strong> may be enforced as fully <strong>and</strong> effectively asif, instead <strong>of</strong> theTransferor Company, the Transferee Company had been a party or beneficiary thereto;7. Uponcoming intoeffect <strong>of</strong> this scheme alll suits, claims, actions <strong>and</strong>proceedings by or against theTransferor Company pending/ /or arising onor before the Effective date shall becontinued <strong>and</strong> beenforced by or against the Transferee Company as if the same had been pending <strong>and</strong>/or arisingby oragainst the Transferee Company;8. The entire equity share capital<strong>of</strong> Arora Fashions Limited is held by Scotts Garments Limited, onmerger <strong>of</strong> Arora Fashions Limited into Scotts Garments, all these shares shall st<strong>and</strong> cancelled <strong>and</strong> noallotment <strong>of</strong> sharess shall be made against shares held in Arora Fashions Limited;The Transferor Company shall be dissolved without windingup on an order made bythe High Court <strong>of</strong>Bangalore<strong>and</strong> the High Court at Bombay under Section 394 <strong>of</strong> the Companies Act.Subsidiaries <strong>of</strong> the Issuer CompanyWe have no subsidiaryCompany, as on date.Other AgreementsWe have entered into contracts/agreements/MoU in the ordinary course <strong>of</strong> the business carriedon orintended to be carriedon by SGL. We have alsoentered intoShare Subscription Agreement (SSA)dated18/01/2012 with Kagal IndustrialTechnologyTextile Park Pvt. Ltd. (KITTP) for allotment <strong>of</strong> l<strong>and</strong>pursuant to investment in KITTP. Except these arrangements we have not entered into anyotheragreement/contract./MoU:MOU between our Company, BRFL <strong>and</strong> Government <strong>of</strong> KarnatakaThe Government <strong>of</strong> Karnataka had organizeda Global Investors Meet on 3 rd <strong>and</strong>4 th June, 2010 inBangalorefor attracting investments into the State. The Company <strong>and</strong> BRFL had made a joint proposal for133
Scotts Garments Limitedsetting uptextile units to Karnataka Udyog Mitra (KUM), a government undertaking incorporated t<strong>of</strong>acilitate investment <strong>and</strong> assist investors in the state. The Company <strong>and</strong> BRFL had identified 12 locationsat Doddaballapur (two locations), Kolar, KGF Apparel Park, Gowribidanur,Chikkaballapura,Chitradurga, Shimoga, Modhol, Siddlaghatta <strong>and</strong> Srinivasapura for setting up textile units in Karnataka.The proposal was approved at the 22 nd State High Level Clearance Committee (SHLCC) held on24/05/2010.A tripartite Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ing was executed between our Company, BombayRayon Fashions Limited <strong>and</strong> Government <strong>of</strong> Karnataka at Global Investors Meet on 3rd /4 th <strong>of</strong> June, 2010.The Company shall utilize part <strong>of</strong> the net issue proceeds towards the proposed project at Doddaballapurwhich is also one <strong>of</strong> the locations forming part <strong>of</strong> the tripartite MOU. The Company <strong>and</strong> BRFLhavemutually agreed on setting up independent projects at five <strong>and</strong> seven locations respectively <strong>of</strong> the saidtwelve locations as approved by the Government <strong>and</strong> there shall be no investment by SGL in the units tobe set upby BRFL. The project location at Doddaballapurforms part <strong>of</strong> MOU <strong>and</strong> the other locationswhere Company has proposed to set up units areHassan, Kolar, KGF Apparel Park <strong>and</strong>Sidlaghatta.The details <strong>of</strong> the MOUare as under:1. A MoU was signed during thismeet between our Company & Bombay Rayon Fashions Limited <strong>and</strong>the Government <strong>of</strong>Karnataka toachieve the following objectives:a) Our Company& Bombay Rayon Fashions Limited to setup Readymade Garments for exports atKolar, KGF, Doddaballapuura, Gowribidanur, Chikkaballapura,Chitradurga,Shimoga with aninvestment <strong>of</strong> ` 682.67 Crores generatingg employment to about 50, ,000;b) The Govt. <strong>of</strong> Karnataka to provide the requisite support for implementation <strong>of</strong> the above project.2. The scope <strong>of</strong> the MoU will be asfollows:I.Our Company & Bombay Rayon Fashions Limiteda)will endeavour to commence operations as per the implementation <strong>and</strong> investment plan<strong>of</strong> thecompany;b)agrees to provide employment to local people as per the Karnataka Industrial Policy 2009-14;c)agrees to promote locall vendors for procurement<strong>of</strong> components <strong>and</strong> raw materials whereverpossibleII.Government <strong>of</strong> Karnatakaa) will endeavour to provide to Our Company & Bombay Rayon Fashions Limited therequired infrastructure facilities such as l<strong>and</strong>, water <strong>and</strong> power on completion <strong>of</strong> theformalities;b) will endeavour to provide on priority the necessary clearances <strong>and</strong>approvals to OurCompany & BombayRayon Fashions Limitedin accordance with the applicable rules <strong>and</strong>regulations;c) will assist Our Company & Bombay Rayon Fashions Limitedin getting theapprovals/clearances, if needed, from the Central Government or its agencies.d) Both parties will interact periodically to reviewthe progress <strong>and</strong> pending issues during theimplementation <strong>of</strong> the project.Subsequently, vide letter no. IADB/HO/Secy/1831/2010-111 dated 11/10/2010, KIADB had notified thedetails <strong>of</strong> the l<strong>and</strong> available for allotment at the locations <strong>of</strong> Doddaballapur (two locations), Hassan, Kolar,KGF Apparel Park, Gowribidanurr, Chikkaballapura, Chitradurga, Shimoga, Modhol, Siddlaghatta <strong>and</strong>Srinivasapura.134
Scotts Garments LimitedThe exact locations <strong>of</strong> the site at theabove mentioned places except for Doddaballapur<strong>and</strong> Kolar have notbeen specified in the MOU. The sitelocation for Doddaballapur is D-3, D-4, A-3, A-10, A-11, S-43, S-44 <strong>and</strong>S-45 (P), Apparel ParkIndustrial Area, Phase I <strong>and</strong> for Kolar is Sy.no 60, 30/1, 32/1,21, 22 & 71 SultanThippans<strong>and</strong>ra Village, Kasaba Hobli.Share Subscription Agreement with Kagal Industrial Textiles Technology Park (P) Ltd.Our Company (Subscriber) has entered into a Share Subscription Agreement (SSA) with Kagal IndustrialTextiles Technology Park (P) Ltd. (KITTP) vide agreementdated 18/01/2012. KITTP is a Companyengaged in development <strong>and</strong> implementation <strong>of</strong> the Textile Park with Infrastructure <strong>and</strong> AdministrativeFacilities. The Textile Park is aimed at providing the Plotor Plot along with Work Shed <strong>and</strong>otherInfrastructure <strong>and</strong> Administrative Facilities therein for settingup textile manufacturingunits on leave <strong>and</strong>license basis to entitiesengaged in activities relating to textile manufacturing etc.Important Terms <strong>and</strong> Conditions <strong>of</strong> the SSA• KITTPshall allot 50,00,000 Equity Shares <strong>of</strong> the face value<strong>of</strong> `10/-at a price mutually agreed betweenKITTP<strong>and</strong> our Company• Pursuant to the issuance <strong>of</strong> Shares to the Subscriber, KITTP shall allot to the Subscriber the Plot or Plotalongwith Work Shed in the Textile Park upon the terms <strong>and</strong> conditions contained in the Leave <strong>and</strong>License Agreement to be entered into between the Subscriber <strong>and</strong> the Company, wherein theSubscriber shall have license touse <strong>of</strong> the Plot or Plot along with Work Shed <strong>and</strong>the Infrastructure<strong>and</strong> Administrative Facilities inthe Textile Park <strong>and</strong> shalll be bound to pay all Fees as may be levied bythe Company fromtime to timein relation thereto• KITTPshall develop the Project <strong>and</strong> enter into a Leave <strong>and</strong> License Agreement with the Subscriber.The Company reserves the absolute right to impose suchconditions as may be necessary from time totime for use <strong>of</strong> thePlot or the Work Shed without prejudice to <strong>and</strong> affecting the business interests <strong>of</strong>the Subscriber• KITTPshall be free to raise finance for developing the Plot or Plot along with Work Shed <strong>and</strong> forproviding Infrastructure <strong>and</strong> AdministrativeFacilities.• Subscriber shall beentitled to use the Plot or Plot along with Work Shed together with Infrastructure<strong>and</strong> Administrative Facilities demised pursuant to the Leave <strong>and</strong> License Agreement for the purpose<strong>of</strong> setting up <strong>of</strong> weaving <strong>and</strong> master weavingunits or textile related activity• Subscriber shall start commercial productionin the unit within 6 months <strong>of</strong> demise <strong>of</strong> the Plot or Plotalongwith Work Shed on a leave <strong>and</strong> license basis or within such time as may be permitted by theCompany at its sole discretion in writing. Incase <strong>of</strong> delayin commencing commercial production, theSubscriber shall be liable for cancellation <strong>of</strong> the allotment <strong>of</strong> the Plot <strong>and</strong>/or Work Shed <strong>and</strong> theCompany shall have the rightto allot/transfer the shares allotted to the Subscriber to anyotherPerson, who is agreeable to abide by the terms <strong>and</strong> conditions <strong>of</strong> this agreement <strong>and</strong> the Leave <strong>and</strong>License Agreement• Subscriber as a shareholder in KITTP <strong>and</strong> asa licensee <strong>of</strong>the Plot or Plot along with Work Shedin theTextile Park herebyundertakesto pay to thecredit <strong>of</strong> theTrust <strong>and</strong> Retention Account opened by theKITTPthe Fees as detailed in Leave <strong>and</strong> License Agreement, which comprises the following charges inproportion to the area occupiedin the Textilee Park viz- fixed monthly infrastructure charges apportioned on the basis <strong>of</strong> demised premises- variable monthly charges such as consumption <strong>of</strong> utilities such as water, power, etc.- other variable expenses• Uponterminationn <strong>of</strong> the Leave <strong>and</strong> License Agreement on account<strong>of</strong> a breachcommitted by theSubscriber or uponexpiry <strong>of</strong> theLeave <strong>and</strong> License Agreement as set forth therein:135
Scotts Garments Limited(a) possession <strong>of</strong> the demised premises including the Plot or Plot along with Work Shed shall betaken over by KITTP; <strong>and</strong>(b) the Subscriberr shall transfer its Sharesin KITTP toany Personidentified by KITTP for suchconsideration as may be decided at the sole <strong>and</strong> absolute discretion<strong>of</strong> the Company.• The Subscriber may, with the prior approval <strong>of</strong> KITTP, terminate this Agreement <strong>and</strong> vacate thedemised premises including thePlot or Plot <strong>and</strong> the WorkShed, whichh shall have been given on, leave<strong>and</strong> license basis. KITTP may grant such approval subject to such terms <strong>and</strong> conditions, as maydeemappropriate. As a part <strong>of</strong> such approval, KITTP may require the Subscriber to transfer the Shares heldby it to any Personat such consideration as may be decided by KITTP at its sole discretion.Share Subscription cum Shareholders Agreement (SSA) dated 19/12/2012 between Canbank VentureCapital Fund Limited(CVCFL) <strong>and</strong> Scotts Garments Limited (the Company) <strong>and</strong> Mr. Naseer Ahmed(the Promoter <strong>of</strong> Scotts Garments Limited)Canbank Venture Capital Fund Limited (CVCFL), our Company <strong>and</strong> thePromoter <strong>of</strong> our Company i.e.Mr. Naseer Ahmed have entered into Share Subscription cum Shareholders Agreement (SSA) dated19/12/2012 in relationto the Pre-IPO Placement. In terms <strong>of</strong> this agreement our Company has issued <strong>and</strong>allotted 17,39,130 equity shares <strong>of</strong>face value `10/- each at an issue price <strong>of</strong> `115/ /- per equityshareincludingpremium <strong>of</strong> `105/- per equity share aggregating to `19,99,99,950/-. Some <strong>of</strong> the importantt terms<strong>of</strong> the agreement are reproduced below:1. During the Term <strong>of</strong> this Agreement, the Company undertakes to use the Subscription Amountsolely for the purposes approved by CVCFL in writing, including inter alia towards meeting thecosts <strong>of</strong> the Project. It is hereby clarifiedthat the Company has represented to CVCFL that it shallnot utilize the SubscriptionAmount forany other purpose. The Company further undertakes toutilize the subscription amount exclusively towards implementation <strong>of</strong> the Project.2. The Company<strong>and</strong> the Promoter undertake that the Company shall bring about an IPO throughlisting <strong>of</strong> its Shares at stockexchanges in <strong>India</strong> within 3 months from the date <strong>of</strong> Acceptance <strong>of</strong>Letter <strong>of</strong> Intentt i.e. on or before 08.03.2013.3. The IPO shall be for issue <strong>of</strong> at least 1,05,06,954 (OneCrore five lakh six thous<strong>and</strong> Nine hundred<strong>and</strong> fifty four)Equity Shares <strong>of</strong> Rs. 10 each, which shall be fullypaid up. Out <strong>of</strong> the saidissueunder the IPO, 4,50,000 (Four Lakh FiftyThous<strong>and</strong>) Equity Shares <strong>of</strong> `10/ each shall be reservedfor Employees<strong>of</strong> the Company. Prior to such IPO, the Company shall have issued 17, ,39,130(Seventeen Lakh Thirty Nine Thous<strong>and</strong> One Hundred <strong>and</strong> Thirty) Equity Shares <strong>of</strong> `10/- each toCVCFL in terms <strong>of</strong> this Agreement, as a Pre-IPO placement.4. The issue <strong>of</strong> Equity Shares shall be for an ‘Issue Price’ (in the IPO) which is not less than `140/-(Rupees One Hundred And Forty only). In this regard, the lower end <strong>of</strong> the Price B<strong>and</strong> (forsubscription <strong>of</strong>Shares in the IPO) that shall be disclosed in the Red Herring Prospectus filed withSEBI, the stockexchanges <strong>and</strong> RoC shall be not less than `140/- (Rupees One Hundred AndFortyonly) per equity share <strong>of</strong> face value Rs.10/- each5. The Companymust pass <strong>and</strong> furnish a certified true copy to CVCFL <strong>of</strong> all the necessary <strong>Board</strong><strong>and</strong> members resolutions (at AGM/ EGM), as required under Applicable Law, approving theissue <strong>and</strong> allotment <strong>of</strong> the CVCFL Shares to CVCFL, on the termsspecified in this Agreement, byway <strong>of</strong> a special resolution <strong>of</strong> the members <strong>of</strong> the Company at a general meeting.6. The nominee <strong>of</strong> CVCFL must have been appointed as the Director (non-rotational)<strong>of</strong> theCompany, firstat a board meeting (as additional director) <strong>and</strong> thereafter at a members meeting (asregular director) <strong>and</strong> a right must begiven to CVCFL to nominate anyother person, forappointment as Director in place <strong>of</strong> the said nominee. This right must be subsisting at all times uptothe time CVCFL is shareholder in the Company.136
Scotts Garments LimitedFurther, the ArticleVII <strong>of</strong> Part 1 <strong>of</strong> the SSA titled as “Conditions Subsequent” has specified conditionsto be fulfilled relating to point 2 <strong>and</strong> 3 <strong>and</strong>other conditions as stated in the reference article. In theevent any one or all <strong>of</strong> the Conditions Subsequent are not duly complied with, tothe satisfaction <strong>of</strong>CVCFL within the time period as specified, the provisions <strong>of</strong> Part-2 <strong>of</strong>the SSA shall forthwith becomeeffective <strong>and</strong> the rights specified there under shall duly accrue to theCVCFL Shares. However, It ishereby clarified that in the event that the Conditions Subsequent are duly complied with in terms <strong>of</strong>Article VII (Part-1), the provisions <strong>of</strong> this Part-2 <strong>of</strong> this Agreement shall not be effective <strong>and</strong> shall notapply.In terms <strong>of</strong> clause 1.3.1 <strong>of</strong> Article I <strong>of</strong> Part-2 <strong>of</strong> SSA, in the event “Conditions Subsequent” asmentioned in Article VII (Part 1) <strong>of</strong> SSA arenot fulfilled by the Company <strong>and</strong> / or the Promoter, thePromoter undertakes that he shall ensure that CVCFL derives an Internal Rate <strong>of</strong> Return <strong>of</strong> 25% on theSubscription Amount, on <strong>and</strong> from the date <strong>of</strong> investment <strong>and</strong> uptothe date <strong>of</strong> sale <strong>of</strong> the CVCFLShares by CVCFL. In this regard, the provisions <strong>of</strong> ArticleVIII (Part-2) (‘EXIT’ provisions) shalll applyto give effect to theabove right.The other important terms <strong>of</strong> Part 2 <strong>of</strong> the SSA are as under:• Ifany securities (equity <strong>and</strong>equity linked) except shares issued under an ESOP, are proposed tobeissued in any subsequent financing (‘Dilutionn Shares’) toany other Person (‘IntendedPurchaser’) (including an existing shareholder), then the Companyshall first <strong>of</strong>fer, by a writtennotice giving details <strong>of</strong> the <strong>of</strong>fer (‘Dilution Notice’) <strong>and</strong> the Dilution Shares toCVCFL (‘Right <strong>of</strong>First Offer’)• Inthe event the Dilution Shares are proposed to beissued to the Intended Purchaser at a pricewhich is less than or equalto the rate at which the CVCFL Shares are acquired by CVCFL, thenCVCFL will receive full dilution protection at no additional cost such that additional shares will beissued to CVCFL to: (i) equate the costbasis <strong>of</strong> CVCFL’s holding in the Company to thelowerprice per security (equity orequity linked) instrument issued in any subsequent round <strong>of</strong> funding;<strong>and</strong> (ii) ensuree that CVCFL continues to hold the same percentagee <strong>of</strong> the issued<strong>and</strong> paid upsharecapital in the Company, on a fully diluted / converted basis. The said rights <strong>of</strong> full dilutionprotection shall be available to CVCFL with respect to further issue <strong>of</strong> shares by way <strong>of</strong>adjustments for stock-splits, dividends <strong>and</strong> stock re-classifications <strong>and</strong> the like, at no additionalcost.• Inthe event the Dilution Shares are proposed to be issued to the Intended Purchaser on terms thatare better thanthe terms attached to theCVCFL Shares, then the CVCFL Shares shall be deemedtohave such better rights, as are <strong>of</strong>fered to the Intended Purchaser.• The <strong>Board</strong> shall comprise <strong>of</strong> not more than 12 (Twelve) Directors. Out <strong>of</strong> the said Directors, oneDirector shall be the nominee Director appointed byCVCFL (‘CVCFL Nominee Director’)(NonRotational) <strong>and</strong>the other Directors shall be appointedby the members <strong>of</strong> the Company.• The Promoter <strong>and</strong> the Company, hereby, agree <strong>and</strong> confirm that they shall provide a complete exit(‘ Exit’) to CVCFL from theCompany, on or beforee June 2016 such that CVCFL derives: i) anannualized IRR <strong>of</strong> at least25% on its SubscriptionAmount from the date <strong>of</strong> Subscription <strong>of</strong>CVCFL Shares; or ii) the book value <strong>of</strong> the shares <strong>of</strong>the Company; whicheveris higher, throughany <strong>of</strong> the following options:- IPO/ Offer for Sale (not being the failed IPO under part-1):The Promoter <strong>and</strong> the Company shall make an IPO <strong>and</strong> seek a listing <strong>of</strong> the equity sharess <strong>of</strong> theCompany on any <strong>of</strong> the recognized Stock <strong>Exchange</strong>s,on or beforee March, 2016. The cost <strong>of</strong> IPO orOffer for Sale shall be borneentirely by the Company.- Buy Back OfShares By The CompanyOr Purchase Of Shares By The PromoterInthe event the Company fails to conduct an IPO, asaforesaid, for any reason whatsoever, beforethe end <strong>of</strong> the financial year 2015-16, then within June 30, 2016, the Company (subject to thesamebeing permissible under Applicable Law) shall buy back the CVCFL Shares from CVCFL <strong>and</strong> / orthe Promoter shall purchasethe CVCFL Shares (either by himself <strong>and</strong> / or through his nominees),137
Scotts Garments Limitedatsuch a priceas would enable CVCFLto derive: i) an IRR <strong>of</strong> not less than25% (Twenty FivePercent) per annum, on theSubscriptionAmount from the date <strong>of</strong> subscription<strong>of</strong> CVCFL Shares;orii) the bookvalue <strong>of</strong> the Share as on such date; whichever is higher. The Company <strong>and</strong>/ /or thePromoter may provide an Exit to CVCFLin the abovemanner either jointly or severally.- Purchase <strong>of</strong> shares by third partyInthe event that all the above options <strong>of</strong> Exit do not fructify within June30, 2016 then theCompany <strong>and</strong> the Promoter shall withinthe next 2 (Two) months, arrange forthe CVCFL Sharestobe bought from CVCFL by any strategic investor/ /s, at such sale price as would enable CVCFLtoderive: i) anIRR <strong>of</strong> 25% per annum, on the Subscription Amount; or ii) thebook value <strong>of</strong> thesaid shares ason such date; whichever is higher. The said sale to any third party shall becompleted within two months from June30, 2016.Supplementary Agreement to Share Subscription cum Shareholders Agreement datedd 19/12/2012CVCFL, our Company<strong>and</strong> the promoter <strong>of</strong> ourCompany incontinuationn to the Share Subscription cumShareholders Agreement (SSA) dated 19/12/2012 have entered into a supplementary agreementdated21/02/2013. In terms <strong>of</strong> the supplementary agreement the lower end <strong>of</strong> the price b<strong>and</strong> for the purposes <strong>of</strong>IPO shall not be less than Rs.130/- per equity share.Financial PartnersThere are no financial partnership agreements entered into bythe Company.Strategic PartnersThere are no strategic partnership agreements entered into bythe Company.138
Name, Age, Qualification, Residential Address,Designation, Occupation, DINNo.Mr. NaseerAhmedS/o: Late C. K.M HyderDesignation: Managingg Director (Executive<strong>and</strong> Non- Independent)Age: 53 YearsQualification: B.ComResidentialAddress:391, 2 nd main, 2 nd Cross, 2 nd Stage,R.M.V.Extension, Bangalore 560 094Occupation: IndustrialistDIN No.: 00027095Mrs. Nuzhat Aisha NaseerW/o: Mr. Naseer AhmedDesignation: Director (Executive <strong>and</strong> Non-Independent)Age: 35 YearsQualification: B.ComResidentialAddress:391, 2 nd main, 2 nd Cross, 2 nd Stage,R.M.V.Extension, Bangalore 560 094Occupation: IndustrialistDIN No.: 00245176MANAGEMENTDate <strong>of</strong>Appointment /Re-appointment,Term19/06/2010(5 Years)Re-appointment19/06/2010(5 Years)Re-appointment1.2.3.4.5.6.7.8.9.10.11.12.13.14.1.2.3.4.Scotts Garments LimitedOther Directorships heldInmark Retail Private LimitedBombay Rayon Fashions Limited(Joint Vice Chairman)GFI Infrastructure DevelopmentPrivate LimitedScotts Fashionciti <strong>India</strong> LimitedScotts Infrastructure &Development Private LimitedScotts Metals& Mines PrivateLimitedScotts Plantations PrivateLimitedCoppers Coin Realty PrivateLimitedScotts Apparels Private LimitedScotts Fashions Private LimitedScotts WearsPrivate LimitedScotts Knits Private LimitedPedigree Construction PrivateLimitedAmanath Co-Operative BankLtd (Honorary Post as President<strong>of</strong> Bank)Scotts Fashionciti <strong>India</strong> LimitedScotts Fashions Private LimitedScotts Apparels Private LimitedScotts Metals<strong>and</strong> Mines PrivateLimitedMr. A. ArumughamS/o: Mr. D.ArunachalamDesignation: Director (Non - Executive <strong>and</strong>Independent)Age: 69 YearsQualification: B.Com, A.C.AResidentialAddress:121, Udani Layout, Cambridge RoadUlsoor, Bangalore 560 008Occupation: Pr<strong>of</strong>essionalDIN No.: 0035016329/09/2012Liable to retire byrotationRe-appointment1.2.3.4.5.6.7.8.Chemicarb Private LimitedCKM Investments PrivateLimitedPedigree Construction PrivateLimitedScotts Apparels Private LimitedScotts Infrastructure &Development Private LimitedTamarind Properties PrivateLimitedAru & Dev (Partnership)Inmark Retail Private Limited139
Name, Age, Qualification, Residential Address,Designation, Occupation, DINNo.Mr. B.S.PatilS/o: Late Sangangowda PatilDesignation: Director (Non-Executive <strong>and</strong>Independent)Age: 68 YearsQualification:<strong>India</strong>nnAdministrativeService (Retired)ResidentialAddress:149, 5 th Cross, 10 th Main, R.M.V.Extension,Bangalore 560 080Occupation: Pr<strong>of</strong>essionalDIN No.: 00061959Date <strong>of</strong>Appointment /Re-appointment,Term30/09/2011Liable to retire byrotationRe-appointment9.10.11.12.13.1.2.3.4.5.6.7.8.9.10.11.12.13.14.Scotts Garments LimitedOther Directorships heldScotts WearsPrivate LimitedScotts Knits Private LimitedBeauty Base Products (<strong>India</strong>)Private Limited.STI <strong>India</strong> LimitedCoppers Coin Reality PrivateLimitedShetron LimitedUnited Breweries (Holdings)LimitedUB International TradingLimitedSuprajit Engineering LimitedMangalore Chemicals <strong>and</strong>Fertilisers LimitedAMR <strong>India</strong> LimitedSurana Industries LimitedB R S Precision ManufacturingPrivate LimitedSurana GreenPower LimitedSurana GreenEnergy LimitedWEIR <strong>India</strong> Private LimitedInternationalPower ConvertionsLimitedTrinethra Energy ConvertionsLimitedPrassana Power LimitedMr. M.M. ChopraS/o: Late Shanti Sarup ChopraDesignation: Director (Non Executive <strong>and</strong>Independent)Age: 79 YearsQualification: M.A., B.L, M.B.A.ResidentialAddress:E69, VasantMarg, Vasant ViharNew Delhi 110 057Occupation: Pr<strong>of</strong>essionalDIN No.: 00036367Mr. Azeezulla BaigS/o: Mr. Dastragirbaig MirzaDesignation: Director (Non- Executive <strong>and</strong>Independent)Age: 64 YearsQualification:<strong>India</strong>nnAdministrativeService (Retired)ResidentialAddress:30/09/2011Liable to retire byrotationRe-appointment30/09/2011Liable to retire byrotationRe-appointment1.2.3.1.<strong>India</strong>n Acrylics LimitedSteel Strips Wheels LimitedSteel Strips LimitedNGEF (Hubli) Limited140
Scotts Garments LimitedName, Age, Qualification, Residential Address,Designation, Occupation, DINNo.319, B-2, Nethravathi Block, NationalGamesVillage, Koramangala, Bangalore 560 047Occupation: Pr<strong>of</strong>essionalDIN No.: 00532908Mr. C.R.MuraliS/o: Mr. C.S.Ranganathaa RaoDesignation: Director (Non- Executive <strong>and</strong>Independent)Age: 54 YearsQualification: B.Com, A.C.AResidentialAddress:561, “Srinidhi”,WaterTank Road,Katriguppa, Banushankri,3 rd Stage,Bangalore 560 085Occupation: Pr<strong>of</strong>essionalDIN No.: 00533104Mr. S. ThiruvadiS/o: Mr. SenthilarumugamDesignation: NomineeeDirector (Non-Executive <strong>and</strong> Independent)Age: 56 YearsQualification: MBA (Banking <strong>and</strong> Finance)& CAIIBResidentialAddress:A3, 313 Sneha Apts, Godavari BlockNational Games Village, KoramangalaBangalore – 560047, KarnatakaOccupation: ServiceDIN No.: 03431263Date <strong>of</strong>Appointment /Re-appointment,Term29/09/2012Liable to retire byrotationRe-appointment08/12/20121.2.3.4.5.6.7.1.2.3.4.5.Other Directorships heldMurlaidharan& Manogaran– Chartered AccountantsSai Ganesh Properties Pvt.Ltd.SM Holding <strong>and</strong> FinancePrivate LimitedVatsalya Services <strong>and</strong>Solutions Pvt. Ltd.Silk Tele Networks Pvt. Ltd.SM DyechemLimitedChiteri Biotech PrivateLimitedCanbank Venture CapitalFund LimitedGNRC LimitedVinyas InnovativeTechnologiesP LimitedRavi Techn<strong>of</strong>orge PrivateLimitedColour Ro<strong>of</strong> (<strong>India</strong>) LimitedThere is no arrangement or underst<strong>and</strong>ing with major shareholders, customers, supplierss or others pursuantto which any<strong>of</strong> the abovementioned Directors were selected asa Director <strong>of</strong>our Company except for Mr. S.Thiruvadi who has been appointed pursuant to Letter <strong>of</strong> Intent dated 08/12/2012 <strong>and</strong> Share Subscription <strong>and</strong>ShareholdersAgreement dated 19/12/ /2012.Details <strong>of</strong> Current <strong>and</strong><strong>Exchange</strong>sPast Directorship in listed companies that havebeen suspended fromStockNone <strong>of</strong> the directors <strong>of</strong> the company have been directors in any other listedcompany(ies) which have beensuspended from the stockexchanges.Details <strong>of</strong> Current <strong>and</strong><strong>Exchange</strong>sPast Directorship in listed companies that have been delisted fromStockNone <strong>of</strong> the directors <strong>of</strong> the company have been directors in any other listedcompany(ies) which have beendelisted fromthe stock exchanges.141
Scotts Garments LimitedAs on date <strong>of</strong> filing <strong>of</strong> theOffer Document there isno service agreement entered into bythe Directors withthe Companyproviding for benefits upon termination <strong>of</strong> employment.Remuneration <strong>and</strong> shareholding <strong>of</strong> Directors in the CompanyParticularsMr. Naseer AhmedMrs. Nuzhat Aisha NaseerMr. A.ArumughamMr. B.S. PatilMr. M.M ChopraMr. Azeezulla BaigMr. C.R. MuraliMr. S.ThiruvadiRemunerationn paidduring F.Y.2011-12(` in lacs)180.0018.00NilNilNilNilNilN.A.No. <strong>of</strong> Sharesheld1,25,54,5007,64,500100NilNilNilNilNilBRIEF PROFILE OF THEDIRECTORS OF SGLA brief pr<strong>of</strong>ile <strong>of</strong> the <strong>Board</strong> Members isgiven below:Executive DirectorsMr. Naseer Ahmed aged53 years is the Managing Director <strong>of</strong>our company. He is the son <strong>of</strong> Late C.K.MHyder. He holds a bachelor degree in commerce. After completing his studies, he enteredinto active politics<strong>and</strong> held various positions in the Congress party.He is presently a Member <strong>of</strong> the Karnataka LegislativeCouncil for Kolar <strong>and</strong> Chikkaballapuur district. He was also a former minister <strong>of</strong> state for small scaleindustries <strong>of</strong>Karnataka from October1990 to November 1992.. He has over 20 years <strong>of</strong> experience in thetextile industry. He provides strategic direction in selection <strong>of</strong> technology <strong>and</strong> machineries in setting up newmanufacturing facilities, improvement <strong>of</strong> production processes <strong>and</strong> new ventures, <strong>and</strong>in the process <strong>of</strong>backward integration.Mrs. NuzhatAisha Naseer aged 35 years, is Executive <strong>and</strong> Non IndependentDirector in our company.She iswife <strong>of</strong> Mr. Naseer Ahmed. She holds a Bachelor’s degree in Commerce. She aids the in house design team indeveloping new designs in line with the latest trends in the fashion industry. Her inputs have helped theCompany inpresenting these designss for approvals <strong>and</strong> obtaining fresh orders from buyers, both existing<strong>and</strong> prospective.Non-Executive DirectorsMr. A. Arumugham aged 69 years is an Independent Director in our Company. He holds a degree inCommerce <strong>and</strong> qualified as a Member<strong>of</strong> the Institute <strong>of</strong> Chartered Accountants <strong>of</strong> <strong>India</strong> in 1967 <strong>and</strong> has 43years <strong>of</strong> st<strong>and</strong>ing in thepr<strong>of</strong>ession, <strong>and</strong> has vast experiencee in the industrial field. He completed hisarticleship with M/s Brahmahayya <strong>and</strong> Company,a leading firm <strong>of</strong> Chartered Accountants in South<strong>India</strong>,<strong>and</strong> after qualifying as a Chartered Accountant, worked with the firm for a year. He then joined theGovernment<strong>of</strong> Mysore, Steel Plant at Bhadravati, Karnataka, as the first chartered accountant <strong>of</strong> theCompany. He is the senior partner <strong>of</strong> M/s. Aru& Dev, an established accountancy firm <strong>of</strong> CharteredAccountants with over 36 years <strong>of</strong> st<strong>and</strong>ing.142
Scotts Garments LimitedMr. Babugouda Sangangouda Patil aged 68 years, is an Independent Director on our <strong>Board</strong>. He is a 1966batch <strong>of</strong> the <strong>India</strong>n Administrative Services, <strong>and</strong> retired as the Chief Secretary, Government <strong>of</strong> Karnataka inJanuary, 2004. He held very importantt assignmentss during his service <strong>and</strong> is generally regarded as one<strong>of</strong> themost dynamic <strong>of</strong>ficers <strong>of</strong> the State Government. He has wide ranging experience from heading State FinancialInstitutions to industrial development.Mr. M. M. Chopra aged 79 Years is an IndependentDirector in our Company. He holds a bachelors degree inscience fromPunjab University, Bachelors Degree in Law from Delhi University, Post Graduate Diploma inBusiness Administrationfrom Jamnalal Bajaj Institute <strong>of</strong> Management Studies, Mumbai University <strong>and</strong>Master’s Degree from Delhi University specializing in Economics <strong>and</strong> Sociology. Hehas an aggregateexperience <strong>of</strong> over 50 years in diverse fields including Naval service <strong>of</strong> 34 years corporateboard directorship<strong>of</strong> 16 years <strong>of</strong> various well known companies like Bombay Dyeing, <strong>India</strong>n Acrylics Steel Strip Wheels,Bombay RealEstate Development Corporation.Mr. Azeezulla Baig aged64 years, isan Independent Directorr in our Company. He holds Master <strong>of</strong> ArtsDegree in Sociology. He started his career as a journalist <strong>of</strong> Daily Salar in1960 <strong>and</strong> isalumni <strong>of</strong> CentralMuslim Association HighSchool. He joined Karnataka Administrative Service (KAS) in the Year 1977 <strong>and</strong> onbasis <strong>of</strong> merit he was inducted into <strong>India</strong>n Administrative Services (IAS) in the Year 1990. During his tenurewith KAS <strong>and</strong> IAS he hasheld different positions in the government organizations like Joint Commissioner,Commercial Taxes (Investigation), Managing Director, Karnataka State Small Industries DevelopmentCorporation,(KSSIDC), Bangalore, Deputy Secretary, Commerce <strong>and</strong> Industries Department, Karnataka,Director – Tourism <strong>of</strong> Karnataka, etc. He retired fromGovernment Service in 2007.Mr. C.R.Murali, aged 54 years is an Independent Director in our Company. He is a Chartered Accountantwith over 25years <strong>of</strong> core practice. He has been a part <strong>of</strong> theteam <strong>of</strong> consultants which has successfullymanaged several businesss restructuring exercises covering mergers, de-mergers, public issues, hiving <strong>of</strong>f etc.Mr. S. Thiruvadi, aged 56 years is Nominee Director <strong>of</strong> CVCFL in our Company. Heis an EngineeringGraduate with additional qualifications <strong>of</strong> MBA (Banking <strong>and</strong>Finance) <strong>and</strong> Certified Associate <strong>of</strong> <strong>India</strong>nInstitute <strong>of</strong> Bankers. Mr. S. Thiruvadi brings with him an experience <strong>of</strong> over 30 years in banking <strong>and</strong> exposurein CorporateCredit, Project Finance, Loan Syndication, SME Portfolio, Export/Import Credit <strong>and</strong> GeneralBanking.BORROWING POWERSOF DIRECTORSThe Company has passedan ordinary resolution atits Annual General Meeting held on 30/09/2011 interms<strong>of</strong> the provisions <strong>of</strong> section 293(1)(d) <strong>of</strong> the Companies Act 1956, wherebyit has authorized the <strong>Board</strong> <strong>of</strong>Directors to borrow money up to ` 75,000.00 Lacs(Rupees Seventy Five Thous<strong>and</strong> Lacs) for its short termcapital <strong>and</strong> long term capital requirements from financial institutions.RELATIONSHIPS BETWEEN DIRECTORSName <strong>of</strong> the DirectorMr. Naseer AhmedMrs.Nuzhat Aisha NaseerRelationship between DirectorsHusb<strong>and</strong> <strong>of</strong> Mrs. Nuzhat Aisha NaseerWife <strong>of</strong> Mr. Naseer AhmedQUALIFICATION SHARES REQUIRED TO BE HELD BY OUR DIRECTORSOur directorsare not required to hold any qualification shares.143
Scotts Garments LimitedINTEREST OF PROMOTER, DIRECTORSAll Directors<strong>of</strong> the Company may be deemed to beinterested tothe extent <strong>of</strong> fees, if any,payable to them forattending meetings <strong>of</strong> the <strong>Board</strong> or a Committeee there<strong>of</strong> as well as to the extent <strong>of</strong> other remuneration,reimbursement <strong>of</strong> expenses payable to them under the Articles <strong>of</strong> Association <strong>of</strong> the Company. Thewholetime directors will be interested to theextent <strong>of</strong> remuneration paid to them for services rendered by them as<strong>of</strong>ficers or employees <strong>of</strong> the Company. All the directors <strong>of</strong> the Company mayalso be deemed to be interestedto the extent <strong>of</strong> equity shares, if any, already held by them or their relatives in the Company or by thecorporate entity to whichh they represent on the <strong>Board</strong> <strong>of</strong> the Company, orthat may besubscribed for <strong>and</strong>allotted to them, out <strong>of</strong> the present Issue in terms <strong>of</strong> this Offer Document <strong>and</strong> also to the extent <strong>of</strong> anydividend payable to them<strong>and</strong> other distributions inrespect <strong>of</strong> the said equityshares.COMPENSATION TO MANAGINGDIRECTORR / WHOLE TIME DIRECTORSDetails <strong>of</strong> appointment <strong>and</strong> fixing <strong>of</strong> remuneration <strong>of</strong> Managing Director / Whole Time Directors:Mr. Naseer Ahmed, Managing DirectorrAs per the Resolution passed at the meeting <strong>of</strong> the <strong>Board</strong> <strong>of</strong> Directors held on03/06/2010,Mr. Naseer Ahmed,is re-appointed as Managing Director <strong>of</strong> the Company for a period <strong>of</strong> 5 years with effect from 18/06/2010 for aconsolidatedd remuneration <strong>of</strong> `25,00,000/- per month (inclusive <strong>of</strong> perquisites, allowances as may beapplicable asper Company’s rules).Minimum RemunerationnIn the event <strong>of</strong> loss or inadequate pr<strong>of</strong>its in any financial year during the currency <strong>of</strong> his tenure as ManagingDirector, theremuneration payable shall be governed by Section II <strong>of</strong> Part II <strong>of</strong> Schedule XIII <strong>of</strong> theCompanies Act, 1956 or any statutory modificationsthere<strong>of</strong>.Mrs. NuzhatAisha Naseer, DirectorAs per the Resolution passed at the meeting <strong>of</strong> the <strong>Board</strong> <strong>of</strong> Directors held on03/06/2010, Mrs. Nuzhat AishaNaseer, is re-appointed as Whole Time Director <strong>of</strong> the Company for a period <strong>of</strong> 5 years with effect from19/06/2010 for a consolidated remuneration <strong>of</strong> `3,00,000/- per month (inclusive <strong>of</strong> perquisites, allowances asmay be applicable as per Company’s rules).Minimum RemunerationnIn the event <strong>of</strong> loss or inadequate pr<strong>of</strong>its in any financial year during the currency <strong>of</strong> his tenure as ManagingDirector, theremuneration payable shall be governed by Section II <strong>of</strong> Part II <strong>of</strong> Schedule XIII <strong>of</strong> theCompanies Act, 1956 or any statutory modificationsthere<strong>of</strong>.No remuneration is paid to any <strong>of</strong> the independent directors except sitting fees.CHANGES IN THE BOARD OF DIRECTORS DURING THE LAST THREE YEARSThere has been following change in the<strong>Board</strong> <strong>of</strong> Directors <strong>of</strong> the Company inlast three years.Sr. No1.2.3.Name <strong>of</strong> DirectorsMr. S.A. HussainMr. Prashant AgarwalMr. Aman AgarwalDate <strong>of</strong> Change27/ /09/201019/ /04/201119/ /04/2011ReasonResignationResignationResignation144
Scotts Garments LimitedSr. No4.Name <strong>of</strong> DirectorsMr. S. ThiruvadiDate <strong>of</strong> Change08/ /12/2012ReasonAppointment asNomineeDirector <strong>of</strong> CVCFLCompliancewith Corporate Governance Requirements:The provisions <strong>of</strong> the Listing Agreement to be entered into with the Stock <strong>Exchange</strong>(s) will be applicable toour Company immediately upon the listing <strong>of</strong> our Equity Shares with the Stock <strong>Exchange</strong>s. Our Companyhas complied with the corporate governance code in accordancewith Clause49 to the extent applicable. OurCompany undertakes to take all necessary steps to continue tocomply withall the requirements <strong>of</strong> Clause49 <strong>of</strong> the Listing Agreement to be entered into withthe Stock <strong>Exchange</strong>s.In terms <strong>of</strong> the Clause 49 <strong>of</strong> the Listing Agreement, our Company has already constituted the followingcommittees.Audit CommitteeThe Audit Committee was re-constituted at the<strong>Board</strong> meeting held on4th January, 2008. TheCommittee comprises <strong>of</strong> the followingmembersAuditName <strong>of</strong> DirectorNr. A. ArumughamMr. C.R. MuraliMr. Azeezulla BaigStatus in CommitteeChairmanMemberMemberNature<strong>of</strong> DirectorshipIndependentIndependentIndependentThe role <strong>of</strong> the Committee has been defined to include the following activities:(a) Overseeing the Company’s financial reportingprocess <strong>and</strong>the disclosure <strong>of</strong> its financial information toensure that the financial statements are correct, sufficient <strong>and</strong> credible.(b) Recommending to the <strong>Board</strong>, the appointment, re-appointment <strong>and</strong>removal <strong>of</strong> the statutory auditor <strong>and</strong> fixation <strong>of</strong> audit fee.if required, the replacement or(c) Approval <strong>of</strong> payment to statutoryauditors for any other services rendered by the statutory auditors.(d) Reviewing with the management the annualapproval, with particular reference to:financial statements before submission to the <strong>Board</strong> for- Matters required to be included in the Director’s Responsibility Statement to be included in the<strong>Board</strong>’s report in terms <strong>of</strong> clause (2AA) <strong>of</strong> section 217 <strong>of</strong> the Companies Act, 1956.- Changes, if any, inaccounting policies <strong>and</strong> practices <strong>and</strong> reasons for the same.- Majoraccounting entries involving estimatess based on theexercise <strong>of</strong> judgment by management.- Significant adjustments made inthe financial statements arising out <strong>of</strong>audit findings.- Compliance with listing <strong>and</strong> other legal requirements relating to financial statements.- Disclosure <strong>of</strong> any related party transactions.- Qualifications in the draft auditreport.(e) Reviewing, with themanagement, the statement <strong>of</strong> uses/ application <strong>of</strong> funds raised through anissue(public issue, rights issue, preferential issue, etc.), the statement <strong>of</strong> fundsutilized for purposes other thanthose stated in the <strong>of</strong>fer document/ prospectus/ notice <strong>and</strong> the report submitted by the monitoring145
Scotts Garments Limitedagency monitoring the utilization <strong>of</strong> proceeds <strong>of</strong> a public or rightsrecommendations tothe <strong>Board</strong> to take up stepss in this matter.issue, <strong>and</strong> making appropriate(f) Reviewing, with the management, performance <strong>of</strong> statutory <strong>and</strong> internal auditors, <strong>and</strong> adequacy<strong>of</strong> theinternalcontrol systems.(g) Reviewing the adequacy <strong>of</strong> internal audit function, if any, including the structure <strong>of</strong> the internal auditdepartment, staffing<strong>and</strong> seniority <strong>of</strong> the <strong>of</strong>ficial heading the department, reportingstructure coverage<strong>and</strong> frequency <strong>of</strong> internal audit.(h) Discussion with internal auditors any significant findings <strong>and</strong> follow up there on.(i) Reviewing the findings <strong>of</strong> any internal investigations by theinternal auditors into matters where there issuspected fraud or irregularity ora failure <strong>of</strong> internal control systems <strong>of</strong>a material nature <strong>and</strong> reportingthe matter to the board.(j) Discussion with statutory auditors before the audit commences, about the nature <strong>and</strong> scope <strong>of</strong> audit aswell as post-audit discussion to ascertain any area <strong>of</strong> concern.(k) To lookinto the reasons for substantial defaults in the payment to thedepositors, debenture holders,shareholders (in case<strong>of</strong> non payment <strong>of</strong> declared dividends) <strong>and</strong> creditors.(l) To review the functioning <strong>of</strong> the Whistle Blower mechanism, in case the same is existing.(m) Carrying out any other function as is mentioned in the terms <strong>of</strong> referencee <strong>of</strong> the AuditCommittee.Remuneration CommitteeThe Remuneration Committee was constituted on 4 th January, 2008 <strong>and</strong> comprises the following directors <strong>of</strong>the <strong>Board</strong>.Name <strong>of</strong>DirectorMr. A. ArumughamMr. C.R. MuraliMr. Azeezulla BaigNature <strong>of</strong> DirectorshipIndependentIndependentIndependentThe terms<strong>of</strong> reference <strong>of</strong> the Remuneration Committee are asfollows:(a)The Remunerationn Committeedirectors.recommends to the board the compensation terms <strong>of</strong> the executive(b)(c)(d)Framing <strong>and</strong> implementing on behalf <strong>of</strong> the<strong>Board</strong> <strong>and</strong> on behalf <strong>of</strong> the shareholders, a credible <strong>and</strong>transparent policyon remuneration <strong>of</strong> executive directors including ESOP, Pension Rights <strong>and</strong> anycompensation payment.Considering approving <strong>and</strong> recommendingto the <strong>Board</strong>the changesin designation <strong>and</strong> increase insalary<strong>of</strong> the executive directors.Ensuring the remuneration policy is good enough to attract, retain <strong>and</strong>motivate directors.146
Scotts Garments Limited(e)Bringing about objectivity in deeming the remuneration package while striking a balance between theinterest <strong>of</strong> our Company <strong>and</strong> the shareholders.Shareholders’/ Investor Grievances CommitteeThe Shareholders <strong>and</strong> Investors Grievances Committee was constituted at the <strong>Board</strong> meeting held on 10 thMay, 2010. The Committee consists <strong>of</strong>the following Directors.Name <strong>of</strong> DirectorMr. Naseer AhmedMr. A. ArumughamMr. Azeezulla BaigStatus in CommitteeChairmanMemberMemberNature <strong>of</strong> DirectorshipNon-IndependentIndependentIndependentThe scope <strong>and</strong> function <strong>of</strong> this committee is to consider <strong>and</strong> review shareholders’/ investors’ grievances <strong>and</strong>complaints <strong>and</strong> ensure that all shareholders’/ investors’ grievances <strong>and</strong> correspondence are attended toexpeditiously <strong>and</strong> satisfactorily unless constrained by incomplete documentation <strong>and</strong>/ or legalimpediments.147
ScottsGarments LimitedORGANISATION CHART148
Scotts Garments LimitedKEY MANAGERIAL PERSONNELThe Key Managerial Personnel <strong>of</strong> SGL other than theDirectors areas follows:Sr.No.1.2.3.Name,Designation <strong>and</strong>AgeMr.PoornaSrinivasannConsultantt(39 years)Mr.Harikrishnan BPresidentOperations-Tirupur(44 years)Mr. RonaldMorrisPresident-Bangaloreoperations(41 years)QualificationDipinTextileTechnologyMBA –Marketing<strong>and</strong>FinanceCertifiedLeanConsultant (TBM –USA).Sc.,DiplomainProductionTechnologyDiplomainApparelMachineEngineeringB.A.PresentresponsibilitiesStrategy<strong>and</strong>organisation planningMarketingProductdevelopment <strong>and</strong>sourcingOverall incharge <strong>of</strong>TirupuractivitiesOverall incharge <strong>of</strong>WovenproductionDate <strong>of</strong>appointment01/07/201106/05/201102/05/2012PreviousEmployment<strong>and</strong> TotalExperienceGokaldasExportCOO(KnitsDivision)(18 Years)EastmanExportsGlobalClothingPrivateLimited(24 years)GokaldasExports18 yearsArea <strong>of</strong>responsibility in previouscompanyOver all incharge <strong>of</strong>knits orderbookingmarketingactivitiesHeading alloperationsinvolvingfrom productdevelopment,salesmansampling,protosampling,productionfeasibilityanalysis,productionuptopick<strong>and</strong>logistics.H<strong>and</strong>ledbusinessvariousinternationpackall<strong>of</strong>nalbuyersrequirementsOverall incharge foroperations <strong>of</strong>the companyCompensation paidduringlastfinancialyear`27,00, ,00018,64, ,25814,85, ,170149
Scotts Garments LimitedSr.No.4.5.6.Name,Designation <strong>and</strong>AgeMr.Madhivanan C.General Manager(51 years)Mr. ShailendraKumar NigamGeneral Manager(38 years)Ms. S R SrideviHead(30 years)QualificationB.ComB.Tech(TextileChemistry)B.ScCostumeDesigning& FashionPresentresponsibilitiesOverall incharge <strong>of</strong>KnittsProductionProjectsDesignDate <strong>of</strong>appointment26/11/200929/09/201101/03/2010PreviousEmployment<strong>and</strong> TotalExperienceShahi ExportsPvt. Ltd.(18 years)MangalTextileLtd.Pvt.15 YearsI Duo DesignStudio8 yearsArea <strong>of</strong>responsibility in previouscompanyOverallincharge <strong>of</strong>knitsproductionIn charge fordevelopment<strong>of</strong>newProjectsDesigningactivitiesCompensation paidduringlastfinancialyear`16,25, ,00013,98, ,00013,13, ,3257.8.9.10.11.12.13.Mr. Ampar Pramod(Vice President)(32 years)Mr.M.ThiagarajanGeneral Manager(51 years)Mr.Manoj FrancisManager(37 years)Mr.Rajan V ManiGeneral Manager(60 years)Mr.JayaprakashH.V.General Manager(38 years)Mr.Mukesh KumarGeneral Manager(36 years)Mr.S.GuruswamyBabuDiplomainFashionDesign<strong>and</strong>Technology (U.K.)B.Com,A.C.AB.A.,L.L.B.,M.B.AM.ComC.A.I.I.BB.E.FDinNIFTCalcuttaM.ComI. .C.W.AA.C.S.Denim –Marketing<strong>and</strong>productdevelopmentFinanceHumanResourceBankingOperationsProductionProductionSecretarialWork01/09/200902/03/200524/11/200901/01/201001/05/200519/06/200901/08/2007PrinciplePartner atLaundaryServiceDesign Inc.,(13 years)FabritexExport (P)Ltd.,(28 years)FFI(12 years)StalinGarments,Tirupur(30 years)CIGFIL LTD.,-I.T.C.ApparelsDivision-(14 years)Arora FahionsLtd.,(13 years)AlphaSystemsPrivate Ltd.,Designing,11,96, ,000orderprocuring<strong>and</strong>marketingactivitiesOverall 11,70, ,000incharge <strong>of</strong>Finance <strong>and</strong>AccountsHRD<strong>and</strong> 9,10,000compliancerelatedactivitiesOverall 8,45,000incharge <strong>of</strong>bankingactivitiesProduction8,45,000OverallchargeproductionactivitiesOverallinchargesecretarialin<strong>of</strong><strong>of</strong>7,50,0006,89,000150
Scotts Garments LimitedSr.No.14.15.16.Name,Designation <strong>and</strong>AgeCompany Secretary(52 years)Mr.NaveedPashaManager(43 years)Mr. SyedTahir AManagerMerch<strong>and</strong>ising(43 years)Mr.Saud NazirAbuGeneral Manager(51 years)-QualificationDiplomainTextileEngineeringM.Sc.,B.E.PresentresponsibilitiesSourcing <strong>of</strong>FabricMarketingactivitiesAdministrationDate <strong>of</strong>appointment10/08/200003/01/201101/04/1999PreviousEmployment<strong>and</strong> TotalExperience(28 years)GokaldasExportsPrivateLimited(20 years)EastmanExports(15 years)STC LimitedU.S.A.(30 years)Area <strong>of</strong>responsibility in previouscompanyactivitiesFabricsourcingactivitiesMerch<strong>and</strong>ising activitiesOverall incharge <strong>of</strong>Administration activitiesCompensation paidduringlastfinancialyear`6,50,0006,30,0005,72,000The above persons are on the rolls <strong>of</strong> the company as permanentemployees. There is no specific tenure <strong>of</strong> any<strong>of</strong> our key managerial personnel.NUMBEROF SHARES HELD BY THE KEY MANAGERIALPERSONNELParticularsNo. <strong>of</strong> Shares heldMr.M.ThiagarajanMr.SaudNazirMr. Naved PashaTotal10,00010,0003,00023,000CHANGES IN THE KEY MANAGERIAL PERSONNEL OFTHE COMPANY DURING LAST THREEYEARSNameDate <strong>of</strong> ChangeReasonMr. S. JagadishMr. Sayed SaffiulaMr. Subair KunjuMr.Rajeev Das KalathilMr. G. RafiqMrs. Sapna ShivdasMr. Sanjay Sadashiv MaheshMr. G. RafiqMrs. Sapna ShivdasMr. Sanjay Sadashiv MaheshMr. Poorna SrinivasannMr. Harikrishnan B28/11/0931/07/1031/03/1031/05/1003/05/1019/05/1001/01/9931/03/1210/01/1117/05/1101/07/1106/05/11ResignationResignationResignationResignationAppointmentAppointmentAppointmentResignationResignationResignationAppointmentAppointment151
NameMr. Ronald MorisMr. Shailendra Kumar NigamMr. Ampar PramodMs. S.R. SrideviMr. Sayed Abu Tahir A.Date <strong>of</strong> Change02/05/1229/09/1101/09/0901/10/1003/01/11Scotts Garments LimitedReasonAppointmentAppointmentAppointmentAppointmentAppointmentBONUS OR PROFIT SHARING PLAN FOR THE KEY MANAGERIAL PERSONNELPresently,the Key Managerial Personnel receive annual Ex-Gratia exists in the Company.as One month <strong>of</strong> Gross salary. Otherthan this there is no bonus or pr<strong>of</strong>it sharing policyRELATIONSHIP AMONGST THEKEY MANAGERIAL PERSONNELNone <strong>of</strong> the Key Managerial Personnel are related to each other.ARRANGEMENTS AND UNDERSTANDINGWITH MAJOR SHAREHOLDERSNone <strong>of</strong> our key managerial personnel have been appointed pursuant to any arrangement orunderst<strong>and</strong>ing with our major shareholders, customers, suppliers or others.LOANS TO KEY MANAGERIAL PERSONNELThe Company has not given any loan to its Key Managerial Personnel in the last financial year. Presently, there isno outst<strong>and</strong>ing loan receivable fromany Key Managerial Personnel.EMPLOYEE STOCK OPTION SCHEMESTill date Company hasnot introduced any Employees Stock Option Schemes/ Employees Stock PurchaseSchemes.INTEREST OF KEY MANAGERIAAL PERSONNELThe premises at B 108, Peenya Industrial Estate, IIIrd stage has been taken on rent from Mr.SaudNazirwho is a Key Managerial Employeee in the company. Presently, a rent <strong>of</strong> ` 30,000 per month is being paidby our company to Mr.Saud Nazir for usingthe said premises. Apart from thisnone <strong>of</strong> the KeyManagerial Personnel have any interest in the Company other than to the extent <strong>of</strong> the remuneration <strong>of</strong>benefits towhich they are entitled as per their terms <strong>of</strong> appointment, reimbursement <strong>of</strong> expenses incurredby them during the ordinary course<strong>of</strong> business <strong>and</strong> to the extent <strong>of</strong> Equity Shares heldby them, if any inour Company.No amount or benefit has been paid or given within the twopreceding years or intended to be given toany <strong>of</strong> thedirectors or key managerial personnel except the normal remuneration for services rendered asdirectors, <strong>of</strong>ficers or employees.PAYMENT OR BENEFIT (NON-SALARY RELATED) TO OFFICERS OFTHE COMPANYExcept as stated in thisOffer Document, no amount or benefit has been paid or given or is intendedd to bepaid or given during the precedingtwo years to any <strong>of</strong> its <strong>of</strong>ficers except for the normal remunerationpaid to Directors, <strong>of</strong>ficers or employees since theincorporation <strong>of</strong> the Company.152
Scotts Garments LimitedPROMOTER ANDITS BACKGROUNDOur PromoterDetails <strong>of</strong> Promoter being individualMr. Naseer AhmedMr. Naseer Ahmedaged 53 years is the Managing Director <strong>of</strong> our company.He is the son <strong>of</strong> Late C.K.M Hyder. He holdsa bachelor degree in commerce.After completing his studies, heentered intoactive politics <strong>and</strong> held variouspositions in the Congress party. He is presently a Member <strong>of</strong> the KarnatakaLegislative Council, for Kolar <strong>and</strong> Chikkaballapur district. He was also aformer minister <strong>of</strong> state for small scale industries <strong>of</strong> Karnataka from October1990 to November1992. He has over 20 years <strong>of</strong> experience in the textileindustry. He provides strategic direction in selection <strong>of</strong> technology <strong>and</strong>machineries in setting up newmanufacturing facilities, improvement <strong>of</strong>production processes <strong>and</strong> newventures, <strong>and</strong> in the process <strong>of</strong> backwardintegration.Identification DetailsVoterID NumberBTF0946954Driving License Number 5560/2000The Permanent Account Number, Bank Account Number <strong>and</strong> Passport Number <strong>of</strong> the Promoter have beensubmitted toBSE <strong>and</strong> NSE.153
Scotts Garments LimitedPROMOTER GROUPThe following natural persons (being the immediate relatives <strong>of</strong> our Promoter <strong>and</strong> Promoter’s),partnerships, companies <strong>and</strong>other entities shall form part <strong>of</strong> our Promoter Group:HUFs,Name <strong>of</strong> theNatural Persons (ImmediateRelative <strong>of</strong> our Promoter)Mrs. NuzhatAisha NaseerMr. Awaiz AhmedMr. Fiaz AhmedMaster ZuiizAhmed;Master Tanish Ahmed.Ms. Abeer FathimaMr. MukhtarAhmedMr. Aslam AhmedMrs. Zareenaa BegumMrs. Jabeen BegumMrs. ThasineSultanaMrs. Naznine BegumRelationship withMr. NaseerAhmedWifeSonSonSonSonDaughterBrotherBrotherSisterSisterSisterSisterName <strong>of</strong> theNatural Persons (ImmediateRelationship withRelative <strong>of</strong> our Promoter’s Spouse) Mrs. Nuzhat Aisha NaseerMr. Mohammed Saleem Ahmed KhanBrotherMrs. Sultanaa KhadijaSisterMs. Abeer FathimaDaughterMr. Awaiz AhmedSonMaster. Faiz AhmedSonMaster ZuiizAhmedSonMaster Tanish AhmedSonOur Group CompaniesThe following are the groupcompanies as defined under Schedule VIII <strong>of</strong> the SEBI (ICDR) RegulationsSr. No. Name <strong>of</strong>the company1. Scotts Fashionciti <strong>India</strong> Limited2. Scotts Plantations Private Limited3. Scotts Metals <strong>and</strong> Mines Private Limited4. Scotts Infrastructure <strong>and</strong> Development Private Limited5. GFI Infrastructure Development Private Limited6. CoppersCoin Realty Private Limited7. Pedigreee Construction Private Limited8. Scotts Apparels Private Limited9. Scotts Fashions Private Limited10. Scotts Wears Private Limited11. Scotts Knits Private Limited12. Inmark Retail PrivateLimitedNone <strong>of</strong> theabove mentioned companies have made any capital issue during last three years nor arethey classified as Sick Industrial Company within the meaning <strong>of</strong> the Sick Industrial Companies(Special Provisions) Act, 1985.154
Scotts Garments LimitedThe details <strong>of</strong> our Groupcompanies are as provided below:1. Scotts Fashionciti <strong>India</strong> Limited (SFIL)SFIL was incorporated on 24/11/2006 as a public <strong>limited</strong> company <strong>and</strong> received certificate <strong>of</strong>commencement <strong>of</strong> business dated 05/06/2007 from Registrarr <strong>of</strong> Companies, Bangalore, Karnataka.The CIN <strong>of</strong> the Companyis U45202KA2006PLC041044. The main object <strong>of</strong> the company is to establish<strong>and</strong> build textile park for location <strong>of</strong> manufacture processing <strong>of</strong> textilee items, research centres,laboratories, testing centres <strong>and</strong> allied activities. Currently the Companyis not carrying on anybusiness activity. The registered <strong>of</strong>fice is situated at 481-B, IV Phase, Peenya Industrial Area, Peenya,Bangalore - 560 058. Mr. Naseer Ahmed <strong>and</strong> Mr. Prashant Agarwal are the promoters <strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors 1) Mr. Naseer Ahmed2) Mrs. Nuzhat AishaNaseer3) Mr. Prashant AgarwalThe Shareholding pattern<strong>of</strong> SFIL as on 31/07/20122 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mrs. Nuzhat Aisha Naseer3 Mr. Prashant Agarwal4 Mr. Aman Agarwal5 Bombay RayonFashions Limited6 Scotts Garments Limited7 Scotts Plantation Private LimitedGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 10/-each10,00010,00010,00010,00010,00010,00010,00070,000% <strong>of</strong> totalshare capital14.2914.2914.2914.2914.2914.2914.29100.00Brief Audited FinancialsParticularsEquity Share Capital at `10/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`Net Asset Value Per Share (`)(` inLacs)2009-107.00NilNil(0.53) N.A. 6.532010-11 7.00NilNil(0.47)N.A.6.422011-127.00(2.56)Nil(0.05)N.A.6.342. Scotts Plantations Private Limited (SPPL)SPPL was incorporated on 28/12/2005 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> the Company is U01132KA2005PTC038071. The main object <strong>of</strong> the company is to acquire bypurchase orotherwise <strong>and</strong> carry on the business <strong>of</strong> estate owners, cultivation, planters, growers <strong>and</strong>allied activities. The registered <strong>of</strong>ficeis situated at 481-B, IV Phase, PeenyaIndustrial Area, Peenya,Bangalore - 560 058. Mr. Naseer Ahmed <strong>and</strong> Mr. Prashant Agarwal are the promoters <strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. Prashant Agarwal155
The Shareholding pattern<strong>of</strong> SPPL as on 31/07/2012 is as follows:Sr. CategoryNo1 Bombay RayonClothing Limited2 Pedigree Constructions Private Limited3 Mr. Naseer Ahmed4 Mr. Prashant AgarwalGr<strong>and</strong> TotalBrief Audited FinancialsParticularsEquity Share Capital at `100/- eachShare Application MoneyReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)3. Scotts Metals <strong>and</strong> MinesPrivate Limited (SMMPL)No. <strong>of</strong> shares held<strong>of</strong> ` 100/ /- each99,50099,5005005002,00,000Scotts Garments Limited% <strong>of</strong> totalshare capital49.7549.750.250.25100.00(` in Lacs)2009-10200.00 328.30 (371.33) 148.71 (93.74) N.A. (85.66) 2010-11 200.00328.30(434.40) 159.50(63.07)N.A.(117.82)2011-12200.00328.30(376.28)218.7158.1229.06(88.14)SMMPL was incorporated on 10/06/ /2005 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. TheCIN <strong>of</strong> the Company is U51420KA2005PTC036525. The main object <strong>of</strong> the company is tocarry out orengage in business <strong>and</strong>/ /or manufacture in <strong>India</strong> <strong>and</strong> elsewhere, various varieties <strong>of</strong> Iron <strong>and</strong> Steelincluding Sponge Iron, Cast Iron, Wrought Iron <strong>and</strong> Mild Steel <strong>and</strong> alliedactivities. The registered<strong>of</strong>fice is situated at 481-B, IV Phase, Peenya Industrial Area, Bangalore, Karnataka, <strong>India</strong>, 560058. Mr.Naseer Ahmed is the promoter <strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mrs. Nuzhat Aisha Naseer3) Mr. Ziaulla Sharief4) Dr. Sayed AnwarThe Shareholding pattern<strong>of</strong> SMMPL as on 31/07/ 2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mrs. Nuzhat Aisha Naseer3 Mr. Ziaulla Sharief4 Dr. Sayed AnwarGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/ /- each2502502502501,000% <strong>of</strong> totalshare capital25252525100.00Brief Audited FinancialsParticularsEquity Share Capital at `100/- eachShare Application MoneyReserves & Surplus(` in Lacs)2009-101.0059.00 Nil2010-11 1.0059.00Nil2011-121.0059.00(2.69)156
