svpcl limited - money control
TRANSCRIPT
SVPCL LIMITED
(Originally Incorporated in India as Sri Vijaya Laxmi Paper Convertors Limited on 26th November, 1999 and obtained Certificate of
Incorporation No. 01- 32913 from Registrar of Companies, Andhra Pradesh under the Companies Act, 1956 and subsequently, the name was changed to SVPCL Limited and obtained fresh Certificate of Incorporation on 28th November, 2003.)
Registered Office: 206 A Concourse, 2nd Floor, Greenlands, Ameerpet, Hyderabad 500 016, Tel No: +91-40-6636 9058 / 59 /2373 0839 Fax No: +91-40-2375 7472 Website: www.svpcl.com ; Email: [email protected]
Contact Person: Mr. Y.V. Sheshatalpa Sai CEO & Compliance Officer Plants:- 1. Plot No- 11-13-173/11 &12 Plot No 2 &3 Survey No 100 Village Fathe Nagar, Balanagar, Hyderabad, Andhra Pradesh 2. 76-10-16, Gandhi Statute Road, Bhavanipuram, Vijaywada- 520012. 3. 1&2, Ground Floor, SDF-II, VSEZ, Visakhapatnam- 530046.
PUBLIC ISSUE OF [ ] EQUITY SHARES THROUGH 100% BOOK BUILDING PROCESS OF FACE VALUE OF RS. 10 EACH FOR CASH AT A PRICE OF RS. [ ], AGGREGATING RS. 3450 LACS (HERE-IN-AFTER REFERRED TO AS THE NET ISSUE ). THE ISSUE WOULD CONSTITUTE [ ] % OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF SVPCL LIMITED PRICE BAND: Rs. 40 TO Rs. 45 PER EQUITY SHARE OF FACE VALUE OF Rs. 10 EACH.; THE ISSUE PRICE IS 4 TIMES OF THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND 4.5 TIMES OF THE FACE VALUE AT THE HIGHER END OF THE PRICE BAND
The issue is being made through the 100% Book Building process where at least 50% of the Net Issue to the public shall be allocated on proportionate basis to Qualified Institutional Buyers (5% of the QIB portion shall be available for allocation on proportionate basis for Mutual Funds only). If at least 50% of the Net Issue cannot be allocated to QIB Bidders, then the entire application money will be refunded. Further not less than 15% of the Net Issue to the public shall be available for allocation to Non-Institutional Bidders and not less than 35% of the Net Issue to the public shall be available for allocation to Retail Individual Investors on Proportionate Basis, subject to valid bids being received at or above the issue price. In case of revision in the Price Band, the Bidding period shall be extended for 3 additional working days after such revision, subject to the Bidding/Offer Period not exceeding 10 working days. Any revision in the price band and the revised bidding period, if applicable shall be widely disseminated by notification to the Bombay Stock Exchange Limited, Mumbai by issuing press release and by indicating the change on the websites of the Book Running Lead Managers and the terminals of the members of the Syndicate.
RISK IN RELATION TO FIRST ISSUE This being the first issue of SVPCL Limited ( the Company ), there has been no formal market for the Equity Shares of the Company. The face value per share is Rs.10 and the issue price is [*] times the face value. The issue price (as has been determined and justified by the Book Running Lead Manager and SVPCL Limited and stated herein under paragraph on Basis of Issue Price ) should not be taken to be indicative of the market price of the equity shares after the shares are listed. No assurance can be given regarding an active and/or sustained trading in the shares of the Company or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISK 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 the Issuer and the Issue including the risk involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does the SEBI guarantee the accuracy or adequacy of this document. Specific attention of the investors is invited to the statement of Risk Factors disclosed on Page Nos. ix to xx of this Red Herring Prospectus.
ISSUER S ABSOLUTE RESPONSIBILITY Our Company having made all reasonable enquiries, accepts responsibility for, and confirms that this Red Herring Prospectus contains all information with regard to the Company and the Issue, which is material in the context of the Issue; that the information contained in this Red Herring Prospectus 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 document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offered through this Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited (BSE) (Designated Stock Exchange) & National Stock Exchange. In-principle approval from BSE vide letter No DCS/IPO/SI/IPO-IP/0269/2007-08 dated May 18, 2007and NSE vide letter No.NSE/LIST/49071-T dated June 18, 2007 for listing of the equity shares being issued in terms of this Red Herring Prospectus have been received.
IPO Grading: the company has not opted for IPO Grading
Red Herring Prospectus
Please read Section 60B of the Companies Act, 1956 Dated (*) 2007 (100% Book Building Issue)
BOOK RUNNING LEAD MANAGER TO THE ISSUECO LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE
BOB Capital Markets Limited (Wholly owned Subsidiary of Bank of Baroda) Meher Chambers, Ground & First Floor,Dr.S.B.Marg Ballard Estate, Mumbai 400038; Tel. :022-66372301 4; Fax : 022-66372312/11 Email: [email protected]
Contact person: Mr. Sandeep Mankad
UTI SECURITIES LIMITED 1st Floor, Dheeraj Arma, Anant Kanekar Marg, Station Road, Bandra (E) Mumbai 400 051. Tel: 91-22-67515820 Fax: 91-22-67023194 Email: [email protected]
Contact Person: Mr Hemant Bothra
Aarthi Consultants Pvt. Ltd. 1-2-285,Domalguda, Hyderabad - 500 029. Tel.:+91-40-2763 8111/ 2763 4445 / 5561 1921 Fax:+91-40-27632184; Email:[email protected] Contact Person : Mr. G. Bhaskar
ISSUE PROGRAMME BID/ ISSUE OPENS ON: 22 OCTOBER 2007 BID/ ISSUE CLOSES ON: 26 OCTOBER 2007
TABLE OF CONTENTS
TITLE PAGE NO I. Definitions i II. Issue Related Terms and Abbreviations ii III. Risk Factors
Forward-looking Statements and Market Data ix Risk Factors x
IV. Introduction 1 Summary 4 Brief Issue Details 7 General Information 8 Capital Structure 16 Objects of the Issue 26 Basic Terms of Issue and Basis for Issue Price 40
Tax Benefits 43 V. About Us
Industry Overview 50 Business Overview 59 History of the Company 74 Our Management 77 Our Promoters 89 Dividend Policy 92
VI. Financial Statements Financial Information of Our Company
Auditors Report 93 Management s Discussion and Analysis of Financial Condition and Results of Operations
117
VII. Legal & Other Information Outstanding Litigations and Material Developments 126 Government Approvals / Licensing Arrangements 130
VIII. Other Regulatory and Statutory Disclosures 131 IX. Issue Information
Terms of the Issue 139 Issue Procedure 143
X. Main Provisions of Articles of Association 167 XI. Other Information
List of Material Contracts and Documents for Inspection 191 Declaration 193
i
SECTION I: DEFINITIONS Term Description
The Company or our Company or we or us and our
SVPCL Ltd. , a Public limited company incorporated under the Companies Act,
1956
Conventional/General Terms
Act The Companies Act, 1956 and amendments thereto Articles Articles of Association of our Company Auditors The statutory auditors of the Company namely M/s. P.Murali & Co, Chartered
Accountants. Board/Board of Directors
Board of Directors of the Company CAGR Compounded Annual Growth Rate CC Cash Credit CSO Central Statistical Organization Directors Directors of our Company, unless otherwise specified. ECB External Commercial Borrowings FCNR(B) Foreign Currency Non-Resident(Borrowings) Indian GAAP Generally accepted accounting principles in India IT Act The Income Tax Act, 1961, as amended from time to time Memorandum/ Memorandum of Association
The Memorandum of Association of SVPCL Limited.
NAV 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 expenditure not written off) and debit balance of Profit and Loss Account, divided by number of issued and paid up equity shares.
NRI/ Non-Resident Indian
A person resident outside India, as defined under FEMA and who is a citizen of India or a Person of Indian Origin under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000
OCBs Means and includes an entity defined in Clause (xi) of Regulation 2 of the Foreign Exchange Management (Deposit) Regulations, 2000 and which was in existence on the date of commencement of the Withdrawal of General Permission to Overseas Body Corporate Regulations, 2003 and immediately prior to such commencement was eligible to undertake transactions pursuant to the general permission granted under the Foreign Exchange Management (Deposit) Regulations, 2000.
Registered Office The Registered Office of the Company at 206 A Concourse, 2nd Floor, Greenlands, Ameerpet, Hyderabad 500 016.
SEBI Act Securities and Exchange Board of India Act, 1992 as amended from time to time. SEBI Guidelines SEBI (Disclosure and Investor Protection) Guidelines 2000, issued by SEBI
effective from January 27, 2000, as amended from time to time, including instructions and clarifications issued by Securities and Exchange Board of India (SEBI) constituted under the Securities and Exchange Board of India Act, 1992.
Stock Exchanges Bombay Stock Exchange Ltd (BSE) & National Stock Exchange WCTL Working Capital Term Loan
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SECTION II. ISSUE RELATED TERMS & ABBREVIATIONS Term Description Allotment/ Allotment of Equity Shares
Unless the context otherwise requires, allotment of Equity Shares pursuant to this Issue
Allottee The successful Bidder to whom the Equity Shares are/have been issued or transferred Banker(s) to this Issue/Escrow Collection Bank
Escrow collections bankers in this case being Bank of Baroda, HDFC Bank Ltd, ICICI Bank Ltd, ABN Amro Bank and Axis Bank Ltd.
Bid An Indication to make an offer made during the Bidding Period by a prospective investor to subscribe to the Equity Shares of the Company at a price within the Price Band, including all revisions and modifications thereto
Bid Amount/Bid Price The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid for this Issue
Bid/ Issue Closing Date
The date after which the Syndicate Member 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 Telugu newspaper with wide circulation
Bid-cum-Application Form
The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of the Company and which will be considered as the application for Allotment in terms of this Red Herring Prospectus
Bid/ Issue Opening Date
The date on which the Syndicate Member shall start accepting Bids for this Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper and a Telugu newspaper with wide circulation
Bidder Any prospective investor who makes a Bid pursuant to the terms of this Red Herring Prospectus
Bid/ Issue Period 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
Book Building Process Book building route as provided under Chapter XI of the SEBI (DIP) Guidelines 2000, in terms of which this Issue is made
Brokers to this Issue Brokers registered with any recognized Stock Exchange, appointed by the Syndicate Member
BRLM Book Running Lead Manager to this Issue, in this case being BOB Capital Markets Limited
CAN/ Confirmation of Allocation Note
The note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares in the Book Building Process
Cap Price The higher end of the Price Band, above which the Issue Price will not be finalized and above which no Bids will be accepted
Co-BRLM Co-Book Running Lead Manager to this Issue, in this case being UTI Securities Ltd Cut-off Price The Issue Price finalized by the Company in consultation with the BRLM. Depository A depository registered with SEBI under the SEBI (Depositories and Participant)
Regulations, 1996, as amended from time to time Depositories Act The Depositories Act, 1996, as amended from time to time Depository Participant A depository participant as defined under the Depositories Act Designated Date The date on which funds are transferred from the Escrow Account of the Company to
the Public Issue Account after the Prospectus is filed with the RoC, following which the Board of Directors shall make the Allotment to successful Bidders
Designated Stock Exchange
Bombay Stock Exchange Limited
DIP Guidelines SEBI (DISCLOSURE AND INVESTOR PROTECTION GUIDELINES), 2000 AND
AMENDMENTS THERETO
Draft Red Herring Prospectus /DRHP
Means this Draft Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, 1956 which does not have complete particulars on the price at which the Equity Shares are offered and number of Equity shares offered through this Issue. It carries the same obligations as are applicable in case of a Prospectus and will be filed with the RoC at least three days before the opening of this Issue.
Equity Shares Equity Shares of our Company of Rs.10 each unless otherwise specified in the context thereof.
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Term Description Escrow Account Account opened with an Escrow Collection Bank(s) and in whose favor the Bidder
will issue cheques or drafts in respect of the Bid amount when submitting a Bid. Escrow Agreement Agreement entered into amongst the Company, the Registrar to this Issue, the
Escrow Collection Bank(s), the BRLM and the Syndicate Member in relation to the collection of the Bid Amounts and dispatch of the refunds (if any) of the amounts collected, to the Bidders on the terms and conditions thereof.
Escrow Collection Bank(s)
The banks which are clearing members and registered with SEBI as Banker to the Issue at which the Escrow Account for the Issue will be opened
First Bidder The Bidder whose name appears first in the Bid cum Application Form or Revision Form
Floor Price The lower end of the Price Band, below which the Issue Price will not be finalized and below which no Bids will be accepted
Issue Price The fresh issue of [ ] Equity Shares of Rs. 10/- each fully paid up at the Issue Price determined by the Company in terms of this Red Herring Prospectus
Issue Size [ ] Equity Shares to be issued to the Investors at the Issue Price Issue Period The Issue period shall be [ ] being the Bid/Issue Opening date, to [ ], being the
Bid/Issue Closing date Issue Management Team
The team managing this Issue as set out in the section titled General Information in this Red Herring Prospectus
Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid, being [
%] to 100% of the Bid Amount
Mutual Fund A Mutual Fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996.
Mutual Fund Portion 5% of the QIB Portion or [ ] Equity Shares (assuming the QIB Portion is for 50% of the Issue) available for allocation to Mutual Funds only.
Non Institutional Bidders
All Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than Rs.100,000
Non Institutional Portion
The portion of this Issue being not less than 15% of the Net Issue i.e. [ ] Equity Shares of Rs.10 each available for allocation to Non Institutional Bidders
Pay-in Date Bid/Issue Closing Date or the last date specified in the CAN sent to Bidders receiving allocation who pay less than 100% margin money at the time of bidding, as applicable
Pay-in-Period This term means (i) with respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid/ Issue Opening Date and extending until the Bid/Issue Closing Date, and (ii) with respect to Bidders whose Margin Amount is less than 100% of the Bid Amount, the period commencing on the Bid/Issue Opening Date and extending until the closure of the Pay-in Date
Price Band Being the price band of a minimum price (Floor Price) of Rs. 40 and the maximum price (Cap Price) of Rs. 45 and includes revisions thereof
Pricing Date The date on which the Company in consultation with the BRLM/Co-BRLM finalizes the Issue Price
Promoters The following are the Promoters of the Company: Mr. K. Mallikarjuna Reddy Mr.K. Sudhakara Reddy, Mrs. K. Mahitha and Mrs. K. Aparna and Dr. Y.R. Nagarjuna Kumar
Promoters Contribution
The money brought in by the Promoters as part of their contribution towards the Issue.
Promoter Group Unless the context otherwise requires, refers to those individuals/companies/entities mentioned in the Section titled Our Promoters and Promoter Group of this Red Herring Prospectus `
Prospectus The Prospectus to be filed with the ROC in terms of Section 60 of the Companies Act, containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of the Issue and certain other information
Public Issue Account Account opened with the Banker(s) to this Issue to receive monies from the Escrow Account for this Issue on the Designated Date
Qualified Institutional Buyers or QIBs
Public financial institutions as specified in Section 4A of the Companies Act, FIIs registered with SEBI, Scheduled Commercial Banks, Mutual Funds registered with
iv
Term Description SEBI, 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 Insurance Regulatory and Development Authority, Provident Funds with minimum corpus of Rs. 2500 lacs and Pension Funds with minimum corpus of Rs. 2500 lacs
QIB Portion The portion of this Issue being up to 50% of the Net Issue to Public including the specific allocation of 5% for Mutual Funds, i.e., [ ] Equity Shares of Rs.10 each available for allocation to QIBs
Red Herring Prospectus/RHP
The Red Herring Prospectus which will be filed with ROC in terms of Section 60B of the Companies Act, at least 3 days before the Bid/Issue Opening Date
Registrar/ Registrar to this Issue
Aarthi Consultants Pvt.Limited, as indicated on the cover page of this Red Herring Prospectus
Retail Individual Bidders
Individual Bidders (including HUFs and NRIs) who have not Bid for an amount more than Rs. 100,000 in any of the bidding options in this Issue
Retail Portion The portion of this Issue being not less than 35% of the Net Issue to Public i.e. [ ] Equity Shares of Rs. 10 each available for allocation to Retail Individual Bidder(s)
Revision Form 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)
Syndicate Agreement The agreement to be entered into between the Company and the Syndicate Member, in relation to the collection of Bids in this Issue
Syndicate Member Intermediaries registered with SEBI and eligible to act as underwriters. The Syndicate Member is appointed by the BRLM in this case being [ ]
Transaction Registration Slip/TRS
The slip or document issued by the Syndicate Member to the Bidder as proof of registration of the Bid on the online system of BSE/NSE
Underwriters The BRLM & Co-BRLM and the Syndicate Member Underwriting Agreement
The agreement among the Underwriters and the Company to be entered into on or after the Pricing Date
Company/ Industry-related Terms
Term Description BR Broad Rule BSM Both Side Margin BD Board CC Cut Carbon CAM Copier AP Millennium CMP Color Map litho Paper CWP Cream Wove Paper CWD Cream wove deluxe CEP Cream wove Excise Paper CNBT Cover Note Book Titles CLM Classmate CR Check Rule DM Deluxe Maplitho DMP Deluxe Maplitho Primary DR Double Rule EP Easy Printing ETE Edge to Edge Carbon EZR Easily Readable GSM Gram Per Square Centimeter GNP Glazed News Paper HBP Hi-Bright Paper KB Kraft Board LNB Long Note Book MPLN Maplitho Ne SU DL MR Maths Rule
v
Term Description MBR Maths Broad Rule OTC One Time Carbon OSR One Side Rule PM Prime Maplitho SS SB Straw Board SNP Standard News Paper SP Sirpur Paper SA Sirpur Azurelaid SSEP SS Envelop Paper SSM SS Map litho SF Super Find SR Single Rule UR Un- Rule WP Wrapping Paper WW White Wove
ABBREVIATIONS
Term Description & And % Per Cent A/c Account AGM Annual General Meeting of the Company AS Accounting Standards issued by the Institute of Chartered Accountants of India AY Assessment Year AXIS BANK AXIS Bank Ltd (Formerly UTI Bank Ltd) BED Basic Excise Duty BIS Bureau of Indian Standards BOB Bank of Baroda BSE Bombay Stock Exchange Limited, Mumbai C.A. Chartered Accountant CAGR Compounded Annual Growth Rate CDSL Central Depository Services (India) Limited CEGAT Central Excise & Gold Appellate Tribunal CESTAT Customs Excise And Service Tax Appellate Tribunal CENVAT Central Excise Value Added Tax CII Confederation of Indian Industry CIN Corporate Identification Number CLB Company Law Board DEPB Duty Entitlement Pass Book Scheme DP Depository Participant DP ID Depository Participant s Identity EBIDTA Earnings before Interest, Depreciation, Tax and Amortization ECS Electronic Clearing System EGM Extra-ordinary General Meeting of the Company EPS Earnings Per Share ESIS Employees State Insurance Scheme ESOP Employees Stock Option Scheme Etc./etc Etcetra EU European Union EXIM Export Import Policy, 2002-2007 Exim/EXIM Export Import F.V. Face Value F.Y / FY Financial Year or Fiscal Year. The 12 months ended March 31, of a particular year
unless otherwise specified Fax Facsimile
vi
Term Description FCD(s) Fully Convertible Debentures FCNR Foreign Currency Non Resident FEMA Foreign Exchange Management Act, 1999, as amended from time to time and the
rules and regulations framed there under. FI Financial Institution FICCI Federation of Indian Chambers of Commerce and Industry FIIs Foreign Institutional Investors as defined under SEBI (Foreign Institutional
Investors) Regulations, 1995 and registered with SEBI and as required under Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000 and under other applicable laws in India.
FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of India FVCI Foreign Venture Capital Investor registered with SEBI under the SEBI (Foreign
Venture Capital Investor) Regulations, 2000 GAAP Generally Accepted Accounting Practices GDP Gross Domestic Product GoI/Government Government of India HNI High Networth Individual Hr./hr Hour HUF Hindu Undivided Family IFSC Indian Financial System Code I.T. Act Income Tax Act ICAI The Institute of Chartered Accountants of India ICSI The Institute of Company Secretaries of India ICWA The Institute of Cost & Works Accountants of India IDBI Industrial Development Bank of India IPC Indian Penal Code IPO Initial Public Offering IPR Intellectual Property Rights IRDA Insurance Regulatory and Development Authority ISI Indian Standards Institution ISO International Standards Organization ITI Industrial Training Institute K.G./ Kg/KG Kilo Gram Kms Kilometers KV Kilo Volt KVA Kilo Volt Ampere KW Kilo Watt L/C Letter of Credit LIBOR London Inter Bank Offered Rate LIC Life Insurance Corporation of India MAT Minimum Alternate Tax MCA Ministry of Company Affairs M/s Messrs MF Mutual Fund Min. Minutes MICR Magnetic Ink Character Recognition Misc. Miscellaneous Mn/mn Million MNC Multi National Company MOA Memorandum of Association MODVAT Modified Value Added Tax MOU/ MoU Memorandum of Understanding MT Metric Ton N.A. Not Applicable NAV Net Asset Value NEFT National Electronic Fund Transfer
vii
Term Description NOC No Objection Certificate Nos. Numbers NR Non-Resident NRE Non Resident External Account NRIs Non Resident Indians as defined under FEMA NRO Non-Resident Ordinary Account NSDL National Securities Depository Limited. NSE National Stock Exchange of India Limited p.a./P.a. Per annum P/E Price to Earning Ratio PAN Permanent Account Number allotted under the Income-Tax Act, 1961 PAT Profit After Tax PBDIT Profit Before Depreciation, Interest and Tax PBIT Profit Before Interest and Tax PBT Profit Before Tax PC Personal Computers PF Provident Fund PIO Persons of Indian Origin Pvt Private QIB Qualified Institutional Buyers Qtr/ Qtr Quarter Qty Quantity R&D Research & Development RBI Reserve Bank of India ROC/RoC Registrar of Companies Rs. Rupees RTGS Real Time Gross Settlement SEBI The Securities and Exchange Board of India SED Special Excise Duty SIDBI Small Industries Development Bank of India Sqr/sqr Square Sq. Ft Square Feet SWOT Strengths, Weaknesses, Opportunities and Threats t/yr Ton per year TAN Tax Deduction Account Number Tel Telephone TL Term Loan Ton/ton/T Ton TPA Ton Per Annum TPY Ton Per Year TRS Transaction Registration Slip UAE United Arab Emirates UIN/ MAPIN Unique Identification Number UK United Kingdom US/USA United States of America USD or $ or US $ United States Dollar UTI Unit Trust of India UTISEL/UTISEC UTI Securities Ltd www World Wide Web
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SECTION III- RISK FACTORS
CERTAIN CONVENTIONS; USE OF MARKET DATA
In this Red Herring Prospectus, 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" and the word "million" means "ten lac" and the word "Crore" means "ten million". In this Red Herring Prospectus, any discrepancies in any table between total and the sum of the amounts listed are only due to rounding-off. Throughout this Red Herring Prospectus, all figures have been expressed in Lacs unless otherwise stated. All references to India contained in this Red Herring Prospectus are to the Republic of India. For additional definitions used in this Red Herring Prospectus, see the section Definitions on page i of this Red Herring Prospectus. In the section entitled Main Provisions of Articles of
Association on page 167 of this Red Herring Prospectus, defined terms have the meanings given to such terms in the Articles of Association of the Company. Industry data used throughout this Red Herring Prospectus has been obtained from industry publications and other published data. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe industry data used in this Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed by us to be reliable, have not been verified by any independent sources
CURRENCY OF PRESENTATION
In this Red Herring Prospectus, all references to Rupees and Rs. are to the legal currency of India,
ix
FORWARD-LOOKING STATEMENTS AND MARKET DATA
In this Red Herring Prospectus, the terms we , us , our Company , the Company or SVPCL or unless the context otherwise implies, refers to SVPCL Limited.
This Red Herring Prospectus contains certain forward-looking statements. These forward-looking statements generally can be identified by words or phrases like will , aim , will likely result , believe , expect , will continue , anticipate , estimate , intend , plan , contemplate , seek to , future , objective , goal , project , should , will pursue and similar expressions or variations of such expressions, that are forward looking
statements . Similarly, statements that describe our objectives, plans or goals are also forward-looking statements.
All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include but are not limited to:
General economic and business conditions in India;
Our ability to successfully implement our growth strategy and expansion plans;
Our ability to respond to technological changes;
Changes in laws and regulations relating to the industry in which we operate;
Changes in political and social conditions in India;
The loss of our key employees and staff;
Any adverse outcome in the legal proceedings in which our Company is involved; and
The loss or shutdown of operations of our Company at any time due to strike or labour unrest or otherwise
The occurrence of natural disasters or calamities affecting the areas in which we have our operations.
For further discussion of factors that could cause our actual results to differ, refer to the section titled Risk factors beginning on page ix.
of this Red Herring Prospectus. 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, our Directors, the BRLMs, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date thereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the BRLM and we 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 Exchanges in respect of the Equity Shares allotted in this Issue.
Market data used throughout this Red Herring Prospectus was obtained from our internal Company reports, 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 Red Herring Prospectus 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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RISK FACTORS
Investors should consider carefully the following risk factors, together with the other information contained in this Red Herring Prospectus, before they decide to buy the Company s Equity Shares. If any of the following risks actually occur, the Company s business, financial condition and results of operations could suffer, the trading price of the Company s Equity Shares could decline and you may lose all or part of your investment.
Note: Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the financial or other implication of any risks mentioned herein under:
A. INTERNAL RISK FACTORS
Internal Risk Factors and Risks Relating to our Business
1. We face intense competition, and if we are not able to compete effectively in the student/exercise books and stationery industry, our business, results of operations and financial condition will be adversely affected.
We face intense competition from both the organized and unorganized segments of the notebook and stationery industry in India. The paper products industry is largely unorganized. As the industry becomes more organized, we will face increasing competition from the organized segments of the market. Moreover, as we expand into new markets, we may be unable to compete with organized or unorganized competitors in these new markets. Moreover, if the Government of India were to relax import restrictions, the possible resulting increase of imports from other countries, particularly in the Southeast Asian region and China, of high-quality, inexpensive student/exercise books could create increased competitive pressures on us to provide higher quality products at lower prices. This has been pointed out in the Project Appraisal Report of BOB Capital Markets Ltd, dated 28th March 2007. Although we are currently working to build our brands and increase brand recognition in order to help us compete with both organized competitors and to distinguish ourselves from competitors in the unorganized sector, we cannot assure you that this initiative will be successful. Moreover, although we have competed successfully in the past, we cannot be certain that we will continue to compete effectively. As a result, we may lose market share and sales revenue to our competitors and our business, results of operations and financial condition could be adversely affected.
2. Our sales are on payment terms averaging approximately 60 days. This may cause us to encounter cash flow difficulties that may adversely affect our business or results of operations.
A significant portion of our sales of student/exercise books and stationery, as well as published materials and commercial printing orders are made on payment terms averaging approximately 60 days. However, we do not enjoy similarly favorable 60-day payment terms with our suppliers and are generally required to pay our suppliers, including our suppliers of raw materials such as paper, in less than 60 days. As a result, our receipts lag behind the expenses associated with sales to the extent we are required to pay for supplies before we receive payment for our products. This has caused us to experience negative operating cash flow, and we expect to continue to experience negative operating cash flow or difficulties with operating cash flow, particularly if we encounter a sudden increase in demand for our products or otherwise need to increase our production levels rapidly. If we are unable to meet our immediate cash needs through our sales because of the imbalance of terms, we have and may continue to be required to borrow short-term funds, which may not be on favorable terms or to forego opportunities to sell more products if no such funds are available on economic terms. Although we are currently able to borrow short-term funds on what we believe are reasonable terms, we may not be able to continue to borrow on such terms. Such difficulties may adversely affect our business or results of operations.
3. Our profitability has shown a substantial jump for the financial year ended 31 March 2006 and the nine months ended December 2006 as compared to earlier years. We may not be able to sustain such rate of growth in profitability and we cannot assure such growth in profitability in future.
Our profit before tax to sales ratio has increased from 1.23% during 2004-05 to 6.63% for the year ended March 2006 and further to 6.22% for the year ended March 2007. Though we continue to focus on evolving a product mix which will optimize profitability, we may not be able to sustain high rate of growth in profitability and we cannot assure the investors of such growth in future.
4. We are yet to fully utilize the existing installed capacity and the capacity utilization has been 40.64% and 79% of the installed capacity during the years ended March 2006 and March 2007 respectively. We cannot
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assure you that we will be able to fully utilize the additional capacity proposed to be created with the funds collected from this issue. Our inability to utilize the installed capacity optimally may adversely affect our business and results of operations in the long term.
We had increased the installed capacity from 10800 tons to 19500 tons during 2004-05. We produce a large number of items of stationery which are of varying sizes. Further, the facility at SEZ Vishakhapatnam is in the process of being set up and the total installed capacity and calculation of capacity utilization includes this facility as well. The capacity utilization at the three facilities are tabulated and provided on page 100 of the RHP. Though it has been our endeavor to optimize the utilization of installed capacity we cannot assure that such endeavor will be totally successful. Any inability to optimally utilize installed capacity will have a negative bearing on the cost of production and profitability.
5. Our promoters are first generation entrepreneurs who have ventured into manufacturing activities for the first time. Their inability to successfully steer the company in difficult and unforeseen eventualities will adversely affect our business and the results of our operations.
Our core promoters have been in the paper products business for the past 15 years and they have been able to build up the business and our sales have grown from Rs. 583 lacs during 2001-02 to Rs. 5576 lacs for the 9 months period ended December 2006. We also believe in running the business by qualified professionals who will be able to steer our business through difficulties. We have qualified professionals in key positions and have been able to show reasonable growth, any unforeseen eventualities which will prevent them from carrying on the business could at least temporarily affect the results of our operations.
6. Our business is dependent on the availability and cost of quality paper and non availability/reduced availability and/or escalation in cost of paper will adversely affect our operations.
Paper forms the major raw material for our business, and represents a significant portion of our expenses. Although we have established relationships with various domestic suppliers of paper, we have no long-term supply contract for the supply of paper. We rely on domestic suppliers for our supplies of paper, which we order to meet our specific requirements as needed. Any significant increase in the price of paper or decrease in the availability of paper for whatever reason, including in the availability of paper of an appropriate quality for our products, could adversely affect our results of operations. Although we have not experienced any disruption in the supply of paper in the past, an inadequate supply of paper of sufficient quality for any reason could hamper our operations. Although we may seek to pass on some or all of the additional costs of paper that we encounter, for whatever reason, to customers or to provide our products with reduced qualities of paper, we cannot assure you that we would be successful in doing so. This may adversely affect our business and results of operations.
7. Any inability to manage our growth could disrupt our business and reduce our profitability.
We have experienced significant growth in our sales in recent years. Our total sale has grown from Rs. 583.10 lacs in fiscal 2002 to Rs. 4020.10 lacs in fiscal 2006 and further to Rs. 6900 lacs for the year ended 31.3.2007.. We expect this growth to place significant demands on both our management and our resources. Any inability to manage growth may have an adverse effect on our business, results of operation and financial condition.
8. We are dependant on sales in a single geographic region, and any impairment to our ability to do business in that region may adversely affect our business or results of operations.
Bulk of our revenues so far has been derived from sales to customers in the state of Andhra Pradesh. Although we have chalked out plans to expand our business geographically and extend our presence to regions beyond the state of Andhra Pradesh and South India, which we believe will reduce our dependence on one region, we cannot assure you that we will be successful in doing so or that we will be able to do so sufficiently to reduce our present dependence on one region significantly
9. If our expansion into new geographic and business markets in India is unsuccessful, it may have an adverse effect on our business or results of operations.
A key part of our business plan is our continued expansion into new geographic and business markets. We plan to expand our business by expanding our geographic reach to new markets within India by augmenting existing manufacturing facilities. The unorganized segment of the Indian student/exercise books and stationery industry is
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intensely localized, whilst the organized sector is largely regionalized or nationwide in character, with different brands having strengths in different regions. As a result, as we continue our geographic expansion, we will be competing largely with well established players in regions where we have not previously had a significant presence. If we are unable to attract adequate customers in the geographic areas where we plan to expand our activities, it may have an adverse effect on our business or results of operations.
10. Our business is dependent on our manufacturing facility and the loss of or shutdown of operations of the manufacturing facility on any grounds listed herein could adversely affect our business or results of operations.
Our manufacturing facilities are subject to operating risks, such as the breakdown or failure of equipment, power supply or processes, performance below expected levels of output or efficiency, labour disputes, natural disasters, industrial accidents and the need to comply with the directives of relevant government authorities. Our manufacturing facility uses heavy equipment and machinery, and whilst that equipment and machinery is insured, the breakdown or failure of such equipment or machinery may result in us having to make repairs or procure replacements, which may take considerable time or expense. Any disruption to the power supply could cause disruption to our manufacturing operations and our business. Accordingly, any significant operational problems or the loss of our manufacturing facilities for an extended period of time could adversely affect our business or results of operations.
11. Our cash collection and inventory control systems may be inadequate to monitor or regulate fraud, pilferage, misappropriation or accounting errors.
We estimate that approximately 17% and 16% of our collections from sales of student/exercise books, stationery and published materials were made in cash in fiscal 2006 and fiscal 2005, respectively. We cannot directly monitor whether all cash collected by our sales executives is paid to us, which may increase the risk of fraud and misappropriation by our sales executives. We monitor inventory to help monitor cash collection, pilferage and other fraud. However, because our inventory management system has not been networked with the corporate office it may not be adequate for such purposes. Although we endeavor to take utmost care to prevent revenue leakages, we cannot assure you that we have or will in the future have sufficient controls on cash or inventory to monitor or regulate fraud, pilferage, misappropriation or accounting errors.
12. We are dependant on our senior management team and the loss of team members may adversely affect our business or results of operations.
We have a team of professionals to oversee the operations and growth of our businesses. Our success and future performance is substantially dependent on the expertise and services of our management team, including our directors and other key personnel. The loss of the services of such management personnel or other key personnel could have an adverse effect on our business and results of operations.
13. Our business is exposed to risks relating to exchange rate fluctuations and movements in foreign exchange rates which may adversely affect our financial performance.
In the future we may incur foreign currency denominated capital expenditure due to our expansion plans and requirements for imported machinery and spare parts. From time to time, we may have to enter into foreign currency derivative transactions in respect of our borrowings. Accordingly, adverse movements in foreign exchange rates may adversely affect our financial performance.
We are planning our foray into the international market through our facility at Vishakhapatnam SEZ. While we would make efforts to hedge our risks, we would be subject to exchange rate risks that are associated with exports.
14. Our sales are on the basis of purchase orders placed by the clients with us, and we do not have any long-term contracts or arrangements with customers which could negatively impact our revenues and profitability.
We do not have any long-term contracts with customers and most of our agreements with customers are without any commitment to future work orders. Our business is dependent on the decisions and actions of our customers. There are a number of factors relating to our customers outside our control that might result in the termination of orders of the loss of one or more customers. Any of these factors could adversely affect our revenues and profitability.
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15. Our Promoters and Promoter Group will continue jointly to retain majority control over our Company after the Issue, which will allow them to determine the outcome of matters submitted to shareholders for approval.
After completion of the Issue, our Promoters and Promoter Group will collectively own substantial part of the paid up equity share capital. As a result, our Promoters and Promoter Group will be able to exercise a significant degree of influence and will be able to control the outcome of any proposal that can be approved by majority shareholders vote, including, the election of members to our Board, in accordance with the Companies Act and our Articles of Association. Such a concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Company. In addition, our Promoters and Promoter Group will continue to have the ability to influence decision which are not in, or may conflict with, our interests or the interests of some or all of our creditors or minority shareholders, and which could have an adverse effect on our future financial performance or the price of our Equity Shares.
16. We may be subject to labour unrest, slowdowns and increased wage costs, which could adversely impact our operations and financial condition.
India has stringent labour legislations that protect the interests of workers, including legislation that sets forth detailed procedures for dispute resolution and employee removal and legislation that imposes certain financial obligations on employers during employment and upon retrenchment. Under Indian law, workers also have a right to establish trade unions. Although our employees are not currently and have never been unionized, we cannot assure you that they will not unionize in the future. Moreover, whether or not our employees unionize, we may be subject to industrial unrest or slowdowns. Although we have never been subject to such unrest, we cannot assure you that we will not experience such unrest in the future. If some or all of our employees unionize or if we experience such unrest or slowdowns, it may become difficult for us to maintain flexible labour policies and we may experience increased wage costs and employee numbers. We also depend on third party contractors for the provisions of various services associated with our business. Such third party contractors and their employees or workmen may also be subject to these labour legislations. Any industrial unrest or slowdowns that our third party contractors may experience could disrupt their provision of services to us and may adversely impact our operations and financial conditions.
17. We may not be able to pass on to the customers, through increases in the sales prices of our products, any upward movement in interest rates on the borrowed funds and such increases in cost of funds will adversely affect our financial performance.
We borrow and will be required to borrow from time to time funds - both in Indian Rupees and in foreign currencies. Some of our borrowings may be linked to movements in particular currencies or particular indices. Adverse movements in interest rates or in such indices or currencies may adversely affect our results of operations and financial condition.
18. We are subject to restrictive covenants in certain debt facilities provided to us by our lenders. These restrictive covenants may affect some of the rights of our shareholders, including the payment of the dividends.
There are restrictive covenants in agreements we have entered into with certain banks and financial institutions for short-term loans, including fund-based and non-fund-based loans, and long-term borrowings. These restrictive covenants provide, amongst other things, that the Company cannot alter its capital structure, make any corporate investments or investments by way of issuance of share capital or debentures, or lend or advance funds to third parties except in the ordinary course of business which may affect some of the rights of the shareholders including the payment of dividends etc.
19. For execution of our commercial printing projects, we may be using certain essential intellectual property for which we may not have obtained prior permission. Our inability or failure to obtain such permissions may adversely affect our business operations.
During execution of certain of our commercial printing products, we may use certain intellectual property for which neither our customers nor we may have obtained prior permission or, in the case of our publishing products, where we may not have obtained ownership of the rights from the author. As a matter of industry practice, we do not monitor the ownership or rights to use intellectual property. We do not obtain written representations and warranties from customers in this regard. This may expose us to claims from the owners of such intellectual property.
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While developing content we may be using certain works available in the public domain and we may not have the requisite licenses or permissions for use of such property. While we believe that this is accepted industry practice, we cannot assure that persons who own such intellectual property will not initiate any action against us for such use. Regardless of whether claims that we are infringing any intellectual property rights have any merit, those claims could, among other things, adversely affect our relationships with current or future customers resulting in costly litigation, divert management s attention and resources, subject us to significant liabilities, require us to enter into royalty or licensing agreements or require us to cease certain activities. An adverse ruling arising out of any intellectual property dispute could subject us to significant liability for damages, prevent us from developing some categories of products, or require us to negotiate licenses to disputed rights from third parties.
20. We have not entered into any definitive agreements to utilise the net proceeds of the Issue and the delay in utilization of the issue proceeds will adversely affect the schedule of implementation of the expansion and diversification plans.
Our Expansion project has been appraised by M/s BOB CAPITAL MARKETS LIMITED. Based on our estimates and third party quotations. Apart from Plant & Machinery and Buildings, which are backed by quotations, other costs of expansion are based on our internal estimates. No definitive plans have been formulated or agreements entered into for utilization of net proceeds of the issue. In addition, our capital expenditure plans are subject to a number of variables, including possible cost overruns and changes in management s views of the desirability of our current plans. We cannot assure you that we will be able to enter into definitive agreements on the prices set forth in the quotations or estimated by us and on terms acceptable to us. For details on how we intend to use the net proceeds of the Issue, see the section titled Objects of the Issue on page 26 of this Red herring Prospectus. Pending use of the net proceeds of the Issue, we intend to invest the funds in high quality, interest and dividend bearing liquid instruments, including deposits with banks, or temporarily deploy the fund in working capital loan accounts. These investments will be authorized by our Board after our project evaluation and monitoring committee has evaluated the proposal and given its recommendations to our Board. The delay, if any, in the implementation of the expansion program as per the schedule of implementation may adversely affect our financial performance.
21. The appraising agency BOB Capital Markets Ltd is not participating in funding of the project through debt or equity and investors may note that substantial part of the funding is proposed to be met from the proposed equity issue.
The appraising agency namely BOB Capital Markets Ltd. is not participating in the funding of the proposed project and except that the appraiser has studied the financial viability of the proposed expansion plan it has not taken any financial stake in our company directly or indirectly. Substantial part of the funding of the proposed expansion project is proposed to be met from this equity issue.
22. Our Expansion Project has been appraised by BOB CAPITAL MARKETS LTD based on the data and estimates given by us.
The Appraisal Report for the proposed project has been prepared by BOB CAPITAL MARKETS LTD at our request. It is based on estimates and data submitted by us and various other sources which are believed to be reliable and accurate. No representation or Warranty, express or implied is or will be made and no responsibility or liability is or will be accepted by BOB CAPITAL MARKETS, as to, or in relation to the accuracy or adequacy of information contained in the appraisal report.
23. The market price of our Equity Shares may be adversely affected by additional issue of equity or equity linked securities or by sale of a large number of our Equity Shares by our Promoters and significant shareholders and additional issues of equity may dilute your equity position.
There is a risk that we may be required to finance our growth or strengthen our balance sheet through additional equity offerings. Any future issuance of equity or equity-linked securities in our Company may dilute the positions of investors in our Equity Shares and could adversely affect the market price of our Equity Shares. In addition, any perception by investors that such issuances or sales might occur could also affect the market price of our Equity Shares. Although our Promoters and significant shareholders are subject to a lock-in, sales of a large number of our Equity Shares by our Promoters and significant shareholders after the expiry of the lock-in periods could adversely affect the market price of our Equity Shares. For further details on the lock-in of Equity Shares, see the section titled History of the company on page 74 of this Red Herring Prospectus.
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24. Our manufacturing facilities at two locations are on leased land, and renewal of the lease is important for smooth and uninterrupted functioning of the plant. The lease at the Special Economic Zone Vishakhapatnam is for a period of fifteen years renewable every three years, and the initial three year period has expired on 17th
May 2007 and we are yet to receive the renewal of the lease. Our inability to receive renewal of the lease or renewal of the lease on terms which are disadvantageous to the company can adversely affect our business operations.The lease rental is subject to revision at the time of renewal of the lease and the extent of such revision in the rate of rentals and its impact on our margins are not ascertainable. It is possible that we may not be able to pass on the revision in lease rentals as increase in the prices of our products and therefore increases in such overheads may adversely affect our profitability.
Our manufacturing facilities at Hyderabad & Vishakhapatnam, admeasuring approximately 6800sqft & 1374 sqm (13740 sq.ft) respectively, are on a lease rental basis. For the Hyderabad facility, the rent payable is Rs. 30,000 per month (Rs. 90,000 per quarter), and for Vishakhapatnam land rent payable is Rs. 1,28,812 per quarter. The lease period for land at Hyderabad is from 14th June 2006 to 13th June 2011. The initial lease period for land at Vishakhapatnam was from 18th May 2004 to 17th May 2007. The lease period in the SEZ is renewed every three years and we do not anticipate any difficulty in the lease getting renewed. However the escalation in lease rental is beyond our control and such escalation could have an adverse impact on our profit margins. Similarly because of some unforeseen eventuality in case the lease cannot be renewed or the premises become unsuitable for carrying on our operations the same will adversely affect our operations.Letter of lease renewal for the land at Vishakhapatnam not yet received.
25. We maintain insurance against various risks, including loss or damage by fire, floods and other similar disasters to our equipment and stock. However, we are not in a position to give any assurance that all claims under the insurance policies maintained by us will be honored fully, or on time, nor that we have taken out sufficient insurance to cover all material losses.
While we believe that the insurance coverage we maintain would reasonably be adequate to cover all normal risks associated with the operation of our business, there can be no assurance that any claim under the insurance policies maintained by us will be honored fully, in part or on time, nor that we have taken out sufficient insurance to cover all material losses. Moreover, the insurance policies in respect of certain of our equipment has been assigned in favor of the lending banks that provided the financing to acquire such equipment and to whom we have pledged that equipment, and the insurance policies covering our stock have been assigned in favor of the consortium of banks from which we have borrowed our working capital facility. To the extent that we suffer loss or damage for which we did not obtain or maintain insurance, that is not covered by insurance or exceeds our insurance coverage or where the insurance policy has been assigned to third parties, the loss would have to be borne by us and our results of operations and financial performance could be adversely affected.
26. We are planning a foray into the global market; we do not have an International Quality Certification by ISO. In the absence of internationally acceptable quality certifications, we may not succeed in the global market and we may not be able to achieve the expected turnover and overall business levels.
We believe that having an international quality certification could greatly help in enhancing our organizational brand equity and giving a fillip to our existing brands of products. An ISO certification may not be necessary in African and South East Asian Markets, but may be a significant factor in more developed markets of the world. A better brand, we feel, can command a higher premium. As of now, we do not have any certification and therefore cannot say for sure if our brands would be accepted across the globe
27. The brand names that we use presently are not registered as Trade Marks in our name. Though we have applied for Registration of Trademarks with the Government of India, Trade Marks Registry, it is possible that these may not be registered in our name and in case of failure to obtain registration of these brands, the same will be open to use by others including our competitors which will adversely affect our sales and thereby profitability.
We have been using brands: a) Lavanya -in respect of Note Books, printed Books, Commercial Books Account Books and all kinds of paper and paper products and all other stationery items, b) Classmate
in respect of note books, binding material and all kinds of paper & paper products and c) Deskmate - in respect of Note Books, printed Books, Commercial Books and all kinds of paper and paper products and all other stationery items, since 26th November 1999. We made an application to the Trade Marks Registry of Government of India at Chennai under Class 16, on 29th
April 2004. The application no for Lavanya was numbered 1293151, Deskmate 1293163, and Classmate 1278564.As
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on date of filing RHP Trade Mark Registry of Govt of India has certified & registered trade mark Lavanya in the name of SVPCL limited vide Certificate no. 626394 dated March 27, 2007. However the brands Classmate and Deskmate are yet to be registered.In the examination report dated 15th September 2004, the Registry raised an
objection to Lavanya being registered that It is a well known personal name . However there was a provision by which the company could provide evidence of appreciable use of the mark in respect of documentary proof. We accordingly submitted one user affidavit stating all facts for the usage of the Trade Mark and the proof for the usage of our trade mark on 25th September 2004. However the brands are yet to be registered.
28. We have allotted shares at par during the past one year though the present issue of equity shares is proposed at a premium to be decided by us in consultation with the Merchant Bankers. Investors may note that they may be at a disadvantage concerning the price of equity shares vis-à-vis shareholders who have received allotments during the past one year at a lower price.
We have allotted 750000 Equity shares of Rs. 10/- each on 22nd June, 2006, for cash at par to a NRI. The price paid by such allottee(s) is lower than the price to be paid by investors in this issue. Though the existing shares as well as the shares proposed to be issued under this Red Herring Prospectus shall rank pari-passu in all respects, the investors applying for shares under the present issue will be at a disadvantage with regard to the price to be paid by them as compared to those who received allotments during the past one year. The details of allotments of shares are disclosed under the head Changes in Share Capital Structure on page 16 of this Red Herring Prospectus.
29. We being paper products manufacturers catering to the educational sector cash flows are negative as at the end of the financial year as bulk of the funds gets locked in inventories for the following academic session starting in April.
30. There are certain negative covenants in our loan agreements with our bankers which may have the effect of restricting the rights of the shareholders directly or indirectly. Such negative covenants are listed below:-
a) STATE BANK OF INDIA
During the currency of the credit facilities being enjoyed by the company it shall not, without bank s permission in writing
Effect any charge in the Company s capital structure
Formulate any scheme of amalgamation or reconstruction.
Undertake any new project, implement any scheme of expansion or acquire fixed assets except those indicated in the fund flow statement submitted to the bank from time to time and approved by the Bank.
Invest by way of share capital in or lend or advance funds to or place deposits with any other concern.
Enter into borrowing arrangements with any bank/FI/company.
Undertake guarantee obligations on behalf of any other company (Including Group Companies).
Declare any dividends for any year except out of profits relating to that year after making all due and necessary provisions and provided further that no default had occurred in any repayment obligations.
Create any charge or lien or encumbrance over its undertaking or any part thereof in favor of any financial institution, bank, company firm or persons
Sell ,assign, mortgage or otherwise dispose off any of the fixed assets charged to the Bank
Enter into any contractual obligation of a long term nature or affecting the company financially to a significant extent.
Change in the practice with regard to remuneration of directors by means of ordinary remuneration or commission, scale of sitting fees, etc.
Undertake any trading activity other than the sale of products arising out of its own manufacturing operations; and
Permit any transfer of the controlling interest or make any drastic change in the management set-up.
b) AXIS BANK LTD
During the currency of Bank facility, the company shall not, without bank s permission in writing
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Effect any charge in the Company s capital structure
Formulate any scheme of amalgamation.
Implement any scheme of expansion or acquire fixed assets.
Make investments/advances or deposit amounts with any other concern
Enter into borrowing arrangements with any bank/FI/company.
Undertake guarantee obligations on behalf of any other company.
Declare any dividends for any year except out of profits relating to that year.
WEAKNESS & THREATS
As contained in the appraisal report of BOB Capital Markets Ltd. through their appraisal report, the following are the threats and weakness vis-à-vis our company is as follows:
Weaknesses
High Cost of Funds (The Company has already begun the process of reducing long term debt).
Presently lacks requisite world-class infrastructure for manufacturing entire range of products, due to which some amount of manufacturing activity had to be outsourced. Post expansion, complete automation would be achieved and the outsourcing would more or less stop. Outsourcing, subsequent to expansion, would only be based on strategic requirements, such as, for those products that are manufactured manually.
Paper cost as a percentage of total raw material cost very high
any fluctuation in quality and quantity of paper affects operations
Dependence on sales in a particular geographic region
Dependence on limited suppliers
No long term contracts with customers
The company does not have any quality certification from ISO. Without this, creating an international brand would be difficult.
Threats
Intense competition from unorganized segments which is localized. Only 15
20 % of paper converter industry is said to be organized.
While, as on date, there is no major threat perception in terms of imports, the government may relax restrictions on imports, resulting in competition from China and other South-east markets (better quality
inexpensive products)
The factories at Hyderabad and Visakhapatnam are on land taken on lease for relatively short periods. The lease expires on 14th June 2011 and 17th May 2007 respectively. The non-renewal of the lease by the lessor will jeopardize operations at these locations, affecting overall performance.
Price of printing ink is linked to the price of crude oil and therefore rise in crude oil price will cause increase in the cost of ink. The company may not be able to pass on the increased input costs to the customers.
The company plans to export part of its production and exports would be susceptible to exchange rate fluctuations.
The company had applied for registration of Trade Marks for three of its brands
Lavanya, Classmate and Deskmate in April 2004. Out of these only one Lavanya has so far been registered as a Trade Mark. The other trade marks have not yet been registered and in case not registered, these brands would be open to use by others.
External Risk Factors
1. A slowdown in economic growth in India could cause our business to suffer.
The Indian economy has grown at 8.5 per cent, 7.5 per cent, and 9.2 percent in fiscal 2004, 2005 and 2006 respectively. Any slowdown in the Indian economy and the consequent impact on disposable income could adversely affect our business, which could in turn affect our results of operations.
2. A significant change in the Government of India s economic liberalization, opening up of the patent regime through the World Trade Orgnisation (WTO) negotiations, deregulation and small-scale reservation policies could disrupt our business and cause the price of our Equity Shares to decline.
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Our assets and substantially all of our customers are located in India. The Government of India has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on private sector entities, including us, and on market conditions and prices of Indian securities, including the Equity Shares. The present government, which was formed after the Indian parliamentary elections in April-May 2004, is headed by the Indian National Congress and is a coalition of several political parties. Any significant change in the government s policies or any political instability in India could adversely affect business and economic conditions in India and could also adversely affect our business, our future financial performance and the price of our Equity Shares. Though we do not use any patented technologies directly, opening up of the patent and other intellectual property rights regime as part of the liberalization process may indirectly affect printing process business in general including us in the short term which may adversely affect our business operations and profitability.
3. Terrorist attacks or war or conflicts involving India or other countries could adversely affect consumer and business sentiment and the financial markets and adversely affect our business.
Terrorist attacks and other acts of violence or war may adversely affect global equity markets and economic growth as well as the Indian economy and stock markets. Such acts negatively impact business and economic sentiment, which could adversely affect our business and profitability. Also, India has from time to time experienced and continues to experience, social and civil unrest and hostilities with neighboring countries. Armed conflicts could disrupt communications and adversely affect the Indian economy. Such events could also create a perception that investments in Indian companies involve a high degree of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including our Equity Shares. The consequences of any armed conflicts are unpredictable and we therefore may not be able to foresee events that could have an adverse effect on our business.
