Dec 22, 2011 - Please read Section 60B of the Companies Act, 1956 ..... Industry publication data and website data gener
CMYK
Draft Red Herring Prospectus Dated: 22nd December 2011 Please read Section 60B of the Companies Act, 1956 100 % Book Building Issue
PRELUDESYS INDIA LIMITED Our Company was incorporated on 14th December 1998 under the name of Prelude Solution Providers Private Limited. The name was further changed to PreludeSys India Private Limited on 30th April 2008. Subsequently the Company was converted to a Public Limited company under the name PreludeSys India Limited on 12th April 2011. Since incorporation the Registered Office of the Company was changed on two occasions (Refer Page 102). The Corporate Identification Number of our Company is U72300TN1998PLC041576. Registered and Corporate Office: 1/18, I Floor, I Main Road, Kotturpuram, Chennai- 600085. Tel: +91-44-43448686, Fax: +91-44-24471007. Email:
[email protected] Web site: www.preludesys.com Contact person: Ms. Preethi Bansal M, Company Secretary and Compliance Officer E-mail:
[email protected] The Company is promoted by Mr. Chandramohan Parlapalli, Mr. Rangesh Rajaram, Mr. Rajamannar Abboy, Mr. Manoj Kumar Chandra, Mr. Kiran Babu Chandra, Mr. Ramjee Kasturirangan and Mr. Ramki Ramakrishnen. ISSUE OF [● ] EQUITY SHARES OF ` 10/- EACH FOR CASH AT A PRICE OF ` [● ] PER EQUITY SHARE AGGREGATING TO ` 8130LAKHS (HEREINAFTER REFERRED TO AS THE “ISSUE”) TO THE PUBLIC. THE ISSUE WOULD CONSTITUTE [● ] % OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF OUR COMPANY. PRICE BAND: ` [● ] TO ` [● ] PER EQUITY SHARE OF FACE VALUE OF ` 10 EACH In case of revision in the Price Band, the Bidding Period/ Issue Period will be extended for three additional working days after such revision, subject to the total Bidding Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding Period, if applicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited (the “BSE”) and National Stock Exchange of India Limited (the “NSE”), whose online IPO System will only be available for bidding, by issuing press release and also by indicating the change on the website of Book Running Lead Manager (the “BRLM”) and the terminals of the members of Syndicate. THE ISSUE PRICE: ` [●] PER EQUITY SHARE OF FACE VALUE OF ` 10/- EACH. THE ISSUE PRICE IS [● ] TIMES THE FACE VALUE. The Issue is made under Sub-regulation 2(a)(i) and 2(b)(i) of Regulation 26 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time and through a 100% Book Building Process wherein at least 50% of the offer to the public shall be allocated on a proportionate basis to Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be refunded. The Issue is being made through the 100% Book Building Process wherein at least 50% of the offer to the public shall be allocated on a proportionate basis to eligible Qualified Institutional Buyers, out of which 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all eligible Qualified Institutional Buyers, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, upto 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of the Company, there has been no formal market for its Equity Shares. The face value of the equity shares is ` 10/- and the issue price is [● ] times of the face value. The Issue Price (as determined by the Company in consultation with the Book Running Lead Managers, on the basis of assessment of market demand for the Equity Shares by way of Book building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares of the Company nor regarding the price at which the Equity Shares will be traded after listing. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of our Company and this Issue including the risks involved. The Equity Shares issued in this Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the statements in the Section titled “Risk Factors” beginning on page 11 of this Draft Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY Our Company having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to our Company and this Issue, which is material in the context of this Issue, that the information contained in this DRHP is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. IPO GRADING Issue has been graded by [● ] and has been assigned [● ] indicating [● ] through its letter dated [● ]. For further details in this regard please refer “General Information” and “Material Contracts and Document for Inspection” on page 35 and 252 respectively of the Draft Red Herring Prospectus. LISTING The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”). Our Company has received in-principle approval for listing of the equity shares from BSE and NSE, vide their letter dated [● ] and [● ] respectively. For the purpose of this Issue, the designated Stock Exchange will be BSE.
BOOK RUNNING LEAD MANAGER
REGISTRAR TO THE ISSUE
BIRLA CAPITAL AND FINANCIAL SERVICES LIMITED SEBI Registration No.: INM000011567 Dalamal House, 1st Floor, J B Marg, Nariman Point, Mumbai - 400 021 Tel: +91 22 6616 8400 / 8494 Fax: +91 22 2204 7835 E-mail:
[email protected] Website: www.birlacaps.com Contact Person: Mr. Sushanth Alva
CAMEO CORPORATE SERVICES LIMITED SEBI Registration No.: INR 000003753* 'Subramanian Building', No. 1, Club House Road, Chennai - 600 002. Tel.: +91-44-2846 0390 (5 Lines); Fax: +91-44- 2846 0129 E-mail:
[email protected] Website: www.cameoindia.com Contact Person: Mr. R. D. Ramasamy *The registration certificate is valid till March 31, 2011. The registrar has made an application vide its letter dated December 30, 2010 with SEBI for renewal of its certificate of registration.
ISSUE PROGRAMME BID/ ISSUE OPENS ON [● ]
BID/ ISSUE CLOSES ON [● ]
CMYK
TABLE OF CONTENTS TITLE SECTION I - DEFINITIONS AND ABBREVIATIONS Conventional / General Terms Issue Related Terms Company / Industry Related Terms Abbreviations Technical / Industry Related Terms SECTION II – GENERAL Certain Conventions: Use Of Financial And Market Data Forward-Looking Statements SECTION III - RISK FACTORS SECTION IV – INTRODUCTION Summary Of Industry Overview Summary Of The Company And Its Business The Issue Summary Of Financial Information General Information Capital Structure SECTION V - OBJECTS OF THE ISSUE Objects Of The Issue Basic Terms Of The Issue Basis For Issue Price Statement Of Tax Benefits SECTION VI - ABOUT US Industry Overview About Our Company & Its Business Key Industry Regulations And Policies Our History And Corporate Structure Our Management Our Promoters Details of Companies / Entities Forming Part Of Our Promoter Group Currency Of Presentation Dividend Policy SECTION VII - FINANCIAL INFORMATION OF OUR COMPANY Report Of The Auditor On Financial Information Management Discussion And Analysis SECTION VIII – LEGAL AND OTHER INFORMATION Outstanding Litigations And Material Developments Government Approvals / Licensing Arrangements SECTION IX - REGULATORY AND STATUTORY DISCLOSURES SECTION X - OFFERING INFORMATION Issue Structure Terms Of The Issue Issue Procedure Restrictions On Foreign Ownership Of Indian Securities SECTION XI: DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION SECTION XII: OTHER INFORMATION Material Contracts And Documents For Inspection Declaration
Page No. 1 2 6 6 7 9 10 11 23 24 30 31 35 43 51 57 57 60 74 79 94 102 104 118 122 128 128 129 157 165 170 172 182 185 188 223 225 251 254
SECTION I - DEFINITIONS AND ABBREVIATIONS I.
CONVENTIONAL / GENERAL TERMS
PreludeSys India Limited/ PIL/ The company/ Company/ We/ Us/ Our/ our Company/ the Issuer
Unless the context otherwise indicates or implies refers to PreludeSys India Limited, a public limited company incorporated under the provisions of the Companies Act, 1956 with its registered office at Chennai in the state of Tamil Nadu.
TERM Articles / Articles Association / AoA BSE CDSL Companies Act Depository
DESCRIPTION Articles of Association of PreludeSys India Limited
of
Depositories Depositories Act Depository Participant/ DP DIPP FEMA FDI Financial Year/FY /Fiscal FIs FII FIPB Indian GAAP IT Act IRDA JV Memorandum / Memorandum of Association / MoA NRI / Non-Resident Indian
NSDL NSE OCB ODI PIS RFC SCRR SEBI SEBI Act
Bombay Stock Exchange Limited, Mumbai Central Depository Services (India) Ltd The Companies Act, 1956, as amended from time to time A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time. NSDL and CDSL The Depositories Act, 1996, as amended from time to time A depository participant as defined under the Depositories Act Department Of Industrial Policy and Promotion Foreign Exchange Management Act, 1999, as amended from time to time and the regulations framed there under for the time being in force Foreign Direct Investments Period of twelve months ended March 31st of that particular year. Financial Institutions Foreign Institutional Investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India Foreign Investment Promotion Board Generally Accepted Accounting Principles in India The Income-Tax Act, 1961, as amended from time to time Insurance Regulatory and Development Authority Joint Venture The Memorandum of Association of PreludeSys India Limited A person resident outside India, as defined under FEMA and who is a citizen of India or a Person of Indian Origin under FEMA (Transfer or Offer of Security by a Person Resident Outside India) Regulations, 2000. National Securities Depository Ltd. National Stock Exchange of India Limited. Overseas Corporate Bodies Overseas Direct Investment Portfolio Investment Scheme Resident Foreign Currency Securities Contracts (Regulations) Rules, 1957 as amended from time to time The Securities and Exchange Board of India constituted under the SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to time
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SEBI (ICDR) Regulations SMBs USA WOS
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended, including instructions and clarifications issued by SEBI from time to time. Small & Medium sized Businesses United States Of America Wholly Owned Subsidiary
II. ISSUE RELATED TERMS: Term Description Allotment/ Allotment of Unless the context otherwise requires, issue of Equity Shares Equity Shares pursuant to this Issue. Allotees The successful applicant to whom the Equity Shares are being / or have been issued or transferred ASBA An application for subscribing to an issue, containing an authorization to block the application money in a bank account. ASBA Investor An Investor who intends to apply through ASBA process and (a) is a “Resident Retail Individual Investor”, “High Networth Individuals”, “Corporate Investors” and Qualified Institutional Buyers. (b) is applying through blocking of funds in a bank account with the SCSB. ASBA Form Bid cum Application form for an ASBA Investor intending to subscribe through ASBA Banker(s) to the Issue [●] Basis of Allotment The basis on which Equity Shares will be allotted to bidders under the issue and which is described in “Issue Procedure – Basis of Allotment” Bid An indication to make an offer, made during the Bidding Period by a prospective investor to subscribe to the Equity Shares at a price within the Price Band, including all revisions and modifications thereto. Bid Amount The highest value of the optional Bids indicated in the Bid-cumApplication Form and payable by the Bidder on submission of the Bid for this Issue. Bid/ Issue Closing Date [●], the date after which the members of the Syndicate will not accept any Bids for this Issue, which shall be notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. Bid/ Issue Opening Date [●], the date on which the members of the Syndicate shall start accepting Bids for this Issue, which shall be the date notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. Bid-cum-Application Form The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of our Company and which will be considered as the application for allotment in terms of this offer document. Bidder Any prospective investor who makes a Bid pursuant to the terms of this offer document and the Bid-cum-Application Form. Bid/ Issue Period The period commencing on the Bid/ Issue Opening Date and extending until the Bid/Issue Closing Date Book Building Process / Book building mechanism as provided under Schedule XI of the Method SEBI ICDR Regulations 2009, in terms of which this Issue is made. BRLM Book Running Lead Manager to this Issue, in this case being
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Term CAN/ Confirmation Allotment Note
of
Cap Price Cut-off
Designated Date
Designated Stock Exchange DRHP
ECS Eligible NRI Equity Shares Escrow Account Escrow Agreement
Escrow Collection Bank(s)/ Banker(s) to this Issue First Bidder Floor Price FC-GPR Indian National Issue size
Issue/ Bidding Period
Description - Birla Capital & Financial Services Limited The note or advice or intimation of allotment of Equity Shares sent to the Bidders who have been allotted Equity Shares after discovery of Issue Price in the Book Building Process. The upper end of the Price Band, above which the Issue Price will not be finalized and above which no Bids will be accepted. The Issue Price finalized by our Company in consultation with the BRLM and it shall be any price within the Price Band. A Bid submitted at the Cut-off Price by a Retail Individual Bidder is a valid Bid at all price levels within the Price Band. The date on which the Escrow Collection Banks transfer and the SCSBs issue, or by when have been issued, instructions for transfer, of the funds from the Escrow Account and ASBA Accounts, respectively to the Public Issue Account or the Refund Account, as appropriate, after the Prospectus is filed with the Registrar of Companies, Tamil Nadu, following which the Board of Directors shall allot Equity Shares to successful Bidders. In this case being the Bombay Stock Exchange Limited, Mumbai. Draft Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not contain complete particulars on the price at which the equity shares are offered and the size (in terms of value) of the Issue Electronic Clearing Service NRI from such jurisdiction outside India where it is not unlawful to make an offer or invitation under the Issue Equity Shares of our Company of face value of ` 10 each unless otherwise specified in the context thereof. Account opened with Escrow Collection Bank(s) and in whose favour the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid. Agreement to be entered into among our Company, the Registrar to this Issue, the Escrow Collection Banks and the BRLM in relation to the collection of the Bid Amounts and dispatch of the refunds (if any) of the amounts collected, to the Bidders. The banks, which are registered with SEBI as Banker (s) to the Issue at which the Escrow Account for the Issue will be opened, in this case being [●] The Bidder whose name appears first in the Bid-cum-Application Form or Revision Form. The lower end of the Price Band, below which the Issue Price will not be finalized and below which no Bids will be accepted. Foreign Collaboration - General Permission Route A citizen of India as defined under the Indian Citizenship Act, 1955, as amended, who is not an NRI. Initial Public Offering of [●] Equity Shares of ` 10/- each for cash at a price of ` [●] Per Equity Share Aggregating to ` 8130 Lakhs (Hereinafter Referred to as the “Issue”) to the Public. The issue would constitute [●] % of the fully diluted Post Issue Paid-Up Capital of our company. The period between the Bid / Issue Opening Date and the Bid/ Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids.
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Term Issue Price
Margin Amount Mutual Funds NEFT NECS Non Institutional Bidders Non Institutional Portion Offer Document Price Band Pricing Date Prospectus
Public Issue Account QIB Margin Amount QIB Portion Qualified Institutional Buyers or QIBs
Description ` [●] (inclusive of a premium of ` [●]) per share of equity share of face value of ` 10 each, the final price at which Equity Shares will be issued and allotted in terms of the RHP or Prospectus. The Issue Price will be decided by our Company in consultation with the BRLM on the Pricing Date. The amount paid by the Bidder at the time of submission of the Bid. Mutual funds registered with SEBI pursuant to the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. National Electronic Fund Transfer National Electronic Clearing Service All Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than ` 2, 00,000. The portion of this Issue being upto 15% of the Issue consisting of [●] Equity shares of `10 each available for allocation to Non Institutional Bidders. DRHP/ RHP and Prospectus The price band of a minimum price (“Floor Price”) of ` [●] and the maximum price (“Cap Price”) of ` [●] and includes revisions thereof. The date on which our Company in consultation with the BRLM will finalize the Issue Price. The Prospectus, to be filed with the Registrar of Companies, Tamil Nadu, Chennai containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of this Issue and certain other information. Account opened with the Banker to this Issue to receive monies from the Escrow Account for this Issue on the Designated Date. An amount representing 100% of the Bid Amount. Consists of issue of [●] Equity Shares of ` 10 each at a price of ` [●] for cash being at least 50% of the Issue, to be allotted to QIBs. “Qualified Institutional Buyer” means: (i) a mutual fund, venture capital fund and foreign venture capital investor registered with the SEBI; (ii) a foreign institutional investor and sub-account (other than a sub-account which is a foreign corporate or foreign individual), registered with the SEBI; (iii) a public financial institution as defined in section 4A of the Companies Act, 1956; (iv) a scheduled commercial bank; (v) a multilateral and bilateral development financial institution; (vi) a state industrial development corporation; (vii) an insurance company registered with the Insurance Regulatory and Development Authority; (viii) a provident fund with minimum corpus of `2500 Lakhs; (ix) a pension fund with minimum corpus of ` 2500 Lakhs; (x) National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India;
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Term
Red Herring Prospectus
Refund Banker Refunds through electronic transfer of funds Registrar/ Registrar to this Issue Retail Individual Bidders Retail Portion Revision Form RTGS Self Certified Banks (SCSB)
Syndicate
Stock Exchanges Syndicate Syndicate Agreement Syndicate Members SCSBs Transaction Registration Slip/ TRS Underwriters Underwriting Agreement
Description (xi) Insurance funds set up and managed by Army, Navy or Air Force of the Union of India; and Insurance Funds set-up and managed by the Department of Posts, India The Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars on the price at which the Equity Shares are offered and the number of equity shares to be offered under this Issue. It carries the same obligations as are applicable in case of a Prospectus and will be filed with the Registrar of Companies, Tamil Nadu, Chennai at least three days before the opening of this Issue. It will become a Prospectus after filing with the Registrar of Companies, Tamil Nadu, Chennai, Andaman & Nicobar Islands after pricing and allocation. [●] Means refunds through ECS, Direct Credit, NEFT or RTGS as applicable Registrars to this issue being Cameo Corporate Services Limited, Chennai having its Registered Office as indicated on the cover page. Individual Bidders (including HUFs) who have Bid for an amount less than or equal to `2, 00,000 in any of the bidding options in this Issue. Consists of issue of [●] Equity Shares of ` 10 each for cash at a price of ` [●], being upto 35% of the Issue, available for allocation to Retail Individual Bidder(s). The form used by the Bidders to modify the quantity of Equity Shares or the Bid price in any of their Bid-cum-Application Forms or any previous Revision Form(s). Real Time Gross Settlement SCSB is a banker to an Issue registered under SEBI (Bankers to an Issue) Regulations 1994 and which offers the service of making an Application Supported by Blocked Amount and recognized as such by the Board. Bombay Stock Exchange Limited and National Stock Exchange of India Limited The BRLM and the Syndicate Members. The agreement to be entered into between our Company and the members of the Syndicate, in relation to the collection of Bids in this Issue. Intermediaries registered with SEBI and eligible to act as underwriters. Syndicate members are appointed by the BRLM and in this case being [●] Self Certified Syndicate Banks The slip or document issued by the Syndicate Members to the Bidders as proof of registration of the Bid. The BRLM and the Syndicate Members. The Agreement among the Underwriters and our Company to be entered into on or after the Pricing Date.
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III.
COMPANY/ INDUSTRY-RELATED TERMS:
TERM AGM AS Auditors Board of Directors Compliance Officer Director(s) Equity Shares Equity Shareholders ESOP Face Value FVCI Non-Resident Promoter(s) Promoter Group Registered Office of our Company IV.
DESCRIPTION Annual General Meeting Accounting Standards as issued by the Institute of Chartered Accountants of India The statutory and tax auditors of our Company is M/s CNGSN & Associates, Chartered Accountants The Board of Directors of PreludeSys India Limited or a committee thereof Company Secretary & Compliance Officer of our Company in this case being, Ms. Preethi Bansal M Director(s) of our Company unless otherwise specified Equity shares of face value of `10 each of our Company unless otherwise specified in the context thereof Persons holding Equity shares of our Company unless otherwise specified in the context otherwise. Employee Stock Option Value of paid-up Equity Capital per Equity Share, in this case ` 10/each. Foreign Venture Capital Investor registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, 2000 An applicant who is not an NRI or FII and not a person resident in India. Mr. Chandramohan Parlapalli, Mr. Rangesh Rajaram, Mr. Rajamannar Abboy, Mr. Manoj Kumar Chandra, Mr. Kiran Babu Chandra, Mr. Ramjee Kasturirangan & Mr. Ramki Ramakrishnen. Unless the context otherwise specifies, includes those entities mentioned in the section ‘Our Promoters’ beginning on page 118 of this DRHP. Registered Office of our Company is situated at No.18, 1st Floor, I Main Road, Kotturpuram, Chennai - 600 085, Tamil Nadu.
ABBREVIATIONS: ABBREVIATION AY Bn CAGR Capex CIN DPID EBDITA EGM EPS FCNR Account GoI GDP HNI HR HUF INR/ Rs. / ` Ltd.
FULL FORM Assessment Year Billion Compounded Annual Growth Rate Capital Expenditure Company Identification Number Depository Participant Identification Earnings Before Depreciation, Interest, Tax and Amortization Extraordinary General Meeting Earnings Per Equity Share i.e. profit after tax divided by outstanding number of Equity Shares at the year end. Foreign Currency Non Resident Account Government of India Gross Domestic Product High Net worth Individual Human Resources Hindu Undivided Family Indian Rupees Limited
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MD Mkt. Mn MoU N. A. / n.a. NAV
NRE Account NRI NRO Account OCB P/E Ra tio PAN Pvt. Pvt. Ltd. RBI ROC RONW Sec. UIN USD/US$ u/s WTD
Managing Director Market Million Memorandum of Understanding Not Applicable Net Asset Value being paid-up Equity Share Capital plus free reserves (excluding reserves created out of revaluation) less deferred expenditure not written off (including miscellaneous expenses not written off) and debit balance of Profit & Loss account, divided by number of issued Equity Shares. Non Resident External Account Non-Resident Indian Non Resident Ordinary Account Overseas Corporate Bodies Price/Earnings Ratio Permanent Account Number Private Private Limited The Reserve Bank of India The Registrar of Companies, Block No.6, B Wing 2nd Floor Shastri Bhawan, 26, Haddows Road, Chennai – 600034, Tamil Nadu, India. Return on Net Worth Section Unique Identification Number United States Dollars Under section Whole time director
V. TECHNICAL/ INDUSTRY RELATED TERMS Term Description AnB AnB Solutions APR Annual Performance Report BFSI Banking, Financial Services and Insurance BI Business Intelligence BPO Business Process Outsourcing CMMI Capability Maturity Management and Integration CMMI L3 Capability Maturity Management and Integration Level 3 CRM Customer Relationship Management DBASE Desktops sprouted databases ECM Enterprise Content Management ERP Enterprise Resource Planning IBM International Business Machines Corporation IDC International Data Center IEC Importer Exporter Code IP Intellectual Property iPad A tablet computer designed and marketed by Apple Inc. Internet Protocol Adapter iPhone A smartphone designed and marketed by Apple Inc. Internet Phone ISO International Organization for Standardization IT Information Technology ITES Information Technology Enabled Services
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J2ME NASSCOM P&M PDA PEP QA QC R&D SAP SEI SIPCOT SQL TCO
Java 2 Micro Edition National Association of Software and Services Companies Plant & Machinery Personal Digital Assistant PreludeSys E-commerce Platform Quality Assurance Quality Control Research and Development Systems, Applications & Products Software Engineering Institute State Industries Promotion Corporation of Tamil Nadu Limited Structured Query Language Total Cost of Ownership
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SECTION II – GENERAL CERTAIN CONVENTIONS: USE OF FINANCIAL AND MARKET DATA In this DRHP, the terms “we”, “us”, “our”, the “Company”, “our Company”, “PIL” “PreludeSys”, unless the context otherwise indicates or implies, refers to PreludeSys India Limited. In this DRHP, unless the context otherwise requires, all references to one gender also refers to another gender and the word “Lakh or Lac” means “One Hundred Thousand”, the word “Crore” means “Hundred Lakhs”, the word “Million (million)” means “Ten Lakh”, the word “Crore” means “Ten Million” and the word “Billion (bn)” means “One Hundred Crore”. In this DRHP, any discrepancies in any table between total and the sum of the amounts listed are due to rounding-off. Throughout this DRHP, all figures have been expressed in Lakhs of Rupees, except when stated otherwise. All references to “Rupees”, “Rs.” and “`” in this DRHP are to the legal currency of India. Unless indicated otherwise, the financial data in this DRHP is derived from our restated standalone financial statements prepared in accordance with Indian GAAP and included in this DRHP. Unless indicated otherwise, the operational data in this DRHP is presented on a standalone basis and refers to the operations of our Company. The company follows the financial year ending 31st March as its accounting period. Our Financial Year commences on April 1 and ends on March 31 of the ensuing calendar year. Unless stated otherwise, references herein to a Financial Year (e.g., Financial Year 2011), are to the Financial Year ended March 31 of that particular year. There are significant differences between Indian GAAP and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements included in this DRHP will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practice and Indian GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this DRHP should accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. For additional definitions used in this DRHP, please refer to the section titled “Definitions and Abbreviations” in Section I of this DRHP. In the section titled “Description of Equity Shares and Terms of the Articles of Association”, defined terms have the meaning given to such terms in the Articles of Association of our Company. Market data used throughout this DRHP has been obtained from internal Company reports and data, websites and industry publications. Industry publication data and website data generally state that the information contained therein has been obtained from sources believed to be reliable, but that their accuracy and completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Although, we believe market data used in this DRHP is reliable, it has not been independently verified. Similarly, internal Company reports and data, while believed by us to be reliable, have not been verified by any independent source.
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FORWARD-LOOKING STATEMENTS This DRHP includes certain forward looking statements with respect to our financial condition, results of operations and business. These forward-looking statements can generally be identified by the fact that they do not relate to any historical or current facts. Forward-looking statements often use words such as “anticipate”, “expect”, “estimate”, “intend”, “plan”, “believe”, “will”, “may”, “should”, “would”, “could” or other words with similar meaning. Similarly, statements that describe our objectives, strategies, plans or goals are also forward looking statements. By their nature, forward looking statements are subject to risk and uncertainty and there are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forwardlooking statements. Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, regulatory changes pertaining to the industries in India in which we have businesses and our ability to respond to them, our ability to successfully implement strategy, growth and expansion of our business, technological changes, exposure to market risks, general economic and political conditions in India which have an impact on our business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in the industry. For further discussions of factors that could cause our actual results to differ, please see the sections titled “Risk Factors” in Section III and “Management Discussion and Analysis” in Section VII of this DRHP. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither we, nor the BRLM nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with the SEBI requirements, the Company and the BRLM will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchange/s are received in relation to the Equity Shares.
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SECTION III – RISK FACTORS An investment in equity shares involves a degree of financial risk. You should carefully consider all information in this DRHP, including the risks described below, before making an investment in our Equity Shares. This section addresses general risks associated with the industry in which we operate and specific risks associated with our business. Any of the following risks, as well as the other risks and uncertainties discussed in this DRHP, could have a material adverse effect on our business, financial condition and results of operations and could cause the trading price of our Equity Shares to decline. In addition, the risks set out in this DRHP may not be exhaustive and additional risks and uncertainties, not presently known to us, or which we currently deem immaterial, may arise or become material in the future. Note: Unless specified or quantified in the relevant risk factors below, our Company is not in a position to quantify the financial or other implication of any risks mentioned herein under: Materiality: The risk factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality: a) Some events may not be material individually, but may be found material collectively. b) Some events may have material impact qualitatively instead of quantitatively. c) Some events may not be material at present but may have material impact in future. The risk factors are as envisaged by the management along with the proposals to address the risk, if any. Wherever possible, the financial impact of the risk factors has been quantified. INTERNAL RISK FACTORS Risks relating to Our Company and Business 1.
Outstanding Litigations against the company (i) Civil Cases filed against our Company: Nil (ii) Criminal cases against our company: Nil (iii) Criminal cases filed by our company: Nil
2. Litigations against Promoters & Promoter Group Companies Nature of Name Litigation Mr. Chandramohan Parlapalli Nil Mr. Rangesh Rajaram Nil Mr. Rajamannar Abboy Nil Mr. Manoj Kumar Chandra Nil Mr. Kiran Babu Chandra Nil Mr. Ramjee Kasturirangan Nil Mr. Ramki Ramakrishnen Nil Wholly owned subsidiary Prelude Systems, Inc., USA Nil Group Companies Mat Exim (India) Pvt Ltd (group company) Nil Indo- Auto Shell Corporation Nil Indoshell Precision Technologies, LLC Nil Globalexim Corporation Nil
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No. of Cases Nil Nil Nil Nil Nil Nil Nil
Amount (` in Lakhs) Nil Nil Nil Nil Nil Nil Nil
Nil
Nil
Nil Nil Nil Nil
Nil Nil Nil Nil
3. Our Promoters and Directors have interests in our Company other than reimbursement of expenses incurred or normal remuneration or benefits. Our Promoters and some of our Directors are interested in our Company to the extent of their shareholding in our Company. Our Directors may also be regarded as interested in the Equity Shares, if any, held by them, that may be subscribed by or allotted to the companies, firms, trusts, in which they are interested as directors, members, partners, trustees and promoters, pursuant to this Issue. All of the Directors may also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of the Equity Shares. In addition to this, they are interested to the extent of repayment of unsecured loans lent by them to the company which also is listed as one of the objects of the issue. For more details, see the paragraphs on “Capital Structure – Capital Built up of Promoters”, “Our Management – Interest of Directors” and “Financial Information of Our Company – Annexure XV on Transactions with Related Parties” under Sections IV, VI and VII respectively of this DRHP. 4. Our success depends upon our ability to attract and retain the Key Management and other personnel. The Industry where our Company operates is a highly employee intensive industry having a high rate of attrition. Our Company needs to attract and retain highly skilled personnel Our success depends on the expertise, experience and continued efforts of our key managerial personnel and also on our directors and our promoters. Our future performance may be affected by any disruptions in the continued service of these persons. Any cause leading to loss of service of any of them could seriously impact our ability to continue to manage and expand our business, thus adversely affecting our operations and financial condition. Our Company expects the anticipated expansion of its business will place a significant strain on its limited managerial, operational and financial resources. Our Company will be required to expand operational, sales and marketing staff significantly and to train and manage its work force in order to manage the expansion of its operations. Our Company’s future success depends on its ability to attract, train, retain and motivate highly skilled managerial, sales, marketing and technical talent. Our Company may not be successful in attracting such talent placing significant burdens on existing talent. If our Company is not successful in attracting this talent, the results of its operations will be materially affected. 5. Our Company doesn’t own the premises where its registered office is situated and lease/ rental agreement have been executed for the same. Any termination or dispute in relation to these lease/ rental agreement may have an adverse effect on our business operations and results thereof. Our Registered office is situated at 1/18, 1st Floor, I Main Road, Kotturpuram, Chennai – 600 085, Tamil Nadu, is on leased/ rented premises which we have been taken on 11 months lease from 1st December 2011 from the owner, Mr. S. Seeni Mohammed residing at Old No. 34, New No. 84, Pushpa Nagar Main Road, Nungambakkam, Chennai – 600 034. Our business operations are also conducted from the said premises. As per the rental agreement the lease is for initial period of 11 months and any non compliance by us in relation to any term of lease may result in the termination of the lease deed/rental agreement and consequently we have to vacate the said premises. We also cannot assure you that lessor will not terminate the rental agreement, which would require us to locate to another premise and may have an adverse effect on our conducting our business operations. 6.
Our branch at Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai- 600 018 operates from the leased out property. Our branch at Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai- 600 018 also operates from the leased out property owned by Ms. Madhulika Sundaram. The Lease is for a period of 3 years with effect from 1st Jan 2011 to 31st Dec 2013. As per the terms of the Lease Agreement, the lease shall stand terminated if there is a default in payment of 3 months lease rentals. Any non compliance by us in relation to any terms of lease may result in the termination of the lease deed/rental agreement and consequently we have to vacate the said premises. We also cannot assure you that lessor will not
12
terminate the rental agreement, which would require us to locate to another premise and may have an adverse effect on our conducting our business operations. 7. Plot Nos. D-12 (New Allotment No. A-3), Land admeasuring of 1.05 acres situated at SIPCOT’s (State Industries Promotion Corporation of Tamil Nadu Limited) Information Technology Industrial Development Area, Siruseri – 603 103, Kancheepuram District, Tamil Nadu, is allotted to our Company by SIPCOT and is subject to certain conditions, some of which have not been complied with by our Company in timely manner. Our Company has executed a Memorandum of Lease Deed Agreement for Lease of Land with State Industries Promotion Corporation of Tamil Nadu Limited for acquisition of Land admeasuring 1.05 acres situated at SIPCOT IT Park, Siruseri, Tamil Nadu. In terms of the said Agreement, our Company is required to commence and complete the construction work and also commence commercial use/production within the time specified therein, failing which the allotment may be cancelled. Our Company had completed the basic civil construction at this site and has not yet started the commercial use. Our Company has applied to SIPCOT for extension of time line for commencement and commercial use of the property & a no objection certificate for the proposed IPO and is awaiting the approval for the same. 8. Our revenues are predominantly dependent on our wholly owned subsidiary Prelude Systems Inc., USA and clients located in the United States America. Economic slowdown and other factors that may affect the economic health of the United States are likely to have an impact on our business. Our present revenues are derived from our subsidiary & clients located in the United States America. Consequently, in the event of any economic slowdown in the United States, our clients may reduce or postpone their IT or software spending significantly, which may in turn, reduce the demand for our services and negatively affect our business, financial condition and results of operations. 9. We have entered into a number of related party transactions for the six months ended 30th September 2011 amounting to ` 2321.35 Lakhs which may involve conflicts of interest. We have entered into a number of related party transactions. Such transactions or any future transactions with related parties may potentially involve conflicts of interest and impose certain liabilities on our Company. The conflict of interests would be resolved by entering into transactions at the prevalent market rates where applicable and also by the interested parties refraining from being a part of the decision making process. For further details on related party transactions, see the section titled “Financial Information of Our Company” beginning on page no 129 of this Offer Document. 10. We have applied / in the process of applying / will be applied in due course for certain Statutory Approvals with respective statutory authorities and are yet to receive the approval. Any delay or inability to obtain or renew our licenses may impact our operations adversely. Our Company has submitted the requisite applications / fees / necessary documents / information / undertaking to the respective Local Authorities for their approval and doesn’t foresee any problems for getting approval. Our Company proposes to utilize the issue proceeds, inter-alia, for the purpose of setting up development centers at Siruseri and branch offices in India and abroad. In order to successfully implement our objects we may be required to obtain regulatory permissions/approvals, applications for which will be made in due course. We shall apply for the necessary SIPCOT approvals, Local municipal approvals, labour laws approvals, necessary applications to RBI for approvals in case of overseas investments if any and other general necessary approvals/permissions/licenses for running the operations of our centers as and when required. 11. Our Company has availed secured loans and unsecured loans which may be recalled by the lenders at any point of time. Our Company have availed secured loans and unsecured loans. Some of the loans are repayable on demand and may be recalled by the lenders at any time without notice, or with short notice, upon default or otherwise. If the lenders exercise their right to recall a loan, it could have an adverse affect
13
on the financial position of our Company. However, a part of the proceeds of the Issue will be used to repay the existing loans. For details see “Financial Statements” on page 129 of this DRHP. 12. We have several contractual obligations with our clients and if we are unable to meet our contractual obligations and / or our customers perceive any deficiency in service it will significantly impact our business and revenues and we may even face legal liabilities and damage to our professional reputation. The engagements that we perform for our clients are often critical to our clients’ businesses. If our client’s proprietary rights are infringed by our employees in violation of any applicable confidentiality agreements and /or our customers perceive any deficiency in service, our customers may consider us liable for that act and seek damages from us. Our client contracts may require us to comply with certain security obligations including maintaining network security and back-up data, ensuring our network is virus free and verifying the integrity of employees that work with our clients by conducting background checks. Any failure in our client’s system or breach of security relating to the services we provide to the client could damage our reputation or result in a claim for substantial damages against us. Our subsidiary has taken a Liability insurance and Errors & omission insurance policy at USA to cover any such adversities. 13. Our Company is subject to restrictive covenants and some of our Company’s properties have been charged / mortgaged as security under certain financing arrangements. Some of our financing arrangements are secured by our assets. There are certain restrictive covenants in the financing agreements we have entered into with banks and financial institutions for loans and advances. These restrictive covenants inter alia require us to obtain either the prior permission of such banks or financial institutions or require us to inform them of various activities, including, among others, alteration of our capital structure, raising of additional equity or debt capital, incurrence of indebtedness, payment of dividends, undertaking any merger, amalgamation, restructuring or changes in management. Our ability to execute expansion plans, including our ability to obtain additional financing on terms and conditions acceptable to us, could be negatively impacted as a result of these restrictions and limitations. In the event that we breach a restrictive covenant, our lenders could deem us to be in default and seek early repayment of loans. An event of default would also affect our ability to raise new funds or renew maturing borrowings as needed to conduct our operations and pursue our growth initiatives. These restrictive covenants may affect some of the rights of our shareholders. For further details please refer to the chapter titled “Financial Indebtedness” beginning on page 91 of this DRHP. 14. We have not received No Objection Certificate from all the lenders of term loans to our company. We have received the No Objection letter from SIDBI & IDBI. Our company has applied for NOC from other term lenders also and is awaiting the same. 15. One of our lenders, SIDBI has classified our account as ‘Technical Non Performing Asset’ in terms of the Bank’s Guidelines. The project for which assistance has been provided by SIDBI is yet to be completed and hence the account has been classified as Technical non performing asset. 16. Our Company did not comply with Section 383A of the Companies Act, regarding the appointment of whole time Company secretary. Such non-compliances may result into penalties or other action on our Company by the statutory authorities. Our Company did not comply with Section 383A of the Companies Act, 1956 regarding the appointment of whole-time Company Secretary from financial years 2009-10 and 2010-11. No action has so far been initiated or taken by any statutory authority for the above non compliance. However, our Company had appointed Ms. Preethi Bansal M on 28th November 2011 as Company Secretary and Compliance Officer. 17. We are subject to risks arising from foreign exchange rate movements.
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Our exchange rate risk primarily arises from our foreign currency revenues, receivables, payables and other foreign currency assets and liabilities. We have significant revenues and expenditures in foreign currencies especially US Dollars. The foreign exchange fluctuation affects both the revenues and expenditures in absolute terms when converted into Indian rupees. To this extent, the revenues and expenditures will be higher or lower depending on the depreciation or appreciation of Indian Rupee in foreign currency terms. We expect that a majority of our revenues will continue to be generated in US Dollars in the future also. Further, we have not entered into any foreign exchange forward contracts or currency options to reduce the effect of exchange rate movements on our outstanding accounts receivables and projected earnings in foreign currency. Also, in future even if we enter into any such foreign exchange forward contracts or currency options, such contracts may not perform effectively as a hedging mechanism. 18. Any inability to manage our growth could disrupt our business and reduce our profitability. Any organic growth in future and other acquisitions would place significant demands on our operational, financial and internal controls across the organization. In particular, continued expansion increases the challenges we face in recruiting, training and retaining sufficient skilled, technical, sales and management personnel; adhering to our high quality and process execution standards; maintaining high levels of client satisfaction; managing a larger number of clients in a greater number of industry sectors; integrating expanded operations while preserving our culture, values and entrepreneurial environment; and developing and improving our internal administrative infrastructure, particularly our financial, operational, communications, and other internal systems. If we are unable to properly manage our growth, it could have an adverse effect on our business, results of operations and financial condition. 19. Our Company’s ability to expand its business and procure new contracts or enter into beneficial business arrangements may be affected by non-compete clauses in the agreements with existing clients or business partners. Our Company may enter into non-compete clauses, which restricts our Company from providing services to competitors of its existing clients or entering new markets where a business partner may already have a presence. Such clauses may restrict our Company’s ability to offer services to clients in a specific industry in which it has acquired expertise, and this may be affecting the business and growth. 20. Delays or defaults in client payments could result in reduction of profits. Our Company regularly commits resources to slew of projects prior to receiving advances or other payments from clients in amounts sufficient to cover expenditures on projects as they are incurred. Our Company may be subject to working capital shortages due to delays or defaults in client payments. If clients default in their payments on a project to which our Company has devoted significant resources or if a project in which it has invested significant resources is delayed, cancelled or does not proceed to completion, it could have an adverse effect on our Company’s business, financial condition and results of operations. 21. A substantial part of our business comprises of short term agreements with most of our clients and there is no assurance that these clients will continue to engage us for our services. Any such non continuance may affect our business. Though our Company has been dealing with some of our customers for several years, our clients typically retain us through non-exclusive service contracts. We do not have any long term agreements with majority of our clients and such agreements are typically terminable by the clients without assigning any cause on a short notice period. Additionally, our service agreements with customers are typically without any commitment to a specific volume of business or future work. The contracts entered into between us and our clients relate to particular assignments in relation to which a set of quality control norms and mechanisms as well as a time-frame for delivery is typically stipulated. If we are not able to provide our software products or services within these particular parameters, our clients may terminate these contracts. Although, we have a strong emphasis on quality, timely
15
delivery of our IT products and services and personal interaction by the top management with the clients, any change in the preferences of our clients may affect the business of our Company. 22. Our fixed-price contracts may expose us to risks beyond our control, which could reduce our profitability. We provide services either on a fixed price basis or on a time and materials basis. Although we use our past project experience and contractual provisions to reduce the risks associated with estimating, planning and performing fixed-price projects, we bear the risk of cost overruns and completion delays in connection with these projects. Many of these risks are beyond our control. Any failure to accurately estimate the effort including the number of people and time required for a project or any failure to complete our contractual obligations within the time frame committed could adversely affect our revenues and profitability. 23. Increases in wages for IT professionals could impact our profit margins. Historically, wage costs in the Indian IT services industry have been significantly lower than wage costs in the developed countries for comparable skilled technical personnel. However, in recent years wage costs in the Indian IT services industry have been increasing at a faster rate than those in certain developed countries. In the long term, wage increases may make us less competitive unless we are able to continue increasing the efficiency and productivity of our professionals and the prices we can charge for our products and services. Increase in wages, including an increase in the cash component of our compensation expenses, may reduce our cash flow and our profit margins. 24. Our business and profitability will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in client preferences and the industry on which we focus. Our business is characterized by constant service level innovation due to evolving industry standards in the service industry to which we cater. Adaptability is one of the key attributes for success in our industry. To compete successfully in the industry, we must be able to identify and respond to changing requirements, as well as operate within substantial delivery constraints. Changes in service levels may impact our operating results and our margins. We cannot assure you that our services will always gain acceptance from our clients and meet customer expectations. Failure to identify and respond to changes in client preferences could, among other things, limit our ability to differentiate our services, adversely affect client acceptance of our services, and lower sales and gross margins. Further, services, that are offered by our competitors may render our offerings non-competitive or force us to reduce prices, thereby affecting our margins. 25. If we are unable to successfully protect our computer systems from security risks, our business could suffer particularly since our Company’s operations involve transmission of data through Internet, which involves security risks. System failures and calamities could adversely impact the business. Many of our services operate on web technologies. Our client contracts require us to comply with certain security obligations, including maintenance of network security, back-up of data, ensuring our network is virus-free and ensuring the credentials of those employees who work with our clients. Further, while we have implemented industry-standard security measures, our network may still be vulnerable to unauthorized access, computer viruses and other disruptive problems. There can be no assurance that any measures implemented will not be circumvented in the future. 26. The insurance coverage taken by our Company may not be adequate to protect against certain business risks. Operating and managing a business involves many risks that may adversely affect our Company’s operations, and the availability of insurance is therefore important to its operations. Our Company maintains Standard Fire & Special Perils and Burglary insurance coverage in relation to its assets, stocks, properties etc. Our Company believes that its insurance coverage is generally consistent with industry practice. However, to the extent that any uninsured risks materialize or if it fails to
16
effectively cover it for any risks, it could be exposed to substantial costs and losses that would adversely affect results of operations. 27. The global operations expose our Company to foreign currency, legal, tax and economic risks. Our Company currently services to customers in Asia and North America. As a result of the expanding international operations, our Company is subject to risks inherent in establishing and conducting business in international markets including but not limited to Compliance with foreign laws, labour laws, immigration, tax etc, restrictions on repatriation of profits and exchange rate volatility. 28. We have had negative cash flows in the past.
Particulars Net cash from (used in) operating activities Net cash from (used in) investing activities Net cash from (used in) financing activities Net Cash Flow
Consolidated Six months ended 30th September 2011
Standalone for six months ended 30th September 2011
(Amount in `) Standalone for year ended 31st March
2011
47,181,470
2010
2009
2008
2007
24,447,901
25,039,545
(2,206,929)
(3,804,581)
33,012,663
(2,574,612)
(43,332,732)
(2,653,598)
10,025,735
20,357
16,181,844
17,519,113
13,906,396
44,607,030
18,547,376
713,129
(5,207,853)
(886,497)
4,201,672
(17,295,948)
17,836,218
1,558,124
(64,249,811) (37,765,342) (56,241,890) (24,563,883) (13,184,671)
29. Our Group Companies have incurred losses during the past years as stated below. Sr. No. Name of the Company 1. Mat Exim (India) Private Limited 2. Indoshell Precision Technologies, LLC 30. Our Company has made application for registration of trademark, which is under process. We have made application for registration of trademarks and the registration for the same in our name is important to retain our brand equity. If our application for registration is not accepted or if the oppositions filed against our trademark application if any, are successful, we may lose the statutory protection available to us under the Trade Marks Act, 1999 for such trademark. For further details please refer to the chapter titled ‘Government and Other Approvals’ beginning on page 170 of the Draft Red Herring Prospectus. Risk Relating to the Objects of the Issue 31. We have not placed orders for any of the equipments or hardware & software items to be installed at our premises, which amount to ` 877.37 lakhs. Any delay in procurement of these items may delay the implementation schedule which may also lead to increase in prices, further affecting our cost, revenue and profitability. We have estimated the cost of equipments/ hardware and software based on quotations received or internal estimates based on the prevailing market prices of manufacturers/ suppliers. However, as on
17
date of filing this DRHP, we have not placed orders for any of these items. We cannot assure that we would be able to acquire them at the prices as quoted/estimated in this DRHP. Any delay in acquisition could lead to time and cost overruns, and may have a material adverse effect on our business, results of operations and financial condition. 32. As the specific acquisition targets have not been identified, the fund deployment in this regard is uncertain. Our Company intends to use part of the Issue Proceeds amounting to 2000 Lakhs (which represents about 24.60% of the Issue Proceeds) for acquisitions as described in the Chapter titled ‘Objects of the Issue’ on page 51 of this Draft Red Herring Prospectus. As on the date of this Draft Red Herring Prospectus, we have not yet identified specific acquisition targets. We have not yet entered into any definitive agreements to utilize the funds allocated for making acquisitions. Further, there can be no assurance that we will be able to conclude definitive agreements for such acquisition on such terms and conditions as anticipated by us or on terms most favourable to us and in the timeframe contemplated by us. The probable period of completion of such acquisition is F.Y. 2013-14. 33. The deployment of the issue proceeds is entirely at the discretion of the Management / Company and no independent agency has been appointed to monitor its deployment. The utilization of proceeds of the Issue has been determined based on our management’s internal estimates and no bank or financial institution has appraised the use of proceeds to be raised through the Issue. A Project Monitoring Committee has been formed consisting of three of our Directors. This Committee will monitor the implementation of the project as well as the use of proceeds of the Issue. We may have to revise our management estimates from time to time and consequently our funding requirements may also change. This may result in the rescheduling of our project expenditure programmes or relocation of some of the aforesaid proposed development centres and thereby our operations may be adversely impacted. In terms of Clause 16 (1) of the ICDR Regulations, 2009, there is no requirement of Monitoring Agency as the issue size is less than ` 500 Cr. Our Board will monitor the utilization of the proceeds of the Issue. Pursuant to Clause 49 of the listing agreement, our Company shall on a quarterly basis disclose the uses and application of the proceeds. The utilization of the proceeds will be provided under a separate head in our balance sheet till such time the funds have been fully utilized along with details. The details of the investments in which the unspent amount is temporarily deployed will also be mentioned. 34. We have not identified any alternate source of financing the ‘Objects of the Issue’. If we fail to mobilize resources as per our plans, our growth plans may be affected. We have not identified any alternate source of funding and hence any failure or delay on our part to raise money from this issue or any shortfall in the issue proceeds may delay the implementation schedule of our project and could adversely affect our growth plans. For further details please refer to the Section V titled “Objects of the Issue” of this DRHP. Risks related to Our Equity Shareholders and Our Equity Shares 35. You may not be able to sell immediately on an Indian stock exchange any of the Equity Shares you purchase in the Issue until the Issue receives the appropriate trading approvals. You can start trading in the Equity Shares only after they have been credited to your Demat account and listing and trading permissions are received from the Stock Exchanges. Our Equity Shares will be listed on the NSE and the BSE. Pursuant to SEBI Regulations, certain actions must be completed before the Equity Shares can be listed and trading may commence. Trading in the Equity Shares is expected to commence within 12 Working Days of the Bid Closure date. Further, there can be no assurance that the Equity Shares allocated to you will be credited to your Demat account, or that the trading in Equity Shares will commence within the specified time periods.
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36. Our Promoters will continue to hold a significant portion of our Equity Shares after the Issue and can influence our corporate actions. Following the completion of the Issue, our Promoters and Promoter Group will own an aggregate of [●] of our issued and paid-up Equity Share Capital. As a result, our promoter Group will have the ability to exercise significant influence over all matters requiring shareholder’s approval, including the election of directors and approval of significant corporate transactions. Our Promoter Group will also be in a position to influence any shareholder action or approval requiring a majority vote, except where it is required by applicable laws to abstain from voting. The significant ownership of promoters may also have the effect of delaying, preventing or deterring a change in control. Our Promoters and/or the members of our Promoter Group will also continue to have the ability to cause us to take actions that are not in, or may conflict with, our interests and/or the interests of our minority shareholders, and there can be no assurance that such actions will not have an adverse effect on our future financial performance and the price of our Equity Shares. For further details, see the Sections IV titled “Capital Structure” and “Our Promoters” respectively in this DRHP. 37. Our ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures. Our company has not declared any dividend since inception on 14th December 1998. The amount of our future dividend payments, if any, will depend upon our future earnings, financial condition, cash flows, working capital requirements and capital expenditures. There can be no assurance that we will be able to pay dividends. 38. Any future equity offerings or issue of options under any future employee stock option scheme may lead to dilution of investor’s stake in our company. Purchasers of Equity Shares in this Issue may experience dilution of their stake to the extent we make future equity offerings and to the extent we decide to grant options to be issued under an employee stock option scheme. We do not have any ESOP scheme currently. EXTERNAL RISK FACTORS 39. Any changes in the regulatory framework could adversely affect our operations and growth prospects. We are subject to various regulations and policies. For details see section titled “Key Industry Regulations” beginning on page no 94 of this DRHP. Our business and prospects could be materially adversely affected by changes in any of these regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. There can be no assurance that we will succeed in obtaining all requisite regulatory approvals in the future for our operations or that compliance issues will not be raised in respect of our operations, either of which could have a material adverse affect on our business, financial condition and results of operations. 40. Civil disturbances, extremities of weather, regional conflicts and other political instability may have adverse affects on our operations and financial performance. Certain events that are beyond our control such as earthquake, fire, floods and similar natural calamities may cause interruption in the business undertaken by us. Our operations and financial results and the market price and liquidity of our equity shares may be affected by changes in Indian Government policy or taxation or social, ethnic, political, economic or other adverse developments in or affecting India. 41. Regional or International hostilities, terrorist attack or other acts of violence of war could have a significant adverse impact on international or Indian financial markets or economic conditions or on Government Policy. Such incidents could also create a greater perception that investment in Indian Companies involves a higher degree of risk and could have an adverse impact on our business and on the market price of our company’s equity shares.
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42. In future we may depend on banks and financial institutions and other sources for meeting our short and medium term financial requirements. Any delay in the disbursal of funds from these bodies can be a bottleneck to our project execution capabilities and thereby our results of operations. We cannot assure that we will be able to do so on commercially reasonable terms. Any increase in interest expense may have a material adverse effect on our business prospects, financial condition and results of operations. 43. The market value of the Equity Shares may fluctuate due to the volatility of the securities markets. The securities markets are volatile and stock exchanges have in the past, experienced substantial fluctuations in the prices of listed securities. The stock exchanges have experienced problems, which, if these were to continue or recur, could affect the market price and liquidity of the securities of Indian Companies, including the Equity Shares. The governing bodies of the various Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, time to time disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on the market sentiment. 44. Shareholders will bear the risk of fluctuation in the price of Equity Shares. The market price of the Equity shares may be affected by fluctuations in the stock markets and it is impossible to predict whether the price of the Equity Shares will rise or fall. Trading prices of the Equity Shares will be influenced by, among other things, our financial position, the results of operations and political, economic, financial and other factors. 45. Future issues or sales of equity Shares of our company may significantly affect the trading price of the Equity Shares. Future issue of Equity Shares / convertible instruments by our company or the disposal of Equity Shares by any of the major shareholders or the perception that such issues or sales may occur may significantly affect trading price of the Equity Shares. Other than the lock-in of Pre-issue capital as prescribed under SEBI (ICDR) Regulations, 2009, none of the shareholders are subject to any lock-up arrangements restricting their ability to issue Equity Shares or the Shareholder’s ability to dispose of their Equity Shares, and there can be no assurance that any shareholder will not dispose of, encumber, or pledge, his shares. PROMINENT NOTES 1.
Issue Of [●] Equity Shares Of ` 10/- each for cash at a price of ` [•] per Equity Share aggregating upto ` 8130 Lakhs (hereinafter referred to as The “Issue”).The Issue would constitute [•]of the fully diluted Post Issue Paid-Up capital of our Company.
2.
Investors are free to contact the BRLM or the Compliance Officer for any complaints / information / clarification pertaining to this Issue. For contact details of the BRLM, please refer to the cover page of this DRHP.
3.
The pre-issue net worth of our Company was ` 1599.02 Lakhs & ` 1532.93 Lakhs as per our restated consolidated & standalone audited financial statements as on September 30, 2011 respectively.
4.
The average cost of acquisition of Equity Shares by all our Promoters is `3.76 per Equity Share other than Mr. Rajamannar Abboy whose average cost of acquisition is `6.00 per equity share.
5.
Book value per Equity Shares (of face value `10/-) of our Company, as per our restated consolidated & standalone audited financial statements as on September 30, 2011 was ` 12.62 and ` 12.09 respectively.
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6.
Trading in equity shares of our Company for all the investors shall be in dematerialised form only.
7.
Other than the issuance of bonus shares mentioned below, our company has not issued any shares for consideration other than cash. Date No. of shares 30th November 2009 24,00,000 30th September 2011 50,89,809
8.
For details on Related Party Transactions refer to the section titled “Financial Information of Our Company” on Page No.129 of this DRHP.
9.
All information shall be made available by the BRLM and our Company to the public and investors at large and no selective or additional information would be available only to a section of the investors in any manner whatsoever.
10. Investors are advised to refer to the paragraph on “Basis for Issue Price” on page No. 57 of this DRHP before making an investment in this Issue. 11. This Issue is being made through 100% Book Building Process wherein atleast 50% of the Net Issue to the Public will be available for allocation to Qualified Institutional Buyers (“QIB”) on a proportionate basis, subject to valid bids being received at or above the Issue Price. Out of the portion available for allocation to the QIBs, 5% will be available for allocation to Mutual Funds. Mutual Funds Bidders shall also be eligible for proportionate allocation under the balance available for the QIBs. Further, upto 15% of the Issue to the Public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 35% of the Issue to the Public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. 12. Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depository, demographic details of the Bidders such as address, bank account details for printing on refund orders and occupation. Hence, Bidders should carefully fill in their Depository Account details in the Bidcum-Application Form and also update their demographic details with their respective depository participant. 13. Investors are advised to go through the paragraph on “Basis of Allotment” beginning on page No.216 of this DRHP. 14. In the event of the Issue being oversubscribed, the allocation shall be on a proportionate basis to QIBs, Retail Individual Bidders and Non-Institutional Bidders. For details, refer to the chapter titled “Issue Procedure” on page No. 188 of this DRHP. 15. Our Company, and the BRLM will update the Offer Document in accordance with the Companies Act and the SEBI (ICDR) Regulations 2009 and our Company and the BRLM will keep the public informed of any material changes relating to our Company till the listing of our shares on the stock exchange. 16. Our promoters, their relatives and associates, promoter group and our directors have not entered into any transactions in our Equity Shares directly or indirectly in the past six months. 17. There were no transactions in the securities of Company during preceding 6 months which were financed directly or indirectly by the Promoters, their relatives, their group companies or associates or by the entities directly or indirectly through other persons.
21
18. No loans and advances have been made to any person(s) / companies in which Directors are interested except as stated in the related party transactions contained in the section titled “Financial Information of Our Company” on Page No.129 of this DRHP. 19. The aggregate value of transactions by the issuer with group / associate companies during the last two accounting periods is `4810.98 Lakhs, details of which are disclosed under section titled “Financial Information of Our Company” beginning on Page No.129 of this DRHP. 20. Our Company was incorporated on 14h December, 1998 under the name and style of Prelude Solution Providers Private Limited and was later renamed as PreludeSys India Private Limited on 30th April, 2008. Our Company was converted into a Public Limited Company called PreludeSys India Limited on 12th April, 2011. 21. No part of the Issue proceeds will be paid as consideration to promoters, directors, key managerial personnel, associate or Group Company.
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SECTION IV – INTRODUCTION This is only a summary and does not contain all information that you should consider before investing in our Equity Shares. You should read the entire DRHP, including the information on “Risk Factors” and our “Financial Statements” and related notes beginning on page no. 11 and 129 respectively of this DRHP, before deciding to invest in our Equity Shares. SUMMARY OF INDUSTRY OVERVIEW Evolution of the IT Industry Information technology (IT): From a pre-historic computer era of mechanical computers, to electronic computers that can transmit information at the speed of the light, technology has changed the way tasks had been performed earlier. Today, the landscape is undergoing a sea change again, with the advent of cloud computing, social media, smart phones, tablets etc. The 1960s and 1970s, saw the domination of mainframes in the corporate computing environment. Then came 1980 when IBM looked at the geeky micro-computer market and saw a more flexible and cheaper terminal to connect to their mainframes. Those who were using micro-computers at the time were not impressed. By this time, Lotus had taken this idea and made it work with large data crating new markets. Rather than the intelligent mainframe workstation with a bit of word processing thrown in, that IBM had envisaged, office workers were running their own programs to get the work done locally. The two armies faced off, and the battle raged. Desktops sprouted databases (DBASE) and 4GL solutions. The mainframe fought back with client server applications, a sort of compromise that would leave IT departments back in charge. Then, the Internet excited everyone with its information presentation technology. The excitement came when they knew that the information they required was at their fingertips and the IT departments saw servers under their control sending information to terminals. Almost every enterprise application since the last 10+ years have been web-based thereby enabling information access to people even outside of the enterprise. With spread of telecommunication, adoption of smart phones increased and today significant percentage of devices connected to the internet are mobiles or tablets. As changes swept through the hardware, software space similar changes were happening in the models of software delivery. Delivering software as a service has started gaining prominence and is on its way to be one of the mainstream models for software application access. Source: IDC Report on 40 Years of IT Looking Back, Looking Ahead by John Gantz ‐ http://homepages.rpi.edu/~tealj2/40%20Years%20of%20IT.pdf
Global Outlook As per Gartner global overall IT spending was US$3.43 trillion for 2010. Gartner has predicted that the overall spending for 2011 will grow by 2.9% (based on Q3 2011 Projection and after adjusting for exchange rates) in 2011 and 3.9% (after adjusting for exchange rates) in 2012. Through 2015, the forecast of overall IT spending will grow at an annual average rate of 5.3% (based on Q2 2011 and before adjusting for exchange rates) as the global economy continues to recover. Source: http://www.gartner.com/technology/research/it-spending-forecast/ Perspective 2020 Transform Business, Transform India report released by NASSCOM predicts that the IT services market will reach the US$ 1.5 trillion mark. The verticals that contributed to the $500 billion were the core markets of BFSI, telecom, retail, manufacturing and the travel segments. The additional growth of around US$800 billion is likely to come from the emerging markets of public sector, healthcare, media and the utilities segments. The Small and the Mid-sized Businesses will be the new customer targets for organizations while the new geographies that will be the potential off shoring markets will be Brazil, Russia, India and China.
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Source: 1. Perspective 2020: Transform Business, Transform India, NASSCOM – http://epi.nasscom.in/upload/Perspective%202020%20Press%20release%20presentation.pdf India Outlook With growing economy IT spending in India across the various sectors will continue to increase. Gartner estimates the overall IT spending in India is expected to reach $71.9 billion in 2011. The IT services market is projected to grow by 17.1% (CAGR) during the 2009-2014 period generating revenues of US$13.6 billion by 2014. Gartner analysts say, the IT services space in India will be driven by new projects in areas of business applications (CRM, ERP, BI), virtualization and data center consolidation and green IT exploration. Source: http://www.gartner.com/it/page.jsp?id=1475414 Indian IT Industry – Perspective 2020- Nasscom - McKinsey Report According to 'Perspective 2020: Transform Business, Transform India’ report, the exports component of the Indian industry is expected to reach US$ 175 billion in revenue by 2020. The domestic component will contribute US$ 50 billion in revenue by 2020. Together, the export and domestic markets are likely to bring in US$ 225 billion in revenue, as new opportunities emerge in areas such as public sector and healthcare and as geographies including Brazil, Russia, China and Japan opt for greater outsourcing. The Indian Information Technology industry is expected to account for a 6% of the country's annual GDP and 28% of annual exports by 2020. Its also expected to create 30 million urban employment (direct and indirect), making it one of the biggest job creators in India and a mainstay of the national economy. Source: 1. Perspective 2020: Transform Business, Transform India, NASSCOM – http://epi.nasscom.in/upload/Perspective%202020%20Press%20release%20presentation.pdf
SUMMARY OF THE COMPANY & ITS BUSINESS Our Company was incorporated on 14th December 1998 under the name & style of Prelude Solution Providers Private Limited. Consequently the name of the company was changed to PreludeSys India Private Limited on 30th April 2008 & the company became public on 12th April 2011 and the name was changed to PreludeSys India Limited. Today, we are an international IT company that delivers IT and IT enabled business solutions to companies large and small. Our offerings are Software Development, Enterprise Application Services, QA and Testing, BPO and Strategic Sourcing. We provide consulting and delivery expertise in solution design, development and integration from delivery centers in India and in the USA through our subsidiary. We provide our services with a strong focus on specific verticals like manufacturing, media, technology, banking, financial services and insurance. We provide end-to-end project execution onsite, offsite, offshore, or in onsite-offshore models. We are ISO 9001:2008 certified organization. In the Enterprise Mobility space, we offer our ‘AnB’ solution. Our solution is targeted at enterprises that have a need to mobile enable their enterprise applications like SAP, Oracle or any other custom application. Our solution enables enterprises to take their enterprise data to the mobile with minimum lead time and cost. We have steadily enhanced the portfolio of services we offer to address the diverse requirements of our clients. This has been through partnering with principals like SAP, Microsoft, RIM and Sybase. Our goal is to be a global IT organization and to this end, we have been increasing our geographical
24
footprint in an aggressive manner. We have beefed up our presence in US with offices in multiple locations there through our subsidiary, Prelude Systems Inc. We have entered the Middle East and Asia Pacific regions through our sales activities. We are continually growing our development centers in India as well as USA. We currently have 2 development centers in Chennai, and our subsidiary in Diamond Bar (California) and Austin (Texas). Our new facility in Siruseri, Tamil Nadu, India is expected to be completed FY 2012-13. With our domain skills and customer-centric approach, we have developed several strategic client relationships. We have built a sales team who are placed in both our premises and that of the client locations focus on developing client relationships. Our sales team is complemented by a team of domain experts and solution architects who provide industry specific and service offering inputs. We also have alliance partnerships with leading software vendors including SAP, Microsoft, IBM, Research in Motion and Sybase. We believe that our ability to maintain growth depends to a large extent on our strength in attracting, training, motivating and retaining our people. Our Services: The following are the list of services offered by us to our clients in India and abroad. Our company, in addition to executing the service requirements of our domestic clients, also executes the work orders received by our US subsidiary. The onsite process flow chart is produced below to understand the flow of work between us and our subsidiary. 1. Software Development We focus our delivery solutions through the adoption of globally benchmarked CMMI processes enabling delivery on time and within budget. On customer engagement a dedicated team of qualified experts are committed to delivering turn-key solutions. We provide insight to every aspect of the customer’s business and technology needs, from strategy consulting and concept development to Project Management, Application Development, Reengineering, Data Migration & Conversion, Testing, Maintenance and Support. Our software development offerings include Application Development: We develop custom application across Microsoft, Java and Open Source technologies. We have experience in Desktop, Web and PDA applications development. We understand the client’s requirements and their IT landscape and based on that we suggest the technology on which the application can be developed. We use industry standard tools during our development process which aids in rapid development. We also have developed frameworks which aid in accelerated development cutting down on time to make the application available for end users. We use structured development processes based on ISO / CMMI framework which ensures that the development phases have proper check gates
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which ensures that quality is built-in throughout the development process. Mobile Application Development: We have experience across multiple platforms in mobile application development including J2ME based mobile application development, iPhone / iPad application development; Android based mobile application development and BlackBerry application development. Application Maintenance & Support: We understand that the application has to be supported through its lifetime to ensure trouble free functioning. During the course of application usage users encounter need for training, more features or fixes. We handle them by providing user training, troubleshooting (any application issues including environment and application code and fix bugs), minor enhancements (provide programming support for minor enhancements to the application). Legacy Modernization: We provide our clients with a variety of alternatives for modernizing their legacy systems. Each of these legacy modernization approaches ensures maximum reuse of the unique logic created and maintained by organizations at the heart of their operations, while incorporating new technologies that enable new functionality to be added quickly. E-Commerce: We offer an e-commerce platform “PreludeSys E-commerce Platform” (PEP), for the enterprises to use the electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals. PEP covers the entire spectrum of activities in an e-commerce transaction process. Database Development: We provide database design, development and optimization services. We work on industry standard databases like SQL Server, Oracle, and MySQL. We use tools for data modeling. We have developed transaction driven applications which require robust data models and optimized queries to function smoothly. We also develop complex reports that require fetching data from multiple tables and drill down views. 2. Enterprise Application Services We help our customers’ access and manage real-time information and transaction processes across their entire organization. We assist clients in transforming their business by implementing proven enterprise solutions from SAP and Microsoft. Our strong partnerships with SAP and Microsoft, help companies achieve optimum returns from ERP investments. ERP: In order to facilitate the smooth-running of businesses, it’s imperative for organizations to have a seamless integration of their business processes across suppliers, employees and customers. Enterprise Applications help organizations accomplish one critical goal - information integration. CRM: We help organizations to plan, implement and manage CRM applications. We adopt practices which ensure organizations derive maximum mileage from their CRM investments. Our service offering in the Enterprise Application space covers CRM consulting, implementation, integration with other Enterprise Applications, etc. ECM: In this era where ‘innovation’ is the buzz word and key differentiator between organizations, forward looking organizations are focused on institutionalizing the innovation process. They invest in processes and tools which help accomplish this goal. One of the vital things in this process is the focus on leveraging organizations’ institutional knowledge. Since this knowledge is spread across different business units and is in different formats, it becomes necessary for organizations to employ processes and tools which will enable them to access, share and use varied content. Our experience in Enterprise Content Management (ECM) covers document management, collaborative content management, forms processing, and web content management.