Scotts Garments LimitedParticularsTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)2009-10Nil(0.41) N.A. (146.74) 2010-11 Nil(0.11)N.A.(157.88) 2011-12Nil(0.11)N.A.(169.11)4. Scotts Infrastructure <strong>and</strong>Development Private Limited (SIDPL)SIDPL was incorporatedon 09/02/2007 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> the Company is U45202KA2007PTC041738. Themain object <strong>of</strong> the company is to carryout businesss<strong>of</strong> Infrastructure. The registered <strong>of</strong>fice is situated at 481-B, IV Phase, Peenya Industrial Area, Peenya,Bangalore - 58. Mr. Naseer Ahmed is the promoterr <strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. A. ArumughamThe Shareholding pattern<strong>of</strong> SIDPL ason 31/07/2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mr. A.ArumughamGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 10/-each9,90010010,000% <strong>of</strong> totalshare capital99.001.00100.00Brief Audited FinancialsParticularsEquity Share Capital at `10/- eachShare Application MoneyReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)(`in Lacs)2009-101.00679.96 NilNil(0.18) N.A.1.382010-11 1.00685.66NilNil(0.25)N.A0.042011-121.00686.41(1.14)Nil(0.14)N.A(1.37)5. GFI Infrastructure Development Private Limited (GIPL)GIPL was incorporated on 31/12/2008 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> the Company is U1320KA2008PTC048765. The main object <strong>of</strong> the company is to carry outInfrastructure activities. The registered <strong>of</strong>fice is situated at 481-B, IV Phase, Peenya Industrial Area,Bangalore, Karnataka, <strong>India</strong>, 560058. Mr. Naseer Ahmed <strong>and</strong> Mr. Prashant Agarwal are the promoters<strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. Prashant Agarwal157
Scotts Garments LimitedThe Shareholding pattern<strong>of</strong> GIPL as on 31/07/2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mr. Prashant AgarwalGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 10/-each5,0005,00010,000% <strong>of</strong> totalshare capital50.0050.00100.00Brief Audited FinancialsParticularsEquity Share Capital at `10/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)(` in Lacs)2009-101.00NilNil(0.05) N.A. (9.19) 2010-11 1.00NilNil(0.27)N.A.(11.90)2011-121.00(2.25)Nil(0.06)N.A.(12.46)6. Coppers Coin Realty Private Limited(CCRPL)CCRPL wasincorporated on 06/10/ 2009 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN <strong>of</strong>the Company is U45201KA2009PTC051106. The company is engaged in therealty business. The registered<strong>of</strong>fice is situated at 481-B, IV Phase, Peenya Industrial Area, Bangalore, Karnataka, <strong>India</strong>, 560058. Mr. NaseerAhmed <strong>and</strong>Mr. Prashant Agarwal arethe promoters <strong>of</strong> the Company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. A. Arumugham3) Mr. Awaiz AhmedThe Shareholding pattern<strong>of</strong> CCRPL as on 16/07/2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mr. Janardhan Agarwal3 Mr. Prashant Agarwal4 B R Machine Tools Pvt. Ltd.Gr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/ /- each50025025076,50077,500% <strong>of</strong> totalshare capital0.650.320.3298.71100.00Brief Audited FinancialsParticularsEquity Share Capital at `100/- eachShare Application MoneyReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)(`` in Lacs)2009-101.002123.75 NilNil(0.33) N.A. 66.89 2010-11 1.001023.75 NilNil(0.26)N.A.40.542011-1277.501486.75114.06Nil(0.15)N.A.247.18158
Scotts Garments LimitedThe paid up equity share capital <strong>of</strong>F.Y.2011-12the company has increased from ` 1.00 lacs to `77.50 lacsduring7. Pedigree Construction Private Limited (PCPL)PCPL was incorporated on 04/02/1985 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> theCompany isU45201KA1985PTC006674. The subscribers to the Memor<strong>and</strong>umm were Mr.Dinyar RustomMody<strong>and</strong> Mrs. Farida Dinyar Mody. The main object <strong>of</strong> the Company is to carry on the business <strong>of</strong> building,erecting <strong>and</strong>constructingstructures, houses, shedss <strong>and</strong> other fixtures on l<strong>and</strong>s or buildings <strong>and</strong> to purchase,take on lease or otherwise acquire or exchange or transfer any l<strong>and</strong>, buildings <strong>of</strong> any tenure whatsoever. Theregistered <strong>of</strong>fice is situated at No. 481/B, IV Phase,Peenya Industrial Area, Bangalore, Karnataka.PCPL is one <strong>of</strong> the major shareholder <strong>of</strong> the Company <strong>and</strong>it presentlyholds 48,31,250 equity sharesrepresenting18.07% equity share capital. PCPL was subsidiary <strong>of</strong> our Company during F.Y.2004 to 2006 <strong>and</strong>later it was hived <strong>of</strong>f fromour Company. In F.Y.2007-08, PCPL made an investment in our Company.The transactions relatingto investment in equity shares between PCPL, ourCompany <strong>and</strong> the promoter <strong>of</strong>our company were perused by SEBI & the matter is being referred by SEBI to the Ministry <strong>of</strong> CorporateAffairs (MCA) as it was an unlisted company.<strong>Board</strong> <strong>of</strong> Directors1) Mr. A. Arumugham2) Mr. M. Thiagarajan3) Mr. Naseer AhmedThe Shareholding pattern<strong>of</strong> PCPL as on 31/07/2012 is as follows:Sr. CategoryNo1 Mrs. Gomathi Rajam2 Mr. Naseer Ahmed3 Mr. A. Arumugham4 Mr.Wajid Khan5 Mr.Dastagir SabGr<strong>and</strong> TotalNo. <strong>of</strong> shares held <strong>of</strong>` 100/ /- each900982398000500000899000% <strong>of</strong> total sharecapital0.100.01negligible44.2755.62100.00Brief Audited FinancialsParticularsEquity Share Capital at `100/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share ( `)(`in Lacs)2009-101.002534.73 89.09 34.30 3430.03 2,53,573 2010-11 1.002547.66 70.1712.931293.172,54,8662011-12899.003885.0573.6412.841.43532.158. Scotts Apparels Pvt. Limited (SAPL)SAPL was incorporated on 04/03/2005 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> theCompany is U18101KA2005PTC035757. The main object <strong>of</strong> the company is business <strong>of</strong> manufacturer,importers <strong>and</strong> exporters, wholesale <strong>and</strong> retail dealers. The registered <strong>of</strong>ficeis situated at 481/B, IV Phase,159
Scotts Garments LimitedPeenya IndlArea, Peenya, Bangalore - 560 058. The present promoters <strong>of</strong> SAPL are Mr. Naseer Ahmed <strong>and</strong>Mrs. Nuzhat Aisha Naseer.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mrs. Nuzhat AishaNaseer3) Mr. A. Arumughamm4) Mr. Aman AgarwalThe Shareholding patternas on 31/07/2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Ms. Nuzhat Aisha NaseerGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/- each5005001000% <strong>of</strong> totalshare capital50.0050.00100.00Brief Audited FinancialsParticularsEquity Share Capital at `100/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)(` in Lacs)2009-10 2010-11 2011-121.00NilNil(0.17) N. .A(172.25) 1.00NilNil(0.15)N.A(188.05) 1.00(3.09)Nil(0.22)N.A(209.84)9. Scotts Fashions Private Limited (SFPL)SFPL was incorporated on 01/03/2002 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> theCompany is U18101KA2002PTC030184. The main object <strong>of</strong> the company is business <strong>of</strong> manufacturer,importers <strong>and</strong> exporters, wholesale <strong>and</strong> retail dealers. The registered <strong>of</strong>ficeis situated at 481/B, IV Phase,Peenya IndlArea, Peenya, Bangalore - 560 058. Thepresent promoter <strong>of</strong> SFPLis Mr. Naseer Ahmed.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Ms. Nuzhat Aisha Naseer3) Mr. ThiagarajanThe Shareholding patternas on 31/07/2012 is as follows:Sr. CategoryNo1 Mr. Naseer Ahmed2 Mr. A. ArumughamGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 10/- each990010010,000% <strong>of</strong> totalshare capital99.001.00100.00Brief Audited FinancialsParticularsEquity Share Capital at `10/- eachShare Application Money(` in Lacs)2009-101.001104.67 2010-11 1.001104.67 2011-121.001104.67160
Scotts Garments LimitedParticularsReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)2009-10NilNil(0.31) 2010-11 NilNil(0.15)2011-12(1.71)Nil(0.27)N.A. N.A.(2.70) (3.81)N.A.(7.14)10. Scotts Wears Private LimitedSWPL was incorporated on 23/07/2008 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> theCompany is U18101KA2008PTC047262. The main object <strong>of</strong> the company is business <strong>of</strong> manufacturer,importers <strong>and</strong> exporters, wholesale <strong>and</strong> retail dealers. The registered <strong>of</strong>ficeis situated at 481/B, IV Phase,Peenya IndlArea, Peenya, Bangalore - 560 058.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. A. Arumugham3) Mr. ThiagarajanThe Shareholding patternas on 31/07/2012 is as follows:Sr. CategoryNo1 Mr. Arumugham2 Mr. ThiagarajanGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/- each5005001000% <strong>of</strong> totalshare capital50.0050.00100.00Brief Audited FinancialsParticularsEquity Share Capital at `100/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)11. Scotts Knits Private Limited2009-10 2010-111.001.00NilNilNilNil(0.25) (0.18)NANA37.56 23.00(` in Lacs)2011-121.00(0.88)Nil(0.19)NA12.25SKPL was incorporatedon 24/10/2008 with Registrar <strong>of</strong> Companies, Bangalore, Karnataka. The CIN<strong>of</strong> theCompany is U18101KA2008PTC048104. The main object <strong>of</strong> the company is business <strong>of</strong> manufacturer,importers <strong>and</strong> exporters, wholesale <strong>and</strong> retail dealers. The registered <strong>of</strong>ficeis situated at F-3, PadmavathyHomes, 7 th Main Road, Puttenahalli, J.P. Nagar, VII Phase, Bangalore – 560078.<strong>Board</strong> <strong>of</strong> Directors1) Mr. Naseer Ahmed2) Mr. Arumugham3) Mr. Thiagarajan161
Scotts Garments LimitedThe Shareholding patternas on 16/07/2012 is as follows:Sr. CategoryNo1 Mr. A. Arumugham2 Mr. ThiagarajanGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/- each5005001000% <strong>of</strong> totalshare capital50.0050.00100.00Brief Audited FinancialsParticularsEquity Share Capital at ` 100/- eachReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)12. Inmark Retail Private Limited (IRPL)2009-10 2010-111.001.00NilNilNilNil(0.26) (0.20)NANA24.02 10.36(` in Lacs)2011-121.00(1.12)Nil(0.37)NA(12.28)IRPL wasoriginally incorporated on 23/07/2008in the name<strong>of</strong> Scotts Dresses PrivateLtd with Registrar<strong>of</strong> Companies, Bangalore, Karnataka. The name <strong>of</strong> the company was changed to InmarkRetail Private Ltd.<strong>and</strong> a fresh certificate <strong>of</strong> incorporation was issued on 19/10/2011. The CIN <strong>of</strong>the Company isU18101KA2008PTC047261. The company is in the business <strong>of</strong> sale <strong>of</strong> readymade <strong>garments</strong> under variousbr<strong>and</strong>s such as Amari,Urban Nomad, Alibi, Slub <strong>and</strong> Tickles through itsretail outlets in Bangalore. Theregistered<strong>of</strong>fice is situated at 481/B, IV Phase, Peenya Indl Area, Peenya, Bangalore - 560 058. -.<strong>Board</strong> <strong>of</strong> DirectorsMr. Naseer AhmedMr. ArumughamMr. ThiagarajanThe Shareholding patternas on 16/07/2012 is as follows:Sr. CategoryNo1 Scotts Garments Ltd.2 Monsoon Real Estate Pvt. Ltd.3 MAF Knits4 Mr. Naseer Ahmed5 Mr. Munnavar Jaliwala6 Mr. Faizal Jaliwala7 Mr. ArumughamGr<strong>and</strong> TotalNo. <strong>of</strong> shares held<strong>of</strong> ` 100/- each2,70,0002,00,0001,00,00040,50012,50012,5005006,36,000% <strong>of</strong> totalshare capital42.4531.4515.726.371.971.970.07100.00Brief Audited FinancialsParticularsEquity Share Capital at ` 100/- each2009-101.002010-111.00(` in Lacs)2011-12636.00162
Scotts Garments LimitedParticularsReserves & SurplusTotal IncomePr<strong>of</strong>it After TaxEarnings Per Share (`)Net Asset Value Per Share (`)Common Pursuits2009-10 2010-11NilNilNilNil(0.25) (7.16)NANA26.91 (685.07)2011-12307.84219.85(89.39)NA148.40Except for the sale <strong>of</strong> Ready Made Garments toone <strong>of</strong> our group companies i.e. Inmark Retail PrivateLimited we do not have any common pursuits withany <strong>of</strong> our group companiesFurther, theCompany has agreed to seek shareholders approval through postal ballot route <strong>and</strong>/or generalmeeting forthe period <strong>of</strong> 5 years in regard to every transactionn with relatedparty(ies) wherein the amountexceeds ` 10.00 crores <strong>and</strong> every transaction withrelated partywherein theaggregate amount to one suchentity during the period <strong>of</strong> one financial year exceeds ` 20.00 crores excluding the approvals relating to anypersonal guarantee given by the Promoter(s)/Promoter Group. The promoter(s) <strong>of</strong> the Companyshallrefrain fromvoting in respect <strong>of</strong> such resolutions as mentioned above.Defunct Promoter Group CompaniesThere are nodefunct Promoter Groupcompanies.Business interest amongst group companiesPresently, we do not have any business interest in our group companiesInterest <strong>of</strong> PromoterOur promoters may be deemed to beinterested tothe extent <strong>of</strong> the remuneration for the services rendered<strong>and</strong> the reimbursement<strong>of</strong> expenses, if any, payable to them under the articles. The Promoter may also bedeemed to be interested to the extent <strong>of</strong> the shares, if any, held by them or by the relatives or by firms orcompanies <strong>of</strong> which any <strong>of</strong> them is a partner <strong>and</strong> a director/member respectively. For further details pleaserefer RelatedParty Transaction appearing on page no 197 <strong>of</strong> this Offer Document.Except as mentioned above the promoter do not have any interest in the business <strong>of</strong> the company.Payment orbenefit to Promoter <strong>of</strong> the Issuer CompanyOther than the salary <strong>and</strong> remuneration <strong>of</strong> thePromoter Directors, dividend, if any declared by theCompany on shares heldby them, there are no payment or benefit to promoter <strong>of</strong> the Company.Company/firm from which the promoter have disassociated themselves during preceding three yearsOur promoter has not disassociatedhimself withany <strong>of</strong> our group companies/firm during the precedingthree years except for CKM Investments LimitedRelated Party Transactions as per Audited Financial StatementsThe details <strong>of</strong> related party transactions please refer to page no. 197 <strong>of</strong> this Red Herring Prospectus.163
Scotts Garments LimitedCURRENCYOF PRESENTATIONIn this RHP, all references to ` or “Rupees” “`” are to the legal currency <strong>of</strong> <strong>India</strong> <strong>and</strong> alll references to“U.S.Dollars”, <strong>and</strong> “US$” are to the legal currency <strong>of</strong> theUnited States.Any percentage amounts, as set forth in “RiskFactors”, “Business”, “Management’s Discussion <strong>and</strong>Analysis <strong>of</strong> Financial Condition <strong>and</strong> Results <strong>of</strong> Operations” etc. in the RHP, unless otherwise indicated, havebeen calculated on the basis <strong>of</strong> our financial statements prepared in accordance with Restated FinancialStatements prepared as per <strong>India</strong>n GAAP.For the convenience <strong>of</strong> the Shareholders, as far as possible the reporting unithas been maintained as Rupeesin Lacs (Rupees in Hundred Thous<strong>and</strong>s).164
Scotts Garments LimitedDIVIDEND POLICYThe <strong>Board</strong> <strong>of</strong> Directors <strong>of</strong> the company may, atits discretion, recommend dividendd to be paid to themembers <strong>of</strong> the company. The factors that may be considered by the <strong>Board</strong> before making anyrecommendations for the dividend includes but not <strong>limited</strong> topr<strong>of</strong>its/earnings duringthe financial year,liquidity <strong>of</strong> the company, need for reserving resources for future growth, applicable taxes including tax ondividend, aswell as exemptions under tax laws available to various categories <strong>of</strong> investors from time to timeetc.Dividend will be declared <strong>and</strong> approved at the Annual General Meeting <strong>of</strong> the shareholders based on therecommendation by the <strong>Board</strong>. The <strong>Board</strong> may also from time to time pay tothe members interim dividendif it considers justified bythe pr<strong>of</strong>its generated by the company.We have declared dividend for the last 3 consecutive years <strong>and</strong> the details <strong>of</strong>the same areas under:Financial Year2011-122010-112009-10Dividend paid10%10%10%165
Scotts Garments LimitedPART IISECTION IV: FINANCIAL STATEMENTSAUDITORS’ REPORT(As required byPart II <strong>of</strong> Schedule II to the Companies Act, 1956)To,The <strong>Board</strong><strong>of</strong> Directors,Scotts Garments Ltd481-B, IVth Phase, Peenya Industrial Area,Bangalore– 560 058.1. We have examinedthe attachedfinancial information <strong>of</strong> SCOTTS GARMENTS LTD as approved bythe <strong>Board</strong> <strong>of</strong> Directors <strong>of</strong> the Company prepared in terms <strong>of</strong> the requirements <strong>of</strong> Paragraph B, Part II<strong>of</strong> Schedule II <strong>of</strong> the Companies Act, 1956 (the Act) <strong>and</strong>the <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong><strong>India</strong>(Issue<strong>of</strong> Capital <strong>and</strong> DisclosureRequirements) Regulations, 2009, as amended (SEBI Regulation) <strong>and</strong>terms<strong>of</strong> our engagement agreed with youin accordance with ourletter datedd 10 th July, 2010 inconnection with the proposed Equity <strong>of</strong>fering.The preparation <strong>and</strong> presentation <strong>of</strong> these financial information is the responsibility<strong>of</strong> the Company’smanagement.2. We have, in terms <strong>of</strong> <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> (ICDR) Regulations, 2009 re- audited theBalance Sheet <strong>of</strong> M/s SCOTTS GARMENTS LTD as at 31st October 2012, 31 st March, 2012 & 31 st March2010 the Statementt <strong>of</strong> Pr<strong>of</strong>it <strong>and</strong>Loss <strong>and</strong> theCash Flow Statement <strong>of</strong> the Companyfor the year endedon that date, whichh have been audited by M/s Siddaiah & Ram, Chartered Accountants, Bangalore. Inour opinion <strong>and</strong> tothe best <strong>of</strong> our information <strong>and</strong> according to the explanation given to us, <strong>and</strong> alsoas perthe reliancee placed on the reports forthe financial year endingon 31 st March 2011, 31 st March2009, <strong>and</strong> 31 st March 2008 submitted by the StatutoryAuditors, M/s Siddaiah& Ram, the saidaccounts give the information required by the Companies Act, 1956,in the manner so required <strong>and</strong>give a true <strong>and</strong> fairview in conformity with the accounting principle generally accepted in <strong>India</strong>.3. We have examined the attached ‘SummaryStatement <strong>of</strong> Assets <strong>and</strong> Liabilities’as restated <strong>of</strong> theCompany as at 31st October, 2012, 31 st March, 2012, 31 st March, 2011, 31 st March, 2010, 31 st March, 2009<strong>and</strong> 31 st March, 2008 ( Annexure I) <strong>and</strong> the attached ‘ Summary Statement <strong>of</strong> Pr<strong>of</strong>it <strong>and</strong> Loss’ asrestated ( Annexure II) <strong>and</strong> the attached ‘Summary Statement <strong>of</strong> Cash Flow’ as restated ( Annexure III)for the period ended 31 st October, 2012, for the financial years ended on 31 st March, 2012, 31 st March,2011, 31 st March, 2010, 31 st March, 2009 & 31st March, 2008 together referred to as ‘Restated SummaryStatements’. These Summary Statements have been extracted from the re-audited financial statementsfor the period ended 31 st October, 2012, March 31, 20122 <strong>and</strong> 31 st March 2010 <strong>and</strong> audited financialstatements for the period endedd 31 st March, 2011, 31 St March, 2009 & 31 st March, 2008. The re-audit forthe period ended 31 st October, 2012 financial year ended 31 st March, 2012 <strong>and</strong> 31st March 2010 wasconducted by us <strong>and</strong> audit for the financial year ended March 31 st March, 2011, 31 st March, 2009& 31 stMarch, 2008 was conducted by the statutoryauditors, M/s, Siddaiah & Ram, Chartered Accountants.The financial information included for the financial year ended March 31, 2011,March 31, 2009 &March31, 2008 are based on reports submitted by them <strong>and</strong> havebeen relied upon by uswhileexpressing our opinion <strong>and</strong> reporting on various restatedfinancial information <strong>and</strong>annexures there<strong>of</strong>expressly stated inthe followingparagraphs.4. Basedon the above, we report that in our opinion <strong>and</strong> according to the information <strong>and</strong> explanationsgivento us, we have found thesame to be correct <strong>and</strong> the same have been accordingly used in thest<strong>and</strong>alone financial information.166
Scotts Garments Limited5. Basedon above <strong>and</strong> also as perthe reliance placed on thereports submitted by theprevious auditors,Siddaiah & Ram, Chartered Accountants for the respective periods <strong>and</strong>year we state that:i) The‘Summary Statements’ have to be read in conjunction with theSignificant Accounting Polices<strong>and</strong> Notes to Accounts given in Annexure IV as welll as with theAudit report on the financialstatementsii) The pr<strong>of</strong>its have been arrived at after charging alll expenses ncluding depreciation <strong>and</strong>aftermaking such adjustment <strong>and</strong> regroupings as in our opinion are appropriate in the year/period towhichh they relate.iii) The accounts as given in the enclosed statements do not requiree any restatement except to theextentt <strong>of</strong> merger effect has beengiven in restated summary statements for the year ended 31 st March,2008 & 31 st March, 2009 as the effective date <strong>of</strong> amalgamation <strong>of</strong> Arora Fashions Ltd with ScottsGarments Ltd is 2 nd February, 2008 as per the order <strong>of</strong>Hon’ble high court <strong>of</strong> Karnataka dated 6 thFebruary, 2010, since:1.There havebeen no adjustments for the changes in accounting policesretrospectively inrespective financial years.2.There have been no material adjustments in the respective financial years to which they relate.3.There are no extra ordinary items that need to be disclosed separately inthe accounts <strong>and</strong>qualification requiring adjustments.6. OtherFinancial InformationWe have also examined the following otherfinancial information setout in Annexures prepared bythe management <strong>and</strong> approved by the <strong>Board</strong> <strong>of</strong> Directors relating to the Company for the periodendedd 31 st October, 2012, 31 st March, 2012, 31 st March, 2011, 31 st March, 2010, 31 st March, 2009& 31 stMarch, 2008.a)b)c)d)e)f)g)h)i)j)k)l)Annexure IV - Significant Accounting Policies & Notes on restated financial statements.Annexure V- Statement <strong>of</strong> Share capitalAnnexure VI- Statement <strong>of</strong> Reserves & Surplus.Annexure VII(a)- Statement <strong>of</strong> Long term borrowingsAnnexure VII(b)- Statement <strong>of</strong> Short term borrowingsAnnexure VII( c)- Details <strong>of</strong> terms <strong>and</strong> conditions <strong>of</strong> Securedloans.Annexure VIII- Statement <strong>of</strong> Tangible assets & Intangible assetsAnnexure IX- Statement <strong>of</strong> Trade receivablesAnnexure X- Statement <strong>of</strong> Long term loans & advancesAnnexure XI- Statement <strong>of</strong> Short term loans & advancesAnnexure XII - Statement <strong>of</strong> Investments.Annexure XIII- Statement <strong>of</strong> Inventories.m)Annexure XIV- Statement <strong>of</strong> Cash & Cash Equivalent.n) Annexure XV- Statement <strong>of</strong> Other Current Assets.o) Annexure XVI- Statement <strong>of</strong> Tradepayables.p) Annexure XVII- Statement <strong>of</strong> Other Current Liabilities167
Scotts Garments Limitedq) Annexure XVIII- Statement <strong>of</strong> Other long term liabilities.r) Annexure XIX- Statement <strong>of</strong> Short Term Provisions.s) Annexure XX - Statement <strong>of</strong> OtherIncome.t) Annexure XXI - Statement <strong>of</strong> Other expenses.u) Annexure XXII - Statement <strong>of</strong> Tax Shelterv) Annexure XXIII - Statement <strong>of</strong> Dividend Paidw)Annexure XXIV – Statement <strong>of</strong> KeyAccountingRatiosx) Annexure XXV - Statement <strong>of</strong> Capitalizationy) Annexure XXVI - Statement <strong>of</strong> Related Party Transactionz) Annexure XXVII - Statement <strong>of</strong> Contingent Liabilities.7. In our opinion, the ‘FinancialInformationn as per Re-audited/Audited Financial Statements’ <strong>and</strong>‘Other Financial Information’ mentioned above read withSignificant Accounting Policies <strong>and</strong> Notes toAccounts appearing in Annexure IV & the audit report for the period ended 31 stOctober, 2012, 31 stMarch2012, 31 st March 2011, 31st March, 2010, 31st March2009 & 31 st March, 2008 have been preparedin accordance withPart II <strong>of</strong> schedule II <strong>of</strong> the Act, <strong>and</strong> the SEBI Regulations.8. This report should, in any way, neither beconstrued as a re-issuance nor re-dating <strong>of</strong> any <strong>of</strong> theprevious audit reports by us nor should this be construed as a new opinion on any <strong>of</strong> the FinancialStatements referredto herein.This report is intended solelyfor your information <strong>and</strong> for inclusion in the Offer Document inconnection with the proposed IPO <strong>of</strong> the Company <strong>and</strong> isnot to be used, referred to or distributed forany other purpose without our prior writtenconsent.For G Anantha & Co.,Chartered AccountantsSd/-N. Raama PrasadName <strong>of</strong> the AuditorPartnerMembership No.: 200/029621Firm Registration No: 005160SPlace: BangaloreDate: 10/01/2013168
Scotts Garments LimitedANNEXURE ISUMMARY STATEMENT OF ASSETS AND LIABILITIES,AS RESTATEDParticularsNon-current assetsFixed assetsTangibleassetsIntangible assetsCapital work-in-Non-currentInvestmentsInvestments in EquityinstrumentsLong term loans <strong>and</strong>progresssadvances31st 31st31st31st31stOctober,March,March,March,March,2012 20122201120102009(` in lacs)31stMarch,200816,403.71 1,045.12 4,975.40 16,346.42 1,475.46 2,453.48 11,890.56 2,213.18 1,645.63 11,242.26 2,950.92 16.788,777.11 3,688.65 50.827,441.883,688.65112.935,069.64 5,018.84 2,665.00 1,665.00 1,665.00 887.00-598.73 581.23 629.17 502.65 472.69 338.83Total non-currentassetsCurrent assetsInventoriesTrade ReceivablesCash <strong>and</strong>cashequivalentsShort-term loans <strong>and</strong>advancesOther current assetsTotal current assets28,092.61 22,268.66 6,804.47 620.66 2027.21 2,531.06 34,252.05 25,875.43 21,688.99 7,592.33 552.76 2,048.68 2,917.94 34,800.70 19,043.54 16,576.29 7,996.17 738.53 2,467.62 2,420.48 30,199.09 16,377.61 11,148.51 7,898.89 484.32 3,511.07 1,829.95 24,872.74 14,654.27 8,134.25 8,496.53 602.21 1,719.08 797.90 19,749.97 12,469.294,947.807,691.05579.071,817.21846.8315,881.96Non-current liabilitiesLong-term borrowings Deferredtax liabilities(net)Other long termliabilitiesTotal non-currentliabilitiesCurrent liabilitiesShort term borrowings Trade payablesOther current liabilities Short-term provisionss Total current liabilities Net Worth8,414.27 1,233.26 289.12 9,936.65 19,104.08 3645.96 3746.80 1587.79 28,084.63 24,323.38 7,326.63 1,208.02 224.99 8,759.64 18,079.52 6,852.18 3,033.95 1,166.59 29,132.24 22,784.25 5,305.53 775.17 228.38 6,309.08 17,335.64 6,708.40 2,525.85 934.88 27,504.77 15,428.78 5,143.58 876.20 174.94 6,194.72 11,886.67 6,235.85 2,366.85 1,581.00 22,070.37 12,985.26 4,586.01 388.01108.635,082.65 9,529.61 5,255.91 2,198.05 1,077.46 18,061.03 11,260.56 7,306.1197.4739.427,443.006,964.423,591.721,182.631,728.3513,467.127,441.13169
Scotts Garments LimitedParticulars31stOctober,201231stMarch,2012231stMarch,201131stMarch,201031stMarch,200931stMarch,2008Net worth representedby:Shareholders FundsShare CapitalEquity share capitalReservess & surplus<strong>Securities</strong> premiumAmalgamation reserve Pr<strong>of</strong>it <strong>and</strong> loss account Net worthANNEXURE II2,673.83 2,496.96 40.00 19,112.59 24,323.38 2,673.83 2,496.96 40.00 17,573.46 22,784.25 2,673.83 2,496.96 40.0010,217.99 15,428.78 2,673.83 2,496.96 40.007,774.47 12,985.26 2,673.83 2,496.96 40.006,049.77 11,260.56 2,473.831,296.9640.003,630.347,441.13SUMMARY STATEMENT OF PROFIT AND LOSSES, AS RESTATED(` in lacs)31st31st31st31st31st31stOctober,March,March,March,March,March,ParticularsRevenuee from operations Other incomeTotal revenueEXPENSESCost <strong>of</strong> raw material <strong>and</strong>components consumed Changedin inventories <strong>of</strong>finished goods <strong>and</strong>traded goodsOther expensesTotal expenditureEarningsbefore interest,tax, depreciation <strong>and</strong>amortization (EBITDA) DepreciationFinance chargesPr<strong>of</strong>it before taxLess: TaxexpenseCurrent tax expenseDeferredtax (credit)/chargeTotal taxexpensePr<strong>of</strong>it after taxation201232,939.87 593.43 33,533.31 17,846.06 395.77 10,027.38 28269.23 5,264.08 1158.90 1,114.98 2,990.20 923.93 25.23949.15 2041.05 201250,025.46 6,587.83 56,613.29 29,019.10 (3,538.98) 17,372.02 42,852.13 13,761.16 1,442.12 2,082.23 10,236.81 1,400.00 432.851,832.85 8,403.95 201149,527.73 847.14 50,374.88 22,112.77 569.44 20,022.64 42,704.85 7,670.02 1,452.06 1,491.41 4,726.55 1,334.53 (101.03) 1,233.50 3,493.06 201043,017.07 418.91 43,435.98 22,142.10 (2,517.85) 16,602.70 36,226.95 7,209.03 1,239.81 1,644.61 4,324.61 1,052.18 488.19 1,540.37 2,784.24 200936,387.70 1,055.86 37,443.56 20,232.41 (2,117.39) 13,381.50 31,496.52 5,947.04 990.34 1,236.19 3,720.51 708.09 290.54 998.63 2,721.88 200833,113.23162.7233,275.9517,651.62(750.28)11,161.8328,063.175,212.78851.87851.283,509.631,097.50187.421,284.922,224.71170
Scotts Garments LimitedANNEXURE IIISUMMARY STATEMENT OF CASH FLOWS AS RESTATEDParticularsA. Cash flow operatingactivitiesNet Pr<strong>of</strong>it before priorperiod item, tax <strong>and</strong>extraordinary itemsAdjustment for:Depreciation/amortisationFinance charges & losson variation on foreignexchangee rates31st October,201231stMarch,20122990.20 10,236.81 4,726.55 4,324.61 3,720.51 3, ,509.631158.901114.9831stMarch,201131stMarch,201031stMarch,20091,442.12 1,452.06 1,239.81 1,014.261,643.91 1,491.41 1,644.61 1,236.20(`in lacs)31stMarch,2008851.88851.28Bad debts written <strong>of</strong>fPr<strong>of</strong>it onsale <strong>of</strong> fixedassetsLoss on Sale <strong>of</strong>investmentDividendd income/capitalgainOperating pr<strong>of</strong>it beforeworkingcapital changesAdjustment for:---5264.080.42--(5,998.07)7,325.19---(49.80) 7,620.2215.26(49.80)7,174.49 (1.55)(869.43)(60.00) 5,039.99 2.27(20.02)(184.88)5, ,010.16Increase in inventoriesIncrease / ( decrease ) in(579.66) (5,112.70) (5,427.78) (3,014.27) (3,186.44) (1,376.39)trade payablesDecreasee / ( increase ) intrade receivables(Increase)/Decrease in( 2798.01)787.87341.66140.74744.16 (679.19)1,078.93 (805.08) 879.43128.12369.92(3,664.72)loans & advancesIncome taxes paid ( net <strong>of</strong>390.85 232.52 (832.14) (1,265.63) (1,006.92)25.00refund)Net cashgenerated /(utilized) from operating(205.10) (1,028.12) (1,431.17) (740.44) (745.56) (1,444.26)activitiesB. Cash flow frominvesting activities2860.03 1,899.29 (5.90) 2,428.00 1,108.62 (1,080.29)Purchase<strong>of</strong> fixed assets Purchase<strong>of</strong> non-current( 3766.92) (6,785.09) (3,728.18) (3,730.71) (2,751.39) (2,437.45)investmentSale <strong>of</strong> non-currentinvestmentDividendd ReceivedCapital Subsidy(50.80)--28.36(4,972.06)8,359.2848.9078.29--49.80-49.80-91.4360.00-(5,433.98)24.88-171
Scotts Garments LimitedParticularsNet cashutilizedinvesting activitiesC. Cash from FinancingactivitiesInterest paidIncrease in share capitalShare premium received( Repayments) /proceeds<strong>of</strong> long termborrowings31st October,201231stMarch,2012(3,789.36) (3,270.68) (3,678.38) (3,680.91) (2,599.96) (7,846.55)(1,114.98) (1,556.35) (1,491.41) (1,644.61) (1,236.20) (851.28)-- - - 200.00 1, ,112.50-- - - 1,200.00 1, ,297.002112.2131stMarch,201131stMarch,201031stMarch,200931stMarch,20083,053.74 5,741.70 3,092.46 3,150.69 5, ,148.93Dividendd & dividendddistribution taxInterest income received( Repayments) /proceeds<strong>of</strong> unsecuredloansNet cashgenerated from/(utilisedin) financingactivitiesNet Increase / ( decrease)in cash <strong>and</strong> cashequivalentsCash <strong>and</strong> cashequivalents at thebeginning <strong>of</strong> the yearCash <strong>and</strong> cashequivalents at the end<strong>of</strong> the year---997.2367.90552.76620.66(311.79) (311.79) (312.82) (289.43) (155.20)--1,185.60--3,938.50--1,135.03 -(1,510.65) 1,514.41 159.701, ,510.708, ,222.35(185.79)738.54552.76254.22484.32738.54(117.88)602.21 484.3323.07 579.13 602.20(704.49)1, ,283.62579.13172
Scotts Garments LimitedAnnexure IVI.STATEMENT OF SIGNIFICANT ACCOUNTINGPOLICIES AND PRACTICES‣ Basis <strong>of</strong> Preparation <strong>of</strong> Financial Statements:The Financial Statementsare prepared under the historical cost concept <strong>and</strong> accrual basis <strong>of</strong>accounting in accordancewith the Generally Accepted Accounting Policy (GAAP) in <strong>India</strong> <strong>and</strong>complies with the accounting st<strong>and</strong>ards prescribed under Companies Act, 1956, to the extentapplicable.‣ Use <strong>of</strong> Estimates:The preparation <strong>of</strong> the financial statements is inconformity with the accounting st<strong>and</strong>ardsgenerally accepted in <strong>India</strong> requires estimates <strong>and</strong> assumptions to be made that affect thereported amounts <strong>of</strong> assets <strong>and</strong> liabilities on the date <strong>of</strong> the financial statements <strong>and</strong> reportedamount <strong>of</strong> revenue <strong>and</strong> expenses during the reporting period. Difference between the actualresults <strong>and</strong> estimates are recognised inthe period inwhich the results are known or materialise.‣ Fixed Assets:Tangible assets are statedat their original cost plusall costs directly attributable to bringing theasset to its working condition for its intended use.Intangible assets are recognized;(i) when it is probable that the future economic benefits that are attributable to the assets willflow to the Company; <strong>and</strong>(ii) cost <strong>of</strong> the asset is measured reliably.Intangible assets are measured initiallyat cost.‣ Depreciation/Amortisation:Depreciationhas been provided following Written Down Value (WDV) method, at theratesprescribed inthe Schedule XIV <strong>of</strong> theCompaniesAct, 1956. Depreciation in respect <strong>of</strong>assetsacquired during the yearhas been provided pro-rata from the date such assets are acquired /put to use.The goodwill is amortisedover the period <strong>of</strong> five years‣ Impairment <strong>of</strong> Assets:An asset is treated as impaired when the carrying cost <strong>of</strong> assets exceeds its recoverable value. Animpairment loss is charged <strong>of</strong>f to the Statement <strong>of</strong> Pr<strong>of</strong>it <strong>and</strong> Loss in the year in which an asset isidentified asimpaired. The impairment loss recognized in prior year accounting period isreversed if there has beena change in the estimate <strong>of</strong> recoverablee amount.‣ Inventories:Inventories are valued at lower <strong>of</strong> cost or net realizable value. The costis determined onweighted average cost. Obsolete, defective <strong>and</strong> unserviceable stocks are duly provided for.173
Scotts Garments Limited‣ Investments:Long Term investments are stated at cost. Provision for diminution in the value <strong>of</strong> long terminvestment is made only if such decline other than temporaryCurrent investments are stated at lower <strong>of</strong> cost, quoted/fair value. Computedcategory wise.‣ Revenue Recognition:Domestic <strong>and</strong> Export sales are accounted on dispatch <strong>of</strong> goods to customer.Sales are recordednet after trade discount, wherever applicable.‣ Foreign Currency Transactions:(i) Foreign Currency Transactions are accounted, on initial recognition, by applying to theforeign currency amount the exchange rate prevailing at the date <strong>of</strong> the transaction.(ii) Foreign currency monetary items as at the Balance sheet date are reported at the exchangerate prevailing as on that date.(iii) Foreign currency nonn - monetaryitems are reported at the exchange rate at the date <strong>of</strong>transaction.The exchange difference arising on the settlement <strong>of</strong> monetary items or on reporting monetaryitems at rates different from those at which they were initially recorded, recognized as income orexpense in the period in which they arise except exchange difference arising on reporting <strong>of</strong> long- term foreign currency monetary items, in so far they relate tothe acquisition <strong>of</strong> a depreciablecapital asset in which caseit is added to or deducted from carrying amount <strong>of</strong> the asset.‣ Employee Benefits:i) Short - term employee benefits:Undiscounted amount <strong>of</strong> short-term employee benefits are recognized in the period inwhich the employee has rendered service.The cost<strong>of</strong> short – term accumulating compensated absences that are vested, measured <strong>and</strong>recognized on actuarial basis.The expected cost <strong>of</strong>bonus payments are measured <strong>and</strong> recognized when Company haspresent obligation to make such payments as a result <strong>of</strong> employee rendered service.ii) Post – employment benefits:Post-employment benefits under defined contribution scheme such as Provident Fund <strong>and</strong>Employees State Insurance, recognized duringthe period inwhich employee has renderedservice on actual liability basis.Post-employment benefits under defined benefit schemeaccounted as per actuarial valuation.(unfunded) such as gratuity, is‣ Borrowing Costs:Borrowing costs that are attributable to the acquisition or construction <strong>of</strong> qualifying assets arecapitalized as part <strong>of</strong> the costs <strong>of</strong> suchassets till such time as the asset is ready for its intendeduse. A qualifying asset isan asset that necessarilyrequires a substantial period <strong>of</strong> time for itsintended use. All other borrowing costs are recognized as an expense in the period in whichthey are incurred.174
Scotts Garments Limited‣ Earning Per Share:Basic earningper share iscalculated by dividing the net pr<strong>of</strong>it or loss for theperiod attributableto equity share holders by the weighted average number <strong>of</strong> equity shares outst<strong>and</strong>ing duringthe period.Diluted earning per shareis calculated<strong>and</strong> presented when there are potential equity shares.When the weighted average number <strong>of</strong> equity shares changed inthe current period as a result <strong>of</strong>bonus issue or share splitor reverse share split, thecalculation <strong>of</strong> basic <strong>and</strong> diluted earning pershare is presented for all the periods presented.‣ Provision forIncome Tax:Provision for current taxis made onthe basis <strong>of</strong>taxable income for the current accountingperiod calculated in accordance with the provisions <strong>of</strong> Income Tax Act, 1961. Deferred tax as aresult <strong>of</strong> timing differences between accounting income <strong>and</strong> taxable income for the period isaccounted using tax rates that have been enacted or substantially enacted as on balancesheetdate.Deferred taxasset is recognized <strong>and</strong> carried forward only to the extent that there is reasonablecertainty that sufficient future taxable income will be available against which such deferred taxassets can berealized.‣ Provisions, Contingent Liabilities <strong>and</strong> Contingent Assets:A provision involving substantial degree <strong>of</strong> estimation in measurement are recognisedwhenthere is a present obligation as a result <strong>of</strong> past events <strong>and</strong> it is probable that there willl be anoutflow <strong>of</strong> resources.Contingent liabilities are not recognised but are disclosed when the possibility <strong>of</strong> any outflow insettlement isremote.Contingent assets are neither recognised nor disclosed in the financial statements.‣ Segment Reporting:The Company is mainlyengaged inthe business <strong>of</strong> manufacture <strong>of</strong> readymade <strong>garments</strong>.Consideringthe nature <strong>of</strong> business <strong>and</strong> financial reporting, the Company has only one segmentviz, <strong>garments</strong> as a reportable segment.In theopinion <strong>of</strong> the <strong>and</strong> to best <strong>of</strong> their knowledge <strong>and</strong> belief the value <strong>of</strong> realization <strong>of</strong>Loan,Advances, CurrentAssets in theordinary course <strong>of</strong> business will not be less than the amount at whichthey are stated in the Balance Sheet.Disclosure under Micro, Small <strong>and</strong> Medium Enterprises Development Act, 2006:Theree are no micro<strong>and</strong> small scale businesss enterprises, to whom thecompany owes dues, which areoutst<strong>and</strong>ing for more than 45 days as at 31st October, 2012. This information to be disclosed underMicro, Small <strong>and</strong> Medium Enterprises Development Act, 2006, has been determined to the extent suchparties have been identified on the basis <strong>of</strong> the information available with the company.175
Scotts Garments LimitedThe financial statements for theperiod ended 31 st October 2012, <strong>and</strong> year ended 31 st March 2012 areprepared under revised schedule VI as well as Guidance Note issued by the Institute <strong>of</strong> CharteredAccountants <strong>of</strong> <strong>India</strong>. Accordingly the previous year figures have alsobeen reclassified to conform tothe year’s classificationThe financials statement for theyear ended 31 st March 2011, 2010, 2009 & 2008 had been prepared asper the then applicable pre revised schedule VI to the companies Act 1956.II. NOTES TO RESTATED FINANCIAL STATEMENT – Annexure IV1. Disclosure pursuant to Accounting St<strong>and</strong>ard-15 “Employee Benefits”Sl.No1)2)3)The employees’ Gratuity Scheme & Compensated Absences are defined benefit plans. The presentobligation is determined basedon actuarial valuation using Projected Unit Credit Method, whichrecognizes each period <strong>of</strong> service as giving rise to additional unit <strong>of</strong> employee benefit entitlement <strong>and</strong>measures each unit separately to build up the final obligation.` in lacsParticulars31.10.20122011-1222010-112009-10Gratuit Compe Gratuit CompeGratuitCompenGratuittCompey nsated y nsatedy sated y nsatedabsenceabsencabsencesabsencsesesAssumption:Discount RateSalary escalation8.50%5.00%8.50%5.00%8.50%5.00%8.50%5.00%8. .50%5. .00%8.50% 5.00% 8.00%5.00%8.00%5.00%Present Value <strong>of</strong>ObligationPresentobligations valueas<strong>of</strong>at157.48 146.18 159.20 209.10 174.9 191.9 108.677.4beginningg <strong>of</strong> yearInterest costService costBenefits settledActuarial (Gain) / Loss on obligation11.1581.06(26.62)1.475.0654.70(105.61)4.3213.670.2(136.6)49.311.587.6(171.4)5.712.974.8(28.3) (6.0) 11.1101.3 106.3 23.58.271.212.5(0.70) 3.9150.455.815.8Present value <strong>of</strong>289.12 113.44 225.0 154.9 228.4 221.5 174.9191.9obligationas at end <strong>of</strong>yearFair Value <strong>of</strong> planassetsFair value <strong>of</strong> plan assetsat beginning <strong>of</strong> yearNil Nil Nil Nil Nil Nil NilNilExpectedplan assetssreturn onNil Nil Nil Nil Nil Nil NilNilContributionBenefits paidActuarial (gain) / losson obligations26.6226.62Nil105.61105.61Nil136.6136.6Nil171.4171.4Nil28.328.3Nil106.3 106.3 Nil12.412.4Nil55.755.7NilFair Value <strong>of</strong> planNil Nil Nil Nil Nil Nil NilNil176
Scotts Garments Limited4)5)assets at the end <strong>of</strong> yearFunded statusThe amounts to berecognized in thebalance sheetPresent value <strong>of</strong>obligations as at theend <strong>of</strong> yearFair value <strong>of</strong> plan assetsas at the end <strong>of</strong> the yearFunded statusExpenses recognizedin statement <strong>of</strong> Pr<strong>of</strong>it<strong>and</strong> lossCurrent service costInterest costExpected return onplan assetssNet actuarial (gain) /loss recognized in theyearExpenses recognized instatement <strong>of</strong> pr<strong>of</strong>it <strong>and</strong>loss.289.12289.12Nil289.1281.0611.16.Nil(1.47)78.30113.43113.43Nil113.4354.705.06Nil4.3151.76225.0225.0Nil225.070.21.36Nil49.3138.0154.9 228.4 221.5 174.9191.9154.9 228.4 221.5 174.9191.9Nil154.9 228.4 221.5 174.9191.987.61.15Nil5.8138.2NilNilNilNil74.8 101.3 71.2150.41.29 1.11 0.820.39Nil Nil NilNil(6.0) 23.5 6.000 15.981.7 135.9 78.88 170.3Note: Provision for Gratuity & compensated absence for thefinancial years 2007-08, 2008-09 was made basedon estimated liability,actuarial valuation was taken from financial year 2009-10.2.Value <strong>of</strong> Imports calculated on C.I.F basis:` in lacsParticulars4. RawFabric)materials (5. Componentsspare parts<strong>and</strong>6. Capital Goods31October, 31 st2012 March,20121249.844 969.31010.73692.4964.20711.331 stMarch,20111420.71280.4604.831 stMarch,2010543.4601.21062.331 stMarch,200931March,2008826.9 1564.9570.2 20.6493.1 481.73. Earnings in ForeignCurrency:ParticularsEarnings:Export<strong>of</strong> goods ( F.O.B. basis)31 stOctober,201228136.5431 stMarch,201231 stMarch,201131 stMarch,201031 stMarch,200931 st` in lacsMarch,200842584.8 40367.7 34302.8 41038.4 28627.2177
Scotts Garments Limited4. Expenditure in Foreign Currencyon account <strong>of</strong>:Expenses:Foreign travellingPr<strong>of</strong>essional feeOthers31 ST2012October, 31 stMarch201231.10 20.859.70 3.4- -31 stMarch201127.3Nil-31 stMarch201016.3Nil-31 stMarch200920.43.3-31 st` in lacsMarch200823.513.711.25. Effect <strong>of</strong> merger <strong>of</strong> subsidiaries.a) Scotts Garments Ltd had a subsidiary by name Scotts Clothing (P) Ltd. This subsidiary companywas merged with Scotts Garments Private Ltd videorder <strong>of</strong> Hon’ble High Court <strong>of</strong> Karnatakadated 02 nd April, 2007; hence the figures for the year ending 31.03.2006 are not comparable with31.03.2007 as the effective date <strong>of</strong> amalgamation was 01.04.2006.The scheme has been accounted for under the ‘Pooling <strong>of</strong> Interest method’ as prescribed byAccounting St<strong>and</strong>ard 14 on– “Accounting for Amalgamation” issued by the Institute <strong>of</strong> CharteredAccountants <strong>of</strong> <strong>India</strong>. In Consideration<strong>of</strong> the above,600000 equity shares <strong>of</strong> Rs. 10/- each<strong>of</strong> thecompany weree issued to theshareholders <strong>of</strong> the SCPLin the ratio <strong>of</strong> six fully paid up equity shares<strong>of</strong>Rs. 10/- each <strong>of</strong> the Company for every one fully paid up equity share <strong>of</strong> Rs. 100 each held inSCPL. In terms there<strong>of</strong>, the difference between theconsiderations, being the shares issued toshareholder <strong>of</strong>SCPL pursuant to amalgamation, <strong>and</strong> book value <strong>of</strong> equity shares acquired istreated as capital reserve. The balance outst<strong>and</strong>ing in general reserves <strong>of</strong> SCPL is transferred togeneral reservee <strong>of</strong> the company.b) Scotts Garments Ltd acquired M/s Arora Fashions Ltd on a 100%takeover from 01.02.2008<strong>and</strong> itbecame a wholly owned subsidiary <strong>and</strong>this was merged with Scotts Garments Ltd vide order <strong>of</strong>Hon’ble High Court <strong>of</strong> Karnataka dated 06 th February, 2010; hencee the figures <strong>of</strong> 31.03.2007 are notcomparable with 31.03.2008 as the effective date <strong>of</strong> amalgamation was 02.02.2008. Purchasemethod <strong>of</strong> accounting is followed to reflect the amalgamation.The scheme provided that the authorized share capital <strong>of</strong> transferee company (SGL)shallautomaticallyst<strong>and</strong> increased without any further act, instrument or deed <strong>and</strong>consequentup onthe amalgamation, the authorized share capital <strong>of</strong> the transferee company will be Rs.44,00,00,000/-(Rupees Forty Four Crores) comprising <strong>of</strong> 4,40,00,000/- (Four Crores FortyLacs)equity shares <strong>of</strong> Rs. 10/- each. Since the entire shares <strong>of</strong> AroraFashions Ltd was held by thecompany, on merger <strong>of</strong> Arora Fashionss Limited into Scotts Garments Limited, all these sharescancelled <strong>and</strong> no allotment <strong>of</strong> shares or cash is paid as consideration for amalgamation. Thedifference between net identifiable assets <strong>of</strong> Arora Fashions Ltd <strong>and</strong> the cost<strong>of</strong> shares <strong>of</strong>AroraFashions Ltd is Rs. 36,88, ,64,657 <strong>and</strong> it is accounted as Goodwill. Goodwill amount will beamortised overa period <strong>of</strong> five years.6. Capacity UtilisationParticularsActual ProductionWoven/ DenimKnittsTurnoverUnitsOctober2012Pieces 37.36Pieces 89.99201299.1081.70No’s in lacs2011 2010 2009200880.50 58.70 44.90 36.10101.80 113.60 103.70 45.40178
Scotts Garments LimitedParticularsWoven/ DenimKnittsStock <strong>of</strong>Finished GoodsWoven/ DenimKnittsUnits October2012Pieces 37.71Pieces 81.55Pieces 4.68Pieces 7.39201295.8081.305.009.702011 2010 2009200882.50 56.10 44.10 35.9099.70 111.90 101.60 42.202.309.304.40 1.90 1.207.20 5.50 3.507. Deferred Tax Asset / (Liability)` in lacsParticulars <strong>of</strong> TimingDifference between BookPr<strong>of</strong>it<strong>and</strong> Tex Pr<strong>of</strong>itAs at 31 stOctober,2012As at 31 stMarch,2012As at 31 stMarch,2011As at31 stMarch,2010As at31 stMarch,2009As at 31 stMarch,2008Depreciationallowance (1045.82) (1074.00) (982.00) (1026.20) (494.20) (61.00)(WDV difference)Provisionfor Gratuity(93.82) (12.6) 74.10 58.10 36.90 3.10ProvisionEncashmentfor Leave (36.81) (44.80) 71.80 63.80 26.30 8.10Provisionfor Bonus(56.78) (76.6) 60.90 28.20 39.80 NilExpensesdisallowedin-- 0.30the earlier year u/s 40a(ia)– but allowed in theyear<strong>of</strong> payment <strong>of</strong> taxTOTAL ( NET)--(1233.25) --(1208.00) --(775.20) (876.20) (390.90) --(49.70)ANNEXURE- VSTATEMENT OF SHARE CAPITALParticularsAuthorised sharesEquity shares <strong>of</strong> Rs. 10each (Numbers)Equity shares <strong>of</strong> Rs. 10each (Rs.)Issued, subscribed<strong>and</strong> fullypaid upEquity shares <strong>of</strong> Rs. 10each (Numbers)Equity shares <strong>of</strong> Rs. 10each (Rs.)31stOctober,201231stMarch,2012231stMarch,201131stMarch,20104,40,00,000 4,40,00,000 4,40,00,000 4,40,00,000 4,00,00,000 4,00,00,0004,400.00 4,400.00 4,400.00 4,400.002,67,38,250 2,67,38,250 2,67,38,250 2,67,38,250 2,67,38,250 2,47,38,2502,673.83 2,673.83 2,673.83 2,673.8331stMarch,20094,000.002,673.83(`in Lacs)31stMarch,20084,000.002,473.83Capital account2,673.83 2,673.83 2,673.83 2,673.832,673.832,473.83Notes onadjustments for Restated Financialcapital.Statements forms integral part <strong>of</strong> this Statementt <strong>of</strong> share179
Scotts Garments LimitedReconciliation <strong>of</strong> the shares outst<strong>and</strong>ing at the beginning <strong>and</strong> at the end <strong>of</strong> the reporting periodParticularsAt the beginning <strong>of</strong> theperiodIssue <strong>of</strong> Equity ShareOutst<strong>and</strong>ing at the end<strong>of</strong> the period31stOctober,201231stMarch,201231stMarch,201131stMarch,201031stMarch,200931stMarch,20082,67,38,250 2,67,38,250 2,67,38,250 2,67,38,250 2,47, 38,250 1,30, ,13,250-- --20,00,000 1,17, ,25,0002,67,38,250 2,67,38,250 2,67,38,250 2,67,38,250 2,67, 38,250 2,47, ,38,250ParticularsEquity shares allottedas fully paidbonus shares by capitalization <strong>of</strong>securities premium <strong>and</strong> reserves<strong>and</strong> surplus31stOctober,201231stMarch,201231stMarch,2011NIL31stMarch,201031stMarch,200931stMarch,200831st31st31stOctober,March,31stMarch, March,ParticularsNumber<strong>of</strong> sharesNaseer AhmedPedigreee Constructionn Private LimitedB.R. Machine ToolsPrivate LimitedBombay Rayon Fashions Limited% holding in classNaseer AhmedPedigreee Constructionn Private LimitedB.R. Machine ToolsPrivate LimitedBombay Rayon Fashions Limited20121,26,44,500 48,31,250 30,05,500 20,00,000 47.29% 18.07% 11.24% 07.48%20121,26, ,44,50048, ,31,25030, ,05,50020, ,00,000 47.29%18.07%11.24%07.48%20111,26,44,500 48,31,25030,05,50020,00,00047.29%18.07%11.24%07.48%20101,26,44,50048,31,25030,05,50020,00,00047.29%18.07%11.24%07.48%31stMarch,20091,26,44,50048,31,25030,05,50020,00,00047.29%18.07%11.24%07.48%31stMarch,20081,26,44,50048,31,25030,05,500-60.74%22.50%13.05%-The company has onlyone class <strong>of</strong>equity shares having a par value <strong>of</strong> Rs. 10 per share. Each holder <strong>of</strong>equity shares is entitled to one vote per share. The company declares dividends in <strong>India</strong>n rupees. Thedividend proposed by the <strong>Board</strong> <strong>of</strong>Directors is subject to theapproval <strong>of</strong>the shareholders in the ensuingAnnual General Meeting. In the event <strong>of</strong> liquidation <strong>of</strong> the Company, the holders <strong>of</strong> equity shares will beentitled toreceive remaining assets <strong>of</strong> the Company, after distribution <strong>of</strong> all preferential amounts. Thedistribution will be in proportion to the number <strong>of</strong> equity shares held by the shareholders.180
Scotts Garments LimitedANNEXURE- VISTATEMENT OF RESERVES AND SURPLUSS31st31stOctober,March,Particulars2012201231stMarch,201131stMarch,201031stMarch,2009(` in Lacs)31stMarch,2008<strong>Securities</strong> premiummaccount-----Opening balanceAdd: Premium on issue<strong>of</strong> equity sharesLess: Amount Utilizedtowards issue <strong>of</strong> fullypaid bonus shares2,496.96 2, ,496.96 2,496.96 2,496.96 1,296.96----- 1,200.00 1,296.96------7. Closing balance2,496.96 2, ,496.96 2,496.96 2,496.96 2,496.96 1,296.96-----Amalgamation Reserve-----Opening balance40.0040.0040.00 40.0040.00 40.008. Closing balance40.0040.0040.00 40.0040.00 40.009. Surplus/ (deficit) inpr<strong>of</strong>it <strong>and</strong> lossaccount----------Opening balance17,573.46 10, ,217.99 7,774.47 6,049.77 4,111.82 1,405.63Add: Pr<strong>of</strong>it for the year 1,539.12 7, ,355.46 2,443.52 1,724.71 1,937.95 2,224.71------Closingbalance19,112.58 17, ,573.46 10,217.99 7,774.47 6,049.77 3,630.34Notes on adjustments for Restated FinancialStatements (Annexure IV) forms integral part <strong>of</strong> thisStatement <strong>of</strong> reserves <strong>and</strong> surplus.181
Scotts Garments LimitedANNEXURE VII(a)STATEMENT OF LONG TERM BORROWINGSParticularsSecured Long TermBorrowings *Term loan from bankCanara BankState Bank <strong>of</strong><strong>India</strong>Exim BankFederal BankTotal31st31st31st 31st31stOctober,March,March,March,March,20122201222011 201002009(` in lacs)31stMarch,20087,283.58 423.16 669.18 -5,638. 54508. 161,173. 64-2,432. .90652. .392,196. .47-1,225.45 725.61 3,119.19 19.571,311.57 615.342,588.04 40.242, ,115.01-3, ,500.00122.408405.92 7,320. 34 5,281. .76 5,089.83 4,555.19 5, ,737.42Vehicle LoanAxis BankHDFC BankICICI BankTotal7.32 3. 59 20. .03 46.261.03 2. 70 3. .73--8.35-6. 29-23. .767.4853.74-4.3226.5130.82-9.6548.3958.04UnsecuredLoan from BRFL----------- 1, ,510.65Total8,414.27 7,326. 63 5,305. .53 5,143.58 4,586.01 7, ,306.11* Note: The statement <strong>of</strong> long term borrowings doesn’ t include loans maturing within one yearaggregating to Rs.3077.43 lacs. The details <strong>of</strong> the same are appearing in Annexure VII(c)ANNEXURE VII(b)STATEMENT OF SHORT TERM BORROWINGSParticulars31stOctober,201231st March,201231stMarch,2011131stMarch,201031stMarch,2009(` in lacs)31stMarch,2008SecuredFrom banksWorkingcapitalloanUnsecured fromOthersTotal18,904.08200.0019,104.0818,079.52 17,335.64 11,886.67 9,529.61 6, ,964.4218,079.52 17,335.64 11,886.67 9,529.61 6, ,964.42182
Scotts Garments LimitedANNEXURE TO VII (c)DETAILS OF TERMS AND CONDITIONS OF SECURED LOANS OUTSTANDING AS AT 31ST OCTOBER,2012Sr. Nature <strong>of</strong> Name<strong>of</strong> Current Non- Security Interest % RepaymentNoSecured Loan Financialmaturities Currentp.a ScheduleInstitution / notmaturitiesBanksincluded inlong termborrowings1 WorkingCapital facilityCanara BankNil14061.82Paripassucharge with SBILIBOR 3.50%+ Repayable onDem<strong>and</strong>on stocks&receivables2 Working StateBank <strong>of</strong>Nil4842.26Paripassu LIBOR + RepaybleonCapital facility<strong>India</strong>charge with 3.50%Dem<strong>and</strong>Canara Bankon stocks&receivablesSub TotalNil18904.0883 Long Term EximBank875.000 480.43First Pari Passu16 QuarterlyWorkingCharge on 12.40 EMIPayableCapital LoanFactory L<strong>and</strong> &fromJanuary,Building at 4812010- A & 481- B ,Peenya Indl.Area, Plant &Machinery<strong>and</strong>Furniture &Fixtures.4 Term LoanCanara BankNILNilFirst Pari Passu20 QuarterlyCharge on 14.75 InstallmentsFactory L<strong>and</strong> &payable fromBuilding at 481June, 2007- A & 481- B ,Peenya Indl.Area, Plant &Machinery<strong>and</strong>Furniture &Fixtures.5 Term LoanCanara Bank 240.000 203.200 First Pari Passu 14.75 60 EMICharge onpayable fromFactory L<strong>and</strong> &August, 2009Building at 481- A & 481- B ,Peenya Indl.Area, Plant &Machinery<strong>and</strong>Furniture &Fixtures.6 FCLR Term Canara Bank 200.000 543.744 First Pari Passu 6 months 20 Quarterly183
Scotts Garments LimitedSr.No789Nature <strong>of</strong>Secured LoanLoanTerm LoanTerm LoanTerm LoanName<strong>of</strong>FinancialInstitution /BanksCanara BankCanara BankEximBankCurrentmaturitiesnotincluded inlong termborrowingsNon-CurrentmaturitiesSecurityCharge onFactory L<strong>and</strong> &Building at 481- A & 481- B ,Peenya Indl.Area, Plant &Machinery<strong>and</strong>Furniture &Fixtures.516.00 4154.044 Exclusivecharge onproject assets:L<strong>and</strong> 14.13acresat Plot No. D-3,D-4, A-3, A-10,A-11, S-43, S-44ANDS-45(P),Plant &Machinery<strong>and</strong>other Misc.fixed assets atDoddabalapurbeing installed864.000 2382.588 ExclusiveCharge onProjectassets:L<strong>and</strong> atSy.Nos. 60, 30/1 &32/1 totaladmeasuring137214 squarefeet, Building<strong>and</strong> Plant&MachineryatKolar beinginstalled147.62218.76First Pari PassuCharge onFactory L<strong>and</strong> &Building at 481- A & 481- B ,Peenya Indl.Area, Plant &Machinery<strong>and</strong>Furniture &Interest %p.aLIBOR +7.50%RepaymentSchedulepaymentspayable fromApril 201114.25 28 Quarterlypaymentspayable fromSeptember201214.25 24 QuarterlyPaymentspayable fromJune 201323 Quarterly12.20 Installmentspayable fromMarch, 2011184
Scotts Garments LimitedSr.NoNature <strong>of</strong>Secured LoanName<strong>of</strong>FinancialInstitution /BanksCurrentmaturitiesnotincluded inlong termborrowingsNon-CurrentmaturitiesSecurityFixtures.Interest %p.aRepaymentSchedule1011Term LoanTerm LoanStateBank <strong>of</strong><strong>India</strong>StateBank <strong>of</strong><strong>India</strong>SubTotal180.000 360.39Exclusivecharge onspecific Plant &Machinery48.000 62.777 Exclusivecharge onspecific Plant &Machinery3070.628405.9113.9074EMIfromMonthlyPayableSeptember200913.85 36EMIfrom2011MonthlyPayableJune121314Vehicle LoanVehicle LoanVehicle LoanAxisBankAxisBankHDFC BankSubTotal2.20NilRespectiveevehicleToyotaFortuner3.602.444 RespectiveeVehicleChevroletCruze1.000 5.90RespectiveevehicleHyundai I206.808.34-––7.85 35EMIfrom2010MonthlyPayableApril,8.75 48EMIfromMonthlypayableDecember20104.69 60EMIfromMonthlyPayableNovember2010ANNEXURE VIIISTATEMENT OF TANGIBLE & INTANGIBLEASSETS31st 31stOctober,March,Particulars2012 201231stMarch,201131stMarch,201031stMarch,2009(`` In lacs)31stMarch,2008TANGIBILE ASSETSLANDGross BlockLess AccumulatedDepreciationNet BlockLAND & BUILDINGSGross BlockLess Accumulated1,202.78 1,202.78 1, ,165.63 732.77 670.90-----1,202.78 1,202.78 1, ,165.63 732.77 670.90952.04322.46952.04284.10932.36 823.04 372.92211.61 133.74 115.20173.14-173.14324.9198.62185
Scotts Garments LimitedParticularsDepreciationNet BlockLEASE HOLD LAND-WIND MILLGross BlockLess AccumulatedDepreciationNet BlockSHOW ROOMGross BlockLess AccumulatedDepreciationNet BlockPROJECT AT TARAPURGross BlockLess AccumulatedDepreciationNet BlockOFFICEBUILDINGGross BlockLess AccumulatedDepreciationNet BlockFACTORY BUILDINGSGross BlockLess AccumulatedDepreciationNet BlockPLANT& MACHINERYGross BlockLess AccumulatedDepreciationNet BlockELECTRICALINSTALLATIONGross BlockLess AccumulatedDepreciationNet BlockFURNITURE & FIXTURESGross BlockLess AccumulatedDepreciationNet BlockFURNITURE & FIXTURES100%Gross Block31stOctober,2012629.5871.03-71.0333.9614.5619.40623.42-623.42280.7464.85215.8931stMarch,20125,424.45 5,345.17 2, ,199.19 2,134.97 1,970.97 1, ,558.171,149.54887.49 711.83 547.50 386.33 249.354,274.91 4,457.68 1, ,487.36 1,587.47 1,584.64 1, ,308.8214,067.91 13,003.25 10, ,428.05 9,463.01 7,450.08 6, ,669.875933.085,237.92 4, ,368.53 3,475.62 2,705.45 2, ,080.488,134.83 7,765.33 6, ,059.52 5,987.39 4,744.63 4, ,589.39590.32295.47294.851053.11 1,042.67 1, ,021.88 863.45 774.72577.65475.4637.59667.9471.0371.0333.9613.3520.61623.42-623.42280.7458.33222.41585.53269.33316.20521.86520.8137.5331stMarch,201131stMarch,2010720.75 689.30 257.7271.0371.0333.9611.0622.90623.42 615.83-623.42 615.83280.74 280.74 203.0446.63 34.30 25.04234.11 246.44 178.00547.38 491.23 411.23223.24 175.32 134.66324.14 315.91 276.57409.41 293.72 180.87612.47 569.73 593.8537.5325.2025.2033.968.5225.44-37.5331stMarch,200925.2025.2033.965.6928.27---37.5331stMarch,2008226.2925.2025.2033.962.5531.41---193.0815.77177.31373.5791.10282.47344.75109.50235.2533.84186
Scotts Garments LimitedParticularsLess AccumulatedDepreciationNet BlockOFFICEEQUIPMENTSGross BlockLess AccumulatedDepreciationNet BlockDATA PROCESSINGEQUIPMENTSGross BlockLess AccumulatedDepreciationNet BlockVEHICLESGross BlockLess AccumulatedDepreciationNet BlockCIVIL WORK ONLEASEDBUILDINGGross BlockLess AccumulatedDepreciationNet BlockMOBILE HANDSETSGross BlockLess AccumulatedDepreciationNet BlockEFFLUENT TREATMENTPLANTGross BlockLess AccumulatedDepreciationNet Block31stOctober,201237.59-267.43135.46131.97-438.51356.1182.40-433.83314.11119.72-20.6119.710.90-7.887.88-185.3158.74126.5731stMarch,201237.53-260.38120.28140.10426.16330.9495.22434.43292.53141.9020.6117.772.846.906.230.67148.1050.6297.4831stMarch,201137.53-31stMarch,2010238.06 199.54 175.0593.27 73.72 56.12144.79 125.82 118.93406.40 279.02 247.90272.06 219.91 191.85134.34 59.11 56.05419.01 382.41 323.41249.40 200.08 166.32169.61 182.33 157.0920.6113.656.965.415.100.31148.1034.88113.2237.53-19.4611.917.554.714.430.2892.5620.8771.6931stMarch,200935.941.594.032.231.804.362.921.4489.809.3780.4331stMarch,200833.540.30123.2942.2681.03220.47164.8155.66307.66114.28193.384.031.782.252.132.13-60.680.7059.98Total Net BlockIntangible AssetsGoodwillAmortizedBalance16403.72 16,346.42 11, ,890.56 11,242.26 8,777.11 7, ,441.881,475.46 2,213.18 2, ,950.92 3,688.65 3,688.65-430.34 737.72 737.74 737.73--1045.12 1,475.46 2, ,213.18 2,950.92 3,688.65 3, ,688.65Capital Work-in-progress4975.40 2,453.48 1, ,645.6316.7850.82112.93187
Scotts Garments LimitedANNEXURE IXSTATEMENT OF TRADE RECEIVABLESParticularsDebt outst<strong>and</strong>ing for a periodexceeding six months(Unsecured considered good)31stOctober,201231stMarch,201231stMarch,201131stMarch,201031stMarch,2009(`` in lacs)31stMarch,2008Considered good------Considered doubtfulDebt outst<strong>and</strong>ing for a periodless thansix months(Unsecured considered good)------------Other debtsDebts due from Groupcompany5,825.317,270.037,996.177,898.898,496.537,691.05Inmark Retail PrivateLimited979.16322.3----Total6,804.477,592.337,996.177,898.898,496.537,691.05188