4. Natural calamities could have a negative impact on the Indian economy and cause our business to suffer.
India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past few years. Natural calamities could have a negative impact on the Indian economy, adversely affecting our business and our results of operations.
5. The price of the Equity Shares may be volatile, and you may be unable to resell your Equity Shares at or above the Issue Price or at all.
Prior to the Issue, there has been no public market for our Equity Shares, and an active trading market on the Indian Stock Exchanges may not develop or be sustained after the Issue. The Issue Price of the Equity Shares may bear no relationship to the market price of the Equity Shares after the Issue. The market price of the Equity Shares after this Issue may be subject to significant fluctuations in response to, among other factors, our results of operations and performance, subsequent corporate actions taken by us, performance of our competitors, market conditions specific to the Indian printing industry and market perception about investments in the printing industry.
Notes to Risk Factors
1. The net worth of the Company as per the audited Financial Statements of the Company as on March 31, 2006 was Rs. 1361.26 lacs and Rs. 1858.17 lacs as on 31.03.2007.
2. The book value per share as on March 31, 2006 was Rs. 12.58 and it was Rs. 16.06 as on 31.03.2007.
3. Public issue of (**) equity shares of face value of Rs.10/- each per share at a price of Rs. [ ] for cash at a premium aggregating Rs. 3450 lacs (hereinafter referred to as the issue ) and the issue would constitute (**) of the fully diluted post issue paid-up capital of the company.
4. The average cost of acquisition of Equity Shares of the Promoters is as follows:
Name of the Promoter Average Cost of Acquisition
(In Rs.)
Mr. K. Mallikarjuna Reddy 10.00 Mr. K.Sudhakara Reddy 10.00
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Dr. Y.R. Nagarjuna Kumar 10.00 Mrs. K Mahitha 10.00 Mrs. K Aparna 10.00
5. The promoters/directors/key management personnel of the Company have no interest other than
reimbursement of expenses incurred or normal remuneration or benefits arising out of employment and or shareholding in the company or out of any of our business relations with any of the ventures in which they are interested.
6. No loans and advances have been made by us to any person(s)/Companies in which the Director(s) of the Company are interested.
7. Outstanding litigation against group companies There are no group companies and therefore there is no information to be disclosed
Investors are advised to refer to the Para on Basis for Issue Price on page No. 41 before making any investment in this Issue.
9. Investors may note that in case of oversubscription, allotment shall be on proportionate basis and will be finalized in consultation with the Designated Stock Exchange. If the Issue is oversubscribed, the Designated Stock Exchange along with the concerned Post Issue Book Running Lead Manager and Registrar to the Issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner.
10. The Issue is being made through a 100% book building process wherein up to 50% of the net issue to public will be allocated on a proportionate basis to Qualified Institutional Buyers ( QIBs ) out of which, 5% shall be available for allocation on a proportionate basis to Mutual Funds. The remaining shall be available for allocation on proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them at or above the Issue Price. Further, not less than 15% of the Net Offer will be available for allocation on a proportionate basis to Non -Institutional Bidders and not less than 35% of the Net Offer will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Offer Price.
11. Investors may note that in case of over-subscription in the issue, allotment shall be on proportionate basis. For more information, see (Basis of Allotment) beginning on page no 141 of this Red Herring Prospectus.
12. The Promoter Group/ directors of the Company have not purchased and or sold /financed any shares of the Company during the past six months other than as disclosed in the notes to the Capital Structure beginning on page no. 16.
13. The investors may contact the BRLM or the Compliance Officer for any complaint/ clarification/information pertaining to the Issue, who will be obliged to attend to the same.
14. Trading in Equity Shares of the company for all the investors shall be in dematerialized form only.
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SECTION IV: INTRODUCTION
Summary of the industry and business of the issuer company
You should read the following summary together with the section on Risk Factors , the section on Industry and Our Business and the section on Financial Data included in this Red Herring Prospectus.
Unless otherwise indicated, all financial and statistical data relating to the industry in the following discussion is derived from data available in the public domain, appraisal report, internal company reports and data, industry publications and estimates. This data has been reclassified in certain respects for purposes of presentation. For more information on the presentation of data, please refer to the section on Forward Looking Statements and Market Data on page i x in this Red Herring Prospectus.
Paper Products Industry
The paper and paper products industry tends to be concentrated in countries that are industrially advanced and have abundant supplies of fibrous raw material, especially wood. There is a large-scale international trade in wood pulp, pulpwood and paper, flowing from those countries with large forest resources to those countries with fewer resources or those whose resources are not yet fully exploited.
Demand for paper and paper products can be said to be directly related to the level of human development. With globalization and increasing availability of printing and copying facilities in offices, increased focus on universal education by governments of developing nations, the production and consumption of paper continues to rise.
THE ADOPTION OF THE Millennium Development Goals, a set of simple but powerful objectives -drawn from the United Nations Millennium Declaration, was a seminal event in the history of the United Nations. The eight Millennium Development Goals range from halving extreme poverty to .providing universal primary education
all by the target date of 2015. Since their adoption, the Goals have galvanized unprecedented efforts to meet the needs of the world s poorest.
Indian Scenario
Some of the demand drivers of paper products are:
1. Expenditure on education by government. 2. Robust Economic growth including healthy industrial growth 3. Growth in outsourcing of printing services from India
Government of India s National Policy on Education (NPE), 1986, as modified in 1992, emphasizes three aspects in relation to elementary education:
universal access and enrolment,
universal retention of children up to 14 years of age, and
a substantial improvement in the quality of education to enable all children to achieve essential levels of learning.
Literacy rates in India have risen sharply from 18.3 per cent in 1951 to 64.8 per cent in 2001. Nevertheless, India continues to lag behind several other developing countries in the region such as China (86 per cent) and Sri Lanka (92 per cent). The National Literacy Mission (NLM) was launched on May 5, 1988 as a Technology Mission to impart functional literacy to non-literates in the country in the age group of 15-35 years in a time-bound manner. This age-group has been the focus of attention because they are in the productive and reproductive period of life. The NPE,1986, as modified in 1992, recognizes the NLM as one of the three instruments to eradicate illiteracy from the country, the other two being SSA and non-formal education. NLM s objective is to attain a sustainable threshold literacy rate of 75 per cent by 2007. The Total Literacy Campaign (TLC) has been the principal strategy of National Literacy Mission for eradication of illiteracy in the target age-group. These campaigns implemented by Zilla Saksharta Samities (District Level Literacy Societies) are area-specific, time-bound, volunteer-based, cost effective and outcome-oriented. At present, 137 districts are implementing TLCs, 165 districts Post Literacy Programmes and 295 districts Continuing Education Programmes. In addition, 157 Jan Shikshan Sansthan have been set up to provide vocational training to the neo-literates.
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Industrial Growth
There were distinct signs of sustained improvements on the industrial front. Entrenchment of the higher growth trends, particularly in manufacturing, has boosted sentiments, both within the country and abroad. The overall macroeconomic fundamentals are robust. With an upsurge in investment, the outlook is distinctly upbeat.
The expected overall annual growth of industry during the Tenth Plan period (2002-2007) at an estimated 8.7 per cent is short of the targeted 10 per cent growth rate for the Plan period. Considering the performance during the past couple of years, the Eleventh Plan (2007-2012) target of 10 per cent annual industrial growth appears reasonably achievable.
Our business
We are one of the paper products manufacturers in Southern India with production facilities spread strategically across Andhra Pradesh at Hyderabad, Vijayawada and Visakhapatnam Special Economic Zone. We manufacture the entire range of educational stationery, business aids and provide printing services.
We were originally promoted as a partnership firm in the year 1992, as the promoters saw good opportunity for paper products in a country with a growing population and strong governmental thrust towards increasing literacy levels. The partnership firm was promoted by Mr. K. Mallikarujna Reddy, Mr. Sudhakara Reddy and Mr. Brahma Reddy for trading in various paper products like books, office stationery, computer stationery, blank and pre-printed forms, and high volume products like books and stationery and also to undertake printing and publishing work. Subsequently Mr. Brahma Reddy ceased to be a partner. In the year 1999 a limited company in the name and style of Sri Vijaya Lakshmi Paper Convertors Limited was incorporated under the Companies Act, 1956 to take-over the business of the partnership firm. The company subsequently changed its name to SVPCL Limited. The promoters of the Company are Mr.K.Mallikarjuna Reddy, Mr.K.Sudhakara Reddy, Dr.Y.R.Nagarjuna Kumar, Mrs. K. Mahitha and Mrs. K. Aparna.
Current Operations
We have manufacturing units equipped with state-of the-art machinery from reputed international manufacturers such as Muller Martini, Komori, and Heidelberg which enable us to manufacture products of the best quality. Our products have been well received and we have been able to grow from a turnover of Rs. 1000 lacs during 2002-03 to Rs. 5576 lacs for the 9 months ended December 2006.
We are involved in the manufacture of paper products and providing printing services. The company provides specialized printing services such as multi-color annual reports, printed stationery, corporate brochures, printing of books, magazines etc. and trades in different kinds of paper. The company has been consistently making profits.
Our range of products can be broadly categorized into (a) Learning Aids, (b) Business Stationery and (c) Printing Services.
Educational/Learning Aids Business aids/Commercial stationery
Printing Services
Notebooks Workbooks Student Books Journals
Ledgers, Writing Pads folders & Files Pre-printed/Blank/EZR Computer Stationery
Annual Reports Brochures Letter pads Bills, Invoices Public Issue Stationery Directories Diaries Calendars School Chronicle Periodicals
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Our Competitive Strengths
We believe the following to be mainly our competitive strengths:
Integrated content design, processing and printing capabilities
Have capacity for offering customized printing services to domestic and overseas educational institutions, corporate, trading houses, chain stores etc.
One of the few large print houses in India in the organized sector catering to the educational and commercial sectors with decentralized bulk printing facilities.
Competent Management Team
For the first time introduced subject specific note books with value added subject content at competitive prices
Our Vision: To be the Best and Innovative Provider of Educational Aids and Printing Services
Our Business Strategy
Our Business Strategy is to be the best and innovative provider of educational aids and printing services.The key elements of our business strategy are as follows:
Expand our decentralized bulk printing capabilities
We have initiated steps to add printing capacities by expanding all our printing facilities at Hyderabad, Vijayawada and Visakhapatnam. We also strive to equip our Visakhapatnam facilities with the most modern processing and printing equipments to cater to international clientele looking to outsource printing services from India.
Expand our distribution capability across India through our own and franchisee network.
We have initiated steps to set up marketing centers across the country with emphasis on states and centers where the consumption of printed products needed by the educational and business sectors continue to grow.
Have arrangements for locally sourcing requirements as per our quality standards at places which are far off from our printing facilities and market the products under our brand names enabling us to price our products competitively.
We shall emdeavour to source printing of stationery conforming to our quality standards and market under our brands at places which are far off from our printing facilities. This will enable economizing on transportation costs, enable us to price our products competitively and increase our reach and turnover.
Tie up with agencies abroad for sourcing of orders for printed products to enable us cater to the markets in the US, Europe, West Asia and Africa.
We have already entered into a Memorandum of Understanding with an agency in the United States for sourcing of orders for us. To have such tie ups with agencies elsewhere to exploit the potential in the export market for printing services, printed products etc.
Provide products and services adhering to the best quality standards
Our printing facilities are equipped with the best equipments from internationally well known manufacturers which enable us to ensure quality for our products.
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SUMMARY FINANCIALS, OPERATING AND OTHER DATA
The following table sets forth certain summary financial data derived from our audited restated unconsolidated financial statements for the fiscal years ended March 31, 2003, 2004, 2005 2006, 2007 and for the period ended June 2007. These have been prepared in accordance with Indian GAAP, the Companies Act, 1956 and SEBI Guidelines and the annual financial statements have been restated as described in the Auditor s Report included therewith in the section titled Restated Unconsolidated Financial Statements beginning on page no 93 of this Red Herring Prospectus. The summary financial data presented below should be read in conjunction with our financial statements, the notes thereto and the section titled Summary of Selected Financial Information on page no 4 of this Red Herring Prospectus and Management Discussion and Analysis of Financial Condition and Results of Operations on page no 117 of this Red Herring Prospectus.
RESTATED SUMMARY OF ASSETS AND LIABILITES (AUDITED) (Rs in Lacs)
RESTATED SUMMARY OF ASSETS AND LIABILITES ( AUDITED)
Sl.No PARTICULARS
FOR THE YEAR ENDED For the period ended
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 A) FIXED ASSETS
Gross Block 263.29 790.14 1773.50 1,840.20
2739.44 2739.45
Less: Depreciation 40.69 72.07 133.79
219.32
345.46 377.28
Net Block 222.6 718.07 1639.71
1,620.88
2393.98 2362.17
B) Capital Work In Progress 59.54 91.02 106.02
C) INVESTMENTS - - - - - -
Current Assets, Loan & Advances
Inventories 261.32 365.13 840.85
831.10
1562.41 1811.67
Sundry Debtors 162.62 208.81 315.70
798.62
942.33 983.43
Cash & Bank Balance 15.05 15.40 50.55
98.21
19.52 22.26
Loans & Advances 3.23 0.71 19.62
24.12
22.87 40.97 D) Total 442.22 590.05 1,226.72 1,752.05
2547.13 2858.33
E) LIABILITIES & PROV.
Secured Loans 205.02 457.40 1204.21 1484.42 1959.74 1919.20
Un Secured Loans 129.27 89.35 149.35
149.35
368.15 368.15
Current Liab. & Provision
150.00
215.67
409.02
308.37
674.32 817.06
Deferred Tax Liability - - - 69.53
171.75 182.41
Total Rs. 484.29 762.42 1,762.58 2,011.67 3173.96 3286.82 F) Net Worth 180.53 545.70 1163.39 1361.26 1858.17 2039.70
Represented By
Equity Shares
130.00
485.00
906.90
1,081.90
1156.90 1156.90
Share Appl.Mony 10.00 0.00 175.00 75.00
Reserves & Surplus
43.72
63.36
83.62
205.96
734.23 937
5
Miscellaneous Expenditure
3.19
2.66
2.13
1.60
32.95 54.19
Total 180.53 545.70 1163.39 1361.26 1858.18 2039.71
Rs. In Lacs. RESTATED SUMMARY OF PROFIT AND LOSS (AUDITED)
Sl. No PARTICULARS FOR THE YEAR / PERIOD ENDED
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
A) INCOME
Sales (Net)
Domestic Sales 879.90 1,401.35 2,759.60 4,020.11 6938.02
2094.01
Export Sales -- -- -- -- - - --
Total Sales 879.90 1,401.35 2,759.60 4,020.11 6938.02 2094.01
Other Income 8.94 15.83 16.76 19.95 31.66 0.96
Increase / ( Decrease ) of Stock 100.25 1.44 37.39 74.14 173.31
330.43
TOTAL (A) 989.09 1,418.62 2,813.75 4,114.20
7142.99 2425.40
B) EXPENDITURE
Raw Material Consumed 815.91 1120.37 2354.29 3322.00 5593.44 2016.10
Manufacturing Expenses 11.11
33.06
58.01
101.43
147.94 38.67
Staff Costs 35.71 43.71 57.28 77.37 84.78 19.00
Administration Expenses 42.58 53.73 73.51 64.28 90.97 21.99
Selling & Distribution Expenses 24.50 33.46 68.48 59.54
81.87 7.90
Depreciation 12.08 31.38 61.72 85.53 126.12 31.82
Financial Charges 29.94 81.04 106.00 136.83 229.89 57.74
Misc. Expenses Written off 0.53 0.53 0.53 0.53 0.53 -
TOTAL: B 972.36 1,397.28 2,779.82 3,847.51 6355.54 2193.22
C) Profit before Tax (A-B) 16.73 21.34 33.93 266.69 787.45 232.18
Provision for Taxation
Current Tax 1.18 1.70 2.70 22.43 88.35 18.00
Deferred Tax - - - 69.52 10.66
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102.22
Provision for FBT - - - 1.25 2.65 0.75
D) Net Profit After Tax 15.55 19.64 31.23 173.49
594.23 202.77
E) Brought forward Profit from Previous Year 28.17 43.72 63.36 83.62 205.96 734.23
F) Less: Transfer for Deferred Tax - - - - - -
Utilize for Bonus Issue - - - - - -
G) Net Balance(E-F) 28.17 43.72 63.36 83.62 205.96 734.23
H) Profits Avail. for Appr (D+G) 43.72 63.36 94.59 257.11 800.19 937
Less: Appropriations
Transferred to General Reserve - - - - - -
Interim Dividend - - - - - -
Dividend Paid - - 9.70 45.35 57.85 -
Tax on Dividend - - 1.27 5.80 8.11 -
I) Bal. Carried Forward to Balance Sheet 43.72 63.36 83.62 205.96 734.23 937.00
II) E P S 13.35 0.79 0.64 1.64 5.21 1.75
Face Value of Share 10 5 5 10 10 10
# Annualized Basis
The above statements should be read with the Notes on Adjustments and Significant Accounting Policies for restated financial statements as appearing in Annexure-III to the Auditors Report beginning on page 93 of this Red Herring Prospectus.
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BRIEF ISSUE DETAILS
Equity shares offered: Fresh Issue or Net Offer to the Public (*) Equity Shares of the face value of Rs. 10 each
aggregating to Rs. 3450 lacs. Of which: Qualified Institutional Buyers portion (*) Equity Shares of the face value of Rs.10 each
constituting 50% of Net Offer to the Public (Allotment on a proportionate basis)
Of which: Reservation for Mutual Funds (*) Equity Shares of the face value of Rs.10 each
constituting 5% of QIB portion. (Allocation on a Proportionate basis)
Balance for all QIBs including Mutual Funds (*) Equity Shares of the face value of Rs.10 each (Allotment on a proportionate basis)
Non Institutional Portion (*) Equity Shares of the face value of Rs.10 each constituting 15% of the Net Offer to the Public (Allocation on a proportionate basis)
Retail Portion (*) Equity Shares of the face value of Rs.10 each constituting 35% of the Net Offer to the Public. (Allocation on a proportionate basis)
Equity Shares outstanding prior to the issue 11569000 Equity Shares of the face value of Rs. 10 each Equity Shares outstanding after the issue (*) Equity Shares of the face value of Rs. 10 each
Objects of the Issue For information, please refer to the section titled Objects of the Issue on page 26 of this Red Herring
Prospectus
Note: Ref: 8.7.1. of SEBI(DIP) Guidelines
Our company is exploring the possibility of placing equity shares with certain investors. In case we are able to complete such placements before we file the final prospectus with the Registrar of Companies the size of issue to the public proposed as per this RHP will stand reduced to the extent of such placements.
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GENERAL INFORMATION
The Company was originally incorporated in India as Sri Vijaya Lakshmi Paper Convertors Limited on 26th
November, 1999 and obtained Certificate of Incorporation No. 01- 32913 from Registrar of Companies; Andhra Pradesh under the Companies Act, 1956 and subsequently, the Company has changed its name to SVPCL Ltd. and obtained fresh Certificate of Incorporation on 28th November, 2003.
NAME : SVPCL LIMITED
REGISTERED OFFICE : 206A, Concourse, 2nd Floor, Greenlands, Ameerpet, Hyderabad- 500016.
Telephone : 040-66369058/59
Fax : 040-23757472
Registration No. : 01-32913 (CIN: U210111AP1999PLC032913)
ROC : Registrar of Companies, Andhra Pradesh, Hyderabad
Address : 2nd Floor, CPWD Building, Kendriya Sadan, Sultan Bazar, Koti, Hyderabad- 500019
OUR BOARD OF DIRECTORS
The Board of Directors of SVPCL Limited comprises of:
Sr.No. Name Age Address 1 Mr.K. Mallikarjuna Reddy
Managing Director 36 Flat No. 201, Surabhi Sri Sampada Apartment, 7-1-
201, Srinivasa Nagar Colony, Hyderabad 500 038. 2 Mr.K. Sudhakara Reddy
Wholetime Director 43 Indira Towers, Flat No. 7, 2nd Floor, Abbas Khaji
Street, Vijayawada 2. 3 Dr. Y.R. Nagarjuna Kumar
Director 44 306, Manohar Bhavan Dwarakapuri Colony,
Punjagutta, Hyderabad 500 082
4 Dr.K.Sudhakara Reddy Director
57 14
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1 L.B.R Nagar, L.H.Reddy Building, Mylavaram, Balaji Nagar, Nellore 500 524
5 Dr. K. Seshaiah, Director
63 Flat No. 201, Vibhevari Block, Narayan Vihar, Nehru Nagar, Tirupati 517502.
6. Mr. Penumolli Parandhama Reddy Director
61 231 - E, IInd Floor, Kalyan Nagar, Hyderabad 500 038.
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7. Mr. K.V.Kondaiah Sastry Director
61 Flat No. 501, Block A, Sri Sai Heights, Street No.8, S.S.Nagar, Habsiguda Hyderabad 500 007.
Brief Details of Managing Director and other Whole Time Director
K. Mallikarjuna Reddy, Age 36 years, is a graduate in Commerce and has about 10 years experience in the manufacturing and marketing of educational and stationery products. He looks after the day to day affairs of the company. He has been able to build up a network of dealers to take care of the marketing and distribution of our products. He is fully conversant with the technicalities of the printing processes which are being managed by experienced professionals.
K. Sudhakara Reddy, Age 43 years, Whole time Director, Graduate in Commerce has around 15 years of experience in manufacturing and marketing paper products. He is looking after production planning and Quality Control. He has been able to stipulate, adhere and maintain quality standards for our products as well as enforce adherence to production schedules. He is also experienced and adept in human resources management and has been responsible for cordial industrial relationship with the workman. He is also looking after the implementation of the expansion project.
ISSUE MANAGEMENT TEAM
BOOK RUNNING LEAD MANAGER TO THE ISSUE
BOB CAPITAL MARKETS LIMITED (Wholly owned subsidiary of Bank of Baroda) SEBI Registration No. INM000009926 Meher Chambers, Dr. Sunderlal Behl Marg, Off R Kamani Marg, Ballard Estate, Mumbai 400 038 Tel: 91-22- 6637 2301 - 04 Fax: 91-22- 6637 2311/ 6637 2312 Website: www.bobcapitalmarkets.com
Email: [email protected] Contact Person: Mr. Sandeep Mankad
CO LEAD MANAGER TO THE ISSUE
UTI SECURITIES LIMITED SEBI Registration No. INM000007458 1st Floor, Dheeraj Arma, Anant Kanekar Marg, Station Road, Bandra (E) Mumbai 400 051. Tel: 91-22- 67515804/09 Fax: 91-22- 67023194 Website: www.utisel.com
Email: [email protected] Contact Person: Mr Hemant Bothra
REGISTRAR TO THE ISSUE
Aarthi Consultants Pvt. Ltd. 1-2-285,Domalguda, Hyderabad - 500 029 Tel.:+91-40-2763 8111 / 2763 4445 / 5561 1921 Fax:+91-40-27632184 Email:[email protected] Website:www.aarthiconsultants.com Contact Person: G. Bhaskar
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STATEMENT OF INTER-SE ALLOCATION OF RESPONSIBILITIES
The following table sets forth the distribution of the responsibilities of various activities
Sr.No Activities Responsibility Co-coordinator
1. Capital structuring with relative components and formalities such as composition of debt and equity, type of instruments.
BCML BCML
2. Due diligence of the Company s operations/management /business plans/legal etc.
BCML BCML
3. Drafting and Design of the offer document and of statutory advertisement including memorandum containing salient features of the Prospectus. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges and SEBI including finalisation of the Prospectus and filing with the Stock Exchanges/ RoC/ SEBI.
BCML BCML
4. Drafting and approval of all publicity material other than statutory advertisement as mentioned above including Corporate advertisement, brochure, etc.
BCML UTISEC
BCML
5. Appointment of other Intermediaries: (a) Printers; (b) Registrar (c) Advertising Agency; (d) Syndicate Members and (e) Banker to the Issue.
UTISEC BCML
UTISEC
6. Marketing of the Issue to Institutional Investors / Retail Investors / Non-Institutional Investors, which will cover inter alia, formulating marketing strategies, preparation of publicity budget, finalize media & PR strategy, finalize centers for holding conferences for brokers, press, etc., finalize collection centers, follow-up on distribution of publicity and issue material including application forms, RHP and deciding on the quantum of the issue material.
UTISEC BCML
UTISEC
7. Managing the Book, coordination with Stock Exchanges, pricing and allocation to QIBs.
UTISEC BCML
UTISEC
8. The Post-issue activities involve essential follow-up steps, finalization of basis of allotment / weeding out of multiple application, etc. Major ones are :
Listing of securities
Dispatch of certificates and refunds
The various agencies connected with the work such as Registrars to the issue
Bankers to the issue and the bank handling refund business
Submission of Statutory reports to SEBI
UTISEC BCML
UTISEC
9. Even if many of these post-issue activities would be handled by other intermediaries, the designated Lead Merchant Banker shall be responsible for ensuring that these agencies fulfill their functions and enable them to discharge this responsibility through suitable agreements with the issuer company
UTISEC BCML
UTISEC
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SYNDICATE MEMBERS ENAM Securities Pvt. Ltd Khatau Building 2nd Floor 44 Bank Street, Fort Mumbai 400-023 Tele: +91-22-22677801 Fax: +91-22-22665613
Saffron Capital Advisors Pvt. Ltd Ground Floor, Vilco Centre Subhash Road, Behind Garware Vile Parle(E), Mumbai-400-057 Tele: +91-22-26820654 Fax:+91-22-26820502
ESCROW COLLECTING BANKS AND BANKERS TO THE ISSUE
BANK OF BARODA Nirmal, Ground Floor Nariman Point, Mumbai-400-021 Tele:+91-22-22846607 Fax: +91-22-22027168 Website: bankofbaroda.com, Contact Person: A.K.Roy
HDFC BANK LTD 26-A Narayan Properties Off Saki ViharRd,Chandivali, MUMBAI-72 Tele: +91-22-28569009 Fax: +91-22-28569256 E-mail: [email protected]
Contact Person: Rakesh Watal
ICICI Bank Limited Capital Markets Division 30, Mumbai Samachar Marg Mumbai 400 001 Tele: +91-22-22627600 Fax: +91-22-22611138 Mail: venkataraghavan.t@icici bank.com Contact Person: Venkataraghavan T A
Axis Bank Limited 6-3-879/B, 1st Floor, G. Pullareddy building, Greenlands, Begumpet Road, Hyderabad-500 016 Tele:+ 91-40-23400731/23400732 Fax: +91-40-23407184 Email: [email protected]
Website: www.axisbank.com Contact Person: Mr. K. Srinivas/ Mr B.Kalyan Kumar
ABN AMRO Bank N.V. Brady House, 14 Veer Nariman Road.Hornimon Circle, Fort, Mumbai-400 001 Tele: +91-22-66585858/ 66585817 Fax: +91-22-22042673 Email: [email protected]
Website: www.abnamro.co.in Contact Person: Mr. Akhouri Malay
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BANKERS TO THE COMPANY
State Bank of India Overseas Branch, 5-9-300, Abids, Hyderabad 500001 Tele: +91-40-5552 7985 Fax: +91-40-5584 3491 / 2321 2509 Email: [email protected] Contact Person: Mr. M. Srinivasan
AXIS Bank Ltd. 6-3-879/B, Greenlands Road, Begumpet, Hyderabad 500 016 Tele. No. +91 40 23405182; +91 40 66510581 Fax No. +91 40 23407184 Email: [email protected]
Contact Person: Mr. P. Deshpande
CEO & COMPLIANCE OFFICER
Mr.Y.V.Sheshatalpa Sai SVPCL Limited 206 A, 2nd Floor, Concourse, 7-1-58, Greenlands Road, Ameerpet, Hyderabad 500 016, Tel.: +91-40-6636 9058 / 59 /2373 0839 Fax: +91-40-2375 7472 Email: [email protected] ; Website: www.svpcl.com The Investors are requested to contact the Compliance Officer in case of any pre-Issue/post-Issue related problems such as non-receipt of letter of allotment/share certificate/refund orders/demat credits not made etc.
COMPANY SECRETARY Mr Y. Sriniwas Arun 206 A, 2nd Floor, Concourse, 7-1-58, Greenlands Road, Ameerpet, Hyderabad 500 016, Tel.: +91-40-6636 9058 / 59 /2373 0839 Fax: +91-40-2375 7472 Email: [email protected] ; Website: www.svpcl.com
LEGAL ADVISORS TO THE ISSUE Little & Co, Advocates, Solicitors & Notaries, Central Bank Building, 3rd Floor, M.G. Road, Fort, Mumbai- 400038 Tel.: +91-22-22703219 to21/24/25 Fax: +91-22-22659918/22670563 Email: [email protected] Contact Person: Ms. Rajas Kasbekar AUDITORS TO THE COMPANY P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad-500082 Tel.: +91-40-23326666/ 23312554 Fax:- +91-40-23392474 Email: [email protected] Contact Person: Mr. Naresh Kumar Chanda
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IPO GRADING Issuer Company has not opted for grading of the issue.
TRUSTEES This being an issue of Equity Shares, appointment of trustees is not required.
CREDIT RATING We have not obtained any credit rating for the issue.
Underwriting Agreement
After the determination of the Issue Price and allocation of our Equity Shares but prior to filing of the Prospectus with the Designated Stock Exchange, we will enter into Underwriting Agreements with the Underwriters for the Equity Shares proposed to be offered through this Issue. The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the Designated Stock Exchange.
Name and address of the underwriter Indicated no. of equity shares to be underwritten
Amount underwritten (Amt. in Rs. Lacs)
BOB Capital Markets Ltd. Meher Chambers Dr. Sunderlal Behl Marg Off: R.Kamani Road Ballard Estate, Mumbai-400038
[*] [*]
UTI Securities Limited 1st Floor, Dheeraj Arma, Anant Kanekar Marg, Station Road, Bandra (E) Mumbai 400 051
[*] [*]
ENAM Securities Pvt. Ltd Khatau Building 2nd Floor 44 Bank Street, Fort Mumbai 400-023 Tel: 91-22-22677801 Fax: 91-22-22665613
[*] [*]
Saffron Capital Advisors Pvt. Ltd Ground Floor, Vilco Centre Subhash Road, Behind Garware Vile Parle(E), Mumbai-400-057 Tel: 91-22-26820654 Fax: 91-22-26820502
[*] [*]
The above-mentioned amount is indicative underwriting and this would be finalized after pricing and actual allocation. The above Underwriting Agreement is dated [ ] 2007.
14
In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the Securities and Exchange Board of India Act, 1992 or registered as brokers with one or more of the Stock Exchanges.
Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. In the event of any default, the respective Underwriters in addition to other obligations to be defined in the Underwriting Agreement will also be required to procure/subscribe to the extent of the defaulted amount. Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them, provided, however, it is proposed that pursuant to the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that their respective Syndicate Members do not fulfill their underwriting obligations. Allocation to QIBs is discretionary as per the terms of this Red Herring Prospectus and may not be proportionate in any way and the patterns of allocation to the QIBs could be different for the various Underwriters.
MINIMUM SUBSCRIPTION
If we do not receive the minimum subscription of 90% of the issued amount on the date of closure of the issue or if the subscription level falls below 90% after the closure of the issue on account of cheques having been returned unpaid or withdrawal of applications, we shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the Company becomes liable to refund amount, the company shall pay interest as per Section 73 of the Companies Act, 1956.
BOOK BUILDING PROCESS
Book Building refers to the process of collection of Bids from Investors, which is based on the Price Band, with the Issue Price being finalized after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are:
Issuer, in this case being, SVPCL Limited.;
Book Running Lead Manager, in this case being BOB Capital Markets Limited and UTI Securities Ltd
Syndicate Members, who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and are eligible to act as underwriters. Syndicate Members are appointed by the BRLM
Escrow collection Bank(s), in this case being (*) (*) (*) ; and
Registrar to the Issue in this case being Aarthi Consultants Pvt. Ltd.
SEBI, through its guidelines, has permitted an Issue of securities to the public through the 100% Book Building Process, wherein up to 50% of the Net Issue to Public shall be allocated on a proportionate basis to the QIBs including the specific allocation of 5% to Mutual Funds. Mutual Funds shall also be considered in the balance, available for allocation to QIBs. Further, not less than 15% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and not less than 35% of the Net Issue to 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. We shall comply with Guidelines issued by SEBI for this Issue. In this regard, we have appointed BOB Capital Markets Limited and UTI Securities Ltd as the BRLMs to manage the Issue and to procure subscription to the Issue.
Pursuant to recent amendments to SEBI Guidelines, QIBs are not allowed to withdraw their Bid after the Bid/ Issue Closing Date and are now required to pay the 10% margin amount upon the submission of their Bids. For details see the section titled Offering Information- Terms of the Issue on page no 139 in this Red Herring Prospectus.
Our company shall comply with the guidelines issued by SEBI from time to time. In this regard we have appointed BOB Capital Markets Limited (a wholly owned subsidiary of Bank of Baroda) and UTI Securities Ltd as the Book Running Lead Managers to manage the issue and to procure subscriptions for this issue.
The process of book building, under SEBI Guidelines, is relatively new and the investors are advised to make their own judgment about investment through this process prior to making a Bid 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).
15
Bidders can bid at any price within the given price band. For instance, assume a price band of Rs. 20 to Rs. 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 centers during the bidding period. The illustrative book as shown below shows the demand for the shares of the company at various prices and is collated from bids from various investors.
Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription 500 24 500 16.67% 1000 23 1500 50.00% 1500 22 3000 100.00% 2000 21 5000 166.67% 2500 20 7500 250.00%
The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired number of shares is the price at which the book cuts off, i.e., Rs. 22 in the above example. The issuer, in consultation with the book running lead managers, will finalize the issue price at or below such cut off price, i.e., at or below Rs. 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:
Check whether the bidder is eligible for bidding having regard to all applicable Indian laws, rules, regulations, guidelines and approvals;
Bidder necessarily needs to have a demat account;
Ensure that the Bid cum Application Form is duly completed as per instructions given in this Red Herring Prospectus and in the Bid cum Application Form; and
Ensure that the Bid cum Application Form is accompanied by the PAN or by Form 60 or Form 61 of the Income Tax Rules, 1962 as may be applicable together with necessary documents providing proof of address. See page 154 and 159 in this Red Herring Prospectus for details. Bidders are specifically requested not to submit their GIR number instead of the PAN number, as the Bid is liable to be rejected.
16
CAPITAL STRUCTURE
(Rs. in Lacs)
Particulars Aggregate amount at Nominal Value
Aggregate amount at Issue Price
A) Authorized Capital 2,75,00,000 equity shares of 10 Each
B) Issued, Subscribed and Paid up Equity Share Capital
11,569,000 equity shares of Rs. 10 each
C) Present Issue to the public in terms of this Prospectus
[*] Equity Shares of Rs. 10 each fully paid up
D) Paid Up Equity Capital After the Issue
[*] Equity Shares of Rs. 10 each fully paid up
E) Share Premium account
Before the issue
After the issue
2750.00
1156.90
[*]
[*]
(*)
[*]
2750.00
1156.90
(*)
[*]
[*]
[*]
Note: Ref: 8.7.1. Of SEBI (DIP) Guidelines
Our Company is exploring the possibility of placing equity shares with certain investors. In case we are able to complete such placements before we file the final prospectus with the Registrar of Companies the size of issue to the public proposed as per this RHP will stand reduced to the extent of such placements.
17
Changes in the Authorized capital since inception are as follows:
Notes to the Capital Structure
1. Changes in Equity Share Capital Structure
Date of Allotment/ Date when fully paid-up
No. of. Shares
Face Value (Rs.)
Issue Price (Rs.)
Consider-ation
Particulars of Issue Cumulative Shares
26.11.1999
700
10 10 Cash Subscription to MOA 700
21.10.2000
99,300
10 10 Cash Further issue of shares 100,000 27.03.2003 12,00,000
10 10 Cash Further issue of shares 1,300,000 10.10.2003
7,00,000
10 10 Cash Further issue of shares 2,000,000 19.11.2003
40,00,000
5 5 Sub-division
Equity shares of Rs. 10 each sub divided into shares of Rs. 5/- each 4,000,000
10.12.2003
57,00,000
5 5 Cash Further issue of shares 9,700,000 31.03.2005
84,38,000
5 5 Cash Further issue of shares 18,138,000 10.05.2005
35,00,000
5 5 Cash Further issue of shares 21,638,000 20.03.2006
1,08,19,000
10 10 Consoli-dation-
Consolidation - Two Equity shares of Rs. 5 each consolidated in to One share of Rs.10 each fully paid up
108,19,000
22.06.2006
7,50,000
10 10 Cash Further issue of shares 11,569,000
2. Share holding Pattern
Particulars PRE ISSUE POST ISSUE
No. of Shares % No. of Shares Promoter Holding Promoters 6042950 52.23 6042950 [ ] Promoters Group 1057400 9.14 1057400 [ ] Total (A) 7100350 61.37 7100350 [ ] Non-Promoter Holding Employees Nil Nil [ ] [ ] Others 4468650 38.63 [ ] [ ] Total (B) [ ] [ ] Total (A + B) 11569000 100.00 [ ] [ ]
Date No. of Shares
Cumulative Number of shares
Face Value (Rs)
Authorized Capital (Rs) Particulars
26.11.1999 100,000 100,000 10 1,000,000
At incorporation
03.02.2003
1,200,000 1,300,000 10 13,000,000
Increase
30.09.2003
700,000 2,000,000 10 20,000,000
Increase
19.11.2003
2,000,000 4,000,000 5 20,000,000
Sub-Divided into Rs. 5/-
19.11.2003
6,000,000 10,000,000 5 50,000,000
Increase
25.02.2005 14,000,000 24,000,000 5 120,000,000
Increase
20.03.2006 - 12,000,000 10 120,000,000
Consolidation of Shares Rs. 10/-
23.03.2007 15,500,000 27,500,000 10 275,000,000
Increase
18
SUMMARY STATEMENT OF SHAREHOLDING AND LOCK-IN
Promoters Total Holding % Holding Lock-in for 3
years Lock-in for 1
year MR. K. Mallikarjuna Reddy 1904000 16.46 1453705 450295 MR. K.Sudhakara Reddy 1077550 9.31 822710 254840 MR. Y.R. Nagarjuna Kumar 1228150 10.62 937695 290455 Mrs. K Mahitha 1214150 10.49 927005 287145 Mrs. K Aparna 619100 5.35 472685 146415 Holding & Lock in Promoters 6042950 52.23 4613800 1429150
Promoter Group K. Ram Mohan Reddy 100000 0.86 NIL 100000 G. Venkataratnamma 264000 2.28 NIL 264000 K. Nirmala 490450 4.24 NIL 490450 G. Sreelakshmi 202950 1.75 NIL 202950 Holding & Lock in Promoter Group 1057400 9.14 NIL 1057400 Others 4468650 38.63 NIL 4468650 TOTAL 11569000 100.00 4613800 6955200
PROMOTERS CONTRIBUTION AND LOCK IN DETAILS OF SHARES LOCKED IN
01 Mr. K. Mallikarjuna Reddy
Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value
Issue price/transfer price
% to post issue paid up capital
Lock-in period
11.04.06 Transfer
1130750 10/- 10/- [ ] 3 Years
10.05.05 Cash
233500 5/- 5/- [ ] 3 years
31.03.05 Cash
412410 5/- 5/- [ ] 3 years
20.03.06 Consolidation
322955 Consolidation of two shares of Rs.5
each allotted on 10.05.05 and 31.03.05 into one share of Rs.10 each
3 years
SUB-TOTAL (A)* 1453705
10/- 10/- [*] 3 years
31.03.05 Cash
150590 5/- 5/- [ ] 1 year
10.12.03 Cash
380000 5/- 5/- [ ] 1 year
10.10.03 Cash
30000 10/- 10/- [ ] 1 Year
27.03.03 Cash
130000 10/- 10/- [ ] 1 year
21.10.00 Cash
24900 10/- 10/- [ ] 1 Year
26.11.99 Cash
100 10/- 10/- [ ] 1 Year
SUB-TOTAL (B) * 450295
10/- 10/- [ ]
GRAND TOTAL (A)+(B) 1904000
10/- 10/- [ ]
Shares allotted on 10.12.2003, 31.03.2005 & 10.05.2005 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each and accordingly it is considered in calculating the sub-total (A)&(B) and also Grand Total with Rs. 10/- face value of each share.
19
02 Mr. K.Sudhakara Reddy
Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value
Issue price/transfer price
% to post issue paid up capital
Lock-in period
11.04.06 Transfer
627150 10/- 10/- [ ] 3 Years
10.05.05 Cash
122800 5/- 5/- [ ] 3 years
31.03.05 Cash
268320 5/- 5/- [ ] 3 years
20.03.06 Consolidation 195560 Consolidation of two shares of Rs.5
each allotted on 10.05.05 and 31.03.05 into one share of Rs.10 each
3 years
SUB-TOTAL (A)* 822710
10/- 10/- [*] 3 years
31.03.05 Cash
27680 5/- 5/- [ ] 1 year
10.12.03 Cash
200000 5/- 5/- [ ] 1 year
10.10.03 Cash
25000 10/- 10/- [ ] 1 Year
27.03.03 Cash
91000 10/- 10/- [ ] 1 year
21.10.00 Cash
24900 10/- 10/- [ ] 1 Year
26.11.99 Cash
100 10/- 10/- [ ] 1 Year
SUB-TOTAL (B) * 254840
10/- 10/- [ ]
GRAND TOTAL (A)+(B) 1077550
10/- 10/- [ ]
Shares allotted on 10.12.2003, 31.03.2005 & 10.05.2005 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each and accordingly it is considered in calculating the sub-total (A)&(B) and also Grand Total with Rs. 10/- face value of each share.
03 MR. Y.R. Nagarjuna Kumar
Date of allotment/ transfer & when fully paid
Conside-ration (cash, bonus, kind, etc)
No of shares
Face value
Issue price/transfer price
% to post issue paid up capital
Lock-in period
11.04.06 Transfer
300000 10/- 10/- [ ] 3 Years
10.05.05 Cash
368300 5/- 5/- [ ] 3 years
31.03.05 Cash
888000 5/- 5/- [ ] 3 years
10.12.03 Cash
19090 5/- 5/- [ ] 3 years
20.03.06 Consolidation 637695 Consolidation of two shares of Rs.5 each allotted on 10.05.05, 31.03.05
and 10.12.03 into one share of Rs.10 each
3 years
SUB-TOTAL (A)* 937695 10/- 10/- [*] 3 years
10.12.03 Cash
580910 5/- 5/- [ ] 1 year
20
SUB-TOTAL (B) * 290455
10/- 10/- [ ]
GRAND TOTAL (A)+(B) 1228150
10/- 10/- [ ]
Shares allotted on 10.12.2003, 31.03.2005 & 10.05.2005 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each and accordingly it is considered in calculating the sub-total (A)&(B) and also Grand Total with Rs. 10/- face value of each share.
04 Mrs. K Mahitha
Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value Issue price/transfer price
% to post issue paid up capital
Lock-in period
11.04.06 Transfer
743300 10/- 10/- [ ] 3 Years
10.05.05 Cash
149700 5/- 5/- [ ] 3 years
31.03.05 Cash
217710 5/- 5/- [ ] 3 years
20.03.06 Consolidation 183705 Consolidation of two shares of Rs.5 each
allotted on 10.05.05 and 31.03.05 into one share of Rs.10 each
3 years
SUB-TOTAL (A)* 927005 10/- 10/- [*] 3 years
31.03.05 Cash
143090 5/- 5/- [ ] 1 year
10.12.03 Cash
250000 5/- 5/- [ ] 1 year
10.10.03 Cash
25000 10/- 10/- [ ] 1 Year
27.03.03 Cash
65000 10/- 10/- [ ] 1 year
21.10.00 Cash
500 10/- 10/- [ ] 1 Year
26.11.99 Cash
100 10/- 10/- [ ] 1 Year
SUB-TOTAL (B) * 287145
10/- 10/- [ ]
GRAND TOTAL (A)+(B) 1214150
10/- 10/- [ ]
Shares allotted on 10.12.2003, 31.03.2005 & 10.05.2005 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each and accordingly it is considered in calculating the sub-total (A)&(B) and also Grand Total with Rs. 10/- face value of each share.
05 Mrs. K Aparna
Date of allotment/ transfer & when fully paid
Conside-ration (cash, bonus, kind, etc)
No of shares
Face value
Issue price/transfer price
% to post issue paid up capital
Lock-in period
10.05.05 Cash
184200 5/- 5/- [ ] 3 years
31.03.05 Cash
444000 5/- 5/- [ ] 3 years
10.12.03 Cash
300000 5/- 5/- [ ] 3 years
10.10.03 Cash
8585 10/- 10/- [ ]
21
20.03.06 Consolidation 464100 Consolidation of two shares of Rs.5
each allotted on 10.05.05, 31.03.05 and 10.12.03 into one share of Rs.10 each
3 years
SUB-TOTAL (A)* 472685 10/- 10/- [ ] 3 years
10.10.03 Cash
16415 10/- 10/- [ ] 1 Year
27.03.03 Cash
130000 10/- 10/- [ ] 1 year
SUB-TOTAL (B) * 146415
10/- 10/- [ ] 1 year
GRAND TOTAL (A)+(B) 619100
10/- 10/- [ ]
Shares allotted on 10.12.2003, 31.03.2005 & 10.05.2005 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each and accordingly it is considered in calculating the sub-total (A)&(B) and also Grand Total with Rs. 10/- face value of each share.
PROMOTER GROUP SHAREHOLDING AND LOCK-IN
01 Mr K. Ram Mohan Reddy Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value Issue price/transfer price
% to post issue paid up capital
Lock-in period
10.12.03 Cash
150000 5/- 5/- [ ] 1 Year
10.10.03 Cash
25000 10/- 10/- [ ] 1 Year
TOTAL 100000
Shares allotted on 10.12.2003 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each
02 Mrs. G. Venkataratnamma Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value Issue price/transfer price
% to post issue paid up capital
Lock-in period
10.05.05 Cash
172000 5/- 5/- [ ] 1 Year
31.03.05 Cash
14600 5/- 5/- [ ] 1 Year
10.12.03 Cash
28000 5/- 5/- [ ] 1 Year
10.10.03 Cash
30000 10/- 10/- [ ] 1 Year
27.03.03 Cash
100 10/- 10/- [ ] 1 Year
20.10.00 Cash
500 10/- 10/- [ ] 1 Year
26.11.99
Cash 100 10/- 10/- [ ] 1 Year
TOTAL 264000
Shares allotted on 10.12.2003,31.03.2005 & 10.05.05 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each
22
03 Mrs. K. Nirmala Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value Issue price/transfer price
% to post issue paid up capital
Lock-in period
11.04.06 (Transfer)
Cash 12500 10/- 10/- [ ] 1 Year
10.05.05 Cash
165900 5/- 5/- [ ] 1 Year
31.03.05 Cash
400000 5/- 5/- [ ] 1 Year
10.12.03 Cash
270000 5/- 5/- [ ] 1 Year
10.10.03 Cash
30000 10/- 10/- [ ] 1 Year
27.03.03 Cash
55000 10/- 10/- [ ] 1 Year
20.10.00 Cash 10/- 10/- [ ] 1 Year
26.11.99
Cash 10/- 10/- [ ] 1 Year
TOTAL 490450
Shares allotted on 10.12.2003,31.03.2005 & 10.05.05 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each
04 Mrs. G. Sreelakshmi Date of allotment/ transfer & when fully paid
Consider-ation (cash, bonus, kind, etc)
No of shares
Face value Issue price/transfer price
% to post issue paid up capital
Lock-in period
10.05.05 Cash
80900 5/- 5/- [ ] 1 Year
31.03.05 Cash
195000 5/- 5/- [ ] 1 Year
10.12.03 Cash
130000 5/- 5/- [ ] 1 Year
TOTAL 202950
Shares allotted on 10.12.2003,31.03.2005 & 10.05.05 were consolidated on 20.03.2006 into the equity shares with face value of Rs. 10/- each
OTHER SHAREHOLDERS
Sr. No. Name of Shareholder No. of shares Lock in for 1 K. Vijayasree 892850 1 year 2 Mithil Poondhala 425290 1 year 3 C. Brahma Reddy 261100 1 year 4 Rajendra Talasani 218746 1 year 5 Hemachand Kolli 180083 1 year 6 G. Rajeshkar Reddy 158150 1 year 7 Spalee Inc 153071 1 year 8 Vishnu Elamanchili 149924 1 year 9 M. Srinivasulu Reddy 143450 1 year
10 Y. Venkatarami Reddy 125350 1 year 11 Sunil K Dheanekula 99360 1 year 12 K. Vinaykumar Reddy 97350 1 year
23
13 P. Madhusudan Reddy 89850 1 year 14 P.P. Reddy 88350 1 year 15 I. Brahmaananda Reddy 81750 1 year 16 G. Siva Rami Reddy 81750 1 year 17 I. Siva Shanker 81700 1 year 18 P. Prabhavathi 79700 1 year 19 G. Srinivasa Reddy 77250 1 year 20 L. Audhi Narayan Reddy 76750 1 year 21 K. Parameswara Reddy 74750 1 year 22 M. Chinna Pullaiah Reddy 74250 1 year 23 S. Usha 73800 1 year 24 M. Narayana Reddy 69300 1 year 25 Preetham Karunakaran 65556 1 year 26 K. Sarojanamma 64150 1 year 27 K. Adillakshmi Reddy 59150 1 year 28 G.Nanda Gopal Reddy 59150 1 year 29 P. Siva Ram Reddy 58500 1 year 30 M. Indira 57250 1 year 31 Satish Kodali 51600 1 year 32 Dr. K Seshaiah 50000 1 year 33 M. Jyoti 49150 1 year 34 Dr. K. Sudhakara Reddy 49150 1 year 35 Divakar Pellakuru 40570 1 year 36 Y. Siva Ramakrishna Reddy 700 1 year 37 Y. Siva Kumar Reddy 700 1 year 38 Y. Anil Kumar Reddy 700 1 year 39 Raj Reddy 700 1 year 40 P. Jamuna 700 1 year 41 K. Padmavathi 700 1 year 42 K. Murali Krishna Reddy 700 1 year 43 K. Kameshwari 700 1 year 44 I. Vinay Kumar Reddy 700 1 year 45 I. Vikram Kumar Reddy 700 1 year 46 Dr. K. Sudheer Reddy 700 1 year 47 B. Sujatha 700 1 year 48 B. Madhavi 700 1 year 49 B. Hindumathi 700 1 year 50 B. Gopal Reddy 700 1 year
Total 4468650 3. The lock-in period for above mentioned shares will commence from the date of allotment of the shares in the present public issue. 4. The shares locked in by promoters are not ineligible for computation towards promoters contribution.
5. The securities which are subject to lock-in shall carry inscription `non transferable along with duration of specified non-transferable period mentioned in the face of the security certificate. 6. In terms of the SEBI guidelines, 20% (4613800 equity shares) of the post issue capital, held by Promoters will be locked-in for 3 years and the balance entire pre-issue holding i.e. 6955200 equity shares will be locked-in for 1 year. The number of shares actually to be locked in shall be modified and incorporated on finalization of the price and number of shares to be issued to ensure that not less than 20% of the post issue paid up shares held by the promoters are locked in for 3 years. 7. Shares held by promoter(s)/promoter group which are locked in, 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.
8. Locked in Equity Shares held by the Promoters/promoter group can be pledged with banks or financial institutions as collateral security for loans granted by such banks or financial institutions provided the pledge of
24
shares is one of the terms of sanction of loan. Provided that if securities are locked in as minimum promoters contribution under clause 4.11.1, 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. In terms of clause 4.16 (b) of the SEBI Guidelines, Equity Shares held by the Promoter /promoter group may be transferred to a new promoter or persons in control of the company subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI Takeover Regulations, as applicable. 9. The Company has not issued any warrant, option, convertible loan, debenture or any other securities convertible at a later date into equity, which would entitle the holders to acquire further equity shares of the company.
10. The Company/Promoters/Directors/Lead Merchant Bankers have not entered into buyback or similar arrangements for purchase of securities issued by the Company.