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Business Intelligence: Our Business Intelligence Practice helps customers integrate their data silos as well as access and analyze consolidated data. This in turn enables organizations to make informed decisions that accelerate business growth. Master data management, enterprise data warehouse, data migration and packaged analytics are also part of the Business Intelligence Practice. 3. QA & Testing We believe that quality is the implicit deliverable in all our engagements, be it solution development or service offering. Recognizing the need for quality driven software testing, we have set up a software testing unit. Staffed by a team of certified professionals and supported by industry-standard testing tools, the unit can test software developed in various technologies and on different platforms. Our testing team does System Testing, Integration Testing, Performance Testing and aids the client in User Acceptance Testing. 4. Business Process Outsourcing The trend of global corporations continuing to face severe competitive pressure and outsourcing work to cost effective locations is accelerating day by day. We are equipped to provide support in various business processes in which we possess proven expertise. Our services span medical records review & categorization, recruitment & staffing, accounts & payroll. 5. Strategic Sourcing We are a direct source for external IT talent. In recent times, traditional IT staffing companies have been functioning predominantly as brokers for contract labor. More often than not, these resources are someone else’s employees. This extra layer inflates the hourly rates and thereby proves pointless in this rough economic climate. We are an employee-based technology company that helps clients cut costs by directly providing them with experienced IT professionals. PROSPECTS OF THE PRESENT & PROPOSED PRODUCTS & SERVICES IT Services Market: The global IT Services industry (data processing and outsourced services market, and the IT consulting & other services) had total revenues of $1,116.6 billion in 2010, representing a compound annual growth rate (CARC) of 5.0% for the period spanning 2006-2010. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 5.3% for the five-year period 20102015, which is expected to drive the industry to a value of $1,442.3 billion by the end of 2015. Of this ERP will reach $50.3bn by 2015, according to a Forrester report. The ERP market size has been growing steadily over the couple of years with $45.5bn in 2011, $43bn in 2010 and $40.6bn in 2009. IDC expects the enterprise applications (EA) software market including ERP, CRM and supply chain products in the Asia Pacific excluding Japan (APEJ) region is likely to grow and reach $8.7 billion by 2015. With our expertise in Application Development and maintenance, and our existing partnership with SAP and Microsoft for their ERP and CRM products we are positioned to leverage the increasing market growth. Source: 1. http://www.researchandmarkets.com/reports/71491/global_it_services 2. http://enterpriseapplications.cbronline.com/news/erp-market-to-grow-to-503bn-in-2015forrester-060511 3. http://www.cio-asia.com/tech/applications/enterprise-apps-market-in-the-asia-pacific-to-reachus87-billion-by-2015/ Enterprise Mobility: The global mobile applications market is estimated to reach $25.0 billion in 2015 from about $6.8 billion in 2010. Applications represent the fastest growing revenue category for
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enterprise mobility, growing at a compounded annual rate of more than 25% by 2015. Players in the enterprise mobility space include Apple’s iOS, Google’s Android, Research In Motion, Microsoft’s Windows Phone. Our ability to build applications with cross platform compatibility is our key strength and with our AnB solution we are uniquely positioned to take advantage of this growing market. Source: http://www.prnewswire.com/news-releases/marketsandmarkets-world-mobile-applications-marketworth-us25-billion-by-2015-114087839.html Cloud Computing: Independent research firm Forrester Research expects the global cloud computing market to reach $241 billion by 2020 compared to $40.7 billion in 2010. A short term outlook from Renub research is that Cloud computing market will cross $25 billion by 2013 and Platform-as-a-Service (PaaS) is likely to reach $4 Billion by 2013. PaaS is the third largest cloud category with a market size of $820 million in 2011, and Forrester predicts steady growth as PaaS becomes a serious alternative for developing custom applications. Many ISVs have been using PaaS since 2010; usage in corporate application development will take off in 2011, while service providers will engage more with PaaS from 2012 on, the Forrester report states. Salesforce.com offers Force.com, which is the development platform and infrastructure for corporate IT departments and independent developers to build business applications. Our partnership with Sales force places us to compete effectively in PaaS space. Source: 1. http://www.cloudtweaks.com/2011/04/cloud-computing-market-will-top-241-billion-in-2020/ 2. http://softwarestrategiesblog.com/2011/01/01/roundup-of-cloud-computing-forecasts-andmarket-estimates-2011/ 3. http://www.globalservicesmedia.com/IT-Outsourcing/Infrastructure-Management/Forrester:Public-Cloud-Growth-to-Surge,-Especially-SaaS/22/6/10838/GS110428139541 BPO Market: The global business process outsourcing (BPO) market will reach revenues of $93.4 billion in 2015, a compound annual growth rate (CAGR) of 5.4 per cent from the $71.92 billion it hit in 2010, predicts independent analyst firm Ovum. According to the NASSCOM and Everest India report, Indian BPO industry would grow nearly five-fold from its present revenue of around $10 billion to reach US$50 billion by 2012. Our specialized offerings in this space allow us to distinguish in the market place and take advantage of the incremental revenue growth. Source: 1. 2.
http://articles.timesofindia.indiatimes.com/2011-09-21/outsourcing/30183844_1_global-bpomarket-global-business-process-outsourcing-enterprises http://www.globalservicesmedia.com/BPO/Market-Dynamics/Indian-BPO-Industry-To-ReachUS$50B-By-2012/23/28/0/GS110901399987
SALES AND MARKETING STRATEGY • •
•
We undertake a detailed exercise periodically to identify existing and prospective clients with the potential to develop into large clients. We have a good flow of new customers towards us from the reference of our existing clients and also because of our competitive strength. We work with clients’ managers and senior executives to formulate and execute our Global Delivery Model and implement fixed price, fixed time basis or time and material basis models and explore new service offerings. Our current sales team is spread across various target industries and service offerings through focused Business Development Managers at different levels and Business Development Executives and Lead Analysts.
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•
Each sales team is supported by an Inside Sales team and additional support staff based out of both our offices in India and US. They are complemented by a team of domain experts and solution architects who support our sales efforts by providing the necessary expertise. In addition, marketing professionals assist in marketing efforts and brand building.
•
We identify sales opportunities in several ways, including: 9 Traditional sales process 9 Senior management relationships 9 Referrals from alliance partners 9 Inside sales team 9 Inquiries from our website.
•
Our marketing initiatives include participating in major industry events, sponsoring user group events, analyst briefing and proactively using the various media sources to increase awareness of our activities. In addition, we have several technology alliances with leading IT vendors like Microsoft, SAP, Sybase and Blackberry, which typically involve systems integration and in certain cases joint product development.
We have invested in, and plan to continue to invest in, developing the PreludeSys brand in India as well as on global stage. We believe that a strong brand will contribute to attracting and retaining talented manpower and client acquisition. OUR COMPETITIVE STRENGTHS We believe that the following aspects of our business help differentiate us from some of our competitors: •
•
•
Comprehensive range of IT Services: We have developed a comprehensive range of service offerings in order to address the varied and expanding requirements of our clients. With development centers in India and the U.S., we offer software development, enterprise application services, quality assurance & testing, strategic sourcing and business process outsourcing services to our customers. Long term client relationships: We have demonstrated the ability to manage large client relationships. This is reflected in the long duration of our relationships and the depth of our service offerings for some of our largest clients. We believe that our ability to be accessible to our customers, the personal attention we give them, our flexible approach and agility to meet customer requirements and our positive attitude in servicing customers has helped increase customer satisfaction levels and is a competitive strength. Global delivery model: We use a client-centric Global Engagement Model that combines local, senior, on-site resources with the cost, scale, and quality advantages of off-shore operations. Since the time of our inception, our location advantage gives our customers the benefit of a 24hour virtual workday, advantages of controlled cost, high productivity and a culturally sensitive English-speaking workforce.
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THE ISSUE Equity Shares Offered: Public Issue of Equity Shares by our Company Of which A) Qualified Institutional Buyers Portion
B) Non-Institutional Portion
C) Retail Portion
Equity Shares outstanding prior to the Issue Equity Shares outstanding after the Issue Objects of the Issue
[•] Equity Shares of `10 each for cash at a price of ` [•] aggregating to ` 8130 Lakhs. [•] Equity Shares of `10 each for cash at a price of ` [•] aggregating to ` 4065 Lakhs, constituting atleast 50% of the issue to the Public (allocation on proportionate basis) out of which 5% i.e. [•] Equity Shares will be available for allocation to Mutual Funds only and the remaining QIB portion will be available for allocation to QIBs, including Mutual Funds. [•] Equity Shares of `10 each for cash at a price of ` [•] aggregating ` 1219.50 Lakhs constituting upto 15% of the issue to the Public. (allocation on proportionate basis) [•]Equity Shares of `10 each for cash at a price of ` [•]aggregating ` 2845.50 Lakhs constituting upto 35% of the issue to the Public (allocation on proportionate basis) 1,27,24,508 Equity Shares of `10 each [•]Equity Shares of `10 each Please refer to chapter titled “Objects of the Issue” on page no.51 of this DRHP
*Under subscription, if any, in any of the categories, other than the QIB category would be allowed to be met with spill over from any of the other categories at the sole discretion of our Company, in consultation with the BRLM and the designated Stock Exchange.
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SUMMARY OF FINANCIAL INFORMATION The following summary financial data has been prepared in accordance with Indian GAAP, the Companies Act and the SEBI ICDR Regulations and restated as described in the Auditor’s Report of our statutory auditors M/s CNGSN & Associates, Chartered Accountants dated 5th December 2011 in the section titled “Financial Information” of this DRHP including the Notes thereto and the Reports thereon, which appears under the paragraph on “Financial Information” in this DRHP, and “Management Discussion and Analysis” on page 129 of this DRHP. SUMMARY STATEMENT OF PROFIT AND LOSS ACCOUNT, AS RESTATED
Summary Statement of Profit and Loss Account, as Restated (Amount in `) Particulars INCOME Services provided Export Domestic Sale of Licenses & AMC Export Domestic Total Other Income Increase/(Decrease) in Stock TotalIncome EXPENDITURE Cost of goods sold Staff Costs Administration expenses Selling & Distribution expenses Finance Charges
PART - A Consolidated for Consolidated for the year ended the year ended 31st 30th Sept 2011 March 2011
For the year ended 30th Sept 2011
For the year ended 31st March 2011
PART - B (STAND ALONE) For the year For the year ended 31st ended 31st March 2010 March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
432,288,982 4,860,276
114,314,059 9,703,590
75,539,073 4,860,276
114,314,059 9,703,590
109,045,273 8,920,072
82,501,906 7,600,708
71,633,326 6,921,572
50,561,685 6,203,798
2,719,734 439,868,992 1,655,084
5,924,225 129,941,874 218,349
2,719,734 83,119,083 1,655,084
5,924,225 129,941,874 218,349
1,904,515 119,869,860 728,946
4,203,845 94,306,459 -
1,695,000 80,249,897 211,833
56,765,483 61,985
1,006,228 442,530,304
127,785 130,288,008
1,006,228 85,780,395
127,785 130,288,008
(4,730,316) 115,868,490
2,921,970 97,228,429
2,473,680 82,935,410
56,827,468
1,996,371 359,248,421 40,306,008
5,455,093 70,044,895 28,408,443
1,996,371 36,246,571 16,301,595
5,455,093 70,044,895 28,408,560
1,640,710 60,583,444 21,201,200
3,798,930 53,484,897 18,895,415
2,017,044 51,494,053 21,998,273
25,473,857 27,426,762
362,145 8,269,716
41,224 6,987,320
2,117 5,804,080
41,224 6,987,320
147,347 2,331,352
176,482 3,333,453
246,361 2,570,447
374,573 785,117
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Total Expenditure Net Profit before Taxes& Extraordinary items Taxation Less: Provision for current tax (including Wealth tax ) Less: Provision for deferred tax (net) Less : Provision for Fringe Benefit tax Effect of adjustments on tax Add : MAT Credit Net Profit before Extraordinary items Less: Extraordinary items Pre operative expenses
410,182,661
110,936,975
60,350,734
110,937,092
85,904,053
79,689,177
78,326,177
54,060,309
32,347,643
19,351,033
25,429,661
19,350,916
29,964,437
17,539,252
4,609,233
2,767,159
11,088,618
3,830,859
8,321,092
3,830,859
5,484,282
474,750
-
317,048
(722,897)
1,581,307
(722,897)
1,581,307
302,028
-
(950,483)
624,287
-
-
-
-
-
81,182
91,195
65,880
-
3,046,963
-
3,046,963
4,448,790
1,240,677
209,792
-
21,981,923
16,985,830
17,831,466
16,985,713
28,626,917
18,223,997
5,678,313
1,759,944
-
-
-
-
-
-
237,403
-
Net Profit/ (loss) after tax
21,981,923
16,985,830
17,831,466
16,985,713
28,626,917
18,223,997
5,440,910
1,759,944
Notes: The above statement should be read with the Notes to Restated Statement of Assets and Liabilities, Restated Statement of Profit and Loss and Restated Statement of Cash Flow
32
Summary Statement of Assets and Liabilities, as Restated (Amount in `) PART - B (STAND ALONE)
PART - A Particulars
A. (i)
(ii) (iii)
Fixed Assets : Gross Block Less: Accumulated Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve Capital work in Progress Goodwill (see note 11 of Sch. XIV) TOTAL (A)
Consolidated for the year ended 30th Sept 2011
Consolidated for the year ended 31st March 2011
For the year ended 30th Sept 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
155,219,728 53,459,076 101,760,652 -
107,144,637 40,970,993 66,173,644 -
55,090,182 35,265,154 19,825,028 -
52,938,778 31,618,381 21,320,397 -
118,717,433 20,597,725 98,119,708 -
98,896,642 16,486,675 82,409,967 -
47,500,835 14,051,673 33,449,162 -
27,099,358 9,671,308 17,428,050 -
101,760,652 99,135,224 25,081,962 225,977,838
66,173,644 98,632,907 27,668,811 192,475,362
19,825,028 99,135,224 118,960,251
21,320,397 98,632,907 119,953,304
98,119,708 98,119,708
82,409,967 82,409,967
33,449,162 33,449,162
17,428,050 17,428,050
12,242,500
11,162,500
77,557,329
77,557,329
9,038,500
8,774,502
3,925,002
13,603,177 2,387,622 1,409,058
B
Investments (B)
C
Current Assets , Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Other Current Assets TOTAL (C)
1,799,347 153,177,054 21,591,977 12,106,576 4,630,642 193,305,595
793,119 129,097,521 20,878,849 16,960,450 4,809,886 172,539,825
1,799,347 61,148,516 5,258,214 7,420,294 4,310,881 79,937,252
793,119 23,574,850 10,466,067 14,384,279 4,518,322 53,736,637
665,334 36,018,940 11,129,564 29,535,515 5,186,648 82,536,001
5,395,650 20,515,248 2,927,891 10,581,617 39,420,406
2,473,680 21,824,792 20,223,839 6,022,035 50,544,345
17,399,857
TOTAL ( A+B+C )
431,525,933
376,177,687
276,454,833
251,247,270
189,694,209
130,604,875
87,918,509
34,827,907
D
Less :Liabilities & Provisions:
33
(i) (ii)
Secured Loans Unsecured Loans Net Deferred Tax liabilities Current Liabilities & provisions Duties and Taxes TOTAL (D)
141,333,213 37,888,552 1,160,438 90,981,272 260,865 271,624,340
124,056,816 40,723,677 1,883,335 85,318,788 1,135,059 253,117,675
59,573,131 18,230,329 1,160,438 43,937,354 260,865 123,162,117
62,010,595 21,764,528 1,883,335 40,713,122 1,135,059 127,506,639
63,865,784 1,633,000 302,028 16,591,124 547,354 82,939,290
56,972,701 301,504 14,567,975 1,534,694 73,376,874
35,375,496 12,117,957 22,873,296 847,756 71,214,505
3,834,241 2,026,403 950,483 23,693,426 260,260 30,764,812
Net worth– (A+B+C – D) Represented By:
159,901,593
123,060,012
153,292,716
123,740,631
106,754,919
57,228,001
16,704,004
4,063,094
Share Capital Reserve & Surplus Net worth–( i+ ii + iii)
127,245,080 74,900,000 127,245,080 74,900,000 74,900,000 30,000,000 7,700,000 500,000 32,656,513 48,160,012 26,047,636 48,840,631 31,854,919 27,228,001 9,004,004 3,563,094 159,901,593 123,060,012 153,292,716 123,740,631 106,754,919 57,228,001 16,704,004 4,063,094 Notes: The above statement should be read with the Notes to Restated Statement of Assets and Liabilities, Restated Statement of Profit and Loss and Restated Statement of Cash Flow
34
GENERAL INFORMATION Our Company was incorporated on 14th December 1998 under the name & style of Prelude Solution Providers Private Limited. Consequently the name of the company was changed to PreludeSys India Private Limited on 30th April 2008 & the company became public on 12th April 2011 and the name was changed to PreludeSys India Limited. Registered Office 1/18, First Floor, I Main Road, Kotturpuram, Chennai – 600 085, Tamil Nadu. Phone No. : +91-44- 43448686 Fax No : +91-44- 24471007 CIN No : U72300TN1998PLC041576 Website : www.preludesys.com Contact Person : Ms. Preethi Bansal M, Company Secretary & Compliance Officer Email :
[email protected] Our Development Centers & Sales Offices In India
In USA (through our 100% subsidiary)
1/18, First Floor, I Main Road, Kotturpuram, Chennai – 600 085, Tamil Nadu.
5 Corporate Park, Suite #140, Irvine, California 92606.
Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai – 600018. Tamil Nadu
4320 Winfield Road, Suite #242, Warrenville, Illinois 60555. 3724 Executive Center Drive, Suite #210, Austin, Texas 78731.
Address of Registrar of Companies: Registrar of Companies, Tamil Nadu, Chennai, Andaman and Nicobar Islands Block No.6, B Wing, 2nd Floor, Shastri Bhawan, 26 Haddows Road, Chennai- 600034 Phone: 044-28277182 Fax: 044-28234298 Email:
[email protected] BOARD OF DIRECTORS: Our Company is currently managed by Board of Directors comprising of 6 directors. The Board of Directors consists of the following persons: NAME OF THE Mr. Chandramohan Parlapalli Mr. Rangesh Rajaram Mr. Rajamannar Abboy Mr. Sambasivam Sathiyamurthy Mr. Vibhu Natarajan Mr. Kalai Meyyappan Ramalingam Mr. Muthukumar Ramalingam
DESIGNATION Managing Director Director Director Director Director Director Alternate Director to Mr. Rajanmannar Abboy
35
STATUS Executive and Non-Independent Director Executive and Non-Independent Director Non executive and Non-Independent Director Non executive and Independent Director Non executive and Independent Director Non executive and Independent Director Executive and Non-Independent Director
PROFILE OF THE DIRECTORS PROMOTER DIRECTORS Managing Director Mr. Chandramohan Parlapalli: As MD of PreludeSys India Limited, Chandramohan is primarily responsible to execute the strategic plans and policies. He sets direction and oversees the operations of PreludeSys India. He has over 15 years of experience in the Information Technology services industry. He began his career by consulting for various corporate clients such as Smith’s Food & Drugs, American Stores, Farmers Insurance Group and Ernst and Young. Prior to taking charge of operations in India, he ran the Strategic Sourcing business and was responsible for Delivery at Prelude Systems, Inc. in the USA. He holds a Bachelor’s degree in Chemical Engineering from Annamalai University and Master’s degree in Chemical Engineering from Anna University. Other Promoter Directors Mr. Rangesh Rajaram is responsible for leading key corporate operations for PreludeSys India Limited. His duties include management and operational excellence for all Accounting, Finance, Vendor Management, Administrative and Statutory Compliance processes. Rangesh possesses an Engineering Degree in Computer Science with over 15 years of experience in consulting and software development. Mr. Rajamannar Abboy joined PreludeSys India Limited on 1st October 2008 as a Director. He has over 30 years of experience in Aerospace Industry in the USA. He has good analytical skills in understanding & solving problems in managing fairly complex programmes specialized in the area of Industrial Engineering/ System Analysis. Currently he is working as a consultant with Northrop Grumman, USA. Other Directors Mr. Sambasivam Sathiyamurthy aged 67 years is an advocate by profession. He has the experience of presiding over civil and criminal courts at various places such as Salem, Dharmapuri, Krishnagiri, Chennai etc. at Tamil Nadu from 1982 to 2004 and presided over District Consumer Disputes Redressal Forum. He is a retired judge, senior central government counsel, High Court of Madras and former president of District Consumer Court. He is also presiding over Lok Adalat conducted by legal Aid Services Authority, High Court, Madras. Mr. Vibhu Natarajan aged 50 years is a post graduate in Business Administration and has the experience of over 28 years. He has specialization in general management, strategic management, sales and marketing, floriculture and exports. Mr. Kalai Meyyappan Ramalingam aged 40 years is a chemical & environmental engineer by profession. He is engaged in the business of retailing & providing warehousing facilities. Currently he runs 6 retail outlets in Singapore. He has the experience of working for Shell, Exxon-Mobil and Titan Chemicals. During his working tenure with pertro chemical industry, he has gained valuable experiences in project management, production planning, process improvements, operations and finance. Mr. Muthukumar Ramalingam aged 37 years is and MBA and has been appointed as an alternate director to Mr. Rajamannar Abboy. He is currently working as Chief Operating Officer of Preludesys India Limited since 2005. He has over a decade of experience in the IT industry in the areas of project/ programme management, ODC operations, delivery management and operation. He has expertise in driving cross functional project teams and synchronizes their efforts for achieving project excellence. His other area of experiences includes software development, BPO and quality management.
36
COMPANY SECRETARY & COMPLIANCE OFFICER Ms. Preethi Bansal M Company Secretary & Compliance Officer PreludeSys India Limited, First Floor, New No.1 (Old No.18), First Main Road, Kotturpuram, Chennai – 600 085 Tel: +91-44- 43448686 Fax: +91-44-4471007 Email:
[email protected] Investors can contact the Compliance Officer in case of any pre-issue or post-issue related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary accounts, refund orders etc. BOOK RUNNING LEAD MANAGER Birla Capital and Financial Services Limited Dalamal House, First Floor, Nariman Point, Mumbai, Maharashtra – 400 021. Tel: Ph: 022-6616 8400/ 8494 Fax: 022- 2204 7835 Website: www.birlacaps.com Email:
[email protected] Contact Person: Mr. Sushanth Alva LEGAL ADVISORS TO THE ISSUE Mrs. R. Revathy No. 63, Old No. 29, Ameer John Street Choolaimedu, Chennai – 600 094. Tel: Ph: 044- 2481 6781 Email:
[email protected] Contact Person: Mrs. R. Revathy BANKERS TO OUR COMPANY IDBI BANK LTD. P.M.Towers, 37, Greams Road, Chennai – 600 006. Tel.No: 044-2829 5392 Website: www.idbi.com
ICICI Bank 110, Prakash Presidium, Nungambakkam, Chennai – 600 034. Tel.No: 044 – 42038612 Website: www.icicibank.com
State Bank of India No. 2A, Prakasam Road, Panagal Park, T. Nagar, Chennai – 600 017. Tel.No: 044 – 28156341 / 28156650 / 28158989 Email Id:
[email protected],
[email protected] Website: www.sbi.co.in
37
Oriental Bank of Commerce 1, First Main Road, Kotturpuram, Chennai – 600085 Tel.No: 044 - 24474288 Website: www.obc.com
REGISTRAR TO THE ISSUE CAMEO CORPORATE SERVICES LIMITED SEBI Regn No: INR 000003753 Subramaniam Building, 1, Club House Road, Chennai – 600 002. Tel : Ph: 044- 2846 0390/ 0425 Fax: 044 – 2846 0129 Website: www.cameoindia.com Email:
[email protected] Contact person: Mr. R D Ramasamy BANKERS TO THE ISSUE AND ESCROW COLLECTION BANKS HDFC Bank Axis Bank SEBI Regn No.: INBI00000063 SEBI Regn. No.: INBI00000017 BTI Ops Department No. 113, Lodha iThink Techno Campus G N Chetty Road, Level 0-3, Next to Kanjurmarg Railway Station T Nagar, Kanjurmarg East, Mumbai – 400042 Chennai – 600017 Contact Person: Mr. Uday Dixit Contact Person: Mr. S D Nandakumar Ph. No.: 022 – 30752927 Ph. No.: 044 – 28349333 Fax no.: 022 – 25799801 Fax No.: 044 – 28349306 Email:
[email protected],
[email protected] Email:
[email protected] ICICI Bank SEBI Regn. No.: INBI00000004 Capital Markets Division, Rajabahadur Mansion, 30, Mumbai Samachar Marg, Fort, Mumbai – 4000001 Contact Person: Mr. Anil Gadoo Ph. No.: 022 – 66310322 Fax No.: 022 – 66310350 Email:
[email protected] SYNDICATE MEMBERS: [●] REFUND BANKER TO THE ISSUE [●] SELF CERTIFIED SYNDICATE BANKS The list of banks that have been notified by SEBI to act as SCSB for the ASBA process are provided on http://www.sebi.gov.in/pmd/scsb.html BROKERS TO THE ISSUE All members of the recognized Stock Exchanges would be eligible to act as Brokers to the Issue. STATUTORY AUDITORS CNGSN & Associates Chartered Accountants “Agastyar Manor”, New No. 20, Old No. 13, Raja Street, T.Nagar, Chennai – 600 017. Tel No: 044 – 24311480 Fax: 044 – 24311485 Website: www.cngsn.com Contact Person: Mr. Vivek Anand Email:
[email protected]
38
CREDIT RATING As this is an Issue of Equity Shares, there is no requirement of credit rating for this Issue. IPO GRADING [●] MONITORING AGENCY As per regulation 16 of the SEBI (ICDR) Regulations, monitoring agency is required to be appointed in case the issue size exceeds `500 crores. Since our proposed issue size will not exceed `500 crore, we do not propose to appoint a Monitoring Agency. However, a Committee of Directors, viz, Project Monitoring Committee has been formed to monitor the implementation of the project as well as utilization of the issue proceeds. Further, as per the Clause 49 of the Listing Agreement to be entered into with the stock exchanges upon listing of the equity shares and the Corporate Governance requirements, the Audit Committee of our Company, would be monitoring the utilization of the proceeds of the Issue. APPRAISING AGENCIES Our project has not been appraised by any entity or agency. TRUSTEES As this is an Issue of Equity Shares, the appointment of Trustees is not required. STATEMENT OF INTER-SE ALLOCATION OF RESPONSIBILITIES Since Birla Capital and Financial Services Limited is the sole Book Running Lead Manager to the Issue, and shall be responsible for all the activities. Book Building Process Book building, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red Herring Prospectus within the Price Band. The Issue Price is finalized after the Bid/ Issue Closing Date. The principal parties involved in the Book Building Process are: 1. Our Company; 2. BRLM; 3. Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE and eligible to act as Underwriters. The Syndicate Members are appointed by the BRLM; 4. Registrar to the Issue; and 5. Escrow Collection Banks; and 6. SCSBs. Regulation 43(2) of the SEBI (ICDR) Regulations, 2009 has permitted an issue of securities to the public through the 100% Book Building Process, wherein atleast 50% of the Issue shall be available for allocation to QIBs on a proportionate basis, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds, and the remainder of the Qualified Institutional Buyers’ portion shall be available for allocation on a proportionate basis to all Qualified Institutional Buyers, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, upto 15% of the Issue shall be available for allotment to Non Institutional Bidders and upto 35% of the Issue shall be available for allotment to Retail Individual Bidders on a proportionate basis, subject to valid Bids being received at or above the Issue Price. We will comply with the SEBI (ICDR) Regulations, 2009 for this Issue. In this regard, we have appointed Birla Capital and Financial Services Limited as the BRLM to manage the Issue and procedure subscriptions to the Issue.
39
In accordance with the SEBI Regulations, QIBs are not allowed to withdraw their Bid(s) after the Bid/Issue Closing Date. For further details, please see the section titled “Terms of the Issue” on page 185 of this Offer document. The process of Book Building under the SEBI Regulations is subject to change from time to time and the investors are advised to make their own judgment about investment through this process prior to making a Bid or application in the Issue. Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for illustrative purposes and is not specific to the Issue) Bidders can bid at any price within the price band. For instance, assume a price band of ` 20 to ` 24 per share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the bidding centres during the bidding period. The illustrative book below shows the demand for the Shares of the issuer company at various prices and is collated from bids received from various investors. Bid Quantity 500 1,000 1,500 2,000 2,500
Bid Price (`) 24 23 22 21 20
Cumulative Quantity 500 1,500 3,000 5,000 7,500
Subscription 16.67% 50.00% 100.00% 166.67% 250.00%
The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired number of shares is the price at which the book cuts off, i.e., ` 22 in the above example. The Issuer, in consultation with the BRLM, will finalise the issue price at or below such cut-off price, i.e., at or below ` 22. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in the respective categories. Steps to be taken by the Bidders for Bidding 1. Check eligibility for making a Bid (please see the section titled “Issue Procedure - Who Can Bid?” on page 188 of this Offer document). 2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum Application Form or the ASBA Form, as the case may be; 3. Except for Bids on behalf of the Central or State Governments and the officials appointed by the courts, for all Bids, ensure that you have mentioned your PAN in your Bid cum Application Form or ASBA Bid cum Application Form. In accordance with the SEBI Regulations, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of the transaction (please see the section titled “Issue Procedure” on page 188 of this Offer document); 4. Ensure that the Bid cum Application Form or ASBA Bid cum Application Form is duly completed as per instructions given in this Prospectus and in the Bid cum Application Form or ASBA Bid cum Application Form; 5. Ensure the correctness of your Demographic Details (as defined in the section titled “Issue Procedure at page 188), given in the Bid cum Application Form or ASBA Form, with the details recorded with your Depository Participant; 6. Bids by ASBA Bidders will have to be submitted to the Syndicate Member (s)/ sub-syndicate members at the specified centres or SCSBs at the Designated Branches. ASBA Bidders should ensure that their bank accounts have adequate credit balance at the time of submission to the Syndicate Member (s)/ subsyndicate member or the SCSB to ensure that their ASBA Bid cum Application Form is not rejected; WITHDRAWAL OF THE ISSUE Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue after the bidding and if so, the reason thereof shall be given as a public notice within two days of the closure of the Issue. The public notice shall be issued in the same newspapers where the pre-issue advertisement
40
had appeared. The Stock Exchange where the specified securities were proposed to be listed shall also be informed promptly. If our Company withdraws the Issue after closure of bidding, we will be required to file a fresh draft offer document with the Securities and Exchange Board of India. Bid/ Issue Programme BID/ISSUE OPENS ON [●] BID/ISSUE CLOSES ON [●] Bids and any revision in Bids will be accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the Bidding centers mentioned in the Bid cum Application Form, or in the case of Bids submitted through ASBA, the designated branches of the SCSBs or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres, except that on the Bid/ Issue Closing Date, Bids excluding ASBA Bids shall be uploaded until (i) 4.00 p.m. in case of Bids by QIB Bidders and Non-Institutional Bidders; and (ii) 5.00 p.m. which may be extended up to such time as permitted by BSE/NSE in case of Bids by Retail Individual Bidders where the Bid Amount is up to `200,000. In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the physical Bid form, for a particular bidder, the details as per physical application form of that Bidder may be taken as the final data for the purpose of allotment. In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the physical or electronic Bid cum Application Form submitted through the ASBA process, for a particular ASBA Bidder, the Registrar to the Issue shall ask for rectified data from the SCSB. Due to limitation of time available for uploading the Bids on the Bid/ Issue Closing Date, the Bidders are advised to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no later than 3.00 p.m. (Indian Standard Time) on the Bid/ Issue Closing Date. Bidders are cautioned that in the event a large number of Bids are received on the Bid/ Issue Closing Date, as is typically experienced in IPOs, which may lead to some Bids not being uploaded due to lack of sufficient time to upload, such Bids that cannot be uploaded will not be considered for allocation in the Issue. If such Bids are not uploaded, our Company and the Syndicate shall not be responsible. Bids will be accepted only on Working Days, i.e., Monday to Friday (excluding any public holiday). On the Bid/ Issue Closing Date, extension of time may be granted by the Stock Exchange only for uploading the Bids received by Retail Individual Bidders, after taking into account the total number of Bids received up to the closure of timings for acceptance of Bid-cum Application Forms and ASBA Bid cum Application Forms as stated herein and reported by the BRLMs to the Stock Exchange within half an hour of such closure. Our Company reserves the right to revise the Price Band during the Bidding Period in accordance with SEBI ICDR Regulations. The Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the face value of the Equity Shares. Subject to compliance with the immediately preceding sentence, the Floor Price can move up or down to the extent of 20% of the Floor Price as disclosed at least two Working Days prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly. In case of revision in the Price Band, the Bidding Period will be extended for three additional Working Days after revision of Price Band subject to the Bidding Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bidding Period, if applicable, will be widely disseminated by notification to the Stock Exchange, by issuing a press release, and also by indicating the change on the websites of the BRLMs and at the terminals of the Syndicate. Underwriting Agreement After the determination of the Issue Price and allocation of the Equity Shares, but prior to the filing of the Prospectus with the ROC, our Company has entered into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that their respective Syndicate Members do not fulfill their underwriting obligations. The Underwriting Agreement is dated [●]. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain conditions specified therein.
41
The Underwriters have indicated their intention to underwrite the following number of Equity Shares: Name and Address Underwriters [●] TOTAL
of
the
Indicated Number of Equity Shares to be Underwritten [●] [●]
Amount Underwritten (` In Lakhs) [●] [●]
The above mentioned amount is indicative underwriting and this would be finalized after determination of the Issue Price and actual allocation. The Board of Directors (based on the certificates given by the Underwriters), confirm that the resources of the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. The above-mentioned Underwriters are registered with SEBI or registered as brokers with the Stock Exchange. The Board of Directors has accepted and entered into the Underwriting Agreement mentioned above on behalf of our Company. Allocation among the Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the table above, the BRLM and the Syndicate Members shall be responsible for ensuring payment with respect to the Equity Shares allocated to the investors procured by them. Notwithstanding the foregoing, the Issue is also subject to obtaining (i) final listing and trading approvals of the Stock Exchange, which our Company shall apply for after Allotment; and (ii) the final approval of the RoC after the Prospectus is filed with the RoC. For further details about allocation please refer to “Other Regulatory and Statutory Disclosures” on page 172 of this Offer Document.
42
CAPITAL STRUCTURE Share Capital as on date of filing the DRHP with SEBI: (` in Lakhs) Aggregate Aggregate Value at Nominal Issue Price
SHARE CAPITAL
1. AUTHORISED CAPITAL 2,50,00,000 Equity shares of `10/- each 2.
2500.00
ISSUED SUBSCRIBED AND PAID-UP CAPITAL BEFORE THE ISSUE 1,27,24,508 Equity shares of `10 /- each fully paid up
3. PRESENT ISSUE IN TERMS OF THIS DRHP Public Issue of [●] equity shares of ` 10/- each Of which Qualified Institutional Buyers portion of atleast [●] equity shares Non Institutional Portion of upto [●]equity shares Retail portion of upto [●] equity shares # 4. PAID-UP EQUITY CAPITAL AFTER THE ISSUE [●] Equity Shares of ` 10 each 5. SHARE PREMIUM ACCOUNT • Before the Issue • After the Issue
2500.00
[●] 1272.45
[●] [●] [●] [●]
[●]
-
[●]
# Under-subscription, if any, in any of the categories, other than QIB category would be met with spill-over from any other category or combination of categories, at the sole discretion of the company and BRLM. The Present Issue has been authorized by Board of Directors on 1 st September 2011 and by the shareholders on 28th September 2011. Details of Increase in Authorized Capital: Our Company was incorporated on 14th December 1998 with an initial Authorized Capital of `5,00,000 divided into 50,000 Equity shares of `10 each. The subsequent changes are given below. Date of Change 14th Dec, 1998 16th April, 2007 30th Sept, 2009 4th Oct, 2010 28th Sept, 2011
Increased from ` 5,00,000 3,00,00,000 7,50,00,000 10,00,00,000
Increased to ` 5,00,000 3,00,00,000 7,50,00,000 10,00,00,000 25,00,00,000
43
AGM/EGM On Incorporation EGM AGM EGM AGM
Notes to the Capital Structure 1.
Share Capital History
The following is the history of the equity share capital of the Company up to the date of this DRHP.
Date of Allotment of Equity Shares
No. of shares Allotted
14-Dec-1998
500
28-Nov-2002
Cumulati ve No. of Equity Shares
Consideration (Cash, Bonus, Consideration other than cash)
Face Value (`)
Issue Price (`)
500
10
10
Cash
49500
50000
10
10
Cash
6-Nov-2007
720000
770000
10
10
Cash
31-Mar-2009
2230000
3000000
10
10
Cash
30-Nov-2009
2400000
5400000
10
10
Bonus
30-Nov-2009
972290
6372290
10
10
Cash
31-Mar-2010
1117710
7490000
10
10
Cash
09-May-2011
102180
7592180
10
81
Cash
14-June-2011
22519
7614699
10
81
Cash
28-Sept-2011
20000
7634699
10
81
Cash
30-Sept-2011
5089809
12724508
10
0
Bonus
Cumulative Paid up Share Capital (`)
Nature of / Reasons for Allotment Subscriber to 5000 Memorandum Further Issue of shares 500000 Further Issue 7700000 of shares Further Issue 30000000 of shares Further Issue 54000000 of shares Further Issue of shares 63722900 Further Issue 74900000 of shares Further Issue 75921800 of shares Further Issue 76146990 of shares Further Issue of shares 76346990 Further Issue 127245080 of shares
Note: Other than the bonus shares mentioned above, we have not issued any shares for consideration other than cash.
44
2. Promoter’s Contribution and Lock-in Period a) Capital built-up of Promoters Name of the Allotee Date of No. of equity Allotment shares Allotted Mr. Chandramohan 28.11.2002 9900 Parlapalli 02.06.2006 100 06.11.2007 120000 31.03.2009 370000 30.11.2009 400000 30.11.2009 75000 31.03.2010 95000 30.09.2011 713334 Sub Total 1783334 Mr. Kiran Babu 06.11.2007 120000 Chandra 16.03.2009 20000
Mr. Ramjee Kasturirangan
Mr. Ramki Ramakrishnen
Mr. Rangesh Rajaram
F V (`) 10 10 10 10 10 10 10 10
Issue Price (`) 10 10 10 10 0 10 10 0
10
10
Cash
10
10
Consideration Cash Cash Cash Cash Bonus 8:10 Cash Cash Bonus 2:3
31.03.2009 30.11.2009 31.03.2010 30.08.2010
360000 400000 170000 (20000)
10 10 10 10
10 0 10 10
30.09.2010
11650
10
10
30.09.2010
8350
10
10
30.09.2011 Sub Total 28.11.2002 02.06.2006 06.11.2007 31.03.2009 30.11.2009 30.11.2009 31.03.2010 30.09.2011 Sub Total 28.11.2002 02.06.2006 06.11.2007 31.03.2009 30.11.2009 31.03.2010 30.09.2011 Sub Total 28.11.2002 02.06.2006 06.11.2007 31.03.2009 30.11.2009 30.11.2009 30.09.2010
713334 1783334 9900 100 120000 370000 400000 70000 100000 713334 1783334 9900 100 120000 370000 400000 170000 713334 1783334 9900 100 120000 370000 400000 181650 (11650)
10
0
Transfer from Manoj Kumar Chandra Cash Bonus 8:10 Cash Transfer to Manoj Kumar Chandra Transfer from Rangesh Rajaram Transfer from Manoj Kumar Chandra Bonus 2:3
10 10 10 10 10 10 10 10
10 10 10 10 0 10 10 0
Cash Cash Cash Cash Bonus 8:10 Cash Cash Bonus 2:3
10 10 10 10 10 10 10
10 10 10 10 0 10 0
Cash Cash Cash Cash Bonus 8:10 Cash Bonus 2:3
10 10 10 10 10 10 10
10 10 10 10 0 10 10
Cash Cash Cash Cash Bonus 8:10 Cash Transfer to Kiran Babu Chandra
45
Mr. Rajamannar Abboy
Mr. Manoj Kumar Chandra
30.09.2011 Sub Total 30.11.2009 31.03.2010 30.09.2011 Sub Total 28.11.2002 02.06.2006 06.11.2007 16.03.2009
713334 1783334 563990 506010 713334 1783334 9900 100 120000 (20000)
10
0
Bonus 2:3
10 10 10
10 10 0
Cash Cash Bonus 2:3
10 10 10 10
10 10 10 10
31.03.2009 30.11.2009 30.11.2009 31.03.2010 30.08.2010
390000 *400000 81650 76700 20000
10 10 10 10 10
10 0 10 10 10
30.09.2010
(8350)
10
10
Cash Cash Cash Transfer to Kiran Babu Chandra Cash Bonus 8:10 Cash Cash Transfer from Kiran Babu Chandra Transfer to Kiran Babu Chandra
30.09.2011 Sub Total
713334 10 0 Bonus 2:3 1783334 Total 12483338 * Record dates for the bonus shares is 31.03.2009 and 30.09.2011 respectively b) Promoters Contribution and Lock in Name of the Promoter Mr. Manoj Kumar Chandra Mr. Chandramohan Parlapalli Mr. Ramjee Kasturirangan Mr. Rangesh Rajaram Mr. Ramki Ramakrishnen Mr. Kiran Babu Chandra Mr. Rajamannar Abboy Total
Number of Equity Shares [●] [●] [●] [●] [●] [●] [●] [●]
Face Value (`) 10 10 10 10 10 10 10 10
% of Post Issue Paid Up Capital [●] [●] [●] [●] [●] [●] [●] 20.00
Pursuant to SEBI (ICDR) Regulations 2009, Clause 36, an aggregate of 20% of the Post-Issue Paid-up Equity Share Capital held by the promoters would be locked-in for a period of three years from the date of allotment. The lock-in period shall be reckoned from the date of allotment of Equity Shares in the present Issue. The equity shares offered under lock-in by the promoters are eligible under regulation 33(1)(b)(i) of the ICDR regulations, 2009.These securities will not be disposed / sold / transferred by the Promoters during the period starting from the date of filing the Red Herring Prospectus with SEBI till the date of commencement of lock in period as stated in the RHP. NOTES: The Equity Shares that are being locked-in are not ineligible for computation of Promoters contribution under Regulation 33 of the SEBI Regulations. In this connection, as per regulation 33 of the SEBI Regulations, we confirm the following: •
The Equity shares offered for minimum 20% Promoters contribution are not acquired during the preceding three years for consideration other than cash and revaluation of assets or capitalization of intangible assets or bonus shares out of revaluation reserves or reserves without
46
accrual of cash resources or against shares which are otherwise ineligible for computation of Promoters contribution; • The Equity shares offered for minimum 20% Promoters contribution were not issued to the Promoters upon conversion of a partnership firm; • The Equity Shares held by the Promoters and offered for minimum 20% Promoters contribution are not subject to any pledge; and • Specific written consent has been obtained from the Promoters for inclusion of the Equity Shares for ensuring lock-in of three years to the extent of minimum 20% of post -Issue paid-up equity share capital from the date of allotment in the proposed public issue. Promoters’ contribution does not consist of any private placement made by solicitation of subscription from unrelated persons either directly or through any intermediary. • Shares held by the person other than the Promoters, prior to this Issue, which are subject to lock in as per Regulation 37 of SEBI (ICDR) Regulations 2009, may be transferred to any other person holding shares which are locked in, subject to continuation of lock -in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable. • Shares held by Promoter(s) which are locked in as per the relevant provisions of Regulation 36 of the SEBI Regulations, may be transferred to and amongst Promoter/Promoter group or to a new promoter or persons in control of the Company, subject to continuation of lock -in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable. As per Regulation 39 of SEBI (ICDR) Regulations, 2009, the locked-in Equity Shares held by the Promoter(s) can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan. Provided that if securities are locked in as minimum promoters’ contribution under Regulation 36 of the SEBI Regulations, the same may be pledged, only if, in addition to fulfilling the requirements of this clause, the loan has been granted by such banks or financial institutions for the purpose of financing one or more of the objects of the issue. Other than those shares that are locked in as promoter’s contribution for three years, the entire pre-issue share capital will be locked in for a period of one year from the date of allotment in this public issue. 3. Details of Shares of our Company Pledged by Promoters/ Promoter Companies: NIL 4. Shareholding Pattern: The table below presents the shareholding pattern of the Company before and after the proposed issue: Shareholder Pre Issue Post Issue % of Sr. No. No. of % of Holding No. of Shares shares Holding 1 PROMOTERS 1783334 14.01 (A) Indian Promoter [●] [●] Individuals i. [●] [●] 1783334 14.01 Sub Total (i) [●] [●] Companies / Trusts ii. 0 0 Sub Total (ii) [●] [●] TOTAL (A) (i+ii) 1783334 14.01 [●] [●] 10700004 84.09 (B) Foreign Promoters [●] [●] Individuals i. [●] [●] 10700004 84.09 Sub Total (i) [●] [●] Companies ii. [●] [●] 0 0 Sub Total (ii) [●] [●] TOTAL (B) (i+ii) 10700004 84.09 [●] [●] (C ) Promoter Group 0 0 TOTAL (C ) [●] [●] TOTAL PROMOTERS 12483338 98.10 [●] [●] (A+B+C)
47
2 i. ii.
NON PROMOTERS Indian Public includes Employees & Institutions Foreign Individuals TOTAL NON PROMOTERS (i+ii) GRAND TOTAL (1+2)
154918
1.22
[●]
[●]
86252 241170
0.68 1.90
[●] [●]
[●] [●]
12724508
100.00
[●]
[●]
5. Equity Shares held by top TEN Shareholders i) Top ten shareholders two years prior to the date of DRHP: (as on 22nd December 2009) Sr. No. Name of the shareholders No. of shares % 1 Mr. Rangesh Rajaram 1081650 16.97 2 Mr. Manoj Kumar Chandra 1001650 15.72 3 Mr. Chandramohan Parlapalli 975000 15.30 4 Mr. Ramjee Kasturirangan 970000 15.22 5 Mr. Ramki Ramakrishnen 900000 14.12 6 Mr. Kiran Babu Chandra 880000 13.81 7 Mr. Rajamannar Abboy 563990 8.85 Total 6372290 100.00 ii) Top ten shareholders 10 days prior to the date of DRHP Sr. No. Name of the shareholders 1 Mr. Manoj Kumar Chandra 2 Mr. Chandramohan Parlapalli 3 Mr. Ramjee Kasturirangan 4 Mr. Rangesh Rajaram 5 Mr. Ramki Ramakrishnen 6 Mr. Kiran Babu Chandra 7 Mr. Rajamannar Abboy 8 Mr. Kochukunju Cheriyan 9 Mr. Prasannan Rajendran 10 Mr. Rakesh K. Desai Total iii) Top ten shareholders as on the date of DRHP Sr. No Name of the shareholders 1 Mr. Manoj Kumar Chandra 2 Mr. Chandramohan Parlapalli 3 Mr. Ramjee Kasturirangan 4 Mr. Rangesh Rajaram 5 Mr. Ramki Ramakrishnen 6 Mr. Kiran Babu Chandra 7 Mr. Rajamannar Abboy 8 Mr. Kochukunju Cheriyan 9 Mr. Prasannan Rajendran 10 Mr. Rakesh K. Desai Total 6.
No. of shares 1783334 1783334 1783334 1783334 1783334 1783334 1783334 37532 33885 32839 12587594
% 14.04 14.04 14.04 14.04 14.04 14.04 14.04 0.30 0.27 0.26 99.08
No. of shares 1783334 1783334 1783334 1783334 1783334 1783334 1783334 37532 33885 32839 12587594
% 14.04 14.04 14.04 14.04 14.04 14.04 14.04 0.30 0.27 0.26 99.08
There have been no purchases and sales of the securities of our Company by the Directors and their relatives, the Promoters, or the Promoter Group, during a period of six months preceding the date of this DRHP except as stated, if any, in table 2(a) of this section.
7. Buy-back and Standby Arrangement: Our Company, its Promoters, Directors or the Lead
48
Managers have not entered into any buy-back and/ or standby arrangements for purchase of Equity Shares of our Company from any person. 8. The securities which are subject to lock-in shall carry the inscription “non-transferable” and the non- transferability details shall be informed to the depositories. The details of lock-in shall be provided to the stock exchanges where the shares are to be listed, before listing of the securities. 9. In the case of over-subscription in all categories, atleast 50% of the Issue to the Public shall be available for allotment on a proportionate basis to QIBs, of which 5% shall be available for allotment on a proportionate basis to Mutual Funds, and the remainder of the QIB Portion would be available for allocation on a proportionate basis to all QIB Bidders, including Mutual Funds; upto 15% of the Issue to the Public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 35% of the Issue to the Public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. 10. If the aggregate demand by Mutual Funds is less than 5% of QIB Portion, the balance share available for allocation in the Mutual Fund Portion will be added to the QIB Portion and be allocated proportionately to QIB Bidders. 11. An oversubscription to the extent of 10% of the Issue can be retained for the purposes of rounding off to the minimum allotment lot and multiple of one share thereafter, while finalizing the Basis of Allotment. Consequently, the actual allotment may go up by a maximum of 10% of the Issue as a result of which, the post-issue paid up capital after the Issue would also increase by the excess amount of allotment so made. The number of Equity Shares to be issued to the Promoters and subject to lock- in will be determined after finalization of Issue Price. The number of shares to be issued to the Promoters will be such so as to ensure that the minimum contribution of 20% of the Post Issue paid-up capital is made and that the same is locked in for a period of 3 years. 12. Our Company has not raised any bridge loan against the proceeds of the Issue 13. As of the date of this DRHP, there are no outstanding financial instruments or warrants or any other right that would entitle the existing Promoter or Shareholders, or any other person any option to receive Equity Shares after the offering. 14. Our Company has not issued any bonus shares out of revaluation reserves. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of this DRHP to SEBI until the Equity Shares issued/ to be issued through the Prospectus are listed or application money refunded on account of failure of Issue. 15. At any given point of time, there shall be only one denomination for the Equity Shares of our Company, unless otherwise permitted by law. Our Company shall comply with such disclosure and accounting norms specified by SEBI from time to time. 16. We presently do not intend or propose to alter our capital structure for a period of six months from the Bid/ Issue Opening Date, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise. Additionally, if we enter into acquisitions or joint ventures, we may, subject to necessary approvals, consider using our Equity Shares as currency for acquisitions or participation in such joint ventures we may enter into and/or we may raise additional capital to fund accelerated growth, subject to the compliance with the relevant guidelines/regulations etc. 17. No single applicant can make an application for number of shares, which exceeds the number of
49
shares offered, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor. 18. The total number of members of our Company as on the date of filing DRHP is eighteen. 19. Our Company has not made any issue of Equity Shares other than as stated above, during the last one year. 20. The company does not currently have any Employee Stock Option Plan. 21. As on date of filing of this Draft Red Herring Prospectus with SEBI, the entire Issued Share Capital of our Company is fully paid-up. 22. Since the entire money of ` [●] per share (` 10/- face value plus ` [●] premium) is being called on application, all the successful applicants will be issued fully paid-up shares only. 23. No payment, direct or indirect in the nature of discount, commission, and allowance or otherwise shall be made either by us or our promoters to the persons who receive allotments, if any, in this issue. 24. We confirm that our BRLM, Birla Capital and Financial Services Ltd. do not hold any equity share in our company.
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SECTION–V - OBJECTS OF THE ISSUE The objects of the issue are 1) To meet the funds requirement related to setting up of global delivery centre. 2) To open 8 branches across USA & Asia Pacific region. 3) To accelerate development and go to market efforts of Enterprise Mobility Solution. 4) To repay the existing loan. 5) To meet the Issue expenses. 6) To Achieve the Benefits of Listing our Company’s Shares on Bombay Stock Exchange Limited (BSE) & National Stock Exchange (NSE). The fund requirements as stated below are based on the current business plan. We may have to revise our business plan from time to time based on the demand and supply position in the industry and consequently the fund requirement may also change. This may include rescheduling of the capital expenditure programmes and increase or decrease in the capital expenditure for a particular purpose visà-vis current plans at the discretion of the management. The main objects clause and objects incidental or ancillary to the main objects clause of the Memorandum of Association enables our Company to undertake the existing activities and the activities for which the funds are being raised by our Company, through this Issue. Funds Requirement Sr. No. Particulars 1. Setting up of Global delivery centre 2. Opening of overseas branches in USA and Asia Pacific 3. Enterprise Mobility 4. Shifting to SEZ 5. Loan Repayment 6. Acquisition of strategic businesses 7. Issue Expenses 8. Contingencies Total
Amount (` in Lakhs) 1120 1600 910 735 800 2000 700 265 8130
Means of Finance: Sr. No. 1.
Amount (` In Lakhs)
Particulars Public Offer of Equity Shares - Issue to Public
8130.00
Proceeds from the Public Issue would be crystallized on finalization of the Issue Price on conclusion of the book building process. Any shortfall in the cost of the project would be met out of internal accruals. In case the Public Issue does not go as planned, our Company will make alternative arrangements like availing of fresh loans from bank(s) and/or utilizing internal accruals. The fund requirement and deployment are based on internal management estimates and have not been appraised by any bank or financial institution. Our capital expenditure plans are subject to a number of variables, including possible cost availability of working capital finance on acceptable terms; and changes in management’s views of the desirability of current plans, among others.
51
In case of any variations in the actual utilization of funds earmarked for the above activities, increased fund deployment for a particular activity may be met with by surplus funds, if any available in any other project and/or our Company’s internal accrual, and/ or the term loans/working capital loans that may be availed from the Banks/ Financial Institutions. SETTING UP OF GLOBAL DELIVERY CENTRE: PreludeSys has leased out a land from SIPCOT, Tamil Nadu Government to build Office Facilities to use it for BPO & Other IT related services. At present the civil work at Ground Floor & First Floor has been completed. The other interior works and Mechanical Electrical and Plumbing works are yet to be completed. The Company has approached M/s STRASAN – Design & Project Management Consultants, Chennai to prepare a cost completion budget for the proposed Office building at Siruseri, Chennai. The total cost estimated towards setting up the said global delivery centre is ` 1119.60 Lakhs. The details as per the cost estimate of M/s STRASAN dated 5th December 2011 are as under: Sr. No. 1 2 3 4 5 6 7 8 9
Description of work 2nd Floor Construction including Interior works and MEP works Interior works – ground floor & first floor Balance Civil works Electrical works Plumbing works Fire fighting works HVAC works Cost of Furniture & Modular systems/ Miscellaneous works Contingencies @ 5% Total Amount
Amount (`) 5,25,00,000 2,05,75,170 1,31,78,046 79,31,000 9,25,000 20,50,000 39,69,000 55,00,000 53,31,411 1119,59,627 say ` 1120 Lakhs
2. OPENING OF OVERSEAS SALES OFFICES Our Company is planning to open sales offices to sell our services and products at various places in North America, MENA (Middle East and North Africa) and Asia Pacific. Some of the locations identified are New York, Tampa, Indianapolis, San Jose, Salt Lake, Dubai, Melbourne, Singapore etc. The Company will be prioritizing the selection of centres based on the business potential. The Company is scheduling to open 3 sales offices in the financial year 2012-13 & 5 in FY 2013-14. The cost of establishing one such office is estimated at ` 200 Lakhs. The details are as under: Sr. No. Description Amount in USD 1. Cost of setting up of office 18,000 2. Hiring Cost 17,000 3. Cost of Computers etc. 5,000 4. Working Capital for 1st year of operations 3,60,000 Total 4,00,000 i.e. @ `50 per USD ` 200 Lakhs Capital cost of setting up the office: This will involve purchase of Chairs, Desks, File Cabinets, and Conference Room Tables etc. Hiring cost: This is typically the consultant fees which will be one month salary of the candidate cost. Since we are hiring 1 Regional Director, 1 Business Development Manager and 1 Admin Staff when we start off this will be sum of their monthly salaries. Cost of computers, etc.: This represents the cost estimate of the computer setup required for running the office such as server, desktops, laptops, printers, etc.
52
Working capital: The working capital requirement of the sales offices for the first year of operations would be taken care of from the proceeds of the issue. From second year onwards, the working capital would be funded from the internal accruals of the respective sales offices. The brief break-up of Working capital requirement of USD 30,000 for per sales office per month is as under: Particulars Amount (in USD) Salary to the Regional Director 10,000 Salary to Business Development Managers 8,000 Salary to one Administration staff 5,000 Marketing Cost 1,000 General Overheads 6,000 Total 30,000 Thus a sum of ` 16 Crores out of the proceeds of the IPO will be utilized towards opening up of 8 overseas sales offices. 3. ENTERPRISE MOBILITY AnB (AnB) is an Enterprise Mobility solution that is light-weight with robust, enterprise-class security and cross-platform support. AnB allows executives and employees to make timely decisions by participating in workflow and approval processes in enterprise applications from their iPhone, Android and BlackBerry devices. AnB is designed to be a fast and easy to use solution. Deployment is simple and requires no changes to the enterprise applications. In today’s fast-paced business world, companies have a growing need for instant and quick decisions. It is critically important for enterprises to address highvalue decisions, when the employees are away from their computers, in meetings or on the road. The company expects to spend ` 910 Lakhs for implementation of the above. The detail of the cost involved is as under: Particulars Solution Development cost Infrastructure Certification Partnership Total
Amount (` In Lakhs)* 792.40 112.50 1.50 3.40 909.80 Say ` 910 Lakhs Note: * Conversion rate assumed to be ` 50 per USD. Solution development Cost: A sum of ` 792.40 Lakhs has been provided towards solution development costs. Under this head, the cost of hiring horizontal and vertical experts, several developers, project managers at onshore & offshore sites and a set of offshore support team comprising of the SAP/ Oracle developer, security/ infrastructure specialists along with research & marketing personnel have been considered. In all, it is assumed that the development would involve 30 professionals whose average monthly salary would range between USD 5000 to USD 12000. Cost of infrastructure: For the purpose of developing the enterprise mobility solution, we may have to invest in certain hardware and software that may be deployed at development, testing and demo stages. The softwares required would be SAP, Oracle and Operating System in addition to the hardwares such as servers (vision control & content management), laptops, etc. A sum of USD 150,000 equivalent to ` 75 Lakhs have been provided towards the cost of these infrastructure requirements. We may also have to procure licensed copies of SAP, Oracle and Websphere which would cost an additional sum of USD 75000 amounting to ` 37.50 lakh. In all the cost of infrastructure would aggregate to ` 112.50 lakhs.
53
Certification: SAP certification and Oracle certification is expected to cost USD 1500 each aggregating to ` 1.5 lakhs. Partnership: For the above mentioned development process, we need partnership arrangements with SAP, Blackberry & Apple. This is estimated to cost around USD 6800 that is ` 3.40 Lakhs. 4. RELOCATING TO SEZ Currently, the company is operating from 2 leased-out premises located at Kotturpuram & Alwarpet, Chennai. The company is planning to shift these offices/ facilities to Shriram The Gateway SEZ at Perungalathur, Chennai. The relocation process is expected to cost the company ` 735.26 Lakhs as per the cost estimate as under: Sr. No. A
B
C
D
Particulars Lease rent deposit for an area of 19739 square feet at the rate of approximately ` 33 per square feet for 6 months (as per the letter of intent of Shriram The Gateway SEZ dated 24th November 2011) Interior and furnishing cost (as per estimate by M/s STRASAN – Design & Project Management Consultants, Chennai) Furnishing Interiors 306.00 Electrical Equipment 72.00 Air Conditioning and Power backup 67.50 IT Infrastructure and other equipment Cost (as per quotations from Choice Solutions Limited, New no. 27, 2nd Cross Street, West CIT Nagar, Nandhanam, Chennai dated 1st December 2011) Data Components 5.04 Hardware 98.00 Software 72.64 Servers and Support Software 50.00 Other supporting Infrastructure facility - Antivirus/firewall license/Testing Software and other supported software (as per quotations from Choice Solutions Limited, Chennai dated 1st December 2011) Total
Amount (` In Lakhs)
39.08
445.50
225.68
25.00 735.26 Say ` 735 Lakhs
5. LOAN REPAYMENT As on 30th November 2011, the company has borrowed money from various banks, financial institutions, NBFCs amounting to ` 656.44 Lakhs in addition to the unsecured loan from the promoters amounting to ` 94.79 Lakhs. A part of the proceeds of the issue to the tune of ` 800 Lakhs will be used for repayment of these loans along with interest due, if any. 6. ACQUISITION OF STRATEGIC BUSINESSES We propose to grow our business both through organic as well as inorganic routes. A sum of ` 2000 Lakhs has been earmarked for acquisition of strategic businesses. The strategic investments & acquisitions will enable us not only to improve our business but also help in consolidating our position as prominent IT & IT enabled service provider. The entities we are looking for acquisition would have the potential to expand our business in newer markets and certain geographical locations which will enhance our global position. We are constantly on the look-out for companies/ investments/ joint ventures/ strategic alliances that would fit with our corporate goal. As on date of this offer document, we have not yet entered into any definitive commitment for any acquisition, investment (equity, debt, or any other instrument) or joint venture for which we may use the proceeds of the issue.
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7. ISSUE EXPENSES Sr. No.
Particulars
1
Fees to BRLM, Underwriting Commission, Brokerage and other selling expenses Advertisement & Marketing Expenses Printing, stationery & dispatch Miscellaneous Expenses including fees payable to SEBI, Stock Exchanges, Registrars, Grading agency, etc. Total
2 3 4
Amount (in ` Lakhs)
% of Issue Expenses
% of Issue
[●]
[●]
[●]
[●] [●] [●]
[●] [●] [●]
[●] [●] [●]
700.00
100.00
8.61
8. CONTINGENCIES Contingencies at the rate of 5 % have been provided with respect to the opening of overseas branches, Enterprise Mobility, shifting to SEZ and acquisition of strategic businesses amounting to ` 265 Lakhs. Schedule of Implementation: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.
Description
2012 - 13
Setting up of Global delivery centre Opening of overseas branches in USA and Asia Pacific Enterprise Mobility Shifting to SEZ Loan Repayment Acquisition of strategic businesses Issue Expenses Contingencies Total
595 600 910 735 800 1200 700 175 5715
2013 - 14 525 1000 0 0 0 800 0 90 2415
(` in Lakhs) Total 1120 1600 910 735 800 2000 700 265 8130
Sources of Financing of Funds already deployed: At Siruseri, the company has constructed ground plus first floors and at present the civil work at ground floor and first floor has been completed and the other interior works and Mechanical, electrical & plumbing works are yet to be completed. The company had spent as on 30th November 2011, a sum of ` 991.97 Lakhs and the same have been funded through share capital from Promoters & internal accruals of ` 475.42 Lakhs, ` 471.95 Lakhs through loans from SIDBI and through other unsecured loans to the tune of ` 44.60 Lakhs. The same has been certified by the statutory auditors of the company CNGSN & Associates, Chennai vide their certificate dated 19th December 2011. Flexibility in utilization of Issue Proceeds In response to the dynamic nature of the industry, our management will have the discretion to revise its business plan from time to time and consequently change the funding requirement & deployment of funds. This may also include rescheduling the proposed utilization of issue proceeds and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of the proceeds of the issue. Accordingly, our management will have the flexibility in utilizing the proceeds in tune with the policies of our Board. Interim Use of Funds The management, in accordance with the policies set up by the Board, will have flexibility in deploying the proceeds received from the Issue. Pending utilization for the purposes described above, we intend to temporarily invest the funds in interest or dividend bearing liquid instruments including deposits with banks and investment in mutual funds and other financial products such as capital protected funds, derivative linked debt instruments, other fixed and variable return instruments, listed debt instruments
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and rated debentures. Such investments would be in accordance with any investment criteria approved by the Board of Directors from time to time. Monitoring of Utilization of Funds As our Issue size is less than ` 500 Crores, we have not appointed any monitoring agency to monitor the utilization of issue proceeds, as the same is not required as per SEBI ICDR regulations, 2009. A Committee of Directors has been formed viz, the Project Monitoring Committee to monitor the implementation of the project and the utilization of proceeds of this Issue on a regular basis. We will disclose the utilization of the proceeds raised through this Issue under a separate head in our financial statements clearly specifying the purpose for which such proceeds have been utilized. No part of this Issue proceeds will be paid by us as consideration to our Promoters, Directors, key managerial personnel or entities promoted by our Promoter, save and except in the normal course of business. Pursuant to Clause 49 of the Listing Agreement, our Company shall on quarterly basis disclose to the Audit Committee the application of the proceeds of the Issue. On an annual basis, our Company shall prepare a statement of funds utilized for purposes other than as stated in this DRHP and place it before the Audit Committee. Such disclosures shall be made only until such time that all the proceeds of the Issue have been utilized in full. The statement will be certified by the Statutory Auditors of our Company. Our Company shall be required to inform the material deviations in the utilisation of the issue proceeds to the Stock Exchanges and shall also be required to simultaneously make the material deviation/ adverse comments of the Audit Committee public through advertisement in newspaper.