Scotts Garments LimitedANNEXURE XSTATEMENT OF LONG TERM LOANS AND ADVANCES31st 31st 31stOctober,March,March,Particulars2012 2012201131stMarch,201031stMarch,2009(` in lacs)31stMarch,2008Unsecured consideredd goodSecurity depositsTotal598.73598.73581.23581.23629.17 502.65 472.69 338.83629.17 502.65 472.69 338.83ANNEXURE XISTATEMENT OF SHORT TERM LOANS ANDADVANCES31 st 31stOctober, March,Particulars(Unsecured Considered goodunless otherwise stated )a) Advance recoverable in cash orkind or value to be receivedConsidered GoodAdvanceTaxes PaidAdvanceto Promoterr groupcompany:Copperscoin realty private <strong>limited</strong>20122,027.21-20122,048.68--31stMarch,20112,305.62-162.0031stMarch,20102,770.63740.44-31stMarch,20091,164.25554.83-(` in lacs)31stMarch,2008471.561,345.65-Total2,027.212,048.682,467.623,511.071,719.081,817.21ANNEXURE XIISTATEMENT OF INVESTMENTSSParticulars31 stOctober,201231stMarch,201231stMarch,201131stMarch,201031stMarch,2009(` in lacs)31stMarch,2008QUOTED in equity shares fullypaid upBombay Rayon Fashions Limitedshares <strong>of</strong>Rs.10eachUN QUOTED in equity sharesInmark Retail PrivateLimitedshares <strong>of</strong>Rs100 eachBombay Rayon Clothing LimitedScotts Fashionciti <strong>India</strong> <strong>limited</strong>Benchmark Derivative InvestmenttFund2,393.64675.002,000.001.00-2,342.84675.002,000.001.00-664.000 664.00- -2,000.000 1,000.001.000 1.00- -664.00-1,000.001.00-800.00--1.0020.00189
Scotts Garments LimitedParticularsICICI Prudential Fixed MaturityPlanSt<strong>and</strong>ardd Charted FMP YLY Series9Total31 stOctober,2012--5,069.6431stMarch,2012--5,018.8431stMarch,201131stMarch,2010- -- -2,665.000 1,665.0031stMarch,2009--1,665.0031stMarch,200830.0036.00887.00ANNEXURE XIIISTATEMENT OF INVENTORIES31 stOctober,Particulars2012Raw materials-(valued at cost) 12,796.77Work-in-progress - (valued at cost) 4,956.19Finishedgoods (valued at lower <strong>of</strong>cost or net realisable value)4,514.97Total22,268.6631stMarch,201211,821.335,676.664,190.9921,688.9931st 31stMarch, March,2011 201010,247.622 4,250.413,509.43 3,424.192,819.25 3,473.9116,576.3011,148.5131stMarch,20093,754.002,937.631,442.628,134.25(` in lacs)31stMarch,20082,679.701,482.18785.924,947.80ANNEXURE XIVSTATEMENT OF CASH AND CASH EQUIVALENTSParticularsCash on h<strong>and</strong>Balances with banks(i) In current accounts(ii) In deposit accounts(held asmargin money)Total31 st 31stOctober, March,2012 201238.9729.2756.7863.90524.91459.59620.666 552.7631stMarch,201133.83223.86480.84738.5331stMarch,201032.62136.69315.01484.3231stMarch,200924.57349.50228.14602.21(` in lacs)31stMarch,200822.87134.92421.28579.07ANNEXURE- XVSTATEMENT OF OTHER CURRENT ASSETSSParticularsBalance with governmentauthoritiesExport Incentive receivableVat & Subsidy receivableTotal31 stOctober,201231stMarch,2012--1,973.942,247.76557.12670.172,531.062,917.9431stMarch,2011-1,984.67435.812,420.4831stMarch,2010-1,402.92427.031,829.9531stMarch,2009-529.40268.50797.90(` in lacs)31stMarch,2008-732.81114.02846.83190
Scotts Garments LimitedANNEXURE - XVISTATEMENT OF TRADE PAYABLESParticularsTrade payables(a) Due toMicro & SmallEnterprises(b) Due toother Creditors31 stOctober,201231stMarch,2012- -3645.966 6,852.1831stMarch,2011-6,708.4031stMarch,2010-6,235.8531stMarch,2009-5,255.91(`` in lacs)31stMarch,2008-3,591.72Total3645.966 6,852.18 6,708.40 6,235.85 5,255.91 3,591.72Note: Trade payable does not include any amount payable to promoter( (s)/ promoter group <strong>and</strong> director <strong>of</strong>the company.ANNEXURE- XVIISTATEMENT OF OTHER CURRENT LIABILITIES31 st 31stOctober, March,ParticularsStatutoryremittancesOver drawn bank balanceCurrent maturities <strong>of</strong> long term debt Total2012328.69340.683,077.433 3,746.802012168.36473.272,392.323,033.9531stMarch,2011191.48230.832,103.542,525.8531stMarch,2010172.75221.331,972.772,366.8531stMarch,2009191.31211.801,794.942,198.05(`` in lacs)31stMarch,2008131.21281.66769.761,182.63ANNEXURE- XVIIISTATEMENT OF OTHER LONG TERM LIABILITIESParticularsGratuityPayableTotal31 st 31stOctober, March,2012 2012289.122 224.99289.122 224.9931stMarch,2011228.38228.3831stMarch,2010174.94174.9431stMarch,2009108.63108.63(`` in lacs)31stMarch,200839.4239.42ANNEXURE- XIXSTATEMENT OF SHORT TERM PROVISIONS31 st 31st31st31stOctober,March,March,March,ParticularsProvisionforcompensated absences Provisionfor bonusProvisionfor taxProvisionfor proposedequity dividend2012113.44 176.25 1,254.73 -20122154.96 236.11 464.77 267.38 20111221.50 187.62 213.97 267.38 2010191.92200.00877.29267.3831stMarch,2009267.38(`` in lacs)31stMarch,200877.45 51.11100.00-587.19 1,387.82247.38191
Scotts Garments LimitedParticularsProvisionfor tax onproposeddividendTotal31 stOctober,201231st31st31st31st 31stMarch,March,March,March,March,201222011120102009200843.37 43.37 44.41 44.41 45.44 42.041,587.79 1,166.59 934.88 1,581.00 1,077.46 1,728.35ANNEXURE XXSTATEMENT OF OTHER INCOME(` in lacs)31 st 31st31st31st31st 31stOctober,March,March,March,March,March,Particulars2012 2012220111201020092008Interest IncomeDividendd receivedForeign exchange gainPr<strong>of</strong>it onsale <strong>of</strong>InvestmentsIncome from Windmill Miscellaneous incomeTotal56.38 -184.53-221.35 131.17 593.43 203.08 48.90 -5,949.16347.91 38.78 6,587.83 206.31 49.8095.50-353.26 142.27847.14 183.6049.8017.41-167.340.76418.9179.4360.0024.04869.4312.4710.491,055.86ANNEXURE XXI48.8750.0056.98-5.041.83162.72STATEMENT OF OTHER EXPENSESParticularsEmployee costPower <strong>and</strong> fuel & waterRent including lease rentalsRepairs <strong>and</strong> maintenanceDyeing & processing chargesLabour chargesEmbroidery chargesPrinting chargesTransportation chargesFreight <strong>and</strong> forwardingInsuranceRates <strong>and</strong> taxesTravelling <strong>and</strong> conveyancePrinting <strong>and</strong> stationeryPostage & Courier chargesBusinesss promotionDocumentation chargesSecurity chargesDonations <strong>and</strong> contributionsLegal <strong>and</strong> pr<strong>of</strong>essional31 stOctober,20126000.00822.93226.44240.12435.98865.2048.27144.93111.33337.7032.1550.92151.8044.5458.3311.242.06201.379.2579.62(` in lacs)31st 31st 31st 31st 31stMarch,March,March,March,March,2012 20112010200920089,971.23 10,376.43 8,254.27 6,241.74 4,744.421,163.50 1,279.14 1,010.72 1,010.80776.52392.21 370.82 256.03 178.71 115.16448.93 349.22 328.67 415.35 368.391,412.22 1,673.42 1,798.55 1,836.19 1,370.721,755.98 3,259.69 2,218.69 1,227.69 1,468.29240.74 525.02 288.37 335.27 290.20107.15 210.20 493.87 255.67 370.38155.94 159.12 97.10 35.88 55.39725.05 883.20 717.96 870.70 635.3514.42 28.56 31.90 20.25 33.5277.29 63.51 60.76 18.59 65.06239.54 201.24 178.82 169.14 125.8655.99 101.48 125.29 106.06 85.6455.36 81.21 155.95 199.44 248.4120.53 24.29 82.01 49.67 46.5730.57 55.63 46.75 37.63 16.70277.91 214.93 168.07 112.18 63.904.95 2.31 11.94 15.96 20.9393.32 49.43 56.99 51.82 81.24192
Scotts Garments LimitedParticularsPayments to auditorsTelephone chargesSubscription, Books &periodicalsAdvertisement expensesGeneral expensesTotal31 stOctober,20122.7130.9131stMarch,20124.9052.0531stMarch,20113.8746.2531stMarch,20103.3144.0331stMarch,20097.6178.3331stMarch,20083.7640.942.07 2.79 7.02 4.46 1.74 13.966079 3.57 2.95 4.23 4.43 2.3856.73 65.89 53.70 163.96 100.67 118.1610,027.39 17,372.02 20,022.64 16,602.70 13,381.50 11,161.83ANNEXURE XXIISTATEMENT OF TAXSHELTERSr.No ParticularsA Restated pr<strong>of</strong>it before taxTax rate(includingsurchargeB <strong>and</strong> education cess)Tax there on(includingsurcharge <strong>and</strong>C education cess)Adjustments :D Permanent DifferencesDisallowance u/s 36(1)(a)FBT debited to P&LaccountDonation disallowedDividend exemptedAdjustments on pr<strong>of</strong>it /losson sale <strong>of</strong> assetsDonation under section 80GIncome taxable under otherheadsDeduction under section80JJAAAPreliminary expenses shownseparatelyTotal31 stOctober,20122,990.20 31stMarch,201210,236.81 31stMarch,20114,726.55 31stMarch,20104,324.61 31stMarch,20093,720.5131stMarch,20083,509.63332.44% 33.22% 33.22%33.99%33.99%33.99%970.02 3,400.67 1,570.16 1,469.93 1,264.601,192.911--- - 0.634.444--- -- 10.62- 2.00 17.87 11.94 15.955 12.17- (48.90) (49.80) (49.80) (60.00) (50.00)- (5,949.16)----(`` in lacs)- 15.26 (864.36) 1.666- 0.25- (0.05)- - (7.61) (20.02)(200.00) (700.00) (698.07) (577.90) (412.35) (86.92)(200.00) (6,696.06) (730.00) (600.25) (1,327.74) (128.10)ETiming differenceeDifference betweenbookdepreciation <strong>and</strong> taxdepreciation as perReturn <strong>of</strong>Incomeprovision for Gratuity, Leaveencashment <strong>and</strong> Bonusundersection 43BDisallowance u/s 40(a) (ia)57.91 111.98 (472.29) (660.19) (327.57) (129.37)-- 405.32 332.44 169.966 184.344---- 0.400 10.333193
Sr.NoFGHIJParticularsAllowance u/s 40 (a)(ia) onpaymentAllowable expenses u/s 35DAllowable expenses u/s35DDDisallowance <strong>of</strong>amalgamation expenses u/s35DDGratuity paid during theyearEarned leave salarypaidBonuspaidTotalNet adjustments (D+E)Tax expenses or (savings)thereon (F*B)Tax liability (C+G)STCGLTCGTax liabilityInterest u/s 234A, 234B <strong>and</strong>234C <strong>of</strong> the IncomeTax Act, 1961Total tax liability31 stOctober,2012----31stMarch,201231stMarch,2011- -- (0.98)- - (0.64)- - 3.22Scotts Garments Limited31stMarch,201031stMarch,200931stMarch,2008- (9.15)--- (1.90)-- (24.02) (12.16) (23.34) (4.58)-- (119.17) (55.77) (80.52) (13.09)-(240.57)- (107.12) (33.92)57.91 (142.09) 111.98 (6,584.08) (451.71) (1,181.71) (393.10) (993.35) (377.34) (1,705.08) 11.811(116.29)(46.09) 923.93 -(2,187.23) 1,184.29 -(392.56) 1,177.60 -(337.64) 1,132.29 -(579.56) 685.04-(39.53)1,153.383.233- 228.26-- 1.200.41923.93 1,412.55 1,197.69 1,132.29 686.241,157.02-- 17.99-- 9.91923.93 1,412.55 1,215.68 1,132.29 686.241,166.93----Note:1. The statement <strong>of</strong> taxshelter <strong>and</strong> adjustment have been prepared as per the summarystatement <strong>of</strong>pr<strong>of</strong>it <strong>and</strong>losses, as restated, <strong>of</strong> the Company2. Adjustment on account <strong>of</strong> restatement are considered in the tax shelterbased on return <strong>of</strong> Income filed forrespectivee years <strong>and</strong> latest tax assessment status positions3. The permanent / timing difference also considers the income - tax returns filed by thecompanyANNEXURE XXIIISCHEDULE OF DIVIDEND PAIDParticularsEquity share capital (Facevalue pershare-Rs.10)Dividendd on equity shares(Final)Rate <strong>of</strong> dividend in (%)AmountCorporate dividend tax31stOctober,20122673.83NIL--31stMarch,20122673.8310.00%267.3843.3731stMarch,20112673.8310.00%267.3844.4031stMarch,20102673.8310.00%267.3844.4031stMarch,20092673.8310.00%267.3845.44(`` in lacs)31stMarch,20082473.8310.00%247.3842.04194
Scotts Garments LimitedANNEXURE XXIVSTATEMENT OF KEYACCOUNTING RATIOSSr.NoABCDEFGParticularsEarnings per share (InRs.)Netpr<strong>of</strong>it after tax asrestated attributableto equity share holdersWeighted average no.equity sharesoutst<strong>and</strong>ing during theyearBasic EPS (A/B)Return on Networth (%)(D/E)Netpr<strong>of</strong>it after tax asrestated attributableto equity share holdersNetworthNetAsset Valueperequity share (F/G)(Rs.)Total Assets less totalliabilitiesWeighted average no.equity shares outst<strong>and</strong>ingduring the year.ANNEXURE-XXV31stOctober,20122,041.0526,735,2506.628.392041.0524,323.3890.9824,323.3826,735,25031stMarch,20128,403.9526,735,250 26,735,250 26,735,250 24,904,917 16,845,16531.43 13.06 10.41 10.93 13.2136.888,403.9522,784.2585.2222,784.2531stMarch,20113,493.0622.643,493.0615,428.7857.7115,428.7831stMarch,20102,784.2321.442,784.2312,985.2648.5612,985.2631stMarch,20092,721.8324.172,721.8311,260.5642.1111,260.56(` in lacs)31stMarch,20082,224.7029.902,224.707,441.1230.087,441.1226,735,250 26,735,250 26,735,250 24,904,917 16,845,165Statement <strong>of</strong> CapitalizationSl. NoABCDEFGHParticularsDebtShort TermDebtLong TermDebt *Total DebtShareholders’ fundsShare capitalReserves <strong>and</strong> surplusTotal shareholders fundLong termDebt/Equity(B/F)Total Debt/Equity (C/ F)Pre issue as at 31 stOctober, 201219104.0811491.6930595.772673.8321649.5524323.380.471.25(` in lacs)Post issue **----------------195
Scotts Garments LimitedNote:1) * Amount repayable within1year from 1 st November 2012 is included in long term debt.2) **The corresponding post issue figuresare not determinable at this stage, pending completion <strong>of</strong> book-building process <strong>and</strong> hencee have not been furnished.ANNEXURE XXVISTATEMENT OF RELATED PARTY TRANSACTIONA. RelatedpartiesName <strong>of</strong> related parties & description <strong>of</strong> relationship31 st October, 2012 31 st March 2012 31 st March201131 stt March 201031 st March 2009 31 st March 2008Key Management Personnel1.Mr.NaseerAhmed,ManagingDirector2.Mrs.Nuzhat1.Mr.NaseerAhmed,ManagingDirector2.Mrs.NuzhatAishaNaseer AishaNaseerDirectorDirector1.Mr.NaseerAhmed,ManaginggDirector2.Mrs.NuzhatAisha NaseerDirector1.Mr.NaseerAhmed,ManagingDirector2.Mrs.NuzhatAishaNaseerDirector1.Mr.NaseerAhmed,ManagingDirector2.Mrs.NuzhatAishaNaseerDirector1.Mr. NaseerAhmedManagingDirector2.Mrs.NuzhatAishaNaseerDirectorAssociates/Enterprises over which directors <strong>and</strong> /or their relatives have significant influence1. Scotts 1. Scotts1.Scotts1.Scotts1.ScottsFashioncitiLimited<strong>India</strong> Fashionciti <strong>India</strong>LimitedPlantations PvtLtdPlantations PvtLtdPlantationsPvtLtd2. Scotts 2. Scotts2. Scotts 2. Scotts 2. ScottsPlantationsPrivate Limited3. Scotts MetalsPlantationsPrivate Limited3. Scotts MetalsFashionciti <strong>India</strong>Limited3. Scotts MetalsFashionciti<strong>India</strong> LimitedFashioncitii<strong>India</strong> Limited<strong>and</strong> Mines <strong>and</strong> Mines<strong>and</strong> MinesPrivate LimitedPrivate Limited Private Limited4. Scotts 4. Scotts4. ScottsInfrastructure<strong>and</strong>DevelopmentPrivate LimitedInfrastructure<strong>and</strong>DevelopmentPrivate LimitedInfrastructure<strong>and</strong>DevelopmentPrivate Limited5.GFI 5.GFI5.GFIInfrastructurePrivate LimitedInfrastructurePrivate LimitedInfrastructurePrivate Limited6. CoppersCoin 6. Coppers Coin6. Coppers CoinRealtyPrivate RealtyPrivateRealty PrivateLimited7.Inmark RetailLimited7.InmarkRetailLimitedPrivate Limited8. Scotts ApparelsPrivate Limited9. Scotts FashionsPrivate Limited10. Scotts WearsPrivate LimitedPrivate Limited8. Scotts ApparelsPrivate Limited9. Scotts FashionsPrivate Limited10. Scotts WearsPrivate Limited1.ScottsPlantations PvtLtd2. ScottsFashionciti<strong>India</strong> Limited3. Scotts Metals<strong>and</strong> MinesPrivate Limited4. ScottsInfrastructure<strong>and</strong>DevelopmentPrivate Limited196
Scotts Garments Limited11. Scotts KnitsPrivate Limited12.PedigreeConstructionPrivateLimited11. Scotts KnitsPrivate Limited12.PedigreeConstructionPrivateLimitedB. RelatedParty TransactionsParticularsRemuneration to keymanagerial personnelGuaranteeskeypersonnelLoans givento associatecompaniesInvestmentss made inassociatesSale <strong>of</strong> investments inAssociatesSale <strong>of</strong> GarmentsGiven bymanagerial(` in lacs)31 st October,201231 stMarch201231 stMarch201131 st March201031 st March200931 stMarch2008115.00 198.00 198.00 198.00 198.00 144.00048040.00 48040.00 48040.00 45030.00 20530.00 4660.000160.20676.00 3008.70 1.0 1.0 1.0 1.0- 2413.701299.30 319.80-- 162.00----- -- -- -Receivableassociatesfrom979.20 322.30--- -ANNEXURE-XXVIICONTINGENT LIABILITY NOT PROVIDED FOR IN RESPECT OF:Particulars31 stOctober,31 stMarch31 stMarch31 stMarch31 stMarch2012201222011 2010 2009Corporate guarantee givenby company for term loangranted bybankersLetter <strong>of</strong> credit issuedbybankers-2213.40 150.00 2031.60 300.000 2038.50 300.000 1942.807283.251600.60Liability on account<strong>of</strong>export obligationLiability onaccount <strong>of</strong> salestax15580.30 -13320.20 -9958.40 -12107.53 -6647.70-Estimated amount <strong>of</strong>capital commitment1875.00 2106.00 Nil Nil Nil(` in lacs)31 stMarch20085171.05443.005495.908.40Nil197
Scotts Garments LimitedMANAGEMENT’S DISCUSSIONAND ANALYSISManagement’sDiscussion <strong>and</strong> Analysiss <strong>of</strong> FinancialCondition <strong>and</strong> Results <strong>of</strong> Operations as Reflected intheAudited Financial Statementsa.Overview <strong>of</strong> our Business:Scotts Garments Limited (SGL) has grown up considerably during last few years in spite<strong>of</strong> the recessionarytrends in the economyduring last year. From a modest beginning involving taking up job works, SGLstarted exploring the market for direct exports, <strong>and</strong> has in course <strong>of</strong>time established a status forproduction <strong>of</strong> quality <strong>garments</strong> <strong>and</strong>dependability in deliveryschedules inthe export market.Our Company has state <strong>of</strong> the art facilities for manufacturing the hi-fashion Ready Made Garments. Wehave domain expertise in providing sampling <strong>and</strong> design <strong>and</strong> have additionalfacilities such asembroidery, printing, dyeing <strong>and</strong> washing. Presently, we are largely engaged in manufacturing <strong>and</strong>export <strong>of</strong> Ready Made Garments (RMG).Our operations <strong>and</strong> facilities enablee us to manufacture readymade apparel by spanningvarious aspects <strong>of</strong>the apparel production chain, frommanaging the design to delivery <strong>and</strong> quality assurance processesinvolved in producingreadymade apparels. SGL is one <strong>of</strong> the competitive manufacturer <strong>and</strong> exporter <strong>of</strong>readymade <strong>garments</strong> with modern manufacturing facilities, fully backed by facilities for productdevelopment, design studio <strong>and</strong> efficient sampling infrastructure to provide quality services to itscustomers. In future, we will continue to explore new marketsdomestically<strong>and</strong> intend to cater internationalmarkets more strongly.b.Capacity ExpansionOur Company normallyoperates ineither one shift or two shifts depending on theorders in h<strong>and</strong>.Presently we have installed capacity <strong>of</strong> 99,72,000 pieces/annum for manufacturing <strong>of</strong> Woven Garments<strong>and</strong> 1,17,36, ,000 pieces/annum for Knitted Garments respectively. We propose to install additional capacity<strong>of</strong> 40,000 kgfor Knitting & Processing<strong>and</strong> 30,000 pieces for <strong>and</strong>Trouser Making.c.Significant Development Subsequent to Last Financial PeriodThe Directors confirm that there havebeen no events or circumstances since the date <strong>of</strong>the last financialstatements as disclosedd in the RHP which materially or adversely affect or is likely to affect themanufacturing or pr<strong>of</strong>itability <strong>of</strong> our company, orthe value <strong>of</strong>our assets, or our abilityto pay liabilitieswithin next twelve months.d.Factors thatt may affect Results <strong>of</strong> OperationsExcept as otherwise stated in this Offer Document, the Risk Factors given inthis Offer Document <strong>and</strong>thefollowing important factors could cause actual results to differmaterially from the expectations include,among others:• General economic <strong>and</strong>business conditions;As a company operating in <strong>India</strong>, we are affectedby the general economic conditions inthe country.The<strong>India</strong>n economy has grown steadily over the past several years. Thisimproved performance waspropelledby the growth in industrial activity <strong>and</strong> robust services sector. The overall economic growthwill therefore impact the results <strong>of</strong> its operations. The growthprospects <strong>of</strong>the businesss <strong>of</strong> the Company<strong>and</strong> its ability to implement the strategies will beinfluenced by macroeconomic growth.198
Scotts Garments Limited• Our ability to successfully implement its strategy <strong>and</strong> its growth <strong>and</strong> expansion plans;Our growth plans are considerablee <strong>and</strong> would put significant dem<strong>and</strong>s on our management team<strong>and</strong>other resources. Any delay in implementation <strong>of</strong> its strategy <strong>and</strong> its growth <strong>and</strong> expansion plans couldimpact theCompany’sroll out schedules <strong>and</strong> cause cost <strong>and</strong> time over runs.• Factors affecting industrial activity;Any suchchanges in the industrial policies relating to textile industry, tariffs, excise duties etc whichmay affect the activities <strong>of</strong> the Textile industry etc. may affectour results <strong>of</strong> operation.• Increasing competitionin the industry;The garment manufacturing industry, globally <strong>and</strong> in <strong>India</strong>, is highly fragmented, with a large number<strong>of</strong> small <strong>and</strong> medium sized manufacturers having a local presence in Western Europe, China <strong>and</strong> <strong>India</strong>.Our principal competitors in our manufacturingoperations in <strong>India</strong> include, among others, M<strong>and</strong>hanaIndustriess Limited, Gokaldas Exports Limited, House <strong>of</strong> Pearl Fashion Limited, KPR Mills Limited,Indus Fila<strong>and</strong> Mudra Lifestyle Limited. Furtherr we also facecompetitionfrom regional players locatedin China, Bangladesh <strong>and</strong> Vietnam.• Cyclical or seasonal fluctuations inthe operating results;Cyclical or seasonal fluctuations in the operating results <strong>of</strong> the Company may affect the enduringfinancial performance at large.• Changes in laws <strong>and</strong> regulations that apply to the industry;There are some laws <strong>and</strong> regulations applicable to the industry in which we operate, which we have tocomply/ follow. In case <strong>of</strong> a failureto comply with these laws <strong>and</strong> regulations or to obtain or renewthenecessarypermits <strong>and</strong> approvals our business may be affected.• Changes in fiscal, economic or political conditions in <strong>India</strong>;External factors such as potential terrorist attacks, acts <strong>of</strong> waror geopolitical <strong>and</strong> socialturmoil in manyparts <strong>of</strong> the world could constrain our ability to do business, increase the costs <strong>and</strong> negatively affectourfinancial performance.• Changes in the foreignexchange control regulations, interest rates <strong>and</strong> tax laws in <strong>India</strong>.Since, more than 90% <strong>of</strong> the turnover <strong>of</strong> the company is exported to different countries any change intheforeign exchange control regulation, mainly interest rates <strong>and</strong>tax laws pertaining to <strong>India</strong> may affect theliquidity <strong>of</strong> cash in the market which in turn mayaffect the purchasing power <strong>of</strong> the economy.e.OutlookThe company is committed to put continuous efforts for providing quality products with research<strong>and</strong>innovation using bestpractices, adopting aggressive saless <strong>and</strong> marketing strategies, investment inpeople development <strong>and</strong> expansionn <strong>of</strong> manufacturing capacity. The company is confident <strong>of</strong> continuousgood performance <strong>of</strong> growth by using better technologies <strong>and</strong> consistentt efforts. Fundamental growthdrivers <strong>of</strong>the <strong>India</strong>n economy continue to exist. The overall scenario for economy is showing recoverytrends <strong>and</strong> we believee it will helpour industry to grow ata faster rate, <strong>and</strong> we at Scotts GarmentsLimited remain optimistic about our future.199
Scotts Garments LimitedOverview<strong>of</strong> our results <strong>of</strong> operationsThe following discussion <strong>of</strong> the financial condition <strong>and</strong> results <strong>of</strong> operations for the financial year endingMarch, 312012, 2011, 2010, 2009 respectively ncluding the notes thereto<strong>and</strong> the reports thereon whichappear in this <strong>of</strong>fer document.The Audited Financial Statements are prepared in accordancewith the <strong>India</strong>n Accounting St<strong>and</strong>ards.Particulars31 st March,201231 st March,201131 st March,20100(` in lacs)31 st March,2009Revenue from OperationsOther IncomeTotal IncomeTotal ExpensesTotal expenses as a % <strong>of</strong> Revenue fromoperationsDepreciationDepreciation as % <strong>of</strong> RevenuefromoperationsFinance CostFinance Cost as % <strong>of</strong> Revenue fromoperationsPr<strong>of</strong>it / (loss) before TaxPr<strong>of</strong>it / (loss) before Tax as a % <strong>of</strong> Revenuefrom operationsPr<strong>of</strong>it / (loss) After Tax <strong>and</strong> extra ordinaryitemsPr<strong>of</strong>it /(loss) after tax as % <strong>of</strong> Revenue fromoperations50025.466587.8356613.2942852.1385.666 1442.122 2.888 2082.2349527.73 847.14 50374.88 42704.85 86.22 1452.06 2.931491.41 43,017.07 418.91 43435.98 36226.95 84.221,239.81 2.881,644.61 3.8236,387.701055.8637443.5631496.5286.56990.342.721,236.193.404.1610236.811 20.468403.9516.803.014726.55 9.543493.06 7.054,324.61 10.052,784.24 6.473,720.5110.222,721.887.48Financial Performance <strong>of</strong> F.Y 2011-122 Vs. F.Y 2010-11Total Income:During the year under review, the revenue from operations was ` 50025.46lacs as compared to ` 49527.73lacs in FY 11. The revenue from operation for the FY 12 was largely constant dueto the temporarysuspension <strong>of</strong> the printing <strong>and</strong> dyeing unit <strong>of</strong> the company at Tirupur. The said unit was closedfor 5months during the FY 12.During the year under review the company had sold certain investments inequity shares <strong>and</strong> earneda netgain <strong>of</strong> ` 5949.17 lacs which has contributed to the substantial increase in theother income from ` 847. 14 lacsin FY11 to ` 6587.83 lacs in FY12.Total Expenditure:The total expenditure as a percentagee <strong>of</strong> total income remained largely constant in FY12.major items<strong>of</strong> expenses is as under :The breakup<strong>of</strong> the200
Scotts Garments LimitedDuring theyear under review due tothe temporary closure <strong>of</strong> the dyeing <strong>and</strong> printingunit, the companywas purchasing finished knits fabrics instead <strong>of</strong> purchasing yarn<strong>and</strong> conversion <strong>of</strong> the same. This hasled toan increase in the cost <strong>of</strong> raw materialconsumed as a percentage <strong>of</strong> sales by ~14%.Further, there was decrease in employee cost in FY 12 as compared to FY 11. This wasmainly due to thetemporary shut down <strong>of</strong> the dyeing <strong>and</strong> printing unit at Tirupur from February 2011 to August 2011.Interest <strong>and</strong>Financial chargesDuring the FY12, there was an overall increase inthe bank lending rates which has pushed up the interest<strong>and</strong> financial charges in the company. Further during the sameperiod due to the currency fluctuation, therewas a non availability <strong>of</strong>packing credit in foreigncurrency (PCFC) limits <strong>and</strong> the company had to avail <strong>of</strong>the rupee packing credit limits (PC). This has also added to the increase in the interest cost <strong>of</strong> the company.Depreciation: Although there has been an increasee in the grosss block <strong>of</strong> fixed assets from` 18578.75 lacs inFY11 to ` 24474.71 lacs inFY 12 the depreciation amount has shown a marginal decrease. This is dueto thefact that the additions in fixed assets with regard to the Doddaballapur project have been capitalisedtowards theend <strong>of</strong> the financial year.Pr<strong>of</strong>it after Tax: Pr<strong>of</strong>it after tax for F.Y12 was around 16.80% <strong>of</strong>the revenuee from operations as compared toaround 7.05% in FY11. The said increase was mainly due to the capital gains on the sale<strong>of</strong> investments bythe company.Long Term Borrowings : The net increase in the long term borrowings <strong>of</strong> thecompany from ` 7409.07 lacs inFY 11 to ` 9718.95 lacs inFY12 was due to availment <strong>of</strong> term loan from Canara Bank forthe new project atDoddaballapur <strong>and</strong> Kolar.Fixed Assets: There has been an addition in the fixed assets <strong>of</strong> the companyduring the FY12 to the tune <strong>of</strong> `5895.96 lacs. This is mainly due to the addition inBuilding <strong>and</strong> plant <strong>and</strong> machinery forthe new project atDoddaballapur. Apart from the addition in fixed assets there is also capital work in progress to the tune <strong>of</strong> `2453.48 lacsas at the end<strong>of</strong> FY 12.Financial Performance <strong>of</strong> F.Y 2010-111 Vs. F.Y 2009-10Total Income:During the year under review, the revenue from operations was ` 49527.73lacs as compared to ` 43017.07lacs in FY 10. The growthin operations by around 15% was dueto increase inadditional capacity.The other income <strong>of</strong> the company increased from ` 418.91 lacs in FY10 to ` 847.14 lacs in FY 11 on account <strong>of</strong>exchange fluctuation, increase in income from wind power generation <strong>and</strong> also refund <strong>of</strong> income taxto theextent <strong>of</strong> `121.04 lacs.Total Expenditure: The total expenditure as a percentage <strong>of</strong> total income has remained constant. Thebreakup <strong>of</strong> the major items <strong>of</strong> expenses is asunder :Raw Material Cost <strong>and</strong> Manufacturinng <strong>and</strong> other expenses: There was a decrease <strong>of</strong> ~7%in the cost <strong>of</strong> rawmaterial as a percentage <strong>of</strong> revenue from operations due to a change in product mix frommanufacturing <strong>of</strong>more <strong>of</strong> woven <strong>garments</strong> <strong>and</strong> less <strong>of</strong> knitted <strong>garments</strong>. Thischange alsocontributedto the increase inmanufacturing <strong>and</strong> otherexpenses during the period under review. The employee cost increased in F.Y.11 ascompared to F.Y.10 dueto increase in the salaries <strong>and</strong> wages <strong>and</strong> otherrelated benefits on account <strong>of</strong>increase in the number <strong>of</strong> employees in the company.201
Scotts Garments LimitedInterest <strong>and</strong>Financial charges: During FY 11 the Company had repaid some <strong>of</strong> its termloan but there hasbeen an increase in the working capital loan availed. There was a reduction in the general bank lendingrates duringthis period. These factors have led toa decrease tothe extent <strong>of</strong> `153.20 lacsin the interest costfor the FY11.Depreciation: There has been an increase in the depreciation provided by the company as comparedto theprevious year to the extent <strong>of</strong> ` 212.25lacs due to certain addition in fixed assets.Pr<strong>of</strong>it after Tax: Pr<strong>of</strong>it after tax for F.Y11 was around 7.05% <strong>of</strong>the revenue from operations as compared toaround 6.47% in FY10 due to increase in other income .Long Term Borrowings: The outst<strong>and</strong>ing balance <strong>of</strong> secured loans has increased from ` 7116.35 lacs inFY10to ` 7409.077 lacs i.e. a net increase <strong>of</strong> ` 292.72 lacs. This increase is mainly due to availment <strong>of</strong> loan forDoddaballapur Project <strong>and</strong> towards addition <strong>of</strong> fixed assets in the existing operations.Fixed Assets: There hasbeen an addition in the fixed assets <strong>of</strong> the company during the FY11 for generalexpansion /modernization at the existing units <strong>and</strong> also purchase <strong>of</strong> l<strong>and</strong> at Peenya industrial estate <strong>and</strong>Doddaballapur.Financial Performance <strong>of</strong> F.Y 2009-100 Vs. F.Y 2008-09Total Income:During the year under review, the revenue fromoperationsfor F.Y 2009-10 is increased by ~18% ascompared to F.Y 2008-09on account <strong>of</strong> efficiencyin execution<strong>of</strong> more export orders by establishing newfactory units in Bangalore <strong>and</strong> Tirupur.The other income <strong>of</strong> the company has decreased from ` 1055.86 lacs in FY09 to ` 418.911 lacs in FY10. Thishas been due to the fact that during FY09 there hadbeen a pr<strong>of</strong>it <strong>of</strong> sale <strong>of</strong> assets / investments to the tune <strong>of</strong>` 870.98 lacs. The other income <strong>of</strong>FY10 includes ` 167.34 lacs by way<strong>of</strong> income from wind powergeneration through the wind mill belonging to Arora Fashionss Ltd. which has been amalgamated with thecompany.Total Expenditure: The total expenditure for F.Y2009-10 was 84.22% <strong>of</strong> the revenue from operations ascompared to86.56 % in the F.Y 2008-09. The breakup <strong>of</strong> the major items <strong>of</strong> expenses is asunder:Raw Material Cost <strong>and</strong> Manufacturing <strong>and</strong> other expenses: There has been a decreasee in the cost <strong>of</strong> rawmaterial as a percentage to revenue from operations due to economies <strong>of</strong> scale. There has been an increasein the manufacturing <strong>and</strong>other expenses from ` 7139.73 lacs in FY09 to ` 8348.43 lacs in FY10 due to increasein the production levels <strong>of</strong> the company. And the employee cost has increased from `6241.73 lacs in FY09 to` 8254.26 lacs in FY10 due to increase in the salaries <strong>and</strong> wages <strong>and</strong> other related benefits <strong>and</strong> also due toincrease in the number <strong>of</strong> employees in the company from 9755 in FY09 to 11702 in FY10.Interest <strong>and</strong>Financial charges: The interest <strong>and</strong> financial charges have increased from `1236.19 lacs inFY09to `1644.61 lacs in FY10due to the increase in working capital loan <strong>and</strong> term loan during the year. Thecompany had availed fresh term loanto the extentt <strong>of</strong> ` 2350 lacs to fund the expansion program <strong>and</strong> settingup <strong>of</strong> the 2.1M.W capacity windmill.Depreciation: There has been an increase in the depreciation provided by the company as comparedto theprevious year to the extent <strong>of</strong> ` 249.46lacs due to addition in fixed assets.202
Scotts Garments LimitedPr<strong>of</strong>it after Tax: Pr<strong>of</strong>it after tax for F. .Y 10 was around 6.47% <strong>of</strong>the revenue from operations as compared toaround 7.48% in FY09. This was due to increase in finance charges <strong>and</strong> other operating expenses.Long Term Borrowing: The outst<strong>and</strong>ing balance <strong>of</strong> secured loans has increased from `6380.95 lacs inFY09to ` 7116.35lacs in FY10. This increase is due to the increase in working capital loan <strong>and</strong> term loan duringthe year. The companyhad availedfresh term loan to the extent <strong>of</strong> ` 2350 lacs to fund the expansionprogram <strong>and</strong> setting up <strong>of</strong> the 2.1 M.Wcapacity windmill.Fixed Assets: There has been an addition in the fixed assets <strong>of</strong> the companyduring the FY10. This has beenmainly on account <strong>of</strong> installation <strong>of</strong> 2.1 M.W capacity Windmill at Bellary. This windmill has commencedoperations on 30 th March, 2010. The company hasalso purchased l<strong>and</strong> at Tarapur <strong>and</strong> constructed buildingon the said l<strong>and</strong>. The other addition in fixed assetss is on account <strong>of</strong> general expansion /modernizationn at theexisting units.An analysis <strong>of</strong> reasonss for the changes in significant items <strong>of</strong> income<strong>and</strong> expenditure is givenhereunder:1. Unusualor infrequent events or transactionsThere have been no events, other than as described in this Offer Document, whichh may be called“unusual” or “infrequent”.2. Significant economic changes that materially affectedcontinuing operationsor are likely to affectincome fromAny slowdown in the growth <strong>of</strong> <strong>India</strong>n economy or future volatility in global commodity prices,could affect the business, including the future financial performance, shareholders’ funds <strong>and</strong> abilityto implement strategy<strong>and</strong> the price <strong>of</strong> the Equity Shares.3. Known trends or Uncertainties that have had or are expected to have a material adverse impact onsales, revenue or income from continuing operationsThere are no known trends or uncertainties that may have material adverse impact on the income,costs <strong>and</strong>pr<strong>of</strong>its <strong>of</strong> the company from continuing operations.4. Future changes in relationship between costs <strong>and</strong> revenues, in case<strong>of</strong> events such as futureincrease in labour or material costs or prices that will causea material change are knownIncrease in the cost <strong>of</strong> the products in which the Companydeals, will affect the pr<strong>of</strong>itability <strong>of</strong> thecompany. Further, the company is not able topass on the increase in prices <strong>of</strong> the product to thecustomers in full. Thiscan be <strong>of</strong>fset through cost reduction.5. The extent to which material increases in net sales or revenue are dueto increasedsales volume,introduction <strong>of</strong> new products or services or increased sales pricesThe increase / decrease in turnover is only on account <strong>of</strong> increase in saless prices <strong>and</strong> volume.6. Total turnover <strong>of</strong> eachmajor industry segmentin which the Company operated<strong>India</strong>n textile industry contributes about 14 per cent to Industrial Production, 4 per cent to thecountry’sGross Domestic Product (GDP), 17per cent to export earnings <strong>and</strong> provides directemployment to 35 million people which includes substantialnumber <strong>of</strong> SC/ST <strong>and</strong> women. Textilee &Clothingsales generated USD 52 Billion in 2008-09 bifurcated as USD33.4 billion from domestic203
Scotts Garments Limitedmarket <strong>and</strong> US $ 21.60billion fromexports. Nearly 40 per cent <strong>of</strong> the textiles producedd in the countryis exported.7. Status <strong>of</strong>any publiclyannouncednew productWe havenot publicly announced any new products.8. The extent to which the business is SeasonalOur business is not seasonal <strong>and</strong> no major cyclical trends areobserved in this industry.9. Competitive conditionsWe face competition from both unorganized <strong>and</strong> other organized players, leading to difficulties inimproving market share which could exacerbatee by cheap imports.Our principal competitors in our manufacturing operations in <strong>India</strong> include, among others,M<strong>and</strong>hana Industriess Limited, Gokaldas Exports Limited, House <strong>of</strong> PearlFashion Limited, KPR MillsLimited, Indus Fila <strong>and</strong> Mudra Lifestyle Limited. Further we also facecompetitionfrom regionalplayers located in China, Bangladesh <strong>and</strong> Vietnam.10. Cautionary StatementStatements in this report on Management Discussion <strong>and</strong> Analysis describing the company’sobjective, expectations or predictions may be forward looking statements within the meaning <strong>of</strong>applicable security law <strong>and</strong> regulations. These statementss are based on certain assumption <strong>and</strong>expectation <strong>of</strong> future events. Actual results could however differ materially from those expressed orimplied.204
Scotts Garments LimitedSECTION V - LEGAL AND REGULATORY INFORMATIONOUTSTANDING LITIGATION, MATERIAL DEVELOPMENTSAND OTHERDISCLOSURESI. CONTINGENT LIABILITIES NOT PROVIDED FOR:The contingenliabilities not provided for as on 31 st October, 20122 are as follows:ParticularsLetter <strong>of</strong> Credits issuedby banker <strong>of</strong> the CompanyLiability on account <strong>of</strong> export obligationEstimatedAmount <strong>of</strong> Capital CommitmentTotalAmount(` in lacs)2213.4015580.301875.0019668.70II. OUTSTANDING LITIGATIONS INVOLVING SCOTTS GARMENTS LIMITED:The IssuerCompany certifies that except as stated herein there are no:• Pending litigations against the company.• Outst<strong>and</strong>ing litigations, defaults etc pertaining to matter likely to affect operations <strong>and</strong> finances <strong>of</strong>the company including prosecution under the Companies Act 1956 (1 <strong>of</strong> 1956).• Such cases <strong>of</strong> pending litigations, defaults etc in respect<strong>of</strong> Companies/firms/ventures with whichthe promoter were associatedin the past but are no longer associated, <strong>and</strong> their names continue tobe associated with particular litigation.• Disciplinary action/ investigation has been taken by<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong><strong>Board</strong> <strong>of</strong> <strong>India</strong>(SEBI)/ Stock <strong>Exchange</strong>s against the Company, its directors, promoter <strong>and</strong> their other businessventures (irrespective <strong>of</strong> the fact whether or not they fall under thepurview <strong>of</strong> section 370(1B) <strong>of</strong>the Companies Act 1956.• Cases against theCompany or its Promoter <strong>of</strong> economic <strong>of</strong>fences in which penalties were imposedon promoter.• Pending litigation, disputes, defaults, non-payment <strong>of</strong> statutory dues, proceedings initiatedfor<strong>of</strong>fences (including past cases <strong>and</strong> irrespective <strong>of</strong> whether specifiedin paragraph (i) <strong>of</strong> part 1 <strong>of</strong>Schedule XIII <strong>of</strong> the Companies Act, 1956) against the promoter <strong>and</strong> their business ventures.• Pending litigations, defaults, non payment <strong>of</strong> Statutorydues, proceedings initiated for economic<strong>of</strong>fences/civil <strong>of</strong>fences, any disciplinary action taken by the <strong>Board</strong> /Stock <strong>Exchange</strong>s against theCompany/Promoter <strong>and</strong> their business ventures/Directors other than those mentioned inthisOffer Document<strong>and</strong> that no litigations have arisen <strong>and</strong> the Company <strong>and</strong> its Directors takefullresponsibility <strong>of</strong> the information mentioned in the OfferDocument.Cases filed against the company(a)(b)(c)(d)(e)Civil Cases - NILCriminal Cases - NILCases filed against the company under labour laws: NilPending Litigation Under Central Excise Act AndService Tax Act: NilPending disputes underIncome Tax Act205
Scotts Garments Limited(f) Pending disputes underthe sales taxactCases filed by the Company(a) Civil Cases - NIL(b) Criminal Cases – NilIII. OUTSTANDING LITIGATIONS INVOLVINGDIRECTORS OF COMPANYThere areno outst<strong>and</strong>ing litigations, disputes, non-payment <strong>of</strong> statutory dues, overdues to banks /financial institutions, defaults against banks / financial institutions, defaults in dues towards instrumentholders like debenture holders, fixed deposits,<strong>and</strong> arrearson cumulative preference shares issued,defaults in creation <strong>of</strong> full security as per terms <strong>of</strong> issue, other liabilities, proceedings initiatedforeconomic / civil / anyother <strong>of</strong>fences (includingpast cases where penalties may or may not have beenawarded <strong>and</strong> irrespective <strong>of</strong> whether they are specified under paragraph (i) <strong>of</strong> Part I <strong>of</strong> Schedule XIII <strong>of</strong>the Companies Act, 1956) against the promoter <strong>and</strong> director <strong>of</strong> the Company except the following:Legal proceedings by or against thedirectors <strong>of</strong>Scotts Garments Limited(a) Proceedings <strong>of</strong> civil nature(i) By the Directors - NIL(ii) Against the Directors - NIL(b) Proceedings <strong>of</strong> criminal nature(i) By the Directors - NIL(ii) Against the Directors - NILIV. OUTSTANDING LITIGATIONSINVOLVINGPROMOTER AND GROUP COMPANIESThere areno outst<strong>and</strong>ing litigation, disputes, non-payment <strong>of</strong> statutorydues, overdues to banks /financial institutions, defaults against banks / financial institutions, defaults in dues towards instrumentholders like debenture holders, fixed deposits,<strong>and</strong> arrearson cumulative preference shares issued,defaults in creation <strong>of</strong> full security as per terms <strong>of</strong> issue, other liabilities, proceedings initiatedforeconomic / civil / anyother <strong>of</strong>fences (includingpast cases where penalties may or may not have beenawarded <strong>and</strong> irrespective <strong>of</strong> whether they are specified under paragraph (i) <strong>of</strong> Part I <strong>of</strong> Schedule XIII <strong>of</strong>the Companies Act, 1956) against the promoter group companies.Legal proceedings by/ /against the promoter/group entities(a) Proceedings <strong>of</strong> civil nature(i) By the promoter/group entities: Nil(ii) Against the promoter/group entities: Nil(b) Proceedings <strong>of</strong> a criminal nature(i) By the promoter/ group entities:Nil(ii) Against the promoter/ group entities: Nil(c) Cases under Income tax Act against the promoter/ group entities: Nil206
Scotts Garments LimitedMATERIAL DEVELOPMENTSThere have beenno significant development since thelast audited Balance Sheet as <strong>of</strong> 31 st October, 2012 till thedate <strong>of</strong> Red Herring Prospectus other thanthe following:• We have availed a shortterm loan from IndusIndd Bank Limited vide their sanction letter dated 09/04/2013for an amount <strong>of</strong> ` 1900.00 Lacs <strong>and</strong> ad hoc loan from Canara Bank vide common hypothecation agreementdated 14/03/2013 for anamount <strong>of</strong> ` 1500.00 lacs• We have repaid a loan aggregating to `1234.00 lacs availed from Canara Bank towards the DodaballapurProject.• The Company has also received sanction for termloan <strong>and</strong> working capital loan aggregating to `8540.00lacs from State Bank <strong>of</strong> <strong>India</strong> towards the Dodaballapur ProjectNocircumstances have arisensince the date <strong>of</strong> last financial statement until the date <strong>of</strong> filing <strong>of</strong> this Red HerringProspectus withSEBI, whichh materially <strong>and</strong> adversely affect or is likely to affect the operations or pr<strong>of</strong>itability <strong>of</strong>ourCompany, or value <strong>of</strong> itsassets, or its ability to payits liability within next twelve months.There is no subsequent development afterthe date <strong>of</strong> the Auditor's Report, which will have a material impact onthereserves, pr<strong>of</strong>its, earningsper share <strong>and</strong> book value<strong>of</strong> the Equity Shares <strong>of</strong> our Company.207
Scotts Garments LimitedGOVERNMEENT/STATUTORY AND BUSINESS APPROVALSOnthe basis <strong>of</strong> the indicative list <strong>of</strong> approvals below, we are permitted to carryon businesss activities <strong>and</strong> n<strong>of</strong>urther major approvals from any Government authorities or regulatory authority or anyother entityarerequired by us to undertakee the Issue or continue these businesss activities. Itmust be understood that, ingranting these licenses, Government <strong>of</strong> <strong>India</strong> <strong>and</strong>/ or Reserve Bank <strong>of</strong> <strong>India</strong> does not take any responsibilityforCompany’s financial soundness or forthe correctness <strong>of</strong> any <strong>of</strong>the statements made or opinion expressedin this behalf.Werequire various approvals to carry onits businesss in <strong>India</strong>. Wehave received the following Governmentapprovals/licenses/permissions:Incorporation <strong>and</strong> other Statutory Compliances:1.2.Certificate <strong>of</strong>Incorporation dated 01/ 03/2002, issued by the Registrar <strong>of</strong> Companies (“ROC”), Bangalore,Karnataka, <strong>India</strong>.Certificate pursuant to change <strong>of</strong> namevide the Fresh Certificatee <strong>of</strong> Incorporation dated 19/06/2007 issuedby the ROC, Karnataka, Bangalore, <strong>India</strong>, consequent upon Change <strong>of</strong> Name on conversion to Public<strong>limited</strong> Company.Labour Registration & Approvals:1.Employee’s Provident Fund code no: KN/23114 issued from the Office <strong>of</strong> the RegionalProvident FundCommissioner vide letter no. KN/PF/ENP III BDXX datedd 1 0/11/1997 (Granted to the erstwhilepartnership concern <strong>and</strong> the number remains the same).2.Employee State Insurancecode no. 53/ /2061/1 issued by the Regional Director Employee’ ’s State InsuranceCorporation vide letter no. KAR. INSPN. 53/F 23. 13.1.92 (BA) 53-12061-19 dated 02/05/ /1994 (Granted tothe erstwhilee partnership concern <strong>and</strong> the number remains the same).3.Registration certificate no. P00100561 issued to the company as per the section 6A (1) <strong>of</strong> the Karnatakaa Taxon Pr<strong>of</strong>essions, Trades, Callings <strong>and</strong> Employment Act, 1976.TaxRegistration:1.2.3.4.The Permanent Account Number (PAN) AAFCS9703C issued by the Director <strong>of</strong> Income-Tax.The Tax Account Number (TAN) BLRS11395G issued by the Director <strong>of</strong> Income-Tax.The Tax Identification Number (TIN) for Bangalore (Karnataka) Units: 29660017109 <strong>and</strong> Tirupur (TamilNadu) Units: 3366224001issued by the Director <strong>of</strong> Income-Tax.Certificate <strong>of</strong> Registration under section 69 <strong>of</strong> theFinance Act, 1994 (32 <strong>of</strong> 1994) read with Servicee TaxRules 1994issued by the Central Excise Department Superintendent, Registration, Service TaxCommissionerate, Bangalore.208
Scotts Garments Limited5.6.7.8.Central Excise Registration Certificate dated June06, 2011 bearing Registration No.AAFCS9703CXM001issued under rule 9 <strong>of</strong> the Central Excise Rules, 2002 to Scotts Garments Limited as a manufacturer <strong>of</strong>excisable goods at Scotts Garments Limited, No.481/B, 4 th Phase, Peenya Industrial Area, BangaloreUrban, Karnataka. This certificate shall remain valid till Scotts Garments Limited carries on the activityforwhich it hasbeen issued or surrenders it or till it isrevoked or suspended.Central Excise Registration Certificate dated May05, 2011 bearing Registration No.AAFCS9703CEM002issued under rule 9 <strong>of</strong> theCentral Excise Rules, 2002 to Scotts Garments Limited operatingas a powerloomweaver/ h<strong>and</strong> processorr dealer <strong>of</strong> yarns <strong>and</strong> fabrics/ manufacturer or readymade <strong>garments</strong> at RassappaGounder Garden, S. F. No.262, Kangeyam Main Road, Nallur Village, Tirupur Tamil Nadu. This certificateshall remainvalid till Scotts Garments Limited carries on theactivity forwhich it has been issued orsurrenders it or till it is revoked or suspended.Certificate <strong>of</strong> Registrationas a dealer under Central Sales Tax Act, 1956 <strong>and</strong> Central Sales Tax (Registration<strong>and</strong> Turnover) Rules, 1956 as per rule 5(1) issued by the Commercial Tax <strong>of</strong>ficer, Bazaar circle, Tirupur.Certificate <strong>of</strong> Registration as dealer under Karnataka Value Added Tax Act, 2003 issuedby the AssistantCommissioner <strong>of</strong> Commercial Taxes, Bangalore, Karnataka.9.Certificate <strong>of</strong> Registration as a dealer under Tamil Nadu Value AddedAssistant Commissioner<strong>of</strong> Commercial Taxes, Tirupur, Tamil Nadu.Tax Act, 2006 issued bytheEnvironmentalLicenses/Approvals/Consents:Sr.NoIssuing Authority1. RegionalKarnatakaOfficer,StatePollution Control<strong>Board</strong>, RegionalOffice Peenya2. RegionalKarnatakaOfficer,StatePollution Control<strong>Board</strong>, RegionalOffice Peenya3. RegionalOfficer,KarnatakaStatePollution Control<strong>Board</strong>, RegionalOffice PeenyaNature <strong>of</strong> RegistrationConsent for Operation <strong>of</strong> the Plantunder Section 21 <strong>of</strong> the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. B-108, III Stage,Peenya Industrial Estate,Bangalore- 560058Consent for existing discharge <strong>of</strong>sewage effluents under section25/26 <strong>of</strong> the Water (prevention<strong>and</strong> Control Pollution) Act- 1974for the premises at No. B-108, IIIStage, Peenya Industrial Estate,Bangalore- 560058Consent for existing discharge <strong>of</strong>sewage effluents under section25/26 <strong>of</strong> the Water (prevention<strong>and</strong> Control Pollution) Act- 1974for the premises at No. B-66, IIIStage, Peenya Industrial Estate,Bangalore- 560058Issuing DateValidity DateMay 28, 2005 December 31, 2014May 28, 2005 December 31, 2014May 28, 2005 December 31, 2014209
Sr.NoIssuing Authority4. RegionalKarnatakaOfficer,StatePollution Control<strong>Board</strong>, RegionalOffice Peenya5. EnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,Kolar6. EnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,Kolar7. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Tiruppur.8. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Tiruppur.9. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Tirupur.10. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Nature <strong>of</strong> RegistrationConsent for Operation <strong>of</strong> the PlantUnder Section 21 <strong>of</strong> the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. B-66, III Stage,Peenya Industrial Estate,Bangalore- 560058Consent for discharge<strong>of</strong> Sewage<strong>and</strong> TradeEffluents under Section25/26 <strong>of</strong> the Water (Prevention<strong>and</strong> Control <strong>of</strong> Pollution) Act 1974for the premises at No. 1028/1,Patte PalliRoad, IV Udayapuram,RobertsonPet, KGF, BagarpetTaluk, Kolar District.Consent for Operation <strong>of</strong> the PlantUnder Section 21 <strong>of</strong> the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. 1028/1, Patte PalliRoad, IV Udayapuram, RobertsonPet, KGF,Bagarpet Taluk, KolarDistrict.Consent for Existing discharge <strong>of</strong>sewage under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 forthe unit atS.F. No. 226/1, Tirupur Town,Tirupur Taluk, CoimbatoreDistrict.Consent for Existing operation <strong>of</strong>the plant under Section 21 <strong>of</strong> theAir (Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 for the unit atS.F. No. 226/1, Tiruppur Town,Tiruppur Taluk, CoimbatoreDistrict.Consent for Existing discharge <strong>of</strong>sewage under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 forthe unit atS.F. No. 295, Veerap<strong>and</strong>i Village,Tirupur Taluk, CoimbatoreDistrict.Consent for Existing operation <strong>of</strong>the plant under Section 21 <strong>of</strong> theAir (Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 for the unit atS.F. No. 295, Veerap<strong>and</strong>i Village,210Scotts Garments LimitedIssuing DateValidity DateMay 28, 2005 December 31, 2014October 3, 2007 December 31, 2016October 3, 2007 December 31, 2016October 16, 2007 December 31, 2013October 16, 2007 December 31, 2013Applied for RenewalApplied for Renewal
Sr.Issuing AuthorityNoTiruppur.11. EnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,RegionalOffice-Tumkur12. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Tiruppur.13. DistrictEnvironmentalEngineer,TamilNadu PollutionControl<strong>Board</strong>,Tiruppur.14. SeniorEnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,Bangalore15. EnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,Bangalore16. SeniorEnvironmentalOfficer, KarnatakaNature <strong>of</strong> RegistrationTiruppurDistrict.Taluk, CoimbatoreConsent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Emissionss(Prevention under<strong>and</strong>theControlAir<strong>of</strong>Pollution) Act 19811 for thepremises at Plot No. 1 <strong>and</strong> 2,SathyamangalaTumkur.IndustrialArea,Consent for Existing discharge <strong>of</strong>sewage under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 forthe unit atS.F. No. 505, Veerap<strong>and</strong>i Village,TirupurDistrict.Taluk, CoimbatoreConsent for Existing operation <strong>of</strong>the plant under Section 21 <strong>of</strong> theAir (Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 for the unit atS.F. No. 505, Veerap<strong>and</strong>i Village,Tirupur Taluk, CoimbatoreDistrict.Consent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Emissionssunder the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. 22, KIADBIndustrial Area, K. G. F. Road,BangarpetTaluk- 563114, KolarDistrict.Consent for discharge <strong>of</strong> Sewage<strong>and</strong> Trade Effluents under Section25/26 <strong>of</strong> the Water (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 forthe premises at at No. B-1028/1,Patte Palli Road, IV Udayapuram,Robertson Pet KGF, BangarpetTaluk, Kolar dist.Consent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Scotts Garments LimitedIssuing DateValidity DateApplied for RenewalApril 02,2012 December 31, 2013April 02,2012 December 31, 2013September 14, December 31, 201920100October 03, 2007 December 31, 2016October 1, 2012 September 30,2014211
Sr.NoIssuing AuthorityState PollutionControl<strong>Board</strong>,Bangalore17. RegionalOfficer,BangaloreNorthII, Karnataka StatePollution Control<strong>Board</strong>18. RegionalOfficer,BangaloreNorthII, Karnataka StatePollution Control<strong>Board</strong>19. SeniorEnvironmentalOfficer, KarnatakaState PollutionControl<strong>Board</strong>,Bangalore20. Environmental<strong>of</strong>ficer,NorthBangalore21. EnvironmentalOfficer, KarnatakaState PollutionControl <strong>Board</strong>Nature <strong>of</strong> RegistrationEmissionssunder the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at 481/ A&B, IV Phase,Peenya Industrial Area, BangaloreConsent for Operation <strong>of</strong> the Plantunder Section 21 <strong>of</strong> the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. 292/D, PatelChennappaIndustrialEstate,Hegganahalli, II Stage, Peenya,BangaloreConsent for discharge<strong>of</strong> Sewage<strong>and</strong> TradeEffluents under Section25/26 <strong>of</strong> the Water (Prevention<strong>and</strong> Control <strong>of</strong> Pollution) Act 1974for the premises at at No. 292/D,Patel Chennappa Industrial Estate,Hegganahalli, II Stage, Peenya,BangaloreConsent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Emissionssunder the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. V-27, III Stag, 7 thmain, Peenya Industrial Estate,BangaloreConsent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Emissionssunder the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. 5F2, 1 st Phase,Peenya Industrial Area, Jalahalliwest, S.M. Road, Bengaluru NorthTaluk, BengaluruConsent for discharge <strong>of</strong> effluentsunder theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1974 <strong>and</strong>Emissionssunder the Air(Prevention <strong>and</strong> Control <strong>of</strong>Pollution) Act 19811 for thepremises at No. 353a,8 th main, IIStage, Peenya Industrial Estate,Bangalore212Scotts Garments LimitedIssuing DateValidity DateJanuary 22, 2008 December 31, 2017January 22, 2008 December 31, 2017Applied for RenewalApplied for RenewalApplied for Renewal
Sr.Issuing AuthorityNo22. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>23. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>Nature <strong>of</strong> RegistrationConsent under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution)268/1D,Act, 1974368/3B,at S.F> noKaraipudurvillage, tirupur taluk, tirupur dist.Consent under section 21 <strong>of</strong> the Air(Preventionn <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 at S.F> no2/785B, Naranapuramvillage,,Palladam taluk, tirupur distScotts Garments LimitedIssuing DateValidity DateSeptember 30,September 30,201112013Applied for renewal24. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>25. Member Secretary,Tamil naduPollution Control<strong>Board</strong>26. Member Secretary,Tamil naduPollution Control<strong>Board</strong>27. EnvironmentalOfficer, KarnatakaState PollutionControl <strong>Board</strong>28. EnvironmentalOfficer, KarnatakaState PollutionControl <strong>Board</strong>29. EnvironmentalOfficer, KarnatakaState PollutionConsent under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act, 1974 at S.F> no2/785B, Naranapuramvillage,,Palladam taluk, tirupur distConsent under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution)536/5 (pt.),tiruppur taluk, tiruppurr dist.Consent under section 21 <strong>of</strong> the Air(Preventionn <strong>and</strong> ControlPollution)536/5 (pt.),tiruppur taluk, tiruppurr distConsent for establishment <strong>of</strong> newfactory in the name <strong>of</strong> M/s. ScottsGarmentsNo. 30/1,Near563101Act, 1974 at S.F> noveerap<strong>and</strong>ivillage,<strong>of</strong>Act, 1981 at S.F> noveerap<strong>and</strong>ivillage,Limited (Unit-13) at Sy.Chikkaballapura Road,RailwayCrossing,Kolar-Consent for establishment <strong>of</strong> newfactory in the name <strong>of</strong> M/s. ScottsGarments Limited (Unit-14) at Sy.No. 60, Sultan Thippas<strong>and</strong>ara,Antharagange Road,Near stadium,Kolar.Consent for establishment <strong>of</strong> newindustry for carryingout knit213Applied for renewalApplied for renewalApplied for renewalApplied for renewalApplied for renewalMarch 17, 2012 valid for a period<strong>of</strong> 5 years from thedate <strong>of</strong> issue
Sr.Issuing AuthorityNoControl <strong>Board</strong>30. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>,Nature <strong>of</strong> Registrationprocessing<strong>and</strong> trouser at Plot No.A-3,10 & 11, D- 3&4, S-43,44 & 45,Apparel Park, Ist Phase, KIADBINDl.Area, Doddaballapura,Bangalore North TalukConsent under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act, 1974 at S.F. no 643,veerap<strong>and</strong>ivillage, tiruppur taluk,tiruppur dist.Scotts Garments LimitedIssuing DateValidity DateApplied for renewal31. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>,32. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>33. DistrictEnvironmentalEngineer,Tamilnadu PollutionControl <strong>Board</strong>,34. EnvironmentalOffice, RegionalOffice, KarnatakaPollution Control<strong>Board</strong>Consent under section 21 <strong>of</strong> the Air(Preventionn <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 at S.F> no 643,veerap<strong>and</strong>ivillage, tiruppur taluk,tiruppur distConsent under section25 <strong>of</strong> theWater (Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act, 1974 at S.F. no 262,nallur village,tiruppurtaluk,tiruppurConsent under section 21 <strong>of</strong> the Air(Preventionn <strong>and</strong> Control <strong>of</strong>Pollution) Act, 1981 at S.F> no 262,nallur village,tiruppurtaluk,tiruppur dist.Consent for discharge <strong>of</strong> effluentsunder the Water (Prevention <strong>and</strong>Control <strong>of</strong> Pollution) Act 1974 <strong>and</strong>Emissions(Preventionn under<strong>and</strong>theControlAir<strong>of</strong>Pollution) Act 1981 for the premisesat 7/1, GummanahalliRoad,Byadgi, KarnatakaApplied for renewalJuly 28, 2011 December 31, 2013July 19, 2012 December 31, 2013January 01, 2013 December 31, 2022Approvals for Business & Factory:1.Certificate <strong>of</strong> Importer-Exporter Code(IEC) number: 0793009014 issued by the Foreign Trade DevelopmentOfficer, Office <strong>of</strong> Joint Director General <strong>of</strong> ForeignTrade, Ministry <strong>of</strong> Commerce <strong>and</strong> Industry, Government<strong>of</strong> <strong>India</strong>.214