11. An oversubscription to the extent of 10% of the Issue can be retained for the purpose of rounding off while finalizing the basis of allotment. 12 Allotment to Qualified Institutional Bidders shall be on a proportionate basis rounded off to the nearest integer subject to the minimum allotment being equal to the minimum application size. In case of over-subscription the proportionate allotment will be subject to the reservation as below:- 13. A minimum of 50% of the net offer to the public will be made available for allotment to Qualified Institutional Bidders on proportionate basis subject to other terms and conditions contained in this Red Herring Prospectus. 14. The balance net offer to the public shall be made available for allotment to applicants such as non-institutional corporate bidders, HNIs and retail individual investors subject to other terms and conditions contained in this Red Herring Prospectus. 15. Unsubscribed portion, if any, in any reserved category other than the portion reserved for Qualified Institutional Bidders may be added to any other reserved category 16. The unsubscribed portion, if any, after such inter se adjustments amongst the reserved categories shall be added back to the net offer to the public. 17. In case of under-subscription in the net offer to the public portion spillover to the extent of under subscription shall be permitted from the reserved category to the net public offer portion.
18. Names of the ten largest shareholders as on date of filing of this Red Herring Prospectus with SEBI.
Sr.No. Name of the Shareholder Number of Shares
% of Issued Capital
01 K. Mallikarujna Reddy 1904000 16.46 02 Y.R.Nagarjuna Kumar 1228150 10.62 03 K. Mahitha 1214150 10.49 04 K. Sudhakara Reddy 1077550 9.31 05 K. Vijayasree 892850
7.72 06 K. Aparna 619100 5.35 07 K. Nirmala 490450 4.24 08 Mithil Poondhala 425290 3.68 09 G. Venkataratnamma 264000 2.28 10 C. Brahma Reddy 261100 2.26
TOTAL 8376640 72.41
19. Names of ten largest shareholders as on 10 days prior to the date of filing of the Red Herring Prospectus with Registrar of Companies are as follows: Sr. No.
Name of the Shareholder Number of Shares
% of Issued Capital
01 K. Mallikarjuna Reddy 1904000 16.46 02 Y.R.Nagarjuna Kumar 1228150 10.62 03 K. Mahitha 1214150 10.49
25
04 K. Sudhakara Reddy 1077550 9.31 05 K. Vijayasree 892850
7.72
06 K. Aparna 619100 5.35 07 K. Nirmala 490450 4.24 08 Mithil Poondhala 425290 3.68 09 G. Venkataratnamma 264000 2.28 10 C. Brahma Reddy 261100 2.26
TOTAL 8376640 72.41
20. Names of ten largest shareholders two years prior to the date of filing of this Red Herring Prospectus with Registrar of companies are as follows: (The Equity Shares had face value of Rs. 5/- per share fully paid up.)
Sr.No. Name of the Shareholder Number of Shares
% of Issued Capital
1 Y. R. Nagarjuna Kumar 1488000 8.20
2 Dr. Jyoshna Rani 1488000 8.20
3 K. Mallikarjuna Reddy 1313000 7.24
4 K. Aparna 1054000 5.81
5 Mithil Poondhla 850580 4.69
6 K. Nirmala 840000 4.63
7 K. Mahitha 792000 4.37
8 K. Sudhakara Reddy 778000 4.29
9 Vijayasree 632000 3.48
10 Dr. K. Seshaiah 496000 2.73
Total 9731580 53.65
21 The aggregate shareholding of the Promoter/Promoter group is 7100350 equity shares of Rs. 10/- each (Face Value). There has been no transfer of shares during the last 6 months prior to the date of filing of Red Herring Prospectus.
22. The Company does not currently have any Employee Stock Option Plan.
23. The Company has not issued any shares for consideration other than cash.
24. The Company has not taken any bridge loan from any bank which would be repaid out of the issue proceeds for any purpose whatsoever or for the proposed project. 25. The company presently does not have any intention or proposal to alter its capital structure for a period
of six months commencing from the date of opening of the Issue, by way of split/consolidation of the Equity Shares or further issue of Equity Shares (including issue of securities convertible into exchangeable, directly or indirectly into Equity Shares) whether on a preferential basis or otherwise. However, during such period or at a later date, the Company may issue Equity Shares or securities linked to equity shares to finance an acquisition, merger or joint venture by the Company or as consideration for such acquisition, merger or joint venture, or for regulatory compliance or such other scheme of arrangement if an opportunity of such nature is determined by the Board to be in the interest of the Company.
26. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Issue, subject to
26
the maximum limit of investment prescribed under relevant laws applicable to each category of investor.
27. Securities offered through this issue shall be made fully paid up or may be forfeited within 12 months from the date of allotments of securities in the manner specified in clause 8.6.2 of the SEBI (DIP) Guidelines.
28. As on the date of filing of this Red Herring Prospectus, the total number of equity
shareholders is 59.
OBJECTS OF THE ISSUE
(a) To expand the existing manufacturing facilities at Hyderabad, Vijayawada and Visakhapatnam. (b) To set up marketing infrastructure at identified locations in different parts of the country. (c) To Augment Long term Working Capital resources (d) To meet the expenses of the issue (e) To list the shares on the Bombay Stock Exchange Limited (BSE) (The Designated Stock Exchange) and
the National Stock Exchange.
The main object clause of our Memorandum of Association and objects incidental to the main objects enable us to undertake our existing activities and the proposed activities for which funds are being raised by us through this issue. The funds requirement and details of deployment are based on internal management estimates and has been appraised by BOB Capital Markets Limited.,relying on estimates given by the company s management. The fund requirements detailed below are based on our current business plan. In view of the highly competitive
and dynamic nature of the industry in which we operate we may have to revise our business plan from time to time and consequently our fund requirement may also change. This may include rescheduling of our capital expenditure programme and increase or decrease in the capital expenditure for a particular purpose vis-à-vis current plans at the discretion of the management. In case of any variations in the actual utilizations of funds earmarked for the above activities, increased fund deployment for any particular activity will be met from the internal accruals and the surplus if any will be utilized for general corporate purposes.
The total expenditure for the above is estimated as follows:- Rs. in lacs
Sr. No. Particulars Amount (a) Expand the existing manufacturing facilities at Hyderabad, Vijayawada and
Visakhapatnam 2444.76
(b) Set up marketing infrastructure at identified locations in different parts of the country
161..38
( c) Augment Long term Working Capital resources 600.00 (d) Expenses of the issue 249.25 (e) Contingencies 254.71
Total 3710.39
Means of Finance Rs. in lacs
Sr. No. Particulars Amount 1. Equity 3450.00 2. Internal Accruals 260.39
Total 3710.39
(a) Expand the existing manufacturing facilities at Hyderabad, Vijayawada and Visakhapatnam
Our in-house DTP unit is presently manned by 3 personnel. We are proposing to strengthen the department by adding 5 more personnel to take care of the additional anticipated workload as well as to enable us to cater to the export market.
The pre-press processing department is equipped with necessary infrastructure such as computer systems and software. Equipped with a range of software, for design and processing of the printing formats. For transferring the content to the printer we are currently using computer-to-plate system and an image-setter system. We propose to upgrade it to the computer-to-printer system doing away with the plate making and image setting system.
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India is fast emerging as an outsourcing hub for printing jobs. In addition to volume printing, we believe there is good scope for offering specialized quality printing jobs to developed markets such as US.
We also attempted to study the international market on our own by short visits to Dubai, Germany, South Africa, Western Africa and Botswana. We find there is reasonably good potential for exporting educational material, annual reports, brochures etc to Arab countries and the African countries such as South Africa, Ghana, Botswana etc. Similarly US and European markets have good demand for economically printed good quality scientific and educational books, children s books etc. The East Asian markets such as Singapore, Malaysia etc have demand for envelopes, greeting cards etc.
We have entered into a Memorandum of Understanding with M/s. Spalee Inc, 3401 Custer Road, # 160, Plano, Texas 75023, USA promoted by Mr. Shiva Poondhla, a non-resident Indian. The Memorandum of Understanding is a step towards entering the US market. Spalee Inc. will source the printing jobs to us for a commission of 5% of the order value.
Through the agents Spalee Inc we are endeavoring to move beyond bulk printing of commercial stationery to cater specialized requirements of different agencies in the US such as scientific and social organizations. Additionally, with the increasing focus in the developing nations in Africa there is reasonably good scope for export of educational stationery such as books and note books.
We propose to strengthen our content design capabilities by installation of specialized software for variable data printing, barcode printing etc which are available in the market. The expenditure for the purpose is proposed to be met from internal accruals.
Expansion of capacities
Hyderabad
2146.35 71.54
10331.25 82.65
88.40 2.21
Estimated expenditure for addition of capacity Rs. in lacs
Capital Expenditure Hyderabad Vijayawada Vishakhapatnam
Total
Factory Building 0.00
69.93
0.00
69.93
Plant & Machineries 764.82
559.68
851.77
Electrical Fittings 28.05
26.17
16.35
70.57
Electronics Equipments 27.30
5.54
5.15
37.99
Furniture & Fixtures 9.45
29.55
26.00
65.00
Vehicle 7.00
9.00
9.00
25.00
Total 836.62
699.87
908.27
2444.76
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We manufacture products and provide printing services as tabulated below:
Educational/Learning Aids Business aids/Commercial stationery
Printing Services
Notebooks Workbooks Student Books Journals
Ledgers, Writing Pads folders & Files Pre-printed/Blank/EZR Computer Stationery
Annual Reports Brochures Letter Heads Bills, Invoices Public Issue Stationery Directories Diaries Calendars School Chronicle Periodicals
Educational/Learning Aids
We currently manufacture different kinds of note books, work-books and other educational stationery to cater to the entire educational sector. The printing industry is a very fragmented segment with substantial share of the business carried on by small players who do not have any standardized system of printing. There are only a few large scale manufacturers who provide standardized, good quality and fairly priced educational stationery.
Notebooks and workbooks are among the most important mediums in the learning process. However they are seen as just a sewn bundle of plain or lined sheets. We believe that the note books can be modeled into a tool to make the learning process much easier especially for subjects where the students need to learn a lot of things by heart.
We have introduced specific note books for different subjects by overprinting of highlights of the prescribed subject material, utilizing the bottom margin area. Our endeavor is to help students and make it easier for them to learn and memorize subjects by providing important aspects in the note books. The note books are thus intended as an active learning aid for the students and are provided with no additional cost. This had been very well accepted by the student community.
We have been pursuing a focused strategy of creating a distinct brand image for our products in a market dominated by the unorganized sector. The products are sold under the following brands.
CLASSMATE
Educational stationery for schools and colleges, catering to the higher strata, quality conscious customers who can afford relatively higher prices.
LAVANYA - targeting the price conscious middle class customers. It is a medium range brand where the quality and costs are optimized.
Business aids:
Office Stationery is marketed under our brand names to the corporate clients. This category of products include writing pads, Pads & Files, Directories, Dairies and Calendars etc. continuous stationery, paper products etc. We supply the same in bulk under our brand name DESKMATE .
Computer Stationery
Today computer stationery is one of the major requirements for all business houses. It is available either in single part, two parts and three parts and is designed as per the requirement of the client in 80 or 132 column.
Printing Service:
The company s printing activity among others includes the printing of Annual Reports, Brochures, and Catalogues etc. We are one of the major players in the large volume-printing segment of the market. We have the capability and have been taking up volume print jobs for large corporate houses all over India.
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Export of printing service India is fast emerging as an outsourcing hub for printing jobs. In addition to volume printing, we believe there is good scope for offering specialized quality printing jobs to developed markets such as US.
We have entered into a Memorandum of Understanding with M/s. Spalee Inc, 3401 Custer Road, # 160, Plano, Texas 75023, USA promoted by Mr. Shiva Poondhla, a non-resident Indian. The Memorandum of Understanding is a step towards entering the US market. Spalee Inc. will source the printing jobs to us for a commission of 5% of the order value. Through the agents Spalee Inc we are endeavoring to move beyond the basic requirements and cater to the specialized requirements of corporate and trading houses, chain stores etc to the developed countries. Additionally, with the increasing focus in the developing nations in Africa there is reasonably good scope for export of educational stationery such as note books. Detailed break-up of the proposed Capital Expenditure
Building:
Our present manufacturing facility at Vijayawada is located in a building with total built up area of 6803 Sq. ft. We propose to construct additional factory space of 9800 sq. ft. at the existing premises at Resurvey No. 83/1, Bhavanipuram, Vijayawada Town, Door No. 760-10-16. As per estimates dated 09-04-2006 received from M/s. Srujana Architects Space Planners, 1-608, Divya Shakti Complex, Ameerpet, Hyderabad 500 016, the construction would cost Rs. 69.93 lacs. The proposed construction would include landscaping of the plot of land admeasuring 5902 Sq.ft.
Rs. in Lacs
Particulars Details of the Architect Amount
Construction of Building
Srujana Architects Space Planners, 1-608, Divya Shakti Complex, Ameerpet, Hyderabad 500 016.
69.93
Total 69.93
Plant & Machinery
We propose to compete in the national and international printing market by adding latest and sophisticated printing and processing equipment to our existing set up. Following are the details of Proposed Machinery Location wise
Rs. in Lacs
30
31
32
33
34
(b) To set up marketing infrastructure at identified locations in different parts of the country.
Presently we have marketing offices at Hyderabad, Vijayawada and Visakhapatnam where the company s manufacturing facilities are located. It is proposed to expand the distribution network into the other states. We propose to expand our marketing network by a combination of own marketing offices and by appointing franchisees at twenty identified locations for the said purpose out of which 10 will be own marketing offices. With a combination of own offices and franchisees we hope to cover substantial part of the country while keeping investment at minimum level.
An amount of Rs.131.38 lacs is estimated for setting up offices and go-downs at ten centers the details of which are as follows:-
Rs. in lacs Sr. No. Particulars Amount (i) Rent Deposits 49.80 (ii) Furniture & Fixtures 102.00 (iii) Maintenance expenses for three months 9.58
Total 161.38
The detailed break up of the envisaged expenditure is given below: (i) Rent Deposits for Premises (Offices and Godowns)
Rs. in lacs Sr. No. Location Area in Sq. Ft Rate
Rs. Amount
1 Mumbai
Office 500 50/sq.ft. 0.25 per month (Rent)
Godown 2000 15/sq.ft 0.30
(a) Rent Deposit for 12 months 6.60 2 Pune
Office 500 30/sq.ft 0.15 per month (Rent)
Godown 1000 10/sq.ft 0.10
(b) Rent Deposit for 12 months 3.00 3 Bangalore
Office 500 50/sq.ft. 0.25 per month (Rent)
Godown 2000 15/sq.ft 0.30
(c) Rent Deposit for 12 months 6.60
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4 Mangalore
Office 500 20/sq.ft. 0.10 per month
(Rent)
Godown 2000 10/sq.ft 0.20
(e) Rent Deposit for 12 months 3.60
5 Ahmedabad
Office 500 40/sq.ft. 0.20 per month
(Rent)
Godown 2000 10/sq.ft 0.20
(d) Rent Deposit for 12 months 4.80 6 Delhi
Office 500 50/sq.ft. 0.25 per month (Rent)
Godown 2000 15/sq.ft 0.30
(e) Rent Deposit for 12 months 6.60
7 Chennai
Office 500 40/sq.ft. 0.20 per month (Rent)
Godown 2000 15/sq.ft 0.30
(e) Rent Deposit for 12 months 6.00
8 Coimbatore
Office 500 30/sq.ft. 0.15 per month (Rent)
Godown 2000 10/sq.ft 0.20
(d) Rent Deposit for 12 months 4.20 9 Bhopal
Office 500 30/sq.ft. 0.15 per month (Rent)
Godown 2000 10/sq.ft 0.20
(d) Rent Deposit for 12 months 4.20 10. Cochin
Office 500 30/sq.ft. 0.15 per month (Rent)
Godown 2000 10/sq.ft 0.20
(d) Rent Deposit for 12 months 4.20 Total Amount of Rent Deposit for the 10 centers 49.80
(ii) Furniture & Fixtures
Furniture and fixtures for the office shall be sitting arrangements i.e. one cabin for the Sales Manager/Centre in-charge, tables and chairs, and one air conditioner each. For the godowns only racks are required to be provided. The management has estimated the following expenditure for furnishing/equipping the marketing offices
Sr. No. Location Amount (Rs. in Lacs) 1. Mumbai 15.00 2. Pune 8.00 3. Delhi 15.00 4. Bhopal 8.00 5. Bangalore 8.40 6. Ahmedabad 8.50 7. Mangalore 8.00 8. Chennai 15.00 9. Coimbatore 8.00 10. Cochin 8.10
Total 102.00
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(iii) Maintenance expenses
The offices established at the above centers will take two to three months to become self supportive. Hence expenditure for the period is estimated as mentioned below:-
Manpower Requirements: Senior Managers 3 (Mumbai, Bangalore, Delhi) @Rs. 20,000/- per month; Managers 7 (One each in Ahmedabad, Chennai, Coimbatore, Cochin, Bhopal, Mangalore, Pune) @ Rs. 10,000/- (average) per month; Assistants -5 (Mumbai, Delhi & Bangalore) @ Rs. 7850/- per month and Godown Keepers 30 @ Rs. 5000/- per month
Salaries:
Grade No. of persons
Salary per person/month (Rs)
Salary for 3 months (Rs)
Total salary expenditure for 3 months (Rs)
Senior Managers 3 20000 60000 180,000 Managers 7 10000 70000 210000 Assistants 5 7850 39250 117750 Godown Keepers 30 5000 150000 450000 Total 45 957750
(c)Augmentation of Long Term Working Capital Resources
The Company is presently enjoying working capital facilities to the tune of Rs. 340 Lacs from State Bank of India and Rs. 450 Lacs from UTI Bank. Interest paid by us during 2005-06 was Rs. 136.83 lacs and Rs. 163.51 for the nine months period ended December 2006. It is proposed to control the financing charges so as to improve profitability. With rising interest rates, our attempt is to reduce or at least restrict borrowings as otherwise our profitability will go down. We have estimated the working capital requirements to go up with the expansion in manufacturing activities and propose to provide Rs.600 Lacs as Long term working Capital fund to be funded through Equity. An amount of Rs. 600 Lacs is therefore earmarked from the proceeds of the issue for augmenting our long term working capital resources. The projected Sales, Current Assets and liabilities and working capital requirements are tabulated below:-
Particulars 2007-08 2008-09 Sales 11025.00 12565.00 A. Total Current Assets 3590.89 4060.91 B. Current Liabilities Other than Bank Borrowing 596.08 660.06 C. Working Capital Gap (A-B) 2994.81 3400.85 D. Bank Borrowings 2097.09 2385.63 E. Working Capital to be funded from Internal accruals and Equity 897.72 1015.22
Assumptions underlying the calculation of working capital requirements:
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Share Issue Expenses
The Company proposes to get its equity shares listed on BSE and the NSE. The management estimates an expense of Rs. 249.25 Lacs towards issue expenses. The Break-up of issue expenses is given below:
Rs. in Lacs Sr.No. Particulars Expenses
1 Lead Managers Fees 86.25
2 Registrar to Issue 6.00
4 Printing, Stationery and Postage 45.00
5 Advertising Expenses 25.00
6 Brokerage & Selling Commission 75.00
7 Listing, Depositories charges, legal expenses etc 12.00
TOTAL 249.25
Contingencies
Contingencies to meet cost escalations to the following project related expenses has been calculated @ 10% (for capacity expansion expenses) and 6% (for marketing set up), and an amount of Rs.254.71 Lacs is proposed to be met from the issue proceeds.
(Rs. In Lacs) Sr. No.
Particulars Expenditure to be Incurred
1 Expenditure relating to Capacity Expansion 2444.76 2 Marketing Set up 161.68
TOTAL 2606.44
Contingencies say 254.71
Raw Material
The main raw materials for the products are printing & writing paper, Art paper, Art card, duplex board, and printing inks, plates, chemicals. These raw materials are abundantly available domestic & international market. Special inks for security products are also available locally.
We use different qualities of printing paper and these are mainly sourced from leading paper manufacturers listed below:
We will be procuring the required additional quantities of raw material from the above mills and other manufacturers.
Inks/Special Inks
Inks of special quality are required to manufacture various types of security stationery. These Inks are also available indigenously and are manufactured by many industries including certain Small Scale Industries.
Printing plates & Chemicals:
These materials are available in the domestic market. In the international market better quality of these products are available at competitive prices as compared to the domestic market. The company has the choice of procuring these from the international or domestic markets.
Cream Wove Paper Maplitho Paper Parchment Paper
ITC Ltd
JK Paper Mills Ltd
Coastal Paper Mills Ltd
AP Paper Mills Ltd
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Power
The requirement of additional power for the proposed project would be 456 KVA for all the three locations together. Out of this 206 KVA for the Hyderabad facility has already been sanctioned. We are in the process of applying for the additional load in the other two locations. We do not anticipate any difficulty in obtaining the required from APTRANSCO. We presently have three generators in all the three locations of total of 250 KVA. In addition we propose to install two 125 KVA Gensets as standby arrangement for ensuring uninterrupted operations.
(In KVA) Location Sanctioned Load Additional
Required/Applied for Total
Hyderabad 55 206 261
Vijayawada 88 150 238
Visakhapatnam 55 100 155
Total 198 456 654
Water The proposed project is not water intensive and water is required only for drinking. Water requirement and availability in factory premises for drinking and other purposes as follows:-
In Litres Hyderabad Vijayawada Visakhapatnam Sources of availability
35000 40000 10000 Bore well, Corporation Water & VSEZ
Effluents The proposed plant does not emit industrial waste, which may have to be treated. Since pieces of paper are the only waste material in the factory, no special permissions are necessary.
Human Resources We have a combination of regular and daily wage earners. Most of the unskilled labour is engaged on daily wage basis. We do not find any difficulty in engaging labour in accordance with the number required which may vary from time to time. The managerial and technical personnel will be recruited in tandem with the progress in the implementation of the project.
We have estimated the additional manpower requirement for the expanded activities as per detail given below:- Particulars Hyderabad Vijayawada Visakhapatnam Marketing
offices Total
Managerial 3 - 1 10 14 Supervisory 2 2 1 5 Office Staff 5 2 - 5 10 Skilled 10 15 4 29 Semi Skilled 15 15 9 39 Unskilled 5 10 7 30 32 Total 40 44 22 45 129
Implementation Schedule
39
Deployment of Funds and Status of Implementation As per the certificate dated October 01, 2007 issued by M/s. P.Murali & Co, Statutory Auditors the details of expenditure incurred till date and the sources were as tabulated below:
Sr. No.
Particulars Amount Rs. in lacs
Status
1. Building construction at Vijayawada 69.00 Mostly Completed
2. Order for Machinery 115.42 Machinery to be received
3. Legal & Other Issue Related Expenses
60.88 -
Total 245.30
SOURCE OF FUNDS
Internal Accruals 245.30
Proposed deployment of funds year wise
Sr. No
Particulars 2006-07 2007-08
1. Building 69.00 - 2. Plant & Machinery 91.02 2277.85 3. Electrical & Electronic Equipments 112.99 4. Furniture & Fixtures, Vehicles 105.57 5. Marketing Set up 144.38 6. Issue Related Expenses 31.88 188.37
Shortfall of Funds
Any shortfalls in meeting the project cost will be met through further internal accruals, cash and bank balances and/or unsecured loans as will be raised by our Promoters. Interim Use of Funds
As per the proposed implementation schedule, there will be a time gap of upto 6 months between expected receipt of the proceeds of the issue and full deployment of funds. The Company intends to invest the unutilized funds in short term deposits with banks in order to earn interest or deposit the same in cash credit account to save interest on Bank Overdrafts.
APPRAISAL
The Project has been appraised by BOB Capital Markets Limited, relying on estimates given by the company s management.and as per their report dated March 28, 2007. The scope and purpose of the appraisal was to study the financial aspects of the proposed expansion plans and to assess the financial viability of the proposed capital expenditure plan. Appraisal by BOB Capital Markets Limited has been used as a basis for this document wherever required. BOB Capital Markets Limited vide their letter dated March 28, 2007 have given their consent for their name being included as appraising agencies and for their appraisal report being used in this document. However, the appraiser does not have any financial commitment in the proposed project expansion nor they have been appointed as the Monitoring Agency for the deployment of funds.
40
BASIC TERMS OF ISSUE AND BASIS OF ISSUE PRICE
The Equity Shares being offered are subject to the provisions of the Companies Act 1956, the Memorandum and Articles of Association of the Company, the terms of this Red Herring Prospectus, Bid-cum-Application Form, the Revision Form, the Confirmation of Allocation Note ( 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 the Issue. The Equity Shares shall also be subject 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, Stock Exchanges, RBI, ROC and / or other authorities, as in force on the date of the Issue and to the extent applicable.
Terms & conditions of the Issue
The Equity Shares being issued are subject to the provisions of the Companies Act, 1956, Our Memorandum and Articles, the terms of this draft red herring pprospectus, Bid Cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the allotment advices and other documents/certificates that may be executed in respect of the issue. The Equity Shares shall also be subject to laws, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by SEBI, Government of India, Stock Exchanges, Registrar of Companies, RBI and/or other authorities, as in force on the date of the issue and to the extent applicable.
Ranking of Equity Shares
The Equity Shares being issued shall be subject to the provisions of the Memorandum and Articles and shall rank pari -passu with the existing Equity Shares of the company including rights in respect of dividend. The Allottees in receipt of allotment of Equity Shares under this Issue will be entitled to pro-rata dividends and other corporate benefits, if any, declared by the Company after the date of allotment.
Face Value and Issue Price
Fresh Equity Shares with a face value of Rs. 10 each are being offered as part of the Issue at a price of Rs. [?] including premium of Rs. (?) per share. At any given point of time there shall be only one denomination for the Equity Shares.
Rights of the Equity Shareholder
Subject to applicable laws, the equity shareholders shall have the following rights:
Right to receive dividend, if declared;
Right to attend general meetings and exercise voting powers, unless prohibited by law;
Right to vote on a poll either in person or by proxy;
Right to receive offers for rights shares and be allotted bonus shares, if announced;
Right to receive surplus on liquidation;
Right of free transferability; and
Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and the Company s Memorandum and Articles.
For a detailed description of the main provisions of the Articles relating to voting rights, dividend, forfeiture and lien and/or consolidation/splitting, please refer to the section titled Main Provisions of Articles of Association of the Company on page no 167 of this Draft Red Herring Prospectus
Market Lot and Trading Lot
In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialized form. As per existing SEBI DIP Guidelines, the trading of the Equity Shares shall only be in dematerialized form. Since trading of the Equity Shares is in dematerialized form, the tradable lot is one Equity Share. Allotment in this Issue will be only in electronic form in multiples of one Equity Share subject to a minimum allotment of ( ) Equity Shares.
BASIS FOR ISSUE PRICE
The Issue Price will be determined by the BRLM in consultation with the Company, on the basis of assessment of market demand for the Equity Shares, by way of Book Building Process.
41
Qualitative factors
Integrated content design, process and printing capabilities
Capacity to provide high quality printing services at competitive costs
Multilocation state-of-the art printing facilities
One of the prominent educational stationery providers in South India
Quantitative factors
a) Earnings per share Financial year ended EPS (Rs) Weight 31st March, 2005 0.21 1 31st March, 2006 1.50 2 31 March 2007 5.21 3 Weighted average EPS 3.14 Note: Net Profit after adjustments attributable to equity shareholders divided by weighted average number of equity shares outstanding at the end of the year.
b) Price/Earning Ratio (P/E Ratio) in relation to the price band of Rs. (*) is calculated below:-
Industry P/E 30.9 Highest : 415.5
Lowest: 3.8 Composite Average: 30.9
(Source: COSPI: CMIE Overall Share Price Index for Paper Products: CMIE Industry Review March 2007)
SVPCL Ltd: Based on the audited results of 31.03.2006 EPS: Rs. 1.50 Based on the audited results of 31.03.2007 EPS: Rs. 5.21
Based on the EPS for the year ended March 31, 2007 EPS (restated financial statement) was Rs. the P/E is (*) times at the lower end of the price band and (*) times at the upper end of the price band.
c) Return on Net worth
Financial Year RONW % Weight 31st March, 2005 2.68 1 31st March, 2006 12.73 2 31st March 2007 31.98 3 Weighted average RONW 20.68
Note: Net Profit after adjustments as restated divided by equity shareholders funds at the end of the period/year.
d) Minimum return on total net worth needed after the Issue to maintain EPS (as on March 31, 2007) at Rs. 5.21 shall be % post issue.
e) Net Asset Value per Equity Share (In Rs.)*
As at 31st March 2007 16.06 (Face value Rs. 10/-)
As at 31st March, 2006 12.58 (Face value Rs. 10)
As at 31st March , 2005 6.41 (Face value Rs. 5) Issue Price (Band) (*) After Issue at Issue Price of Rs.[ ] (*)
*Note: Net worth at the end of the year divided by the weighted average number of equity shares at the end of the period / year
42
f) The face value of equity shares of SVPCL is Rs.10/- and the Issue price is (*) times of the face value at the lower end and (*) times at the upper end of the price band.
The issue price will be determined by the Company in consultation with the BRLM, on the basis of assessment of market demand for the equity shares by way of book building and is justified on the basis of the above factors.
Comparison of accounting ratios of the Company with industry average and accounting ratios of peer group for Financial Year 2006.
There are only a couple of companies which have comparable business model as SVPCL. The following companies have some elements of the business, therefore, a comparison with these companies could be relevant to a negligible extent:
*31 *March 2007 EPS Rs. 5.21
**NAV as on 31.03.2007 Rs. 15.61
(Source: CMIE Prowess Database April 11, 2007)
BRLM and Co-BRLM believe that the Issue Price Band of Rs. 40-45 is justified in view of the above qualitative and quantitative parameters. See the section titled Risk Factors beginningn on page no. ix of this Red Herring Prospectus and the financials of the Company including important profitability and return ratios, as set out in the Auditors Report on page no. 93 of this Red Herring Prospectus to have a more informed view.
Company Year/Period Ended
EPS (Rs.) P/E Book Value (Rs.)
SVPCL Ltd March 2006 1.50* 12.58** Blue Bird India Ltd March, 2006 7.17 8.90 47.25 Sundaram Multipap. Ltd March, 2006 1.25 11.04 6.05 TCPL March, 2006 50.00 11.10 283.90 Bilcare March, 2006 35.80 16.87 130.63
43
STATEMENT OF TAX BENEFITS
The Board of Directors SVPCL LIMITED, 206 A, Concourse, 2 nd Floor, Green Lands, Ameerpet, Hyderabad 500 016.
Dear Sirs,
Subject: Opinion on Tax Benefits
We hereby report that the enclosed annexure states the possible tax benefits available to SVPCL LIMITED, ( 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. Hence, the ability of the Company or its shareholders to derive the 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 below are not exhaustive. This statement is only intended to provide general information to investors and is neither designed nor intended to be a substitute for a professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult their own tax consultant with respect to the specific tax implications arising out of their participation in the issue.
We do not express any opinion or provide 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 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 and operations of the Company.
No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views
are based on the existing provisions of the law and its interpretation, which are subject to change from time to
time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to
any person in respect of this assignment.
FOR P. MURALI & CO., Chartered Accountants
PLACE: Hyderabad DATE: 15-09-2007
P. MURALI MOHANA RAO
Partner Membership No.23412
44
STATEMENT OF POSSIBLE TAX BENEFITS
SPECIAL BENEFITS
(A) TO THE COMPANY UNDER INCOME TAX ACT, 1961
The company is having a Unit at Vishakapatnam /Vizag for which the special benefit for SEZ unit is available under section 10 B of the Provisions of Income Tax Act, 1961 and a profit of the unit is exempted under Income Tax Act, till assessment years 2009-2010.
The Minimum Alternate Tax is applicable to the company under section 115 JB of the Income Tax Act, 1961, as for as the Total Taxable Income under Regular Income Tax is less than the Book Profit of the Company.
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GENERAL BENEFITS
(A) TO THE COMPANY UNDER INCOME TAX ACT, 1961:
1. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1st April 2003 by domestic companies) received on the shares of any company is exempted from the tax.
2. As per section 10 (35) of the Act, the following income shall be exempt in the hands of the company
a) Income received in respect of the units of a Mutual Fund specified under clause (23D) of section 10; or
b) Income received in respect of the units from the Administrator of the Specified undertaking; or
c) Income received in respect of units from the specified company
However, this exemption does not apply to any income arising from the transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.
For this purpose (I) Administrator means the Administrator as referred to in section 2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 and (ii) Specified Company means a company as referred to in section 2(h) of the Said Act.
3. As per section 10(38) of the Act, long term capital gains arising to the company from the transfer of a long term capital asset being a equity share in a company or a unit of an equity oriented fund where such transaction is chargeable to securities transactions tax would not liable to tax in the hands of the company.
For this purpose, Equity Oriented Fund means a fund
a) where the investible funds are invested by way of equity shares in the domestic companies to the extent of more than 65% of the total proceeds of such funds; and
b) which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the Act.
As per section 115JB, the company will not be able to reduce the income to which the provisions of the section 10(38) of the Act apply while calculating book profits under the provisions of section 115JB of the Act and will be required to pay the Minimum Alternate Tax @ 11.22% (including a surcharge of 10% and education cess of 2% on the overall tax) of the book profits determined.
4. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(38) of the Act) arising on transfer of a long term capital asset will be exempt from capital gains tax if the capital gains are invested within a period of 6 months after the date of such transfer for a period of at least 3 years in bonds issued on or after April 1, 2006 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, a company formed and registered under the Companies Act, 1956.
5. Under section 112 of the Act and other relevant provisions of the Act, long term capital gains (i.e. if the shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising on transfer of investment in shares, shall be taxed at a rate of 20% (plus applicable surcharge & cess) after indexation as provided in the second proviso to section 48. The amount of such tax should, however, be limited to 10% (plus applicable surcharge & cess) without indexation, at the option of the shareholder.
46
6. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., of the shares listed in a recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge & cess) in cases where securities transaction tax has been paid.
(B) BENEFITS TO THE SHAREHOLDERS OF THE COMPANY
UNDER THE INCOME TAX
ACT, 1961
Resident shareholders
7. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1st April 2003 by domestic companies) received on the shares of any company is exempted from the tax.
8. As per section 10(38) of the Act, long term capital gains arising to the share holder from the transfer of a long term capital asset being a equity share in a company or a unit of an equity oriented fund where such transaction is chargeable to securities transactions tax would not liable to tax in the hands of the share holder.
For this purpose, Equity Oriented Fund means a fund
a) where the investible funds are invested by way of equity shares in the domestic companies to the extent of more than 65% of the total proceeds of such funds; and
b) which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the Act.
9. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head Profits and gains of business or profession arising from taxable securities transactions. As such, no deduction will be allowed in computing the income chargeable to tax as capital gains or under the head Profits and Gains of Business or Profession for such amount paid on account of securities transaction tax.
10. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(38) of the Act) arising on transfer of a long term capital asset will be exempt from capital gains tax if the capital gains are invested within a period of 6 months after the date of such transfer for a period of at least 3 years in bonds issued on or after April 1, 2006 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, a company formed and registered under the Companies Act, 1956.
11. Under section 54F of the Act, long-term capital gains [in cases not covered under section 10(38) of the Act arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from Capital gain tax subject to other conditions, if the net consideration from such shares are used for purchase of residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer.
12. Under section 112 of the Act and other relevant provisions of the Act, long term capital gains (i.e. if the shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising on transfer of investment in shares, shall be taxed at a rate of 20% (plus applicable surcharge & cess) after indexation as provided in the second proviso to section 48. The amount of such tax should, however, be limited to 10% (plus applicable surcharge & cess) without indexation, at the option of the shareholder.
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13. Under section 111A of the Act and other relevant provisions of the Act, short-term capital gains (i.e., of the shares listed in a recognized stock exchange, shall be taxed at a rate of 10% (plus applicable surcharge & cess) in cases where securities transaction tax has been paid.
Non-Resident Indians/Non-Resident shareholders (Other than FIIs and Foreign Venture Capital Investors)
14. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1st April 2003 by domestic companies) received on the shares of any company is exempted from the tax.
15. As per section 10(38) of the Act, long term capital gains arising to the share holder from the transfer of a long term capital asset being a equity share in a company or a unit of an equity oriented fund where such transaction is chargeable to securities transactions tax would not liable to tax in the hands of the share holder.
For this purpose, Equity Oriented Fund means a fund
a) where the investible funds are invested by way of equity shares in the domestic companies to the extent of more than 65% of the total proceeds of such funds; and
b) which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the Act.
16. In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head Profits and gains of business or profession arising from taxable securities transactions. As such, no deduction will be allowed in computing the income chargeable to tax as capital gains or under the head Profits and Gains of Business or Profession for such amount paid on account of securities transaction tax.
17. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(38) of the Act) arising on transfer of a long term capital asset will be exempt from capital gains tax if the capital gains are invested within a period of 6 months after the date of such transfer for a period of at least 3 years in bonds issued on or after April 1, 2006 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, a company formed and registered under the Companies Act, 1956.
18. Under section 54F of the Act, long-term capital gains [in cases not covered under section 10(38) of the Act arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from Capital gain tax subject to other conditions, if the net consideration from such shares are used for purchase of residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer.
19. Under section 115-I of the Act, the Non-Resident Indian shareholder has an option to be governed by the provisions of Chapter XIIIA of the Act viz. Special Provisions Relating to Certain Incomes of Non-Residents which are as follows:
a) As per section 115E of the Act, where shares in the company are acquired or subscribed to in convertible foreign exchange by a Non-Resident Indian, capital gains arising to the nonresident on transfer of shares held for a period exceeding 12 months, shall (in cases not covered under section 10(38) of the Act) be concessionally taxed at the flat rate of 10% (plus applicable surcharge and education cess) (without indexation benefit but with protection against foreign exchange fluctuation).
b) As per section 115F of the Act, long term capital gains (in cases not covered under section 10(38) of the Act) arising to a Non-Resident Indian from the transfer of shares of the company subscribed to in convertible foreign exchange shall be exempt from Income tax, if the net consideration is
48
reinvested in specified assets within six months of the date of the transfer. If only a 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 of acquisition.
c) As per section 115G of the Act, Non-Resident Indians are not obliged to file a return of income under section 139(1) of the Act, if their only source of income is income from specified investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Act.
d) As per section 115H of the Act, where the 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 the Assessment Year in which he is first assessable as Resident, under section 139 of the Act to the effect that the provisions of the Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money.
20. The tax rates and consequent taxation mentioned above shall be further subject to any benefits available under the Tax Treaty, if any, between India and the country in which the non-resident has fiscal domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the Non-resident.
Foreign Institutional Investors (FIIs)
21. In terms of section 10(34) of the Act, any income by way of dividends referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1st April 2003 by domestic companies) received on the shares of any company is exempted from the tax.
22. As per section 10(38) of the Act, long term capital gains arising to the FIIs from the transfer of a long term capital asset being a equity share in a company or a unit of an equity oriented fund where such transaction is chargeable to securities transactions tax would not liable to tax in the hands of the FIIs.
For this purpose, Equity Oriented Fund means a fund
a) where the investible funds are invested by way of equity shares in the domestic companies to the extent of more than 65% of the total proceeds of such funds; and
b) which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the Act.
23. As per section 115AD of the Act, FIIs will be taxed on the capital gains that are not exempt under the section 10(38) of the Act at the following rates:
Nature of Income Rate of Tax Long Term Capital Gains 10% Short term capital gains (other than referred to section 111A) 30%
The above rates have to be increased by the applicable surcharge and education cess.
In case of long term capital gains, (in cases not covered under section 10(38) of the Act), the tax is levied on the capital gains computed without considering the cost indexation and without considering foreign exchange fluctuation.
24. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(38) of the Act) arising on transfer of a long term capital asset will be exempt from capital gains tax if the capital gains are invested within a period of 6 months after the date of such transfer for a period of at least 3 years in bonds issued on or after April 1, 2006 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, a company formed and registered under the Companies Act, 1956.
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25. The tax rates and consequent taxation mentioned above shall be further subject to any benefits available under the Tax Treaty, if any, between India and the country in which the FIIs has fiscal domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the FII.
Venture Capital Companies/Funds
In terms of section 10(23FB) of the Act, all Venture capital companies/funds registered with Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including dividend from and income from sale of shares of the company.
Mutual Funds
In terms of section 10(23D) of the Act, any income of the Mutual Funds registered under Securities and Exchange Board of India Act, 1992 or Regulations made there under, Mutual Funds set up by public sector banks or public financial institutions and the Mutual Funds authorized by the Reserve Bank of India would be exempt from Income tax, subject to such conditions as the Central Government may by notification in the Official Gazette specify in this behalf.
(C) BENEFITS TO THE MEMBERS OF THE COMPANY UNDER WEALTH TAX ACT
Shares of Company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of Wealth Tax Act 1957, hence shares are not liable to Wealth Tax Act, 1957.
(D) BENEFITS TO MEMBERS OF THE COMPANY UNDER GIFT TAX ACT, 1958
Gifts made after 1st October 1998 is not liable for any gift tax and hence gift of shares of the company would not be liable for gift tax.
The above statement of Possible 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 shares.
Notes: (i) All the above benefits are as per the current tax laws. (ii) The stated benefits will be available only to the sole/first named holder in case of joint holder of
shares. (iii) In view of the individual nature of tax consequences, each investor is advised to consult his/her
own tax advisor with respect to specific tax consequences of his/her investments in the shares of the company.
(iv) The content of this annexure is 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.
No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based o the existing provisions of the law and its interpretation, which are subject to change from time to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to SVPCL LIMITED, for any claims, liabilities or expenses relating to this assignment except to the extent of fees relating this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. We will not be liable to any other person in respect of this assignment.
FOR P. MURALI & CO., Chartered Accountants
PLACE: Hyderabad DATE: 15-09-2007 P. MURALI MOHANA RAO
Partner Membership No.23412
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SECTION V. ABOUT US
INDUSTRY OVERVIEW
Unless otherwise indicated, all financial and statistical data relating to the industry in the following discussion is derived from data available in the public domain, appraisal report, internal company reports and data, industry publications and estimates. This data has been reclassified in certain respects for purposes of presentation. For more information on the presentation of data, please refer to the section on Forward Looking Statements and Market Data on page ix in this Red Herring Prospectus.
The paper and paper products industries tend to be concentrated in countries that are industrially advanced and have abundant supplies of fibrous raw material, especially wood. There is a large-scale international trade in wood pulp, pulpwood and paper, flowing from those countries with large forest resources to those countries with fewer resources or those whose resources are not yet fully exploited.
Demand for paper and paper products can be said to be directly related to the level of human development. With globalization and increasing availability of printing and copying facilities in offices, increased focus on universal education by governments of developing nations, the production and consumption of paper continues to rise. People are the real wealth of nations. That simple truth is sometimes forgotten. Mesmerized by the rise and fall of national incomes (as measured by GDP), we tend to equate human welfare with material wealth. The importance of GDP growth and economic stability should not be understated: both are fundamental to sustained human progress, as is clear in the many countries that suffer from their absence. But the ultimate yardstick for measuring progress is people s quality of life. Real opportunity for the people of a nation is about having real choices the choices that come with a sufficient income, an education, good health and living in a country that is not governed by tyranny. Over the past decades there have been unprecedented increases in material wealth and prosperity across the world. At the same time these increases have been very uneven, with vast numbers of people not participating in progress. Mass poverty, deeply entrenched inequality and lack of political empowerment contribute to deny a large share of the world s population the freedom to make real choices. Moreover, GDP is still measured in a way that does not take into account environmental degradation and the depletion of natural resources. Education: Progress in education is critical for human development in its own right and because of the links to health, equity and empowerment. Here, too, the progress report is one of a glass half empty and half full. Much has been achieved but large deficits remain. Illiteracy patterns today are a legacy of education deficits of the past. Since 1990 adult literacy rates have risen from 75% to 82%, reducing the number of illiterate people in the world by 100 million. There has been less progress in gender equity. Women still account for about two-thirds of adult illiteracy the same as in the 1990s. Net primary enrolment ratios have increased across the developing world, and the gender equity gap in enrolment is shrinking in all regions. Set against this good news, the bad news is that 115 million children are still out of school and some 62 million of them are girls. Enrolment differences at the primary level capture an important dimension of progress in education, but only one dimension. In a knowledge-based global economy a good quality primary education is just a first step on a ladder and not a destination. In this broader perspective the inequality in the distribution of global education opportunities remains daunting. On average a child in Burkina Faso can expect less than 4 years of education, compared with more than 15 in most high-income countries. These large educational inequalities of today are the income and health inequalities of tomorrow.
The enrolment-completion gap.
Almost one child in five in developing countries drops out before completing primary school. In some cases high enrolment rates mask limited progress towards the acquisition of basic literacy and numeric skills. In countries such as Chad, Malawi and Rwanda fewer than 40% of the children who enroll in school complete a full primary education cycle.
Low rates of transition to secondary school and beyond.
In rich countries more than 80% of children who reach the end of primary school continue their studies at a lower secondary level. Over half go on to tertiary education. The picture is very different in Sub-Saharan Africa, where less than half of children make the transition from primary to secondary school. There are 37 countries with net secondary enrolment rates of less than 40%, 26 of them in Sub-Saharan Africa.
High levels of post-primary gender inequality.
While enrolment gaps between girls and boys are narrowing, large disparities remain at secondary and tertiary levels. The disparities reflect institutionalized gender discrimination that disadvantages women by restricting their choices and reducing their opportunities for income and employment. Because of the links between maternal education and child health, gender discrimination also holds back progress in child mortality reduction. Income
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poverty and distribution Income poverty has fallen in all regions since 1990, except in Sub-Saharan Africa. High economic growth in China and India has been the most powerful motor for reducing income poverty. (Source: Human Development Report 2006: www.undp.org)
THE ADOPTION OF THE Millennium Development Goals, drawn from the United Nations Millennium Declaration, was a seminal event in the history of the United Nations. It constituted an unprecedented promise by world leaders to address, as a single package, peace, security, development, human rights and fundamental freedoms. We will not enjoy development without security, we will not enjoy security without development, and we will not enjoy either without respect for human rights. Unless all these causes are advanced, none will succeed. The eight Millennium Development Goals range from halving extreme poverty to .providing universal primary education
all by the target date of 2015. They form a blueprint agreed by all the world s countries and all the world s leading development institutions
a set of simple but powerful objectives that every man and woman in the street, from New York to Nairobi to New Delhi, can easily support and understand. Since their adoption, the Goals have galvanized unprecedented efforts to meet the needs of the worlds poorest.
The Millennium Development Goals are based on a global partnership, stressing the responsibilities of developing countries for getting their own house in order, and of developed countries for supporting those efforts. These goals have unprecedented political support, embraced at the highest levels by developed and developing countries, civil society and major development institutions alike.
Some progress has been made in some areas; larger efforts are needed to meet the Millennium Development Goals in others. If current trends persist, there is a risk that many of the poorest countries will not be able to meet many of them. Considering how far we have come, such a failure would mark a tragically missed opportunity. The report shows that nations do have the means at hand to ensure that nearly every country can make good on the promises of the Goals. And the challenge is to deploy those means. The costs of missing this opportunity will be that millions of lives that could have been saved will be lost; many freedoms that could have been secured will be denied; and we shall inhabit a more dangerous and unstable world . (Source: Secretary General United Nations The Millennium Development Goals Report 2005: www.unstats.un.org)
Achieve universal primary education
Achieving universal primary education by 2015 is the Second among the Millennium Development Goals. Five developing regions are approaching universal enrolment. But in Sub-Saharan Africa, less than two thirds of children are enrolled in primary school. Other regions, including Southern Asia and Oceania, also have a long way to go. In these regions and elsewhere, increased enrolment must be accompanied by efforts to ensure that all children remain in school and receive a high-quality education. (Source: United Nations The Millennium Development Goals Report 2005: www.unstats.un.org)
Education for All (EFA): Education as a Human Right
A basic education is a right inherent to being human, each child's birthright and thus constitutes an end in itself. However, education is also a means to an end: it is required to ensure all people can live in a dignified manner and participate effectively in society. It also enables human beings to exercise all the other human rights (enshrined in the UN Declaration of Human Rights). Unfortunately there is often a gap between the language of "rights" and the setting of "development goals" (which are often more influential in defining the actions of governments). The Education For All Goals, that were reaffirmed at the Dakar World Education Forum in 2000, were unusual in recognizing the right to education:
all children, young people and adults have the human right to benefit from an education that will meet their basic learning needs Ensuring that by 2015 all children have access to and complete free and compulsory primary education of good quality.
The focus on Education as a Human Right leads the campaign to promote the entire Education for All agenda. Too many governments have been pressurized to make choices between investing in one part of EFA over another. But education rights cannot be traded off against one another. Adults and pre-school children have as much right to education as primary school children.
Delivering on the Education for All goals is not an act of charity by governments
rather it is their responsibility as governments to deliver on the right to education for all their citizens. If a government fails, it is not just that they are missing out on a globally agreed goal - rather they will be violating a basic right and should be held accountable. (Source: Global Campaign for Education www.campaignforeducation.org)
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Trends in Economic Development International Trade
One of the Millennium Development Goals is to bring down the existing extreme poverty levels by 50% by 2015. Accelerated developmental efforts including promotion of industry and trade, health, education and skill development for a vast population in the African and Asian continents are required for bringing down poverty in accordance with the UN declaration. That opening up economy, deregulation, bringing down tariff levels, and increasing trade help in improving income levels in general has been shown by the experiences of countries in the Asia and Pacific Region.
China and India together comprise over a third of the world s population; and since 1980, they have achieved remarkable rates of economic growth and poverty reduction. In many respects, China and India seem similar. Both are geographically large countries with enormous populations that remain very poor. In 1980 both had extremely low per capita incomes. Since then, GDP per capita has more than doubled in India and has increased a remarkable 7-fold in China. (Source: Accounting for growth Comparing China and India: Working Paper February 2007 National Bureau of Economic Research, Cambridge www.nber.org)
The countries of the Asia-Pacific region are renowned for the speed at which they have developed economically. Now they find themselves at a different frontier
trying to combine accelerated trade-driven economic growth with equally rapid poverty reduction and, more broadly, human development. One thing is certain
that Asia and the Pacific will remain at the forefront of global development and will offer fresh lessons to the rest of the world. (Source: Trade and Human Development- Asia Pacific Human Development Report 2006: www.undp.org)
Demand for paper products in the US and other markets
The number of pages of paper consumed in US offices is growing by 20% per year. The introduction of email into an office resulted in a 40% increase in paper consumption. A worldwide growth of 600% in printer accessibility during 1980s and 1990s has contributed to it. The US is by far the largest producer and consumer of paper and per capita consumption is over 6 times the world average. The global paper products consumption has tripled over the last three decades (1970 to 2000) and is expected to grow by 50% by 2010. (Source: www.forestethics.org)
Indian Scenario
Some of the demand drivers of paper products are:
1. Expenditure on education by government. 2. Robust Economic growth including healthy industrial growth 3. Growth in outsourcing of printing services from India
(a) Expenditure on Education by Government
India s rank among 179 countries of the World continues to be low at 127 and placed among some of the least developed nations, despite various measures taken by the Government according to the Human Development Report 2006 published by the United Nations (www.undp.org).
Rank Adult literacy rate (%) Rank Combined primary, secondary and tertiary gross enrolment ratio (%)
1. Georgia (100.0) 1. Australia (113.2)
105. Rwanda (64.9) 125. Syrian Arab Republic (62.6)
106. Malawi (64.1) 126. Cameroon (62.3)
107. India (61.0) 127. India (62.0) 108. Sudan (60.9) 128. Lao People's Dem. Rep. (61.0)
109. Burundi (59.3) 129. Cambodia (60.2) 128. Mali (19.0) 172. Niger (21.5)
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Government of India s National Policy on Education (NPE), 1986, as modified in 1992, emphasizes three aspects in relation to elementary education:
universal access and enrolment,
universal retention of children up to 14 years of age, and
a substantial improvement in the quality of education to enable all children to
achieve essential levels of learning.
Literacy rates in India have risen sharply from 18.3 per cent in 1951 to 64.8 per cent in 2001. Nevertheless, India continues to lag behind several other developing countries in the region such as China (86 per cent) and Sri Lanka (92 per cent). The National Literacy Mission (NLM) was launched on May 5, 1988 as a Technology Mission to impart functional literacy to non-literates in the country in the age group of 15-35 years in a time-bound manner. This age-group has been the focus of attention because they are in the productive and reproductive period of life. The NPE,1986, as modified in 1992, recognizes the NLM as one of the three instruments to eradicate illiteracy from the country, the other two being SSA and non-formal education. NLM s objective is to attain a sustainable threshold literacy rate of 75 per cent by 2007. The Total Literacy Campaign (TLC) has been the principal strategy of National Literacy Mission for eradication of illiteracy in the target age-group. These campaigns implemented by Zilla Saksharta Samities (District Level Literacy Societies) are area-specific, time-bound, volunteer-based, cost effective and outcome-oriented. At present, 137 districts are implementing TLCs, 165 districts Post Literacy Programmes and 295 districts Continuing Education Programmes. In addition, 157 Jan Shikshan Sansthan have been set up to provide vocational training to the neo-literates.