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BASIC TERMS OF ISSUE The Equity shares being offered are subject to the provision of the Companies Act, 1956, our Memorandum and Articles of Association, the terms of this offer document and other terms and conditions as may be incorporated in the Allotment advice and other documents /certificates that may be executed in respect of the issue. The Equity shares shall also be subjected to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, RBI, ROC and /or other authorities as in force on the date of issue and to the extent applicable. BASIS FOR ISSUE PRICE The issue price will be determined by our Company in consultation with the BRLMs on the basis of assessment of market demand for the equity shares by the book building process. The face value of the Equity Shares is `10 and the Issue Price is [•] times the face value at the lower end of the price band and [•] times the face value at the higher end of the price band. Investors should review the entire Draft Red Herring Prospectus, including the sections titled "Risk Factors", "Our Business Overview" and "Financial Information of Our Company " beginning on pages 11, 79, 129 respectively, of the Draft Red Herring Prospectus to get a more informed view before making the investment decision. The trading price of the Equity Shares of Our Company could decline due to these risks and the investors may lose all or part of their investment. Qualitative Factors We believe that the following aspects of our business help differentiate us from some of our competitors: Promoted by experienced professionals in the field of IT & IT enabled services industry Comprehensive range of IT Services: We have developed a comprehensive range of service offerings in order to address the varied and expanding requirements of our clients. With development centers in India and the U.S., we offer software development, enterprise application services, quality assurance & testing, strategic sourcing and business process outsourcing services to our customers. Long term client relationships: We have successfully demonstrated the ability to manage large client relationships. This is reflected in the long duration of our relationships and the depth of our service offerings for some of our largest clients. We believe that our ability to be accessible to our customers, the personal attention we give them, our flexible approach and agility to meet customer requirements and our positive attitude in servicing customers has helped increase customer satisfaction levels and is a competitive strength. Global delivery model: We use a client-centric Global Engagement Model that combines local, senior, on-site resources with the cost, scale, and quality advantages of off-shore operations. Since the time of our inception, our location advantage gives our customers the benefit of a 24-hour virtual workday, advantages of controlled cost, high productivity and a culturally sensitive English-speaking workforce. Process Certifications: Our processes are certified by ISO 9001:2008. Partnerships: We have partnerships with SAP & Microsoft and our subsidiary with Sybase.
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Quantitative Factors on Standalone Basis 1) Adjusted earnings per share (EPS) weighted For the period Consolidated Standalone Weightage EPS (`) EPS (`) FY ended 31st March 2009 NA 2.21 1 FY ended 31st March 2010 NA 2.66 2 FY ended 31st March 2011 1.35 1.35 3 Weighted average 1.35 1.93 Annualized EPS for Half year ended 30th 3.46 2.82 September 2011. Note: EPS represents basic earnings per share calculated as per Accounting Standard 20 issued by the Institute of Chartered Accountants of India. 2) Price Earning ratio (P/E ratio)* in relation to the Issue Price of ` [•] per share Particulars P/E at the lower end of the P/E at the higher end of the price band (` [•]) price band (` [•]) Based on 2011-12 Annualized [•] [•] consolidated EPS of `3.46 Based on weighted average EPS of [•] [•] ` 1.93 Industry P/E* Highest 54.2 Lowest 1.1 Industry Composite 7.9 *Source: Capital Market Vol. XXVI/21 Dated Dec 12-25, 2011. 3) Return on Net worth (RONW) For the period FY ended 31st March 2009 FY ended 31st March 2010 FY ended 31st March 2011 Weighted average Standalone RONW for Half year ended 30th September 2011. Consolidated RONW for Half year ended 30th September 2011.
RONW (%) 32.00 27.00 14.00 21.33 12.00
Weightage 1 2 3
14.00
4) Minimum return on total Net worth after issue needed to maintain pre-issue EPS: [●] 5) Net Asset Value (NAV) per share (`) Particulars Consolidated NAV (`) Standalone NAV (`) As on March 31st 2009 NA 6.93 As on March 31st 2010 NA 9.92 As on March 31st 2011 9.78 9.84 NAV as on 30th September 2011. 12.62 12.09 Issue Price* [●] [●] After Issue [●] [●] *would be finalized after discovery of the Issue Price through Book Building process
58
6) Comparison with Industry Peers and Industry average Company Name Face Value E.P.S RONW (`) (`) (%) Preludesys India Limited 10.00 3.46* 14.00 (For Consolidated Half year ended 30-09-2011) Nucleus Software Exports 10.00 14.10 18.20 Limited Take Solutions Ltd. 1.00 1.70 8.90 Datamatics Global Services 5.00 3.00 6.00 Limited Geometric Limited 2.00 3.50 10.10 *Annualized E.P.S. Source: Capital Market Vol. XXVI/21 Dated Dec 12-25, 2011.
P.E. Ratio [●]
Book Value per share (`) 12.62
4.90
83.70
7.60 7.50
22.00 53.90
9.20
36.10
7) The face value of our Equity Shares is ` 10 and the Issue Price is ` [●] i.e., [●] times of the face value. The BRLM believes that the Issue Price of ` [●] with a face value of ` 10 and premium of ` [●] per Equity Share is justified in view of the above parameters. Please refer to the section titled "Risk Factors" beginning on page 11 of this Draft Red Herring Prospectus and the financials of our Company including important profitability and return ratios, as set out in the section titled "Financial Information of Our Company" beginning on page 129 of this Draft Red Herring Prospectus to have a more informed view.
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STATEMENT OF TAX BENEFITS To, The Board of Directors, PreludeSys India Limited 1/18, 1st Floor, 1st Main Road Kotturpuram, Chennai-600085 Dear Sirs, Sub: Statement of Possible Tax Benefits We refer to the proposed Initial Public Offer of PreludeSys India Limited (the “Company”) and hereby report that the enclosed annexure, states the possible tax benefits that may be available to the Company and to the Shareholders of the Company under the provisions of the Income Tax Act, 1961, Wealth Tax Act, 1957 presently in force in India as of date. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws and their interpretations. Hence, the ability of the Company or its Shareholders to derive tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill. The benefits discussed in the enclosed statement are not exhaustive nor are they conclusive. The preparation of the contents stated is the responsibility of the Company’s management. This statement is only intended to provide general information and to guide the investors and is neither designed nor intended to be a substitute for professional tax advice. A shareholder is advised to consult his/ her/ their own tax consultant with respect to the tax implications of an investment in the equity shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal precedent or may have a different interpretation on the benefits, which an investor can avail. Further, we have also incorporated the amendments brought out by the Finance Act, 2011, where applicable. We do not express any opinion or provide any assurance as to whether:
the Company or its shareholders will continue to obtain these benefits in future; or the conditions prescribed for availing the benefits have been / would be met with; the revenue authorities/ courts will concur with the views expressed herein.
Our views are based on the existing provisions of law and its interpretations, which are subject to change from time to time. We do not assume responsibility to up-date the views of such changes. The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. While all reasonable care has been taken in the preparation of this statement, we accept no responsibility for any errors or omissions therein or for any loss sustained by any person who relies on it.
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This report is intended solely for information and for the inclusion in the offer Document in connection with the proposed follow on offer of the equity shares of the Company to the public and is not to be used, referred to or distributed for any other purpose without our prior written consent. For and on behalf of CNGSN & ASSOCIATES Chartered Accountants Firm Registration No: 4915S
V.VIVEK ANAND Partner Membership No. 208092 Place: CHENNAI Date: 21.11.11
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Annexure STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS. Under the Income-tax Act, 1961 (“the IT Act”): A) SPECIAL TAX BENEFITS: As per the existing provisions of the IT Act and other laws as applicable for the time being in force, the Company and its share holders will not be entitled to any special Tax Benefit under any law. B) GENERAL TAX BENEFITS: To the Company: 1. Tax Rates: The corporate tax rate shall be 30% (plus applicable surcharge, education cess and secondary and higher education cess). 2. Tax under Section 115JB: The Company is liable to pay income tax at the rate of 18.5% (plus applicable surcharge, education cess and secondary and higher education cess) on the Book Profit as per the provisions of Section 115JB if the total tax payable as computed under the IT Act is less than 18.5% of its Book Profit as computed under the said Section. 3. Benefit under Section 115JAA (1A): Under Section 115JAA (1A) credit shall be allowed of any MAT paid under Section 115JB of the I.T. Act. Credit eligible for carry forward is the difference between MAT paid and the tax computed as per the normal provisions of the I.T. Act. However, no interest shall be payable on the tax credit under this sub-section. Such MAT credit shall be available for set-off up to 10 years succeeding the year in which the MAT credit initially arose. 4. Exemption under Section 10(34): In accordance with Section 10(34), dividend income (referred to in Section 115-O) will be exempt from tax. 5. Exemption under Section 10(38): If the Company invests in the equity shares of another company, as per the provisions of Section 10 (38), any income arising from the transfer of a long term capital asset being an equity share in a company is not includible in the total income if the transaction is chargeable to securities transaction tax. 6. Exemption under Section 10(35): Income received in respect of the units of mutual fund specified under clause 10(23D) or income received in respect of units from administrator of the specified undertakings or income received in respect of units from the specified company is exempt from tax in the hands of the Company, under Section 10(35) of IT Act.
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7. Preliminary Expenses under Section 35D: The Company will be entitled to amortise, over a period of five years, all expenditures in connection with the proposed public issue subject to overall limit specified in the Section. 8. Exemption under Section 54EC: Long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: (a) National Highway Authority of India constituted under Section 3 of The National Highway Authority of India Act, 1988; (b) Rural Electrification Corporation Limited, the Company formed and registered under the Companies Act, 1956. If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this Section for calculating capital gain, shall not be allowed as a deduction from the income-tax under Section 80C of the IT Act for any assessment year beginning on or after April 1, 2006. Further, the investment made on or after 1st day of April, 2007 in the above specified assets by an assessee during any financial year can not exceed Rs. 50 lakhs. 9. Benefit under Section 72: Any unabsorbed business loss is allowed to be carried forward for a period of eight assessment years; and under Section 32(2) any unabsorbed depreciation is allowed to be carried forward indefinitely. 10. Tax Rate under Section 111A: Short-term capital gains (i.e., if shares are held for a period not exceeding 12 months) arising on transfer of equity share in the Company would be taxable at a rate of 15 percent (plus applicable surcharge, education cess and secondary and higher education cess) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax. Shortterm capital gains arising from transfer of shares in a Company, other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the normal provisions of the IT Act. 11. Tax Rate under Section 112: In accordance with section 112, the tax on capital gains on transfer of listed shares, where the transaction is not chargeable to securities transaction tax, held as long term capital assets will be the lower of: a) 20 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed after indexation of the cost. Or b) 10 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed without indexation.
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12. Tax on distributed profits of domestic companies under Section 115 O: Any amount declared, distributed or paid by the company by way of dividend shall be charged to additional income tax at the rate of 15% plus applicable surcharge, education cess and secondary and higher education cess. To Resident Shareholders: 1. Exemption under Section 10(34): Any income by way of dividends (whether interim or final) referred to in Section 115-O received on the shares of the Company is exempt from income tax in the hands of shareholders. 2. Exemption under Section 10(38): Any income arising from transfer of a long term capital asset being an equity share in a Company is not includible in the total income, if the transaction is chargeable to securities transaction tax. 3. Computation of Capital Gains under Section 48: Section 48 prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition / improvement and expenses incurred wholly and exclusively in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, as per second proviso to Section 48 of the IT Act, in respect of long term capital gains (i.e. shares held for a period exceeding 12 months) from transfer of shares of Indian Company, it permits substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index, as prescribed from time to time. 4. Exemption under Section 54EC: Long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: (a) National Highway Authority of India constituted under Section 3 of The National Highway Authority of India Act, 1988; (b) Rural Electrification Corporation Limited, the Company formed and registered Companies Act, 1956.
under the
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this Section for calculating capital gain, shall not be allowed as a deduction from the income-tax under Section 80C of the IT Act for any assessment year beginning on or after April 1, 2006. Further, the investment made on or after 1st day of April, 2007 in the above specified assets by an assessee during any financial year cannot exceed Rs. 50 lakhs. 5. Exemption under Section 54F: Subject to the conditions specified in Section 54F, long-term capital gains (other than those
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exempt from tax under Section 10(38) of the IT Act) arising to an individual or a Hindu Undivided Family (‘HUF’) on transfer of shares of the Company will be exempt from capital gains tax subject to certain conditions, if the net consideration from transfer of such shares is used for purchase of residential house property within a period of 1 year before or 2 years after the date on which the transfer took place or for construction of residential house property within a period of 3 years after the date of such transfer. If only part of the net consideration is so reinvested, the exemption available shall be in the same proportion as the cost of the new asset bears to the net consideration. If new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the residential house is transferred. 6. Under Section 56(2) (vii): Where an individual or a Hindu undivided family receives from any person on or after the 1st day of October, 2009, any property, other than immovable property (which includes shares & securities [being capital asset of the assessee]), (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property shall be chargeable to income-tax under the head Income from other sources; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration shall be chargeable to income-tax under the head Income from other sources. Provided that this clause shall not apply to any property received (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of Section 10 of the IT Act; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of Section 10 of the IT Act; or (g) from any trust or institution registered under Section 12AA of the IT Act. For this purpose, ‘relative’ means (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) any lineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the person referred to in clauses (ii) to (vi);] 7. Set off of losses under Section 74: Short term capital loss suffered during the year is allowed to be set-off against short-term as well as long term capital gain of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ short-term as well as long term capital gains.
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Long term capital loss suffered during the year is allowed to be set-off against long term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ long term capital gains. 8. Tax Rate under Section 111A: Short-term capital gains (i.e., if shares are held for a period not exceeding 12 months) arising on transfer of equity share in the Company would be taxable at a rate of 15 percent (plus applicable surcharge, education cess and secondary and higher education cess) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax. Shortterm capital gains arising from transfer of shares in a Company, other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the normal provisions of the IT Act. 9. Tax Rate under Section 112: In accordance with section 112, the tax on capital gains on transfer of listed shares, where the transaction is not chargeable to securities transaction tax, held as long term capital assets will be the lower of: a) 20 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed after indexation of the cost. Or b) 10 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed without indexation. To Non Resident Indian Shareholders: 1. Exemption under Section 10(34): Any income by way of dividends (whether interim or final) referred to in Section 115-O received on the shares of the Company is exempt from income tax in the hands of shareholders. 2. Exemption under Section 10(38): Any income arising from transfer of a long term capital asset being an equity share in a Company is not includible in the total income, if the transaction is chargeable to securities transaction tax. 3. Under Section 48: Cost indexation benefits will not be available in such a case. The capital gains/ loss in such a case is computed by converting the cost of acquisition, sales consideration and expenditure incurred wholly and exclusively in connection with such transfer into the same foreign currency which was utilized in the purchase of the shares. 4. Exemption under Section 54EC: Long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: (a) National Highway Authority of India constituted under Section 3 of The National Highway Authority of India Act, 1988; (b) Rural Electrification Corporation Limited, the Company formed and registered Companies Act, 1956.
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under the
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this Section for calculating capital gain, shall not be allowed as a deduction from the income-tax under Section 80C of the IT Act for any assessment year beginning on or after April 1, 2006. Further, the investment made on or after 1st day of April, 2007 in the above specified assets by an assessee during any financial year can not exceed `50 lakhs. 5. Exemption under Section 54F: Subject to the conditions specified in Section 54F, long-term capital gains (other than those exempt from tax under Section 10(38) of the IT Act) arising to an individual or a Hindu Undivided Family (‘HUF’) on transfer of shares of the Company will be exempt from capital gains tax subject to certain conditions, if the net consideration from transfer of such shares is used for purchase of residential house property within a period of 1 year before or 2 years after the date on which the transfer took place or for construction of residential house property within a period of 3 years after the date of such transfer. If only part of the net consideration is so reinvested, the exemption available shall be in the same proportion as the cost of the new asset bears to the net consideration. If new residential house is transferred within a period of three years from the date of purchase or construction, the amount of capital gains on which tax was not charged earlier, shall be deemed to be income chargeable under the head “Capital Gains” of the year in which the residential house is transferred. 6. Under Section 56(2) (vii): Where an individual or a Hindu undivided family receives from any person on or after the 1st day of October, 2009, any property, other than immovable property (which includes shares & securities [being capital asset of the assessee]), (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property shall be chargeable to income-tax under the head Income from other sources; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration shall be chargeable to income-tax under the head Income from other sources. Provided that this clause shall not apply to any property received (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of Section 10 of the IT Act; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of Section 10 of the IT Act; or (g) from any trust or institution registered under Section 12AA of the IT Act. For this purpose, ‘relative’ means
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(i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) any lineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the person referred to in clauses (ii) to (vi);] 7. Set off of losses under Section 74: Short term capital loss suffered during the year is allowed to be set-off against short-term as well as long term capital gain of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ short-term as well as long term capital gains. Long term capital loss suffered during the year is allowed to be set-off against long term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years’ Long term capital gains. 8. Benefit under Section 90(2): The Non Resident Indian shareholder has an option to be governed by the provisions of the tax treaty, if they were beneficial than the domestic law wherever India has entered into Double Taxation Avoidance Agreement (DTAA) with the relevant country. 9. Tax Rate under Section 111A: Short-term capital gains (i.e., if shares are held for a period not exceeding 12 months) arising on transfer of equity share in the Company would be taxable at a rate of 15 percent (plus applicable surcharge, education cess and secondary and higher education cess) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax. Shortterm capital gains arising from transfer of shares in a Company, other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the normal provisions of the IT Act. 10. Tax Rate under Section 112: In accordance with section 112, the tax on capital gains on transfer of listed shares, where the transaction is not chargeable to securities transaction tax, held as long term capital assets will be the lower of: a) 20 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed after indexation of the cost. Or b) 10 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed without indexation. However, as per second proviso of Section 48, benefit of indexation is not available to Non Residents. A Non Resident Indian has the option to be governed by the provisions of Chapter XII – A of the IT Act, according to which: A. Under Section 115E: Where the total income of a non-resident Indian includes any income from investment or income from capital gains of an asset other than a specified asset, such income shall be taxed at a concessional rate of 20 per cent (plus applicable surcharge, education cess and secondary and higher education cess). Also, where shares in the Company are subscribed for in convertible
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foreign exchange by a Non-Resident India, long term capital gains arising to the non-resident Indian shall be taxed at a concessional rate of 10 percent (plus applicable surcharge, education cess and secondary and higher education cess). The benefit of indexation of cost and the protection against risk of foreign exchange fluctuation would not be available. B.Under provisions of Section 115F: Long term capital gains (in cases not covered under Section 10(38) of the IT Act) arising to a nonresident Indian from the transfer of shares of the Company subscribed to in convertible Foreign Exchange (in cases not covered under Section 115E of the IT Act) shall be exempt from Income tax, if the net consideration is reinvested in specified assets or in any savings certificates referred to in Section 10(4B), within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted into money within three years from the date of their acquisition. C.Under provisions of Section 115G: It shall not be necessary for a Non-Resident Indian to furnish his return of income under Section 139(1) if his income chargeable under the IT Act consists of only investment income or long term capital gains or both; arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from as per the provisions of Chapter XVII-B of the IT Act. D.Under Section 115 H: Where Non Resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under Section 139 of the IT Act, declaring therein that the provisions of Chapter XII – A shall continue to apply to him in relation to such investment income derived from the specified assets for the year and subsequent assessment years until such assets are converted into money. E.Under Section 115-I: A non-resident Indian may elect not to be governed by the provisions of Chapter XII-A for any assessment year by furnishing his return of income under Section 139 of the IT Act declaring therein that the provisions of this Chapter shall not apply to him for that assessment year and if he does so the provisions of this Chapter shall not apply to him, instead the other provisions of the IT Act shall apply. To Other Non Resident Shareholders: 1. Exemption under Section 10(34): Any income by way of dividends (whether interim or final) referred to in Section 115-O received on the shares of the Company is exempt from income tax in the hands of shareholders. 2. Exemption under Section 10(38): Any income arising from the transfer of a long term capital asset being an equity share in a Company is not includible in the total income, if the transaction is chargeable to securities transaction tax. 3. Under Section 48: Capital Gains arising out of transfer of capital asset being shares in the company, and such transaction is not chargeable to securities transaction tax , shall be computed by converting the
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cost of acquisition, expenditure in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer into the same foreign currency as was initially utilized in the purchase of the shares and the capital gains computed in such foreign currency shall be reconverted into Indian currency, such that the aforesaid manner of computation of capital gain shall be applicable in respect of capital gains accruing / arising from every reinvestment thereafter and sale of shares or debentures of an Indian company including the Company. 4. Exemption under Section 54EC: Long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: (a) National Highway Authority of India constituted under Section 3 of The National Highway Authority of India Act, 1988; (b) Rural Electrification Corporation Limited, the Company formed and registered under the Companies Act, 1956. If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this Section for calculating capital gain, shall not be allowed as a deduction from the income-tax under Section 80C of the IT Act for any assessment year beginning on or after April 1, 2006. Further, the investment made on or after 1st day of April, 2007 in the above specified assets by an assessee during any financial year can not exceed Rs.50 lakhs. 5. Exemption under Section 54F: Subject to the conditions specified under Section 54F, long-term capital gains (other than those exempt from tax under Section 10(38) of the IT Act) arising to an individual or a Hindu Undivided Family (‘HUF’) on transfer of shares of the Company will be exempt from capital gains tax subject to certain conditions, if the net consideration from transfer of such shares are used for purchase of residential house property within a period of 1 year before or 2 years after the date on which the transfer took place or for construction of residential house property within a period of 3 years after the date of such transfer. If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of the new asset bears to the net consideration. However, in case the new asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year such transfer or conversion. 6. Benefit under Section 90(2): Provisions of the Double Taxation Avoidance Agreement between India and the country of residence of the Non Resident would prevail over the provisions of the IT Act to the extent they are more beneficial to the Non Resident. 7. Tax Rate under Section 111A: Short-term capital gains (i.e., if shares are held for a period not exceeding 12 months) arising on transfer of equity share in the Company would be taxable at a rate of 15 percent (plus applicable surcharge, education cess and secondary and higher education cess) where such transaction of sale
70
is entered on a recognized stock exchange in India and is liable to securities transaction tax. Shortterm capital gains arising from transfer of shares in a Company, other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the normal provisions of the IT Act. 8. Tax Rate under Section 112: In accordance with section 112, the tax on capital gains on transfer of listed shares, where the transaction is not chargeable to securities transaction tax, held as long term capital assets will be the lower of: a) 20 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed after indexation of the cost. Or b) 10 percent (plus applicable surcharge, education cess and secondary and higher education cess) of the capital gains as computed without indexation. However, as per second proviso of Section 48, benefit of indexation is not available to Non Residents. To Mutual funds 1. Benefit under Section 10(23D): Mutual Funds registered under the Securities and Exchange Board of India or regulations made thereunder or Mutual Funds set up by Public Sector Banks or Public Financial Institutions or authorized by the Reserve Bank of India and subject to the conditions specified therein, would be eligible for exemption from income tax on their income. To Foreign institutional investors (‘FIIs’) 1. Exemption under Section 10(34): Any income by way of dividends (whether interim or final) referred to in Section 115-O received on the shares of the Company is exempt from income tax in the hands of shareholders. 2. Exemption under Section 10(38): Any income arising from the transfer of a long term capital asset being an equity share in a Company is not includible in the total income, if the transaction is chargeable to securities transaction tax. 3. Exemption under Section 54EC: Long-term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in the bonds (long term specified assets) issued by: (a) National Highway Authority of India constituted under Section 3 of The National Highway Authority of India Act, 1988; (b) Rural Electrification Corporation Limited, the Company formed and registered Companies Act, 1956.
under the
If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain.
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However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted (earlier) shall be chargeable to tax during the year of such transfer or conversion. The cost of the long term specified assets, which has been considered under this Section for calculating capital gain, shall not be allowed as a deduction from the income-tax under Section 80C of the IT Act for any assessment year beginning on or after April 1, 2006. Further, the investment made on or after 1st day of April, 2007 in the above specified assets by an assessee during any financial year can not exceed `50 lakhs. 4. Benefit under Section 90(2): Provisions of the Double Taxation Avoidance Agreement between India and the country of residence of the FII would prevail over the provisions of the IT Act to the extent they are more beneficial to the FII. 5. Under Section 115AD (1) (ii) and 115 (1) (iii): As per the provisions of Section 115 AD of the IT Act, FIIs will be taxed on the capital gains that are not exempt under Section 10(38) of the IT Act at the following rates: Nature of Income Long Term Capital Gain Short Term Capital Gain
Rate of Tax (%) 10 30
The above tax rates would be increased by the applicable surcharge ,education cess and secondary and higher education cess .The benefits of indexation and foreign currency fluctuation protection as provided by Section 48 of the IT Act are not available to FIIs. According to Section 111A of the IT Act, short term capital gains on sale of equity shares where the transaction of sale is chargeable to securities transaction tax shall be subject to tax at a rate of 15% (plus surcharge, education cess and secondary and higher education cess). To venture capital companies/ funds 1. Exemption under Section 10(23FB): Any income of Venture Capital companies/ Funds (set up to raise funds for investment in venture capital undertaking notified in this behalf) registered with the Securities and Exchange Board of India would be exempt from income tax, subject to conditions specified therein. As per Section 115U of the IT Act, any income derived by a person from his investment in venture capital companies/ funds would be taxable in the hands of the person making an investment in the same manner as if it were the income received by such person had the investments been made directly in the venture capital undertaking. Under The Wealth Tax Act, 1957: Asset as defined under Section 2(ea) of the Wealth tax Act, 1957 does not include shares in companies and hence, shares of the Company held by the shareholders would not be liable to wealth tax.
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Notes: • •
•
• •
The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of equity shares; The above Statement of Possible Direct Tax Benefits sets out the possible tax benefits available to the Company and its shareholders under the current tax laws presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws, including as laid down by the circular 4/2007 dated 15th June 2007 issued by CBDT concerning capital gain, for availing concessions in relation to capital gains tax; This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences, the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue; In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any, between India and the country in which the non-resident has fiscal domicile; and The stated benefits will be available only to the sole/first named holder in case the shares are held by joint share holders.
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SECTION VI – ABOUT US INDUSTRY OVERVIEW Evolution of the IT Industry Information technology (IT): From a pre-historic computer era of mechanical computers, to electronic computers that can transmit information at the speed of the light, technology has changed the way tasks had been performed earlier. Today, the landscape is undergoing a sea change again, with the advent of cloud computing, social media, smart phones, tablets etc. The 1960s and 1970s, saw the domination of mainframes in the corporate computing environment. Then came 1980 when IBM looked at the geeky micro-computer market and saw a more flexible and cheaper terminal to connect to their mainframes. Those who were using micro-computers at the time were not impressed. By this time, Lotus had taken this idea and made it work with large data crating new markets. Rather than the intelligent mainframe workstation with a bit of word processing thrown in, that IBM had envisaged, office workers were running their own programs to get the work done locally. The two armies faced off, and the battle raged. Desktops sprouted databases (DBASE) and 4GL solutions. The mainframe fought back with client server applications, a sort of compromise that would leave IT departments back in charge. Then, the Internet excited everyone with its information presentation technology. The excitement came when they knew that the information they required was at their fingertips and the IT departments saw servers under their control sending information to terminals. Almost every enterprise application since the last 10+ years have been web-based thereby enabling information access to people even outside of the enterprise. With spread of telecommunication, adoption of smart phones increased and today significant percentage of devices connected to the internet are mobiles or tablets. As changes swept through the hardware, software space similar changes were happening in the models of software delivery. Delivering software as a service has started gaining prominence and is on its way to be one of the mainstream models for software application access. Source: IDC Report on 40 Years of IT Looking Back, Looking Ahead by John Gantz ‐ http://homepages.rpi.edu/~tealj2/40%20Years%20of%20IT.pdf
Global Outlook IT spending on software products and services is a significant component of the global economy. Innovation, Quality and Cost Reduction are the key drivers of the Information Technology sector. The need for greater competence, combined with ever-increasing geographic diversification of business, drives much of the spending, as companies continue to invest in hardware and software infrastructure that enables them to operate in increasingly competitive markets. Many business houses and multinational companies of the developed countries are looking forward to setup bases in the developing countries, where skilled and inexpensive human talent is abundantly available. As per Gartner global overall IT spending was US$3.43 trillion for 2010. Gartner has predicted that the overall spending for 2011 will grow by 2.9% (based on Q3 2011 Projection and after adjusting for exchange rates) in 2011 and 3.9% (after adjusting for exchange rates) in 2012. Through 2015, the forecast of overall IT spending will grow at an annual average rate of 5.3% (based on Q2 2011 and before adjusting for exchange rates) as the global economy continues to recover. Source: http://www.gartner.com/technology/research/it-spending-forecast/
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The table that follows give the IT spending by sector for a period of 7 years from 2008-2015. IT Spending by Sector, Worldwide, 2008-2015 2008
2009
2010
2011
2012
2013
2014
2015
CAGR (%) 2010-2015
381.6
334.6
375.1
418.9
454.8
496.6
540.5
603.5
10
-12.3
12.1
11.7
8.6
9.2
8.8
11.7
-
225.5
244.4
267.6
288.1
308.4
329.4
350.9
7.5
-2.5
8.4
9.5
7.6
7.1
6.8
6.5
-
769.2
793
845.7
882.5
919.9
960.8
1,004.0 4.8
-5.1
3.1
6.6
4.4
4.2
4.4
4.5
-
374.2
412.5
446.1
480.2
514.2
543.4
571.7
6.7
-6.2
10.2
8.1
7.6
7.1
5.7
5.2
-
Computing Hardware Spending ($B)
Annual Growth (%) Software Spending ($B)
231.2
Annual Growth (%) IT Services Spending ($B)
810.9
Annual Growth (%) Telecom Equipment Spending ($B)
398.8
Annual Growth (%) Telecom Services Spending ($B)
1,578.4
Annual Growth (%) -
1,533.3 1,602.3 1,693.7 1,748.6 1,803.7 1,860.5 1,913.9 3.6 -2.9
4.5
5.7
3.2
3.1
3.2
2.9
-
All IT Spending ($B)
3,401.0
3,236.7 3,427.3 3,672.0 3,854.2 4,042.8 4,234.6 4,444.0 5.3
Annual (%)
-
-4.8
Growth 5.9
7.1
5
4.9
4.7
4.9
-
CAGR = compound annual growth rate Source: Gartner (June 2011) http://blogs.lesechos.fr/IMG/pdf/garnter.pdf Perspective 2020 Transform Business, Transform India report released by NASSCOM predicts that the IT services market will reach the US$ 1.5 trillion mark. The verticals that contributed to the $500 billion were the core markets of BFSI, telecom, retail, manufacturing and the travel segments. The additional growth of around US$800 billion is likely to come from the emerging markets of public sector, healthcare, media and the utilities segments. The Small and the Mid-sized Businesses will be the new customer targets for organizations while the new geographies that will be the potential off shoring markets will be Brazil, Russia, India and China. Source: Perspective 2020: Transform Business, Transform India, NASSCOM – http://epi.nasscom.in/upload/Perspective%202020%20Press%20release%20presentation.pdf
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India Outlook With growing economy IT spending in India across the various sectors will continue to increase. Gartner estimates the overall IT spending in India is expected to reach $71.9 billion in 2011. The IT services market is projected to grow by 17.1% (CAGR) during the 2009-2014 period generating revenues of US$13.6 billion by 2014. Gartner analysts say, the IT services space in India will be driven by new projects in areas of business applications (CRM, ERP, BI), virtualization and data center consolidation and green IT exploration. IT End-User Spending Forecast, India, 2009-2014 Particulars 2009 2010 Hardware ($M) 6,388 7,558 Software ($M) 2,112 2,421 IT Services ($M) 6,223 7,591 Telecommunications ($M) 42,100 47,664 Total ICT ($M) 56,823.50 65,233.90 CAGR = compound annual growth rate
2011 9,290 2,768 8,774
2012 11,152 3,124 10,181
2013 13,257 3,521 11,815
2014 16,152 3,960 13,691
CAGR 2009-2014 (%) 20.40 13.40 17.10
51,097 71,927.90
54,487 78,943.80
58,178 86,770.40
61,668 95,470.60
7.90 10.90
Source: http://www.gartner.com/it/page.jsp?id=1475414 Indian IT Industry – Perspective 2020- Nasscom-Mckinsey Report According to 'Perspective 2020: Transform Business, Transform India’ report, the exports component of the Indian industry is expected to reach US$ 175 billion in revenue by 2020. The domestic component will contribute US$ 50 billion in revenue by 2020. Together, the export and domestic markets are likely to bring in US$ 225 billion in revenue, as new opportunities emerge in areas such as public sector and healthcare and as geographies including Brazil, Russia, China and Japan opt for greater outsourcing. The Indian Information Technology industry is expected to account for a 6% of the country's annual GDP and 28% of annual exports by 2020. Its also expected to create 30 million urban employment (direct and indirect), making it one of the biggest job creators in India and a mainstay of the national economy. Source: Perspective 2020: Transform Business, Transform India, NASSCOM – http://epi.nasscom.in/upload/Perspective%202020%20Press%20release%20presentation.pdf Key Industry Drivers • • • • •
Large Manpower Pool - 750,000 engineering graduates every year transform India into the one of the largest English speaking IT Reliability – Majority of the Indian software companies implement industry standard quality frameworks like ISO / CMMI which streamlines their delivery processes and enables them to adhere to delivery schedules and accomplish customer satisfaction. Cost and Time saving - Offshore software development in India with the use of high-speed data communication links provide immense cost and time saving including 24-hour virtual offices. Time tested solutions - India enjoys very strong brand equity in major markets, thanks to its growing and globally competitive software industry. Foreign investor friendly tax structure for ITES/BPO industry
Source: http://www.sourcingnotes.com/content/view/731/74/
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Industry Trends Today’s IT environments are built on a series of costly compromises that drive unintended consequences. IT environments are configured and over-provisioned for just-in-case traffic scenarios and then sit largely idle until the extreme case occurs, if ever. Hardware, too, is often planned and purchased to meet long term operational goals such as transaction increases; although in the immediate term the technology sits underutilized. Ironically, by the time the anticipated long term goal arrives, the hardware can be purchased for less. Cloud Computing
A cloud-oriented environment avoids these compromises even as it enables high levels of efficiency, flexibility, and responsiveness while ensuring a way to control IT costs. At the same time, a cloud environment enables new business models and opportunities. A cloud oriented environment enables efficiency through automation; flexibility through the ability to configure and provision systems and resources on demand, effectively scaling systems up or down as needed; to control IT costs by eliminating the need to over-buy and over-provision IT resources; scale resources as needed. Market Size Independent research firm Forrester Research expects the global cloud computing market to reach $241 billion by 2020 compared to $40.7 billion in 2010. Software-as-a-Service is the largest segment of the cloud computing services market, accounting for 73% of the market’s revenues 2010. IT’s most trending topic currently is the migration to public cloud services and Gartner forecasts spending in this area is roughly $89 billion in 2011, compared to $74.3 billion in 2010. The market will continue to grow and reach $176.8 billion by 2015. Source: 1. Way for Cloud – Zinnov Consulting.pdf 2. Forrester - 'Sizing the Cloud – Forrester Research' 3. Gartner - http://blogs.lesechos.fr/IMG/pdf/garnter.pdf Enterprise Mobility Instant access and communication is today’s lingo for anybody. Organizations are adapting to the needs of their end-users, in this case their employees. Time is money and timely action results in improvement of productivity and better service delivery to customers at an enterprise level. Modern businesses are realizing an urgent need to connect their people to their enterprise data from anywhere. Field workers with mobile devices which can access enterprise applications from anywhere are bringing in greater productivity and efficiency to field operations.
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Market Size The recent turmoil in global economy impacted many businesses and regardless of noticeable decline in business growth, several companies chose to invest in mobile infrastructure to reap dividends in later stages. Demand for enterprise mobility remained more or less intact during the recession despite some cost cutting programs implemented by organizations. Global market for enterprise mobility is projected to exceed US$168.8 billion by the year 2015. The European enterprise mobility market is projected to cross the $50 billion mark by the year 2012. Growthwise, the Middle East is projected to be the fastest growing regional market for enterprise mobility, with a CAGR of more than 8.0% by 2012. Increasing mobile workforce population in the region represents the key factor driving growth in the Middle East enterprise mobility market. Applications represent the fastest growing revenue category for enterprise mobility, growing at a compounded annual rate of more than 25%. Source: http://www.prweb.com/releases/enterprise/mobility/prweb4370204.htm Social Computing The business impact of social computing is not just with social media platforms like Facebook, Twitter, LinkedIn, but has a larger impact in shaping the business environment, culture and attitude. As the Global head of Research, Gartner stated, the rigid business processes which dominate enterprise organizational architectures today are well suited for routine, predictable business activities. But they are poorly suited to support people whose jobs require discovery, interpretation, negotiation and complex decision-making. Social computing technologies and principals will be implemented across and between all organizations, which will unleash the yet to be realized productivity growth contributing to economic growth. Small & Mid Sized Business Segment (SMBs) During much of the last decade and half, IT companies have grown targeting Fortune 1000/2000 companies to offer their services. With little scope for further growth in the segment, they started focusing on Small and Midsized Businesses. With developing economies starting to play a critical role in the global economy, the number and role of SMBs is going to increase. Market Size IDC predicts that the global SMB market will reach $US 543 billion in 2011. IDC forecasts that the worldwide SMB IT spending will grow to nearly $629.3bn in 2014. North America SMB spending will exceed US$ 162 billion by 2012 with a CAGR of 6.3% and Western Europe will grow 5%(CAGR) and will value around $206 billion in 2011 . Source: 1. http://www.idc.com/research/globalsmbmarketplace.jsp 2. http://www.idc.com/research/viewdocsynopsis.jsp?containerId=222409§ionId=null&eleme ntId=null&pageType=SYNOPSIS
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ABOUT OUR COMPANY & ITS BUSINESS History of our company We started our operations in 1998 in India. During the initial years, we were offering development and consulting services. In 1999, our WOS opened our first overseas office in Los Angeles, California. In 2003, we got an opportunity to enter into BPO space. With our focus on delivering quality services, we put in a Quality Management System compliant to ISO 9001:2000 and were certified in the year 2004. The certification recognized our focus on quality. To accelerate our growth and to increase our breadth of services we entered into Enterprise Application Services by partnering with global leaders like SAP in 2006 and with Microsoft 2007. We have done ERP and CRM implementations across various verticals. We also expanded our geographical presence by opening up offices of our subsidiary in Chicago, Illinois in 2006, and Austin, Texas in 2008. This enabled us to reach out to more prospects which aided in accelerating our growth. We constantly keep looking for emerging trends to spot the next big opportunity for growth. This has resulted in us entering Enterprise Mobility in 2010 and Cloud Computing space in 2011. With these two being the next significant technological waves, we are positioning ourselves to ride on them successfully. We are providing business solutions to small, mid and large sized companies and government agencies. We deliver technology enabled business solutions to clients across manufacturing, financial services, insurance, retail, technology, government and media that help them achieve business efficiencies and goals with reduced total cost of ownership and increased quality. Rewards & Recognitions Of Prelude Systems Inc & PreludeSys India Year
Prelude Systems Inc 2008
2009
2010
2011
PreludeSys India Ltd Listed in Dun and Bradstreet’s India’s top ITES and BPO companies
Listed in Deloitte Fast Technology 500 Company Listed in Software Magazine 500 Fastest Growing Companies Listed in Inc. 5000 Company Listed in L.A. Business Journal 100 Fastest Growing Companies Listed in Deloitte Fast Technology 500 Company Listed in Software Magazine 500 Fastest Growing Companies Listed in Inc. 5000 Company Listed in Inc. 5000 Company
ABOUT OUR COMPANY & ITS BUSINESS We are an international IT company that delivers IT and IT enabled business solutions to companies large and small. Our offerings are Software Development, Enterprise Application Services, QA and Testing, BPO and Strategic Sourcing. We provide consulting and delivery expertise in solution design, development and integration from delivery centers in India and through our subsidiary Prelude Systems Inc. in the U.S. IT Services comprise Software Development, Enterprise Application Services and QA and Testing. We provide our services with a strong focus on specific verticals like manufacturing, media, technology, banking, financial services and insurance. In the Enterprise Mobility space, we offer our AnB solution. Our solution is targeted at enterprises that
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have a need to mobile enable their enterprise applications like SAP, Oracle or any other custom application. Our solution enables enterprises to take their enterprise data to the mobile with minimum lead time and cost. We have steadily enhanced the portfolio of services we offer to address the diverse requirements of our clients. This has been through partnering with principals like SAP, Microsoft and with RIM and Sybase through our subsidiary Prelude Systems Inc. Our goal is to be a global IT organization and to this end, we have been increasing our geographical footprint. We have beefed up our presence in US with our subsidiary opening new offices in Chicago, Illinois in 2006 and Austin & Texas in 2008. We have entered the Middle East and Asia Pacific regions through our sales activities. We are continually growing our development centers in India as well as in US. We currently have development centers in Chennai, Diamond Bar (California) in addition to the above mentioned places in US. Our new facility in Siruseri, Tamil Nadu, India is expected to be completed in Fiscal 2012. We are also proposing to shift our facilities from Kotturpuram and Alwarpet which are housed at leased premises to Shriram The Gateway SEZ. We also propose to open up 8 of our development centres/ sales offices across various cities in USA, Singapore, Dubai and Australia. However, we have not placed orders for any of the equipments, hardware or software to be installed in the above premises which roughly amount to ` 880 Lakhs. We provide end-to-end project execution onsite, offsite, offshore, or in onsite-offshore models. We are ISO 9001:2008 certified organization. The SEI-CMM standards were developed by the Carnegie Mellon University to assess an organization’s quality management system, systems engineering processes and methodologies. With our domain skills and customer-centric approach, we have developed several strategic client relationships. We have built a sales team who are placed in both our premises and that of the client locations focus on developing client relationships. Our sales team is complemented by a team of domain experts and solution architects who provide industry specific and service offering inputs. We and our subsidiary also have alliance partnerships with leading software vendors including SAP, Microsoft, IBM, Research in Motion and Sybase. We believe that our ability to maintain growth depends to a large extent on our strength in attracting, training, motivating and retaining our people. Our Services
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Software Development We leverage a blend of industry-proven practices and leading standards, with a good foundation of technical skills to cater to the requirements of our customers. We have acquired knowledge in diverse areas of technology, operation, client engagement and industry domains. We focus our delivery solutions through the adoption of globally benchmarked CMMI processes enabling delivery on time and within budget. Our commitment to quality practices is a key differentiator from other companies of our size. On customer engagement a dedicated team of qualified experts are committed to delivering turn-key solutions. We provide insight to every aspect of the customer’s business and technology needs, from strategy consulting and concept development to Project Management, Application Development, Reengineering, Data Migration & Conversion, Testing, Maintenance and Support. In a change-driven environment where companies face sizable business and technology challenges, we provide valuable advice that help the customer through the business centric engagement model and work hand-in-hand to improve their business performance to create a competitive edge. Our software development offerings include: Application Development: We develop custom application across Microsoft, Java and Open Source technologies. We have expertise in Desktop, Web and PDA applications development. We understand the client’s requirements and their IT landscape and based on that we suggest the technology on which the application can be developed. We use industry standard tools during our development process which aids in rapid development. We also have developed frameworks which aid in accelerated development cutting down on time to make the application available for end users. We use structured development processes based on ISO / CMMI framework which ensures that the development phases have proper check gates which ensures that quality is built-in throughout the development process. Mobile Application Development: We have experience across multiple platforms in mobile application development including J2ME based mobile application development, iPhone / iPad application development; Android based mobile application development and BlackBerry application development. Application Maintenance & Support: We understand that the application has to be supported through its lifetime to ensure trouble free functioning. During the course of application usage users encounter need for training, more features or fixes. We handle them by providing User Training, Troubleshooting (We will troubleshoot any application issues including environment and application code and fix bugs, if any) and Minor Enhancements (We will provide programming support for minor enhancements to the application). We follow our internal process during such support activities which ensure that each incident is assigned a unique ticket number and it is properly tracked and closed. Legacy Modernization: We provide our clients with a variety of alternatives for modernizing their legacy systems. Each of these legacy modernization approaches ensures maximum reuse of the unique logic created and maintained by organizations at the heart of their operations, while incorporating new technologies that enable new functionality to be added quickly. Some of our solutions are web-enabled Legacy Interface, Service Oriented Architecture - based Legacy Extension, Application Integration, System Migration, Application Development and Support, Consolidation and Remediation, Legacy Portfolio Assessment E-Commerce: We offer an e-commerce platform “PreludeSys E-commerce Platform” (PEP), for the enterprises to use the electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals. PEP covers the entire spectrum of activities in an e-commerce transaction process. It endeavors to incorporate best practices and global benchmarks to provide enriched features such as configurable layout (home page, promotional page, etc.), wide selection of pre-designed templates & color sets, intuitive navigation, multi-level listing of product
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categories, automated display of best-sellers, related up-sell & cross-sell products, configurable search by title, description, category, product number, price or weight, customizable customer features like e-mail notifications, invoices, robust security features, web-based admin panel, integration with external systems like ERP, CRM, synchronization of inventory catalog which allows them with inventory management, order processing, and shipment tracking, sales analysis & tracking, support multiple payment gateways (PayPal, Google check out, Authorize.net). Database Development: We provide database design, development and optimization services. We work on industry standard databases like SQL Server, Oracle, and MySQL. We use tools for data modeling. We have developed transaction driven applications which require robust data models and optimized queries to function smoothly. We also develop complex reports that require fetching data from multiple tables and drill down views. Enterprise Application Services In an intensely competitive global marketplace, it is critical for businesses to improve their operational efficiency in order to keep pace with constant industry changes. To achieve this, they require more than state-of-the-art technology in the form of enterprise applications. They need a partner who can provide valuable insight and help them redefine the way they do business. We help our customers’ access and manage real-time information and transaction processes across their entire organization. We work handin-hand with them to develop and implement appropriate solutions and achieve their goals. We assist clients in transforming their business into an agile enterprise by implementing proven enterprise solutions from SAP and Microsoft. Our strong partnerships with SAP and Microsoft, help companies achieve maximum returns from ERP investments. Our team of professionals have also built and managed enterprise solutions to meet the unique needs and challenges of clients across industry verticals. We provide our customers with the flexibility and responsiveness that’s essential to the growth of their business, while addressing ongoing business and technology changes. We have a reputation for adhering to deadlines and accommodating budget constraints, which allows our clients to enjoy improved business processes at reduced operational costs. ERP: In order to facilitate the smooth-running of businesses, it’s imperative for organizations to have a seamless integration of their business processes across suppliers, employees and customers. Enterprise Applications help organizations accomplish one critical goal - information integration. Our offerings in the ERP space include: Product Evaluation Enterprise Resource Planning (ERP) software unifies traditional management functions within a coherent, integrated system. These management functions may vary from product to product. Due to the complexity of ERP projects, there are many factors which have to be considered before deciding on which ERP solution to implement. All ERP packages are expected to support core business process. For example, creating customer, vendor and products master records, maintaining customer orders and sending invoices are integral parts of ERP systems. Besides core processes, ERP solutions vary widely. One ERP solution might be very good at managing manufacturing operations, while another one will have a robust accounting module. It is vital to identify the unique strength of each ERP solution and deciding the best fit for the customer’s business requirements. We have capability in assisting number of organizations of all sizes through the software selection process. We take 5 key factors in evaluating the alternative ERP software products for its customers. The factors are Software Functionality, Software Vendor, Support & Maintenance, Software Technology, Total Cost of Ownership. Implementation: A key success factor in any kind of information system implementation is knowledge around the product. The complexity of a project and the varying requirements from one project to another requires knowledge of the ERP software being implemented. We have the expertise in understanding all of the business processes, the data elements that are involved, and the types of management reports used to run the business and external systems that need to be integrated etc. We follow the below best practices during project implementation phase: ¾ Understanding the Customer’s target benefit of ERP implementation
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¾ Superior Project Plan ¾ Emphasis on business process and requirements ¾ Robust Project Management ¾ Data Migration Apart from the above practices, we work on prototyping including the development of data extraction & importing tools, developing customizations, creating reports, and testing that can help customers bring out the highest possible Return on Investment. Post Implementation Support: We do not breathe free when the ERP system goes live. Our post implementation plan includes provisions for on-going training to help client’s employees get the most out of the ERP investment. We provide ERP Support Services through the following methods: On-Call / Helpdesk: We provide technical support via a dedicated support email and support phone line to our technical experts specializing in various ERP technologies. Troubleshooting: We will troubleshoot any application issues including environment and application code and fix bugs, if any. Answer Questions: We have the expertise to solve the issues raised through queries from the business regarding the application under support. Configuration Fixes: We fix any software configuration issues. Minor Enhancements: We provide programming support for minor enhancements to the application. New Version Upgrades: ¾ The urgency to shape and develop state-of-the-art ERP characteristics is vital in today's rapidly changing and turbulent environment. In the process of upgrading an ERP we make sure that it puts its best efforts in achieving below mentioned guidelines. ¾ Building a business case on a new functionality ¾ Treating the upgrade like a new project in order to avoid underestimating the resources needed ¾ Continue with the same team as in the initial ERP project to save the orientation effort ¾ Treating the project as business, not an IT project ¾ Assessing for hidden infrastructure costs caused by the upgrading of the technology needed ¾ Un-customize customizations in order to save on maintenance costs ¾ Test carefully, because upgrades may affect existing systems and processes Provide sufficient training for the users, because the utilization of the system depends on the organization's ability to use the system. We follow proven methods to execute the mentioned tasks and leverage our deep domain expertise to add value to its customers. CRM: Businesses owe their existence to customers, and that makes it critical for organizations to manage and nurture business relationships. Organizations need to acquire and manage customer data which provide critical insights into the customers’ preferences. This in turn helps organizations personalize services and fine tune delivery processes to result in customers’ maximum satisfaction. We help organizations to plan, implement and manage CRM applications. We adopt industry-best practices which ensure organizations derive maximum mileage from their CRM investments. Our service offering in the Enterprise Application space covers CRM Consulting and CRM Implementation Integration with other Enterprise Applications: The primary service of CRM Integration is to provide ongoing synchronization of data between the CRM and other Enterprise Applications. We provide outof-the-box connectivity to different applications and data sources to automatically connect the CRM data with the in-house systems. With our high scalability and real-time integration ability, the customer’s business will make a fast transition to the new CRM system, or synchronize data between the CRM and other business applications, without data loss or other risk concerns. Our post implementation plan includes provisions for on-going training to help client’s employees get the most out of the CRM investment and also includes New Version Upgrades. Provide sufficient training for the users, because the utilization of the system depends on the organization's ability to use the system.
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ECM: In this era where ‘innovation’ is the buzz word and key differentiator between organizations, forward looking organizations are focused on institutionalizing the innovation process. They invest in processes and tools which help accomplish this goal. One of the vital things in this process is the focus on leveraging organizations’ institutional knowledge. Since this knowledge is spread across different business units and is in different formats, it becomes necessary for organizations to employ processes and tools which will enable them to access, share and use varied content. We enable organizations to implement these processes and tools in order to take advantage of the collective knowledge spread across the enterprise. Our experience in Enterprise Content Management (ECM) covers document management, collaborative content management, forms processing, and web content management. Our service offerings include Product Evaluation, Implementation consist of three (3) phases: discover, configure, and deliver, Legacy system integration with Enterprise Content Management (ECM) systems, New Version Upgrades, Post Production Support like On-Call / Helpdesk, Troubleshooting, Answer Questions, Configuration Fixes & Minor enhancements. BUSINESS INTELLIGENCE From partly automated organizations to those that have implemented the latest technologies, every organization is saddled with huge amounts of data. This data contains valuable information that can bring huge strategic and operational benefits for the organization. It can help the organization understand its customers and competitors better and highlight areas of operational inefficiencies which when addressed, will result in immediate benefits to the bottom line. Our Business Intelligence Practice helps customers integrate their data silos as well as access and analyze consolidated data. This in turn enables organizations to make informed decisions that accelerate business growth. Master data management, enterprise data warehouse, data migration and packaged analytics are also part of the Business Intelligence Practice. QA & Testing We believe that quality is the implicit deliverable in all our engagements, be it solution development or service offering. Recognizing the need for quality driven software testing, we have set up a software testing unit. Staffed by a team of professionals and supported by industry-standard testing tools, the unit can test software developed in various technologies and on different platforms. The main activities of the unit are: • Testing of software developed in-house The software testing unit is competent and possesses the versatility to handle the testing requirements of all software developed by us in various technologies and business domains. • Testing as an independent service offering We also provide software testing services for other companies that lack a testing infrastructure or in the case of the client insisting on testing and certification provided by independent testing agencies. Our testing team does System Testing, Integration Testing, Performance Testing and aids the client in User Acceptance Testing. Business Process Outsourcing The trend of global corporations continuing to face severe competitive pressure and outsourcing work to cost effective locations is accelerating day by day. We are ideally placed to provide support in various business processes in which we possess proven expertise. Our services span the following • Medical Records Review and Categorization • Recruitment • Accounts and Payroll In the area of medical records we summarize the contents of records by distilling the key data thereby enabling the user to get quicker access to important details. We also categorize the individual pages records for easy access. In recruitment, we handle job requirements provided by sales teams. Based on the requirement need, our team sources resumes, interacts with candidates and gets their acceptance for their resume submission. Our team handles the entire cycle of activities from sourcing, acceptance, submission, interview
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coordination, candidate follow-up and joining formalities. In Account and Payroll management, our team coordinates with the consultants for their timesheet collection, raises invoices based on the timesheets, follows up on the invoices with the clients. Similarly they are handle vendor payments. They also ensure that statutory compliance tasks are taken care of. Strategic Sourcing In today’s competitive environment, IT organizations are charged with the challenge of delivering faster, delivering more and reducing or maintaining cost. Demand for IT resources peaks and wanes while many IT departments maintain steady staffing levels. As IT departments attempt to transform to more agile and nimble organizations, they are employing sourcing and organization approaches to better align supply and demand. We are a direct source for external IT talent. In recent times, traditional IT staffing companies have been functioning predominantly as brokers for contract labor. More often than not, these resources are someone else’s employees. This extra layer inflates the hourly rates and thereby proves pointless in this rough economic climate. We are an employee-based technology company that helps clients cut costs by directly providing them with experienced IT professionals. Process Flow chart
Our Strategy Towards incremental growth: We intend to provide our range of services to the currently untapped market of new verticals in developed countries such as the Public Sector, Healthcare, Media, Utilities and small-medium sized business segments. We through our subsidiary have expanded our service offerings to address new market opportunities such as cloud computing, enterprise mobility, social media computing while also addressing the traditional segments of Application Development and Maintenance, ERP/CRM, and Testing. We will continue to evaluate our service portfolio in line with future business opportunities. Geographical Expansion: Our service exists in regions that have more opportunities including US and India. We have been increasing our geographical footprint in an aggressive manner. We have beefed up our presence in US with offices in multiple locations. We have started our sales activities in Middle East and Asia Pacific regions.
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Influence existing client relationships to enhance our business: We will also continue to grow our business by enhancing our existing relationships and increasing the scope of engagements with our clients by expanding the breadth of services we offer, pursuing excellence in delivery through innovative practices and leveraging our industry experience. Boost the “PreludeSys” brand: Investment in Brand building will be a continuous process among our client markets within selected geographies in India and other boundaries. We achieve this through various marketing initiatives including targeted analyst outreach programmes, trade shows, white papers, events, workshops, road shows, speaking engagements and global public relations management. We believe that a strong brand will contribute to attracting and retaining talented people and enhancing our lead generation process and client acquisition. Sustain to be a preferred employer in the IT industry: We intend to further develop our position as a preferred employer in the Indian IT industry and place special emphasis on attracting and retaining highly skilled people. We will continue to invest in career development and training for our people, with the objective of further enhancing their technical and leadership skills. Sales and Marketing Our growth in recent years has been driven by world class process and product quality as well as an increase in our share of our existing clients’ IT budgets. We undertake a detailed exercise periodically to identify existing and prospective clients with the potential to develop into large clients. We have a good flow of new customers towards us from the reference of our existing clients and also because of our competitive strength. We develop our client relationships into partnerships by working closely with our clients’ managers and senior executives. We work with them to formulate and execute our Global Delivery Model and implement fixed price, fixed time basis or time and material basis models and explore new service offerings. Our current sales team is spread across various target industries and service offerings through focused Business Development Managers at different levels and Business Development Executives and Lead Analysts. Each sales team is supported by an Inside Sales team and additional support staff based out of both our offices in India and its subsidiary in US. They are complemented by a team of domain experts and solution architects who support our sales efforts by providing the necessary expertise. In addition, marketing professionals assist in marketing efforts and brand building. We identify sales opportunities in several ways, including Traditional sales process, senior management relationships, Referrals from alliance partners, Inside sales team and Inquiries from our website. Our senior management and dedicated engagement managers are actively involved in managing client relationships and business development through targeted interaction with multiple contacts at different levels in the client organization. In addition, for strategic clients, we will have an identified senior executive who is responsible for overall client development. We and our subsidiary have sales offices spread across North America and the Asia-Pacific region. We set targets for our sales personnel at the beginning of each year, which are subject to periodic reviews. In order to boost the motivational level in our sales team, they have an incentive based compensation plan in addition to their regulars. Our marketing initiatives include participating in major industry events, sponsoring user group events, analyst briefing and proactively using the various media sources to increase awareness of our activities. In addition, we and our subsidiary have several technology alliances with leading IT vendors like Microsoft, SAP, Sybase and Blackberry, which typically involve systems integration and in certain cases joint product development. We have invested in, and plan to continue to invest in, developing the PreludeSys brand in India as well as on global stage. We believe that a strong brand will contribute to attracting and retaining talented manpower and client acquisition.
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SWOT Analysis Strengths Weaknesses • Technical expertise of a cumulative experience of more • Minimal differentiation in some of the services than 3 million man hours offered like custom application development • Highly optimized, world class processes (We are ISO • Limited domain expertise 9001:2008 certified) • Dependence on the US markets • Partnerships with SAP, Microsoft, • IP creation • Partnerships with Sybase with our subsidiary • Limited expertise in high end services like business • Recent partnership with Salesforce.com to provide cloud consulting based services • Geographical presence in India and USA • Wide range of IT services - software development, enterprise application services, quality assurance & testing, strategic sourcing and business process outsourcing services. • Global delivery model - Local, senior, on-site resources with the cost, scale, and quality advantages of off-shore operations. • Services targeting multiple verticals – Retail, Manufacturing, Textile, Government, Textile, Financial Services, Media and entertainment • Good management to operational ratio. • Impeccable credentials vouched by our consistent listings in various lists published over the last 3 years Opportunities Threats • The overall IT spend will grow to around US$4.5 • Unstable global economic condition trillion by 2020 and the IT services market alone is • Emerging low cost destinations like Eastern likely to reach the US$ 1.5 trillion mark by 2020 Europe, Russia and China can neutralize the cost • The current US$500 billion IT service market will grow advantage by around US$800 billion. This new growth will be in • High levels of competition in traditional services healthcare, media, public sector verticals, SMBs and like custom application development and new geographics into the BRIC region maintenance • The Indian IT services market will grow by 17.1% to • Increasing cost of human capital generate a revenue of US$13.6 billion • Employee attrition • Emerging Trends o Enterprise mobility – global growth of US$168.8 billion by the year 2015 & Indian growth of US$1 billion excluding device market by 2015 o Cloud computing - global growth of US$241 billion by 2020 & Indian growth of $1 billion by 2012 o Social computing Source: 1. 'Perspective 2020: Transform Business, Transform India’ report http://epi.nasscom.in/upload/Perspective%202020%20Press%20release%20presentation.pdf 2. http://www.gartner.com/it/page.jsp?id=1475414 3. Enterprise Mobility a. http://www.prweb.com/releases/enterprise/mobility/prweb4370204.htm b. https://research.zecco.com/research/quotes/stock-news/story.asp?key=100-262u3399-1 4. Cloud Computing: Reports from Forrester Research – a. http://www.globalservicesmedia.com/IT-Outsourcing/Infrastructure-Management/Forrester:Public-Cloud-Growth-to-Surge,-Especially-SaaS/22/6/10838/GS110428139541 b. http://www.zinnov.com/pdfFiles/1274981703orv_Cloud_India_Overview_Snippet.pdf
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Our Competitive Strengths We believe that the following aspects of our business help differentiate us from some of our competitors: Comprehensive range of IT Services: We have developed a comprehensive range of service offerings in order to address the varied and expanding requirements of our clients. With development centers in India and the U.S., we offer software development, enterprise application services, quality assurance & testing, strategic sourcing and business process outsourcing services to our customers. We believe that our comprehensive range of offerings help our clients achieve their business objectives and enable us to obtain additional business from existing clients as well as address a larger base of potential new clients. Long term client relationships: We have successfully demonstrated the ability to manage large client relationships. This is reflected in the long duration of our relationships and the depth of our service offerings for some of our largest clients. We believe that our ability to be accessible to our customers, the personal attention we give them, our flexible approach and agility to meet customer requirements and our positive attitude in servicing customers has helped increase customer satisfaction levels and is a competitive strength. In our client engagements, we leverage our industry experience with our high quality processes, project management capabilities and breadth of technical expertise. Our ability to rapidly service client requirements, both onsite in client geographies and offshore in India enables us to effectively respond to the demands of our large clients. Our senior executives and dedicated account managers continuously maintain and develop these relationships through multiple contacts at different levels in the clients’ organization. In addition, for strategic clients, an identified senior executive is responsible for the overall client relationship and conducts periodic reviews with the client. Global delivery model: We use a client-centric Global Engagement Model that combines local, senior, on-site resources with the cost, scale, and quality advantages of off-shore operations. Since the time of our inception, our location advantage gives our customers the benefit of a 24-hour virtual workday, advantages of controlled cost, high productivity and a culturally sensitive English-speaking workforce. Thus, the global delivery model offers our customers the best quality solutions designed and developed with the latest technologies, but at lower costs at our offshore center. Thus leads to business process improvement, greater operational efficiencies, better productivity, improved response time, increased customer satisfaction and naturally, greater profitability. Insurance Policies: Sr. No
Policy No & Name of the Insurance Company 1. 2130/00011930/000/00 Cholamandalam MS General Insurance Company
2. PBG-00028430-000-00 Cholamandalam MS General Insurance Company
3. 012601/11/10/11/00000367
Description
Expiry Date
Standard Fire and Special Perils Policy On Machineries and Electrical Installations kept at 1/18, 1st Floor, 1st Main Road, Kotturpuram and at Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai Burglary BP Policy On Computers, Equipments, Servers, UPS, Desktops, Laptops, Air Conditioner Stationed at 1/18, 1st Floor, 1st Main Road, Kotturpuram and at Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai. Standard Fire and Special
24/3/2012 (midnight)
88
Sum Assured (Amt in `) 69,05,832
Premium p.a. (Amt in `) 6,684
8/2/2012 (midnight)
69,05,832
11,426
24/3/2012
6,15,00,000
26,008
United India Insurance Company Limited
4. 3362/00663300/000/00 Cholamandalam MS General Insurance Company 5. 1203702311002660 Bajaj Allianz General Insurance Company Limited
Perils Policy & Earthquake Building in course of construction (covering civil works, interior works and electrical installations) Situated at D12, New. No A3, SIPCOT IT Park, Navalur, Kanjeepuram District. Four wheeler General Insurance Tata Indigo Four wheeler General Insurance Honda CRV
(midnight)
28/7/2012
3,37,500
6,834
30/8/2012
16,00,000
42,709
INTELLECTUAL PROPERTY Trademarks pending approvals Sr. Issuing Authority No. 1. Registrar of Trademarks Chennai
2. 3.