Scotts Garments Limited2.Certificate <strong>of</strong> Registration as TradingHouse in accordance with the provisions <strong>of</strong> the Foreign Trade Policy,2009-2014 issued by the Joint Director General <strong>of</strong> Foreign Trade, Ministry <strong>of</strong> Commerce & Industry,Government <strong>of</strong> <strong>India</strong> on 12/03/2012. The certificate is valid till 31/03/2014.3.RegistrationCum Membership Certificate <strong>of</strong> Apparel ExportPromotionDirector, Apparel ExportPromotion Council.Council issued by the Deputy4.License under Factories Act 1948 including Registration Number: MYB-16961, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at 422, Patel Channappa Industrial Estate,Peenya, 2 nd stage,Bangalore-91. The licensee was valid upto 31/12/2012. The Company has made application for renewal.5.License under Factories Act 1948 including Registration Number: MYB-8451, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at 481/B, 4 th Phase, Peenya Industrial Area, Bangalore. Thelicense was valid upto 31/12/2012. The Company has made application for renewal.6.License under Factories Act 1948 including Registration Number: MYK-405, issued by theChief Inspector <strong>of</strong>Factories, Karnataka State, <strong>India</strong> for unit at Irudayasuru, Robertson Pet, K. .G.F. The license was validupto31/12/2012. The Company has made application for renewal.7.License under Factories Act 1948 including Registration Number: MYB-16402, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at U-27, 7 th main, Peenya Industrial Area, Bangalore. The licensewas valid upto 31/12/2012. The Company has made applicationfor renewal.8.License under Factories Act 1948 including Registration Number: MYK-430, issued by theChief Inspector <strong>of</strong>Factories, Karnataka State, <strong>India</strong> for unit at Plot No. 22, KIADB, K.G.F. Road, Bangarpet. The license wasvalid upto 31/12/2012. The Companyhas made application forrenewal.9.License under Factories Act 1948 including Registration Number: MYB-630, issued by theChief Inspector <strong>of</strong>Factories, Karnataka State, <strong>India</strong> for unit at Plot No. 1, NH No. 4, Sathyamangala Industrial Area, BehindBharath Petrol Bunk, Tumkur. The license was valid upto 31/12/2012. The Company has made applicationfor renewal.10.License under Factories Act 1948 including Registration Number: MYB-17218, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for units at 5/1, Madanayakanahalli,Tumkur Road, Bangalore. Thelicense was valid upto 31/12/2012. The Company has made application for renewal.11.License under Factories Act 1948 including Registration Number: MYB-17738, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at SF-2, 1 st Phase, Peenya Industrial Area, Jalahalli West, S.M.Road, Bangalore. The license was valid upto 31/12/2012. The Company has made application for renewal.12.License under Factories Act 1948 including Registration Number: MYB-12213, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at 481/B, 4 th Phase, Peenya Industrial Area, Patel ChennappaIndustrial Area, Andrahalli, B-91 Main Road, Peenya 2 nd stage. The licensee is valid upto 31/12/2012. TheCompany has made application for renewal.215
Scotts Garments Limited13. License under Factories Act 1948 including Registration Number: MYB-18212, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at A-353/(9), 8 thMain, 2 nd Stage, PeenyaIndustrial Estate,Bangalore. The license is valid upto 31/12/2012. The Company has made application for renewal.14.License under Factories Act 1948 including Registration Number: MYB-12222, issued by the Chief Inspector<strong>of</strong> Factories, Karnataka State, <strong>India</strong> for unit at B-108, 3 rd Stage, Peenya Industrial Estate, Bangalore. Thelicense was valid upto 31/12/2012. The Company has made application for renewal.15. Licence bearing registration no. CB 11406 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S.F. No. 226/1 Dharampuram Road, Pudhur Pirivu, Tirupur – 641 608. The said license is valid till31/12/2013316.Licence bearing registration No. CB 12365 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S.F. No. 295 – Murugampalayam road, Sundamedu, Tirupur. The said license was valid till 31/12/2012.The Company has made application for renewal.17.Licence bearing registration No. CB 12364 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat D. No. 1/805 – Lakshana Theatre near, Dharampuram Road, Palavanchipalayam, Tirupur – 641 608. Thesaid license is valid till 31/12/2013.18.Licence bearing registration No. CB 13511 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S. F. No. 368 – Nochipalayam Road, Lakshmi Garden, Veerap<strong>and</strong>i Post, Tirupur on June 12, 2007. The saidlicense was valid till 31/12/2012. The Company has made application for renewal.19.Licence bearing registration No. CB 15951 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S. F. No. 699/2 – R. M & Bros., m Industrial complex, Kamaraj Road, Tirupur. The said license was validtill 31/12/2012. The Company has made application for renewal.20.Licence bearing registration No. CB 14372 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S. F. No. 2/ 785 – B Mahalakshmi Nagar, Tirupur main Road, Naranpuram, Palladam.The said license isvalid till 31/ /12/2013.21.Licence bearing registration No. CB 15817 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S. F. No. 643, Kulathupalayam, Near veerap<strong>and</strong>i, telephone exchange, veerap<strong>and</strong>i (po), Tirupur. The saidlicense was valid till 31/12/2012. The Company has made application for renewal.22.Licence bearing registration No. CB 16396 issued by Deputy Chief Inspector<strong>of</strong> Factories, Tirupur to factoryat S. F. No. 262, Kangeyam road, Kulathu Thotam, Vijayapuram(po), Tirupur – 641 608. The said license isvalid till 31/ /12/2013.23.Licence bearing registration No. CB 7717 issued byDeputy Chief Inspector <strong>of</strong> Factories, Tirupur to factory atS. F. No. 536/5, Veerap<strong>and</strong>i (po), Tirupur. The said license was valid till 31/12/2012. The Company hasmade application for renewal.216
Scotts Garments Limited24. Licence bearing registration No. No.: MYB-19543 to run Factory at 36/6, Byraveshwara Industrial area,Hegganahalli Main road,Bangalore. The said license is valid tilll 31/12/201425. License bearing registration No. No.: MYB-14198 to run Factory at B-66,Peenya Industrial Estate, IIIrdstage, Bangalore-58. Thesaid licensee was valid till 31/12/2012. The Company has made application forrenewal.Other Certificates1.2.3.4.Gold Certificate <strong>of</strong> Compliance awarded to Scotts Garments Limited by Directorr <strong>of</strong> ComplianceAdministration – Worldwide Responsible Accredited Production, having facility at SF-2,1 st Phase PeenyaIndustrial Area, Jalahalli, West, S. M. Road, Bangalore, Karnataka, <strong>India</strong> -560015 bearing CertificateNo.12450 for period fromJanuary 17, 2012 to January 17, 2013 for productionprocesses. The Companyhasmade an application for renewal.Renewed Certificate forthe Social Accountability System, SA8000:2008 having Certificate No.: SA-385,issued by the Director <strong>of</strong>CertificationDivision RINA Services S.p.A. This certificate is issued for design <strong>and</strong>manufacture <strong>of</strong> woven readymade <strong>garments</strong> for operating unit at 481-B, IVPhase, Peenya IndustrialArea,Bangalore. The expiry date <strong>of</strong> certificate is 26/09/2014Global Organic Textile St<strong>and</strong>ard (GOTS) Textile Certificationincluding Certificate No.: CU808682GOTS-01.2013 <strong>and</strong>Registration No.: CU 808682, issued by the Managing Director, Certifier, Control UnionCertification. The certificate is valid till 28/12/2013Certificate <strong>of</strong> Compliance for Organic <strong>Exchange</strong> 100 St<strong>and</strong>ardd (OE 100) version 1.3 bearing certificate no.CU808682OE100-01.2013<strong>and</strong> Registration No.: CU808682, issued by Managing Director, Certifier, ControlUnion Certification. The certificate is valid till 28/12/20135.Scotts Garments has received Certificate <strong>of</strong> Conformity issued by FLO-CERT Gmbh Certification forDevelopment certifying the compliance <strong>of</strong> Fairtrade st<strong>and</strong>ard for the following- Generic FAIRTRADE TradeSt<strong>and</strong>ards- FLO-CERT Public Compliance criteria list for Trade Certification- FLO-CERT Trade Certification Policies- FAIRTRADE St<strong>and</strong>ards for Seed Cotton for Small Producers OrganizationsThis certificate is issued for functions such as CMT, Dyeing, Washing, Printing, Embroidery. The productionsite applicable for this certificate is481- A&B, Peenya Industrial Area, Peenya, Bangalore <strong>and</strong> 536/5,Veerap<strong>and</strong>iPost, Tirupur. It is valid upto 05/05/2013.Approvals for Doddaballapur project*Wehave received the following statutory approvals1. Karnatakaa State Pollution Control <strong>Board</strong>, Bangalore for consent for discharge <strong>of</strong> effluents undertheWater (Prevention <strong>and</strong>Control <strong>of</strong> Pollution) Act 1974 <strong>and</strong> Emissions under the Air(Prevention <strong>and</strong>Control <strong>of</strong>Pollution) Act 1981 for establishment<strong>of</strong> unit vide their letter dated 17/03/2012.217
Scotts Garments Limited2. Registration as a dealer under Central Sales Tax Act, 1956<strong>and</strong> Central Sales Tax (Registration <strong>and</strong>Turnover)Rules, 1956 as per rule 5( (1)3. Registration as dealer under section22 <strong>of</strong> Karnataka Value Added Tax Act, 2003, FormVAT 7 Rule9(1)<strong>of</strong> the Rules4. Temporary Connectionn <strong>of</strong> 1000 KVAfrom Bangalore Electricity Supply Company Limited received.TheCompanyis in processs <strong>of</strong> complyingwith other requirements.Other than above the following are the statutory license <strong>and</strong> approvals for whichh application has been made:1. Chief Inspector <strong>of</strong> Factories, Karnataka State, No.3, 1st Crosss Road, G<strong>and</strong>hinagar, Bangalore – 560 009 forlicense under FactoriesAct 1948 <strong>and</strong>its rules;2. Department <strong>of</strong> Ecology<strong>and</strong> Environment; KarnatakaApprovals for Kagal Project*Weshall make requisite applications forthe Kagal project after the l<strong>and</strong> is allotted to our Company.required licenses <strong>and</strong> approvals for commencement <strong>of</strong> Project is as under:1. Approvalfrom Maharashtra Pollution Control <strong>Board</strong>2. License under Factories Act3. License under Shops <strong>and</strong> Establishment Act4. Other Commercial registrations under the indirect tax authorities.The*Our Company shall apply for any other licenses <strong>and</strong> approvals as required for commencement <strong>of</strong> operations.218
Scotts Garments LimitedOTHER REGULATORY ANDSTATUTORY DISCLOSURESA)AUTHORITY FOR THEPRESENT ISSUEOur <strong>Board</strong> has, pursuant to resolution passed atits meeting held on 10/ 05/2010, authorised the Issuesubject to the approval by the shareholders <strong>of</strong> theCompany under Section 81(1A) <strong>of</strong> theCompanies Act.The shareholders <strong>of</strong> ourCompany have authorised the Issue by a special resolution passed pursuant toSection 81(1A) <strong>of</strong> the Companies Act, at an Extra Ordinary General Meeting held on10/06/2010 <strong>and</strong>19/12/2012.B)PROHIBITION BY SEBI, RBI OR GOVERNMENT AUTHORITIESThe Company, its Promoter, its Directors or any <strong>of</strong> the Company’s associates or groupcompanies <strong>and</strong>companies with which the Directors <strong>of</strong> the Company are associated as Directors or Promoter, are currentlynot prohibited from accessing or operating in the capital market under anyorder or direction passed bySEBI.The Promoter, his relatives (as per Act), the Company, groupcompanies, associate companies havenotdetained as wilful defaulters by RBI / Governmentauthorities.None <strong>of</strong> theDirectors <strong>of</strong> the Company are associated with any entities which are engaged in securitiesmarket related business <strong>and</strong> are registered with SEBI.C)Eligibility for the IssueThe Company is eligible for the Issue as per regulation 26(1) <strong>of</strong> the (Issue <strong>of</strong> Capital <strong>and</strong> DisclosureRequirements) Regulations, 2009 as explained under:• Scotts Garments Limited has a net tangible assets <strong>of</strong> at least ` 3 crores in each <strong>of</strong> thepreceding threefull years (<strong>of</strong> 12 months each), <strong>of</strong> which not more than 50% is held in monetary assets;• Scotts Garments Limited has a pre-Issue net worth <strong>of</strong> at least ` 1 crore in each <strong>of</strong> thethree precedingfull years (<strong>of</strong> 12 months each);• Scotts Garments hasa minimumm average pre-tax operating pr<strong>of</strong>it <strong>of</strong>` 15 crores,calculated on arestatedbasis duringthe three most pr<strong>of</strong>itable years out <strong>of</strong> the immediately precedingfive years;• The proposed Issue size would not exceed five times the pre-Issue net worth asper the auditedaccounts for the yearended March31, 2012;• Scotts Garments Limited has not changed its name during the last one year.(In ` lacs)Particulars7 MonthsFor the Financial Year Ended March 31ended 2012 2011 2010 2009 200831 stOctober2012Pre Tax Operating Pr<strong>of</strong>itsNet Worth (1)Net Tangible Assets (2) Monetary Assets(3)Monetary Assets as a % <strong>of</strong>Net Tangible Assets2933.8224323.38 23278.26620.662.67%4035.6722784.2521308.79552.762.59%4470.4415428.7813215.60738.535.59%4091.2212985.2610034.34484.324.83%3581.0811260.567571.91602.217.95%3410.767441.133752.48579.0715.43%219
Scotts Garments LimitedNote:(1) Net worth has beendefined as the aggregate <strong>of</strong>equity share capital <strong>and</strong> reserves, excluding miscellaneousexpenditures, if any.(2) Net tangible assets means the sum<strong>of</strong> all net assets <strong>of</strong> the Company excluding intangible assets as defined inAccounting St<strong>and</strong>ard 26 issued byInstitute <strong>of</strong> Chartered Accountants <strong>of</strong> <strong>India</strong>.(3) Monetary assets comprise <strong>of</strong> cash <strong>and</strong> bank balances, public deposit account with the Government.The Company satisfies all theeligibility criteria, laid down in regulation 26(1) <strong>of</strong>the SEBI (Issue <strong>of</strong> Capital<strong>and</strong>Disclosure Requirements) Regulation. However, the Company is doing a “voluntary book-building issue”wherein the Company proposes to 25% <strong>of</strong>the Issue to QIBsThe promoter, the company, directors <strong>of</strong> Scotts Garments Limited are not detained as willful defaulters bytheRBI/ GOI authorities <strong>and</strong> there are no violations <strong>of</strong> securities laws committed by them in thepast or pendingagainst them other than those disclosed inthis Offer Document.Nopenalty hasbeen imposed by SEBI <strong>and</strong> other regulatory bodies against the company,its directors, itspromoter <strong>and</strong> companies promoted their directors.Scotts GarmentsLimited undertakes that the number <strong>of</strong> allottees inthe Issue shall be at least 1,000. Otherwise,theentire application moneyshall be refunded forthwith. In case <strong>of</strong>delay, if any, in refund, the Company shallpayinterest on the application money at the rate <strong>of</strong> 15%per annum for the period<strong>of</strong> delay.D)DISCLAIMER CLAUSE(SEBI)"IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO THESECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) SHOULD NOT IN ANY WAYBEDEEMED OR CONSTRUED THATT THE SAME HAS BEEN CLEAREDOR APPROVED BY SEBI.SEBI DOESNOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESSS OFANY SCHEME OR THEPROJECT FOR WHICHH THE ISSUEIS PROPOSED TO BE MADE OR FORTHE CORRECTNESS OF THE STATEMENTSMADE OR OPINIONS EXPRESSED IN THE OFFERDOCUMENT. THE BOOK RUNNING LEADMANAGER, KEYNOTE CORPORATE SERVICESLIMITED AND CO-BOOK RUNNING LEAD MANAGER, CANARA BANK – MERCHANTBANKING DIVISION HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFERDOCUMENT ARE GENERALLY ADEQUATE AND ARE INCONFORMITY WITH SEBI (ISSUEOFCAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009IN FORCE FOR THE TIMEBEING. THIS REQUIREMENT ISTO FACILITATE INVESTORS TO TAKE AN INFORMEDDECISIONFOR MAKING INVESTMENT IN THE PROPOSED ISSUE.IT SHOULD ALSO BE CLEARLYUNDERSTOOD THATT WHILE THE ISSUERCOMPANYISPRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALLRELEVANTINFORMATION IN THE OFFER DOCUMENT, THE BOOK RUNNING LEADMANAGERIS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUERDISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THISPURPOSE, THE BOOK RUNNING LEAD MANAGER,KEYNOTEE CORPORATE SERVICESLIMITED AND CANARA BANK MERCHANT BANKING DIVISION HAS FURNISHED TO SEBI ADUE DILIGENCE CERTIFICATE DATED 28/09/2010 IN ACCORDANCE WITH SEBI (MERCHANTBANKERS)REGULATION, 1992, WHICH READS AS FOLLOWS:(1) WE HAVE EXAMINED VARIOUS DOCUMENTSINCLUDING THOSE RELATING TOLITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITHCOLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE220
Scotts Garments LimitedFINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAININGTO THE SAIDISSUE;(2) ON THE BASIS OF SUCH EXAMINATIONN AND THEDISCUSSIONS WITH THE ISSUER,ITSDIRECTORSANDOTHEROFFICERS,OTHERAGENCIES,AND INDEPENDENTVERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICEJUSTIFICATIONAND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERSFURNISHED BY THE ISSUER, WE CONFIRM THAT:(A)(B)(C)THE DRAFT RED HERRING PROSPECTUSS FILED WITH THE BOARD IS INCONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANTTOTHE ISSUE;ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THEREGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THEBOARD, THECENTRALGOVERNMENTAND ANYOTHERCOMPETENTAUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; ANDTHE DISCLOSURES MADE IN THEDRAFT RED HERRINGPROSPECTUS ARE TRUE,FAIR AND ADEQUATEE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMEDDECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCHDISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THECOMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)REGULATIONS, 2009 ANDOTHER APPLICABLE LEGAL REQUIREMENTS.(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THEDRAFT RED HERRING PROSPECTUS ARE REGISTERED WITHTHE BOARD AND THATTILL DATE SUCHREGISTRATION IS VALID.(4) WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERSTOFULFIL THEIR UNDERWRITING COMMITMENTS.(5) WE CERTIFY THAT WRITTEN CONSENTFROM PROMOTERS HAS BEEN OBTAINED FORINCLUSIONOFTHEIR SPECIFIEDSECURITIES AS PART OF PROMOTERS’CONTRIBUTIONSUBJECT TO LOCK-INAND THE SPECIFIED SECURITIES PROPOSEDTOFORMPART OFPROMOTERS’ CONTRIBUTION SUBJECT TOLOCK-IN SHALL NOTBEDISPOSED / SOLD / TRANSFERREDBY THE PROMOTERS DURINGTHE PERIODSTARTING FROMTHE DATE OF FILINGTHE DRAFT RED HERRING PROSPECTUS WITHTHE BOARD TILL THE DATE OF COMMENCEMENTOF LOCK-IN PERIODAS STATEDINTHE DRAFT REDHERRING PROSPECTUS.(6) WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARDOFINDIA (ISSUE OF CAPITALAND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLEFOR COMPUTATIONOFPROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH ANDAPPROPRIATEDISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADEIN THE DRAFT RED HERRING PROSPECTUS.(7) WE UNDERTAKEE THAT SUB-REGULATION (4) OF REGULATION32 AND CLAUSE (C) AND(D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGEBOARD OF INDIA(ISSUE OF CAPITALANDDISCLOSUREREQUIREMENTS)REGULATIONS,2009 SHALLL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTSHAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BERECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKETHATT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE221
Scotts Garments LimitedBOARD. WE FURTHER CONFIRM THAT ARRANGEMENTSHAVE BEEN MADE TOENSURE THAT PROMOTERS’ CONTRIBUTIONSHALL BEKEPT IN AN ESCROWACCOUNT WITHA SCHEDULED COMMERCIAL BANK ANDSHALL BE RELEASEDTOTHE ISSUER ALONG WITH THE PROCEEDS OF THEPUBLIC ISSUE. – NOT APPLICABLE(8) WE CERTIFY THAT THE PROPOSED ACTIVITIES OFTHE ISSUER FOR WHICH THE FUNDSARE BEING RAISED IN THEPRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTEDIN THE OBJECTCLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHERCHARTER OF THE ISSUER AND THATT THE ACTIVITIES WHICH HAVE BEEN CARRIEDOUT UNTIL NOW ARE VALID INTERMS OF THE OBJECT CLAUSE OF ITSMEMORANDUMM OF ASSOCIATION.(9) WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURETHATT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT INA SEPARATEBANKACCOUNTAS PER THE PROVISIONS OF SUB-SECTION(3) OF SECTION 73 OF THECOMPANIES ACT, 1956 ANDTHAT SUCH MONEYS SHALL BERELEASEDBY THE SAIDBANKONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGESMENTIONED INTHE PROSPECTUS. WE FURTHERR CONFIRMTHAT THE AGREEMENTENTERED INTOBETWEENTHE BANKERS TO THE ISSUE AND THE ISSUERSPECIFICALLY CONTAINS THIS CONDITION.(10) WE CERTIFY THAT SINCE THE PROPOSED ISSUE SIZE IS MORE THAN `10 CRORES, THEPROVISION RELATING TOOPTION TO THE INVESTORS TO GET THE SHARESS INPHYSICAL MODE IS NOT APPLICABLE IN TERMS OF SECTION68B OF THE COMPANIESACT, 1956.(11) WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THESECURITIES ANDEXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL ANDDISCLOSUREREQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TODISCLOSURES WHICH, IN OUR VIEW, ARE FAIRAND ADEQUATE TOENABLE THEINVESTOR TO MAKE A WELL INFORMED DECISION.(12) WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFTRED HERRING PROSPECTUSS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER:(A)(B)ANUNDERTAKING FROMTHE ISSUER THAT ATANY GIVEN TIME, THERE SHALLL BEONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUERANDANUNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLYWITH SUCHDISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIMETOTIME.(13) WE UNDERTAKE TO COMPLYWITH THE REGULATIONSPERTAININGTOADVERTISEMENT IN TERMS OF THE SECURITIESS AND EXCHANGE BOARD OF INDIA(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILEMAKING THE ISSUE.(14) WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEENEXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUNDORTHE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISKFACTORS, PROMOTERS EXPERIENCE ,ETC.(15) WE ENCLOSE A CHECKLISTCONFIRMING REGULATION-WISE COMPLIANCE WITH THEAPPLICABLE PROVISIONSOF THE SECURITIESAND EXCHANGE BOARD OF INDIA(ISSUE OF CAPITALANDDISCLOSUREREQUIREMENTS)REGULATIONS, 2009,222
Scotts Garments LimitedCONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUSOF COMPLIANCE, PAGE NUMBER OF THE DRAFTRED HERRING PROSPECTUS WHERETHE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IFANY.PriceInformationn <strong>of</strong> Past Issues h<strong>and</strong>led by BRLM & Co-BRLM1. Price information <strong>of</strong> past issues h<strong>and</strong>ledd by Keynote Corporate Services LimitedSrNoIssueNameIssueSize`( (Cr.)Issueprice`Listing dateOpening priceonlistingdate`Closing priceonlistingdate`%Changein Priceonlistingdate(Closing)vs. IssuePriceBenchmark index onlistingdate(Closing)Closingprice ason 10 thcalendar dayfromlistingday`Benchmark index ason 10 thcalendardaysfromlisting day(Closing)Closingprice ason 20 thcalendar dayfromlistingday`Benchmark index ason 20 thcalendardays fromlisting day(Closing)Closingprice ason 30 thcalendar dayfromlistingday`Benchmark indexason 30 thcalendardays fromlisting day(Closing)1.PrakashSteelageLimited68.75 110.00 25/08/ 2010118.55(BSE)122.00(NSE)187.95(BSE)185.00(NSE)70.86%(BSE)68.18%(NSE)18,179.64(SENSEX)5462.35(NIFTY)181.80(BSE)182.10(NSE)18,221.43(SENSEX)5479.40(NIFTY)156.40(BSE)156.65(NSE)19,208.33(SENSEX)5760.00(NIFTY)145.60(BSE)145.65(NSE)19,861.01(SENSEX)5959.555(NIFTY)2.3.4.5.BedmuthaIndustriesLimitedGravita<strong>India</strong>LimitedServalakshmi PaperLimitedVetoSwitchgears <strong>and</strong>CablesLimited91.80 102.00 14/10/ 201045.00 125.00 16/11/ 201060.00 29.00 12/05/ 201125.00 50.00 13/12/ 2012114.40(BSE)113.50(NSE)218.75(BSE)201.10(NSE)30.00(BSE)29.00(NSE)58.00180.80(BSE)179.15(NSE)210.40(BSE)209.70(NSE)19.00(BSE)19.05(NSE)77.25%(BSE)75.64%(NSE)68.32%(BSE)67.76%(NSE)(34.48%)(BSE)(34.31%)(NSE)50.45 0.9%20,497.64(SENSEX)6177.35(NIFTY)19865.14(SENSEX)5988.70(NIFTY)18,335.79(SENSEX)5,486.15(NIFTY)19,229.26(BSE)204.20(BSE)*203.00(NSE)*257.65(BSE)257.45(NSE)11.75(BSE)*20,303.12(SENSEX)6105.80(NIFTY)19,318.16(SENSEX)5799.75(NIFTY)17,993.33(SENSEX)11.80 5,386.55(NSE)* (NIFTY)50.25* 19,255.09*(BSE)176.05(BSE)174.95(NSE)255.70(BSE)*256.10(NSE)*11.05(BSE)11.10(NSE)50.1520,345.69(SENSEX)6119.00(NIFTY)19,981.31(SENSEX)5992.25(NIFTY)18,503.28(SENSEX)5,560.15(NIFTY)19580.81(BSE)116.95(BSE)116.15(NSE)235.40(BSE)235.40(NSE)20,156.89(SENSEX)6071.65(NIFTY)19,647.77(SENSEX)5892.30(NIFTY)10.19 18,268.54(BSE) (SENSEX)10.20 5,485.80(NSE) (NIFTY)50.50 19663.64(BSE)(SMEPlatform –NSEEMERGE)5851.50(NSE)5855.75*(NSE)5950.85(NSE)5951.30(NIFTY)*Being non trading day, price data is considered for next tradingday.223
2. Summarystatement <strong>of</strong>price information <strong>of</strong> past issues h<strong>and</strong>led by Keynote Corporate Services LimitedFinancialYearTotalno. <strong>of</strong>IPOs2010-11 32011- 12 12012-13 1TotalFundsRaised(`. Cr.)1. Price information <strong>of</strong> past issues h<strong>and</strong>led by Canara Bank – Nil*2. Summarystatement <strong>of</strong>price information <strong>of</strong> past issues h<strong>and</strong>led by Canaraa Bank – Nil*Canara Bank has not h<strong>and</strong>led any Initial Public Offer <strong>of</strong> equity shares in last three financial years <strong>and</strong>hence there is no data available.Track record <strong>of</strong> past issues h<strong>and</strong>ledd by BRLMsScotts Garments LimitedNos. <strong>of</strong> IPOs trading at Nos. <strong>of</strong> IPOs trading at Nos. <strong>of</strong> IPOs tradingat Nos. <strong>of</strong> IPOs trading atdiscount on listing date premium on listing datediscount as on 30 th calendarpremium as on 30 thday fromlisting day calendar day from listingdayOverBetwee Less Over BetweenLess Over Between LessOverBetwe Less50%n50%25- than25%50% 25-50% than25%50% 25-50% than25%50%en 25-50%than25%205.55 NilNil Nil 3 Nil Nil Nil NilNil 1 1 160.00 Nil 1 Nil Nil Nil Nil 1 NilNil Nil Nil Nil25.00 NilNil Nil Nil Nil 1 N.A. N.A.N.A. N.A. N.A. 1For details regarding the track record <strong>of</strong> the BRLMs to the Offer as specified in Circular referenceCIR/MIRSD/1/2012 dated January10, 2012 issued by the SEBI, please refer to the websites <strong>of</strong> the BRLMsat Keynote Corporate Services Limited - http://www.keynoteindia.net/track_record.html.Canara Bank has not h<strong>and</strong>led any Initial Public Offer <strong>of</strong> equityshares in last three financial years.THE FILING OF THE OFFER DOCUMENT DOES NOT, HOWEVER, ABSOLVE OUR COMPANYFROM ANYLIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORYOR OTHERCLEARANCESAS MAY BE REQUIRED FOR THE PURPOSE OF THEPROPOSED ISSUE. SEBI FURTHERRESERVESS THE RIGHT TO TAKEUP, AT ANY POINT OFTIME, WITH THE LEAD MERCHANTBANKER ANY IRREGULARITIES OR LAPSES IN OFFER DOCUMENT."The promoter / director <strong>of</strong> Scotts Garments Limited, Mr. Naseer Ahmed, Mrs. Nuzhat Aisha Naseer,Mr.A Arumugam, Mr. B. S. Patil, Mr. M. M. Chopra, Mr. Azeezulla Baig,Mr. C.R. Murali <strong>and</strong> Mr. S.Thiruvadi confirm that no information/material likely to havea bearing on the decision <strong>of</strong> investors inrespect <strong>of</strong> the shares <strong>of</strong>fered in terms <strong>of</strong> this Red Herring Prospectus has been suppressed withheld <strong>and</strong> /or incorporated in the manner that would amountto mis-statement/misrepresentation <strong>and</strong> in the event <strong>of</strong>its transpiring at any point in time tilll allotment/refund, as the case may be, that any information/materialhas been suppressed/ /withheld <strong>and</strong>/ or amounts to a mis-statement/ misrepresentation,thepromoters/ directors undertake to refund the entire application monies to all subscribers within 7 daysthereafter without prejudice to the provisions <strong>of</strong> section 63 <strong>of</strong> the companies act.E)DISCLAIMER STATEMENT FROMTHE COMPANY AND THE BRLM AND Co-BRLMThe Company, the Directors, the BRLM <strong>and</strong> Co-BRLM accept no responsibility for statements madeotherwise than in this RHP or in the advertisements or any other material issued by or at instance <strong>of</strong> theabove mentioned entities <strong>and</strong> anyone depending on any other source <strong>of</strong> information, includingourwebsite, www.<strong>scotts</strong><strong>garments</strong>.com, would be doing so at his or her own risk.The BRLM<strong>and</strong> Co-BRLM accept noresponsibility, save to the <strong>limited</strong>extent as provided intheAgreement entered intoamong Keynote Corporate servicess Limited <strong>and</strong> us dated 24/09/2010 <strong>and</strong>between Canara Bank <strong>and</strong> us datedd 25/09/20100 <strong>and</strong> the Underwriting Agreement tobe entered intoamong the Underwriters<strong>and</strong> us.224
Scotts Garments LimitedAll information shall bemade available by us <strong>and</strong> BRLM <strong>and</strong>Co-BRLM to the public<strong>and</strong> investors atlarge <strong>and</strong> no selective oradditional information would be available for a section <strong>of</strong> theinvestors inanymanner whatsoever including at roadshow presentations, in research or sales reports or at bidding centresetc. Neitherwe nor the Syndicate is liable to the Bidders for any failure in downloading the Bids due t<strong>of</strong>aults in anys<strong>of</strong>tware/hardware system or otherwise.F)DISCLAIMER WITH RESPECT TO JURISDICTIONThis Issue isbeing madein <strong>India</strong> to persons resident in <strong>India</strong> {including <strong>India</strong>n nationalsresident in <strong>India</strong>who are majors, HUFs, companies, corporate bodies <strong>and</strong> societies registeredunder the applicable laws in<strong>India</strong> <strong>and</strong> authorised toinvest in shares, <strong>India</strong>nn Mutual Funds registeredwith SEBI,<strong>India</strong>n financialinstitutions,commercial banks, regional rural banks, co-operative banks (subject to RBI permission), ortrusts underthe applicable trust law <strong>and</strong> who are authorised under their constitution to hold <strong>and</strong> invest inshares, permitted insurance companies <strong>and</strong> pension funds}. This RHP does not, however, constitute aninvitation tosubscribe toEquity Shares <strong>of</strong>fered hereby in any other jurisdiction to any person to whom itis unlawful to make an <strong>of</strong>fer or invitation in such jurisdiction. Any person into whose possession this RHPcomes is required to inform him or herself about <strong>and</strong> to observe, any such restrictions. Any dispute arisingout <strong>of</strong> this Issue will be subject to the jurisdiction <strong>of</strong> appropriatecourt(s) in Karnataka, Bangalore only.No action has been or will be taken to permit a public <strong>of</strong>feringin any jurisdiction wheree action would berequired forthat purpose, except thatt this RHP hasbeen filed with SEBI for observations.Accordingly, theEquity Shares, represented thereby may not be <strong>of</strong>fered or sold, directly or indirectly, <strong>and</strong>this Red HerringProspectus may not be distributed, inany jurisdiction, except in accordance with the legal requirementsapplicable insuch jurisdiction. Neither the delivery<strong>of</strong> this Red Herring Prospectus nor any sale hereundershall, underany circumstances, create any implication that there has been no change inour affairs fromthe date here<strong>of</strong> or that the informationn contained herein is correct as <strong>of</strong> any time subsequent to this date.G)DISCLAIMER CLAUSEOF THE STOCK EXCHANGESDisclaimer Clause <strong>of</strong> Bombay Stock <strong>Exchange</strong> Limited (BSE):“Bombay Stock <strong>Exchange</strong> Limited (“the <strong>Exchange</strong>”) has given vide its letter no. DCS/IPO/RK/IPO-IP/1349/2010-11 dated 21/12/2010 permission to the Company to use the <strong>Exchange</strong>’s name in this OfferDocument as one <strong>of</strong> the stock exchanges on which this Company’s securitiess are proposedto be listed.The<strong>Exchange</strong> has scrutinizedthis Offer Document for its <strong>limited</strong> internal purpose <strong>of</strong> decidingon the matter <strong>of</strong>granting theaforesaid permission to this Company. The <strong>Exchange</strong> does not in any manner:i. Warrant, certify or endorse the correctnesss or completeness <strong>of</strong> any <strong>of</strong> the contents <strong>of</strong> this OfferDocument; orii. Warrant that this Company’s securities will be listed or will continue to be listed onthe <strong>Exchange</strong>; oriii. Take any responsibility for thefinancial orother soundness <strong>of</strong> thisCompany, its promoters, itsmanagement or any scheme or project <strong>of</strong> thisCompany;<strong>and</strong> it should not for any reason be deemed or construed that this Offer Document has been cleared orapproved by the <strong>Exchange</strong>. Every person who desires to applyfor or otherwise acquiresany securities <strong>of</strong>this Company may do sopursuant toindependent inquiry, investigation <strong>and</strong> analysis <strong>and</strong> shall not haveany claim against the <strong>Exchange</strong> whatsoever by reason <strong>of</strong> any loss which may be suffered by such personconsequent to or in connection with such subscription/acquisition whetherby reason <strong>of</strong> anything statedor omitted to be stated herein or for any other reason whatsoever”.225
Scotts Garments LimitedDisclaimer Clause <strong>of</strong> theNSEAs required, a copy <strong>of</strong> this Offer Document hasbeen submitted to National Stock <strong>Exchange</strong> <strong>of</strong> <strong>India</strong>Limited (hereinafter referred to as NSE). NSE has given videits letter ref.: NSE/LIST/155676-Y dated11/01/20111 permission to the Issuer to use the<strong>Exchange</strong>’s name in this Offer Document as one <strong>of</strong> thestock exchanges on which this Issuer’ ’s securities are proposed to be listed. The <strong>Exchange</strong> has scrutinisedthis draft <strong>of</strong>fer document for its <strong>limited</strong> internal purpose <strong>of</strong>deciding on the matter <strong>of</strong> grantingg theaforesaid permission to this Issuer. It is to be distinctly understood that the aforesaid permission given byNSE shouldnot in anyway be deemed or construed that the Offer Document has been clearedorapproved by NSE; nor does it in any manner warrant,certify or endorse thecorrectnesss orcompleteness <strong>of</strong> any <strong>of</strong> the contents <strong>of</strong> this <strong>of</strong>fer document; nordoes it warrant that this Issuer’s securitieswill be listed or will continue to be listed on the<strong>Exchange</strong>; nor does it take any responsibility forthefinancial or other soundness <strong>of</strong> this Issuer, its promoters, its management orany schemee or project <strong>of</strong>thisIssuer.Every person who desires to apply for or otherwise acquireany securities <strong>of</strong> this Issuer may do sopursuant toindependent inquiry, investigation <strong>and</strong> analysis <strong>and</strong> shall not have any claim againstthe<strong>Exchange</strong> whatsoever byreason <strong>of</strong> any loss which may be suffered bysuch person consequent toor in connection with such subscription/acquisition whetherby reason <strong>of</strong>anything stated or omitted tobe stated herein or any other reason whatsoever.Disclaimer Clause <strong>of</strong> Credit Analysiss & ResearchLtd. (CARE)IPO Grading AgencyThis Issue has been graded by CreditAnalysis & Research Ltd. (CARE) <strong>and</strong> has been assigned the “CAREIPO Grade 3” indicatingAverage Fundamentals,through its letter dated 01/03/2013. The IPO grading isassigned ona five pointscale from 1 to 5 with an “IPO Grade 5” indicating strong fundamentals <strong>and</strong> an“IPO Grade1” indicatingpoor fundamentals.Disclaimer clause: CARE’s IPO Grading is a one time assessment <strong>and</strong> the analysis drawsheavily fromtheinformationn provided bythe issuer aswell as information obtained from sources believed by CARE to beaccurate <strong>and</strong>reliable. However, CARE, does not guarantee the accuracy, adequacy or completeness <strong>of</strong>anyinformationn <strong>and</strong> is not responsible for any errors or omissions or for the results obtained from the use <strong>of</strong>such information. CARE’s IPO grading does not take cognizance <strong>of</strong> the price <strong>of</strong> the security <strong>and</strong> it is not arecommendation to buy,sell or hold shares/securities. It is also not a comment on the <strong>of</strong>fer price orthelisted price <strong>of</strong> the scrip. It does not imply that CARE performs an audit function or forensic exercise todetect fraud. It is also not a forecast <strong>of</strong> the futuremarket performance <strong>and</strong>the earningsprospects <strong>of</strong> theissuer; also it does not indicate compliance/violation <strong>of</strong> variousstatutory requirements. CARE shall not beliable for any losses incurred by userss from any use<strong>of</strong> the IPO grading.H)I)FILINGA copy <strong>of</strong> this RHP has been filedwith SEBI at Mumbai.A copy <strong>of</strong> the Red Herring Prospectus, along with the documents required to be filed under Section 60B <strong>of</strong>the Companies Act, will be delivered for registration to the ROC <strong>and</strong> a copy<strong>of</strong> the Prospectus required tobe filed under Section 60 <strong>of</strong> the Companies Act would be delivered for registrationwith the ROC,Bangalore, ' E' Wing, 2nd Floor, Kendriya Sadana, Koramangala, Bangalore-560034, Karnataka.LISTINGApplications will be made to NSE <strong>and</strong> BSE for permission to deal in <strong>and</strong> for an <strong>of</strong>ficialquotation <strong>of</strong> theEquity Shares <strong>of</strong> the Company. BSEshall be theDesignatedStock <strong>Exchange</strong> with which the basis <strong>of</strong>allocation will be finalised.226
Scotts Garments LimitedIf the permission to dealin <strong>and</strong> for an<strong>of</strong>ficial quotation <strong>of</strong> the Equity Shares is not granted by any <strong>of</strong> theStock <strong>Exchange</strong>s mentioned above, the Company shall forthwith repay,without interest, all moniesreceived from the applicants in pursuance <strong>of</strong> this RHP. If such money is not repaid within eight days afterthe Company becomes liable to repaythen the Company, <strong>and</strong>every Director <strong>of</strong> the Company who is an<strong>of</strong>ficer in default shall, on <strong>and</strong> from expiry <strong>of</strong> eight days, be liable to repay the money, with interest at therate <strong>of</strong> 15% per annum on applicationmoney, as prescribed under Section 73<strong>of</strong> the Companies Act.Our Company shall ensure that alll steps for the completion <strong>of</strong> the necessary formalities for listing<strong>and</strong> commencement <strong>of</strong> trading at both the Stock<strong>Exchange</strong>s mentioned above are taken within twelveworking days <strong>of</strong> the Bid/ /Issue Closing Date.J)ImpersonationAttention <strong>of</strong>the Applicants is specifically drawn to the provisions <strong>of</strong> sub-section (1) <strong>of</strong> Section 68 A <strong>of</strong> theCompanies Act, which isreproduced below:"Any person who:a) makes in a fictitious name, an application to a company for acquiring or subscribing for,any shares therein, Orb) otherwise induces a companyto allot, orregister any transfer <strong>of</strong> shares, therein to him, orany other personin a fictitious name, shall be punishable withimprisonment for a termwhichh may extend to five years."K)CONSENTSConsents inwriting <strong>of</strong> the Directors, the Company Secretary <strong>and</strong> Compliance Officer, the StatutoryAuditor & Peer Review Auditor, the Legal Advisor, Bankers tothe Company, Bankers tothe Issue, BRLM<strong>and</strong> Co-BRLM, SyndicateMember, the Escrow Collection Bankers, IPO Grading Agency <strong>and</strong> the Registrarto the Issue to act in their respective capacities, have been obtained <strong>and</strong> will be filed along with a copy <strong>of</strong>the RHP with the ROC as required under Sections 60 <strong>and</strong> 60B<strong>of</strong> the Companies Act <strong>and</strong> such consentshave not been withdrawnup to the time <strong>of</strong> delivery <strong>of</strong> the Prospectus for registration withthe ROC.M/s G. Anantha & Co., Peer ReviewAuditor have given theirconsent to the inclusion <strong>of</strong> their report asappearing hereinafter inthe form <strong>and</strong> context in which appears in this RHP <strong>and</strong> M/s Siddaiah & Ram,Statutory Auditors <strong>of</strong> theCompany have given their consent to the inclusionn <strong>of</strong> the tax benefits accruing tothe Company <strong>and</strong> to the members <strong>of</strong> the Company <strong>and</strong> suchconsents <strong>and</strong> the reports have not beenwithdrawn up to the time <strong>of</strong> signing this RHP.L)EXPERT OPINION OBTAINED, IF ANYExcept as stated in “Auditor Report”,“Statement <strong>of</strong> Tax Benefits”, “IPO Grading” <strong>and</strong> “Techno EconomicFeasibility Report issuedby Gherzi Eastern Limited as part <strong>of</strong> objects <strong>of</strong> issue”, the Company hasnotobtained any expert opinion.M)EXPENSES OF THE ISSUEThe Management estimates an expense or ` [●] Lacs towardsissue expense. The expenses <strong>of</strong> this Issueinclude, among others, underwriting<strong>and</strong> management fees, selling commission, printing<strong>and</strong> distributionexpenses, legal fees, statutory advertisement expenses <strong>and</strong> listing fees. The estimated Issue expenses are asfollows:(` in Lacs)227
Scotts Garments LimitedSr.No.Nature <strong>of</strong> ExpensesAmount*% to theTotalExpenses% totheIssue1. Lead Management Fee, Underwriting Commissions<strong>and</strong> SellingCommissions[●][●][●]2. SCSB Commission/processing fee to SCSBs for [●][●][●]processing ASBA Bidcum Application Formsprocured by members <strong>of</strong> syndicate <strong>and</strong> non-syndicate members**3. Commission to Non-SyndicateMembers on [●][●][●]procurement <strong>of</strong> eligiblee applicationsconsidered forpurpose <strong>of</strong> allotment***4.5.6.Advertising<strong>and</strong> Marketing ExpensessPrinting <strong>and</strong> StationeryOthers (Registrar’s Fee, Legal Fee, Grading Fee,Service Tax, etc.)[●][●][●][●][●][●][●][●][●]Total Estimated Issue Expenses[●][●][●]* Willl be incorporated after finalisation <strong>of</strong> Issue Price**SCSBs would be entitled to a processing fee <strong>of</strong>`10/- per Bid-cum-Application Form, for processing the Bid-cum ApplicationForms procured by the members <strong>of</strong> the Syndicate <strong>and</strong> submitted to SCSBs.***Non-Syndicate Members wouldbe entitled to a commission <strong>of</strong> `20/-formper valid bid cum applicationprocured <strong>and</strong> considered for basis <strong>of</strong> allotmentN)DETAILS OF FEE PAYABLEBook Running Lead Manager <strong>and</strong> Co-Book Running Lead Manager to the IssueThe total fees payable to the Book Running Lead Manager <strong>and</strong> Co-Book Running Lead Manager will be asper the Memor<strong>and</strong>um <strong>of</strong>Underst<strong>and</strong>ing signed with the Lead Manager(s), a copy <strong>of</strong> which is available forinspection at the Registered Office <strong>of</strong> the Company. The Lead Manager( (s) will be reimbursed for allrelevant out-<strong>of</strong>-pocket expenses such as cost <strong>of</strong> travel, stationery, postage <strong>and</strong>communication expenses.Fees Payable to the Registrar to the IssueThe fees payable by our Company to the Registrarr to the Issue Link Intime Private Limited for processing<strong>of</strong> application, data entry, printing <strong>of</strong>CAN/ refund order, preparation <strong>of</strong> refund data on magnetic tape,printing <strong>of</strong> bulk mailingregister will be as per the Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ingsigned withtheCompany dated 25/09/2010.The Registrar to the Issue will be reimbursed for all out-<strong>of</strong>-pocket expenses including cost <strong>of</strong> stationery,postage, stamp duty <strong>and</strong>communication expenses. Adequate funds will beprovided bythe Company tothe Registrar to the Issue to enable them to send refund orders or Allotment advice byregistered post/speed post/under certificate <strong>of</strong> posting.O)UNDERWRITING COMMISSION,BROKERAGE AND SELLING COMMISSIONThe underwriting commission <strong>and</strong> the selling commission forthe Issue are as set out in the SyndicateAgreement amongst the Company, the BRLM<strong>and</strong> Co-BRLM <strong>and</strong> the Syndicate Member. Theunderwriting commission shall be paid as set out in the Syndicate Agreement based on the Issue price<strong>and</strong>the amount underwrittenn in the manner mentionedon page no.33 <strong>of</strong> this RHP.228
Scotts Garments LimitedP)PREVIOUSPUBLIC ORRIGHTS ISSUEWe have not made any public or rights issue <strong>of</strong> shares either in<strong>India</strong> or abroad since incorporation <strong>of</strong> theCompany.Q)PREVIOUSISSUE OF SHARES OTHERWISE THAN FOR CASHExcept as disclosed in the chapter “Capital Structure” beginning on page 34 <strong>of</strong> this Red HerringProspectus, our Company has not issued any Equity Shares for considerationn otherwise than for cash.R)COMMISSION AND BROKERAGEE ON PREVIOUS ISSUESSSince this is the initial public <strong>of</strong>fer <strong>of</strong> the Company, no sumhas been paid or has been payable ascommissionor brokeragee for subscribing to or procuring or agreeing to procure subscription for any <strong>of</strong> theEquity Shares since inception <strong>of</strong> the Company.S)CAPITAL ISSUE DURING THE LAST THREE YEARSNeither we nor our group companies have made any capital issue during thelast three years.T)PROMISE VIS-A-VIS PERFORMANNCEThis is a first issue <strong>of</strong> ourCompany <strong>and</strong> none <strong>of</strong> our group companies are listed on any stock exchanges in<strong>India</strong>.U)OUTSTANDING DEBENTURES OR BONDSOTHER INSTRUMENTSAND REDEEMABLE PREFERENCEE SHARES ANDOur Company has no outst<strong>and</strong>ing debenturesinstrumentss issued as onthe date <strong>of</strong> this RHP.or bonds orredeemablepreference shares <strong>and</strong> otherV)STOCK MARKET DATAThis beingexchange.an initial public <strong>of</strong>fering<strong>of</strong> our Company, the Equity Sharesare not listed on any stockW)INVESTORGRIEVANCES AND REDRESSAL SYSTEMOur company has appointed the Registrar to the Issue, to h<strong>and</strong>le the investor grievancesin co-ordinationwith the Compliance Officer <strong>of</strong> theCompany. All grievances relating to the present issue maybeaddressed to the Registrar with a copyto the Compliance Officer, giving fulll details such as name, address<strong>of</strong> the applicant, number<strong>of</strong> equity shares applied for, amount paid on application <strong>and</strong> bank <strong>and</strong> branch.All grievances relating tothe ASBA process may be addressed to the Registrar to the Issue with a copy tothe relevantSCSB <strong>and</strong> the Syndicate Member withwhom the Bid cum Application Form was submitted bythe ASBA Bidder, givingg full details such as name, address <strong>of</strong> the applicant, application number, number<strong>of</strong> Equity Shares appliedfor, amount paid on application <strong>and</strong> the Designated Branch or the collectioncentre <strong>of</strong> the SCSB where the Bid cum Application Form was submitted by the ASBAA Bidders ortheaddress <strong>of</strong> the center <strong>of</strong> the Syndicatewhere the Bid cum Application Formwas submitted by the ASBABidder.The Company would monitor the work <strong>of</strong> the registrar to ensure that the investor grievances are settledexpeditiously <strong>and</strong> satisfactorily.229
Scotts Garments LimitedThe Registrar to the issue, namely, Link Intime Private Limited, will h<strong>and</strong>le investor’s grievancespertaining to the issue. A fortnightly status report <strong>of</strong> the complaints received <strong>and</strong> redressed by themwould be forwarded to the company.The Company would also be co-ordinating with the registrar totheissue in attending to thegrievances to the investor. The Company assures that the <strong>Board</strong> <strong>of</strong> Directors inrespect <strong>of</strong> the complaints, if any, to bereceived shall adhere to the following schedules:Sr. No.1.2.3.Nature <strong>of</strong> complaintNon-receipt <strong>of</strong> refundNon Receipt <strong>of</strong> Share Certificate/DematCreditAny other complaint inrelation to PublicIssueTime TableWithin 7 days <strong>of</strong> receipt <strong>of</strong> complaint subject toproduction <strong>of</strong> satisfactory evidenceWithin 7 days <strong>of</strong> receipt <strong>of</strong> complaint subject toproduction <strong>of</strong> satisfactory evidenceWithin 7 days <strong>of</strong>receipt <strong>of</strong> complaint withallrelevant detailsRedressals <strong>of</strong> investors’grievance are given toppriority bythe Company. The Committee overseesredressal <strong>of</strong>complaints <strong>of</strong> shareholders/investors <strong>and</strong> otherimportant investor related matters. TheCompany has adequate arrangementsfor redressal <strong>of</strong> investor complaints asfollows:Share transfer/ dematerialisation/rematerialisation are h<strong>and</strong>led by well equipped pr<strong>of</strong>essionallymanaged Registrar <strong>and</strong> Transfer Agent, appointed by the Company in terms <strong>of</strong> SEBI’s directionforappointmen<strong>of</strong> Common Agency for physical as well as demat shares. The Registrars are constantlymonitored <strong>and</strong> supported by qualified<strong>and</strong> experienced personnel <strong>of</strong> the Company.We have appointed Mr. S. Guruswamy Babu, Company Secretary as the Compliance Officer <strong>and</strong> he maybe contactedin case <strong>of</strong> any pre-issue or post-issue problems. He can be contacted at the following address:Mr. S. Guruswamy BabuCompany Secretary & Compliance OfficerScotts Garments Limited481-B, Peenya Industrial Area,Peenya IV Phase,Bangalore – 560 058;Tel.: +91-080-40858585/41179001/41179002/41179003;Fax : +91-080-41179007/28362452E-mail: cs@ <strong>scotts</strong><strong>garments</strong>.comX)CHANGESIN AUDITORSThere has been no change in the auditor <strong>of</strong> the Company since past three yearsY)Z)CAPITALIZATION OF RESERVES OR PROFITSDURING LAST 5 YEARSOur company has issued1,20,12,000 Equity Sharesin the ratio <strong>of</strong> 12 equity shares for every 1 equity shareheld (12:1), on 28/03/2006 by capitalizing share premium account <strong>and</strong> reserves or pr<strong>of</strong>its.REVALUATION OF ASSETS DURING THE LAST 5 YEARSThe company has not revalued its assets during thelast 5 years.230
Scotts Garments LimitedThe Equity Shares being <strong>of</strong>fered are subject to the provisions <strong>of</strong> the Companies Act, ourMemor<strong>and</strong>um <strong>and</strong> Articles <strong>of</strong> Association, the terms <strong>of</strong> this Red HerringProspectus, the Prospectus, theBid-cum-ApplicationForm, the Revision Form, the CAN<strong>and</strong> other terms <strong>and</strong> conditions as maybe incorporated in the Allotment advices <strong>and</strong>other documents/certificates that may be executed inrespect <strong>of</strong>the Issue. The Equity Shares shall alsobe subject tolaws as applicable, guidelines, notifications<strong>and</strong> regulations relating to the issue <strong>of</strong> capital <strong>and</strong> listing <strong>and</strong> trading <strong>of</strong> securities issuedfromtime to time by SEBI, Government <strong>of</strong> <strong>India</strong>, the Stock <strong>Exchange</strong>s, the Reserve Bank <strong>of</strong> <strong>India</strong>, ROC<strong>and</strong>/or other authorities, as in force on the date <strong>of</strong> theIssue <strong>and</strong> to the extent applicable.RANKING OF EQUITY SHARESThe Equity Shares being <strong>of</strong>feredshall be subject to the provisions <strong>of</strong> the Companies Act, ourMemor<strong>and</strong>um <strong>and</strong> Articles <strong>of</strong> Association <strong>and</strong> shall rankpari passu in all respects with the existingEquity Shares including rights in respect <strong>of</strong> dividend. The Allottees willl be entitled to dividend or anyother corporate benefits, if any, declared by the Company after the date <strong>of</strong> allotment.MODE OF PAYMENTOF DIVIDENDWe shall pay dividendd to our shareholders as per the provisions <strong>of</strong> the Companies Act, 1956.FACE VALUE AND ISSUE PRICEThe face value <strong>of</strong> the Equity Shares is ` 10/- each<strong>and</strong> the Floor Price is ` 130/- <strong>and</strong> the Cap Price is ` 132/-per EquityShare. At any given point <strong>of</strong> time there shall be only one denomination for the Equity Sharessubject to the applicable laws.RIGHTS OF THE EQUITY SHAREHOLDERSSubject toapplicable laws, the equity shareholders shall have the followingrights:‣ Right to receive dividend, if declared;‣ Right to attend general meetings <strong>and</strong> exercise voting powers, unless prohibited by law;‣ Right to vote on a poll either in person or by proxy;‣ Right to receive annual reports <strong>and</strong> notices tomembers;‣ Right to receive <strong>of</strong>fers for rightsshares <strong>and</strong> be allotted bonus shares, ifannounced;‣ Right to receive surplus on liquidation;‣ Right <strong>of</strong> free transferability; <strong>and</strong>‣ Such other rights, as may beavailable toa shareholder <strong>of</strong> a listed public company under theCompanies Act, 1956 <strong>and</strong> the Memor<strong>and</strong>um <strong>and</strong> Articles <strong>of</strong> Association <strong>of</strong> the Company.MARKETLOTSECTION VI - OFFERING INFORMATIONA) TERMS OF THE ISSUEIn terms <strong>of</strong> Section 68B <strong>of</strong> the Companies Act, 1956, theEquity Shares <strong>of</strong> the Company shall beallotted only in dematerialized form. In terms <strong>of</strong> existing SEBI Regulations, the trading in the EquityShares <strong>of</strong> the Company shall only be in dematerialized form for all investors. Since trading <strong>of</strong> ourEquity Shares will be in dematerialized mode, the tradable lot is one equity share. Allotment <strong>of</strong> EquityShares through this Issue will be done only in electronic formin multiples<strong>of</strong> one Equity Share subject to aminimumm Allotment <strong>of</strong> 100 Equity Shares.231
Scotts Garments LimitedNOMINATION FACILITY TO INVESTORIn accordance with Section 109A <strong>of</strong> the Companies Act, the sole or first Bidder,along withotherjoint Bidder(s), may nominate any one person inwhom, in the event <strong>of</strong> death <strong>of</strong> the sole Bidder or in case<strong>of</strong> joint Bidders, death <strong>of</strong> all the Bidders, as the case may be, the Equity Shares Allotted, if any, shall vest.A person,being a nominee, entitled to the Equity Shares by reason<strong>of</strong> the death <strong>of</strong> the originalholder(s), shall in accordance with Section 109A <strong>of</strong> theCompaniesAct, be entitled to thesameadvantages to which he or she would be entitled if he or she were the registered holder <strong>of</strong> the EquityShare(s). Where the nominee is a minor, theholder(s) may make a nomination to appoint, in theprescribedmanner, any person to become entitled to Equity Share(s) inthe event <strong>of</strong> his or herdeathduring the minority. A nomination shall st<strong>and</strong> rescinded upon a sale/transfer/alienation <strong>of</strong> EquityShare(s) by the personnominating. A buyer will be entitledto make a fresh nomination in the mannerprescribed. A fresh nomination can be made only on the prescribed form availableon request at theregistered<strong>of</strong>fice <strong>of</strong> the Company orat the registrar <strong>and</strong> transfer agent <strong>of</strong> the Company.In accordance with Section 109B <strong>of</strong>the Companies Act, any person who becomes a nominee by virtue <strong>of</strong>the provisions <strong>of</strong> Section 109A <strong>of</strong>the Companies Act, shall upon theproduction<strong>of</strong> such evidenceas may be required byour <strong>Board</strong>, elect either:‣ To register himselfor herself as the holder <strong>of</strong>the Equity Shares; or‣ To make such transfer <strong>of</strong> the Equity Shares, as the deceased holder could have made.Further, our <strong>Board</strong> may at any time give noticerequiring any nominee to choose either to be registeredhimself orherself or totransfer the Equity Shares, <strong>and</strong> if the notice is not complied with, within a period <strong>of</strong>90 days, our <strong>Board</strong> may thereafter withhold payment <strong>of</strong>all dividends, bonusess or other moniespayable in respect <strong>of</strong> the Equity Shares, until the requirements <strong>of</strong> the notice have beencomplied with.Since the allotment <strong>of</strong> Equity Shares in the Issue will be made only in dematerialized form, theree is noneed to make a separate nomination with us. Nominations registered with the respective depositoryparticipant <strong>of</strong> the applicant wouldprevail. If the investorss require changing the nomination, they arerequestedto inform their respectivee depository participant.MINIMUM SUBSCRIPTIONIf we do not receive the minimumm subscription <strong>of</strong> 90% <strong>of</strong> the <strong>of</strong>fer through <strong>of</strong>fer document includingdevolvement <strong>of</strong> the Underwritersif any, within 60 days from the Bid/ Issue Closing Date, weshallforthwith refund the entire subscription amount received. If there is a delay beyond 8 days after webecome liable to pay the amount, we shall pay interest as per Section 73 <strong>of</strong> the Companies Act.ARRANGEMENTS FOR DISPOSAL OF ODD LOTSOur Company`s sharess will be traded in dematerialised formonly <strong>and</strong> hence the marketable lot would beone (1) equity share. Therefore the possibility <strong>of</strong> odd lots would not arise.RESTRICTIONS ON TRANSFER OF SHARESSExcept for lock-in <strong>of</strong> the pre-Issue Equity Shares <strong>and</strong> Promoter’s minimum contribution in the Issue asdetailed in“Capital Structure” on page. 37, <strong>and</strong> except as provided in the Articles, there are no restrictionson transfers <strong>of</strong> Equity Shares. Theree are no restrictions on transmission <strong>of</strong> shares/ debentures <strong>and</strong> on theirconsolidation/ splitting except as provided in the Articles. Please see “Main Provisions <strong>of</strong> the Articles <strong>of</strong>Association” on page 279.232
Scotts Garments LimitedB. ISSUE STRUCTUREPublic Issue <strong>of</strong> 1,05,06, 954 Equity Shares <strong>of</strong> face value `10/- each for cash by the company issued at a price<strong>of</strong> ` [●] per Equity Share, aggregating ` [●] Lacs (hereinafter referred toas the “Issue”). Up to 4, ,50,000Equity Shares will be reserved in the Issue for subscription byEmployees at the Issue Price <strong>and</strong> a Net Issue<strong>of</strong> 1,00,56,954 Equity Shares <strong>of</strong> ` 10/- each. TheIssue wouldconstitute 26.95% <strong>of</strong> the post Issue paid-upcapital <strong>of</strong> the Company <strong>and</strong> the Net Issue will constitute 25.80% <strong>of</strong> the post Issue paid up capital <strong>of</strong> theCompany. The Issue isbeing made through the 100% Book Building Process.ParticularsEmployeesReservationQIBs Non-InstitutionalBiddersPortionNumber <strong>of</strong> Upto 4,50,000 equity 25,14,238 EquityNot lessthanEquity Shares sharesShares willbe 40,22,782 Equityallottedto QIBs. Shares shall beavailable forallocation.Percentage<strong>of</strong> Upto 4.28% <strong>of</strong>the 25% <strong>of</strong>the Net IssueNot less than 40% <strong>of</strong>Issue Size Issue size.(<strong>of</strong> which 5% shallthe Net Issue oravailableforbe reserved forIssueless theallocationMutualFunds)allocation to QIBsMutualFunds<strong>and</strong> RetailPortionparticipating in the5% reservationinthe QIB Portion willalso be eligible forallocation in theremainingQIBPortion. Theunsubscribedportion, if any, intheMutual Fundreservation will beavailable to QIBs.Basis <strong>of</strong> ProportionateProportionate (a)Proportionateallocationif1,25,712 EquityrespectiveShares shallbecategoryisavailableforoversubscribedallocationon aproportionate basisto MutualFunds;<strong>and</strong> (b) 23,88,526EquityShares shallbe allottedon aproportionate basisto all QIBs,includingMutualFunds receivingallocation as per (a)above.Retail IndividualBiddersNot less than35,19,934 EquitySharesavailableshallbeforallocation.Not less than35% <strong>of</strong>the Net Issue or Issueless the allocation toQIBs <strong>and</strong> Non-Institutional Portion.Firm Allotment uptominimum bid lotsize# <strong>and</strong> balance onProportionate233
Scotts Garments LimitedParticularsEmployeesReservationQIBs Non-InstitutionalBiddersPortionMinimumm Bid 1000 Equity SharesSuch number <strong>of</strong> Such number <strong>of</strong><strong>and</strong>in multiples <strong>of</strong> EquityShares thatEquityShares that1000 Equity Share the Bid Amountthe Bid Amountthereafter.exceeds `200,000exceeds ` 2,00,000<strong>and</strong> inmultiples <strong>of</strong> <strong>and</strong> in multiples <strong>of</strong>100 Equity Shares100 Equity Sharesthereafter.thereafter.Maximum BidModeAllotmentTradingLotNot exceeding the Not exceeding theNot exceeding thesize<strong>of</strong> the Issue size <strong>of</strong> the Issuesize <strong>of</strong> the IssuesubjectregulationsapplicableBidder **toto subjectas regulationsthe applicable Bidderto to subjectas regulationstheapplicableBiddertotoasthe<strong>of</strong> Compulsorilyin Compulsorilyin Compulsorilyindematerialized form. dematerialized form.dematerialized form.One Equity ShareOne Equity ShareOne Equity ShareWho canApply EligibleEmployeesPublic financialResident <strong>India</strong>n*<strong>of</strong> the Companyinstitutions specifiedindividuals,HUFsin Section 4A <strong>of</strong> the(in the name <strong>of</strong>Companies Act, FIIsKarta),companies,(<strong>and</strong>theircorporate bodies,subaccountsEligible NRIs,registeredwithscientific institutionsSEBI, other than a societies <strong>and</strong> trusts,sub-accountwhich<strong>and</strong> any FII subregisteredis a foreignaccountcorporate or foreignwith SEBI, which isindividual),a foreign corporatescheduledor foreign individualcommercialbanks,<strong>and</strong> Eligible QFIsmutualfundsregisteredwithSEBI, multilateral<strong>and</strong> bilateraldevelopmentfinancialinstitutions,FVCIsregistered with SEBI(subject to receipt <strong>of</strong>appropriateapprovals by theFVCI from theappropriateregulatoryauthority),ventureRetail IndividualBidders100 Equity Shares<strong>and</strong> in multiples <strong>of</strong>100 Equity Sharethereafter.SuchEquitynumberShares<strong>of</strong>perRetail IndividualBidder so as toensure that the BidAmount doesnotexceed `200,000.Compulsorilyindematerialized form.One Equity ShareIndividuals(including HUFs inthe name <strong>of</strong> karta)applying forEquityShares such that theBid AmountperRetail IndividualBidderexceedvalue.does`200,000 notin234
ParticularsTermsPaymentBiddingMechanismEmployeesReservationPortionQIBscapitalfundsregistered with theSEBI, state industrialdevelopmentcorporations,insurancecompaniesregistered with theInsuranceRegulatory<strong>and</strong>DevelopmentAuthority,providentfunds(subjecttoapplicable law) witha minimum corpus<strong>of</strong> ` 250 million,pension funds witha minimum corpus<strong>of</strong> ` 250 million, theNational InvestmentFund set up byresolution F. No.2/3/2005-DD-IIdated November 23,2005 <strong>of</strong> GoIpublished in theGazette <strong>of</strong> <strong>India</strong> <strong>and</strong>insurance funds setup <strong>and</strong>managed bythe Army, Navy orAirForce <strong>of</strong> theUnion <strong>of</strong> <strong>India</strong>ASBA is optionalASBA is m<strong>and</strong>atory<strong>and</strong>Bids couldbesubmittedthroughASBA or non- ASBAASBA is optional <strong>and</strong>Bids couldbesubmitted throughASBA or non-ASBASubject tovalid Bids being received at or above the Issue Price, under-subscription, if any, inNII<strong>and</strong> Retail category would be allowed to be met with spill over inter-se from any <strong>of</strong> theother categories,235Non-InstitutionalBiddersASBA is m<strong>and</strong>atoryScotts Garments LimitedRetail IndividualBidders<strong>of</strong> Full Bid AmountFull Bid AmountFull Bid AmountFull Bid Amountshall be payable at shall be blocked in applicableshall beapplicable at the timethe time <strong>of</strong> an account with theblocked in an<strong>of</strong> submission<strong>of</strong> Bid -submission <strong>of</strong> Bid-SCSBs at the time <strong>of</strong> account with thecum - Applicationcum-Applicationsubmission <strong>of</strong> Bid-SCSBs at the time <strong>of</strong>Form.Form.cum-Applicationsubmission <strong>of</strong> Bid-Form.cum-ApplicationForm.