Gross Enrolment Ratio 2004-05 (I to VIII standards)
Gross enrolment ratio (GER) indicates the proportion of children in the 6-14 years age group actually enrolled in elementary schools. It has increased progressively from 32.1 in 1950-51 to 84.91 in 2003-04 and 94.23 % in 2004-05. With the rate of increase in GER of girls higher than that of boys, the gender gap in enrolment is declining. Drop-out rate at the primary level (Classes I-V) declined from 39.0 per cent in 2001-02 to 31.4 per cent in 2003-04. As on October 2005, number of out-of-school children, as reported by States/UTs, was down to 95 lakh from 320 lakh in 2001. (Source: Economic Survey 2005-06, 2006-07: www.indiabudget.nic.in)
Population growth shows addition of 81 million persons into the college going age group of above 15 years of age bracket. The number of educational institutions of higher learning has been growing and the present status is given below:-
India: Population projections (in millions)
Year 2006 2011 Percent growth
Total 1,112 1,193 7.28 Below 15 years 357 347 -2.80 15-64 years 699 780 11.59
(Source: Population Projections for India and States 2001-2026 Census of India 2001: Report of the Technical Group on Population Projections constituted by the National Commission on Population, May 2006).
Educational Institutions in India
Type of Institution No. of institutions Primary/Junior Schools 767520 Middle/Senior Schools 274731 High/Hr.Sec/Jr.College 152049 Colleges for Gen Edn 10377 Prof. Education 3201 Univ/Deemed Univ etc 500 Total 1208378
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THE IMMEDIATE FUTURE - ELEVENTH FIVE YEAR PLAN
Objectives: "Faster and More Inclusive Growth"; growth rate of approximately 10% by the end of plan period; growth of 4% in the agriculture sector, faster employment creation, reducing disparities across regions and ensuring access to basic physical infrastructure and health and education services to all.
Allocations for Major Sectors for fiscal 2007-08: Increase in provision for Bharat Nirman by 31.6% from Rs.18,696 crore to Rs.24,603 crore, for education by 34.2% to Rs.32,352 crore & for health and family welfare by 21.9% to Rs.15,291 crore.
Sarva Shiksha Abhiyan (SSA):
Increase in allocation for school education by 35% from Rs.17,133 crore to Rs.23,142 crore, of which Rs.10,671 crore for SSA, provision for strengthening of teachers training institutions to be increased from Rs.162 crore to Rs.450 crore with 200,000 more teachers to be appointed and 500,000 more class rooms to be constructed. Mid-day Meal Scheme to be provided Rs.7,324 crore; children in upper primary classes in 3,427 educationally backward blocks to be also covered; transfer to Prarambhik Shiksha Kosh to increase from Rs.8,746 crore to Rs.10,393 crore; provision for secondary education to double from Rs.1,837 crore to Rs.3,794 crore during 2007-08.
Means-Cum-Merit Scholarships:
National Means-cum-Merit Scholarship Scheme to be introduced to arrest drop out ratio; selection through a national test from among students who have passed class VIII; each student to be given Rs.6,000 per year; 100,000 scholarships to be awarded every year; a corpus fund of Rs.750 crore to be created this year, and augmented by a like amount annually over the next three years. (Source: Budget 2007-08: www.indiabudget.nic.in)
(b) Robust Economic growth including healthy industrial growth
Vigorous growth with strong macroeconomic fundamentals has characterized developments in the Indian economy in 2006-07 so far. From 3.8% during 2002-03, India s GDP has grown to 9.0 per cent and 9.2 per cent in 2005-06 and 2006-07 at constant prices and over 14% at current prices, respectively. (Source: Ministry of Statistics & Programme Implementation: www.mospi.nic.in)
The upward trend in growth observed in recent years is reflected in the Eleventh Five Year Plan target of an average annual growth of 10 per cent as compared to 8 per cent targeted by the Tenth Plan (2002-03 to 2006-07). The annual average growth of 7.6 per cent as compared to targeted growth of 8 per cent in the five years of the Tenth Plan is attributable to the very low growth rate of 3.8 per cent in the first year of the Plan and its subsequent surge to 8.6 per cent, on average, in the last four years.
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Gross Domestic Product Growth Pattern*
*Growth for 2007-08 as projected for the 11th Plan Period. See Budget Speech
28 February 2007: www.indiabudget.nic.in
Industrial Growth
There were distinct signs of sustained improvements on the industrial front. Entrenchment of the higher growth trends, particularly in manufacturing, has boosted sentiments, both within the country and abroad. The overall macroeconomic fundamentals are robust. With an upsurge in investment, the outlook is distinctly upbeat.
The expected overall annual growth of industry during the Tenth Plan period (2002-2007) at an estimated 8.7 per cent is short of the targeted 10 per cent growth rate for the Plan period. Considering the performance during the past couple of years, the Eleventh Plan (2007-2012) target of 10 per cent annual industrial growth appears reasonably achievable. Capacity additions through investment are critical for accelerating growth in industry. The investment scenario looks quite optimistic, particularly with rising domestic savings rates and FDI inflows. Sustained economic growth, fiscal consolidation and an enabling policy environment will continue to provide incentive to capacity addition in industry and sustaining its high growth. The following graph shows industrial growth pattern:
Industrial Growth in Percentage
Achieving the necessary escape velocity to move from tepid growth into a sustained high-growth trajectory requires careful consideration of two issues and three priorities. The two issues are: the sustainability of high growth with moderate inflation; and the inclusive nature of such high growth. The three priorities are: rising to the challenge of
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maintaining and managing high growth; bolstering the twin pillars of growth, namely fiscal prudence and high investment; and improving the effectiveness of Government intervention in critical areas such as education, health and support for the needy.
As declared by the Government of India, one of the areas of top priority for the government is improving the effectiveness of Government intervention in critical areas especially in the social sector. According to the Finance Minister, the goal of inclusive growth can be achieved only through effective government intervention in the areas of education, health and support to the needy.
Government Efforts on Human development
Human development essentially deals with equipping every human being into a physically and mentally healthy individual with freedom and wherewithal to achieve the best in him or her.
Government of India s efforts towards social sector development continues to focus on the key areas of human development and creation of social infrastructure. The importance of the recent efforts at improving social infrastructure assumes significance in view of India s relatively low rank of 126 (among 177 nations) in 2004, only one step higher compared to the rank in 2003, in the UNDP s global Human Development Report for 2006. Independent surveys on elementary education in the country have also pointed out the impossibility of achieving universal elementary education by the target date of 2007 and the low levels of achievement of the children passing out of the school system. The Sarva Shiksha Abhiyan of the Government needs to garner greater efforts to focus attention on the achievement of quality education at the elementary level. (Source: Economic Survey 2006-2007: http: indiabudget.nic.in)
The formation of appropriate skills through a wide variety of vocational training as well as optimal degree of flexibility of labour laws are important aspects employment growth in industry. Progress on these fronts will determine how much progress is made in generating employment in the organized industry in the years to come.
Outlook for Social Sectors:
Sustained and high levels of economic growth in recent years provide a unique opportunity and momentum for faster social sector development. The buoyant economy should not only generate adequate employment but also provide adequate and need based resources for large interventions in the critical areas of social sector. (Source: Economic Survey 2007: www.indiabudget.nic.in)
Correlation between economic growth and expenditure on education
There is a correlation between education and economic growth. The examples of countries like Germany, Japan and the Republic of Korea, in the 18th, 19th and 20th centuries respectively, suggest that an educated population is a springboard for jumping to high economic performance. The most successful trading countries have invested heavily in human development generating a healthy and well
educated workforce that has the stamina, the skill and the flexibility to cope with a changing trading environment. China, for example, long before it started opening up to the world at the end of the 1970s, already had good basic human development indicators. Education has to start with strong and universal primary schooling, but nowadays all countries need to make sure they have sufficient people with technical and managerial skills. India s success in selling IT services is a reward for heavy investment in technical education, almost all of it funded by the government.
(See: Trade for Human Development: An Eight-Point Agenda
Asia Pacific Development Report 2006: www.undp.org)
The funding of basic education has to essentially come from the national and state governments. The World Bank though had sometime flirted with the idea of fee-paying education now holds firmly that universal primary education will not be achieved unless it is both compulsory and free. Achieving that will require some states to economize on their spending at other levels.
Education as a human right endorsed by governments allows a full focus on global leaders' commitments to Education for All at a half way point to 2015. As the largest and most encompassing theme it could bring in a new
constituency of supporters and civil society groups to the campaign such as Amnesty International. (Source: www.unesco.org/education/efa)
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Human Development seems to have become the central theme politically and economically for developing nations across the world with education usurping the focal point. Industries providing educational aids stand to gain from this increased emphasis on education for all.
(c) Export of paper products and printing services from India
India s exports have been growing at a faster pace and year-on-year growth during the current financial year up-to January 2007 has been approx. 36% as shown below: INDIA'S EXPORTS
Rs. In lacs
January April-January
Provisional Provisionally
Revised Provisional Provisionally
Revised
EXPORTS (including re-exports)
2005-2006 3754974 4059678 33177101 36516912
2006-2007 42773.57 451167.67 %Growth 2006-2007/2005-2006 13.91 5.36 35.99 23.55
(Source: India s Foreign Trade: April- January 2006-2007- Government of India, Ministry of Commerce and Industry, Department of Commerce, Economic Division press release dated March 01, 2007)
The past few years have seen very good growth in outsourcing of various services from India in the fields of manufacturing and various fields such as processing and printing services. In view of the low cost of printing enabled by low wages and other overheads India is in an advantageous position to exploit the opportunities in the developed countries such as US and those in Europe. The increasing focus of developing countries in human development also provides good scope for exporting educational aids to these countries especially in the African continent. Providing contract printing and processing services to the US and European markets are other avenues to aggressively expand exports by Indian companies.
EXPORT OF PRINTING SERVICES: PRINTING OF BOOKS, PUBLICATIONS INCLUDING PRINTED MATERIALS:
Rs. in lacs April-July April-July
Particulars 2005-06 2005 2006 Books and Pamphlets Printed 455210 111730 151500 Newspaper and Periodicals 21820 6000 7500 Job Printing 100140 6540 n.a. Printed Materials 75330 29240 25000 Total 652500
153510
184000* (Source: CAPEXIL
www.capexil.com) *Provisional
Export of Exercise books, letter pads etc:
India exported exercise books and letter pads to the tune of Rs. 21687 lacs during 2004-05. Over 83% of the total exports of educational stationery have been to Africa, Europe, US and the Gulf countries such as UAE and Saudi Arabia.
Export of Exercise Books, Letter Pads 2004-05
Destination Percentage of Total
Africa 24.37%
Europe 25.92%
Gulf 7.04%
USA 25.92%
Total 83.25%
(Source: CAPEXIL
www.capexil.com)
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The quantum of export of educational and commercial stationery such as letter pads, envelopes, invoices, bills etc. is expected to rise because of the following reasons:
(a) India has the technological capability to provide educational and commercial stationery to the advanced markets of USA, Europe and Gulf countries at competitive prices because of the relatively lower costs while adhering to international quality standards;
(b) The adoption of the Millennium Development Goals globally is expected to see increasing trade and economic activity for reduction of poverty and education by the least developed countries especially in the African and Asian countries.
Demand Projections for Paper Products:
The Indian Finance Minister in his budget speech on 28th February 2007 stated The year 2007-08 will mark the beginning of the Eleventh Plan. The declared objective is "Faster and More Inclusive Growth". I can state with confidence that, on the eve of the Plan, the economy is in a stronger position than ever before. It therefore behooves us to set higher goals. The Approach Paper to the Eleventh Plan states that the Plan "will aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of its period." (Source: Budget Speech by Finance Minister 28th February 2007: www.indiabudget.nic.in)
The government s increased focus on education is expected to accelerate the demand for printing and writing paper.
The Indian Printing Industry
The Indian printing industry at large is still in the stages of development technologically. Quality printing services is not yet available across the country and is limited to very few printing houses.
When it comes to the state of Indian printing industry at large, even the basic printing needs are not properly met. The basic needs for the student community include routine textbooks, notebooks and other reading material on health, career, etc. Every year, in each academic session, we hear news of shortages of schoolbooks, which is a nightmare for the students. The quality factor in these printed materials is yet another important area which has been neglected altogether.
(Source: Print & Publishing February 2007: www.print-publishing.com)
There are a few printers in the corporate sector who have chosen to adopt state-of-the-art technologies and they are able to provide printing services qualitatively comparable to those in the US and Europe. But the majority is unable to rise beyond the routine printing jobs.
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Business Overview
Our business
We are paper product manufacturers in Southern India with production facilities spread strategically across Andhra Pradesh at Hyderabad, Vijayawada and Visakhapatnam Special Economic Zone.
We were originally promoted as a partnership firm in the year 1992, as the promoters saw good opportunity for paper products in a country with a growing population and strong governmental thrust towards increasing literacy levels. The partnership firm was promoted by Mr. K. Mallikarjuna Reddy, Mr. Sudhakara Reddy and Mr. Brahma Reddy for trading in various paper products like books, office stationery, computer stationery, blank and pre-printed forms, and high volume products like books and stationery and also to undertake printing and publishing work. Subsequently Mr. Brahma Reddy ceased to be a partner. In the year 1999 a private limited company in the name and style of Sri Vijayalakshmi Paper Convertors Limited was incorporated under the Companies Act, 1956 to take-over the business of the partnership firm. The company subsequently changed its name to SVPCL Limited. The promoters of the Company are Mr.K.Mallikarjuna Reddy, Mr. Sudhakara Reddy, Dr.Y.R.Nagarjuna Kumar, Mrs. K. Mahitha and Mrs. K. Aparna.
Our Business Strategy Our Business Strategy is to be the best and innovative provider of educational aids and printing services.The key elements of our business strategy are as follows:
Expand our decentralized bulk printing capabilities
We intend to add printing capacities by expanding all our printing facilities at Hyderabad, Vijayawada and Visakhapatnam. We also strive to equip our Visakhapatnam facilities with the most modern processing and printing equipments to cater to international clientele looking to outsource printing services from India.
Expand our distribution capability across India through our own and franchisee network.
We are focused to set up marketing centers across the country with emphasis on states and centers where the consumption of printed products needed by the educational and business sectors continue to grow.
Have arrangements for locally sourcing requirements as per our quality standards at places which are far off from our printing facilities and market the products under our brand names enabling us to price our products competitively.
We are looking for possibilities to source printing of stationery conforming to our quality standards and market under our brands at places which are far off from our printing facilities. This will enable economizing on transportation costs, enable us to price our products competitively and increase our reach and turnover.
Tie up with agencies abroad for sourcing of orders for printed products to enable us cater to the markets in the US, Europe, West Asia and Africa.
We have already entered into a Memorandum of Understanding with an agency in the United States for sourcing of orders for us. To have such tie ups with agencies elsewhere to exploit the potential in the export market for printing services, printed products etc.
Provide products and services adhering to the best quality standards
Our printing facilities are equipped with the best equipments from internationally well known manufacturers which enable us to ensure quality for our products.
Purchase of Property
There is no property which has been purchased or acquired or is proposed to be purchased or acquired which is to be paid for wholly or partly from the proceeds of the present issue or the purchase or acquisition of which has not been completed on the date of this red herring prospectus, other than property in respect of which:
(a) The Contract for purchase or acquisition was entered into in the ordinary course of business
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(b) nor was the Contract entered into in contemplation of the issue, nor is the ssue contemplated in consequence of the Contract; or
(c) The amount of purchase money is not material.
Manufacturing Activities
Our manufacturing units are equipped with state-of the-art machinery from reputed international manufacturers like Muller Martini, Komori, and Heidelberg which enable us to manufacture products of the best quality. Our products have been well received and we have been able to grow from a turnover of Rs. 1000 lacs during 2002-03 to Rs. 5576 lacs for the 9 months ended December 2006.
Turnover during the last 5 years
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acs
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We have been involved in the manufacture of paper products which can be broadly categorized into three viz. (a) Learning Aids, (b) Business Stationery and (c) Printing Services. The company provides specialized printing services such as multi-color annual reports, printed stationery, corporate brochures, printing of books, magazines etc. and trades in different kinds of paper. The company has been consistently making profits.
We manufacture products and provide printing services as tabulated below: Educational/Learning Aids Business aids/Commercial
stationery Printing Services
Textbooks Notebooks Workbooks Student Books Journals
Ledgers, Writing Pads folders & Files Pre-printed/Blank/EZR Computer Stationery
Annual Reports Brochures Letter pads Bills, Invoices Public Issue Stationery Directories Diaries Calendars School Chronicle Periodicals
Contribution of different segments for the year ended 31 March 2006
Product category Sales in MT Sales Rs. lacs
Percentage Contribution
Educational Aids 3760.24
1912.46
47.57
Business Aids 2477.82
1260.21
31.35
Printing Services 1666.22
847.44
21.08
Total 7904.28
4020.11
100
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The paper products industry, other than packaging, is projected to grow to 26.90 lacs tons by 2010.
4683; 64%
2690; 36%
Writing & Printing
Others
Educational Aids
We currently print books and textbooks; different kinds of note books and work-books and other educational stationery to cater to the entire educational sector. The printing industry is a very fragmented segment with substantial share of the business carried on by small players who do not have any standardized system of printing. There are only a few large scale manufacturers who provide standardized, good quality and fairly priced educational stationery.
Notebooks and workbooks are among the most important mediums in the learning process. However they are seen as just a sewn bundle of plain or lined sheets. We believe that the note books can be modeled into a tool to make the learning process much easier especially for subjects where the students need to learn a large number of things by heart.
We have introduced subject specific note books with overprinting of highlights of the prescribed subject material, utilizing the bottom margin area. Our endeavor is to help students and make it easier for them to learn and memorize subjects by providing important aspects in the note books. The note books are thus intended as an active learning aid for the students and are provided with no additional cost or reducing the space available for writing. This had been very well accepted by the student community.
We have been pursuing a focused strategy of creating a distinct brand image for our products in a market dominated by the unorganized sector. The products are sold under the following brands.
CLASSMATE
Educational stationery for schools and colleges, catering to the higher strata, quality conscious customers who can afford relatively higher prices.
LAVANYA - targeting the price conscious middle class customers. It is a medium range brand where the quality and costs are optimized.
Business aids:
Office Stationery is usually outsourced by us and marketed under our brand names to the corporate clients. This category of products include writing pads, Pads & Files, Directories, Dairies and Calendars etc. continuous stationery, paper products etc. The company supplies the same in bulk quantitative and gets it outsourced from the local and domestic market, under their brand name DESKMATE .
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Computer Stationery
Today computer stationery is one of the major requirements for all business houses. It is available either in single part, two parts and three parts and is designed as per the requirement of the client in 80 or 132 column.
Printing Service:
The company s printing activity among others includes the printing of books and text books, Annual Reports, Brochures, and Catalogues etc. We are one of the major players in the large volume-printing segment of the market. We have the capability and have been taking up volume print jobs for large corporate houses all over India.
Publications
In addition the commercial printing, we have since 2004 in developing publishing, magazines. We have generated our revenue through the publication of various magazines for Telugu Associations of Metro Atlanta,Teja in Telugu Language and Health Today, Doctor Choice & Discovery, School Chronicle in both English and Telugu.
Export of printing service
Our in-house DTP unit is presently manned by 3 personnel. We are proposing to strengthen the department by adding 5 more personnel to take care of the additional anticipated workload as well as to enable us to cater to the export market.
The pre-press processing department is equipped with necessary infrastructure such as computer systems and software. equipped with a range of software, for design and processing of the printing formats. For transferring the content to the printer we are currently using computer-to-plate system and an image-setter system. We propose to upgrade it to the computer-to-printer system doing away with the plate making and image setting system.
India is fast emerging as an outsourcing hub for printing jobs. In addition to volume printing, we believe there is good scope for offering specialized quality printing jobs to developed markets such as US.
We also attempted to study the international market on our own by short visits to Dubai, Germany, South Africa, Western Africa and Botswana. We find there are reasonably good potential for exporting educational material, annual reports, brochures etc to Arab countries and the African countries such as South Africa, Ghana, and Botswana etc. Similarly US and European markets have good demand for economically printed good quality scientific and educational books, children s books etc. The East Asian markets such as Singapore, Malaysia etc have demand for envelopes, greeting cards etc.
We have entered into a Memorandum of Understanding with M/s. Spalee Inc, 3401 Custer Road, # 160, Plano, Texas 75023, USA promoted by Mr. Shiva Poondhla, a non-resident Indian.
The details for Spalee Inc USA are given below:
1) Place of Registration-Texas USA 2) Year of Incorporation- 2002 3) Turnover of last FY of Operations-$ 375683 for the period (January 2006- December 2006)
The Memorandum of Understanding is a step towards entering the US market. Spalee Inc. will source the printing jobs to us for a commission of 5% of the order value.
Through the agents Spalee Inc we are endeavoring to move beyond bulk printing of commercial stationery cater to specialized requirements of different agencies in the US such as scientific and social organizations. Additionally, with the increasing focus in the developing nations in Africa there is reasonably good scope for export of educational stationery such as books and note books.
We propose to strengthen our content design capabilities by installation of specialized software for variable data printing, barcode printing etc which are available in the market. The expenditure for the purpose is proposed to be met from internal accruals. Paper Products
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These include copier paper, color/azure wove paper, these paper are mainly used for letter heads, paper used in Copier Services etc. This is a traditional product which is used by every person who needs paper in day to day activities, right from a Copier Service Person to a corporate client. The paper is purchased in bulk in reel form and is feed into the cutting machine; the usual size is A3, A4 or Foolscap. The reels are cut into the sizes as per the demand projection given by the marketing department.
Manufacturing Facilities:
The first manufacturing unit was set up at Vijayawada in 1999-2000. In the year 2003 we purchased a plot of land admeasuring 793.44 Square yards at survey No. 76-10-16, Gandhi Statue Road, Bhavanipuram, Vijayawada-520012 and constructed a factory with a built up area of approximately 27400 Sq. Feet.
We have also taken a piece of land admeasuring 1374 Sq. Meters on lease basis from Development Commissioner Special Economic Zone, Visakhapatnam for a period of three years from 18.05.2004. A manufacturing unit to cater to export market has been constructed.
The manufacturing unit at Hyderabad was located in our own premises at 206 A Concourse, 2nd Floor, Greenlands, Ameerpet, Hyderabad 500 016. The premises were found to be insufficient and unsuitable for installation of new machines as part of the ongoing expansion/modernization process. The manufacturing facility was shifted to the present location admeasuring 13600 square feet at Plot No- 11-13-173/11 &12 Plot No 2 &3 Survey No 100 village Fathe Nagar, Balanagar, Ranga Reddy Dist. Andhra Pradesh and is on lease from 14th June, 2006 to 13th June, 2011 for a period of five years taken from Excel Stationeries Ltd.
Machinery & Equipments
We propose to compete in the national and international printing market by adding latest and sophisticated printing and processing equipment to our existing set up.
Following are the details of Proposed Machinery Location wise
Rs. in Lacs
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Location wise availability of printing machinery and equipments is tabulated below:
HYDERABAD UNIT
Sr. No. Type of Machines No. of Units 1 5 Color offset printing Machine 1 2 Cutting Machine 1 3 Cutting machine 1 4 Two hole paper drill 1 5 Collators 3 6 Muller Martini Saddle Stitching Machine 1 7 Plate Processor 1 8 Plate Exposing 1 9 Slitting rewinding machine 1
10 Pack to pack machine 1 11 Roland Folders 2 12 2 color sheet fed printing machine 1 13 Strapping Machine 1 14 Web offset machine addl. Heat Set 1
VIJAYAWADA UNIT
Sr. No. Type of Machines No. of Units 1 Komari 4 Color Offset Printing Machine 1 2 Grapha Progress Web Offset Printing Machine 1 3 Web Offset printing Machine 1 4 Pack To Pack-Machine (Ryobi+ 1 5 Automatic Slitting, Re-winding, Reel to sheet
Converting Machine 1 6 Paper Cutting Machine 1 7 Cutting Machine Program 1 8 Automatic Cutting machine 1 9 Cutting, Stitching & Trimming machine 1 10 Cutting Machine 32" 3 11 Perfect Binding Machine (Glue Binding) 1 12 Three side Trimmer 1 13 Pin Machines 6 14 Spiral Binding Machine 1 15 Thread Sewing Machine 1 16 Shrink Wrapping Machine 1 17 Plastic Thread Strapping Machine 1 18 Packing Machines 2 19 Plate Punching Machine 2 20 Plate Making Machine 1 21 Ruling Machine 3 22 Ruling Machine 1 23 Carbon Collating Machine 1 24 Collating Machine 1 25 Reel Re-winding & Slitting Machine 1 26 Hot Press 1 27 1 color offset printing machine 1 28 Covers Dye Press 1
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VISAKHAPATNAM UNIT
Sl. No. Type of Machines No. of Units 1 4 Color Offset Printing Machine 1 2 1 Color Offset Printing Machine 1 3 Paper Cutting Machine 1 4 Proteck Plate Exposing System 1 5 Isolated Voltage Stabilizer & Transformer 1
Utilities
Power: The following table shows the present sanctioned load of power.
Location Sanctioned Load KW
Additional Required/Applied for KW
Total KW
Hyderabad 55 206 261
Vijayawada 88 150 238
Visakhapatnam 55 100 155
Total 198 456 654
Water
Particulars Hyderabad Vijayawada Visakhapatnam Bore well, Corporation Water & VSEZ 50,000 Ltrs Per
Month 90,000 Ltrs Per
Month 20,000 Ltrs Per Month
The printing process follows the same basic flow for all products. The steps involved in printing are:
Design and content generation;
Pre-press processing;
Printing (including ruling for student/exercise books);
Post-press processing (including binding and finishing).
Irrespective of the type of product to be printed, the printing process follows the same basic flow and uses the same groups of equipment. This allows flexibility and adaptability of the printing equipment allowing us to switch from one product to another with ease. Demand for products and customer expectations have been growing both in terms of range of products as well as in terms of quality. The flexibility of the equipment also allows us enough freedom for expanding our product range and to meet diverse printing demands of our customers. Our continuous endeavour is to provide products of quality standards as per the expectations of our customers and with the active involvement of our personnel we have been able to build up a reasonable amount of reputation and brand loyalty among our corporate clients. We have installed equipments and printing machinery of the best quality which is a part of our endeavour to ensure quality of our products.
Design and Generation of Content In designing our student/exercise books and stationery products, we continuously endeavour to develop an increasing range of quality standards and styles to cater to different sections of the social strata.
For our commercial printing products, our customers provide the content. Styling and formatting is done by our computer/data processing personnel in consultation with the customers to suit specific requirements.
Pre-Press Processing
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Pre-press processing includes formatting the content and creating the layout. For our own products such as educational and commercial stationery the pre-press processing from input of the content to the layout are carried out by our designing unit. For commercial printing operations, our customers in general provide the formatted content.
Our in-house DTP unit is presently manned by 3 personnel. We are proposing to strengthen the department by adding 5 more personnel to take care of the additional anticipated workload as well as to enable us to cater to the export market.
The pre-press processing department is equipped with necessary infrastructure such as computer systems and software equipped with a range of software, for design and processing of the printing formats. For transferring the content to the printer we are currently using computer-to-image-setter system -film-to-plate system. We propose to upgrade it to the computer-to-plate (CTP) system doing away with the image setting and film making system. This will greatly improve the quality of the final product.
Printing
Note book printing
Note book printing involves the cover page design and printing and ruling of the note books. We use Automatic Ruling Machines, Automatic Counting & Folding Machines, and Automatic Programmable Cutting Machine for the respective functions and Automatic Strapping for every 40 books. We also have one, two, and five colours web offset machines for printing of covers of the note books.
Printing of Text Books
The printing of text books involves designing the text pages and cover pages, text pages layout, preparation of films and plates for printing, printing, and stitching. We use multicolour Heatset Web Offset Machines and Multicolour Coldset Web Offset Machines for printing and Saddle Stitching machine and Glue Binding for perfect stitching and binding.
Printing of Magazines, Corporate Stationery etc
The printing of magazines starts with the designing the text pages and cover pages, text pages layout, finalizing the colour combinations, preparation of films and plates for printing, printing, and stitching. We use multicolour Sheetfed Machines and Five-colour Sheetfed Machine with UV Light for state-of-the-art perfect printing and Saddle Stitching machine and Glue Binding for perfect stitching and binding.
Post-Press Processing
For post-press processing such as folding, stitching and binding, trimming etc we use state-of-the-art automatic machines. The machines are equipped with counting and scanning systems which ensure optimum usage of paper and other material, perfect collation and assembly etc. The quality of the final product, thus, is of the highest order.
The infrastructure we have already and propose to create is one of the best among the organized printing houses in India which gives us an edge over the large number of competitors in the unorganized sector. Additionally the subject specific note books with overprinting of excerpts from the text books is further value addition to our student stationery range with gives us an edge over other competitors even in the organized sector.
Sales and Marketing
We believe we have been able to develop an effective sales and marketing network over the years. We continuously endeavour to provide best quality value added products to our customer community at competitive prices and according to their requirements. We have also brands to cater to different customer groups in the social strata. Our customer base has therefore been growing and the growth is evidenced by the increasing revenues we have been able to generate. For the financial statements please refer to the restated financial statements provided on page no. 93 of this Red Herring Prospectus.
Marketing
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Our sales and marketing team constantly target existing customers for the purpose of ascertaining their changing needs which enables us to retain our existing customers. We also endeavour to organise our marketing efforts on the lines of our target markets and product segments. The continuous interaction between us and existing and potential customers enables strengthening customer relationship with us.
Our Customers
Our marketing network includes approximately 250 dealers from whom the retail segment sources the requirements. Our commercial printing customers include various business concerns, including entertainment companies, financial institutions and publishers, as well as educational authorities.
List of Clients for whom the company is a preferred supplier along with the business share:
Sr No Name of Client % of Sales (05-06)
1 Vijaya Krishna Super Bazaar 3.00
2 SRS Agencies 2.00
3 Sri Venkateswara Book Depot 0.97
4 Srinivasa Book Manufacturers 0.97
5 Sri Rajeshwari Traders 0.93
6 Karvy Computershare Ltd. 0.75
7 CMS 1.39
8 Andhra Bank 1.32
9 ANL Parcel Service 0.37
10 Teja (New Weekly) 1.06
List of Clients to whom SVPCL has supplied in the past:
According to information provided by the company executives, SVPCL has had the following clients in the past: Corporate
Air Tel
Amway
ITC Bhadrachalam Paper Boards Ltd.
ARM Limited (cable division)
Tata Teleservices Ltd.
BMF Belting Ltd.
BOC Gases Ltd.
Voltas Ltd.
Karvy Consultants Ltd.
ECE Industries Ltd.
Everyday Industries Ltd.
Idea Cellular Ltd.
Reliance India Mobile - Andhra Circle
Malhotra Shaving Products Pvt. Ltd.
Myhome Cement
Kakatiya Cement
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Varun Motors Ltd.
Food World Ltd.
Gaatri Capital Ltd.
Aurobindo Pharma Ltd.
Dr. Reddy s Ltd.
Biological E Ltd.
Uni Sankyo Ltd.
The Professional Courier Ltd.
Pennaa Cement
Deccan Chronicle
Vaartha
Andhra Prabha
Andhra Bhoomi
Andhra Jyoti
Santosham
Human Resource We recruit manpower from the industry depending upon the requirement. We also engage workmen on daily wages basis for doing Semi skilled, unskilled work as when required. During the peak time the company employ additional labour force on daily wages basis directly. We maintain cordial relationship among the employees. The company doesn t foresee any problem for available of manpower any plant.
As on 1st March 2007 we had 166 employees out of which 65 are permanent employees as on 30th September, 2006. The distribution of permanent employees is as follows:-
Particulars Hyderabad Vijayawada Visakhapatnam Total Managerial 8 1 1 10 Supervisory 2 7 1 10 Clerical Staff 8 6 1 15 Skilled 6 8 0 14 Semi Skilled 6 4 0 10 Unskilled 4 2 0 6 Total 34 28 3 65
Raw Material Used
Sr. No. Name of Supplier
01 ECC Trading Pvt. Ltd. 02 Sri Balaji Enterprises 03 The Sirpur Paper Mills Limited 04 Ramchand Sivannarayan Sons 05 Siva Ganesh Paper Agencies (P) Ltd 06 A.P.Paper Mills Ltd 07 Murli Agro Industries Ltd.
Competition and Marketting
The key players in the organized segment are Blue Bird India Ltd. and Sundaram Multipap Ltd. The other listed companies who have part of their business in the stationery and printed products segment are Bilcare Ltd, TCPL. We also compete with a large number of players from the unorganized sector. We have a distribution network, consisting of 250 dealers/distributors, spread across South India and a few other states in India. We have been able to build up a reasonable amount of dealer loyalty and support which enable us to market our products effectively competing with products from the unorganized and organized sectors. With the proposed setting up of marketing offices across the country, we expect to achieve market penetration across the country and emerge as one of the important players in the paper products industry.
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71
PROPERTY OWNED Location Wise Owned Properties :-
Sr No
Description Of Property
Vendor
Agreement/Memorandum Of Understanding Date
Area (Sq. Mt.)
Amt. (Rs. In Lacs)
Details Of Registration
HYDERABAD :-
1 206 A, II Floor, Concourse, 7-1-58, Survey No. 191,192 & 130/2. Ameerpet, Hyderabad.
500 016
A) M/S. Dymes Exports Limited B) M/S. Dymes Engineers C) M/S. Dymes Engineers Private Limited D) Sri B. Sarat Gopal
31st
December 2003
1800 18.00 31-12-2003 Government Of Andhra Pradesh Receipt No. A
5573975 Dated 14-07-2005 Registrar Of Andhra Pradesh
VIJAYAWADA :-
01 Bhavanipuram, Vijayawada Town, Door No. 76-10-16
Mr. Sudhakara Reddy Mrs. K. Nirmala
16th April 2004
3157 24.63 04-07-2006 Government Of Andhra
Pradesh
Property Leased :-
Sr No
Description Of Property
Owner Of Property Lease Period
Lease Rent
01 Flat No.2 & 3, Ground Floor, 7-1-58, Concourse, Ameerpet, Hyderabad- 500 016
K. Mallikarjuna Reddy Eleven Months
Rs.34,500/- for first two years,10% increase on the above rent per month for second two years period and 10% increase on the rent per month existing at the end of second two year period, for the third two years period.
02 Flat No. 4, Ground Floor, 7-1-58, Concourse, Ameerpet, Hyderabad- 500 016
K. Sudhakara Reddy Eleven Months
Rs.27,000/- for First two years, 10% increase on the above rent per month for second two years period and 10% increase on the rent per month existing at the end of second two year period, for the third two years period.
03 Door No. 11-13-173 / 11 & 12, Plot No. 2 & 3, Survey No. 100, Fathe- Nagar (V), Balanagar (M), Ranga Reddy (Dist.)
a) M/s. Excel Stationeries Limited
14th June 2006 to
13th June 2011
Rs. 30,000/- P.M. for 13,600 Sq. Feet on 1st and 2nd Floor
04 SDF
II, No. 1 & 2 in the V.S.E.Z., Duvvada, District - Visakhapatnam
VSEZ Fifteen Years
Rs. 2,57,625 Yearly rent without any other deduction whatsoever Provided further that the lease rent shall be revisable after every Three years by the Lessor subject to the maximum not exceeding 25% of the last lease rent payable in respect of the demised premises.
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INDEBTEDNESS
We are currently enjoying following facilities from the below mentioned Banks, the details of which are as under:
Nature of Facility Sanctioned Amount
Amount Outstanding on 31.03.2007
Security
SECURED LOANS AXIS Bank Ltd Term Loan Cash Credit Letter of Credit Bank Guarantee
225.00 660.00 100.00 25.00
227.13 805.40
NIL NIL
State Bank of India
Term Loan-I II Cash Credit
133.99 419.00 490.00
95.51 346.74 484.96
First Charge on Current Assets present and future of the company, on Pari passu basis with UTI Bank to the extent of Rs. 660 lacs and State Bank of India to Extent of Rs.
Second Charge on Fixed Assets present and future except Vehicles acquired on hire Purchase scheme of the company.
Vehicle Loan ` HDFC Bank Tata Finance
Hypothecation of Vehicle owned by the company.
UNSECURED LOANS Loans from Directors
1. K. Mallikarjuna Reddy 2. K. Mallikarjuna Reddy (HUF) 3. K. Sudhakara Reddy 4. K. Sudhakara Reddy (HUF) 5. Y.R. Nagarjuna Kumar 6. K. Mahitha 7. K. Aparna
51.80
8.80
7.50
7.50 8.50 6.50 5.50 7.50
51.80
8.80
7.50
7.50 8.50 6.50 5.50 7.50
N.A. N.A.
Loans from Others 1. Venkataramanna R. HUF 2. Padmaja 3. Vijayasree 4. Rammohan R. 5. G.Rajshekhar 6. G.Rajshekhar (HUF) 7. O.Chandrashekhar 8. O.Chandrashekhar (HUF)] 9. Ishwaramma 10 Vinaykumar R. 11 Vikram Kumar 12 Brahama R. 13 V.Vijyakumar 14. Vainku R.
97.55
7.50 5.50 4.75 6.75 6.50 6.00 6.75 6.50
10.05 5.50 4.50 7.75 8.50
10.00
97.55
7.50 5.50 4.75 6.75 6.50 6.00 6.75 6.50
10.05 5.50 4.50 7.75 8.50
10.00
N.A. N.A.
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INSURANCE
We have taken different insurance policies covering the following:
Policies covering Building, Plant & Machinery:
THE NEW INDIA ASSURANCE CO. LTD (Rs. Lacs)
Sr No
Policy No Particulars Coverage Type Period Covered Sum Insured
Premium Amount
From To 1 2005/
61190211051100000377
Hyderabad Office :-
Furniture and Fittings- Furniture, Fixtures, Fittings, Electrical Fittings, Fittings and Interior Decoration
Standard Fire & Special Perils Policy
12/10/2006
11/10/2007
25.00
0.02
2 611902 /11/06/11/00000413
Hyderabad, Vijayawada,& Vishakhapatnam
Plant / Machinery and Accessories
Standard Fire & Special Perils Policy
24/10/2006
23/10/2007
1465.00 3.30
BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LTD . (Rs. Lacs)
Sr No
Policy No
Particulars Coverage Type Period Covered Sum Insured
Premium Amount
From To 1 OG-07-
1801-4001-00003237
Vijay
wada
On Plant & Machinery & Accessories related to Insured Premises
Standard Fire & Special Perils Policy
12/10/2006
11/10/2007
156.25 0.47
2 OG-07-1801-4001-00000-298
Vijay
wada
Stocks of Paper & Paper Products
Standard Fire & Special Perils Policy - Earthquake with Plinth and Foundation
12/04/2006
11/04/2007
449.50 0.69
3 OG-07-1801-4003-0000093
Hyderabad
&
Vijaya-
wada
Stocks of Paper & Other Related Stocks of Insured
Standard Fire & Special Perils Policy
Floater
12/10/2006
11/10/2007
582.50
1.94
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Policies covering Vehicles
Sr. No
Vehicle Number Policy Number Period Covered
1 Tata Indica DLG TC III
AP-09-BB-8357 611902/31/05/02712 08/02/2006 07/02/2007
2 Maruti Zen D- AP-16-AF-8774
611902/31/05/01/00003023 16/03/2006 15/03/2007
3 Tata Indica
AP-09-AX-9118 611902/31/06/00000 21/03/2006 20/03/2007
4 Maruti Alto LX
AP-09-AU-1047 611902/31/06/01/00000592 03/07/2006 02/07/2007
5 Tata Indica-DLX- AP-09-BE-0829
611902/31/06/01/00000832 01/08/2006 31/07/2007
6 Hyundai Accent GLS- AP-09-AZ-5545
611902/31/06/01/00000883 09/08/2006 08/08/2007
7 Tata Mobile-207/20- AP-09-X-1905
611902/31/06/01/00001444 17/10/2006 16/10/2007
Key Industrial Regulations & Policies
Apart from the regulations applicable to all industries, there is no special industry specific regulations applicable to the company.
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HISTORY OF THE COMPANY
SVPCL Limited was incorporated as a Limited Company on 26-11-1999 as Sri Vijaya Lakshmi Paper ConvertorsLimited and taken over the Partnership business of M/s. Sri Vijaya Lakshmi Paper Converters. The company was formed with the initial capital of Rupees 5 Lacs. SVPCL has grown up into medium paper converter industry manufacturing Student Note Book, Corporate Articles, Printing Materials, Promotional Materials, and Magazines & Computer Stationeries.
Our company has decentralized manufacturing facilities located at Hyderabad, Vijayawada and Vishakhapatnam to cater entire Andhra, Karnataka, Some part of Tamilnadu and Maharashtra.
The Installed Capacity of the company has increased from 1,500 MT in the year 2000to 19,500 MT in the year 2005 and proposed to increase from 19,500 MT to 34,000 MT during our present expansion programme.
The company has achieved a significant sales turnover from Rupees 150 Lacs in the year 2000 to Rupees 6938 Lacs in the year 2006-07 in just 7 years. The company has entered the export market by publishing magazines for Telugu Association of Metro Atlanta.
Considering the rapid growth in the business the company was indeed to increase its manufacturing facilities by adding sophisticated heat set web offset machine, perfect binder will be added to out existing facilities.
During the year 2006-07 the company has switched over the existing Term Loan and Working Capital from Andhra Bank to State Bank of India with competitive interest rates.
Major events in the history of the company
Date Event 1999-2000 Started Manufacturing Unit at Vijayawada by erecting various Machines 2003-2004 Expansion Made in Existing Vijayawada Manufacturing Unit
Installed Grapha Prograss Web Offset Printing Machine, Imported from Japan
Purchased Corporate Office at Hyderabad. 2004-2005 Started Manufacturing Unit at Hyderabad
Started Manufacturing Unit at Visakhapatnam
Installed Automatic slitting, Re-winding, Reel to Sheet Converting Machine. 2005-2006 Achieved Sales Turnover from 150 Lacs in 2000 to 6938 Lacs in 2006 -07. 2006 Shifted Entire Term Loan and Working Capital from Andhra Bank to State Bank of India.
Started Exports for U.S.A.
MAIN OBJECTS OF THE COMPANY
The main objects of the company are as follows
1. To carry on the business of Paper Converters, printers, publishers of books, lithographers, sterotypers, electropes, photografics printers, photo-lithographers, engravers, die-sinkers, envelope manufacturers, bookbinders, account book manufacturers, machine rulers, numerical printers, paper makers, paper bag and account book makers, box makers, files cardboard manufacturers, type founders, photographers, manufacturers and dealers in playing, visiting, railway, festive, complimentary and fancy card and valentines, dealers in ink, booksellers, publishers, dealers and in the materials used in the printing and for the furtherance of same.
2. To takeover the Assets and Liabilities of the partnership company in the name & style of Sri Vijaya Lakshmi Paper Convertors including its assets and liabilities.
3. To carry on in India or elsewhere the business to publish, print, produce, promote, organize, manage, acquire, run, maintain, amalgamate, establish, commercialize, control, circulate, develop, sponsor, import, export, equip, job work, market, operate, own, purchase, sell, protect, the business related to printing of business forms, computer stationery, security printing, carbonless products, main line barcodes, mailers, barcodes, barcode products, flexography printing and all types of printing activities and printing of newspapers, periodicals, magazines, pamphlets, journals, specific bulletins, souvenir, newsletters.
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Changes in Memorandum of Association and Articles of Association since incorporation
S.No. Date Particulars Remarks 1 03.02.2003 Increase in Authorized Share
Capital Rs. 10.00 Lacs to Rs. 130.00 Lacs Altered MOA & AOA
2 30.09.2003 Increase in Authorized Share Capital
Rs. 130.00 Lacs to 200.00 Lacs Altered MOA
3 19.11.2003 Division of Shares From Rs. 10/- to Rs. 5/- 4 19.11.2003 Increase in Authorized Share
Capital Rs. 200.00 Lacs to 500.00 Lacs Altered MOA
5 19.11.2003 Change of Name From Sri Vijaya Lakshmi Paper ConvertorsLimited to SVPCL Limited
6 19.11.2003 Alteration of AOA Insertion of Demat Clause 7 25.02.2005 Increase in Authorized Share
Capital Rs. 500.00 Lacs to 1200.00 Lacs Altered MOA
8 20.03.2006 Consolidation of Shares From Rs. 5/- to Rs. 10/- 9 16.10.2006 Alteration of AOA Adoption of new set of articles
10 23.03.2007
Increase in Authorized Share Capital
Rs. 1200.00 Lacs to 2500.00 Lacs Altered MOA
Financial Information of Group Companies /Subsidiaries
There are no group companies / Subsidiaries.
Agreements:
Other agreements: Memorandum of Understanding entered into with M/s. Spalee Inc, USA for marketing
1) Place of Registration-Texas USA 2) Year of Incorporation- 2002 3) Turnover of last FY of Operations-$ 375683 for the period (January 2006- December 2006) Brief Particulars of Memorandum of Understanding
Parties to MOU
Date of Signing of MOU
Scope of the MOU
SVPCL Limited, a public limited company incorporated under Companies Act, 1956 having registered office at 206A, 2nd Floor, Concourse, 7-1-58, Greenlands Road, Ameerpet, Hyderabad
500016 represented by its Managing Director Mr. K. Mallikarjuna Reddy herein after called the First Part; AND M/s Spalee Inc which is a going concern having its office at United States of America represented by its CEO, Mr. Shiva Poondhla hereinafter called the party of the Second Part;
18th day of October, 2006.
1. The first party undertakes the responsibility of manufacturing and printing of note books, stationery, Magazines etc for supply to Schools, Colleges, Universities and to other consumers located in the United States of America as identified by the second party.
2. As per the guidance and intervention of second party the above items should also be supplied to other business entities located in the United States of America for sale by them on retail basis.
3. The first party shall hereby undertake to maintain quality and replace such items not as per the accepted standards after conducting joint inspection.
4. The first party undertakes to be prompt in deliveries and is liable for liquidated damages for belated deliveries.
77
5. Transport costs for finished products to the destinations as proposed by second party shall be recouped/reimbursed to the first party based on the terms of the order governing such supplies.
6. The first party prepares invoices and delivers these invoices to second party from time to time for products supplied.
7. The second party undertakes the responsibility of approaching the recipients of products supplied by the first party and collects the dues and remit the same to the bank account of the first party
8. For these services rendered by the second party to the first party, the second party pays himself 5% (five percent) per invoice and balance only is remitted to the first party s bank account.
9. In case of bad debts second party does not get any payment by the first party.
Shareholders/Financial Agreement:
We do not have any shareholder agreement.
Strategic Partners:
We do not have any Strategic Partner.
Financial partners
We do not have any financial partners.
78
OUR MANAGEMENT
Board of Directors
The Board of Directors comprises of the following members.
Sr. No.
Name, Designation, Age and Address Age Date of Appointment in the Company
Other Directorships
1 MR. K. MALLIKAJUNA REDDY Executive : Managing Director DIN NO:01494680 S/o Mr.K Chinna Venkata Subba Reddy Flat No. 201, Surabhi Sri Sampada Apartment, 7-1-201, Srinivasa Nagar Colony, Hyderabad 500 038.
36 26/11/1999
Nil
2 MR. K. SUDHAKARA REDDY Executive : Executive DIN NO: 01352620 S/o Mr. K Venkata Subba Reddy Indira Towers, Flat No. 7, 2nd Floor, Abbas Khaji Street, Vijayawada 2.
43 26/11/1999
Nil
3 DR. Y. R. NAGARJUNA KUMAR Non - Executive and Non Independent DIN NO.: 01420317 S/o Mr.Y Venkata Krishna Rao 306, Manohar Bhavan Dwarakapuri Colony, Punjagutta, Hyderabad 500 082
44 31/05/2004
Nil
4 DR. K.SUDHAKARA REDDY Non - Executive and Independent DIN NO: 01420253 S/o Mr. K V Krishna Reddy 14
12
1 L.B.R Nagar, L.H.Reddy Building, Mylavaram, Balaji Nagar, Nellore 500 524
57 31/05/2004
Nil
5 DR. K. SESHAIAH Non - Executive and Independent DIN NO: 01529232 S/o Mr.K Nagaratnam Flat No. 201, Vibhevari Block, Narayan Vihar, Nehru Nagar, Tirupati 517502.
62 03/02/2003
Nil
6 MR. P.P. REDDY Non - Executive and Independent DIN NO: 01483433 S/o Mr.P D Rami Reddy 231 - E, IInd Floor, Kalyan Nagar, Hyderabad 500 038.
61 26/04/2006
Nil
7 MR. K. V. KONDAIAH SASTRY Non - Executive and Independent DIN NO: 01702212 S/o Mr.K Satyanarayana Flat No. 501, Block A, Sri Sai Heights, Street No.8, S.S.Nagar, Habsiguda Hyderabad 500 007
61 22/06/2006
Nil
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Brief Profile of Directors of the Company
The Company is currently managed by Board of Directors comprising of Seven Directors. The day to day affairs of the company are being managed by Mr. K. Mallikarujna Reddy, Managing Director under the Guidance and supervision of Board of Directors. The Board of Directors Comprises of the Following
Mr. K. Mallikarjuna Reddy, Age 36 years, is a graduate in Commerce and has about 10 years experience in the Manufacturing and marketing of educational and stationery products. He looks after the day to day affairs of the company. He has been able to build up a network of dealers to take care of the marketing and distribution of our products. He is fully conversant with the Technicalities of the printing processes which are being managed by experienced professionals.
Mr. K. Sudhakara Reddy, Age 43 years, Whole time Director, has around 15 years of experience in manufacturing and marketing paper products. He is looking after production planning and Quality Control. He has been able to stipulate, adhere and maintain quality standards for our products as well as enforce adherence to production schedules. He is also experienced and adept in human resources management and has been responsible for cordial industrial relationship with the workman. He is also looking after the implementation of the expansion project.
Dr.Y.R.Nagarjuna Kumar, M.B.B.S - M.D, Age 44 years, Director, a reputed gastroenterologist from Hyderabad. Dr. Nagarjuna Kumar is a medicalpractitioner with his own clinic as also renders services in the Government Hospitals.
Dr. K.Seshaiah, Age 62 years, M.Com, Ph. D, Director, is a reputed academician associated with various authors and institutions for printing and publishing various books required by the vast student community in the country. Dr. Seshaiah s rich experience and guidance help us to be ahead of the competition in the educational printing segment. He is a former professor from the S.V.University and is chairman for Board of Studies, Board of examinations, and various Inspection Commissions. He is also Coordinator of I.C.C and founder for M.F.M. course. He is also a panel member for U.G.C. Research Projects and A.I.C.T.E. He is having over 30 years of experience in the field of education.
Dr. K. Sudhakara Reddy, Age 57 years M. Tech Ph.D., Director, is also the principal of the L.B.College of Engineering and Technology. He is an able administrator and strategist and the company benefits from his strategic planning abilities. Has indepth understanding about the educational sector and the role of technology savvy educational aids providers like us. His knowledge in the fields of technology and new developments in equipments is a major advantage for the company; Dr. Reddy also guides us in the choice of technology and selection of state-of-the-art equipments.
Mr. P. P. Reddy, Age 60 years, Graduate in Science is a Businessman. Has over 35 years experience in various industries including paper products. With his experience in paper products industry Mr. Reddy helps us in planning business strategies.
Mr. K. V. Kondaiah Sastry, Age 61 years. He is a Member of Institute of Charted Accountants of India. . He retired from the services of Singareni Colleries` Company Limited (SCCL), a Public Sector Undertaking, as General Manager (Finance and Accounts). Has over 38 years experience in finance, industrial development and rehabilitation of industries. His experience in finance helps the company in the management of finance, cost control and accounting policies.
RELATIONSHIP BETWEEN DIRECTORS AND PROMOTERS AND DIRECTORS OF THE ISSUER COMPANY
The details of relationship between Directors and or Directors and Promoters are given below:
Mr. K. Mallikarujna Reddy and Mr. K. Sudhakara Reddy who are brothers.