Registrar of Trademarks Chennai Registrar of Trademarks Chennai
Application No. 1598981 in Class 42
Nature of Registration/ License Trademark for the logo of the Company
2212250 in Classes 9 Trademark for the name 35 & 42 ‘PRELUDESYS’ 2212255 in Classes Trademark for the logo of the 9, 35 & 42 Company
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Application Date 07/09/2007
28/09/2011 28/09/2011
PROPERTY - Leasehold Property Sr. No.
Leave & License Agreement Date 1st January 2011
Name of the Licensor
Location
Area (Sq. ft.)
Period
Ms. Madhulika Sundaram
Asma Towers, No. 84, TTK Road, 3rd Floor, Alwarpet, Chennai - 600018
5250
3 years from 1st January 2011
2.
1st December 2011
S. Seeni Mohamed S.Bushra,
1800
3.
1st December 2011
S. Seeni Mohamed
1/18, 1st Floor, 1st Main Road, Kotturpuram, Chennai - 600 085. 1/18, 2nd Floor, 1st Main Road, Kotturpuram, Chennai - 600 085.
11 months from 1st December 2011 11 months from 1st December 2011
4.
29th December 2004
State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT)
SIPCOT – IT park Plot No.(s) (Old No.D.l2 ) New No.A.3 in the said industrial Park at Siruseri
1.05 acres /Sq. mtrs
1.
90
2285
99 years from 29-12-2004
Consideration (Rent and Security deposit) (`) Rent: 1,47,000 p.m. upto 31st December 2011, 158760 from 1st January 2012 & 171460 from 1st January 2013. Security Deposit: 8,82,000 Rent: 108,750 p.m. Security Deposit: 3,00,000 Rent: 36,250 p.m Security Deposit: 2,75,000 3,67,400/Towards Security deposit and Development charges amounting 13,12,500/-
FINANCIAL INDEBTEDNESS OF OUR COMPANY Industrial Development Bank of India Limited, 115, Anna Salai, Saidapet, Chennai – 600 01. Our Company has been sanctioned `2.75 Crores as Cash Credit from Industrial Development Bank of India Ltd Bank vide their letter no. 37/IDBI/MSME/PIPL, dated 05-April-2011. The terms and conditions of the Loan mentioned as below: Amount of Loan 2,75,00,000 Currency Indian Rupee Nature of Facility Cash credit Purpose To meet working capital requirement Margins 25% of stocks including work - in- progress and receivables Rate of Interest BBR+450BPS payable monthly. Repayment Interest Payable Monthly cash credit loan repayable on demand ,before April 4, 2012 Security Supplemental Deed of Hypothecation and supplemental loan/facility agreement dated 21-10-2009, First Charge by way of Hypothecation including Stock of work-inprogress and other movables and second charges of hypothecation of the borrower's movables including movable machinery, machinery spares, tools and accessories, present and future. Collateral Equitable Mortgage on the following: • Plot No.183, S. No.32/3, Karunguzhipallam Village, Chengalpattu Taluk, Kancheepuram Dist admeasuring 2400 Sq ft in the name of Mr. Manoj Kumar Chandra. • No. 127, Plot No.4/B-2, Block 4, II Main Road, Maduravoyal admeasuring 3690 Sq ft in the name of Mr. Kiran Babu Chandra. • Plot No.215, S. No.32/3, Karunguzhipallam Village, Chengalpattu Taluk, Kancheepuram Dist admeasuring 2400 Sq ft in the name of Mr. Rangesh Rajaram. • Plot No.184, S. No.32/3, Karunguzhipallam Village, Chengalpattu Taluk, Kancheepuram Dist admeasuring 2400 Sq ft. in the name of Mr. Chandramohan Parlapalli. • Plot No.185, S.No.32/3, Karunguzhipallam Village, Chengalpattu Taluk, Kancheepuram Dist admeasuring 2400 Sq ft. in the name of Mr. Ramjee Kasturirangan. In addition to the above an irrevocable and unconditional Personal Guarantees of Mr. Manoj Kumar Chandra, Mr. Rangesh Rajaram, Mr. Ramjee Kasturirangan, Mr. Chandramohan Parlapalli, Mr. Kiran Babu Chandra and Mr. Ramki Ramakrishnen (Promoters of the Company). Additional 2% Interest/Penal Interest Tenure 12 months from the date of sanction letter. Outstanding ` 27148503.39 balance as on 30th November 2011 Small Industries Development Bank of India; 480, Anna salai, Nandanam, Chennai - 600 035. Our Company has been sanctioned `5 Crores as Term Loan from Small Industries Development Bank of India vide their letter no. 3525/PFD/PSPL dated 7-02-2007. The terms and conditions of the Loan mentioned as below: Amount of Loan `5,00,00,000 Currency Indian Rupee Nature of Facility Term Loan Purpose For construction of building and related infrastructural facilities for operating software development services, BPO operations, etc in acquired land at SIPCOT. Promoters ` 303 Lakhs comprising of fully paid up share capital of ` 200 Lakhs and internal Contribution accruals of ` 50 Lakhs out of the total project cost of ` 803 Lakhs. Rate of Interest 11.5% p a. on Principle Amount outstanding, payable monthly on the first day of every
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Repayment Security
Collateral
month. 90 monthly installments starting 1-June-2008 ending 1-Nov-2015 1. First Charge by way of mortgage in favor of SIDBI on all the immovable properties of the company both present and future, situate at Survey No. 76, Plot Old No. D-12, New No. 3/A-3, SIPCOT IT Part, Siruseri, Kancheepuram Dt., Admeasuring 1.05 Acres together with all the buildings and structure thereon. 2. First Charge by way of hypothecation of all the movable assets of the borrower, both present and future subject to prior charge created / to be created by the borrower in favor of its banker. 1. Deposit with SIDBI for an amount of ` 30 Lakhs. The maturity period of Term Deposit Receipts (TDRs) shall be at least 8 years 6 months or till the currency of the loan, whichever is later. 1. First charge by way of mortgage in favor of SIOBI of all the immovable properties situate at 169, Anna Salai, Anthiyur, Erode, Tamil Nadu, owned by Mr. Ramki Ramakrishnen, one of the promoter directors, admeasuring 2778 sq. ft together with all the buildings and structure thereon. 1. Unconditional and irrevocable personal guarantees of Mr. Manoj Kumar Chandra, Mr. Rangesh Rajaram, Mr. Chandramohan Parlapalli, Mr. Ramjee Kasturirangan, Mr. Ramki Ramakrishnen and Mr. Kiran Babu Chandra. 1% p.a. on the pending creation of security.
Additional Interest/ Outstanding ` 30563937.07 balance as on 30th November 2011 Tata Capital Limited.; Akruti SMC 3rd Floor, Khopat Junction, LB S Marg Thane West - 400 602 Our Company has been sanctioned `25,00,000 /- as Business Loan from Tata Capital Ltd ,vide their letter no. NIL dated 03-Dec-2010. The terms and conditions of the Loan mentioned as below: Amount of Loan 25,00,000 Currency Indian Rupees Purpose PL- Business Loan Tenure 36 months equal Installments by way of ECS EMI ` 89,755 p.m. Repayment 03-Dec-2013 Completion date Security Unsecured Outstanding ` 18,73,467.00 balance as on 30th November 2011 Religare Finvest Limited. Our Company has been sanctioned ` 24, 90,000 Business Loan from Religare Finvest Limited., vide their letter no. 540233 dated 25-11-2010 . The terms and conditions of the Loan mentioned as below: Amount of Loan `24,90,000 Currency Indian Rupee Purpose Business Loan Tenure 36 months equal Installments by way of ECS Rate of Interest 15.5% Repayment 01-Dec-2013 Completion date Security Unsecured Outstanding ` 16,63,367.00 balance as on 30th November 2011 HDFC Bank Limited Our Company has been sanctioned ` 25, 00,000 business loan from HDFC Bank Limited, vide their letter no. Nil dated 13-Dec-2010. The terms and conditions of the Loan mentioned as below:
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Amount of Loan 25,00,000 Currency Indian Rupee Purpose Business Loan Tenure 36 months equal Installments by way of ECS EMI ` 87,277 p.m. Repayment 04-Dec-2013 Completion date Security Unsecured Outstanding ` 1,727,088.10 balance as on 30th November 2011 HDFC Bank Limited Our Company has been sanctioned ` 13,60,000 as Used car purchase loan from HDFC Bank Limited, vide their letter no. Nil dated 01-June-2011. The terms and conditions of the Loan mentioned as below: Amount of Loan 13,60,000 Currency Indian Rupee Loan Purpose Used car purchase loan Tenure 48 months equal Installments by way of ECS EMI ` 31,164 p.m. Repayment 05-June-2015 Completion date Security Hypothecation of the car with the Bank Outstanding ` 1250999.38 balance as on 30th November 2011 Oriental Bank of Commerce;1 /18, 1st Floor, 1st Main Road, Kotturpuram, Chennai Our Company has been sanctioned ` 4, 42,000 as Term Loan from Oriental Bank of Commerce, vide their letter no. Cn1024 dated 25-July-2009. The terms and conditions of the Loan mentioned as below: Amount of Loan `4,42,000 Currency Indian Rupee Nature of Facility Term Loan Purpose For purchasing of new Tata Indigo car Margins 15% Rate of Interest PLR – 1% ie11.0% at present EMI ` 14,500 Repayment 36 equal Installments by way of ECS Security Hypothecation of New Tata Indigo Car costing of `5.20 Lakhs Collateral Personal Guarantee of Mr. Chandramohan Parlapalli FNW ` 100Lakhs Outstanding ` 130720.82 balance as on 30th November 2011
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KEY INDUSTRY REGULATIONS AND POLICIES A brief summary of the relevant regulations and policies as prescribed by the Government of India and the relevant state governments that are applicable to us are as follows. Please note that the same are based on the legal provisions and the judicial interpretations as on the date hereof, which are subject to change. The regulations and policies set out below are only for general information to the investors and is neither exhaustive nor is a substitute for professional legal advice. INFORMATION TECHNOLOGY ACT, 2000 The Information Technology Act, 2000 (“the IT Act”) was enacted with the purpose of providing legal recognition to electronic transactions and facilitating electronic filing of documents. The IT Act further provides for civil and criminal liability including fines and imprisonment for various cyber crimes, including unauthorized access to computer systems, unauthorized modification to the contents of computer systems, damaging computer systems, the unauthorized disclosure of confidential information and computer fraud. The IT Act regulates Information Technology i.e. it governs information storage, processing and communication. The Act provides legal recognition of electronic records and electronic signatures, their use, retention, attribution and security. Penalties are provided for cyber crimes which include tampering with computer source document and electronic publishing of obscene information, in addition to provision of compensation in certain cases. TRADE MARKS ACT, 1999 The Indian law of trademarks is enshrined in the Trade Marks Act; The Trade Marks Act seeks to provide for the registration of trademarks relating to goods and services in India. A trade mark means a mark used in relation to goods for the purpose of indicating a connection in the course of trade between the goods and the proprietor. While registration of a trademark is not compulsory it offers better legal protection. Any person can apply for registration of a trademark to the Trademark Registry under whose jurisdiction the principal place of the business of the applicant in India falls. The term of a trademark registration is for a period of ten years. The renewal is possible for further period of 10 years each. There is no system as yet wherein a single trademark application is sufficient to protect the trademark right internationally. However, Paris convention to which India is a party provides certain privileges to member countries in trademark registration. A party that files their first trademark application in a member state of the Convention, such as India, can within six months of that filing date file applications in other member countries claiming the priority of the first application. If such a trademark is accepted for registration it will be deemed to have registered from the same date on which the application is made in the home country. THE PATENTS ACT, 1970 The Patents Act, 1970 (‘Patents Act’) is the primary legislation governing patent protection in India. In addition to broadly requiring that an invention satisfy the requirements of novelty, utility and non obviousness in order for it to avail patent protection, the Patents Act further provides that patent protection may not be granted to certain specified types of inventions and materials even if they satisfy the above criteria. The term of a patent granted under the Patents Act is for a period of twenty years from the date of filing of application for the patent. The Patents Act deems that computer programs per se are not ‘inventions’ and are therefore, not entitled to patent protection. This position was diluted by The Patents Amendment Ordinance, 2004, which included as patentable subject matter: 1. Technical applications of computer programs to industry; and 2. Combinations of computer programs with the hardware. However, the Patents Amendment Act, 2005, does not include this specific amendment and consequently, the Patents Act, as it currently stands, disentitles computer programs per se from patent
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protection. The public use or publication of an invention prior to the making of an application for a patent, may disentitle the said invention to patent protection on grounds of lack of novelty. Under the Patents Act, an invention will be regarded as having ceased to be novel (and hence not patentable), inter alia, by the existence of: 1. Any earlier patent on such invention in any country; 2. Prior publication of information relating to such invention; 3. An earlier product showing the same invention; or 4. A prior disclosure or use of the invention that is sought to be patented. Following its amendment by the Patents Amendment Act, 2005, the Patents Act permits opposition to grant of a patent to be made, both pre-grant and post-grant. The grounds for such patent opposition proceedings, inter alia, include lack of novelty, inventiveness and industrial applicability, non-disclosure or incorrect mention of source and geographical origin of biological material used in the invention and anticipation of invention by knowledge (oral or otherwise) available within any local or indigenous community in India or elsewhere. The Patents Act also prohibits any person resident in India from applying for patent for an invention outside India without making an application for the invention in India. Following a patent application in India, a resident must wait for six weeks prior to making a foreign application or may obtain the written permission of the Controller of Patents to make foreign applications prior to this six week period. The Controller of Patents is required to obtain the prior consent of the Central Government before granting any such permission in respect of inventions relevant for defence purpose or atomic energy. This prohibition on foreign applications does not apply, however, to an invention for which a patent application has first been filed in a country outside India by a person resident outside India. COPYRIGHT ACT, 1957 The Copyright Act, 1957 (“Copyright Act”) protects original literary, dramatic, musical and artistic works, Cinematographic films and sound recordings from unauthorized use of such works. Unlike the case with patents, copyright protects the expressions and not the ideas. There is no copyright in an idea. The object of copyright law is to encourage authors, artists and composers to create original works by rewarding them with exclusive right for a fixed period to reproduce the works for commercial exploitation. Copyrights subsist in following class of works: a) Original literary, musical, dramatic and artistic works b) Cinematograph films c) Sound recordings Under the copyright law the creator of the original expression in a work is its author who is vested with a set of exclusive rights with respect to the use and exploitation of the work. The author is also the owner of the copyright, unless there is a written agreement by which the author assigns the copyright to another person or entity, such as a publisher, where work is done under a ‘work for hire’ agreement, the copyright vests with the hirer, i.e., the person providing the work. The owner of copyright in a work can assign or license his copyright to any person, such as publisher, under a written agreement. Copyright subsists in a work since the time it comes into being. Therefore, registration of copyright neither creates any rights nor precludes enforcement of the existing ones. However, owing to its evidentiary value, a registered copyright is easier to establish in the court of law. The term of copyright varies across different types of works. In the case of broadcasts, the Act grants “broadcast reproduction rights” to broadcasting organizations which subsist for 25 years.
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Special Economic Zones Act, 2005 With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. The Special Economic Zones Act, 2005 (the “SEZ Act”) and the Special Economic Zones Rules, 2006 (the “SEZ Rules”) simplified the procedure for development, operation and maintenance of the SEZs and for the setting up of and conducting business in the SEZs. The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:• Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units • 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. • Exemption from minimum alternate tax under section 115JB of the Income Tax Act. • External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels. • Exemption from Central Sales Tax. • Exemption from Service Tax. • Single window clearance for Central and State level approvals. • Exemption from State sales tax and other levies as extended by the respective State Governments. Software Technology Parks Scheme Software Technology Parks of India (STPI), an Autonomous Society under Govt. of India, Ministry of Communications and Information Technology, Department of Information Technology, was set up to implement STP/EHTP Scheme, to promote software and electronic hardware exports by providing infrastructure facilities, providing single point contact services, High Speed Data Communication (HSDC) services. This scheme is unique in its nature as it focuses on one product/sector, i.e. computer software and electronic hardware. The scheme integrates the Govt of India concept of 100% EOUs and Export Processing Zone (EPZ) and the concept of science parks/Technology Parks, as operating else where in the world. STPI is head quartered in New Delhi. STPI started operations at Chennai in 1995 for implementation of STP/EHTP schemes in Tamil Nadu. The objectives of the Software Technology Parks of India are: • To promote development of software, Electronic Hardware exports and software services. • To provide statutory services to the exporters by implementing STP/EHTP Scheme. • To provide data communication services including various value added services to IT industries (100% EOUs) and corporate houses. • To provide Project management and consultancy services both at national and international level. • To promote small and medium entrepreneurs by creating a conducive environment in the field of Information Technology. • Establishment of incubation facilities. FEMA REGULATIONS Foreign investment in India is governed primarily by the provisions of FEMA which relates to regulation primarily by RBI and the rules, regulations and notifications there under, and the policy prescribed by the Department of Industrial Policy and Promotion, Government of India, ("FDI Policy") and the FDI Policy issued by the DIPP (Circular 1 of 2011, with effect from April 1, 2011). The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended ("FEMA Regulations") to prohibit, restrict or regulate, transfer by or issue of security to a person resident outside India. As specified by the FEMA Regulations, no prior consent and approval is required from the FIPB or the RBI, for FDI under the "automatic route" within the specified sectoral caps. In respect of all industries not specified as FDI
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under the automatic route, and in respect of investment in excess of the specified sectoral limits under the automatic route, approval may be required from the FIPB and/or the RBI. FOREIGN EXCHANGE MANAGEMENT (TRANSFER OR ISSUE OF ANY FOREIGN SECURITY) REGULATIONS, 2004 A person resident in India may purchase a foreign security out of funds held in Resident Foreign Currency (RFC) account maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts) Regulations, 2000. An Indian Company may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India provided that the total financial commitment of the Indian Company in the Joint Ventures/Wholly Owned Subsidiaries shall not exceed 400% of the net worth of the Indian Party as on the date of the last Audited Balance Sheet. Application for Direct Investment in a Wholly Owned Subsidiary outside India, or by way of exchange for shares of a Foreign Company, shall be made in Part I of the Form ODI. Reserve Bank will allot a Unique Identification Number (UIN) for each Joint Venture (JV) or Wholly Owned Subsidiary (WOS) outside India and the Indian Party shall quote such number in all its communications and reports to the Reserve Bank and the Authorised Dealer. A Joint Venture/Wholly Owned Subsidiary set up by the Indian party as per the Regulations may diversify its activities /set up step down subsidiary/ alter the shareholding pattern in the overseas entity. Provided the Indian party reports to the Reserve Bank, the details of such decisions taken by the Joint Venture/Wholly Owned Subsidiary within 30 days of the approval of those decisions by the competent authority concerned of such Joint Venture/Wholly Owned Subsidiary in terms of local laws of the host country, and, include the same in the Annual Performance Report (APR) required to be forwarded annually to the Reserve Bank. REGULATIONS REGARDING FOREIGN INVESTMENT Foreign investment in Indian securities is governed by the provisions of the FEMA read with the applicable FEMA Regulations. The DIPP has issued ‘Circular 1 of 2011’ (the “FDI Circular”) which consolidates the policy framework on FDI, with effect from April 1, 2011. The FDI Circular consolidates and subsumes all the press notes, press releases, and clarifications on FDI issued by DIPP till September 30, 2010. All the press notes, press releases, clarifications on FDI issued by DIPP till March 31, 2011 stand rescinded as on April 1, 2011. Foreign investment is permitted (except in the prohibited sectors) in Indian companies either through the automatic route or the approval route, depending upon the sector in which foreign investment is sought to be made. Under the approval route, prior approval of the GoI through FIPB is required. FDI for the items or activities that cannot be brought in under the automatic route may be brought in through the approval route. Where FDI is allowed on an automatic basis without the approval of the FIPB, the RBI would continue to be the primary agency for the purposes of monitoring and regulating Foreign Investment. In cases where FIPB approval is obtained, no approval of the RBI is required except with respect to fixing the issuance price, although a declaration in the prescribed form, detailing the foreign investment, must be filed with the RBI once the foreign investment is made in the Indian company. INVESTMENT BY FIIS FIIs including institutions such as pension funds, mutual funds, investment trusts, insurance and reinsurance companies, international or multilateral organizations or their agencies, foreign governmental agencies, sovereign wealth funds, foreign central banks, asset management companies, investment managers or advisors, banks, trustees, endowment funds, university funds, foundation or charitable trusts or societies and institutional portfolio managers can invest in all the securities traded on the primary and secondary markets in India. FIIs are required to obtain an initial registration from the SEBI and a general permission from the RBI to engage in transactions regulated under the FEMA. FIIs must also comply with the provisions of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as amended from time to time (“FII Regulations”). The initial registration and the RBI’s general permission together enable the registered FII to buy (subject to the ownership restrictions
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discussed below) and sell freely, securities issued by Indian companies, to realize capital gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares, to appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income received by way of interest and any compensation received towards sale or renunciation of rights issues of shares. FIIs are permitted to purchase shares of an Indian company through public/private placement under: • Regulation 5 (1) of the FEMA Regulations, subject to terms and conditions specified under Schedule 1 of the FEMA Regulations (“FDI Route”). • Regulation 5 (2) of the FEMA Regulations subject to terms and conditions specified under Schedule 2 of the FEMA Regulations (“PIS Route”). In case of investments under FDI Route, investments are made either directly to our Company account, or through a foreign currency denominated account maintained by the FII with an authorised dealer, wherein Form FC-GPR is required to be filed by our Company. Form FC-GPR is a filing requirement essentially for investments made by non-residents under the ‘automatic route’ or ‘approval route’ falling under Schedule 1 of the FEMA Regulations. In case of investments under the PIS Route, investments are made through special non-resident rupee account, wherein Form LEC (FII) is required to be filed by the designated bank of the FII concerned. Form LEC (FII) is essentially a filing requirement for FII investment (both in the primary as well as the secondary market) made through the PIS Route. Foreign investment under the FDI Route is restricted/ prohibited in sectors provided in Part A and Part B of Annexure A to Schedule 1 of the FEMA Regulations. OWNERSHIP RESTRICTIONS OF FIIS The issue of securities to a single FII under the PIS Route should not exceed 10% of the issued and paidup capital of our company. In respect of an FII investing in securities on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of the total issued and paid-up capital. The aggregate FII holding in a company cannot exceed 24% of its total paid-up capital. The said 24% limit can be increased up to 100% by passing a resolution by the board of directors followed by passing a special resolution to that effect by the shareholders of our company. Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of Regulation 15A(1) of the FII Regulations, an FII may issue, deal or hold, offshore derivative instruments such as “Participatory Notes”, equity-linked notes or any other similar instruments against underlying securities listed or proposed to be listed on any stock exchange in India only in favour of those entities which are regulated by any relevant regulatory authorities in the countries of their incorporation or establishment subject to compliance of “know your client” requirements. An FII or their Sub-Account shall also ensure that no further downstream issue or transfer of any instrument referred to hereinabove is made to any person other than a regulated entity. FIIs and their Sub-Accounts are not allowed to issue offshore derivative instruments with underlying as derivatives. LAWS RELATING TO EMPLOYMENT/ STATUTORY DUES ACT(S)/REGULATION(S): The Minimum Wages Act, 1948 State governments may stipulate the Minimum wages applicable to a particular industry. The Minimum wages may consist of a basic rate of wages and a special allowance, or a basic rate of wages and the cash value of the concessions in respect of supplies of essential commodities, or an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions, if any. Value Added Tax, 2005
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The levy of Sales Tax within the state is governed by the VAT Act and Rules of the respective states. VAT has resolved the problem of Cascading effect (double taxation) that were being levied under the hitherto system of sales tax. Under the current regime of VAT the trader of goods has to pay the tax (VAT) only on the Value added on the goods sold. Hence VAT is a multi-point levy on each of the entities in the supply chain with the facility of set-off of input tax- that is the tax paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value addition in the hands of each of the entities is subject to tax. Periodical returns and challans are required to be deposited with the VAT Department of the respective States. Central Sales Tax, 1956 In accordance with the Central Sales Tax Act, every dealer registered under the Act shall be required to furnish a return in Form I (Monthly/ Quarterly/ Annually) as required by the State sale Tax laws of the assessee authority together with treasury challan or bank receipt in token of the payment of taxes due. Income Tax Act, 1961 Income Tax Act, 1961 is applicable to every Domestic /Foreign Company whose income is taxable under the provisions of this Act or Rules made under it depending upon its “Residential Status” and “Type of Income” involved. U/s 139(1) Every Company is required to file its Income tax Return for every Previous Year by 31st October of the Assessment Year .Other compliances like those relating to Tax Deduction at Source, Fringe Benefit Tax, Advance Tax, Minimum Alternative Tax and like are also required to be complied by every Company. Customs Act, 1962 The provisions of the Customs Act, 1962 and rules made there under are applicable at the time of import of goods i.e. bringing into India from a place outside India or at the time of export of goods i.e. taken out of India to a place outside India. Any Company requiring to import or export any goods is first required to get itself registered and obtain an IEC (Importer Exporter Code). Service Tax (Finance Act, 1994) In accordance with Rule 6 of Service tax Rules the assessee is required to pay Service tax in TR 6 challan by fifth of the month immediately following the month to which it relates. Further under Rule 7 (1) of Service Tax Rules, the company is required to file a half yearly return in Form ST 3 by twenty fifth of the month immediately following the half year to which the return relates. Employees’ State Insurance Act, 1948; All the establishments to which the ESI Act applies are required to be registered under the Act with the Employees State Insurance Corporation. The Act requires all the employees of the factories and establishments to which the Act applies to be insured in the manner provided under the Act. Further, employer and employees both are required to make contribution to the fund. The return of the contribution made is required to be filed with the ESI department. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; The act is applicable to the factories employing more that 20 employees and as notified by the government from time to time. All the establishments under the Act are required to be registered with the Provident Fund Commissioners. Also, in accordance with the provisions of the Act the employers are required to contribute to the employees’ provident fund the prescribed percentage of the basic wages, dearness allowances and
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remaining allowance (if any) payable to the employees. The employee shall also be required to make the equal contribution to the fund. As per the provision of the Act, employers are to contribute 12% of the basic wages, dearness allowances and remaining allowances (if any) payable for the time being to the employees. A monthly return on Form 12 A is required to be submitted to the commissioner. The Maternity Benefit Act, 1961 The Maternity Benefit Act, 1961 (“MB Act”) regulates the employment of women for certain periods before and after childbirth and also provides for maternity and other benefits to pregnant women. The maternity benefit under the MB Act is to be paid at the rate of the average daily wage for the period of her absence immediately before the delivery and six-weeks after that day. Contravention of the MB Act is punishable by imprisonment up to one year and/or a fine up to five thousand rupees. Payment of Gratuity Act, 1972; The provisions of the Act are applicable on all the Factories. As Act provides that within 30 days of opening of the establishment, it has to notify the controlling authority in Form A thereafter whenever there is any change it the name, address or in the change in the nature of the business of the establishment a notice in Form B has to be filed with authority. The Employer is also required to display an abstract of the act and the rules made there-under in Form U to be affixed at the or near the main entrance. Further, every employer has to obtain insurance for his liability towards gratuity payment to be made under payment of Gratuity Act 1972, with Life Insurance Corporation or any other approved insurance fund. Payment of Bonus Act, 1965 The Payment of Bonus Act, 1965 is applicable on every establishment employing 20 or more employees and is also applicable on us. The said act provides for payment of the minimum bonus to the employees specified under the Act. It further requires for the maintenance of certain books and registers like register showing computation of the allocable surplus; register showing the set on & set off of the allocable surplus and register showing the details of the amount of Bonus due to the employees. Further it also require for the submission of Annual Return (FORM D) deposited by the employer within 30 days of payment of the bonus to the Inspector. Payment of Wages Act, 1936 The Payment of Wages Act, 1936 applies to the persons employed in the factories and to persons employed in industrial or other establishments where the monthly wages payable to such persons is less than ` 1600/-. Person responsible for payment of wages shall display in such factory/establishment, the abstracts of this Act and Rules made there under. Importer Exporter Code Under the Indian Foreign Trade Policy, 2004, no export or import can be made by a person or company without an Importer Exporter Code number unless such person/company is specifically exempted. An application for an Importer Exporter Code number has to be made to the office of the Joint Director General of Foreign Trade, Ministry of Commerce. An Importer Exporter Code number allotted to an applicant is valid for all its branches/divisions/ units/factories.
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Regulations and Policies relating to our Operations in Overseas Jurisdictions The following is a summary of the regulations and policies of overseas jurisdictions that our Company and its foreign subsidiaries may be subject to. Our Company operates in a number of jurisdictions around the world, so this summary cannot be and is not intended to be exhaustive. United States The following legislations apply or may apply to processes our Company carries out for its clients in the United States: • The Fair Debt Collection Practices Act; • The Fair Credit Reporting Act; • The Gramm-Leach-Bliley Act; • The Health Insurance Portability and Accountability Act of 1996; • The Truth in Lending Act; • The Fair Credit Billing Act; • “Do Not Call” legislation; and • U.S. Federal Deposit Insurance Corporation, or the FDIC, rules and regulations.
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OUR HISTORY AND CORPORATE STRUCTURE History Our Company was incorporated on 14h December, 1998 under the name and style of Prelude Solution Providers Private Limited and was later renamed as Preludsys India Private Limited on 30th April, 2008. Our Company was converted into a Public Limited Company called PreludeSys India Limited on 12th April, 2011. About our company We started our operations in 1998 in India. During the initial years, we were offering development and consulting services. In 1999, our WOS opened our first overseas office in Los Angeles, California. In 2003, we got an opportunity to enter into BPO space. With our focus on delivering quality services, we put in a Quality Management System compliant to ISO 9001:2000 and were certified in the year 2004. The certification recognized our focus on quality. To accelerate our growth and to increase our breadth of services we entered into Enterprise Application Services by partnering with global leaders like SAP in 2006 and with Microsoft 2007. We have done ERP and CRM implementations across various verticals. We also expanded our geographical presence by opening up offices of our subsidiary in Chicago, Illinois in 2006, and Austin, Texas in 2008. This enabled us to reach out to more prospects which aided in accelerating our growth. We constantly keep looking for emerging trends to spot the next big opportunity for growth. This has resulted in us entering Enterprise Mobility in 2010 and Cloud Computing space in 2011. With these two being the next significant technological waves, we are positioning ourselves to ride on them successfully. We are providing business solutions to small, mid and large sized companies and government agencies. We deliver technology enabled business solutions to clients across manufacturing, financial services, insurance, retail, technology, government and media that help them achieve business efficiencies and goals with reduced total cost of ownership and increased quality. Changes in Registered Office of the Company The registered office of the company was shifted twice. The details are as under: Date From Address To Address On Incorporation 139, Ist Floor, Arihant-VTN Residency, North Osman Road, T. Nagar, Chennai – 600 017, Tamilnadu. 29/04/2002 139, Ist Floor, Arihant-VTN 35/17, Jayachandra Villa, III Residency, North Osman Road, Main Road, R.A. Puram, T. Nagar, Chennai – 600 017, Chennai – 600 028, Tamil Nadu. Tamil Nadu 10/07/2006 35/17, Jayachandra Villa, III 1/18, Ist Floor, I Main Road, Main Road, R.A. Puram, Kotturpuram, Chennai – 600 Chennai – 600 028. 085, Tamil Nadu. Major Events in the History of Our Company: Date Event th 14 December 1998 Incorporated as Prelude Solution Providers Private Limited 11th March 1999 Prelude Systems Inc was incorporated and opened sales office in Los Angeles, California, USA August 2003 Started offering BPO as a service November 2006 Started offering Enterprise Application Services 23rd November 2006 Partnered with SAP 28th April 2008 Partnered with Microsoft for dynamics 30th April 2008 Name changed to PreludeSys India Private Limited 2008 Listed in Dun & Bradstreet’s India’s Top ITES & BPO companies
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30th March 2011 22nd February 2011 12th April 2011
Acquired 100 % stake in Prelude Systems Inc., USA, a wholly owned subsidiary ISO 9001:2008 certification Converted to Public limited
Key Events in the history of our wholly owned subsidiary, Prelude Systems Inc., USA 1999 Opened sales office in Los Angeles, California, USA 1999 Started offering Software Development and Strategic Sourcing services 2006 Opened sales office in Chicago, Illinois 2010 Started “Enterprise Mobility” service 2011 Partnered with Salesforce.com to provide cloud based services Main Object of our Company: To carry on India or elsewhere the business to develop, import, export, buy, sell, distribute, transfer, lease, hire, license, use, dispose of, alter, improve, install, modify or otherwise to deal in all kinds of software and to act as consultant, agent, broker, franchiser, representative, advisor or otherwise to deal in all kinds of software, the export and import of software and software professionals, to establish and run data processing center for computer software development, multimedia, Internet application, consultancy, and training to industrial, business and other types of customers both in India and outside India. The amendments to our Memorandum and Articles of Association, apart from the changes in the Authorized Share Capital of the Company are as follows: Sr. No. 1. 2. 3. 4.
Changes in Memorandum, Articles of Association Change of name from Prelude Solution Providers Private Limited to PreludeSys India Private Limited Inserting clause 67 and 67A to AOA regarding capitalization of profits Change of company from PreludeSys India Private Limited to PreludeSys India Limited Adoption of new set of articles of association
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Date & Type of General Meeting 24/03/2008 EGM 16/11/2009 EGM 07/04/2011 EGM 28/09/2011 AGM
OUR MANAGEMENT Our Company functions under the control of a Board consisting of professional Directors who set policy guidelines and the Chief Executive Officer along with other key personnel are responsible for day to day management of the company. Name, Age, Address, Designation and Occupation Mr. Chandramohan Parlapalli S/o P Hemantha Reddy Age: 39 years Address: No. 9, Balaji Avenue, II Street, T. Nagar, Chennai – 600017 Managing Director DIN: 00625405 Term: 5 years effective from 1st October 2011 Nationality: Indian Mr. Rangesh Rajaram S/o Rajaram J. Aged 39 years Address: 8/26, II Cross Street, Lake Area, Nungambakkam, Chennai – 600 034. Whole time Director DIN: 00634328 Term: 5 years effective from 1st October 2011 Nationality: USA Mr. Rajamannar Abboy S/o Mr. M. Abboy Naidu Aged 69 years Address: 7531, Barbi Lane, La Palma, California 90623, USA. Director DIN: 02156049 Term: Liable to retire by rotation Nationality: USA Mr. Sambasivam Sathiyamurthy S/o Mr. Subramaniya Iyer Sambasivam Aged 67 years Address: No. 20 New Postal Colony Street, T Nagar, Chennai -600017, Tamil Nadu. Independent Director DIN: 03596805 Term: Liable to retire by rotation Nationality: Indian Mr. Vibhu Natarajan S/o Mr. Krishnaswami Natarajan Aged 50 years Address: New No. 20 (Old no. 156) Santhome High Road, Mylapore, Chennai – 600004, Tamil Nadu. Independent Director DIN: 00532042
Date of Appointment October 1st 2011
Qualification
Other Directorships
B.E., M. Tech. (Chem)
NIL
1st October 2011
Mat Exim (India) Pvt Ltd B.E. (Computer Science & Engineering)
1st October 2008
B.E. (Mech)
NIL
1st September 2011 (regularized as Independent director on 28th September 2011)
B.A., B.L.
NIL
1st September 2011 (regularized as Independent director on 28th September 2011)
MBA
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• Kutty Flush Doors & Furniture Co Pvt Ltd • Vimanaa Landscapes Pvt Ltd
Name, Age, Address, Designation and Occupation Term: Liable to retire by rotation Nationality: Indian Mr. Kalai Meyyappan Ramalingam S/o Mr. Kalai Muthiah Meyyappan Aged 40 years Address: BLK 30 Bukit Batok Street 21, Bukit, Singapore – 659636 Independent Director DIN: 05118592 Term: Liable to retire by rotation Nationality: Citizen of Singapore Mr. Muthukumar Ramalingam S/o Mr. Ramalingam Chitathoor Aged 37 years Address: 25 Compounder Ramaswamy Mudali Street, Varadarajapuram, Chennai – 600053 Tamil Nadu Alternate Director to Mr. Rajamannar Abboy DIN: 05111753 Term: same as that of Mr. Rajamannar Abboy Nationality: Indian
Date of Appointment
Qualification
1st September 2011 (regularized as Independent director on 28th September 2011)
B.E. (Chem), M.Sc. (Environmental Engineering)
3rd October 2011
B.Tech., MBA
Other Directorships
• • • •
Sri Murugan Trading Pte Ltd Sri Murugan Trading (Wholesale) Pte Ltd Sri Murugan Trading (Branch) Pte Ltd Sri Murugan Trading (Stores) Pte Ltd
NIL
Note: None of the directors are related to one another. None of the above mentioned Directors are on the RBI List of wilful defaulters as on the date of the Draft Red Herring Prospectus. None of our directors are or have been directors in any of the listed companies whose shares have been/were suspended from being traded on the Bombay Stock Exchange Ltd./National Stock Exchange of India Ltd. None of our director’s hold or have held Directorships, in companies which are/were delisted from the stock exchanges. None of the Promoters, Directors or persons in control of our Company, has been or is involved as a promoter, director or person in control of any other company, which is debarred from accessing the capital market under any order or directions made by the SEBI. There is no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any of the mentioned Directors was selected as Director or member of senior management. PROMOTER DIRECTORS Managing Director Mr. Chandramohan Parlapalli: As MD of PreludeSys (India), Chandramohan is primarily responsible to execute the strategic plans and policies. He sets direction and oversees the operations of PreludeSys India. He has over 15 years of experience in the Information Technology services industry. He began his career by consulting for various corporate clients such as Smith’s Food & Drugs, American Stores, Farmers Insurance Group and Ernst and Young. Prior to taking charge of operations in India, he ran the Strategic Sourcing business and was responsible for Delivery at PreludeSys in the US. He holds a
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Bachelor’s degree in Chemical Engineering from Annamalai University and Master’s degree in Chemical Engineering from Anna University. Other Promoter Directors Mr. Rangesh Rajaram: As the Whole time Director of the company, he is responsible for leading key corporate operations for PreludeSys. His duties include management and operational excellence for all Accounting, Finance, Vendor Management, Administrative and Statutory Compliance processes. Rangesh possesses an Engineering Degree in Computer Science with over 15 years of experience in consulting and software development. Mr. Rajamannar Abboy joined PreludeSys India Limited on 1st October 2008 as a Director. He has over 30 years of experience in Aerospace Industry in the US. He has strong analytical skills in understanding & solving problems in managing fairly complex programmes specialized in the area of Industrial Engineering/ System Analysis. Currently he is working as a consultant with Northrop Grumman, USA. Other Directors Mr. Sambasivam Sathiyamurthy aged 67 years is an advocate by profession. He has the experience of presiding over civil and criminal courts at various places such as Salem, Dharmapuri, Krishnagiri, Chennai etc. at Tamil Nadu from 1982 to 2004 and presided over District Consumer Disputes Redressal Forum. He is a retired judge, senior central government counsel, High Court of Madras and former president of District Consumer Court. He is also presiding over Lok Adalat conducted by legal Aid Services Authority, High Court, Madras. Mr. Vibhu Natarajan aged 50 years is a post graduate in Business Administration and has the experience of over 28 years. He has specialization in general management, strategic management, sales and marketing, floriculture and exports. Mr. Kalai Meyyappan Ramalingam aged 40 years is a chemical & environmental engineer by profession. He is engaged in the business of retailing & providing warehousing facilities. Currently he runs 6 retail outlets in Singapore. He has the experience of working for Shell, Exxon-Mobil and Titan Chemicals. During his working tenure with pertro chemical industry, he has gained valuable experiences in project management, production planning, process improvements, operations and finance. Mr. Muthukumar Ramalingam aged 37 years is and MBA and has been appointed as an alternate director to Mr. Rajamannar Abboy. He is currently working as Chief Operating Officer of Preludesys India Limited since 2005. He has over a decade of experience in the IT industry in the areas of project/ programme management, ODC operations, delivery management and operation. He has expertise in driving cross functional project teams and synchronizes their efforts for achieving project excellence. His other area of experiences includes software development, BPO and quality management. Details of the Borrowing Powers Vide a resolution passed at the Extra Ordinary General Meeting of our Company held on 9th May 2011, consent of the members of our Company was accorded to the Board of Directors of our Company pursuant to Section 293(1)(d) of the Companies Act, 1956 for borrowing from time to time any sum or sums of moneys which together with the money already borrowed by our Company (apart from temporary loans obtained from our Company’s bankers in the ordinary course of business), shall not exceed in the aggregate at any one time ` 100 Crores (Rupees One hundred Crores only) over and above the paid up capital and free reserves of our Company, that is to say reserves not set apart for any specific purpose at any one time.
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Compensation of Managing Director In accordance with the provisions of the Sections 198, 269, 309, 310 and 311 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, Mr. Chandramohan Parlapalli was appointed as a Managing Director of the Company, for a period of 5 years from 1st of October 2011 to 30th of September 2016, on the following terms and conditions: Remuneration: Mr. Chandramohan Parlapalli shall be entitled to the following emoluments S. No. Particulars Per Month (`) Per Annum (`) 1. Basic Salary 24,610/2,95,320/2. House Rent Allowance 12,305/1,47,660/3. Other Allowances & perquisites 12,305/1,47,660/Total 49,220/5,90,640/Other Allowances & Perquisites: Perquisites should be allowed in addition to the salary but within the overall limit, if any, prescribed under Schedule XIII of the Companies Act, 1956, as amended from time to time. Perquisites shall be restricted to the followings: a. Medical Reimbursement: Reimbursement of expenses incurred for self and family subject to a ceiling of one month’s salary in a year or three month’s salary over a period of three years. b. Leave Travel Assistance: For self and family, once in a year incurred in accordance with the rules of the Company to any destination. Family defined as spouse and two dependent children. c. Club Fees: Fees and expenses at clubs subject to a maximum of two clubs. This will not include admission and life membership fees. d. Employer’s contribution to Provident Fund/Superannuation Fund: As per Rules of the Company e. Gratuity: Gratuity payable shall be at the rate of 15 days salary for each completed year of service in accordance with the rules of the Company. f. Car/Telephone: Car with driver for use on Company’s business and telephone/telefax facilities at residence will not be considered as perquisites. Personal long distance calls on telephone and use of car for private purpose shall be billed by the Company. The Consolidated Remuneration including perquisites as above shall be subject to a maximum of ` 1,00,000/- per month. Minimum Remuneration: Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of the tenure of Mr. Chandramohan Parlapalli, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of salary, perquisites and allowances not exceeding the limits as specified above. The Board of Directors in consultation with the Recommendation Committee will have liberty to alter and vary the aforesaid terms and conditions relating to remuneration in line with such amendments as may be made from time to time to the Companies Act, 1956. Compensation of Whole time Director In accordance with the provisions of the Sections 198, 269, 309, 310 and 311 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, Mr. Rangesh Rajaram was appointed as a Whole-time Director of the Company, for a period of 5 years from 1st of October 2011 to 30th of September 2016, on the following terms and conditions: Remuneration: Mr. Rangesh Rajaram shall be entitled to the following emoluments S.No. Particulars Per Month (`) Per Annum (`) 1. Basic Salary 24,610/2,95,320/2. House Rent Allowance 12,305/1,47,660/3. Other Allowances & perquisites 12,305/1,47,660/Total 49,220/5,90,640/-
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The Consolidated Remuneration of ` 49,220/- per month is subject to a revision up to a maximum of ` 1,00,000/- by the Board of Directors of the Company and subject to the recommendation of the Remuneration Committee within the tenure of his appointment. Other Allowances & Perquisites: Perquisites should be allowed in addition to the salary but within the overall limit, if any, prescribed under Schedule XIII of the Companies Act, 1956, as amended from time to time. Perquisites shall be restricted to the followings: a. Medial Reimbursement: Reimbursement of expenses incurred for self and family subject to a ceiling of one month’s salary in a year or three month’s salary over a period of three years. b. Leave Travel Assistance: For self and family, once in a year incurred in accordance with the rules of the Company to any destination. Family defined as spouse and two dependent children. c. Club Fees: Fees and expenses at clubs subject to a maximum of two clubs. This will not include admission and life membership fees. d. Employer’s contribution to Provident Fund/Superannuation Fund: As per Rules of the Company e. Gratuity: Gratuity payable shall be at the rate of 15 days salary for each completed year of service in accordance with the rules of the Company. f. Car/Telephone: Car with driver for use on Company’s business and telephone/telefax facilities at residence will not be considered as perquisites. Personal long distance calls on telephone and use of car for private purpose shall be billed by the Company. The Consolidated Remuneration including perquisites as above shall be subject to a maximum of ` 1,00,000/- per month. Minimum Remuneration: Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of the tenure of Mr. Rangesh Rajaram, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of salary, perquisites and allowances not exceeding the limits as specified above. The Board of Directors in consultation with the Recommendation Committee have liberty to alter and vary the aforesaid terms and conditions relating to remuneration in line with such amendments as may be made from time to time to the Companies Act, 1956. COMPLIANCE WITH CORPORATE GOVERNANCE REQUIREMENTS: The Board of Directors of our Company has an optimum combination of executive and non-executive Directors as envisaged in Clause 49 of the Listing Agreement. Accordingly not less than one third of the Board of Directors comprises of non-executive and independent Directors. Sr. No. 1. 2. 3.
Name of the Director Mr. Sambasivam Sathiyamurthy Mr. Vibhu Natarajan Mr. Kalai Meyyappan Ramalingam
Status Independent, Non Executive – Director Independent, Non Executive – Director Independent, Non Executive – Director
There is no service contract between our Company and its Directors except the Managing Director & Whole time Directors. CONSTITUTION AND FORMATION OF COMMITTEES: 1. Audit Committee: Name of Committee Member Designation in Committee
Category
Mr. Vibhu Natarajan
Chairman
Non-Executive Independent
Mr. Sambasivam Sathiyamurthy
Member
Non-Executive Independent
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Mr. Chandramohan Parlapalli
Member
Managing Director
Role and Functions of Audit Committee: a. b. c.
d. e. f. g. h. i. j.
Overview of the Company’s financial reporting process and the disclosure of its financial information. Recommending the appointment and removal of external auditors, fixation of audit fee and also approval for payment for any other service. Reviewing with management the annual financial statements before submission to the Board, focusing primarily on (1) any changes in accounting policies and practices, (2) major accounting entries based on exercise of judgment by management (3) qualifications in draft audit report, (4) significant adjustments arising out of audit (5) the going concern assumption (6) compliances with accounting standards (7) compliances with stock exchanges and legal requirements concerning financial statements (8) any related party transactions i.e. transactions of the Company of material nature, with promoters of the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of Company at large. Reviewing with the management, external and internal auditors, and the adequacy of internal control systems. Reviewing the adequacy of internal audit functions. Discussion with internal auditors any significant findings and follow up there on. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board. Discussion with external auditors before the audit commences nature and scope of audit as well as to have post-audit discussion to ascertain any area of concern. Reviewing the company’s financial and risk management policies. To look into the reasons for substantial defaults in the payment to the shareholders (in case of non-payment of declared dividends) and creditors.
2. Investors Grievance & Share Transfer Committee: Name of Committee Member
Designation in Committee
Category
Mr. Sambasivam Sathiyamurthy
Chairman
Non-Executive Independent
Mr. Vibhu Natarajan
Member
Non-Executive Independent
Mr. Rangesh Rajaram
Member
Whole time director
Roles and functions of Investors Grievance Committee: The committee will look into redressing of shareholders’ complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc. The committee will oversee the performance of the registrar and Transfer Agents, and recommend measures for overall improvement in the quality of investor services. This committee will also monitor the implementation and compliance of our code of conduct for prohibition of insider trading pursuant to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended. Roles and functions of Share Transfer Committee: The committee will oversee and review all matters connected with the securities transfers. The committee will oversee the performance of the Registrar and Transfer Agents, and recommends measures for overall improvement in the quality of investor services. The Board of Directors has delegated the power of approving transfer of securities to the Share Transfer Committee.
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3. Remuneration Committee: Name of Committee Member
Designation in Committee
Category
Mr. Sambasivam Sathiyamurthy
Chairman
Non-Executive Independent
Mr. Kalai Meyyappan Ramalingam
Member
Non-Executive Independent
Mr. Vibhu Natarajan
Member
Non-Executive Independent
Roles and functions OF Remuneration Committee: The committee will oversee and review all matters connected with the compensation and benefits for Executive Directors and to frame policies and systems.” Apart from discharging the above-mentioned basic functions, the Remuneration Committee will also discharge the following functions: 1. Framing policies and compensation including salaries and salary adjustments, incentives, bonuses, promotion, benefits, stock options and performance targets of the top executives; and 2. Formulating strategies for attracting and retaining employees and employee development programmes. 4. IPO Committee: Name of Committee Member
Designation in Committee
Category
Mr. Chandramohan Parlapalli
Member
Managing Director
Rangesh Rajaram
Member
Whole time Director
Mr. Kalai Meyyappan Ramalingam
Chairman
Non-Executive Independent
The terms of reference of the IPO committee are as follows: 1.
2.
3.
4.
to decide on the actual size of the IPO, including any offer for sale by promoters/shareholders, green shoe option, any pre-IPO placement, promoter’s contribution and/or reservation for employees or shareholders of promoting companies or shareholders of group companies and/or any other reservations or firm allotments as may be permitted, timing, pricing and all the terms and conditions of the issue of the Equity Shares, and to accept, implement, negotiate, carry out and decide any amendments, modifications, variations or alterations thereto; to appoint and enter into arrangements with the book running lead managers, co-managers to the Issue, underwriters to the Issue, bankers to our Company, syndicate members to the Issue, advisors to the Issue, stabilizing agent, brokers to the Issue, escrow collection bankers, accountants, auditors, depositories, trustees, custodians, registrar to the Issue, legal advisors as to Indian and overseas jurisdictions to our Company, advertising and/or promotion or public relations agencies and any other agencies, persons or other intermediaries as may be involved with the IPO, including any successors or replacements thereof; to finalize, approve, execute and deliver or arrange the delivery of the offering documents (including the draft red herring prospectus, the red herring prospectus, the final prospectus (including the preliminary international wrap and the final international wrap, if required, for marketing of the Issue in jurisdictions outside India)), the statement-in-lieu of the prospectus, syndicate agreement, underwriting agreement, escrow agreement, stabilization agreement and all other documents, deeds, agreements and instruments and any amendments, supplements, notices or corrigenda thereto, together with any summaries thereto, as may be required or desirable in connection with the issue of the Equity Shares or the IPO by our Company; to open one or more separate current account(s) in such name and style as may be decided, with a scheduled bank to receive applications along with application monies in respect of the issue of the Equity Shares of our Company;
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5. 6. 7.
8. 9. 10. 11. 12. 13. 14.
15. 16.
17. 18. 19. 20. 21.
to open one or more bank account(s) of our Company in such name and style as may be decided for the handling of refunds for the Issue; to open any other bank account(s), share/securities account, escrow or custodian accounts, in India or abroad, in rupees or in any other currency, in accordance with applicable laws, rules, regulations, approvals and guidelines; to make applications for listing of the Equity Shares of our Company in one or more stock exchange(s) and to execute and to deliver or arrange the delivery of the listing agreement(s), or equivalent documentation to the concerned stock exchange(s) and to take all such actions as may be necessary in connection with obtaining the listing of the Equity Shares of our Company; to make and approve amendments to the memorandum of association and the articles of association of our Company; to approve all actions required to dematerialize the Equity Shares of our Company; to approve codes of conduct as may be considered necessary by the Board or the IPO Committee or as required under applicable laws, regulations or guidelines for the Board, officers of our Company and other employees of our Company; to approve a suitable policy on insider trading as required under applicable laws, regulations and guidelines; to approve any corporate governance requirement that may be considered necessary by the Board or the IPO Committee or as may be required under applicable laws, regulations or guidelines in connection with the IPO; to take all action as may be necessary or authorized in connection with any offer for sale; to remunerate all book running lead managers, co-managers to the Issue, underwriters to the Issue, bankers to our Company, syndicate members to the Issue, advisors to the Issue, stabilizing agent, brokers to the Issue, escrow collection bankers, accountants, auditors, depositories, trustees, custodians, registrar to the Issue, legal advisors as to Indian and overseas jurisdictions to our Company, advertising and/or promotion or public relations agencies and any other agencies, persons or other intermediaries as may be involved with the IPO, by way of commission, brokerage, fees or the like; to seek the admission of our Company’s Equity Shares into the Central Depository Services (India) Limited and the National Securities Depository Limited and take any further action as may be necessary or required for the dematerialization of our Company’s Equity Shares; to seek, if required, the consent of our Company’s lenders, parties with whom our Company has entered into various commercial and other agreements, all concerned government and regulatory authorities in India or outside India, and any other consents that may be required in connection with the IPO; to determine the price band for the purpose of bidding, any revision to the price band and the final IPO price after bid closure; to determine the bid opening and closing dates to finalize the allocation/allotment/transfer of Equity Shares to retail investors/non-institutional investors/qualified institutional buyers in consultation with the book running lead managers, the stock exchanges and/or any other entity; to allocate/issue/allot/transfer the Equity Shares in accordance with the terms of the IPO, and all such Equity Shares shall rank pari passu with the existing Equity Shares of our Company in all respects, except as may be provided under the terms of the Issue and any IPO document; to authorize and empower Mr. Chandramohan Parlapalli, Mr. Rangesh Rajaram and Mr. Kalai Meyyappan Ramalingam, officers of our Company (each, an “Authorized Officer”), for and on behalf of our Company, to execute and deliver, on a several basis, any agreements and arrangements as well as amendments or supplements thereto that the Authorized Officer considers necessary, desirable or advisable, in connection with the IPO, including, without limitation, engagement letter(s), the listing agreements, the registrar’s agreement and memorandum of understanding, the depositories agreements, the memorandum of understanding with the book running lead managers (and other entities as appropriate), the underwriting agreement, the syndicate agreement, the stabilization agreement, the escrow agreement, confirmation of allocation notes, and any agreement or document in connection with the pre-IPO placement (including any placement agreement, escrow agreement and offering documentation), with the book running lead managers, co-managers to the Issue, underwriters to
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22.
23.
24.
25. 26.
the Issue, bankers to our Company, syndicate members to the Issue, advisors to the Issue, stabilizing agent, brokers to the Issue, escrow collection bankers, accountants, auditors, depositories, trustees, custodians, registrar to the Issue, legal advisors as to Indian and overseas jurisdictions to our Company, advertising and/or promotion or public relations agencies and any other agencies, persons or other intermediaries as may be involved with the IPO, and any such agreements or documents so executed and delivered and acts and things done by any such Authorized Officer shall be conclusive evidence of the authority of the Authorized Officer and our Company in so doing; to severally authorize each of the Authorized Officers to enter into and execute all other arrangements, letters, agreements, deeds, and powers of attorney with the placement agents, and any such documents so executed and delivered or acts and things done by any Authorized Officer shall be conclusive evidence of the authority of such Authorized Officer and our Company in so doing and any document so executed and delivered or acts and things done by any such Authorized Officer prior to the date hereof are hereby ratified, confirmed and approved as the acts and deeds of the Authorized Officer and Company; to make or to authorize an Authorized Officer to make any application and take any and all action in connection with obtaining approvals or entering into any arrangement, in respect thereof from the Foreign Investment Promotion Board of India, the Reserve Bank of India, the shareholders of our Company, the Government of India, the Securities and Exchange Board of India, the Registrar of Companies and such other authorities, as may be required, for the purpose of issue of the Equity Shares by our Company in the IPO, including the issue of the Equity Shares to non-resident investors, including but not limited to, NRIs, FIIs, FVCI’s and other non-residents; to severally authorize and empower each Authorized Officer, for and on behalf of our Company, to execute and deliver any and all other documents, papers or instruments and to do or cause to be done any and all acts or things as any such Authorized Officer may deem necessary, appropriate or advisable in order to carry out the purposes and intent of the foregoing resolutions the IPO; and any such documents so executed and delivered or acts and things done by any such Authorized Officer shall be conclusive evidence of the authority of such Authorized Officer and our Company in so doing and any such document so executed and delivered or acts and things done by any such Authorized Officer prior to the date hereof are hereby ratified, confirmed and approved as the act and deed of the Authorized Officer and our Company, as the case may be; to settle all questions, difficulties or doubts that may arise in regard to the Issue or allotment of Equity Shares as the IPO Committee may, in its absolute discretion, deem fit; and to sign, execute, and deliver all such documents or instruments and do all such acts, deeds, matters and things as the IPO Committee may, in its absolute discretion, deem necessary or desirable in order to carry out the purposes and intent of the foregoing, or otherwise in relation to the Issue or any matter incidental or ancillary in relation to the Issue, including without limitation, allocation and allotment of the Equity Shares as permissible in law and issue of share certificates in accordance with the relevant rules, and any documents or instruments so executed and delivered or acts and things done or caused to be done by the IPO Committee shall be conclusive evidence of the authority of the IPO Committee in so doing.
5. Project Monitoring Committee The composition of the Committee is as follows: Name of Committee Member
Designation in Committee
Category
Mr. Kalai Meyyappan Ramalingam
Member
Non-Executive Independent
Mr. Rangesh Rajaram
Member
Whole time Director
Mr. Vibhu Natarajan
Chairman
Non-Executive Independent
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The terms of reference of the Project Monitoring Committee are as follows: The committee will be responsible for monitoring the implementation of project and deployment of funds raised through the IPO and to ensure that the funds are utilized for achieving the objects of the issue as mentioned in the offer document. INTERESTS OF DIRECTORS Except as stated in Related Party Transactions under section titled “Financial Information of Our Company” beginning on page 129 of this Offer Document, and to the extent of shareholding in our Company, the directors do not have any other interest in the business. The directors are interested to the extent of shares allotted to them. Except to the extent of their compensation stated in Related Party Transactions under section titled “Financial Information of Our Company” beginning on page 129 of this Offer Document, sitting fees for the Board/Committees of the Board and their shareholding or shareholding of companies they represent, the Directors, other than the Promoters who are also Directors, do not have any other interest in our Company. All Directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be entered into by our Company with any company in which they hold Directorships or any partnership firm in which they are partners as declared in their respective declarations. Our Company has not entered into any contract, agreements or arrangements during the preceding two years from the date of the Offer Document in which the directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them other than those mentioned in Annexure XV on Related Party Transaction of Section VII on Financial Information about the company. The Articles of Association provide that the Directors and officers shall be indemnified by our Company against loss in defending any proceeding brought against Directors and officers in their capacity as such, if the indemnified Director or officer receives judgment in his favor or is acquitted in such proceeding. Statement Showing Shares held by the Directors Sr. No. 1. 2. 3.
Name of the Director Mr. Chandramohan Parlapalli Mr. Rangesh Rajaram Mr. Rajamannar Abboy
Number of Shares held 1783334 1783334 1783334
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Changes in the Board of Directors in the last 3 years The following are the changes in the Board of Directors in the last 3 years and no changes thereafter have taken place: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.
Name
Designation
Mr. Chandramohan Parlapalli Mr. Rangesh Rajaram Mr. Manoj Kumar Chandra Mr. Kiran Babu Chandra Mr. Ramjee Kasturirangan Mr. Ramki Ramakrishnen Mr. K. Kasturi Rangan Mr. Sambasivam Sathiyamurthy
MD
Date of Appointment 1.10.2011
Date of Cessation -
Whole time Director Director
01.10.2011
-
28.11.2002
15.04.2011
Director
20.01.2006
15.04.2011
Director
20.01.2006
15.04.2011
Director
20.01.2006
15.04.2011
Director
07.04.1999
22.03.2011
Independent Director
01.09.2011
-
9.
Mr. Vibhu Natarajan
Independent Director
01.09.2011
-
10.
Mr. Kalai Meyyappan Ramalingam Mr. Muthukumar Ramalingam
Independent Director
01.09.2011
-
Alternate Director
3.10.2011
-
11.
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Remarks Reappointment as MD Reappointment as Whole time director Resigned for personal reasons Resigned for personal reasons Resigned for personal reasons Resigned for personal reasons Resigned for personal reasons Regularized as independent director on 28th September 2011 Regularized as independent director on 28th September 2011 Regularized as independent director on 28th September 2011 Fresh Appointment
MANAGEMENT ORGANISATION CHART
115
KEY MANAGERIAL PERSONNEL: Our company is headed by key executives who have long experience in the field of activities related to our business. Our company is headed and run by persons with long years of experience in their respective fields. Date of Joining
Functional Responsibility
Feb 2007 (Appointed as MD on 1st October 2011) 7th April 1999 (Appointed as WTD on 1st October 2011) 5th February 2001
To execute the strategic plans and policies & oversee the Indian operations In charge of management & operational activities and vendor management Operations / Program Management / Pre-sales/ Sales Support Handling IT infrastructure and client interaction and responsible for HR and Administration. Heading Finance & Accounts
Name
Designation
Ag e (in yrs )
Qualificatio n
1
Mr. Chandramoha n Parlapalli
Chief Executive Officer India
39
B.E., M. Tech (Chemical Eng.)
15
2
Mr. Rangesh Rajaram
Vice President (Operations)
B.E. (Computer Science)
15
3
Mr. Muthukumar. R
Chief Operating Officer
37
B.Tech (Chem Eng), MBA
10
4
Mr. Prasad Reddy K.L.N
Sr. Manager – HR/IT/Admin
40
BCA, MHRM
4
1st August 2007
5
Mr. Dada Khalander
Sr. Manager – Finance
42
B.Com,
16
1st February 2010
6
Ms. Preethi Bansal M
Company Secretary & Compliance officer
26
M.Com, ACS
2
28th November 2011
Experience (Years)
Sr . N o
In charge of secretarial & corporate governance matters
Paym ent made in FY 2011 ` in Lakh s 5.53
Cybersoft Technologies
14.64
Standard Chartered
7.90
Kaycees Healthsoft
9.76
Education Development Center, Inc. Bangalore Yalamanchili Software Exports Limited
4.30#
None of the above has any family relationship. All the key managerial personnel mentioned above are the permanent employees of our Company. Shareholding of Key Managerial Personnel other than Directors: NIL Bonus or Profit Sharing Plan for the Key Managerial Personnel: NIL
116
Common Agency PlatformCGEY
2.95
# CTC as per the appointment letter. • •
Previously Employed
Changes in Key Managerial Personnel in the last three years: Sr. No. 1. 2. 3.
Name Mr. Dada Khalander Mr. Vinod Viswanathan Ms. Preethi Bansal M
Designation/ functional responsibility Sr. Manager – Finance Vice President – Sales (APAC – MENA) Company Secretary & compliance officer
Date joining
of
1st February 2010 15th June 2011 28th November 2011
Date of leaving
Reason
-
Fresh Appointment Resigned on account of personal reasons Fresh Appointment
16th December 2011 -
EMPLOYEES: The present strength of our Company is 238 as on 30th November 2011 Payment or Benefit to Officers of our Company No amount or benefit has been paid or given to any officer of our Company within the two preceding years from the date of filing of this Draft Red Herring Prospectus or is intended to be paid, other than in the ordinary course of their employment and what is stated in the Annexure XV on related party transactions forming part of the Financial Information about the company beginning on page no. 129.
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OUR PROMOTERS Our company has been promoted by the following people in their individual capacities. Details of Promoters Being Individuals: 1. Name: Mr. Chandramohan Parlapalli Designation Permanent Account Number Passport Number Nationality Bank A/c details Address
Managing Director AHFPC7171E E3406388 Indian IDBI Bank, Ashok Nagar Branch, Chennai Account no.: 129104000053394 No. 9, Balaji Avenue, II Street, T. Nagar, Chennai - 600017
The following natural persons being relatives of Mr. Chandramohan Parlapalli, form part of the Promoter Group: Name of Relative Sharmila Jayachandran Ankita Parlapalli, Akshita Rama Parlapalli P Hemantha Reddy P Saraswathy Rama Parlapalli Kusuma Srikar Reddy
Relationship Wife Daughter Father Mother Sister Sister
2. Name: Mr. Rangesh Rajaram Designation Permanent Account Number US Passport Number Overseas Citizen of India Certificate No. Nationality Bank A/c details
Address
Whole time Director AEPPR7600J 480418618 A 828954 USA State Bank Of Travancore, Nungambakkam Branch, Chennai – 600 034. Account No. 00000067075715084 India: 8/26, II Cross Street, Lake Area, Nungambakkam, Chennai – 600 034. USA: 4434, Autumn Glow Ct, Chino Hills, California, 91709.
The following natural persons being relatives of Mr. Rangesh Rajaram, form part of the Promoter Group: Name of Relative Relationship Vidhya Rangesh Wife Rekshne Rangesh Daughter Rohaan Rangesh Son Rajaram J. Father Saraswathy R. Mother
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3. Name: Mr. Rajamannar Abboy Designation Permanent Account Number US Passport Number Overseas Citizen of India Certificate No. Nationality Bank A/c details
Address
Non Executive Director ATVPA0882G 214500318 A681159 USA Bank of America, Cerritos Financial Center, PO Box 37176, San Francisco, CA 94137-0176. Account No. 1051806608 7531, Barbi Lane, La Palma, California 90623, USA.
The following natural persons being relatives of Mr. Rajamannar Abboy, form part of the Promoter Group: Name of Relative Relationship Kanchana Abboy Wife Radha Abboy Daughter Venkatesh Abboy Son M. Abboy Naidu Father M. Thayarammal Mother A. Ramadas & Radhakrishnan Abboy Brother A. Sakkubai, A. Meerabai & A. Laxmibai Sisters 4. Name: Mr. Manoj Kumar Chandra Designation Permanent Account Number Passport Number Nationality Bank A/c details
Address
Promoter AJZPM1893K H3548357 Indian Bank of America, Loehmann’s Plaza, PO Box 37176, San Francisco, CA 94137-0176. Account No.18358-00360 In India: 5 Varadappan Street, West Mambalam, Chennai – 600 033, Tamil Nadu. At USA: 16632, Brambleberry CT, Chino Hills, CA 91709.
The following natural persons being relatives of Mr. Manoj Kumar Chandra, form part of the Promoter Group: Name of Relative Relationship Subashini Bodduluri Wife Sahasra Chandra Daughter Abinav Chandra Son Kotewara Rao Chandra Father Jayalakshmi Chandra Mother Chakravarti Chandra & Kiran Babu Chandra Brother
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5. Name: Mr. Kiran Babu Chandra Designation Permanent Account Number Passport Number Nationality Bank A/c details
Address
Promoter AZIPK7113K G3969283 Indian Bank of America, La Palma Branch, PO Box 37176, San Francisco, CA 94137-0176. Account No.07317-05854. In India: 5 Varadappan Street, West Mambalam, Chennai – 600 033, Tamil Nadu. At USA 16630, Joshua Tree CT, Chino Hills, CA 91709.
The following natural persons being relatives of Mr. Kiran Babu Chandra, form part of the Promoter Group: Name of Relative Relationship Lavanya Jagarlamudi Wife Aslesha Chandra Daughter Mahat Chandra Son Kotewara Rao Chandra Father Jayalakshmi Chandra Mother Chakravarthi Chandra & Manoj Kumar Chandra Brother 6. Name: Mr. Ramjee Kasturirangan Permanent Account Number Passport Number Nationality Bank A/c details
Address
ANKPR8777N F3886674 Indian Bank of America, Cerritos Financial Center, PO Box 37176, San Francisco, CA 94137-0176. Account No.10519-04576. In India: B3, No. 8, Rangan Street. T. Nagar, Chennai – 600 017, Tamil Nadu. At USA: 13315, Hariana Avenue, Chino Hills, CA 91710.
The following natural persons being relatives of the Mr. Ramjee Kasturirangan, form part of the Promoter Group: Name of Relative Relationship Chitra Gopalakrishnan Wife Abinaya Ramjee Daughter Anirudh Ramjee Son Kasturirangan Krishnaswamy Father Chellam Kasturi Mother Kannan Kasturirangan Brother
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7. Name: Mr. Ramki Ramakrishnen * Designation Permanent Account Number US Passport Number Nationality Bank A/c details
Promoter ALDPR9491G
465881289 USA Bank of America, N.A., P.O. Box 25118, Tampa, FL 33622-5118. Account No. 0047 9769 9966 At USA: Address 3615 Whidbey CT, Spring TX 77388-4843. * Name changed from Thavittupalayam Munisamy Ramakrishnan on 21st August 2009 as per US District Court for the Southern District of Texas order granted on 16th September 2009 The following natural persons being relatives of the Mr. Ramki Ramakrishnen, form part of the Promoter Group: Name of Relative Relationship Sumathy Ramakrishnen Wife Sindhuja Ram, Sushmitha R. Ram & Daughter Sahaana Ram T.R. Muniswamy Father Krishnaveni Mother Bhaktavatchalam Brother Savithri & Vijaya Kumari Sisters Declarations The Permanent Account Number, Bank Account details and Passport Number of our Promoters have been submitted to Stock Exchanges, on which our Company proposes to list its Equity Shares at the time of filing of this DRHP. Our Promoters, Promoter Group and Group Companies have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI or any other authorities. None of our Promoters was or also is a promoter, director or person in control of any other company which is debarred from accessing the capital market under any order or directions made by the SEBI. Further, our Promoters have not been identified as a willful defaulter by RBI or any other Government authority and there are no violations of securities laws committed by the Promoters in the past or any such proceedings are pending against the Promoters. Relationship between Promoters Except as stated otherwise, there is no relation between any Promoters. Payment or Benefit to Promoters of Our Company No payment has been made or benefit given to our Promoters in the two years preceding the date of the DRHP or is intended to be given by us except mentioned / referred to in this Chapter and in Page no 129 under Related Party Transactions, under the Chapter “Financial Information of our company” of the DRHP.
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DETAILS OF PROMOTER COMPANIES: NIL DETAILS OF COMPANIES/ ENTITIES FORMING PART OF OUR PROMOTER GROUP: DETAILS OF SUBSIDIARY COMPANY: PRELUDE SYSTEMS INC., USA (PSI) Date of Incorporation Employer Identification Number Certificate Number Registered Office Nature of Business
11th March 1999 33-0846653 2156676 Issued by the State of California 7531, Barbi Lane, La Palma, CA 90623. The Company provides multiple IT business solutions to its customers which includes client specific projects relating to software development, quality assurance & testing etc, business process outsourcing, enterprise mobile solutions etc.
On 26th day of November 2007, Prelude Solution Providers (P) Ltd., currently known as PreludeSys India Limited entered into a stock purchase agreement by and among Prelude Systems Inc. (Corporation) and individuals Rajamannar Abboy, Kiran Babu Chandra, Rangesh Rajaram and Chandramohan Parlapalli. The stock purchase agreement facilitated to acquire 400 shares, representing 100 % stake in Prelude Systems Inc. held by the above four individuals equally. A detailed valuation of shares as on 31st March 2007 was carried out by Paglia Consulting Group, LLC, Simi Valley, California and a stock of 100 shares was valued at USD 250,000 thus the purchase consideration aggregating to USD 1,000,000. It was agreed to complete the transaction in tranches on or before 31st December 2012. Accordingly, the acquisition was made by transferring shares to PreludeSys India Limited from each seller subject to compliance of ODI and FEMA Regulations. Prelude Systems Inc., USA became 100% subsidiary of PreludeSys India Limited on 31st March 2011. Board of Directors of Prelude Systems Inc., USA as on 30th November 2011 1. 2. 3. 4.
• • • • •
Mr. Rajamannar Abboy Mr. Rangesh Rajaram Mr. Chandramohan Parlapalli Mr. Kiran Babu Chandra
Other Details: PSI is not a listed Company. PSI is neither a sick company under the laws of USA nor is under winding up. There are no defaults in meeting any statutory/bank/institutional dues. No proceedings have been initiated for economic offences against PSI PSI is not a loss making company & didn’t have negative networth in the last 3 years.
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Promoter group companies 1. Mat Exim India Private Limited 2. Globalexim Corporation 3. Indo-Auto Shell American Corporation 4. Indoshell Precision Technologies, LLC DETAILS OF GROUP COMPANIES: 1. MAT EXIM (INDIA) PRIVATE LIMITED (MEPL) Date of Incorporation CIN Registered Office Nature of Business Directors
23rd September 2005 U51420TN2005PTC057599 1/18, 1st Floor, 1 Main Road, Kotturpuram, Chennai – 600085. Tamil Nadu To carry on the business of buying, selling, trading, importing and exporting all kinds of products in steel, iron, copper aluminum, etc. Mr. Manoj Kumar Chandra Mr. Rangesh Rajaram
Details of Financial Information (Amount in`) 2011 2010 2009 500000 500000 500000 (110954) (107645) (99628) The company has not carried out any commercial operations (5580) (10288) (10597) -ve -ve -ve 7.78 7.85 8.01
Particulars Equity Capital Reserves (Excluding Revaluation Reserve) Sales Profit after Tax Earnings Per Share Net Asset Value Shareholding Pattern Name of the shareholder Mr. Manoj Kumar Chandra Mr. Rangesh Rajaram Total
No. of shares 25000 25000 50000
Percentage 50 50 100
Other Details: • MEPL is not a listed Company. • MEPL is neither a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995 nor is under winding up. • There are no defaults in meeting any statutory/bank/institutional dues. • No proceedings have been initiated for economic offences against MEPL. • MEPL is a loss making entity and did not have negative networth in the last 3 years.
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2. GLOBALEXIM CORPORATION (GEC) Date of Incorporation Employer Identification Number Certificate Number Registered Office Nature of Business Directors
24th July 2006 20-5267666 001 & 002 3615, Whidbey CT, Spring, TX 77388 GEC is an export/ import corporation, procure parts worldwide, do warehouse service and distribution to the clients. Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen
Details of Financial Information Particulars Equity Capital Reserves (Excluding Revaluation Reserve) Sales Profit after Tax Earnings Per Share Net Asset Value
2008 1000 24021
2009 1000 15899
(Amount inUSD) 2010 1000 22150
645102 15915 15.915 25.021
702871 68058 68.058 16.899
573817 21477 21.477 23.150
Shareholding Pattern Name of the shareholder Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen Total
No. of shares 550 450 1000
Percentage% 55.00 45.00 100.00
Other Details: • GEC is not a listed Company. • GEC is neither a sick company within the meaning of relevant laws in USA nor is under winding up. • There are no defaults in meeting any statutory/bank/institutional dues. • No proceedings have been initiated for economic offences against GEC. • GEC is not a loss making entity and did not have negative networth in the last 3 years.
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3. INDO-AUTO SHELL AMERICAN CORPORATION (ISAC) Date of Incorporation Employer Identification Number Certificate Number Registered Office Nature of Business Directors
10th November 2000 76-0661436 001 & 002 3615, Whidbey CT, Spring, TX 77388 ISAC is an export/ import corporation, manufacture & procure parts worldwide. Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen
Details of Financial Information Particulars Equity Capital Reserves (Excluding Revaluation Reserve) Sales Profit after Tax Earnings Per Share Net Asset Value
2008 1000 176146
2009 1000 231759
5825911 46173 46.173 177.146
5746322 56180 56.180 232.759
(Amount in USD) 2010 1000 106611 4097439 6793 6.793 107.611
Shareholding Pattern Name of the shareholder Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen Total
No. of shares 550 450 1000
Percentage% 55.00 45.00 100.00
Other Details: • ISAC is not a listed Company. • ISAC is neither a sick company within the meaning of relevant laws in USA nor is under winding up. • There are no defaults in meeting any statutory/bank/institutional dues. • No proceedings have been initiated for economic offences against ISAC. • ISAC is not a loss making entity and did not have negative networth in the last 3 years.
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4. INDOSHELL PRECISION TECHNOLOGIES, LLC (IPT) Date of Incorporation Employer Identification Number Certificate Number Registered Office Nature of Business Directors
23rd February 2010 27-2010366 C20100223-1269 17207, Kuykendahl Rd, Ste 260, Spring, TX 77379 IPT is precision machining and manufacturing company, manufacturing parts for hydraulic, automobile, oil & gas industry components Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen Mr. Balaji Jagadeesan Mr. Rajesh Jagadeesan
Details of Financial Information Particulars Equity Capital Reserves (Excluding Revaluation Reserve) Sales Profit after Tax Earnings Per Share Net Asset Value Shareholding Pattern Name of the shareholder Mr. Ramki Ramakrishnen Mrs. Sumathy Ramakrishnen Mr. Balaji Jagadeesan Mr. Rajesh Jagadeesan Total • • • • •
2008 N.A. N.A. N.A. N.A. N.A. N.A. No. of shares 27000 24000 24500 24500 100000
(Amount in USD) 2009 2010 N.A. 100000 N.A. (42582) N.A. 5691791 N.A. (42582) N.A. (0.426) N.A. 0.574 Percentage 27.00 24.00 24.50 24.50 100.00
Other Details: IPT is not a listed Company. IPT is neither a sick company under the laws of USA nor is under winding up. There are no defaults in meeting any statutory/bank/institutional dues. No proceedings have been initiated for economic offences against IPT. IPT is a loss making company & didn’t have negative networth in the last year.
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INTEREST OF PROMOTERS AND COMMON PURSUITS Our Promoters are interested in the promotion of our Company and are also interested to the extent of their, friends & relatives shareholding, for which they are entitled to receive the dividend declared, if any, by our Company. Further, our Promoters and directors, may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of our Board or committees constituted thereof as well as to the extent of remuneration and/or reimbursement of expenses payable to them for services rendered to us in accordance with the provisions of the Companies Act and in terms of the Articles. The related business transactions with the subsidiary/ associate/ group companies are detailed out in the Related Party Transactions beginning on page no. 151 in Section VII on Financial Information of our company. The following are the details of sales affected to Prelude Systems Inc., USA, our wholly owned subsidiary since 30th March 2011. Prior to this, it was a company under the same management. Particulars
Total sales (A) Sales to Prelude Systems Inc., USA (B) % of B to A Net Profit after tax (C) Profit on B above (D) % of D to C
For the year ended 30th Sept 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
83,119,083
129,941,874
119,869,860
94,306,459
80,249,847
56,765,483
75,539,073
110,732,491
94,470,373
60,001,266
62,291,242
50,561,685
90.88
85.22
78.81
63.62
77.62
89.07
17,831,466
16985713
28626917
18,223,997
5,440,910
1,759,944
13597033
14395223
25507000
10200215
2491649
1516850
76.25
84.75
89.1
55.97
45.79
86.19
Our company follows an Arms Length pricing policy for the international transactions entered into with its Associate enterprise namely Prelude Systems Inc., USA from the stand point of the Indian Transfer Pricing Regulations under the Income Tax Act 1961 and the corresponding Income Tax Rules, 1962 in this regard. DETAILS OF COMPANIES / FIRMS FROM WHICH PROMOTERS HAVE DIASSOCAITED During preceding three years, our Promoters have not disassociated themselves from any companies/firm(s). DETAILS OF PROMOTER GROUP COMPANIES WHOSE NAMES HAVE BEEN STRUCK OFF FROM REGISTRAR OF COMPANIES There are no companies/entities that form part of our Promoter Group, whose names have been struck off from Registrar of Companies. CHANGE IN ACCOUNTING POLICIES IN THE LAST THREE YEARS There has been no change in accounting policies since last 3 years.
127
CHANGE IN ACCOUNTING PERIOD There has been no change in the accounting period of the company since inception. RELATED PARTY TRANSACTIONS AS PER THE FINANCIAL STATEMENTS The other details of related party transactions please refer to in section “Financial Information of Our Company” on page 129 of this offer document. CURRENCY OF PRESENTATION In this offer document, all references to “Rupees” and “Rs.” and “Indian Rupees” and “`” are to the legal currency of the Republic of India; all references to “U.S. Dollars” and “US$” are to legal currency of the United States. In this Offer Document, any discrepancies in any table between total and the sum of the amounts listed are due to rounding-off. DIVIDEND POLICY The Company in General Meeting may declare a dividend to be paid to the Members according to their rights and interests in the profits and may, subject to the provisions of Section 207 of the Act, fix the time for payment. The company has not declared any dividend since inception.
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SECTION VII - FINANCIAL INFORMATION OF OUR COMPANY REPORT OF THE AUDITOR ON FINANCIAL INFORMATION The Board of Directors Preludesys India Ltd Chennai Dear Sirs, We have examined the financial information of PRELUDESYS INDIA LIMITED [hereinafter referred to as ‘the Company’] contained in the statements annexed to this report, which have been approved by the Board of Directors, proposed to be included in the DRHP in connection with the proposed Public Offer of Equity Shares of the Company. In terms of the requirement of: a. Paragraph B (1) of Part – II of Schedule II to the Companies Act, 1956, b.
The Securities and Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations, 2009 in pursuance of Section 11 of Security and Exchange Board of India Act (SEBI), 1992, ‘the SEBI (ICDR) Regulations’;
c.
The appointment letter dated 12th November 2011 received from the Company, requesting us to issue a report as Statutory Auditors of the Company relating to the DRHP being issued by the Company in connection with the Initial Public Offer of Equity Shares of the Company.
Financial Information as per audited financial Statements: a.
We have examined the accompanying ‘Summary Statement of Profits and Losses, as Restated’ (Annexure - I ) (Part A – Consolidated figures of PreludeSys India Ltd & Its Subsidiary Prelude Systems Inc, USA and Part B – Standalone figures of PreludeSys India Ltd) for the year ended March 31 2007, March 31 2008, March 31, 2009, March 31, 2010 and March 31, 2011 and for the period ended September 30, 2011 and the ‘Summary Statement of Assets and Liabilities, as Restated’ (Annexure – II ) (Part A – Consolidated figures of PreludeSys India Ltd & Its Subsidiary Prelude Systems Inc, USA and Part B – Standalone figures of PreludeSys India Ltd) as on the same dates, forming Part of the ‘Financial Information’ dealt with by this Report, detailed below. Both read together with the significant Accounting Policies and notes to accounts (Annexure- III & IV) thereon, which are the responsibility of the Company’s management, have been extracted from the financial statements for the year ended March 31 2007, March 31 2008, March 31, 2009, March 31, 2010, March 31 2011 and for the period ended 30th September, 2011 audited and, approved by the Board of Directors and adopted by the Members.
b.
We report as under:-
(i) The statement of restated profits and/or losses, and the assets and liabilities of the Company as at the end of the year ended 31st March 2007, 31st March 2008, 31st March 2009, 31st March 2010, 31st March 2011 , and for the period ended 30th September 2011 reflect the profits and losses and assets and liabilities extracted from the Profit and Loss Accounts and Balance Sheets for the period ended on that date, after making such adjustments, regrouping and disclosures as were, in our opinion, appropriate and required to be made in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 except for the effect of accounting for retirement benefits on cash basis for the year ended 31st March 2007, 31st March 2008, 31st March 2009 and 31st March 2010 which is not as per the Accounting Standard 15 “Employee Benefits”. The Company has carried out actuarial valuation for Gratuity w.e.f. 31st March, 2011. Accordingly provision is made in F.Y.2010-
129
11 and Half year ended 30th September, 2011. In the absence of information, no effect has been given for the same in Restated Financial Statements for period ended 31st March 2007, 31st March 2008, March 31, 2009 and Year ended March 31, 2010. (ii) in our opinion, read with the respective Significant Accounting Policies and subject to/read together with the notes thereon and after making such adjustments, regroupings and disclosures as were, in our opinion, appropriate and required, the financial information referred to above and the other Financial Information herein below, have been prepared in accordance with Part – II of Schedule II of the Companies Act, 1956. Other Financial Information: We have also examined the following other financial information Part A relating to the Consolidated financials and Part B relating to the Standalone financials proposed to be included in the Offer Document, extracted from the accounts for the year ended 31st March 2007, 31st March 2008, 31st March 2009, 31st March 2010, and 31st March 2011 and for the period ended 30th September 2011 audited by us, except that, the Related Party transactions, are as prepared by the management and reviewed by us:i) ii) iii) iv) v) vi) vii) viii) ix) x)
Summary Statement of Cash Flow, from Restated Financial Statements (Annexure - V) Schedule of Secured Loans, as Restated (Annexure - VI) Schedule of Unsecured Loans, as Restated (Annexure - VII) Schedule of Investments, as Restated (Annexure - VIII) Schedule of Debtors, as Restated (Annexure – IX) Schedule of Loans and Advances, as Restated (Annexure – X) Schedule of Other Income, as Restated (Annexure - XI) Statement of Dividend paid (Annexure - XII) Capitalization Statement (Annexure -XIII) Summary of Accounting Ratios based on adjusted profits relating to the earning per share, net asset value and return on net worth (Annexure – XIV) Related Party Transactions (Annexure - XV) Statement of Tax Shelter (Annexure - XVII)
xi) xii)
Based on and subject to our comments as above we are of the opinion that the restated financial information has been made considering: i.
Adjustments, if any, required for the changes in accounting policies and estimates adopted by the Company retrospectively in respective financial years have been made to reflect the same accounting treatment as per changed accounting policy and estimates for all the reporting periods
ii. Material prior period items have been restated to the respective years to which such prior period items related; iii. There are no extraordinary items which need to be disclosed separately in the Statement of Restated Financial Information; iv. All material qualifications in the auditors’ reports, which require adjustments to the summary statements, have been so adjusted except for the adjustment for AS 15 Employee benefits for the year ended 31st March 2007, 31st March 2008, 31st March, 2009 and 31st March, 2010. This report should not in any way be construed to be a reissuance or redating of any of the previous audit reports issued by us or by the other firm of Chartered Accountants, nor should it be construed to be a new opinion on any of the financial statements referred to herein.
130
Our this Report, is being provided solely for the use of Preludesys India Limited, for the purpose of its inclusion in the said Prospectus in connection with the proposed Public Offer of the Equity Shares of the Company. This Report may not be used or relied upon by or disclosed, referred to or communicated by yourself (in whole or in part) to any third party for any purpose other than the stated use, except with our written consent in each instance and which consent may be given only after full consideration of the circumstances at that time. We have been subjected to peer review process of the Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer Review Board of ICAI. For and on behalf of CNGSN & ASSOCIATES, Chartered Accountants Firm Registration No. : 4915S Sd/V. VIVEK ANAND Partner Membership No. : 208092 Place: Chennai Date: 05-12-2011
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Annexure I Summary Statement of Profit and Loss Account, as Restated
Particulars INCOME Services provided Export Domestic Sale of Licenses & AMC Export Domestic Total Other Income Increase/(Decrease) in Stock Total Income EXPENDITURE Cost of goods sold Staff Costs Administration expenses Selling & Distribution expenses Finance Charges Total Expenditure Net Profit before Taxes& Extraordinary items Taxation Less: Provision for current tax (including Wealth tax ) Less: Provision for deferred tax (net)
PART - A Consolidated for Consolidated for the year ended the year ended 31st 30th Sept 2011 March 2011
(Amount in `) For the year ended 30th Sept 2011
For the year ended 31st March 2011
PART - B (STAND ALONE) For the year For the year ended 31st ended 31st March 2010 March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
432,288,982 4,860,276
114,314,059 9,703,590
75,539,073 4,860,276
114,314,059 9,703,590
109,045,273 8,920,072
82,501,906 7,600,708
71,633,326 6,921,572
50,561,685 6,203,798
2,719,734 439,868,992 1,655,084
5,924,225 129,941,874 218,349
2,719,734 83,119,083 1,655,084
5,924,225 129,941,874 218,349
1,904,515 119,869,860 728,946
4,203,845 94,306,459 -
1,695,000 80,249,897 211,833
56,765,483 61,985
1,006,228 442,530,304
127,785 130,288,008
1,006,228 85,780,395
127,785 130,288,008
(4,730,316) 115,868,490
2,921,970 97,228,429
2,473,680 82,935,410
56,827,468
1,996,371 359,248,421 40,306,008
5,455,093 70,044,895 28,408,443
1,996,371 36,246,571 16,301,595
5,455,093 70,044,895 28,408,560
1,640,710 60,583,444 21,201,200
3,798,930 53,484,897 18,895,415
2,017,044 51,494,053 21,998,273
25,473,857 27,426,762
362,145 8,269,716 410,182,661
41,224 6,987,320 110,936,975
2,117 5,804,080 60,350,734
41,224 6,987,320 110,937,092
147,347 2,331,352 85,904,053
176,482 3,333,453 79,689,177
246,361 2,570,447 78,326,177
374,573 785,117 54,060,309
32,347,643
19,351,033
25,429,661
19,350,916
29,964,437
17,539,252
4,609,233
2,767,159
11,088,618
3,830,859
8,321,092
3,830,859
5,484,282
474,750
-
317,048
(722,897)
1,581,307
(722,897)
1,581,307
302,028
-
(950,483)
624,287
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Less : Provision for Fringe Benefit tax Effect of adjustments on tax Add : MAT Credit Net Profit before Extraordinary items Less: Extraordinary items Pre operative expenses Net Profit/ (loss) after tax
-
-
-
-
-
81,182
91,195
65,880
-
3,046,963
-
3,046,963
4,448,790
1,240,677
209,792
-
21,981,923
16,985,830
17,831,466
16,985,713
28,626,917
18,223,997
5,678,313
1,759,944
-
-
-
-
-
-
237,403
-
21,981,923
16,985,830
17,831,466
16,985,713
28,626,917
18,223,997
5,440,910
1,759,944
Notes: The above statement should be read with the Notes to Restated Statement of Assets and Liabilities, Restated Statement of Profit and Loss and Restated Statement of Cash Flow
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Annexure II - Summary Statement of Assets and Liabilities, as Restated (Amount in `) PART - B (STAND ALONE)
PART - A Particulars
A. (i)
(ii) (iii)
Fixed Assets : Gross Block Less: Accumulated Depreciation Net Block Less: Revaluation Reserve Net Block after adjustment for Revaluation Reserve Capital work in Progress Goodwill (see note 11 of Sch. XIV) TOTAL (A)
Consolidated for the year ended 30th Sept 2011
Consolidated for the year ended 31st March 2011
For the year ended 30th Sept 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
155,219,728 53,459,076 101,760,652 -
107,144,637 40,970,993 66,173,644 -
55,090,182 35,265,154 19,825,028 -
52,938,778 31,618,381 21,320,397 -
118,717,433 20,597,725 98,119,708 -
98,896,642 16,486,675 82,409,967 -
47,500,835 14,051,673 33,449,162 -
27,099,358 9,671,308 17,428,050 -
101,760,652 99,135,224 25,081,962 225,977,838
66,173,644 98,632,907 27,668,811 192,475,362
19,825,028 99,135,224 118,960,251
21,320,397 98,632,907 119,953,304
98,119,708 98,119,708
82,409,967 82,409,967
33,449,162 33,449,162
17,428,050 17,428,050
12,242,500
11,162,500
77,557,329
77,557,329
9,038,500
8,774,502
3,925,002
13,603,177 2,387,622 1,409,058
B
Investments (B)
C
Current Assets , Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Other Current Assets TOTAL (C)
1,799,347 153,177,054 21,591,977 12,106,576 4,630,642 193,305,595
793,119 129,097,521 20,878,849 16,960,450 4,809,886 172,539,825
1,799,347 61,148,516 5,258,214 7,420,294 4,310,881 79,937,252
793,119 23,574,850 10,466,067 14,384,279 4,518,322 53,736,637
665,334 36,018,940 11,129,564 29,535,515 5,186,648 82,536,001
5,395,650 20,515,248 2,927,891 10,581,617 39,420,406
2,473,680 21,824,792 20,223,839 6,022,035 50,544,345
17,399,857
TOTAL ( A+B+C )
431,525,933
376,177,687
276,454,833
251,247,270
189,694,209
130,604,875
87,918,509
34,827,907
141,333,213 37,888,552
124,056,816 40,723,677
59,573,131 18,230,329
62,010,595 21,764,528
63,865,784 1,633,000
56,972,701 301,504
35,375,496 12,117,957
3,834,241 2,026,403
D
Less :Liabilities & Provisions: Secured Loans Unsecured Loans
134
(i) (ii)
Net Deferred Tax liabilities Current Liabilities & provisions Duties and Taxes TOTAL (D)
1,160,438 90,981,272 260,865 271,624,340
1,883,335 85,318,788 1,135,059 253,117,675
1,160,438 43,937,354 260,865 123,162,117
1,883,335 40,713,122 1,135,059 127,506,639
302,028 16,591,124 547,354 82,939,290
14,567,975 1,534,694 73,376,874
22,873,296 847,756 71,214,505
950,483 23,693,426 260,260 30,764,812
Net worth– (A+B+C – D) Represented By:
159,901,593
123,060,012
153,292,716
123,740,631
106,754,919
57,228,001
16,704,004
4,063,094
Share Capital Reserve & Surplus Net worth–( i+ ii + iii)
127,245,080 74,900,000 127,245,080 74,900,000 74,900,000 30,000,000 7,700,000 500,000 32,656,513 48,160,012 26,047,636 48,840,631 31,854,919 27,228,001 9,004,004 3,563,094 159,901,593 123,060,012 153,292,716 123,740,631 106,754,919 57,228,001 16,704,004 4,063,094 Notes: The above statement should be read with the Notes to Restated Statement of Assets and Liabilities, Restated Statement of Profit and Loss and Restated Statement of Cash Flow
Annexure III Significant Accounting Policies 1. System of Accounting : The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the mandatory Accounting Standards (‘AS’) prescribed by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956, to the extent applicable. 2. Use of Estimates The preparation of the financial statements requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 3. Revenue Recognition : The Company follows mercantile system of accounting and recognizes income and expenditure on accrual basis. Revenues in respect of the service activities of the company are recognized on time and materials basis in respect of fixed priced contracts. In respect of other contracts revenue is recognized on the achievement of the milestones set out in the contracts. 4. Fixed Assets :
135
Fixed Assets are stated at their historical cost less accumulated depreciation till date. The cost of fixed assets comprises of its purchase price and other attributable costs to bring the asset to its present location and working condition for its intended use. 5. Depreciation : Depreciation has been charged on the fixed assets on Written down Value and at the rates and method specified in Schedule XIV of the Companies Act, 1956 except depreciation on Interior Decoration / modular workstations and the like which are depreciated over a period of three years from the date the asset is put to use. Individual assets costing less than ` 5,000/‐are depreciated in full, in the year of purchase. Depreciation on additions to the value of existing fixed assets on account of revaluation of foreign currency loan is being provided prospectively taking into account the residual life of the assets based on the rates prescribed in Schedule XIV of the Companies Act, 1956. The Consolidated financials for the period ended March 31, 2010, March 31, 2011 & September 30, 2011 were qualified as under In respect of fixed assets of subsidiary, depreciation is computed based on straight line, method over its useful life. The estimated useful lives of computer equipment and furniture are generally five to seven years. The income tax provision of subsidiary differs from the expense that would result from applying state statutory rates to income before income taxes because certain expenses are not deductible for tax purposes and depreciation methods differ for book and Tax purposes. 6. Impairment of Asset : All the fixed assets are assessed for any indication of impairment, at the end of each financial year. On such indication, the impairment loss, being the excess of carrying value over the recoverable value of the assets, is charged to profit and loss account of the respective year. The impairment loss recognized in the prior years is reversed in cases where the recoverable value exceeds the carrying value, upon the reassessment in the subsequent years 7. Investments : Long Term investments are valued at their acquisition cost. Any decline in the value of investment, other than a temporary decline, is recognized and provided in the profit and loss account. Short term investments are carried at cost or their market values whichever is lower. 8. Foreign Currency Transactions : Transactions in Foreign Currencies are recorded at exchange rates prevailing on the respective dates of the relevant transactions. Realized exchange gains or losses are recognized in the Profit and Loss account. Current assets and Current liabilities outstanding at the yearend are translated at year end exchange rates. 9. Inventory Valuation : Inventories represent the Project work-in-progress and the same is valued at Cost. 10. Borrowing Cost :
136
Borrowing costs are charged to revenue except those attributable to acquisition of qualifying assets. 11. Taxation : Income‐tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income‐tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written‐up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. 12. Employee Benefits : A) Retirement Benefit Plans – Provident Fund: The company has made defined contribution to the Regional Provident Commissions for its employees. The contributions are charged to Profit & Loss Account in the year when the contributions to the fund are due. The company does not have any further obligation in this respect. B) Retirement Benefit Plans – Gratuity: Gratuity is a post employment defined benefit plan. The liability recognized in the Balance Sheet in respect of gratuity is on the basis of Actuarial valuation on project unit credit method. Actuarial gains and losses, comprising of experience adjustments and the effects of changes in actuarial assumptions, are recognized immediately in the profit and loss account as income or expense. The financials for the period ended March 31, 2010 were qualified as under Provision for gratuity for eligible employees have been made on the basis of the provisions of the payment of gratuity act and not in accordance with the Provisions of AS 15. Subsequently the Company complied with the above accounting standard AS- 15 for the FY 2011 and 6 month endedSeptember 2011. 13. Cash and Cash Equivalent : The company considers deposits with bank which have maturities of three months or less from the date of deposit to be cash equivalents. The Management of Prelude Systems Inc ( Wholly Owned Subsidiary) has represented that it has become the Wholly Owned Subsidiary of Preludesys India Pvt Ltd ( Holding company ) w.e.f from 30.03.2011 only. Since 31st March, 2011 is the first year of consolidation; Consolidated Cash Flow Statement has not been prepared for the year ended 31st March, 2011. 14. Provisions & Contingent Liabilities. The Company recognizes a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. No provision or disclosure is made when, as a result of obligating events and onerous contracts, there is a possible obligation or a present obligation where the likelihood of an
137
outflow of resources is remote. Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognized when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a reliable estimate of such obligation. 15. Leases Lease rentals paid as per the contractual obligations are charged to Profit and loss Account. 16. Segmental Reporting The company has identified business segment as its primary segment and geographic segment as its secondary segment. Geographical revenues are identified based on location of the customer. Fixed assets used in the business or liabilities contracted have not been identified for any of the reportable segments, as the Fixed assets and services are used interchangeably between segments.Accordingly, no disclosure relating to total segment assets and liabilities are made. 17. Transfer Pricing Policy The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under Sections 92‐92F of the Income‐tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company has had a transfer pricing analysis conducted by a firm of Chartered Accountants. The accountants report has been received by the Company and the report did not envisage any adjustment in the accounts.
138
Annexure IV - Major Notes forming part of the Accounts 1 Background of the company: PreludeSys provides business solutions to small, mid and large sized companies and government agencies. We deliver technology-enabled business solutions to clients across manufacturing, financial services, insurance, retail, technology, government and media that help them achieve business efficiencies and goals with reduced total cost of ownership (TCO) and increased quality PreludeSys was incorporated in 1998. During the initial years we were offering development and consulting services. In 1999 Prelude Systems, Inc. was opened in Los Angeles, California and later converted as a wholly owned subsidiary of PreludeSys. In 2003 we got an opportunity to enter into BPO space.With our focus on delivering quality services, we put in a Quality Management System compliant to ISO 9001:2000 and were certified in the year 2004. The certification recognized our focus on quality.To accelerate our growth and to increase our breadth of services we entered into Enterprise Application Services by partnering with global leaders like SAP in 2006 and with Microsoft 2007. We have done ERP and CRM implementations across various verticals.We also expanded our geographical presence with our subsidiary opening new offices in Chicago, Illinois in 2006, and Austin, Texas in 2008. This enabled us to reach out to more prospects which aided in accelerating our growth. In 2011, we acquired 100% stake in Prelude Systems Inc. We constantly keep looking for emerging trends to spot the next big opportunity for growth. This has resulted in us entering Enterprise Mobility in 2010 and Cloud Computing space in 2011. With these two being the next significant technological waves, we are positioning ourselves to ride on them successfully. 2
Software Development Costs Research and development expenses are recognized in P&L account as and when incurred. Software development costs are included in research and development costs until the pointthat technological feasibility is reached, which is generally before the product is released for sale. Once technological feasibility is reached such costs are capitalized and amortized over the estimated life of the product, generally five years.
3
Debtors, Creditors & Loans & Advances are subject to confirmation & reconciliation in some cases.
4
Remuneration to Auditors : Statutory Auditors Audit Fees Tax Audit Fees Certification and Others
5
PART A 30-09-2011 31-03-2011 Consolidated Consolidated 80,000 8,000
PART - B (STAND ALONE) – Year ended 31st March 30-Sep-11
2011
2010
2009
2008
2008
80,000 8,000
137,875 36,000
110,300 -
82,725 -
67,416 -
67,416 -
137,875 36,000
Earning per share is calculated as follows:
139
Particulars
30-Sep-11 Net Profit / (Loss)after tax Weighted no. of Equity shares outstanding as at the period end (in Nos.) Nominal Value per Equity Share (in `) Earning Per Share (Basic) (in `) Not Annualised Earning Per Share (Diluted) (in `) Not Annualised
PART B (STAND ALONE) – Year ended 31st March
PART - A
30-Sep-11
2011
2010
2009
2008
2008
21,981,923
31-Mar-11 16,985,830
17,831,466
16,985,713
28,626,917
18,223,997
5,440,910
1,759,944
12,674,294 10
12,579,809 10
12,674,294 10
12,579,809 10
10,763,721 10
8,259,809 10
8,120,137 10
7,539,809 10
1.734
1.35
1.407
1.35
2.66
2.21
0.67
0.23
1.734
1.35
1.406
1.35
2.66
2.21
0.67
0.23
6
The Company has not been received any intimations from any of the Creditors as to their registration under Micro, Medium and Small Enterprises Act and hence the details regarding the same are not provided.
7
Leases: A. Operating Lease Taken: Particulars Amount due within one year from the balance sheet date Amount due in the period between one year and five years Amount due later than five years
PART - A 30-09-2011 31-03-2011 Consolidated Consolidated
PART - B (STAND ALONE) 31-Mar31-Mar31-Mar31-Mar11 10 09 08
30-Sep11
31-Mar07
4,036,597
-
-
-
-
-
-
-
11,123,339 -
-
-
-
-
-
-
-
PART - B (STAND ALONE) 31-Mar31-Mar31-Mar31-Mar11 10 09 08 -
31-Mar07 -
The Following Lease payments are recognized in Profit and Loss Account: PART - A 30-09-2011 31-03-2011 Lease Rent Consolidated Consolidated Rental Expenses 7,271,472 2,876,520
30-Sep-11 -
General description of the leasing arrangement: Related to the Subsidiary Company i) Leased Assets: Premises ii)Future lease rentals are determined on the basis of agreed terms.
140
iii) At the expiry of the lease term, the Company has an option extend the term by givingnotice in writing. 8
The break up of deferred tax assets and liabilities is as under: PART - A Deferred Tax Asset/(Liability) 30-09-2011 31-03-2011 Consolidated Consolidated Timing difference on account of Depreciation 1,824,538 2,609,650 Provision for Gratuity (664,100) (726,315) Disallowance under Sec 40(a) Business Losses Net deferred tax Liability/(Asset) 1,160,438 1,883,335
30-Sep-11 1,824,538 (664,100) 1,160,438
PART - B (STAND ALONE) 31-Mar31-Mar31-Mar31-Mar11 10 09 08 2,609,650 (726,315) 1,883,335
997,787 (695,759) 302,028
-
9
Quantitative details of Raw materials and components Consumed : Not Applicable
10
Goodwill on consolidation represents the excess of purchase consideration over the Holding Company’s Share in fair value of subsidiary’s equity
11
Preliminary Expenses and Trade Mark has been written off fully in the year 2008 itself for the purpose of restatement of financials
12
Finance Charges are net of interest income
13
MAT Credit has been recognised in the year in which the same was applicable
14
Figures are rounded off to the nearest rupee.
141
-
31-Mar07 950,483 950,483
Annexure V - Summary Statement of Cash Flow, from Restated Financial Statement PART - A Consolidated For the Half year ended 30th September 2011
Particulars
CASH FLOW FROM OPERATING ACTIVITIES Net Profit/(Loss) before Taxation Adjustments for : Depreciation Exchange Difference on translation of Foreign currency Cash & Cash Equivalents ROC Exp for increase in Authorised Capital Financial Charges Operating Profit before Working Capital Changes Adjustment of Translation differences on working capital Decrease (Increase) in Sundry Debtors Decrease (Increase) in Closing Work-in-Progress Decrease (Increase) in Loans & Advances (Increase)/Decrease in other current assets (Decrease) Increase in Current Liabilities & Provisions Cash Generated from Operations Taxes Paid (net of refund) Net Cash from Operating Activities (A) CASH
FLOW
FROM
(Amount in `) PART - B (STAND ALONE) For the period ended 30th September 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
32,347,643
25,429,661
19,350,916
29,964,437
17,539,252
4,609,233
2,767,159
11,583,194
3,646,773
11,020,656
4,111,050
2,435,002
4,380,366
3,607,179
(1,007,463) 8,374,150
5,804,080
125,000 6,987,320
1,602,406
3,874,356
2,925,780
786,915
51,297,524
34,880,514
37,483,892
35,677,893
23,848,610
11,915,379
7,161,253
2,001,492 (12,006,070) (1,006,228) 2,803,439 (2,598,669)
(37,573,666) (1,006,228) 2,803,439 (737,809)
12,444,089 (127,785) 94,551 668,326
(15,503,692) 4,730,316 (4,081,582) (1,487,622)
1,309,544 (2,921,970) (3,318,905) -
(8,221,614) (2,473,680) (4,403,185) -
(13,603,177) 18,845 -
(2,654,893)
1,478,338
1,565,019
5,112,587
6,206,867
1,067,366
3,001,426
37,836,595 (4,823,932) 33,012,663
(155,412) (2,419,200) (2,574,612)
52,128,092 (4,946,622) 47,181,470
24,447,901 24,447,901
25,124,145 (84,600) 25,039,545
(2,115,734) (91,195) (2,206,929)
(3,421,653) (382,928) (3,804,581)
INVESTING
142
ACTIVITIES Purchase of Fixed Assets Conversion of receivables from Prelude Systems Inc into equity shares of prelude system Inc Increase In Fixed Deposits Preliminary Expenses incurred (Increase) / Decrease In Capital Work in progress (Increase) in Investments Net Cash Flow from Investing Activities (B) CASH FLOW FROM FINANCING ACTIVITIES. Proceeds from share application money/share capital Increase in unsecured Loans Decrease in unsecured loans Repayment of longterm borrowings Proceeds from long term borrowings ROC Exp for Increase of authorised share capital Financial Charges Paid Net Cash from Financing Activities (C) Net increase in cash and cash equivalents (A+B+C) Cash and Cash equivalents: Beginning Exchange Difference on translation of Foreign currency Cash & Cash Equivalents At the end of the year Net increase in cash and cash equivalents (A+B+C)
(42,830,416)
(2,151,282)
(797,879)
(3,074,279)
(51,395,807)
(20,421,978)
(13,184,671)
-
-
(502,317) (43,332,732)
(502,317) (2,653,598)
(13,675,106) (223,000) (12,832,655) (36,721,171) (64,249,811)
(16,304,513) (18,386,550) (37,765,342)
3,417 (4,849,500) (56,241,890)
(216,903) (3,925,002) (24,563,883)
(13,184,671)
12,672,672 (1,466,295) (275,924,189) 283,117,697 (8,374,150) 10,025,735
12,672,672 (331,023) (9,500,211) 2,983,000 (5,804,080) 20,357
5,017,825 4,932,814 (11,475,252) 24,818,777 (125,000) (6,987,320) 16,181,844
12,971,940 (6,187,819) 12,337,398 (1,602,406) 17,519,113
8,000,000 (11,816,453) (2,875,496) 24,472,701 (3,874,356) 13,906,396
5,900,000 10,091,554 (3,008,954) 34,550,209 (2,925,780) 44,607,030
15,400,000 2,026,403 (887,162) 2,795,051 (786,915) 18,547,376
(294,334)
(5,207,853)
(886,497)
4,201,672
(17,295,948)
17,836,218
1,558,124
16,655,849
6,243,067
7,129,564
2,927,891
20,223,840
2,387,622
829,498
1,007,463 17,368,978
1,035,214
6,243,067
7,129,564
2,927,891
20,223,840
2,387,622
713,129
(5,207,853)
(886,497)
4,201,672
(17,295,948)
17,836,218
1,558,124
143
Annexure VI - Schedule of Secured Loan, as Restated (Amount in `) Particulars
PART - A Consolidated for the year ended 30th Sept 2011
Consolidated for the year ended 31st March 2011
for the year ended 30th Sept 2011
PART - B (STAND ALONE) 31st March, 31st March, 31st March, 2011 2010 2009
31st March, 2008
31st March, 2007
Payable to Promoter / Promoter Group Companies Payable to Banks & NBFCs 141,333,214 124,056,816 59,573,132 62,010,595 63,865,784 56,972,701 35,375,496 3,834,241 Payable to Others Total 141,333,214 124,056,816 59,573,132 62,010,595 63,865,784 56,972,701 35,375,496 3,834,241 For principal terms & conditions of the term loans including assets charged as security, etc, please refer to page no. 91 to 93 on Financial Indebtedness of our company.
144
Annexure VII - Schedule of Unsecured Loan, as Restated Particulars
Payable to Promoter / Promoter Group Companies* Payable to Others
(Amount in `) PART - B (STAND ALONE) 31st 31st 31st 31st March, March, March, March, 2010 2009 2008 2007
Consolidated for the year ended 30th Sept 2011
PART -A Consolidated for the year ended 31st March 2011
For the year ended 30th Sept 2011
31st March, 2011
29,443,565
31,655,426
12,233,842
14,928,777
1,633,000
-
-
-
8,444,986
9,068,251
5,996,486
6,835,751
-
301,504
12,117,957
2,026,403
37,888,551
40,723,677
18,230,328
21,764,528
1,633,000
301,504
12,117,957
2,026,403
Total *Promoter Group Co. Consist of : Rajamannar Abboy Rangesh Rajaram MAT Exim (India) Pvt Ltd Ramjee Kasturirangan Manoj KumarChandra Chandramohan Parlapalli Kiranbabu.C.
2,162,000 2,000,000 2,162,000 2,000,000 10,071,842 11,378,777 10,071,842 11,378,777 - 1,633,000 9,833,127 8,965,675 7,119,259 7,526,338 257,337 234,636 1,550,000 1,550,000 29,443,565 31,655,426 12,233,842 14,928,777 1,633,000 Note: For unsecured loans from promoters, interest is @18% p.a.. All the unsecured loans are not for any fixed tenure other than loans from NBFCs and hence they can be recalled by the lenders at anytime. For further details on terms & conditions, please refer to page 91 on the Financial Indebtedness of the Company
145
Annexure VIII - Schedule of Investments, as Restated
Particulars
Consolidated for the year ended 30th Sept 2011
PART - A Consolidated for the year ended 31st March 2011
(Amount in `) PART - B (STAND ALONE) for the year ended 30th Sept 2011 2011
Promoter / Promoter Group Companies - Prelude Systems Inc, USA - Subsidiary Company Others Total
12,242,500 12,242,500
11,162,500 11,162,500
146
77,557,329 77,557,329
77,557,329 77,557,329
As on 31st March 2010 2009 9,038,500 9,038,500
8,774,502 8,774,502
2008
2007
3,925,002 3,925,002
-
Annexure IX Schedule of Debtors, as Restated (Amount in `) PART - B (STAND ALONE) As on 31st March
PART - A Consolidated
Particulars
More than six months
Less than six months
Considered good Receivable from Promoter/ Promoter Group Co. Receivable from Others Less: Provision TOTAL(A) Considered good Receivable from Promoter/ Promoter Group Co Prelude Systems Inc, USA Subsidiary Company Receivable from Others Less: Provision TOTAL (B) TOTAL (A+B)
for the period ended 30th Sept 2011
Consolidated
for the year ended 31st March 2011
Standalone for the period ended 30th Sept 2011
38,054 38,054
85,578 85,578
153,139,000
129,011,943
153,139,000 153,177,054
129,011,943 129,097,521
2011
2010
2009
2008
2007
-
-
-
-
-
-
38,054 38,054
85,578 85,578
40,205 40,205
605,711 605,711
767,061 767,061
-
34,220,439 1,758,296
16,226,477 3,683,060
35,978,735 36,018,940
19,909,537 20,515,248
57,440,488 3,669,974 61,110,462 61,148,516
147
19,264,390 4,224,882 23,489,272 23,574,850
16,583,087 4,474,644 21,057,731 21,824,792
12,913,884 689,293 13,603,177 13,603,177
Annexure X - Schedule of Loans & Advances and Other Current Assets, as Restated
Particulars
Receivable from Promoter/ Promoter Group Companies / Director Receivable from other body corporate VAT & other taxes refund receivable and deposit for VAT registration and sales tax Advances recoverable in cash or in kind or for value to be received Deposits given to landlords, telephone, etc. Total
PART - A Consolidate Consolidated d for the for the year year ended ended 30th 31st March Sept 2011 2011
(Amount in `) PART - B (STAND ALONE) As on 31st March
Standalone for the year ended 30th Sept 2011
2011
2010
2009
2008
2007
86,738
1,391,756
86,738
1,391,756
-
91,622
-
-
3,635,847
4,034,519
3,635,847
4,034,519
4,237,488
3,241,369
1,359,625
29,948
11,552,872
14,894,496
6,866,590
12,133,205
29,325,971
6,073,626
209,792
186,615
1,461,761 16,737,218
1,449,565 21,770,336
1,142,000 11,731,175
1,343,121 18,902,601
1,158,704 34,722,163
1,175,000 10,581,617
4,452,618 6,022,035
1,192,495 1,409,058
Annexure XI - Schedule of Other Income, as Restated (Amount in `)
Particulars
Credit reversal Exchange Gain Miscellaneous Income Total
Consolidated for the year ended 30th Sept 2011 1,655,084 1,655,084
Consolidated for the year ended 31st March 2011 218,349 218,349
Standalone for the year ended 30th Sept 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
1,655,084 1,655,084
218,349 218,349
692,746 36,200 728,946
-
211,833 211,833
61,985 61,985
148
Annexure XII - Statement of Dividend (Amount in `) PART - B (STAND ALONE)
PART - A Particulars
Equity shares Weighted average number of shares Face value (`) Paid-up value (`) Rate of dividend Total dividend (`) Corporate dividend tax on above (`)
Consolidated for the year ended 31st March 2011
Consolidated for the year ended 30th Sept 2011 12,674,294 10/10/-
Standalone for the year ended 30th Sept 2011
12,579,809 10/10/-
12,674,294 10/10/-
Particulars Borrowings : Short term Debts Long term Debts Total Debts Shareholders Funds: Share Capital Reserves & Surplus Total Shareholders' Funds Long term Debt/ Equity ratio
Pre issue as at 30th September 2011 Standalone
12,579,809 10/10/-
Annexure XIII - Statement of Capitalization Pre issue as at 30th September 2011 Consolidated
2011
Adjusted for present issue
26,661,890 152,559,875 179,221,765
26,661,890 51,141,570 77,803,460
-
127,245,080 32,656,513 159,901,593 0.95
127,245,080 26,047,636 153,292,716 0.33
[●] [●] [●] [●]
149
2010
10,763,721 10/10/-
2009
2008
8,259,809 10/10/-
2007
8,120,137 10/10/-
7,539,809 10/10/-
Annexure XIV - Significant Accounting Ratios (Amount in `) Particulars Equity shares Net Profit after Tax No. of Equity shares (weighted) BASIC EARNINGS PER SHARE (EPS) (`) No. of Equity shares (weighted) DILUTED EARNINGS PER SHARE (EPS) (`) NET ASSETS VALUE (NAV) Net Assets No. of Equity shares (weighted) NAV PER SHARE RETURN ON NET WORTH Net Profit after Tax Net Worth RETURN ON NET WORTH
PART - A Consolidated Consolidated - September - March 2011 2011
PART - B (STAND ALONE) Sep 2011
2011
2010
2009
2008
2007
21,981,923 12,674,294
16,985,830 12,579,809
17,831,466 12,674,294
16,985,713 12,579,809
28,626,917 10,763,721
18,223,997 8,259,809
5,440,910 8,120,137
1,759,944 7,539,809
1.73 12,674,294
1.35 12,599,520
1.41 12,674,294
1.35 7,509,711
2.66 10,763,721
2.21 8,259,809
0.67 8,120,137
0.23 7,539,809
1.73
1.35
1.41
2.26
2.66
2.21
0.67
0.23
159,901,593 12,674,294 12.62
123,060,012 12,579,809 9.78
153,292,716 12,674,294 12.09
123,740,631 12,579,809 9.84
106,754,919 10,763,721 9.92
57,228,001 8,259,809 6.93
16,704,004 8,120,137 2.06
4,063,094 7,539,809 0.54
21,981,923 159,901,593 0.14
16,985,830 123,060,012 0.14
17,831,466 153,292,716 0.12
16,985,713 123,740,631 0.14
28,626,917 106,754,919 0.27
18,223,997 57,228,001 0.32
5,440,910 16,704,004 0.33
1,759,944 4,063,094 0.43
The Ratios have been computed as per the following formula: a) Earning per Equity Share:- (Adjusted Net Profit after tax)/ (weighted average number of Equity shares). b) Net Asset Value/ Net worth: - (Adjusted Net assets after reduction of miscellaneous expenditure not written off)/ (Number of equity shares at the end of accounting period). c) Return on Net Worth :- (Adjusted Net Profit After Tax /Adjusted Equity Share holders fund after reduction of Miscellaneous expenditure not written off at the end of the year) Net Profit, as restated and appearing in the statement of profit and losses has been considered for the purpose of computing the above ratios. These ratios are computed on the basis of the restated financial statements of the company Earning per share calculations have been done in accordance with Accounting standard- 20 "Earning per share" issued by the Institute of Chartered Accountants of India.
150
Annexure XV - Transaction with Related Parties Particulars
Category of related party
For the year ended 31st March 2009
For the year ended 31st March 2008
(Amount in `) For the year ended 31st March 2007
94,470,373
60,001,266
62,291,242
50,561,685
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,223,718
3,462,840
3,782,744
1,644,750
540,000
1,450,000
1,805,000
-
-
-
-
-
-
49,933,380
-
44,900,000
22,300,000
7,200,000
-
-
-
-
-
-
-
5,970,000 -
-
43,233,000 -
255,572 -
4,500,000 -
16,500,000 -
-
-
1,633,000
-
-
-
1,623,000
15,328,777
-
-
-
-
-
-
-
-
-
-
For the year ended 30th September 2011
For the year ended 31st March 2011
75,539,073
113,313,325
-
For the year ended 31st March 2010
Sales: Goods and services
Related Parties referred in (A) Below Related Parties referred in (B) Below
Expenses: Related Parties referred (A) Below Related Parties referred in (B) Below Related Parties referred (A) Below Incurred for related parties: Related Parties referred in (B) Below Related Parties referred (A) Below Equity Shares issued Related Parties referred in (B) Below Related Parties referred Share (A) Below Application Related Parties referred in money received (B) Below Advances and Loan taken/repayment Related Parties referred (A) Below Unsecured loan taken Related Parties referred in (B) Below Related Parties referred Advances given (A) Below
in
Incurred by related parties:
in
in
in
in
in
151
Unsecured loan repayment Refund of advance Equity Shares of Prelude Systems Inc (Subsidiary) Purchased Dues received Outstandings:
Related Parties referred in (B) Below Related Parties referred (A) Below Related Parties referred in (B) Below Related Parties referred (A) Below Related Parties referred in (B) Below Related Parties referred (A) Related Parties referred in (B) Related Parties referred (A) Below Related Parties referred in (B) Below
-
-
-
-
-
-
-
1,633,000
-
-
-
-
4,871,967
2,400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,677,106
9,038,500
-
-
-
-
20,782,739
7,008,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,633,000
-
-
-
-
-
50,740
-
-
-
-
34,220,439
16,226,477
16,583,087
12,913,884
-
-
-
-
in
in
in
in
Related Parties referred in (A) Below Related Parties referred in (B) Below 12,233,842 14,928,777 Related Parties referred in Payable for (A) 21,060,072 19,261,828 services & Related Parties referred in purchases (B) Below Related Parties referred in (A) Below 57,440,488 19,264,390 Receivable Related Parties referred in (B) Below Note: Related party disclosures are identified by the management and relied upon by the auditors Unsecured loan payable
A.
For the period ended 30th March 2011 Enterprises owned or significantly influenced by key management
152
Subsidiary company Associate companies B.
personnel or their relatives Prelude System Inc, USA MAT Exim (India) Pvt Ltd Key Management Personnel & their relatives P Chandramohan - Managing Director Rangesh Rajaram - Wholetime Director Kiran Babu Chandra - Promoter Manoj Kumar Chandra - Promoter Rajamannar Abboy - Promoter Director Kasturirangan Ramji - Promoter Ramki Ramakrishnen - Promoter
Annexure XVI - Statement of Segment Reporting For the year ended 31-03-2011 Particulars Revenues Identifiable Operating Expenses Allocated Expenses Segmental Operating Profit Un Allocable Expenses Operating Income Other Income (net) Net Profit before taxes and exceptional items Income Taxes incl deferred Tax & Mat Credit Net Profit after taxes before exceptional items Exceptional Item Net Profit after taxes and exceptional items
Software Services 55,473,478 23,564,092 16,013,292 15,896,093
BPO 67,953,153 24,986,476 22,703,257 20,263,421
Geographical Segments - Year ended 31st March 2011 Particulars USA
( Amounts In ` ) Revenues 113,313,326
153
Staffing 6,515,243 3,554,650 1,940,006 1,020,587
(Amount in `) Total 129,941,874 52,105,218 40,656,556 37,180,101 18,175,319 19,004,782 346,134 19,350,916 2,365,203 16,985,712 16,985,712
India Singapore Middle East Total
For the year ended 30th September 2011 Segmental Operating Profit Revenues Identifiable Operating Expenses Allocated Expenses Segmental Operating Profit Un Allocable Expenses Operating Income Other Income (net) Net Profit before taxes and exceptional items Income Taxes Net Profit after taxes before exceptional items Exceptional Item Net Profit after taxes and exceptional items Geographical Segments Year ended 30th September 2011 Particulars USA India Total
15,627,815 689,172 311,561 129,941,874
Software Services 52,714,387 13,416,499 10,780,623 28,517,266
BPO 28,989,312 19,496,450 5,928,606 3,564,256
( Amounts In ` ) Revenues 75,539,073 7,580,010 83,119,083
154
Staffing 1,415,384 988,243 289,460 137,681
Total 83,119,083 33,901,192 16,998,689 32,219,202 8,893,249 23,325,953 2,826,604 26,152,557 8,321,092 17,831,465 17,831,465
Consolidated Segment Reporting for the year ended 30-09-2011 Particulars Software Services Revenues 99,378,319 Identifiable Operating Expenses 46,177,638 Allocated Expenses 21,480,388 Segmental Operating Profit 31,720,293 Un Allocable Expenses Operating Income Other Income (net) Net Profit before taxes and exceptional items Income Taxes Net Profit after taxes before exceptional items Exceptional Item Net Profit after taxes and exceptional items Consolidated Geographical Segments Period ended 30th September 2011 Particulars USA India Total
BPO 30,063,028 16,086,274 9,379,466 4,597,288
Staffing 310,427,644 263,911,419 35,760,202 10,756,023
Total 439,868,992 326,175,331 66,620,056 47,073,605 16,829,670 30,243,935 2,826,604 33,070,539 11,088,618 21,981,921 21,981,921
( Amounts In ` ) Revenues 432,288,982 7,580,010 439,868,992
Notes: 1. The Segmental reporting for the earlier periods were not given since the Company was an SMC for those periods as per Accounting Standard 17 and accordingly the same was not applicable. 2. Fixed assets used in the business or liabilities contracted have not been identified for any of the reportable segments, as the Fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made. 3. For the period ended 31-03-2010, since there is no income & expenditure of subsidiary has been considered, the same standalone segment report will apply to consolidation also.
155
Annexure XVII Statement of Tax Shelter
Particulars Profit before current and deferred taxes, as restated Profit before current and deferred taxes(A) Adjustments : Add: Permanent Differences Expenses disallowed u/s 40 Expenses disallowed u/s 43 (B) Others Total (B) Less: Temporary Differences Difference between tax depreciation and book depreciation P F/ Gratuity payable Others Total (C ) Business Profit / Loss (A+B-C) TOTAL INCOME Set-off of brought forward unabsorbed loss /depreciation Exemption u/s.10 Taxable Profit Book Profit Tax Liability on above or on Book Profit u/s 115 JB Tax as per P/L A/c Adjusted Tax Provision Carried forward unabsorbed loss as on 31st March
For the Assessment Year 2011 -12
(Amount in `) For the For the Assessment Assessment Year 2010 -11 Year 2009 -10
For the Assessment Year 2008-09
For the Assessment Year 2007 -08
19,350,916 19,169,307
29,964,437 29,936,540
17,539,252 17,511,355
4,609,233 4,609,233
2,767,159 2,767,159
630,185 630,185
225,000 225,000
57,565 57,565
27,353 27,353
402 402
2,766,601 2,766,601 17,032,891
(345,631) (2,312,261) (2,657,892) 32,819,432
(723,487) (723,487) 18,292,407
141,791 141,791 4,494,795
1,827,270
17,032,891 14,480,373 2,552,518 19,221,086 3,830,859 3,830,859 -
32,819,432 29,473,253 3,346,179 32,261,018 5,482,760 5,484,282 -
18,292,407
4,494,790 4,494,790 NIL NIL -
156
18,292,407 1,984,036 -
1,827,270 940,291 940,291 940,291 316,502 317,048 -
MANAGEMENT DISCUSSION AND ANALYSIS You should read the following discussion and analysis of our financial condition and results of operations together with our restated financial statements and the annexures and notes thereon, included in the Draft Red Herring Prospectus, under the chapter titled “Financial Information of Our Company” on page 129 of the Draft Red Herring Prospectus, which presents important financial and statistical information about our Company’s business. You should also read the chapter titled “Risk Factors” on page 11 of the Draft Red Herring Prospectus, which discusses a number of factors and contingencies that could impact our financial condition and results of operations. This discussion also contains forward looking statements and you should refer to the chapter titled “Forward-Looking Statements” on page 10 of the Draft Red Herring Prospectus. The following discussion is based on internally prepared statistical information and on publicly available information. Our financial year ends on March 31, so all references to a particular financial year are to the twelve-month period ended March 31. The following discussion relates to our Company and is based on our standalone restated financial statements, as of and for the for the years ended 31st March 2007, 2008, 2009, 2010, 2011 & six months ended 30th September 2011 and consolidated restated financial statements, as of and for the for the year ended 31st March 2011 & six months ended 30th September 2011, which have been prepared in accordance with Indian GAAP, the accounting standards referred to in section 211(3C) of the Companies Act,1956 and other applicable legal provisions. Certain industry, technical and financial terms used in this discussion shall have the meanings ascribed to them in the chapter titled "Definitions and Abbreviations" on page 1 of the Red Herring Prospectus. Overview: Significant Developments Subsequent to the Last Financial Year The directors of our Company confirm that in their opinion no circumstances have arisen since the date of the last financial statements as disclosed in this Offer Document, which materially and adversely affect or are likely to affect the trading or profitability of our Company, or the value of our assets, or our ability to pay our liabilities within the next twelve months. Factors Affecting Our Results of Operations Our financial condition and results are affected by numerous factors including the following: General Economic and Business Conditions: Any deterioration of economic conditions in US, Europe and Asia. Brand Image: Relatively young and unfamiliar brand can be a challenge. Competition: With new companies and new geographies entering the IT services market, the competition is bound to increase. Pricing Pressures: With increasing competition pricing pressure is bound to continue. Consumer Demographics: With significant youth population which adopts technology with ease, there are more opportunities and the increasing youth population also fulfills the skill demand of the industry. Regulatory Changes: Unfavorable changes to regulatory framework in US and Europe which can impact outsourcing and offshoring.
157
Management Discussion & Analysis Significant items of Income and expenditure (as per the format of the restated accounts) (Amount in `) PART - A Particulars
INCOME Services provided Export Domestic Sale of Licenses & AMC Export Domestic Total Sales Other Income Increase/(Decrease) in Stock Total Income EXPENDITURE Cost of goods sold (Purchase of License & AMC) % of Total Sales % of Total Expenditure Staff Costs % of Total Expenditure Administration expenses % of Total Expenditure Selling & Distribution expenses % of Total Sales % of Total Expenditure
PART – B
Consolidated for the year ended 31st March 2011
For the year ended 30th Sept 2011
For the year ended 31st March 2011
For the year ended 31st March 2010
For the year ended 31st March 2009
For the year ended 31st March 2008
For the year ended 31st March 2007
432,288,982 4,860,276
114,314,059 9,703,590
75,539,073 4,860,276
114,314,059 9,703,590
109,045,273 8,920,072
82,501,906 7,600,708
71,633,326 6,921,572
50,561,685 6,203,798
2,719,734 439,868,992 1,655,084 1,006,228 442,530,304
5,924,225 129,941,874 218,349 127,785 130,288,008
2,719,734 83,119,083 1,655,084 1,006,228 85,780,395
5,924,225 129,941,874 218,349 127,785 130,288,008
1,904,515 119,869,860 728,946 (4,730,316) 115,868,490
4,203,845 94,306,459 2,921,970 97,228,429
1,695,000 80,249,897 211,833 2,473,680 82,935,410
56,765,483 61,985 56,827,468
1,996,371 0.45% 0.49% 359,248,421 87.58% 40,306,008 9.83% 362,145 0.08% 0.09%
5,455,093 4.20% 4.92% 70,044,895 63.14% 28,408,443 25.60% 41,224 0.03% 0.04%
1,996,371 2.40% 3.31% 36,246,571 60.06% 16,301,595 27.01% 2,117 0.00% 0.00%
5,455,093 4.20% 4.92% 70,044,895 63.14% 28,408,560 25.61% 41,224 0.03% 0.04%
1,640,710 1.37% 1.91% 60,583,444 70.52% 21,201,200 24.68% 147,347 0.12% 0.17%
3,798,930 4.03% 4.77% 53,484,897 67.12% 18,895,415 23.71% 176,482 0.19% 0.22%
2,017,044 2.51% 2.58% 51,494,053 65.74% 21,998,273 28.09% 246,361 0.31% 0.31%
0.00% 0.00% 25,473,857 47.12% 27,426,762 50.73% 374,573 0.66% 0.69%
Consolidated for Half year ended 30th Sept 2011
158
Finance Charges % of Total Expenditure Total Expenditure % of Total Income Net Profit before Taxes& Extraordinary items % of Total Income Taxation Less: Provision for current tax (including Wealth tax ) Less: Provision for deferred tax (net) Less : Provision for Fringe Benefit tax Effect of adjustments on tax Add: MAT Credit Net Profit before Extraordinary items Less: Extraordinary items* Pre operative expenses Net Profit/ (loss) after tax % of Total Income (*): Includes income and expenses of Preoperative period.