Scotts Garments Limitedat the solediscretion <strong>of</strong> the Company, the BRLM, the Co-BRLM <strong>and</strong> subject to applicable provisions<strong>of</strong> the SEBI Regulations.# Subject to availability <strong>of</strong> Shares in the Retail Category*In case the Bid-cum-Application Formis submittedin joint names, the investors should ensure that the demataccount is also held in the same joint names <strong>and</strong> in the same sequence in which they appear in the Bidcum-ApplicationForm.**If the aggregate dem<strong>and</strong> in this category is less than or equal to4,50,000 Equity Shares at or above the IssuePrice, full allocation shall be made to the Eligible Employees to the extent <strong>of</strong> theirdem<strong>and</strong>. Provided that the value<strong>of</strong> allotment to any employee in pursuance <strong>of</strong> this reservation, shall not exceed` 2,00,000/-. The aggregate <strong>of</strong>reservations for employees shall not exceed five per cent <strong>of</strong> the post issue capital <strong>of</strong>the CompanyIf the aggregate dem<strong>and</strong> by MutualFunds is less than 1,25,712 Equity Shares, the balance Equity Sharesavailable for allocationin the Mutual Fund reservation willl first be added to the QIB Portion <strong>and</strong> beallocated proportionately to the QIBBidders in proportion to their Bids.Withdrawal <strong>of</strong> this IssueThe Company, in consultation withthe BRLM <strong>and</strong> the Co-BRLM, reservess the right not to proceed withthe issue after the bidding <strong>and</strong> if so, the reason there<strong>of</strong> shall be given as a public noticewithin two days<strong>of</strong> the closure <strong>of</strong> the issue. The public notice shall be issued inthe same newspapers where the pre-issueadvertisement had appeared. The stock exchanges where the specified securities were proposed to belisted shall also be informed promptly. If the Company withdraws the Issue after the Bid/Issue ClosingDate <strong>and</strong> thereafter determines thatt it will proceed with an initial public <strong>of</strong>fering <strong>of</strong> itsEquity Shares, itshall file a fresh draft red herring prospectus with the SEBI.Bidding/Issue ProgrammeBID/ISSUE OPENS ONBID/ISSUE CLOSES ONTHURSDAY, APRIL 25, 2013MONDAY, APRIL 29, 2013An indicative timetablee in respect <strong>of</strong> this issue is set out below:EventBid/IssueClosing DateFinalisation <strong>of</strong> basis <strong>of</strong> allotment with Stock <strong>Exchange</strong>sInitiation <strong>of</strong> refundsCredit <strong>of</strong>Equity shares to investor`s demat accountsinstructionCredit <strong>of</strong> Equity sharess to investor`ss demat accountsCommencement <strong>of</strong> trading*Workingdays are all days except Sundays <strong>and</strong> Bank HolidaysIndicativeDateApril 29, 2013May 09, 2013May 09, 2013May 10, 2013May 13, 2013May 14, 2013The abovetimetable is indicative <strong>and</strong> does not constitute any obligation onthe Company or the BRLMs.The Company <strong>and</strong> BRLMs shall ensure that all steps for the completion <strong>of</strong> the necessary formalities forthe listing<strong>and</strong> the commencement<strong>of</strong> trading <strong>of</strong> the EquityShares on the Stock <strong>Exchange</strong>s are takenwithin 12Working Days <strong>of</strong> the Bid/ Issue Closing Date, the timetablee may change due to variousfactors, such as extension <strong>of</strong> the Bid/ Issue Period by the Company, revision <strong>of</strong> the Price B<strong>and</strong> oranydelays in receiving thefinal listing <strong>and</strong> trading approval fromthe Stock <strong>Exchange</strong>s. The commencement<strong>of</strong> trading<strong>of</strong> the Equity Shares will be entirely at the discretion <strong>of</strong> the Stock <strong>Exchange</strong>s <strong>and</strong> inaccordance with the applicable laws.236
Scotts Garments LimitedExcept in relation to the revision <strong>of</strong> Bids by theRetail Individual Bidders, Bids <strong>and</strong> any revision in Bidswill be accepted only between 10.00 a.m. <strong>and</strong> 5.00 p.m. (<strong>India</strong>n St<strong>and</strong>ard Time) duringthe Bidding Periodas mentioned above at the Bidding centers or with the Syndicate Membersat the Specified Centers <strong>and</strong> theDesignated Branches <strong>of</strong> SCSBs as mentioned in the Bid cum Application Form. On theBid ClosingDate,Bids <strong>and</strong> revision <strong>of</strong> bids excluding ASBA Bidsshall be accepted only between 10.000 a.m. <strong>and</strong> 3.00 p.m.(<strong>India</strong>n St<strong>and</strong>ard Time) <strong>and</strong> uploaded until ( i) 4.00 p.m. in case <strong>of</strong> Bids by QIB Bidders <strong>and</strong>Non-Institutional Bidders; <strong>and</strong> (ii) 5.00 p.m. which may be extended up to suchtime as permitted by theStock<strong>Exchange</strong>s in case <strong>of</strong> Bids by Retail Individual Bidders <strong>and</strong> Eligible Employees. It is clarified that Bids notuploaded in the book,would be rejected. Bids by ASBA Bidders shall be uploaded by the SCSB in theelectronicc system to beprovided bythe NSE <strong>and</strong>the BSE. Retail Individual Bidders may either withdrawor revise their Bid at any time prior to the finalisation <strong>of</strong> Allotment. QIBBidders <strong>and</strong> Non-InstitutionalBidders may revise their Bids upwards (in terms <strong>of</strong> quantity <strong>of</strong> Equity Shares or the Bid Amount) duringthe Bid/Issue Period. Such upwardrevision(s) must be made using the Revision Form. QIB Bidders <strong>and</strong>Non-Institutional Bidders are not permitted to lower the size <strong>of</strong> their Bid(s) (in terms <strong>of</strong>quantity <strong>of</strong> EquityShares or the Bid Amount) at any stage.In case <strong>of</strong>discrepancyin the dataa entered in the electronicc book vis-à-viper the Bid file receivedfrom the Stockthe data contained inthephysical Bid form, for a particular bidder, the details as<strong>Exchange</strong>s <strong>of</strong> that Bidder may betaken as the final data for the purpose <strong>of</strong> allotment. In case <strong>of</strong>discrepancy in the data entered inthe electronic book vis-à-vis the dataa contained inthe physical orelectronicc Bid cum Application Form submitted through the ASBA process, for a particular ASBABidder, the details as per the Bid file received from the Stock<strong>Exchange</strong>s <strong>of</strong> that Biddermay be taken asthe final data for the purpose <strong>of</strong> allotment.Due to limitation <strong>of</strong> time availablefor uploading the Bids on the Bid Closing Date, the Biddersareadvised tosubmit their Bids one Working Day prior to the Bid Closing Date <strong>and</strong>, in any case, no laterthan 1.00 p.m. (<strong>India</strong>n St<strong>and</strong>ard Time) on the BidClosing Date. Bidders are cautioned that in the event alarge number <strong>of</strong> Bids are received on the Bid Closing Date, as is typically experienced in IPOs, whichmay lead to some Bidsnot being uploaded due to lack <strong>of</strong> sufficient time toupload, suchBids that cannotbe uploaded will not be considered for allocation in the Issue. If suchBids are not uploaded,theCompany<strong>and</strong> the Syndicate shall not be responsible. Bids will be accepted only between Monday<strong>and</strong>Friday (excluding any public holiday). Neither our Companynor any member <strong>of</strong> the Syndicate is liablefor any failure in uploading the Bids due to failure in any s<strong>of</strong>tware/hardware system orotherwise.On the Bid Closing Date, extensionn <strong>of</strong> time willl be granted by the Stock <strong>Exchange</strong>s only for uploadingthe Bids received by Retail Individual Bidders <strong>and</strong> Eligible Employees, after taking intoaccount the totalnumber <strong>of</strong> Bids received up to the closure <strong>of</strong> timings for acceptance <strong>of</strong> Bid-cum Application Forms asstated herein <strong>and</strong> reported by the BRLM, Co-BRLM to the Stock <strong>Exchange</strong>s within half an hour <strong>of</strong> suchclosure.Our Company reserves the right torevise the Price B<strong>and</strong> during the Bidding Period inaccordance withICDR Regulations. The Cap Price shall be lesss than or equal to 120% <strong>of</strong> the Floor Price. Subject tocompliance with the immediately preceding sentence, the Floor Price can move up or down to the extent<strong>of</strong> 20% <strong>of</strong> the floor price originally disclosed in the RHP <strong>and</strong> the Cap Price will be revised accordingly.In case <strong>of</strong>revision in the Price B<strong>and</strong>, the IssuePeriod will be extended for three additional workingdays afterrevision <strong>of</strong> Price B<strong>and</strong> subject to the Bidding Period/Issue Period not exceeding 10 workingdays. Anyrevision in the Price B<strong>and</strong> <strong>and</strong> the revised Bidding Period/Issue Period, ifapplicable, willbe widelydisseminated by notification to the BSE <strong>and</strong> the NSE, by issuing a press release, <strong>and</strong> alsoby indicating the change on the web sites <strong>of</strong> theBook Runners at the terminals <strong>of</strong> theSyndicate.237
Scotts Garments LimitedThis section applies toall Bidders. Please note that QIB Bidders <strong>and</strong> NonInstitutional Bidders have toparticipate in the Issuethrough theASBA process. Retail Individual Bidders can participate in the Issuethrough the ASBA process as well as the non ASBA process.ASBA Bidders should note that the ASBAprocess involves application procedures that are different from the procedure applicable to Biddersother thanthe ASBA Bidders. Bidders applyingthrough the ASBA process should carefully readtheprovisions applicable to such applications before making their application through the ASBA process.Please note that all theBidders are required to make payment <strong>of</strong> the full Bid Amount along with theBidcum Application Form.Pursuant to <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> circular no. CIR/CFD/14/2012 dated 04/10/2012,the investors can submit application forms in public issuess using the stock broker network <strong>of</strong> Stock<strong>Exchange</strong>s, who may not be syndicate members in an issue. This mechanism can be used to submitASBA as well as Non-ASBA applications. The details <strong>of</strong> the locations are available on the website <strong>of</strong>BSE<strong>and</strong> NSE i.e. www.bseindia.com <strong>and</strong>www.nseindia.comFurther, please note thatt pursuant to the <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong>(Issue <strong>of</strong> Capital <strong>and</strong> DisclosureRequirements) (Fourth Amendment) Regulations, 2012, certain aspects, such as withdrawal <strong>and</strong> revision <strong>of</strong> Bids,manner <strong>of</strong>allocation to Retail Individual Bidders <strong>and</strong> announcement <strong>of</strong> Price B<strong>and</strong>, have been modified. Pleasenote that such modifications have come into effect from October 12, 2012 <strong>and</strong> all Bidders are advised to readthissection carefully before participating inthe Issue.Bidders are advised to make their independent investigations <strong>and</strong> ensure that their Bids do not exceedtheinvestment limits or maximum number <strong>of</strong> Equity Shares that can be held by them under applicable law or asspecified inthis Prospectus.BOOK BUILDING PROCEDUREC) ISSUE PROCEDUREThe Issueis being made through the 100% BookBuilding Process wherein 25% <strong>of</strong> the Net Issue will beallocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out <strong>of</strong> which 5% shall beavailable for allocationon a proportionate basis to Mutual Funds only. The remainder shall be availablefor allocation on a proportionate basis to all QIBs, includingMutual Funds, subject tovalid Bids beingreceived from them ator above the Issue Price. Further, not less than 40% <strong>of</strong> the Net Issue shall beavailable for allocationon a proportionate basiss to Non-Institutional Bidders <strong>and</strong> notless than 35% <strong>of</strong>the Net Issue shall beavailable for allocation on a proportionate basis to Retail Individual Bidders,subject to valid Bids being received at or above the Issue Price. Further up to 4,50,000 Equity Shares shallbe available for allocation on a proportionate basis to Employees, subject to valid Bids being received ator above the Issue Price.Under-subscription, if any, in any category, except in the QIBPortion, would be allowed to be met withspill over from any other category or combination <strong>of</strong> categories at the discretion <strong>of</strong> our Company <strong>and</strong> inconsultation with the BRLMs <strong>and</strong> the DesignatedStock <strong>Exchange</strong>.Bidders are required to submit their Bids through the members <strong>of</strong> theSyndicate or non syndicatemembers (nationwide broker network <strong>of</strong> Stock <strong>Exchange</strong>s). ASBA investors intending to subscribe totheissue shall submit a complete Bidcum Application form to the designated branch<strong>of</strong> the SCSB orsyndicate member at specified cities or non syndicate members (nationwide broker network <strong>of</strong> Stock<strong>Exchange</strong>s). We, in consultation with the BRLM <strong>and</strong> the Co-BRLM reservee the right to reject any QIBBidprocured by any or alll members <strong>of</strong> the Syndicate provided the rejection isat the time <strong>of</strong> receipt <strong>of</strong> suchBids <strong>and</strong> the reason for rejection <strong>of</strong> the Bid is communicatedto the Bidderat the time <strong>of</strong> rejection <strong>of</strong> the238
Scotts Garments LimitedBid. In the cases <strong>of</strong> Non-Institutional Bidders, Retail Individual Bidders <strong>and</strong> Bidders in the EmployeeReservation Portion, the Company will have a right to reject the Bids only on technical grounds.Investors should notethat Allotment <strong>of</strong> Equity Shares to all successful Bidders will be only inthedematerialised form. The Bid cumApplicationForms which do not have the details <strong>of</strong> the Bidders’depository accounts shall be treated as incomplete <strong>and</strong> rejected. Bidders will not have the option <strong>of</strong>being Allotted EquityShares in physical form.The Equity Shares on Allotment shall be traded onlyon the dematerialisedsegment <strong>of</strong> the Stock <strong>Exchange</strong>s.Bidders are required to ensure that the PAN (<strong>of</strong> the sole/ first Bidder) providedd in the Bid cumApplication Form is exactly the same as thePAN <strong>of</strong> the person(s) in whose name the relevantbeneficiary account is held.BID CUMAPPLICATION FORMPursuant to SEBI circular CIR/CFD/DIL/4/2011dated September 27, 2011, Bid cum Application Formshave beenst<strong>and</strong>ardized <strong>and</strong> it hasbeen decided that henceforth there would only be a single formfor ASBAA <strong>and</strong> non-ASBA Bidders. It has also been decided that theBid cum Application Form(accompanied with abridged prospectus) wouldbe printed in a booklet form <strong>of</strong> A4 size paper.Bidders (other than ASBA Bidders)shall submitthe bid through the Syndicate. The Bidders shall havethe optionto make a maximum <strong>of</strong> three Bids inthe Bid-cum-ApplicationForm <strong>and</strong> such options shallnot be considered as multiple Bids.ASBA Bidders shall submit Bid cum Application Form to the SCSBauthorising blocking <strong>of</strong> funds that are available in the bank account except for the ASBA Bids submittedin the Specified Cities through the Syndicate. In the case <strong>of</strong> Specified Cities, the ASBA Bids may either besubmittedwith the Designated Branches or with the Syndicate. Bid cum application forms will beavailable for download <strong>and</strong> printing, from websites <strong>of</strong> the Stock <strong>Exchange</strong>s which provide electronicinterface for ASBA facility i.e. Bombay Stock <strong>Exchange</strong> (BSE) <strong>and</strong> NationalStock <strong>Exchange</strong> (NSE).ASBA Bidders bidding through the Syndicateshould ensure that the Bid cum Application Form issubmittedto the Syndicate only inthe Specified Cities. ASBA Bidders should also note that theBidcum Application Forms submittedto the Syndicate in the Specified Cities will not be accepted iftheSCSB where the ASBAA Account, asspecified inthe Bid cumApplicationForm, is maintained hasnotnamed at least one branch at that location for the Syndicateto deposit Bid cum Application Forms (Alist <strong>of</strong> such branchesis available at http://www.sebi.gov.in/pmd/scsb-asba.html). ASBA Biddersbidding directly through the SCSBs should ensure that the Bid cum Application Formis submitted toa Designated Branch <strong>of</strong> a SCSB where the ASBAA Account ismaintained.Upon filing <strong>of</strong> the Prospectus withthe RoC, theBid-cum-Application Form shall be considered astheApplication Form. Upon completing <strong>and</strong> submitting the Bid-cum-Application Form toa member <strong>of</strong> theSyndicate, Non Syndicate members or the SCSB, the Bidder or the ASBA Bidder is deemed to haveauthorized our Company to make the necessary changes inthe Red Herring Prospectus as would berequired for filing the Prospectus with the RoC <strong>and</strong> as would be requiredby the RoCafter such filing,without prior or subsequent notice <strong>of</strong> such changes to the Bidder or the ASBA Bidder.The prescribed colour <strong>of</strong> the Bid cumApplicationForm for various categories is as follows:CategoryResident<strong>India</strong>ns, QIBs, Eligible NRIs applyingon a non-repatriationbasis (ASBA <strong>and</strong> non ASBA)Eligible NRIs <strong>and</strong> FIIs applying on a repatriation basis (ASBA <strong>and</strong>Colour <strong>of</strong> Bid cum ApplicationFormWhiteBlue239
Scotts Garments LimitedCategoryNon ASBA)Eligible Employees applying in the Employee Reservation Portion(ASBA <strong>and</strong> non ASBA)Colour <strong>of</strong> Bid cum ApplicationFormPinkASBA Bidders shall submit an Bidcum Application Form either in physical or electronic form totheSCSB authorizing blocking the funds that are available in the bank account specified in the ASBAA Bidcum Application Formused by ASBA Bidders except for the ASBA bids submitted in specified cities. Inthe case <strong>of</strong> Specified Cities, the ASBA Bids may be submitted with the members <strong>of</strong> the Syndicate. Kindlynote that Bid cum Application Forms submittedby ASBA Bidders to members <strong>of</strong> theSyndicate at theSyndicateASBA Bidding Locationswill not be accepted if the SCSB withwhich the ASBA Account, asspecified in the Bid cum Application Form, is maintained has not named at least one branch at thatlocation for the members <strong>of</strong> the Syndicate to deposit the Bid cum Application Form(A list <strong>of</strong> suchbranches is available at http://www.sebi.gov.in/pmd/scsb-asba.html).The Bidders shall havetheoption to make a maximum <strong>of</strong> threee Bids in the ASBA Bid-cum-Application Form <strong>and</strong> such options shallnot be considered as multiple Bids. Upon the allocation <strong>of</strong> Equity Shares, dispatch <strong>of</strong> the CAN <strong>and</strong> filing<strong>of</strong> the Prospectus with the RoC, the ASBA Bid cum Application Formshall be considered astheApplication Form.Who can Bid?• Persons eligible to invest underall applicablelaws, rules, regulations <strong>and</strong> guidelines;• <strong>India</strong>nn Nationals, resident in <strong>India</strong>, who arecompetent to contract under <strong>India</strong>n Contract Act, 1872as amended <strong>and</strong> Minors, having valid demat account, as per demographic details providedd byDepositaries. ;• HinduUndivided Families or HUFs, in the individual name <strong>of</strong> the Karta. The Bidder should specifythat the Bid is being made inthe name <strong>of</strong> the HUFin the Bidcum Application Formasfollows: “Name <strong>of</strong> Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ,wheree XYZ is the name <strong>of</strong> the Karta”. Bids by HUFs would be considered at parwith those fromindividuals;• Companies, corporate bodies <strong>and</strong> societies registered under the applicable laws in <strong>India</strong> <strong>and</strong>authorized to invest in the equity shares;• Mutual Funds registered with SEBI;• Eligible NRIs on a repatriation basis or on a non-repatriation basis, subject to applicable laws. NRIsother than EligibleNRIs are noteligible to participate in this issue;• <strong>India</strong>nn Financial Institutions, commercial banks, regionalrural banks, co-operativee banks (subject toRBI <strong>and</strong> the SEBI Regulations <strong>and</strong> regulations, as applicable);• FIIs <strong>and</strong> sub-accounts registeredwith SEBI, other than a sub-account which is a foreign corporate ora foreign individual;• Venture Capital Funds registered with SEBI;• Foreign Venture Capital Investors registeredwith SEBI,• Multilateral <strong>and</strong> Bilateral development financial institutions• AIFs registered withSEBI;• Eligible QFIs240
Scotts Garments Limited• State Industrial Development Corporations;• Trusts/ societies registered under the Societies Registration Act, 1860, as amended, or underanyother law relating to trusts/ societies <strong>and</strong> who are authorized under their constitution to hold<strong>and</strong>investin equity shares;• Scientific <strong>and</strong>/or industrial research organizations authorized to invest in equity shares;• Insurance Companies registeredwith Insurance Regulatory <strong>and</strong> Development Authority, <strong>India</strong>;• Provident Funds with minimum corpus <strong>of</strong> ` 2500.00 lacs <strong>and</strong> who are authorized under theirconstitution to hold<strong>and</strong> invest in equity shares;• Pension Funds with a minimum corpus <strong>of</strong> ` 2500.00 lacs <strong>and</strong> who are authorized under theirconstitution to hold<strong>and</strong> invest in equity shares; <strong>and</strong>• National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005<strong>of</strong> Government <strong>of</strong> <strong>India</strong> published in the Gazette <strong>of</strong> <strong>India</strong>;<strong>and</strong>• Eligible Employees(as defined in the section“Definitions<strong>and</strong> Abbreviations” beginning on pagei <strong>of</strong>the Red Herring Prospectus.)• Limited Liability Partnerships registered under the Limited Liability Partnership Act, 2008• Insurance funds set up <strong>and</strong> managed by the army, navy or air force <strong>of</strong> the Union <strong>of</strong> <strong>India</strong>• Insurance funds set up <strong>and</strong> managed by Department <strong>of</strong> Posts, <strong>India</strong>;As per theexisting regulations, OCBs cannot participate in this Issue.Participation by associates <strong>of</strong> BRLM, Co-BRLM<strong>and</strong> Syndicate MemberThe BRLM, the Co-BRLM <strong>and</strong> Syndicate Member shall not be allowed tosubscribe tothis Issue inanymanner except towards fulfilling their underwriting obligations. However, associatess <strong>and</strong> affiliates <strong>of</strong>the BRLM, the Co-BRLM <strong>and</strong> Syndicate Member may subscribe for Equity Shares in the Issue, either inthe QIB Portion <strong>and</strong> Non-Institutional Portion where the allotment is on a proportionatebasis.Bids by Eligible EmployeesReservation to Eligibleemployees has been provided in this issue, as per Regulation 42<strong>of</strong> the SEBI (ICDR)Regulations, 2009. Eligible Employee shall meana permanent <strong>and</strong> full-time employee working in <strong>India</strong> orabroad, <strong>of</strong>the issuer or <strong>of</strong> the holding companyor subsidiary company or <strong>of</strong> that material associate(s) <strong>of</strong>the issuerwhose financial statements are consolidated with the issuer’s financial statements as perAccounting St<strong>and</strong>ard 21, or a director <strong>of</strong> the issuer, whether whole time or part time <strong>and</strong> does not includepromoters<strong>and</strong> an immediate relative <strong>of</strong> the promoter (i.e.,any spouse<strong>of</strong> that person, or any parent,brother, sister or child <strong>of</strong> that personor <strong>of</strong> the spouse);]Bids under Employee Reservation Portion by Eligible Employees shall be:• Made in the prescribed Bid-cum-ApplicationForm or Revision Form.• Eligible Employees,as defined above, shouldmention their Employee Number at the relevant placein the Bid-cum-Application Form.241
Scotts Garments Limited• The sole/First Bidder should be Eligible Employees as defined above. In case the Bid-cum-Application Form is submitted in joint names, it should be ensured that the Depository Account isalso held in the same joint names <strong>and</strong> in thesame sequence in whichh they appearin the Bid-cum-Application Form.• Only Eligible Employees wouldbe eligible to apply in this Issue under the Employee ReservationPortion.• Eligible Employees will have to bid like any other Bidder. Only those bids, which are received at orabove the Issue Price, would be considered for allocation under this category.• Eligible Employees who apply or bid for securities <strong>of</strong> or for a value <strong>of</strong> not more than` 200,000 inany<strong>of</strong> the bidding options can apply at the Cut-Off Price. This facility is not availableto other EligibleEmployees whose minimum BidAmount exceeds ` 200,000.• Bid/Application byEligible Employees can also be made in the Net Issue portion <strong>and</strong> such Bids shallnot be treated as multiple bids.• If the aggregate dem<strong>and</strong> in this category is less than or equal to 4,50,0000 Equity Shares at or abovetheIssue Price, full allocation shall be made to the Eligible Employees to the extent <strong>of</strong> their dem<strong>and</strong>.Provided that the value <strong>of</strong> allotment to anyemployee in pursuance<strong>of</strong> this reservation, shalll notexceed` 2,00,000/-.• Any under-subscription in the Equity Shares under the Employee Reservation Portion will be addedback tothe Net Issue.• If the aggregate dem<strong>and</strong> in this category is greater than 4,50,000 Equity Shares at or above the IssuePrice, the allocationshall be made on a proportionate basis. Provided that the value <strong>of</strong> allotment toany employee in pursuance <strong>of</strong> this reservation, shall not exceed ` 2,00,000/-.Bids by Mutual FundsAn eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the MutualFunds Portion. In the event that the dem<strong>and</strong> is greater than1,25,712 Equity Shares, allocation shall bemade to Mutual Funds proportionately, to the extent <strong>of</strong> the Mutual Fund Portion. The remainingdem<strong>and</strong> by Mutual Funds shall, aspart <strong>of</strong> the aggregate dem<strong>and</strong> by QIBs, be available for allocationproportionately out <strong>of</strong>the remainder <strong>of</strong> the QIB Portion, after excludingthe allocation in the MutualFunds Portion.In case <strong>of</strong>a mutual fund, a separate Bid can be made in respect <strong>of</strong> each scheme <strong>of</strong> the mutual fundregisteredwith SEBI <strong>and</strong> such Bidsin respect <strong>of</strong> more than one scheme <strong>of</strong> the mutualfund will not betreated asmultiple Bids provided that the Bids clearly indicate the scheme concerned for which theBidhas been made.As per the current regulations, the following restrictions are applicable for investments by mutual funds:No mutual fund scheme shall invest more than 10% <strong>of</strong> its net asset value in the equityshares or equityrelated instruments <strong>of</strong>any single company provided that the limit <strong>of</strong> 10% shall not be applicableforinvestments in index funds or sector or industryspecific funds. No mutual fund under all its schemesshould own more than10% <strong>of</strong> any company’s paid-up capitalcarrying voting rights.The above information is given for the benefit <strong>of</strong> the Bidders. Our Company <strong>and</strong>the BRLM & Co-which may happen after the date <strong>of</strong> this Red Herring Prospectus. Bidders are advised to makeBRLM arenot liable for any amendments or modification or changes inapplicable laws or regulations,their242
Scotts Garments Limitedindependent investigations <strong>and</strong> ensure that the number <strong>of</strong> Equity Shares bid forapplicable limits under laws or regulations.do not exceed theBids by Eligible NRIsBid cum Application Forms have been made available for Eligible NRIs at the registered <strong>of</strong>fice <strong>of</strong>theCompany<strong>and</strong> with members <strong>of</strong> theSyndicate <strong>and</strong> the Registrar to the Issue.Eligible NRI applicants should notethat only such Bids as are accompanied by payment in free foreignexchange shall be considered for Allotment. The Eligible NRIs who intend to make payment throughNon-Resident Ordinary (NRO) accounts shall use the Bid cum Application Form meant for Resident<strong>India</strong>ns.Bids by FIIsAs per the current regulations, the following restrictions are applicable for investments by FIIs:The issue <strong>of</strong> Equity Shares to a single FII should not exceed10% <strong>of</strong> the post-Issue paid- up capital. Inrespect <strong>of</strong>an FII investing in the Equity Shares on behalf <strong>of</strong> its sub-accounts, the investment on behalf <strong>of</strong>each sub-accounissued capital, in casesuch sub-account is a foreign corporate or an individual. The aggregate limitshalll not exceed 10% <strong>of</strong> our total issued capital <strong>of</strong> the Company or 5% <strong>of</strong> the totalfor FII investment is 24% <strong>of</strong> the capital <strong>of</strong> the company. This aggregate limit <strong>of</strong> 24% can be increased tothe sectoral cap/statutory ceiling, through a resolution by its <strong>Board</strong> <strong>of</strong> Directors, followed by a specialresolutionto that effect.Subject tocompliance with all applicable <strong>India</strong>n laws, rules, regulations, guidelines <strong>and</strong> approvals interms <strong>of</strong> Regulation 15A(1) <strong>of</strong> the <strong>Securities</strong> <strong>Exchange</strong> <strong>Board</strong><strong>of</strong> <strong>India</strong> (Foreign Institutional Investors)Regulations 1995, as amended, an FII or its sub-account may issue, deal orhold, <strong>of</strong>fshorederivativeeinstruments such as Participatory Notes, equity-linkednotes or any other similarinstruments against underlying securities listed or proposed to be listed in any stock exchange in <strong>India</strong>only in favour <strong>of</strong> those entities which are regulated by any relevant regulatory authorities inthecountries <strong>of</strong> their incorporationor establishment subjectto compliance <strong>of</strong> “know your client”requirements. An FII or sub-account shall also ensure that no further downstream issue or transfer <strong>of</strong>any instrument referred to hereinabove is made to any personother than a regulated entity.Bids by Sebi Registered Venture Capital Funds(VCF) And Foreign Venture Capital Investors (FVCI)<strong>and</strong> Alternative Investment Funds (AIF)As per the current regulations, the following restrictions are applicable for Sebi registered venturecapital funds <strong>and</strong> foreign venture capital investors <strong>and</strong> Alternative Investment Funds:The SEBI(Venture Capital) Regulations, 1996 <strong>and</strong> the SEBI (Foreign Venture Capital Investor)Regulations, 2000 prescribe investment restrictions on venture capital funds <strong>and</strong> foreign venture capitalinvestors registered with SEBI.Accordingly, the holding by any individual venture capital fund registered with SEBIin one companyshould not exceed 25% <strong>of</strong> the corpus <strong>of</strong> the venture capital fund (VCF); a ForeignVenture CapitalInvestor can invest itsentire funds committedfor investments into <strong>India</strong> in one company. Further,Venture Capital Funds<strong>and</strong> ForeignVenture Capital Investors can invest only up to 33.33% <strong>of</strong> the fundsavailable for investment by way <strong>of</strong> subscription to an initial public <strong>of</strong>fer.Category I <strong>and</strong> II AIFscannot invest more than 25% <strong>of</strong> the corpus in one investee company. A category243
Scotts Garments LimitedIII AIF cannot invest more than 10% <strong>of</strong> the corpus in one investee company. A venture capital fundunder thecategory I AIFs, as defined in the SEBI AIF Regulations, can invest only upto 33.33% <strong>of</strong> thecorpus by way <strong>of</strong> subscriptionto an initial public <strong>of</strong>fering <strong>of</strong> a venture capital undertaking.Additionally, the VCFs which have not re-registered as an AIF under the SEBI AIF Regulations shallcontinue to be regulated by the VCFRegulations.Bids by Eligible QFIsPursuant to a circular dated January13, 2012, theRBI has permitted Eligible QFIs to invest in equity shares<strong>of</strong> <strong>India</strong>n companies on a repatriation basis subject to certain terms <strong>and</strong>conditions. Eligible QFIs havebeen permitted to invest in equity shares <strong>of</strong> <strong>India</strong>n companies which are <strong>of</strong>fered to the public in <strong>India</strong> inaccordance with the SEBI Regulations. The individual <strong>and</strong> aggregate investment limits for Eligible QFIs inan <strong>India</strong>nn company are 5% <strong>and</strong> 10% <strong>of</strong> the paid up capital<strong>of</strong> the <strong>India</strong>n company, respectively. Theselimits are in addition to the investment limits prescribed under the portfolio investment scheme for FIIs<strong>and</strong> NRIs. However, incases <strong>of</strong> those sectors which have composite foreign investment caps, Eligible QFIinvestment limits are required to beconsidered within such composite foreign investment cap.QFIs shalll be included under the Non-Institutional Bidders category. Further, the SEBI in its circularr datedJanuary 13, 2012 has specified, amongst other things, eligible transactions for Eligible QFIs (which includesinvestment in equity shares in public issues to be listed on recognised stock exchanges<strong>and</strong> sale <strong>of</strong> equityshares held by EligibleQFIs in theirdemat account through SEBI registered brokers), manner <strong>of</strong> operation<strong>of</strong> demat accounts by Eligible QFIs, transaction processes <strong>and</strong> investment restrictions.SEBI has specifiedthat transactions by Eligible QFIs shall be treated at par with those made by <strong>India</strong>n non-institutionalinvestors in various respects including, margins,voting rights<strong>and</strong> public issues.Eligible QFIs shall open a single non interest bearing Rupee account withan AD category-I bank in<strong>India</strong>for routing the payment for transactions relating to purchase <strong>of</strong> equity shares (including investment inequity shares in publicissues) subject to the conditions as maybe prescribed by the RBIfrom time totime.Eligible QFIs who wishto participate in the Offer are requiredto submit the Bid cum Application Form forthe Offer. Eligible QFIsare advised to use the Bidcum Application Form meant for Non-Residents (blue incolour). Eligible QFIs are required to participate in the Offer through the ASBA process.Eligible QFIs are not permitted to issue <strong>of</strong>f-shorederivative instruments orparticipatorynotes.Bids by <strong>limited</strong> liability partnershipsIn case <strong>of</strong>Bids made by <strong>limited</strong> liability partnerships registered under the LLP Act, a certified copy <strong>of</strong>certificatee <strong>of</strong> registration issued under the LLP Act, must beattached to the Bid cumApplication Form.Failing this, our Company reserve the right to reject any Bid without assigning any reason there<strong>of</strong>.Bids by insurance companiesIn case <strong>of</strong>Bids made by insurance companies registered with the IRDA, a certified copy <strong>of</strong> certificate <strong>of</strong>registration issued by IRDA must be attached to the Bid cum Application Form. Failingthis, our Companyreserve the right to reject any Bid without assigning any reason there<strong>of</strong>.The exposure norms for insurers, prescribed under the Insurance Regulatory <strong>and</strong> Development Authority(Investment) Regulations, 2000, as amended, are broadly set forth below:(a) equity shares <strong>of</strong> a company: the least <strong>of</strong> 10% <strong>of</strong> the investee company’s subscribed capital (facevalue) or 10% <strong>of</strong> the respective fund in case <strong>of</strong> life insurer or 10%<strong>of</strong> investment assets in case <strong>of</strong>general insurerr or reinsurer;244
Scotts Garments Limited(b) the entire group <strong>of</strong> the investee company: the least <strong>of</strong> 10% <strong>of</strong> the respective fund in case <strong>of</strong> a lifeinsurer or 10%<strong>of</strong> investment assets in case <strong>of</strong> a general insurer or reinsurer (25%in case <strong>of</strong> ULIPs);<strong>and</strong>(c) the industry sector in whichh the investeee company operates: 10% <strong>of</strong> the insurer’s total investmentexposure to the industry sector (25% in case <strong>of</strong> ULIPs) ).Bids by provident funds/pension fundsIn case <strong>of</strong> Bids made byprovident funds/pension funds, subject to applicable laws, with minimum corpus<strong>of</strong> Rs. 250million, a certified copy <strong>of</strong> certificatee from a chartered accountant certifying the corpus <strong>of</strong> theprovidentfund/pension fund must be attached to the Bid cum Application Form. Failing this, ourCompanyreserve the right to reject any Bid, without assigning any reason there<strong>of</strong>.The above information is given for the benefit<strong>of</strong> the Bidders. The Company <strong>and</strong> the Book Runnersare not liable for anyamendments or modification or changes in applicable laws or regulations,which may occur after the date <strong>of</strong>this Red Herring Prospectus. Bidders are advised to make theirindependent investigations <strong>and</strong> ensure that the number <strong>of</strong>Equity Shares Bid for do not exceedtheapplicable limits under laws or regulations.Maximumm <strong>and</strong> Minimum Bid Sizea) For Retail Individual Bidders: The Bid mustbe for a minimum <strong>of</strong> 1000 Equity Shares <strong>and</strong> in multiples<strong>of</strong> 100 Equity Shares thereafter, so as to ensure that theBid Price payable by theBidder does notexceed`200,000. Incase <strong>of</strong> revision <strong>of</strong> Bids, the Retail Individual Bidders have to ensure that the BidPrice does not exceed ` 200,000. In case the Bid Price is over ` 200,000 due to revision <strong>of</strong> the Bid orrevision <strong>of</strong> the PriceB<strong>and</strong> or onexercise <strong>of</strong> Cut-<strong>of</strong>f option, the Bid would be considered for allocationunder the Non-Institutional Bidders portion.The Cut-<strong>of</strong>ff option is anoption givenonly to theRetailIndividual Biddersindicating their agreement to Bid <strong>and</strong> purchase at the final Issue Price asdetermined at the end <strong>of</strong> the Book Building Process. The Retail Individual Bidders may eitherwithdraw or revise their Bid at any time prior to the finalisation <strong>of</strong> allotment.b) For Other Bidders (Non-Institutional Bidders <strong>and</strong> QIBs Portion): TheBid must befor a minimum <strong>of</strong>such number <strong>of</strong> Equity Shares such that theBid Amount exceeds `200,000 <strong>and</strong> in multiples <strong>of</strong> 100EquityShares thereafter. A Bid cannot be submitted for more than theIssue. However, the maximumBid bya QIB investor should not exceed the investment limits prescribed for them by applicablelaws.Under the existingSEBI Regulations, a QIBBidder <strong>and</strong>Non-Institutional Bidder cannot withdrawtheir Bid(s) or lower the size <strong>of</strong> their bid(s) (in terms<strong>of</strong> quantity<strong>of</strong> Equity Shares or the BidAmount) at any stage. QIBs <strong>and</strong>Non-Institutional Bidders are m<strong>and</strong>atorily required to submit theirBid through ASBAA process. Non-Institutional Bidders <strong>and</strong> QIBs are not allowed to Bid at cut-<strong>of</strong>fprice.In casethe Bid Amount reduces to Rs. 200,000 or less due to a revision<strong>of</strong> the Price B<strong>and</strong>, Bids byNon-forInstitutional Bidders who are eligible for allocation in the Retail Portion wouldbe consideredallocation under theRetail Portion.c) For Bidders in the Employee Reservation Portion: The Bid must be for a minimum <strong>of</strong> 100 EquityShares <strong>and</strong> in multiples <strong>of</strong> 100 Equity Shares thereafter. Eligible Employees, whose Bid Amount doesnot exceed `200,000, including due to any revision in thePrice B<strong>and</strong>, may Bid at the Cut-<strong>of</strong>f Price.Eligible Employees whose Bid Amount exceeds `200,000/ /- have to bidthrough ASBA only <strong>and</strong> maynot Bidat Cut-<strong>of</strong>f Price. A single applicant applying under the Employee Reservation portion maymake an applicationfor a number <strong>of</strong> specified securities which does not exceeds the reservationi.e;4,50,000 equity shares. However, allocation shall be made on a proportionate basis provided that the245
Scotts Garments Limitedvalue <strong>of</strong> allotment2,00,000.to any employee in pursuance <strong>of</strong> theemployee reservation, shall not exceed `Bidders are advisedd to ensure that any single Bid from them does not exceed theinvestment limitsor maximum number <strong>of</strong> EquityShares that can be held by them under applicablelaw or regulationor as specified in this Red Herring Prospectus.Information for theBidders:(a) Our Company in consultation with the BRLM <strong>and</strong> Co- BRLM shall declare the Bid/Issue OpeningDate <strong>and</strong> Bid/Issue Closing Date in the RedHerring Prospectus to beregistered with the RoC<strong>and</strong>also publish the same in two (2) national newspaper one(1) each in English <strong>and</strong> Hindi newspaper<strong>and</strong> one regional newspaper with wide circulation. We shall announce the price b<strong>and</strong> at leastfiveworking days before the opening <strong>of</strong> the bid, by way <strong>of</strong> an announcement in all the newspapers inwhichh the pre-issue advertisement was released by our Company or the BRLM <strong>and</strong> Co-BRLM.Theprice b<strong>and</strong> announcement shalll contain relevant financialratios computed for bothupper <strong>and</strong> lowerend <strong>of</strong> the price b<strong>and</strong> <strong>and</strong> also a statement drawing the attention <strong>of</strong> the investors tothe section titled“basiss <strong>of</strong> issue price” in the <strong>of</strong>fer document. The Syndicate <strong>and</strong> the SCSBs shall accept Bids fromtheBidders during the Bid/Offer Period. ThePrice B<strong>and</strong>, along withthe relevant financial ratioscalculated at the Floor Price <strong>and</strong> at the Cap Price, shall be pre-filledin the Bid cum ApplicationFormsavailable at the websites <strong>of</strong> the Stock <strong>Exchange</strong>s.(b) Bidding by QIBs will close oneWorking Day prior to the Bid ClosingDate, provided that Biddingshall be kept open for a minimum <strong>of</strong> three Working Days for all categories <strong>of</strong> Bidders.(c) Our Company willl file the Red Herring Prospectus with the RoC before the Bid/Issue Opening Datein compliance withthe SEBI (ICDR) Regulations 2009 <strong>and</strong>the Companies Act, 1956(d) The members <strong>of</strong> the Syndicatewill circulate copies <strong>of</strong> the Bid-cum-Application Form to potentialinvestors, <strong>and</strong> at the request <strong>of</strong>the potential investor’s, copies <strong>of</strong> theRed HerringProspectus. TheSCSBsshall ensuree that the abridged prospectus is made available on their websites.(e) Any Bidders (whois eligible to invest in the Equity Shares) who would like toobtain the RedHerring Prospectus <strong>and</strong>/ or theBid cum Application Form can obtainthe same from the RegisteredOfficeor from any member <strong>of</strong> the Syndicate or the SCSBs.(f) Eligible investors who are interested in subscribing for the EquityShares should approachtheBRLM, Co-BRLM or Syndicate Member or their authorized agent(s) to register their Bids. Bidderswho wish to use the ASBA process should approach the Designated Branches <strong>of</strong> the SCSBs toregister their Bids or the Syndicate in Specified Cities to register their Bids.(g) ASBAA Bidders shall correctly mention the bank account number in the ASBA Bid cum ApplicationForm <strong>and</strong> ensure that funds equal to the BidAmount areavailable inthe bank account maintainedwith the SCSB before submitting the ASBA Bid cum Application Formto the respective DesignatedBranch or the Syndicate in Specified Cities to register their Bids. ASBA Bidders bidding through aSyndicate Membershould ensure that the Bid cum Application Formis submitted to a SyndicateMember only in the Specified Cities. ASBA Bidders should also ensuree that the Bidcum ApplicationFormssubmitted to the Syndicate Membersin the Specified Cities will not be accepted if the SCSBwheree the ASBA Account, as specified in the Bid cumApplication Form, is maintained hasnotnamed at least one branch at that location for the members <strong>of</strong> the Syndicate to deposit Bid cumApplication Forms(A list <strong>of</strong> such branches is available at http://www.sebi.gov.in/pmd/scsbasba.html)(h) If theASBA Account holder isdifferent from the ASBAA Bidder, theASBA Bid cum ApplicationForm should be signed by the account holder as providedd in the ASBAA Bid cum Application Form.246
Scotts Garments Limited(i) The Bids should be submitted on the prescribed Bid-cum-Application Formonly. Bid-cum-Formswhich do not bear the stamp <strong>of</strong> a member <strong>of</strong> the Syndicate will be rejected. Further, suchApplication Formsshould bear the stamp <strong>of</strong> the member <strong>of</strong> the Syndicate. Bid-cum-Applicationbroker or SCSB branch shall affix its stamp, date <strong>and</strong>time on theBid cum Application Formacknowledging theupload <strong>of</strong> the Bid in the electronic bidding system<strong>of</strong> the Stock<strong>Exchange</strong>s. Bidsby ASBA Bidders shall be accepted by the Designated Branches <strong>of</strong> theSCSBs in accordance withtheSEBI (ICDR) Regulations <strong>and</strong> any circulars issued by SEBI in this regard. Bidders applying throughthe ASBA process also have anoption to submit the ASBA Bid cum Application Form in electronicform.(j) The Syndicate <strong>and</strong>the Designated Branches<strong>of</strong> the SCSBsshall acceptBids from the Bidders duringthe Bid/Issue Period in accordance with the terms <strong>of</strong> the Syndicate Agreement.The applicants may note that in case the DP ID <strong>and</strong> Client ID <strong>and</strong> PAN mentionedin the Bid cumApplication Form <strong>and</strong>entered into the electronic biddingsystem <strong>of</strong> the Stock <strong>Exchange</strong>s bytheSyndicatedo not match with the DP ID <strong>and</strong> Client ID<strong>and</strong> PAN available inthe SettlementDepository database, the application is liable tobe rejected.Method <strong>and</strong> Process <strong>of</strong> Bidding(a) Our Company in consultation with the BRLM <strong>and</strong> Co-BRLM will decide the Price B<strong>and</strong> <strong>and</strong>theminimum Bid lot size for the Issue. The members <strong>of</strong> Syndicate <strong>and</strong> theSCSBs shalll accept Bids fromthe Bidders duringthe Bid/Issue Period.(b) The Bid/Issue Period shall befor a minimum <strong>of</strong> threee Working Days <strong>and</strong> shall not exceed 10Working Days. In case <strong>of</strong> revision in Price B<strong>and</strong>, the Bid/Issue Periodmay be extended, if required,by minimum <strong>of</strong> three Working Days, subjectto the total Bid/Issue Period not exceeding 10 WorkingDays.Any revision in the Price B<strong>and</strong> <strong>and</strong>the revisedBid/ Issue Period, if applicable, will bepublished in two national newspapers (one each in English <strong>and</strong> Hindi) <strong>and</strong> one regional newspaperwith wide circulation <strong>and</strong> also by indicating the change on the websites <strong>of</strong> the BRLM, Co-BRLM<strong>and</strong>at theterminals <strong>of</strong> the Syndicate.(c) During the Bid/Issue Period, Bidders, other than QIBs,who are interested in subscribing fortheEquityShares should approach the Syndicate (including at specified cities) or their authorisedagents or SCSBs toregister their Bids. The Syndicate shall accept Bids from all non ASBA Bidders<strong>and</strong> at specified citites from ASBA Bidders <strong>and</strong> have the right to vet the Bids during the Bid/ IssuePeriodin accordance with the terms <strong>of</strong> the Red HerringProspectus. Bidders whowish to usetheASBAA process should approachthe Designated Branches<strong>of</strong> the SCSBsor the Syndicate (for the Bidsto be submitted in the SpecifiedCities) to register their Bids.(d) Each Bid cum Application Formwill give the Bidder the choice to Bid for up to three optional prices(for details refer tothe paragraph entitled ― “Bids at Different Price Levels” below) within the PriceB<strong>and</strong> <strong>and</strong> specify the dem<strong>and</strong> (i.e., the number <strong>of</strong> EquityShares Bid for) in each option. The price<strong>and</strong> dem<strong>and</strong> options submittedby the Bidder in the Bidcum Application Form will be treated asoptional dem<strong>and</strong>sfrom the Bidder <strong>and</strong> will not be cumulated. After determination <strong>of</strong> the IssuePrice, the maximumm number <strong>of</strong>Equity Shares Bid for by a Bidder at or above the Issue Price will beconsidered for allocation/Allotment <strong>and</strong> therest <strong>of</strong> the Bid(s), irrespective <strong>of</strong> the Bid Amount, willbecome automatically invalid.(e) The Bidder cannotBid on another Bid cum Application Form after Bids on one Bidcum ApplicationForm have been submitted to any member <strong>of</strong> the Syndicate or the SCSBs. Submission <strong>of</strong> a secondBid cum Application Form to either the same or to another member <strong>of</strong>the Syndicate or SCBS will betreated as multipleBids <strong>and</strong> is liable to be rejected eitherbefore entering the Bid into the electronicbidding system, orat any point<strong>of</strong> time prior to the allocation or Allotment <strong>of</strong> Equity Shares inthis247
Scotts Garments LimitedIssue.However, the Bidder can revise the Bidthrough theRevision Form, the procedure for which isdetailed under the paragraph entitled ― “Build up <strong>of</strong> the Book <strong>and</strong> Revision <strong>of</strong> Bids”.(f) The Syndicate/thee SCSBs will enter each Bidoption into the electronicc bidding system as a separateBid <strong>and</strong> generate a Transaction Registration Slip, (‘TRS’), for each price<strong>and</strong> dem<strong>and</strong>d option <strong>and</strong> givethe same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cumApplication Form.(g) Alongwith the Bid cum Application Form, all Bidders (other than ASBA Bidders) will makepayment in the manner described in ― “Escrow Mechanism - Terms <strong>of</strong> payment <strong>and</strong> payment intothe Escrow Accounts” on page 260.(h) Uponreceipt <strong>of</strong> theBid cum Application Form from ASBAA Bidder, whether submitted in physical orelectronic mode, the DesignatedBranch <strong>of</strong> the SCSB shall verify if sufficient fundsequal to theBidAmount are available in the ASBA Account,as mentioned in the ASBA Bid cum Application Form,prior to uploadingsuch Bids with the Stock <strong>Exchange</strong>s.(i) If sufficient funds are not available in the ASBA Account, the Designated Branch <strong>of</strong> the SCSB shallreject such Bids <strong>and</strong> shall not upload such Bids with the Stock <strong>Exchange</strong>s.(j) If sufficient funds are available in the ASBAA Account, theSCSB shall block an amount equivalent tothe Bid Amount mentioned in the ASBA Bidcum Application Form <strong>and</strong> will enter each Bid optioninto the electronic bidding system as a separate Bid <strong>and</strong> generate a TRS for each price <strong>and</strong> dem<strong>and</strong>option. The TRS shall be furnished to the ASBA Bidder onrequest.(k) The Bid Amount shall remain blocked in theaforesaid ASBA Account until finalisation <strong>of</strong> the Basis<strong>of</strong> Allotment <strong>and</strong> consequent transfer <strong>of</strong> theBid Amount against the Allotted Equity Shares tothePublicIssue Account, or until withdrawal/failure <strong>of</strong> theIssue or until withdrawal/rejection <strong>of</strong> theBid cum Application Form, as the case may be. Once the Basis <strong>of</strong> Allotment is finalized, the Registrarto theIssue shall send an appropriate request to the Controlling Branch <strong>of</strong> the SCSB for unblockingthe relevant ASBAA Accounts <strong>and</strong> for transferring the amount allocable to the successful Bidders tothe Public Issue Account. In case <strong>of</strong> withdrawal/failure<strong>of</strong> the Issue,the blockedamount shall beunblocked on receipt <strong>of</strong> such information from the Registrar to the Issue.(l) Pursuant to SEBI Circular No. CIR/CFD/14/ /2012 dated October 04, 2012 all investors can submit theirapplication form through nationwide broker network <strong>of</strong>Stock <strong>Exchange</strong>s (i.e. around four hundred(400) broker centres to be covered by January 01, 2013). The details <strong>of</strong>locations including name<strong>of</strong> thebroker, contact details such as name <strong>of</strong> the contact person, postal address, telephone number, e-mailaddress <strong>of</strong> the broker, etc. where the application forms shall be collected will be disclosed by theStock<strong>Exchange</strong>s on theirwebsites.- Application forms can be downloaded from the Stock <strong>Exchange</strong>s websites/broker terminals, sothat any investor or stock broker can download/printthe forms directly.- Eligible investor may submit the application indicating the mode <strong>of</strong> payment to any <strong>of</strong> theregistered broker <strong>of</strong> the Stock <strong>Exchange</strong>having its <strong>of</strong>fice in any <strong>of</strong> the broker centre <strong>of</strong> theStock<strong>Exchange</strong>- All accepted applications shall be stamped <strong>and</strong> thereby acknowledged by the broker at the time <strong>of</strong>receipt <strong>and</strong> will be uploaded on the Stock <strong>Exchange</strong> platform- Broker shall be responsiblee for uploading the bid on the Stock <strong>Exchange</strong> platform, banking thecheque/submitting the ASBA form to SCSB, etc. <strong>and</strong> liable for anyfailure in this regard- Incase <strong>of</strong> non-ASBA application, broker to deposit the cheque, prepare electronic schedule <strong>and</strong>send it to Banker to the Issue. All Bankers to the Issue (“BTI”), which have branch/es in a brokercentre, shall ensure that at least one <strong>of</strong> its branches in the broker centre accepts cheques. Brokersshall deposit the cheque inany <strong>of</strong> the bank branch<strong>of</strong> the collecting bank inthe broker centre.Brokers shall also update the electronic schedule (containing application details including the248
Scotts Garments Limitedapplication amount) as downloaded from Stock <strong>Exchange</strong> platform <strong>and</strong> send it to local branch <strong>of</strong>the collecting bank. Brokers shall retain all physical applications initially <strong>and</strong> send it to RegistrartoIssue (“RTA” or ”Registrar”) after 6 months- Incase <strong>of</strong> ASBA application, broker to forward a schedule along with application form torespective ASBA Branch. Broker shall forward a schedule (containing application number <strong>and</strong>amount) alongwith application formsto the branch named for ASBA <strong>of</strong> the respective selfcertified syndicate banks (SCSBs) for blocking <strong>of</strong> fundBids at Different PriceLevels <strong>and</strong> Revision <strong>of</strong> Bids1. TheBidder can bid at any price within the Price B<strong>and</strong>. The Bidder has to bidfor the desirednumber <strong>of</strong> Equity Shares at a specific price. Retail Individual Bidders applying for a maximumm Bidin any <strong>of</strong> the bidding options not exceeding ` 200,000 <strong>and</strong> Biddersin the Employee ReservationPortion may bidat Cut-Off Price. However, bidding at Cut-Off Price is prohibited for QIB, Non<strong>of</strong>`Institutional Bidders or Bidders in the Employee Reservation Portion bidding in excess200, ,000 <strong>and</strong> suchbids shall berejected.2. Retail Individual Bidders <strong>and</strong>Bidders in Employee Reservation Portion who bid at the Cut-OffPrice agree that they shall purchase the Equity Sharesat any pricewithin the Price B<strong>and</strong>. RetailIndividual Bidders <strong>and</strong> Bidders in Employee Reservation Portion bidding at Cut-Off Price shalldeposit the Bid Price based on the higher end <strong>of</strong> the Price B<strong>and</strong> in the EscrowAccount. Intheevent the Bid Price is higher than the subscription amount payable by the Retail IndividualBidders Bidders in Employeee ReservationPortion whoBid at Cut <strong>of</strong>f Price (i.e., the total number<strong>of</strong> Equity Shares allocated in the Issue multiplied by the Issue Price) ), the Retail Individual Bidders<strong>and</strong>Bidders in Employee Reservation portion who Bidat Cut <strong>of</strong>f Price, shall receive the refund <strong>of</strong>the excess amounts from the Escrow Account. Incase <strong>of</strong> ASBA Bidders (excluding Non-the SCSBs to block an amountbased on theCap Price.Institutional Bidders <strong>and</strong> QIBBidders) bidding at Cut-<strong>of</strong>f Price, the ASBA Bidders shall instruct3. TheRetail individual bidder may either withdraw or revise their bids until finalization <strong>of</strong>allotment whereas QualifiedInstitutional Bidders <strong>and</strong> Non Institutional Bidders shall neitherwithdraw nor lower the size <strong>of</strong> their bids at any stage.4. In case <strong>of</strong> an upward revision in the Price B<strong>and</strong> announced as above, Retail Individual Bidders<strong>and</strong>Bidders in the Employeee Reservationportion who had Bid atCut-<strong>of</strong>f Price could either (i)revise their Bid or (ii) make additional payment based on the higher end <strong>of</strong> the Revised Price B<strong>and</strong>(such that the total amount i.e., original Bid Price plus additional payment does not exceed `200, ,000 for Retail Individual Bidders, if the Bidder wants to continue to Bid at Cut-<strong>of</strong>f Price),withthe members <strong>of</strong> the Syndicate to whom the original Bid was submitted. In case the totalamount (i.e., original Bid Price plus additional payment) exceeds ` 200,000 for Retail IndividualBidders the Bid will be considered for allocation underthe Non- Institutional Portion in terms <strong>of</strong>thisRed Herring Prospectus. If, however, the Bidder does not either revise the Bid or makeadditional payment <strong>and</strong> the Issue Price ishigher thanthe higher end <strong>of</strong> the Price B<strong>and</strong> prior torevision, the number <strong>of</strong> Equity Shares Bid for shall be adjusted downwards for the purpose <strong>of</strong>Allotment, such that no additional payment would be requiredfrom the Bidder <strong>and</strong> suchBidder is deemed to have approved suchrevised Bid at Cut-<strong>of</strong>f Price.5. In case <strong>of</strong> a downward revision in the Price B<strong>and</strong>, announced as above, Retail Individual Bidders<strong>and</strong>Bidders in the Employee Reservation portion who have Bid at Cut-<strong>of</strong>f Price could either revisetheir Bid or the excess amount paid at the time <strong>of</strong> bidding would be refunded from the EscrowAccount.249
Scotts Garments Limited6. In the event <strong>of</strong> any revision in the Price B<strong>and</strong>, whether upwards or downwards, the minimumapplication size shall remain100 Equity Shares irrespective <strong>of</strong> whether the Bid Price payableon such minimum application is not in the range <strong>of</strong> ` 10,000 to ` 15, ,000.7. Revision optionis also available to ASBA investor.For details,please refer section “ASBAProcess” in this Red Herring Prospectus.8. Thebidder who has registered his or her interest in theEquity Shares at a particular price level isfreee to revise hisor her Bid within the Price B<strong>and</strong> usingthe printed Revision Form, which is a part<strong>of</strong> the Bid cum Application Form. However, for any revision(s) in the Bid, the Bidder(s) will haveto use the services <strong>of</strong> the same member <strong>of</strong>the Syndicate through whom he or she had placedtheoriginal Bid.9. Revisions can bemade in boththe desired number <strong>of</strong> Equity Shares <strong>and</strong> the Bid price by usingtheRevision Form. The Bidder must also mention the details <strong>of</strong> all the options in his or her Bid cumApplication Formor earlier Revision Form. For example, if a Bidder has Bid forthree options inthe Bid cum Application Form<strong>and</strong> he is changing only one <strong>of</strong> the options in the Revision Form, hemust complete all the details<strong>of</strong> the other two options that are not being revised, in the RevisionForm. The members <strong>of</strong> the Syndicate will not accept incomplete or inaccurate Revision Forms.10. TheQIB <strong>and</strong> Non Institutional Bidder canincrease the bid size during the Bidding/ Issue Period.However, for any revision(s)in the Bid, the Bidders will have to use the services <strong>of</strong> the samemember <strong>of</strong> the Syndicate through whom he or she had place the original Bid.11. Bidders are advised to retain copies <strong>of</strong> the blank Revision Form <strong>and</strong> the revised Bid must be madeonlyin such Revision Form orcopies there<strong>of</strong>.12. Anyrevision <strong>of</strong> the Bid shall be accompanied by payment in the form <strong>of</strong> chequee or dem<strong>and</strong> draftfor the incremental amount, if any, to be paid on account <strong>of</strong> the upward revision <strong>of</strong> the Bid. Theexcess amount, if any, resulting from downward revision <strong>of</strong> the Bid would bereturned totheBidder at the time <strong>of</strong> refund in accordancewith the terms <strong>of</strong> this Red Herring Prospectus. In case<strong>of</strong> the QIB Bidders, the members <strong>of</strong> the Syndicate shalll collect the payment in the form <strong>of</strong> chequeor dem<strong>and</strong> draftor electronicc transfer <strong>of</strong> funds through RTGS for the incremental amount intheQIBMargin Amount, if any, to be paid on account <strong>of</strong> the upward revision <strong>of</strong> the Bid at the time <strong>of</strong>oneor more revisions by the QIB Bidders.13. When a Bidder revises his orher Bid, he or she shall surrender theearlier TRS <strong>and</strong> get a revisedTRSfrom the members <strong>of</strong> theSyndicate. It is the responsibility <strong>of</strong> the Bidder torequest for<strong>and</strong>obtain the revised TRS, which will act as pro<strong>of</strong> <strong>of</strong> revision <strong>of</strong> the original bid.Electronicc Registration<strong>of</strong> Bids(a) The Syndicate <strong>and</strong> the SCSBs will register the Bids using the on-line facilities <strong>of</strong> the Stock <strong>Exchange</strong>s.(b) The Syndicate <strong>and</strong>the SCSBs will undertakee modification<strong>of</strong> selected fields in the Bid details alreadyuploaded within one Working Day from the Bid/Issue Closing Date.(c) Theree will be at least one on-line connectivity facility in each city, where a stock exchange is locatedin <strong>India</strong> <strong>and</strong> wheree Bids are being accepted.(d) The BRLM Co-BRLM, our Company <strong>and</strong> the Registrar are not responsible for anyacts, mistakes orerrorsor omission<strong>and</strong> commissions in relation to, (i) theBids accepted by the Syndicate Members<strong>and</strong> the SCSBs, (ii) the Bids uploaded by the Syndicate Members <strong>and</strong> the SCSBs, (iii) the Bidsaccepted but not uploaded by the SyndicateMembers <strong>and</strong> the SCSBsor (iv) withrespect to ASBABids, Bids accepted <strong>and</strong> uploaded withoutt blocking funds in the ASBA Accounts. However, theSyndicate <strong>and</strong>/or the SCSBs shall be responsible for any error in the Bid details uploaded by them. It250
shall be presumedthat for Bids uploaded by the SCSBs, the Bid Amount has been blocked intherelevant ASBA Account.(e) In case <strong>of</strong> apparent data entry error by either the members <strong>of</strong> the Syndicate or the SCSBs in enteringthe Bid cum Application Form number in their respective schedules other things remainingunchanged, the Bidcum Application Form may be considered as valid <strong>and</strong> such exceptions may berecorded in minutes <strong>of</strong> the meeting submitted to Stock <strong>Exchange</strong>(s).(f) The Stock <strong>Exchange</strong>s will <strong>of</strong>feran electronic facility for registering Bids for the Issue. This facilitywill be available with the Syndicate <strong>and</strong> theirauthorised agents <strong>and</strong> the SCSBs during the Bid/ IssuePeriod. The Syndicate Members<strong>and</strong> the Designated Branches <strong>of</strong> the SCSBs can also set up facilitiesfor <strong>of</strong>f-line electronic registration <strong>of</strong> Bids subject to the condition that they will subsequently uploadthe <strong>of</strong>f-line data file into the on-line facilitiesfor Book Building on a regular basis. On the Bid/ IssueClosing Date, the Syndicate <strong>and</strong>the Designated Branches<strong>of</strong> the SCSBsshall uploadthe Bids till suchtime as may be permitted by theStock <strong>Exchange</strong>s. This information will be available with the BRLM,Co-BRLM on a regular basis.(g) Basedon the aggregate dem<strong>and</strong>d <strong>and</strong> price for Bids registered on the electronic facilities <strong>of</strong> the Stock<strong>Exchange</strong>s, a graphical representation <strong>of</strong> consolidatedd dem<strong>and</strong> <strong>and</strong> price as available onthewebsites <strong>of</strong> the Stock <strong>Exchange</strong>s would be made available at theBidding centres duringtheBid/Issue Period.(h) At thetime <strong>of</strong> registering eachBid other than ASBA Bids, the Syndicate shall enter the followingdetails <strong>of</strong> the Bidders in the on-line system:• Name <strong>of</strong> theBidder: Bidders should ensure that the name given in the Bid cum ApplicationForm is exactly the same as the name in which the Depositary Account is held. In case theBidcum Application Form is submitted injoint names,Bidders should ensure that the DepositoryAccount is also held in the same joint names <strong>and</strong>are in the same sequence in which theyappear in theBid cum Application Form.• Investor Category – Individual, Corporate, QIBs, Eligible NRI, FVCI, FII & sub-accountregistered with SEBI (other than a sub-account which is a foreign corporate or foreign individual) orMutual Fund, etc.• Numbers <strong>of</strong> Equity Shares Bid for.• Price Per Equity Share (price option)• Bid Amount.• Bid cum Application Formnumber.• DP ID <strong>and</strong> client identification number<strong>of</strong> the beneficiary account <strong>of</strong> the Bidder.• PAN• Cheque NumberWith respect to ASBA Bids, at the time <strong>of</strong> registering eachBid, the Designated Branches <strong>of</strong> the SCSBsshall enter the following information pertaining to the Bidder into the online system:• Name <strong>of</strong> the Bidder(s);• Bid cum Application FormNumber;• PAN (<strong>of</strong> First Bidder, in case <strong>of</strong> more than one Bidder);• Investor Category <strong>and</strong> Sub-Category:Scotts Garments Limited251
Retail(No sub category)Non- Institutional• Individual• corporate• otherScotts Garments LimitedQIB• Mutual Funds• FinancialInstitutions• Insurance companies• Foreign Institutional• Investorss other than• corporate<strong>and</strong> individual• sub-accounts• Employee/shareholder (if reservation) );• DP ID <strong>and</strong> client identification number;• Beneficiary account number <strong>of</strong> Equity Shares Bid for;• Quantity;• Price Per Equity Share (price option)• Bid Amount<strong>and</strong>• Bank account number;(i) A system generated TRS will be given to the Bidder asa pro<strong>of</strong> <strong>of</strong> the registration <strong>of</strong> each <strong>of</strong>thebidding options. It is the Bidder‘s responsibility to obtain the TRS from the Syndicate ortheDesignated Branches <strong>of</strong> the SCSBs. The registration <strong>of</strong> theBid by the member <strong>of</strong> theSyndicate or theDesignated Branches <strong>of</strong> the SCSBs does not guarantee that the Equity Shares shalll beallocated/Allottedd either by theSyndicate orour Company.(j) Such TRS will be non-negotiable <strong>and</strong> by itself will not create any obligation <strong>of</strong> any kind.(k) In case <strong>of</strong> QIB Bidders, only the BRLM, Co-BRLM, SCSBs <strong>and</strong> theirAffiliate Syndicate Members(only in specified cities) have the right to accept the Bid or reject it. However, suchrejection shall bemadeat the time <strong>of</strong> receiving the Bid <strong>and</strong> only after assigning a reason for such rejection in writing.In case <strong>of</strong> Non-Institutional Bidders, Retail Individual Bidders <strong>and</strong> Eligible Employees, Bids will berejected on technical grounds listed on page 263. The Members <strong>of</strong> the Syndicate may also reject Bidsif all the information required is not provided <strong>and</strong> the Bid cum Application Formis incomplete inany respect. The SCSBs shall have no right toreject Bids, except on technical grounds.(l) The permission given by the Stock <strong>Exchange</strong>s to use their network <strong>and</strong> s<strong>of</strong>tware <strong>of</strong> the online IPOsystemshould notin any way be deemed or construed to mean thatt the compliance with variousstatutory <strong>and</strong> other requirements by our Company <strong>and</strong>/or the BRLM, Co-BRLMare cleared orapproved by the Stock <strong>Exchange</strong>s; nor does it in anymanner warrant, certifyor endorsee thecorrectness or completeness <strong>of</strong> any <strong>of</strong> the compliance with the statutory <strong>and</strong> other requirementsnordoes it take any responsibilityfor the financial or other soundness <strong>of</strong>our Company, the Promoter,the management or any scheme or project <strong>of</strong> our Company; nor does it in any manner warrant,certifyor endorsee the correctness or completeness <strong>of</strong> any <strong>of</strong> the contents <strong>of</strong> this Red HerringProspectus; nor does it warrantthat the Equity Shares will be listed or will continue to be listed onthe Stock <strong>Exchange</strong>s.(m) Only Bids that are uploaded onthe online IPO system <strong>of</strong> the Stock <strong>Exchange</strong>s shall be consideredd forallocation/ Allotment. Members <strong>of</strong> the Syndicate <strong>and</strong> the SCSBs will be given up toone day after theBid/Issue ClosingDate to verify the information uploaded in the online IPO system duringtheBid/Issue Period after which the date will be sent to theRegistrar forreconciliation <strong>and</strong> Allotment<strong>of</strong> Equity Shares. Incase <strong>of</strong> any discrepancy <strong>of</strong> data between the BSE or the NSE <strong>and</strong> the Members <strong>of</strong>the Syndicate or the Designated Branches <strong>of</strong> the SCSBs, the decision <strong>of</strong> our Company, in252
Scotts Garments Limitedconsultation with the BRLM, Co-BRLM <strong>and</strong> the Registrar, based on the physical records <strong>of</strong> Bid CumApplication Formsshall be final <strong>and</strong> binding on all concerned. If the Syndicate Members findsanydiscrepancy in theDP name, DP Id <strong>and</strong> the Client Id, the Syndicate Members willl correct the same<strong>and</strong> send the data to the Registrar for reconciliation <strong>and</strong> Allotment <strong>of</strong> Equity Shares.Build up <strong>of</strong> the book <strong>and</strong> revision <strong>of</strong> Bids:(a) Bids received fromvarious Bidders throughh the Syndicate, Non-Syndicate <strong>and</strong> the SCSBs shall beelectronically uploaded to the Stock <strong>Exchange</strong>s‘ mainframe on a regular basis.(b) The Book gets built up at various price levels. This information will beavailable with the BRLM<strong>and</strong>Co-BRLM on a regular basis at the end <strong>of</strong> theBid/Issue Period.(c) The Retail individual bidder may either withdraw or revise their bidsuntil finalization <strong>of</strong> allotmentwhereas QualifiedInstitutionalBidders <strong>and</strong>Non Institutional Bidders shall neither withdraww norlowerthe size <strong>of</strong> their bids at any stage. However, the QIB <strong>and</strong> Non institutional Bidders are free toincrease the size <strong>of</strong>bids.(d) The Bidder who has registeredhis or her interest in the Equity Shares at a particular price level isfree torevise his orher Bid within the Price B<strong>and</strong> using the printed Revision Form, which is a part <strong>of</strong>the Bid cum Application Form.(e) Revisions can be made in both the desired number <strong>of</strong> Equity Shares <strong>and</strong> the Bid Amount by usingthe Revision Form. Apart frommentioningthe revised options in the Revision Form, the Biddermust also mentionn the details <strong>of</strong> all the options in his or her Bid cumApplicationForm or earlierRevision Form. For example, if a Bidder hasBid for threee options in the Bid cum Application Form<strong>and</strong> such Bidder is changing only one <strong>of</strong> the options inthe Revision Form, he must still filll thedetails <strong>of</strong> the othertwo optionsthat are not being revised, in the Revision Form. The Syndicate<strong>and</strong>the Designated Branches <strong>of</strong> the SCSBs will not accept incomplete or inaccurate Revision Forms.(f) The Bidder can make this revision any number <strong>of</strong> times during the Bid/Issue Period. However, forany revision(s) in the Bid, the Bidders will have to usethe services <strong>of</strong> the same member <strong>of</strong>theSyndicate, Non-Syndicate or the SCSB through whom such Bidder had placed the original Bid.Bidders are advised to retain copies <strong>of</strong> the blank Revision Form <strong>and</strong> the revised Bid must be madeonly in such Revision Form or copies there<strong>of</strong>.(g) In case <strong>of</strong> an upward revision in the Price B<strong>and</strong> announced as above, Retail Individual Bidders<strong>and</strong>Eligible Employees who had Bid at Cut-<strong>of</strong>f Price could either (i) revise their Bid or (ii) shall makeadditional payment based on the cap <strong>of</strong> the revised Price B<strong>and</strong> (such that the total amounti.e.,original Bid Amount plus additional payment does not exceed ` 200,000 if the Bidder wants tocontinue to Bid at Cut-<strong>of</strong>f Price), with the Syndicate or Non Syndicate to whom theoriginal Bidwassubmitted. In casethe total amount (i.e., original Bid Amount plus additional payment) exceeds `200,000, the Bid will be considered for allocation under the Non-Institutional Portion in terms <strong>of</strong>thisRed Herring Prospectus. If, however, the Bidder does not either revise the Bid ormake additionalpayment <strong>and</strong> the Issue Price is higher than the cap <strong>of</strong> the Price B<strong>and</strong> prior to revision, the number <strong>of</strong>EquityShares Bidfor shall beadjusted downwards for the purpose <strong>of</strong> allocation, such that noadditional payment would be required fromthe Bidder <strong>and</strong> the Bidder is deemed to have approvedsuch revised Bid atCut-<strong>of</strong>f Price.(h) In case <strong>of</strong> a downward revision in the PriceB<strong>and</strong>, announced as above, Retail Individual Bidders<strong>and</strong> Eligible Employees who have Bid at Cut-<strong>of</strong>f Price could either revise their Bid or the excessamount paid at thetime <strong>of</strong> bidding would berefunded from the EscrowAccount.(i) Our Company, in consultation with the BRLM <strong>and</strong> Co-BRLM, shall decide the minimum number <strong>of</strong>EquityShares for each Bid to ensure that the minimum application value is within the range <strong>of</strong> `10,0000 to ` 15,000.253
Scotts Garments Limited(j) Any revision <strong>of</strong> theBid shall beaccompaniedby payment in the form <strong>of</strong> cheque or dem<strong>and</strong> draft forthe incremental amount, if any, to be paidon account<strong>of</strong> the upward revision <strong>of</strong> the Bid. Withrespect to the ASBA Bids, if revision <strong>of</strong> the Bids results inan incremental amount, the relevant SCSBshall block the additional Bid Amount. In case <strong>of</strong> Bids, other than ASBA Bids, the Syndicate or NonSyndicate shall collect the payment in the form <strong>of</strong> cheque or dem<strong>and</strong> draft if any, to be paidonaccount <strong>of</strong> the upward revision <strong>of</strong> the Bid at the time <strong>of</strong> one or more revisions by the QIB Bidders. Insuch cases, the Syndicate or Non Syndicate will revise the earlier Bids details with the revisedBid<strong>and</strong> provide the cheque or dem<strong>and</strong> draft number <strong>of</strong> the new payment instrumentt in the electronicbook. The Registrar will reconcile the Bid data <strong>and</strong> consider the revised Bid data for preparingtheBasis <strong>of</strong> Allotment.(k) Whena Bidder revises his or her Bid, he or she shall surrender the earlier TRS <strong>and</strong> may get a revisedTRS from the Syndicate or the SCSB, as applicable. It is the responsibility <strong>of</strong> the Bidder to request for<strong>and</strong> obtain the revised TRS, which will act aspro<strong>of</strong> <strong>of</strong> his or her havingrevised the previous Bid.Price Discovery <strong>and</strong> Allocation1. After the Bid/Issue Closing Date, the BRLM<strong>and</strong> the Co-BRLM with the Company.shall analyze the dem<strong>and</strong> generatedat various price levels <strong>and</strong> discuss pricing strategy2. Our Company in consultationn with the BRLM <strong>and</strong> Co-BRLM, shall finalize theIssue Price, thenumber <strong>of</strong> EquityShares to be allotted in each investor category.3. The allocation to QIBs will be25% <strong>of</strong> the Net Issue <strong>and</strong> the availability for allocation to Non-Institutional <strong>and</strong> Retail Individual Bidders will not less than 40%<strong>and</strong> 35% <strong>of</strong> the Net Issuerespectively. The allocation in retail category shall be onfirm allotment basis subject to availability<strong>of</strong> equity shares <strong>and</strong>, would beon proportionate basis toQIB <strong>and</strong> Non-Institutional Bidder, inthemanner specified in the SEBI Regulations <strong>and</strong> this RedHerring Prospectus, in consultation withDesignated Stock <strong>Exchange</strong>, subject to valid Bids being received at or above the Issue Price.4. Under subscription, if any, in any category, except in theQIB Portion, would be allowed to bemetwith spill-over from any other category or combination <strong>of</strong> categories at the discretion <strong>of</strong> ourCompany in consultation with the BRLMs <strong>and</strong> the Designated Stock <strong>Exchange</strong>.5. Allocation to Non-Residents,including Eligible NRI’s, FIIs <strong>and</strong> FVCIs registered with SEBI,applying on repatriation basis will be subject to applicable law, rules, regulations, guidelines <strong>and</strong>approvals.6. Only Bids that areuploaded on the online system <strong>of</strong> the Stock <strong>Exchange</strong>s shall be consideredd forallocation/Allotment. The members <strong>of</strong> the Syndicate, Non Syndicate <strong>and</strong> the SCSBs shall capture alldata relevant for the purposes <strong>of</strong> finalizing the Basis <strong>of</strong> Allotment while uploading Bid data intheelectronic Bidding systems <strong>of</strong> the Stock <strong>Exchange</strong>s. In order that the data so captured is accuratethemembers <strong>of</strong> the Syndicate, NonSyndicate <strong>and</strong> the SCSBs will be givenup to one Working Day afterthe Bid Closing Date to modify/ verify certain selected fields uploaded in the online system duringthe Bidding Periodafter which the data willl be sent to the Registrar for reconciliation with the dataavailable with the NSDL <strong>and</strong> CDSL.In case no corresponding record is available with the Depositories, which matches the threeparameters, namely, DP ID, Client ID <strong>and</strong> PAN, then suchBids are liable to be rejected.7. The BRLM <strong>and</strong> Co-BRLM, in consultation with us, shall notify the members <strong>of</strong> theSyndicate <strong>of</strong> theIssue Price <strong>and</strong> allocations to their respective Bidders, where the full Bid Amount has not beencollected from the Bidders.8. The Allotment details shall be put on the website <strong>of</strong> the Registrar to theIssue.254
Scotts Garments LimitedSigning <strong>of</strong> the Underwriting Agreement <strong>and</strong> the RoC Filing(a) Our Company, theBRLM, Co-BRLM <strong>and</strong> the Syndicate Members shall enter into an UnderwritingAgreement on or immediately after the finalisation <strong>of</strong> the Issue Price.(b) After signing the UnderwritingAgreement, our Company will update <strong>and</strong> file the updated RedHerring Prospectus with the RoC in accordance with the applicable law, whichh then would betermed as the ‘Prospectus‘. The Prospectus will contain details <strong>of</strong> the Issue Price, Issue size,underwriting arrangements <strong>and</strong>will be complete in all material respects.Pre-Issue AdvertisementSubject toSection 66 <strong>of</strong> the Companies Act, our Companyshall, afterregistering the Red HerringProspectus with the RoC, publisha pre-Issuee advertisement, in the form prescribed by the SEBIRegulations, in one English language nationaldaily newspaper, one Hindi language national dailynewspaper <strong>and</strong> one regional language daily newspaper, each with wide circulation.Advertisement regarding Issue Price <strong>and</strong> ProspectusOur Company will issue a statutoryadvertisement after the filing <strong>of</strong> the Prospectus with the RoC. Thisadvertisement, in addition to the information that has to be set out in the statutory advertisement,shallindicate the Issue Price. Any material updates between the date <strong>of</strong> the Red Herring Prospectus <strong>and</strong>thedate <strong>of</strong> Prospectus willl be included in such statutory advertisement.Issuance <strong>of</strong> Confirmation <strong>of</strong> Allotment Note (“CAN”)(a) Uponapproval <strong>of</strong> the Basis <strong>of</strong> Allotment by the Designated Stock <strong>Exchange</strong>, the Registrar shall sendto theSyndicate a list <strong>of</strong> the Bidders who have been Allotted Equity Shares in the Issue.. However,Bidders should note that our Company shall ensure thatt (i) the Allotment <strong>of</strong> the Equity Shares<strong>and</strong>(ii) the instructionss by the Company for the demat credit<strong>of</strong> the Equity Shares, to all Bidders inthisIssue shall be doneon the samedate.(b) The Registrar will then dispatcha CAN to the Bidders who have beenAllotted Equity Shares intheIssue.(c) The Issuance <strong>of</strong> CAN shall be deemed a valid, binding <strong>and</strong> irrevocable contract forthe Allotment <strong>of</strong>EquityShares to such Bidder.Unblocking <strong>of</strong> ASBA AccountOnce the Basis <strong>of</strong> Allotment is approved by the Designated Stock <strong>Exchange</strong>, the Registrar to the Issue shallprovide the following details to the Controlling Branches <strong>of</strong> each SCSB, along with instructions to unblockthe relevant bank accounts <strong>and</strong> transfer the requisite moneyto the Public Issue Account designated forthis purpose, within the timelines specified in the ASBA facility: (i) the number <strong>of</strong> Equity Sharesto beAllotted against each valid ASBA Bid, (ii) the amount to be transferred from the relevant bank account tothe PublicIssue Account, for each valid ASBA Bid, (iii) the date by whichh funds referred to in above shallbe transferred to the Public Issue Account, <strong>and</strong> (iv) details<strong>of</strong> rejected ASBA Bids, if any, alongwithreasons for rejection <strong>and</strong> details <strong>of</strong> withdrawn <strong>and</strong>/or unsuccessful ASBAA Bids, if any,to enable SCSBs tounblock the respectivee bank accounts. On the basis <strong>of</strong> instructions fromthe Registrar to the Issue, theSCSBs shall transfer the requisite amount against each successful ASBA Bidder to the Public Issue Account<strong>and</strong> shall unblock the excess amount, if any, inthe ASBA Account. In case <strong>of</strong> withdrawal/failure<strong>of</strong> theIssue, theblocked amount shall beunblocked on receipt <strong>of</strong>such information from the Registrar to theIssue.255
Scotts Garments LimitedDesignated Date <strong>and</strong> Allotment <strong>of</strong>Equity Shares(a) Our Company will ensure thatt (i) the Allotment <strong>of</strong> Equity Shares; <strong>and</strong> (ii) credit to the successfulBidder‘s depository account will be completed within 12 Working Days <strong>of</strong> the Bid/Issue ClosingDate.(b) In accordance withthe SEBI Regulations, Equity Shares will be issued<strong>and</strong> Allotment shall be madeonly in the dematerialised formto the Allottees.(c) Allottees will havethe option tore-materialise the EquityShares so Allotted as perthe provisions <strong>of</strong>the Companies Act<strong>and</strong> the Depositories Act.Investors are advised to instruct their Depository Participant to accept the Equity Shares that may beallocated/Allotted to them pursuant to this Issue.GENERAL INSTRUCTIONSDo’s:a) Checkif you are eligible to apply;b) Ensure that you have Bid withinthe Price B<strong>and</strong>;c) Read all the instructions carefully <strong>and</strong> complete the Bid cum Application Form;d) Ensure that the details about the DepositoryParticipant <strong>and</strong> the beneficiary account are correct asAllotment <strong>of</strong> Equity Shares willl be in the dematerialised form only;e) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp <strong>of</strong> amember <strong>of</strong> the Syndicate or with respect to ASBA Bidders, ensure that your Bid issubmitted eitherto Syndicate (only in specified citites) or at a Designated Branch <strong>of</strong> the SCSB where the ASBA Bidderor theperson whose bank account will be utilised by the Bidder forbidding hasa bank account.Further, such syndicate or SCSB branch shall affix itsstamp, date <strong>and</strong> time on the Bid cumApplication Form acknowledging the upload <strong>of</strong> Bid in the electronicc bidding system <strong>of</strong> the Stock<strong>Exchange</strong>. Where applications are submitted to a Non Syndicate member the applications may ormay not bear stamp <strong>of</strong> a member <strong>of</strong> the Syndicate.f) With respect to ASBA Bids ensure that theBid cum Application Form is signedby the accountholder in case the applicant is not the account holder. Ensure that you have mentioned the correctbank account number in the ASBA Bid cum Application Form;g) QIBs <strong>and</strong> Non – Institutional bidders shouldsubmit their bids throughh ASBA process only;h) Ensure that you request for <strong>and</strong>receive a TRS for all yourBid options;i) ASBAA Bidders should ensure that you havefunds equalto the Bid Amount in your bank accountmaintained with the SCSB before submitting the Bid cum Application Form to the respectiveDesignated Branch<strong>of</strong> the SCSB or syndicate in the specified cities;j) Ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate <strong>and</strong>funds equivalentto theBid Amountare blocked in case <strong>of</strong> anyBids submitted though the SCSBs.k) Instruct your respective banks to not releasee the funds blocked in the bank accountunder the ASBAprocess;l) Submit revised Bids to the same member <strong>of</strong> the Syndicate or Non Syndicate through whomtheoriginal Bid was placed <strong>and</strong> obtain a revisedTRS;m) Except for Bids submitted on behalf <strong>of</strong> the Central Government or the State Government <strong>and</strong><strong>of</strong>ficials appointedby a court, all Bidders should mentionn their PAN allotted under the IT Act;256
Scotts Garments Limitedn) Ensure that the Demographic Details (as defined herein below) are updated, true <strong>and</strong> correct in allrespects;o) Ensure that the name(s) given inthe Bid cumApplicationForm is exactly the same as the name( (s) inwhichh the beneficiary account is held with the Depository Participant. In case the Bid cumApplication Form is submittedin joint names, ensure that the beneficiary account is also held insame joint names <strong>and</strong> such names are in the same sequence in which they appear in the Bid cumApplication Form.Don’ts:a) Do not Bid for lower than the minimum Bid size;b) Do not Bid/revise Bid Amount to less than the Floor Priceor higher than the Cap Price;c) Do not withdraw or lower thesize <strong>of</strong> yourBids at any stage (both in terms <strong>of</strong> number <strong>of</strong> EquityShares Bid for <strong>and</strong> Bid Amount), in case youare a Non Institutional Bidder or a QIBBidderd) Do not Bid on another Bid cumApplicationForm after you have submitted a Bid to the Syndicate,Non Syndicate or the SCSBs, as applicable;e) Do not pay the BidAmount in cash, by money order or bypostal orderr or by stock invest;f) Do not send Bid cum Application Forms by post; instead submit the same to a member <strong>of</strong>theSyndicate, Non Syndicate or theSCSBs only;g) Do not Bid at Cut-<strong>of</strong>f Price (for QIB Bidders <strong>and</strong> Non-Institutional Bidders, for Bid Amount in excess<strong>of</strong> ` 200,000);h) Do not Bid for a Bid Amount exceeding ` 200,000 (for Bids by Retail Individual Bidders <strong>and</strong> EligibleEmployees biddingunder the Employee Portion);i) Do not fill up the Bid cum Application Formsuch that the Equity Shares Bid for exceeds the IssueSize <strong>and</strong>/ or investment limit or maximumm number <strong>of</strong> Equity Shares that can be held undertheapplicable laws or regulations or maximum amount permissible underthe applicable regulations;j) Do not submit the GIR numberinstead <strong>of</strong> the PAN as theBid is liableto be rejected on this ground;<strong>and</strong>k) Do not submit Bids on plain paper or on incomplete or illegible Bid cum Application Forms, or on Bidcum application Forms in a colour prescribedfor another category <strong>of</strong> Bidder;l) Do not submit the Bids withoutt the full Bid Amount.m) Do not Bid if you are not competent to contract under the<strong>India</strong>n Contract Act, 1872n) Do not submit ASBA Bids to a Syndicate Member in theSpecified Cities unless the SCSB where theASBAA Account is maintained, as specified in the Bid cumApplication Form, has named at-least onebranch in the relevant Specified City, for the SyndicateMembers to deposit Bid cum ApplicationForms(A list <strong>of</strong> such branches is available athttp://www. sebi.gov.in/pmd/scsb-asba.html).Instructionss for Completing the Bid cum Application FormBids must be:a) Madeonly in the prescribed Bidcum Application Form or Revision Form, as applicable.b) Completed in full, in BLOCKLETTERS in ENGLISH <strong>and</strong> in accordance withthe instructionscontained herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cumApplication Forms or Revision Forms areliable to be rejected. Bidders should note thatt the257
Scotts Garments LimitedSyndicate <strong>and</strong> / or the SCSBs, as appropriate, will notbe liable for errors in data entry due toincomplete or illegible Bid cum Application Forms or Revision Forms.c) Information provided by the Bidders will be uploaded in the online IPO system by the Syndicate,Non - Syndicate <strong>and</strong> the SCSBs, as the casemay be, <strong>and</strong>the electronic data will be used to makeallocation/ Allotment. The Bidders should ensure that thedetails are correct <strong>and</strong> legible.d) For Retail Individual Bidders, the Bid must be for a minimum <strong>of</strong> 100 Equity Shares<strong>and</strong> in multiples<strong>of</strong> 1000 thereafter subject to a maximum Bid Amount <strong>of</strong> ` 200,000.e) In case <strong>of</strong> Eligible Employees, Bids <strong>and</strong> revision <strong>of</strong> Bids must be for a minimum <strong>of</strong> 100 Equity Shares<strong>and</strong> inmultiples <strong>of</strong> 100 Equity Shares thereafter, so as to ensure that the Bid Amount does not exceedRs. 200,000. In casethe Bid Amount is over Rs. 200,000, due to, amongother things, revision <strong>of</strong> the Bidor revision <strong>of</strong> the Price B<strong>and</strong> oron exercise <strong>of</strong> bidding atCut-<strong>of</strong>f Price, the Bid is liable to be rejected.Eligible Employees bidding in the Employee Reservation Portion have the option to bid at Cut-<strong>of</strong>fPrice indicating their agreement to Bid <strong>and</strong> purchase at the Issue Price. Eligible Employees bidding inthe Employee Reservation Portion at the Cut-Off Price have to ensuree payment at the Cap Priceat thetime <strong>of</strong> making a Bid.f) For Non-Institutional Bidders <strong>and</strong> QIB Bidders, Bids must be for a minimum <strong>of</strong>such number <strong>of</strong>EquityShares thatt the Bid Amount exceeds or equal to` 200,000 <strong>and</strong> in multiples <strong>of</strong> 100 EquityShares thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensurethat a single Bid from them should not exceed the investment limits or maximum number <strong>of</strong> EquityShares that can be held by themunder the applicable laws or regulations.g) In case <strong>of</strong> joint bidding, the Bidcum Application Form should be submitted with single name or injoint names (not more than three, <strong>and</strong> in the same order as their Depository Participant details).h) Thumb impressions <strong>and</strong> signatures other than in the languages specified in the Eighth Schedule tothe Constitution <strong>of</strong><strong>India</strong> must be attested bya Magistrate or a NotaryPublic or a Special ExecutiveMagistrate under <strong>of</strong>ficial seal.Bidder’s PAN, Depository Account <strong>and</strong> Bank Account DetailsBidders should note that on the basis <strong>of</strong> PAN <strong>of</strong>the Bidders, DP ID <strong>and</strong>beneficiary account numberprovided bythem in theBid cum Application Form, the Registrar will obtain from the Depositorythedemographic details ncluding address, Bidders bank account details, MICR code <strong>and</strong> occupation(hereinafterr referred to as “Demographic Details”). These bank account details would be usedforgiving refunds (including through physical refund warrants,direct credit, NECS, NEFT <strong>and</strong> RTGS) orunblocking<strong>of</strong> ASBA Account. Hence, Bidders are advised toimmediately update their bank accountdetails as appearing on the records <strong>of</strong> the Depository Participant. Please note that failure to do so couldresult in delays in despatch/ credit <strong>of</strong>refunds to Bidders or unblocking <strong>of</strong> ASBA Account at the Bidderssole risk <strong>and</strong> neither the BRLM, Co-BRLM or the Registrar or the Escrow Collection Banks ortheSCSBs nor our Company shall have any responsibility <strong>and</strong> undertake anyliability for the same. Hence,Bidders should carefullyfill in their Depository Account details in the Bidcum Application Form.IT IS MANDATORYFOR ALLL THE BIDDERS TO GET THEIR EQUITYSHARES INDEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DP ID, CLIENT ID ANDPAN IN THE BID CUMAPPLICATION FORM. INVESTORS MUST ENSURE THAT THE DPID,CLIENT IDAND PAN GIVEN IN THE BID CUMAPPLICATION FORM IS EXACTLYTHE SAMEASTHE DP ID, CLIENT IDAND PAN AVAILABLEIN THE DEPOSITORY DATABASE.These Demographic Details would be used for all correspondence with the Bidders ncluding mailing<strong>of</strong> the Refund Orders/CANs/Allotment Advice <strong>and</strong> printing<strong>of</strong> Bank particulars on the refund orders.258
Scotts Garments LimitedThe Demographic Details given by Bidders in theBid cum Application Form would not be used foranyother purpose by the Registrar to the Issue.By signing the Bid cumApplication Form, theBidder would have deemed to have authorizedtheDepositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details asavailable onits records.In case <strong>of</strong> Bidders not receiving refunds through electronic transfer <strong>of</strong> funds, delivery <strong>of</strong> refund orders/allocation advice/ CANs may get delayed if the same, once sent to theaddress obtained fromtheDepositories, are returned undelivered. In such an event, the address <strong>and</strong> other details given bytheBidder in the Bid cum ApplicationForm would be used only to ensure dispatch <strong>of</strong> refund orders.Please notethat any such delay shall be at the Bidders sole risk <strong>and</strong> neither the Bank, the Registrar,Escrow Collection Bank(s) nor the BRLM, Co-BRLM shall beliable to compensate the Bidder foranylosses caused to the Bidder due to any such delayor pay any interest for such delay. Incase <strong>of</strong> Biddersreceiving refunds through electronic modes, Bidders may note that refunds may get delayed if Bankparticulars obtained fromthe Depository Participant are incorrect.In case no correspondingrecord is available with the Depositories that matches three parameters, namely,names <strong>of</strong> the Bidders (including the order <strong>of</strong> names <strong>of</strong> joint holders), the Depository Participant’s identity(DP ID) <strong>and</strong>the beneficiary’s identity,then such Bids are liable to be rejected.Our Company in their absolute discretion, reservee the right to permit the holder <strong>of</strong> the power <strong>of</strong> attorneyto request the Registrar that for the purpose <strong>of</strong> printing particulars on the refund order <strong>and</strong> mailing <strong>of</strong> therefund order/CANs/allocation advice/ refunds through electronic transfer <strong>of</strong> funds, the DemographicDetails given on the Bid cum Application Formshould beused (<strong>and</strong> not those obtained fromtheDepository <strong>of</strong> the Bidder). In such cases, the Registrar shall use Demographic Details asgiven in theBidcum Application Form instead <strong>of</strong> those obtained from the depositories.Refunds, dividends <strong>and</strong> other distributions, ifany, will be payable in <strong>India</strong>n Rupees only at theprevailing exchange rate <strong>and</strong> net <strong>of</strong> bank charges <strong>and</strong>/or commission. In case <strong>of</strong> Bidders who remitmoney through <strong>India</strong>nn Rupee drafts purchasedabroad, such payments in <strong>India</strong>n Rupees will beconverted into US Dollars or any other freely convertible currency as may be permitted by the RBI atthe rate <strong>of</strong> exchange prevailing at thetime <strong>of</strong> remittance <strong>and</strong> will be dispatched by registered post or ifthe Biddersso desire, will be credited to their NRE accounts, details <strong>of</strong> which shouldbe furnished inthe space provided for this purpose in the Bidcum Application Form. Our Company will not beresponsiblee for loss, if any, incurred by the Bidder on account<strong>of</strong> conversion <strong>of</strong> foreign currency.Bids under Power <strong>of</strong> AttorneyIn case <strong>of</strong> Bids made pursuant to a power <strong>of</strong> attorney or by <strong>limited</strong> companies, corporate bodies,registered societies, a certified copy <strong>of</strong> the power <strong>of</strong> attorney orthe relevant resolution orauthority, as thecase may be, along with a certified copy <strong>of</strong> the Memor<strong>and</strong>um <strong>and</strong> Articles <strong>of</strong> Association<strong>and</strong>/or bye lawsmust be along with the Bid cum Application Form. Failing this,we reserve the right to accept or rejectanyBid in whole or in part, ineither case, without assigning any reason therefore.In case <strong>of</strong> Bids made pursuant to a Power <strong>of</strong> Attorney by FIIs, a certified copy <strong>of</strong> the Power <strong>of</strong> Attorney orthe relevantresolution or authority as the casemay be, along with a certified copy <strong>of</strong> their SEBIregistration certificate must be lodgedd along with the Bid cum Application Form. In case<strong>of</strong> Bids made byMutual Funds, venture capital funds registered with SEBI <strong>and</strong> FVCIs, a certified copy <strong>of</strong> their SEBIregistration certificate must be lodged along with the Bid cum Application Form. Failing this,theCompany reserves the right to accept or reject any Bid in wholeor in part, ineither case, without assigningany reason therefore.259
Scotts Garments LimitedIn case <strong>of</strong> the Bids made by insurance companies registered with the Insurance Regulatory <strong>and</strong>Development Authority,a certified copy <strong>of</strong> certificate <strong>of</strong> registration issued by Insurance Regulatory<strong>and</strong> Development Authority must belodged along with the Bid cum Application Form. Failing this, wereserve the right to accept or reject any Bid in whole or in part, in either case,without assigning any reasontherefore.In case <strong>of</strong> the Bids madeby provident funds with minimum corpus <strong>of</strong> ` 250million (subject to applicablelaw) <strong>and</strong> pension fundswith minimum corpus <strong>of</strong> ` 250 million, a certified copy <strong>of</strong>certificate froma charteredaccountant certifying the corpus <strong>of</strong> the provident fund/pension fund must be lodgedalong with the Bid cumApplicationForm. Failing this, we reserve the right to accept orreject any Bid inwhole or in part, in either case, without assigning any reason therefore.We, in our absolute discretion, reserve the right to relaxthe abovecondition <strong>of</strong> simultaneoussubmission <strong>of</strong> the power <strong>of</strong> attorney along with the Bid cum Application Form, subject to such terms<strong>and</strong>conditions that we <strong>and</strong> the BRLM <strong>and</strong>Co-BRLM may deem fit.PAYMENTINSTRUCTIONSEscrow Mechanism for Bidders otherthan ASBA BiddersOur Company <strong>and</strong> the Syndicate shall open Escrow Account(s) with one or more Escrow CollectionBank(s) in whose favour the Bidders shall make out the cheque or dem<strong>and</strong> draft in respect <strong>of</strong> his or herBid<strong>and</strong>/or revision <strong>of</strong> the Bid. Chequesor dem<strong>and</strong> drafts received for the full Bid Amount from Bidderswould be deposited in the Escrow Account.The EscrowCollection Banks will actin terms <strong>of</strong> the Red Herring Prospectus <strong>and</strong> the Escrow Agreement.The EscrowCollection Banks for <strong>and</strong>on behalf <strong>of</strong> the Bidders shall maintain the monies in the EscrowAccount until the Designated Date. The Escrow Collection Banks shall notexercise anylien whatsoeverover the monies deposited therein <strong>and</strong> shall hold the monies therein in trust for the Bidders. OntheDesignated Date, the Escrow Collection Banks shall transfer thefunds represented by allocation <strong>of</strong> EquityShares (other than ASBAA funds with the SCSBs) from the Escrow Account, as per the terms <strong>of</strong> the EscrowAgreement,into the Issue Account held for thebenefit <strong>of</strong> the Bidders who are entitled to refunds.Payments <strong>of</strong> refund to the Bidders shall also be made from the Refund Account as perthe terms <strong>of</strong> theEscrow Agreement <strong>and</strong> the Red Herring Prospectus.The Biddersshould notethat the escrow mechanism is not prescribed by SEBI <strong>and</strong> has been established asan arrangement betweenour Company, the Syndicate, the Escrow Collection Banks <strong>and</strong>the Registrar t<strong>of</strong>acilitate collections fromthe Bidders.Payment mechanism forASBA BiddersThe ASBA Bidders shalll specify the bank account number in the Bid cumApplication Form. The SCSBshall block an amount equivalent tothe Bid Amount in thebank account specifiedin the Bid cumApplicationForm <strong>and</strong> each ASBA Bidder or the account holder shall be deemed to have agreed to blocksuch amount. The SCSB shall keep the Bid Amount in the relevant bank account blocked untilwithdrawal/ rejection <strong>of</strong> the ASBA Bid or receipt <strong>of</strong> instructions from theRegistrar tounblock theBidAmount. Inthe event <strong>of</strong> withdrawal or rejection <strong>of</strong> the Bid cumApplicationForm or forunsuccessfulBidcum Application Forms, the Registrarr shall give instructions to the SCSB to unblock the application moneyin the relevant bank account <strong>and</strong> it shall be actedby SCSB within one day <strong>of</strong> receipt <strong>of</strong>such instruction.The Bid Amount shall remain blockedin the ASBAA Account until finalisation <strong>of</strong> the Basis <strong>of</strong> Allotment in260
Scotts Garments Limitedthe Issue <strong>and</strong> consequent transfer <strong>of</strong> the Bid Amount to the Public Issue Account, or until withdrawal/failure <strong>of</strong> the Issue or until rejection <strong>of</strong>the ASBA Bid, as the casemay be.Payment into Escrow Account for Bidders other than ASBA BiddersEach Bidder shall draw a cheque ordem<strong>and</strong> draft or remit the funds electronically through the RTGSmechanism for the Bid Amount payable on the Bidas per the following terms:1. All Bidders wouldbe required to pay the full Bid Amount at the time <strong>of</strong> the submission <strong>of</strong> theBidcum Application Form.2. The Bidders shall, with the submission <strong>of</strong> the Bid cum Application Form, draw a paymentinstrument for theBid Amount in favour <strong>of</strong> the Escrow Account <strong>and</strong> submit the same totheSyndicate. If the payment is not made favouring the Escrow Account along with the Bid cumApplication Form, the Bid <strong>of</strong> theBidder shall be rejected.3. The payment instruments for payment into the Escrow Account shouldbe drawn infavour <strong>of</strong>:(a) Incase <strong>of</strong> Resident Retail: ESCROW ACCOUNT – SGL- R(b) In case <strong>of</strong> Non-Residencase <strong>of</strong> Eligible Employees: ― ESCROWACCOUNT– SGL – ELIGIBLE EMPLOYEES - RRetail: ESCROWACCOUNT – SGL – NR(c) In4. In case <strong>of</strong> Bids by NRIs applying on repatriation basis, the payments must be made through <strong>India</strong>nRupeee drafts purchased abroador cheques or bank drafts, for the amount payable on applicationremitted through normal banking channelsor out <strong>of</strong> funds held in Non-Resident External (NRE)Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorisedto deal in foreign exchange in <strong>India</strong>, along with documentary evidence in support <strong>of</strong> the remittance.Payment will not be acceptedout <strong>of</strong> Non-Resident Ordinary (NRO) Account <strong>of</strong> Non-ResidentBidder bidding on a repatriationbasis. Payment by draftsshould be accompanied by bank certificateconfirming that thedraft has been issued by debiting to NRE Account or FCNR Account.5. In case <strong>of</strong> Bids byNRIs applying on non-repatriation basis, the payments must be made through<strong>India</strong>nn Rupee Drafts purchased abroad orcheques or bank drafts, for the amount payableonapplication remitted through normal banking channels or out <strong>of</strong> funds held in Non-ResidentExternal (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained withbanksauthorised to deal in foreign exchange in <strong>India</strong>, along with documentary evidence in support<strong>of</strong> theremittance or out <strong>of</strong> a Non-Resident Ordinary (NRO) Account <strong>of</strong> a Non-Resident Bidderbidding on a non-repatriation basis. Payment by drafts should be accompanied by a bank certificateconfirming that thedraft has been issued by debiting an NRE or FCNRor NRO Account.6. In case <strong>of</strong> Bids by FIIs, the payment should be made out<strong>of</strong> funds held in a Special Rupee Accountalongwith documentary evidence in support <strong>of</strong> the remittance. Payment by drafts shouldbeaccompanied by a bank certificate confirming that the draft has been issued by debiting the SpecialRupeee Account.7. The monies deposited in the Escrow Account will be held for the benefit <strong>of</strong> the Bidders (other thanASBAA Bidders) till the Designated Date.8. On the DesignatedDate, the Escrow Collection Banks shall transfer the funds from the EscrowAccount as per theterms <strong>of</strong> the Escrow Agreement into the Public Issue Account with the Bankers tothe Issue.261
Scotts Garments Limited9. On the DesignatedDate <strong>and</strong> nolater than ten (10) Working Days fromthe Bid/Issue Closing Date,the Escrow Collection Bank shall also refund all amounts payable to unsuccessful Bidders (otherthan ASBA Bidders) <strong>and</strong> alsothe excess amount paid on bidding, if any, after adjustingforallocation/Allotment to such Bidders.10. Payments should be made bycheque, or a dem<strong>and</strong> draft drawn on any bank (including a co-houselocated at the centre where the Bid cum Application Form is submitted. Outstationcheques/bank drafts drawn onbanks not participating in the clearingprocess will not be accepted<strong>and</strong> applications accompaniedby such cheques or bank drafts are liable to be rejected. Cash/ stockoperative bank), which is situated at, <strong>and</strong> is a member <strong>of</strong> or sub-member <strong>of</strong> the bankers‘ clearinginvest/money orders/postal orders will not be accepted.Submission<strong>of</strong> Bid cum Application FormAll Bid cumApplicationForms or Revision Forms duly completed <strong>and</strong> accompanied by account payeecheques or drafts shall be submitted to the Syndicate at the time <strong>of</strong> submission <strong>of</strong> the Bid. With respect tothe ASBA Bidders, the ASBA Bid cumApplicationForm or the ASBA Revision Form shall be submitted tothe Designated Branches<strong>of</strong> the SCSBs.No separatee receipts shall be issued for the money payable on the submission <strong>of</strong> Bid cum ApplicationForm or Revision Form. However, the collection centre <strong>of</strong> the Syndicate will acknowledge the receipt <strong>of</strong>the Bid cum Application Forms orRevision Forms by stamping <strong>and</strong> returning tothe Biddertheacknowledgement slip. This acknowledgement slipwill serve as the duplicate <strong>of</strong> the Bid cum ApplicationForm for therecords <strong>of</strong> the Bidder.OTHER INSTRUCTIONSJoint Bids in the case <strong>of</strong> IndividualsBids may be made in single or jointnames (not more than three). In the case <strong>of</strong> jointBids, all refundpayments will be made out in favour<strong>of</strong> the Bidder whose name appears first in the Bid cum ApplicationForm or Revision Form. All communication will beaddressed to the First Bidder <strong>and</strong> willl be dispatched tohis or her address as per the Demographic Details received fromthe Depository.Multiple BidsA Bidder should submit only one Bid(<strong>and</strong> not more than one) . In this regard, all Bids will be checkedforcommon PAN as per Depository records <strong>and</strong> all such bids will be treated as multiple Bids <strong>and</strong> are liable tobe rejected. Two or moreBids will bedeemed to be multiple Bids if the soleor first Bidder is one <strong>and</strong>thesame. In case <strong>of</strong> a Mutual Fund, a separate Bid maybe made in respect <strong>of</strong> each scheme <strong>of</strong>the Mutual Fund<strong>and</strong> such Bids in respect <strong>of</strong> over one scheme <strong>of</strong> the Mutual Fund will not be treated as multiple Bidsprovided that the Bids clearly indicate the scheme concerned for which the Bid has been made. EligibleEmployees can Bid in the Employeee Reservation Portion <strong>and</strong> the Net Offer <strong>and</strong> such Bids shall not beconsidered as multiple Bids.Our Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or allcategories. In this regard, the procedures to be followed by the Registrar to the Issue to detect multipleapplicationsare given below:262
Scotts Garments Limited1. All Bids will be checked for common PAN <strong>and</strong> will be accumulated <strong>and</strong> taken toa separate processfile which will serve as a multiple master document. For Bidders other than Mutual Funds <strong>and</strong> FIIsub-accounts, Bidsbearing the same PAN will be treated as multiple Bids <strong>and</strong> will be rejected.2. In this master, a check will be carried outfor the same PAN numbers. In cases where thePANnumbers are different, the samewill be deleted from this master.3. The applications will be electronically matched for Depository Participant’s Identity (DP ID) <strong>and</strong>(Client ID) numbers. If applications bear the same numbers, these will be treated as multipleapplications.Our Company, in consultation withthe BRLM <strong>and</strong> Co-BRLMreserves theright to reject, in their absolutediscretion, all or any multiple Bids in any or all categories.Permanent Account Number or PANPursuant tothe circularr MRD/DoP/ /Circ-05/2007dated April 27, 2007, SEBI has m<strong>and</strong>ated PermanentAccount Number (PAN) to be the sole identification number for all participants transacting inthesecurities market, irrespective <strong>of</strong> the amount <strong>of</strong> the transactionn with effect from July 2, 2007. Each <strong>of</strong> theBidders, should mentionn his/her PANallotted under the IT Act. Applications without this informationwill be considered incomplete <strong>and</strong> are liable tobe rejected.It is to be specifically noted that Biddersshould not submit the GIR number instead <strong>of</strong> the PAN, as the Bid is liable to be rejected on this ground.However, the exemptionfor the Central or State Government <strong>and</strong> the <strong>of</strong>ficials appointed by the courts<strong>and</strong>for investors residing in the State <strong>of</strong> Sikkim is subject to the Depository Participants‘ verifying the veracity<strong>of</strong> such claims <strong>of</strong> the investors by collecting sufficient documentary evidencee in support <strong>of</strong> their claims. Atthe time <strong>of</strong> ascertaining the validity <strong>of</strong> these Bids, the Registrar will check under the Depository recordsfor the appropriate description under the PAN field i.e. either Sikkim category or exempt category.Our Right to Reject BidsIn case <strong>of</strong> QIB Bidders, our Company in consultation with the BRLM <strong>and</strong> CO-BRLMmay reject Bidsprovided that the reasons for rejecting the same shall be provided to such Bidders in writing. In case <strong>of</strong>Non-Institutional Bidders <strong>and</strong> Retail Individual Bidders, our Company, BRLM <strong>and</strong> Co-BRLM has a rightto reject Bids based on technicalgrounds.Consequentrefundsshall be made byRTGS/NEFT/NECS/Direct Credit/cheque or payorder or draft <strong>and</strong> will be sent to the Bidder‘s addressat the Bidder‘s risk. Withrespect to ASBA Bids, the DesignatedBranches <strong>of</strong> the SCSBs shall have the rightto reject ASBA Bids if at the time <strong>of</strong> blocking the Bid Amount in the Bidder‘ ‘s bank account, the respectiveDesignated Branch <strong>of</strong> the SCSB ascertains that sufficient funds are not available in the Bidder‘s bankaccount maintained with the SCSB. Subsequent to the acceptance <strong>of</strong> the ASBA Bid by the SCSB,ourCompany would have a right to rejectthe ASBA Bids only on technical grounds.GROUNDSFOR TECHNICAL REJECTIONSBidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:• Amount paid does not tally with the amount payable for the highest value <strong>of</strong> Equity SharesBidfor. With respectto ASBA Bids, the amounts mentionedin the Bid cum Application Form doesnottallywith the amount payablefor the value <strong>of</strong> the Equity Shares Bid for;• In case <strong>of</strong> partnership firms, Equity Shares may be registered inthe names <strong>of</strong> the individualpartners <strong>and</strong> no firm as such shall be entitled to apply;263
Scotts Garments Limited• Bid by persons not competentt to contract under <strong>India</strong>n contract Act,1872 as amended, except bidsby Minors having valid demat account as per demographic details provided by Depositaries.• PANnot mentioned in the Bid cum Application Form except forBids by or on behalf <strong>of</strong>theCentral or State Government<strong>and</strong> the <strong>of</strong>ficials appointedby the courts <strong>and</strong> by investors residing inthe State <strong>of</strong> Sikkim provided such claims have been verified by the Depository Participants, DP ID<strong>and</strong>Client ID not mentioned in the BidcumApplicationForm;• GIRnumber furnished instead<strong>of</strong> PAN;• Bids for lower number <strong>of</strong> Equity Shares than specified for that category <strong>of</strong> investors;• Bids at a price less than the Floor Price;• Bids at a price more than the Cap Price;• Bids submitted by Retail Individual Bidders, wherein the Bid Amount exceeds Rs. 200,000 uponrevision <strong>of</strong> Bids;• Bids by persons, other than Eligible Employees, in the Employee Reservation Portion;• Signature <strong>of</strong> First/sole Biddermissing;• Submission <strong>of</strong> more than five Bid cum Application Forms per ASBA Account;• Application by banks not through separate account in own name with any other SEBI registeredSCSB/s (SEBI Circular No. CIR/CFD/DIL/1/2013)• Bids at Cut-<strong>of</strong>f Price by Non-Institutional <strong>and</strong> QIB Bidders;• Bids by QIBs <strong>and</strong>Non-Institutional Bidders not submitted through ASBA;• Bids for more than ` 2,00,000 applying through Non ASBA process• Bids for number <strong>of</strong> Equity Shares which are not in multiples <strong>of</strong> 100;• Multiple Bids as defined in the Red Herring Prospectus;• In case <strong>of</strong> Bids under power<strong>of</strong> attorney or by <strong>limited</strong>companies, corporate, trust etc., relevantdocuments are not submitted;• Bids accompanied by Stock invest/moneyorder/postalorder/cash;• Signature <strong>of</strong> sole<strong>and</strong>/or jointBidders missing;• Bid cum Application Formsdoes not have the stamp <strong>of</strong> the BRLM, Co-BRLM or SyndicateMembers or the SCSB;• Bid cum Application Forms does not have Bidder‘s depository account details;• Bid cum Application Forms are not delivered by the Bidders withinthe time prescribed as per theBid cum Application Forms, Bid/Issue Opening Date advertisement <strong>and</strong> the Red HerringProspectus <strong>and</strong> as per the instructions in the Red Herring Prospectus <strong>and</strong> the Bidcum ApplicationForms;• In case no corresponding record is available with the Depositories that matches three parametersnamely, names <strong>of</strong> the Bidders (includingthe order <strong>of</strong> names <strong>of</strong> joint holders), the DepositaryParticipant‘s identity (DP ID) <strong>and</strong> the beneficiary‘s account number;• With respect to ASBA Bids,inadequate funds in thebank account to block the Bid Amountspecified in the ASBA Bid cum Application Form at the time <strong>of</strong> blocking such Bid Amount inthebank account;• Bids for amountsgreater thanthe maximum permissible amounts prescribed by the regulations;• Bids where clear funds are not availablein Escrow Accounts as per final certificate fromtheEscrow Collection Banks;• Bids by QIBs notsubmitted through the BRLM <strong>and</strong> the Co-BRLM orin case <strong>of</strong> ASBA Bids for QIBsnot intimated to the BRLM <strong>and</strong> the Co-BRLM;• Bids by OCBs;• Bids by persons in the United States excluding qualified institutional buyers asdefined in Rule144A<strong>of</strong> the <strong>Securities</strong> Act or other than in reliance <strong>of</strong> Regulation S under the <strong>Securities</strong> Act;• Bids by any person outside <strong>India</strong> if not in compliance with applicable foreign <strong>and</strong><strong>India</strong>n Laws;264
Scotts Garments Limited• Bids not uploaded on the terminals <strong>of</strong> theStock <strong>Exchange</strong>s; <strong>and</strong> Bids by personss prohibited frombuying, selling or dealing inthe shares directly or indirectly by SEBI or any other regulatoryauthority.• In case <strong>of</strong> Bid cum Application Forms submitted to the members <strong>of</strong> the Syndicate, if the SCSB whosename has been included in the Bid cum Application Form does not have a branch at the relevantSyndicate ASBAIN CASE THE DP ID, CLIENT ID AND PAN MENTIONED IN THE BID CUM APPLICATION FORMAND ENTERED INTO THE ELECTRONIC BIDDING SYSTEM OF THE STOCK EXCHANGESORTHE SYNDICATE/THEE SCSBs DONOT MATCH WITHTHE DP ID, CLIENTID AND PANAVAILABLE IN THE RECORDS WITH THE DEPOSITARIES, THE APPLICATION IS LIABLE TOBEREJECTED.For Bid cumApplicationForms submitted by non-ASBA Bidders, the Basis <strong>of</strong> Allotment will be basedon the Registrar’s validation <strong>of</strong> the electronic Biddetails withthe Depository records, <strong>and</strong> the completereconciliation <strong>of</strong> the final certificatesreceived from the EscrowCollection Banks with the electronicc Biddetails in terms <strong>of</strong> SEBI circularr CIR/CFD/DIL/3/2010 dated April 22, 2010 <strong>and</strong> SEBI circularCIR/CFD/DIL/1/2011 dated April 29,2011. The Registrar will undertake technical rejections basedonthe electronic Bid details <strong>and</strong> the Depository database. Incase <strong>of</strong> any discrepancy betweentheelectronic Bid data <strong>and</strong>the Depository records,our Company in consultation with the BRLMs,theRegistrar <strong>and</strong> the Designated Stock<strong>Exchange</strong>, reserves theright to proceed as perthe Depositoryrecords or treat such Bidas rejected.For ASBA Bids submitted to the SCSBs, in terms<strong>of</strong> the SEBIcircular CIR/CFD/DIL/3//2010 dated April22, 2010, the Registrar will reconcile the compiled data received from the Stock <strong>Exchange</strong>s <strong>and</strong>allSCSBs, <strong>and</strong>match suchdata with the Depository database for correctness <strong>of</strong> DP ID, Client ID <strong>and</strong>PAN. In cases where any DP ID, Client ID <strong>and</strong> PAN mentioned in the Bid file does not match theoneavailable inthe Depository database, our Company reserves the right to proceed as per the Depositoryrecords for such ASBA Bids or treat such ASBAA Bids as rejected. The Registrar will reject multipleASBA Bids based on common PAN.For ASBA Bids submitted to the members <strong>of</strong> theSyndicate at the Syndicate ASBA Bidding Locations,the Basis <strong>of</strong>Allotment will be basedon the Registrar’s validation <strong>of</strong> the electronic Biddetails withtheDepository records, <strong>and</strong>the complete reconciliation <strong>of</strong> the final certificates received from the SCSBswith the electronic bid details in terms <strong>of</strong> the SEBI circular CIR/CFD/DIL/1/2011 dated April 29, 2011.The Registrar will undertake technical rejectionsbased on the electronic Bid data <strong>and</strong> the Depositoryrecords. In case <strong>of</strong> any discrepancy between theelectronic Bid data <strong>and</strong>the Depository records,ourCompany, in consultation with the Designated Stock <strong>Exchange</strong>, the BRLMs <strong>and</strong> the Registrar, reservesthe right to proceed as per the Depository recordsor treat suchASBA Bid as rejected.Equity Shares in Dematerialized Formwith NSDLor CDSLAs per the provisions <strong>of</strong>Section 60B <strong>of</strong> the Companies Act, the Allotment <strong>of</strong> Equity Shares in this Issueshall be only in a dematerialized form(i.e., not in the form <strong>of</strong> physical certificates but the fungible <strong>and</strong> berepresentedby the statement issued through the electronic mode).In this context, two agreements havebeen signedamong the Company, the respective Depositories <strong>and</strong>the Registrar to the Issue:a) Agreement dated 29/ /11/2010 with NSDL, the Company <strong>and</strong> the Registrar to the Issue;b) Agreement dated 06/ /12/2010 with CDSL, the Company <strong>and</strong> the Registrar to the Issue.The ISIN number allottedto the Company is INE688L01011265
Scotts Garments LimitedAll bidderscan seek Allotment onlyin dematerialized mode. Bids fromdetails <strong>of</strong> his or her depository account are liable tobe rejected.any Bidderwithout relevanta) A bidder applying for Equity Shares must have at least one beneficiary account with either <strong>of</strong>theDepository Participant <strong>of</strong> either NSDL or CDSLprior to making the Bid.b) The Bidder must necessarily fill in the details (including the Beneficiary Account Number <strong>and</strong>Depository Participant’s identification number) appearing in the Bid-cum-Application FormorRevisionForm.c) Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account(with the DepositoryParticipant) <strong>of</strong> the Bidder.d) Names in the Bid-cum-Application Form or Revision Formshould be identical to those appearing inthe account details inthe Depository. In case <strong>of</strong> joint holders, the names should necessarily be inthesame sequence as they appear in the account details in the Depository.e) If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ inthe Bid-cum-Applicati<strong>of</strong>) The Bidder is responsible for the correctness <strong>of</strong> his or her Demographicdetails givenin the Bid-cum-Application Form vis-à-vis those with his or her DepositoryParticipant.Form orRevision Form, it is liableto be rejected.g) Equity Shares in electronic formcan be traded only on the stock exchanges having electronicconnectivity with NSDL or CDSL. All the Stock <strong>Exchange</strong>swhere our Equity Sharesare proposed tobe listedhave electronic connectivity with NSDL <strong>and</strong> CDSL.h) The trading <strong>of</strong> the Equity Shares <strong>of</strong> the Company would be in dematerialized form only for allinvestors in the demat segment <strong>of</strong>the respective Stock <strong>Exchange</strong>s.CommunicationsAll future communications in connection with Bids made in this Issue should be addressed totheRegistrar quoting the full name <strong>of</strong> the sole or First Bidder, Bid cum Application Form number, BiddersDepository Account Details, number <strong>of</strong> Equity Shares applied for, date <strong>of</strong> Bid form, name <strong>and</strong> address <strong>of</strong>the member<strong>of</strong> the Syndicate or the Designated Branch <strong>of</strong> theSCSBs where the Bid was submitted <strong>and</strong>cheque or draft number <strong>and</strong> issuing bank there<strong>of</strong> or with respect to ASBA Bids, bank account number inwhich the amount equivalent to the Bid Amount was blocked.Bidders cancontact theCompliance Officer or the Registrar in case <strong>of</strong>any pre-Issue or post-Issuerelated problems such as non-receipt <strong>of</strong> letters <strong>of</strong>Allotment, credit <strong>of</strong> Allotted shares in the respectivebeneficiaryaccounts, refund orders etc. In case <strong>of</strong> ASBA Bidssubmitted to the Designated Branches <strong>of</strong>the SCSBs, the Bidders can contact the Designated Branches <strong>of</strong> the SCSBs.PAYMENTOF REFUNDWithin 10 Working Days<strong>of</strong> the Bid Closing Date, the Registrar to the Issue will dispatch the refund ordersfor all amounts payable to unsuccessful Bidders (other than ASBA Bidders) <strong>and</strong> also any excess amountpaid on Bidding, after adjusting for allocation/ Allotment to BiddersBidders other than ASBA Bidders must note thatt on the basis <strong>of</strong> the names <strong>of</strong> the Bidders, DepositoryParticipant‘ s name, DP ID, beneficiary account number provided by themin the Bid cum ApplicationForm, the Registrar willl obtain, fromthe Depositories, the Bidders‘ bank account details, includingthenine digit Magnetic InkCharacter Recognition (“MICR”) code as appearing on a cheque leaf. Hence,Bidders are advised to immediately update their bank accountdetails as appearing on the records <strong>of</strong> theDepository Participant. Please note that failure to do so could result in delays in despatch <strong>of</strong> refund order266
Scotts Garments Limitedor refunds through electronic transferr <strong>of</strong> funds, asapplicable, <strong>and</strong> any suchdelay shall be at the Bidders‘sole risk <strong>and</strong> neither our Company, the Registrar, Escrow Collection Bank(s), Bankers to the Issue, theBRLM <strong>and</strong> Co-BRLM shall be liable to compensatee the Biddersfor any losses caused to the Bidder due toany such delay or liable to pay any interest for suchdelay.Mode <strong>of</strong> making refunds forBidders otherthan ASBA BiddersThe payment <strong>of</strong> refund,if any, for Bidders other than ASBAA Bidders would be donemodes in the following order <strong>of</strong> preference:through various1. NECS– Payment <strong>of</strong> refund would be done through NECS for applicants having an account at any <strong>of</strong>the centres where such facilityis available. . This mode<strong>of</strong> payment <strong>of</strong> refunds would be subject toavailability <strong>of</strong> complete bank account details including the nine-digit MICR codeas appearing on acheque leaf from the Depository. The payment <strong>of</strong> refundthrough NECS is m<strong>and</strong>atory for applicantshaving a bank account at any<strong>of</strong> the sixtyeight (68) centres notified by SEBI,except where theapplicant is otherwise disclosedd as eligible toreceive refunds through direct credit or RTGS.2. Direct Credit - Applicants having bank accounts with the Refund Banker, shall be eligible to receivefundsthrough direct credit. Charges, if any, levied by theRefund Banker for the same would beborneby theCompany.3. RTGS- Applicantshaving a bank account atany <strong>of</strong> the above-mentioned 68 centers<strong>and</strong> whose refundamount exceeds ` Two Lacs, have the optionto receive refund throughh RTGS. Sucheligible applicantswho indicate theirpreference toreceive refund through RTGS are required to provide the IFSCCodein theBid-cum-Application form. In the event the same isnot provided, refund shall be made throughNECS. Charges, ifany, levied by the refund banks for the same would be borneby the Company.Charges, if any, levied by the applicants’ bank receiving the credit would be borne by the applicant.4. NEFT- Payment <strong>of</strong> refund shall be undertaken through NEFT wherever the applicants’ bank has beenassigned the IFSC, which can be linked to a MICR, if any, availableto that particular bank branch.IFSC will be obtained from the website <strong>of</strong> RBI as on a dateimmediatelyprior to thedate <strong>of</strong> payment <strong>of</strong>refund, duly mapped with MICR numbers. Wherever the applicants have registered their nine digitMICRnumber <strong>and</strong>their bank account number while opening <strong>and</strong> operating the demat account, thesame will be duly mapped with the IFSC <strong>of</strong> that particular bank branch <strong>and</strong> the payment <strong>of</strong> refundwill be made to the applicants through this method. The process flowin respect <strong>of</strong>refunds by way <strong>of</strong>NEFTis at an evolving stage hence use <strong>of</strong> NEFT is subject to operational feasibility, cost <strong>and</strong> processefficiency. In the event that NEFT is not operationally feasible, the payment <strong>of</strong> refunds would bemadethrough any one <strong>of</strong>the other modes as discussed in the sections.5. Refund Orders - For all other applicants, including those who have not updated their bank particularswith the MICR code, the refund orders will be dispatched through Speed Post/ Registered Post forrefund orders. Such refunds will be made by cheques, pay orders or dem<strong>and</strong> drafts drawn on theEscrow Collection Banks <strong>and</strong> payable at par at places where Bids arereceived. Bank charges, if any,for cashing such cheques, pay orders or dem<strong>and</strong> drafts at other centreswill be payable by the Bidders.Mode <strong>of</strong> making refunds forASBA BiddersIn case <strong>of</strong> ASBA Bidders,the Registrar shall instruct the relevant SCSB to unblock the funds in the relevantASBA Account to the extent <strong>of</strong> the Bid Amount specified in the ASBA Bid cum Application Forms forwithdrawn,rejected or unsuccessful or partially successful ASBA Bids within ten (10) working days <strong>of</strong> theBid/Issue Closing Date.267
Scotts Garments LimitedDISPOSALOF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASEOFDELAYWith respect to Bidders other than ASBA Bidders,our Company shall ensure dispatch <strong>of</strong> Allotment advice,refund orders (except forBidders who receive refunds throughh electronic transfer <strong>of</strong> funds) <strong>and</strong> give benefitto the beneficiary account with Depository Participants <strong>and</strong>submit thedocumentspertaining to theAllotment tothe Stock <strong>Exchange</strong>s after the Allotment <strong>of</strong> Equity Shares.In case <strong>of</strong> Bidders who receive refunds through NECS, NEFT, direct credit or RTGS, the refund instructionswill be given to the clearing system within Nine (9) Working Days from the Bid Closing Date. A suitablecommunication shall be sent to the Bidders receiving refunds through thismode within ten (10) WorkingDays <strong>of</strong> the Bid Closing Date, giving details <strong>of</strong> thebank where refunds shall be credited along with amount<strong>and</strong> expected date <strong>of</strong> electronic credit <strong>of</strong> refund.Our Company shall use best efforts to ensure that all steps for completion<strong>of</strong> the necessary formalities forlisting <strong>and</strong> commencement <strong>of</strong> tradingat all the Stock <strong>Exchange</strong>s where the Equity Sharesare proposedto belisted, are taken within twelve (12) Working Days <strong>of</strong> the Bid Closing Date.In accordance with the Companies Act, the requirements <strong>of</strong> theStock <strong>Exchange</strong>s <strong>and</strong> theICDR Regulations,our Company further undertakes that:• Allotment <strong>of</strong> Equity Shares shall be made only in dematerialised form, including the credit <strong>of</strong> AllottedEquityShares to the beneficiaryaccounts <strong>of</strong> the Depository Participants, within nine Working Days <strong>of</strong>the Bid Closing Date;• With respect to Bidders other than ASBA Bidders, dispatch <strong>of</strong> refund orders or in a case where therefund or portionthere<strong>of</strong> is made in electronic manner, the refund instructions are given to theclearing system within ten (10) Working Days <strong>of</strong> the Bid Closing Date would be ensured. With respectto theASBA Bidders’ instructions for unblocking <strong>of</strong> the ASBA Bidder’s bank account shall bemadewithinten days from the Bid Closing Date; <strong>and</strong>• Our Company shall pay interest at 15% p.a. for any delay beyond the 15 days time period asmentioned above, if Allotment is not made <strong>and</strong> refund orders are not dispatched or if, in a case wherethe refund or portion there<strong>of</strong> is made in electronic manner, the refund instructions have not beengivento the clearing system in the disclosedd manner <strong>and</strong>/or demat credits are not made to investorswithineight days from the day the Company becomes liable to repay (i.e. 15 Days after the BidClosing Date or thedate <strong>of</strong> refusal by the Stock <strong>Exchange</strong>(s), whichever is earlier). If such moneyis notrepaidwithin eight days from the day the Company becomes liableto repay it, the Company <strong>and</strong>every<strong>of</strong>ficer in default shall, on <strong>and</strong> from expiry <strong>of</strong> eight days, be liable to repay the moneywithinterest as prescribed under applicable law.Interest incase <strong>of</strong> delay in dispatch<strong>of</strong> Allotment Letters or Refund Orders/instruction to SCSB bytheRegistrar to the IssueAllotmentt <strong>of</strong> Equity Shares in the Issue, including the credit <strong>of</strong> Allotted Equity Shares to the beneficiaryaccounts <strong>of</strong> the Depository Participants, shall be made notlater than ten Working Days <strong>of</strong> theBidClosing Date. Our Company further agrees that it shall pay interest at the rate <strong>of</strong> 15% p.a. iftheallotment letters or refund orders have not been dispatchedd to the Bidders or if, in a case wheree therefund orportion there<strong>of</strong> is made in electronic manner, the refund instructions have not been given inthe disclosed manner within eight days from theday the Company becomes liable to repay (i.e. 15 Daysafter the Bid Closing Date or the date <strong>of</strong> refusalby the Stock<strong>Exchange</strong>(s) ), whichever is earlier). If such268
Scotts Garments Limitedmoney is not repaid within eight days from the day the Company becomes liableto repay it,theCompany<strong>and</strong> every <strong>of</strong>ficer in default shall, on<strong>and</strong> from expiry <strong>of</strong> eight days, be liable to repaythemoney with interest asprescribed under Section 73 <strong>of</strong> the Companies Act.Refunds will be madeby cheques,pay-orders or dem<strong>and</strong> drafts drawnon a bank appointed byourCompanyas a RefundBank <strong>and</strong> payable at par at places where Bids are received. Bank charges, if any,for encashing such cheques, pay orders or dem<strong>and</strong> drafts at other centres will be payable by the Bidders.IMPERSONATIONAttention <strong>of</strong> the applicants is specifically drawn to the provisions <strong>of</strong> sub-secti<strong>of</strong>or acquiring or subscribing for, any sharestherein, or person ina fictitious name, shall be punishablewith imprisonment for a term which may(1) <strong>of</strong> Section 68 A <strong>of</strong>the Companies Act, which is reproduced below:“Any personwho:(a) makes in a fictitiousname, an application to a company extend to five years.”(b) otherwise induces a company to allot, or register any transfer <strong>of</strong> shares, therein to him, or any otherperson in a fictitious name, shall be punishable with imprisonment fora term which may extend t<strong>of</strong>ive years.”BASIS OF ALLOTMENTA. For Retail IndividualBidders‣ Bidsreceived from the Retail Individual Bidders at or above the Issue Price shall be groupedtogether to determine the total dem<strong>and</strong> under this category. The Allotment to all the successfulRetail IndividualBidders will be made at the Issue Price.‣ The Issue size less Allotment to Non-Institutional <strong>and</strong> QIB Bidders shall be availableforAllotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to orgreater than the Issue Price.‣ If the aggregate dem<strong>and</strong> in this category is less than or equal to 35,19,934 Equity Shares at or abovethe Issue Price, full Allotmentt shall be made to the Retail Individual Bidders to the extent <strong>of</strong> theirvalidBids.‣ In the event, the Bids receivedfrom RetailIndividual Bidders exceeds 35,19,934 Equity Shares, thenthe maximum number <strong>of</strong> Retail IndividualBidders whocan be allocated/Allottedd the minimum BidLot will be computed bydividing the total number <strong>of</strong> Equity Shares available forallocation/Allotment to Retail Individual Bidders by the minimum Bid Lot (“Maximumm RIIAllottees”). Theallocation/Allotment toRetail Individual Bidders will thenbe made in thefollowing manner:- Inthe event the number <strong>of</strong> Retail Individual Bidders who have submitted validBids in the Offer isequal to or less than Maximum RII Allottees, (i) Retail Individual Bidders shall be allocated /Allotted the minimum Bid Lot; <strong>and</strong> (ii) the balance Equity Shares, if any, remaining in theRetailPortion shall be allocated/ Allotted on a proportionate basis to the Retail Individual Bidders whohave received allocation/Allotment as per (i) above for less thanthe Equity Shares Bid bythem(i.e. who have Bid for more than the minimum Bid Lot).‣ In the event the number <strong>of</strong> Retail Individual Bidders who have submitted valid Bids in the Offer ismore than Maximum RII Allottees, the Retail Individual Bidders (inthat category) who will thenbe allocated/ Allotted minimum Bid Lot shall be determined on draw<strong>of</strong> lots basis. For the method<strong>of</strong> basis <strong>of</strong> Allotment, refer illustration below.269
Scotts Garments LimitedIllustration ExplainingProcedure <strong>of</strong> Allotment for Retail Bidder(1) Total no. <strong>of</strong> specified securities on <strong>of</strong>fer@ Rs. 600 per share: 1 crore specified securities.(2) Specified securities on <strong>of</strong>fer for retail individual investors’ category: 35 lakh specifiedsecurities.(3) The issue is over-subscribed2.5 times whereas the retail individual investors’ category isoversubscribed 4 times.(4) Issuer decides to fix the minimum application / bid sizeas 20 specified securitiess (falling within therange <strong>of</strong> Rs. 10,000 - 15,000). Application can be made for a minimum <strong>of</strong> 20 specified securities <strong>and</strong> inmultiples there<strong>of</strong>.(5) Assume that a total <strong>of</strong> one lakh retail individual investors have applied in the issue, in varyingnumber <strong>of</strong> bid lots i.e. between 1 – 16 bid lots, based on the maximum application size <strong>of</strong> upto Rs. 2,00,000.(6) Out <strong>of</strong> the one lakh investors, there are five retail individual investors A, B, C, D <strong>and</strong> E whohaveapplied asfollows: A has applied for 320 specified securities. B has applied for 220 specified securities. Chas applied for 120 specified securities. D has applied for 60 specified securities <strong>and</strong> E has appliedfor 20specified securities.As per allotment procedure, the allotment to retail individualinvestors shall not be lesss than the minimumbid lot, subject to availability <strong>of</strong> shares, <strong>and</strong> theremaining available shares, if any, shall be allotted on aproportionate basis.Sr.Name Total Number <strong>of</strong>No. <strong>of</strong>InvestorSpecifiedapplied forsecurities1 A 3202 B 2203 C 1204 D 605 E 20Total number <strong>of</strong> specified securities eligible to be allotted20 specified securities (i.e. the minimum bid lot) + 38specified securities [{35,00,000 - (1,00,000 * 20)} / {140,00,000 -(1,00,000 * 20)}] * 300 (i.e. 320-20)20 specified securities (i.e. the minimum bidlot) + 25specified securities [{35,00,000 - (1,00,000 * 20) /{140,00,000 - (1,00,000 * 20)}] * 200 (i.e. 220-20)20 specified securities (i.e. the minimum bidlot) + 13specified securities [{35,00,000 - (1,00,000 * 20)} /{(140,00,000 - (1,00,000 * 20)}] * 100 (i.e. 120-20)20 specified securities (i.e. the minimum bidlot) + 5specified securities [{(35,00,0000 - 1,00,000 * 20)} /{(140,00,000 - (1,00,000 * 20)}] * 40 (i.e. 60-20)20 specified securities (i.e. the minimum bidlot)B.(1) Total no. <strong>of</strong> specified securities on <strong>of</strong>fer @ Rs. 600 per share: 1 crore specified securities.(2) Specified securities on <strong>of</strong>fer for retail individual investors’ category: 35 lakh specifiedsecurities.(3) The issue is over subscribed 7 times whereas the retail individual investors’ categoryis over subscribed9.37 times.(4) Issuer decides to fix the minimum application / bid sizeas 20 specified securitiess (falling within therange <strong>of</strong> Rs. 10,000 - 15,000). Application can be made for a minimum <strong>of</strong> 20 specified securities <strong>and</strong> inmultiples there<strong>of</strong>.(5) Assume that a total<strong>of</strong> two lakh retail individual investors have appliedin the issue,in varying number<strong>of</strong> bid lotsi.e. between1 – 16 bid lots, based on the maximumm applicationsize <strong>of</strong> uptoRs.2,00,000, as perthe table shown below.270
Scotts Garments Limited(6) As per allotment procedure, the allotment to retail individual investors shall not be less than theminimumm bid lot, subject to availability <strong>of</strong> shares.(7) Since the total number <strong>of</strong> shares on <strong>of</strong>fer to retail individual investors is 35,00,0000 <strong>and</strong> the minimumbid lot is 20 shares, the maximumm no. <strong>of</strong> investors who can be allottedthis minimum bid lot will be1,75,000. In other words, 1,75,000 retail applicants will get the minimum bid lot <strong>and</strong> the remaining 25,000retail applicants will not get allotment.The details <strong>of</strong> allotment shall be as follows:No. <strong>of</strong>LotsA12345678910111213141516TotalNo. <strong>of</strong>Shares ateach lotB20406080100120140160180200220240260280300320No. <strong>of</strong> Retail Total No. <strong>of</strong>InvestorsShares appliedapplying at forat each loteach lotCD = (B*C)10,0002,00,00010,0004,00,00010,0006,00,00010,0008,00,00020,00020,00,00020,00024,00,00015,00021,00,00020,00032,00,00010,00018,00,00015,00030,00,00010,00022,00,00010,00024,00,00010,00026,00,0005,000014,00,00015,00045,00,00010,00032,00,0002,00,000 328,00,000No. <strong>of</strong> investors who shall receiveminimum bid-lot (tobe selected onlottery)E8,750 = (1,75,000/2,00,000)*10,0008,7508,7508,75017,500017,500013,12517,50008,75013,1258,7508,7508,7504,37513,1258,7501,75,000B. For Non-Institutional Bidders‣ Bidsreceived from Non-Institutional Bidders at or above the Issue Price shall be grouped togetherto determine the total dem<strong>and</strong> under this category. The Allotment to all successful Non-toInstitutional Bidders will be made at the Issue Price.‣ The Issue size less Allotment to QIBs <strong>and</strong> Retail Portion shall be available for AllotmentNon-Institutional Bidders who have bid inthe Issue ata price that is equal to orgreater thantheIssue Price.‣ If the aggregate dem<strong>and</strong> in this category is less than or equal to 40,22,782 Equity Shares at or abovethe Issue Price, full Allotment shall be made to Non-Institutionagreaterthan 40,22,782 Equity Shares at or above theIssueBidders to the extent <strong>of</strong> theirdem<strong>and</strong>.In case the aggregate dem<strong>and</strong> in this category isPrice, Allotment shall be made on a proportionate basis up to a minimumm <strong>of</strong> 100 Equity Shares. For themethod <strong>of</strong> proportionate basis <strong>of</strong> allotment, referr below.271
Scotts Garments LimitedC. For QIBs‣ Bidsreceived from the QIB Bidders at or above the Issue Price shall be grouped together todetermine the total dem<strong>and</strong> under this portion. The Allotment to alll the QIB Bidders will be madeat the Issue Price.‣ The QIB Portionshall be available for Allotment to QIB Bidders who have bidin the Issue at aprice that is equal to or greater than the Issue Price.‣ Allotment shall be undertakenn in the following manner:(a) Inthe first instance allocation to Mutual Funds for up to 5%determined as follows:<strong>of</strong> the QIBPortion shall be(i) In the event that Mutual FundBids exceeds 5% <strong>of</strong> the QIB Portion, allocation toMutualFunds shall be done on a proportionate basis for upto 5% <strong>of</strong> the QIB Portion.(ii) In the event that the aggregatee dem<strong>and</strong> from Mutual Funds is lesss than 5% <strong>of</strong>theQIB Portion, then all Mutual Funds shall getfull Allotment to the extent <strong>of</strong> valid bidsreceivedabove the Issue Price.(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shallbe available to all QIB Bidders as set out in (b) below;(b) Inthe second instance, Allotment to all QIBs shall be determined as follows:(i) In the event that the oversubscription in theQIB Portion, all QIB Bidders who havesubmitted Bids above the Issue Price shall be Allotted Equity Shares ona proportionatebasis for upto 95% <strong>of</strong> the QIB Portion.(ii) MutualFunds, who have received allocation as per (a) above, for less than the number <strong>of</strong>Equity Shares Bid for by them, are eligible toreceive Equity Shares ona proportionatebasis along with other QIB Bidders.(iii) Under-subscription below 5% <strong>of</strong> the QIB Portion, if any, from Mutual Funds, would beincluded for allocation to the remaining QIB Bidders on a proportionate basis.‣ The aggregate Allotment to QIB Bidders shall be 25,14,238 Equity Shares.Employeee ReservationPortionOnly Eligible Employees are eligiblee to apply under the Employee Reservation PortionBids received from theEmployees at or above the Issue Price shall be grouped togetherto determinee thetotal dem<strong>and</strong> under this category. The allocation to all the successful Employees will be made attheIssue Price.If the aggregate dem<strong>and</strong> in this category is less than or equal to 4,50,000 Equity Shares at or abovetheIssue Price, full allocation shall be made to the Employees tothe extent <strong>of</strong> their dem<strong>and</strong>. Provided thatthe value <strong>of</strong> allotment to any employee in pursuance <strong>of</strong> this reservation, shall not exceed` 2,00,000/-.If the aggregate dem<strong>and</strong> in this category is greater than 4,50,000 EquityShares at orabove the IssuePrice, the allocation shall be made on a proportionate basis up to a minimum <strong>of</strong> 4,50,000 Equity Shares.Only Employees (as defined above) are eligible to apply under Employee ReservationPortion. Forthemethod <strong>of</strong> proportionate allocation,refer below.272
Scotts Garments LimitedProceduree <strong>and</strong> Time <strong>of</strong> Schedule for Allotment <strong>and</strong> Demat Credit <strong>of</strong> EquityThe Issue will be conducted through a "100% book building process" pursuant to which the members <strong>of</strong>the Syndicate or SCSBs will accept bids for the Equity Shares during the Bidding/Issue Period.Followingthe expiration <strong>of</strong> the Bidding/Issue Period, our Company, in consultation with the BRLM<strong>and</strong>the Co-BRLM, will determine the Issue Price, <strong>and</strong>, in consultation with theBRLM <strong>and</strong> the Co-BRLM, thebasis <strong>of</strong> allocation <strong>and</strong>entitlement to Allotmentt based on thebids received <strong>and</strong> subject to confirmationby the BSE. The SEBI (ICDR) Regulations require our Company to complete the Allotment to successfulBidders within ten (10) working days <strong>of</strong> the expiration <strong>of</strong> theBidding / Issue period. The equity shareswill be then be credited <strong>and</strong> Allotted to the investors’ Demat Accounts maintained with the relevantdepositoryparticipant. Upon approval by the Stock <strong>Exchange</strong>s, the Equity Shares will be listed <strong>and</strong>trading will commence.Method <strong>of</strong> Proportionate Basis <strong>of</strong> Allotment in the IssueIn the event the Issue is over-subscribed, the basis <strong>of</strong> Allotment shall befinalized bythe Company inconsultation with the Designated Stock <strong>Exchange</strong>. The Executive Director (or any other senior <strong>of</strong>ficialnominated by them) <strong>of</strong> the Designated Stock <strong>Exchange</strong> along with the BRLM, Co-BRLM <strong>and</strong>theRegistrar to the Issue shall be responsible for ensuring that basis <strong>of</strong> allotment is finalized in a fair<strong>and</strong>proper manner in accordance with the allotment procedure specified Schedule XV<strong>of</strong> SEBI (ICDR)Regulations 2009.The Allotment to the QIB Bidders <strong>and</strong> Non-Institutional Bidders shall be made in marketable lots, on aproportionate basis as explained below:(a) Bidders in that respective category will be categorized according to the number <strong>of</strong> Equity Sharesapplied for.(b) The total number <strong>of</strong> Equity Shares to be allotted to each category as a whole shall be arrived at on aproportionate basis, which is the total number <strong>of</strong> Equity Shares applied for in that category (number<strong>of</strong> Bidders in the category multiplied by the number <strong>of</strong> Equity Shares applied for) multiplied bytheinverse <strong>of</strong> the over-subscriptionratio.(c) Number <strong>of</strong> Equity Shares to be allotted to the successful Bidders will be arrived at on aproportionate basis, which is total number<strong>of</strong> Equity Shares applied for by each Bidder in thatcategory multiplied by the inverse <strong>of</strong> the over-subscription ratio.(d) In alll Bids wheree the proportionate Allotment is less than 100 Equity Sharesper Bidder,theAllotment shall be made as follows:‣ The successful Bidders out <strong>of</strong> the totalBidders for a category shall be determined by draw <strong>of</strong>lots in a manner such thatt the total number <strong>of</strong> Equity Shares Allotted in that portion is equal tothe number <strong>of</strong> Equity Shares calculatedin accordance with (b) above; <strong>and</strong>‣ Each successful Bidder shall be allotteda minimum <strong>of</strong> 100 EquityShares.(e) If the proportionate Allotment to a Bidder isa number that is more than 100 but isnot a multiple <strong>of</strong>one (which is the market lot), the decimal would be rounded <strong>of</strong>f to the higher whole number ifthatdecimal is 0.5 or higher. If that number is lower than 0.5, it would be rounded <strong>of</strong>f to thelowerwhole number. Allotment to all Bidders in suchcategories would be arrived at after suchrounding <strong>of</strong>f.(f) If theEquity Shares allocated on a proportionate basis to any category aremore thantheEquityShares Allotted to the Bidders in that category, the remaining Equity Shares availablefor Allotment shall be first adjusted against any other category, where the Allotted shares arenot273
sufficient for proportionate Allotment to thesuccessful Bidders in that category. The balance EquityShares, if any, remaining after such adjustment will be added to thecategory comprising Biddersapplying for minimum number<strong>of</strong> Equity Shares.Illustration<strong>of</strong> Allotment to QIBs <strong>and</strong>Mutual Funds (“MF”) (Investors should note that this example is solelyfor illustrative purposes <strong>and</strong> is not specific to the Offer)A. Issue DetailsSr.No.ParticularsIssue details1. Issue size200 million equity shares2. Allocation to QIB*100 million equity shares3. Anchor Investor Portion30 millionequity shares4. Portion available to QIBs other than AnchorInvestors [(2) minus (3)]Of which:a. Allocation to MF (5%)b. Balance forall QIBs including MFs70 millionequity shares3.50 million equity shares66.50 million equity shares5. No. <strong>of</strong> QIB applicants106. No. <strong>of</strong> shares applied for500 million equity shares* Wheree 50% <strong>of</strong> the issue size is required to be allotted to QIBs.B. Details<strong>of</strong> QIB BidsScotts Garments LimitedSr.No.1.2.3.4.5.6.7.8.9.10.Type <strong>of</strong> QIBbidders #A1A2A3A4A5MF1MF2MF3MF4MF5TotalNo. <strong>of</strong> shares bid for (in million)502013050504040802020500# A1-A5: (QIB biddersother than MFs), MF1-MF5 (QIB bidderswhich are Mutual Funds)274
Scotts Garments LimitedC. Details<strong>of</strong> Allotment to QIB Bidders/ ApplicantsType<strong>of</strong>QIBbiddersSharesbid forAllocation <strong>of</strong> 35millionEquity Shares to MFproportionately(please seenote2 below)(Number<strong>of</strong> equity shares in million)Allocation <strong>of</strong>Aggregatebalance 665 allocation tomillion Equity MFsShares to QIBsproportionately(please seenote 4 below)(I)A1A2A3A4A5MF 1MF 2MF 3MF 4MF 5(II)502013050504040802020500(III)000000.700.701.400.350.353.5(IV)6.652.6617.296.656.655.325.3210.642.662.6666.5(V)000006.026.0212.043.013.0130.01Please note:1. The illustration presumes compliance with the requirements specified in this Red HerringProspectus in “Issue Structure”beginning on page 233.2. Out <strong>of</strong> 70 million equity shares allocatedto QIBs, 3.5 million (i.e. 5%) will be allocatedonproportionate basis among five Mutual Fund applicantswho appliedfor 200 million equity sharesin QIB category.3. The balance 70 million equity shares (i. e. 100 - 5 (available forMFs)) will be allocatedonproportionate basis among 10 QIB applicants who applied for 500 million equity shares (includingfive MF applicants who applied for 200 million equity shares).4. The figures in thefourth column entitled are arrived as under:• For QIBs other than Mutual Funds (A1 to A5) = No. <strong>of</strong> equity shares bid for (i.e. in column II)X 66.5 / 496.5• For MutualFunds (MF1 to MF5) = [(No. <strong>of</strong> shares bid for (i.e. incolumn II <strong>of</strong> the table above)less equity shares allotted ( i.e., column III <strong>of</strong> the table above)] X 66.5 / 496.5• The numerator <strong>and</strong> denominator for arriving at allocation <strong>of</strong> 66.5 million equity shares tothe10 QIBs arereduced by 3.5 million equity shares, which have already been allotted to MutualFunds in the manner specified in column III <strong>of</strong> the table above.Letters <strong>of</strong> Allotment or Refund Orders or instructions to the SCSBsBidders residing at the centres wheree clearing houses are managed by the RBI will getrefunds throughNECS only,except where the Bidder is otherwise disclosed as eligible to getrefunds through direct credit<strong>and</strong> RTGS. Our Company shall ensure dispatch <strong>of</strong>refund orders, if any, by registered or speed post at thesole or first Bidder’s solerisk within 10 Working Days <strong>of</strong> the Bid Closing Date. Bidders to whom refunds275
Scotts Garments Limitedare made through electronic transfer <strong>of</strong> funds willl be sent a letter through ordinary post, intimating them<strong>of</strong> the mode<strong>of</strong> credit <strong>of</strong> refund within10 Working Days <strong>of</strong> the Bid Closing Date.In case <strong>of</strong> ASBA Bidders, the Registrar to the Issueshall instruct the relevantSCSB to unblock the funds inthe relevantASBA Account to the extent <strong>of</strong> the Bid Amount specified in the Bid cum Application Formsfor withdrawn, rejected or unsuccessful or partially successfulASBA Bids within eight Working Days <strong>of</strong>the Bid Closing Date..Signing <strong>of</strong> Underwriting Agreement <strong>and</strong> Filing with Registrar <strong>of</strong> Companies (ROC)(a) We, the BRLM, Co-BRLM <strong>and</strong> the SyndicateMembers shall enter intoan Underwriting Agreementon finalization <strong>of</strong> the Issue Price<strong>and</strong> allocation/ Allotment to the Bidders.(b) After signing the UnderwritingAgreement, we would update <strong>and</strong> file the updated Red HerringProspectus with ROC in accordance with the applicable law,, which then would be termed as‘Prospectus’. The Prospectus would have details <strong>of</strong> the Issue Price, Issue size, underwritingarrangements <strong>and</strong> would be complete in all material respects.Filing <strong>of</strong> theProspectus with the Registrar <strong>of</strong> CompaniesWe will filea copy <strong>of</strong> the Prospectuss with the Registrar <strong>of</strong> Companies in terms <strong>of</strong> Section 56, Section 60<strong>and</strong> Section60B <strong>of</strong> the Companies Act.UNDERTAKINGS BY THE COMPANYOur Company undertakes that:• The complaints received in respect <strong>of</strong> thecaptioned Public Issue shall be attended to bytheCompany expeditiously <strong>and</strong> satisfactorily• All steps for completion <strong>of</strong> the necessary formalities for listing <strong>and</strong> commencement <strong>of</strong> trading at allstock exchanges where the securities are to be listed are taken within twelve working days fromtheclosure <strong>of</strong> the issue• The funds requiredfor making refund to unsuccessful applicants as per the modes disclosed shall bemadeavailable to the Registrar to the captioned Public Issue.• Where refunds aremade through electronic transfer <strong>of</strong> funds, a suitable communication shall be sentto theapplicant within 12 days <strong>of</strong> closure <strong>of</strong>the issue, giving details <strong>of</strong> the bank where refund shallbe credited along with amount <strong>and</strong> expecteddate <strong>of</strong> electronic credit <strong>of</strong> refund.• The certificates <strong>of</strong> the shares/ refund ordersto the Non-Resident <strong>India</strong>ns shall be dispatched withinthe specified time.• No further issue <strong>of</strong> securities shall be made till the sharess <strong>of</strong>fered through the prospectus are listedor till the application moneys are refunded on account <strong>of</strong> non-listing, undersubscription, etc• That at any given time there shall be only one denomination for the shares <strong>of</strong> the company,• That the company shall complywith such disclosure <strong>and</strong>accounting norms specified by the <strong>Board</strong>(SEBI) from time totime <strong>and</strong>• That the adequatee arrangements under theASBA Process shall be made to collect all Bid cumApplication Form<strong>and</strong> to consider them similar to Bid cum Application Form by non-ASBAapplications while finalizing thebasis <strong>of</strong> allotment.276
Scotts Garments LimitedUTILISATION OF ISSUE PROCEEDSOur <strong>Board</strong><strong>of</strong> Directorscertify that:(a) all monies received out <strong>of</strong> the issue to the public shall be transferred to a separate bank accountother than the bankaccount referred to in sub-section (3) <strong>of</strong> Section 73 <strong>of</strong> the Companies Act, 1956.(b) details <strong>of</strong> all monies utilised out <strong>of</strong> the issuereferred to in sub-item (a) shall be disclosed under anappropriate separate head in the balance sheet <strong>of</strong> the Company indicating the purpose for whichsuch monies had been utilised, <strong>and</strong>(c) details <strong>of</strong> all unutilised monies out <strong>of</strong> the issue, if any, referred to in sub-item (a) shall be disclosedunderan appropriate separatee head in the balance sheet <strong>of</strong> the Company indicating the forminwhichh such unutilised monies have been invested.The Company shall not have recourse to the Issue proceeds until the approval for trading <strong>of</strong> the EquityShares from all the Stock <strong>Exchange</strong>swhere listingis sought has been received.The <strong>Board</strong><strong>of</strong> Directorsalso certifiesthat:• the utilization <strong>of</strong> monies received under the Employeee Reservationshall be disclosed under anappropriate head in the balancesheet <strong>of</strong> theissuer company, indicating the purpose for which suchmonies have been utilized <strong>and</strong>,• the details <strong>of</strong> all monies out <strong>of</strong>the funds received under Employee Reservation shall be disclosedundera separate head in the balance sheet <strong>of</strong> the issuer company, indicating the form in which suchmonies have been invested.RESTRICTIONS ON FOREIGN OWNERSHIPOF INDIANN SECURITIESForeign investment in <strong>India</strong>n securities is regulated through the Industrial Policy <strong>of</strong> the Government <strong>of</strong><strong>India</strong> notified throughh press notes <strong>and</strong> press releases issued from time to time <strong>and</strong> FEMA <strong>and</strong> circulars<strong>and</strong> notifications issued there under. While the policy <strong>of</strong> theGovernment prescribes the limits <strong>and</strong>theconditions subject to which foreigninvestment can be made in different sectors <strong>of</strong> the <strong>India</strong>n economy,FEMA regulates the precise mannerin which such investment may be made. Under theIndustrial Policy<strong>of</strong> the Government, unless specifically restricted, foreign investment is freely permitted in all sectors <strong>of</strong><strong>India</strong>n economy up to any extent <strong>and</strong> without any prior approvals, but the foreign investor is requiredto follow certain prescribed procedures <strong>and</strong> reporting requirements for making such investment.Subscription by NRIs/FIIsIt is to bedistinctly understood that there is noreservationfor Non-Residents, NRIs<strong>and</strong> FIIs <strong>and</strong> allNon- Resident, NRI <strong>and</strong> FII applicants will betreated on the same basis as other categories forthepurpose <strong>of</strong> allotment.As per theRBI regulations, OCBs cannot participate in this Issue.As per thecurrent regulations, the following restrictions are applicable for investments by FIIs:No singleFII can hold more than 10% <strong>of</strong> the post-Issue paid-up capital <strong>of</strong> our Company. In respect <strong>of</strong> anFII investing in our Equity Shareson behalf <strong>of</strong> its sub-accounts, the investment on behalf <strong>of</strong> each277
Scotts Garments Limitedsubaccount shall not exceed 10% <strong>of</strong>our total issued capital or5% <strong>of</strong> total issued capital<strong>of</strong> our Companyincase such sub account is a foreign corporate or an individual. The aggregate FII holding shouldnotexceed 24% <strong>of</strong> the totalissued capital <strong>of</strong> our company.The aboveinformationn is given forthe benefit <strong>of</strong> the Bidders. The Company <strong>and</strong> the BRLM, Co-BRLMare not liable for any amendmentsor modification or changes in applicable laws or regulations, whichmay happen after the date <strong>of</strong> this Red Herring Prospectus. Biddersare advised to make theirindependent investigations <strong>and</strong> ensure that thenumber <strong>of</strong>Equity Shares bid for do not exceedtheapplicablelimits underlaws or regulations.278
Scotts Garments LimitedSECTION VII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION“CAPITAL ANDINCREASEE AND REDUCTION OF CAPITAL”346Authorised Share CapitalThe AuthorisedShare capital <strong>of</strong> the Company is ` 44,00,00,000/- (Rupees Forty Four Crores only)divided into 4,40,00,000 (Four Crore Forty Lakh) Equity Shares <strong>of</strong> `10/- (Rupees Ten only) each,with power to increase modify the said capital <strong>and</strong> todivide the Shares for thetime being <strong>of</strong> theCompany into several classes <strong>and</strong> attachthereto preferential, deferred, qualified or special rightsor conditions, as may be determined by or in accordance with theArticles <strong>of</strong> Association <strong>of</strong> theCompany <strong>and</strong> subject to applicable legislative provisions for the time being in force, <strong>and</strong> to vary,modify or abrogate any suchrights, privileges or conditions in such manner asmay for thetimebeing be provided for by the Articles <strong>of</strong>Association<strong>of</strong> the Company <strong>and</strong> subject to applicablelegislative provisions for thetime being in force. The Company shall be entitled to dematerialiseitsexisting shares, reconvert its shares held by the depositories electronicallyto physical form<strong>and</strong>/or to <strong>of</strong>ferits fresh shares in electronic form pursuant to the Depositories Act, 1996 <strong>and</strong> therules framed thereunder, if any.The minimum Paid-up Share Capital <strong>of</strong>the Company shall be `5,00,000/- (Rupees Five Lakhsonly).Increase <strong>of</strong> Capital bythe Company <strong>and</strong> how carried into effect.The Company at the General Meeting may, from timeto time, increase the capital by creation <strong>of</strong>new shares, such increase tobe <strong>of</strong> such aggregate amount <strong>and</strong> to be divided into shares <strong>of</strong>suchrespective amounts as the resolution shall prescribe. Subject to the provisions <strong>of</strong> the Act, any share<strong>of</strong> the original or increased capital shall be issued upon such terms<strong>and</strong> conditions <strong>and</strong> withsuchrights <strong>and</strong> privileges annexed thereto, as the general meeting resolving upon the creation there<strong>of</strong>,shall direct, <strong>and</strong>if no direction be given,as the Directors shall determine, <strong>and</strong> in particular,suchshares may be issued with a preferential or qualified right to dividends, <strong>and</strong> in the distribution <strong>of</strong>assets <strong>of</strong> the Company, <strong>and</strong> with, <strong>and</strong> if the act allows without, a right <strong>of</strong> voting at generalmeeting <strong>of</strong> the Company in conformity with Section 87 <strong>and</strong> 88 <strong>of</strong> the Act. Whenever the Capital <strong>of</strong>theCompany has been increased under the provisions <strong>of</strong> this Article, the Directors shall complywith the provisions <strong>of</strong> Section 97 <strong>of</strong> the Act.Buy back<strong>of</strong> shares:Notwithst<strong>and</strong>ing anything contained inthese articles, in accordance with the provisions <strong>of</strong>Sections 77A, 77AA <strong>and</strong> 77B <strong>of</strong> the Actor any statutory modification thereto <strong>and</strong> such otherregulations <strong>and</strong>guidelines as may be issued in this regard by the relevant authorities, the <strong>Board</strong><strong>of</strong> Directors may, if <strong>and</strong> when deem fit, buy back such <strong>of</strong> the Company’s ownshares, stocks orsecurities, whether or not they are redeemable, as it may decide, subject to suchlimits, uponsuchterms <strong>and</strong> conditions, <strong>and</strong> subject to suchapproval, asare specifiedin this regard.6ASubject to Article 6, the funds <strong>of</strong> the Company shall not be employed for the purchase <strong>of</strong> or lent onthesecurity <strong>of</strong> shares <strong>of</strong> the Company <strong>and</strong> the Company shall not give, directlyor indirectlyanyfinancial assistance whether by way <strong>of</strong> loan, guaranteee or by provision <strong>of</strong> security or otherwise forthepurpose <strong>of</strong>or in connection with any purchase<strong>of</strong> or subscription for the Shares inthe279
Scotts Garments LimitedCompany, its Holding Company.6B7The article shall not be deemed to affect the power <strong>of</strong> the Companyto enforce repayment <strong>of</strong> loansto members or to exercise a lien conferredby Article 40.Further issue <strong>of</strong> Capital(1) Where at any time after the expiry <strong>of</strong> twoyears from the formation<strong>of</strong> the Company or at anytimeafter the expiry<strong>of</strong> one year from the allotment <strong>of</strong> shares in the Company made for the firsttimeafter its formation, whichever is earlier, it is proposed to increase the subscribed capital <strong>of</strong> theCompany by allotment <strong>of</strong> further shares out <strong>of</strong> the unissued capital or out <strong>of</strong> the increased sharecapital then;(a)such furtherr shares shalll be <strong>of</strong>fered tothe personss who at the date <strong>of</strong> the <strong>of</strong>fer, are holders <strong>of</strong>theequity shares <strong>of</strong> the Company, in proportion, as nearly as circumstances admit, to the capitalpaid up on those shares at that date.(b)Such <strong>of</strong>fer shall be madeby a noticespecifying the number <strong>of</strong> shares <strong>of</strong>fered <strong>and</strong> limiting atime not being less than fifteen days fromthe date <strong>of</strong> <strong>of</strong>fer within which the <strong>of</strong>fer, if not accepted,will be deemedd to have beendeclined.(c)The aforesaid <strong>of</strong>fer shall be deemed to include a right exercisable by the person concerned torenounce the shares <strong>of</strong>feredto them in favour <strong>of</strong> anyother person <strong>and</strong> the notice referred to insub clause (b) here<strong>of</strong> shall contain a statement <strong>of</strong> this right. PROVIDED THAT the Directorsmaydecline, without assigning any reason to allot any shares to anyperson in whose favouranymember may renounce the shares <strong>of</strong>feredto him.(d)After the expiry <strong>of</strong> the time specifiedin the noticeaforesaid or on receipt <strong>of</strong>earlier intimationfrom the person to whom such notice isgiven that he declines toaccept the shares <strong>of</strong>fered, the<strong>Board</strong> may dispose <strong>of</strong> them in such manner <strong>and</strong> to such person(s) as they may think, in their solediscretion, fit.(2) Notwithst<strong>and</strong>ing anything contained in preceding sub-clause, the further sharess aforesaid may be<strong>of</strong>fered to any persons (whether or not those persons include the persons referred to in clause (a)<strong>of</strong> sub-clause (1) here<strong>of</strong>) in any manner whatsoever.i. If a special resolution to that effect is passed by the Companyin General Meeting; orii. where nosuch special resolution is passed, if thevotes cast (whether on a show <strong>of</strong> h<strong>and</strong>s, oron a poll, as the case may be) in favour <strong>of</strong> the proposal contained in the motion moved inthe general meeting (including the casting vote, if any, <strong>of</strong> the Chairman) bymembers who,being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed thevotes, if any, cast against the proposal by members so entitled<strong>and</strong> voting <strong>and</strong> the CentralGovernment is satisfied, on an application madeby the <strong>Board</strong><strong>of</strong> Directorsin this behalf,that the proposal is most beneficial to the Company.(3) Nothing in sub-clause (1)(c) above shall be deemed:a.To extendthe time within which the <strong>of</strong>fer shouldbe accepted; tob.To authorise any person to exercisee the right <strong>of</strong> renunciation for a second time on theground that the personin whose favour the renunciation wasfirst made has declined to280
Scotts Garments Limitedtake the shares comprised in the renunciation(4) Nothing contained in this Article shall apply to the increase <strong>of</strong> the subscribed capital caused bytheexercise <strong>of</strong> an option attached to the debentures issued or loans raised by theCompanyi. to convert such debentures or loansinto shares in the Company; orii. to subscribe for sharess in the Company (whethersuch option is conferred in these Articlesor otherwise).PROVIDED THAT the terms<strong>of</strong> issue <strong>of</strong> such debentures or the terms <strong>of</strong> such loans include a termprovided for such option <strong>and</strong> such term:8910a.Either hasbeen approved by the Central Government before the issue <strong>of</strong> the debenturesorthe raising <strong>of</strong> the loansor is in conformity with Rules; if any, made by, that Government inthis behalf; <strong>and</strong>b.In the case <strong>of</strong> debentures loans or other than debentures issued to or loansobtained fromGovernment or any institution specified by the Central Government in this behalf, has alsobeen approved by a special resolution passed but the Company in GeneralMeeting beforethe issue <strong>of</strong> the debentures or raising <strong>of</strong> the loans.Redeemable Preference shares.Subject to the provisions <strong>of</strong> Sections 80, 85 <strong>and</strong> other applicable provisions <strong>of</strong> the Act, theCompany shalll have power to issue Preference Shareswhich are or at the option <strong>of</strong> the Companyareliable to beredeemed <strong>and</strong> the resolution authorising such issue shall prescribe the manner,terms <strong>and</strong> conditions <strong>of</strong> redemption there<strong>of</strong>.Provisions to apply onissue <strong>of</strong> Redeemable Preference Shares.Onthe issue <strong>of</strong> Redeemable Preferencee Shares under the provisions <strong>of</strong> Article 8 here<strong>of</strong>, thefollowing provisions shall take effect:a.no such shares shall beredeemed except out <strong>of</strong> the pr<strong>of</strong>its <strong>of</strong> the Companywhich wouldotherwisee be availablefor dividendd or out <strong>of</strong> theproceeds <strong>of</strong> a fresh issue <strong>of</strong> shares made forthe purpose <strong>of</strong> the redemption;b.no such shares shall beredeemed unless they arefully paid;c. the premium, if any, payable on redemption must have been provided for out <strong>of</strong> the pr<strong>of</strong>its<strong>of</strong> the Company or theCompany's Share Premium Account before the shares are redeemed;d. Where any such sharess are redeemed otherwise than out <strong>of</strong> the proceeds <strong>of</strong> a fresh issue,there shall out <strong>of</strong> pr<strong>of</strong>its which would otherwisee have been available for dividend, betransferred to a reservee fund to be called the “Capital Redemption Reservee Account” a sumequal to the nominal amount <strong>of</strong> theshares redeemed <strong>and</strong> the provisions <strong>of</strong>the Act relatingto reduction <strong>of</strong> the share capital <strong>of</strong> the company shall, except as provided in Section 80 <strong>of</strong>the Act, apply as if theCapital Redemption Reserve Account were paid-upp share capital <strong>of</strong>the Company.Reduction <strong>of</strong> Capital.The Company may (subject to the provisions <strong>of</strong> Sections 78,80,100 to 105 <strong>of</strong> theAct) from time totime by Special Resolution, reduce its capital <strong>and</strong> any Capital Redemption Reserve Account orShare Premiumm Account in any mannerfor the timebeing authorised by lawby following theprocedure prescribed by theAct.281
Scotts Garments Limited111213Sub-division consolidation <strong>and</strong> cancellation <strong>of</strong> shares.Subject to the provisions <strong>of</strong> Section 94 <strong>of</strong> the Act, the Company in general meeting may, fromtimeto time, sub-divide or consolidate its shares, or any <strong>of</strong> them, <strong>and</strong> the resolution whereby any shareis subdivided, may determine that, as between the holders <strong>of</strong> the shares resulting from suchsub-division, one or more <strong>of</strong> such shares shall havesome preference or special advantage asregards dividend, capital orotherwise over or as compared with the other or others. Subject asaforesaid the Company in general meeting may also cancel sharess which have not been taken oragreed to be taken by any person <strong>and</strong> diminish the amount <strong>of</strong> its share capitalby the amount <strong>of</strong>theshares so cancelled.Modification <strong>of</strong> rights.Whenever the capital, by reason <strong>of</strong> the issue <strong>of</strong> Preference Shares or otherwise, is dividedd intoclasses <strong>of</strong> shares all or any <strong>of</strong> the rights <strong>and</strong> privileges attached toeach class may subject to theprovisions <strong>of</strong> Sections 106 <strong>and</strong> 107 <strong>of</strong> the Act be modified, commuted, affectedor abrogated, ordealt with by Agreement between the Company <strong>and</strong> any person purporting to contract on behalf<strong>of</strong> that class, provided such agreement isratified in writing by holders <strong>of</strong> atleast three-fourths innominal value <strong>of</strong> the issued shares <strong>of</strong> theclass or is confirmed by a Special Resolution passedat aseparate general meeting <strong>of</strong> the holders <strong>of</strong> shares <strong>of</strong> the class.(a)Subject to the provisions <strong>of</strong> Section76 <strong>of</strong> the Act, the Company may at any time pay acommission to any person in consideration <strong>of</strong> his subscribing or agreeing to subscribe (whetherabsolutely or conditionally)for any shares in or debentures <strong>of</strong> the Company, or procuring, oragreeing to procure, subscriptions (whether absolute or conditional) for any shares in ordebentures <strong>of</strong> the Company,but so that the commission shall not exceed, in the case <strong>of</strong> shares fiveper cent <strong>of</strong> the price at whichh the shares are issued, <strong>and</strong> in the case <strong>of</strong> debentures two <strong>and</strong> half percent <strong>of</strong> the priceat which thedebentures are issued.14SHARES AND SHARE CERTIFICATE1516(b)The Company may pay such sum for brokerage as may be lawful <strong>and</strong> reasonable.Issue <strong>of</strong> Sweat EquityShares:Company shalll subject to <strong>and</strong> in accordance with theprovisions <strong>of</strong> section 79A<strong>of</strong> the Act, shallhave the power, by a SpecialResolution passed at a General Meeting to issue Sweat Equity Sharesto the Directors, Employees <strong>of</strong> either <strong>of</strong> the Company or <strong>of</strong> any <strong>of</strong> its subsidiary or holdingCompany.The Company shall cause to be kept a Register <strong>and</strong>Index <strong>of</strong> Members in accordance with allapplicable provisions <strong>of</strong> theCompanies Act, 1956 <strong>and</strong>the Depositories Act, 1996 with details <strong>of</strong>shares held in physical <strong>and</strong>dematerialised forms in any mediumm as may be permitted bylawincluding in any from <strong>of</strong> electronic medium. The Company shall be entitled tokeep in any Stateor Country outside <strong>India</strong> a branch Register <strong>of</strong> Members Resident inthat State or Country.Shares tobe numbered progressively <strong>and</strong> no share to be subdivided.The shares inthe capital shall be numbered progressivelyaccording to their severaldenominations,provided however, that the provisionrelating to progressive numbering shall notapply to the shares <strong>of</strong> the company which are dematerialised or may be dematerialised in futureor issued in future in dematerialised form. Except in the manner herein before mentioned noshare shall be sub-divided.Every forfeited or surrendered share held in material form shall282
Scotts Garments Limitedcontinue to bear the numberby which thesame was originally distinguished.Shares atthe Disposal <strong>of</strong> the Directors.1718192021Subject to the provision <strong>of</strong> Section 81 <strong>of</strong> the Act <strong>and</strong> these Articles,the shares inthe capital <strong>of</strong> theCompany for the time beingshall be under the control <strong>of</strong> the Directors who may issue, allot orotherwise dispose <strong>of</strong> the same or any <strong>of</strong>them to such persons, insuch proportion <strong>and</strong> onsuchterms <strong>and</strong> conditions <strong>and</strong> either at a premium or at par or (subject to the compliance with theprovisions <strong>of</strong> Section 79 <strong>of</strong> the Act) at a discount <strong>and</strong> at such time as they may from time totimethink fit <strong>and</strong> with the sanction <strong>of</strong> the Company in the General Meeting to giveto any person orpersons the option or right to call for any shares either at par or premium during such time<strong>and</strong>forsuch consideration as the Directors think fit, <strong>and</strong> may issue <strong>and</strong> allot shares in the capital <strong>of</strong>thecompany onpayment infull or part <strong>of</strong> any property sold <strong>and</strong> transferred or for any servicesrendered to theCompany inthe conduct<strong>of</strong> its business <strong>and</strong> any shares which may so be allottedmay be issued as fully paidup shares <strong>and</strong> if so issued, shall be deemed to be fully paid shares.Provided that option or right to call <strong>of</strong> shares shall not be given to any person or persons withoutthesanction <strong>of</strong> the companyin the General Meeting.Powers <strong>of</strong> Company to issue shares in General Meeting.In addition to <strong>and</strong> without derogating from the powers for that purpose conferred on the <strong>Board</strong>bythese Articles, the Company in General Meeting may, subject tothe provisions <strong>of</strong> Section81 <strong>of</strong>theAct, determine that any shares (whether forming part <strong>of</strong> the original capital or <strong>of</strong>anyincreased capital <strong>of</strong> the Company) shall be <strong>of</strong>fered tosuch person(whether members or not) insuch proportion <strong>and</strong> on such terms <strong>and</strong>conditions <strong>and</strong> either (subject to compliance with theprovisions <strong>of</strong> Section 78 <strong>and</strong> 79 <strong>of</strong> the Act) at a premium or at par or at a discount, as such GeneralMeeting shall determine <strong>and</strong>with full power to give any person (whether a member or not) theoption to call for or be allotted shares <strong>of</strong>any class <strong>of</strong> the Company either (subject to compliancewith the provisions <strong>of</strong> Sections 78 <strong>and</strong> 79<strong>of</strong> the Act) at a premium or at par or at a discountsuchoption being exercisable at such time <strong>and</strong> for such considerationn as may bedirected by suchGeneral Meeting or the Company in General Meetingmay make any other provision whatsoeverforthe issue, allotment or disposal <strong>of</strong> anyshares.Acceptance <strong>of</strong> shares.Any applicationsigned by or on behalf <strong>of</strong> an applicant for share inthe Company, followed by anallotment <strong>of</strong> any share therein, shall bean acceptance <strong>of</strong> sharess within the meaning <strong>of</strong> theseArticles, <strong>and</strong> every person who pays or otherwise accepts any shares <strong>and</strong> whose name is enteredin the Register <strong>of</strong> Members shall for the purpose <strong>of</strong> these Articles, be a Member.Deposit <strong>and</strong> call etc. to be a debt payable immediately.The money, if any, which the <strong>Board</strong> shall, on the allotment <strong>of</strong> any shares being made by it, requireor direct to be paid by way <strong>of</strong> deposit call or otherwise in respect <strong>of</strong> any shares so allotted,shallimmediately onthe insertionn <strong>of</strong> the name<strong>of</strong> the allottee in the Register <strong>of</strong> Members as the name <strong>of</strong>theholder <strong>of</strong> such shares, become a debt due to <strong>and</strong> recoverable bythe Company from the allotteethere<strong>of</strong>, <strong>and</strong> shall be paid byhim accordingly.Liability<strong>of</strong> Members.Every member,or his heirs, executors or administrators, shall pay to the Company the portion <strong>of</strong>capital represented by his share or shares which may, for the timebeing remain unpaid thereon,in such amounts, at such time or times, <strong>and</strong> in such manner as the<strong>Board</strong> shall, from time totime283
Scotts Garments Limited2223in accordance with the Company's regulations, requiree or fix for thepayment there<strong>of</strong>.Limitation <strong>of</strong> Time for Issue <strong>of</strong> Certificatesa. Every Member shall be entitled, without payment, to one or more certificates in marketablelots, for alll the Shares <strong>of</strong> each class <strong>of</strong> denomination registeredin his name,or if the directorsso approved (upon paying such fee as the Directors may from time to time determined) toseveral certificates, eachfor one or more <strong>of</strong> such shares <strong>and</strong> thecompany shall complete <strong>and</strong>keep readyfor deliverysuch certificates within three months from the date <strong>of</strong> allotment,unless the conditions <strong>of</strong>issue there<strong>of</strong> otherwise provide, or within one month <strong>of</strong> the receipt<strong>of</strong> application <strong>of</strong> registration <strong>of</strong> transfer, transmission, sub-division, consolidation or renewal<strong>of</strong> any <strong>of</strong> itshares as thecase may be. Every certificate <strong>of</strong> shares shall be under the seal <strong>of</strong> thecompany <strong>and</strong> shall specify the number <strong>and</strong> distinctive numbers <strong>of</strong> shares inrespect <strong>of</strong> whichit is issued<strong>and</strong> amountpaid-up thereon <strong>and</strong> shall be in such form as the directors mayprescribe or approve, provided thatt in respect <strong>of</strong> a share or shares held jointly by severalperson, thecompany shall not be bound to issue more than one certificate <strong>and</strong> delivery <strong>of</strong> acertificate <strong>of</strong> shares to one <strong>of</strong> several joint holdersshall be sufficient deliveryvis-à-vis alll suchholders.b. Any two or more joint allottees <strong>of</strong> a share shall, for the purpose <strong>of</strong> this Article, be treatedas asingle member, <strong>and</strong> thecertificate <strong>of</strong>any share, which may be the subject <strong>of</strong>joint ownershipmay be delivered to anyone <strong>of</strong> such joint owners on behalf <strong>of</strong> all <strong>of</strong> them.c. A Directorr may sign a share certificate by affixinghis signaturethereon by means <strong>of</strong> anymachine, equipment or other mechanical means, such as engraving in metal or lithography;but not by means <strong>of</strong> a rubber stamp provided that the Directorr shall be responsible for thesafe custody <strong>of</strong> such machine, equipment or othermaterial used for the purpose.Issue <strong>of</strong> New Certificate in place <strong>of</strong>One Defaced, Lost or DestroyedIf any share certificate be worn out, defaced, mutilated or torn or if there be n<strong>of</strong>urther space ontheback there<strong>of</strong> for endorsement <strong>of</strong> transfer, then upon production <strong>and</strong> surrender there<strong>of</strong> to theCompany, a new certificates may be issued in lieu, there<strong>of</strong>, If any Share Certificates is lost ordestroyed thenupon pro<strong>of</strong> there<strong>of</strong> to the satisfaction<strong>of</strong> the company <strong>and</strong> on execution <strong>of</strong>suchindemnity as the company deems adequate, being given, a new Certificate in lieu there<strong>of</strong> shall begiven to the party entitled to such lostor destroyed certificate. Every Certificates under theArticles shall beissued without payment<strong>of</strong> fees if theDirectors sodecide, or onpayment <strong>of</strong>suchfees (not exceeding `2/- for each certificate) as the Directors shall prescribe. Provided that no feeshall be charged for issue <strong>of</strong> new certificates in replacement <strong>of</strong> those which are old, defaced orworn out or where there is no further space on the back there<strong>of</strong> for endorsement<strong>of</strong> transfer.Provided that the Directorsshall comply with such rules or regulation or requirements <strong>of</strong> anyStock <strong>Exchange</strong>or the Rules made under the Act orthe rules made under <strong>Securities</strong> contracts(Regulation )Act,1956 or anyother Act, orrules applicable in this behalf.24The provisions <strong>of</strong> this Article shall mutatis mut<strong>and</strong>is apply to the debenture certificates <strong>of</strong> theCompany.Power <strong>of</strong><strong>Board</strong> <strong>of</strong> Directors to Regulate sub-division or consolidation.Notwithst<strong>and</strong>ing anything contained inArticle 23, the <strong>Board</strong> <strong>of</strong> Directors or any committeethere<strong>of</strong> shall beentitled to refuse any application for sub-division or consolidation <strong>of</strong> sharess intodenominations<strong>of</strong> less than ten except when such sub-division or consolidationn is required to be284
252627INTEREST OUTOF CAPITAL28made to complywith a statutory order or an order ora decree <strong>of</strong> a Competent Court <strong>of</strong> Lawor arequest from a member to convert his holding <strong>of</strong> oddd lots <strong>of</strong> shares into transferable/marketablelots, subject, however, to necessary verification by the Company.The first named <strong>of</strong> joint-holders deemed sole holder.If any share st<strong>and</strong>s in the names <strong>of</strong> two or more persons, the person first namedin the Register <strong>of</strong>Members shall,as regards receipts <strong>of</strong> dividends or bonus or servicee <strong>of</strong> notices <strong>and</strong> all or any othermatter connected with the Company, except voting atmeetings, <strong>and</strong> the transfer <strong>of</strong> the shares, bedeemed the sole holder there<strong>of</strong> but the other joint-holders <strong>of</strong> a share shall be severally as well asjointly liable for the payment <strong>of</strong> all instalments <strong>and</strong>calls due in respect <strong>of</strong> share <strong>and</strong> for allincidents there<strong>of</strong> according to the Company's regulations.Company not bound to recognise any interest inshare other than that <strong>of</strong> registered holder.Except as ordered by a Court <strong>of</strong> competent jurisdiction or as by lawrequired, the Companyshallbeentitled to treat the person whose name appears on the Register <strong>of</strong> Members as the holder <strong>of</strong>any share or whose nameappears as the beneficial owner <strong>of</strong> shares in the records <strong>of</strong> theDepository, as the absolute owner there<strong>of</strong> <strong>and</strong> accordingly shall not be boundto recognisee anybenami trust, equity, equitable, contingenor other claim to or interest in such share on the part <strong>of</strong>any other person whether ornot it shall have express or implied notice there<strong>of</strong>. The <strong>Board</strong> shall beentitled at their sole discretion to register any shares in the joint names <strong>of</strong> any two or morepersons or the survivor or survivors <strong>of</strong> them.Provisionfor Employees' Stock Optiona.Subject to the provisionss <strong>of</strong> section 81(1A) <strong>and</strong> other applicable provisions, ifany, <strong>of</strong> theCompanies Act, 1956, <strong>and</strong> subject to the Articles <strong>of</strong>Association,the <strong>Board</strong> may, from timetotime, create, <strong>of</strong>fer <strong>and</strong> issue to or for the benefit <strong>of</strong> the Company's employeesincluding theExecutive Chairman, Vice-Chairman,the Managing Directors <strong>and</strong> the Wholetime Directorssuch number <strong>of</strong> equity shares <strong>of</strong> the Company, in one or more trenches on such terms as maybe determined by the <strong>Board</strong> prior to the issue <strong>and</strong> <strong>of</strong>fer, in consultation withthe authoritiesconcerned <strong>and</strong> in accordance with such guidelinesor other provisions <strong>of</strong> lawas may beprevalent atthat time but ranking pari passu with the existing equity shares <strong>of</strong> the Company.b.The issue price <strong>of</strong> such shares shall bedetermined by the <strong>Board</strong>in accordance with the lawsprevalent atthe time <strong>of</strong> the issue.c. In the alternative to equity shares, mentioned hereinabove, the <strong>Board</strong> may also issue bonds,equity warrants or othersecurities as may be permitted in law, from time to time. All suchissues as above are to be made in pursuance <strong>of</strong> Employees' Stock Option (ESOP) scheme to bedrawn up <strong>and</strong> approvedby the <strong>Board</strong>.Interest may be paid out <strong>of</strong> capital.Where any shares are issued for the purpose <strong>of</strong> raising money to defray the expenses <strong>of</strong> theconstruction <strong>of</strong>any work or building, or the provision <strong>of</strong> any plant whichh cannot be madepr<strong>of</strong>itable for a lengthy period, the Company may payinterest on so much <strong>of</strong> that share capital asis for the timebeing paid-up, by Section 208 <strong>of</strong> the Act <strong>and</strong> may charge the same to capital as part <strong>of</strong> thefor the period, at the rate <strong>and</strong> subject to the conditions<strong>and</strong>restrictions providedcost <strong>of</strong> construction for the work <strong>of</strong> building, or the provision <strong>of</strong> plant.CALLSDirectorsmay make calls.Scotts Garments Limited285
Scotts Garments Limited29303132333435The <strong>Board</strong> may, from time totime, subject to the termson which any shares mayhave been issued<strong>and</strong> subject to the conditions <strong>of</strong> allotment by a resolution passedat a meeting <strong>of</strong> the <strong>Board</strong> inrespect <strong>of</strong> all moneys unpaidon the shares held by them respectively <strong>and</strong> each member shall paytheamount <strong>of</strong> every call somade on himto the person or persons <strong>and</strong> at thetimes <strong>and</strong> placesappointed by the <strong>Board</strong>. A call may be made payable by instalments.Notice <strong>of</strong> calls.Fifteen day's notice in writing <strong>of</strong> any calll be given by the Companyspecifying the time <strong>and</strong> place<strong>of</strong> payment <strong>and</strong>the person or persons to whom such call shall be paid.Calls to date from resolution.A call shall be deemed to have been made at the time when the resolution authorising such call ispassed at a meeting <strong>of</strong> the <strong>Board</strong>.Call maybe revoked or postponedA call may be revoked or postponed at the discretion <strong>of</strong> the <strong>Board</strong>.Joint-holders, jointly <strong>and</strong> severallyliable to paycallsThe joint-holders <strong>of</strong> a share shall be jointly <strong>and</strong> severally liable to pay all calls in respect there<strong>of</strong>.Power <strong>of</strong><strong>Board</strong> to extend time for payment <strong>of</strong> calls.The <strong>Board</strong> may, from time to time at its discretion, extend the time fixed for the payment <strong>of</strong> anycalls under Article 29.Calls to carry interest.If any member fails to pay any call due from him onthe day appointed for payment there<strong>of</strong>, orany such extension there<strong>of</strong> as aforesaid, he shall be liable to pay interest on the same from the dayappointed for the payment there<strong>of</strong> to time <strong>of</strong> actual payment at such rate as shall, from time totime, be fixed by the <strong>Board</strong> not exceeding 9 per cent per annum but nothing inthis Articleshallrender it obligatory for the <strong>Board</strong> to dem<strong>and</strong> or recover any interest from any such member.Partial payment not topreclude forfeiture.38LIEN39Neither receipt by the Company <strong>of</strong> a portion <strong>of</strong> any money which shall from time to time beduefrom any member to the Company in respect <strong>of</strong> his shares, either by way <strong>of</strong> principal or interestnor any indulgence granted by the Company in respect <strong>of</strong> the payment <strong>of</strong> any such money,shallpreclude the Company from thereafterr proceeding to enforce a forfeiture <strong>of</strong> such shares ashereinafter provided.Company to have lienon shares.The Company shall have a first <strong>and</strong> paramount lien upon all theshare/Debentures (otherthanfully paid-up shares/debenntures) registered in the name <strong>of</strong> such member (whether solely orjointly) with others) <strong>and</strong> upon the proceeds <strong>of</strong> sale there<strong>of</strong> for all moneys (whether presentlypayable or not) called or payable at a fixed time in respect <strong>of</strong> such shares/debentures <strong>and</strong> noequitable interest in any shares shall be created except on the condition that this Article willl havefull affect. Suchlien shall extend to all dividends <strong>and</strong> bonuses from time totime declared inrespect <strong>of</strong> suchshares/debenture. Unless otherwise agreed theregistration<strong>of</strong> a transfer <strong>of</strong>shares/debentures shall operate as a waiver <strong>of</strong>the Company’s lien if any, on suchshares/debentures. The Directors may at any time declare any shares/debentures wholly or inpart to be exempt from the provision <strong>of</strong> the clause.FORFEITURE OF SHARES286
Scotts Garments Limited4244474851If moneypayable on share not paidnotice to begiven to membersIf any member fails to pay any call or instalment <strong>of</strong> a call on or before the dayappointed for thepayment <strong>of</strong> thesame or any such extension there<strong>of</strong>as aforesaid, the <strong>Board</strong> may at anytimethereafter, during such time as the call orinstalment remains unpaid, give notice to him requiringhimto pay the same together with any interest that may have accrued by the Company by reason<strong>of</strong> such non-payment.In default <strong>of</strong> payment, shares to beforfeited.If the requirements <strong>of</strong> any such notice as aforesaid shall not be complied with, every or any sharein respect <strong>of</strong> which such notice has been given, may at time thereafter before payment <strong>of</strong> alll callsor instalments, interest <strong>and</strong>expenses due in respect there<strong>of</strong>, be forfeited by a resolution <strong>of</strong> the<strong>Board</strong> to that effect. Such forfeiture shall include all dividends declared or any other moneyspayable in respect <strong>of</strong> the forfeited share <strong>and</strong> not actually paid before the forfeiture.Memberstill liable to pay money owing at the time <strong>of</strong> forfeiture <strong>and</strong> interest.Any member whose shares have been forfeited shall not withst<strong>and</strong>ing the forfeiture, be liable topay <strong>and</strong> shall forthwith pay to the Company on dem<strong>and</strong> all calls, instalments, interestt <strong>and</strong>expenses owing upon or inrespect <strong>of</strong> such shares at the time <strong>of</strong> the forfeiture, together withinterest thereonfrom the time <strong>of</strong> the forfeiture untilpayment, atsuch rate not exceedingninepercent per annum as the <strong>Board</strong> may determine <strong>and</strong> the <strong>Board</strong> may enforce thepayment there<strong>of</strong>,if it thinks fit.Effect <strong>of</strong> forfeitureThe forfeiture <strong>of</strong> a share shall involve extinction at thetime <strong>of</strong> the forfeiture, <strong>of</strong>all interest in<strong>and</strong>alll claims <strong>and</strong> dem<strong>and</strong>s against the Company, in respect <strong>of</strong> the share <strong>and</strong>all other rightsincidental to theshare, except only such <strong>of</strong> those rightsas by these articles are expressly saved.Cancellation <strong>of</strong> share certificates inrespect <strong>of</strong> forfeited shares.Upon any sale, re-allotmentt or other disposal under the provisions <strong>of</strong> the preceding Articles, thecertificate <strong>of</strong> shares originally issued in respect <strong>of</strong> the relative shareshall (unlesss the same shall ondem<strong>and</strong> by the Company have been previously surrendered to it bythe defaulting member) st<strong>and</strong>cancelled <strong>and</strong> become null <strong>and</strong> void <strong>and</strong> <strong>of</strong> no effect, <strong>and</strong> the Directors shall beentitled to issue aduplicate certificate or certificates in respect <strong>of</strong> the said shares to the person or persons entitledthereto.Power to annulforfeiture52 The <strong>Board</strong> mayat any time before anyshare so forfeited shall have been sold, re-allotted orotherwise disposed <strong>of</strong>f, annul the forfeiture there<strong>of</strong> upon such conditions as it thinks fit.TRANSFER AND TRANSMISSION OF SHARES5354Transferr or transmission <strong>of</strong> sharesIn the case <strong>of</strong> transfer or transmission <strong>of</strong> shares or other marketablee securities where the Companyhas not issued any certificates <strong>and</strong> wheree such sharess or securitiess are being held in an electronic<strong>and</strong> fungible form in a Depository, the provisions <strong>of</strong> the Depositories Act, 1996 shall apply.Register <strong>of</strong> TransferThe Company shall keep a `Register <strong>of</strong> Transfer' <strong>and</strong> therein shall be fairly <strong>and</strong>distinctly enteredparticulars <strong>of</strong> every transfer or transmission <strong>of</strong> any share held in material form.Instrument <strong>of</strong> transferr287
Scotts Garments Limited555658The instrumentt <strong>of</strong> transfer shall be in writing <strong>and</strong> all provisions <strong>of</strong> Section 108 <strong>of</strong> the CompaniesAct, 1956 <strong>and</strong> statutory modification there<strong>of</strong> for the time being shall be duly complied with inrespect <strong>of</strong> all transfer <strong>of</strong> shares <strong>and</strong> registration there<strong>of</strong>.Directorsmay Refusee to Register TransferSubject to the provisions <strong>of</strong>Section 111 <strong>of</strong> the Act <strong>and</strong> Section 22A <strong>of</strong> the <strong>Securities</strong> Contracts(Regulation Act, 1956, the Directors may, at their own absolute <strong>and</strong> uncontrolled discretion<strong>and</strong>bygiving reason, decline to register or acknowledge any transfer <strong>of</strong> shares whether fully paid ornot <strong>and</strong> the right <strong>of</strong> refusal, shall not be affected by the circumstance that the proposed transfereeis already a member <strong>of</strong> the Company butin such cases, the Directors shall within one monthfromthedate on which the instrument <strong>of</strong> transfer was lodged with the Company, send to the transferee<strong>and</strong> transferor notice <strong>of</strong> the refusal to register such transfer provided that registration <strong>of</strong> transfershall not be refused on the ground <strong>of</strong> the transferor being either alone or jointly with any otherperson or persons indebted to the company or any account whatsoever except when the companyhas a lien on the shares However, no transfer <strong>of</strong> shares/debenturess shall be refused on the ground<strong>of</strong> them not being held in marketable lots.Dematerialisation <strong>of</strong> <strong>Securities</strong>Company to recognise interest in dematerialised securities under Depositories Act.(i) Either the Company or the investor may exercise an option to issue, deal in, hold thesecurities (includingshares) witha Depository in electronic form <strong>and</strong>the certificates inrespectthere<strong>of</strong> shall be dematerialised, in which event the rights <strong>and</strong> obligations <strong>of</strong> theparties concerned <strong>and</strong> matters connected therewith or incidental there<strong>of</strong>, shall begoverned by the provisions <strong>of</strong> the Depositories Act, as amended from time to time orany statutory modification thereto or re-enactment there<strong>of</strong>.(ii) Notwithst<strong>and</strong>ing anything contained in thesee Articles, theCompany shall be entitled todematerialise its existing securities, dematerialise its securities held In the Depository<strong>and</strong>/or<strong>of</strong>fer Its fresh securities in the dematerialised formpursuant tothe DepositoriesAct <strong>and</strong>the rules framed thereunder, If any.(iii) Every person subscribing to or holding securities <strong>of</strong> the Company shall have theoption to receive security certificate or to hold the security with a Depository, theCompany shall Intimate such Depository the details <strong>of</strong> allotment <strong>of</strong> the security, <strong>and</strong> onreceipt <strong>of</strong> the Information, the Depository shall enter in itsrecord the name <strong>of</strong> the allotteead the Beneficial Owner <strong>of</strong> the security.(iv) All securities held by a Depository shall bedematerialised <strong>and</strong> be in fungible form.Nothing contained in Sections 153, 153A, 187C <strong>and</strong> 372 <strong>of</strong> the Actshall applyto aDepository in respect <strong>of</strong> the securities held by it on behalf <strong>of</strong> the Beneficial Owners.(v) Notwithst<strong>and</strong>ing anything to the contrary contained inthe Act or the Articles, aDepository shall be deemed tobe the registered owner for the purpose <strong>of</strong> effectingtransferr <strong>of</strong> ownership <strong>of</strong> security on behalf <strong>of</strong> the BeneficialOwner.(vi) Same as otherwise provided In (1) above, theDepository as the registered owner <strong>of</strong> thesecurities shall not have any voting rights or any other rights in respect <strong>of</strong> the securities288
Scotts Garments Limitedheld byit.(vii) Every person holding securities <strong>of</strong> the Company <strong>and</strong> whose name is entered as BeneficialOwner in the records <strong>of</strong> the Depository shall be deemed to be the member <strong>of</strong> theCompany. The Beneficial Owner <strong>of</strong> securities shall be entitled to all the rights <strong>and</strong> benefitssubject to all the liabilities in respect <strong>of</strong> his securities whichh are held by a Depository.(viii) Exceptas ordered by a court <strong>of</strong> competent jurisdiction or as required by law, theCompany shall be entitled to treat the person whose name appears on the register <strong>of</strong>members as holders <strong>of</strong> any share or where the name appears as Beneficial Owner <strong>of</strong>shares in the records <strong>of</strong> the Depository as the absolute owner there<strong>of</strong> <strong>and</strong> accordinglyshall not be bound to recognise any benami trust or equitable, contingent, future or partialinterestt in any share, or (except only as is by these Articles,otherwise expressly provided)any right in respect<strong>of</strong> a share other than anabsolute right thereto inaccordance withthese Articles, on the part <strong>of</strong> anyother person whether or not it has express or impliednotice there<strong>of</strong>, but the <strong>Board</strong> shall be at theirsole discretion to register any share in thejoint names <strong>of</strong> any two or more persons or thesurvivor or survivors <strong>of</strong> them.(ix) Every Depository shall furnish to the Company about the transfer <strong>of</strong> securities in thename <strong>of</strong> the Beneficial Owner at such intervals<strong>and</strong> in such manner as may be specified bythe bye-laws <strong>and</strong> theCompany inthat behalf.(x) Upon receipt <strong>of</strong> certificate <strong>of</strong> securities <strong>of</strong> surrender by a person who has entered into anagreement with theDepository through a Participant, the Company shall cancel suchcertificate <strong>and</strong> substitute in its records the name <strong>of</strong> Depository as the registered owner inrespect<strong>of</strong> the said securities <strong>and</strong> shall also inform the Depository accordingly.(xi) If a Beneficial Owner seeks to opt out <strong>of</strong> a Depository in respect <strong>of</strong>any security, theBeneficial Owner shall inform the Depository accordingly. The Depository shall onreceipt <strong>of</strong> information as above make appropriate entries in its records<strong>and</strong> shall informthe Company. The Company shall, within thirty (30) days <strong>of</strong> the receipt <strong>of</strong> intimationfrom the Depository<strong>and</strong> on fulfilment <strong>of</strong> suchconditions <strong>and</strong> on payment <strong>of</strong> such fees asmay bespecified bythe regulations, issue the certificatee <strong>of</strong> securitiess to the BeneficialOwner or the transferee as the case may be.(xii) Notwithst<strong>and</strong>ing anything in theAct or thesee Articles to the contrary, these securities areheld ina Depository, the records <strong>of</strong> the beneficial ownership may be served by suchDepository on the Company be means <strong>of</strong> electronic mode or by delivery <strong>of</strong> floppies ordiscs.(xiii) Exceptas specifically provided in these Articles, the provisions relating to joint holders<strong>of</strong> shares, calls, lien on shares, forfeiture <strong>of</strong> shares <strong>and</strong> transfer <strong>and</strong> transmission <strong>of</strong> sharesshall beapplicable to shares held in Depository so far as they apply to shares held inphysical form subject to the provisions <strong>of</strong> the Depository Act.(xiv) Notwithst<strong>and</strong>ing anything in the Act or thesee Articles, where securitiess are dealt with bya Depository, the Company shall intimate the details there<strong>of</strong> tothe Depository289
Scotts Garments Limitedimmediately on allotment <strong>of</strong> suchsecurities.(xv) The shares in the capital be numbered progressively according to their severaldenominations, provided however, that the provision relating to progressive numberingshall not apply to the shares <strong>of</strong> the Company which are dematerialised or may bedematerialised in future or issuedin future indematerialised form. Except in the mannerhereinbefore mentioned, no share shall be sub-divided. Every forfeited or surrenderedshare held in material form shall continue tobear the number by which the samewasoriginally distinguished.(xvi) The Company shall cause to be kept a Register <strong>and</strong> index <strong>of</strong> Members <strong>and</strong> a Register<strong>and</strong> index <strong>of</strong> Debenture holders in accordance with Sections 151 <strong>and</strong> 152 <strong>of</strong> theActrespectively, <strong>and</strong> the Depositories Act, withdetails <strong>of</strong> shares <strong>and</strong> debentures held inmaterial <strong>and</strong> dematerialised forms in any media as may bepermitted by law including inany form <strong>of</strong> electronics media. The Register <strong>and</strong> index <strong>of</strong> Beneficial Owners maintainedby a Depository under Section 111 <strong>of</strong> the Depositories Act shall be deemed to the Register<strong>and</strong> index <strong>of</strong> Members <strong>and</strong> Register <strong>and</strong> index <strong>of</strong> Debenture holders, as the case may be,for the purpose <strong>of</strong> the Act. The Company shall have the power to keep in any state orcountryoutside <strong>India</strong> a branch Register <strong>of</strong> Members resident in that state or country.61(xvii) The Company shall keep a Register <strong>of</strong> Transfer <strong>and</strong> shall have recorded therein fairly<strong>and</strong> distinctly particulars <strong>of</strong> every transfer ortransmissionn <strong>of</strong> any share held in materialform.Death <strong>of</strong>one or more joint-holders<strong>of</strong> securities.Every holder <strong>of</strong>share(s) in <strong>and</strong>/or debenture(s) <strong>of</strong> theCompany may at any time nominate in themanner prescribed under the Act a person to whomhis share(s) in <strong>and</strong>/or debenture(s) <strong>of</strong> theCompany shall vest in the event <strong>of</strong> his death.Where the share(s) in <strong>and</strong> /or debenturee <strong>of</strong> the Company, are heldby more than the one personjointly, all the joint holdersmay together nominate in the manner prescribedunder the Act aperson to whomall the rights in the share(s) <strong>and</strong>/ordebenture(s) <strong>of</strong> the Company, as thecasemay be shall vest in the event <strong>of</strong> death <strong>of</strong> all the joint holders.Notwithst<strong>and</strong>ing anything contained in any other lawfor the time being in forceor in these articleor in any disposition, whether testamentary or otherwise, in respect <strong>of</strong> such share(s) in , <strong>and</strong>/ordebenture(s) <strong>of</strong>the Company, where a nomination made in the manner prescribed under the Actpurports to confer on any person the right to vest the share(s) in <strong>and</strong>/or debenture(s) <strong>of</strong> theCompany the nominee shalll on the death<strong>of</strong> the shareholder <strong>and</strong>/ or debenturee holder concernedor on the death<strong>of</strong> all the joint holder, as the case may be, became entitled to all the rights inrelation to such share(s) <strong>and</strong>/or debenture(s) to the exclusion <strong>of</strong> all other person unless thenomination is varied cancelled in the manner prescribed under theAct.Where the nominee is a minor the holder<strong>of</strong> the share(s) in <strong>and</strong>/ordebenture(s) <strong>of</strong> the Company,canmake a nomination in the manner prescribed under the Act toappoint anyperson to becameentitled to the share(s) in <strong>and</strong>/or debentures(s) <strong>of</strong> theCompany inthe event <strong>of</strong> his death duringtheminority.290
Scotts Garments Limited62Notwithst<strong>and</strong>ing anything contained in these article any person who became a nominee by virtue<strong>of</strong> the provision<strong>of</strong> Article 60 upon the production <strong>of</strong> such evidence as may be required by the<strong>Board</strong> <strong>and</strong> subject as hereinafter providedd may elect either.Tobe registeredhimself as holder <strong>of</strong> the share(s) <strong>and</strong>/ /or debenture(s) as the casemay be orTomake such transfer <strong>of</strong> the share(s) <strong>and</strong>/ or debenture(s) as the case may be as the deceasedshareholder <strong>and</strong>debenture holder as the case may be could have made.If the person being a nominee so becoming entitled elects to be registered as holder <strong>of</strong> the share(s)<strong>and</strong>/or debenture(s) himself he shall deliver or send to the Company, notice in writing dulysigned by him starting thatt he so elects<strong>and</strong> such notice shall beaccompanied with the deathcertificate <strong>of</strong> thedeceased shareholder <strong>and</strong>/or debenture holder, asthe case maybe.636465All the limitation restriction<strong>and</strong> provision <strong>of</strong> the Act relating tothe right totransfer <strong>and</strong> theregistration transfer <strong>of</strong> share(s) <strong>and</strong>/or debenture (s) shall be applicable to any such notice ortransfer as aforesaid as if the death <strong>of</strong> the share holder/debenture holder hadnot occurred<strong>and</strong>thenotice or transfer were a transfer signed by that shareholder <strong>and</strong>/or debenture holder as thecase may be.A person, beingnominee becoming entitled to the share(s) <strong>and</strong>/ordebenture(s) by reason <strong>of</strong> thedeath <strong>of</strong> the shareholder shall be entitledto the same dividend <strong>and</strong>other advantage to which hewould be entitled if he were the registered a member in respect <strong>of</strong> hisshare(s) <strong>and</strong>/ordebenture(s) expect that he shall not, before being registered a member in respect <strong>of</strong> his share(s)or debenture(s)be entitled in respect <strong>of</strong> it to exercise any right conferred bymembership inrelation to meeting <strong>of</strong> the Company.Provided that the <strong>Board</strong> may, at any time give notice requiring any such person to elect either toberegistered himself or to transfer the share(s) <strong>and</strong>/ or debenture(s) <strong>and</strong> ifthe notice is notcomplied with within ninetydays, the <strong>Board</strong> may hereinafter withhold payment <strong>of</strong> all dividendbounces or other moneys payable in respect <strong>of</strong> the share(s) <strong>and</strong>/or debenture(s) until therequirement <strong>of</strong> the notice have been complied with.No transfer to infant, etc.Noshare shall in any circumstances be transferred toany infant, insolvent or person <strong>of</strong> unsoundmind.Registration <strong>of</strong> persons entitled to share otherwise than by transfer.Subject to the provisions <strong>of</strong> the Act <strong>and</strong> Articles 60 <strong>and</strong> 61 any person becomingentitled to sharesin consequences <strong>of</strong> the death, lunacy, bankruptcy or insolvency <strong>of</strong>any memberor by any lawfulmeans other than by transfer in accordance with thesee articles maywith the consent <strong>of</strong> the <strong>Board</strong>(which it shalll not be under any obligation to give), upon producing such evidence that hesustains the character in respect <strong>of</strong> whichh he proposes to act under this Articleor <strong>of</strong> such title asthe<strong>Board</strong> thinks sufficient, either be registered himself as the holder <strong>of</strong> the shares or elect tohavesome person nominated by him <strong>and</strong> approved by the<strong>Board</strong> registered as suchholder providednevertheless, that if such person shall elect to have his nominee registered, he shall testify theelection by executing in favour <strong>of</strong> his nominee an instrument <strong>of</strong> transfer in accordance with theprovisions herein contained <strong>and</strong> until he does so, he shall not be freed from any liability in respect<strong>of</strong> the shares.291
Scotts Garments LimitedPersons entitled may receive dividend.66A person entitled to a shareby transmission shall, subject to the right <strong>of</strong> the Directors to retainsuch dividendsor money as hereinafter provided, be entitled toreceive <strong>and</strong>may be given adischarge for, any dividendsor other moneys payable in respect <strong>of</strong> the share.No Fee on transfer or transmission.67N<strong>of</strong>ee shall becharged forregistration <strong>of</strong> transfer, transmission, Probate, Succession certificate<strong>and</strong> Letters <strong>of</strong> administrationn, Certificate <strong>of</strong> Death or Marriage, Power <strong>of</strong> Attorney or similar otherdocument withthe Company.BORROWING POWERSPowers to borrow70 Subject to the provision <strong>of</strong> Section 292 <strong>of</strong> the Act the <strong>Board</strong> may, from time to time at its discretionbya resolution passed at a meeting <strong>of</strong> the <strong>Board</strong> accept deposits from memberseither in advance<strong>of</strong> calls or otherwise <strong>and</strong> generally raise or borrow orsecure the payment <strong>of</strong> any sum or sums <strong>of</strong>money for the purpose <strong>of</strong> the Company. Provided however, where the moneys to be borrowedtogether with the moneys already borrowed (apartfrom temporary loan obtained fromtheCompany's bankers in the ordinary course <strong>of</strong> business) exceed the aggregate <strong>of</strong> the paid up capital<strong>of</strong> the Company <strong>and</strong> its freee reserves (not being reserves set apart for any specific purpose) the<strong>Board</strong> shall not borrow suchmoneys without the consent <strong>of</strong> the Company in General Meeting.Paymentor repayment <strong>of</strong> moneys borrowed.71727374The payment orrepayment <strong>of</strong> moneys borrowed as aforesaid may be secured insuch manner <strong>and</strong>upon such terms <strong>and</strong> conditions in all respects asthe Ordinary Resolution shall prescribeincluding by the issue <strong>of</strong> debentures or debenture-stock <strong>of</strong> the Company, charged upon all or anypart <strong>of</strong> the property <strong>of</strong> the Company (both present <strong>and</strong> future), ncluding its uncalled capital forthetime being <strong>and</strong> debentures, debenture-stock <strong>and</strong> other securities may be made assignablefromany equities between the Company <strong>and</strong> the person to whom the same may be issued.Terms <strong>of</strong>issue <strong>of</strong> Debentures.Any debenture, debenture-stocmay be issued on condition that they shall be convertible into shares <strong>of</strong>anyor other securities may be issued at a discount, premium orotherwise <strong>and</strong>denomination,<strong>and</strong> with any privileges <strong>and</strong> conditions as to redemption, surrender, drawingallotment <strong>of</strong> shares <strong>and</strong> attending (but not voting) at General Meetings, appointment <strong>of</strong> Directors<strong>and</strong> otherwise. Debentures with the rightto conversion into or allotment <strong>of</strong> shares shall be issuedonly with the consent <strong>of</strong> the Company in General Meeting accordedd by a SpecialResolution.Register <strong>of</strong> Mortgages, etc. to be kept.The <strong>Board</strong> shall cause a proper Register to be kept inaccordance with the provisions <strong>of</strong> Section143 <strong>of</strong> the Act <strong>of</strong> all mortgages, debentures <strong>and</strong> charges specifically affecting the property <strong>of</strong> theCompany; <strong>and</strong> shall cause the requirements <strong>of</strong> Sections 118, 125 <strong>and</strong> 127 to 144 (both inclusive) <strong>of</strong>theact in that behalf to be duly complied with, so far as they fall to be complied with by the<strong>Board</strong>.Register <strong>and</strong> Index <strong>of</strong>Debenture-holders.The Companyshall, if atany time it issues debentures, keep a Register <strong>and</strong> Index <strong>of</strong>Debenture-holders in accordance with Section 152 <strong>of</strong> the Act. The Company shall have the powerto keep in any state or country outside <strong>India</strong> a branch Register <strong>of</strong>Debenture-holders resident inthat State or Country.292
Scotts Garments LimitedSHARE WARRANTS7576Power toissue share warrants.The Company may issue share warrants subject to <strong>and</strong> in accordance with the provisions <strong>of</strong>Sections 114 <strong>and</strong> 115; <strong>and</strong> accordingly the <strong>Board</strong> mayin its discretion, with respect to any sharewhich is fully paid upon application in writing signed by the persons registered as holder <strong>of</strong> theshare <strong>and</strong> authenticated by such evidence (if any) as the <strong>Board</strong> may, from time to time require asto the identity <strong>of</strong> the person signing the application, <strong>and</strong> on receiving the certificate (if any) <strong>of</strong> theshare, <strong>and</strong> the amount <strong>of</strong> thestamp duty on the warrant <strong>and</strong> such fee as the <strong>Board</strong> may fromtimeto time require,issue a sharewarrant.Deposit <strong>of</strong> share warrantThe bearer <strong>of</strong> a share warrant may at anytime deposit the warrant at the <strong>of</strong>fice<strong>of</strong> the Company,<strong>and</strong> so long asthe warrant remains sodeposited, the depositorshall have the same right <strong>of</strong>signing a requisition for calling a meeting <strong>of</strong> the Company, <strong>and</strong><strong>of</strong> attending, <strong>and</strong> voting<strong>and</strong>exercising the other privileges <strong>of</strong> a member at any meeting held after the expiry<strong>of</strong> two cleardaysfrom the time <strong>of</strong> deposit, as if his name were inserted in the Register <strong>of</strong> Members as the holder <strong>of</strong>theshare included in the deposited warrant.Not more than one person shall be recognised as depositor <strong>of</strong> the share warrant.77The Company shall, on two days' written notice, return the deposited share warrant to thedepositor.Privileges <strong>and</strong> disabilities <strong>of</strong> the holders <strong>of</strong> share warrant.Subject as herein otherwise expressly provided, no persons shall, as bearer <strong>of</strong> a share warrant,sign a requisition for callinga meeting <strong>of</strong> the Company or attendor vote or exercise any otherprivileges <strong>of</strong> a member at a meeting <strong>of</strong> the Company, or be entitledto receive any notices fromtheCompany.The bearer <strong>of</strong> a share warrant shall be entitled in all other respect to the same privileges<strong>and</strong>advantages as if he were named in the Register <strong>of</strong> Members as the holder <strong>of</strong> theshare included inthewarrant, <strong>and</strong> he shall be a member <strong>of</strong> the Company.Issue <strong>of</strong> new share warrant or coupon.78 The <strong>Board</strong> may, from time totime, make rules as to the terms on which (if it shall think fit) a newshare warrant or coupon may be issued by way <strong>of</strong> renewal incase <strong>of</strong> defacement, loss ordestruction.MEETINGS OF MEMBERSAnnual General Meeting—AnnualReturn.81The Company shall in each year hold a General Meeting as its Annual General Meeting inaddition to anyother meetings in that year. All General Meetings, other thanAnnual GeneralMeetings shall be called “ExtraordinaryGeneral Meetings”. The first AnnualGeneral Meetingshall be held within six months after theexpiry <strong>of</strong> the financial year in which the Companywasestablished <strong>and</strong>thereafter an Annual General Meeting <strong>of</strong> the Company shall be held within sixmonths after the expiry <strong>of</strong> each financial year provided that not more than fifteen months shalllapse between the date <strong>of</strong> one Annual General Meeting <strong>and</strong> that <strong>of</strong>the next. Nothing contained in293
Scotts Garments Limited8286theforegoing provisions shall be taken as affecting the right conferred upon the Registrar undertheprovisions <strong>of</strong> Section 166(1) <strong>of</strong> the Act to extend the time within which any Annual GeneralMeeting may be held. EveryAnnual General Meetingshall be called for a time during businesshours, on a daythat is not a public holiday, <strong>and</strong> shalll be held at the Office <strong>of</strong> the Companyor atsome other place within thecity in which the <strong>of</strong>fice <strong>of</strong> the Company is situate as the <strong>Board</strong>maydetermine <strong>and</strong> the Notices calling the Meeting shall specify it as theAnnual General Meeting. TheCompany may in any one Annual General Meeting fixthe time for its subsequent Annual GeneralMeetings. Everymember <strong>of</strong> the Company shall be entitled to attend either in person or by proxy<strong>and</strong> the Auditor <strong>of</strong> the Company shall have the right to attend <strong>and</strong> to be heard at any GeneralMeeting whichh he attends on any part <strong>of</strong> the business which concerns him as Auditor. At everyAnnual General Meeting <strong>of</strong>the Company, there shall be laid on the table theDirector's Report<strong>and</strong> Audited Statement <strong>of</strong> Accounts, Auditor's Report(if not already incorporated in the AuditedStatement <strong>of</strong> Accounts), theProxy Register with proxies <strong>and</strong> the Register <strong>of</strong> Directors' shareholdings whichh latter register shall remain open <strong>and</strong> accessible during the continuance <strong>of</strong> themeeting. The <strong>Board</strong> shall cause to be prepared the Annual List <strong>of</strong> members, Summary <strong>of</strong> the ShareCapital, Balance Sheet <strong>and</strong> Pr<strong>of</strong>it <strong>and</strong> Loss Account<strong>and</strong> forwardthe same to the Registrar inaccordance withSections 159, 161 <strong>and</strong> 220<strong>of</strong> the Act.Extraordinary General Meeting.The <strong>Board</strong> may, whenever it thinks fit, call an Extra ordinary General Meeting<strong>and</strong> it shall do soupon a requisition in writing by any member or members holdingin the aggregate not lesss thanone-tenth <strong>of</strong> such <strong>of</strong> the paidup capital as at that date carries the right <strong>of</strong> voting in regard to thematter in respect <strong>of</strong> which the requisitionhas been made.Twenty one days' notice <strong>of</strong> meeting to be given.Atleast Twenty-one days' notice <strong>of</strong> every General Meeting—Annual or Extraordinary — <strong>and</strong> bywhomsoever called specifying the day, place <strong>and</strong> hour <strong>of</strong> meeting, <strong>and</strong> the general nature <strong>of</strong> thebusiness to be transacted thereat shall be given in the manner hereinafter provided, to suchpersons as are under these Articles entitled to receive notice from the Company. Provided that inthecase <strong>of</strong> an Annual General Meeting with the consent in writing<strong>of</strong> all the members entitled tovote thereat <strong>and</strong> in case <strong>of</strong> any other meeting, with the consent <strong>of</strong> members holding not lesss than95 percent <strong>of</strong> such part <strong>of</strong> the paid-up share capital <strong>of</strong>the Company as gives a right to vote at themeeting, a meeting may beconvened by a shorter notice. In the case <strong>of</strong> anAnnual GeneralMeeting, if anybusiness other than (i) the consideration <strong>of</strong> the Accounts, Balance Sheets<strong>and</strong>Reports <strong>of</strong> the<strong>Board</strong> <strong>of</strong> Directors <strong>and</strong>Auditors, (ii) the declaration <strong>of</strong> dividend, (iii) theappointment <strong>of</strong> Directors inplace <strong>of</strong> those retiring, (iv) the appointment <strong>of</strong>, <strong>and</strong> fixing <strong>of</strong> theremuneration <strong>of</strong> the Auditors is to be transacted, <strong>and</strong> in the case<strong>of</strong> any other meeting, inanyevent, there shall be annexedto the notice <strong>of</strong> the Meeting a statement setting out all materialfactsconcerning eachsuch item <strong>of</strong> business, ncluding in particular the nature or interest if any, therein<strong>of</strong> every Director <strong>of</strong> the concern, <strong>and</strong> the Manager,(if any). Where any such item <strong>of</strong> specialbusiness relates to, or affects any othercompany, the extent <strong>of</strong> shareholdinginterest in othercompany <strong>of</strong> every Director, <strong>and</strong> the Manager if any, <strong>of</strong> the Company shall alsobe set out in thestatement if theextent <strong>of</strong> such share-holding interestt is not less than 20 per cent <strong>of</strong> the paid-upshare capital <strong>of</strong>that other company. Where any item <strong>of</strong> business consists <strong>of</strong> according <strong>of</strong> approvalto any document by the meeting, the time <strong>and</strong> place where the document can be inspectedshallbespecified in the statementt aforesaid.294
Scotts Garments Limited88899091General Meeting not to transact business not mentioned in the notice.NoGeneral Meeting, Annual or Extraordinary, shall be competent to enterupon discuss ortransact any business whichh has not been mentioned in the notice or notices upon which themeeting was convened.Quorumat General Meeting.Five Members present in person shall forma quorum for a General Meeting.If quorumnot present meeting to be dissolved or adjourned.If at the expiration <strong>of</strong> halfan hour from the timeappointed for holding a meeting <strong>of</strong> theCompany, a quorum shall not be present, the Meeting if convenedby or uponthe requisition <strong>of</strong>Members, shalll st<strong>and</strong> dissolved, but in any other case the Meeting shall st<strong>and</strong>adjourned to thesame day in thenext week or if that day is a public holiday until the next succeeding day which isnot a public holiday at the same time <strong>and</strong> place or at such other time <strong>and</strong> place within the citytown or villagein which the RegisteredOffice <strong>of</strong> the Companyis situated as the <strong>Board</strong>maydetermine, <strong>and</strong>if at such adjourned meeting, a quorum is not present at the expiration <strong>of</strong> half anhour from the time appointed for holding the meeting, the Members present shall be a quorum,<strong>and</strong> may transact the business for which the Meeting was called. It shall not benecessary togiveany notice <strong>of</strong> anadjournment or <strong>of</strong> the business to be transacted at an adjournedd meeting.Chairman <strong>of</strong> General Meeting.The Chairman <strong>of</strong> the <strong>Board</strong> shall be entitled to take the chair at every GeneralMeeting whetherAnnual or Extra Ordinary. If the Chairman is unable or unwilling to take the chair or if he is notpresent within fifteen minutes <strong>of</strong> the time appointed for holding such meeting then theViceChairman shalll be entitled totake the chair at such meeting. If there be no such Chairman <strong>and</strong>/orVice Chairmanif he/they are unable/unwilling to take the chair, or if he/they are not presentwithin fifteen minutes <strong>of</strong> thetime appointed for holding such meeting, then theDirectors presentshall elect another Directorr as Chairman, <strong>and</strong> if no Director is present, or ifall the Directorspresent declinee to take the chair, then the members present shall elect one <strong>of</strong> their number to betheChairman.Scrutineers at poll.97Where a poll is to be taken the Chairman <strong>of</strong> the meeting shall appoint two scrutineers to scrutinisethevote given on the poll <strong>and</strong> to report thereon to him. One <strong>of</strong> thescrutineers so appointedshallalways be a member (not being an <strong>of</strong>ficer or employee <strong>of</strong> the Company) present at the meeting,provided such a member is available <strong>and</strong>willing to beappointed. The Chairmanshall have powerat any time before the result <strong>of</strong> the polll is declared to remove a scrutineer from <strong>of</strong>fice <strong>and</strong> fillvacancies in the<strong>of</strong>fice <strong>of</strong> scrutineer arising from such removal or from any othercause.Passing <strong>of</strong> resolutionss by postal ballot1000 Subject to the provisions <strong>of</strong> Section 192A <strong>of</strong> the Act read with the Companies (passing <strong>of</strong>resolutions by postal ballot) rules, 2001, the Company may passs resolutions by way <strong>of</strong> postalballot from timeto time.VOTES OF MEMBERSMembers in arrears not to vote.1011 Nomember shall be entitled to vote either personally or by proxy at any General Meeting ormeetings <strong>of</strong> class <strong>of</strong> shareholders either upon a show<strong>of</strong> h<strong>and</strong>s orupon a polll in respect <strong>of</strong> anyshares registered in his name on which any calls or other sums presently payable by him have not295
Scotts Garments Limitedbeen paid or in regard to which the Company has, <strong>and</strong>has exercised, any right <strong>of</strong> lien.Number<strong>of</strong> votes to which Member entitled.102Subject to the Provisions <strong>of</strong> these Articles <strong>and</strong> without prejudice to any special privileges orrestrictions as to voting forthe time being attachedto any class <strong>of</strong> shares for the time beingforming part <strong>of</strong>the capital <strong>of</strong> the Company, every member, not disqualified by the last precedingArticle shall beentitled to be present <strong>and</strong> to speak <strong>and</strong> vote at such meeting, <strong>and</strong> on a show <strong>of</strong>h<strong>and</strong>s every member present in person shall have one vote <strong>and</strong> upon a poll the voting right <strong>of</strong>every member present in person shall have one vote<strong>and</strong> upon a poll the voting right <strong>of</strong> everymember present in person or by proxy shall be in proportion to his share <strong>of</strong> the paid-up equityshare capital <strong>of</strong>the Company. Provided, however, if any preference shareholderr be present at anymeeting <strong>of</strong> the Company, save as provided in Section 87 (2) (b) <strong>of</strong> the Act, he shall have a right tovote only on resolution placed before themeeting which directly affects the right attached to hispreference shares.Casting <strong>of</strong> votes by a member entitled to more than one vote.103Ona poll takenat a meeting <strong>of</strong> the Company a member entitledto more than one vote, or hisproxy or other persons entitled to vote for him as the case may be, need not, if he votes, use all hisvotes or cast in the same wayall the voteshe uses.Votes <strong>of</strong> joint-members.105If there be jointregistered holders <strong>of</strong> anyshares, any one <strong>of</strong> such person may vote at any meetingor may appointanother person (whethera member ornot) as his proxy in respect <strong>of</strong> such shares,as if he were solely entitled thereto but the proxy so appointed shall not have any right to speak atthemeeting <strong>and</strong>, if more than one <strong>of</strong> such joint holders be presentat any meeting that one <strong>of</strong> thesaid persons sopresent whose name st<strong>and</strong> higher on the Register shall alone beentitled to speak<strong>and</strong> to vote in respect <strong>of</strong> suchshares, but the other or others <strong>of</strong> the joint-holders shall be entitled tobepresent at the meeting. Several executors or administrators <strong>of</strong>a deceased member in whosename shares st<strong>and</strong> shall for the purpose <strong>of</strong> these Articles be deemedd joint holders there<strong>of</strong>.Voting inperson or by proxy.106Subject to the provisions <strong>of</strong>these Articles votes maybe given either personally or by proxy. Abody corporatebeing a member may voteeither by a proxy or by a representative duly authorisedin accordance with Section 187 <strong>of</strong> the Act<strong>and</strong> such representativeshall be entitled to exercise thesame rights <strong>and</strong> powers (including the right to vote by proxy) onbehalf <strong>of</strong> the body corporatewhich he represents as that body could exercise if it were an individual member.Votes in respect <strong>of</strong> shares <strong>of</strong> deceased <strong>and</strong> insolvent Member.107Any person entitled under Article 64 to transfer any share may vote at any General Meeting inrespect there<strong>of</strong> in the same manner as ifhe were theregistered holder <strong>of</strong> suchshares providedthat forty-eightt hours atleast before the time <strong>of</strong> holding the meeting or adjourned meeting as thecase may be at which he proposes to votehe shall satisfy the Directors <strong>of</strong> his right to transferr suchshares <strong>and</strong> givesuch indemnity (if any) as the Directors may require or the Directors shall havepreviously admitted his right to vote at such meeting in respect there<strong>of</strong>.Appointment <strong>of</strong> proxy.108Every proxy (whether a member or not) shall be appointed in writing under the h<strong>and</strong> <strong>of</strong> theappointer or his attorney or if such appointer is a corporate body under the common seal <strong>of</strong>suchcorporation, or be signed byan <strong>of</strong>ficer orany attorney duly authorised by it, <strong>and</strong> any committee296
or guardian may appoint such proxy. The proxy so appointed shall not have any right to speak atthemeetings.Proxy tovote only ona poll.110A member present by proxyshall be entitled to vote only on a poll.Chairman <strong>of</strong> the meeting to be the judge <strong>of</strong> validity <strong>of</strong> any vote.115The Chairman <strong>of</strong> any meeting shall be thesole judge <strong>of</strong> the validity<strong>of</strong> every vote tendered atsuchmeeting. The Chairman present at the taking <strong>of</strong> a poll shall be the sole judge<strong>of</strong> the validity <strong>of</strong>every vote tendered at such poll.116The Company shall cause minutes <strong>of</strong> all proceedings <strong>of</strong> every General Meeting to be kept bymaking within thirty days <strong>of</strong> the conclusion <strong>of</strong> everysuch meeting concerned,entries there<strong>of</strong> inbooks kept forthat purpose with their pages consecutively numbered. Minutes <strong>of</strong> GeneralMeeting <strong>and</strong> inspection there<strong>of</strong> by members.Each page <strong>of</strong> every such book shall be initialled or signed <strong>and</strong> the last page<strong>of</strong> the record <strong>of</strong>proceedings <strong>of</strong> each meetingin such bookshall be dated <strong>and</strong> signed by the Chairman <strong>of</strong> the samemeeting withinthe aforesaidperiod <strong>of</strong> thirty days or in the event <strong>of</strong> the death or inability <strong>of</strong> theChairman within that period, by a Director duly authorised by the <strong>Board</strong> for thepurpose.In no case the minutes <strong>of</strong> proceedings <strong>of</strong> a meeting shall be attachedto any suchbook as aforesaidbypasting or otherwise.The minutes <strong>of</strong> each meetingshall containn a fair <strong>and</strong> correct summary <strong>of</strong> the proceedings thereat.All appointments <strong>of</strong> Officers made at any meeting aforesaid shalll be includedd in the minutes <strong>of</strong>themeeting.Nothing hereincontained shall require orbe deemed to require theinclusion inany such minutes<strong>of</strong> any matter which in the opinion <strong>of</strong> the Chairman <strong>of</strong> the meeting (a) is or could necessarily beregarded as defamatory <strong>of</strong> any person, or (b) is irrelevant or immaterial to the proceedings, or (c)detrimental to the interest <strong>of</strong> the Company. The Chairman <strong>of</strong> the meeting shall exercise anabsolute discretion in regardto the inclusion or non-inclusion <strong>of</strong> any matter in the minutes on theaforesaid grounds.Any such minutes shall be evidence <strong>of</strong> the proceedings recorded therein.The book containing the minutes <strong>of</strong> proceedings <strong>of</strong> General Meeting shall be kept at the <strong>of</strong>fice <strong>of</strong>theCompany <strong>and</strong> shall be open duringbusiness hours, for suchperiods as the Directorsmaydetermine, for the inspectionn <strong>of</strong> any member without charge.DIRECTORSNumber<strong>of</strong> Directors117Until otherwisee determined by a General Meeting <strong>of</strong> the Company <strong>and</strong> subject tothe provisions <strong>of</strong>Section 252 <strong>of</strong> the Act, the number <strong>of</strong> the Directors shall not be less than three nor morethantwelve. The present Directors <strong>of</strong> the Company are:1.Mr. Naseer AhmedScotts Garments Limited297
Scotts Garments Limited2. Mrs. Nuzhat Aisha Naseer3. Mr. A. Arumugham118Subject to the provisions <strong>of</strong> the Act <strong>and</strong> within the overall limit prescribed under these Articles forthenumber <strong>of</strong>Directors on the <strong>Board</strong>,the <strong>Board</strong> may appointany SeniorExecutive <strong>of</strong> theCompany as a whole-time Director <strong>of</strong> the Company for such period <strong>and</strong> upon such terms<strong>and</strong>conditions as the <strong>Board</strong> may decide. A Senior Executive so appointed shall begoverned by thefollowing provisions:When no Executive Chairman is appointed, the Whole-time Director or Directors, shall function,subject to the supervision <strong>and</strong> control <strong>of</strong> the Managingg Director or Managing Directors.His remuneration shall be fixed by the<strong>Board</strong> <strong>and</strong> shall be payable out <strong>of</strong> the funds <strong>of</strong> theCompany subject to the provisions <strong>of</strong> the Act <strong>and</strong> approval <strong>of</strong> the Company in the GeneralMeeting.Heshall not be required tohold any qualification share for his appointmenas a whole-timeDirector <strong>of</strong> the Company.119Nothing contained in this Article shall be deemed to restrict or prevent the right <strong>of</strong> the <strong>Board</strong> torevoke, withdraw, alter, vary or modify all/or any<strong>of</strong> such powers, authorities, duties<strong>and</strong>responsibilitiesconferred upon or vested in or entrusted to such whole-time Directors.120In connection with any collaboration arrangement with any company or corporation or firm orperson for supply <strong>of</strong> technical know-how <strong>and</strong>/or machinery or technical advice, the Directorsmay authorise such Company, Corporation, firm or person (hereinafter in this clause referred toas “Collaborator”) to appoint from time to time, any person or persons as Director or Directors <strong>of</strong>theCompany (hereinafter referred to as `Special Director’) <strong>and</strong>may agree that such specialdirector shall not be liable to retire by rotation <strong>and</strong> need not possess any qualification shares toqualify him for the <strong>of</strong>fice <strong>of</strong> such Director, so however, that such Special Director shall hold <strong>of</strong>ficeso long as such collaboration arrangement remains in force unless otherwise agreed uponbetween the Company <strong>and</strong> such Collaborator arrangements or at any time thereafter.The Collaborator may at any time <strong>and</strong>from time to time remove any such special directorappointed by it<strong>and</strong> may at the time <strong>of</strong> such removal <strong>and</strong> also in thecase <strong>of</strong> death or resignation <strong>of</strong>theperson so appointed, at any time, appoint any other person asa special director in his place<strong>and</strong> such appointment or removal shall be made in writing signed by such Company orCorporation or any partner or such person <strong>and</strong> shall be delivered tothe Company at its registered<strong>of</strong>fice.It is clarified that every collaborator entitled to appoint a Director under this Article may appointone or more such person or persons as Director(s) <strong>and</strong>so that if more than one Collaboratorr is soentitled there may at any time be as many special directors as theCollaborators eligible to maketheappointment.Power toappoint ex-<strong>of</strong>ficio Directors.1211 Whenever Directors enter into a contractt with any Government, Central, State or Local, any bankor financial institution or any person or persons (hereinafter referred to as “the appointer” ”) for298
orrowing any money or forproviding any guaranteee or security or for technical collaboration orassistance or for underwriting or entering into any other arrangement whatsoever, the Directorsshall have, subject to the provisions <strong>of</strong>Section 255 <strong>of</strong> the Act, the power to agree that suchappointer shalll have the right to appoint or nominate by a notice in writingaddressed to theCompany one or more Directors on the <strong>Board</strong> for such period <strong>and</strong>upon such conditions asmaybementioned in the agreement <strong>and</strong> that such Director or Directors may not beliable to retire byrotation nor berequired to hold any qualification shares. The Directors may also agree that anysuch Director or Directors may be removed from timeto time by the appointer entitled to appointor nominate them <strong>and</strong> the appointer mayfill any vacancy that may occur as a result <strong>of</strong> anysuchDirector or Directors ceasing to hold that <strong>of</strong>fice for any reason whatsoever. The Directorsappointed or nominated under this Article shall be entitled to exercise <strong>and</strong> enjoy all or any <strong>of</strong> therights <strong>and</strong> privileges exercised <strong>and</strong> enjoyed by the Directors <strong>of</strong> theCompany ncluding payment,remuneration <strong>and</strong> travelling expenses to such Director or Directors as may be agreed by theCompany with the appointer.Directors' power to add to the <strong>Board</strong>.124Subject to the provisions <strong>of</strong> Section 260, 261 <strong>and</strong> 264, the <strong>Board</strong> shall have power at any time <strong>and</strong>from time to time to appoint any other qualified person to be an additional Director, but sothatthetotal number <strong>of</strong> Directors shall not at any time exceed twelve. Any such additional Directorshall hold <strong>of</strong>ficeonly up to the date <strong>of</strong> thenext Annual General Meeting.Directors' power to fill casual vacancies.125Subject to the provisions <strong>of</strong> Section 261, 264 <strong>and</strong> 284 (4) the <strong>Board</strong>shall have power at anytime<strong>and</strong> from time to time to appoint any other qualified person tobe a Director to fill a casualvacancy. Any person so appointed shall hold <strong>of</strong>fice only up to the date upto which the Director inwhose place heis appointedwould have held <strong>of</strong>fice if it had not been vacated byhim.Remuneration <strong>of</strong> Directors.Scotts Garments Limited126Subject to the provisions <strong>of</strong> the Act, the Executive Chairman or a Managing Director or Director,who is in the whole-time employment <strong>of</strong>the Company may be paid remuneration either byway<strong>of</strong> a monthly payment or at a specified percentage <strong>of</strong> the net pr<strong>of</strong>its <strong>of</strong> the Company or partly byone way <strong>and</strong> partly by the other.Subject to the provisions <strong>of</strong> the Act, a Director other than the Executive Chairman or a Director inthewhole-time employmentor a Managing Director may be paid remunerationeither:byway <strong>of</strong> monthly, quarterly or annual payment withthe approval<strong>of</strong> the Central Government; orbyway <strong>of</strong> commission if the Company bya special resolution authorised such payment.The fee payable to a Director (includingthe Executive Chairman or a Managing or WholetimeDirector, if any)for attending a meeting <strong>of</strong> the <strong>Board</strong> or Committeee there<strong>of</strong> shalll be decided by the<strong>Board</strong> <strong>of</strong> Directors from time to time within the minimum limit <strong>of</strong> such a fee that may beprescribed by the Central Government under the proviso to section 310 <strong>of</strong> the CompaniesAct,1956.Director may contractt with Company.130(a)A Director or his relative, a firm in which such Director or relative is a partner, or any otherpartner in suchfirm or a private company <strong>of</strong> whichh the Directorr is a member or directorr may299
enter into any contract with the Companyfor the sale, purchase oror services, or for underwriting the subscription <strong>of</strong> any shares in,subject to the provisions <strong>of</strong> the Section 297 <strong>of</strong> the Act.(b) No sanctionn shall, however, be necessary for :Scotts Garments Limitedsupply <strong>of</strong> anygoods, materials,or debentures <strong>of</strong> the Companyany purchase <strong>of</strong> goods <strong>and</strong> materials from the Company, or the sale <strong>of</strong> goods or materials to theCompany, by any such Director, relative,firm, partnerr or private company as aforesaid for cash atprevailing market prices; orany contract orcontracts between the Company on one side <strong>and</strong> any such Director, relative, firmpartner or private company on the other side for sale, purchase or supply <strong>of</strong> any goods, materials<strong>and</strong> services inwhich either the Company or the Director, relative firm partner or privatecompany, as the case may be regularly trades or does business, where the value<strong>of</strong> the goods <strong>and</strong>materials or the cost <strong>of</strong> such services does not exceed ` 5,000/-in the aggregate in anyyearcomprised in the period <strong>of</strong> the contractt or contracts. Provided that in circumstances <strong>of</strong> urgentnecessity, a Director, relative, firm partner or private company as aforesaid may withoutobtaining the consent <strong>of</strong> the<strong>Board</strong> enterinto any such contract with the Company for thesale,purchase or supply <strong>of</strong> any goods, materials or services even if the value <strong>of</strong> suchgoods or thecost<strong>of</strong> such services exceeds ` 5000/- in theaggregate in any year comprised in the period <strong>of</strong> thecontract if the consent <strong>of</strong> the <strong>Board</strong> shall be obtainedto such contract or contracts at a meetingwithin three months <strong>of</strong> the date on whichh the contract was entered into.Disclosure <strong>of</strong> interest.1311 A Director <strong>of</strong> the Companywho is in any way—whether directly or indirectly—concerned orinterested in a contract or arrangement, or proposed contract or arrangement entered into or to beentered into byor on behalf<strong>of</strong> the Company shall disclose the nature <strong>of</strong> his concern or interest ata meeting <strong>of</strong> the <strong>Board</strong> in the manner provided in Section 299 (2) <strong>of</strong> the Act, provided that itshallnot be necessary for a director to disclose his concernn or interest in any contract or arrangemententered into orto be entered into with any other company where any <strong>of</strong> the Directors <strong>of</strong> theCompany or two or more <strong>of</strong> them together holds or hold not more than two percent <strong>of</strong> thepaid-up share capital in any such other company.General Notice <strong>of</strong> Interest.132A general Notice given to the <strong>Board</strong> by the Director tothe effect that he is a director or member <strong>of</strong>specified body corporate or is a member <strong>of</strong> a specifiedfirm <strong>and</strong> is to be regarded as concerned orinterested in any contract orarrangement which mayafter the date <strong>of</strong> the notice be enteredintowith that bodycorporate or firm shall be deemed to be a sufficient disclosure <strong>of</strong> concern orinterest in relation to any contract or arrangement so made. Any such general notice shall expireat the end <strong>of</strong> the financial year in which it is given butmay be renewed for a further period <strong>of</strong> onefinancial year inwhich it would have otherwise expired. No such general notice, <strong>and</strong> no renewalthere<strong>of</strong> shall be <strong>of</strong> effect unless, either it is given at a meeting<strong>of</strong> the <strong>Board</strong> or the Directorconcerned takesreasonable steps to secure that it is brought up <strong>and</strong>read at the first meeting <strong>of</strong> the<strong>Board</strong> after it isgiven.Interested Directors not to participate or vote in<strong>Board</strong>'s proceedings.1333 NoDirector shall as a director, take any part in thediscussion <strong>of</strong>, or vote on any contract orarrangement entered into or to be entered into by oron behalf <strong>of</strong> the Company, if he is inany300
way, whether directly or indirectly, concerned or interested in such contract orarrangement, norshall his presence count for the purpose <strong>of</strong> forming a quorum at the time <strong>of</strong> any such discussionor vote <strong>and</strong> if he does vote, his vote shall be void, provided however, that nothing hereincontained shall apply to:any contract <strong>of</strong>indemnity against any loss which theDirectors oranyone or more <strong>of</strong> them,maysuffer by reason<strong>of</strong> becomingor being sureties or a surety for the Company;any contract or arrangemententered intoor to be entered into witha public company or a privatecompany whichh is a subsidiary <strong>of</strong> a public company in which the interest <strong>of</strong> theDirector consistssolely;(i)in his being:a director <strong>of</strong> such company, <strong>and</strong>theholder <strong>of</strong> not more thanshares <strong>of</strong> such number orvalue therein as is requisite to qualifyhimforappointmenas a Director there<strong>of</strong>,he having been nominated as suchdirector bythecompany; or[ii] in his being a member holding not more than 2% <strong>of</strong> its paid-upp share capital.Register <strong>of</strong> contracts in which Directors are interested.Scotts Garments Limited134The Company shall keep a Register in accordance with Section 301 (1) <strong>and</strong> shall within thetimespecified in Section 301 (2) enter therein such <strong>of</strong> the particulars as may be relevant having regardto the application thereto <strong>of</strong> Section 297 or Section 2999 <strong>of</strong> the Act as the case may be. The Registeraforesaid shall also specify, in relation toeach Director <strong>of</strong> the Company the names <strong>of</strong> the bodies,corporate <strong>and</strong> firms <strong>of</strong> which notice has been given by him underArticle 132. The Registershallbekept at the <strong>of</strong>fice <strong>of</strong> the Company <strong>and</strong>shall be open to inspection at such <strong>of</strong>fice, <strong>and</strong> extractsmay be taken therefrom <strong>and</strong>copies there<strong>of</strong> may be required by any member <strong>of</strong> the Company tothesame extent, in the samemanner, <strong>and</strong>on payment<strong>of</strong> the same fee as in the case <strong>of</strong> Register <strong>of</strong>Members <strong>of</strong> theCompany <strong>and</strong> the provisions <strong>of</strong> Section 163 <strong>of</strong> the Act shall apply accordingly.Directorsmay be directors <strong>of</strong> companies promoted by the Company.135A Director maybe or become a Director <strong>of</strong> any company promotedby the Company or in which itmay be interested as vendor, shareholder, or otherwise, <strong>and</strong> no such Director shall be accountableforany benefitsreceived as a director or shareholder <strong>of</strong> such company except in so far as Section309 (6) or Section 314 <strong>of</strong> the Act may be applicable.Retirement by Rotation <strong>of</strong> Directors.136Atevery Annual General Meeting <strong>of</strong> the Company, one third <strong>of</strong> such <strong>of</strong> the Directors for thetimebeing as are liable to retiree or if their number is not three or a multiple <strong>of</strong> three, the numbernearest to one-third shall retire from <strong>of</strong>fice. The Debenture Directors, if any, shall not be countedin determining the number <strong>of</strong> Directors liable to retire by rotation.Company may increase or reduce the number <strong>of</strong> Directors.1411 Subject to Section 259 <strong>of</strong> theAct, the Company may by Ordinary Resolution, from time to time,increase or reduce the number <strong>of</strong> Directors, <strong>and</strong> may,(subject to the provisions <strong>of</strong> Section 284 <strong>of</strong>theAct) remove any director before theexpiration <strong>of</strong> his period <strong>of</strong> <strong>of</strong>fice <strong>and</strong>appoint another301
qualified person in his stead. The personso appointed shall hold <strong>of</strong>fice duringsuch time as theDirector in whose place he isappointed would have held the same if he had not been removed.Disclosure by directorr <strong>of</strong> appointment to any other body corporate.145Every Directorr (including a person deemed to be a Director byvirtue <strong>of</strong> the Explanation tosub-section (1) <strong>of</strong> Section <strong>of</strong> the Act), Managing Director, Manager, or Secretary <strong>of</strong> the Companyshall within twenty days <strong>of</strong> his appointment to any <strong>of</strong> the above <strong>of</strong>fice inany other bodycorporate, disclose to the Company the particularsrelating to his <strong>of</strong>fice inthe other bodycorporate whichh are requiredto be specified under sub-section (1) <strong>of</strong> Section 3033 <strong>of</strong> the Act.Disclosure by a Director <strong>of</strong> his holding <strong>of</strong> shares <strong>and</strong> debentures <strong>of</strong> the Company, etc.146Every Director <strong>and</strong> every person deemedd to be a Director <strong>of</strong> the Company by virtue <strong>of</strong> sub-section(10) <strong>of</strong> Section 307 <strong>of</strong> the Act, shall give notice to the Company <strong>of</strong> such matters relating to himselfas may be necessary for thepurpose <strong>of</strong> enabling the Company to comply withthe provisions <strong>of</strong>that section.MANAGEMENT<strong>Board</strong> may appoint Executive Chairman <strong>and</strong> Managing DirectorsScotts Garments Limited147Subject to the provisions <strong>of</strong> the Act <strong>and</strong> <strong>of</strong> these Articles, the <strong>Board</strong> shall have power to appointfrom time to time any <strong>of</strong> itsmembers as Executive Chairman, Managing Director or ManagingDirectors <strong>of</strong> theCompany for a fixed termnot exceeding five yearsat a time <strong>and</strong>upon such terms<strong>and</strong> conditions as the <strong>Board</strong> thinks fit, <strong>and</strong> subject to the provisions <strong>of</strong> Article 143, the <strong>Board</strong>maybyresolution vest in such Executive Chairman, Managing Directorr or Managingg Directors such <strong>of</strong>thepowers hereby vested inthe <strong>Board</strong> generally as it thinks fit, <strong>and</strong> such powers may be madeexercisable for such period or periods, <strong>and</strong> upon suchconditions <strong>and</strong> subject to such restrictionsas it may determine. The remuneration <strong>of</strong> the Executive Chairman, Managing Director orManaging Directors may be by way <strong>of</strong> monthly payment, fee for each meeting or participation inpr<strong>of</strong>its, or by any or all these modes, or any other mode not expressly prohibited by the Act. TheExecutive Chairman <strong>and</strong> theManaging Director shalll not be required to retire by Rotation underArticle 137. Notwithst<strong>and</strong>ing anything contained in this Article where no Executive Chairman isappointed as such, the <strong>Board</strong> <strong>of</strong> Director may elect, from time totime, any <strong>of</strong> its members, asChairman who shall be subject to retirement by rotation. Subject tothe provisions <strong>of</strong> the Act <strong>and</strong><strong>of</strong> these Article,the <strong>Board</strong> shall have the power to nominate from time to time, any <strong>of</strong> its membersas Vice-Chairman on such terms <strong>and</strong> conditions asthe <strong>Board</strong> thinks fit. The Directors maywhenever theyappoint more than one Managing Director, designate one ormore <strong>of</strong> them as“Joint Managing Director” or “Joint Managing Directors” or “Deputy Managing Director” or“Deputy Managing Directors”, as the case may be, <strong>and</strong> accordingly the expression “ManagingDirector” shall also include<strong>and</strong> be deemed to include “Joint Managing Director” or “DeputyManaging Director” as the case may be.Managing Directors <strong>and</strong> Whole-time Directors to report to Executive Chairman148“The Managing Director or Managingg Director or Directors who are inthe whole timeemployment inthe Company shall subject to supervision <strong>and</strong> control <strong>of</strong> the Executive Chairman,exercise such powers as are vested in themby the <strong>Board</strong>”,Restriction on management.149The Executive Chairman or Managing Director or Managing Directors shall not exercise thepowers to:302
(a)make calls on shareholders in respect<strong>of</strong> money unpaid on the shares in the Company;(b)issue debentures; <strong>and</strong> except to the extent mentioned in the resolution passed at the <strong>Board</strong>meeting under Section 292 <strong>of</strong> the Act shall also notexercise the powers to;(c)borrow moneys otherwise than on debentures;(d)invest the funds <strong>of</strong> the Company; <strong>and</strong>(e)make loansCertain persons not to be appointed as Executive Chairman or Managing Director or Whole-timeDirector.150The Company shall not appoint or employ, or continue the appointment or employment<strong>of</strong> aperson as its Executive Chairman or Managing or Whole-time Director who,is an undischarged insolvent, or has any time been adjudged an insolvent;Scotts Garments Limitedsuspends, or has at any time suspendedd payment to his creditors, or makes, or has at anytimemade, a composition with them, oris, or has at anytime, been, convicted by a Court <strong>of</strong> an<strong>of</strong>fence involving moral turpitude.PROCEEDINGSOF THE BOARD OF DIRECTORSMeetings<strong>of</strong> Directors.152The Directors may meet together as a <strong>Board</strong> for the purpose <strong>of</strong> business from time to time, <strong>and</strong>shall so meet atleast once inevery threee months <strong>and</strong>atleast four such meetings shall be held inevery year. TheDirectors may adjourn <strong>and</strong> otherwise regulate theirmeetings as they think fit.Notice <strong>of</strong> Meetings.153Four clear day'snotice at least <strong>of</strong> every meeting <strong>of</strong> the<strong>Board</strong> shall be given by the Secretary <strong>of</strong> theCompany, if any, or by any person or persons nominated by the Executive Chairman, in writingto every Director at his usual address. Provided, however, that the Chairman <strong>of</strong> the <strong>Board</strong> shallhave the powers to convenee a meeting <strong>of</strong>the <strong>Board</strong> orto request the Secretary <strong>of</strong> the Company toconvene a Meeting <strong>of</strong> the <strong>Board</strong> by giving a shorter notice. Such notice or shorter notice may besent by h<strong>and</strong> delivery or post or by cable or telegram depending upon the circumstances.Quorum.154Subject to Section 287 <strong>of</strong> theAct, the Quorum for a meeting <strong>of</strong> the<strong>Board</strong> shall be one third <strong>of</strong> itstotal strength (excluding Directors, if any, whose places may be vacant at the time <strong>and</strong>anyfraction contained in that one-third being rounded <strong>of</strong>f as one) or two Directors, whichever ishigher provided that where at any time the number <strong>of</strong> interested Directors exceeds or is equal totwo-thirds <strong>of</strong> the total strength the number <strong>of</strong> the remaining Directors, that is to say, the number<strong>of</strong> Directors who are not interested, present at the meeting being not less thantwo, shall be thequorum duringsuch time.Adjournment <strong>of</strong> meeting for want <strong>of</strong> quorum.1555 If a meeting <strong>of</strong> the <strong>Board</strong>could not be held for want <strong>of</strong> quorum, then the meeting shallautomatically st<strong>and</strong> adjourned to such other date <strong>and</strong> time (if any) as maybe fixed by theChairman not being later than seven daysfrom the date originally fixed for the meeting.303
Chairman <strong>and</strong> Vice Chairman.Scotts Garments Limited157The Executive Chairman or Chairman shall be the Chairman <strong>of</strong> the<strong>Board</strong>. If at any meeting <strong>of</strong> the<strong>Board</strong>, the Executive Chairman or Chairman is not present withinfifteen minutes after thetimeappointed for holding the same or if the Executive Chairman or Chairman is unable or unwillingto take the chair, the Vice-Chairman shall be entitled to take the chair at such meeting. If there benosuch Executive Chairmanor Chairman <strong>and</strong> / or Vice-Chairman or if he / they are unable orunwilling to take the chair,or if he / they are not present within fifteen minutes <strong>of</strong> the timeappointed for holding the meeting, then the Directors present may choose any one <strong>of</strong> theirnumber to be the Chairman <strong>of</strong> the meeting.158Questions arising at any meeting <strong>of</strong> the <strong>Board</strong>, shall be decided by a majority <strong>of</strong> vote <strong>and</strong> in thecase <strong>of</strong> an equality <strong>of</strong> votes the Chairmanshall have a second or a casting vote.Powers <strong>of</strong> <strong>Board</strong> Meeting.159A meeting <strong>of</strong> the <strong>Board</strong> forthe time being at which a quorum ispresent shall be competent toexercise all or any <strong>of</strong> the authorities, powers <strong>and</strong> discretion which by or under the Act or theArticles <strong>of</strong> the Company are for the time being vested in or exercisable by the <strong>Board</strong> generally.Directorsmay appoint Committee.160Subject to the restriction contained in Section 292 <strong>of</strong> the Act the <strong>Board</strong> may delegate any <strong>of</strong>theirpowers to Committees <strong>of</strong> the<strong>Board</strong> consisting <strong>of</strong> such Member or Members <strong>of</strong> its body as it thinksfit,<strong>and</strong> it may from time totime revokee <strong>and</strong> discharge any such committee <strong>of</strong> the <strong>Board</strong> eitherwholly or in part <strong>and</strong> either as to persons or purposes, but every committee <strong>of</strong> the <strong>Board</strong> s<strong>of</strong>ormed shall inthe exercise <strong>of</strong> the powers so delegated conform to any regulations that may fromtime to time be imposed on it by the <strong>Board</strong>. All acts done by any such Committee <strong>of</strong> the <strong>Board</strong> inconformity with such regulations <strong>and</strong> infulfilment <strong>of</strong> the purpose <strong>of</strong> their appointment but nototherwise, shalll have the likeforce <strong>and</strong> effect as if done by the <strong>Board</strong>.Resolution by circulation.162Noresolution shall be deemed to have been duly passed by the <strong>Board</strong> or by a Committee there<strong>of</strong>bycirculation unless the resolution has been circulated in draft, bythe Secretary<strong>of</strong> the Company,if any, or by any person orpersons nominated by the Executivee Chairman, together with thenecessary papers if any to all the Directors or to all the Members <strong>of</strong> the Committee, then in <strong>India</strong>(not being less in number than the quorum fixed for a meeting <strong>of</strong> the <strong>Board</strong> or Committee, as thecase may be), <strong>and</strong> to all other Directors or Members <strong>of</strong> the Committee at theirusual address in<strong>India</strong> <strong>and</strong> has been approvedby such <strong>of</strong> the Directors or Members <strong>of</strong> the Committee as are then in<strong>India</strong>, or by a majority <strong>of</strong> such <strong>of</strong> them, asare entitled to vote on theresolution.Powers <strong>of</strong> Directors165The <strong>Board</strong> mayexercise all such powers<strong>of</strong> the Company <strong>and</strong> do all such acts<strong>and</strong> things as arenot by the Companies Act, or any otherAct or by the Memor<strong>and</strong>um or by the Articles <strong>of</strong> theCompany required to be exercised by the Company in General Meeting, subject nevertheless tothese Articles, to the provisions <strong>of</strong> the Act, or any other Act <strong>and</strong>to such regulations being notinconsistent with the aforesaid regulations or provisions, as may beprescribed by the Company inGeneral Meeting but no regulation made by the Company in General Meeting shall invalidate anyprior act <strong>of</strong> the <strong>Board</strong> which would have been valid if that regulation hadnot been made.Provided that the <strong>Board</strong> shall not, except with the consent <strong>of</strong> the Company inGeneral Meetingaccorded by anordinary resolution.304
Scotts Garments Limited(a)sell, lease or otherwise dispose <strong>of</strong> the whole or substantially the whole, <strong>of</strong> the undertaking <strong>of</strong>theCompany, or where the Companyowns morethan one undertaking <strong>of</strong> the whole, orsubstantially the whole <strong>of</strong> any such undertaking;(b)remit, or give time for the repayment <strong>of</strong>, any debt due by a Director;(c)invest otherwise than in trust securities theamount <strong>of</strong> compensationn received by theCompany in respect <strong>of</strong> the compulsory acquisition <strong>of</strong>any such undertakings as is referred to inclause (a) or <strong>of</strong>any premises or properties used for any such undertaking <strong>and</strong>without which itcannot be carried on or can be carried on only with difficulty or only after a considerable time;(d)borrowmoneys where the moneys to be borrowed together with the moneys alreadyborrowed by the Company (apart from temporary loans obtained from the Company's bankers intheordinary course <strong>of</strong> business), will exceed the aggregate <strong>of</strong> the paid-up capital <strong>of</strong> the Company<strong>and</strong> its free reserves that is tosay, reserves not set apart for any specific purpose. Provided furtherthat the powersspecified in Section 292 <strong>of</strong> the Act shall subject to these Articlesbe exercisedonlyat meeting <strong>of</strong> the <strong>Board</strong> unless the same be delegated to the extent therein stated; or(e)contribute to charitable <strong>and</strong> other trusts not directly relating to the business <strong>of</strong> theCompany or the welfare <strong>of</strong> its employees, any amounts the aggregate <strong>of</strong> which will, inanyfinancial year exceed twenty-five thous<strong>and</strong> rupees or five percent <strong>of</strong> its average net pr<strong>of</strong>its asdetermined in accordance with the provisions <strong>of</strong> Sections 349 <strong>and</strong> 350 <strong>of</strong> the Act during the threefinancial years immediatelypreceding, whichever is greater.Certain powers <strong>of</strong> the<strong>Board</strong>.1666 (a)Without prejudice to the general powers conferredby the preceding Article<strong>and</strong> so as not inany way to limit or restrict those powers,<strong>and</strong> withoutt prejudice tothe other powers conferred bythese Articles, but subject tothe restrictions contained in the last preceding Article, it is herebydeclared that the Directors shall have the followingpowers, that is to say power to adopt allpreliminary contracts, if any, entered into by the promoters eitherby enteringinto a contract orwith any otherperson, firmor company on behalf <strong>of</strong> the Company by way<strong>of</strong> ratification orsubstitution <strong>and</strong>to remunerate person orcompany forservices rendered or to be rendered for theformation or promotion <strong>of</strong> the Company or for the acquisition <strong>of</strong> any property, licence,trademarks, letter <strong>of</strong> intent, allotments, know how or similar thing by the Company.(b)Without prejudice to the generality<strong>of</strong> the foregoing, uponthe adoption <strong>of</strong> preliminarycontracts, if any, entered into by <strong>and</strong> between the promoters <strong>and</strong>any other persons, the <strong>Board</strong>shall have power in its absolute discretion to issue <strong>and</strong> allot fully paid Equity or PreferenceShares <strong>of</strong> the Company or by issue <strong>of</strong> Fully <strong>and</strong>/orPartly paid Convertible /Non-ConvertibleDebentures or such other <strong>Securities</strong> or partly by one <strong>and</strong> partly byother, in any combination, inone or more trenches may be thought fit by the <strong>Board</strong>, for consideration in cashorotherwise than in cash to thePromoters or to any other person interms <strong>of</strong> the agreementthatmay be enteredinto betweenthe Company <strong>and</strong> the Promoters or toany other person including.Topay cost, charges <strong>and</strong> expenses preliminary <strong>and</strong> incidentalestablishment <strong>and</strong> registration <strong>of</strong> the Company.to the promotion, formation,305
Scotts Garments Limited(ii)To enter into contracts for the acquisition <strong>of</strong> fixed assets, net current assets, selling rightsetc<strong>and</strong> to enterinto non-compete agreements with any other person, firm or company on behalf<strong>of</strong> the Company by way <strong>of</strong> ratification or substitution<strong>and</strong> to remunerate person or company forservices rendered or to be rendered or for the acquisition <strong>of</strong> any property, licence, trademarks,letter <strong>of</strong> intent, allotments, know how or similar thing by the Company <strong>and</strong> for the purpose to payforsuch consideration as may arise therefrom by issue<strong>of</strong> fully paidEquity or Preference Shares <strong>of</strong>theCompany or by issue <strong>of</strong> Fully <strong>and</strong>/or Partly paid Convertible / Non-Convertible Debenturesor partly by one <strong>and</strong> partlyby other, in any combination, in one or more trenches as the <strong>Board</strong>may deem fit.(iii) To pay<strong>and</strong> charge to the capitalaccount <strong>of</strong> the Company any commission, brokerage orinterest lawfullypayable thereon under the provisionss <strong>of</strong> Sections 76 <strong>and</strong> 208 <strong>of</strong> the Act.(iv) Subjectto Sections 292, 297 <strong>and</strong> 360 <strong>of</strong> the Act to purchase or otherwise acquire for theCompany any property, rights or privileges which theCompany isauthorised to acquire, at or forsuch price or consideration <strong>and</strong> generallyon such terms <strong>and</strong> conditions as theymay think fit <strong>and</strong>in any such purchase or other acquisitionto accept such title as theDirectors may believe ormaybeadvised to be reasonably satisfactory.(v)At their discretion <strong>and</strong> subject toprovision <strong>of</strong> the Act to pay for any property, rights, orprivileges acquired by or services rendered to the Company, eitherwholly or partially, in cash orin shares, bonds, debentures, mortgages or other securities <strong>of</strong> the Company, <strong>and</strong> any such sharesmay be issued either as fullypaid up or with such amount creditedd as paid up thereon as may beagreed upon; <strong>and</strong> any such bonds, debentures, mortgages or other securities may be eitherspecially charged upon all or any part <strong>of</strong>the property<strong>of</strong> the Company <strong>and</strong> its uncalled capital ornot so charged.(vi) To secure the fulfillment <strong>of</strong> any contracts or engagement entered into bythe Company bymortgage or charge <strong>of</strong> all orany <strong>of</strong> the property <strong>of</strong> the Company <strong>and</strong> its uncalled capital for thetime being or insuch manner as they maythink fit.(vii)To accept from any member, as far as maybe permissible by law, a surrender <strong>of</strong> hisshares or any part there<strong>of</strong>, onsuch terms <strong>and</strong> conditions as shall beagreed.(viii)To appoint any person to accept <strong>and</strong> holdin trust for the Company any propertybelonging to the Company, in which it is interested, orfor any other purposes, <strong>and</strong> to execute <strong>and</strong>doall such deeds <strong>and</strong> things as may be required in relation to any trust, <strong>and</strong> to provide for theremuneration <strong>of</strong> such trusteee or trustees.(ix) To institute, conduct, defend, compound, or ab<strong>and</strong>on any legal proceedings by or againsttheCompany or its <strong>of</strong>ficers or otherwise concerning the affairs <strong>of</strong> the Company, <strong>and</strong> also tocompound <strong>and</strong>allow time for paymentor satisfaction <strong>of</strong> any debts due <strong>and</strong>or any claim ordem<strong>and</strong>s by oragainst the Company <strong>and</strong>to refer anydifferences to arbitration, <strong>and</strong> observe <strong>and</strong>perform any awards made thereon.(x)To act on behalf <strong>of</strong> the Company in all mattersrelating to bankruptcy <strong>and</strong> insolvency.306
Scotts Garments Limited(xi) To make <strong>and</strong> give receipts, releases, <strong>and</strong> other discharges for moneys payable to theCompany <strong>and</strong> for the claims<strong>and</strong> dem<strong>and</strong>s <strong>of</strong> the Company.(xii)Subject to the provisions <strong>of</strong> Sections 292, 295, 369, 370 <strong>and</strong> 372 <strong>of</strong> the Act, to invest <strong>and</strong>deal with any moneys <strong>of</strong> the Company not immediately required for the purposes there<strong>of</strong> uponsuch security (not being shares <strong>of</strong> this Company) or without security <strong>and</strong> in such manner astheymay think fit, <strong>and</strong> from time to time tovary or realise such investments. Save as provided inSection 49 <strong>of</strong> the Act, all investments shall be made <strong>and</strong> held in the Company's own name.(xiii)To execute in the name <strong>and</strong> on behalf <strong>of</strong> the Company in favour <strong>of</strong> anyDirector or otherperson who may incur or beabout to incur any personal liability whether as principal or surety,forthe benefit, <strong>of</strong> the Company, such mortgages <strong>of</strong> the Company'sproperty (present <strong>and</strong> future)as they think fit, <strong>and</strong> any such mortgage may contain a power <strong>of</strong> sale <strong>and</strong> such other powers,provisions, covenants <strong>and</strong> agreements as shall be agreed upon.(xiv)To determine fromtime to timewho shall be entitled to sign on the Company's behalfbills, notes, receipts, acceptances, endorsements, cheques, dividend warrants, releases, contracts<strong>and</strong> documents<strong>and</strong> to give them necessary authority for such purpose.(xv) To distribute by way<strong>of</strong> bonus amongst the staff <strong>of</strong> the Company a share or shares in thepr<strong>of</strong>its <strong>of</strong> the Company <strong>and</strong>to give to any <strong>of</strong>ficer or other persons employed by the Company acommission onthe pr<strong>of</strong>its <strong>of</strong> any particular business or transaction <strong>and</strong> to charge such bonus orcommission as part <strong>of</strong> the working expenses <strong>of</strong> the Company.(xvi)To provide for the welfare <strong>of</strong> Directors or ex-Director<strong>and</strong> families or the dependants or any connection <strong>of</strong>suchor employees or ex-employees <strong>of</strong>theCompany <strong>and</strong> their wives, widows persons, by building or contributing to the building <strong>of</strong> houses, dwellings, or chawls, or by grants<strong>of</strong> moneys, pension, gratuities, allowances, bonus or other payments or by creating, <strong>and</strong> fromtimeto time subscribing or contributing to provident fund<strong>and</strong> other associations, institutions, funds,trusts <strong>and</strong> by providing or subscribing or contributing towards places <strong>of</strong> instructionn <strong>and</strong>recreation, hospital <strong>and</strong> dispensaries, medical <strong>and</strong> other attendance <strong>and</strong> otherassistance as the<strong>Board</strong> shall think fit, <strong>and</strong> to subscribe or contributeor otherwise to assist or to guarantee tocharitable, benevolent, religious, scientific, national orinstitutions or objects which shall have anymoral or other claim to support or aid by the Companyeither by reason <strong>of</strong> locality <strong>of</strong> operation, or<strong>of</strong> public <strong>and</strong> general utility or otherwise.(xvii)Beforee recommending any dividend, to set aside out <strong>of</strong> the pr<strong>of</strong>its <strong>of</strong> the Companysuchsums as they may think proper for depreciation or to DepreciationFund or to an Insurance Fundor as a Reserve Fund or Sinking Fund or any special fund to meet contingencies or to repaydebenture or debenture-stock or for special dividends or for equalising dividends or for repairing,improving, extending, <strong>and</strong> maintaining any <strong>of</strong> the property <strong>of</strong> theCompany <strong>and</strong> for such otherpurposes (including the purposes referred to in the preceding clause), as the <strong>Board</strong> may, intheirabsolute discretion, think conducive to the interest <strong>of</strong>the Company <strong>and</strong> subject to Section 292 <strong>of</strong>theAct, invest the several sums to set aside for so much there<strong>of</strong> asrequired to be invested, uponsuch investments (other thanshares <strong>of</strong> the Company) as they may think fit, <strong>and</strong>from time totimeto deal with <strong>and</strong> vary suchinvestmentss <strong>and</strong> dispose<strong>of</strong> <strong>and</strong> apply <strong>and</strong> expend all or anypart307
Scotts Garments Limitedthere<strong>of</strong> for the benefit <strong>of</strong> the Company insuch manner<strong>and</strong> for suchpurposes asthe <strong>Board</strong> intheirabsolute discretion, think conducive to the interest <strong>of</strong> the Company notwithst<strong>and</strong>ing that thematters to which the <strong>Board</strong> apply or upon which theyexpend the same, or anypart there<strong>of</strong>maybematters to or upon which the capital moneys <strong>of</strong> the Company might rightly be applied orexpended, <strong>and</strong> to divide theReserve Fund into such special funds as the <strong>Board</strong> may think fitwithfull power to transfer the whole or any portion <strong>of</strong> a Reserve Fund or division <strong>of</strong> a Reserve Fund toanother Reserve Fund or Division <strong>of</strong> a Reserve Fund<strong>and</strong> with full power to employ the assetsconstituting all or any <strong>of</strong> theabove funds, including the Depreciation Fund, in the business <strong>of</strong> theCompany or inthe purchase or repayment <strong>of</strong> Debenture or debenture stock <strong>and</strong> without beingbound to keep the same separate from the other assets <strong>and</strong> without being bound to pay interestonthe same with power however to the <strong>Board</strong> at their discretion to pay or allow to the credit <strong>of</strong>such funds interest at such rate as the <strong>Board</strong> may think proper, not exceedingnine percent perannum.(xviii)To appoint, <strong>and</strong> at their discretion remove orsuspend such general managers, managers,secretaries, assistants, supervisors, clerks, agents <strong>and</strong> servants for permanent, temporary orspecial servicess as they may from time totime think fit, <strong>and</strong> to determine their powers <strong>and</strong> duties<strong>and</strong> fix their salaries or emoluments or remuneration, <strong>and</strong> to require securityin such instances<strong>and</strong> to such amount as they may think fit. And also from time to time toprovide for themanagement <strong>and</strong> transaction <strong>of</strong> the affairs <strong>of</strong> the Company in anyspecified localities in <strong>India</strong> orelsewhere in such manner asthey think fit <strong>and</strong> the provisions contained in the four next followingsub-clauses shall be withoutt prejudice to the general powers conferred by this sub-clause.(xix)To comply with the requirements <strong>of</strong> any local law whichh in their opinion shall be in theinterests <strong>of</strong> the Company necessary or expedient to comply with.(xx) From time to time <strong>and</strong> at any time to establish any local <strong>Board</strong> for managing any <strong>of</strong> theaffairs <strong>of</strong> the company in any specified locality in <strong>India</strong> or elsewhere <strong>and</strong> to appoint any personsto be members <strong>of</strong> such local <strong>Board</strong>s, <strong>and</strong> to fix their remuneration.(xxi)Subjectto Section 292 <strong>of</strong> the Act, from time to time <strong>and</strong> at any time to delegate toanypersons so appointed any <strong>of</strong> the powers, authorities <strong>and</strong> discretion for the time being vested inthe<strong>Board</strong>, other than theirpower to make calls or to make loans or borrowmoneys, <strong>and</strong> toauthorise the Members for the time being <strong>of</strong> any suchlocal <strong>Board</strong>, or any <strong>of</strong> them to fill upanyvacancies therein <strong>and</strong> to actnotwithst<strong>and</strong>ing vacancies <strong>and</strong> any such appointment or delegationmay be made on such terms <strong>and</strong> subjectto such conditions as the <strong>Board</strong> maythink fit, <strong>and</strong> the<strong>Board</strong> may at any time remove any person so appointed, <strong>and</strong> may annul or vary any suchdelegation.(xxii) At any time <strong>and</strong> fromtime to time by power <strong>of</strong> Attorney under the Seal <strong>of</strong> the Company, toappoint any person or persons to be the Attorney or Attorneys <strong>of</strong> the Company for such purposes<strong>and</strong> with such powers, authorities <strong>and</strong> discretion (not exceeding those vested in/or exercisable bythe<strong>Board</strong> under these presents <strong>and</strong> excluding the power to make calls <strong>and</strong> excluding also exceptin their limits, authorised by the <strong>Board</strong>, the power tomake loans<strong>and</strong> borrowmoneys) <strong>and</strong> forsuch period <strong>and</strong>subject to such conditions as the <strong>Board</strong> may fromtime to timethink fit; <strong>and</strong>anysuch appointment may (if the <strong>Board</strong> thinks fit) be made in favour<strong>of</strong> the members or any <strong>of</strong> the308
Scotts Garments LimitedMembers <strong>of</strong> any Local <strong>Board</strong>, established as aforesaid or in favour <strong>of</strong> any Company, or theshareholders, directors, nominees, or managers <strong>of</strong> anycompany or firms or otherwise in favour <strong>of</strong>any fluctuatingbody <strong>of</strong> persons whethernominated directly or indirectly by the <strong>Board</strong> <strong>and</strong>anysuch Power <strong>of</strong> Attorney may contain such Powers for the protection or convenience <strong>of</strong> personsdealing with such Attorneys as the <strong>Board</strong> may thinkfit, <strong>and</strong> maycontain powers enablinganysuch delegates or attorneys as aforesaid to sub-delegate all or any<strong>of</strong> the powers authorities <strong>and</strong>discretion for the time beingvested in them.(xxiii) Subject toSection 294 <strong>and</strong> 297 <strong>of</strong> the Act, for or in relation toany <strong>of</strong> the matters aforesaid orotherwise for the purposes <strong>of</strong> the Company to enter into all such negotiations <strong>and</strong> contracts <strong>and</strong>rescind <strong>and</strong> vary all such contracts, <strong>and</strong>execute <strong>and</strong>do all suchacts, deeds <strong>and</strong> things in thename <strong>and</strong> on behalf <strong>of</strong> the Company as they may consider expedient.(xxiv) From time to time to make, vary <strong>and</strong> repeal by-laws for the regulation <strong>of</strong> the business <strong>of</strong> theCompany its <strong>of</strong>ficers <strong>and</strong> servants.THE SECRETARYSecretary.168Subject to the provisions <strong>of</strong> Section 383A <strong>of</strong> the Act, the <strong>Board</strong> <strong>of</strong> Directors may,from time totimeappoint <strong>and</strong>, at their discretion remove any individual (hereinafter called `the Secretary’)whoshall have suchqualifications as the authority under the Act or these Articles are to be performedbythe Secretary, <strong>and</strong> to execute any other purely ministerial or administrativeduties whichh mayfrom time to time be assigned to the Secretary. The<strong>Board</strong> <strong>of</strong> Directors mayalso at anytimeappoint some persons (who need not be the Secretary)to keep the registers required to be kept bytheCompany.THE SEALThe seal,its custody <strong>and</strong> use.169(a)The <strong>Board</strong> shall provide a Common seal for the purpose <strong>of</strong> the Company <strong>and</strong>shall have powerfrom time to time to destroythe same <strong>and</strong>substitute a new seal in lieu <strong>of</strong> the same, <strong>and</strong> the <strong>Board</strong>shall provide for the safe custody <strong>of</strong> the seal for the time being, <strong>and</strong> the Seal shall never be usedexcept by the authority <strong>of</strong> the <strong>Board</strong> or a Committee <strong>of</strong>the <strong>Board</strong> previously given.(b)The Company shall also be at liberty to have an <strong>of</strong>ficial seal in50 <strong>of</strong> the Act, for use in any territory,district or place outside <strong>India</strong>.accordance with SectionDeeds how executed.170Every Deed or other instrument, to which the seal <strong>of</strong> the Companyis required to be affixedshallunless the same is executedby a duly constituted attorney, be signed by twoDirectors or oneDirector <strong>and</strong> Secretary or some other person appointedby the <strong>Board</strong> for the purpose.DIVIDENDSDivisionpr<strong>of</strong>its.1711 The pr<strong>of</strong>its <strong>of</strong> the Company,subject to any special rights relating thereto created or authorised tobecreated by these Articles <strong>and</strong> subject to the provisions <strong>of</strong> these Articles, shall be divisibleamong the members, in proportion to theamount <strong>of</strong> capital paid-up or creditedd as paid-up on theshares held by them respectively.309
The Company in General Meeting may declare a dividend.172The Company in General Meeting may declare dividends to be paid to members according totheir respectivee rights, but no dividends shall exceed the amount recommendedd by the <strong>Board</strong>, buttheCompany inGeneral Meeting may declare a smaller dividend.Dividends only to be paid out <strong>of</strong> pr<strong>of</strong>its.173Nodividends shall be declared or paid otherwise than out <strong>of</strong> pr<strong>of</strong>its <strong>of</strong> the financial year arrivedat after providing for depreciation in accordance withthe provisions <strong>of</strong> Section205 <strong>of</strong> the Act orout <strong>of</strong> the pr<strong>of</strong>its <strong>of</strong> the Company forany previous financial year or years arrived at afterproviding for depreciation in accordancewith these provisions <strong>and</strong> remainingundistributed orout <strong>of</strong> both provided that:(a)If the Company has notprovided for depreciationfor any previous financial year or years itshall, before declaring or paying adividend forany financial year, provide for suchdepreciation out <strong>of</strong> the pr<strong>of</strong>its <strong>of</strong> the financial year or out <strong>of</strong> thepr<strong>of</strong>its <strong>of</strong> any other previousfinancial year or years;(b)if the Company has incurred any loss in any previous financial year or yearsthe amount <strong>of</strong> theloss or an amount which is equal to the amount provided for depreciation for that year or thoseyearswhichever is less, shall be set <strong>of</strong>f against the pr<strong>of</strong>its <strong>of</strong> the Company for the year for whichthedividend isproposed tobe declaredd or paid or against the pr<strong>of</strong>its <strong>of</strong> the Company for anyprevious financial year or years arrived at in bothcases after providing for depreciation inaccordance withthe provisions <strong>of</strong> sub-section (2) <strong>of</strong> Section 205 <strong>of</strong> the Act or against both.Interim dividend.174The <strong>Board</strong> may from timeto time, pay to the Members such interim dividends as in theirjudgement the position <strong>of</strong> the Company justifies.Capital paid up in advance to interest but not toearn dividend.175Where Capital is paid in advance <strong>of</strong> calls such capital may carry interest but shall not in respectthere<strong>of</strong> confer a right to dividend or participate in pr<strong>of</strong>its.Dividends in proportion to amount paid-up.176All dividends shall be apportioned <strong>and</strong> paid proportionately to the amounts paid or credited aspaid on the shares during any portion or portions <strong>of</strong> the period in respect <strong>of</strong> which the dividend ispaid; but if any share is issued on terms providingthat it shalll rank for dividend as from aparticular date,such share shall rank for dividend accordingly.Retention <strong>of</strong> dividends until completion <strong>of</strong> transfer under Article 64.1777 The <strong>Board</strong> mayretain the dividends payable upon shares in respect <strong>of</strong> which any person is, underArticle 64 entitled to become a Memberor which any person under that Article is entitled totransfer, until such person shall become a member, in respect <strong>of</strong> such shares or shall duly transferthesame.Scotts Garments LimitedDividendd etc. to joint-holders.178Any one <strong>of</strong> several persons who are registered as the joint-holders <strong>of</strong> any share may give effectualreceipts for all dividends or bonus <strong>and</strong>payments on account <strong>of</strong>dividends or bonus or othermoneys payable in respect <strong>of</strong> such shares.No member to receive dividend whilst indebted to the Company, <strong>and</strong> Company's right <strong>of</strong>reimbursement thereat.310
Scotts Garments Limited179Nomember shall be entitledto receive payment <strong>of</strong> any interest or dividend in respect <strong>of</strong> his shareor shares whilst any moneys may be dueor owing from him to the Company in respect <strong>of</strong>suchshare or shares or otherwisee howsoever, either alone or jointly with any other person or persons;<strong>and</strong> the <strong>Board</strong> may deductfrom the interest or dividend payable to any member all sums <strong>of</strong>moneys so due from him to the Company.Right toDividend, rights shares <strong>and</strong> bonus shares to beheld in abeyance pending registration <strong>of</strong>transfer <strong>of</strong> shares.180Where any instrument <strong>of</strong> transfer <strong>of</strong> shares has beendelivered tothe Company for registration<strong>and</strong> the transferr <strong>of</strong> such shares has not been registeredby the company, it shall.(a)transfer thedividend inrelation to such shares to the special account referred to in Section205A <strong>of</strong> the Act, unless theCompany isauthorised by the registered holder <strong>of</strong> such shares inwriting to pay such dividendd to the transferee specified in such instrument <strong>of</strong> transfer; <strong>and</strong>(b)keep in abeyance in relation to suchshares any<strong>of</strong>fer <strong>of</strong> rights shares under clause (a) <strong>of</strong>subsection (1) <strong>of</strong> Section 81 <strong>and</strong> any issue <strong>of</strong> fully paid up bonus sharess in pursuance <strong>of</strong>sub-section (3)<strong>of</strong> Section 205<strong>of</strong> the Act.Dividends how remitted.1811 Unless otherwise directed any dividendd may be paidby cheque or warrant or by a payslip orreceipt having the force <strong>of</strong> a cheque or warrant sent through the post to the registered address <strong>of</strong>themember orperson entitled or in case <strong>of</strong> joint-holders to that one <strong>of</strong> them first named inRegister in respect <strong>of</strong> the joint-holdings.Every such cheque or warrant shall bemade payable totheorder <strong>of</strong> theperson to whom it is sent. The Company shall not be liable or responsible for anycheque or warrant or payslip or receipt lost in transmission, orfor any dividend lost to themember or person entitled thereto by the forged endorsement <strong>of</strong>any cheque or warrant or theforged signature <strong>of</strong> any payslip or receiptor the fraudulent recovery <strong>of</strong> the dividend by any othermeans.Unclaimed dividend182(a)Where the Company has declared a dividend but which has not been paid or the dividendwarrant in respect there<strong>of</strong> has not been posted within30 days fromthe date <strong>of</strong> declaration toanyshareholder entitled to the payment <strong>of</strong> the dividend, the Company shall within 7 days fromthedate <strong>of</strong> expiry <strong>of</strong> the said period <strong>of</strong> 30 days, open a special account in that behalf in any scheduledbank called unpaid dividend <strong>of</strong> Scotts Garments Limited <strong>and</strong> transfer to the said account, thetotal, amount <strong>of</strong> dividend which remainsunpaid or inrelation to which no dividend warrant hasbeen posted.Any money transferred to the unpaid dividend account <strong>of</strong> the Company which remains unpaid orunclaimed for a period <strong>of</strong> seven years from the date <strong>of</strong> such transfer, shall be transferred by theCompany to the general revenue account <strong>of</strong> the Central Government. A Claimto any money sotransferred to the general revenue account may be preferred to the Central Government by theshareholders towhom the money is due.(b)That there shall be no forfeiture <strong>of</strong> unclaimed dividends before the claim becomes barred bylaw<strong>and</strong> the Company shall comply withall the provisions <strong>of</strong> Section 205-A <strong>of</strong> the Act in respect<strong>of</strong> unpaid or unclaimed divided.311
Scotts Garments LimitedNo interest on dividends.183Nounpaid dividend shall bear interest asagainst the Company.Dividendd <strong>and</strong> call together.184Any General Meeting declaring a dividend may on the recommendation <strong>of</strong> theDirectors make acall on the members <strong>of</strong> such amount as the meeting fixes, but so that the call on each membershallnot exceed the dividend payable to him <strong>and</strong> so that the call be made payable at the same time asthedividend; <strong>and</strong> the dividend may, if soarranged between the Company <strong>and</strong> the member, be set<strong>of</strong>ff against the calls.Capitalisation.185(a)The Company in General Meeting may by a special resolution resolve that any moneys,investments or other assets forming part <strong>of</strong> the undivided pr<strong>of</strong>its <strong>of</strong> the Company st<strong>and</strong>ing to thecredit <strong>of</strong> the Reserve Account or Fund, or any Capital Redemption Reserve Account, or in theh<strong>and</strong>s <strong>of</strong> the Company <strong>and</strong> available for dividend (or representing premium received on the issue<strong>of</strong> shares <strong>and</strong> st<strong>and</strong>ing tothe credit <strong>of</strong> the Shares Premium Account) be capitalised<strong>and</strong>distributed amongst such <strong>of</strong> the shareholders as would be entitled to receive the same ifdistributed by way <strong>of</strong> dividend <strong>and</strong> in the same proportions onthe footing that they becomeentitled theretoas capital <strong>and</strong> that all or any part <strong>of</strong>such capitalised value or sum or fund beapplied on behalf <strong>of</strong> such shareholders inpaying up infull either at par or at such premium as theresolution mayprovide, anyunissued shares or debentures or debenture stock<strong>of</strong> the Companywhich shall be distributed accordingly or in or towards payment <strong>of</strong> the uncalled liability onanyissued shares or debenturesor debenture-stock <strong>and</strong> that such distribution or payment shall beaccepted by such shareholders in full satisfaction <strong>of</strong>their interest in the saidcapitalised sum,provided that a Share Premium account <strong>and</strong> a Capital RedemptionReserve Account may, for thepurpose <strong>of</strong> thisArticle, only be appliedin the paying <strong>of</strong> any unissued shares to be issued tomembers <strong>of</strong> theCompany asfully paid bonus shares.(b)A General Meeting mayresolve that any surplus moneys arising from the realisation <strong>of</strong> anycapital assets <strong>of</strong> the Company, or any investments representing the same, or any otherundistributed pr<strong>of</strong>its <strong>of</strong> the Company not subject to charge may be distributed amongthemembers on thefooting thatt they receive the same as capital.(c)For the purpose <strong>of</strong> giving effect to any resolution under thepreceding paragraphs <strong>of</strong> thisarticle, the <strong>Board</strong> may settle any difficulty which may arise in regard to thedistributionas itthinks expedient <strong>and</strong> in particular mayissue fractional certificates <strong>and</strong> mayfix the value fordistribution <strong>of</strong> any specific assets, <strong>and</strong> maydetermine that such cash payments shall bemade to any members uponthe footing <strong>of</strong> the value so fixed or that fraction <strong>of</strong> less value than `10/- may be disregarded in order to adjust the rights <strong>of</strong> all parties <strong>and</strong> may vest any such cash orthespecific assets in trustees upon such trusts forthe personentitled to the dividends orcapitalised funds as may seem expedientto the <strong>Board</strong>. Where requisite, a proper contract shall bedelivered to theRegistrar for registrationin accordance with Section 75 <strong>of</strong> the Act, <strong>and</strong> the <strong>Board</strong>may appoint any person to sign such contract on behalf <strong>of</strong> the persons entitled to the dividend orcapitalised fund, <strong>and</strong> such appointment shall be effective.ACCOUNTSDirectorsto keep trueaccounts.312
186The Company shall keep at the Office or at such otherplace in <strong>India</strong> as the <strong>Board</strong> thinks fit properBooks <strong>of</strong> Account in accordance with Section 209 <strong>of</strong> the Act with respect to:(a)all sums <strong>of</strong> money received <strong>and</strong> expended bythe Company <strong>and</strong> the matters in respect <strong>of</strong>which the receipts <strong>and</strong> expenditure take place;(b)all saless <strong>and</strong> purchases <strong>of</strong> goods by the Company; <strong>and</strong>(c)the assets <strong>and</strong> liabilities <strong>of</strong> the Company.Scotts Garments LimitedWhere the <strong>Board</strong> decides tokeep all or any <strong>of</strong> the Books <strong>of</strong> Accounts at any place other than the<strong>of</strong>fice <strong>of</strong> the Company, theCompany shall within seven days <strong>of</strong> the decision file withtheRegistrar a notice in writing giving thefull address <strong>of</strong> that other place. The Company shallpreserve in good order the Books <strong>of</strong> Accounts relating to a period <strong>of</strong> not less than eight yearspreceeding the current yeartogether with the vouchers relevant to any entryin such Books <strong>of</strong>Accounts. Where the Company has a branch <strong>of</strong>fice, whether in or outside <strong>India</strong>, the Companyshall be deemed to have complied with this Article if proper Books <strong>of</strong> Accounts relating to thetransactions effected at the branch <strong>of</strong>ficeare kept atthe branch <strong>of</strong>fice <strong>and</strong> proper summarisedreturns, made up to dates atintervals <strong>of</strong> not more thanthree months, are sent bythe branch <strong>of</strong>ficeto the Company at its <strong>of</strong>ficeor other place in <strong>India</strong>, at which the Company's Books <strong>of</strong> Accountsarekept as aforesaid. The Books <strong>of</strong> Accounts shall give a true <strong>and</strong> fair view <strong>of</strong> the state <strong>of</strong> theaffairs <strong>of</strong> the Company or branch <strong>of</strong>fice, as the case may be <strong>and</strong> explain its transactions. The Books<strong>of</strong> Accounts <strong>and</strong> other books <strong>and</strong> papers shall be open to inspection by any Director duringbusiness hours.Statement <strong>of</strong> Accounts to be furnished to General Meeting.1888 The Directors shall from time to time, in accordance with Sections 210, 211, 212, 215, 216 <strong>and</strong> 217<strong>of</strong> the Act, cause to be prepared <strong>and</strong> tobe laid before the Company in General Meeting suchBalance Sheets, Pr<strong>of</strong>it <strong>and</strong> Loss Accounts <strong>and</strong> Reports as are required by these Sections.Copies shall be sent toeach Member.189A printed copy<strong>of</strong> every balance sheet (including every document required by law to be annexedor attached thereto) which is to be laid before the Company in Annual GeneralMeeting togetherwith a copy <strong>of</strong> the Auditors' Report or a statement containing salient feature <strong>of</strong> such documents intheprescribed form, as laiddown under Section 219<strong>of</strong> the Act as the Company may deem fit,shall not less than twenty one days beforee the date <strong>of</strong> the Meeting, be sent to every person entitledthereto pursuant to the provisions <strong>of</strong> the said Section.190Every Balance Sheet <strong>and</strong> Pr<strong>of</strong>it <strong>and</strong> Loss Account <strong>of</strong> the Companywhen audited <strong>and</strong> adopted bytheCompany in general meeting shall be conclusive except as regards any matters in respect <strong>of</strong>which modifications may from time to time be considered properr by the <strong>Board</strong><strong>of</strong> Directors <strong>and</strong>approved by the shareholders at a general meeting.Auditors1911 Auditors shall be appointed <strong>and</strong> their rights <strong>and</strong> duties regulated in accordancewith Sections 224to 233 <strong>of</strong> the Act.WINDING UPLiquidator may divide assets in specie.201The Liquidatoron any winding-up (whether voluntary, under supervision or compulsory)may313
Scotts Garments Limitedwith the sanction <strong>of</strong> a Special Resolution, but subject to the rights attached to any preferenceshares capital, divide amongthe contributors in speciee any part <strong>of</strong> the assets <strong>of</strong> the Company<strong>and</strong>may with the like sanction, vest any part <strong>of</strong> the assets <strong>of</strong> the Company in trustees upon suchtrustforthe benefit <strong>of</strong> the contributors as the liquidator, with the like sanction, shall think fit.INDEMNITY AND RESPONSIBILITYDirectors' <strong>and</strong> others' right <strong>of</strong> indemnity.2022 Every <strong>of</strong>ficer orAgent for the time being <strong>of</strong> the Company shall be indemnified out <strong>of</strong> the assets <strong>of</strong>theCompany against all liability incurred by him in defending anyproceedings, whether civil orcriminal, in which judgement is given in his favour orin which he is acquitted or dischargedd or inconnection withany application under Section 633 <strong>of</strong> the Act, in which relief is granted to him bytheCourt.SECRECY CLAUSESecrecy Clause.203(a)Every Director, Manager, Auditor, Treasurer, member <strong>of</strong> a Committee, servant, agent,accountant or other person employed in the business <strong>of</strong> the Company shall, if so required by theDirectors, before entering upon his duties, sign a declaration pledging himself to observe strictsecrecy respecting all transactions <strong>and</strong> affairs <strong>of</strong> the Company withthe customers <strong>and</strong> the state <strong>of</strong>accounts with individuals <strong>and</strong> in matters relating thereto, <strong>and</strong> shall by such declaration pledgehimself not to reveal any <strong>of</strong> the matters which may come to his knowledge in the discharge <strong>of</strong> hisduties except when requiredso to do bythe Directors or by law or by the person to whomsuchmatters relate <strong>and</strong> except <strong>and</strong> so far as may be necessary in order to complywith any <strong>of</strong> theprovisions in these presents contained.b) No members shall be entitled to visit or inspectany works <strong>of</strong> the Company without thepermission <strong>of</strong> the Directors or to require discovery <strong>of</strong> or any information respecting any details <strong>of</strong>theCompany's trading, or any matter which is or maybe in the nature <strong>of</strong> a tradesecret mystery <strong>of</strong>trade, secret process <strong>of</strong> any other matterwhich may relate to the conduct <strong>of</strong> the business <strong>of</strong> theCompany <strong>and</strong> which in the opinion <strong>of</strong> the Directors, it would be inexpedient inthe interest <strong>of</strong> theCompany to disclose.GENERAL POWER204Wherever in the Companies Act, it has been provided that the Company shall have right,privilege or authority or thatt the Company could carryout any transaction onlyif the Company isso authorised by its articles, then <strong>and</strong> in that case this regulation hereto authorises <strong>and</strong> empowerstheCompany to have such rights, privilege or authority <strong>and</strong> to carry such transactions as havebeen permittedby the Act, without there being any specific regulation in that behalf hereinprovided.314
Scotts Garments LimitedSECTION VIII - OTHER INFORMATIONMATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONNThe following contracts <strong>and</strong> agreements referred to (not being contracts enteredinto in the ordinary course <strong>of</strong>business carriedon or intended to be carried on by the Companyor contracts entered into more than twoyears before this RHP), which are or maybe deemed material to be material have been entered into by or onbehalf <strong>of</strong> the Company. Copies <strong>of</strong> these contracts together with copies <strong>of</strong> documents referred under MaterialDocuments below all <strong>of</strong> which have been attached tothe copy <strong>of</strong>this RHP <strong>and</strong> have beendelivered totheStock <strong>Exchange</strong>s <strong>and</strong> may beinspected at the Registered Office <strong>of</strong> the Company between 9: 30 am to 5:30pmon any workingday from thedate <strong>of</strong> this RHP until thedate <strong>of</strong> closure <strong>of</strong> the subscription List.Material contracts1. Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ing dated 24/09/ 2010 enteredinto between the Company <strong>and</strong> KeynoteCorporateServices Limited, Book Running Lead Manager to the Issue.2. Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ing dated 25/09/ /2010 enteredinto between the Company <strong>and</strong> CanaraBank, Co-Book Running Lead Manager to the Issue.3. Memor<strong>and</strong>um <strong>of</strong> Underst<strong>and</strong>ing dated 25/09/2010 entered into between the Company<strong>and</strong> Link IntimePvt. Limited, Registrarr to the Issue.4. Escrow Agreement dated [•], between the Company, the BRLM, the Escrow Collection Banks <strong>and</strong>theRegistrar to the Issue.5. SyndicateAgreement dated [•] between the Company, BRLM<strong>and</strong> Syndicate Members.6. Underwriting Agreement dated [•] between the Company, BRLM <strong>and</strong> Syndicate Members.7. Copy <strong>of</strong> Tripartite agreement dated 06/12/2010 entered into between the Company, CDSL <strong>and</strong>Registrar to the Issue.8. Copy <strong>of</strong> Tripartite agreement dated 29/11/2010 entered into between the Company, NSDL <strong>and</strong>Registrar to the Issue.9. Share Subscription cumShareholders Agreement dated 19/12/2012 <strong>and</strong> Supplementary Agreement toShare Subscription cumShareholders Agreement dated 21/02/2013Material Documents1. Memor<strong>and</strong>um <strong>of</strong> Association <strong>and</strong> Articles <strong>of</strong> Association <strong>of</strong>the Company, as amended from time totime.2. Shareholders’ resolutions dated 10/ /06/2010 <strong>and</strong>19/12/20122 in relation to the Pre-IPO Placement<strong>and</strong>this Issue.3. Resolutions passed at the EGM dated 30/03/2010 approving the remuneration <strong>of</strong> Mr. Naseer Ahmed<strong>and</strong> Mrs. Nuzhat AishaNaseer.4. Audited Balance sheets <strong>and</strong> Pr<strong>of</strong>it <strong>and</strong> Loss Accounts <strong>of</strong> the Company for seven months period endedon October 31, 2012 <strong>and</strong> for the financial years ending on March 31, 2012, 2011, 2010, 2009 <strong>and</strong> 2008.5. Consents <strong>of</strong> Auditors,Bankers to the Company, Bankers tothe Issue, BRLM, Registrar to the Issue,Directors <strong>of</strong> our Company, Company Secretary& Compliance Officer, Legal Advisor to the Issue asreferred to, in their respective capacities.315
Scotts Garments Limited6. Legal DueDiligence Report dated 28/09/2010 by DSK Legal,Advocates, Legal Advisor to the Issue<strong>and</strong>due diligence certificate dated 30/10/2012.7. Copy <strong>of</strong> certificate dated 10/01/2013 issued by the Peer Review Auditor <strong>of</strong> the Company, M/ /s. GAnantha & Co., Chartered Accountants in terms <strong>of</strong> Part II Schedule III <strong>of</strong> the Companies Act 1956includingcapitalisationstatement, taxation statement <strong>and</strong> accounting ratio.8. Copy <strong>of</strong> certificate dated 28/06/2012 issued bySiddaiah & Ram Chartered Accountant <strong>and</strong> StatutoryAuditors <strong>of</strong> the Company regardingg tax benefits accruing to the company <strong>and</strong> its shareholders.9. Copy <strong>of</strong> certificate dated 25/03/2013 issued bySiddaiah & Ram, Chartered Accountant <strong>and</strong> StatutoryAuditors <strong>of</strong> the Company regardingg sources <strong>and</strong>deployment <strong>of</strong> funds.10. Copy <strong>of</strong> In-principle approval received from BSEvide their letter no. DCS/IPO/RK/IPO-IP/1349/2010-11 dated 21/12/2010 for listing <strong>of</strong> the securities <strong>of</strong>fered through this Offer Document atBSE.11. Copy <strong>of</strong> In-principle approval received from NSE vide their letter no. NSE/LIST/155676-Y dated11/01/2011 for listing <strong>of</strong> the securities <strong>of</strong>fered through this Offer Document at NSE.12. SEBI Observation Letter No. CFD/ /DIL/SP/DK/9407/2012dated 26/04/ /2012 issued by the <strong>Securities</strong><strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> <strong>and</strong> reply to the observation by Keynote Corporate Services Limited (BookRunning Lead Manager) vide their letter no. SGL/CL/GS(01)dated 30/10/201213. Tripartite MOU between Government <strong>of</strong> Karanataka, our Company <strong>and</strong> Bombay Rayon FashionsLimited dated 03/06/ /2010 <strong>and</strong> 04/06/2010 <strong>and</strong> Karanatakaa Government Oder No. CI 200 SPI 2010,Bangaloredated 02/06/2010.14. CARE IPOGrading vide their letterdated 01/03/2013Any <strong>of</strong> the contracts or documents mentioned in the RHP may be amended or modified at any time if sorequired in the interest <strong>of</strong> our Company or if required by the other parties, without reference totheshareholders subject to compliance <strong>of</strong> the provisions contained in the Companies Act <strong>and</strong> other relevantstatutes.316
Scotts Garments LimitedPART IIIDECLARATIONAlll the relevant provisions <strong>of</strong> the Companies Act, 1956, <strong>and</strong> the guidelines issued by the Government <strong>of</strong> <strong>India</strong>or the regulations issued by <strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong>, established under Section 3 <strong>of</strong>the<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> Act, 1992, as the case may be, havebeen complied with <strong>and</strong>nostatement madein this Red Herring Prospectus is contrary to the provisions <strong>of</strong>the Companies Act, 1956, the<strong>Securities</strong> <strong>and</strong> <strong>Exchange</strong> <strong>Board</strong> <strong>of</strong> <strong>India</strong> Act, 1992 or rules made there under or regulations issued, as the casemay be. We further certify that all statements in this Red Herring Prospectus are true <strong>and</strong> correct.Signed by all DirectorsSd/-Naseer AhmedSd/-A ArumughamSd/-C.R.MuraliSd/-B.S. PatilSd/-Azeezulla BaigSd/-M.M.ChopraSd/-Nuzhat Aisha NaseerSd/-S.ThiruvadiSigned by the Company Secretary <strong>and</strong> Compliance OfficerSd/-S.GuruswamyBabuDate: April 12, 2013Place: Bangalore317
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