Mrs. K.Mahitha Promoter is wife of Mr. K.Mallikarjuna Reddy, Managing Director
Mrs. K. Aparna is wife of Mr. K.Sudhakara Reddy, Wholetime Director
80
Mr. K. Ram Mohan Reddy (Promoter Group) is brother of Mr. K.Mallikarjun Reddy, Managing Director
Mrs. G.Venkataratnamma (Promoter Group) is elder sister of Mr. K.Mallikarjun Reddy and Mr. K. Sudhakara Reddy
Mrs. K. Nirmala (Promoter Group) is the mother of Mrs. K. Mahitha
Mrs. G.Sreelakshmi (Promoter Group) is sister of Mr. K.Mallikarjuna Reddy and Mr. K. Sudhakara Reddy
DETAILS OF BORROWING POWERS
Vide a resolution passed at the Annual General Meeting of the company held on 30th September, 2006, Consent of the members of the company was accorded to the Board of Directors of the company pursuant to the provisions of section 293(1)(d) and other applicable provisions, if any, of the Companies Act, 1956, consent of the Company be and here-by accorded to the Board of Directors of the Company for borrowing from time to time, as they may consider fit, any sums of money, together with the monies already borrowed by the company (apart from the temporary loans obtained from the companies bankers in the ordinary course of business) will exceed the aggregate of paid- up share capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose so that the total amounts of monies so borrowed at any time shall not exceed the sum of Rs. 100,00,00,000/-(Rupees Hundred crores only) for the purpose of expansion and business development of the Company.
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Terms and conditions of appointment of Managing Director and Whole Time Directors
Name Mr. K. Mallikarjuna Reddy
Designation Managing Director
Period of appointment
03-02-2003 to 02-02-2008
Salary Rs. 80,000 per month w.e.f 01.10.2006
Perquisites
Part-A
a) House Rent Allowance: HRA will be given as per company norms.
b) Medical reimbursement: Reimbursement of medical expenses actually incurred for self and family including dependent parents, subject to a ceiling of one month s salary per year or 3 months salary in a block of 3 years.
c) Leave Travel Concession: For self and family once in a year as per the rules of the Company.
d). Club fees: Fees of club subject to a maximum of 2 clubs will be allowed, provided no admission or life membership will be allowed.
Part-B
Pension, Provident Fund, Superannuation benefits and gratuity as per the rules of the Company subject to the ceilings as per the guidelines for Managerial remuneration in force from time to time. Part-C
a]. Car : Use of Company's car with driver for official purposes. b]. Telephone : Free telephone / Communication facility at residence for business purposes.
IV. Other Benefits Leave
On full pay and allowances as per the rules of the Company, but not more than one month s leave for every 11 months of service. Leave not availed of shall be allowed to be encashed at the end of the tenure and the same will not be included in the computation of the ceiling on perquisites.
Date of Approval of the terms of appointment
06-01-2003
Authority Board of Directors
82
Name Mr. K. Sudhakara Reddy
Designation Whole Time Director
Period of
appointment 19-11-2003 to 18-11-2008
Salary Rs. 70,000 per month w.e.f 01.10.2006
Perquisites
Part A
A] Medical Reimbursement Reimbursement of medical expenses actually incurred for self and family including dependent mother and father, subject to a ceiling of one month s salary per year or 3 months salary in a block of 3 years.
B] Leave Travel Concession For self and family including dependent father and mother, to and from any place in India, once in a year in accordance with the rules of the Company.
C] Club Fees Fees of Club subject to a maximum of 2 clubs will be allowed, provided that no admission or life membership fees shall be paid.
Part B
A] Provident Fund Company s contribution to provident Fund as per the scheme of the Company.
B] Pension / Superannuation Fund Company s contribution to Pension / Superannuation Fund in accordance with the scheme of the company.
(Note: The contribution towards Provident Fund Pension / Superannuation Fund will not be included in the computation of the ceiling on perquisites to the extent these either singly or put together are not taxable under the Income Tax Act, 1961).
C] Gratuity As per the rules of the Company, payable in accordance with the approved fund at a rate not exceeding one-half months salary for each completed year of service.
Part C
A] Car Use of Company s car with driver for business purposes.
B] Telephone Free Telephone / Communication facilities at residence for business purposes.
IV. Other Benefits
Leave
On full pay and allowances as per rules of the Company but not more than one months leave for every 11
months of service. Leave not availed of shall be allowed to be encased at the end of the tenure and the same will not be included in the computation of the ceiling on perquisites.
Date of Approval of the terms of appointment
13-11-2003
Authority Board of Directors
83
Remuneration Paid to Non-Executive Independent Directors
Non-executive Independent Directors are not entitled to any remuneration except for the sitting fees for attending meetings of Board of Directors or any Committee meetings of the company.
CORPORATE GOVERNANCE
The provisions of the listing agreement to be entered in to, with the stock exchanges with respect to corporate governance are applicable to company immediately upon listing of our company s equity shares on the stock exchanges. The company has complied with SEBI Guidelines in respect of Corporate Governance Clause 49 of the Listing agreements specifically with reference to broad basing the board, constituting of committees such as Audit Committee, Remuneration Committee and Share Holder s/ Investors Grievances Committee. The primary responsibility to adopt high standards of corporate governance in all areas including providing necessary disclosures within the framework of legal provisions with commitment to enhance shareholders value vests with the Board of Directors. The details are under:
COMPOSITION OF BOARD OF DIRECTORS
The Board of Directors comprise of Elective, Non Executive and Non Independent Directors and Non Executive Non Independents as under
Sr. No.
Name of the Director Designation Status
1 Mr. K.Mallikarjuna Reddy Managing Director Executive &Non Independent
2 Mr.K.Sudhakara Reddy Wholetime Director Executive &Non Independent
3 Dr.Y.R.Nagarjuna Kumar Director Non Exe &Non Independent
4 Mr.P.P.Reddy Director Non Exe & Independent
5 Mr.K.V.Kondaiah Sastry Director Non.Exe & Independent
6 Dr. K.Sudhakara Reddy Director Non.Exe & Independent
7 Dr. K. Seshaiah Director Non.Exe & Independent
The Company has formed the following committees pursuant to clause 49 of the Listing Agreement:
Committees of the Board
Audit Committee :
The Company has an Audit Committee of Board of Directors consisting of Three Directors.
* Mr.Y. Sriniwas Arun, Company Secretary, will act as Member Secretary to co-ordinate and conduct the proceedings of the committee.
The terms of reference of the Audit Committee are as under:
1. To review with the management, the quarterly financial statements before submission to the board for approval.
2. To review with the management, performance of the Statutory and internal auditors, adequacy of internal control system.
Sr.No. Name of the Directors Designation Nature of Directorship 1 Mr.K.V.Kondaiah Sastry Chairman Non Executive & Independent 2 Mr.P.P.Reddy Member Non Executive & Independent 3 Dr.K.Seshaiah Member Non Executive & Independent
84
3. To review the adequacy of internal audit function and the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.
4. To discuss with internal Auditors any significant findings and follow up thereon. 5. To discuss with statutory auditor before the audit commences about the nature and scope of audit as
well as post audit discussion to ascertain any area of concern. 6. To review with the management the annual financial statements before submission to the board for
approval with reference to:
Matter required to be included in the Director s Responsibility statement to be included in Board report in terms of clause (2AA) of section 217 of the Companies Act, 1956.
-Changes if any, in accounting policies and practices and reason for the same -Major accounting entries involving estimates based on exercise of judgment by management.
-Compliance with the listing and other legal requirement relating to financial statement. -Disclosure of any related party transactions -Qualification in the draft audit report
-To carry such other function as is mentioned in the terms of reference of Audit Committee.
Remuneration Committee
The Remuneration Committee of Board of Directors consisting of Three Directors.
* Mr.Y. Sriniwas Arun, Company Secretary, will act as Member Secretary to co-ordinate and conduct the proceedings of the committee.
The terms of reference of the Remuneration Committee are as under: 1. To fix the Salary & Perquisites of Executives of the company 2. To consider and grant annual and special increments to the executives of the company and to confirm
the adhoc special increments granted to staff and executives of the company. 3. To consider the profits of the company and to decide about the adequacy of profits of the company. 4. To consider the adequacy of profits of the company and to consider remuneration payable to the
Managerial persons as per requirement of the companies Act, 1956 and Schedule XIII of the companies Act.
5. To approve the remuneration payable to the managerial personnel of the company in case of inadequacy of the profits
6. To take all other consequential and incidental action and measure.
Share Transfer and Investors Grievence Committee
The Share Transfer Committee constitute the following Directors of the Board.
Sr.No. Name of the Directors Designation Nature of Directorship 1 Mr.K.Mallikarjuna
Reddy Chairman Executive & Non
Independent 2 Mr.K.Sudhakara Reddy Member Executive & Non
Independent 3 Mr.P.P.Reddy Member Non Executive
&Independent
* Mr.Y. Sriniwas Arun, Company Secretary, will act as Member Secretary to co-ordinate and conduct the proceedings of the committee.
Sr.No. Name of the Directors Designation Nature of Directorship 1 Dr.K.Seshaiah Chairman Non Executive & Independent 2 Mr.P.P.Reddy Member Non Executive & Independent 3 Mr.K.V.Kondaiah Sastry Member Non Executive & Independent
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The terms of reference of the Share Transfer Committee are as under:
1. To scrutinize the Share transfer application forms received by the Company and if found in order in all respects, to register transfers of shares in the Register of members of the company.
2. To scrutinize the various documents received by the company, namely Death certificates, Marriage certificates, succession certificates, letter of indemnity in favour of the company, probate of wills of the shareholders and if found in order to register transmission of shares in the Register of members of the Company;
3. To register the various documents as mentioned above in the register of Documents maintained by the company.
4. To approve the issue of split share certificates and new share certificates in place of defaced, torn, damaged and soiled share certificates on receipt of proper application and other required papers and documents from the shareholders;
5. To sign the share certificates and to affix the company s Common seal on them in accordance with the provisions of the Companies Act, the Companies (Issue of Share) Certificates Rules, 1960 and those of the Articles of Association of the company, and
6. To take all other consequential and incidental action and measure.
Investor Grievance Redresal
1. To look in to redressal of shareholder and investor complaints 2. To receive complaints from the shareholders regarding non receipt of Balance Sheet, Non receipt of
declared Dividend, Non inspection of the Statutory Records, non-receipt of the copy of records as required by the Act to be given to shareholders.
3. To reply to the investors and shareholders on their queries. 4. To inform the shareholders regarding provisions of various Acts and the redressal agency for their
grievance. 5. To take all other consequential and incidental action and measure.
IPO COMMITTEE
The IPO Committee was constituted the following Directors.
Srno. Name of the Directors Designation Nature of Directorship 1 Mr.K.Mallikarjuna Reddy Chairman Executive & Non Independent 2 Mr.K.Sudhakara Reddy Member Executive & Non Independent 3 Mr.K.V.Kondaiah Sastry Member Non Executive & Independent
* Mr. Mr.Y. Sriniwas Arun, Company Secretary, will act as Member Secretary to co-ordinate and conduct the proceedings of the committee.
Shareholding of Directors, including qualification shares held by them:
Sr. No.
Name of the Director Designation Shares Held
1 Mr. K.Mallikarjuna Reddy Managing Director 1904000
2 Mr.K.Sudhakara Reddy Wholetime Director 1077550
3 Dr.Y.R.Nagarjuna Kumar Director 1228150
4 Mr.P.P.Reddy Director 88350
5 Dr. K.Sudhakara Reddy Director 49150
6 Dr. K. Seshaiah Director 50000
Directors are not required to hold qualification shares as per Articles of Association of the company.
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INTEREST OF DIRECTORS All the Directors may be deemed to be interested to the extent of reimbursement of expenses, if any, payable to them under the articles. The Directors may also be deemed to be interested to the extent of the shares, if any, held by them or by the relatives or by firms or companies of which any of them is a partner and a Director/ Member respectively and the shares if any, out of the present Offer that may be subscribed for and allotted to them or their relatives or any Company in which they are Directors / members of firms in which they are partners.
Changes in the Board of Directors during the last three years and reasons thereof:
Sr. No
Name, Designation, Qualification, father s name, address occupation, Term, Date of Birth and age
Date Appointment / Resignation
Reason for Change
1 MRS. K. NIRMALA 31-05-2004 Resignation Other preoccupations
2 DR. Y. R. NAGARJUNA KUMAR 31-05-2004 Appointment as an Additional Director Strengthening the Board
3 DR. K. SUDHAKARA REDDY 31-05-2004 Appointment as an Additional Director Strengthening the Board
4 MR. P.P. REDDY 26-04-2006 Appointment as an Additional Director Strengthening the Board
5 MR. K. V. KONDAIAH SASTRY 22-06-2006 Appointment as an Additional Director Strengthening the Board
87
MANAGEMENT ORGANISATION STRUCTURE
88
Key Managerial Personnel
The details of key managerial personnel are as follows:
Sr.No
Name Age Date of Joining
Designation Qualification Exp in (yrs.)
HYDERABAD 1 Mr.Y.V.Sheshatalpa
Sai 51
05-02-2007 Chief Executive Officer
MBA,LLM,ACS,CAIIB
30 years
2 P. Kodanda Ramaiah 56 01-02-1998 General Manager B.Sc. 12 Years 3 Mr.Y. Sriniwas Arun 30 02.07.2007 Company Secretary B.Com, ACS 3Years 4 Mr.V.V. Rao 54
19-06-2007 General Manager Finance
B Com FCA
27 Years
5 D. Madhusudhan Rao 35 15-12-1999 Manager (Marketing) B.Com, M.Com 12 Years 6 P. Ashok 34 06-08-2005 Purchase
Executive B.Com, DCA 10 Years
VIJAYAWADA 7 D. Prasad 30 01-07-1996 Commercial Manager B.Com 10 Years 8 R.R.Srinivas 36
01-02-1998 Web Designer B.Com, PGDCA,
Web Designing 8 years
Mr. Y.V.Sheshatalpa Sai, 51 years is Chief Executive Officer entrusted with overall charge of the Company including Finance, Accounts and Administration. Mr. Sai holds Masters Degrees in Business Administration and Law and is an Associate Member of the Institute of Company Secretaries of India. He is also a Chartered Associate of the Indian Institute of Bankers and has about 30 years of experience in Banking, having worked with Corporation Bank and Laxmi Vilas Bank. He takes care of all our administrative matters, Finance and Accounts assisted by a team of experienced professionals.
P. Kodanda Ramaiah, Age 56 years, Science Graduate, General Manager, has overall charge over Production and Marketing. Has more than 20 years of experience in similar industry. He is responsible for production planning, Quality Control, marketing strategies. developing Marketing policy and production planning. He has also successfully implemented projects and installed latest technical know how to the company. He is also fully conversant with Quality of the product and timely delivering.
Mr.Y. Sriniwas Arun, Company Secretary Age 30 years. He is a Commerce Graduate and an Associate Member of Institute of Company Secretaries of India. He has over 3 years experience in Finance and Administration. Prior to joining our company he was working as Manager Finance and Administrationwith Re-distribution Stockists of Nokia India Private Limited, namely M/s Snacharika, Bhagalpur. He takes care of the Secretarial functions and Administration of the company.
Mr. V.V.Rao, General Manager Finance, Age 54 years, is a Commerce Graduate and Fellow Member of the Institute of Chartered Accountants of India. He has over twenty-seven years of experience in Accounts and Finance in various industries. He is responsible for the Accounts and Finance function of the company including internal control function..
Mr. D.Madhusudhan Rao, Manager Marketing: Age 35 years, Post Graduate in commerce from Osmania University of Hyderabad. He joined the company during the inception. During his tenure the company has expanded its marketing network and he is instrumental in developing strategic collection and laying down strategies for marketing.
Mr. P. Ashok, Age 34 years, Purchase Executive, Graduate in Commerce from Osmania University of Hyderabad. He has over 10 years experience in Raw Material procurement and inventory management. Prior to this he has worked with Minwool Rock Field as a Commercial Executive. He is responsible for controlling inventory of Raw Material and Finished stock.
Mr. D. Prasad, Age 30 years, Graduate in Commerce, Commercial Manager having 8 years experience in similar industry. takes care of entire production, inventory and day to day affair of the Plant at Vijayawada and he reports to whole time director Mr. Sudhakara Reddy. He is overall in charge of the plant.
89
Mr. R.R.Srinivas, Age 36 years, Graduate in Commerce, PGDCA, Web Designing, Web Designer having 8 years experience in art work and DTP. He is responsible for the designing, printing, and meeting dispatch schedules.
Bonus or Profit Sharing Plan for Key Managerial Personnel
There is no bonus or profit sharing plan for Key Managerial Employees. The key managerial personnel of the Company do not have any interest in the Company other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business.
Interest of Key Managerial Personnel
Our key managerial personnel do not have any interest in our company except to the extent of remuneration or benefits to which they are entitled to as per the terms of their appointments and reimbursement of expenses incurred by them during the ordinary course of business.
Except as stated otherwise in this Red Herring Prospectus, we have not entered into any contract, agreement or arrangement during the preceding 2 years from the date of this Red Herring Prospectus in which the key managerial personnel 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.
Shareholding of Key Managerial Personnel in the Company
None of the Key Managerial Personnel hold any Equity Shares of the Company in their personal capacity as at the date of this Red Herring Prospectus.
Changes in Key Managerial Employees during the last one year
There have been no changes in key managerial personnel during the last one year except resignations as detailed below and appointments made by the Company as mentioned in the table for key managerial personnel.
Name Designation Date of Joining
Date Of leaving
Reasons of Leaving
Mr.Y. Sriniwas Arun Company Secretary 02-07-2007 N.A.
Disclosure Regarding Employee stock Option Plan
The Company has not issued shares to its employees and does not have scheme of Employee Stock Option Plan (ESOP)
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OUR PROMOTERS
K. Mallikarujna Reddy, Age 35 years, young and dynamic and Graduate in Commerce having long and varied experience in the Manufacturing Business. The Marketing is his forte. He has nearly 10 years of experience in manufacturing and marketing of educational and stationery products. He is looking after the day to day affairs of the company and looks after the marketing and commercial aspects directly under the professional team. He has built a network of wide dealers and well connected with the paper in the market as well as the industry. He has proven leadership qualities required to build a dedicated team of manpower responsible for the growth of the company. He is Managing Director and overall in- charge of all the activities of the company. He is fully conversant with the Technicalities of the Production which are being managed by experienced professionals recruited from the Paper Industry. Although professional have been recruited in the paper converter industry for carrying out various production activities Mr. K. Mallikarjuna Reddy is fully conversant with technology and day to day demand of the end user customer s.
K. Sudhakara Reddy, Age 43 years, Whole Time Director, Graduate in Commerce, the work horse of the company, has around 15 years of experience in manufacturing and marketing paper products. He is looking after production planning and Quality Control. His dedicated attention is the result of high quality products of the company and strict production schedules maintained by him has endeared him to the market. He has an excellent track record in human resources management, with due credit to him, the company has not lost a single day due to cordial or industrial relationship with the workman. His inventory management is major advantage to the company. He is responsible for erection and commissioning of new projects. He is instrumental in setting up Plant and Machinery for the new factory at Hyderabad and developing new products of the company from concept to delivery.
Name Mr.K.Mallikarjuna Reddy Residential Address Flat No. 201, Surabhi Sri Sampada Apartment, 7-1-
201, Srinivasa Nagar Colony, Hyderabad 500 038. PAN AKGOK3343N Bank A/c no. Andhra Bank, Ameerpet Branch.Hyderabad. A/C
No. ABJ / 01/ 05. Voter ID NA Passport No. E7803284
Driving License no. DLDAP009350412003
Name Mr.K.Sudhakara Reddy
Residential Address Indira Towers, Flat No. 7, 2nd Floor, Abbas Khaji Street, Vijayawada 2.
PAN AMDPK9619E
Bank A/c no. Andhra Bank, Ameerpet Branch, Hyderabad. A/C No. ABJ / 01/ 07
Voter ID NA
Passport No. E5589272
Name Dr.Y.R.Nagarjuna Kumar
Residential Address 306, Manohar Bhavan Dwarakapuri Colony, Punjagutta, Hyderabad 500 082.
PAN AAUPY4107A
Bank A/c no. Andhra Bank, NIMS Branch, Punjagutta, Hyderabad A/C No. ABJ/01 /21228.
Voter ID KYJ0811638
Passport No. E3450709
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Dr.Y.R.Nagarjuna Kumar, M.B.B.S - M.D, Age 44 years, Director, a reputed gastroenterologist from Hyderabad, and is a private medical practitioner.
Ms. K. Mahitha is a Graduate in Commerce and she is a house wife. She is not involved in the affairs of the Company.
Ms. K. Aparna is a Graduate in Commerce and she is a house wife. She is not involved in the affairs of the Company.
Companies Promoted by our Promoters
Our Promoters have not promoted any other company.
Declarations by the Promoters We confirm that the Permanent Account Number, Bank Account number, Company Registration Number, and the address of the Registrars of the Companies where the company is registered has been submitted to the BSE & NSE at the time of filling of this document with them.
SVPCL Limited, its Directors and persons in control of the company have not been declared as willful defaulters by RBI or any other government authority and there are no violations of securities laws committed by the Promoters in the past nor any such proceedings are pending against the Promoters Neither SVPCL Limited, nor its Directors or persons in control have been prohibited from accessing the capital market under any order or direction passed by SEBI.
Promoters Interests and Common Pursuits
Except as stated above and in the Related Party Transactions on page 100 of this Red Herring Prospectus and to the extent of shareholding in our company, the promoters do not have any other interest in our business. Our promoters, as shareholders, have significant shareholding in our company. For the rights of our shareholders, please see page 167 detailing the main provisions of the Articles of Association.
Name Mrs.K.Mahitha
Residential Address Flat No. 201, Surabhi Sri Sampada Apartment, 7-1-201, Srinivasa Nagar Colony, Hyderabad
500 038.
PAN AMXPK 7308 J
Bank A/c no. Andhra Bank, S.R.Nagar Branch, Hyderabad, A/C No: ABG /01/00505620.
Voter ID NA
Passport No. E7568224
Driving License no. NA
Name Mrs.K.Aparna
Residential Address Indira Towers, Flat No. 7, 2nd Floor, Abbas Khaji Street, Vijayawada 2.
PAN AMEPK4827B
Bank A/c no.
The Aishwaria Co-op Society Limited, Branch Ameerpet, Hyderabad
500 016, A/c No. : SB - 16828
Voter ID NA
Passport No. NA
Driving License no. NA
92
Except as stated above there are no common pursuits among our Company and our promoters.
Payment of benefits to our Promoters during the last two years
Except as stated in Financial Statements-Related Party Disclosures no payment has been made or benefit has been provided to our Promoters. during the last two years from the date of filing of the Red Herring Prospectus..
Companies from which our Promoters have disassociated in the last three years
There are no companies from which our Promoters have disassociated themselves during the past three years:
Listing of group companies
There is no group company hence question of listing of group companies with stock exchange does not arise.
Sick companies within the group
There are no group companies.
Losses incurred by group companies
There are no group companies
Defunct companies within the group
None of our group companies has been struck off from the records of the Registrar of Companies as a defunct company.
Related Party Transactions
For details of related party transactions please refer to the section titled Financial Statements on page no. 100 in this Red Herring Prospectus.
Currency of Presentation
In this Red Herring Prospectus, all references to Rupees and Rs. are to the legal currency of India,
DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and approved by the shareholders, at their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition.
Details of dividend declared by the Company for the last five years are as under
Financial Year Rate of dividend
2002-2003 NIL 2003-2004 NIL 2004-2005 2% 2005-2006 5% 2006-2007 5%
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SECTION VI. FINANCIAL STATEMENTS
CURRENCY OF PRESENTATION
In this Red Herring Prospectus, all references to Rupees and Rs. are to the legal currency of India,
RESTATED FINANCIAL STATEMENT AS PER INDIAN GAAP
The Board of Directors SVPCL Ltd. 206A, 2nd Floor, Concourse, 7-1-58, Greenlands Road, Ameerpet, Hyderabad- 500 016.
Ref: Initial Public Offering of SVPCL Ltd. Auditors Report as required by Part II of Schedule II to the Companies Act, 1956
Dear Sirs,
We have examined the Financial information of SVPCL Ltd. ( The Company ) annexed to this report which have been prepared in accordance with the requirement of:
Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 ( the Act ).
The Securities and Exchange Board of India (Disclosures and Investor Protection) Guidelines 2000 ( The Guidelines ) issued by the Securities and Exchange Board of India( SEBI ) on January, 2000 in pursuance of Section 11 of Securities Exchange Board of India, Act, 1999; and
The terms of reference from the company requesting us to carry out work, proposed to be included in the offer document of the company in connection with the proposed Initial Public Offer ( IPO )
Financial information as per audited financial statements
1. We have examined the attached restated summary of assets and liabilities of the company as at, 31st March, 2002, 2003, 2004, 2005, 2006, 2007 and 30th June, 2007 the attached restated summary statement of Profit and Loss for each of the years ended those dates ( Summary Statement ) (See Annexure I and II) as prepared by the company and approved by the board of Directors. These profits have been arrived at after making such adjustments and regroupings as in our opinion appropriate. These summary statements have been extracted from the financial statements for these years audited by us and have been adopted by the Board of Directors/ members for the respective years. Based on our examination of these summary statements we confirm that:
a. The Impact of changes in accounting policies adopted by the company for the period ended 30th June,2007 have been adjusted with retrospective effect in the attached summary statements.
b. The Prior Period items have been adjusted in the summary statements in the years to which they relate:
c. The extraordinary items, which need to be disclosed separately in the summary statements, are approximately disclosed; and
d. There are no qualifications in the auditors report, which require any adjustments in the summary.
2 The Summary of Significant accounting policies adopted by the company together with the notes pertaining to the audited financial statements for the period ended 30th June, 2007 is enclosed as Annexure III to this report.
94
Other Financial Information
3 We have examined the following unconsolidated financial information of the company proposed to
be included in the offer document as approved by you and annexed to this report. a. Restated Summary of Profit & Loss (Audited) as Annexure I b. Restated Summary of Assets & Liabilities ( Audited) as Annexure II c. Significant Accounting Policies & Notes to accounts as Annexure III. d. Details of Related Party Transactions as Annexure IV. e. Details of Dividend as Annexure V. f. Accounting ratio based on the restated profits relating to earning per share, net asset value and
return on net worth is enclosed in Annexure VI. g. Capitalization statement for the period ended June 30th, 2007 is enclosed in Annexure VII h. Statement of tax shelters is enclosed in Annexure VIII. i. Restated statement of Cash Flows in enclosed as Annexure IX j. Details of Secured Loans and Certificate of Indebt ness as Annexure X k. Restated Statement of Un-Secured Loan as Annexure XI l. Restated Statement of Sundry Debtors as Annexure XII m. Details of Loans & Advances as Annexure XIII n. Details of Other Income as Annexure XIV
4 In our view, the financial information as per audited financial statements and other financial information mentioned above have been prepared in accordance with Part II of schedule II of the Act.
5 This report in intended solely by your information and for the inclusion in the offer document in connection with the proposed IPO of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.
Place: Hyderabad For P. MURALI & CO. Date: 28.09.2007 Chartered Accountants
P. MURALI MOHANA RAO Partner Membership No. 23412
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ANNEXURE- I Rs. In Lacs.
RESTATED SUMMARY OF PROFIT AND LOSS (AUDITED) Sl. No PARTICULARS FOR THE YEAR / PERIOD ENDED
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
A) INCOME
Sales (Net)
Domestic Sales 879.90 1,401.35 2,759.60 4,020.11 6938.02
2094.01
Export Sales -- -- -- -- - - --
Total Sales 879.90 1,401.35 2,759.60 4,020.11 6938.02 2094.01
Other Income 8.94 15.83 16.76 19.95 31.66 0.96
Increase / ( Decrease ) of Stock 100.25 1.44 37.39 74.14 173.31
330.43
TOTAL (A) 989.09 1,418.62 2,813.75 4,114.20
7142.99 2425.40
B) EXPENDITURE
Raw Material Consumed 815.91 1120.37 2354.29 3322.00 5593.44 2016.10
Manufacturing Expenses 11.11
33.06
58.01
101.43
147.94 38.67
Staff Costs 35.71 43.71 57.28 77.37 84.78 19.00
Administration Expenses 42.58 53.73 73.51 64.28 90.97 21.99
Selling & Distribution Expenses 24.50 33.46 68.48 59.54 81.87 7.90
Depreciation 12.08 31.38 61.72 85.53 126.12 31.82
Financial Charges 29.94 81.04 106.00 136.83 229.89 57.74
Misc. Expenses Written off 0.53 0.53 0.53 0.53 0.53 -
TOTAL: B 972.36 1,397.28 2,779.82 3,847.51 6355.54 2193.22
C) Profit before Tax (A-B) 16.73 21.34 33.93 266.69 787.45 232.18
Provision for Taxation
Current Tax 1.18 1.70 2.70 22.43 88.35 18.00
Deferred Tax - - - 69.52 102.22 10.66
Provision for FBT - - - 1.25 2.65 0.75
D) Net Profit After Tax 15.55 19.64 31.23 173.49
594.23 202.77 E) Brought forward Profit
from Previous Year 28.17 43.72 63.36 83.62 205.96 734.23
96
F) Less: Transfer for Deferred Tax - - - - - -
Utilize for Bonus Issue - - - - - -
G) Net Balance(E-F) 28.17 43.72 63.36 83.62 205.96 734.23
H) Profits Avail. for Appr (D+G) 43.72 63.36 94.59 257.11 800.19 937
Less: Appropriations
Transferred to General Reserve - - - - - -
Interim Dividend - - - - - -
Dividend Paid - - 9.70 45.35 57.85 -
Tax on Dividend - - 1.27 5.80 8.11 -
I) Bal. Carried Forward to Balance Sheet 43.72 63.36 83.62 205.96 734.23 937.00
II) E P S 13.35 0.79 0.64 1.64 5.21 1.75
Face Value of Share 10 5 5 10 10 10
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ANNEXURE- II
( Rs. in Lacs) RESTATED SUMMARY OF ASSETS AND LIABILITES ( AUDITED)
Sl.No PARTICULARS
FOR THE YEAR ENDED For the period ended
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 A) FIXED ASSETS
Gross Block 263.29 790.14 1773.50 1,840.20
2739.44 2739.45
Less: Depreciation 40.69 72.07 133.79
219.32
345.46 377.28
Net Block 222.6 718.07 1639.71
1,620.88
2393.98 2362.17
B) Capital Work In Progress 59.54 91.02 106.02
C) INVESTMENTS - - - - - -
Current Assets, Loan & Advances
Inventories 261.32 365.13 840.85
831.10
1562.41 1811.67
Sundry Debtors 162.62 208.81 315.70
798.62
942.33 983.43
Cash & Bank Balance 15.05 15.40 50.55
98.21
19.52 22.26
Loans & Advances 3.23 0.71 19.62
24.12
22.87 40.97 D) Total 442.22 590.05 1,226.72 1,752.05
2547.13 2858.33
E) LIABILITIES & PROV.
Secured Loans 205.02 457.40 1204.21 1484.42 1959.74 1919.20
Un Secured Loans 129.27 89.35 149.35
149.35
368.15 368.15
Current Liab. & Provision
150.00
215.67
409.02
308.37
674.32 817.06
Deferred Tax Liability - - - 69.53
171.75 182.41
Total Rs. 484.29 762.42 1,762.58 2,011.67 3173.96 3286.82 F) Net Worth 180.53 545.70 1163.39 1361.26 1858.17 2039.70
Represented By
Equity Shares
130.00
485.00
906.90
1,081.90
1156.90 1156.90
Share Appl.Mony 10.00 0.00 175.00 75.00
Reserves & Surplus
43.72
63.36
83.62
205.96
734.23 937
Miscellaneous Expenditure
3.19
2.66
2.13
1.60
32.95 54.19
Total 180.53 545.70 1163.39 1361.26 1858.18 2039.71
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ANNEXURE III
A) SIGNIFICANT ACCOUNTING POLICIES
(1) AS- 1 SYSTEM OF ACCOUNTING: The Accounts are prepared under historical cost convention on accrual basis except otherwise stated.
(2) AS-2 INVENTORIES: Raw-materials and packing materials are valued at cost. Work-in -process and Finished Goods are valued at cost and include element of production overheads. Traded goods are valued at cost. Consumable stores are charged to the profit and loss account in the year of purchases.
(3) AS-6 DEPRECIATION: Depreciation on all the fixed assets have been charged in accordance with rates specified in Schedule XIV of
Companies Act, 1956 on straight line basis.
(4) AS- 9 REVENUE RECOGNITION: The Company recognizes sale when the risk and rewards of ownership are passed on to the customers, which is generally on dispatch of goods. .
(5) AS- 10 FIXED ASSETS: Fixed Assets are stated at cost of purchases. Assets costing upto Rs.5000 are fully depreciated in the year of
purchase.
(6) AS-11 FOREIGN CURRENCY TRANSACTIONS: Foreign Currency Transactions are recorded at exchange rates prevailing on the date of such transaction.
(7) AS 13 INVESTMENTS: Long term investments are carried at cost less provision, if any, for permanent diminution in value of such investments. Current investments are stated at lower of cost and quoted/fair value computed category wise.
(8) AS- 15 RETIREMENT BENEFITS: Company s contribution to Provident Fund and ESI are charged to Profit and Loss Account. Gratuity and Leave Encashment Benefits are charged in the Profit and Loss Account on the basis of Actual Valuation as at year end
(9) AS- 17 SEGMENT REPORTING: The Company has a single segment namely manufactures of stationery & printing press
(10) AS-22 ACCOUNTING FOR TAXES: Deferred tax is recognized, for all timing differences, subject to consideration prudence, in respect of Deferred Tax Assets. .
(11) AS-26 ACCOUNTING FOR INTANGIBLE ASSETS: Preliminary Expenditure is being amortized over a period of 10 years.
B) NOTES ON BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
1) Number of Employees in respect of remuneration of Rs. 24,00,000/- P.A. or more if employed throughout the financial year (or Rs. 2, 00,000/- P. M. if employed for the part of the period) is nil
2) In the opinion of the Board of Directors all the Current assets, Loans and Advances have a value on a realization in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet. (The bal. of Sundry Debtors, loans & Advances and other Current Assets are subject to confirmations)
3) The Company has no amounts payable to small scale industrial undertakings for period more than 30 days. NIL for all years
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4). Auditors Remuneration: (Rs. In Lacs)
Particulars 31.03.02 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Statutory Audit Fees
0.15 0.25 0.25 0.25 0.25 0.25 0.25
Fees for Other Services
0.20 0.20 0.20 0.20 0.05 0.20 0.00
5). Managerial Remuneration: Remuneration paid or provided in accordance with Sec 198 of the Companies Act, 1956 to Managing Director and Whole Time Director is as follows:
K.Mallikarjuna Reddy, Managing Director (Rs. In Lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Basic Salary 1.80 2.40 3.00 4.80 7.50 2.40 HRA 0.60 0.60 0.60 0.60 1.20 0.30 Commission -- - - - - - Total 2.40 3.00 3.60 5.40 8.70 2.70
K.Sudhakara Reddy, Wholetime Director (Rs. In Lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Basic Salary 1.50 1.80 2.40 4.80 6.60 2.10 HRA - - - - - - Commission - - - - - - Total 1.50 1.80 2.40 4.80 6.60 2.10
6 Secured Loans:
Name of the Bank Nature of Loan
Loan Sanctioned (Rs. In Lacs)
Loan Outstanding as on 30 June 07
Rate of Interest
Repayment Schedule (Rs. in Lacs)
Security Offered
State bank of India Term Loan I 264 94.39 12.75% 13.20 *
76State bank of India
Term Loan II 600 347.64 12.75% 25.00 *
Axis Bank Limited Term Loan 225 227.43 12.75% 4.75 *
* First charge by way of hypothecation of fixed assets present and future.
7 Cash Credit:
Name of the Bank Nature of Loan
Loan Sanctioned (Rs. In Lacs)
Loan Outstanding
as on ,30,June 07
Rate of Inte-rest
Repayment Schedule (Rs. in Lacs)
Security Offered
State bank of India Cash Credit **690.00 491.31 13% On demand * Axis Bank Ltd Cash Credit 660.00 758.42 13% On demand *
** Includes Rs. 150.00 Lacs interchanged from LC and Rs. 200.00 Adhoc limit.
*First Charge on Current Assets present and future of the company, on Pari passu basis with AXIS Bank Ltd and State Bank of India.
Second Charge on Fixed Assets present and future except Vehicles acquired on hire Purchase scheme of the company.
100
8) Contingent Liabilities: (Rs. In Lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Bank Guaratee - - 26.01 30.68 30.00 30.00
Letter of Credit 99.95 99.95 299.83 299.87 174.96 349.55
Excise Matters - - - - - -
* includes Rs. 27.00 lacs Counter guarantee given by SBI to Andhra Bank. 9) Earning in Foreign Currency (Rs. In Lacs) Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Earning in Foreign Currency
- -
- -
- -
- -
- 5.57
- -
10) Expenditure in Foreign Currency (Rs in Lacs) Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 a) Raw Material - - - - - - b) Expenditure in Foreign Currency
- - #452.97 - 6.50 -
# The expenditure in Foreign Currency was towards Import of Plant and Machinery.
11) Additional information required by Paragraph 3 and 4 of Part II of Schedule VI to the Companies Act, 1956.
Capacity & Production, (Qty. in MT)
Sr No.
Particulars ( MTPA)
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 01 Licensed
Capacity 10800 10800 15000 34000 34000 34000
02 Installed Capacity (Qty)
4500 10800 12500 12500 19500 19500
03 Production (Qty)
1932.29 2641.60 5913.36 7924.02 14481 4401
12) Sales, Opening Stock, Closing Stock of Finished Goods (Qty. in MT)
Particulars ( MT )
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Sales 1763.03 2665.05 5756.94 7791.38 14159.00 3807.00 Opening Stock of F.G.
80.61 249.87 226.42 382.84 515.48 838.00
Closing Stock of F. G.
249.87 226.42 382.84 515.48 838.00 1432.00
101
13) Raw Material Consumed: (Qty. in MT)
Particulars (MT) 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Opening Stock 70.43 277.11 519.02 1564.50 1361.50 2693.00 Purchases 2124.87 2897.99 7045.48 7701.27 15772.00 4499.00 Less: Closing Stock
277.11 519.02 1564.50 1361.50 2693.00 2432.00
Consumption 1918.19 2656.08 6000.00 7904.27 14440.00 4750.00
14) Proportion of Imported & Indigenous Material
Sr No.
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
01 Imported (%) Nil NIL NIL Nil 0.12 Nil 02 Imported (value
Rs.in Lacs) 0 0 0 0 6.5 Nil
03 Indigenous % 100% 100% 100% 100% 99.88% 100% 04 Indigenous
(Value in Rs. In Lacs)
815.91 1120.37 2354.29 3322.00 5586.94 2016.10
102
ANNEXURE- IV
DETAILS OF TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND RELATED PARTIES OF THE KEY MANAGEMENT PERSONNEL ARE AS FOLLOWS:-
For the Period Ended 30th June, 2007
List of Related Parties with whom transactions entered into
Sr.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director
Nature of Transaction Total Transaction
Amount Outstanding on 30.06.07
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
240,000 210,000
N.A. N.A.
Managing Director Whole Time Director
Rent Paid to Mr. K. Mallikarjuna Reddy 30,000 NIL Managing Director Mr. K. Sudhakara Reddy - NIL Whole Time Director
For the Period Ended 31st March, 2007 List of Related Parties with whom transactions entered into
Sr.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director
Nature of Transaction Total Transaction
Amount Outstanding on 31.03.07
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
750000 660000
N.A. N.A.
Managing Director Whole Time Director
Rent Paid to Mr. K. Mallikarjuna Reddy 120000 NIL Managing Director Mr. K. Sudhakara Reddy - NIL Whole Time Director
For the Period Ended 31st March, 2006 List of Related Parties with whom transactions entered into
S.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director
Nature of Transaction Total Transaction
Amount Outstanding on 31.3.06
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
5,40,000 4,80,000
N.A. N.A.
Managing Director Whole Time Director
Rent Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakaraa Reddy
3,60,000 3,00,000
NIL NIL
Managing Director Whole Time Director
For the Period Ended 31st March, 2005
103
List of Related Parties with whom transactions entered into
S.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director 3 Mr. Y.R. Nagarjuna Kumar Director 4 Mrs. K.Mahitha Wife of Managing Director 5 Mrs. K. Aparna Wife of Whole time Director Mr. K.
Sudhakaraa Reddy
Nature of Transaction Total Transaction
Amount Outstanding on 31.3.05
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
3,60,000 2,40,000
N.A. N.A.
Managing Director Whole Time Director
Rent Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
NIL NIL Whole Time Director
Fixed Deposit/ Loan Accepted Mr. K. Mallikarjuna Reddy K. Mallikarjuna Reddy HUF K. Sudhakara Reddy HUF Mr. Y.R. Nagarjuna Kumar Ms. K. Mahitha
Ms. K. Aparna
50,000 2,.50,000 8,50,000 5,50,000 5,50,000
7,50,000
Managing Director Managing Director Whole Time Director Director Wife of Managing Director. Wife of Whole Time Director
For the Period Ended 31st March, 2004
List of Related Parties with whom transactions entered into
S.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director 3 Mrs. K.Mahitha Wife of Managing Director 4 Mrs. K. Aparna Wife of Whole time Director Mr. K.
Sudhakaraa Reddy
Nature of Transaction Total Transaction
Amount Outstanding on 31.3.04
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
3,00,000 1,80,000
N.A. N.A.
Managing Director Whole Time Director
Repayment of Unsecured Loan K. Sudhakara Reddy( HUF) Ms. K. Mahitha
Ms. K. Aparna
8,50,000 2,50,000
7,50,000
Whole Time Director Wife of Managing Director. Wife of Whole Time Director
Purchase of Land together with Building at Vijayawada Plot No.76-10-16 from Mr. K. Sudhakara Reddy
21,50,000 NIL Whole Time Director
For the Period Ended 31st March, 2003
104
List of Related Parties with whom transactions entered into
S.No. Name of Related Party Nature of Relationship 1 Mr. K. Mallikarjuna Reddy Managing Director 2 Mr. K. Sudhakara Reddy Whole Time Director
Nature of Transaction Total
Transaction Amount Outstanding on 31.3.03
Nature of Relationship
Director s Remuneration Paid to Mr. K. Mallikarjuna Reddy Mr. K. Sudhakara Reddy
2,40,000 1,50,000
N.A. N.A.
Managing Director Whole Time Director
Loan or Fixed Deposit Accepted K.Sudhakara Reddy (HUF)
8,50,000 Whole Time Director
For the Period Ended 30th, June 2007 (Rs. In Lacs)
Particulars Associates Joint Venture Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales Salary K.Mallikarjuna Reddy K.SudhakaraReddy
2.40
2.10
Purchase of Raw Material Loan/ Fixed Deposits Accepted
Nil
Debtors Creditors
Repayment of Loan Rent Paid K.MallikarjunaReddy K.Sudhakara Reddy
0.30 - -
Amount Written Off Investment Fixed Assets Sold Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
For the Period Ended 31st, March 2007 (Rs. In Lacs)
Particulars Associates Joint Venture Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales Salary
105
K.Mallikarjuna Reddy K.SudhakaraReddy
7.50
6.60
Purchase of Raw Material Loan/ Fixed Deposits Accepted
Nil
Debtors Creditors Repayment of Loan Rent Paid K.MallikarjunaReddy K.Sudhakara Reddy
1.20 - -
Amount Written Off Investment Fixed Assets Sold Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
Related Party Transaction for year ended as on March 31, 2006
(Rs. In Lacs) Particulars Associates Joint
Venture Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales
Salary- K.Mallikarjuna Reddy, M.D K.Sudhakara Reddy
5.40
4.80
Purchase of Raw Material Loan/ Fixed Deposits Accepted
Nil
Debtors Creditors Repayment of Loan Rent Paid K.Mallikarjuna Reddy K.Sudhakara Reddy
3.60
3.00
Amount Written Off Investment Fixed Assets Sold Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
106
Related Party Transaction for year ended as on 31st March, 2005 (Rs. In Lacs)
Particulars Associates Joint Venture
Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales Salary Mr. K.Mallikarjuna Reddy Mr. K.Sudhakara Reddy
3.60
2.40
Purchase of Raw Material Loan/ Fixed Deposits Accepted Mr. K. Mallikarjuna Reddy K. Mallikarjuna Reddy HUF K. Sudhakara Reddy HUF Mr. Y.R. Nagarjuna Kumar Ms. K. Mahitha Ms. K. Aparna Debtors
30.00
0.50
2.50 8.50 5.50 5.50 7.50
Creditors Repayment of Loan Rent Paid Mr. K.Mallikarjuna Reddy Mr. K.Sudhakara Reddy
0.90
0.75
Amount Written Off Investment Fixed Assets Sold Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
Related Party Transaction for year ended as on 31st March, 2004 (Rs. In Lacs)
Particulars Associates Joint Venture
Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales Salary Mr. K.MallikarjunaReddy Mr. K.Sudhakara Reddy
3.00
1.80
Purchase of Raw Material Loan/ Fixed Deposits Accepted Nil Debtors Creditors Repayment of Loan K. Sudhakara Reddy (HUF) Ms. K.Mahitha Ms. K.Aparna
8.50 2.50 7.50
Interest Paid Amount Written Off Investment Fixed Assets Sold
107
Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
Related Party Transaction for year ended as on 31st March, 2003
(Rs. In Lacs) Particulars Associates Joint
Venture Key Management Personal and Relatives
Enterprises Significantly influenced by key Management personal and Relatives
Sales Salary
Mr. K.Mallikarjuna Reddy Mr. K.Sudhakara Reddy
2.40
1.50
Purchase of Raw Material Loan/ Fixed Deposits Accepted K.Sudhakara Reddy (HUF) 8.50
Debtors Creditors Repayment of Loan Interest Paid Amount Written Off Investment Fixed Assets Sold Other Services Provision for Doubtful Debts Tech /Advisory Fees Paid
RELATED PARTIES AS DISCLOSED BY THE COMPANY
i) List of Key Managerial Personnel/Directors.
Sr No. Name Designation
01 K. Mallikarjuna Reddy Managing Director
02 K. Sudhakara Reddy Whole Time Director
03 Mrs. K. Aparna Promoter
04 Mrs. K. Mahitha Promoter
108
ANNEXURE- V DIVIDENDS (Rs. in lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
No of Shares 1300000 9700000 18138000 10819000 11569000 11569000
Face Value (Rs.) 10 5 5 10 10 10
Paid up Value (Rs.) 130.00 485.00 906.90 1081.90 1156.90 1156.90
Rate of Dividend - - 2% 5% 5%
Total Dividend - - 9.70 45.35 57.85 -
Corporate Dividend tax on above (Rs.)
1.27 5.81 8.11
ANNEXURE- VI SUMMARY OF ACCOUNTING RATIOS: Summary of Accounting Ratio 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
Earning per Share (EPS) (Rs.) 13.35 0.79 0.64 1.64 5.21 1.75 Return on Net Worth (RONW) (%) 8.63% 3.60% 2.68% 12.73% 31.98% 9.94%
Net Asset Value (NAV) (Rs per share)
13.89 11.25 12.83 12.58 16.06 17.63
Weighted Average Number of Equity Shares
1300000 9700000 18138000 10819000 11569000 11569000
Face Value of Share 10 5 5 10 10 10
# Annualized Basis
Basic Earning per share (Rs.) . Net Profit attributable to Equity Shareholders .
Total No. of Equity shares outstanding during the year.
Return on Net worth (%). Net Profit After Tax .
Net worth excluding Revaluation reserve at the end of the year.
Net Assets Value per . Net worth excluding Revaluation reserve . Equity share (Rs) Total No. of Equity shares outstanding during 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. Earnings per share calculations have been done in accordance with AS- 20 Earning per share issued by The Institute of Chartered Accountants of India.
109
ANNEXURE- VII STATEMENT OF CAPITALISATION: (Rs. in lacs)
Particulars Pre-issue for the period ended June 2007
Post-issue as adjusted for the issue
A. Short Term Debts 1249.73 B. Long Term Debts 669.46 Total Debts 1919.19
Shareholders Fund a. Equity Shares Capital 1156.90
b. Reserves & Surplus 936.98
(Incl. Share Premium)
Total 2093.88
Long Term Debts / Equity 0.92
ANNEXURE- VIII
STATEMENT OF TAX SHELTER ( Rs. in lacs)
Previous year 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Net Profit as per Books of Account
16.73 21.34 33.93 266.69 787.43 232.18
Net Profit/(Loss) before Tax (as restated)
NIL NIL NIL NIL NIL NIL
Tax rate Normal 36.75% 35.88% 36.60% 33.66% 33.66% 33.99%
Tax rate MAT 7.88% 7.69% 7.84% 8.42% 11.22% 11.33%
Tax at Normal Tax Rates (A) NIL NIL NIL NIL NIL NIL
Adjustments :
Permanent Difference (B)
Donation & Others
Depreciation as per Books 12.08 31.38 61.72 85.53 126.12 31.81
Benefits u/s 80 I NIL NIL NIL NIL NIL NIL
Total Permanent Difference 12.08 31.38 61.72 85.53 126.12 31.81
Temporary Difference ( C )
Depreciation as per Income Tax 40.67 150.26 228.81 220.39 429.89 63.19 Expenses u/s 43 B NIL NIL NIL NIL NIL NIL
Total Temporary Difference 40.67 150.26 228.81 220.39 429.89 63.19
Timing Difference
Net Adjustments ( C-B ) 28.59 118.88 167.09 134.86 303.77 31.38
Tax Saving thereon 10.51 42.65 61.15 45.39 102.25 10.56
Tax on Restated Income NIL NIL NIL NIL NIL NIL
Tax at MAT rate 1.32 1.64 2.66 22.46 88.35 26.05
110
ANNEXURE-IX
CASH FLOW STATEMENT AS PER AUDITED FINANCIAL STATEMENT (Rs. In lacs)
PARTICULARS 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 1.Cash flow from Operating Activities Net Profit Before Tax &
Extra-ordinary Items 16.73 21.34 33.93 266.70 787.43 232.18
Adjustment for : Depreciation 12.08 31.38 61.72 85.53 126.12 31.81 Loss on Sale of Fixed Assets Preliminary Expenses W/ off 0.53 0.53 0.53 0.53 0.53 0 Profit / Loss on sale of Investments Dividend income Other income -8.94 -15.83 -16.76 -19.95 -31.66 -0.96
Income tax refund Interest & Financial Charges 29.94 81.04 106.00 136.83 229.89 57.74 Operating profit Before Working Capital Changes 50.34 118.46 185.42 469.64 1112.31 320.77
Adjustment for : Trade & other Receivables -85.02 -46.19 -106.89 -482.92 -143.69 .-41.10
Inventories -176.80 -103.81 -475.72 9.75 -731.31 -249.26
WIP - - - - -91.02 -15.00
Loans & Advances 2.11 2.52 -18.91 -4.50 1.25 -18.10
Trade payable 88.22 65.67 193.35 -100.65 291.33 123.98
Cash Generated from operations -121.15 36.65 -222.75 -108.68 438.87 121.29 Less: Taxes Paid -1.18 -1.70 -3.97 -29.48 -31.18 0 Net cash flow from Operating Activities (A) -122.33 34.95 -226.72 -138.16
407.69 121.29 2. Cash flow from Investing
Activities
Purchase of Fixed Assets / Capital Expenditure -78.58 -526.85 -1042.90 -7.16 -899.24 0
Sale of Fixed Assets Purchase of Investments Other Income 8.94 15.83 16.76 19.95 31.66 .0.96
Miscellaneous Expenditure -31.88 -21.24
Sale of Investments Net Cash used in investment Activities(B) -69.64 -511.02 -1026.14 12.79
-899.46 -20.28
111
3.Cash Flow from Financial Activities Long Term Loan 184.94 252.38 746.81 280.21 475.31 -40.53
Issue of Equity Shares 10.00 345.00 596.90 75.00 - 0
Unsecured Loans taken 30.00 -39.92 60.00 218.80 0
Repayment of Unsecured Loans Short Term Borrowings Refund of Share Application Money Deferred Tax Dividend paid -9.70 -45.35 -51.16 0
Interest Expenses -29.94 -81.04 -106.00 -136.83 -229.89 -57.74 Cash Flow from Financial Activities (C)
195.00 476.42 1288.01 173.03 413.06 -98.27
Net Increase / Decrease in Cash Equivalents (A+B+C) 3.03 0.35 35.15 47.66 -78.71 2.74 Cash & Cash Equivalent at the beginning of the period
12.02 15.05 15.40 50.55 98.21 19.52
Cash & Cash Equivalent at the Close of the period
15.05 15.40 50.55 98.21 19.52 22.26
ANNEXURE-X
STATEMENT OF SECURED LOANS (Rs. in lacs)
Particulars
31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Cash Credit
State Bank of India 173.86 194.92 482.03 504.03 484.95 491.31
Axis Bank Ltd - - - 391.69 805.39 758.42
Andhra Bank Vijayawada
5.00 2.28 4.89 -
Term Loan
S B I I 26.15 260.19 199.81 146.71 95.52 94.39
S B I II 517.48 441.97 346.75 347.64
Axis Bank Ltd 227.13 227.44
VEHICLE LOANS
ABN AMRO 2.73 1.56 3.21 1.55 1.36 1.12
HDFC 3.60 8.22 7.40 5.85
112
CERTIFICATE OF INDEBTEDNESS
The company is currently availing Working Capital facilities and Term Loan from State Bank of India & AXIS Bank, the details of which are as under:
(Rs. in Lacs)
Name of the Bank Nature of Loan
Loan Sanctioned
(Rs. in Lacs)
Loan Outstanding as on June Ended 07
Rate of Interest
Repayment Schedule Rs. in Lacs)
Security Offered
State bank of India
Axis Bank Ltd
Cash Credit
Cash Credit
**690.00
660.00
491.31
758.42
13.00%
BPLR-13.00%
On demand *
State Bank of India
State Bank of India
Axis Bank Ltd
ABN AMRO & HDFC
Term Loan 1
Term Loan 2
Term Loan
Vehicle Loans
264.00
600.00
225.00
20.32#
94.39
347.64 227.44
6.97
12.75%
12.75%
12.75%
10.54@
Qtly Rs.13.20
Qtly Rs.25.00
Mthly Rs.4.75
***
#ABN AMRO.Rs 4.17 Lacs and HDFC. Rs 15.19 lacs @ABN AMRO. Rs 1.59 lacs and HDFC. Rs. 8.95 lacs
* Cash Credit: First Charge on Current Assets present and future of the company, on Pari passu basis with AXIS Bank Ltd. to the extent of Rs. 660 lacs and State Bank of India to Extent of Rs. 490.00 lacs
Second Charge on Fixed Assets present and future except Vehicles acquired on hire Purchase scheme of the company.