8,269,716 2.02% 410,182,661 92.69% 32,347,643 7.31% -
6,987,320 6.30% 110,936,975 85.15% 19,351,033 22.56% -
5,804,080 9.62% 60,350,734 70.35% 25,429,661 19.52% -
6,987,320 6.30% 110,937,092 85.15% 19,350,916 14.85% -
2,331,352 2.71% 85,904,053 74.14% 29,964,437 25.86% -
3,333,453 4.18% 79,689,177 81.96% 17,539,252 18.04% -
2,570,447 3.28% 78,326,177 94.44% 4,609,233 5.56% -
785,117 1.45% 54,060,309 95.13% 2,767,159 4.87% -
11,088,618 (722,897) 21,981,923 21,981,923 4.97%
3,830,859 1,581,307 3,046,963 16,985,830 16,985,830 19.80%
8,321,092 (722,897) -
3,830,859 1,581,307 3,046,963 16,985,713 16,985,713 13.04%
5,484,282 302,028 4,448,790 28,626,917 28,626,917 24.71%
474,750 81,182 1,240,677 18,223,997 18,223,997 18.74%
(950,483) 91,195 209,792 5,678,313 237,403 5,440,910 6.56%
317,048 624,287 65,880 1,759,944 1,759,944 3.10%
17,831,466 17,831,466 13.69%
159
Consolidated: Review of consolidated results for the six months ended 30th September 2011 versus the consolidated financial year ended 31st March 2011: The consolidated results for the six months ended 30th September 2011 is not comparable with the consolidated results for the FY ended 31st March 2011 as the consolidation has been effected by combining the results of PreludeSys India Limited for FY 2011 & for the foreign subsidiary, Prelude Systems Inc., USA for one day as the acquisition was completed only on 30th March 2011. Standalone: Review of standalone results for the six months ended 30th September 2011 versus the financial year ended 31st March 2011: For the purpose of comparison & analysis, the annualized figures of 30th September 2011 have been taken into consideration. Sales: Total sales for the six months period ended 30th September 2011 was at ` 831 Lakhs as compared to ` 1299 Lakhs for the whole of FY 2011. Comparing the annualized figures, the total income had gone up by 28%. This is mainly on account of increase in revenues from software services which has clocked in an increase of 32%. Other Income: The other income had gone up from ` 2 Lakhs to ` 16.55 Lakhs for the six months ended 30th September 2011. This was due to the rupee depreciation, there is a forex gain. As result, there is a substantial increase when compared to last year. Expenditure: During the year, the total expenditure has increased by 9% from ` 1109 Lakhs to ` 1207 Lakhs on an annualized basis. Cost of goods sold: Cost of goods sold with respect to licenses and AMCs has decreased by 27% on an annualized basis when compared to FY 2011 as against 8.18% decrease in income from sale of licenses & AMC in the domestic market. Staff expenses: Staff expenses increased marginally by 3.5% i.e. from ` 700 Lakhs to ` 725 Lakhs, annualised when compared to last year. As a percentage to total expenditure, the same has come down from 63% to 60%. Administration expenses: Administration expenses increased by over 14 % from ` 284 Lakhs to ` 326 Lakhs, annualised. The major component for the increase is certain consultancy charges and general office expenses paid during the period. Selling and Distribution expenses: Selling and Distribution expenses decreased considerably when compared to last year mainly on account of advertisement expenses being quite negligible. Finance charges: Finance charges have gone up by 66%. This is on account of the borrowing costs in respect of loan from SIDBI and IDBI has been charged to revenue in the current period due to suspension of work at Siruseri whereas in the previous year, it was capitalized as the construction was in progress.
160
PBT/ PAT: There is a significant increase in PBT from ` 193.50 Lakhs to ` 508.59 Lakhs, annualized registering an increase of 162% whereas the PAT has gone up from ` 169.86 Lakhs to ` 356.63 Lakhs, an increase of 109%. This can be attributed to the increase in Sales and rupee depreciation against the dollar. Review of results for the financial year ended 31st March 2011 versus the financial year ended 31st March 2010: Sales: Total Sales were up by 8.4% compared to last year. While the domestic sales & services income went up by 8.78%, the exports raised by only 5%. Less than 10% growth could be completely attributed to the global economic slow down. Other Income: Other income went down from ` 7.29 Lakhs to ` 2.18 Lakhs. The main component of other income i.e. forex gains/ loss contributed to the decrease in the other Income. Expenditure: The total Expenditure increased by over 29% from ` 859.04 Lakhs to ` 1109.37 Lakhs due to the increase of the Cost of Goods, Staff Expenses and Admin Expenses. Cost of goods sold: Cost of goods sold has increased by 232.48% from ` 16.41 Lakhs to ` 54.55 lakhs. This is in tune with the increase in sale of software licenses & AMCs which has gone up by 211%. Staff expenses: Staff expenses have increased by over 15.62 %. However this compares favourably, if we compare the staff costs to total expenditure, it has come down from 70% to 63%. Administration expenses: The administration expenses during FY 2011 have increased from ` 212.01 Lakhs to ` 284.09 Lakhs i.e. an increase of about 34%. However, as a percentage to total expenditure, in both the years, it remained at the same level of 25-26 %. Selling and Distribution expenses: Selling and Distribution expenses have decreased considerably by 72 % due to the amount less spent on advertisements. Finance Charges: Finance charges have gone up from ` 23.31 Lakhs to ` 69.87 Lakhs. The main reason for this is because of the interest paid to SIDBI. The interest expense was capitalized in the previous years as the building in Siruseri IT park was work in progress. During the year 2010-2011, we have stopped the construction work in Siruseri, as a result the interest serviced on this loan was not capitalized. PBT/ PAT: PBT and PAT have decreased by over 35% & 40 % respectively. This is mainly because of the decrease in the margin of profit from 25% to 13% during FY 2011. Review of results for the financial year ended 31st March 2010 versus the financial year ended 31st March 2009: Sales: Total Sales were up by 27% compared to last year. The exports went up from ` 825 Lakhs to ` 1090 Lakhs recording an increase of 32 % whereas the income from domestic services provided went up from
161
` 76 Lakhs to ` 89 Lakhs i.e. increase of 17 %. However the domestic sale of licenses & AMCs went down from ` 42 Lakhs to ` 19 Lakhs. Other Income: The other income for the year was at ` 7.29 Lakhs as against nil in the previous year. The main component of other income i.e. forex gains/ loss contributed to the decrease in the other Income. Expenditure: The total Expenditure increased by over 7.8 % from ` 796.89 Lakhs to ` 859.04 Lakhs. Staff Expenses and Admin Expenses are the main components for the increase in the total expenditure. However the percentage of total expenditure to total income has come down from 81.96% to 74.14%. Cost of goods sold: Cost of goods sold has decreased by 56.81% from ` 37.98 Lakhs to ` 16.41 Lakhs with respect to the purchase of license and AMC. Staff expenses: Staff expenses have increased by over 13.27 % i.e from ` 534.85 Lakhs in the previous year to ` 605.83 lakhs in the current year. As a percentage to total expenditure, the staff costs have gone up marginally from 67% to 70 %. Administration expenses: The administration expenses during FY 2010 have increased from ` 188.95 Lakhs to ` 212.01 Lakhs i.e. an increase of about 12%. However, as a percentage to total expenditure, in both the years, it remained at the same level of 24-25 %. Selling and Distribution expenses: Selling and Distribution expenses have decreased by 16.51 % from ` 1.76 Lakhs to ` 1.47 Lakhs. Finance Charges: Finance charges have gone down from ` 33.33 Lakhs to ` 23.31 Lakhs registering a decline of 30%. As a percentage to total expenditure, it has come down from 4.18% to 2.71 % PBT/ PAT: PBT and PAT have increased by over 70% & 57 % respectively. This can be attributed to increase in sales and the higher margin of profit at 25% as compared to 18% in the previous year. Review of results for the financial year ended 31st March 2009 versus the financial year ended 31st March 2008: Sales: Sales were up by over 17.5% when compared to last year. During the year export services went up from ` 716 Lakhs to ` 825 lakhs registering an increase 15.17 & whereas income from domestic services went up by 10%. The income from sale of licenses in India had gone up from ` 16.95 Lakhs to ` 42.03 Lakhs i.e. up by 148%. Other Income: As against ` 2.12 Lakhs of Other Income in FY 2008, there was Nil income in FY 2009. Expenditure: The total Expenditure increased marginally by 1.74 % from ` 783.26 Lakhs to ` 796.89 Lakhs. As a percentage of total expenditure to total income, it has come down from 94.44% to 81.96% which has helped in increasing the margin of profit from 5.56% in the previous year 18.04% in the current year.
162
Cost of goods sold: Cost of goods sold with respect to the license and AMC has increased from ` 20 lakhs to ` 38 Lakhs i.e. an increase by ` 18 Lakhs as against an increase of ` 25 Lakhs in the income from sale of licenses & AMC. Staff expenses: Staff expenses have increased marginally by 3.87 % i.e. from ` 515 Lakhs in the previous year to ` 534.85 lakhs in the current year. As a percentage to total expenditure, the staff costs have gone up from 65.74% to 67.12 %. Administration expenses: The administration expenses during FY 2009 have decreased from ` 220 Lakhs to ` 189 Lakhs i.e. a decrease of about 14%. However, as a percentage to total expenditure, in both the years, it was at 28 & 24 % respectively. Selling and Distribution expenses: Selling and Distribution expenses have decreased from ` 2.46 Lakhs to ` 1.76 Lakhs. Finance Charges: Finance charges have gone up from ` 25.70 Lakhs to ` 33.33 Lakhs registering an increase of 30%. As a percentage to total expenditure, it has gone up from 3% to 4 %. PBT/ PAT: PBT and PAT have increased significantly by 280% & 221 % respectively. This can be attributed to substantial increase in the margin of profit from 6% to 18% in the current year.
163
Quantitative and Qualitative Disclosures about Market Risk 1.
Unusual or infrequent events or transactions: There have been no unusual or infrequent events or transactions that have taken place during the past accounting periods presented in the offer document.
2.
Significant economic changes that materially affected or are likely to affect income from continuing operations: There are no significant economic changes that materially affected our Company’s operations or are likely to affect income from continuing operations except, as detailed in the preceding paragraph and as described in the chapter titled “Risk Factors” beginning on page 11 of this Draft Red Herring Prospectus and chapter titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 157 of this Draft Red Herring Prospectus.
3.
Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations. Other than as described in the chapter titled “Risk Factors” beginning on page 11 of this Offer Document and as described under this Chapter, to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on our income from continuing operations.
4.
Future changes in relationship between costs and revenues, in case events such as future increase in labour or material costs or prices that will cause a material change are known. Other than as described in the chapter titled “Risk Factors” beginning on page 11 of this Red Offer Document and as described under this Chapter, to our knowledge there are no future relationship between costs and revenues that have or had or are expected to have a material adverse impact on our operations and finances.
5.
The extent to which material increase on net sales or revenue is due to increased sales volume, introduction of new products or services or increased sales prices. The incremental growth in the sales and revenues of our Company has been on account of sale of licenses, other new products introduced by us and expansion of our bouquet of services. In future too, we expect that new products and services and opening of new Rebirth stores will account for part of the increase in revenues.
6.
Total turnover of each major Industry segment in which our Company operates. Our Company operates in only one industry segment viz. IT & IT enabled services.
7.
Status of any publicly announced new products or business segment. We are in the business of IT & IT enabled services, where we keep introducing new services that appeal to consumers or meet their requirements. Such products are introduced based on product and market research.
8.
The extent to which business is seasonal. Our business is not seasonal and no major cyclical trends are observed in this industry.
9.
Any significant dependence on a single or few suppliers or customers. Our company is not dependent on any single supplier. However, we are dependent on our 100% subsidiary Prelude Systems Inc., USA which ranks as our No. 1 customer.
10. Competitive Conditions For a discussion of the competitive conditions that the company faces, please see the para titled ‘Competition’ on page 157 of this Offer Document.
164
SECTION VIII - LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS Our Company certifies that except as stated herein, there are no: •
Pending litigations against our Company.
•
Outstanding litigations, defaults etc pertaining to matter likely to affect operations and finances of our Company including prosecution under any enactment in respect of Schedule XIII of the Companies Act 1956 (1 of 1956).
•
Such cases of pending litigations, defaults etc in respect of Companies/firms/ventures with which the promoters were associated in the past but are no longer associated, and their names continue to be associated with particular litigation.
•
Disciplinary action/ investigation has been taken by Securities and Exchange Board of India(SEBI)/ Stock Exchanges against our Company, its directors , promoters and their other business ventures (irrespective of the fact whether or not they fall under the purview of section 370(1B) of the Companies Act 1956.
•
Cases against our Company or its Promoters of economic offences in which penalties were imposed on promoters.
•
Pending litigations, defaults, non payment of Statutory dues, proceedings initiated for economic offences/civil offences, any disciplinary action taken by the Board /Stock Exchanges against our Company/Promoters and their business ventures/Directors other than those mentioned in this Offer Document and that no litigations have arisen after the issue of SEBI’s Observation letter and our Company and its Directors take full responsibility of the information mentioned in the Offer Document.
LITIGATIONS Pending litigation (i) (ii) (iii) (iv) (v) (vi) (vii) (viii)
Labour Cases filed against the Company Labour Cases filed by the Company Civil Cases filed against the Company Civil Cases filed by the Company Criminal cases against the company Criminal cases filed by the company Notices served on the Company Tax related matters
: : : : : : : :
Nil Nil Nil Nil Nil Nil Nil Nil
Pending litigation – Promoters (i) Mr. Chandramohan Parlapalli, Managing Director (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters
: : : : :
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Nil Nil Nil Nil Nil
(ii) Mr. Rangesh Rajaram, Whole Time Director (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
(iii) Mr. Rajamannar Abboy, Promoter Director (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters (iv) Mr.Kiran Babu Chandra (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters (v) Mr.Chandra Manoj Kumar (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters (vi) Mr. Ramjee Kasthurirangan (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter (c) Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters (vii) Mr. Ramki Ramakrishnen (a) Criminal case against our promoter (b) Civil Cases Against Our Promoter © Criminal Cases Filed By Our Promoter (d) Civil Case Filed By Our Promoter (e) Cases Relating To Tax Matters
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Pending litigation – For Independent Directors 1. Mr. Sambasivam Sathiyamurthy (a) Criminal case against our Director (b) Civil Cases Against Our Director © Criminal Cases Filed By Our Director (d) Civil Case Filed By Our Director (e) Cases Relating To Tax Matters
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
: : : : :
Nil Nil Nil Nil Nil
2. Mr. Vibhu Natarajan (a) Criminal case against our Director (b) Civil Cases Against Our Director © Criminal Cases Filed By Our Director (d) Civil Case Filed By Our Director (e) Cases Relating To Tax Matters 3. Mr. Kalai Meyyappan Ramalingam (a) Criminal case against our Director (b) Civil Cases Against Our Director © Criminal Cases Filed By Our Director (d) Civil Case Filed By Our Director (e) Cases Relating To Tax Matters
Pending Litigations – Mr. Muthukumar Ramalingam (Alternate director to Mr. Rajamannar Abboy) (a) Criminal case against our Director (b) Civil Cases Against Our Director © Criminal Cases Filed By Our Director (d) Civil Case Filed By Our Director (e) Cases Relating To Tax Matters
: : : : :
Nil Nil Nil Nil Nil
Prelude Systems Inc., USA – 100% subsidiary a. Labour Cases filed against the Company : b. Labour Cases filed by the Company : c. Civil Cases filed against the Company : d. Civil Cases filed by the Company : e. Criminal cases against the company : f. Criminal cases filed by the company : g. Notices served on the Company : h. Tax related matters :
Nil Nil Nil Nil Nil Nil Nil Nil
Pending litigation – Promoter group companies Listed companies – Nil Unlisted companies 1.
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•
•
•
•
Mat Exim India Private Limited a. Labour Cases filed against the Company b. Labour Cases filed by the Company c. Civil Cases filed against the Company d. Civil Cases filed by the Company e. Criminal cases against the company f. Criminal cases filed by the company g. Notices served on the Company h. Tax related matters
: : : : : : : :
Nil Nil Nil Nil Nil Nil Nil Nil
Globalexim Corporation a. Labour Cases filed against the Company b. Labour Cases filed by the Company c. Civil Cases filed against the Company d. Civil Cases filed by the Company e. Criminal cases against the company f. Criminal cases filed by the company g. Notices served on the Company h. Tax related matters
: : : : : : : :
Nil Nil Nil Nil Nil Nil Nil Nil
Indo-Auto Shell American Corporation a. Labour Cases filed against the Company b. Labour Cases filed by the Company c. Civil Cases filed against the Company d. Civil Cases filed by the Company e. Criminal cases against the company f. Criminal cases filed by the company g. Notices served on the Company h. Tax related matters
: : : : : : : :
Nil Nil Nil Nil Nil Nil Nil Nil
Indoshell Precision Technologies, LLC a. Labour Cases filed against the Company b. Labour Cases filed by the Company c. Civil Cases filed against the Company d. Civil Cases filed by the Company e. Criminal cases against the company f. Criminal cases filed by the company g. Notices served on the Company h. Tax related matters
: : : : : : : :
Nil Nil Nil Nil Nil Nil Nil Nil
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Material Developments since the Last Balance Sheet Date Other than the above, in the opinion of the Board of Directors of the Company, there have not arisen, since the date of the last financial statements disclosed in this Offer Document, any circumstance that materially or adversely affect or are likely to affect the profitability of the Company or the value of its assets or its ability to pay its material liabilities within the next twelve months other than as disclosed in the offer document. Amounts due to Small Scale Undertakings and Other Creditors There is no amount outstanding for more than 30 days to small scale and ancillary industrial undertaking provided in the Small Scale and Ancillary, Industrial Undertaking Act, 1992. The information regarding Small Scale Industrial Undertakings have been determined to the extent such parties have been identified on the basis of information available with our company. Adverse Events There has been no adverse event affecting the operations of our Company occurring within one year prior to the date of filing of this Draft Red Herring Prospectus with the Registrar of Companies.
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GOVERNMENT APPROVALS/ LICENSING ARRANGEMENTS We believe our Company has received the necessary licenses, permissions and approvals from the Central and State Governments of India and other government agencies/certification bodies required for its business and no other approvals are required by our Company for carrying on its present business activities. It must, however, be distinctly understood that in granting the above approvals, the Government and other authorities do not take any responsibility for the financial soundness of our Company or for the correctness of any of the statements or any commitments made or opinions expressed. In view of the approvals listed below, our Company can undertake this Issue and its current business activities and no further major approvals from any statutory authority are required to continue those activities. The following statement sets out the details of licenses, permissions and approvals taken by our Company under various Central and State Laws for carrying out its business. Sl. Issuing No. Authority 1. Registrar of Companies, Tamil Nadu, Chennai 2.
3. 4. 5.
6.
7. 8.
9.
10.
Registration/ License No. 18-41576 of 1998
Nature of Registration/ License Certificate of Incorporation in the name of M/s Prelude Solution Providers Private Limited Registrar of CIN No. Fresh Certificate of Companies, Tamil U72300TN1998PT041576 Incorporation in the name of Nadu, Chennai PreludeSys India Private Limited Registrar of CIN No. Fresh Certificate of Companies, Tamil U72300TN1998PT041576 Incorporation in the name of Nadu, Chennai PreludeSys India Limited Director of Income Tax, AABCP7252K Permanent Account Number Government of India of PreludeSys India Limited 33830862547 Commercial Tax Tax Payer’s Department, Tamil Identification Number Nadu Value Added Tax (TIN) Act, 2006, Government of Tamil Nadu CHEP02506A National Securities Allotment of Tax Deduction Depository Limited for Account Number (TAN) and on behalf of Income Tax department Corporation of Chennai PTNAN 09-138-PE-0052 Allotment of Profession tax number AABCP7252KSD002 Superintendent of Allotment of service tax no. Service tax facilitation for information technology, & information centre, software service, manpower Service Tax, Chennai recruitment & supply agency service. Zonal Joint Director 0499018834 Certificate of Importer General of Foreign Exporter Code Trade, Ministry of Commerce & Industry, Government Of India Regional Office (Tamil 51-77102-66 Implementation of ESI Act, Nadu) Employee’s State 1948 Insurance Corporation
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Date of registration 14th December 1998 30th April 2008
12th April 2011 28th May 2011 1st January 2007
19th June 2008 & 20th May 2011
16th October 2009
6th January 2010
3rd August 2001
11. Office of Regional E4-/ TN/ 49276/ Commissioner Enf/Regl./2000 Employee’s Provident Funds 12. Sai Global Certification QEC22633 Services Pty Ltd., Australia
Employee’s Provident Funds & Misc. Provisions Act,1953
1st October 2000
ISO 9001:2008
13. Department of Telecommunications, Ministry of Communications and IT
Permission to set up an international call centre at Chennai under the Other Service Provider (OSP) category as defined in New Telecom Policy 99 (NTP 99).
Valid from 22nd February 2011 to 10th February 2014 Valid for 20 years with effect from 5th November 2007
10-2582/2007-OSP dated 5th November 2007 and amended Regn no. VTMCHN-145/2008OSP/7 dated 31st December 2008
Approvals to be obtained/ renewed We have not yet filed for the following approvals as they are not required during construction phase. Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9.
Issuing Authority Tamil Nadu (Water) Pollution Control Board Tamil Nadu (Air) Pollution Control Board Airports Authority of India Chennai Metropolitan Development Authority (CMDA) Chennai Regional Advisory Committee (CRAC) Department of town and country planning ELCOT Tamil Nadu Fire and Rescue Services Department Health Department
Trademarks pending approvals Sr. No. 4.
5. 6.
Issuing Authority
Application No.
Nature of Registration/ License
Registrar of Trademarks Chennai
1598981 in Class 42
Registrar of Trademarks Chennai Registrar of Trademarks Chennai
2212250 in Classes 9 Trademark for the name 35 & 42 ‘PRELUDESYS’ 2212255 in Classes Trademark for the logo of the 9, 35 & 42 Company
Trademark for the logo of the Company
Application Date 07/09/2007
28/09/2011 28/09/2011
Investment Approvals As per notification number bearing FEMA/20/2000-RB dated May 3, 2000, as amended from time to time, under automatic route of the Reserve Bank, our Company is not required to make an application for Issue of Equity Shares to NRIs/FIIs with repatriation benefits. However, the allotment/transfer of the Equity shares to NRIs/FIIs shall be subject to the prevailing RBI Guidelines.
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SECTION IX - REGULATORY AND STATUTORY DISCLOSURES Authority for the Present Issue The issue of Equity Shares by our Company has been proposed by the resolution of the Board of Directors passed at their meeting held on 1st September 2011.The shareholders of our Company have authorized and approved this Issue under section 81(1A) of the Act by a Special Resolution at the Annual General Meeting held on 28th September 2011. Prohibition by SEBI Our Company, our Directors, our Promoters, the Directors of our Promoter Companies or persons in control of our Promoter Companies, the group companies, companies promoted by or Promoters and companies or entities with which our Company’s Directors are associated as directors / promoters / partners have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI. The listing of any securities of our Company has never been refused at anytime by any of the stock exchanges in India. Our Company, our Promoters, their relatives, group companies and associate companies has, not been identified as willful defaulters by RBI/government authorities and there are no violations of securities laws committed by them in the past or pending against them. Compliance with SEBI Regulations The Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time. In this regard the Company has appointed Ms. Preethi Bansal M, as Company Secretary and Compliance Officer of the Company. Eligibility for the Issue The company is not eligible as per Regulation 26(1) of the SEBI ICDR 2009 and hence is making this issue under Regulation 26(2)(a)(i) and b(i) of the SEBI (Issue of Capital and Disclosure Requirements), 2009. 26(2)(a)(i) “the issue is made through the book building process and the issuer undertakes to allot atleast 50% of the net offer to public to qualified institutional buyers and to refund full subscription monies if it fails to make allotment to the qualified institutional buyers” 26(2)(b)(i) “the minimum post-issue face value capital of the issuer is ten crore rupees” The Company is doing a “compulsory book-building issue” wherein the Company shall allot atleast 50% of the net public offer to QIBs and to refund full subscription monies if it fails to make allotment to the QIBs. The promoters, the company, directors of PIL are not identified as willful defaulters by the RBI/ GOI authorities and there are no violations of securities laws committed by them in the past or pending against them other than those disclosed in this Offer Document. None of the promoters, directors or persons in control of our company, has been or is involved as a promoter, director or person in control of any other company, which is debarred from accessing the capital market under any order or directions made by the SEBI. PIL undertakes that the number of allottees in the Issue shall be at least 1,000. Otherwise, the entire application money shall be refunded forthwith. In case of delay, if any, in refund, the Company shall pay interest on the application money at the rate of 15% per annum for the period of delay.
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DISCLAIMER CLAUSES SEBI DISCLAIMER CLAUSE IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE OFFER DOCUMENT. THE BOOK RUNNING LEAD MANAGER, BIRLA CAPITAL AND FINANCIAL SERVICES LTD HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI ICDR REGULATIONS 2009 AS FOR THE TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT, THE BOOK RUNNING LEAD MANAGER BIRLA CAPITAL AND FINANCIAL SERVICES LTD IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGER BIRLA CAPITAL AND FINANCIAL SERVICES LTD, HAS FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED 22nd DECEMBER 2011 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READS AS FOLLOWS: WE, THE LEAD MERCHANT BANKER(S) TO THE ABOVE MENTIONED FORTHCOMING ISSUE, STATE AND CONFIRM AS FOLLOWS: (1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS (IN CASE OF A BOOK BUILT ISSUE) / DRAFT PROSPECTUS (IN CASE OF A FIXED PRICE ISSUE) / LETTER OF OFFER (IN CASE OF A RIGHTS ISSUE) PERTAINING TO THE SAID ISSUE; (2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT: (a) THE DRAFT RED HERRING PROSPECTUS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER FILED WITH THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; (b) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE REGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND (c) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS/DRAFT LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO
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ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS. (3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRING PROSPECTUS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID. (4)WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.
OF
THE
(5)WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SPECIFIED SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN SHALL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS. (6) WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS. (7) WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. (8) WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION. (9) WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 73 OF
174
THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE PROSPECTUS/ LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION. (10) WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE. (11) WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION. (12)WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER: (A) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUER AND (B) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME. (13)WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE. (14) WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE, ETC. (15) WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING PROSPECTUS WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY. (16) WE ENCLOSE STATEMENT ON ‘PRICE INFORMATION OF PAST ISSUES HANDLED BY MERCHANT BANKERS (WHO ARE RESPONSIBLE FOR PRICING THIS ISSUE)’, AS PER FORMAT SPECIFIED BY THE BOARD THROUGH CIRCULAR.” THE FILING OF DRHP DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI, FURTHER
175
RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGER ANY IRREGULARITIES OR LAPSES IN OFFER DOCUMENT. The promoters / directors of PreludeSys India Limited confirm that no information/material likely to have a bearing on the decision of investors in respect of the shares offered in terms of this Draft Red Herring Prospectus has been suppressed withheld and / or incorporated in the manner that would amount to misstatement/ misrepresentation and in the event of its transpiring at any point in time till allotment/refund, as the case may be, that any information/material has been suppressed/withheld and/ or amounts to a misstatement/ misrepresentation, the promoters/directors undertake to refund the entire application monies to all subscribers within 7 days thereafter without prejudice to the provisions of Section 63 of the Companies Act. DISCLAIMER FROM THE COMPANY AND BRLM Investors may note that our Company, its Directors and its BRLM, accept no responsibility for statements made other than in this Offer Document or in the advertisement or any other material issued by or at the instance of the Issuer Company or BRLM and that any one, placing reliance on any other source of information including our website www.preludesys.com would do so at their own risk. The BRLM, do not accept any responsibility save to the limited extent as provided in terms of the Agreement entered into between our Company and the BRLM dated 29th September 2011 and the Underwriting Agreement to be entered into between our Company and the Underwriters. All information shall be made available by our Company and the BRLM to the public and investors at large and no selective or additional information would be available for any section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports or at bidding centers etc. Neither we nor the Syndicate is liable to the Bidders for any failure in downloading the Bids due to faults in any software/ hardware system or otherwise. DISCLAIMER IN RESPECT OF JURISDICTION This Issue is being made in India to persons resident in India (including Indian nationals resident in India who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as amended from time to time, or any other Trust law and who are authorized under their constitution to hold and invest in shares) and to NRIs, FIIs and Foreign Venture Capital Funds Registered with SEBI. This Prospectus does not, however, constitute an invitation to subscribe to shares issued hereby in any other jurisdiction to any person to whom it is unlawful to make an Issue or invitation in such jurisdiction. Any person into whose possession this Prospectus comes is required to inform him or herself about, and to observe any such restrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of appropriate court(s) in Mumbai only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that the RHP has been filed with SEBI. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and this Offer Document may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Offer Document nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of our Company since the date hereof or that the information contained herein is correct as of any time subsequent to this date.
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DISCLAIMER CLAUSE OF STOCK EXCHANGES Disclaimer Clause of Bombay Stock Exchange Limited (BSE) As required, a copy of this Draft Red Herring Prospectus has been submitted to the BSE. The disclaimer clause as intimated by BSE to our Company, post scrutiny of this Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to the ROC filing. Disclaimer Clause of National Stock Exchange Limited (NSE) As required, a copy of this Draft Red Herring Prospectus has been submitted to the NSE. The disclaimer clause as intimated by NSE to our Company, post scrutiny of this Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to the ROC filing. Disclaimer Clause of IPO Grading Agency [●] FILING A copy of the Draft Red Herring Prospectus would be filed with SEBI at its Southern Regional Office at D' Monte Building, 3rd Floor, 32 D' Monte Colony, TTK Road, Alwarpet, Chennai - 600018. A copy of the Red Herring Prospectus, along with the documents required to be filed under 60B of the Companies Act would be delivered for registration to the Registrar of Companies, Block No.6 B Wing 2nd Floor, Shastri Bhawan 26, Haddows Road, Chennai – 600034, Tamil Nadu and a copy of the Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration with RoC. LISTING Applications would be made to the BSE & NSE for permission to deal in and for an official quotation of our Equity Shares. BSE will be the Designated Stock Exchange with which the Basis of Allotment will be finalized. If the permission to deal in and for an official quotation of the Equity Shares is not granted by the Bombay Stock Exchange, we shall forthwith repay, without interest, all moneys received from the applicants in pursuance of this Prospectus. If such money is not repaid within eight days after we become liable to repay it, i.e., from the date of refusal or within 70 days from the date of Bid/ Issue Closing Date, whichever is earlier, then we and all our directors jointly and severally shall, on and from expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act. Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at BSE & NSE are taken within seven working days of the finalization of the basis of allotment for the Issue. Impersonation Attention of the Applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the Companies Act, which is reproduced below: "Any person who: a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, Or
177
b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years." CONSENTS Necessary Consents for the issue have been obtained from the following 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Directors of our Company Bankers to our Company Auditors to our Company Book Running Lead Manager to the Issue Syndicate Members* Legal Advisor to the Issue Registrar to the Issue Company Secretary & Compliance Officer Bankers to the Issue Underwriters to Issue* * to be obtained
The said consents would be filed along with a copy of the RHP/ Prospectus with the Registrar of Companies, Block No.6 B Wing 2nd Floor, Shastri Bhawan 26, Haddows Road, Chennai – 600034, Tamil Nadu, as required under Sections 60 and 60B of the Companies Act, 1956 and such consents have not been withdrawn up to the time of delivery of the RHP/ Prospectus, for registration with the Registrar of Companies, Block No.6 B Wing 2nd Floor, Shastri Bhawan 26, Haddows Road, Chennai – 600034, Tamil Nadu. M/s CNGSN & Associates, Chartered Accountant, have given their respective written consents to the inclusion of their report in the form and context in which it appears in this Prospectus and such consents and reports have not been withdrawn up to the time of delivery of RHP/ Prospectus for registration with the RoC. M/s CNGSN & Associates, Chartered Accountant, have given their written consents to the tax benefits accruing to our Company and its members in the form and context in which it appears in this Prospectus and have not withdrawn such consent up to the time of delivery of RHP/ Prospectus for registration with the RoC. EXPERT OPINION Except for the report of [●] in respect of the IPO grading of this Issue, Restatement of financial information & statement of possible tax benefits, we have not obtained any expert opinions.
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ISSUE EXPENSES The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertising expenses and listing fees. The estimated Issue expenses are as follows: Sr. No.
Particulars
1
Fees to BRLM, Underwriting Commission, Brokerage and other selling expenses Advertisement & Marketing Expenses Printing, stationery & dispatch Miscellaneous Expenses including fees payable to SEBI, Stock Exchanges, Registrars, Grading agency, etc. Total
2 3 4
% of Issue Expenses
(` in Lakhs) % of Issue
Amount (` in. Lakhs) [●]
[●]
[●]
[●] [●] [●]
[●] [●] [●]
[●] [●] [●]
[●]
100
[●]
FEES PAYABLE TO THE BRLM, BROKERAGE AND SELLING COMMISSION The total fees payable to the BRLM including underwriting & brokerage if any for the Issue will be as per the Agreement executed between our Company and the BRLM dated 28th September 2011, a copy of which is available for inspection at our Registered Office and forms part of Material Contracts & Documents. FEES PAYABLE TO THE REGISTRAR TO THE ISSUE The fees payable to the Registrar to the Issue, Cameo Corporate Services Limited, will be as per the Memorandum of Understanding executed between our Company and the Registrar dated 27th September 2011 a copy of which is available for inspection at our Registered Office and forms part of Material Contracts & Documents. Adequate funds will be provided to the Registrar to the Issue to enable them to send refund orders or allotment advice by registered post. PREVIOUS PUBLIC OR RIGHTS ISSUES IN THE LAST 5 YEARS Our Company has not made any public or rights issue of Equity Shares/ Debentures since inception. PREVIOUS ISSUE OF SHARES OTHERWISE THAN FOR CASH Our Company has not issued any equity shares for consideration other than cash other than what is mentioned in the Capital Structure. For Further details please refer Chapter Capital Structure appearing on page no. 43 of this offer document. COMMISSION OR BROKERAGE ON PREVIOUS ISSUES Our Company has not made any public or rights issue of Equity Shares/ Debentures since inception Details of capital issue made during last three years in regard to the issuer company and other listed companies under the same management within the meaning of section 370(1)(B) of the Companies Act, 1956. There have been no capital issues since inception by us/ subsidiary/ group companies.
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OUTSTANDING DEBENTURES OR BOND ISSUE OR PREFERENCE SHARES: Our Company has no outstanding debentures or bond issue or redeemable preference shares. STOCK MARKET DATA FOR OUR COMPANY’S EQUITY SHARES Our company is coming out with IPO and its shares are not yet listed in any of the exchanges. MECHANISM FOR REDRESSAL OF INVESTOR’S GRIEVANCES Our Company has constituted a Shareholders Grievance Committee to look into the redressal of shareholders/Investors complaints such as Issue of duplicate/split/consolidated share certificates, allotment and listing of shares and review of cases for refusal of transfer/transmission of shares, complaints for non receipt of dividends etc. To expedite the process of share transfer, our company has appointed Cameo Corporate Services Limited as the Registrar and Share Transfer Agents of Our Company vide Memorandum of Understanding dated 27th September 2011. DISPOSAL OF INVESTOR’S GRIEVANCES AND REDRESSAL MECHANISM Our Company assures that the Board of Directors in respect of the complaints, if any to be received shall adhere to the following schedules: Sr. No. 1.
Nature of complaint Non-receipt of refund
2.
Non Receipt of share Certificate/ Demat Credit Any other complaint in relation to Initial Public Issue
3.
Time Table Within 7 days of receipt of complaint subject to production of satisfactory evidence Within 7 days of receipt of complaint subject to production of satisfactory evidence Within 7 days of receipt of complaint with all relevant details
Our company has appointed Ms. Preethi Bansal M, Company Secretary, as Compliance Officer who would directly deal with SEBI with respect, to implementation/ compliance of various laws, rules, regulations and other directives issued by SEBI and matters related to investor complaints .The investors may contact the Compliance Officer in case of any offer related problems. The Compliance Officer would be available at the Corporate Office of our Company. She may be contacted at the following address: Ms. Preethi Bansal M Company Secretary and Compliance Officer PreludeSys India Limited CHANGES IN AUDITORS DURING THE LAST THREE YEARS SRJ Associates, Chartered Accountants, Chennai were appointed as the First Statutory Auditors of the company by the Board of Directors at their meeting held on 8th January 1999, and confirmed by the shareholders of the company at the AGM held on 31st March 2000. M/s CNGSN & Associates, Chennai were appointed as the statutory auditors of the company for the financial year 2010 - 11 by the Board of Directors and confirmed by the shareholders of the company at the AGM held on 23rd February 2010 & they continue to be the statutory auditors as on date.
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CAPITALISATION OF RESERVES OR PROFITS DURING THE LAST FIVE YEARS: Our Company has issued bonus shares twice till date and the details are as under: Date of Allotment No. of shares Face Value (`) In the ratio of Allotted 30-Nov-09 2400000 10 8:10 30-Sep-11 5089809 10 2:3 REVALUATION OF ASSETS DURING THE LAST FIVE YEARS: Our company has not revalued any of its assets since its inception.
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SECTION X - OFFERING INFORMATION (A) ISSUE STRUCTURE This Issue is being made through a 100% Book Building Process. The Issue comprises of [●] equity shares of ` 10/- each for cash at a price of ` [●] per equity share aggregating to ` 8130 lakhs (hereinafter referred to as the “Issue”). The details of the issue structure are as follows: Particulars
QIBs
Number of Equity Shares*
At least Shares.
Percentage Issue available allocation
At least 50% of the Issue. However, up to 5% of the QIB Portion shall be available for allocation proportionately to Mutual Funds only. Proportionate as follows: a. Equity Shares constituting to 5% of the QIB portion shall be allocated on proportionate basis to Mutual Funds; b. The balance Equity Shares shall be allocated on proportionate basis to all QIBs including Mutual Funds receiving allocation as per (a) above. Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount exceeds ` 2, 00,000. Such number of Equity shares in multiples of [●] equity shares so that the bid does not exceed the issue subject to applicable limits Compulsorily in Dematerialized mode [●]Equity Shares and in multiples of[●] Equity Shares
of Size for
Basis of Allocation if respective category is oversubscribed
Minimum Bid
Maximum Bid
Mode of Allotment Bid/ Allotment Lot
[●]
Equity
Non Institutional Bidders Up to [●] Equity Shares or Offer less allocation to QIB Bidders and Retail Individual Bidders. Up to 15% of the Issue or the Issue less allocation to QIB Bidders and Retail Individual Bidders.
Retail Individual Bidders Up to [●] Equity Shares or Offer less allocation to QIB Bidders and NonInstitutional Bidders. Up to 35% of the Issue or the Issue less allocation to QIB Bidders and NonInstitutional Bidders.
Proportionate
Proportionate
Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount exceeds `2, 00,000. Such number of Equity shares in multiples of [●] equity shares so that the bid does not exceed the issue subject to applicable limits Compulsorily in Dematerialized mode [●]Equity Shares and in multiples of[●] Equity Shares
Such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount is less than `2, 00,000. Such number of Equity Shares in multiples of [●] equity shares so that the Bid amount does not exceed ` 2,00,000/-
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Compulsorily in Dematerialized mode [●]Equity Shares and in multiples of[●] Equity Shares
Trading Lot/Market lot Who can apply**
Terms payment***
of
One (1) Equity Share
One (1) Equity Share
One (1) Equity Share
Public financial institutions, as specified in Section 4A of the Companies Act, 1956, scheduled commercial banks, mutual funds, foreign institutional investor registered with SEBI, other than subaccount which is a foreign corporate or foreign individual, multilateral and bilateral development financial institutions, Venture Capital Funds registered with SEBI, foreign Venture capital investors registered with SEBI, State Industrial Development corporations, insurance companies registered with the Insurance Regulatory and Development Authority, (IRDA), provident funds with minimum corpus of ` 2500 Lakhs , pension funds with minimum corpus of ` 2500 Lakhs, National Investment Fund set up by Resolution F.NO. 2/3/2005 DD II DATED Nov.23,2005 of Government of India published in the Gazette of IndiaInsurance funds set up and managed by Army, Navy or Air Force of the Union of India; and Insurance Funds set-up and managed by the Department of Posts, India Margin Amount applicable to QIB Bidders shall be payable at the time of submission of Bid cum Application form to the members of
Companies, Corporate Bodies, Scientific Institutions, Societies, Trusts, Resident Indian individuals, HUF (in the name of Karta), and NRIs (applying for an amount exceeding ` 2,00,000/-)
Individuals (including NRIs and HUFs in the name of Karta) such that the Bid Amount does not exceed ` 2,00,000 in value.
Margin Amount applicable to Non Institutional Bidders shall be payable at the time of submission of Bid cum Application form to the members of the
Margin Amount applicable to Retail Individual Bidders shall be payable at the time of submission of Bid cum Application form to the
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the syndicate Margin Amount
Full bid bidding
amount
syndicate on
Full bid bidding
amount
on
members of the syndicate or the ASBA Form to the SCSB. Full bid amount on bidding
* Subject to valid bids being received at or above the Issue Price. The Issue is being made through a 100% Book Building Process wherein at least 50% of the Issue shall be allotted on a proportionate basis to QIBs. 5% of the Issue in the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds. The remainder shall be available for allotment on a proportionate basis to QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. If at least 50% of the Issue cannot be allotted to QIBs, then the entire application money will be refunded. Further, up to 15% of the Issue shall be available for allocation on a proportionate basis to Non- Institutional Bidders and up to 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. If the aggregate demand from Mutual Funds is less than [●] Equity Shares, the balance Equity Shares available for Allotment in the Mutual Fund Portion will be added to the QIB Portion and be allocated proportionately to the QIB Bidders in proportion to their Bids. Under-subscription, if any, in the non- institutional and retail portion, would be allowed to be met with spill over from any other category or combination, at the sole discretion of our Company in consultation with the BRLM subject to applicable provisions of SEBI Regulations. ** In case the Bid Cum Application Form or ASBA Form is submitted in joint names, the investors shall ensure that the demat account is also held in the same joint names and in the same sequence in which they appear in the Bid Cum Application Form or ASBA Form. *** In case of ASBA bidders, the SCSB shall be authorized to block such funds in the bank account of the ASBA bidder that are specified in the Bid cum ASBA Form. Bid/Issue Program BID/ISSUE OPENS ON: [●] BID/ISSUE CLOSES ON: [●] Bids and any revision in Bids shall be accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form. On the Bid/Issue Closing Date, Bids (excluding the ASBA Bidders) shall be uploaded until (i) 4.00 p.m. incase of Bids by QIB Bidders and Non- Institutional Bidders where the Bid Amount is in excess of ` 200,000 and (ii) until 5.00 p.m. or such extended time as permitted by the NSE and the BSE, in case of Bids by Retail Individual Bidders where the Bid Amount is up to ` 200,000. It is clarified that Bids not uploaded in the book, would be rejected. Bids by ASBA Bidders shall be uploaded by the SCSB in the electronic system to be provided by the NSE and the BSE. In case of discrepancy in the data entered in the electronic book vis-a-vis the data contained in the physical Bid form, for a particular bidder, the details as per physical application form of that Bidder may be taken as the final data for the purpose of allotment. In case of discrepancy in the data entered in the electronic book vis-a-vis the data contained in the physical or electronic Bid cum Application Form submitted through the ASBA process, for a particular ASBA Bidder, the Registrar to the Issue shall ask for rectified data from the SCSB. Due to limitation of time available for uploading the Bids on the Bid/Issue Closing date, the bidders are advised to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no later than the times mentioned above on the Bid/Issue Closing Date. All times are Indian Standard Time. Bidders
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are cautioned that in the event a large number of Bids are received on the Bid/Issue Closing Date, as is typically experienced in pubic offerings, some Bids may not get uploaded due to lack of sufficient time. Such Bids that cannot be uploaded will not be considered for allocation under the Issue. If such Bids are not uploaded, the Issuer, BRLMs and Syndicate members will not be responsible. Bids will be accepted only on Business Days, i.e., Monday to Friday (excluding any public holidays). The Company reserves the right to revise the Price Band during the Bid/Issue Period in accordance with the SEBI ICDR Regulations provided that the Cap Price is less than or equal to 20% of the Floor Price. The Floor Price can be revised up or down to a maximum of 20% of the Floor Price advertised at least one day before the Bid /Issue Opening Date. (B) TERMS OF THE ISSUE The Equity Shares being issued are subject to the provisions of the Companies Act, the Memorandum and Articles of the Company, the terms of the DRHP/RHP/Prospectus, Bid-cumApplication Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the allotment advice, and other documents/certificates that may be executed in respect of this Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to this Issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, Reserve Bank of India, Stock Exchanges, Registrar of Companies and/or other authorities, as in force on the date of this Issue and to the extent applicable. Ranking of Equity Shares The Equity Shares being issued shall be subject to the provisions of our Memorandum and Articles and shall rank pari passu in all respects with the other existing Equity Shares of our Company including rights in respect of dividend. The Allottees will be entitled to dividend or any other corporate benefits, if any, declared by our Company after the date of Allotment. Mode of Payment of Dividend The declaration and payment of dividends will be recommended by our Board of Directors and our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition. We shall pay dividends in cash and as per provisions of the Companies Act. Face Value and Issue Price The Equity Shares with a face value of ` 10 each are being issued at a price of ` [●] per Equity Share. The Floor Price is ` [●] per Equity Share and the Cap Price is ` [●] per Equity Share. The issue price will be determined by our Company in consultation with the BRLM on the basis of assessment of market demand for the equity shares offered by way of book building. At any given point of time, there shall be only one denomination for the Equity Shares of our Company, subject to applicable laws. Rights of the Equity Shareholders Subject to applicable laws, rules, regulations and guidelines and the Articles of Association, the equity shareholders shall have the following rights: Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll either in person or by proxy; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation; Right of free transferability; and Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and Articles of Association of the Company.
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Market Lot and Trading Lot In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialized form. In terms of existing SEBI (ICDR) Regulations, 2009, the trading in the Equity Shares shall only be in dematerialized form for all investors. Since trading of the Equity Shares will be in dematerialized mode, the tradable lot is one Equity Share. Allocation and allotment of Equity Shares through this Offer will be done only in electronic form in multiples of one Equity Share subject to a minimum allotment of [●] Equity Shares to the successful bidders. Nomination Facility to the Investor In accordance with Section 109A of the Companies Act, the sole or first bidder, along with other joint bidder, may nominate any one person in whom, in the event of the death of sole bidder or in case of joint bidders, death of all the bidders, as the case may be, the Equity Shares transferred, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the equity share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to equity share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale/ transfer/ alienation of equity share(s) by the person nominating. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either: a. b.
to register himself or herself as the holder of the Equity Shares; or to make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice have been complied with. Since the allotment of Equity Shares in this Issue will be made only in dematerialized mode, there is no need to make a separate nomination with us. Nominations registered with respective depository participant of the applicant would prevail. If the investors require to change the nomination, they are requested to inform their respective depository participant. Bid/Issue Program The period of operation of subscription list of public issue: Bid/Issue opens on: [●] Bid/Issue closes on: [●] Our Company in consultation with the BRLM, may decide to close the Bidding for QIBs one day prior to the Bid/Issue Closing Date
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Application by Eligible NRIs, FIIs registered with SEBI and FVCIs registered with SEBI There is no reservation for any NRIs, FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral development financial institutions and such NRIs, FIIs, foreign venture capital investors registered with SEBI and multilateral and bilateral development financial institutions will be treated on the same basis with other categories for the purpose of allocation/allotment. As per RBI regulations, OCBs cannot participate in the Issue. Minimum Subscription If our Company does not receive the minimum subscription of 90% of the Issue to the Public including devolvement of underwriters, if any, within 60 days from the Bid/Issue Closing Date, we shall forthwith refund the entire subscription amount received within 70 days. If there is a delay beyond eight days, we and every director of our Company who is an officer in default, becomes liable to repay the amount with interest as per Section 73 of the Companies Act. If the number of allottees in the proposed Issue is less than 1,000 allottees, we shall forthwith refund the entire subscription amount received. Arrangements for Disposal of Odd Lots Since, our Equity Shares will be traded in dematerialized form only; the marketable lot is one (1) Equity Share. Therefore, there is no possibility of any odd lots. Jurisdiction The jurisdiction for the purpose of this Issue is with competent courts/authorities in Mumbai, India. Restrictions, if any on Transfer and Transmission of Equity Shares The restrictions, if any, on the Transfer and Transmission of our Equity Shares are contained in section “Description of equity Shares and Terms of Article of Association” on page 225 of this offer document. Compliance with SEBI Regulations Our Company shall comply with all requirements of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended from time to time. Our Company shall comply with all disclosure norms as specified by SEBI from time to time. Withdrawal of the Issue Our Company, in consultation with the BRLM, reserves the right not to proceed with the issue after the bidding and if so, the reason thereof shall be given as a public notice within two days of the closure of the issue. The public notice shall be issued in the same newspapers where the pre-issue advertisement had appeared. The stock exchanges where the specified securities were proposed to be listed shall also be informed promptly. Notwithstanding the forgoing, the Issue is also subject to obtaining (i) the final listing and trading approvals of the Stock Exchanges, which the Company shall apply only after Allotment and (ii) the final ROC approval of the prospectus after it is filed with Stock Exchanges. IF THE COMPANY WITHDRAWS THE ISSUE AFTER CLOSURE OF BIDDING, THE COMPANY SHALL FILE A FRESH OFFER DOCUMENT WITH THE SEBI.
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ISSUE PROCEDURE This section applies to all Bidders. Please note that all Bidders can participate in the Issue through the ASBA process. ASBA Bidders should note that the ASBA process involves application procedures that are different from the procedure applicable to Bidders other than the ASBA Bidders. Bidders applying through the ASBA process should carefully read the provisions applicable to such applications before making their application through the ASBA process. Please note that all the Non-ASBA Bidders are required to make payment of the full Bid Amount along with the Bid-cum-Application Form and the ASBA Bidders shall instruct the relevant SCSB to block the full Bid Amount along with the application. By a Circular dated April 29, 2011 issued by SEBI and bearing no. CIR/CFD/DIL/1/2011, it is now mandatory for all QIB Bidders and Non-Institutional Bidders to apply through the ASBA process only. Further, the Syndicate/ sub-syndicate members shall also accept Bid-cum-Application Forms from all Bidders applying through the ASBA process at Mumbai, Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur, Bangalore, Hyderabad, Pune, Baroda and Surat only (“Specified Centres”). However, before accepting these ASBA forms syndicate/sub-syndicate members shall satisfy themselves that the SCSBs whose name has been filled in the ASBA form has named a branch in that centre to accept ASBA forms. Investors are also advised in their own interest to ensure before they submit ASBA applications to Syndicate / Sub Syndicate Members that the SCSB whose name has been filled in the ASBA form has named a branch in that centre to accept ASBA forms. Neither the company nor the BRLM shall be responsible for any claims from investors who submit ASBA applications to Syndicate/sub-syndicate members without verifying and confirming as above. Our Company and the Syndicate do not accept any responsibility for the completeness and accuracy of the information stated in this section, and are not liable for any amendment, modification or change in applicable law, which may occur after the date of the Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that their Bids do not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or as specified in the Red Herring Prospectus. Book Building Procedure The Issue is being made through the 100% Book Building Process wherein atleast 50% of the Issue shall be available for allocation to Qualified Institutional Buyers on a proportionate basis (of which 5% shall be allocated for Mutual Funds). Further, upto 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and upto 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. Under-subscription, if any, in any category, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLM and the Designated Stock Exchange. All Bidders other than the ASBA Bidders are required to submit their Bids through the Syndicate or their affiliates. ASBA Bidders may submit their Bids either to the Designated Branch of the SCSBs or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres. Investors should note that the Equity Shares will be allotted to all successful Bidders only in dematerialised form. The Bid-cum-Application Forms which do not have the details of the Bidders’ depository account including the DP ID Numbers, PAN and the beneficiary account number shall be treated as incomplete and rejected. In case of QIB Bidders, our Company in consultation with the BRLM may reject Bids provided that the reasons for rejecting the same shall be provided to such Bidders in
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writing. Bidders will not have the option of being Allotted Equity Shares in physical form. The Equity Shares on Allotment shall be traded only in the dematerialised segment of the Stock Exchanges. Bid-cum-Application Form The prescribed colour of the Bid-cum-Application Form for various categories is as follows: Category Indian Public including QIBs, Non-Institutional Bidders or NRIs applying on a non-repatriation basis (ASBA as well as NonASBA) Non-residents, NRIs, FIIs or Foreign Venture Capital Funds, registered Multilateral and Bilateral Development Financial Institutions applying on a repatriation basis (ASBA as well as Non-ASBA)
:
Colour of Bid-cum-Application Form White
:
Blue
Copies of the Bid-cum-Application Form and the Red Herring Prospectus will be available for categories of Bidders with the members of the Syndicate and at our Registered office and Corporate Office. Before being issued to Bidders, the Bid-cum-Application Forms must be serially numbered. The ASBA Bid cum Application Form will also be available on the websites of the Stock Exchanges and SCSBs at least one day prior to the Bid/Issue Opening Date and shall bear an unique application number. The BRLM and the SCSBs will provide the hyperlink to BSE or NSE on their websites. The Bidder shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options will not be considered as multiple Bids. Upon filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to a member of the Syndicate or to a Designated Branch of the SCSB or in electronic form (through the internet banking facility available with the SCSBs or such other electronically enabled mechanism for Bidding), the Bidder is deemed to have authorised our Company to make the necessary changes in the Red Herring Prospectus as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder. ASBA Bidders shall submit an ASBA Bid cum Application Form in physical form either to the Designated Branches of the SCSBs or to any of the members of the Syndicate/ sub-syndicate at the Specified Centers or in electronic form (through the internet banking facility available with the SCSBs or such other electronically enabled mechanism for Bidding), authorising the SCSBs to block funds equal to the Bid Amount in the ASBA Accounts. The Bid-cum-Application Form shall contain information about the Bidder and the price and number of Equity Shares that the Bidder wishes to Bid for. Bidders shall have the option to make a maximum of three Bids in the Bid-cum-Application Form and such options shall not be considered multiple Bids. Category of Bidder
Mode of Bidding
Retail Individual Bidders and Eligible Employees
Either (i) ASBA or (ii) Non-ASBA
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Application Form to be used for bidding (i) If Bidding through ASBA, ASBA form (physical or electronic) or; (ii) If Bidding through Non-ASBA, Bidcum-Application
To whom the application form has to be submitted (i) If using physical ASBA Form, to the members of the Syndicate only at Syndicate ASBA Centres; or (ii)If using physical ASBA Form, to the Designated
Form
Non-Institutional Bidders and QIBs (excluding Anchor Investors)
ASBA (Kindly note that ASBA is mandatory and no other mode of Bidding is permitted)
ASBA Form (physical or electronic)
Branches of the SCSBs where the SCSB account is maintained; or (iii) If using electronic ASBA Form, to the SCSBs, electronically through internet banking facility, where the SCSB account is maintained; or (iv) If using Bid cum Application Form, to the members of the Syndicate at the Bidding Centres. (i) If using physical ASBA Form, to the members of the Syndicate only at Syndicate ASBA Centre; or (ii) If using physical ASBA Form, to the Designated Branches of the SCSBs where the SCSB account is maintained; or (iii) If using electronic ASBA Form, to the SCSBs, electronically through internet banking facility, where the SCSB account is maintained.
Who can Bid? •
Any person eligible to invest under all applicable laws, rules, regulations and guidelines;
•
Indian nationals resident in India who are competent to contract under the Indian Contract Act, 1872, as amended, in single or joint names (not more than three);
•
Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid-cum-Application Form as follows: “Name of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the “Karta”. Bids by HUFs would be considered at par with those from individuals;
•
Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in equity shares;
•
Mutual Funds registered with SEBI;
•
Eligible NRIs on a repatriation basis or on a non repatriation basis subject to applicable laws. NRIs other than eligible NRIs are not eligible to participate in this issue;
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•
Indian financial institutions, commercial banks (excluding foreign banks), regional rural banks, cooperative banks (subject to RBI regulations and the SEBI Regulations and other laws, as applicable);
•
FIIs and sub-accounts registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual bidding in the QIB portion;
•
Sub-accounts of FIIs registered with SEBI, which are foreign corporates or foreign individuals only under the Non-Institutional Bidders category.
•
Venture Capital Funds registered with SEBI;
•
Foreign Venture Capital Funds registered with SEBI;
•
Multilateral and bilateral development financial institutions;
•
State Industrial Development Corporations;
•
Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts/societies and who are authorised under their respective constitutions to hold and invest in equity shares;
•
Scientific and/or industrial research organisations authorised to invest in equity shares;
•
Insurance Companies registered with Insurance Regulatory and Development Authority;
•
Provident Funds with a minimum corpus of ` 2500 Lacs and who are authorised under their constitution to hold and invest in equity shares;
•
Pension Funds with a minimum corpus of ` 2500 Lacs and who are authorised under their constitution to hold and invest in equity shares;
•
National Investment Fund set up by resolution F. No. 2/3/2005 – DDII dated November 23, 2005, by the GoI, published in the gazette of India;
•
Insurance funds set up and managed by the army, navy or air force of the Union of India; and
•
Insurance funds set-up and managed by the Department of Posts, India.
As per the existing regulations, OCBs cannot participate in this Issue. Participation by associates and affiliates of the BRLM and the Syndicate Members The BRLM and the Syndicate Members shall not be allowed to subscribe to this Issue in any manner except towards fulfilling their underwriting obligations. However, the associates and affiliates of the BRLM and Syndicate Members may subscribe to or purchase Equity Shares in the Issue, either in the QIB Portion or in Non-Institutional Portion as may be applicable to such Bidders, where the allocation is on a proportionate basis. Such holding or subscription may be on their behalf or on behalf of their clients. Bids by Mutual Funds An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Fund Portion.
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In the event that the demand is greater than [●] Equity Shares, allocation shall be made to Mutual Funds proportionately, to the extent of the Mutual Fund Portion. The remaining demand by the Mutual Funds shall, as part of the aggregate demand by QIBs, be available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual Fund Portion. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. As per the existing regulations, no mutual fund scheme shall invest more than 10% of its net asset value in equity shares or equity related instruments of any single company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes should own more than 10% of any company’s paid-up share capital carrying voting rights. The Bids made by asset management companies or custodians of Mutual Funds shall clearly indicate the name of the concerned scheme for which application is being made. Bids by Non Residents There is no reservation for Eligible NRIs or FIIs or FVCIs registered with SEBI. Such Eligible NRIs, FIIs and FVCIs registered with SEBI will be treated on the same basis as other categories for the purpose of allocation. As per the existing regulations, OCBs cannot participate in this Issue. Bids by Eligible NRIs 1.
Bid-cum-Application Forms have been made available for Eligible NRIs at the Registered Office viz. No.18, 1st Floor, I Main Road, Kotturpuram, Chennai - 600 085, Tamil Nadu, India and with the members of the Syndicate.
2.
Eligible NRIs applicants should note that only such applications as are accompanied by payment in free foreign exchange shall be considered for Allotment. Eligible NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts should use the Bid cum Application form meant for Resident Indians (White in colour).
Bids by FIIs As per the current regulations, the following restrictions are applicable for investments by FIIs: The issue of Equity Shares to a single FII should not exceed 10% of our post-Issue paid-up share capital. In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our total paid-up share capital or 5% of our total paid-up share capital in case such sub-account is a foreign corporate or a foreign individual. Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of regulation 15A(1) of the Securities Exchange Board of India (Foreign Institutional Investors) Regulations 1995, as amended (the “SEBI FII Regulations”), an FII, as defined in the SEBI FII Regulations, deal or hold, offshore derivative instruments (as defined under the SEBI FII Regulations as any instrument, by whatever name called, which is issued overseas by a FII against securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its underlying) directly or indirectly, only in the event (i) such offshore derivative instruments are issued only to persons who are regulated by an appropriate regulatory authority; and (ii) such offshore derivative instruments are issued after compliance with know your client’s norms. An FII is also required to ensure that no further issue or transfer of any offshore derivative instrument is made by or on behalf of it to any persons
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that are not regulated by an appropriate foreign regulatory authority as defined under the SEBI FII Regulations. Associates and affiliates of the underwriters including the BRLM and the Syndicate Members that are FIIs may issue offshore derivative instruments against Equity Shares Allotted to them in the Issue. Any such Offshore Derivative Instrument does not constitute any obligation or claim or claim on or an interest in, our Company. Bids by limited liability partnerships In case of Bids made by limited liability partnerships registered under the Limited Liability Partnership Act, 2008, a certified copy of certificate of registration issued under the Limited Liability Partnership Act, 2008, must be attached to the Bid cum Application Form. Failing this, our Company reserves the right to reject any Bid without assigning any reason thereof. Bids by insurance companies In case of Bids made by insurance companies registered with the IRDA, a certified copy of certificate of registration issued by IRDA must be attached to the Bid cum Application Form. Failing this, our Company reserves the right to reject any Bid without assigning any reason thereof. Bids by provident funds/ pension funds In case of Bids made by provident funds/pension funds, subject to applicable laws, with minimum corpus of ` 2500 Lacs, a certified copy of certificate from a chartered accountant certifying the corpus of the provident fund/ pension fund must be attached to the Bid cum Application Form. Failing this, our Company reserves the right to reject any Bid, without assigning any reason thereof. Bids by SEBI registered Venture Capital Funds and Foreign Venture Capital Funds As per the current regulations, the following restrictions are applicable for SEBI Registered Venture Capital Funds and Foreign Venture Capital Investors The SEBI (Venture Capital Funds) Regulations, 1996 and SEBI (Foreign Venture Capital Investor) Regulations, 2000 inter alia prescribe the following investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI: The holding by any individual venture capital fund registered with SEBI in one company should not exceed 25% of the corpus of the venture capital fund. Further, venture capital funds and foreign venture capital investors can invest only up to 33.33% of the investible funds by way of subscription to an initial public offer. The above information is given for the benefit of the Bidders. Our Company and the BRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in this Draft Red Herring Prospectus. Bids under Power of Attorney In case of Bids made pursuant to a power of attorney by limited companies, corporate bodies, registered societies, FIIs, Mutual Funds, insurance companies and provident funds with minimum corpus of ` 2500 Lacs (subject to applicable law) and pension funds with a minimum corpus of ` 2500 Lacs a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the Memorandum of Association and Articles of Association and/or bye laws must be
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lodged with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In addition to the above, certain additional documents are required to be submitted by the following entities: (a)
With respect to Bids by FVCIs, FIIs and Mutual Funds, a certified copy of their SEBI registration certificate must be lodged along with the Bid-cum-Application Form.
(b)
With respect to Bids by insurance companies registered with the Insurance Regulatory and Development Authority, in addition to the above, a certified copy of the certificate of registration issued by the Insurance Regulatory and Development Authority must be lodged with the Bid-cum-Application Form.
(c)
With respect to Bids made by provident funds with minimum corpus of ` 2500 Lacs (subject to applicable law) and pension funds with a minimum corpus of ` 2500 Lacs, a certified copy of a certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the Bid-cum-Application Form.
Our Company in their absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the power of attorney along with the Bid-cum-Application Form, subject to such terms and conditions that our Company and the BRLM may deem fit. The above information is given for the benefit of the Bidders. Our Company and the BRLM is not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares Bid for do not exceed the applicable limits under laws or regulations. Maximum and Minimum Bid Size (a)
For Retail Individual Bidders: The Bid must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Share thereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed ` 200,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed ` 200,000. In case the Bid Amount is over ` 200,000 due to revision of the Bid or revision of the Price Band or on exercise of Cut-off Price option, the Bid would be considered for allocation under the Non-Institutional Portion. The Cutoff Price option is an option given only to the Retail Individual Bidders indicating their agreement to Bid and purchase at the final Issue Price as determined at the end of the Book Building Process.
(b)
For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such number of Equity Shares in multiples of [●] Equity Shares so that the Bid Amount exceeds ` 2,00,000 and in multiples of [●] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue Size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. Under the SEBI Regulations, a QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date. In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the Bid Amount is greater than `200,000 for being considered for allocation in the NonInstitutional Portion. In case the Bid Amount reduces to `200,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non-Institutional Bidders and QIBs are not allowed to Bid at “Cut-off Price”.