***Term Loan: 1st charge on fixed assets of the company financed by SBI & AXIS Bank Ltd. separately
Second Charge on Current Assets present and future of the company on Pari passu basis
** Includes Rs. 150.00 Lacs interchanged from LC & Rs. 200.00 Lacs Adhoc limit.
113
ANNEXURE- XI
STATEMENT OF UN SECURED LOANS & FIXED DEPOSITS (Rs. in lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Loans from Directors 40.30 21.80 51.80 51.80 51.80 51.80
Loans from Others 88.97 67.55 97.55 97.55 316.35 316.35
ANNEXURE- XII (Rs. in lacs)
STATEMENT OF SUNDRY DEBTORS
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Receivable From Others More than 6 months 3.55 44.28 39.36 36.98 6.79 43.41
Others 159.07 164.53 276.34 761.64 935.54 940.02 Receivable from promoters groups
- - - - - -
Total 162.62 208.81 315.70 798.62 942.33 983.43
114
ANNEXURE- XIII (Rs. in lacs)
STATEMENT OF LOANS& ADVANCES
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07 Receivable from Promoters
Nil Nil Nil Nil Nil Nil
Receivable From Promoters
Group Companies Nil Nil Nil Nil Nil Nil
Others 3.23 0.71 19.62 24.12 22.87 40.97
Total 3.23 0.71 19.62 24.12 22.87 40.97
ANNEXURE- XIV
STATEMENT OF OTHER INCOME (Rs. in lacs)
Particulars 31.03.03 31.03.04 31.03.05 31.03.06 31.03.07 30.06.07
Details of Other Income Recurring ( Sale of Scrap)
8.94 15.83 16.76 19.95 31.66 0.96
Non Recurring NIL NIL NIL NIL NIL NIL
Total 8.94 15.83 16.76 19.95 31.66 0.96
115
INFORMATION OF GROUP COMPANIES
There is no Group Company/ Companies
Relationship of Sundry Debtors with Directors/Promoters
Sundry Debtors are not related to the company, its promoters or directors.
Relationship of Directors and or promoters with parties against whom there are outstandings in the Loans & Advances accounts
None of the Directors and or Promoters are related to any of the parties against whom there are outstanding Loans and Advances.
Disassociation of the Promoters
Promoters have not disassociated from any of the Companies/firms during the preceding three years.
MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITIONS AND RESULTS OF THE OPERATIONS AS REFLECTED IN THE FINANCIAL STATEMENTS.
It is advised to read the following discussion and analysis of our financial condition and the results of operations together with our financial statements included in this Red Herring Prospectus. You are also advised to read the section titled Risk Factors , which discusses a number of factors and contingencies that could impact our financial condition, results of operations and cash flows. The following discussion relates to our company and is based on our restated financial statements. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards referred to in Section 211(3C) of the Companies Act and the other applicable provisions of the Companies Act. The discussion is based on internally prepared data and publicly available information.
The following discussion does not relate to our results of operations after the year ended 30 June 2006. For a discussion on our results of operations after the year ended March 31, 2006 please see the section titled Significant Developments after 31 December 2006 that may affect the Future of our Operations .
Overview
We are a leading manufacturer of paper based student note books, under our brands Classmate/Lavanya and stationery under our brand with major market share in Andhra Pradesh among the organised segment. We also undertake printing of school/college text books for various state governments. And other institution. And commercial printing of items such as files, education books & guides and other books, calendars, diaries, corporate brochures, leaflets, product pamphlets, instruction manuals and other various printing jobs. We have over 10 years of experience in the printing business.
SVPCL is having manufacturing facilities at Vijayawada, Hyderabad and Visakhapatnam SEZ. SVPCL corporate office is situated at 206 A, Concourse, Ameerpet, Hyderabad.
SVPCL acquired land during 2003-04 at Vijayawada and established a full fledged printing unit in 12300 sq.ft. Area. During 2004-05 the company has expanded its production facilities by establishing state of the art facility in printing at Hyderabad and commenced its production in Hyderabad unit. During fiscal year 2005-06 the company entered into lease agreement with AP Government for lease of land at SEZ Visakhapatnam to establish production facilities to cater the demand in export markets in printing industry.
SVPCL leverages global economies and multidisciplinary solution to provide cost effective, timely and reliable services constantly striving to adopt and improve products and services to the customer satisfaction.
The Company s strengths include its 10 years presence in the south market as leading manufacturer and the promoters have rich experience with proven management skills and excellent industrial relationships. The company has adopted a strategy of growth through constant up-gradation of technology in production which is cost effective, introducing products for consumer convenience, manufacturing quality consistent products.
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STATEMENT OF PROFIT AND LOSSES
PARTICULARS 31.03.04
% Total Income 31.03.05
% Total Income 31.03.06
% Total Income 31.03.2007
% Total Income
INCOME 1,418.62 100 2,813.75 100 4,114.20
7142.99
Raw Material Consumed 1120.37
78.98
2354.29 83.67
3322
80.74
5593.44
78.31
Manufacturing Expenses 33.06
2.33
61.87 2.20
101.43
2.47
147.94
2.07
Staff Costs 43.71
3.08
57.28 2.04
77.37
1.88
84.78
1.19
Administration Exps. 53.73
3.79
70.65 2.51
64.28
1.56
90.97
1.27
Selling & Distribution Expenses 33.46
2.36
67.28 2.39
59.52
1.45
81.87
1.15
PBDIT 134.29
9.46
202.38 7.19
489.60
11.90
1143.99
16.02
Depreciation 31.38
2.21
61.72 2.19
85.53
2.08
126.12
1.05
Financial Charges 81.04
5.71
106 3.77
136.83
3.33
229.89
2.29
Misc. Exps. Written off 0.53
0.04
0.53 0.02
0.53
0.01
0.53
0.01
TOTAL: B 1,397.28
98.50
2,779.82 98.79
3,847.50
93.52
6238.15
72.55
Profit before Tax (A-B) 21.34
1.50
33.93 1.21
266.7
6.48
787.45
7.52
Provision for Taxation
0.00
Current Tax 1.7
0.12
2.7 0.10
22.43
0.55
88.35
0.79
Deferred Tax -
-
69.52
1.69
102.22
0.49
Provision for FBT -
-
1.25
0.03
2.65
0.02
Net Profit After Tax 19.64
1.38
31.23 1.11
173.49
4.22
594.23
6.22
Key factors affecting the Results of Operations
There are several key factors, which may affect our operations. Some important factors are given below.
The competition from organized and unorganized players in the field.
Fluctuations in Cost of main raw material such as paper.
Foreign Exchange Fluctuation affects import of paper
Imports of paper Products
Support from our suppliers.
Success of our expansion plans.
Paper product imports
Change in custom policies of Government of India
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Known trends or uncertainties
There have not been any discernible known negative trends or uncertainties which could adversely impact the income or revenue from continuing operations.
Future relationship between costs and revenues
The company major costs of production is the cost of paper. Paper being the major component of the cost, any increase in the cost of paper would be duly covered in the price of the products. The company doesn t foresee any substantial increase in the cost of labour and other manufacturing expenses.
New Products
The company is continuously monitoring the market requirements accordingly introducing new products and the product mix of the production. The existing and proposed product of the company is as below:-
PROPOSED PRODUCTS Education Journals Annual Reports Large Volume of Printing Orders Paper Stationery Directories Expansion in Business Promotion Products
Seasonality of Business
The company s products are not seasonal in nature. The range of products manufactured by the company is having demand through out the year. Peak season for Note books starts from January to June where as August to December printing will be at peak for Corporate Orders.
Competitive Conditions
In south unorganized sector is contributing to 60% of the market share. Among the organized sector there are players like Blue Bird India Ltd, ITC Ltd etc. SVPCL has a 3% share in the organized sector. The company has competitive strength to meet the competitive environment as:-
The product of the company being in the market for last 10 years, and is well positioned and accepted by the customers. The branded note books DESKMATE and LAVANYA have a good awareness.
The consistent quality products and timely supplies has positioned the products of the company strongly in the market vis a vis competitors.
The company s ability to retain the customers since 6 years reflects the strength of the company s products vis a vis the competitors.
The prices of the products are very competitive and give value for the money to the customers.
The company has wide marketing net work in south part of Tamilnadu and Part of Karnataka in addition to Andhra Pradesh. The company is strengthening its market network by consolidating its existing marketing offices and opening additional marketing offices covering other part of INDIA. This will give an edge over competitors to reach more customers and strengthening the image of the company.
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Material Developments after the date of Balance Sheet.
There are no material developments after the date of last audited balance sheet which will have adverse impact of the company.
Adverse events
There are no adverse events affecting the operations of the company occurring within one year prior to the date of filing of the Red Herring Prospectus.
Significant Developments after 30 June 2007 that may affect our future results of operations.
Except as specifically stated elsewhere in this prospectus, to our knowledge, no circumstances have arisen or developments have taken place since the date of the last audited financial statement disclosed in this prospectus 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 material liabilities within the next twelve months.
COMPARISON OF SIGNIFICANT ITEMS OF INCOME AND EXPENDITURE OF THE COMPANY FOR THE PAST THREE YEARS IS AS FOLLOWS:
Comparison of Financial Year 2006-07 with F.Y. 2005-2006 Total Income
The Company s total income registered a growth of 73% during 2006-07 as compared to the financial year 2005-06. The increase has been achieved due to overall growth in demand for our products and scale of our operations.
Expenditure in general saw a marginal fall due to economies of scale. Itemwise details are discussed below:
Raw Material Consumed
There has been a marginal decrease in the cost of Raw Material Consumption as a proportion of Total Income from 80.74% to 68.38% during 2006-07 as compared to F.Y. 2005-06. This has been achieved due to economies of scale..
Manufacturing Expenses
Manufacturing expenses showed a slight decrease due to increased scale of operations. The manufacturing expenses as a proportion to income came down from 2.47% to 2.07% during 2006-07 as compared to financial year 2005-06.
Employee Cost
We have been able to reduce the Employee cost from 1.88% to 1.19% due to better productivity during 2006-07 as compared to 2005-06.
Administration, Selling & Distribution Expenses
Administration, Selling & Distribution Expenses came down from 3.01% of the total income to 2.42% during 2006-07 as compared to 2005-06 on account of improved productivity and scale of operations.
Profit Before Tax, Interest and Depreciation
EBITDA improved from 11.90% of the total income to 16.02% for the year ended March 2007 as compared to F.Y. 2006. The improvement has been due higher volume and productivity and overall cost reductions.
Interest and Finance Charges
Interest and Finance charges as a percentage to total income decreased from 3.33% to 2.29%. However in absolute terms finance charges increased from Rs. 136.83 lacs during 2005-06 to Rs. 229.89 lacs during 2006-07. The increase has been due to increase in the amount of borrowings during 2006-07.
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Net Profit
Our Net Profit after Tax increased from 4.22% of total income during 2005-06 to 6.22% during 2006-07. The improvement in net profit margin has been achieved due to increase in sales volumes as also general improvement in efficiency because of scale of operations.
Comparison of F.Y. 2006 with F.Y. 2005- Reason for Variance
Total Income
The Company s total income registered a growth of 45.52% to Rs. 4040.06 Lacs in FY2006 compared to Rs. 2776.36 Lacs in FY2005. This growth is due to increase in sales of student note books and computer stationery, printed materials and other products. Revenue from sales has increased due to overall growth in the scale of operations by expansion and modernization as well as the strengthening of our marketing set up.
Raw Material Consumed
Raw Material Consumption increased by 41.10%, from Rs. 2354.29 Lacs in fiscal 2005 to Rs 3322.00 Lacs in fiscal 2006 due to increased in production and sales by 46% during the year compared to F.Y. 2005.
As a percentage of revenue, the cost of consumption of raw material has decreased to 82.63% in fiscal 2006 as compared to 85.31% in fiscal 2005. The decrease is mainly due to a reduction in wastage as a result of modernization of manufacturing process and change in product mix with increase in sales of Corporate Stationary, Magazines and Printed Books where value addition is more and higher margins.
Manufacturing Expenses Manufacturing expenses have increased by Rs 39.56 Lacs from Rs 61.87 Lacs fiscal 2005, to Rs 101.43 Lacs in fiscal 2006. This represents an increase of 63.94% principally on account of increase in production and change in product mix with increase in Magazine Publication, Printing Books and printing order.
Employee Cost Employee cost has increased by 35.07%, from Rs.57.28 Lacs in F.Y. 2005 to Rs.77.37 Lacs in F.Y. 2006 due to increase in scale of operations.
Administration, Selling & Distribution Expenses Administration, Selling & Distribution Expenses decreased by Rs 14.13 Lacs or 10.24% from Rs. 137.93 Lacs in fiscal 2005 to Rs 123.80 Lacs in fiscal 2006 on account of strict cost cutting exercise undertaken by the company.
Profit before Tax, Interest and Depreciation. EBITDA for the F.Y. 2006 increased by 142% to 489.60 Lacs compared to Rs. 202.38 Lacs in F.Y. 2005. This Increase was mainly attributable to increase sales, company s focus on products such as Corporate Stationary, Magazines and Printed Books where value addition is more and better margins and also due to economies of scale and increase in production.
Interest and Finance Charges Interest and Finance charges increased by Rs. 30.83 Lacs, or 29.08%, from Rs.106.00 Lacs in F.Y. 2005 to Rs. 136.83 Lacs in F.Y. 2006. The increase is on account of an increase in bank borrowing for working capital in connection with the increased scale of operations that we experienced during F.Y. 2006.
Depreciation Depreciation increased by Rs.23.81 Lacs, or by 38.57%, from Rs.61.72 Lacs in F.Y. 2005 to Rs.85.53 Lacs in F.Y. 2006. The increase is due to increase in fixed assets as part of our expansion and modernization during F.Y. 2005 and the impact of F.Y. 2006 being the first full year of operation after the expansion plan.
Profit before Tax Profit before tax increased by Rs.232.77 Lacs or by 686.03%, from Rs.33.93 Lacs in fiscal 2005 to Rs.266.70 Lacs in F.Y. 2006 due to increase in sales, and EBITDA margins and due to economics of large scale operation.
The Depreciation and interest Charges being fixed in nature has not increased in proportion to increase in Sales
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and Profit has increased 686.03% compared to 142% increase in EBITDA.
Provision for Taxation
Provision for taxation increased by 730.74% from Rs 2.70 Lacs F.Y. 2005 to Rs 22.43 Lacs in F.Y. 2006 due increase in profits.
Net Profit
Our Net Profit after Tax increased by Rs.142.26 Lacs, or by 455.52%, from Rs.31.23 Lacs in F.Y. 2005 to Rs.173.49 Lacs in F.Y. 2006 due to increase in sales and change in product mix with focus on products with better margins and economies of large scale operations.
Comparison of F.Y. 2005 with F.Y. 2004 - Reason for Variance
Total Income
Total income increased by about 96%, from Rs.1417.18 Lacs in F.Y. 2004 to 2776.36 Lacs in F.Y. 2005. This increase was due to overall increase in sales of all our products. The company was also able to drive the benefits of Expansion and modernization program undertaken by it during the year.
Raw material Consumed
Raw Material Consumption increased by 110.14% from Rs.1120.37 Lacs in F.Y. 2004 to Rs. 2354.29 Lacs in F.Y. 2005 on account of increase in production and sales by 98.34% during the year compared to F.Y. 2005 compared to F.Y. 2004.
As a percentage of Revenue, cost of consumption of raw material increased to 85.31% in F.Y. 2005 as compared to 79.94% in F.Y. 2004. The increase is due to increase in the cost of paper, our principal raw material.
Manufacturing Expenses Manufacturing expenses have increased by 87.14% to Rs. 61.87 Lacs in F.Y. 2005, from Rs. 33.06 Lacs in F.Y. 2004 on account of increase in production.
Employee Cost
Employee cost has increased by 31.05%, from Rs. 43.71 Lacs in F.Y. 2004 to Rs.57.28 Lacs in F.Y. 2005 due to increase in scale of operations.
Administration, Selling & Distribution Expenses Administration, Selling & Distribution Expenses increased by 58.19% from Rs. 87.19 Lacs in F.Y. 2004 to Rs. 137.93 Lacs in F.Y. 2005 on account of increase in operations and set up of independent marketing division by the company.
Profit before Tax, Interest and Depreciation. EBITDA for the F.Y. 2005 increased by 50.70% from Rs. 134.29 Lacs in F.Y. 2004 to Rs. 202.38 Lacs in F.Y. 2005. This Increase was mainly attributable to increase in sales and economies of scale due to increase in production. EBITDA Margins has decreased due to increase in Raw Material cost.
Interest and Finance Charges. Interest and Finance charges increased by 30.80% to Rs.106.00 Lacs in F.Y. 2005 compared to Rs. 81.04 Lacs in F.Y. 2004. The increase is on account of an increase in working capital bank borrowing and term loan for expansion & modernisation.
Depreciation Depreciation increased by 96.69% to Rs.61.72 Lacs in F.Y. 2005 from Rs.31.38 Lacs in F.Y. 2004. The increase is due to increase in fixed assets as part of our expansion and modernization during F.Y. 2005.
Profit before Tax Profit before tax increased by 59%, from Rs.21.34 Lacs in F.Y. 2005 to Rs.33.93 Lacs in F.Y. 2005 due to increase in Sales.
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Provision for Taxation
Provision for taxation increased by 58.82% to Rs 2.70 Lacs F.Y. 2005 from Rs 1.70 Lacs in F.Y. 2004 due increase in profits.
Net Profit
Our Net Profit after Tax increased by 59%, from Rs.19.64 Lacs in F.Y. 2004 to Rs.31.23 Lacs in F.Y. 2005 due to increase in sales. Net Profit Margins has declined due to increase in Raw Material cost.
INFORMATION REQUIRED AS PER CLAUSE 6.10.5.5 (a) OF SEBI DIP GUIDELINES
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Unusual or infrequent events or transactions
There have been no unusual or infrequent events or transactions.
Significant economic changes
There are no significant economic changes that will affect the industry.
Known trends or uncertainties that have had or are expected to have a material adverse impact on income from operations
Other than as described below under Seasonality of Business to the best of our knowledge, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.
Future relationship between costs and revenues
We are constantly endeavoring to create efficient manufacturing processes resulting in cost reductions. We expect to continue our efforts in improving our technology initiatives and try and realize better margins in the future. Any change in government policies relating to indirect taxes such as excise duty can affect the cost of our products. Further with increasing manufacturing capacities that are being created we expect economies of scale to significantly add to our operating efficiencies and reduce operating costs vis-à-vis our operating income.
Except as stated above and others as covered under Risk Factors given in this Red Herring Prospectus, to the best of our knowledge, there are no known factors, which are likely to affect the future relationship between our costs and revenues, or which will have a material impact on the operations or the finances of our company.
Seasonality of business
We are part of the printing industry which is not a cyclical industry. However our profitability may fluctuate in future depending on a number of factors including fluctuation in rupee value, import tariff, domestic duties and taxes, changes in relationship between and revenue and cost in the paper products industry, effect of economic cycles, availability and price of raw material, change of Govt. policies, addition of new machinery and other general economical and business factors. Due to all or any of these factors it is possible that in some future year the company s operating results may vary from the expectations of share holders, market analysts and public.
Dependence on single or few customers
The company is not dependent on a single or few customers. Text books and educational stationery are required by school and college going children across the country. We have a fairly large number of corporate clients for business stationery.
Competitive Conditions
With the globalization of the Indian economy and opening up of the industrial environment leading global automobile industry players are entering the market with latest technologies and we will have to face competition from such manufacturers or joint ventures which may be set up by such manufacturers in India. However we are constantly endeavoring to adapt to the latest technologies and production processes to face such competitive conditions.
Total Turnover of the Industry
For data relating to the industry, please refer to the section titled Industry Overview on page 50 of this Red Herring Prospectus.
Changes in Accounting Policies in the last three years
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There have been no significant changes in accounting policies during the preceding three years. Changes if any are disclosed as part of Auditors report
BRIEF DETAILS OF THE WORKING CAPITAL AND TERM LOANS FACILITIES AVAILED BY THE COMPANY.
Nature of Facility Sanctioned Amount
Amount Outstanding on 31.03.2007
Security
SECURED LOANS UTI Bank Ltd Term Loan Cash Credit Letter of Credit Bank Guarantee
225.00 660.00 100.00 25.00
227.13 805.40
NIL NIL
State Bank of India
Term Loan-I II Cash Credit
133.99 419.00 490.00
95.51 346.74 484.96
First Charge on Current Assets present and future of the company, on pari passu basis with UTI Bank to the extent of Rs. 660 lacs and State Bank of India to Extent of Rs.
Second Charge on Fixed Assets present and future except Vehicles acquired on hire Purchase scheme of the company.
Vehicle Loan ` HDFC Bank Tata Finance
Hypothecation of Vehicle owned by the company.
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SECTION VII: LEGAL AND OTHER INFORMATION
Outstanding Litigations and Material Developments
LEGAL AND OTHER INFORMATION
I. OUTSTANDING LITIGATIONS INVOLVING THE COMPANY
A. FILED BY THE COMPANY
1. LITIGATION INVOLVING CRIMINAL LAWS
There is no litigation filed by the company involving criminal offences.
2. LITIGATION INVOLVING SECURITIES AND ECONOMIC LAWS
There is no litigation filed by the Company involving securities or economic offences.
3. LITIGATION INVOLVING STATUTORY LAWS
There is no litigation filed by the Company involving statutory laws.
4. LITIGATION INVOLVING CIVIL LAWS
There is no litigation filed by the Company involving civil laws same as mentioned herein below:
B. LITIGATION AGAINST THE COMPANY
1. LITIGATION INVOLVING CRIMINAL LAWS
2. Litigation pertaining to Company Law: There is no litigation filed by the Company involving labour offences.
3. LITIGATION INVOLVING LABOUR LAWS
There is no litigation filed by the Company involving labour offences.
II. OUTSTANDING LITIGATION INVOLVING DIRECTORS AND PROMOTERS
A. AGAINST THE DIRECTORS/PROMOTERS
1. LITIGATION INVOLVING CRIMINAL LAWS
There is no litigation pending against the Directors/Promoters of the Company involving Criminal Law.
2. LITIGATION INVOLVING SECURITIES AND ECONOMIC LAWS
There is no litigation pending against the Directors/Promoters of the Company involving securities or economic offences.
3. LITIGATION INVOLVING STATUTORY LAWS
There is no litigation pending against the Directors/Promoters of the Company involving statutory offences.
4. LITIGATION INVOLVING CIVIL LAWS
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There is no litigation pending against the Directors/Promoters of the Company involving civil laws.
5. LITIGATION INVOLVING LABOUR LAWS
There is no litigation filed by the Directors/Promoters of the Company involving labour offences.
B. FILED BY THE DIRECTORS/PROMOTERS
1. LITIGATION INVOLVING CRIMINAL LAWS
There is no litigation filed by the Directors/Promoters involving criminal offences.
2. LITIGATION INVOLVING SECURITIES AND ECONOMIC LAWS
There is no litigation filed by the Directors/Promoters involving securities or economic offences.
3. LITIGATION INVOLVING STATUTORY LAWS
There is no litigation filed by the Directors/Promoters involving statutory laws.
4. LITIGATION INVOLVING CIVIL LAWS
There is no litigation filed by the Directors/Promoters involving civil laws.
5. LITIGATION INVOLVING LABOUR LAWS
There is no litigation filed by the Directors/Promoters of the Company involving labour laws.
III. OUTSTANDING LITIGATIONS INVOLVING PROMOTER S GROUP COMPANIES
There is no Group Company.
A. FILED AGAINST THE PROMOTERS/ DIRECTORS COMPANY
1. LITIGATION INVOLVING CRIMINAL LAWS
There is no litigation pending against the Directors/Promoters group companies involving criminal offences.
2. LITIGATION INVOLVING SECURITIES AND ECONOMIC LAWS
There is no litigation pending against the Directors/Promoters group companies involving securities or economic offences.
3. LITIGATION INVOLVING STATUTORY LAWS
There is no litigation pending against the Directors/Promoters group companies involving statutory laws.
4. LITIGATION INVOLVING CIVIL LAWS
There is no litigation pending against the Directors/Promoters group companies involving civil laws.
5. LITIGATION INVOLVING LABOUR LAWS
There is no litigation pending against the Directors/Promoters group companies involving labour laws.
B. FILED BY THE PROMOTERS/ DIRECTORS OF THE COMPANY
126
1. LITIGATION INVOLVING CRIMINAL LAWS
There is no litigation filed by the Directors/Promoters group companies involving criminal offences.
2. LITIGATION INVOLVING SECURITIES AND ECONOMIC LAWS
There is no litigation filed by the Directors/Promoters group companies involving securities or economic offences.
3. LITIGATION INVOLVING STATUTORY LAWS There is no litigation filed by the Directors/Promoters group companies involving statutory laws.
4. LITIGATION INVOLVING CIVIL LAWS There is no litigation filed by the Directors/Promoters group companies involving civil laws.
5. LITIGATION INVOLVING LABOUR LAWS There is no litigation filed by the Directors/Promoters group companies involving labour laws.
127
MATERIAL DEVELOPMENTS
Significant Development since the last audited balance sheet as on June 30, 2007 till the date of Prospectus.
No circumstances have arisen since the date of last financial statement until the date of filing of this Prospectus with SEBI, which materially and adversely affect or is likely to affect the operations or profitability of our Company, or value of its assets, or its ability to pay its liability within next twelve months.
There is no subsequent development after the date of the Auditor s Report, which will have a material impact on the reserves, profits, earnings per share and book value of the Equity Shares of the Company.
Adverse events There are no adverse events affecting the operations of the Company occurring within one year prior to the date of filing of the Prospectus with the Registrar of Companies.
128
GOVERNMENT APPROVALS/LICENSING ARRANGEMENTS
Investment Approvals
There is no investment approval required for the Company from FIPB/RBI or any other authority.
Government approvals
In view of the indicative list of approvals mentioned below, the Company is permitted to undertake all the present or proposed activities and no further major approvals are required from any Government authority / statutory body to continue these activities. However, the Company may need to take additional approvals time to time that may be required to be taken in the normal course of the business.
Technical Approvals
There are no technical approvals required for the Company from any authority.
Approvals for the Business
The Company requires various approvals and registrations to carry on its business in India. The approvals and registrations that the Company has received are detailed below:
The Company has received the following licenses / approvals:
Sr. No.
Name of License/Registration Licensing/Registering Authorities
Registration no.
1. Certificate of Incorporation Registrar of Companies, AP, Hyderabad
01-32913 dated 26/11/1999
2. Fresh Certificate of Incorporation (consequent to change of name of the Company)
Registrar of Companies, AP, Hyderabad
28/11/2003
3 Fresh Certificate of Incorporation (for Conversion into Public Limited Company)
NA NA
4. Importer Exporter Code (IEC) DGFT, Hyderabad 0903005417, dt 19.08.03 5. Registration certificate of Central
Sales Tax Commercial Tax office, Sanath Nagar Circle
PJT/06//1/4016/2004-05
6. Registration certificate under AP VAT Act, 2002.
Commercial Tax office, Sanath Nagar Circle
28800231351 Dt. 26/03/2005
7. Permanent Account Number Income Tax Dept. AAFCS0765A 8. Registration under Secretariat for
Industrial Assistance NA NA
9. Tax Deduction Account Number Income Tax Dept. HYDS06154B 10. Provident Fund Number Provident Fund Dept.,
Hyderabad A.P/ST/48665
11. Registration under E.S.I. ESI Corporation 62-16553-83 12. AP Pollution Control Board
Registration NA NA
It must be specifically understood that in giving the above approvals, the Central / State Government or RBI does not take any responsibility for financial soundness or correctness of the statements made by the Company.
SECTION VIII: OTHER REGULATORY AND STATUTORY DISCLOSURES
129
Authority for the present issue
The Issue has been authorized pursuant to a resolution passed by the Board of Directors of the Company at its meeting held on 23rd February 2007 and by a special resolution adopted pursuant to Section 81(1A) of the Companies Act, at the extraordinary general meeting of the shareholders of the Company held on 23rd
March 2007.
Prohibition by SEBI and RBI
The Company, its Directors, its Promoters, the directors and persons in control of Promoters, its subsidiaries, its group companies, associates of its group companies and other companies promoted by the Promoters and companies with which the Company s Directors are associated as directors 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 us, our promoters, associates, promoter group, our Directors and the companies in which our Directors are associated as Directors have been declared as willful defaulters by the Reserve Bank of India or any governmental authority or there has been no violation of any securities law committed by any of them in the past and no such proceedings are pending against any of them.
Eligibility for the Issue
In terms of clause 2.2.1 of the SEBI (DIP) Guidelines, 2000 an unlisted company may make an Initial Public Offering (IPO) of Equity Shares or any other securities, which may be converted into or exchanged, with Equity Shares at a later date, only if it meets all the following conditions.
(a) The company has net tangible assets of at least Rs. 300 lacs in each of the preceding three full financial years (of 12 months each), of which not more than 50% is held in monetary assets and is compliant with clause 2.2.1(a) of the SEBI Guidelines.
Provided that if more than 50% of the net tangible assets are held in monetary assets, the company has made firm commitments to deploy such excess monetary assets in its business/project.
(b) The company has a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least three(3) out of immediately preceding five (5) years has complied with Clause 2.2.1(b) of the SEBI Guidelines Provided further that extraordinary items shall not be considered for calculating distributable profits in terms of Section 205 of the Companies Act, 1956;
(c) The company has net worth of at least Rs.100 lacs in each of the preceding 3 full years (of 12 months each) an d is compliant with Clause 2.2.1(c) of the SEBI Guidelines 5377.59
(d) In case the company has changed its name within the last one year, at least 50% of the revenue for the preceding 1 full year is earned by the company from the activity suggested by the new name.
(e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size (i.e., offer through offer document + firm allotment + promoters contribution through the offer document), does not exceed five (5) times its pre -issue net worth as per the audited balance sheet of the last financial year and is compliant with Clause 2.2.1(e) of the SEBI Guidelines
The Company satisfies the above eligibility criterion in the following manner: (Rs. in Lacs)
Year 31.03.2003 31.03.2004 31.03.2005 31.03.2006 31.03.2007
Net Tangible Assets 664.82 1308.12 2866.43 3,372.93 5377.59
Monetary Assets 18.28 16.11 70.17 122.33 42.39
Distributable Profits 43.72 63.36 94.59 257.11 800.19
Net Worth 180.53 545.70 1163.39 1361.26 1858.17
Net Tangible Assets: means the sum of all net assets of the Company excluding intangible assets .
Monetary assets means cash and bank balances and loans and advances.
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In addition to these, the company shall ensure that the number of allotters getting Equity Shares is not less than one thousand in number.
DISCLAIMER CLAUSE
AS REQUIRED , A COPY OF THE RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE RED HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED TO MEAN 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 RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGER, BOB CAPITAL MARKETS LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES 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 RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGER BOB CAPITAL MARKETS LIMITED ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE BOOK RUNNING LEAD MANAGER, BOB CAPITAL MARKETS LTD. HAS FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED 12 APRIL 2007 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:
(i) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABOURATORS, ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE. (ii) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.
WE CONFIRM THAT:
A) THE RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;
B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND
C) THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELLINFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE;
D) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID; AND
E) WHEN UNDERWRITTEN WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITTMENTS
THE FILING OF THE RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE
COMPANIES ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY
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AND/OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGER, ANY IRREGULARITIES OR LAPSES IN THE RED HERRING PROSPECTUS.
THE BOOK RUNNING LEAD MANAGER AND THE COMPANY ACCEPT NO RESPONSIBILITY FOR STATEMENTS MADE OTHERWISE THAN IN THE RED HERRING PROSPECTUS OR IN THE ADVERTISEMENT OR ANY OTHER MATERIAL ISSUED BY OR AT OUR INSTANCE AND ANYONE PLACING RELIANCE ON ANY OTHER SOURCE OF INFORMATION WOULD BE DOING SO AT HIS OWN RISK.
WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE PROMOTERS CONTRIBUTION SUBJECT TO LOCK -IN, 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 RED HERRING PROSPECTUS.
ALL LEGAL REQUIREMENTS PERTAINING TO THE ISSUE WILL BE COMPLIED WITH AT THE TIME OF FILING OF THE PROSPECTUS WITH THE REGISTRAR OF COMPANIES, 2 ND
FLOOR, KENDRIYA SADAN, SULTAN BAZAR, KOTI,HYDERABAD,ANDHRA PRADESH IN TERMS OF SECTION 56, SECTION 60 AND SECTION 60B OF THE COMPANIES ACT.
GENERAL DISCLAIMER
The Company, its Directors and the BRLM accept no responsibility for statements made otherwise than in this Red Herring Prospectus or in the advertisements or any other material issued by or at the instance of Company or its Directors or BRLM and anyone placing reliance on any other source of information, including the Company s web site, www.svpcl.com would be doing so at his or her own risk.
The BRLM accept no responsibility, same to the limited extent as provided in the Memorandum of Understanding entered into between the BRLM and the Company and the Underwriting Agreement to be entered into between the Underwriters and the Company.
All information shall be made available by us, the BRLM to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in research or sales reports, at bidding centers or elsewhere.
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 not minors, Hindu Undivided Families (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, permitted insurance companies and pension funds and to non -residents including NRIs and FIIs. This Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to Equity Shares offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Red Herring Prospectus comes is required to inform himself 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 Hyderabad, Andhra Pradesh, India only.
No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Red Herring Prospectus has been submitted to the
SEBI. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or
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indirectly, and this Red Herring Prospectus may not be distributed, in any jurisdiction, except in
accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to this date.
The Equity Shares have not been and will not be registered under the US Securities Act of 1933 ( the Securities Act ) 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 Regulations under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold (i) in the United States to qualified institutional buyers , as defined in Rule 144A of the Securities Act in reliance on Rule 144A under the Securities Act, and (ii) outside the United States to certain Persons in offshore transactions in compliance with Regulations under the Securities Act and the applicable laws of the jurisdictions where those offers and sales occur.
A copy of this Red Herring Prospectus, has been filed with the Corporate Finance Department of SEBI, at SEBI Bhavan, Plot No C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051.
A copy of the Red Herring Prospectus, along with documents required to be filed under Section 60B of the Act, would be delivered for registration to the Registrar of Companies, Andhra Pradesh, Hyderabad and a copy of the Prospectus to be filed under Section 60 of the Act would be delivered for registration with the Registrar of Companies, Andhra Pradesh, Hyderabad.
Disclaimer Clause of BSE (Designated Stock Exchange)
As required, a copy of this Red Herring Prospectus has been submitted to the BSE. The Bombay Stock Exchange Limited ( the Exchange ) has given vide letter No DCS/IPO/SI/IPO-IP/0269/2007-08 dated May 18, 2007 permission to this Company to use the Exchange s name in this Red Herring Prospectus as one of the Stock Exchange on which the Company s securities are proposed to be listed. The Exchange has scrutinized this Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The Exchange does not in any manner:
Warrant, certify or endorse the correctness of any of the contents of this Red Herring Prospectus or
Warrant that this Company s securities will be listed or will continue to be listed on the Exchange or
Take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this company;
And it should not for any reason be deemed or construed that the Red Herring Prospectus has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
Disclaimer Clause of the NSE
As required, a copy of this Red Herring Prospectus has been submitted to the National Stock Exchange of India Limited (NSE). NSE ( the Exchange ) has given vide its letter No.NSE/LIST/49071-T dated June 18, 2007 permission to this Company to use the Exchange s name in this Red Herring Prospectus as one of the Stock Exchange on which the Company s securities are proposed to be listed subject to , the Company fulfilling the various criteria for listing including the one related to the paid up capital (i.e. the paid up capital shall not be less than Rupees 1000 lacs and market capitalization shall not be less than Rs.2500 lacs at the time of listing). It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Red Herring Prospectus has been cleared or approved by NSE nor does in any manner warrant, certify or endorse the correctness of any of the contents of this Red Herring Prospectus nor does it warrant that the Company s securities will be listed or will continue to be listed on the Exchange or nor does it take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this company;
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Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
UNDERTAKING FROM PROMOTERS AND DIRECTORS
The Issuer accepts full responsibility for the accuracy for the information given in this Red Herring Prospectus and confirms that to the best of their knowledge and belief, there are no other facts, their omission of which makes any statement in this Red Herring Prospectus misleading and they further reconfirm that they have made all reasonable inquiries to ascertain such facts. The issuer further declares that the Stock Exchanges to which an application for official quotation is proposed to be made do not take any responsibility for the financial soundness of this issue or for the price at which the equity shares are offered or for the correctness of the statement made or opinions expressed in this Red Herring Prospectus. The promoters/directors declare and confirm that no information/material likely to have a bearing on the decision of the investors in respect of the shares offered in terms of the Red Herring Prospectus has been suppressed, withheld and/or incorporated in the manner that would amount to mis -statement, mis-representation and in the event of its transpiring at any point of time till allotment/refund, as the case may be that any information/material has been suppressed/withheld and/or amounts to a mis-statement/mis-representation, the promoters/directors undertake to refund the entire application monies to all the subscribers within 7 days thereafter without prejudice to the provisions of the Section 63 of the Companies Act, 1956.
Filing
A copy of the Red Herring Prospectus had been filed with SEBI at Corporate Finance Department, at SEBI Bhavan, Plot No C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051.
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the Companies Act, would be delivered for registration to the RoC,2nd Floor, Kendriya Sadan, Sultan Bazar Koti, Hyderabad. and a copy of the Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration with RoC 2nd Floor, Kendriya Sadan, Sultan Bazar Koti, Hyderabad.
Listing
Initial Listing Applications have been made to the BSE and NSE for permission to deal in and for an official quotation of the Equity Shares. BSE will be the Designated Stock Exchange.
If the permissions to deal in and for an official quotation of the Equity Shares are not granted by any of the Stock Exchanges mentioned above, the Company will forthwith repay, without interest, all moneies received from the applicants in pursuance of this Red Herring Prospectus. If such money is not repaid within 8 days after the Company become liable to repay it, i.e. from the date of refusal or within 15 or 30 days from the Bid/Issue Closing Date, whichever is earlier, then the Company, and every Director of the Company who is an officer in default shall, on and from such expiry of 8 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.
The Company with the assistance of the BRLM shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within 7 working days of finalization of the Basis of Allotment for the Issue.
Consents
Consents in writing of: (a) the Directors, the Company Secretary and Compliance Officer, the Statutory Auditor, Tax Auditor, Bankers to the Company and Bankers to the Issue; and (b) Book Running Lead Managers to the Issue and Syndicate Members, Escrow Collection Bankers, Registrar to the Issue and
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Legal Advisor to the Issue, to act in their respective capacities, have been obtained and filed along with a copy of the Prospectus with the RoC, as required under Sections 60 and 60B of the Companies Act and such consents have not been withdrawn up to the time of delivery of this Red Herring Prospectus for registration with the RoC.
M/s. P. Murali &Co., Chartered Accountants has given its written consent to the inclusion of their report in the form and context in which it appears in this Red Herring Prospectus and such consent and report has not been withdrawn up to the time of delivery of this Red Herring Prospectus for registration with the RoC.
M/s. P. Murali & Co. Chartered Accountants, have given their written consent to the inclusion of statement of tax benefits accruing to the Company and its members in the form and context in which it appears in this Red Herring Prospectus and has not withdrawn such consent up to the time of delivery of this Prospectus for registration with the RoC.
Expert Opinion
We have not obtained any expert opinions nor any such opinions have been incorporated in this Red Herring Prospectus.
Expenses of the Issue
The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertisement expenses and listing fees. All expenses with respect to the Issue would be borne by the Company.
The estimated Issue expenses are as under:
Sr. No Activity Expenses (Rs. in Lacs)
As a % of the issue size
As a % of the total issue expenses
1 Lead management fees, underwriting commission and selling commission 161.25 64.70 4.67
2 Advertising and Marketing expenses 25.00 10.00 0.72 3 Printing and stationery 45.00 18.10 1.30 4 Others (Registrars fee, legal fee, listing fee, etc.) 18.00 7.20 0.52
Total estimated Issue expenses 249.25 100 7.22
Fees Payable to the BRLM
The total fees payable to the Book Running Lead Manager will be as per the letter of appointment dated 20.03.2006 with BOB Capital Markets Limited and 12.04.2007 UTI Securities Ltd issued by the Company, a copy of which is available for inspection at the registered office of the Company.
Fees Payable to the Registrar to the Issue
The fees payable to the Registrar to the Issue will be as per the letter of appointment dated 09.06.2006, issued by the Company, a copy of which is available for inspection at the registered office of the Company.
Adequate funds will be provided to the Registrar to the Issue to enable them to send refund orders or allotment advice by registered post.
Underwriting commission, brokerage and selling commission on Previous Issues
Since this is the initial public offer of the Company, no sum has been paid or has been payable as commission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares since its inception.
Previous Rights and Public Issues
The Company has not made any previous rights and public issues.
Previous issues of shares otherwise than for cash
The Company has not made any previous issues of shares otherwise than for cash except capitalization of
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reserves including revaluation reserves.
Particulars in regard to the Company and other listed Companies under the same management within the meaning of Section 370(1B) of the Companies Act, 1956, which made any capital issues during the last three years.
There are no listed companies under the same management within the meaning of section 370(1B) of the Companies Act, 1956 which made any capital issue during the last three years.
Promise v/s performance
The Company has not made any public issue of shares since incorporation. There are no group companies, which have made any public issues.
Outstanding Debentures or Bond Issues or Preference Shares
The Company has no outstanding debentures or bond issues.
Stock Market Data for the Equity Shares
This being an initial public issue of the Company, no Stock Market data is available.
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Issue and the Company will provide for retention of records with the Registrar to the Issue for a period of at least one year from the last date of despatch of the letters of allotment, demat credit and refund orders to enable the investors to approach the Registrar to the Issue for redressal of their grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name, address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or collection centre where the application was submitted.
The average time required by the Company or the Registrar to the Issue for the redressal of routine investor grievances will be seven business days from the date of receipt of the complaint. In case of non -routine complaints and complaints where external agencies are involved, the Company will seek to redress these complaints as expeditiously as possible.
The Company has formed an Investor Grievance Committee on 8th July 2006 under the Chairmanship of Mr. P.P. Reddy Independent, Non-Executive Director; with Mr. K. Sudhakara Reddy, Wholetime Director and Mr. K. Mallikarjuna Reddy, Managing Director as members.
Changes in Auditors
The auditors of the Company are appointed (and reappointed) in accordance with provisions of the Companies Act and their remuneration, rights and duties are regulated by Sections 224 to 233 of the Companies Act.
There has been a change in the statutory auditors during 2006-07. The change has been necessitated by the resignation of M/s. M.G.Rao & Co. due to health reasons.
M/s. P. Murali & Co., Chartered Accountants, Hyderabad were appointed in place of M/s. M.G. Rao & Co., Chartered Accountants, Hyderabad w.e.f. 19th October 2006.
Capitalization of Reserves or Profits
There is no capitalization of Reserves or Profits.
Revaluation of Assets
The Company has not revalued its assets in the last five years.
Other disclosures
Except as disclosed in the Capital Structure on page 16 of this Red Herring Prospectus the Promoters and Directors of the Company had not purchased or sold any securities of the company during a period of six months
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preceding the date on which this Red Herring Prospectus is filled with SEBI.
Purchase of Property
There is no property which has been purchased or acquired or is proposed to be purchased or acquired which is to be paid for wholly or partly from the proceeds of the present issue or the purchase or acquisition of which has not been completed on the date of this red herring prospectus, other than property in respect of which:
(a) The Contract for purchase or acquisition was entered into in the ordinary course of business nor was
the Contract entered into in contemplation of the issue, nor is the issue contemplated in consequence
of the Contract; or
(b) The amount of purchase money is not material.
Except as stated in this red herring prospectus, the Company has not purchased any property in which any of its Promoters and/ or Directors have any direct or indirect interest in any payment made there under.
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SECTION IX- ISSUE INFORMATION
1. Terms of the Issue
The Equity Shares being issued are subject to the provisions of the Companies Act, 1956, Our Memorandum and Articles, the terms of this red herring prospectus, Bid Cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the allotment advices and other documents/certificates that may be executed in respect of the issue. The Equity Shares shall also be subject to laws, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by SEBI, Government of India, Stock Exchanges, Registrar of Companies, RBI and/or other authorities, as in force on the date of the issue and to the extent applicable.
Authority for t he Issue
The Issue has been authorized pursuant to a resolution passed by the Board of Directors of the Company at its meeting held on 23rd February 2007 and by a special resolution adopted pursuant to Section 81(1A) of the Companies Act, at the extraordinary general meeting of the shareholders of the Company held on 23rd
March 2007.
Ranking of Equity Shares
The Equity Shares being issued shall be subject to the provisions of the Memorandum and Articles and shall rank pari -passu with the existing Equity Shares of the company including rights in respect of dividend. The Allottees in receipt of allotment of Equity Shares under this Issue will be entitled to pro-rata dividends and other corporate benefits, if any, declared by the Company after the date of allotment.
Mode of payment of dividend
The Company shall pay dividend to the shareholders as per the provisions of the Companies Act, 1956.
Face Value and Issue Price
Fresh Equity Shares with a face value of Rs. 10 each are being offered as part of the Issue at a price of Rs. [?] including premium of Rs. (?) per share. At any given point of time there shall be only one denomination for the Equity Shares.
Rights of the Equity Shareholder
Subject to applicable laws, the equity shareholders shall have the following rights:
Right to receive dividend, if declared;
Right to attend general meetings and exercise voting powers, unless prohibited by law;
Right to vote on a poll either in person or by proxy;
Right to receive offers for rights shares and be allotted bonus shares, if announced;
Right to receive surplus on liquidation;
Right of free transferability; and
Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and the Company s Memorandum and Articles.
For a detailed description of the main provisions of the Articles relating to voting rights, dividend, forfeiture and lien and/or consolidation/splitting, please refer to the section titled Main Provisions of Articles of Association of the Company on page no 167 of this Red Herring Prospectus.
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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. As per existing SEBI DIP Guidelines, the trading of the Equity Shares shall only be in dematerialized form. Since trading of the Equity Shares is in dematerialized form, the tradable lot is one Equity Share. Allotment in this Issue will be only in electronic form in multiples of one Equity Share subject to a minimum allotment of ( ) Equity Shares.
Jurisdiction Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Hyderabad, Andhra Pradesh, India.
Nomination Facility to Investor
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, 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 allotted, 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 of equity share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the Registered Office of the Company or to the Registrar and Transfer Agents of the Company.
In accordance with Section 109B of the Companies Act, any Person who becomes a nominee by virtue of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either:
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 moneys payable in respect of the Equity Shares, until the requirements of the notice have been complied with.
Since the allotment of Equity Shares in the Issue will be made only in dematerialized form, 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 changing their nomination, they are requested to inform their respective depository participant.
Notwithstanding anything stated above, since the Allotment in the Issue will be made only in dematerialized mode, there is no need to make a separate nomination with the Company. Nominations registered with the respective depository participant of the applicant would prevail. If the investors require changing the nomination, they are requested to inform their respective depository participant.
Subscription by Eligible Non Residents
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. Application in Issue
Equity Shares being issued through this Red Herring Prospectus can be applied for in the dematerialized form
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only.
Minimum subscription
If the Company does not receive the minimum subscription of 90% of the net issue to public including devolvement of underwriters within 60 days from the date of closure of the issue, the company shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after the company becomes liable to pay the amount, the Company shall pay interest as prescribed under Section 73 of the Companies Act, 1956.
If the number of allottees in the proposed issue is less than 1000 allottees, the Company shall forthwith refund the entire subscription amount received. If there is a delay beyond 15 days after the Company becomes liable to pay the amount, the Company shall pay interest at the rate of 15% per annum for the delayed period.
Withdrawal of the Issue
The Company in consultation with the BRLMs, reserves the right not to proceed with the Issue at anytime including after the Bid Closing Date, without assigning any reason thereof.
Arrangements for disposal of odd lots
The Company s shares will be traded in dematerialized form only and therefore the marketable lot is one share. Therefore there is no possibility of odd lots.
Restriction on transfer and transmission of shares
Nothing contained in the Articles of Association of the Company shall prejudice any power of the Company to refuse to register the transfer of any share.
No fee shall be charged for sub-division and consolidation of share certificates (physical form), debenture Certificates and detachable warrants and for sub-division of letters of allotment and split, consideration, renewal and pucca transfer receipts into denomination corresponding to the market units of trading.
ISSUE STRUCTURE
Public issue of (**) Equity Shares of face value of Rs.10/- each at a price of Rs. [?] for cash at a premium of Rs. [?] per Equity Shares aggregating Rs. 3450 lacs (hereinafter referred to as the Issue ], and the issue would constitute (**) % of the post issue paid up capital of the Company. The Issue is being made through Book Building Process.
Particulars QIBs Non-Institutional Bidders
Retail Individual Bidders
(**) Number of Equity Shares
At least (**) Equity Shares Minimum of (**)Equity Shares or Issue less allocation to QIB Bidders and Retail Individual Bidders
Minimum of (**)Equity Shares or Issue less allocation to QIB Bidders and Non-Institutional Bidders
Percentage of Issue Size available for allotment/allocation
At least 50% of Issue Size being allotted. However, up to 5% of the QIB portion shall be available for allocation proportionately to Mutual Funds
Minimum 15% of the Issue Size or Issue Size less allotment of the QIB Portion and allocation to Retail Individual Bidders
Minimum 35% of the Issue Size or Issue Size less allotment of the QIB Portion and allocation to Non-Institutional Bidders
Basis of Allotment/ Allocation if respective category is oversubscribed
Proportionate as follows: (a) Equity Shares shall be allocated on a Proportionate basis to Mutual Funds in the Mutual Funds Portion; (b) Equity Shares shall be allotted on a proportionate basis to all
Proportionate Proportionate
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QIBs including Mutual Funds receiving allocation as per (a) above.
Minimum Bid Such number of Equity Shares that the Bid Amount exceeds Rs.1,00,000 and in multiples of [*] Equity Shares thereafter
Such number of Equity Shares that the Bid Amount exceeds Rs.1,00,000 and in multiples of [*] Equity Shares thereafter
[*] Equity Shares and in multiples of [*] Equity Shares thereafter.
Maximum Bid Such number of Equity Shares not exceeding the Issue, subject to applicable limits
Such number of Equity Shares not exceeding the Issue, subject to applicable limits
Such number of Equity Shares whereby the Bid Amount does not exceed Rs.100, 000.
Mode of Allotment Compulsorily in dematerialized form
Compulsorily in dematerialized form
Compulsorily in dematerialized form
Trading Lot One Equity Share One Equity Share One Equity Share Who can Apply ** Public financial Institutions as
specified in Section 4A of the Companies Act, Scheduled commercial banks, mutual funds, foreign institutional investors registered with SEBI, multilateral and bilateral development financial institutions, and State Industrial Development Corporations, permitted insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs.2500 lacs and pension funds with minimum corpus of Rs.2500 lacs in accordance with applicable law
NRIs, Resident Indian Individuals, HUF (in the name of Karta), companies, corporate bodies, scientific institutions, societies and trusts.
Individuals (including HUFs, NRIs) applying for Equity Shares such that the Bid Amount does not exceed Rs.100, 000 in value.
Terms of Payment QIB Margin Amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members.
Margin Amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members.
Margin Amount shall be payable at the time of submission of Bid cum Application Form to the Syndicate Members.
Margin Amount At least 10% of Bid amount Full Bid amount on bidding
Full Bid amount on bidding
* Subject to valid Bids being received at or above the Issue Price and subject to a minimum of 50% of the Issue being allotted to QIBs. The Issue is being made through the 100% Book Building Process wherein at least 50% of the Issue shall be allotted to Qualified Institutional Buyers on a proportionate basis out of which 5% 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 and Mutual Funds, subject to valid bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue would be allocated to Non-Institutional Bidders and not less than 35% of the Issue would be allocated to Retail Individual Bidders on a proportionate basis, subject to valid bids being received from them at or above the Issue Price. Under-subscription, if any, in the Non -Institutional category and the Retail Individual category would be met with spill over from any other category at the sole discretion of the Company in consultation with the BRLM.
** In case the Bid cum Application Form is submitted in joint names, the investors should ensure that the demat 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.
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2. ISSUE PROCEDURE
Book Building Procedure
The Issue is being made through the 100% Book Building Process wherein up to 50% of the net Issue to the public shall be available for allocation to QIB Bidders on proportionate basis out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds. The remaining shall be available for allotment on a proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them at or above the issue price. Further not less than 35% of the Issue to the public shall be available for allocation on a proportionate basis to the Retail Individual Bidders and up to 15% of the net Issue to the public shall be available for allocation on a proportionate basis to Non -Institutional Bidders, subject to valid Bids being received at or above the Issue Price within price band.
Bidders are required to submit their Bids through the Syndicate. The Company, in consultation with the BRLM, would have the discretion to allocate to QIBs based on a number of criteria which would typically include but not be limited to the following: prior commitment, investor quality, price, earliness of bid. In case of Non-Institutional Bidders and Retail Individual Bidders, the Company would have a right to reject the Bids only on technical grounds.
Investors should note that allotment to all successful Bidders will only be in the dematerialized form. Bidders will not have the option of getting allotment in physical form. The Equity Shares, on allotment, shall be traded only in the dematerialized segment of the Stock Exchanges.
Illustration of Book Building and Price Discovery Process (Investors may note that this illustration is solely for the purpose of easy understanding and is not specific to the Issue)
Bidders can bid at any price within the price band. For instance, assume a price band of Rs.31 to Rs 38 per share, issue size of 7000 equity shares and receipt of five bids from bidders out of which one bidder has bid for 500 shares at Rs.38 per share while another has bid for 1,500 shares at Rs.37 per share. A graphical representation of the consolidated demand and price would be made available at the bidding centers during the bidding period. The illustrative book as shown below shows the demand for the shares of the company at various prices and is collated from bids from various investors.
Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription % 500 38 500 7.14 1000 37 1500 21.43 2500 35 4000 57.14 3000 33 7000 100 4000 31 11000 157.14
The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off i.e. Rs.33 in the above example. The issuer, in consultation with the BRLM, will finalize the issue price at or below such cut off price i.e., at or below Rs.33. All bids at or above this issue price and cutoff bids are valid bids and are considered for allocation in respective category.
Bid cum Application Form
Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of this Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the allocation of Equity Shares, dispatch of the CAN, and filing of the
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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, the Bidder is deemed to have authorized the Company to make the necessary changes in this Red Herring Prospectus and the Bid cum Application Form 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.
The prescribed color of the Bid Cum Application Form for various categories, is as follows:
Category Colour of Bid cum Application Form Indian public including resident QIBs, Non Institutional Bidders and Retail Individual Bidders
White
NRIs and FIIs Blue
Who can Bid?
Indian nationals resident in India who are majors, 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 the Equity Shares;
Indian Mutual Funds registered with SEBI;
Indian Financial Institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission, as applicable);
Venture Capital Funds registered with SEBI; Foreign Venture Capital Investors registered with SEBI;
State Industrial Development Corporations;
Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to Trusts and who is authorized under their constitution to hold and invest in equity shares;
NRIs and FIIs on a repatriation basis or a non-repatriation basis subject to applicable laws;
Scientific and/or Industrial Research Organizations authorized to invest in equity shares;
Insurance Companies registered with Insurance Regulatory and Development Authority;
Provident Funds with minimum corpus of Rs. 2500 lacs and who are authorized under their constitution to hold and invest in equity shares;
Pension Funds with minimum corpus of Rs. 2500 lacs and who are authorized under their constitution to hold and invest in equity shares;
Multilateral and Bilateral Development Financial Institutions; and
Pursuant to the existing regulations, OCBs are not eligible to participate in the Issue.
Bidders are advised to ensure that any single bid from them does not exceed the investment limits and maximum number of equity shares that can be held by them under the relevant regulations or statutory guidelines.
Note: BRLM and Syndicate Members shall not be entitled to subscribe to this issue in any manner except
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towards fulfilling their underwriting obligation.
Application by Mutual Funds
As per the current regulations, the following restrictions are applicable for investments by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related instruments of any 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. These limits have to be adhered to by the mutual funds for investment in the equity shares.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such 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.
Under the SEBI Guidelines 5% of the QIB portion has been specifically reserved for Mutual Funds.
Application by NRIs
Bid cum application forms have been made available for NRIs at the Registered Office of the Company NRI applicants may please note that only such applications as are accompanied by payment in free foreign exchange shall be considered for allotment under the NRI category. The NRIs who intend to make payment through Non -Resident Ordinary (NRO) accounts shall use the form meant for Resident Indians and shall not use the forms meant for reserved category. All instruments accompanying bids shall be payable in Mumbai only.
Application 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 the post-Issue issued capital. In respect of an FII investing in the Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of the total issued capital or 5% of the total issued capital in case such sub-account is a foreign corporate or an individual. As of now, the aggregate FII holding in the Company cannot exceed 24% of the total issued capital of the Company. With the approval of the Board of Directors and the shareholders by way of a special resolution, the aggregate FII holding can go up to 100%. However, as on this date, no such resolution has been recommended to the shareholders of the Company for adoption.
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, an FII or its sub account may issue, deal or hold, off shore derivative instruments such as participatory Notes, equity-linked notes or any other similar instruments against underlying securities listed or proposed to be listed in any stock exchange in India only in favor of those entities which are regulated by any relevant regulatory authorities in the countries of their incorporation or establishment subject to the compliance of know your client requirements. An FII or sub-account shall also ensure that no further downstream issue or any instrument referred to hereinabove is made to any person other than a regulated entity.
Bids by NRIs or FIIs on repatriation basis.
Bids and revision to Bids must be made:
On the Bid cum Application Form or Revision Form, as applicable, (Blue in color), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.
In a single or joint names (not more than three).
Bids by NRIs for a Bid Amount of up to less than Rs. 1,00,000 would be considered under the Retail Individual Bidders Portion for the purposes of allocation and Bids for a Bid Amount of more
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than or equal to Rs. 1,00,000 would be considered under Non Institutional Bidder Portion for the purposes of allocation; by FIIs or Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions for a minimum of such number of Equity Shares and in multiples of [ ] Equity Shares thereafter so that the Bid Amount exceeds Rs. 1,00,000; For further details, please refer to the sub-section titled Maximum and Minimum Bid Size on page no.146 of this Red Herring Prospectus.
In the names of individuals or in the names of FIIs or in the names of Foreign Venture Capital Fund, Multilateral and Bilateral Development Financial Institutions but not in the names of minors, firms or partnerships, foreign nationals or their nominees or OCBs.
Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or commission. In case of Bidders who remit money payable upon submission of the Bid cum Application Form or Revision Form through 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/speed 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. The Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.
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) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulations, 2000 prescribe investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI. Accordingly, the holding by any individual venture capital fund or foreign venture capital investor registered with SEBI should not exceed 33.3% of the corpus of the venture capital fund/ foreign venture capital investor.
The above information is given for the benefits of the Bidders. The Company and the BRLMs are not liable for any amendments or modification or changes if applicable laws or regulations, which may happen after the date of the 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 Rs.1,00,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed Rs.1,00,000. In case the Bid Amount is over Rs. 1,00,000 due to revision of the Bid or revision of the Price Band or on exercise of cut-off option, the Bid would be considered for allocation under the Non Institutional Bidders portion. The cut-off 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 Non-Institutional Bidders and QIB Bidders: The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount exceeds Rs. 1,00,000 and in multiples of [ ] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue to the public. However, the maximum Bid by a QIB Bidder should not exceed the investment limits prescribed for them by applicable laws. Under existing SEBI guidelines, a QIB Bidder cannot withdraw its Bid after the Bid Closing Date/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 Rs. 1,00,000 for being considered for allocation in the Non Institutional Portion. In case the Bid Amount reduces to Rs. 1,00,000 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 QIB Bidders are not allowed to Bid at cut-off . A QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date.
Information for the Bidders
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(a) The Company will file the Red Herring Prospectus with the RoC at least three days before the Bid Opening Date/ Issue Opening Date.
(b) The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum Application Form to potential investors.
(c) Any investor (who is eligible to invest in the Equity Shares according to the terms of this Red Herring Prospectus and applicable law) who would like to obtain the Red Herring Prospectus and/or the Bid cum Application Form can obtain the same from the Registered Office or from any of the members of the Syndicate.
(d) The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms should bear the stamp of the members of the Syndicate. Bid cum Application Forms which do not bear the stamp of the members of the Syndicate will be rejected.
(e) Investors who are interested in subscribing for the Company s Equity Shares should approach the BRLM or syndicate Members or their authorized agent(s) to register their Bid.
Method and Process of Bidding
(a) The Company and the BRLM shall declare the Bid Opening Date/Issue Opening Date, Bid Closing Date/Issue Closing Date and Price Band at the time of filing the Red Herring Prospectus with the RoC and also publish the same in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is situated. This advertisement shall be in the format and contain the disclosures specified in Part A of Schedule XX-A of the SEBI Guidelines amended form time to time. The BRLMs and Syndicate Member shall accept Bids from the Bidders during the issue Period in accordance with the terms of the Syndicate Agreement.
(b) Investors who are interested in subscribing for the Company s Equity Shares should approach any of the members of the Syndicate or their authorised agent(s) to register their Bid.
(c) The Bidding Period shall be a minimum of at least three working days and not exceed seven working days. In case the price band is revised, the revised price band and Bidding Period will be published in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is situated and the Bidding period will be extended for the further period of three days, subject to the total Bidding period not exceeding 10 working days. During the bidding period, the Bidders may approach the Syndicate to submit their Bid. Every member of the Syndicate shall accept Bids from all clients/investors who place orders through them and shall have the right to vet the bids.
(d) Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for details see the section titled Issue Procedure -Bids at Different Price Levels on page no. 143 of this Red Herring Prospectus) within the Price Band and specify the demand (i.e. the number of Equity Shares Bid for) in each option. The price 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 and the rest of the Bid(s), irrespective of the Bid Price, will become automatically invalid.
(e) The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to either the same or to another member of the Syndicate 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 section titled Issue Procedure-Build up of the Book and Revision of Bids on page no. 155 of this Red Herring Prospectus.
(f) The Syndicate Members 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
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Form.
(g) During the Bidding Period, Bidders may approach the members of the Syndicate to submit their Bid. Every member of the Syndicate shall accept Bids from all clients / investors who place orders through them and shall have the right to vet the Bids.
h) Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the section titled Issue Procedure -Terms of Payment and Payment into the Escrow Accounts on page no. 149 of this Red Herring Prospectus.
Bids at Different Price Levels
1. The Price Band has been fixed at Rs. 40 to Rs. 45 per Equity Share of Rs. 10 each, Rs. 40 being the Floor Price and Rs. 45 being the Cap Price. The Bidders can bid at any price within the Price Band, in multiples of Re. 1 (one).
2. In accordance with SEBI Guidelines, The Company reserves the right to revise the Price Band during the Bidding Period. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of the Price Band disclosed in the Red Herring Prospectus.
3. In case of revision in the Price Band, the Issue Period will be extended for 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 Bidding Period/Issue Period, if applicable, will be widely
disseminated by notification to BSE and NSE, by issuing a public notice in two national newspapers (one each in English & Hindi) and a regional newspaper and also by indicating the change on the websites of the BRLMs and at the terminals of the members of the Syndicate.
4. The Company, in consultation with the BRLMS, can finalize the Issue Price within the Price Band in accordance with this clause, without the prior approval of, or intimation, to the Bidders.
5. The Bidder 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 applying for a maximum Bid in any of the bidding options not exceeding Rs.1, 00,000 may bid at Cut-off Price. However, bidding at Cut-off Price is prohibited for QIB Bidders and Non - Institutional Bidders and such Bids from QIB Bidders and Non Institutional Bidders shall be rejected.
6. Retail Individual Bidders who bid at the Cut-off Price agree that they shall purchase the Equity Shares at the issue price, as finally determined, which will be a price within the price band. Retail Individual Bidders bidding at Cut-off Price shall deposit the Bid Amount based on the Cap Price in the respective Escrow Accounts. In the event the Bid Amount is higher than the subscription amount payable by the Retail Individual Bidders who Bid at Cut-off Price (i.e. the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail Individual Bidders, who Bid at Cut off Price, shall receive the refund of the excess amounts from the respective Escrow Accounts/refund account(s).
7. 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) 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 Rs.1,00,000 if the Bidder wants to continue to bid at Cut-off Price), with the Syndicate Member to whom the original Bid was submitted. In case the total amount (i.e. original Bid Amount plus additional payment) exceeds Rs.1,00,000, 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 the revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of allotment, 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.
8. In case of downward revision in the Price Band, announced as above, Retail Individual Bidders, who have
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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 respective Escrow Accounts/refund account(s).
9. In the event of any revision in the Price Band, whether upwards or downwards, the minimum application size shall remain [ ] Equity Shares irrespective of whether the Bid Amount payable on such minimum application is not in the range of Rs. 40 to Rs. 45
Escrow Mechanism
The Company shall open Escrow Accounts with one or more Escrow Collection Bank(s) in whose favor the 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 in a certain category would be deposited in the respective Escrow Account. The Escrow Collection Bank(s) will act in terms of this Red Herring Prospectus and the Escrow Agreement. The monies in the Escrow Accounts shall be maintained by the Escrow Collection Bank(s) for and on behalf of the Bidders. The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Bank(s) shall transfer the monies from the Escrow Accounts to the Issue Account as per the terms of the Escrow Agreement. Payments of refund to the Bidders shall also be made from the Escrow Accounts/refund account(s) as per the terms of the Escrow Agreement and this Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between the Company, the members of the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Issue to facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Accounts
In case of Non-Institutional Bidder and Retails Individual Bidders, each Bidder shall, with the submission of the Bid cum Application Form draw a cheque or demand draft for the maximum amount of his Bid in favor of the Escrow Account of the Escrow Collection Bank(s) (for details see the section titled Issue Procedure -Payment Instructions on page no 155 of this Red Herring Prospectus) and submit the same to the member of the Syndicate to whom the Bid is being submitted. Bid cum Application Forms accompanied by cash shall not be accepted. The maximum Bid price has to be paid at the time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder.
The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Bank(s), which will hold the monies for the benefit of the Bidders till the Designated Date. On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds equivalent to the size of the Issue from the Escrow Accounts, as per the terms of the Escrow Agreement, into the Issue Account with the Banker(s) to the Issue. The balance amount after transfer to the Issue Account shall be held for the benefit of the Bidders who are entitled to refunds on the Designated Date, and not later than 15 days from the Bid Closing Date/Issue Closing Date, the Escrow Collection Bank(s) shall refund all monies to unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for allotment to the Bidders.
Each category of bidders i.e. QIBs, Non -Institutional Bidders and Retail Individual Bidders would be required to pay their applicable margin amount at the time of submission of the bid cum application form. The margin amount payable by each category of bidders is mentioned under the section titled, Issue Structure on page no. 141 of this Red Herring Prospectus. Where the margin amount applicable to the bidder is less than 100% of the bid price, any difference between the amount payable by the bidder for equity shares allocated/allotted at the issue price and the margin amount paid at the time of Bidding, shall be payable by the Bidder not later than the Pay-in-Date which shall be minimum period of 2 days from the date of communication of the allocation list to the Members of the Syndicate by the BRLM. If the payment is not made favoring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled. However, if the members of the Syndicate do not waive such payment, the full amount of payment has to be made at the time of submission of the bid cum application form.
Where the Bidder has been allocated lesser number of Equity Shares than he or she had Bid for, the excess amount paid on bidding, if any, after adjustment for allocation, will be refunded to such Bidder within 15 days from the Bid Closing Date/Issue Closing Date, failing which the Company shall pay
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interest at 15% per annum for any delay beyond the periods as mentioned above.
Electronic Registration of Bids
(a) The Members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE. There will be at least one on -line connectivity in each city, where a stock exchange is located in India and where Bids are being accepted.
(b) NSE and BSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the terminals of the Members of the Syndicate and its authorized agents during the Bidding Period/Issue Period. Members of the Syndicate can also set up facilities for off-line electronic registration of Bids subject to the condition that it will subsequently download the off-line data file into the on-line facilities for book building on an half hourly basis. On the Bid Closing Date/ Issue Closing Date, the Syndicate Member shall upload the Bids till such time as may be permitted by the Stock Exchanges.
(c) The aggregate demand and price for Bids registered on the electronic facilities of NSE and BSE will be downloaded on an half hourly basis, consolidated and displayed on-line at all bidding centers. A graphical representation of the consolidated demand and price would be made available at the bidding centers and the websites of the Stock Exchanges during the Bidding Period/Issue Period.
(d) At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the on-line system:
Name of the investor (Investors 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 Bid cum Application Form is submitted in joint names, investors should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form).
Investor Category Individual, Corporate, FII, NRI or Mutual Fund, etc.;
Numbers of Equity Shares Bid for;
Bid price;
Bid cum Application Form number;
Whether payment is made upon submission of Bid cum Application Form; and
Depository Participant identification no. and client identification no. of the demat account of the Bidder.
(e) 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. The registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be allocated either by the members of the Syndicate or the Company.
(f) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
(g) It is to be distinctly understood that the permission given by NSE and 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 the Company or the BRLM are cleared or approved by NSE and 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 the Company, its Promoter, its management or any scheme or project of the Company.
(h) It is also to be distinctly understood that the approval given by NSE and BSE should not in any way be deemed or construed that this Red Herring Prospectus has been cleared or approved by the NSE and 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 NSE and BSE.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the Government of India and FEMA. While the Industrial Policy, 1991 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 the 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. As per current foreign investment policies foreign direct investment in any sector not included in Annexure A to schedule 1 of the Foreign Exchange Management (Transfer or issue of security by a person resident Outside India) Regulations, 2000 is allowed up to 100% under the automatic route. Accordingly, 100% foreign direct investment is allowed in our Company.
By way of Circular No 53. dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian Company in a public offer without prior RBI approval, so long as the price equity shares to be issued is not less than the price at which equity shares are issued to residents.
Transfer of equity shares previously required the prior approval of the FIPB. However, vide a RBI Circular dated October 4, 2004, the transfer of shares between and Indian resident and a non-resident does not require the prior approval of the FIPB or the RBI, provided that (i) the activities of the investee company are under the automatic route under the foreign direct investment (FDI) Policy and transfer does not attract the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (ii) the non-resident shareholding is within the sect oral limits under the FDI policy, and (iii) the pricing is in accordance with the guidelines prescribed by the SEBI/RBI.
Subscription by foreign investors (NRIs/FIIs)
There is no reservation for Non-Residents, NRIs, FIIs, foreign venture capital funds, multi-lateral and bilateral development financial institutions and any other foreign investor. All Non-Residents, NRIs, FIIs and foreign venture capital funds, multi-lateral and bilateral development financial institutions and any other foreign investor applicants will be treated on the same basis with other categories for the purpose of allocation.
As per existing regulations, OCBs cannot participate in the Issue.
The Equity Shares have not been and shall not be registered under the US Securities Act of 1933 (the Securities Act) 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 under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold outside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act.
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.
The above information is given for the benefit of the Bidders. The company and the BRLM are not liable for any amendments or modifications or changes in applicable laws or regulations, which may occur after the date of this 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.
Build Up of the Book and Revision of Bids
(a) Bids registered by various Bidders through the Members of the Syndicate shall be electronically transmitted to the NSE or BSE mainframe on an on-line basis. Data would be uploaded on a regular basis.
(b) The Price Band can be revised during the Bidding Period, in which case the Bidding period shall be extended further for a period of three days, subject to the total Bidding Period not exceeding ten working days. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of Price Band can move up or
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down to the extent of 20% of the floor of the Price Band disclosed in theRed Herring Prospectus.
(c) Any revision in the Price Band will be widely disseminated by informing the stock exchanges, by issuing a public notice in two national newspapers (one each in English and Hindi) and one regional newspaper and also indicating the change on the relevant websites and the terminals of the members of the Syndicate.
(d) The book gets built up at various price levels. This information will be available with the
BRLMs on a regular basis.
(e) During the Bidding 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.
(f) Revisions can be made in both the desired number of Equity Shares and the Bid price 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 cum Application Form and he 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 changed, in the Revision Form unchanged. Incomplete or inaccurate Revision Forms will not be accepted by the members of the Syndicate.
(g) The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate through whom he or she had placed 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.
(h) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this Red Herring Prospectus. In case of QIB Bidders, the members of the Syndicate may at their sole discretion waive the payment requirement at the time of one or more revisions by the QIB Bidders.
(i) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members of the Syndicate. 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.
(j) In case of discrepancy of data between NSE or BSE and the members of the Syndicate, the decision of the BRLM, based on the physical records of Bid cum Application Forms, shall be final and binding on all concerned.
Price Discovery and Allocation
(a) After the Bid Closing Date/Issue Closing Date, the BRLM will analyze the demand generated at various price levels and discuss pricing strategy with the company.
(b) The Company, in consultation with the BRLM, shall finalise the Issue Price , the number of Equity Shares to be Allotted in each portion and the allocation to successful QIB Bidders. The allocation will be decided based inter- alias, on the quality of the Bidder, and the size, price and time of the Bid.
(c) The allocation for QIB Bidders for up to 50% of the Net Issue (including 5% specifically reserved for Mutual Funds) would be on proportionate basis in consultation with the Designated Stock Exchange subject to valid bids being received at or above the Issue Price, in the manner as described in the Section titled Basis of Allotment
Allotment to QIB Bidders . The allocation to Non -Institutional Bidders not less than 15% and Retail Individual Bidders not less than 35% each of the Issue, respectively, would be on proportionate basis, in the manner specified in the SEBI
Guidelines, in consultation with Designated Stock Exchange, subject to valid Bids being received at or above the Issue Price.
(d) Allocation to QIBs, Non Residents, FIIs and NRIs applying on repatriation basis will be subject to the terms and conditions stipulated by RBI while granting permission for allotment of Equity Shares to them.
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(e) Under subscription, if any, in any category, other than QIB category, would be allowed to be met with spill over from any other categories at the discretion in consultation with the BRLM. (f) The BRLM, in consultation with the Company, shall notify the Members of the Syndicate of the Issue Price and allocations to their respective Bidders, where the full Bid Amount has not been collected from the Bidders. (g) The Company reserves the right to cancel the Issue any time after the Bid Opening Date/Issue Opening Date without assigning any reasons whatsoever. (h) In terms of SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid Closing Date/Issue Closing Date.
(i) The allotment details shall be put on the website of the Registrar to the Issue.
Signing of Underwriting Agreement and ROC Filing
(a) The Company, the BRLM and the Syndicate Member shall enter into an Underwriting Agreement on finalization of the Issue Price and allocation(s) to the Bidders.
(b) After signing the Underwriting Agreement, the Company would update and file the updated Red Herring Prospectus with the RoC, which then would be termed Prospectus . The Prospectus would have details of the Issue Price, Issue size, underwriting arrangements and would be complete in all material respects.
Filing of the prospectus with the ROC
The Company will file a copy of the prospectus with the Registrar of Companies, Andhra Pradesh in terms of Section 56, Section 60 and Section 60B of the Companies Act, 1956.
Announcement of Pre-Issue Advertisement
Subject to Section 66 of the Companies Act, 1956, the Company shall after receiving final observations, if any, on this Draft Red Herring Prospectus from SEBI, publish an advertisement, in the form prescribed by the SEBI (DIP) Guidelines in an English National Daily with wide circulation, one Hindi National Newspaper and a regional language Newspaper with wide circulation.
Advertisement regarding Issue Price and Prospectus
The company will issue a statutory advertisement after the filing of the Prospectus with the ROC in two widely circulated newspapers (one each in English and Hindi) and a regional language newspaper circulated at the place where the registered office of the Company is located. This advertisement, in addition to the information (in the format and contain the disclosures specified in Part A of Schedule XX-A of the SEBI Guidelines), that has to be set out in the statutory advertisement shall indicate the issue price along with a table showing the number of Equity Shares, Any material updates between the date of Draft Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.
Issuance of Confirmation of Allocation Note (CAN) (a) Upon the approval of the basis of allotment by the Designated Stock Exchange the BRLMs or Registrar to the Issue shall send to the Members of the Syndicate a list of their Bidders who have been allocated Equity Shares in the Issue.
(b) The BRLM or members of the Syndicate would then send the CAN to their Bidders who have been allocated Equity Shares in the Issue. The dispatch of a CAN shall be deemed to be a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to
such Bidder. Those Bidders who have not paid the entire bid amount into the Escrow Accounts at the time of bidding shall pay in full the amount payable into the Escrow Accounts by the Pay-in Period specified in the C AN.
(c) Bidders who have been allocated Equity Shares and who have already paid into the Escrow Account at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, subject to realization of their cheque or demand draft paid into the Escrow Accounts. The dispatch of a CAN shall be a deemed a valid, binding and irrevocable contract for the Bidder to pay
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the entire Issue Price for the allotment to such Bidder.
Designated Date and Allotment of Equity Shares
a) The Company will ensure that the Allotment of Equity Shares is done within 15 days of the Bid Closing Date/Issue Closing Date. After the funds are transferred from the escrow Accounts to the issue account on the Designated Date, the Company would ensure the credit to the successful Bidders depository account Allotment of the Equity Shares to the allottees within two working days of the date of Allotment.
b) All allottees will receive credit for the Equity Shares directly in their depository account. Equity Shares will be offered only in the dematerialized form to the allottees. Allottees will have the option to re-materialize the Equity Shares so allotted, if they so desire, as per the provisions of the Companies Act and the Depositories Act.
c) After the funds are transferred from the Escrow Account to the Public issue account on the Designated Date, the Company would allot the Equity Shares to the allottees. The Company would ensure the allotment of Equity Shares within 15 days of Bid / Issue Closing Date and give instructions to credit to the allottees` within 15 days of the Bid/Issue Closing Date, interest would be paid to the investors at the rate of 15% per annum.
d) Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated to them pursuant to this issue.
GENERAL INSTRUCTIONS
Do s:
Check if you are eligible to apply;
Read all the instructions carefully and complete the Resident Bid cum Application Form (white in color) or Non-Resident Bid cum Application Form (blue in color), as the case may be;
Ensure that the details about Depository Participant and Beneficiary Account are correct as allotment of Equity Shares will be in the dematerialized form only; 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 Bid cum Application Form is submitted in joint names, investors should ensure that the Depository Account is also held in the same joint names and are in the same sequence in which they appear in the Bid cum Application Form;
. Ensure that the Bids are submitted at the bidding centers only on forms bearing the stamp of a Members of the Syndicate; Ensure that you have been given a TRS for all your Bid options; Submit revised Bids to the same Member of the Syndicate through whom the original
Bid was placed and obtain a revised TRS; Ensure that you mention your Permanent Account Number (PAN) allotted under the I.T. Act where the maximum Bid for Equity Shares by a Bidder is for a total value of Rs. 50,000 or more and attach a copy of the PAN Card and also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN along with the application for the purpose of verification of the number, with the Bid cum Application Form. In case you do not have a PAN, ensure that you provide a declaration in Form 60 prescribed under the I.T. Act along with the application.; and
Ensure that bid is within the Price Band Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects.
Ensure that the Bid Cum Application Form Number is mentioned on the reverse of the cheque/demand draft.
Don ts:
Do not Bid for lower than the minimum Bid size;
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Do not Bid/ revise Bid price to less than the lower end of the price band or higher than the higher end of the Price Band;
Do not Bid on another Bid cum Application Form after you have submitted a Bid to the
members of the Syndicate; Do not pay the Bid Amount in cash; Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate only; Do not Bid at Cut-off Price (for QIB Bidders, Non-Institutional Bidders) 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; Do not submit Bid accompanied with Stockinvest.
. Do not submit the GIR Number instead of the PAN as the Bid is liable to be rejected on this ground.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM
Bidders can obtain Bid cum Application Forms and/or Revision Forms from the Members of the Syndicate.
Bids and Revisions of Bids
Bids and revisions of Bids must be:
Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white color for Resident Indians and blue color for NRIs and FIIs and applying on repatriation basis).
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. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected.
The Bids from the Retail Individual Bidders must be for a minimum of [ ] Equity Shares and in multiples of [ ] thereafter subject to a maximum Bid Amount of Rs. 1,00,000.
For Non-institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds Rs. 1,00,000 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.
In single name or in joint names (not more than three, and in the same order as their Depository Participant details).
Thumb impressions and signatures other than in the languages specified in the Eighth Schedule of the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.
Bidder s Bank Details
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 the Bidders bank account details. These bank account details would be printed on the refund order, if any, to be sent to Bidders. 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 credit of refunds to Bidders at the Bidders sole risk and neither the BRLM nor the Company shall have any responsibility and undertake any liability for the same.
Bidder s Depository Account Details
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
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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.
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 ( Demographic Details ). Hence, Bidders should carefully fill in their Depository Account details in the Bid cum Application Form.
These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/ CANs/Allocation Advice and printing of bank particulars on the refund order and the Demographic Details given by Bidders in the Bid cum Application Form would not be used for these purposes by the Registrar.
Hence, Bidders are advised to update their Demographic Details as provided to their Depository Participants.
By signing the Bid cum Application Form, Bidder would have deemed to authorize the depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. Refund Orders/Allocation Advice/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/allocation advice/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 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 the Bidders sole risk and neither the Company nor 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 that matches three parameters, namely, names of the Bidders (including the order of names of joint holders), the Depository Participant s identity (DP ID) and the beneficiary s identity, then such Bids are liable to be rejected.
Bids under Power of Attorney
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 and articles of association and/or bye laws must be lodged along with the Bid cum Application Form. Failing this, the Company reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made pursuant to a power of attorney by FIIs, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form. Failing this, the Company reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the Bid cum Application Form. Failing this, the Company reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof. In case of Bids made by provident funds with minimum corpus of Rs. 2500 lacs and pension funds with minimum corpus of Rs. 2500 lacs, a certified copy of certificate from a chartered accountant certifying the corpus of the provident fund/ pension fund must be lodged along with the Bid cum Application Form. Failing this, the Company reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason thereof.
In case of Bids made by Mutual Fund registered with SEBI, venture capital fund registered with SEBI and
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foreign venture capital investor registered with SEBI, a certified copy of their SEBI registration certificate must be submitted 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.
The Company, in its absolute discretion, reserve 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 the Company and the BRLM may deem fit.
The Company, in its absolute discretion, reserve the right to permit the holder of the power of attorney to request the Registrar that for the purpose of printing particulars on the refund order and mailing of the refund order/CANs/allocation advice, the Demographic Details given on the Bid cum Application Form should be used (and not those obtained from the Depository of the Bidder). In such cases, the Registrar shall use Demographic Details as given in the Bid cum Application Form instead of those obtained from the depositories.
Bids by NRIs, FIIs, Foreign Venture Capital Funds registered with SEBI on a repatriation basis
NRI, FIIs and Foreign Venture Capital funds Bidders to comply with the following:
Individual NRI bidders can obtain the Bid cum Application Forms from the Registered Office of the Company or Registrar to the Issue or BRLM whose addresses are printed on the cover page of this Red Herring Prospectus.
NRI bidders may please note that only such bids as are accompanied by payment in free foreign exchange shall be considered for allotment under the NRI category.
The NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall use the form meant for resident Indians [white in color].
Bids and revision of Bids must be made:
Bids and revision to Bids must be made:
On the Bid cum Application Form or the Revision Form, as applicable (blue in color), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.
In a single name or joint names (not more than three).
By FIIs for a minimum of such number of Equity Shares and in multiples of [ ] thereafter that the Bid Amount exceeds Rs.1,00,000. For further details see section titled Issue Procedure-Maximum and Minimum Bid Size on page no 146 of this Red Herring Prospectus.
In the names of individuals, or in the names of FIIs, or in the names of foreign venture capital funds, multilateral and bilateral development financial institutions, but not in the names of minors, firms or partnerships, foreign nationals (including NRIs) or their nominees, foreign venture capital investors.
Refunds, dividends and other distributions, if any, will be payable in Rupees only and net of bank charges and/or commission. In case of Bidders who remit money through Rupee drafts purchased abroad, such payments in Rupees will be converted into U.S. Dollars or any other freely convertible currency as may be permitted by 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. The Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency. It is to be distinctly understood that there is no reservation for NRIs and FIIs. All NRIs and FIIs will be treated on the same basis with other categories for the purpose of allocation.
The Company does not require approvals from FIPB or RBI for the transfer of Equity Shares in this Issue to eligible NRIs, FIIs, Foreign Venture Capital Investors registered with SEBI and multilateral and bilateral institutions. As per the RBI regulations, OCBs are not permitted to participate in the issue.
There is no reservation for non-residents, NRIs, FIIs and foreign venture capital funds and all non-residents, NRI, FII and foreign venture capital fund applicants will be treated on the same basis with other categories for the purpose of allocation.
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Payment Instructions
The Company shall open Escrow Accounts with the Escrow Collection Bank(s) for the collection of the Bid Amounts payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Issue.
Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the following terms:
(a) Payment into Escrow Account
The Bidders for whom the applicable Margin Amount is equal to 100% 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 members of the Syndicate.
In case the above Margin Amount paid by the Bidders during the Bidding Period is less than the Issue Price multiplied by the Equity Shares allocated to the Bidder, the balance amount shall be paid by the Bidders into the Escrow Account within the period specified in the CAN which shall be subject to a minimum period of two days from the date of communication of the allocation list to the members of the Syndicate by the BRLM.
The payment instruments for payment into the Escrow Account should be drawn in favour of:
In case of QIB Bidders : Escrow Account
SVPCL Public Issue - QIB
Incase of Non-resident QIB Bidders: Escrow Account
SVPCL Public Issue QIB-NR
In case of Resident Bidders : Escrow Account SVPCL Public Issue
In case of Non Resident Bidders: Escrow Account
SVPCL Public Issue
NR
In case of bids by NRIs applying on a repatriation basis, the payments must be made through 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 the NRE Accounts or the Foreign Currency Non -Resident Accounts(FCNR), 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 the 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 the NRE Account or the Foreign Currency Non-Resident Account.
In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to Special Rupee Account.
Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for, the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated, will be refunded to the Bidder from the Escrow Accounts.
The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated Date.
On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds from the Escrow Account as per the terms of the Escrow Agreement into the Issue Account with the Banker to the Issue.
On the Designated Date and no later than 15 days from the Bid Closing Date/Issue Closing Date, the Escrow Collection Bank(s) shall also refund all amounts payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for allocation to the Bidders
Payments should be made by cheque, or demand draft drawn on any bank (including a Co-operative bank), which is situated at, and is a member of or sub-member of the bankers clearing house located at the centre where the Bid cum Application Form 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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Payment by Stock Invest
In terms of the Reserve Bank of India Circular No.DBOD No.FSC BC 42/27.47.00/2003-04 dated November 05, 2003, the option to use the Stock Invest instrument in lieu of cheques or bank drafts for payment of bid money has been withdrawn. Hence, payment through Stock Invest would not be accepted in this issue.
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. Each member of the Syndicate may, at its sole discretion, waive the requirement of payment at the time of submission of the Bid cum Application Form and Revision Form provided however that for QIB Bidders the Syndicate Member shall collect the QIB margin and deposit the same in specified Escrow Account.
No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection center of the members of the Syndicate 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.
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.
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.
The Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all portion.
Permanent Account Number or PAN
Where Bid(s) is/are for Rs. 50,000 or more, the Bidder or in the case of a Bid in joint names, each of the Bidders, should mention his/ her Permanent Account Number (PAN) allotted under the I.T. Act. The copy of the PAN card or PAN allotment letter is required to be submitted with the Bid-cum-Application Form. Applications without this information and documents will be considered incomplete and are 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. In case the Sole/First Bidder and Joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention Not Applicable and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s) should Mention Applied for in the Bid cum Application Form. Further, where the Bidder(s) has mentioned Applied for or Not Applicable , the Sole/First Bidder and each of the Joint Bidder(s), as the case may be, would be required to submit Form 60 (Form of declaration to be filed by a person who does not have a permanent account number and who enters into any transaction specified in rule 114B), or, Form 61 (form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable to income tax in respect of transactions specified in rule 114B), as may be applicable, duly filled along with a copy of any one of the following documents in support of the address: (a) Ration Card (b) Passport (c) Driving License (d) Identity Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address (f) Any document or communication issued by any authority of the Central Government, State Government or local bodies showing residential address (g) Any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and Form 61 have been amended vide a notification issued on December 1, 2004 by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes. All Bidders are requested to furnish, where applicable, the revised Form 60 or 61, as the case may be.
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Unique Identification Number ( UIN )
With effect from July 1, 2005, SEBI has decided to suspend all fresh registrations for obtaining Unique Identification Number (UIN) and the requirement to contain/ quote UIN under the SEBI (Central Database of Market Participants) Regulations 2003 by its circular bearing number MAPIN/cir -13/2005.
The Company s right to reject Bids
The Company and BRLM have a right to reject Bids on technical grounds only. Consequent refunds shall be made by cheque or pay order or draft and will be sent to the Bidder s address at the Bidder s risk.
Grounds for Technical Rejections
Bidders are advised to note that Bids are liable to be rejected on among others on the following technical grounds:
Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for;
Age of First Bidder not given;
In case of partnership firms, shares may be registered in the names of the individual partners and no firm as such, shall be entitled to apply;
Bids by Persons not competent to contract under the Indian Contract Act, 1872, including minors, insane Persons;
PAN photocopy/ PAN Communication/ Form 60/Form 61 declaration not given if Bid is for Rs. 50,000 or more;
Bids for lower number of Equity Shares than specified for that category of investors;
Bank account details for refund are not given;
Bids at a price less than lower end of the Price Band;
Bids at a price more than the higher end of the Price Band;
Bids at Cut -off Price by Non -Institutional Bidders and QIB Bidders.
Bids for number of Equity Shares, which are not in multiples of [ ];
Category not ticked;
Multiple Bids as defined in this Red Herring Prospectus;
In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;
Bids accompanied by Stockinvest/money order/postal order/cash;
Signature of sole and /or joint Bidders missing;
Bid cum Application Forms does not have the stamp of the BRLM or the Syndicate Member;
Bid cum Application Forms does not have Bidder s depository account details;
Bid cum Application Forms are not submitted by the Bidders within the time prescribed as per the Bid cum Application Forms, Bid Opening Date/Issue Opening Date advertisement and as per the instructions in this Red Herring Prospectus and the Bid cum Application Forms;
Bids accompanied by Stock Invest;
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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 identity;
Bids for amounts greater than the maximum permissible amounts prescribed by the regulations. See the details regarding the same in the section titled Issue Procedure Bids at Different Price Levels at page no. 143 of this Red Herring Prospectus;
Bids by OCBs; and
Bids by US Persons other than qualified institutional buyers as defined in Rule 144A under the Securities Act.
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 portion. The allotment to all the successful Retail Individual Bidders will be made at the Issue Price.
The Issue size less allotment to Non -Institutional Bidders and QIB Bidders shall be available for allotment to 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 portion 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 demand.
If the aggregate demand in this category is greater than (**) Equity Shares at or above the Issue Price, the allocation shall be made on a proportionate basis up to a minimum of [ ] Equity Shares and in multiples of one Equity Share thereafter. For the method of proportionate basis of allocation, refer below.
B. For Non-Institutional Bidders
Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to determine the total demand under this portion. The allotment to all successful Non -Institutional Bidders will be made at the Issue Price.
The Issue size less allocation to QIB Bidders and Retail Individual Bidders shall be available for allocation to Non -Institutional Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.
If the 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, allocation shall be made on a proportionate basis up to a minimum of [ ] Equity Shares and in multiples of one Equity Share thereafter. For the method of proportionate basis of allocation refer below.
C. For QIB Bidders
Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the total demand under this portion. The allocation to all the QIB Bidders will be made at the Issue Price.
50% of the Net Issue size shall be available for allotment to QIBs who have bid in the issue at a price that is equal to or greater than 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:
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a) In the first instance allocation to Mutual Funds for up to 5% of the QIB portion
shall be determined as follows:
1. In the event that Mutual Fund bids exceed 5% of the QIB portion, allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB portion.
2. 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.
3. 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.
b) In the second instance, allocation to all QIBs shall be determined as follows:
1. In the event that the oversubscription in the QIB portion, all QIB Bidders who have submitted Bids above the issue price be allotted Equity Shares on a proportionate basis for up to 95% of the QIB portion.
2. 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 proportionate basis along with other QIB Bidders.
3. Under subscription below 5% of the QIB portion, if an y, from Mutual Funds would be included for allocation to the remaining QIB Bidders on a proportionate basis.
Method of proportionate basis of allocation in the QIBs, Retail and Non-Institutional Portions
Bidders will be categorized according to the number of Equity Shares applied for by them.
(a) The total number of Equity Shares to be allotted to each portion as a whole shall be arrived at on a proportionate basis, being the total number of Equity Shares applied for in that portion (number of Bidders in the portion multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.
(b) Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a proportionate basis, being the total number of Equity Shares applied for by each Bidder in that portion multiplied by the inverse of the over-subscription ratio.
(c) If the proportionate allotment to a Bidder is a number that is more than [ ] but is not a multiple of one (which is the market lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0. 5, it would be rounded off to the lower whole number. Allotment to all Bidders in such categories would be arrived at after such rounding off.
(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. The successful Bidders out of the total Bidders for a portion shall be determined by draw of lots in a manner such that the total number of Equity Shares Allotted in that portion is equal to the number of Equity Shares calculated in accordance with (b) above;
(e) If the Equity Shares allocated on a proportionate basis to any portion are more than the Equity Shares allotted to the Bidders in that portion, the remaining Equity Shares available for allotment shall be first adjusted against any other portion, where the Equity Shares are not sufficient for proportionate allotment to the successful Bidders in that portion. The balance Equity Shares, if any, remaining after such adjustment will be added to the portion comprising Bidders applying for minimum number of Equity Shares.
The Executive Director /Managing Director of the Designated Stock Exchange along with the Book Running Lead Managers and the Registrars to the issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner in accordance with the SEBI Guidelines.
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Procedure and time of schedule for allotment and issue of certificates
The Company reserves, at their absolute and uncontrolled discretion and without assigning any reason thereof, the right to accept or reject any Bid in whole or in part. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. In case a Bid is rejected in part, the excess bid amount will be refunded to the Bidder within 15 days of the Bid/Issue Closing Date. The Company will ensure the allotment of the Equity shares within 15 days from the Bid/Issue Closing Date. The Company shall pay interest at the rate of 15% per annum (for any delay beyond the periods as mentioned above), if allotment is not made, refund orders are not dispatched and/or dematerialized credits are not made to investors within two working days from the date of allotment.
Modes of Refund
The payment of refund, if any, shall be undertaken in any of the following manners:
1. NEFT Payment of refund shall be undertaken through NEFT wherever the applicant s bank has been assigned the Indian Financial System Code, which can be linked to a Magnetic Ink Character Recognition (MICR), if any, available to that particular 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.
2. ECS Payment of refund shall be undertaken through ECS for applicants having an account at any of the following fifteen centers: Ahmedabad, Bangalore, Bhubaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvanthapuram. 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. One of the methods for payment of refund is through ECS for applicants having a bank account at any of the abovementioned fifteen centers.
3. Direct Credit
Applicants having bank accounts with the Banker(s) to the Issue, in this case being, [*] shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Bank(s) to the Issue for the same would be borne by the Issuer.
4. RTGS Applicants having a bank account at any of the abovementioned centers and whose refund amount exceeds Rs.Ten lacs, have the option to receive refund through RTGS. Such eligible applicants who indicate their preference to receive refund through RTGS are required to provide the IFSC Code in the Bid-cum-Application Form. In the event the same is not provided, refund shall be made through ECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by such applicant opting for RTGS as a mode for refund. Charges, if any, levied by the applicant s bank receiving the credit would be borne by the applicant.
Note: We expect that all payments including where refund amounts exceed Rs.10,00,000 (Rupees Ten Lacs) shall be made through NEFT, however in some exceptional circumstances where refund amounts exceed Rs.10,00,000 (Rupees Ten Lacs) refunds may be made through RTGS.
5. For all other applicants, including those who have not updated their bank particulars with the MICR code, the refund orders shall be dispatched under certificate for value upto Rs.1500 and through Speed Post/ Registered Post for refund orders of Rs.1,500 and above. Such refunds shall 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 centers will be payable by the Bidders.
In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional days after the revision of Price Band. Any revision in the Price Band and the revised Bid/Issue Period, if
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applicable, will be widely disseminated by notification to the BSE and NSE, by issuing a press release, and by indicating the changes on the web site of the BRLM and the terminals of the Syndicate.
Equity Shares in Dematerialised Form with NSDL or CDSL
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 agreements have been/shall be signed among the Company, the respective Depositories and the Registrar to the Issue:
a tripartite agreement dated [ ] with NSDL, the Company and Registrar to the Issue ; and a tripartite agreement dated [ ] with CDSL, the Company and Registrar to the Issue.
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 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.
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.
Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.
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.
Non-transferable allotment advice or refund orders will be directly sent to the Bidders by the Registrar.
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.
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.
It may be noted that 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.
The trading of the Equity Shares of the Company would be in dematerialised form only for all investors 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 to the Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, details of Depository Participant, number of Equity Shares applied for, date of Bid form, name and address of the member of the Syndicate where the Bid was submitted and cheque or draft number and issuing bank thereof.
The investors can contact the Compliance Officer in case of any pre -issue or post-issue related problems such as non -receipt of letter of allotment, credit of allotted shares in the respective beneficiary account, refund orders etc.,
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Companies Act, which is reproduced below:
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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.
Undertaking by the Company
The Company undertakes :
that the complaints received in respect of this Issue shall be attended to by the Company expeditiously and satisfactorily;
that all steps will be taken for the 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 within seven working days of finalisation of the basis of allocation;
that the funds required for dispatch of refund orders or allotment advice by registered post or speed post shall be made available to the Registrar to the Issue by the Company;
that the refund orders or allotment advice to the non-resident Indians shall be dispatched within specified time; and.
that no further issue of Equity Shares shall be made till the Equity Shares offered through the Red Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription etc.
The Company shall not have recourse to the Issue proceeds until the approval for trading of the Equity Shares from all the Stock Exchanges where listing is sought has been received.
Utilisation of Issue Proceeds
The Board of Directors of the Company certifies that:
all monies received out of the Issue to the 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;
details of all monies utilised out of the Issue shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such monies have been utilised;
details of all unutilised monies out of the Issue, if any, shall be disclosed under the appropriate separate head in the balance sheet of the Company indicating the form in which such unutilized monies have been invested;
The Company shall not have any recourse to the Issue proceeds until the approval for trading the Equity Shares is received from the Stock Exchanges.
Disposal of Applications and Applications Money and Interest in Case of Delay in Dispatch of Allotment Letters/Refund Orders
The Company shall ensure dispatch of allotment advice, refund orders and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the allotment to the Stock Exchanges within two working days of date of finalisation of allotment of Equity Shares. The Company shall dispatch refund orders, if any, of value up to Rs. 1,500/-, Under Certificate of Posting , and shall dispatch refund orders above Rs. 1,500, if any, by registered post only at the sole or First Bidder s sole risk and adequate funds for the purpose shall be made available to the Registrar by the Company.
The Company shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at the Stock Exchanges where the Equity Shares are proposed to be
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listed, are taken within seven working days of finalisation of the basis of allotment.
In accordance with the requirements of the Stock Exchanges and SEBI Guidelines, the Company further undertake that:
Allotment shall be made only in dematerialised form within 15 days of the Bid Closing Date/Issue Closing Date;
dispatch of refund orders shall be made within 15 days of the Bid Closing Date/Issue Closing Date; and
to pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if allotment is not made and refund orders are not dispatched and/or demat credits are not made to investors within the 15 day time prescribed above as per the guidelines issued by the Government of India, Ministry of Finance pursuant to their letter No. F/8/S/79 dated July 31, 1983, as amended by their letter No. F/14/SE/85 dated September 27, 1985, addressed to the Stock Exchanges, and as further modified by SEBI s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.
Refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Bank(s) 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 centers will be payable by the Bidders.
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the Government of India and FEMA. While the Industrial Policy, 1991 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 the 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. As per current foreign investment policies foreign direct investment in any sector not included in Annexure A to schedule 1 of the Foreign Exchange Management (Transfer or issue of security by a person resident Outside India) Regulations, 2000 is allowed up to 100% under the automatic route. Accordingly, 100% foreign direct investment is allowed in our Company.
By way of Circular No 53. dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian Company in a public offer without prior RBI approval, so long as the price of equity shares to be issued is not less than the price at which equity shares are issued to residents.
The above information is given for the benefit of the Bidders and neither the Company nor the BRLM is liable for any changes in the regulations after the date of this Red Herring Prospectus.
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SECTION X : MAIN PROVISIONS OF ARTICLES OF ASSOCIATION
Applicability of Table "A"
1. Same as otherwise provided herein the regulations contained in Table "A" in Schedule to the Act shall apply to the Company.
INTERPRETATION
2. In the interpretation of these Articles the following expression shall have the following meaning unless repugnant to the subject or context:
The Act : means the Companies Act, 1956, or any statutory modification of reenactment thereof for the time being in force
These Articles means Articles of Association for the time being or as altered from time to time by Special Resolution.
Auditors means and includes those persons appointed as such for the time being of the Company.
Board or Board of Directors means the Board of Directors of the Company or the Directors of the Company collectively.
Capital means the share capital for the time being raised or authorized to be raised for the purposes of the Company.
The Chairman means the Chairman of the Board of Directors for the time being of the Company.
Charge includes a mortgage.
The Company or This Company means SVPCL LIMITED.
Debenture includes Debenture Stock, bonds and other securities of the Company, whether constituting a charge on the assets of the Company or not.
Director means the Board of Directors for the time being of the Company or as the case may be, the Directors assembled at a Board, or acting upon a Circular Resolution under the Articles.
Dividend includes bonus.
Executor or Administrator means a person who has obtained probate or letter of administration, as the case may be, from a Court of competent jurisdiction and shall include holder of a Succession Certificate authorizing the
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holder thereof to negotiate or transfer the share or shares of the deceased member and shall also include the holder of a Certificate granted by the Administrator General under Section 31 of the Administrator Generals Act, 1963. Gender Words importing the masculine gender shall include the feminine gender.
In Writing and Written includes Printing, Lithography and other modes of representing or reproducing words
in a visible form.
Legal Representative means a person who in law represents the estate of a deceased Member.
Members means the duly registered holders, from time to time of the shares of the Company and includes the subscribers to the Memorandum of the Company.
Meeting or General Meeting means a meeting of the members.
Annual General Meeting means a meeting of the members held in accordance with the provisions of Section 166 of the Act.
Extra-Ordinary General Meeting means an extra-ordinary general meeting duly called and constituted and any adjourned holding thereof.
Month means a calendar month.
Office means the registered office for the time being of the Company.
Ordinary Resolution shall have the meaning assigned to it by sub-section (1) of Section 189 of the Act.
Paid-up includes credited as paid up.
Persons includes corporations.
Proxy means an instrument whereby any person is authorized to attend a meeting and vote for a member at the general meeting on a poll.
The Register of Members means the register of members to be kept pursuant to section 150 of the Act.
The Registrar means the Registrar of Companies, Andhra Pradesh.
The Company s Regulations means the regulations for the time being for the management of the Company.
Seal means the Common Seal for the time being of the Company.
Secretary means any individual possessing the prescribed qualifications under the Companies (Secretaries Qualifications) Rules 1975, appointed by the Board to perform the duties of a Secretary.