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The maximum and minimum Bid size applicable to a QIB, Retail Individual Bidder or a NonInstitutional Bidder shall be applicable to an ASBA Bidder in accordance with the category that such ASBA Bidder falls under. Bidders are advised to make independent enquiries and ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in this offer document. Information for the Bidders: (a)
Subject to Section 66 of the Companies Act, our Company shall, after registering the Red Herring Prospectus with the Registrar of Companies, publish pre-Issue advertisement, in the form prescribed under the SEBI Regulations, in two national daily newspapers (one each in English and Hindi) and one regional language daily newspaper, each with wide circulation.
(b)
Our Company will file the Red Herring Prospectus with the RoC at least three days before the Bid/Issue Opening Date.
(c)
Copies of the Bid-cum-Application Form and copies of the Red Herring Prospectus will be available with the Syndicate. The SCSBs shall ensure that the abridged prospectus is made available on their websites.
(d)
Eligible Bidders who are interested in subscribing for the Equity Shares should approach BRLM or any of the Syndicate Members or their authorised agent(s) or to the Designated Branches of the SCSBs to register their Bids.
(e)
Any Bidders (who is eligible to invest in the Equity Shares) who would like to obtain the Red Herring Prospectus and/ or the Bid-cum-Application Form can be obtain the same from our Registered Office, Corporate Office and from the BRLM and the members of the syndicate.
(f)
The Bids should be submitted on the prescribed Bid-cum-Application Form only. Bids by ASBA Bidders shall be accepted by the Designated Branches of the SCSBs or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres in accordance with the SEBI Regulations and any circulars issued by SEBI in this regard. Bid cum Application Forms (except electronic ASBA Bid cum Application Forms) which do not bear the stamp of a member of the Syndicate or the Designated Branch are liable to be rejected.
(g)
The Syndicate (in accordance with the terms of the Syndicate Agreement) and the Designated Branches will accept Bids during the Bidding Period in accordance with the terms of the Red Herring Prospectus.
(h)
With effect from August 16, 2010, the demat accounts of Bidders for whom PAN details have not been verified shall be “suspended for credit” and no credit of Equity Shares pursuant to the Issue will be made into the accounts of such Bidders.
Bidders may note that in case the DP ID and Client ID and PAN mentioned in the Bid-cumApplication Form and entered into the electronic bidding system of the Stock Exchanges by the members of the Syndicate do not match with the DP ID and Client ID and PAN available in the Settlement Depository database, the application is liable to be rejected. Bidders are advised not to submit the Bid cum Application Form to Escrow Collection Banks and the same will be rejected in such cases and the Bidders will not be entitled to any compensation whatsoever.
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The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law. Submission of Bid-cum-Application Form All Bid-cum-Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid. With respect to ASBA Bidders, the ASBA Form or the ASBA Revision Form may be submitted to the Designated Branches of the SCSBs or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres. No separate receipts shall be issued for the money payable on the submission of Bid-cum-Application Form or Revision Form. However, the collection centre of the members of the Syndicate and SCSBs, as applicable, will acknowledge the receipt of the Bid-cum-Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid-cum-Application Form for the records of the Bidder. Additional information specific to ASBA Bidders (i)
ASBA Bid cum Application Forms in physical form will be available with the Designated Branches and with the members of the Syndicate; and electronic ASBA Bid cum Application Forms will be available on the websites of the SCSBs and the Stock Exchanges at least one day prior to the Issue Opening Date. Further, the SCSBs will ensure that the abridged Red Herring Prospectus is made available on their websites.
(ii)
SCSBs may provide the electronic mode of Bidding either through an internet enabled Bidding and banking facility or such other secured, electronically enabled mechanism for Bidding and blocking funds in the ASBA Account. Eligible ASBA Bidders may also approach the Designated Branches to register their Bids through the ASBA process.
(iii)
The SCSBs shall accept Bids only during the Bid Period and only from the ASBA Bidders. The SCSB shall not accept any ASBA Bid cum Application Form after the closing time of acceptance of Bids on the Issue Closing Date.
(iv)
The ASBA Bid cum Application Form shall bear the stamp of the Designated Branch or the members of the Syndicate (in case of Bids through Syndicate ASBA), if not, the same shall be rejected.
Public announcement upon filing of this DRHP The Company shall either on the date of filing the DRHP with SEBI or on the next day shall make a public announcement in one English national daily newspaper and one Hindi national daily newspaper, each with wide circulation, disclosing that the DRHP has been filed with SEBI and inviting the public to give their comments to SEBI in respect of disclosures made in the DRHP Method and Process of Bidding (a)
Our Company and the BRLM shall declare the Bid/Issue Opening Date and Bid/Issue Closing Date at the time of filing the Red Herring Prospectus with the RoC and also publish the same in widely circulated national newspapers (one each in English and Hindi) and a widely circulated
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regional (Tamil) newspaper. The Syndicate and the SCSBs shall accept Bids from the Bidders during the Issue Period. (b)
Our Company in consultation with the BRLM will decide the Price Band and the minimum Bid lot size for the Issue and the same shall be advertised in two national newspapers (one each in English and Hindi) and in one regional (Tamil) newspaper with wide circulation at least two Working Days prior to the Bid/ Issue Opening Date.
(c)
The Bid/Issue Period shall be for a minimum of three Working Days and shall not exceed 10 Working Days. The Bid/ Issue Period maybe extended, if required, by an additional three Working Days, subject to the total Bid/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/ Issue Period, if applicable, will be published in two national newspapers (one each in English and Hindi) and one regional (Tamil) newspaper with wide circulation and also by indicating the change on the websites of the BRLM, at the terminals of the Syndicate and by intimation to the SCSBs.
(d)
During the Bid/Issue Period, Bidders (other than ASBA Bidders), who are interested in subscribing for the Equity Shares should approach the Syndicate Members or their authorised agents to register their Bids. The Syndicate Members shall accept Bids from all Bidders and have the right to vet the Bids during the Bid/ Issue Period in accordance with the terms of the Red Herring Prospectus. Bidders applying through the ASBA process may approach the Designated Branches of the SCSBs or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres to register their Bids.
(e)
Each Bid-cum-Application Form will give the Bidder the choice to Bid for up to three optional prices (for details refer to the paragraph entitled “Bids at Different Price Levels” below) within the Price Band and specify the demand (i.e., the number of Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid-cum-Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation/Allotment and the rest of the Bid(s), irrespective of the Bid Amount, will become automatically invalid.
(f)
The Bidder cannot Bid on another Bid-cum-Application Form after Bids on one Bid-cumApplication Form have been submitted to any member of the Syndicate or the SCSBs. Submission of a second Bid-cum-Application Form or ASBA Bid Cum Application Form to either the same or to another member of the Syndicate or SCBS will be treated as multiple Bids and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the paragraph titled “Build up of the Book and Revision of Bids”.
(g)
In case of Bidders applying through the ASBA process has submitted the Bid-cum-Application Forms to the Syndicate Member(s)/sub-syndicate members at the Specified Centres or its authorized agents, the Syndicate members shall upload the Bid details in the electronic bidding system of the Stock Exchange. Before accepting the Bid-cum-Application Forms, the Syndicate/sub-syndicate members shall ensure that SCSBs whose name has been entered in the Bid-cum-Application Form has designated a branch in that particular bidding center to accept such Bid-cum-Application Forms. Within two days of the Bid/Issue Closing date, the Syndicate members shall forward a schedule containing the application and amount along with the application forms to the branch of the SCSBs so authorised to accept the ASBA forms procured by the Syndicate members. Upon receipt of such application forms the SCSBs shall verify whether sufficient funds are available in the ASBA account as mentioned in the application forms. In the event sufficient funds are not available in the relevant ASBA Account, the Designated Branch of the SCSB shall reject such Bids.
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(h)
The members of the Syndicate/the SCSBs will enter each Bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid-cum-Application Form.
(i)
Along with the Bid-cum-Application Form, all Bidders (other than ASBA Bidders) will make payment in the manner described in “Escrow Mechanism- Terms of payment and payment into the Escrow Accounts” on page 209.
(j)
In case of receipt of the ASBA Form directly from the Bidder, submitted whether in physical or electronic mode, the Designated Branch of the SCSB shall verify if sufficient funds equal to the Bid Amount are available in the ASBA Account, as mentioned in the ASBA Form, prior to uploading such Bids with the Stock Exchanges. If sufficient funds are not available in the ASBA Account, the Designated Branch of the SCSB shall reject such Bids and shall not upload such Bids with the Stock Exchanges. If sufficient funds are available in the ASBA Account, the SCSBs shall block an amount equivalent to the Bid Amount mentioned in the ASBA Form and will enter each Bid option into the electronic bidding system as a separate Bid and generate a TRS for each price and demand option. The TRS shall be furnished to the ASBA Bidder on request. ( l) The Bid Amount shall remain blocked in the aforesaid ASBA Account until finalisation of the Basis of Allotment and consequent transfer of the Bid Amount against the Allotted Equity Shares to the Public Issue Account, or until withdrawal/failure of the Issue or until withdrawal/rejection of the ASBA Form, as the case may be. Once the Basis of Allotment is finalized, the Registrar to the Issue shall send an appropriate request to the Controlling Branch of the SCSB for unblocking the relevant ASBA Accounts and for transferring the amount allocable to the successful Bidders to the Public Issue Account. In case of withdrawal/failure of the Issue, the blocked amount shall be unblocked on receipt of such information from the Registrar to the Issue.
Bids at Different Price Levels and Revision of Bids (a)
The Price Band and the minimum Bid lot size shall be decided by our Company in consultation with the BRLM and advertised at least two working days prior to the Bid/Issue Opening Date, in an English national newspaper, a Hindi national newspaper and a regional (Tamil) newspaper, each with wide circulation.
(b)
Our Company, in consultation with the BRLM and without the prior approval of, or intimation, to the Bidders, reserves the right to revise the Price Band during the Bid/ Issue Period, provided that the Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the face value of the Equity Shares. The revision in Price Band shall not exceed 20% on the either side i.e. the floor price can move up or down to the extent of 20% of the floor price disclosed at least two days prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly.
(c)
In case of revision in the Price Band, the Bid/Issue Period will be extended for at least three additional days after revision of Price Band subject to a maximum of 10 working days. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a public notice in an English national newspaper, a Hindi national newspaper and a Regional (Tamil) newspaper, each with wide circulation and also by indicating the change on the websites of the BRLMs, SCSBs and at the terminals of the Syndicate Member(s).
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(d)
Our Company, in consultation with the BRLM will finalise the Issue Price within the Price Band in accordance with this clause, without the prior approval of, or intimation, to the Bidders.
(e)
The Bidders can Bid at any price within the Price Band. The Bidder has to Bid for the desired number of Equity Shares at a specific price. Retail Individual Bidders may Bid at the Cut-off Price. However, bidding at Cut-off Price is prohibited for QIB and Non- Institutional Bidders and such Bids from QIB and Non-Institutional Bidders shall be rejected.
(f)
Retail Individual Bidders, who Bid at Cut-off Price agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders, shall submit the Bid-cumApplication Form along with a cheque/demand draft for the Bid Amount based on the Cap Price with the Syndicate. In case of ASBA Bidders (excluding Non-Institutional Bidders and QIB Bidders) bidding at Cut-off Price, the ASBA Bidders shall instruct the SCSBs to block an amount based on the Cap Price.
(g)
In the event of any revision in the Price Band, whether upward or downward, the minimum application size shall remain [•] Equity Shares irrespective of whether the Bid Amount payable on such minimum application is not in the range of ` 5,000 to `7,000.
Escrow mechanism, terms of payment and payment into the Escrow Accounts For details of the escrow mechanism and payment instructions, please see “Issue Procedure - Payment Instructions” on page 188. Electronic Registration of Bids (a)
The members of the Syndicate and the Designated branches of the SCSBs will register the Bids using the on-line facilities of the Stock Exchanges.
(b)
The Syndicate and the SCSBs will undertake modification of selected fields in the Bid details already uploaded within one Working Day from the Bid/Issue to amend some of the data fields (currently DP ID, Client ID) entered by them in the electronic bidding system. Bidders are cautioned that a high inflow of Bids typically experienced on the last Working Day of the Bidding may lead to some Bids received on the last Working Day not being uploaded due to lack of sufficient uploading time, and such Bids that could not be uploaded will not be considered for allocation.
(c)
There will be at least one on-line connectivity facility in each city, where a stock exchange is located in India and where Bids are being accepted. The BRLM, our Company and the Registrar are not responsible for any acts, mistakes or errors or omission and commissions in relation to, (i) the Bids accepted by the Syndicate Members and the SCSBs, (ii) the Bids uploaded by the Syndicate Members and the SCSBs, (iii) the Bids accepted but not uploaded by the Syndicate Members and the SCSBs or (iv) with respect to ASBA Bids, Bids accepted and uploaded without blocking funds in the ASBA Accounts. However, the Syndicate and/or the SCSBs shall be responsible for any error in the Bid details uploaded by them. It shall be presumed that for Bids uploaded by the SCSBs, the Bid Amount has been blocked in the relevant ASBA Account.
(d)
The Stock Exchanges will offer an electronic facility for registering Bids for the Issue. This facility will be available with the Syndicate and their authorised agents and the SCSBs during the Bid/ Issue Period. The Syndicate Members and the Designated Branches of the SCSBs can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently upload the off-line data file into the on-line facilities for Book Building on a regular basis. On the Bid/ Issue Closing Date, the Syndicate and the Designated Branches of the SCSBs shall upload the Bids till such time as may be permitted by the Stock Exchanges. This information will be available with the BRLM on a regular basis.
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(e)
Based on the aggregate demand and price for Bids registered on the electronic facilities of the Stock Exchanges, a graphical representation of consolidated demand and price as available on the websites of the Stock Exchanges would be made available at the Bidding centres during the Bid/Issue Period.
(f)
At the time of registering each Bid other than ASBA Bids, the Syndicate shall enter the following details of the Bidders in the on-line system: •
Name of the Bidder: Bidders should ensure that the name given in the Bid-cum-Application Form is exactly the same as the name in which the Depositary Account is held. In case the Bidcum-Application Form is submitted in joint names, Bidders should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid-cum-Application Form.
•
Investor Category – Individual, Corporate, FII, NRI, Mutual Fund, etc.
•
Price Option
•
Numbers of Equity Shares Bid for.
•
Bid Amount.
•
Cheque Details.
•
Bid-cum-Application Form number.
•
DP ID and client identification number of the beneficiary account of the Bidder.
•
PAN.
With respect to ASBA Bids, at the time of registering each Bid, the Designated Branches of the SCSBs or the Syndicate/ Sub-Syndicate members shall enter the following information pertaining to the Bidder into the online system: • • • •
Name of the Bidder(s); Application Number; PAN (of First Bidder, in case of more than one Bidder); Investor Category and Sub-Category: Retail (No sub category)
• •
Non- Institutional • • •
QIB • • • • • • •
Individual corporate other
Mutual Funds Financial Institutions Insurance companies Foreign Institutional Investors other than corporate and individual sub-accounts
Number of Equity Shares Bid for. Depository Participant Identification Number and Client Identification Number of the beneficiary account of the Bidder.
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• •
Bid Amount Bank Account number
(g)
A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate or the SCSBs as the case may be. The registration of the Bid by the member of the Syndicate or the SCSB does not guarantee that the Equity Shares shall be allocated/Allotment either by the members of the Syndicate or our Company.
(h)
Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
(i)
In case of QIB Bidders, only the BRLM and their affiliate Syndicate Members also have the right to accept the bid or reject it. However, such rejection should be made at the time of receiving the bid and only after assigning a reason for such rejection in writing. In case of NonInstitutional Bidders and Retail Individual Bidders, Bids would not be rejected except on the technical grounds.
(j)
The permission given by BSE to use their network and software of the Online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by our Company, or the BRLM are cleared or approved by BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, our Promoters, our management or any scheme or project of our Company.
(k)
It is also to be distinctly understood that the approval given by BSE should not in any way be deemed or construed that this Draft Red Herring Prospectus has been cleared or approved by the BSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be listed on the BSE.
Build up of the book and revision of Bids (a)
Bids received from various Bidders through the Syndicate and the SCSBs shall be electronically uploaded to the Stock Exchanges main frame on a regular basis.
(b)
The Book gets built up at various price levels. This information will be available with the BRLM on a regular basis at the end of the Bid/Issue Period and can be obtained from them.
(c)
During the Bid/Issue Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the Price Band using the printed Revision Form, which is a part of the Bid-cum-Application Form or ASBA Bid Cum Application Form.
(d)
Revisions can be made in both the desired number of Equity Shares and the Bid Amount by using the Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in his or her Bid-cum-Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid-cumApplication Form and such Bidder is changing only one of the options in the Revision Form, he must still fill the details of the other two options that are not being revised, in the Revision Form. The Syndicate and the Designated Branches of the SCSBs will not accept incomplete or inaccurate Revision Forms.
(e)
The Bidder can make this revision any number of times during the Bid/Issue Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of
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the Syndicate or the SCSB through whom such Bidder had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof. (f)
In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had Bid at Cut-off Price could either (i) revise their Bid or (ii) shall make additional payment based on the cap of the revised Price Band (such that the total amount i.e., original Bid Amount plus additional payment does not exceed ` ` 200,000 if the Bidder wants to continue to Bid at Cut-off Price), with the Syndicate to whom the original Bid was submitted. In case the 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 of this Red Herring Prospectus. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the cap of the Price Band prior to revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of allocation, such that no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut-off Price.
(g)
In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders, who have Bid at Cut-off Price could either revise their Bid or the excess amount paid at the time of bidding would be refunded from the Escrow Account.
(h)
Our Company, in consultation with the BRLM, shall decide the minimum number of Equity Shares for each Bid to ensure that the minimum application value is within the range of ` 5,000 to ` 7,000.
(i)
Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. With respect to the ASBA Bids, if revision of the Bids results in an incremental amount, the relevant SCSB shall block the additional Bid Amount. In such cases, the Syndicate will revise the earlier Bids details with the revised Bid and provide the cheque or demand draft number of the new payment instrument in the electronic book. The Registrar will reconcile the Bid data and consider the revised Bid data for preparing the Basis of Allotment.
(j)
When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and may get a revised TRS from the Syndicate or the SCSB, as applicable. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised the previous Bid.
Price Discovery and Allocation a)
After the Bid/Issue Closing Date, the BRLM will analyze the demand generated at various price levels and discuss pricing strategy with us.
b)
Our Company, in consultation with the BRLM shall finalize the ‘Issue Price’, the number of Equity Shares to be allotted in each category of Bidders.
c)
The allocation available to QIBs for atleast 50% of the Issue to the Public, of which 5% shall be reserved for Mutual Funds, would be on a proportionate basis, subject to valid bids being received at or above the Issue Price in the manner as described in the section titled ’Basis of Allotment’. The allocation to Non-Institutional Bidders and Retail Individual Bidders of upto 15% and 35% of the Issue to the Public, respectively, would be on proportionate basis, in the manner specified in the SEBI (ICDR) Regulations in consultation with Designated Stock Exchange, subject to valid Bids being received at or above the Issue Price.
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d)
Under subscription, if any, in QIBs, Non-Institutional and Retail categories would be allowed to be met with spill over from any of the other categories at the discretion of our Company and the BRLM. However, if the aggregate demand by Mutual Funds is less than [●] Equity Shares, the balance Equity Shares from the portion specifically available for allocation to Mutual Funds in the QIB Portion will first be added to the QIB Portion and be allocated proportionately to the QIB Bidders in proportion to their Bids.
e)
Allocation to NRIs, FIIs, Foreign Venture Capital Funds registered with SEBI applying on repatriation basis will be subject to the terms and conditions stipulated by the FIPB and RBI while granting permission for Issue/Allocation of Equity Shares to them.
f)
Our Company in consultation with the BRLM, reserves the right to cancel the Issue any time after the Bid/Issue Opening Date but before allocation, without assigning reasons whatsoever.
The allotment details shall be uploaded on the website of the Registrar to the Issue. Signing of the Underwriting Agreement and the RoC Filing (a)
Our Company, the BRLM and the Syndicate Members shall enter into an Underwriting Agreement on or immediately after the finalisation of the Issue Price.
(b)
After signing the Underwriting Agreement, Our Company will update and file the updated Red Herring Prospectus with the RoC in accordance with the applicable law, which then would be termed as the “Prospectus”. The Prospectus will contain details of the Issue Price, Issue size, underwriting arrangements and will be complete in all material respects.
Pre-Issue Advertisement Subject to Section 66 of the Companies Act, Our Company shall, after registering the Red Herring Prospectus with the RoC, publish a pre-Issue advertisement, in the form prescribed by the SEBI Regulations, in one English language national daily newspaper, one Hindi language national daily newspaper and one regional (Tamil) language daily newspaper, each with wide circulation. Advertisement regarding Issue Price and Prospectus Our Company will issue a statutory advertisement after the filing of the Prospectus with the RoC. This advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the Issue Price. Any material updates between the date of the Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement. Issuance of Confirmation of Allotment Note (“CAN”) (a)
Upon approval of the Basis of Allotment by the Designated Stock Exchange, the Registrar shall send to the Syndicate a list of the Bidders who have been Allotted Equity Shares in the Issue.
(b)
The Registrar will then dispatch a CAN to the Bidders who have been Allotted Equity Shares in the Issue. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder for all the Equity Shares allocated to such Bidder.
Designated Date and Allotment of Equity Shares (a)
Our Company will ensure that (i) the Allotment of Equity Shares; and (ii) credit to the successful Bidder‘s depositary account will be completed within 12 Working Days of the Bid/Issue Closing Date.
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(b)
In accordance with the SEBI Regulations, Equity Shares will be issued and Allotment shall be made only in the dematerialised form to the Allottees.
(c)
Allottees will have the option to re-materialise the Equity Shares so allotted as per the provisions of the Companies Act and the Depositories Act.
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated/ Allotted to them pursuant to this Issue. GENERAL INSTRUCTIONS Do’s: (a)
Check if you are eligible to apply in terms of the Red Herring Prospectus and under applicable law;
(b)
Ensure that you have Bid within the Price Band;
(c)
Read all the instructions carefully and complete the Bid-cum-Application Form;
(d)
Ensure that the details about the Depository Participant, PAN and the beneficiary account are correct as Allotment of Equity Shares will be in the dematerialised form only;
(e)
Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate or with respect to ASBA Bidders, ensure that your Bid is submitted either at a Designated Branch of the SCSB or to the Syndicate Member(s)/sub-syndicate members at the Specified Centres.;
(f)
With respect to ASBA Bids ensure that the ASBA Form is signed by the account holder in case the applicant is not the account holder. Ensure that you have mentioned the correct bank account number in the ASBA Form;
(g)
Ensure that you request for and receive a TRS for all your Bid options;
(h)
In case of Bids submitted through ASBA process, ensure that you have funds equal to the Bid Amount in your bank account maintained with the SCSB before submitting the ASBA Form to the respective Designated Branch of the SCSBs or the Syndicate members;
(i)
In case of Non-ASBA Bids, ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate and in case of Bids under the ASBA process funds equivalent to the Bid Amount are blocked in case of any Bids submitted through the SCSBs.
(j)
In case of Bids submitted through the ASBA process, instruct the relevant SCSBs not to release the funds blocked in the ASBA Account in respect of the relevant Bid Amounts until receipt of instructions from the Registrar to the Issue to unblock the Bid Amount, based on finalization of the Basis of Allotment;
(k)
Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised TRS;
(l)
Except for Bids submitted on behalf of the Central Government or the State Government and officials appointed by a court and subject to the SEBI circular dated April 3, 2008 from the residents of the state of Sikkim, all Bidders should mention their PAN allotted under the IT Act. Bid Cum-Application Form in which the PAN is not provided will be rejected;
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(m)
Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects;
(n)
Ensure that the name(s) given in the Bid-cum-Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the Bid-cum-Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Bid-cum-Application Form.
(o)
All QIB Bidders and Non-Institutional Bidders shall apply only through the ASBA process.
Don’ts: (a)
Do not Bid if you are prohibited from buying, selling or dealing in shares, directly or indirectly, by SEBI or any other regulatory authority;
(b)
Do not Bid if you are not eligible to acquire Equity Shares under applicable law or your relevant constitutional documents or otherwise, or if you are not competent to contract under the Indian Contract Act, 1872, as amended;
(c)
Do not Bid if you are a US resident;
(d)
Do not bid after the time prescribed as per the Bid cum Application Form, Pre-issue advertisement and the Red Herring Prospectus and if the Bid is not as per the instructions in the Red Herring Prospectus and the Bid cum Application Forms;
(e)
Do not submit your Bids on plain paper;
(f)
Do not forget to tick the Bidder category on the Bid cum Application Form;
(g)
In case of ASBA Bids, do not forget to tick the authorization to the SCSB to block funds in the ASBA Account;
(h)
Do not Bid for lower than the minimum Bid size;
(i)
Do not Bid/ revise Bid Amount to less than the Floor Price or higher than the Cap Price;
(j)
Do not Bid on another Bid-cum-Application Form after you have submitted a Bid to the Syndicate or the SCSBs, as applicable;
(k)
Do not pay the Bid Amount in cash, by money order or by postal order or by stockinvest;
(l)
Do not send Bid-cum-Application Forms by post; instead submit the same to a member of the Syndicate or the SCSBs only;
(m)
Do not Bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders, for Bid Amount in excess of ` 200,000);
(n)
Do not Bid for a Bid Amount exceeding ` 200,000 (for Bids by Retail Individual Bidders);
(o)
With respect to ASBA Bids, do not bid if there are inadequate funds in the ASBA Account for enabling the SCSB to block the Bid Amount specified in the ASBA Bid cum Application Form;
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(p)
Do not Bids under power of attorney or if you are a limited company, corporate, trust, etc., unless the Bid is supported with relevant documents;
(q)
Do not forget to mention the sole or first Bidder’s PAN (except for Bids on behalf of the Central or State Government, residents of Sikkim and officials appointed by the courts), DP ID and BAN in the Bid-cum-Application Form;
(r)
Do not fill up the Bid-cum-Application Form such that the Equity Shares Bid for exceeds the Issue Size and/ or investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations;
(s)
Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground; and
(t)
Do not submit the Bids without the full Bid Amount.
INSTRUCTIONS FOR COMPLETING THE BID-CUM-APPLICATION FORM Bids must be: (a)
Made only in the prescribed Bid-cum-Application Form or Revision Form, as applicable.
(b)
Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, in the Bid-cum-Application Form or in the Revision Form. Bidders must provide details of valid and active DP ID, Beneficiary Account Number and PAN clearly and without error. Invalid accounts/ suspended accounts or where such account is classified as invalid or suspended may not be considered for allotment. Incomplete or incorrect Bid-cumApplication Forms or Revision Forms are liable to be rejected. Bidders should note that the Syndicate and / or the SCSBs, as appropriate, will not be liable for errors in data entry due to incomplete 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 and the SCSBs, as the case may be, and the electronic data will be used to make allocation/ Allotment. The Bidders should ensure that the details are correct and legible.
(d)
For Retail Individual Bidders, the Bid must be for a minimum of [●] Equity Shares and in multiples of [●] thereafter subject to a maximum Bid Amount of `200,000.
(e)
For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds `200,000 and in multiples of [●] Equity Shares thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of Equity Shares that can be held by them under the applicable laws or regulations.
(f)
In single name or in joint names (not more than three, and in the same order as their Depository Participant details).
(g)
Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.
(h)
If the ASBA Account holder is different from the ASBA Bidder, the Bid cum Application Form should also be signed by the account holder as provided in the Bid cum Application Form.
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Bidder’s PAN, Depository Account and Bank Account Details Bidders should note that on the basis of PAN of the Bidders, DP ID and beneficiary account number provided by them in the Bid-cum-Application Form, the Registrar will obtain from the Depository the demographic details including address, Bidders bank account details, MICR code and occupation (hereinafter referred to as “Demographic Details”). These bank account details would be used for giving refunds (including through physical refund warrants, direct credit, NECS, NEFT) or unblocking of ASBA Account. It is mandatory to provide the bank account details in the space provided in the Bid-cum-Application Form and Bid-cum-Application Form that do not contain such details are liable to be rejected. Hence, Bidders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays in despatch/ credit of refunds to Bidders or unblocking of ASBA Account at the Bidders sole risk and neither the BRLM or the Registrar or the Escrow Collection Banks or the SCSBs nor Our Company shall have any responsibility and undertake any liability for the same. Hence, Bidders should carefully fill in their Depository Account details in the Bid-cum-Application Form. IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT‟S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID-CUM-APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID-CUM-APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID-CUM-APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID-CUM-APPLICATION FORM. These Demographic Details would be used for all correspondence with the Bidders including mailing of the CANs/allocation advice and printing of bank particulars on the refund orders or for refunds through electronic transfer of funds, as applicable. The Demographic Details given by Bidders in the Bid-cumApplication Form would not be used for any other purpose by the Registrar. By signing the Bid-cum-Application Form, the Bidder would be deemed to have authorised the Depositories to provide, upon request, to the Registrar, the required Demographic Details as available on its records. Refund orders/ CANs would be mailed at the address of the Bidder as per the Demographic Details received from the Depositories. Bidders may note that delivery of refund orders/ CANs may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Bidder (other than ASBA Bidders) in the Bid-cum-Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at such Bidder’s sole risk and neither our Company, the Escrow Collection Banks, Registrar, the BRLM shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay. In case no corresponding record is available with the Depositories, which matches the three parameters, namely, PAN of the sole/First Bidder, the DP ID and the beneficiary‘s identity, then such Bids are liable to be rejected. Bids by Non-Residents including Eligible NRIs, FIIs and Foreign Venture Capital Funds on a repatriation basis Bids and revision to Bids must be:
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1.
On the Bid-cum-Application Form or the Revision Form, as applicable (blue in colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained in the Red Herring Prospectus, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision are liable to be rejected.
2.
Bids by Retail Individual Bidders must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter, subject to a maximum Bid Amount of `200,000.
3.
Bids by QIBs bidding and Non- Institutional Bidders must be for a minimum of such number of Equity Shares that the Bid Amount exceeds ` [●] and in multiples of [●] Equity Shares thereafter. Bids cannot be made for more than the size of this Issue, subject to applicable investment limits under laws or regulations to the Bidders.
4.
Made in a single name or joint names (not more than three and in the same order as their Depositary Participant Details).
5.
Bids on a repatriation basis shall be in the names of individuals, or in the name of FIIs but not in the names of minors, OCBs, firms or partnerships, foreign nationals (excluding NRIs) or their nominees.
Bids by Eligible NRIs for a Bid Amount of up to `200,000 would be considered under the Retail Portion for the purposes of allocation and Bids for a Bid Amount of more than `200,000 would be considered under Non- Institutional Portion for the purposes of allocation. Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid-cum-Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency. There is no reservation for Eligible NRIs and FIIs and all Bidders will be treated on the same basis with other categories for the purpose of allocation. Bids under Power of Attorney or by Limited Companies, Corporate Bodies or Registered Societies In case of bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the Memorandum & Article of Association and/or Bye Laws must be lodged along with the Bid-cum-Application Form. Failing this, our Company reserves the right to accept or reject any bid in whole or in part. Certain additional documents are required to be lodged along with the Bid cum Application Form by the following entities: (a)
With respect to Bids by FVCIs, FIIs and Mutual Funds, a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form.
(b)
With respect to Bids by insurance companies registered with the IRDA, in addition to the above, a certified copy of the certificate of registration issued by the IRDA must be lodged with the Bid cum Application Form.
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(c)
With respect to Bids made by provident funds with minimum corpus of ` 25.00 crore (subject to applicable law) and pension funds with a minimum corpus of ` 25.00 crore, a certified copy
Our Company in our absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the power of attorney and additional documents, as specified above, along with the Bid cum Application Form, subject to such terms and conditions that the Bank and the BRLMs may deem fit. PAYMENT INSTRUCTIONS By a Circular dated April 29, 2011 issued by SEBI and bearing no. CIR/CFD/DIL/1/2011, it is now mandatory for all QIB Bidders and Non-Institutional Bidders to apply through the ASBA process only. Escrow Mechanism for Bidders other than ASBA Bidders Our Company and the Syndicate shall open Escrow Account(s) with one or more Escrow Collection Bank(s) in whose favour the Retail Individual Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders would be deposited in the Escrow Account. The Escrow Collection Banks will act in terms of the Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Banks for and on behalf of the Retail Individual Bidders shall maintain the monies in the Escrow Account until the Designated Date. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Retail Individual Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the funds represented by allocation of Equity Shares (other than ASBA funds with the SCSBs) from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue Account with the Bankers to the Issue. The balance amount after transfer to the Public Issue Account shall be transferred to the Refund Account. Payments of refund to the Bidders shall also be made from the Refund Account as per the terms of the Escrow Agreement and the Red Herring Prospectus. The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between our Company, the Syndicate, the Escrow Collection Banks and the Registrar to facilitate collections from the Bidders. Payment mechanism for ASBA Bidders The ASBA Bidders shall specify the bank account number in the ASBA Form and the SCSB shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Form. The SCSB shall keep the Bid Amount in the relevant bank account blocked until withdrawal/ rejection of the ASBA Bid or receipt of instructions from the Registrar to unblock the Bid Amount. In the event of withdrawal or rejection of the ASBA Form or for unsuccessful ASBA Forms, the Registrar shall give instructions to the SCSB to unblock the application money in the relevant bank account within one day of receipt of such instruction. The Bid Amount shall remain blocked in the ASBA Account until finalisation of the Basis of Allotment in the Issue and consequent transfer of the Bid Amount to the Public Issue Account, or until withdrawal/ failure of the Issue or until rejection of the ASBA Bid, as the case may be. Payment into Escrow Account for Bidders other than ASBA Bidders Each Retail Individual Bidder shall draw a cheque or demand draft or remit the funds electronically through the NEFT/RTGS mechanism for the amount payable on the Bid and/or on allocation/Allotment as per the following terms:
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1.
All Retail Individual Bidders would be required to pay the full Bid Amount at the time of the submission of the Bid-cum-Application Form.
2.
The Retail Individual Bidders shall, with the submission of the Bid-cum-Application Form, draw a payment instrument for the Bid Amount in favour of the Escrow Account and submit the same to the Syndicate. If the payment is not made favouring the Escrow Account along with the Bid-cum-Application Form, the Bid of the Bidder shall be rejected.
3.
The payment instruments for payment into the Escrow Account should be drawn in favour of: (a) (b)
In case of Resident Retail: “Escrow – PIL Public Issue - R” In case of Non-Resident Retail “Escrow – PIL Public Issue - NR”
4.
In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident Bidder bidding on a repatriation basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE Account or FCNR Account.
5.
In case of Bids by NRIs applying on non-repatriation basis, the payments must be made through Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance or out of a Non-Resident Ordinary (NRO) Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting an NRE or FCNR or NRO Account.
6.
The monies deposited in the Escrow Account will be held for the benefit of the Bidders (other than ASBA Bidders) till the Designated Date.
7.
On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to the Issue.
8.
Within 12 Working Days from the Bid/Issue Closing Date, the Refund Bank shall also refund all amounts payable to unsuccessful Bidders (other than ASBA Bidders) and also the excess amount paid on bidding, if any, after adjusting for allocation/Allotment to such Bidders.
9.
Payments should be made by cheque, or a demand draft drawn on any bank (including a cooperative bank), which is situated at, and is a member of or sub-member of the bankers‘ clearing house located at the centre where the Bid-cum-Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ stockinvest/money orders/postal orders will not be accepted.
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OTHER INSTRUCTIONS Joint Bids in the case of Individuals Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour of the Bidder whose name appears first in the Bid-cum-Application Form or Revision Form. All communications will be addressed to the First Bidder and will be dispatched to his or her address as per the Demographic Details received from the Depository. Multiple Bids A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. Bids by QIBs under QIB Portion will not be considered as multiple Bids. Our Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all categories. In this regard, the procedures which would be followed by the Registrar to detect multiple Bids are given below: 1.
All Bids will be checked for common PAN and will be accumulated and taken to a separate process file which would serve as a multiple master.
2. In this master, a check will be carried out for the same PAN. In cases where the PAN is different, the same will be deleted from this master. 3. The Registrar will obtain, from the depositories, details of the applicant‘s address based on the DP ID and Beneficiary Account Number provided in the Bid data and create an address master. 4. The addresses of all the applications in the multiple master will be strung from the address master. This involves putting the addresses in a single line after deleting non-alpha and nonnumeric characters i.e. commas, full stops, hash etc. Sometimes, the name, the first line of address and pin code will be converted into a string for each application received and a photo match will be carried out amongst all the applications processed. A print-out of the addresses will be taken to check for common names. The Bids with same name and same address will be treated as multiple Bids. 5. The Bids will be scrutinised for DP ID and Beneficiary Account Numbers. In case applications bear the same DP ID and Beneficiary Account Numbers, these will be treated as multiple applications. Permanent Account Number or PAN The Bidders, or in the case of a Bid in joint names, each of the Bidders, should mention his/ her PAN allotted under the I.T. Act. In accordance with the SEBI Regulations, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of transaction. Any Bid-cum-Application Form without the PAN is liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground.
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REJECTION OF BIDS In case of QIB Bidders, our Company in consultation with the BRLM may reject Bids provided that the reasons for rejecting the same shall be provided to such Bidders in writing. In case of Non-Institutional Bidders and Retail Individual Bidders, our Company has a right to reject Bids based on technical grounds. Consequent refunds shall be made by NEFT/NECS/Direct Credit/cheque or pay order or draft and will be sent to the Bidder‘s address at the Bidder‘s risk. With respect to ASBA Bids, the Designated Branches of the SCSBs shall have the right to reject ASBA Bids if at the time of blocking the Bid Amount in the Bidder‘s bank account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not available in the Bidder‘s bank account maintained with the SCSB. Subsequent to the acceptance of the ASBA Bid by the SCSB, our Company would have a right to reject the ASBA Bids only on technical grounds. Grounds for Technical Rejections Bidders 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 of Equity Shares Bid for. With respect to ASBA Bids, the amounts mentioned in the ASBA Form does not tally with the amount payable for the value of the Equity Shares Bid for;
•
In case of partnership firms, Equity Shares may be registered in the names of the individual partners and no firm as such shall be entitled to apply;
•
Bid by persons not competent to contract under the Indian Contract Act, 1872 including minors, insane persons;
•
PAN not mentioned in the Bid-cum-Application Form;
•
GIR number furnished instead of PAN;
•
Bids for lower number of Equity Shares than specified for that category of investors;
•
Bids at a price less than the Floor Price;
•
Bids at a price more than the Cap Price;
•
Bids at Cut-off Price by Non-Institutional and QIB Bidders;
•
Bids for number of Equity Shares which are not in multiples of [ ];
•
Category not ticked;
•
Multiple Bids as defined in the Red Herring Prospectus;
•
In case of Bids under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;
•
Bids accompanied by Stockinvest/money order/postal order/cash;
•
Bid-cum-Application Forms does not have the stamp of the BRLM or Syndicate Members or the SCSB;
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•
Bid-cum-Application Forms does not have Bidder‘s depository account details;
•
Bid-cum-Application Forms are not delivered by the Bidders within the time prescribed as per the Bid-cum-Application Forms, Bid/Issue Opening Date advertisement and the Red Herring Prospectus and as per the instructions in the Red Herring Prospectus and the Bid-cumApplication Forms;
•
In case no corresponding record is available with the Depositories that matches three parameters namely, names of the Bidders (including the order of names of joint holders), the Depositary Participant‘s identity (DP ID) and the beneficiary‘s account number;
•
With respect to ASBA Bids, inadequate funds in the bank account to block the Bid Amount specified in the ASBA Form at the time of blocking such Bid Amount in the bank account;
•
Bids for amounts greater than the maximum permissible amounts prescribed by the regulations;
•
Bids where clear funds are not available in Escrow Accounts as per final certificate from the Escrow Collection Banks;
•
ASBA Bids for QIBs not intimated to the BRLM;
•
Bids by persons in the United States;
•
Bids by any person outside India if not in compliance with applicable foreign and Indian Laws;
•
Bids by QIBs and Non-Institutional Bidders through the non-ASBA process;
•
Bids not uploaded on the terminals of the Stock Exchanges; and
•
Bids by persons prohibited from buying, selling or dealing in the shares directly or indirectly by SEBI or any other regulatory authority.
IN CASE THE DP ID, CLIENT ID AND PAN MENTIONED IN THE BID-CUM-APPLICATION FORM AND ENTERED INTO THE ELECTRONIC BIDDING SYSTEM OF THE STOCK EXCHANGES OR THE SYNDICATE/THE SCSBs DO NOT MATCH WITH THE DP ID, CLIENT ID AND PAN AVAILABLE IN THE RECORDS WITH THE DEPOSITARIES. EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL As per the provisions of Section 68B of the Companies Act, the Allotment of Equity Shares in this Issue shall be only in a de-materialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode). In this context, two agreements have been signed among our Company, the respective Depositories and the Registrar: Agreement dated [●], between NSDL, Our Company and the Registrar; Agreement dated [●], between CDSL, Our Company and the Registrar. All Bidders can seek Allotment only in dematerialised mode. Bids from any Bidder without relevant details of his or her depository account are liable to be rejected. (a)
A Bidder applying for Equity Shares must have at least one beneficiary account with either of the Depository Participants of either NSDL or CDSL prior to making the Bid.
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(b)
The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository Participant‘s identification number) appearing in the Bid-cum-Application Form or Revision Form.
(c)
Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.
(d)
Names in the Bid-cum-Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same 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” in the Bid-cum-Application Form or Revision Form, it is liable to be rejected.
(f)
The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid-cum-Application Form vis-à-vis those with his or her Depository Participant.
(g)
Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where the Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.
(h)
The trading of the Equity Shares of Our Company would be in dematerialised form only for all Bidders in the demat segment of the respective Stock Exchanges.
Communications All future communications in connection with Bids made in this Issue should be addressed to the Registrar quoting the full name of the sole or First Bidder, Bid-cum-Application Form number, Bidders Depository Account Details, number of Equity Shares applied for, date of Bid form, name and address of the member of the Syndicate or the Designated Branch of the SCSBs where the Bid was submitted and cheque or draft number and issuing bank thereof or with respect to ASBA Bids, bank account number in which the amount equivalent to the Bid Amount was blocked. Bidders can contact the Compliance Officer or the Registrar in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of Allotment, credit of Allotted shares in the respective beneficiary accounts, refund orders etc. In case of ASBA Bids submitted to the Designated Branches of the SCSBs/ to the Syndicate Member(s)/sub-syndicate members at the Specified Centres, the Bidders can contact the Designated Branches of the SCSBs or the Syndicate/ Sub-Syndicate members, as the case may be. PAYMENT OF REFUND Bidders other than ASBA Bidders must note that on the basis of the names of the Bidders, Depository Participant‘s name, DP ID, beneficiary account number provided by them in the Bid-cum-Application Form, the Registrar will obtain, from the Depositories, the Bidders ‘bank account details, including the nine digit Magnetic Ink Character Recognition (“MICR”) code as appearing on a cheque leaf. Hence, Bidders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays in dispatch of refund order or refunds through electronic transfer of funds, as applicable, and any such delay shall be at the Bidders‘sole risk and neither Our Company, nor the Book Running Lead Managers, the Registrar, Escrow Collection Bank(s), Bankers to the Issue, the BRLM shall be liable to compensate the Bidders for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay. Mode of making refunds for Bidders other than ASBA Bidders
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The payment of refund, if any, for Bidders other than ASBA Bidders would be done through various modes in the following order of preference: 1.
NECS – Payment of refund would be done through NECS for applicants having an account at any of the centres where such facility has been made available. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf, from the Depositories. The payment of refunds is mandatory for applicants having a bank account at any of the abovementioned centres, except where the applicant, being eligible, opts to receive refund through direct credit.
2.
Direct Credit – Applicants having bank accounts with the Refund Bank (s), as mentioned in the Bid-cum-Application Form, shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Company.
4.
NEFT – Payment of refund shall be undertaken through NEFT wherever the applicants‘ bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a Magnetic Ink Character Recognition (MICR), if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the applicants have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the applicants through this method. The process flow in respect of refunds by way of NEFT is at an evolving stage and hence use of NEFT is subject to operational feasibility, cost and process efficiency. The process flow in respect of refunds by way of NEFT is at an evolving stage, hence use of NEFT is subject to operational feasibility, cost and process efficiency. In the event that NEFT is not operationally feasible, the payment of refunds would be made through any one of the other modes as discussed in the sections.
5.
For all other applicants, including those who have not updated their bank particulars with the MICR code, the refund orders will be despatched through Speed Post/ Registered Post. Such refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.
Mode of making refunds for ASBA Bidders In case of ASBA Bidders, the Registrar shall instruct the relevant SCSB to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within 12 Working Days of the Bid/Issue Closing Date. DISPOSAL OF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF DELAY With respect to Bidders other than ASBA Bidders, Our Company shall ensure dispatch of Allotment advice, refund orders (except for Bidders who receive refunds through electronic transfer of funds) and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the Allotment to the Stock Exchanges within 12 Working Days of the Bid/Issue Closing Date. In case of applicants who receive refunds through NECS, NEFT, direct credit the refund instructions will be given to the clearing system within 12 Working Days from the Bid/ Issue Closing Date. A suitable communication shall be sent to the Bidders receiving refunds through this mode within 12 Working Days of Bid/ Issue Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund.
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Our Company shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed, are taken within 12 Working Days of the Bid/Issue Closing Date. In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Regulations, Our Company further undertakes that: Allotment of Equity Shares shall be made only in dematerialised form within 12 Working Days of the Bid/Issue Closing Date; and With respect to Bidders other than ASBA Bidders, dispatch of refund orders or in a case where the refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing system within 12 Working Days of the Bid/Issue Closing Date would be ensured. With respect to the ASBA Bidders, instructions for unblocking of the ASBA Bidder‘s Bank Account shall be made within 12 Working Days from the Bid/Issue Closing Date. If the Allotment letters or refund orders have not been despatched to the applicants or if, in a case where the refund or portion thereof is made in electronic manner through Direct Credit, NEFT or ECS, the refund instructions have not been given in the disclosed manner within 12 Working Days from the Bid/ Issue Closing Date or on refusal by stock exchanges to grant listing permission for the Equity Shares being offered, our Company shall, within 8 days, repay the money failing which it shall pay interest with interest at 15% per annum, as prescribed under section 73 of the Companies Act. IMPERSONATION Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the Companies Act, which is reproduced below: “Any person who: (a)
makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or
(b)
otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”
BASIS OF ALLOTMENT A.
For Retail Individual Bidders Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all the successful Retail Individual Bidders will be made at the Issue Price. The Issue size less Allotment to Non-Institutional and QIB Bidders shall be available for Allotment to Retail Individual Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids. If the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, the Allotment shall be made on a proportionate basis up to a minimum of [●] Equity
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Shares and in multiples of [●] Equity Shares thereafter. For the method of proportionate Basis of Allotment, refer below. B.
For Non-Institutional Bidders Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all successful Non- Institutional Bidders will be made at the Issue Price. The Issue size less Allotment to QIBs and Retail shall be available for Allotment to NonInstitutional Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent of their demand. In case the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter. For the method of proportionate Basis of Allotment refer below.
C.
For QIBs Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the total demand under this portion. The Issue size less Allotment to Non Institutional Bidders and Retail shall be available for Allotment to Non- QIB Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price. The Allotment to all the QIB Bidders will be made at the Issue Price. The QIB Portion shall be available for Allotment to QIB Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.
Allotment shall be undertaken in the following manner: (a)
(b)
In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be determined as follows: (i)
In the event that Bids by Mutual Fund exceeds 5% of the QIB Portion, allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion.
(ii)
In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB Portion then all Mutual Funds shall get full Allotment to the extent of valid Bids received above the Issue Price.
(iii)
Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be available for Allotment to all QIB Bidders as set out in (b) below;
In the second instance Allotment to all QIBs shall be determined as follows: (i)
In the event that the oversubscription in the QIB Portion, all QIB Bidders who have submitted Bids above the Issue Price shall be allotted Equity Shares on a proportionate basis, upto a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter for up to 95% of the QIB Portion.
(ii)
Mutual Funds, who have received allocation as per (a) above, for less than the number of Equity Shares Bid for by them, are eligible to receive Equity Shares on a
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proportionate basis, upto a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter, along with other QIB Bidders. (iii)
Under-subscription below 5% of the QIB Portion, if any, from Mutual Funds, would be included for allocation to the remaining QIB Bidders on a proportionate basis. The aggregate Allotment to QIB Bidders shall not be less than [●] Equity Shares.
The Book Running Lead Managers, the Registrar to the Issue and the Designated Stock Exchange shall ensure that the ‘Basis of Allocation’ is finalized in a fair and proper manner in accordance with the SEBI Regulations. The drawing of lots (where required) to finalize the ‘Basis of Allocation’ shall be done in the presence of a public representative on the Governing Board of the Designated Stock Exchange. A. Illustration of Allotment to QIBs and Mutual Funds (“MF”) Sr. No 1. 2. 3. 4.
5. 6.
Particulars Issue Size Allocation to QIB (50%) Anchor Investor Portion Portion available to QIBs other than Anchor Of which a. Allocation to Mutual Funds b. Balance for all QIBs including MFs No. of QIB applicants No of Shares applied for
Issue Details 200 Crores equity shares 100 Crores Equity Shares 30 Crores Equity shares 70 Crores Equity shares 3.5 Crores Equity Shares 66.5 Crores Equity Shares 10 500 Crores Equity shares
B. Details of QIB Bids Sr .No 1 2 3 4 5 6 7 8 9 10
QIB Bidders No. of shares bid (in crores) A1 50 A2 20 A3 130 A4 50 A5 50 MF1 40 MF2 40 MF3 80 MF4 20 MF5 20 Total 500 #A1-A5 : (QIB bidders other than MFs), (MF1-MF5) : (QIB Bidders other than Mutual Funds) C. Details of Allotment to QIB Bidders
Type of QIB Bidders
Equity shares bid for
A1 A2 A3 A4 A5
50 20 130 50 50
Allocation of 3.5 crores equity shares to MFs proportionately 0 0 0 0 0
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Allocation of balance 66.5 crores equity shares to QIBs proportionately 6.65 2.66 17.29 6.65 6.65
Aggregate allocation MFs 0 0 0 0 0
to
MF1 MF2 MF3 MF4 MF5
40 40 80 20 20
0.7 0.7 1.4 0.35 0.35
5.32 5.32 10.64 2.66 2.66
6.02 6.02 12.04 3.01 3.01
500
3.5
66.5
30.1
Please note: 1. The illustration presumes compliance with the requirements specified in this Draft Red Herring Prospectus in the section titled “Issue Structure” on page 213. 2. Out of 70 crores equity shares allocated to QIBs, 3.5 crores (i.e. 5%) will be allocated on proportionate basis among five Mutual Fund applicants who applied for 200 equity shares in QIB category. 3. The balance 66.5 crores equity shares (i.e. 70 – 3.5 (available for MFs)) will be allocated on proportionate basis among 10 QIB applicants who applied for 500 equity shares (including five MF applicants who applied for 200 equity shares). 4. The figures in the fourth column entitled “Allocation of balance 66.5 crores Equity Shares to QIBs proportionately” in the above illustration are arrived as under: For QIBs other than Mutual Funds (A1 to A5) = No. of shares bid for (i.e. in column II) X 66.5 /496.5 For Mutual Funds (MF1 to MF5) = [(No. of shares bid for (i.e. in column II of the table above) less Equity Shares allotted ( i.e., column III of the table above)] X 66.5 / 496.5 The numerator and denominator for arriving at allocation of 66.5 crore Equity shares to the 10 QIBs are reduced by 3.5 crores Equity shares, which have already been allotted to Mutual Funds in the manner specified in column III of the table above. Method of Proportionate Allotment In the event of the Issue being over-subscribed, the basis of allotment shall be finalised by Our Company in consultation with the Designated Stock Exchange. The Executive Director/Managing Director/authorized employees of the Designated Stock Exchange along with the post Issue Lead Merchant Banker and the Registrar to the Issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner. The allotment shall be made in marketable lots, on a proportional basis as explained below: (a)
Bidders will be categorized according to the number of Equity Shares applied for,
(b)
The total number of Equity Shares to be allotted to each category as a whole shall be arrived at on a proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.
(c)
Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the over-subscription ratio, in that category subject to a
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minimum allotment of [●] Equity Shares. The allotment lot shall be the same as the minimum application lot irrespective of any revisions to the Price Band. (d)
In all Bids where the proportionate allotment is less than [●] Equity Shares per Bidder, the Allotment shall be made as follows:
Each successful Bidder shall be allotted a minimum of [●] Equity Shares; and The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of Equity Shares allotted in that category is equal to the number of Equity Shares calculated in accordance with (b) above.
(e)
If the proportionate Allotment to a Bidder is a number that is more than [●] but is not a multiple of one (which is the marketable lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If the decimal is less than 0.5, it would be rounded off to the lower whole number. All Bidders in such categories would be allotted Equity Shares arrived at after such rounding off.
(f)
Investors should note that the Equity Shares will be allocated to all successful Bidders in dematerialised form only. Bidders will not have the option of being allocated Equity Shares in physical form.
If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares allotted to the Bidders in that category, the remaining Equity Shares available for allotment shall be first adjusted against any other category, where the allotted Equity Shares are not sufficient for proportionate allotment to the successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of Equity Shares. Letters of Allotment or Refund Orders or instructions to the SCSBs, disposal of application and application moneys Our Company shall give credit to the beneficiary account with depository participants within 12 Working Days from the Bid/Issue Closing Date. Applicants residing at the centres where clearing houses are managed by the RBI, will get refunds through NECS only except where applicant is otherwise disclosed as eligible to get refunds through direct credit. Our Company will ensure dispatch of any refund orders by speed or registered post or direct credit, NEFT or NECS, at the sole or first Bidders’ sole risk, within 12 Working Days from the Bid/ Issue Closing Date. Bidders to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post, intimating them about the mode of credit of refund within 12 Working Days of the Bid/ Issue Closing Date. In case of ASBA Bidders, the Registrar shall instruct the relevant SCSBs to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within 12 Working Days of the Bid/Issue Closing Date. Interest in case of delay in despatch of Allotment Letters or Refund Orders/ instruction to the SCSBs by the Registrar. Our Company agrees that (i) Allotment of Equity Shares; and (ii) credit to the successful Bidders’ depositary accounts will be completed within 12 Working Days of the Bid/ Issue Closing Date. Our Company further agrees that if the Allotment letters or refund orders have not been despatched to the applicants or if, in a case where the refund or portion thereof is made in electronic manner through Direct Credit, NEFT or ECS, the refund instructions have not been given in the disclosed manner within 12 working days from the Bid/ Issue Closing Date or on refusal by stock exchanges to grant listing permission for the Equity Shares being offered, our Company shall, within 8 days, repay the money failing which it shall pay interest with interest at 15% per annum, as prescribed under section 73 of the Companies Act.
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Our Company will provide adequate funds required for dispatch of refund orders or Allotment advice to the Registrar. Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by our Company as a Refund Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders. UNDERTAKING BY OUR COMPANY We undertake as follows: 1.
that the complaints received in respect of the Issue shall be attended to by our Company expeditiously and satisfactorily;
2.
that all steps for completion of the necessary formalities for listing and commencement of trading at all Stock Exchanges where the Equity Shares are to be listed are taken within 12 Working Days of closure of Issue;
3.
that funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available to the Registrar to the issue by our Company.
4.
that where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 10 Working days of closure of the issue, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund.
5.
that certificates of the securities/ refund orders to the non-resident Indians shall be dispatched within specified time.
6.
that no further issue of securities shall be made till the securities offered through the Red Herring Prospectus are listed or till the application moneys are refunded on account of non-listing, under subscription, etc.
7.
that adequate arrangements shall be made to collect all Applications Supported by Blocked Amount (ASBA) and to consider them similar to non-ASBA applications while finalizing the basis of allotment. Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue after the bidding and if so, the reason thereof shall be given as a public notice within two days of the closure of the issue. The public notice shall be issued in the same newspapers where the pre-issue advertisement had appeared. The Stock Exchanges where the specified securities were proposed to be listed shall also be informed promptly. If our Company withdraws the issue after closure of bidding, the issuer shall be required to file a fresh draft offer document with SEBI. UTILIZATION OF ISSUE PROCEEDS The Board of Directors of our Company certifies that: i)
All monies received out of this issue of Equity Shares to public shall be transferred to a separate bank account other than the bank account referred to in sub-section (3) of section 73 of the Companies Act, 1956;
ii)
Details of all monies utilized out of the issue referred to in sub-item (a) shall be disclosed and continue to be disclosed till the time any part of the issue proceeds remains unutilised under an
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appropriate separate head in the Balance Sheet of our Company indicating the purpose for which such monies had been utilized; and iii)
Details of all unutilized monies out of the issue of Equity Shares, referred to in sub-item (i) shall be disclosed under an appropriate separate head in the Balance Sheet of our Company indicating the form in which such unutilized monies have been invested;
iv)
Our Company shall comply with the requirements of Clause 49 of the listing agreement in relation to the disclosure and monitoring of the utilization of the Net Proceeds; and
v)
Our Company shall not have recourse to the proceeds of the Issue until the approval for listing of the Equity Shares from the Stock Exchanges has been received.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES Foreign investment in Indian securities is regulated through the industrial policy of Government of India, or the Industrial Policy and FEMA. While the Industrial Policy prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. The government bodies responsible for granting foreign investment approvals are the Foreign Investment Promotion Board of Government of India (FIPB) and the RBI. RBI, vide its circular A.P (DIR Series) Circular No. 53 dated December 17, 2003, permitted FIIs to subscribe to shares of an Indian Company in the public issue without prior approval of RBI, so long as the price of Equity Shares to be issued is not less than the price at which the Equity Shares are issued to residents. Investment by Non-Resident Indians A variety of special facilities for making investments in India in shares of Indian Companies are available to individuals of Indian nationality or origin residing outside India (“NRIs”). These facilities permit NRIs to make portfolio investments in shares and other securities of Indian companies on a basis not generally available to other foreign investors. Under the portfolio investment scheme, NRIs are permitted to purchase and sell Equity Shares of our Company through a registered broker on the Stock Exchange. NRIs collectively should not own more than 10% of the post-issue paid up capital of our Company. No single NRI may own more than 5% of the post- issue paid up capital of our Company. NRI investment in foreign exchange is now fully repatriable whereas investments made in Indian Rupees through rupee accounts remains non repatriable. Investment by Foreign Institutional Investors Foreign Institutional Investors (“FIIs”) including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated, institutional portfolio managers can invest in all the securities traded on the primary and secondary markets in India. FIIs are required to obtain an initial registration from the SEBI and a general permission from the RBI to engage in transactions regulated under FEMA. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time. The initial registration and the RBI’s general permission together enable the registered FII to buy (subject to the ownership restrictions discussed below) and sell freely securities issued by Indian companies, to realise capital gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares, to appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income received by way of interest and any compensation received towards sale or renunciation of rights issues of shares. Ownership restrictions of FIIs Under the portfolio investment scheme, the overall issue of Equity Shares to FIIs on a repatriation basis should not exceed 24% of post-issue paid-up capital of our Company. However, the limit of 24% can be raised up to the permitted sectoral cap for that Company after approval of the board of Directors and shareholders of our Company. The issue of Equity Shares to a single FII should not exceed 10% of the post-issue paid-up capital of our Company. In respect of an FII investing in Equity Shares of a Company on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of the total issued capital of that Company.
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Registration of Equity Shares under US Laws The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, ‘U.S. persons’ (as defined in Regulation S of the U.S. Securities Act, 1933), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares will be offered and sold only outside the United States in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales occur. The above information is given for the benefit of the Bidders and neither our Company nor the BRLM are liable for any changes in the regulations after the date of the Draft Red Herring Prospectus.
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SECTION XI - DESCRIPTION OF EQUITY SHARES AND TERMS OF THE ARTICLES OF ASSOCIATION We have submitted the Articles of Association to the Stock Exchanges and we may be required to amend the Articles of Association, if so required by the Stock Exchanges. The main provisions of our Articles of Association, as submitted to the Stock Exchanges for their approval are as follows: Pursuant to Schedule II of the Companies Act and the SEBI ICDR, the main provisions of the Articles of Association relating to voting rights, dividend, lien, forfeiture, restrictions on transfer and transmission of Equity Shares and debentures and/or their consolidation/splitting are detailed below. Please note that the each provision herein below is numbered as per the corresponding article number in the Articles of Association and defined terms herein have the meaning given to them in the Articles of Association. SHARES (3)
The Authorized share capital of the Company is `25,00,00,000/- (Rupees Twenty five Crore Only) divided into 2,50,00,000 (Two Crore fifty lakhs only) Equity shares of `10/- (Rupees Ten only) each with power to increase or reduce the capital in accordance with the provisions of the Companies Act 1956.**
** Amended vide a Special Resolution passed at the Extraordinary General Meeting of the Company held on 28th September 2011. (4)
Company shall be entitled to purchase its own shares or other securities subject to the limits and upon such terms and conditions and subject to such approvals as requested under section 77A of the Companies Act, 1956 and other applicable provisions, rules, regulations and bye-laws and any amendments, modifications, repromulgation’s or re-enactment thereof.
(5)
Subject to the provisions of these Articles and of Section 81 of the Act, the shares shall be under the control of the Board who may allot to such persons, on such terms and conditions, at such times, either at par or at a premium and for such consideration as the Board thinks fit. “provided that the option or right to call of shares not given to any person except with the sanction of the company in General Meeting.
(6)
Subject to the provisions of these Articles, the Company shall have power to issue Preference shares carrying a right to redemption out of profits which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose such redemption or liable to be provisions of Section 80 of the Act, exercise such power in such manner as may be provided in these Articles.
(7)
The company is entitled to issue shares at a premium or at a discount subject to Section 78 & 79 of the Act and to pay commission on the shares subscribed or agreed to be subscribed subject to Section 76 of the Act.
(8)
The joint holders of a share shall be severally as well as jointly liable for the payment of all installments and calls due in respect of such share.
(9)
Save as otherwise provided in the Act, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a Court of competent jurisdiction, or as by Statute required, be bound to recognize any equitable or to other claim to or interest in such share on the part of any other person.
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(10)
Shares may be registered in the name of any person, company, registered society or other body corporate.
(11)
Any application signed by any applicant for shares in the Company, or where the power of attorney or other authority under which such application is signed or a notarially certified copy of power of authority is deposited at the Registered Office of the Company, an application signed on behalf of such person, followed by an allotment of any share therein shall, be acceptance of shares within the meaning of these Articles; and every person who thus or otherwise accepts any shares and whose name is on the Registrar, shall for the purpose of these Articles be a Member.
(12)
The money (if any) which the Board shall, on the allotment of any shares being made by it, require or direct to be paid by way of deposit, call or otherwise in respect of any shares allotted by it shall, immediately on the entry of the name of the allottee in the Registrar of Members as the name of the holder of such shares become a debt due to and recoverable by the Company from the allottee thereof and shall be paid by him accordingly. CERTIFICATES
(13)(1) The issue and sealing of share certificate and duplicates and the issue and sealing of new share certificates which are surrendered for cancellation due to their being defaced, torn, old, decrepit or worn out or the cages for recording transfers having been utilized or of share certificates which are lost or destroyed shall be in accordance with the provisions of the Companies (Issue of Share Certificates) Rules 1960 or any statutory modification or re-enactment thereof. If any share certificate be lost or destroyed then, upon proof thereof to the satisfaction of the board, and on such indemnity as the Board thinks fit being given, a new Certificate in lieu thereof shall be given to the party entitled to the shares to which such lost or destroyed Certificate shall relate. (13)(2) Every member shall be entitled free of charge, to one certificate for all the shares of each class registered in his name or, if the board so approves to several certificates each for one or more of such shares. Unless the conditions of issue of any shares otherwise provides, the Company shall, within three months after the date of allotment and on surrender to the company of its letter making the allotment or of its fractional coupons of requisite value (save in the ease of issue against letters of acceptances or of renunciation or in the case of issue of bonus shares) or within one month of receipt of the application for registration of the transfer of any of its shares, as the case may be complete and have ready for delivery the certificates of such shares. In respect of any share held jointly by several persons, the Company shall not be bound to issue more than one certificate and delivery of a certificate to the first named of several joint holders shall be sufficient delivery to all such holders. For every duplicate certificate the Board may charge such out of pocket expenses incurred by the company in investigating evidence as the Board may determine. (13)(3) Share/debenture certificate shall be issued in marketable lots and where share/debenture certificate are issued for either more or less than marketable lots, sub-division or consolidation into marketable lots shall be done free of charge. (13)(4) Provided that no share certificate shall be issued in respect of shares held in dematerialized form. CALLS (14)
The Board may, from time to time, subject to the terms on which any share may have been issued, and subject to the provisions of Section 91 of the Act, make such calls as the Board thinks fit upon the members in respect of all moneys unpaid on the shares held by them
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respectively, and not by the conditions of allotment thereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the persons and at the times and places appointed by the Board. A call may be made payable by installments and shall be deemed to have been made when the resolution of the Board authorizing such call was passed. (15)
No call shall exceed one-fourth of the nominal amount of a share, nor shall it be made payable within one month after the last proceeding call was payable. Not less than one month’s notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid.
(16)(1) If the sum payable in respect of any call or installment be not paid on or before the day appointed for payment thereof, the holder for the time being in respect of the share for which the call shall have been made or the installment shall be due shall pay interest for the same at the rate of twelve percent per annum from the date appointed for the payment thereof to the time of the actual payment or at such lower rate (if any) as the Board may determine. (2) The Board shall be a liberty to waive payment of any such interest either wholly or in part. (17)
If by the terms of issue of any share or otherwise any amount is made payable at any fixed time, or by installment at fixed times, whether on account of the amount or installment of the share of by way of premium every such amount shall be payable as it were a call duly made by the Board and of which due notice had been given, and all the provisions herein contained in respect of calls shall relate to such amount or installment accordingly.
(18)
Subject to the provisions of any law in force to the contrary on the trial or hearing of any action or suit brought by the Company against any shareholder or his representatives to recover any debt or money claimed to e due to the Company in respect of his share, it shall be sufficient to prove that the name of the defendant is, or was when the claim arose, on the Register as a holder or one of the joint holders of the number of shares in respect of which such claim is made, and that the amount claimed is not entered as paid in the books of the Company and it shall not be necessary to prove the appointment of the Board who made any call, nor that a quorum was present at the Board Meeting at which any call was made nor that the meeting at which any call was made was duly convened or constituted, nor any other matter whatsoever, but the proof of the matters aforesaid shall be conclusive evidence or the debt.
(19)
The Board may if it thinks fit receive from any member willing to advance the same all or any part of the money so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been the Company may pay interest at such rate not exceeding, unless the Company in General Meeting shall otherwise direct, ten percent per annum as the member paying such sum in advance and the Board agree upon. Money said paid in excess of the amount of calls shall not rank for dividends or confer any voting rights or a right to participate in profits. The Board may at any time repay the amount so advanced upon giving to such member not less than three months’ notice in writing.
(20)
A call may be revoked or postponed at the discretion of the Board.
(21)
If call or installment not paid notice may be given. If any member fails to pay any call or installment of a call on or before the day appointed for the payment of the same, the Board may, at any time thereafter during such time as the call or installment remains unpaid, serve a notice on such member requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment.
(22)
The notice shall name a day (not being less than one month from the date of the notice), and a place or places on and at which such call or installment and such interest and expenses as
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aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which such call was made or installment is payable will be liable to be forfeited. If notice no complied with Shares may be forfeited. (23)
If the requirements of any such notice as aforesaid are not complied with any shares in respect of which such notice has been given may, at any time thereafter, before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.
(24)
When any share shall have been so forfeited, notice of the resolution shall be given to the member in whose name it stood immediately prior to the forfeiture and in entry of the forfeiture, with the date thereof, shall forthwith be made in the Register, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make such entry as aforesaid.
(25)
The forfeiture of a share shall involve the extinction, at the time of forfeiture, of all interest in and all claims and demands against the Company, in respect of that share, and all other rights incidental to the share except such as are by these Articles expressly saved.
(26)
Any share so forfeited shall be deemed to be the property of the Company, and the Board may sell, re-allot or otherwise dispose of the same in such manner as it thinks fit.
(27)
The Board may, at any time before any share so forfeited shall have been sold, re-allotted or otherwise disposed of, annual the forfeiture hereof upon such conditions as it thinks fit.
(28)
A person whose share has been forfeited shall cease to be a member in respect of the forfeited share, but shall, notwithstanding such forfeiture remain liable to ay and shall forthwith pay to the Company all calls or installments, interest and expenses owing upon or in respect of such share; at the time of the forfeiture, together with interest thereon from the time of forfeiture until payment, at twelve per cent per annum and the Board may enforce the payment thereof or any part thereof, without any deduction or allowance for the value of the share at the time of forfeiture, but shall not be under any obligation to do so.
(29)
A duly verified declaration in writing that the declarant is a Director, the Managing Director, Manager or Secretary of the Company, and that certain shares in the Company have been duly forfeited on a date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the shares and such declaration and the receipt of the Company for the consideration, if any, given for the shares on the sale or disposition thereof shall constitute a good title to such share; and the person to whom, any such share is sold shall be registered as the holder of such share and shall not be bound to see to the application of the purchase money, nor shall his title to such share be affected by any irregularity or invalidity in the proceedings in reference to such forfeiture, sale of dispositions.
(30)
Neither the receipt by the Company of any money which shall from time to time be due from any member to the Company in respect of his shares, either by way of principal or interest, nor any indulgence granted by the Company in respect of the payment of any such money, shall preclude the Company from thereafter proceeding to enforce a forfeiture of such shares as herein before provided.
(31)
The provisions of Articles 21 to 30 hereof shall apply in the case of non-payment of any sun which, by the terms of issue of a share, becomes payable at fixed time, whether on account of the nominal value of a share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
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(32)
The Company shall have a first and paramount lien upon every share (not being fully paid up) registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for all moneys called or payable at a fixed time in respect of such share whether the time for the payment thereof shall have actually arrived or not and no equitable interest in any share shall be created except upon the footing and condition that Article 9 hereof is to have full effect. Such lien shall extent to all dividends from time to time declared in respect of such share. Unless otherwise agreed, the registration of a transfer of a share shall operate as a waiver of the Company’s if any, on such share.
(33)
For the purpose of enforcing such lien the Board may sell the share subject thereto in such manner as it thinks fit, but no sale shall be made until such time for payment as aforesaid shall have arrived an until notice in writing of the intention to sell shall have been served on such member, his executor or administrator or his committee CURATOR BONDS or other legal representative as the case may be and default shall have been made by him or them in the payment of the moneys called or payable at a fixed time in respect of such share for one month after the date of such notice.
(34)
The net proceeds of the shall be received by the Company and applied in or towards payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the share before the sale) be paid to the person entitled to the share at the date of sale. Validity of sale in exercise of lien and after forfeiture.
(35)
Upon any sale after forfeiture or for enforcing a line in purported exercise of the powers herein before given, the Board may appoint some person to execute an instrument of transfer of the share sold and cause the purchaser’s name to be entered in the Register in respect of the share sold, and the purchaser shall not be bound to see the regularity of the proceedings, nor to the application of the purchase money, and after his name has been entered in Register in respect of such share the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.
(36)
Where any share under the powers in that behalf herein contained is sold by the Board and the certificate in respect thereof has not been delivered upto the Company be the former holder of such share, the Board may issue a new certificate for such share distinguishing it in such manner as it may think fit from the certificate not so delivered up.
(36)(a) Notwithstanding anything contained in these articles the Company shall be entitled to dematerialize its existing securities, rematerialize its securities held in the Depositories and / or offer its fresh securities in a dematerialized form pursuant to the Depositories Act, 1996 and any rules framed thereunder and any amendments modifications, re-promulgation or reenactment thereof for the time being in force. (36)(b) Option for Investors. i) Every person subscribing to securities offered by the Company shall have the option to receive security certificates or to hold the securities with a Depository. Such person being a Beneficial Owner of the securities can at any time opt out of a depository, if permitted and in the manner provided by law and the company shall in the manner and within the time prescribed, issue to the beneficial owner the required certificate of securities. (ii)
If a person opts to hold his security with a depository the company shall intimate such depository the details of allotment of the security and on receipt of the information the depository shall enter in its record the name of the allottee as the Beneficial Owner of the securities.
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(iii)
All securities held by a depository shall be dematerialized and be in fungible form. Nothing contained in Sections 153, 153A, 153B, 187B, 187C and 372A of the Act shall apply to a Depository in respect of the securities held by it on behalf of the Beneficial Owners.
(36)(c) Rights of Depositories and Beneficial Owners. (i)
Depository shall be deemed to be the registered owner for purpose of effecting transfer of ownership of security on behalf of the Beneficial Owner.
(ii)
Save as otherwise provided in above the Depository as the registered owner of the securities shall not have any voting rights or to other rights in respect of the securities held by it.
(iii)
The Beneficial Owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities held by a Depository.
(36)(d) Service of Documents – Where securities are held in a Depository the record of the Beneficial Owner may be served by such depository on the Company by means of electronic mode or by floppies or discs by any other manner as may be permitted by law. (36)(e) Transfer of securities – Nothing contained in section 108 of the Act or these articles 37, 38, 39 and 42 of these Articles of Association shall apply to a transfer of securities effected by a transferor or transferee both of whom are entered as Beneficial Owners in record of Depository. Subject to the Provisions of the Act, the Board shall without assigning any reason for such refusal may refuse to register any transfer of or, the transmission by operation of law of any security held within a Depository or any right therein. (36)(f) Distinctive Nos. of securities held in a Depository – Nothing contained in these Articles regarding the necessity of having distinctive number of securities issued by the Company shall apply to securities held with a Depository. TRANSFER AND TRANSMISSION (37)
Save as provided in Section 108 of the Act, no transfer of a share shall be registered unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation if any, of the transferee has been delivered to the Company together with the certificate relating to the share or, if no such certificate is in existence, the Letter of Allotment of the share. Each signature to such transfer shall be duly attested by the signature of the credible witness who shall add his address.
(38)
Application for the registration of the transfer of a share may be made either by the transferor or the transferee, provided that where such application is made by the transferor, no registration shall, in the case of a partly paid share, be reflected unless the company gives notice of the application to the transferee in the manner prescribed by Section 110 of the Act, subject to the provision of these Articles, the Company shall, unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the Register the name of the transferee in the same manner and subject to the same conditions as if the application for registration of the transfer was made by the transferee.
(39)
The instrument of transfer of any share shall be in writing and shall be in the form prescribed by Section 108 (1A) of the Act.
(40)
Subject, to the provisions of Section 111A of the Act, the Board, without assigning any reason for such refusal may refuse to register any transfer of, or the transmission by operation of law of the right to a share.
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Registration of a transfer of shares shall not be refused on the ground of the transferor being either alone or jointly with any other person indebted to the Company on any account whatsoever except a lien on the shares. (41)
No transfer of shares shall be made to a minor or person of unsound mind.
(42)
Every instrument of transfer shall be left at the office for registration, accompanied by the certificate of the share to be transferred or, if no such certificate is in existence, by the Letter of Allotment of the share, and such other evidence as the Board may require to prove the right of the transferor to transfer the share. Every instrument of transfer which shall be registered shall be retained by the Company, but any instrument of transfer which the Board may refuse to register shall be returned to the person depositing the same.
(43)
If the Board refuses whether in pursuance of Article 40 hereof or otherwise to register the transfer of, or the transmission by operation of law of the right to any share the Company shall give notice of the refusal.
(44)
Subject to the right of nomination as contained in the Article 47(b) of the Articles of Association, the Executor or Administrator of a deceased member (Not being one of several joint holders) shall be the only person recognized by the Company as having any title to the share registered in the name of such member, and in case of the death of any one or more of the joint holders of any registered share, the survivor or survivors shall be the only person or persons recognized by the Company as having any title to or interest in such share, but nothing herein contained shall be taken to release the estate of a deceased joint holder from any liability on the share held by him jointly with any other person. Before recognizing any executor or administrator the board may require him to obtain a Grant of Probate or Letters of Administration, Succession Certificate or other legal representation, as the case may be, from a competent court in India, and having effect in Madras; Provided nevertheless that in any case where the Board in its absolute discretion thinks fit it shall be lawful for the Board to dispense with the production of Probate or Letters of Administration, Succession Certificate or such other legal representation upon such terms as to indemnify or otherwise as the Board, in its absolute discretion, may consider adequate.
(45)
Any Committee or guardian of a lunatic member of any person becoming entitled to or to transfer of share in consequence of the death or bankruptcy or insolvency of any member upon producing such evidence that he sustains the character in respect of which he proposes to act under this Article or of his title as the Board thinks sufficient, may with the consent of the Board (which the Board shall not be bound to give), be registered as a member in respect of such share, or may subject to the regulations as to transfer herein before contained, transfer such share. This Article is hereinafter referred to as ‘the Transmission Article’.
(46)(1) If the person so becoming entitled under the Transmission Article shall elect to be registered as holder of the share himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. (2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing an instrument of transfer of the share. (3)
(47)
All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of instruments of transfer as a share shall be applicable to any such notice or transfer as aforesaid as if the death, lunacy, bankruptcy or insolvency of the member has not occurred and the notice of transfer were a transfer signed by that member. A person so becoming entitled under the Transmission Article to a share by reason of the death, lunacy, bankruptcy or insolvency of the holder shall, subject to the provisions of Article 85
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hereof and of Section 206 of the Act, be entitled to the same dividends and other advantages as he would be entitled to if he were the registered holder of the share. Provided that the Board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share, and if the notice is not complied with within ninety days, the board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share, until the requirements of the notice have been complied with. (47)(a) No fee shall be charged for transfer of share / debenture or for effecting transmission or for registering any letters of probate, letters of administration and other similar documents. (47)(b) Nomination of Shares / Debentures. (i) Notwithstanding anything to the contrary contained in these Articles every share / debenture holder may at any time nominate a person to whom his shares / debentures shall best in the event of his death, in the manner prescribed under the Act and any rules regulations made thereunder for the time being in force. (ii) Where the shares / debentures of the Company are held by more than one person jointly, joint holders may together nominate a person to whom all the rights in the shares / debentures shall vest in the event of death, in the manner prescribed under the Act and any rules regulations made there under for the time being in force. (iii) Notwithstanding anything contained in any other law for the time being in force or in any disposition whether testamentary or otherwise where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares / debentures of the Company, the nominee shall on death of the holders or as the case may be on death of holders or as the case may be on death of all the joint holders be entitled to all the rights in the shares / debentures of the Company to the exclusion of all other persons unless the nomination is varied or cancelled. (iv) A member or in the case of joint holder, all the joint holders may revoke or vary his nomination at any time by notifying the Company in writing to this effect. (v) Any person who becomes a nominee by virtue of the aforesaid provision upon the production of such evidence as required by the Board or the committee thereof and subject as hereinafter provided, elect either. (a) to be registered as a holder of shares / debentures or (b) to make such transfer as the deceased holder could have made (vi)
If the nominee elects to be registered as holder of the shares / debentures he shall submit to the Company a notice in writing signed by him to such effect, accompanies with the death certificate of the deceased holder.
(vii) The board shall have the same right to decline or suspend registration, as it would have had if the deceased holder had effected such transfer. (viii) No person shall be recognized by the Company as the nominee unless the holder had during his life time given an intimation to the Company of having appointed a nominee in the manner prescribed in the law of the time being in force. (ix)
A nominee shall be entitled to the dividend and other advantages to which he would be entitled if he were the registered holder of such shares/debentures provided that he shall not before being registered as a member be entitled to exercise any right conferred by membership in relation to the
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Company. Provided further that the board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the shares/debentures and if the notice is not complied within 90 days the Board may thereafter with hold payment of all dividends bonuses shares or other moneys payable in respect of shares/debentures until the requirements of the notice have been complied with. INCREASE AND REDUCTION IN CAPITAL (48)
The company in General Meeting may, from time to time by Ordinary Resolution, increase the capital by the creation of new shares of such amount as may be deemed expedient.
(49)
Subject to any special rights or privileges for the time being attached to any shares in the capital of the Company then issued and the provisions of Section 81 and 86 of the Act the new shares may be issued upon such terms and conditions and with such rights and privileges attached thereto as the General Meeting resolving upon the creations thereof shall direct, and if no direction be given, as the Board shall determine, in particular such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company.
(50)
Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new shares shall be considered part of the then existing capital of the company and shall be subject to the provisions herein contained with reference to the payment of dividends, calls and installments, transfer and transmission, forfeiture, lien, surrender and otherwise.
(51)
If, owing to any inequality in the number of new shares to be issued and the number of shares held by members entitled to have the offer of such new shares, any difficulty shall arise in the appointment of such new shares or any of them amongst the members, such difficulty shall, in the absence of any direction in the resolution creating the shares or by the Company in General Meeting be determined by the Board.
(52)
The Company may from time to time, by Special Resolution, reduce its capital and any Capital Redemption Reserve Account or Share premium Account in any manner and with and subject to any incidental authorized and consent required by law.
(53)
Subject to the provisions of Section 100 to 105 inclusive of the Act, the Board may accept from any member the surrender, on such terms and conditions as shall be agreed of all or any of his shares ALTERATION OF CAPITAL
(54)
The company in general meeting may from time to time:
(a)
Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares.
(b)
Sub-divide its existing shares or any of them into shares of smaller amount than if fixed by the Memorandum so, however that in the sub-division the proportion between the amount paid and the amount if any unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and
(c)
Cancel any shares, which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its share capital, by the amount of the shares so cancelled.
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(55)
The resolution where by any share is sub-divided may determine that, as between the holders of the shares shall have some preference or special advantages as regards dividend, capital, voting or otherwise over or as compared with the others or others, subject, nevertheless, to the provisions of Section 85, 87, 88 and 106 of the Act. MODIFICATION OF RIGHTS
(56)
If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the share of that class) may whether or not the Company is being wound up, be varied with the consent in writing of the holders of threefourths of the issued shares of that class or with the sanction of a special resolution passed at a separate General Meeting of the holders of the issued shares of that class. To every such separate General Meeting the provisions of these Articles relating to General Meetings shall apply, but so that the necessary quorum shall be two persons at least holding or but so that the necessary quorum shall be two persons at least holding or representing by proxy one-fifty of the issued shares of the class. If at any adjourned meeting of such holders quorum as above defined is not present, those members who are present shall be a quorum and any holder of shares of the class present shall be a quorum and any holder of shares of the class present in person or by proxy may demand a poll and, on a poll, shall have one vote for each share of the class of which he is the holder. This Article is not by implication to curtail the power of modification, which the Company would have, if this article were omitted.
(57)
The Company may issue share warrants subject to and in accordance with the provisions of Sections 114 and 115 of the Act, and accordingly to Board may in its discretion with respect to any share which is fully paidup, on application in writing signed by the person registered as holder of the share, and authenticated by such evidence (if any) as the Board may, from time to time, require as to the identity of the person signing the application, and on receiving the certificate (if any) of the share and the amount of the stamp duty on the warrant and such fee as the Board may from time to time require, issue a share warrant.
(58)(1) The bearer of a share warrant may at any time deposit the warrant at the office of the Company, and so long as the warrant remains so deposited, the depositor shall have the same right of signing a requisition for calling a meeting of the Company, and of attending and voting and exercising the other privileges of a member at any meeting held after the expiry of two clear days from the time of deposit, as if his name were inserted in the register of Members, as the holder of the shares included in the deposited warrant. (2) Not more than one person shall be recognized as depositor of the share warrant. (3) The Company shall, on two day’s written notice, return the deposited shares warrant to the depositor. (59)(1) Subject as herein otherwise expressly provided, no person shall as bearer of a share warrant, sign a requisition for calling a meeting of the Company, or attend, or vote of exercise any other privilege of a member at a meeting of the Company, or be entitled to receive any notice from the Company. (2) The bearer of a share warrant shall be entitled in all other respects to same privileges and advantages as if he was named in the Register of Members as the holder of the share included in the warrant, and he shall be a member of the Company. (60)
The Board may from time to time make rules as to the terms on which (if it shall think fit) a new share warrant or coupon may be issued by way of renewal in case of defacement, loss or destruction. BORROWING POWERS
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(64)
The Board may, from time to time as its discretion subject to the provisions of Section 297, 293 and 372A of the Act, as amended from time to time, raise or borrow, either from the Directors of from elsewhere, and secure the payment of any sum or sums of money for the of purposes of the Company provided that the Board shall not, without the sanction of the Company in General Meeting, borrow any sum of money which together with money already borrowed by the Company (apart from temporary loans obtained from the Company’s bankers) in the ordinary course of business) will exceed the aggregate for the time being of the paid-up capital of the Company and its free reserves, that is to say, reserves not set aside for any specific purpose.
(65)
The Board may rise or secure the repayment of such sum or sums in such manner and upon such terms and conditions in all respects as it thinks fit, and in particular, by the issue of bonds perpetual or redeemable debentures or debenture stock (convertible & non-convertible) or any mortgage or other security on the undertaking of the whole or any part of the property of the Company (both present and future) including its uncalled capital for the time being.
(66)
Any debentures & debentures-stock (convertible & non-convertible) bonds or other securities may be issued at a discount, premium or otherwise and with any special privileges as to redemption, surrender, drawings, allotment of shares, appointment of Directors and otherwise. Debentures, debenture-stock, bond and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued. Provided that debentures with the right to allotment of or conversion into shares shall not be issued except in conformity with the provisions of Section 81(3) of the Act.
(67) Save as provided in Section 108 of the Act, no transfer of debentures shall be registered unless a proper instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the Company together with the certificate of the debentures. (68)
If the Board refuses to register the transfer the transfer of any debentures, the Company shall give notice of the refusal in accordance with the provisions of Section 11(2) of the Act. GENERAL MEETINGS
(69)
In addition to any meetings, General Meetings of the Company shall be held within such intervals as are specified in Section 166(1) of the Act, and subject to the provisions of Section 166(2) of the Act, as such times and places as may be determined by the Board. Each such General Meeting shall be called an “Extra ordinary General Meeting’. (When other Extraordinary General Meeting to be called).
(70)
The board may whenever it thinks fit call an Extra-ordinary General Meeting and it shall on the requisition of the members in accordance with Section 169 of the Act, proceed to call an Extraordinary General Meetings. The requisitionists may, default of the Board convening the same convene the Extraordinary General Meeting as provided by Section.
(71)
If at any time there are not with India Directors capable of acting who are sufficient in number to form a quorum any Director or any two members of the Company may call an Extraordinary General Meeting in the same manner, as nearly as possible, as that in which such a meeting may be called by the Board.
(72)
The Company shall comply with the provisions of Section 188 if the Act as to giving notice of resolutions and circulating statements on the requisition of members.
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(73)(1) Save, as provided in sub-section (2) of Section 171 of the Act, not less than twenty one day’s notice shall be given of every general meeting of the Company. Every notice of a meeting shall specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted thereat and there shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him and that a proxy need not be a member of the Company. Where any such business consists of special business as hereinafter defined in Article 74 hereof there shall be annexed to the notice a statement complying with Section 173(2) and (3) of the Act. (2) Notice of every meeting of the Company shall be given to every member of the Company, to Auditors of the Company, and to any persons entitled to a share in consequence of the death or insolvency of a member in any manner hereinafter authorised for the giving of notices to such persons provided that where the notice of a general meeting is giving by advertising the same in newspaper circulating in the neighbourhood of the Office under sub-section (3) of Section 53 of the Act, the statement of material facts referred to in Section 173 (2) of the Act need not be annexed to the notices as required by that Section but it shall be mentioned in the advertisement that the statement has been forward to the members of the Company. (3) The accidental omission to give any such notice to or its non-receipt by any member or other person to who notice to or its non-receipt by any member or other person to whom it should be given shall not invalidate the proceedings of the meeting. (74)
The ordinary business of an Annual General Meeting shall be to receive and consider the Profit and Loss Account the Balance Sheet and the Reports of the Directors and of the Auditors, to elect Directors in the place of those retiring, to appoint Auditors and fix their remuneration and to declare dividends. All other business transacted at Annual General Meeting and all business transacted at any other General Meeting shall be deemed special business.
(75)
No business shall be transacted at any General Meeting unless a quorum of members is present at the when the meeting proceeds to business. Save as herein otherwise provided five members present in person shall be a quorum.
(76)
If within half an hour from the time appointed for the meeting a quorum is not present, meeting if convened upon the requisition of members as aforesaid, shall be dissolved, but in any other case it shall stand adjourned in accordance with the provisions of sub-sections (3) and (4) and (5) of Section 174 of the Act.
(77)
Any act or resolution which under the provisions of these Articles or of the Act is permitted or required to be done or passed if effected by an Ordinary resolution as defined in Section 189(1) of the Act unless either the Act or these Articles specifically require such act to be done or resolution passed by a Special Resolution as defined in Section 189(2) of the Act.
(78)
The Chairman of the Board or the person acting Chairman of the Board shall be entitled to take the chair at every General Meeting. If there be no such Chairman, or if at any meeting he shall not be present within fifteen minutes after the time appointed for holding such meeting or is unwilling to act, the members present shall choose another Director as Chairman and if no Director be present, or if all the Directors present decline to take the chair, then the members present shall on a show of hands or on a poll if properly demanded, elect one of their members. Being a member entitled to vote, to be Chairman.
(79)
Every resolution submitted to a meeting shall be decided in the first instance by a show of hands, and in the case of an equality of votes, whether on a show of hands, and in the case of an equality of votes, whether on show of hands or on poll the Chairman of the meeting shall have a casting vote in addition to the vote to which be may be entitled as a member.
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(80)
At any General Meeting, unless a poll is (before or on the declaration of the result of the show of hands) demanded in accordance with the provisions of Section 179 of the Act, a declaration by the Chairman that the resolution has or has not been carried, or has or has not been carried unanimously or by a particular majority and on entry to that effect in the book containing the minutes of the proceedings of the Company shall be convulsive of the fact, without proof of the number of proportion of the votes cast in favour of or against the resolution.
(81)(1) Before or on the declaration of the result of the voting on any resolution on a show of hands, a poll may be ordered to be taken by the Chairman of the meeting of his own motion, and shall be ordered to be taken by him on demand made in that behalf by any member of members present in person or by proxy and holding shares in the company which confer a power to vote on the resolution or on which an aggregate sum of not less than fifty thousand rupees has been or on paid up. A poll demanded on a question of adjournment or election of chairman shall be taken forthwith and on any other question shall be taken at such time not being later than forty eight hours from the time when the demand was made and at such place as the Chairman of the meeting directors and subject as aforesaid either at once or after an interval or adjournment or otherwise, and the result of the poll shall be deemed to be the decision to be the decision of the meeting on the resolution on which the poll was demanded. (2) The demand of a poll may be withdrawn at any time. (3)(a) Where a poll is to be taken the Chairman of the meeting shall appoint two scrutinizers, one at least of whom shall be member (not being officer or employee of the Company) present at the meeting provided such member is available and willing to be appointed to scrutinize vote given on the poll and to report to him thereon. (b) The Chairman shall have power at any time before the result of the poll is declared, to remove a scrutineer from office and to fill vacancies in the office of scrutineer arising from such removal or any other cause. (4) On a poll a member entitled to more than one vote, or his proxy or other persons entitled to vote for him, as the case may be need not if he votes, use all his votes or cast in the same way all the vote he uses. (5) The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than question on which a poll has been demand. (82)(1) The Chairman may with the consent of any meeting at which a quorum is present and shall if so directed by the meeting, adjourn the same from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. (2) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of the original meeting but save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to transacted at an adjourned meeting. VOTES OF MEMBERS (83)(1) Save as hereinafter provided on a show of hands every member present in person and being a holder of Equity shares shall have one vote. (2) Save as hereinafter provided on poll the voting rights of a holder of Equity shares shall be as specified in Section 87 of the Act.
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(3) The holders of Preference shares shall not be entitled to vote at General Meetings of the Company except as provided for in Section 87 of the Act. (84)
Where a Company or body corporate (hereinafter called ‘Member Company’) is member of the Company, a person duly appointed by resolution in accordance with the provisions of Section 187 of the Act to represent such member company at a meeting of the Company shall not by reason of such appointment be deemed to be proxy, and the lodging such resolution duly signed by a Director of such member company and certified by him as being a true copy of the resolution shall, on production at the meeting be accepted by the Company as sufficient evidence of the validity of his appointment. Such a person shall be entitled to exercise the same rights and powers, including the right to vote by proxy on behalf of the member company which he represents, as that member Company could exercise if it were an individual member. Provided that no member Company shall votes by proxy so long as a resolution of its Board of Directors under the provision of Section 187 of the Act is in force and the representative named in such resolution is present at the General Meeting at which the vote by proxy is tendered.
(85)
Any person entitled under the Transmission Article to transfer any shares may vote at any General Meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that forty-eight hours atleast before the time of holding the meeting or adjourned meeting the case may be at which he proposes to vote, he shall satisfy the Board of his right to transfer such shares unless the Board shall have previously adjourned meeting the case may be at which he proposes to vote, he shall satisfy the Board of his right to transfer such share unless the Board shall have previously admitted his right to vote at any such meeting in respect thereof.
(86)
Where there are joint registered holders of any share any one of any one of such persons may vote at any meeting either personally or by proxy in respect of such shares as if he were solely entitled thereto and if more than one of such joint holders be present at any meeting either personally or by proxy that one of the said persons so present whose name stands first on the Register in respect of such share alone shall be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any share is registered shall for the purpose of this Article the deemed joint holders thereof.
(87)
On a poll votes may be given either personally or by proxy, or in the case of a body corporate, by a representative duly authorised as aforesaid and a person entitled to more than one vote need not use all his votes or cast all the votes he used in the same way.
(88)(1) The instrument appointing a proxy shall be in writing under the under the hand of the appointer or of his Attorney duly authorised in writing or if such appointer is a body corporate under its common seal or the hand of its officer or Attorney duly authorised. (2) A person may be appointed a proxy though he is not a member of the Company and every notice convening a meeting of the Company shall state this and shall also state that a member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him. (89)
The instrument appointing a proxy and the Power of Attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power authority shall be deposited at the office not less than forty-eight hours before the time for holding the meeting at which the person named in the instrument purports to vote in respect thereof and in default the instrument of proxy shall not be treated as valid.
(90)
A vote given in accordance with the terms of an instrument appointing a proxy shall be valid notwithstanding the previous death or insanity of the principal or the revocations of the instrument or the transfer of the share in respect of which the vote is given, provided that no
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intimation in writing of the death, insanity, revocation or transfer of the share shall have been received by the Company at the office before the commencement of the meeting or adjourned meeting at which the proxy is used. Provided nevertheless that the Chairman of any meeting shall be entitled to require such evidence as he may in his discretion think fit of the due execution of an instrument of proxy and that the same has not been revoked. (91)
Every instrument appointing a proxy shall be retained by the Company and shall be in either of the forms specified in Schedule IX of the Act or a form as near thereto as circumstances will admit.
(92)
No member shall be entitled to exercise any voting rights either personally or by proxy at any meeting of the Company in respect to any, share registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the Company has and has exercised any right of lien.
(93)(1) Any objection as to the admission or rejection of a vote, either on a show of hands or on a poll made in due time shall be referred to the Chairman who shall forthwith determine the same, and such determination made in good faith shall be final and conclusive. (2) No objection shall be raised to the qualification of any voter except at the meeting of adjourned meeting at the vote objected to is given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. MINUTES (123)(1) The Board shall in accordance with the provisions of Section 193 of the Act, cause Minutes to be kept of every General Meeting every meeting of the Board and of every Committee of the Board. (2) Any such Minutes of any meeting of the Board or of any Committee of the Board or of the Company in General Meeting if kept in accordance with the provisions of Section 193 of the Act, shall be evidence of the matters stated in such Minutes, The Minutes Books of Genera; Meetings of the Company shall be kept at the office and shall be open to inspection by members during normal business hours on such business days as the Act requires them to be open for inspection. RESERVES (134)
The Board may from time to time before recommending any dividend set apart any such portion of the profits of the Company as it thinks fit as reserves to meet contingencies or for the liquidation of any debentures, debts or other liabilities of the Company, for equalization of dividends, for repairing, improving or maintaining any of the property of the Company and for such other purposes of the Company, for equalization of dividends, for repairing, improving or maintaining any of the property of the Company and for such other purposes of the Company as the Board in its absolute discretion thinks conducive to the interest of the Company and may subject to the provisions of Sections 372A of the Act, as amended from time to time invest the several sums so set aside upon such investment (other than shares of the Company) as it may think fit and from time to time deal with and vary such investments and dispose of all or any part thereof for the benefit of the Company, and may divide the Reserves into such special funds as it thinks fit, with full power to employ the Reserves or any part thereof in the business of the Company and without being bound to keep the same separate from the other assets.
(135)
All moneys carried to the Reserves shall nevertheless remain and be profits of the Company applicable, subject to due provision so being made for actual loss or depreciation for the payment of dividends and such moneys and all the other moneys of the Company not
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immediately required for the purposes of the Company may subject to the provisions of Section 372A of the Act, as amended from time to time, be placed on loan or invested by the Board in or upon such investments or securities as it may select or may be used as working capital or may be kept at any Bank on deposit or otherwise as the Board may, from time to time think proper. (136)
Any General Meeting may resolve that any moneys investments other assets forming part of the undivided profits of the Company standing to the credit of the Reserves, or any Capital Redemption Reserve Account, or in the hands of the Company and available for dividends or representing premium received on the issue of shares and standing to the credit of the Share Premium Account be capitalized and distributed amongst such of the shareholder as would be entitled to receive the same if distributed by way of dividend and the same proportion on the footing that they become entitled thereto as capital and that all or any part of such capitalized fund be applied on behalf of such share-holders in paying up in full any un issued shares of the company which shall be distributed accordingly or in or in or towards payment of the uncalled liability on any issued shares and that such distribution or payment shall be accepted by such shareholder in full satisfaction of their interest in the said capitalized sum.
(137)
The Company in General Meeting may at any time and from time to time resolve that any surplus moneys in the hands of the Company representing capital profits arising from the receipt of moneys received or recovered in respect of or arising from the realization of any capital assets of the Company or investment representing the same instead of being applied in the purchase of other capital assets or for other capital purposes be distributed amongst the Equity shareholders paid on the footing that they receive the same as capital and in the shares and proportions in which they would have been entitled to receive the same if it had been distributed by way of dividend, provided always that no such profit as aforesaid shall be so distributed unless there shall remain in the hands of the company a sufficiency of other assets to meet in full the whole of the liabilities and paid up share capital of the Company for the time being.
(138)
For the purposes of giving effects to any resolution under the two last preceding Articles, the Board may settle any difficulty which may arise in required to the distribution as it thinks expedient and in particular may issue fractional certificates, and may fix the value for distribution of any Specific assets, and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized sum as may seem expedient to the Board. Where required a proper contract shall be field in accordance with Section 75 of the Act, an the Board may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalized sum and such appointment shall be effective. DIRECTORS
(94)
Until otherwise determined by Special Resolution the number of Directors shall not be less than three nor more than ten. The first directors of the company shall be the following: 1) Mrs. R.Saraswathy 2) Mrs. Chellam Kasthuri 3) Mrs. C.Jayalakshmi 4) Mrs. P.Saraswathy 5) Mr. Suresh Ram
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The first directors other than the Managing Director (who will be ex-officio directors) if any, shall hold office till the First Annual General Meeting of the Company, on which date they will retire but will be eligible for re-appointment. (95)
The Board shall have power at any time and from time to time to appoint any person as a Director as an addition to the Board but so that the total number of Directors shall not at any time exceed the maximum number fixed by these Articles. Any Director so appointed shall hold office only until the next Annual General Meeting of the Company and shall then be eligible for re-election.
(96)
Unless otherwise determined by the Company in General Meeting, a Director shall not be required to hold in his own name or jointly with any other person, whether beneficially or as a trustee or otherwise any share in the capital of the Company as a qualification share but nevertheless a Director shall be entitled to attend and speak at any General Meeting of the Company and at any separate meeting of the holders of any class of shares in the Company.
(97)
Each directors other than the Managing Director or Managing Directors, whole time directors shall be paid such sum towards sitting fees as may be decided by the board of directors but not exceeding the amount as may be prescribed by the act or by the Central Government from time to time for attending each meeting of the board of or the committee of the board.
(98)
If any Director, being willing, shall be called upon to perform extra services or to make any special exertions in going or residing away from his normal place of residence for any of the purposes of the Company or in giving special attention to the business of the Company or as a member of a Committee or the Board then subject to Sections 198, 319 and 310 of the Act, the Board may remunerate the director, so doing either by a fixed sum and or by a percentage of profits or otherwise and such remuneration may be either in addition to or in substitution for any other remuneration to which he may be entitled.
(99)
The continuing Directors may act notwithstanding any vacancy in their body but so that if the number falls below the minimum above fixed, the Board shall not except for the purposes of filling vacancies, act so long as the number is below the minimum
(100)
The office of a Director shall become vacant if at any time he contravenes any of the provisions of Section 283 of the Act.
(101)
No director or other person referred to in Section 314 of the Act shall hold an office or place of profit save as permitted by that Section. When Director of this Company appointed Directors of Company in which the Company is interested either as a member or otherwise.
(102)
A Director of the Company may be or become a director of any other company promoted by this Company or in which it may be interested as a member, shareholder or otherwise and no such director shall be accountable for any benefits received as a Director or member of such Company.
(103)
Subject to the provisions of Section 297 of the Act, a Director shall not be disqualified form contracting with the Company either as vendor, purchaser or otherwise for goods, materials or services or for underwriting the subscription of any share in or debentures of the Company not shall any such contract or arrangement entered into by or on behalf of the Company with a relative of such director, of a firm in which such director or relative is a partner or with any other partner in such firm or with a private company of which such Director is a member or director, be avoided nor shall any Director so contacting or being such member or so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason of such Director holding office or of the fiduciary relation thereby established.
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(104)
Every Director shall comply with the provision of Section 299 of the Act in regard to disclosure of his concern or interest in any contract or arrangement entered into or to be entered into by the Company.
(105)
Save as permitted by Section 300 of the Act or any other applicable provision of the Act no director shall as Director, take any part in the discussion of or vote on any contract or arrangement in which he is in any way, whether directly or indirectly concerned or interested nor shall his presence count for the purpose of forming a quorum at the time of such discussion or vote. APPOINTMENT AND RETIREMENT OF DIRECTORS
(106)
All the Directors other than the President or an Additional Director appointed by the Board under Article 109 hereof shall be persons who are liable to retire by rotation. If at any time the total number of Presidents or Managing Directors is more than one-third of the total number of Directors for the period of office is liable to determination by retirement of Directors by time being, such number of the Presidents or Managing Directors shall be reckoned as Directors whose period of office is liable to determination by retirement of Directors by rotation as in necessary to make the number of such persons not less than two-thirds of the total number of Directors for the time being. The President, those who have been longest in the office of President or Managing Director since their last appointment and as between person who became President or Managing Directors on the same day those to be so reckoned shall in default of any subject to any agreement among themselves be determined by lot.
(107)
At each Annual General-Meeting of the Company one-third of such of the Directors for the time being as are liable to retire by rotation or if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office.
(108)
The Directors to retire by rotation at every Annual General Meeting shall be those who have been longest in office since their last appointment, but as between persons who become Directors on that same day those to retire shall in default of and subject to any agreement among themselves, be determined by lot.
(109)
The Company may remove any director before the expiration of the period of office in accordance with the provisions of Section 284 of the Act, and may subject to the provisions of Section 262 and 274 of the Act, appoint another person instead.
(110)
If any Director appointed by the Company in General Meeting vacates office as a Director before his term of office will expire in the normal course, the resulting casual vacancy may be filled by the Board at Meeting of the Board, but any person so appointed shall retain his office so long only as the vacating Director would have retained the same if no vacancy had occurred, provided that the Board may not fill such a vacancy by appointing thereto any person who has been removed from the office of Directors under Article 109 thereof.
(111)
A retiring Director shall be eligible for re-election. The eligibility and appointment of a person other than a retiring Director to the office of Director shall be governed by the Provisions of Section 257 of the Act.
(112)
The Board may in accordance with and subject to the provisions of Section 313 of the Act, appoint any person to act as Director, Whole Time Director, Executive Director, Independent Director and Alternate Director for a Director during the latter’s absence from the State in which meetings of the Board are ordinarily held.
(112-A) Any trust deed for the securing of any debentures or debenture stock and or any mortgage deed or other bond for securing payment of moneys borrowed by or due by the Company and or any
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contract or any agreement made by the Company with any person, firm, body corporate, Financial Institutions, Banks, Government or Authority who may render any financial assistance to the Company by way of loans advanced or by Guaranteeing of any loan borrowed or other obligations of the Company to provide assistance in any other manner, may provide for the appointment, from time to time by any such mortgagee, lender, trustee, of or holder of debentures or contracting party as aforesaid of one or more persons to be a Director or Directors of the Company. Such trust deed, mortgage deed, bond or contract may provide that the person appointing a director as aforesaid may from time to time remove any director so appointed by him and appoint any other person in his place and provide for filling up of any casual vacancy created by such person vacating office as such Director. Such Power shall determine and terminate on the discharge or repayment of the respective mortgage, loan or debt or debenture or on the termination of such contract and any person so appointed as director under mortgage or bond or debenture trust deed or under such contract shall cease to hold office as such director on the discharge the same. The Director or Directions so appointed shall not be liable to retire by rotation or to be removed from Office by the Company. PROCEEDINGS OF DIRECTORS (113)
The Board shall meet at least once in every three months for the dispatch of business and may adjourn and otherwise regulate its meetings and proceedings as it thinks fit, provided that at least four such meetings shall be held every year. Notice in writing of every meeting of the Board specifying the nature of all business proposed to be considered there at shall be given to every director for the time being in India, to every other directors at his usual address in India.
(114)
Subject to due notice, a Director may at any time and the Manager or Secretary shall upon the request of a Director made at any time, convene a meeting of the Board.
(115)
The Board may appoint a Chairman of its Meetings and determine the period for which he is to hold office. If at any meeting of the Board the Chairman is not present within five minutes after the time appointed for holding the same, the directors present shall choose some one of their member to be Chairman of such meeting.
(116)
The quorum for a meeting of the Board shall determined form time to time in accordance with the provisions of Section 287 of the Act. If a quorum shall not be present within fifteen minutes from the time appointed for holding a meeting of the Board, it shall be adjourned until such date and time as the Chairman of the Board shall appoint.
(117)
A meeting of the Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretion by or under these Articles of the Act for the time being vested in or exercisable by the Board.
(118)
Subject to the provisions of Section 316, 373(5) and 386 of the Act, questions arising at any meeting shall be decided by a majority of the votes and in case of an equality of votes, the Chairman shall have a second or casting vote.
(119)
The Board may subject to the provisions of the Act, from time to time and any time, delegate any of its powers to a Committee consisting of such Director or Directors and it thinks, fit, and may from time to time revoke such delegation. Any Committee so formed shall in the exercise of the powers so delegated, confirm to any regulations that may from time to time be imposed upon it by the Board.
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(120)
The meeting and proceedings of any such Committee consisting of two more members shall be governed by the provisions herein contained for regulating the meeting and proceedings of the Board so far as the same are applicable thereto, and not superseded by any regulations made by the Board under the last proceeding.
(121)
Acts done by a person as a Director shall be valid, notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of nay defect or disqualification or had terminated by virtue of any provisions contained in the Act or in these Articles. Provided that nothing in this article shall be deemed to give validity to acts done by a Director after his appointment has been shown to the Company to be invalid or to have terminated.
(122)
Save in those cases where a resolution is required by Sections 262, 292, 297, 316, 372(5) and 386 of the Act to be passed at a meeting of the Board, a regulation shall be as valid and effectual as if it as been passed at a meeting of the Board or committee of the Board, as the case may be, duly called and constituted, it a draft thereof in writing is circulated together with the necessary papers, if any, to all the Directors or to all the members of the committee of the Board, as the case may, then in India (not being less in number than the quorum fixed for a meeting of the Board or Committee, as the case may be) and to all other Directors or members of the Committee at their usual addresses in India and has been approved by such of them as are then in India or by a majority of such of them as are entitled to vote on the resolution. POWER OF THE BOARD
(124)
Subject to the provisions of the Act, the management and control of the Company shall be vested in the Board who shall be entitled to exercise all such powers and to do al such acts and things as the Company is authorised to exercise an do provided that the Board shall not exercise any power or do any act or thing which is directed or required whether by the Act or by any other statute or by the Memorandum of the Company or done by the Company, in General Meeting. Provided further that in exercising any such power or doing any such act or thing, the Board shall be subject to the provisions in that behalf contained in the Act or any other statute or in the Memorandum of the Company or in these Articles or in any regulations not inconsistent therewith and duly made thereunder including regulations made by the Company in General Meeting but no regulations made by the Company in General Meeting shall invalidate nay prior Act of the Board which would have been valid if that regulation had not been made. MANAGING DIRECTORS
(128)
Subject to the provision of Sections 267, 269, 316 and 317 of the Act, the Board may, from time to time, appoint one or more directors to be Managing Director or Managing Directors of the Company either for a fixed term or without any limitations as the period for which he or they is or are to hold such office and may from time to time (subject to the provisions of any contract between him or them and the Company) remove or dismiss him or them office and appoint another or others in his or their place or places.
(129)
A Managing Director shall (subject to the provisions of any contract between him and the Company) be subject to the same provisions as to resignation and removal as the other Directors, and shall, ipso facto and immediately cease to be a Managing Directors if he ceased to hold the office of Director from any cause except where he cased to hold office or retires by rotation at an Annual General Meeting and is re-appointment or elected a Director at that meeting.
(130)
Subject to the provisions of Sections 309, 310 and 311 of the Act a Managing Director shall, in addition to the remuneration payable to him as a Director of the Company, under these Articles, receive such additional remuneration as may from time to time be sanctioned by the Company.
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(131)
Subject to the Provision of the Act in particular to the prohibitions and restrictions contained in Section 292 thereof, the Board may from time to time entrust to and confer upon a Managing Director for the time being such of the power exercisable under these presents by the Directors as it may think fit, and may confer such powers for such time and to be exercised for such objects and purposes and upon such terms and conditions and with such restrictions as it thinks fit and it may confer such powers, either collaterally with or to the exclusion of, and in substitution for all or any of the powers of the Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.
(a)
Subject to the provision of the Act, the Board of Directors may from time to time appoint one or more their body to the office, of the whole-time Director with such designation as they may deem fit for such period and on such terms as the Board may think fit and subject to the terms of any Agreement entered into with him may revoke such appointment.
(b)
The Whole-time Director shall be paid such remuneration per mensum including a specified percentage on the net profit, if any, and with such other benefits or perquisites as may be agreed upon by the Company subject to the provision of the Act and approval of the Central Government as required under law.
(c)
The Board may entrust and confer upon a Whole-time Director any of the powers of the management which would not be otherwise exercisable by him upon such terms and conditions and with such restrictions as the Board may think fit, subject always to the superintendence, control and directions of the Board and the Board may from time to time revoke, withdraw, alter or vary all or any of such powers. THE SECRETARY
(132)
The Directors may from time to time appoint and at their discretion remove any individual (hereinafter called “the Secretary”) to perform any functions, which by the Act or to be performed by the Secretary, and to execute any other purely ministerial or administrative duties, which may from time to time be assigned to the Secretary by the Directors. The Directors may also at any time appoint some person (who need not be the Secretary ) to keep the registers required to be kept by the Company. THE SEAL
(133)
The Board shall provide for the safe custody of the Seal and the Seal shall not be used except by the authority previously given of the Board or a Committee of the Board authorised by the Board in that behalf and save as provided in Article 17(1) hereof, any two Directors or any director and the Secretary or any Director as the Board may appoint shall sign every instrument to which the Seal is affixed. Provided nevertheless that any instrument bearing the Seal of the Company and issued for valuable consideration shall be binding on the Company notwithstanding any irregularity touching the authority of the Board to issued the same. DIVIDENDS
(139)
Subject to the rights of members entitled to shares (if any) with preferential or special rights attached thereto, the profits of the Company which it shall from time to time be determined to divide in respect of any year or other period shall be applied in the payment of a dividend on the Equity Shares of the Company but so that at partly paid up share shall only entitle the holder with respect thereof to such a proportion of the distribution upon a fully paid up share as the amount paid thereon bears to the nominal amount of such share and so that when capital is paid
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up in advance of calls upon the footing that the same shall carry interest, such capital shall not rank for dividends or confer a right to participate in profits. (140)
The Company in General Meeting may declare a dividend to be paid to the members according to their rights and interest in the profits and may subject to the provisions of Section 207 of the Act fix the time for payment.
(141)
No large dividend shall be declared than is recommended by the Board, but the Company in General Meeting may declare a smaller dividend.
(142)
Subject to the provisions of Section 205 of the Act, no dividend shall be payable except out of the profit of the Company or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of any guarantee given by such Government and no dividend shall carry interest against the Company. No unclaimed dividends shall be forfeited By the Board and the Company shall comply with the provisions of Section 205 (A) of the Companies Act in respect of such dividends.
(143)
The declaration of the Board as to the amount of the net profits of the Company shall be conclusive.
(144)
The Board may, from time to time pay to the amount of the net profits of the Company shall be conclusive.
(145)
The Board may deduct from any dividend payable to any member all sums of money if any presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company.
(146)
Any General Meeting declaring a dividend may make a call on the members of such amount as the meeting fixes, but so that the call shall be made payable at the same time as the dividend And the dividend may be set off against the call.
(147)
No dividend shall be payable except in cash. Provided that nothing in the foregoing shall be deemed to prohibit the capitalization of profits or reserves of the Company for the purpose of issuing fully paid up bonus share or paying up any amount for the time being unpaid on the shares held by the members for the Company.
(148)
A transfer of shares shall not pass the rights to any dividend declared thereon before the registration of the transfer by the Company.
(149)
The Company many pay interest on Capital raised for the construction of works or buildings when and so for as it shall be authorised to do by Section 208 of the Act.
(150)
No dividend shall be paid in respect of any share except to the registered holder of such share or to his order or to his bankers but nothing contained in this Article shall be deemed to require the bankers of a registered shareholder to make a separate application to the Company for the payment of the dividend. Nothing in this Article shall be deemed to affect in any manner the operation of Article 153 hereof.
(151)
Any of the several persons who are registered as the joint holders of any share may give effectual receipts for all dividends, bonuses and other payments in respect of such shares. (152) Notwithstanding anything interim or otherwise, shall be given to the persons entitled to share therein in the manner hereinafter provided.
(153)
Unless otherwise directed in accordance with Section 206 of the Act any dividend, interest or other moneys payable in cash in respect of a share may be paid by cheque or warrant sent
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through the post to the registered address of the holder or, in the case of joint holders, to the registered address of that one of the joint holding or to such person and such address as the holder or joint holders as the case may be, may direct, and every cheque or warrant so sent shall be made payable to the order of the person to whom it is sent. The Company shall not be liable for any dividend lost to any members by the forged endorsement of any such cheque or warrant. (154)(1) If the Company has declared a dividend but which has not been paid or warrant in respect thereof has not been posted within 42 days from the date of the declaration, to any shareholder entitled to the payment of the dividend, the Company shall within 7 days from the date of expiry of the said period of 42 days open special account in that behalf in any scheduled bank called the Unpaid Dividend Account. (2) Any money transferred to the unpaid dividend account of the Company which remain unpaid or unclaimed for a period of three years from the date of such transfer, shall be transferred to the General Revenue Account of the Central Government. A claim to any money so transferred to the General Revenue Account may be preferred to the Central Government by the shareholders to whom the money is due. BOOKS AND DOCUMENTS (155)
The Board shall proper books of account to be kept in accordance with Section 209 of the Act.
(156)
The books of account shall be kept at the registered office or at such other place in India as Board may decide and when the Board so decides, the Company shall, within seven days of the decision, file with the Register a notice in writing giving the full address of that other place.
(157)(1) The books of account shall be open to inspection by any Director during business hours. (2) The Board shall, from time to time, determine whether and to what extent, and at what times and places, and under what conditions or regulations, the books of account and books documents of the company other than those referred to in Article 123 (2) hereof shall be open to the inspection of the member not being Directors and no member (not being a Director) shall have any right of inspecting any books of account or books or documents of the Company except as conferred by law or authorised by the Board or by the Company in General Meeting. BALANCE SHEET AND ACCOUNTS (158) At every Annual General Meeting the Board shall lay before the Company as Balance Sheet and Profit and Loss Account made up in accordance with the provisions of Section 210 of the Act and such Balance Sheet and Profit and Loss accounts shall comply with the requirements of sections 210, 211, 212, 215 and 216 and of Schedule VI to the Act so far as they are applicable to the Company but save as aforesaid, the Board shall not be bound to disclose create details of the result or extent of the trading and transactions of the Company that it may deem expedient. (159)
There shall be attached to every Balance Sheet laid before the Company in General Meeting a report by the Board complying with Section 217 of the Act.
(160)
A copy of Balance sheet (including the profit and loss account, the auditor’s report and every other document required by law to be annexed or attached to the balance sheet or the salient futures of such documents, or such other documents as may be prescribed, shall be sent to, and also be available for inspection by the members of the company and other persons entitled, as required by law.
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(161)
The Company shall comply with Section 220 of the Act and filing with Registrar copies of the Balance Sheet and Profit and Loss Account and documents required to be annexed or attached thereto.
(162)
Every balance sheet and profit and loss account of the Company when audited and adopted by the Company in General Meeting shall be conclusive. AUDITORS
(163)
Once atleast every year the books of account of the Company shall be examined by one or more Auditor or Auditors.
(164)
Auditors shall be appointed and their rights and duties regulated in accordance with Section 224 to 233 of the Act. DOCUMENTS AND NOTICES
(165)(1) A document or notice may be served or given by the Company on any Member either personally or by sending it by post to him to his address, if any, in India supplied by him to his address, if any, in India supplied by him to the Company for serving documents or notices on him. (2) Where a document or notice is sent by post, service of the documents or notice shall be deemed to be effected by properly addressing / prepaying and posting a letter containing the documents or notice, provided that where a member has intimated to the Company in advance that documents or notices should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the Company a sum of sufficient to defray the expenses of doing so; service of the document or notice shall not be deemed to be effected in case of a Notice of a meeting, at expiration of forty eight hours after the letter containing the document or notice is posted and in any other case, at the time of which the letter would be delivered in the ordinary course of post. (166)
A document or notice advertised in a newspaper circulating in the neighbourhood of the office shall be deemed to be duly served or sent on the day on which the advertisement appears on or to every member who has no registered address in India and has not supplied to the Company an address within India for the serving of documents on or the sending or notice to him.
(167)
A document or notice may be served or given by the Company on or to the joint holders of a share by serving or giving the documents or notice on or the joint-holders named first in the Registered of member in respect of the share.
(168)
A document or notice may be served or given by the company on or the persons entitled to a share in consequence of the death or insolvency of a member by company sending it through the post in prepaid letter address to them by name or by the title of the representatives of the deceased, or assignee of the insolvent or by any like description, at any address (if any) in India supplied for the purpose by the persons claiming to be, entitled or (until such an address has been so supplied) by serving the document or notice in any manner in which the same might have been given if the death or insolvency had not occurred.
(169)
Document or notice of every General Meeting shall be served or given in some manner here in before authorised on or to (a) every person entitled to a share in consequence of the death or insolvency of a member and (c) the Auditor or Auditors for the time being of the Company.
(170)
Every person who by operation of law, transfer or other means whatsoever, shall become entitled to any share be bound to every document or notice in respect of such share, which previously to his name and address being entered on the Register of members, shall have been duly served on or given to the person from whom be derives his title to such shares.
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(171)
Any document or notice to be served or given by the Company may be signed by a Director to some person duly authorised by the Board of Directors for such purpose and the signature thereto may be written, printed or lithographed.
(172)
All document or notices to be served or given by Members on or to the Company or any officer thereof shall be served or given by sending it to the Company or officer at the office by post under a certificate of posting by registered post or by leaving it at the office. RECONSTRUCTION
(173)
On any sale of the undertaking of the Company, the Board or the Liquidators on a winding up may, if authorised by a Special Resolution, accept fully paid or partly paid up shares, debentures or securities of any other Company, whether incorporated in India or not, either then existing or to be formed for the purchase in whole or impact of the property of the Company, and the Board (if the profits of the Company permit) or the Liquidators (in a winding up) may distribute such shares or securities, or any other property of the Company amongst the members without realization, or vest the same in trustees for them, and any special Resolution, may provide for the distribution or appropriation of the cash, shares are other securities, benefits or property, otherwise than in accordance with the strict legal rights of the members or contributories of the Company, and for the valuation of any such securities or Property at such price and in such manner as the meeting may approve and all holders of shares, shall be bound to accept and shall be bound by any valuation or distribution so authorised and waive all rights in relation thereto, save only in case the Company is proposed to be or is in the course of being wound up, such statutory rights (if any ) under Section 494 of Act as are incapable of being varied or excluded by these Articles. SECRECY
(174)
Every director, Manager, Secretary, Trustee for the Company, its members or debentures holders, member of a committee officer, servant, agent, accountant or other person employed in or about the business of the Company shall, if so required by the Board or by the Board or by the Managing Director before entering upon his duties sign a declaration pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of his duties except so far as may be necessary in order to comply with any of the provisions in these Articles contained.
(175)
No member or other person (not being a director) shall be entitled to enter upon the property of the Company or to inspect or examine the premises or properties of the company without the permission of the Board or of the Managing Director or subject to Article 162 hereof to require discovery of or any matter which is or may be in the nature of a trade secret, mystery of trade, or secret process, or of any matter whatsoever which may relate to the conduct of the business of the company and which may relate to the conduct of the business of the company and which in opinion of the Board or Managing Director it will be inexpedient in the interest of the Company to communicate. WINDING UP
(176)
If the company shall be wound up and the assets available for distribution among the members as such shall be insufficient to repay the whole of the paid up capital, such assets shall be distributed so that, as nearly as may be the loses shall be borne by the members in proportion to the capital paid up or which ought to have been paid up at commencement of winding on the shares held by them respectively. And if in a winding up the assets available for distribution among the members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the members in proportion to capital at the commencement of the winding up paid up or which ought to have been paid up on the shares held them respectively.
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But this Article is to be without prejudice to the rights of holders of shares issue upon special terms and conditions. (177)
If the Company shall be wound up whether voluntarily or otherwise the Liquidators may with the sanction of a special resolution, divide among the contributories, in specific or kind, any part of the assets of the Company and may, with the like sanction, vest any part of the assets of the Company in Trustees upon such Trusts for the benefits of the contributories or any of them as the Liquidators, with the like sanction, shall think fit. INDEMNITY
(178)
Every Director, Manager, Secretary or Officer of the Company or any person (whether an officer of the Company or not) employed by the Company and any person appointed auditor shall be indemnified out of the funds of Company against all liability incurred by him as such Director, Managing Director, Manager, Secretary, Officer, Employee or Auditor in defending any proceedings, whether civil or criminal, in which judgement is given in his favour, or in which he is acquitted, or in connection with any applications under Section 633 of the Act in which relief is granted to him by the Court.
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SECTION XII - OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION The following Contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of this Offer Document) which are or may be deemed material have been entered or to be entered into by our Company. These Contracts, copies of which have been attached to the copy of this Offer Document, delivered to the Registrar of Companies, Tamil Nadu located at Chennai for registration and also the documents for inspection referred to hereunder, may be inspected at the Registered office of our Company situated at No.18, 1st Floor, I Main Road, Kotturpuram, Chennai - 600 085, Tamil Nadu., India from 10.00 a.m. to 4.00 p.m. from the date of this Offer Document to until the date of Closing of the Issue. A. Material Contracts: 1.
Engagement Letter dated 19th October 2010 between our Company & BRLM, Birla Capital & Financial Services Limited, Mumbai.
2.
Agreement dated 28th September 2011 entered between our Company and Birla Capital & Financial Services Limited, the Book Running Lead Manager.
3.
Memorandum of Understanding dated 27th September 2011 entered into by our Company with Cameo Corporate Services Limited, to act as the Registrar to the Issue.
4.
Escrow agreement dated [●] between our Company, BRLMs, Registrar, the Syndicate Members and the Escrow Collection Banks.
5.
Syndicate Agreement dated [●] between our Company, BRLM and the Syndicate Members.
6.
Underwriting Agreement dated [●] between our Company, BRLM and the Syndicate Members.
7.
Tripartite agreement between the Company, CDSL and Cameo Corporate Services Limited dated [●]
8.
Tripartite agreement between the Company, NSDL and Cameo Corporate Services Limited dated [●].
9.
Agreement with Mr. Chandramohan Parlapalli dated 1st October 2011 recording terms and conditions of his appointment as the Managing Director of the company.
10. Agreement with Mr. Rangesh Rajaram, dated 1st October 2011 recording terms and conditions of his appointment as the Whole time director of the company. 11. Agreement with Software Technology Parks of India – Chennai dated 8th May 2007 granting the status of 100% Export Oriented Unit status. 12. Valuation report of Paglia Consulting Group, LLC, Simi Valley, California valuing the equity shares of Prelude Systems Inc, USA and the management letter on the acquisition of 100% stake in Prelude Systems Inc., USA making it a 100 % subsidiary of PreludeSys India Limited. 13. Stock purchase agreement between Prelude Systems Inc. and Mr. Rajamannar Abboy, Mr. Kiran Babu Chandra, Mr. Rangesh Rajaram & Mr. Chandramohan Parlapalli, promoters of our company and our company to acquire 100 % stake in Prelude Systems Inc dated 26th November 2007.
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B. 1.
Material Documents: Memorandum and Articles of Association of our Company as amended from time to time.
2.
Certificate of Incorporation issued by the Registrar of Companies, Tamil Nadu dated 14th December 1998 under the name & style of Prelude Solution Providers Private Limited. Consequently the name of the company was changed to PreludeSys India Private Limited on 30th April 2008 & the company became public on 12th April 2011 and the name was changed to PreludeSys India Limited.
3.
Copy of the resolution passed at the meeting of the Board of Directors held on 1st September 2011 authorizing further issue of shares through an Initial Public Offer.
4.
Copy of the special resolution passed in the annual general meeting of the shareholders held on 28th September 2011 authorizing further issue of shares through IPO under Section 81 (1A) of the Companies Act, 1956
5.
Copy of resolution passed in the extra ordinary general meeting of the shareholders held on 9th May 2011 authorizing borrowing powers to the Board of Directors under Section 293(1)(d) of the Companies Act, 1956.
6.
Copy of resolution of the meeting of board of directors of the company held on 28th November 2011 interalia constituting the Public Issue Committee and to do all other acts in relation to this issue.
7.
Copy of resolution of the meeting of board of directors of the company held on 28th November 2011 interalia constituting the Project Monitoring Committee to oversee the implementation of the project.
8.
Copies of annual reports of our Company for the Years ended 31st March 2007, 2008, 2009, 2010, 2011 (standalone & consolidated) and six months ended 30th September 2011 (standalone & consolidated).
9.
Resolution passed at the Annual General Meeting of the members of the company held on 28th December 2011 appointing M/s CNGSN & Associates, Chartered Accountants as the statutory auditors of the company until the conclusion of the next Annual General Meeting of the Company & resolution of the members of the Board held on 8th January 1999 appointing M/s SRJ Associates as First Auditors of the company.
10. Report of the statutory Auditor M/s CNGSN & Associates, Chartered Accountants, dated 5th December 2011 as mentioned in the DRHP. 11. Letter dated 21st November 2011 from the auditors of our Company M/s CNGSN & Associates, Chartered Accountants confirming tax benefits and tax shelter as mentioned in the DRHP. 12. Consent letter dated 2nd November 2011 from statutory auditors, M/s CNGSN & Associates, Chartered Accountants. 13. Copy of the Board Resolution dated 28th November 2011 regarding appointment of Ms. Preethi Bansal M as our Company secretary and compliance officer.
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14. Sanction letters for the term loans from various banks: Sr. Name of the Bank Amount No. (` In Lakhs) a) IDBI Bank 275.00 b) SIDBI 500.00 c) Tata Capital Limited 25.00 d) Religare Finvest Limited 24.90 e) f) g)
HDFC Bank Limited HDFC Bank Limited Oriental Bank Commerce
of
25.00 13.60 4.42
Reference
Date
37/IDBI/MSME/PIPL 3525/PFD/PSPL A/c no. 3141369 540233
5th April 2011 7th February 2007 3rd December 2010 25th November 2010 13th October 2010 1st June 2011 25th July 2009
A/c no. 17381498 A/c no. 18815119 Cn1024//2009
15. Copies of Undertakings from PreludeSys India Limited 16. Consents of BRLM, Bankers to our Company, Legal Advisors, Directors, Company Secretary & Compliance Officer, Registrars and Bankers to the Issue, to include their names in the Offer Document to act in their respective capacities. 17. Letter of provisional offer of land for space and infrastructure at Shriram The Gateway SEZ, a notified SEZ in Chennai dated 24th November 2011 by Shriram Properties & Infrastructure Pvt Ltd. 18. Legal Due Diligence Report dated 12th December 2011 from Mrs. R. Revathy, Advocates as Legal Advisors to the Issue for vetting and approval of Offer Document. 19. In principle listing approval from BSE, NSE vide their letters dated [●] & [●] respectively; 20. Due Diligence Certificate dated 22nd December 2011 to SEBI from Birla Capital & Financial Services Limited. 21. SEBI Final observation letter [●] dated [●]and reply of the BRLM to the same dated [●] 22. IPO Grading Report dated [●] by [●] Any of the contracts or documents mentioned in this DRHP may be amended or modified at any time if so required in the interest of the Company or if required by the other parties, without reference to the shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.
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