Share means share in the share capital of the Company and includes stock where a distinction between stocks and shares is expressed or implied.
Special Resolution shall have the meaning assigned thereto by sub-section (2) of Section 189 of the Act.
The Statutes means the Companies Act, 1956 and every other Act for the time being in force effecting the Company.
Year means the calendar year and Financial Year shall have the meaning assigned thereto by section 2 (17) of the Act.
Beneficial Owner means beneficial owner as defined in clause (a) of Subsection (1) of Section 2 of the Depositories Act, 1996.
Depositories Act, 1996 includes any statutory modification or reenactment thereof for the time being in force.
Depository means a depository as defined in clause (e) of sub-section 2 of the Depositories Act, 1996.
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Security means and includes Share, Debenture and such other security as may be specified by the securities and Exchange Board of India from time to time.
Securities and Exchange Board of India or SEBI means the Securities and Exchange Board of India
established under Section 3 of the Securities and Exchange Board of India Act, 1992.
Member means the duly registered holder from time to time of the shares of the Company and includes
subscribers of the Memorandum of the Company and Beneficial owner in the records of the Depository.
'Bye-laws' means bye-laws made by a Depository under Section 26 of the Depositories Act, 1996.
'Registered Owner' means a Depository whose name is entered as such in the records of the Company.
Words importing the singular number includes where the context admits or requires the plural number and vice versa
Save as aforesaid any words and expressions contained in these Articles shall bear the same meaning as in the Act or any statutory modification thereof for the time being in force.
Share Capital
3. The Authorised Share Capital of the Company will be as specified in the Memorandum of Association of the Company
The Company shall have the power to increase or reduce the capital for the time being of the Company and to divide the shares in the Capital into several classes with rights, privileges or conditions as may be determined.
The Company may issue preference shares, which shall, or at the option of the Company shall be, liable to be redeemed.
Further Issue of Share Capital
4. (1) Where at the time after the expiry of two years from the formation of the Company or at any time after the expiry of one year from the allotment of shares in the Company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the Company by allotment of further shares either out of the un-issued capital or out of the increased share capital then:
a) Such further shares shall be offered to the persons who at the date of the offer, are holders of the equity shares of the Company, in proportion, as near as circumstances admit, to the capital paid up on those shares at the date.
b) Such offer shall be made by a notice specifying the number of shares offered and limiting a time not less than thirty days from the date of the offer and the offer if not accepted, will be deemed to have been declined.
c) The offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to them in favour of any other person and the notice referred to in sub clause (b) hereof shall contain statement of this right.
d) After expiry of the time specified in the aforesaid notice or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose off them in such manner and to such person(s) as they may think, in their sole discretion, fit.
(2) Notwithstanding anything contained in sub-section (1) thereof, the further shares aforesaid may be offered to any persons (whether or not those persons include the persons referred to in sub clause (a) of sub clause (1) hereof, in any manner whatsoever.
a) If a special resolution to that effect is passed by the Company in General Meeting, or
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b) Where no such special resolution is passed, if the votes cast (whether on a show of hands or on poll as the case may be) in favour of the proposal contained in the resolution moved in the general meeting (including the casting vote, if any of the Chairman) by the members who, being entitled to do so, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members, so entitled and voting and the Central Government is satisfied on an application made by the Board of Directors in this behalf that the proposal is most beneficial to the Company.
(3) Nothing in sub-clause (c) of (1) hereof shall be deemed:
a) To extend the time within which the offer should be accepted; or
b) To authorise any person to exercise the right of renunciation for a second time on the ground that person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.
(4) Nothing in these Articles shall apply to the increase of the subscribed capital of the Company caused by the exercise of an option attached to the debenture issued or loans raised by the Company:
a) To convert such debentures or loans into shares in the Company; or
b) To subscribe for shares in the Company (whether such option is conferred in these Articles or otherwise.)
PROVIDED THAT the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term:
i. Either has been approved by the Central Government before the issue of the debentures or the raising of the loans or is in conformity with the Rules, if any, made by that Government in this behalf; and
ii. In the case of debentures or loans or other than debentures issued to or loans obtained from Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the Company in General Meeting before the issue of the debentures or the raising of the loans.
Shares at the Disposal of the Directors
5. Subject to the provisions of section 81 of the Act and these Articles, the shares (including any shares forming part of any increased capital of the Company) for the time being shall be under the control of the Directors who may issue, allot or otherwise dispose off the same or any of them to such person, in such proportion and on such terms and conditions and either at a premium or at par or in (Subject to the compliance with the provision of section 79 of the Act) at a discount and at such time, as they may from time to time think fit and with the sanction of the Company in the General Meeting to give to any person or persons the option or right to call for any shares either at par or premium during such time and for such consideration as the Directors think fit, and may issue and allot shares in the capital of the Company on payment in full or part of any property sold and transferred or for any services rendered to the Company in the conduct of its business and any shares which may so be allotted may be issued as fully paid up shares and if so issued as fully paid up shares and if so issued, shall be deemed to be fully paid shares. Provided that option or right to call of shares shall not be given to any person or persons without the sanction of the Company in the General Meeting.
6. Allotment As regards all allotments made, from time to time, the Directors shall duly comply with Section 75 of the Act.
Issue of Preference Shares
7. Subject to the provisions of these Articles, the Company shall have power by special resolution to issue preference shares carrying a right to redemption out of the profits which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of such redemption is liable to be redeemed at the option of the Company and the Board may subject to the provisions of section 80 of the Act exercise such powers in such manner as may be provided in these Articles.
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Commission & Brokerage
8. (1) The Company may exercise the powers of paying commission conferred by Section 76 of the Act. In such case it shall comply with the requirements of that Section. Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares or partly in one way and partly in the other. The Company may also on any issue of shares or debentures pay such brokerage as may be lawful.
(2) The Company may on any issue of shares or debentures or on deposits pay such brokerage as may be reasonable and lawful.
Issue of Shares at Discount
9. With the previous authority of the Company in General Meeting and the sanction of the court and upon otherwise complying with section 79 of the Act, the Directors may issue at a discount shares of a class already issued.
10. If, by the conditions of allotment of any share, the whole or part of the amount or issue price thereof shall be payable by installments, every such installment shall, when due, be paid to the Company by the person who, for the time being, shall be the registered holder of the shares of by his executor or administrator.
Payment of Issue Price in Installment
11. 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.
12. Same as herein otherwise provided and subject to section 187C of the Companies Act, 1956, 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 statue required, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person.
Registered holder of share to be absolute owner
13. Shares may be registered in the name of any person, company or other body corporate. Not more than three persons shall be registered as joint holders of any share. No share shall be allotted to or registered in the name of a person of unsound mind or a partnership.
Certificates
14. (a) Every member shall be entitled, without payment to one or more certificates marketable lots, for all the shares of each class or denomination registered in his name or if the directors so approve (upon paying such fee as the Directors so determine ) to several certificates, each for one or more of such shares and the company shall complete and have ready for delivery such certificates within three months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within two months of the receipt of application of registration of transfer, transmission, sub division, consolidation or renewal of any of its shares as the case may be. Every certificates of shares shall be under the seal of the company and shall specify the number and distinctive numbers of shares in respect of which it is issued and amount paid-up thereon and shall be in such form as the directors may prescribe and approve, provided that in respect of a share or shares held jointly by several persons, the company shall not be bound to issue more than one certificate and delivery of a certificate of shares to one or several joint holders shall be a sufficient delivery to all such holder.
(b) If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back thereof for endorsement of transfer, then upon production and surrender thereof to the Company, a new Certificate may be issued in lieu thereof, and if any certificate lost or destroyed then upon proof thereof to the satisfaction of the company and on execution of such indemnity as the company deem. adequate, being given, a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed Certificate. Every certificate under the article shall be issued without payment of fees if the Directors so decide, or on payment of such
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fees (not exceeding Rs.2/- for each certificate) as the Directors shall prescribe. Provided that no fee shatl be charged for issue of new certificates in replacement of those which are old, defaced or worn out or where there is no further space on the back thereof for endorsement of transfer. Provided that notwithstanding what is stated above the Directors shall comply with such rules or regulation or requirements of any Stock Exchange or the rules made under the Act or rules made under Securities Contracts (Regulation) Act,1956 or any other Act, or rules applicable thereof in this behalf.
The provision of this Article shall mutatis mutandis apply to debentures of the company
Calls on shares
15. The Board may, from time to time, subject to the terms on which any shares 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 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 installment and shall be deemed to have been made when the resolution of the Board authorizing such call was passed.
Notice of Call
16. No call shall be made payable within one month after the last preceding call was payable.
17. Not less than thirty days notice of any call shall be given specifying the time and place of payment and to whom such call shall be paid.
Interest on delayed payment
18. (a) If the sum payable in respect of any call or installment be not paid on or before the day appointed for payment thereof, the holders 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 12 (twelve) per cent per annum from the day appointed for the payment thereof to the time of the actual payment or at such lower rate (if any) as the Board may determine.
(b) The Board shall be at liberty to waive payment of any such interest either wholly or in part.
Payment of Amount due
19. If by the terms of issue of any share or otherwise any amount is made payable upon allotment or at any time fixed time or by installments at fixed time, whether on account of the share or by way of premium, every such amount or installment shall be payable as if it were a call duly made by the Board 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.
Evidence in actions by Company against Shareholders
20. On the trial or hearing of any action or suit brought by the Company against any shareholder or his representative to recover any debt or money claimed to be 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 registered as a holder, or one of the 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 books of the Company and it shall not be necessary to prove the appointment of the Board who made any call, not 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 but the proof of the matters aforesaid shall be conclusive evidence of the debt.
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Call in Advance
21. The Directors may, if they think fit, subject to the provisions of Section 92 of theAct, agree to and receive from any member willing to advance the same whole or any part of the monies due upon the shares held by him beyond the sums actually called for, and upon the amount 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 made, the company may pay interest at such rate, as the member paying such sum in advance and the Directors agree upon provided that money paid in advance of calls shall not confer a right to participate in profits or dividend. The Directors may at any time repay the amount so advanced.
The members shall not be entitled to any voting rights in respect of the monies so paid by him until the same would but for such payment, become presently payable.
The provisions of these Articles shall mutatis mutandis apply to the calls on debentures of the company
Revocation of Call
22. A call may be revoked or postponed at the discretion of the Board.
Notice in case of failure to pay Call
23. 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 for 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.
24. The notice shall name a day (not being less than thirty days 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 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.
Forfeiture in case of default
25. If the requisitions 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 of that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares but not actually paid before the forfeiture, subject to Section 205 A of the Act.
Notice of Forfeiture
26. When any share shall have been so forfeited, notice of the forfeiture shall be given to the member in whose name it stood immediately prior to the forfeiture and an 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 any such entry as aforesaid.
Board s Power to Sell/ Re-allot shares
27. Any share so forfeited shall be deemed to be the property of the Company and the Board may sell, re-allot or otherwise dispose off the same in such manner, as it thinks fit.
Annulment of forfeiture
28. The Board may at any time before any share so forfeited shall have been sold, re-allot or otherwise dispose off, annul the forfeiture thereof upon such conditions, as it thinks fit.
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Liability to pay Calls, interests, etc.
29. A person whose share has been forfeited shall ceases to be a member in respect of the share, but shall, not withstanding such forfeiture remain liable to pay, and shall forthwith pay to the Company all calls, or installments, interests and expenses, owing upon or in respect of such share, at the time of the forfeiture together with interest thereon, from the time of the forfeiture until payment, at 12 (Twelve) per cent per annum or at such other rates as the Board may determine and the Board may enforce the payment thereof, or any part thereof, without any deduction or allowance for the value of the shares at the time of forfeiture, but shall not be under any obligation to do so.
Conclusive evidence of Forfeiture
30. A duly verified declaration in writing that the declaring is a Director or the 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 shares 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, not shall his title to such share be affected by any irregularity or invalidity in the proceedings in reference to such forfeiture, sale or disposition.
Non-payment of other sums
The provisions of Articles 23 to 27 hereof shall apply in the case of nonpayment of any sum which by the terms of issue of a share becomes payable at a 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.
Lien
31. The company shall have a first and paramount lien upon all the shares/debentures (other than fully paid-up shares/debentures) registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for all monies (whether presently payable or not) called or payable at a fixed time in respect of such shares/debentures and no equitable interest in any share shall be created except upon the footing and condition that this Article will have full effect and such lien shall extend to all dividends and bonuses from time to time declared in respect of such shares/debentures. Unless otherwise agreed the registration of a transfer of shares/debentures shall operate as a waiver of the company's lien if any, on such shares/debentures. The Directors may at any time declare any shares/debentures wholly or in part to be exempt from the provisions of this clause.
Enforcement of Lien by Sale
32. For the purpose of enforcing such lien the Board may sell the shares 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 and until notice in writing of the intention to sell shall have been served on such member, his executor or administrator or his committee, curator bonus or other legal representative as the case may be and default shall have been made by him or them in the payment of the monies called or payable at a fixed line in respect of such share for fourteen days after the date of such notice.
Application of Sale Proceeds
33. The net proceeds of the sale 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 persons entitled to the share at the date of the sale.
Validity of Sale of shares
34. Upon the sale after forfeiture or for enforcing a lien in purported exercise of the powers hereinbefore given, the Board may appoint some person to execute an instrument of transfer of respect of the shares sold and cause the purchaser s name to be entered in the Register in respect of the shares sold and the
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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 the 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.
Issue of New Share Certificate
35. 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 up to the Company by 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.
Instrument of Transfer
36. Same 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 has been delivered to the Company together with the certificate 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 one credible witness who shall add his address and occupation.
Application for Transfer
37. 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 affected unless the Company gives the notice of the application to the transferee in the manner prescribed by Section 110 of the Act and subject to the provisions 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 and the particulars of the transferee as if the application for registration of transfer was made by the transferee.
Form of Instrument of Transfer
38. The instrument of transfer of any share shall be in writing in the form prescribed by the Act or the Rules made there under or where no such form is prescribed in the usual common form prescribed by the Stock Exchange in India or as near thereto as circumstances will admit.
Refusal to Register Transfer
39. Subject to the provisions of Section 111A, these Articles and other applicable provisions of the Act or any other law for the time being in force, the Board may refuse whether in pursuance of any power of the company under these Articles or otherwise to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a Member in or debentures of the Company. The Company shall within one month from the date on which the instrument of transfer, or the intimation of such transmission, as the case maybe, was delivered to Company send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. Provided that the registration of a transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person or persons indebted to the Company on any account whatsoever except where the Company has a lien on shares
Transfer of Shares for a Minor, Insolvent, etc.
40. The Board shall not issue or register a transfer of any shares for a minor (except in case they are fully paid) insolvent or person of unsound mind.
Share Certificate to accompany Instrument of Transfer
41. 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 title of the transferor or his right to transfer the share and the transferee shall (subject to the Board s right to decline to register hereinabove mentioned) be registered as a member in respect of such share. Every instrument of transfer, which
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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.
Notice of Refusal
42. If the Board refuses, whether in Article 40 or otherwise to register the transfer of, or transmission by operation of law of the right to, any share, the Company shall, give notice of the refusal in accordance with the provisions of Section 111(2) of the Act.
No fee to be charged
43. No fee shall be charged for registration of transfer, transmission, probate, succession certificate and Letters of administration, Certificate of Death or Marriage, Power of Attorney or similar other document.
Transmission of Registered Shares
44. 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 shall be the only person 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 or other legal representation as the case may be, from a Court in India competent to grant it. 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 or such other legal representation upon such terms as to indemnify or otherwise as the Board, in its absolute discretion, may think fit.
Transmission Article
45. Any committee or curator bonis of a lunatic or guardian of a minor member or any person becoming entitled to or to transfer a 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 regulation as to transfer hereinabove contained, transfer such shares. The Article is hereinafter referred to as The Transmission Article .
Notice by person entitled to Transmission
46. (a) 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 he so elects.
(b) If the person aforesaid shall elect to transfer the shares, he shall testify his election by executing an instrument of transfer of the share.
(c) All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of instruments of transfer of a share shall be applicable to any such notice of transfer as aforesaid as if the death, lunacy, bankruptcy or insolvency of the member had not occurred and the notice of transfer were a transfer signed by that member.
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Entitlement to dividend and other advantages
47. A person so becoming entitled under the Transmission Article to a share be reason of the death, lunacy, bankruptcy or insolvency of the holder shall, subject to the provisions of Article 83 and Section 206 of the Act, be entitled to the same dividends and other advantages as he would be entitled to if he was 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 monies payable in respect of the share, until the requirements of the notice has been complied with.
Alteration of Share Capital
48. The Company in General Meeting may, from time to time, alter the conditions of its Memorandum of Association to increase its capital by the creation of new shares of such amount and class as may be deemed expedient.
Terms of further issue of shares
49. Subject to any special rights for the time being attached to any shares in the capital of the Company then issued and to the provisions of Section 81 of the Act, the new shares may be issued upon such terms and conditions, and with such rights attached thereto as the general meeting resolving upon the creation thereof shall direct, and if no direction be given, as the Board shall determine, and in particular such shares may be issued with a preferential right to dividends and in the distribution of assets of the Company.
Capital raised to be part of Existing capital
50. Except so far as otherwise provided by the condition of issue or by these presents, and 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.
Difficulty in apportionment of new shares to be resolved by Board
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 apportionment 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.
Reduction of Capital
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 incident authorised and consent required under Sections 100 to 104 of the Act.
Dematerialisation of Shares
53. (a) Dematerialisation: Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize its existing Securities, rematerialise its Securities held in the Depositories and/or to offer fresh Securities in a dematerialised form pursuant to the Depositories Act, and the rules framed thereunder, if any.
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(b) Options for Investors: Subject to Section 68B of the Act, 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 a Person who is the Beneficial Owner of the Securities can at any time opt out of a Depository, if permitted by law, in respect of any Securities in a manner provided by the Depositories Act, and the Company shall, in the manner and within the time prescribed, issue to the Beneficial Owner the required Certificate of Securities. If a Person opts to hold his Securities with a Depository, the Company shall intimate such Depository the details of allotment of the Securities 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.
(c) Securities in Depositories to be in fungible form: All Securities held by a Depository shall be dematerialised 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.
(d) Rights of Depositories & Beneficial Owners: i. Notwithstanding anything to the contrary contained in the Act or these Articles, a
Depository shall be deemed to be the Registered Owner for the purposes of effecting transfer of ownership of Securities on behalf of the Beneficial Owner.
ii. Same as otherwise provided in (i) above, the Depository and the Registered Owner of the Securities shall not have any voting rights or any other rights in respect of the Securities held by it.
iii. Every person holding Shares of the Company and whose name is entered as the Beneficial Owner in the records of the Depository shall be deemed to be a Member of the Company.
iv. The Beneficial Owner of Securities shall, in accordance with the provisions of these Articles and the Act, be entitled to all the rights and subject to all the liabilities in respect of his Securities, which are held by a Depository.
(e) Service of Documents: Notwithstanding anything contained in the Act or these Articles to the contrary, where Securities are held in a Depository, the records of the Beneficial Ownership may be served by such Depository on the Company by means of electronic mode or by delivery of floppies or discs.
(f) Transfer of Securities:
i. Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of Securities effected by transferor and transferee both of whom are entered as Beneficial Owners in the records of a Depository.
ii In the case of transfer or transmission of Shares or other marketable Securities where the Company has not issued any certificates and where such Shares or Securities are being held in any electronic or fungible form in a Depository, the provisions of the Depositories Act shall apply.
(g) Allotment of Securities dealt with in a Depository: Notwithstanding anything in the Act or these Articles, where Securities are dealt with by a Depository, the Company shall intimate the details of allotment of relevant Securities thereof to the Depository immediately on allotment of such Securities.
(h) Certificate No. etc. of Securities in Depository: Nothing contained in the Act or these Articles regarding the necessity of having certificate number/distinctive numbers for Securities issued by the Company shall apply to Securities held with a Depository.
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(i) Register and Index of Beneficial Owners: The Register and Index of Beneficial Owners maintained by a Depository under the Depositories Act, shall be deemed to be the Register and Index (if applicable) of Members and Security holders for the purposes of these Articles.
Consolidation, Subdivision etc. of Capital
54. Subject to the applicable provisions of the Act, the Company in General Meeting may, from time to time:
a. Consolidate and divide all or any of its share capital into shares of large amount than its existing shares.
b. Sub-divide its existing shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association, so however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on such reduced share shall be the same as it was in the case of the share from which the reduced share is derived.
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.
d. Convert all or any of its fully paid shares into stock and reconvert that stock into fully paid up shares of any denomination.
Preferential advantage on sub-division
55. The resolution whereby any share is sub-division may determine that as between the holders of the shares resulting from such sub-division, one or more of such shares shall have some preferential or special advantage as regards dividend, capital, voting or otherwise over or as compared with the others or other, subject nevertheless, to the provision of Sections 85, 87, 88 and 106 of the Act.
Surrender of Shares
56. Subject to the provisions of Sections 100 to 105, both 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.
RIGHTS OF SHAREHOLDERS
57. Transfer of Stock: The holders of stock may transfer the same or any part thereof in the same manner, and subject to the same regulations, as and subject to which the shares from which the stock arose might previously to conversion have been transferred, or an near thereto as circumstances admit; and the Board may from time to time, fix the minimum amount of stock transferable provided that such minimum shall not exceed the nominal amount of the shares from which stock arose.
Rights of Stockholders
58. The holders of stock shall, accordingly to the amount of stock held by them the same rights, privileges and advantages as regards dividends, voting at the meetings of the Company, and other matters as if they hold the shares from which the stock arose; but no such privileges of advantages (except participation in the dividends and profits of the Company and in the assets on a winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage.
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Nomination
60.A. 1 Every shareholder or debenture holder of the company may at anytime nominate,in the prescribed manner,a person to whom his shares in,or debentures of the company shall vest in the event of his death.
2. Where more than one person holds the shares in, or debentures of the company jointly, the joint holders may together nominate, in the prescribed manner, a person, towhom all the rights in the shares or debentures of the company as the case may be,shall vest in the event of death of all the joint holders.
3.Not withstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in or debentures of the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in or debentures of the company, the nominee shall, on the death of the shareholder or debenture holder or, as the case may be, or on the death of the joint holders, become entitled all, the rights in such shares or debentures or, as the case may be, all the joint holders, in relation to such shares or debentures, to the exclusion of all other persons, unless the nomination is varied, cancelled in the prescribed manner.
4. Where the nominee is a minor, it shall be lawful for the holder of the shares or debentures, to make the nomination to appoint, in the prescribed manner, any person to become entitled to shares in or debentures of the Company, in the event of his death, during the minority.
Transmission securities by nominee
B. The Board and subject may require a nominee, upon production of such evidence as hereinafter provided, elect, either:
1. To be registered himself as holder of the share or debenture as the case may be, or 2. To make such transfer of the share or debenture, as the case may be, as the deceased shareholder or
debenture holder, could have made. 3 If the nominee elects to be registered as holder of the share or debenture, himself, as the case may be, he
shall deliver or send to the company, a notice in writing signed by him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased shareholder or debenture holder as the case may be.
4. A nominee shall be entitled to the same dividends and other adventures to which he would be entitled to, if he were the registered holder of the share or debenture except that he shall not, before registered as a member in respect of his share or debenture, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the 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 share or debenture,and if the notice is not complied with within ninety days,the board may thereafter withhold payment of all dividends, bonuses or other monies payable or rights accruing in respect of the share or debenture, until the requirements of the notice have been complied with.
Transfer of securities by nominee
C. The shares in the company shall be transferred by an instrument in writing in the prescribed form, duly stamped and in the manner provided under the provisions of section 108 of the Act and any modification thereof and the rules prescribed thereof
1. Subject to the provisions of section 111 of Act, the board may at any time in their absolute discretion decline to register any transfer of transmission by operation of law of the right to a share, whether fully paid up or not and whether the transferee is a member of the company or not and may also decline to register any transfer of shares on which the company has a lien.
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Provided further that the registration of transfer shall not be refused on the ground of the transferor being alone or either jointly with any person or persons indebted to the company or any account except a lien on the shares.
2. If the Board refuses to register any transfer or transmission of right, they shall within two months from the date on which the instrument of transfer or the intimation of such transmission was delivered to the company send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.
3. In case of such refusal by the Board, the decision of the Board shall be subject to the right of appeal conferred by section 111 of Act.
4. The provisions of the clause shall apply to transfers of stock also.
Articles applicable to Paid-up Shares to apply to Stock
61. Such of the Articles of the Company (other than relating to share warrants) as are applicable to paid-up shares shall apply to stock and the words Shares and Shareholder therein shall include Stock and Stockholder respectively.
SHARE WARRANTS
62. Share Warrants Subject to the provisions of Sections 114 and 115 of the Act and subject to any directions, which may be given by the Company in general meeting, the Directors may issue Share Warrants in such manner and on such terms and conditions as the Board thinks fit. In case of such case, regulation 40 to 43 of Table A of Schedule 1 of the Act shall apply.
Modification of Rights
63. 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 shares of that class) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourth 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 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 representing by proxy one-third of the issued shares of that class, but so that if any adjourned meeting of such holders a quorum as above defined is not present those members who are present shall be a quorum and that any holder of shares of the class present in person or by proxy may demand a poll and, on a poll, his voting rights shall be as per Section 87 of the Act. This article is not by implication to curtail the power of modification which the Company would have is this Article were omitted.
BORROWING POWERS
64. The Board may, from time to time and at its discretion, subject to the provisions of Sections 58A, 292, 293 and 370 of the Act and Regulations made there under and directions issued by Reserve Bank of India raise or borrow, either from the Directors or from elsewhere and secure the payment of any sum or sum of money for the purposes of the Company.
65. The Board may raise or secure the repayment or payment 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, 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.
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Right to issue Debentures and other Securities
66. Any debentures, debenture-stock or other securities may be issued at a discount, premium or otherwise and may be issued on condition that they shall be convertible into shares of any denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of shares, attending (but not voting) at the General Meeting, appointment of Directors and otherwise Debentures with the right to conversion into or allotment of shares shall be issued only with the consent of the company in the General Meeting by a Special Resolution.
Transfer of Debentures 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 or certificates of the debentures.
Annual General Meeting 68. In addition to any other meetings, Annual general Meetings of the Meeting Company shall be held
within such intervals as are specified in Section 166(1) Read with Section 210(3) of the Act, and subject to the provisions of section 166(2) of the Act, at such times and places as may be determined by the Board. All other meetings of the Company shall except in the case of a statutory meeting, be called Extra Ordinary General Meetings and shall be convened under the provisions of next following Article.
Extraordinary General Meeting
69. The Board may, whenever it thinks fit, can call extraordinary 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 Meeting as provided by Section 169 of the Act.
70. The Company shall comply with the provisions of section 188 of the Act as to giving notice of resolutions and circulating statements on the requisition of members.
Notice
71. Subject to the provisions of Section 171 to 186 of the Act, notice of every meeting of the Company shall be given to such persons and in such manner as provided by Section 172 of the Act. Where any business consists of Special Business as hereinafter-defined in Article 72 there shall be annexed to the notice a statement complying with Sections 173 (2) and (3) of the Act. The accidental omission to give any such notice to or the non-receipt by any member of other persons to whom it should be given shall not invalidate the proceedings of the meeting.
Ordinary and Special Business
72. The ordinary business of an Annual General meeting shall be to receive and consider the Profit and Loss account, the Balance Sheet and the report of the Directors and of the Auditors, to elect Directors in the place of those retiring by rotation to appoint Auditors and fix their remuneration and to declare dividends. All other business transacted at an Annual General Meeting and all business transacted at any other General Meeting shall be deemed special business.
Quorum
73. Five members entitled to vote and present in person shall be quorum for General Meeting and no business shall be transacted at the general meeting unless the quorum requisite is present at the commencement of the meeting. A body corporate being a member shall be deemed to be personally present if it is represented in accordance with Section 187 of the Act. The President of India or the Governor of a State being a member of the Company shall be deemed to be personally present if he is presented in accordance with Section 187A of the Act.
74. If within half an hour from the time appointed for the meeting a quorum be not present, the meeting if convened upon such regulation as aforesaid, shall be dissolved; but in any other case it shall stand adjourned in accordance with the provisions of sub-sections (3), (4) and (5) of Section 174 of the Act.
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Passing of Resolution
75. Any act or resolution which, under the provisions of these Articles or of the Act, is permitted or required to be done or passed by the Company in general meeting shall be sufficiently so 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 as a Special Resolution as defined in Section 189(2) of the Act.
Chairman
76. The Chairman of the Board shall be entitled to take the chair at every General Meeting. If there be no such Chairman, or if at meeting he shall not present within fifteen minutes after the time appointed for holding the 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 poll if properly demanded, elect one of their members, being a member entitled to vote, to be chairman of the meeting.
Voting
77. Every question submitted to a meeting shall be decided, in the first instance by a show of hands and in case of equality if votes on a show of hands and on a poll, the Chairman of the meeting shall have a casting vote in addition to the votes to which he may be entitled as a member.
Evidence of Votes cast
78. 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 provision of section 179 of the Act a declaration by the Chairman that the resolution has or has not been carried or has been carried either unanimously, or by a particular majority, and an entry to that effect in the book containing the minutes of the proceedings of the meeting of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes of cast in favour of, or against the resolution.
Poll
79. (1) If a poll be demanded as aforesaid, it shall be taken forthwith on a question of adjournment or election of a Chairman of the meeting and in any other case in such manner and 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 directs and subject as aforesaid, either at once or on after an interval or adjournment or otherwise, and the result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was demanded.
(2) The demand of poll may be withdrawn at any time, before the poll is held.
(3) Where a poll is to be taken the Chairman of the meeting shall appoint two scrutineers, one at least of whom shall be a member (not being an officer or employee of the Company) present at the meeting provided such a member is available and willing to be appointed, to scrutinise the votes given on the poll and to report to him thereon.
(4) On a poll a member entitled to more than one vote, or his proxy or other person 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 votes he uses.
(5) The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.
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Adjournment of Meeting
80. (1) The Chairman of a general meeting may 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 less than 30 (thirty) days it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.
Postal Ballot
81. Notwithstanding anything contained in the Articles of Association of the Company, the Company do adopt the mode of passing a resolution by the members of the Company by means of a postal ballot and/or other ways as may be prescribed by the Central Government in this behalf in respect of the following matters instead of transacting such business in a General Meeting of the Company: -
(i) Any business that can be transacted by the Company in General Meeting; and
(ii) Particularly, resolutions relating to such business as the Central Government, may by notification, declare to be conducted only by postal ballot. The Company shall comply with the procedure for such postal ballot and/or other ways prescribed by the Central Government in this regard.
Votes of Members
82. (a) On a show of hands every member present in person and being holder of Equity Shares shall have one vote and every person present either as a proxy (as defined in Article 86) in behalf of a holder of Equity Shares as a duly authorised representative of a body corporate being a holder of an Equity Share shall, if he is not entitled to vote in his own right, have one vote. On a poll the voting rights of a holder of any Equity Share shall be as specified in Section 87 of the Act.
(b) The holder of a preference share shall not be entitled to vote at general meeting of the Company except as provided for in Section 87 of the Act. At any meeting at which or upon any question the holders of the said Preference Shares are entitled to vote the said Preference Shares shall, on a show of hands, and on a poll confer the same voting rights as Equity Shares.
(c) No body corporate shall vote by proxy so long as a resolution of its Board of Directors under the provisions of Section 187 of the Act is in force and the representative named in such resolution is present at the general meeting in which the vote by proxy is tendered.
Representation of a member being Company or Body Corporate
83. Where a Company or a body corporate (hereinafter called member Company ) is a 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 a proxy, and the lodging with Company at the office or production at the meeting of a copy of such resolution duly signed by one Director of such member company and certified by him or them 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 entitle 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.
Right to Vote of person entitled under Transmission Article
84. 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 member registered in respect of such share, provided that forty-eight hours at least before the time of holding the meeting or adjourned meeting, as 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 admitted his right to vote at such meeting in respect thereof. If any member be a lunatic, idiot or nocompose mentis, he may vote whether on a show
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of hands or a poll by his committee; curator or other legal curator and such last mentioned persons may give their votes by proxy.
Voting by Joint Holders
85. Where there are members registered jointly in respect of any one share any one of such persons may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto; and if more than one of such members be present at any meeting either personally or by proxy that one of the said members so present whose name stands first on the Register in respect of such shares alone shall be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name by share is registered shall for the purpose of this Article be deemed to be member registered jointly in respect thereof.
Voting on Poll 86. On a poll, votes may be given either personally or by proxy, or in case of a body corporate, by a
representative duly authorized as aforesaid.
Instrument appointing Proxy
87. The instrument appointing a proxy shall be writing under the hand of the appointer of his Attorney duly-authorised in writing or if such appointer is a body corporate be under its common seal or the hand of its officer or Attorney duly authorised. A proxy who is appointed for a specified meeting only shall be called a special proxy and any other proxy shall be called a general proxy.
A person may be appointed a proxy whether he is a member or not of the Company and every notice convening a meeting of the Company shall state this and that a member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of him and the proxy need not to be a member of the Company.
88. The instrument appointing a proxy and the Power of Attorney or other Authority (if any) under which it is signed or a notary certified copy of that power or 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 proposes to vote in respect thereof and in default the instrument of proxy shall not be treated as valid.
Vote by Proxy
89. 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 principle or revocation of the instrument or transfer of the share in respect of which the vote is given, provided that no intimation in writing of the death, insanity, revocation or transfer of the share shall have been received by the Company at the Office before note is given, provided nevertheless 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.
Instrument appointing Special Proxy
90. Every instrument appointing a special proxy shall be retained by the Company and shall as nearly as circumstances admit, be in the forms set out in Schedule IX to the Act or as near thereto as possible or in the form which the Board may accept.
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Restriction on Voting Rights when calls due
91. No member shall be entitled to exercise any voting rights either personally or by proxy at any meeting of the Company in respect of any shares 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 exercised any right of lien.
92. (1) Any objection as to admission or rejection of vote either, on a show of hands or on poll made in due time shall be referred to the Chairman of the meeting 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 or adjourned meeting at which the vote objected to is given or tendered and every vote not disallowed at such meeting shall be valid for all purposes.
DIRECTORS
93.Until otherwise determined by a General Meeting of the Company and subject to the provisions of Section 252 of the Act, the number of Directors shall not be less than three and not more than twelve.
94The Company in general meeting may from time to time increase or reduce the number of Directors within the limits by Article 91.
Appointment of First Directors, Institutional Directors not to retire by rotation
95The following persons hereinafter named shall become and be the first Directors of the Company:
(1) Mr. K Mallikarjuna Reddy (3) Mr. C Brahma Reddy
(2) Mr. K Sudhakara Reddy
If at any time the Company obtains any loans from any financial institution and/or any central or state Government referred to in the Articles as The Corporation or enters into underwriting arrangements with the Corporation and it is a term of such loans or of the underwriting arrangements that the Corporation shall have the right to appoint one or more Directors then subject to the terms and conditions of such loans or underwriting arrangements the corporation shall be entitled to appoint one or more Directors as the case may be, to the Board of Directors of the Company and to remove from office any Director, so appointed and to appoint another in his place or in the place of director appointed who resigns or otherwise Vacates his office. Any such appointment or removal shall be made in writing and shall be signed by the Corporation or by any person duly authorized by it and shall be served at the office of the Company. The Director or Directors so appointed shall not be liable to retire by rotation of Directors in accordance with provisions of these Articles, but he/they shall be counted in determining the number of retiring directors.
No Qualification Shares required
96. A Director of the Company shall not be required to hold any shares as his qualification.
Remuneration of Directors Managing Director, Whole Time Director
97. The remuneration of Directors for his service shall be such sum as may be fixed by the Board of Directors subject to a ceiling as may be prescribed by the Central Government from time to time for each meeting of the Board or a Committee thereof attended by him. The Directors subject to the sanction of the Central Government (if any required) may be paid such further remuneration as the Company in General Meeting shall, from time to time, determined and such further remuneration shall be divided among the Directors in such proportion and manner as the Board may from time to time determine.
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Subject to the provisions of the Act, a Director who is either in the whole time employment of the Company or a Managing Director may be paid remuneration as provided in Sections 198, 309, 310 and 311 of the Act and Schedule XIII of the Act either by way of monthly payment or at a specified percentage of the net profits of the Company or partly by one way and partly by the other.
Subject to the provisions of the Act, a Director who is neither in the Whole-time employment of the Company nor a Managing Director may be paid remuneration as provided in Sections 198, 309, 310 and 311 of the Act and Schedule XIII of the Act either:
(iii) by way of a monthly, quarterly or annual payment with the approval of the Central Government; or
(iv) by way of commission if the Company by special resolution authorise such payment.
Subject to the provisions of the Companies Act, 1956 and rules framed hereunder, each Director may receive out of the funds of the Company by way of sitting fees for his services a sum not exceeding the sum prescribed under the Companies Act 1956, for every meeting of the Board of Director or Committee thereof attended by him.
98. A Director of this Company may be or become a Director of any other company promoted by this Company or in which it may be interested as member, shareholder or otherwise and no such Director shall be countable for any benefits received as a Director or member of such company.
99.`Subject to the provisions of Section 297 and 299 of the Act, neither shall a Director be disqualified from contracting with Company either as vendor, purchase or otherwise for goods materials or services or for underwriting the subscription of any share in or debentures of the Company nor shall any such contract of 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 contracting or being such member or so interested be liable to account to the Company for any profit realized by any such contract, arrangement by reason of such Director holding office or of the fiduciary relating thereby established.
Filling of Casual Vacancy
100. 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 up by the Board at a meeting of the Board, but any person so appointed shall remain in his office so long as the vacating Director would have retained the same of 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 Director under Article 110.
Retirement by rotation
101.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 member nearest to one-third shall retire from office.
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102Subject to the provisions of these Articles, the Director 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 became Directors on the same day those to retire shall, in default of an subject to any agreement among themselves, be determined by lot.
Retirement by rotation for Managing Directors
103. (a) Subject to the provisions of Section 255 off the Act, a Managing Director shall not, while he continues to hold that office be subject to retirement by rotation. However, he shall be counted in determining the number of directors to be retired by rotation but (subject to the provisions of any contract between him and the Company) he shall be subject to the same provisions as to resignation and removal as the other Directors and he shall, ipso facto and immediately, cease to be a Managing Director if he ceases to hold the office of Director from any cause. However, he shall be counted in determining the number of meeting Directors.
(d) If at any time the total number of Managing Directors is more than one-third of the total number of Directors, the Managing Directors who shall not retire shall be determined by and in accordance with their respective seniorities. For the purpose of this Article the seniorities of the Managing Director shall be determined by the date of their respective appointments as Managing Directors by the Board.
PROCEEDINGS OF DIRECTORS
104. The Director may meet together as a Board for the dispatch of business from time to time unless the Central government by virtue of the proviso to section 285 of the Act otherwise directs shall so meet at least once in every three months and at least four such meetings shall be held in every year. The Directors may adjourn and otherwise regulate their meetings as they think fit. The provision of this Article shall not be deemed to have been contravened merely be reason of the fact that the meeting of the Board which had been called in compliance with the terms of this Article could not be held for want of quorum. Notice of every meeting of the Board of Directors shall be given in writing to every Director for the time being in India and at his usual address in India and to every other Director.
Meetings of Board of Directors
105. Director may at any time and the secretary shall upon the request of a Director made at any time, convene a meeting of the Board.
Appointment of Chairman
106. The Board may appoint a Chairman of its meetings and determine the period for which he is to hold office. If no Chairman is appointed, or if at any meeting of the Board the chairman be not present within five minutes after the time appointed for holding the same, Directors present shall choose some one of their member to be Chairman of such meeting.
Quorum for a Board Meeting
107. The quorum for a meeting of the Board shall be minimum two or 1/3rd of total strength; whichever is higher subject to 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.
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108. A meeting of the Board at which a quorum be present shall be competent to exercise all or any of the authorities, power and discretions by or under these Articles or the Act for the time being vested in or exercisable by the Board.
109. Subject to the provisions of Section 316 and 372(5) and 386 of the Act, questions arising at any meeting shall be decided by a majority of votes and in case of an equality of votes the Chairman shall have a second or casting vote.
110. The Board may, subject to provisions of the Act, from time to time and at any time, delegate any of its power to a committee consisting of such Director or Directors as 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, conform to any regulations that may, from time to time, be imposed upon it by the Board.
111. The meetings and proceedings of any such Committee consisting of two or more members shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far the same are applicable thereto, and or not superseded by any regulations made by the Board under the last preceding Article.
112. All acts done by the meeting of the Directors, or any Committee of Directors, or any person acting as a Director, shall notwithstanding that it may afterwards be discovered that there was some defect in the appointment of any one or more of such Directors or of any person acting as aforesaid, or that they or any of them were disqualified or had vacated office by virtue of any provisions contained in the Act or in these Articles be as valid as it every such Director or person had been duly appointed and was qualified to be a Director and had not vacated such office provided that nothing in this Article shall be deemed to give validity to acts done by a Director after the appointment of such Director has been shown to be invalid or to have terminated.
Proceedings at the Board Meeting
113. Same in those cases where a resolution is required by Sections 262, 292, 297, 319 and 372(5) and 386 of the Act or any other provisions of the Act to be passed at a meeting of the Board, resolution shall be valid and effectual as if it had been passed at a meeting of the Board or Committee of the Board, as the case may be, duly called and constituted if it is passed by circulation in the manner as provided in section 289 of the Act.
Powers of Board
114. (a) Subject to the provisions of the Act, the control of the Company shall be vested in the Board who shall be entitled to exercise all such powers ,and to do all such acts and things as the Company is authorised to exercise and 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 any other statue or by the Memorandum of Association of the Company or by these Articles or otherwise, to be exercised or done by the Company in general meeting. Provided further that in exercised any such power doing any such or act thing, the Board shall be subject to the provisions in that behalf contained in the Act or any other statue or in the Memorandum of Association of the Company or in these Articles, or in any regulations not inconsistent therewith and duly made thereunder including regulation made by the Company in general meeting, but no regulation made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulations had not been made.
(e) Without prejudice to the general powers conferred by the preceding Article, the Director may, from time to time and at any time, subject to the restrictions contained in the Act, delegate to managers, secretaries, officers, assistants and other employees or other persons any of the powers, authorities and discretions for the time being vested in the Board and the Board may, at any time remove any person so appointed and may annual or very delegation.
How profits shall be divisible
115. Subject to Section 205 of the Companies Act the rights of the members entitled to shares (if any) with preferential rights 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 in the Company but so that partly paid-up shares shall only entitled the holder with respect thereof to such proportion of the distribution upon a fully paid-up share as the amount paid thereon bears to the nominal amount of such shares. All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but being if any share is issued on terms providing that it
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shall rank for dividend as from a particular date; such share shall rank for dividend accordingly. Where capital is paid up in advance of calls upon the footing that the same shall carry interest, such capital shall not, whilst carrying interest, rank for dividends or confer a right to participate in profits.
Declaration of Dividend 116. The Company in general meeting may declare 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.
Restriction on declaration of larger dividend
118. No larger dividends shall be declared than is recommended by the Board, but the Company in general meeting may declare a smaller dividend.
Dividends out of profits only 118. Subject to the provisions of Section 205 of the Act, no dividend shall be payable except out of the profits of the Company or out of monies 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.
Net Profits as per Audited Accounts 119. The declaration of the net profit of the Company as stated in the audited Annual Accounts shall be conclusive.
Interim Dividend
120. The Board may, from time to time, pay to the members such interim dividends as appear to the Board to be justified by the profits of the Company.
Deduction of amounts due to Company
121. Subject to section 205A of the Act, the Board may deduct from any dividend payable to any member all sum of monies, if any, presently payable by him to the Company on accounts of calls or otherwise in relation to the shares in the Company.
Set-off of Dividend against Call
122. Subject to Section 205A of the Act, any general meeting declaring a dividend may make a call on the members of such amount as the meeting fixed not exceeding the amount remaining unpaid on the shares, but so that the call on each member also does not exceed the dividend payable to him and so the call be made payable at the same as the dividend and in such case the dividend may, if so arranged between the Company and the members, be set off against the call.
Payment of Dividend in Cash
123. 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 shares or paying up any amount for the time being unpaid on the shares held by the members of the Company.
Transfer of Right to Dividend on registration
124. A transfer of share shall not pass the rights to any dividend declared thereon before the registration of the transfer by the Company.
Payment of Interest on Capital
125. The Company may pay interest on capital raised for the construction of works or buildings when and so far as it shall be authorised to do by section 208 of the Act.
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Payment to Registered Holder 126. 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.
Receipts of Dividend 127. Any one of the several persons who are registered as the joint-holders of and share may give effectual receipts for all dividends, bonuses and other payments in respect of such share.
Notice of Dividend 128. Notice of any dividend, whether interim or otherwise shall be given to the person entitled to share therein in the manner hereinafter provided.
Manner of Payment of Dividend 129. Unless otherwise directed in accordance with Section 206 of the Act, any dividend, interest or other monies payable in cash in respect of any share may be paid by cheque or warrant sent through the post to the registered address of the members or in case of members who are registered jointly to the registered address of that one of such member who is first named in the Register in respect of joint-holding or to such person and to such address as the member or members who are registered jointly, 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 or responsible for any cheque or warrant lost in transmission or for any dividend lost to the member or person entitled thereto by forged endorsement of any cheque or warrant or fraudulent recovery thereof by any other means.
Unclaimed/ unpaid Dividend 130. Where the Company has declared a dividend but which has not been paid or claimed within 30 days from the date of declaration, transfer the total amount of dividend which remains unpaid or unclaimed within the said period of 30 days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called SVPCL Unpaid Dividend Account
131. Any money transferred to the unpaid dividend account of a company which remains unpaid or unclaimed for a period or seven years from the date of such transfer, shall be transferred by the company to the Fund known as Investor Education and Protection Fund established under section 205C of the Act.
132. No unclaimed or unpaid dividend shall be forfeited by the Board.
Time limit for Payment of Dividend
133. The Company shall pay the dividend or send the warrant in respect thereof to shareholders entitled to the payment of dividend, within thirty days from the date of the declaration unless:
a) When the dividend could not be paid by reason of the operation of any law. b) Where a shareholder has given directions regarding the payment of the dividend and those directions
cannot be complied with. c) Where there is a dispute regarding the right to receive the dividend. d) Where the dividend has been lawfully adjusted by the Company against any sum due to it from
shareholder; or e) Where for any other reason, the failure to pay the dividend or to post the warrant within the period
aforesaid was not due to any default on the part of the Company
Indemnity
134. Subject to Section 201 of the Companies Act, 1956 every Director, Managing 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 as Auditor shall be indemnified out of the funds of the Company against all bonafide liability incurred by him as such Director, Managing Director, Manager, Secretary, Officer, employee or Auditor in defending any bonafide proceeding, whether Civil or Criminal in which judgment is given in his favour, or in which he is acquitted, or in connection with any application under Section 633 of the Act in which relief is granted to him by the Court.
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SECTION XI. OTHER INFORMATION
LIST OF MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following Contracts (not being contracts entered into in the ordinary course of business carried on by the Company or entered into more than two years before the date of this Red Herring Prospectus) which are or may be deemed material have been entered or to be entered into by the Company. These Contracts, copies of which have been attached to the copy of the Draft Red Herring Prospectus, to be delivered to the Registrar of Companies, for registration and also the documents for inspection referred to thereunder, may be inspected at the Registered office of the Company from 10.00 am to 4.00 pm on working days from the date of this Red Herring Prospectus until the Bid/Issue Closing Date.
Material Contracts
1.Memorandum of Understanding (MOU) dated 20.03.06 between BOB Capital Markets Limited and Our Company appointing them as the BRLM.
2.Memorandum of Understanding (MOU) dated 12.04.2007 amongst our Company and UTI Securities Ltd, Co-BRLM.
3.Letter dated 09.06.06 appointing M/s Aarthi Consultants Private Limited as the Registrars to the Issue.
4.Memorandum of Understanding (MOU) dated 9th June, 2006 entered into with M/s Aarthi Consultants Private Limited, to act as the Registrar to the Issue.
5.Escrow Agreement dated [ ] amongst Escrow Collecting Banks, Syndicate Members, Registrars, the Company and BRLM.
6.Syndicate Agreement dated [ ]amongst BRLM, The Registrar, Syndicate Members and the Company.
7.Underwriting Agreement dated [ ] amongst BRLM, the Company and Syndicate Members.
8.Engagement Letter dated 5th March, 2007 of M/s Little & Co; Legal Advisors to the issue.
Material Documents
1. Memorandum and Articles of Association as amended from time to time.
2. Resolution passed by the Board of Directors of Company on 23rd February, 2007 and by the shareholders of Company at the Extra Ordinary General Meeting held on 23rd
March, 2007 pursuant to Section 81(1A) of the Companies Act, 1956.
3. Copy of the tax benefit report dated 23.03.2007 from M/s P. Murali & Co, Chartered Accountants; Statutory Auditors of the Company.
4. Report of statutory Auditors M/s P. Murali & Co, Chartered Accountants; Statutory Auditors of the Company. Dated 23.03.2007 for financial statements mentioned in the Red Herring Prospectus along with the Annual Reports for the relevant period.
5. Consents of Auditors, Bankers to the Company, BRLM, Syndicate Members, Legal Advisor to the Issue, Directors, Company Secretary, Registrars, Bankers to the Issue, Compliance Officer as referred to, in their respective capacities.
6. Power of Attorney executed by the Directors in favour of Mr. K. Mallikarjuna Reddy Managing Director for signing and making necessary changes in the Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus.
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7. Copy of Initial Listing application filed with BSE and NSE.
8. In principle listing approvals from BSE dated May 18, 2007 and NSE dated June 18, 2007.
9. Resolutions passed by the Company appointing the Managing Director and
Executive Directors.
10. Copy of Legal Advisor certificate dated 12.04.2007 regarding litigation.
11. Legal Advisor s due diligence report dated 02.04.2007
12. Resolution of the Meeting of the Board of Directors held on July 08, 2007 for
the constitution/ Reconstitution of the Company s Audit Committee, Investors
Grievances Committee, and Remuneration Committee.
13. Tripartite agreement between the NSDL, Company and Aarthi Consultants Private
Limited dated July 05,2007.
14. Tripartite agreement between the CDSL, Company and Aarthi Consultants Private Limited dated May 03, 2007.
15. Resolution of the Members of Company passed at the Extra Ordinary General Meeting held on 15th November, 2006 appointing M/s. P. Murali & Co; Chartered Accountants, as Statutory Auditors of the Company in palce of M/s M.G. Rao & Co, Chartered Accountants
16. Certified copies of Form 5 alongwith relevant resolutions for increase in
authorized Share Capital.
17. Copies of letters/agreements entered into with Banks/Financial Institutions
sanctioning term loan and credit facilities.
18. Copy of the Board Resolution dated October 8, , 2007 approving Red
Herring Prospectus.
19. Copies of various Government approvals obtained by the Company.
20. Statutory Auditors certificate dated _October 01, 2007 regarding sources and deployment of funds as on 30.09. 2007.
21. Due Diligence certificate dated 12.04.2007 issued by Book Running Lead Manager(BRLM) to the issue, BOB Capital Markets Ltd.
22. SEBI Observation letter No. CFD/DIL/NB/103685/2007 dated 11.09.2007
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23.Copy of the Special Resolution passed by the members of the Company under
Section 293(1)(a) and Section 293 (1) (d) of the Companies Act 1956.
Any of the contracts or documents mentioned in this Red Herring Prospectus may be amended or modified at any time, if so required, in the interest of the Company or if required by other parties, without reference to the shareholders, subject to compliance of the applicable laws.
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DECLARATION
We the Directors of our Company hereby declare that all the relevant provisions of the Companies Act, 1956, and the guidelines issued by the GOI or the guidelines issued by Securities and Exchange Board of India, as the case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or the rules made thereunder or guidelines issued, as the case may be. We further certify that all the statements in this Red Herring Prospectus are, to the best of our knowledge and belief, true and correct.
SIGNED BY THE DIRECTORS OF SVPCL LIMITED Name Designation Signature Mr.K. Mallikarjuna Reddy Managing Director
Mr.K. Sudhakara Reddy Wholetime Director
Dr. Y. R. Nagarjuna Kumar Director Dr.K.Sudhakara Reddy Director Dr. K. Seshaiah, Director Mr. Penumolli Parandhama Reddy
Director
Mr. K.V.Kondaiah Sastry Director
SIGNED BY THE COMPANY SECRETARY Mr.Y. Sriniwas Arun,
SIGNED BY THE CEO & COMPLIANCE OFFICER Mr.Y.V.Sheshatalpa Sai
PLACE: Hyderabad DATE: