RNS INFRASTRUCTURE LIMITED Our Company Was Originally Incorporated on August 06, 2003 As R

CMYK

DRAFT RED HERRING PROSPECTUS Please read Section 60B of the Companies Act, 1956 100% Book Built Issue Dated July 12, 2007

RNS INFRASTRUCTURE LIMITED Our Company was originally incorporated on August 06, 2003 as R. N. Shetty & Company Private Limited. The name of our Company was changed from R. N. Shetty & Company Private Limited to RNS Infrastructures Private Limited vide a fresh certificate of incorporation dated December 21, 2005. Our Company was converted into a public company and the name of the Company was changed from RNS Infrastructures Private Limited to RNS Infrastructures Limited vide a fresh certificate of incorporation dated January 10, 2006. Subsequently the name of our Company was changed from RNS Infrastructures Limited to RNS Infrastructure Limited vide a certificate of incorporation dated February 8, 2006. Registered office: No. 604/B, Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India Tel: +91 836 233 1615 Fax: +91 836 233 0436; Website: www.rnsinfrastructure.com, Corporate office: Naveen Complex, 7th Floor, No. 14, M.G. Road, Bangalore 560 001, Karnataka, India, Tel: +91 80 2558 4181; Fax: +91 80 2558 4017 Contact person and Compliance Officer: Vijayamahantesh V. Khannur Tel: +91 80 2558 4181; Fax: +91 80 2558 4017; Email: [email protected] PUBLIC ISSUE OF 21,660,000 EQUITY SHARES OF Rs. 10 EACH OF RNS INFRASTRUCTURE LIMITED (“COMPANY”/”ISSUER”) FOR CASH AT A PRICE OF RS. PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. PER EQUITY SHARE) AGGREGATING RS. MILLION (THE “ISSUE”). THE ISSUE COMPRISES A NET ISSUE TO THE PUBLIC OF 21,500,000 SHARES OF RS. 10 EACH (THE “NET ISSUE”) AND A RESERVATION OF 160,000 EQUITY SHARES OF RS. 10 EACH FOR ELIGIBLE EMPLOYEES OF THE COMPANY (THE “EMPLOYEE RESERVATION PORTION”). THE ISSUE WOULD CONSTITUTE 25.58% OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF THE COMPANY. THE NET ISSUE WILL CONSTITUTE 25.40% OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF THE COMPANY. PRICE BAND: Rs. TO Rs. PER EQUITY SHARE OF FACE VALUE Rs. 10.THE FACE VALUE OF EQUITY SHARES IS RS. 10 THE FLOOR PRICE IS TIMES THE FACE VALUE AND THE CAP PRICE IS TIMES THE FACE VALUE

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three additional days after revision of the Price Band subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the National Stock Exchange of India Limited (“NSE”) and the Bombay Stock Exchange Limited (“BSE”), by issuing a press release, and also by indicating the change on the website of the Book Running Lead Manager (“BRLM”) and at the terminals of the Syndicate The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Net Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”). 5% of the QIB Portion shall be available for allocation to Mutual Funds only and the remaining QIB Portion shall be available for allocation to all the QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. 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 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. Further, 160,000 Equity Shares shall be available for allocation on a proportionate basis to Eligible Employees, subject to valid Bids being received at or above the Issue Price RISK IN RELATION TO FIRST ISSUE This being the first public issue of the Equity Shares, there has been no formal market for the Equity Shares. The face value of the Equity Shares is Rs. 10 and the Floor Price is times the face value and the Cap Price is times the face value. The Issue Price (as 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) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Company and the Issue including the risks 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 SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the section titled “Risk Factors” commencing on page x. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Issuer and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. IPO GRADING This Issue has been rated by as (pronounced ), indicating . For more information on IPO Grading, please refer to Section “General Information” beginning on page ii. LISTING The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the NSE and the BSE. We have received in-principle approval from the NSE and the BSE for the listing of our Equity Shares pursuant to letters dated , 2007 and , 2007, respectively. shall be the Designated Stock Exchange for purpose of this issue.

BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE

ICICI SECURITIES LIMITED KARVY COMPUTERSHARE PRIVATE LIMITED ICICI Centre, H.T. Parekh Marg, Karvy House, 46, Avenue 4, Street No.1, Churchgate Mumbai 400 020 Banjara Hills, Hyderabad 500 034 Tel: + 91 22 2288 2460 Tel: +91 40 2342 0818 Fax: + 91 22 2282 6580 Fax: +91 40 2342 0814 Email: [email protected] Email: [email protected] Website: www.icicisecurities.com Website: http://kcpl.karvy.com Contact person: Tathagat Mukhopadhyay Contact person: Murali Krishna

ISSUE PROGRAMME BID / ISSUE OPENS ON , 2007 BID / ISSUE CLOSES ON , 2007

CMYK TABLE OF CONTENTS

SECTION I - GENERAL ...... ii CERTAIN CONVENTIONS; PRESENTATION OF FINANCIAL AND MARKET DATA ...... viii FORWARD-LOOKING STATEMENTS ...... ix

SECTION II - RISK FACTORS ...... x

SECTION III – INTRODUCTION ...... 1 SUMMARY OF OUR BUSINESS, STRENGTHS AND STRATEGIES ...... 1 THE ISSUE ...... 4 SUMMARY FINANCIAL INFORMATION ...... 5 GENERAL INFORMATION ...... 7 CAPITAL STRUCTURE ...... 14 OBJECTS OF THE ISSUE ...... 22 BASIS FOR ISSUE PRICE ...... 26 STATEMENT OF TAX BENEFITS ...... 29

SECTION IV – ABOUT US ...... 38 INDUSTRY OVERVIEW ...... 38 OUR BUSINESS ...... 50 REGULATIONS AND POLICIES ...... 68 HISTORY AND CERTAIN CORPORATE MATTERS ...... 75 OUR MANAGEMENT ...... 81 OUR PROMOTERS AND PROMOTER GROUP ...... 93 DIVIDEND POLICY ...... 105

SECTION V – FINANCIAL INFORMATION ...... 106 FINANCIAL STATEMENTS ...... 106 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 139 DESCRIPTION OF CERTAIN FINANCIAL INDEBTEDNESS ...... 155

SECTION VI – LEGAL AND OTHER INFORMATION ...... 158 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ...... 158 GOVERNMENT APPROVALS ...... 166 OTHER REGULATORY AND STATUTORY INFORMATION ...... 170 SECTION VII – ISSUE INFORMATION ...... 179 TERMS OF THE ISSUE ...... 179 ISSUE STRUCTURE ...... 181 ISSUE PROCEDURE ...... 184 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ...... 213

SECTION VIII - MAIN PROVISIONS OF OUR ARTICLES OF ASSOCIATION ...... 214

SECTION IX - OTHER INFORMATION ...... 226 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ...... 226 DECLARATION ...... 228

SECTION I - GENERAL

DEFINITIONS AND ABBREVIATIONS

Company related terms

Term Description

“We”, “us”, “our”, “RNS Unless the context otherwise indicates or implies, refers to RNS Infrastructure Limited”, Infrastructure Limited, a public Limited Company incorporated “the Company” or “our under Companies Act, 1956 and having its registered office at Company” 604/B, Murudeshwar Bhavan, Gokul Road, Hubli 580 030, India and its corporate office at Naveen Complex, 7th Floor, 14, M.G. Road, Bangalore 560 001, Karnataka, India Articles/Articles of Articles of Association of our Company, as amended from time Association to time Auditors B.C. Shetty & Co., the statutory auditors of our Company Board of Directors/Board The board of directors of our Company or a committee constituted thereof Director(s) Director(s) on the Board of our Company, as may change from time to time, unless otherwise specified Memorandum/Memoran The memorandum of association of our Company, as amended dum of Association from time to time Promoters Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty Promoter Group Individuals, companies and entities enumerated in the section titled “Our Promoters and Promoter Group” beginning on page 93 Registered Office The registered office of our Company located at 604/B, Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India RNS Group Unless the context otherwise requires, the Company and the following entities forming part of the Promoter Group: (i) Murudeshwar Ceramics Limited, (ii) Murdeshwar Power Corporation Limited, (iii) Naveen Hotels Limited, (iv) Naveen Mechanised Construction Company Private Limited, (v) Naveen Structurals & Engineering Company Private Limited, (vi) Murudeshwar Infosystems Limited, (vii) Murudeshwar Finance & Leasing Limited, (viii) Shri Murudeshwar Tiles Private Limited (ix) Firebricks & Potteries Private Limited, (x) RNS Motors Limited, (xi) Sairam Mines & Minerals Limited, (xii) RNS Family Trust (xiii) R.N. Shetty Trust (xiv) RNS Trust and (xv) Murudeshwar Finance Corporation

Issue related terms

Term Description

Allotment/Allot Unless the context otherwise requires, the issue of Equity Shares for successful Bidders pursuant to the Issue. Allottee The successful Bidder to whom Equity Shares are Allotted Allocation Amount The amount payable by a Bidder on or prior to the Pay-in Date after deducting any Bid Amounts that may already have been paid by such Bidder Banker(s) to the Issue y Bid An indication to make an offer during the Bidding Period/Issue Period by a Bidder to subscribe to the Equity Shares of the Company at a price within the Price Band, including all revisions and modifications thereto

Term Description

Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid in the Issue Bid cum Application The form in terms of which the Bidder shall make an offer to Form purchase Equity Shares of our Company in terms of the Red Herring Prospectus Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid cum Application Form Bidding Period/Issue The period between the Bid/Issue Opening Date and the Period Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids Bid/Issue Closing Date The date after which the Syndicate will not accept any Bids for the Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper and a Kannada newspaper with wide circulation Bid/Issue Opening Date The date on which the Syndicate will start accepting Bids for the Issue, which shall be the date notified in an English national newspaper, a Hindi national newspaper and a Kannada newspaper with wide circulation Book Building The book building process as provided in Chapter XI of the Process/Method SEBI Guidelines, in terms of which this Issue is being made BRLM/Book Running Book Running Lead Manager to the Issue, in this case being Lead Manager/I Sec ICICI Securities Limited CAN/Confirmation of The note or advice or intimation of allocation of Equity Shares Allocation Note sent to the Bidders who have been allocated Equity Shares after discovery of the Issue Price in accordance with the Book Building Process Cap Price The higher end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted Cut-off Price Any price within the Price Band finalised by the Company in consultation with the BRLM. A Bid submitted at Cut-off Price is a valid Bid at all price levels within the Price Band Designated Date The date on which funds are transferred from the Escrow Account to the Public Issue Account after the Prospectus is filed with the RoC following which the Board shall Allot Equity Shares to successful Bidders Designated Stock y Exchange Draft Red Herring This Draft Red Herring Prospectus dated July 12, 2007 issued Prospectus in accordance with Section 60B of the Companies Act, which does not have complete particulars of the Issue Price and the size of the Issue Eligible Employees A permanent employee of the Company including its directors as as on Bid/Issue Opening Date and working and present in India as on the date of submission of the Bid cum Application Form. However, Directors who are Promoters of the Company shall not be considered to be Eligible Employees Eligible NRI NRI from such jurisdiction outside India where it is not unlawful to make an offer or invitation under the Issue Employee Reservation The portion of the Issue being up to 160,000 Equity Shares Portion available for allocation to Eligible Employees, on a proportionate basis Equity Shares Equity shares of the Company of face value of Rs. 10 each Escrow Accounts Accounts opened with the Escrow Collection Banks and in whose favour the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid

iii

Term Description

Escrow Agreement Agreement to be entered into among the Company, the Registrar, the Escrow Collection Bank(s), the BRLM and the Syndicate Members for collection of the Bid Amounts and for remitting refunds, if any, of the amounts collected, to the Bidders on the terms and conditions thereof Escrow Collection The banks, which are clearing members and registered with Bank(s) SEBI as Bankers to the Issue, at which the Escrow Accounts will be opened, in this case being y 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 finalised and below which no Bids will be accepted ISEC ICICI Securities Limited Issue The issue of 21,660,000 Equity Shares of Rs. 10 each at a price of Rs. y each for cash, aggregating Rs. y by the Company under the RHP and the Prospectus. The Issue comprises a Net Issue to the Public of 21,500,000 Equity Shares and the Employees Reservation Portion of up to 160,000 Equity Shares Issue Price The final price at which Equity Shares will be Allotted in the Issue, as determined by the Company in consultation with the BRLM, on the Pricing Date Margin Amount The amount paid by the Bidder at the time of submission of his/her Bid, being 10% to 100% of the Bid Amount, as applicable Mutual Fund A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996 Mutual Fund Portion 5% of the QIB Portion or 537,500 Equity Shares (assuming the QIB Portion is 50% of the Net Issue size) available for allocation to Mutual Funds only, out of the QIB Portion Net Issue The Issue less the Employee Reservation Portion Non-Institutional Bidders Bidders that are neither Qualified Institutional Buyers nor Retail Individual Bidders and who have Bid for an amount more than Rs. 100,000 (but not including NRIs other than Eligible NRIs) Non-Institutional Portion The portion of the Net Issue being not less than 3,225,000 Equity Shares available for allocation to Non-Institutional Bidders Pay-in Date Bid/Issue Closing Date or the last date specified in the CAN sent to the Bidders, as applicable Pay-in-Period (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 The price band with a minimum price (Floor Price) of Rs. y per Equity Share and a maximum price (Cap Price) of Rs. y per Equity Share Pricing Date The date on which our Company in consultation with the BRLM will finalise the Issue Price Prospectus The prospectus, to be filed with the RoC after pricing containing, among other things, 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 the Issue to receive monies from the Escrow Account for the Issue on the

Term Description

Designated Date Qualified Institutional Public financial institutions as specified in Section 4A of the Buyers or QIBs Companies Act, scheduled commercial banks, mutual funds registered with SEBI, foreign institutional investors registered with SEBI, venture capital funds registered with SEBI, state industrial development corporations, insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs. 250 million and pension funds with minimum corpus of Rs. 250 million QIB Margin Amount An amount representing at least 10% of the Bid Amount that QIBs are required to pay at the time of submitting their Bid QIB Portion The portion of the Net Issue being at least 10,750,000 Equity Shares to be mandatorily allotted to QIBs Refund Account(s) Account(s) opened with an Escrow Collection Bank(s), from which refunds of the whole or part of the Bid Amount, if any, shall be made Registrar/Registrar to Registrar to the Issue, in this case being Karvy Computershare the Issue Private Limited having its registered office at Karvy House, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034, India Retail Individual Bidders Individual Bidders (including HUFs applying through their karta and Eligible NRIs) who have bid for Equity Shares for an amount less than or equal to Rs. 100,000 Retail Portion The portion of the Net Issue being not less than 7,525,000 Equity Shares 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 their Bid cum Application Forms or any previous Revision Form(s) RHP or Red Herring The Red Herring Prospectus to be issued in accordance with Prospectus Section 60B of the Companies Act, which will not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue. The Red Herring Prospectus will be filed with the RoC at least three days before the Bid/Issue Opening Date and will become a Prospectus after filing with the RoC after determination of the Issue Price Stock Exchanges NSE and BSE Syndicate or members of The BRLM and the Syndicate Members the Syndicate Syndicate Agreement The agreement dated y, 2007 to be entered into among the Company and the members of the Syndicate, in relation to the collection of Bids in this Issue Syndicate Members y TRS/ Transaction The slip or document issued by any of the members of the Registration Slip Syndicate to a Bidder as proof of registration of the Bid Underwriters BRLM and Syndicate Members Underwriting Agreement The agreement among the Underwriters and the Company to be entered into on or after the Pricing Date

Industry related terms

Term Description

AAI Airport Authority of India Acre Equals 43,560 sq.ft BDA Bangalore Development Authority

Term Description

BESCOM Bangalore Electricity Supply Company Limited BIAAPA Bangalore International Airport Area Planing Authority BIAPA Bangalore International Airport Promotion Authority BMP Bangalore Mahanagara Palike BMRDA Bangalore Metropolitan Region Development Authority BPO Business Process Outsourcing BWSSB Bangalore Water Supply and Sewerage Board CDP Comprehensive Development Plan CMC City Municipal Corporation CRIS INFAC CRIS INFAC Industry Information Service, a brand of CRISIL Research and Information Services Limited ERP Enterprise Resource Planning FAR Floor Area ratio Gunta Equals 1089 sq.ft ITES Information Technology Enabled Services NHAI National Highway Authority of India Sq.ft Square Feet

General terms

Term Description

Companies Act The Companies Act, 1956 as amended from time to time Depositories Act The Depositories Act, 1996, as amended from time to time Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time Depository Participant A depository participant as defined under the Depositories Act Indian GAAP Generally accepted accounting principles in India IT Act The Income Tax Act, 1961, as amended from time to time Non Residents/NR All eligible Bidders, including NRIs, FIIS registered with SEBI and FVCIs registered with SEBI, who are not persons resident in India NRI/Non Resident Indian A person resident outside India, who is a citizen of India or a person of Indian origin and shall have the same meaning as ascribed to such term in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 OCB/ Overseas A company, partnership, society or other corporate body owned Corporate Body directly or indirectly to the extent of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000. OCBs are not permitted to invest in this Issue SEBI Act The Securities and Exchange Board of India Act, 1992, as amended from time to time SEBI Guidelines The SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by SEBI, as amended, including instructions and clarifications issued by SEBI from time to time SICA Sick Industrial Companies (Special Provisions) Act, 1985 U.S. GAAP Generally accepted accounting principles in the United States of America

Abbreviations

Abbreviation Full form

AGM Annual General Meeting AS Accounting Standards as issued by the Institute of Chartered Accountants of India BSE Bombay Stock Exchange Limited, earlier known as The Stock Exchange, Mumbai CAGR Compounded Annual Growth Rate CDSL Central Depository Services (India) Limited CIBIL Credit Information Bureau (India) Limited DIPP Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India ECS Electronic Clearance Service EGM Extraordinary General Meeting EPS Earnings per share FDI Foreign direct investment FSI Floor Space Index FII Foreign Institutional Investor (as defined under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of India FVCI Foreign Venture Capital Investor FY/Fiscal/Financial Period of twelve months ended March 31 of that particular year, year/Fiscal year unless otherwise stated GoI Government of India HUF Hindu Undivided Family IT Information Techonology ITES Information Technology Enabled Services NAV Net Asset Value N/G Through natural guardian NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited p.a. per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PLR Prime Lending Rate. RBI The Reserve Bank of India RoC The Registrar of Companies, Karnataka at Bangalore RoNW Return on Net Worth Rs. Rupees SCRA Securities Contracts (Regulations) Act, 1956 SCRR Securities Contracts (Regulations) Rules, 1957 SEBI The Securities and Exchange Board of India constituted under the SEBI Act

vii

CERTAIN CONVENTIONS; PRESENTATION OF FINANCIAL AND MARKET DATA

In this Draft Red Herring Prospectus, references to “our lands” or “lands to which we have access to” are lands the title to which is with our Company, or lands from which the Company can derive the economic benefit through a documented framework (such as with third party individuals or corporate entities), or where our Company has executed joint development agreements.

In this Draft Red Herring Prospectus, any discrepancies in any table between the totals and the sum of the amounts listed are due to rounding.

Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated financial statements prepared in accordance with Indian GAAP and the SEBI Guidelines, which are included in this Draft Red Herring Prospectus. Our financial year commences on April 1 and ends on March 31 of the following year. Accordingly, all references to a particular financial year are to the twelve-month period ended on March 31 of that year.

There are significant differences between Indian GAAP and US GAAP. We have not attempted to explain those differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on our financial data. Accordingly, the degree to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this Draft Red Herring Prospectus should accordingly be limited.

Unless stated otherwise, market and industry data used throughout this Draft Red Herring Prospectus has been obtained from government and third party sources, which has not been independently verified by the Company. The extent to which such market and industry data is meaningful depends on the reader’s familiarity with and understanding of the methodologies used in compiling such data. There are no standard data gathering methodologies in the real estate industry in India and methodologies and assumptions may vary widely among different industry sources. Further, the accuracy and completeness of such data is not guaranteed and the reliability of such data cannot be assured.

The following table sets forth, for each period indicated, information concerning the number of Rupees for which one U.S. Dollar could be exchanged at the noon buying rate in the City of New York on the last business day of the applicable period for cable transfers in Rupees as certified for customs purposes by the Federal Reserve Bank of New York. The row titled “Average” in the table below is the average of the daily noon buying rate for each day in the period.

FY 2007 FY 2006 FY 2005 FY 2004

Period End 43.10 44.48 43.62 43.40 Average 43.12 44.17 44.86 45.96 Low 42.78 43.05 43.27 43.40 High 46.83 46.26 46.45 47.45

On July 09, 2007, the noon buying rate was Rs. 40.37 per U.S. Dollar.

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FORWARD-LOOKING STATEMENTS

This Draft Red Herring Prospectus contains certain “forward-looking statements”. These forward looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”, “objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe our strategies, 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 and property valuations to differ materially from those contemplated by the relevant statement.

Important factors that could cause actual results and property valuations to differ materially from our expectations include, but are not limited to, the following:

the outcome of legal proceedings and claims in relation to certain civil matters involving our Company, Promoter Directors and Promoter Group entities;

fluctuations in market conditions which may affect our ability to sell the residential and commercial properties from our development projects at the prices we anticipated;

our successful expansion into the real estate development business;

the expiration or termination of our joint development agreements prior to completion of the developments;

any defects or irregularities in title to some of our land or the lands that we plan to develop under the joint development agreements or the joint venture agreement;

our ability to access suitable parcels of land for development; and

our ability to obtain adequate funding for our operations or to service our future financing obligations.

For further discussion of factors that could cause our actual results to differ, see the sections titled “Risk Factors” and “Management’s Discussion of Financial Condition and Results of Operations” on pages x and 139. Neither our Company nor the BRLM nor its affiliates has any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, our Company and the BRLM will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges.

SECTION II - RISK FACTORS

An investment in Equity Shares involves a high degree of risk, which cannot be measured accurately. You should carefully consider all the information in this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Equity Shares. To obtain a complete understanding of our Company, you should read this section in conjunction with the sections titled “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 50 and 139, respectively, as well as the other financial and statistical information contained in the Draft Red Herring Prospectus. These risks could materially and adversely impact our business, results of operations and financial condition, and the price of the Equity Shares and the value of your investment in the Equity Shares could decline. The numbering of the risk factors has been done to facilitate ease of reading and reference and does not in any manner indicate the importance of one risk factor over another.

RISKS RELATING TO OUR BUSINESS OR INTERNAL RISK FACTORS

1. Our Company, Promoter Directors and Promoter Group entities are involved in certain legal proceedings and claims in relation to certain civil matters. One of our Promoters is also on the list of ‘Suit-filed Accounts’ of the Credit Information Bureau (India) Limited.

Our Company, Promoter Directors and Promoter Group entities are involved in certain legal proceedings and claims in relation to certain civil matters. These legal proceedings and claims are pending at different levels of adjudication before various courts and tribunals. We cannot assure you that these legal proceedings will be decided in our favour. A summarisation of these legal proceedings is set out below. Any adverse decision may have a significant effect on our business, financial condition and results of operations.

Category Our Company Promoters and Promoter Group Directors

Disputes with 6 proceedings involving 2 proceedings, 4 proceedings, governmental a sum of involving a sum of involving a sum of authorities Rs. 539,963,328 Rs. 2,214,443 Rs. 9,681,186

Labour proceedings 4 proceedings, None 14 proceedings, involving a sum of involving a sum of Rs. 1,003,327 Rs. 14,242,987.60

Recovery proceedings None 8 proceedings, None involving a sum of Rs. 114,171,539.09

Company law None 2 proceedings 2 proceedings proceedings

Consumer disputes None None 1 proceeding, involving a sum of Rs. 31,030

Miscellaneous None None 2 proceedings

Further, our Promoter, Mr. R.N. Shetty, is mentioned in the list of ‘Suit-filed Accounts’ of the CIBIL in respect of defaults committed by two companies, Murudeshwar Foods & Exports Limited and Karnataka Exports Limited, where he was a director. These two companies are not Promoter Group companies. For more information, please refer to the section titled “Outstanding Litigation and Material Developments” on page 158.

2. All the joint development agreements and the joint venture agreement that we have entered into are with members of our Promoter Group, who may take actions that are not in our Shareholders’ best interests.

All the joint development agreements and the joint venture agreement that we have entered into are with members of our Promoter Group. We cannot assure you that the terms and conditions under these agreements were negotiated at arm’s-length or are in the best interests of the Company. These members of our Promoter Group hold the lands that are the subject of the agreements (except for certain land located in Chalamatti, Hubli, which is leased by the Promoter Group entity), at least until the sale of the completed project to customers and possibly thereafter. In the event that the owners of such lands take any action with respect to such lands, it may conflict with our interests and may materially and adversely affect our business, results of operations and financial condition. All the joint development agreements and the joint venture agreement could be modified by members of our Promoter Group at any time and to any extent, even in ways that require our consent or acquiescence, due to the fact that we are controlled by our Promoter Group and expect to continue to be so controlled after the Issue.

3. Our Company has been operating in its present form only since January 1, 2007 and, therefore, the historical financial information set forth in this Draft Red Herring Prospectus may not be indicative of the past or future results of operations and financial condition of the Company.

Our Company has been operating in its present form only since January 1, 2007, when we sold our motors division business to RNS Motors Limited, a newly formed Associate company, in a business transfer transaction. In addition, we have entered the real estate development business only recently, in 2006, and we have not yet completed and sold any units in any of our development projects. Our historical financial statements may not completely reflect these changes. First, income from our motors division is still included in our fiscal 2006 and prior year financial statements (although it is broken out separately in the sections titled “Our Business” and “Management’s Discussion and Analysis of Financial Condition” in this Draft Red Herring Prospectus). Second, under the “percentage of completion” revenue recognition method that we follow in respect of our real estate development business, we are already recognising some income from that business, even though we have not yet completed any projects or sold any part of any projects. Therefore, the financial statements of the Company included in this Draft Red Herring Prospectus:

do not completely reflect the results and financial condition of the company as we are now constituted and managed;

do not completely reflect what our results would have been if our motors division had not been part of the Company for the presented periods; and

may not be indicative of the past or future results of operations or financial condition of the Company as we are now constituted.

4. We cannot assure you that we will be successful when expanding into the real estate development business.

We have a long history as a civil engineering and construction company operating in South India, particularly Karnataka. Our civil engineering and construction projects have been focused on construction of national highways, bridges, tunnels, power houses, canals, dams, irrigation projects reservoirs and commercial buildings. We recently expanded into the real estate development sector in early 2006 and are currently developing one project in Bangalore. This is a relatively new business for us and there is no assurance that we will be successful in identifying and acquiring suitable parcels of lands, anticipating and responding to the tastes and preferences of our customers, identifying suitable projects in a timely manner or completing our projects in a timely and cost effective manner. In addition, currently substantially all of the lands we are developing or planning to are owned by members of our Promoter Group and not by us. Further, we cannot assure you that we will be able to build a

reputation for, or successfully market our, real estate development projects. Any inability to manage our real estate development business or market our real estate projects may have a material and adverse effect on our business and results of operations.

5. Fluctuations in market conditions may affect our ability to sell the residential and commercial properties from our development projects at the prices we anticipated.

We are subject to potentially significant fluctuations in the market value of land and constructed inventories. Recently, the prices of real estate in Bangalore have been experiencing significant gains. We cannot assure you that such gains will continue or that the prices of real estate in Bangalore and in India generally will not materially and adversely fluctuate. We are subject to adverse fluctuations in the market value of the land due to the inherent nature of our business and also due to the stock of land we are developing for future projects. The risk of holding unsold inventory or owning undeveloped land can be substantial and the market value of the same can fluctuate significantly as a result of changing economic and market conditions.

There is often a significant lag between the time we acquire land or obtain development rights for land and the time that we can construct and develop such project. Further, the actual timing of the completion of a project may be different from its forecasted schedule for a number of reasons, including the need to obtain governmental approval and building permits. In addition, real estate investments in land are relatively illiquid, which may limit our ability to vary our exposure in the real estate development and construction businesses promptly in response to changes in economic or other conditions.

We cannot assure you that the fair value of any of the lands that we are developing or plan to develop will not decrease in the future. We may be materially and adversely affected if market conditions deteriorate between the time of our purchase or obtaining of development rights, the commencement of construction and the development and the sale of our projects or if we purchase land or construct projects at higher prices during stronger economic periods and the value of the land or the constructed projects subsequently decline during weaker economic periods. In such times we may also be unable to dispose of land previously acquired by us to reduce losses. Any material increase in land prices may also affect our ability to purchase real estate, which may materially hinder our future real estate development opportunities.

6. We are required to obtain certain approvals or licences in the ordinary course of our business and the failure to obtain such approvals or licences or to comply with such requirements in a timely manner or at all may materially and adversely affect our operations.

We are required to obtain certain approvals, licences, registrations and permissions to operate our businesses and also for the development of each of our residential and commercial projects, some of which may have expired and for which we may have either made or are in the process of making an application for obtaining the approval or renewal. For more information, see the section titled “Government Approvals” on page 166. As described in the section titled “Objects of the Issue” on page 22, we intend to use a portion of the net proceeds of the Issue for the development of the Channasandra project, for which we have not yet received all required approvals. If we fail to obtain any required approvals or licences, or renewals thereof, in a timely manner or at all for any reason, or if we fail to comply with the requirements thereof, our business may be materially and adversely affected.

7. Our joint development agreements and joint venture agreement may expire or otherwise be terminated prior to completion of the developments.

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We have entered into joint development agreements and a joint venture agreement with respect to the development of approximately 35 million sq.ft. of land. These agreements typically stipulate time frames within which development of the land must be commenced and completed once certain conditions are satisfied. In the event that any of the parties to these agreements are unable to satisfy the conditions specified in such agreements within the prescribed time frame, or we fail for any reason to commence or complete development within the stipulated time frames, or the land owners unilaterally decide to terminate the agreements prior to completion, we may lose the right to develop these lands and be subject to contractual penalties, which could materially and adversely affect our business, prospects, financial condition and results of operation.

8. We may not be able to correct any defects or irregularities in title to some of our land or the lands that we plan to develop under the joint development agreements or the joint venture agreement.

There may be various legal defects and irregularities to the title on the lands that we own or on which we have development rights, which we may not be able to fully identify, resolve or assess. Prior to acquisition of or entering into a joint development agreement with respect to any land, we conduct due diligence and assessment exercises on such land. Through an internal assessment process we analyze information about the land that is available to us. However, there can be no assurance that such information is accurate, complete or current. Our rights in respect of these lands may be compromised by improperly executed, unregistered or insufficiently stamped conveyance instruments in the property’s chain of title, unregistered encumbrances in favor of third parties, rights of adverse possessors, ownership claims of spouses or other family members of prior owners, or other to the defects that we may not be aware of. For example, we may not be able to assess or identify all the relevant risks and liabilities associated with defects or irregularities of title. Any acquisition or joint development decision made by us in reliance on our assessment of such information, or the assessment of such information by a third party, is subject to risks and potential liabilities arising from the inaccuracy of such information. If such information later proves to be materially inaccurate, any defects or irregularities of title may result in our loss of title or development rights over land, and the cancellation of our development plans in respect of such land. Furthermore, any failure to obtain good title to a particular plot of land within a larger development may materially prejudice the success of the development for which that plot is a critical part, and may cause us to write off substantial expenditures in respect of a project. Any inability to identify defects or irregularities of title, and any ability to correct any such defects or irregularities of title, on lands that we plan to develop may have a material and adverse effect on our business, financial condition and results of operations.

Legal disputes arising in respect of land title can take several years and considerable expense to resolve if they become the subject of court proceedings and their outcome can be uncertain. Under Indian law, a title document generally is not effective, nor may be admitted as evidence in court, unless it has been registered with the applicable land registry and applicable stamp duty has been paid in respect of such title document. The failure of prior landowners to comply with such requirements may result in our failing to have acquired valid title or development rights.

We face various practical difficulties in verifying the title of a prospective seller or lessor of property. Multiple property registries exist, and verification of title is difficult. Indian law, for example, recognises the ability of persons to effectuate a valid mortgage on an unregistered basis by the physical delivery of original title documents to a lender. Adverse possession under Indian law also gives rise upon 12 years of occupation to valid ownership rights as against all parties, including government entities that are landowners, without the requirement of registration of ownership rights by the adverse possessor. Furthermore, under Indian law, a married person retains property rights in land alienated by their spouse if such married person has

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not consented to such alienation, effectively requiring the consent by each spouse to all land transfers in order for a transferee to receive good title. In addition, Indian law recognises the concept of a Hindu undivided family, whereby all family members jointly own land and must consent to its transfer, including minor children, absent whose consent a land transfer may be challenged by such non-consenting family member. Our title to land may be defective as a result of a failure on our part, or on the part of a prior transferee, to obtain the consent of all such persons. As each transfer in a chain of title may be subject to these and other various defects, our title and development rights over land may be subject to various defects of which we are not aware. We may face claims of third parties to ownership or use of the land after purchasing or obtaining development rights in respect of land, and where disputes cannot be resolved through accommodations with such claimants, we may lose our interest in the land.

In this regard, prospective investors should note that in connection with the Issue, the Domestic Legal Counsel to the Issue and the BRLM have not provided any opinions or other assurances in respect of land title.

9. We are not able to obtain title insurance guaranteeing title or land development rights.

Title insurance is not commercially available in India. Title records provide only for presumptive rather than guaranteed title. As a result, we face an uninsured risk of loss of lands that we believe we own or have development rights over. Prior to undertaking each real estate development project, we conduct due diligence and assessment exercises in relation to the ownership of the property proposed to be developed. In spite of such efforts, we cannot assure you that we have valid title or development rights in respect of all of the land that we believe we own or have development rights over and are unable to insurance against such risk.

10. Our revenues from real estate development activities have contributed to less than 25% of our revenue in each of the last three fiscal years.

We have only recently entered the real estate development business in April 2006. Accordingly, we had no revenue from real estate development activities prior to that time, including fiscal years 2004, 2005 and 2006. Revenue from real estate development activities contributed to 14.96% of our total revenue for the year ended March 31, 2007. We cannot assure you that the revenue generated from our real estate development activities will constitute a significant percentage of our revenue in the future.

11. Revenue recognition based on the “percentage of completion method” of accounting is subject to uncertainties and inaccurate estimates.

We recognise the revenue generated from our residential and commercial projects on the “percentage completion method” of accounting. Under this method, a portion of anticipated revenue is recognised on the basis of the percentage of the actual construction cost incurred against the total estimated cost of construction of the project. In addition, revenue is recognised only if the actual construction cost incurred on the date of the financial statements is at least 30% of the total construction cost as estimated by management. We cannot assure you that these estimates will match the actual cost incurred in respect of these projects. The effect of any changes to estimates is recognised in the financial statements of the period in which such changes are determined. Therefore, our revenue is based on the number of projects under execution that qualify for such revenue recognition during a period. This may lead to significant fluctuations in our revenues from period to period. Payments received from customers for projects, which do not qualify for revenue recognition under this method are paid by customers in surplus of the amounts recognised under the method described above, are accounted for as advances from customers as part of unsecured loans. Currently, we follow Accounting Standard 7

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regarding revenue recognition, which has been mandated by the Institute of Chartered Accountants of India. In the event of any change in law or Indian GAAP which would require a change in the method of revenue recognition, the financial results of our operations may be materially and adversely affected.

We began pre-sales of residential flats being constructed in the first phase of our Yeshwantpur project in May 2007. In addition, we are continuing construction activities on our Yeshwantpur project. Nevertheless, we have accrued income from real estate development in our profit and loss account for the fiscal year ended March 31, 2007. This is because we recognise revenue from these activities according to the percentage of completion method, and based on our application of this method a certain amount of real estate development revenue is already eligible to be recognised, even though no sales were made during this period.

We re-evaluate project costs periodically, particularly when, in our opinion, there have been significant changes in market conditions, anticipated sales prices, costs of labor and materials and other contingencies. Material re-evaluations will affect our revenues in the relevant fiscal periods. If our estimates of project costs or sales prices are inaccurate or if contingencies occur that materially impact our estimates, our revenues may fluctuate significantly from period to period.

12. We are geographically concentrated and our civil engineering and construction and real estate development activities are concentrated in projects in Karnataka.

Our project portfolio has historically been concentrated in construction projects in Karnataka. As of June 30, 2007, approximately 23.51% of our Order Book was comprised of projects in Karnataka. Additionally, all of our ongoing and planned real estate development projects are all in Karnataka, particularly in Bangalore and Hubli. The demand for residential and commercial real estate in India, including in Karnataka, has grown in recent years. However, it is not possible to predict whether such demand will continue to increase in the future. Our business plan has been and is likely to continue to be dependent on construction activity and demand for real estate in Karnataka. The development of a real estate project takes a substantial amount of time, during which many circumstances may change. In the event of a regional slowdown in construction activity or a decrease in demand for real estate, or any development arises that makes construction and real estate development projects in Karnataka less economically attractive, including declines in prices and adverse changes in government monetary and economic policies such as support for and investment in building and upgrading infrastructure, our business, financial condition and results of operations may be materially and adversely affected.

13. A significant portion of the land to which we have access is classified as “Agriculture Land”, which does not permit commercial or residential development.

Approximately 77% of the land to which we have access under our joint development agreements and joint venture agreement is classified as “Agriculture Land". No commercial or residential development is permitted on such land without prior approval of local authorities, including the conversion of such land to the appropriate zone for development. We cannot assure you that we will be able to obtain the requisite permissions and conversions by the relevant authorities to convert the use of such land for commercial or residential development purposes in a timely manner or at all. If we do not receive permissions and conversions in a timely manner, we may not be able to develop these lands as intended, which could materially and adversely affect our business, prospects, financial condition and results of operations.

14. Some of the land that we plan to develop pursuant to joint development agreements are subject to charges or other encumbrances.

The lands that are the subject of two of the joint development agreements that we have entered into are subject to charges or other encumbrances to secure certain indebtedness of the relevant landowners. In the event that such landowners default on any of their obligations in respect of such obligations, the secured lenders may foreclose on and take possession of the subject lands. If this were to occur, we may lose the right to develop these lands, which could materially and adversely affect our business, prospects, financial condition and results of operation.

15. We may not have access to suitable parcels of land for development.

As discussed in the section titled “Our Business” on page 50, our real estate development operations are presently based on a series of joint development agreements and a joint venture agreement that we have entered into with members of our Promoter Group and other affiliates, who own lands in Karnataka, particularly in and around Bangalore. Our ability to execute our future real estate development projects will depend on our ability to identify and obtain access to or directly acquire suitable parcels of land for development. Our ability to obtain access to and acquire suitable parcels of land can be affected by a variety of factors, including location, the willingness of landowners to sell or develop the land, the ability to enter into an agreement to buy land or enter into joint development agreements with the owners, the availability and cost of financing such acquisition or joint development arrangement, encumbrances on the targeted land, government directives on land use, obtaining permits and approvals for land acquisition and development and competition from other potential buyers and real estate developers. Some of those factors are beyond our control. In addition, the loosening up of regulatory restrictions on foreign investment, together with the aggressive growth strategies and financing plans of domestic real estate development companies and real estate investment funds, may make suitable land increasingly expensive. Our growth plans will require us to execute our real estate development projects at a rapid rate. Any failure to identify and obtain access to or directly acquire suitable parcels of land for development in a timely manner may reduce the number of development projects that we can undertake and thereby affect our business, prospects, financial condition and results of operation.

16. We may not be able to obtain adequate funding for our operations or to service our future financing obligations.

Our business is capital intensive and requires significant expenditure for working capital and real estate development. For the fiscal year ended March 31, 2007, we incurred finance charges of Rs. 518.13 million. As of March 31, 2007, we had outstanding borrowings (including secured and unsecured) of Rs. 1,228.88 million and capital expenditure commitment (net of advances) of Rs. 3,770.00 million. However, we may obtain additional debt financing in the future. For more information, please see the section titled “Objects of the Issue” on page 22.

Due to our expansion into the real estate development business and the continuing operations of our civil engineering and construction business, we expect to incur substantial expenditure in the foreseeable future, which we expect to fund through a combination of debt, equity and working capital. Our ability to borrow and the terms of our borrowings will depend on our financial condition, the stability of our cash flows and our capacity to service debt in a rising interest rate environment. We may not be successful in obtaining sufficient funds in a timely manner or on favourable terms, or at all. Any delay in obtaining finance will affect the progress of our projects which in turn will affect our debt serving capacity. Moreover, if we do not have access to adequate funding, we may have to delay or abandon some or all of our planned developments or reduce capital expenditures and the size of our operations, which may have a material adverse effect on our business, financial condition and results of operations.

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17. Our funding requirements and the deployment of the proceeds of the Issue are based on management estimates and have not been independently appraised.

We intend to use the net proceeds of the Issue for the purposes described in the section titled “Objects of the Issue” on page 22. Our funding requirements and the deployment of the proceeds of the Issue are based on management estimates and have not been appraised by any bank or financial institution. The deployment of funds as stated in the section titled “Objects of the Issue” on page 22 is at the discretion of our Board. In view of the highly competitive nature of the industry in which we operate, we may have to revise our management estimates from time to time and consequently our funding requirements may also change. 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 current plans, among others. The purposes for which the net proceeds of the Issue are to be utilised have not been appraised by an independent entity and are based on our estimates and on third-party quotations.

18. The statements contained herein with regard to projects planned and under development and the area and make-up of our developable land are based on management estimates, and other statistical and financial data contained herein may be incomplete or unreliable.

The acreage and square footage data presented herein with regards to projects planned and under development and the area and make-up of our developable land are based on management estimates. The acreage and square footage that we may in the future develop with regards to a particular project may differ from the amounts presented herein based on various factors, such as market conditions, title defects and any inability to obtain required regulatory approvals and conversions. Moreover, various title defects may prevent us from having valid rights enforceable against all third parties to lands over which we believe we hold interests or development rights, rendering our management's estimates of the area and make-up of our developable land subject to uncertainty.

We also have not independently verified data from government and industry publications and other sources contained herein and therefore cannot assure you that they are complete or reliable. Such data may also be produced on a different basis from comparable information compiled with regards to other countries. Therefore, discussions of matters herein relating to India, its economy or our industry are subject to the caveat that the statistical and other data upon which such discussions are based have not been verified by us and may be incomplete or unreliable.

19. We have entered into, and will continue to enter into, related party transactions.

We have entered into transactions with several related parties, including our Promoters, Directors and Promoter Group entities. For example, substantially all of the lands we are developing or planning to develop through our real estate development business are owned by our Promoters and not by us. The transactions we have entered into and any future transactions with our related parties have involved or could potentially involve conflicts of interest. For more information regarding our related party transactions, see the disclosure on related party transactions contained in our restated financial statements included in this Draft Red Herring Prospectus. Further, our business is expected to involve transactions with such related parties in the future.

20. We cannot assure you that we will be able to implement our growth plan effectively or at all.

Our growth strategy involves the diversification of our business into the real estate development sector, as well as the expansion of our current business in the civil engineering and construction sector. Such a growth strategy will place significant

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demands on our management as well as our financial, managerial, accounting and operating systems. Further, as we scale up and diversify our operations, we may not be able to execute our projects efficiently or as planned on such increased scale, which could result in delays, increased costs and diminished quality, and may materially and adversely affect our results of operation and reputation. The planned expansion and diversification of our business may also increase the challenges involved in, among other things: (i) integrating a new business unit with our existing business; (ii) preserving a uniform culture, values and work environment across our projects; (iii) developing and improving our internal administrative infrastructure, particularly our financial, operational, communications, internal control and other internal systems; (iv) recruiting, training and retaining sufficient skilled management, technical and marketing personnel; (v) maintaining high levels of client satisfaction; and (vi) adhering to health, safety, and environmental standards. Any inability to implement our growth plan effectively may have a material adverse effect on our business and results of operations.

21. We face intense competition in our business from other real estate developers and construction companies.

We operate in a competitive environment. Our competition for construction projects varies depending on the size, nature and complexity of the project and on the geographical region in which the project is to be executed. We compete against various engineering and construction companies. While many factors affect the client decisions, price is a key deciding factor in most of the tender awards. Our competitors in the civil engineering and construction space include Larsen & Toubro Limited, Hindustan Construction Company Limited, Afcons Infrastructure Limited, Gammon India Limited, B.L. Kashyap & Sons Limited, Simplex Infrastructures Limited, IVRCL Infrastructure & Projects Limited, Madhucon Projects Limited, Patel Engineering Limited, Gayatri Projects Limitedand Nagarjuna Construction Company Limited.

We may be unable to compete with other construction companies for complex, higher margin contracts as well as projects that are of comparatively lesser value. Many of our competitors may have greater financial resources, economics of scale and operating efficiencies. If we are unable to bid for and win construction projects, both large and small, or compete with our competitors, we could fail to increase, or maintain, our volume of order intake and our results of operations may be materially and adversely affected. There can be no assurance that we can continue to effectively compete with our competitors for construction projects in the future, and any failure to compete effectively may have a material adverse effect on our business, financial condition and results of operations.

We are a new entrant in the real estate development sector. We face competition at a local as well as a national level from various competitors with established reputations as real estate developers, who include Prestige Estates Projects Private Limited, DLF Limited, Raheja Builders Limited, Sobha Developers Limited, Purvankara Projects Limited, Parsvnath Developers Limited, Mantri Developers Limited and D.S. Kulkarni Developers Limited. Due to increased demand for land for the development of residential and commercial properties, we are experiencing increasing competition in obtaining access to, and acquiring, land in various geographies where we operate or propose to operate. Competition among real estate developers may result in increased costs for land acquisition, increased costs for raw materials and shortages of qualified personnel. In addition, the unavailability or shortage of suitable parcels of land for development may lead to an escalation in land prices. We may not be able to compete successfully with our competitors for real estate development. Any failure to compete effectively against other real estate developers may materially and adversely affect our business, financial condition and results of operations.

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22. The Government may exercise rights of compulsory purchase or eminent domain in respect of the lands that we are developing or intend to develop.

The Government in India (which includes State governments and the GoI) has the ability to take over land belonging to private parties in the event the land is required for a public purpose, which if used in respect of our land could require us to relinquish such land with minimal compensation. The likelihood of such actions may increase as the central and state governments seek to acquire land for the development of infrastructure projects such as roads and airports. Although the same can be challenged in a court of law, we cannot assure you that the government may not in the future acquire lands that belong to us or which we may be interested in acquiring or that we are developing. In the event that the government does acquire any of the lands that we are developing or intend to develop, or in the event of our contesting any such acquisition, we may be forced to incur substantial financial obligations and may experience delays in completing our projects as a result of such court proceedings.

23. The success of our residential property developments is dependent on our ability to anticipate and respond to new consumer requirements.

The growing disposable income of India’s middle and upper income classes has led to a change in lifestyle, resulting in a substantial change in the nature of their demands. Increasingly, consumers are seeking better housing options and better amenities in new residential developments. We are required to continue our focus on the development of quality-centric residential accommodation with various amenities. If we fail to anticipate and respond to consumer needs accordingly, we could lose potential clients to competitors, which in turn could materially and adversely affect our business and prospects.

24. Our revenue generation and profits from our real estate development and construction activities are difficult to predict and can vary significantly from period to period, which could cause the price of our Equity Shares to fluctuate.

Our real estate development and construction revenues and profits are dependent on various factors, such as the size of our developments and the extent to which they qualify for percentage of completion treatment under our revenue recognition policies, and general market conditions. In addition, the anticipated completion dates for our projects, including those set forth in this Draft Red Herring Prospectus, are estimates based on current expectations and could change significantly. The combination of these factors may result in significant variations in our revenues and profits. Therefore, we believe that period-to-period comparisons of our results of operations from development and construction activities may not be as meaningful as they would be for a company with a greater proportion of recurring revenues and should not be relied upon as indicative of our future performance. If in the future our results of operations are below market expectations, the price of our Equity Shares could be materially and adversely affected.

25. We may not be able to complete our civil engineering and construction projects and real estate development projects on time or at all.

Real estate development projects and civil engineering and construction projects require substantial capital expenditure prior to and during the construction period. The timing and costs involved in completing a project can be materially and adversely affected by a variety of factors, including: (i) delays in obtaining required licences, consents or approvals from governmental authorities; (ii) shortages of materials, equipment and skilled labor leading to cost increases; (iii) labour disputes; (iv) construction accidents; (v) natural catastrophes; and (vi) adverse weather conditions. We cannot assure you that we will be able to complete our projects within the stipulated budget and time schedule. In most of our civil engineering and construction projects, penalties may be imposed for any delays in completion caused

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by us. Any delays or failure by us to complete a project as planned or budgeted may materially and adversely impact our overall profitability, financial condition, results of operations and reputation.

26. A significant portion of our civil engineering and construction business transactions are with governmental agencies.

Most of our existing civil engineering and construction projects are awarded by the Government and semi-Government departments. Contracts awarded by such entities accounted for approximately 89.17% of our Order Book as of June 30, 2007. Therefore, our future prospects in the civil engineering and construction business are directly linked to the Government policies that encourage continuing investment in infrastructure. If there is any change in Government policies, practices or focus that results in a slowdown in infrastructure development, our business and results of operations may be materially and adversely affected.

27. We may experience delays associated with the collection of receivables from our clients.

There may be delays associated with the collection of receivables from our clients, including government owned, controlled or funded entities and related parties. As of May 31, 2007, Rs. 10.86 million, or 7.91%, of our accounts receivable were outstanding for a period of more than one year. Of the total debtors outstanding as on May 31, 2007, Rs. 100.15 million, or 91.91%, was owed to us by related parties. Our operations involve significant working capital requirements and delayed collection of receivables could materially and adversely affect our liquidity and results of operations. In addition, we may be subject to additional regulatory or other scrutiny associated with commercial transactions with government owned, controlled or funded entities.

28. We may not be able to qualify for and win larger civil engineering and construction contracts. If we do, such projects present their own risks.

In selecting contractors for major projects, clients generally limit the tender to contractors they have pre-qualified based on several criteria, including experience, technological capacity and performance, reputation for quality, safety record, financial strength and bonding capacity and size of previous contracts in similar projects, although the price competitiveness of the bid is often the most important selection criterion. Pre-qualification is key to our winning such major projects. We are currently qualified to bid for projects up to a certain value and therefore may not be able to compete for larger projects. Our ability to bid for and win such projects is dependent on our ability to show experience working on such engineering and construction contracts and develop strong engineering and construction capabilities and credentials to execute more technically complex projects.

If we win such projects, they may represent a large part of our portfolio, increasing the potential volatility of our results and exposure to individual project risks. As of June 30, 2007, we had a total of seven contracts for current projects representing 100% of our Order Book. Managing larger-scale projects may also increase the potential relative size of cost overruns and negatively affect our operating margins. Larger-scale projects may cause us to assume portions of the project that may have potentially lower percentage margins. If we do not achieve our expected margins or suffer losses on one or more of these contracts, this could materially reduce our net income or cause us to incur a loss.

29. We depend on forming successful joint ventures to qualify for the bidding process for certain projects.

In order to be able to bid for some larger scale projects, we enter into joint venture agreements with various other companies to meet capital adequacy, technical or

other requirements that may be required as part of the pre-qualification for bidding or execution of the contract. In cases where we are unable to forge an alliance with appropriate companies to meet such requirements, we may lose out on opportunities to bid.

Where we have formed a joint venture, our Company can claim benefits flowing to the joint venture to the extent of its share in the joint venture as agreed among the joint venture partners. However, the liability of joint venture partners is joint and several. Therefore, we would be liable for completion of the entire project if our joint venture partner were to default on its duty to perform, which could have a material adverse effect on our business and results of operations.

30. We may be dependent in certain instances on various sub-contractors or specialists to construct and develop our projects.

We have our own in-house construction arm, which, along with our own personnel, are able to execute our development projects. However, there may be instances where we require certain specialised skills and labor available from third party sub- contractors. Delays on the part of such sub-contractors to complete their services in time or failure to match the specified quality level could result in delays in the completion of our projects or increased costs to us. Additionally, we rely on manufacturers and other suppliers to provide us with many products, the quality of which we do not have direct control. We are exposed to risks relating to the quality of such products. Any of the factors could result in cost overruns, construction defects and failures to meet scheduled completion dates, which may materially and adversely affect our financial condition and market reputation.

Additionally, our operations may also be affected by circumstances beyond our control, which may be due to labor disputes, work stoppage, shortage of qualified skilled labor and lack of availability of adequate infrastructure services.

31. Our loan agreements contain restrictive covenants that may affect our business and operations.

The loan agreements that we have entered into with certain banks and financial institutions contain restrictive covenants. These restrictive covenants require us to obtain prior permission of such banks or financial institutions or to inform them with respect to various activities, including, inter alia, alteration of our capital structure, raising of fresh capital or debt, payment of dividend, undertaking new projects, undertaking any merger or amalgamation, restructuring and change in management. These loan agreements further permit the concerned lenders to seek early repayments of, or recall the said loans or enhance the interest rates applicable thereto. Additionally, certain loan agreements require us to meet and maintain identified financial ratios. Further, under these loan agreements during the subsistence of the facility the lender has a right to appoint from time to time a director/directors on our Board, as nominee director, and/or remove such director/directors so appointed and appoint another person in his/their place to protect the interest of the lender, subject however that the director so appointed by the lender shall not be liable to retire by rotation and need not possess any share qualification prescribed by our Articles. We and certain of our Promoter Group companies who have pledged assets to secure our financing, including certain lands that are the subject of our joint development agreements, may be forced to sell some or all of the assets in our portfolio if we do not have sufficient cash or credit facilities to make repayments. Additionally, if our borrowings are secured against all or a portion of our assets, lenders may be able to sell those assets upon our default in payments. Furthermore, our financing arrangements may contain cross default provisions which could automatically trigger defaults under other financing arrangements, in turn magnifying the effect of an individual default.

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32. Our operations and our work force are exposed to various physical hazards and similar risks.

We conduct various site studies prior to the acquisition of any parcel of land and undertaking its construction and development. However, there are certain unanticipated or unforeseen risks that may arise due to adverse weather and geological conditions such as storm, tempest, hurricane, lightning, flood, landslide, rockslide and earthquake, specification changes and other reasons. Additionally, our operations are subject to hazards inherent in providing construction services, such as risk of equipment failure, impact from falling objects, collision, work accidents, fire, or explosion, including hazards that may cause injury and loss of life, severe damage to and destruction of property and equipment, and environmental damage. Although we have taken insurance coverage to reduce the damage or losses (if any) from such circumstances, we cannot assure you that we will not bear any liability as a result of these hazards. There can also be no assurance that the contractors and sub- contractors hired by us for various activities have sufficient insurance coverage to cover all material mishaps which may arise while carrying on activities on our behalf. Any liabilities and costs arising from such events may have a material adverse effect on our business, results of operations and financial condition.

33. Our insurance coverage may not adequately protect us against all material hazards.

While we believe that the insurance coverage we maintain would be reasonably adequate to cover the normal risks associated with the operation of our business, we cannot assure that any claim under the insurance policies maintained by us will be honoured fully, in part or on time, or that we have taken out sufficient insurance to cover all material losses. In addition, there are certain types of losses, such as those due to earthquakes, floods, hurricanes, terrorism or acts of war, which may be uninsurable or are not insurable at a reasonable premium. Further, we may not have obtained insurance cover for some projects that do not require us to maintain insurance. To the extent that we suffer loss or damage arising from an event for which we did not obtain or maintain insurance, which is not covered by insurance or exceeds our insurance coverage, the loss would have to be borne by us. As such our results of operations and financial performance could be materially and adversely affected.

34. We are subject to fluctuations in the costs of raw materials.

Our business is affected by the availability, cost and quality of the raw materials needed to construct and develop our properties. Our principal raw materials include steel, cement, sand, aggregate, hardware and electrical items. We have not entered into any long-term supply contracts with our suppliers. The prices and supply of these and other raw materials depend on factors that are not within our control, including general economic conditions, competition, production levels, transportation costs and import duties. If, for any reason, our primary suppliers of raw materials should curtail or discontinue their supply in sufficient quantities and quality and at competitive prices, our ability to meet our material requirements for our projects could be materially impaired, our construction schedules could be materially disrupted, our construction and real estate development costs could increase substantially and we may not be able to complete our projects on time or at all. Furthermore, we may also not be able to pass on any increase in the prices of these raw materials to our customers. The occurrence of any of these events could materially and adversely affect our results of operations and financial condition.

35. Our civil engineering and construction contracts are dependent on adequate and timely supply of key raw materials at commercially acceptable prices.

Timely and cost effective execution of our projects is dependent on the adequate and timely supply of key raw materials. We have not entered into any long-term supply

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contracts with our suppliers. Additionally, we typically use third-party transportation providers for the supply of most of our raw materials. Transportation strikes by, for example, members of various Indian truckers’ unions and various legal or regulatory restrictions placed on transportation providers have had, in the past, and could have, in the future, a material and adverse effect on our receipt of supplies. Further, transportation costs have been steadily increasing, and the prices of raw materials themselves can fluctuate. If we are unable to procure the requisite quantities of raw materials in time and at commercially acceptable prices, the performance of our business and results of operations may be materially and adversely affected.

36. Certain tax benefits for real estate development activities under the provisions of the Indian Income Tax Act will not be available for our future real estate development projects.

Our business may benefit from the provisions of Section 80-IB of the Income Tax Act. These provisions provide for a 100% deduction of the profits derived from qualified development and building of housing projects approved before March 31, 2007 by a local authority, provided that certain other specified conditions are met, including the requirement that the area of each dwelling unit located (i) in or within the radius of 25 kilometres of the municipal limits of the metropolitan cities of New Delhi and Mumbai be not more than 1,000 sq.ft. of built up area or (ii) in the rest of India be not more than 1,500 sq.ft of built up area. We believe that the first phase of our Yeshwantpur project qualifies for such tax benefit. We will not be able to continue to avail the benefits of these provisions for any other phase of the Yeshwantpur project or any of our future real estate development projects unless there is a change in the tax law. Accordingly, the effective tax rates payable by us may increase, which may have a material and adverse effect on our financial condition. In addition, certain tax benefits claimed by us in the past may be denied and we may be required to pay the amounts in relation to the claimed tax benefits to the relevant tax authorities. This could materially and adversely affect our financial condition and results of operations.

37. We have not registered any corporate names or trademarks.

We have not registered our corporate name or logo, including the “RNS Infrastructure Limited” trade name or trademark with the Trade Mark Registry. We cannot assure you that third parties will not infringe upon our trademark and/or trade name in a manner that may cause damage to our business prospects, reputation and goodwill.

38. Our registered office premise is not owned by us.

We do not own the premise that is registered as our registered office. There is no assurance that the owners of the premises will renew the lease agreement upon expiry on terms and conditions acceptable to us. Any failure to renew our existing lease may lead to a disruption in our operations.

39. We are dependent on a number of key personnel, including our senior management.

Our performance depends largely on the efforts and abilities of our senior management and other key personnel. They have many years of collective experience with the Company and the construction industry in general. Our ability to meet future business challenges depends on our ability to attract, recruit and retain talented and skilled personnel. The loss of the services of such persons could have a material adverse impact on our business. We do not maintain “key man” insurance for any of our senior managers or other key personnel. Any loss of our senior managers or other key personnel or the inability to recruit additional senior managers or other key personnel may have a material adverse effect on our business, including significant impairment of our day-to-day operations, development of new projects and ability to develop, maintain and expand client relationships.

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40. If our employees unionise, we may be subject to industrial unrest, slowdowns and increased wage costs.

India has stringent labor legislation that protects the interests of workers, including legislation that sets forth detailed procedures for the establishment of unions, dispute resolution and employee removal and legislation that imposes certain financial obligations on employers upon retrenchment. Although our employees are not currently unionised, there can be no assurance that they will not unionise in the future. If our employees unionise, it may become difficult for us to maintain flexible labor policies, and our business may be materially and adversely affected.

41. Our Promoters have given personal guarantees in relation to certain debt facilities provided to us and to our group concerns in favor of lenders.

Certain debt facilities that have been provided to our Company by our lenders contain certain restrictive conditions wherein our Promoters have provided personal guarantees of the obligations undertaken by our Company. In the event that there is any default by the Company in any of these obligations, the personal guarantees given by our Promoters may be invoked.

42. We will be controlled by our Promoters and Promoter Group companies so long as they control a majority of our Equity Shares.

After the completion of the Issue, our Promoters and Promoter Group companies will control, directly or indirectly, in excess of 70% of our outstanding Equity Shares. So long as our Promoters own a majority of our Equity Shares, they will be able to elect our entire Board of Directors and control most matters affecting us, including the appointment and removal of our officers, our business strategies and policies, any decisions with respect to mergers, acquisitions or dispositions of assets, our dividend policy and our capital structure and financing. Further, the extent of their shareholding in us may result in delay or prevention of a change of management or control of our company, even if such a transaction may be beneficial to our other shareholders. In addition, our Promoters also control certain other companies in the construction business, which may conflict with our interests. We cannot assure you that our Promoters will act in the best interests of the other shareholders of the Company.

43. Certain of our Promoter Group companies have incurred losses.

Certain of our Promoter Group Companies have incurred losses during in fiscal years 2004, 2005 and 2006, as set forth in the section titled “Our Promoters” on page 93. These losses are not expected to have a negative impact on our business.

(Rs. in Million) Name of Company Fiscal Year ended Fiscal Year ended Fiscal Year ended March 31, 2006 March 31, 2005 March 31, 2004

Shri Murudeshwar Tiles Private (0.37) (9.77) - Limited Murudeshwar Infosystems Limited - - (2.08) Sairam Mines & Minerals Private (0.70) (0.77) - Limited Murudeshwar Finance & Leasing (4.71) (3.56) - Limited Fire Bricks & Potteries Private (3.22) (7.52) (2.74) Limited RNS Trust (6.44) (1.23) -

44. Conflicts of interest may arise out of common business objects shared by our Company and certain of our Promoters and Promoter Group entities.

Our Promoters are actively involved in the management of other business operations carried on by companies in our Promoter Group, some of which conduct businesses

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and operations similar to ours within the real estate development industry. Accordingly, there may be potential conflicts of interest between our operations and those of our Promoter Group companies. There is no requirement or undertaking made by the Promoters or other entities in our Promoter Group not to compete with our business. In addition, there is no requirement or undertaking for our Promoters or such entities to conduct or direct any opportunities in the real estate industry only to or through us. As a result, conflicts of interest may arise in allocating or addressing business opportunities and strategies amongst our Company, our Promoters and other entities in our Promoter Group in circumstances where our interests differ from theirs. We cannot assure you that our Promoters will act to resolve any conflicts of interest in the Company’s favor or will refrain from competing with the business of the Company. Furthermore, attention paid to the other Promoter Group companies may distract or dilute management attention from our business, which could materially and adversely affect our results of operations and financial condition. For more details regarding other entities in our Promoter Group, please refer to the section titled “Our Promoters and Promoter Group” on page 93.

45. Our contingent liabilities could materially and adversely affect our financial condition.

As at the fiscal year ended March 31, 2007, our contingent liabilities as disclosed in our restated financial statements were as follows:

Contingent liabilities not provided for: (Rs. in Million) Particulars As on March 31, 2007

Counter Guarantees given to Bank 988.37 Corporate Guarantee given to related parties: 122.00 a) Murdeshwar Power Corporation Limited Total 1,110.37

EXTERNAL RISK FACTORS

1. Restrictions on foreign direct investment in the real estate sector may hamper our ability to raise additional capital.

The GoI has permitted foreign direct investment to invest, without prior regulatory approval, in townships, housing, built-up infrastructure and construction and development projects. However, it has issued a notification titled Press Note No. 2 (2005), dated March 3, 2005, which subjects such investments to certain restrictions. Our inability to raise additional capital as a result of these and other restrictions could materially and adversely affect our business and prospects. For more information on these restrictions, see the section titled “Regulations and Policies” on page 68.

2. Any downgrading of India’s debt rating by an independent agency may harm our ability to raise debt financing.

Any adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may materially and adversely affect our ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. This could have a material adverse effect on our capital expenditure plans, business and financial performance and the price of our Equity Shares.

3. Our business may be materially and adversely affected by increases in interest rates or changes in tax regimes.

A large number of our customers, especially buyers of residential properties, finance their purchases of properties through third-party mortgage financing. The interest rate was at relatively low levels in the past few years, though it has started rising in recent

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months. Availing of home loans for residential properties has become particularly attractive due to income tax benefits and higher disposable income. In the event there is a change in the policy of the government that causes such income tax benefits to be withdrawn or the availability of home loans to be decreased, or if interest rates continue to rise, the affordability and attractiveness of purchasing properties may be materially reduced. Additionally, any continued increase in interest rates could increase our borrowing costs. Our civil engineering and construction and real estate development activities are capital intensive and require significant expenditure for working capital before revenues are received from clients. As a result, our business, financial condition and results of operations may be materially and adversely affected.

4. The industry in which we operate is competitive, highly fragmented, with low entry barriers resulting in increased competition that may materially and adversely affect our results.

The industry in which we operate is highly fragmented. Less or low fixed capital requirements have led to low entry barriers resulting in a large number of players in the industry. According to CRISINFAC Construction Annual Review May 2007, in 2004 there were over three million construction entities (including housing contractors) in India. Moreover, due to the lower requirements of technical expertise in the housing and real estate sector as opposed to the industrial/infrastructure construction sector, the housing and real estate sector has a larger number of new entrants and existing players from whom we face competition. These new and existing players undertake projects similar to ours in the same regional markets in which our projects are located. Our inability to compete successfully in our industry with the new entrants or the existing players may materially affect our business prospects and financial condition. We compete for land and sale of projects with other real estate developers from Karnataka and from other parts of India. Some of our competitors may have greater resources (including financial, land resources, and other types of infrastructure) to take advantage of efficiencies created by size, and access to capital at lower costs, have a brand recall and relationships with homeowners. Our success in the future will depend significantly on our ability to maintain and increase market share in the face of such competition. Our inability to compete successfully with the existing players in the industry, may affect our business prospects and financial condition.

5. Our business is subject to extensive statutory or Governmental regulations.

We are subject to extensive local, state and central laws and regulations that govern the acquisition, construction and development of land, including laws and regulations related to zoning, permitted land uses, proportion and use of open spaces, building designs, fire safety standards, height of the buildings, access to water and other utilities and water and waste disposal. Acquisition of land and development rights in relation to immovable properties are governed by certain statutory and governmental regulations, which govern various aspects of our business, including requirement of transaction documents, payment of stamp duties, registration of property documents, purchase of property for benefits of others and limitations on land acquisition by an individual entity. Some of these approvals are required to be obtained before and after the commencement of construction in relation to a project. In addition, we and our subcontractors are subject to laws and regulations relating to, among other things, environmental approvals in respect of the project, minimum wages, working hours, health and safety of labourers and requirements of registration for contract labor.

Although we believe that our projects are significantly in compliance with such laws and regulations, statutory authorities may allege non-compliance. We cannot assure you that we will not be subjected to any such regulatory action in the future, including penalties, seizure of land and other civil or criminal proceedings. Further, though we have been able to obtain the necessary approvals in the past, we cannot assure you that we will be able to obtain approvals in relation to our new projects, at such times

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or in such form as we may require, or at all.

Our obligations, and the obligations of our sub-contractors, to comply with the laws and regulations under which we and our subcontractors operate may result in delays in construction and development, cause us to incur substantial compliance and other increased costs, and prohibit or severely restrict our real estate and construction businesses. If we are unable to continue to acquire, construct and develop land and deliver products as a result of these restrictions or if our compliance costs increase substantially, our revenues and earnings may be significantly reduced and we may not be able to continue our current level of growth.

6. Our operations are sensitive to weather conditions.

Our business activities could be materially and adversely affected by severe weather. Severe weather conditions may require us to evacuate personnel or curtail activities and may result in damage to a portion of our fleet of equipment or to our facilities, resulting in the suspension of operations, and may further prevent us from delivering materials to our project sites in accordance with contract schedules or generally reduce our productivity. Our operations are also materially and adversely affected by difficult working conditions and extremely high temperatures during summer months and during monsoon, which restrict our ability to carry on construction activities and fully utilise our resources.

7. 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 and may cause suspension, delays or damage to our current projects and operations, which may materially and adversely affect our business and results of operations.

RISKS RELATING TO INDIA AND INVESTMENT IN EQUITY SHARES

1. Our business could be materially and adversely impacted by economic, political and social developments in India and particularly in the regional markets that we develop, construct and sell projects.

Our performance and growth are dependent on the health of the Indian economy overall and the economies of the regional markets we serve in particular. These economies could be materially and adversely affected by various factors, such as political and regulatory action including adverse changes in liberalisation policies, social disturbances, terrorist attacks and other acts of violence or war, natural calamities, interest rates, commodity and energy prices and various other factors. Any slowdown in these economies could materially and adversely affect our prospective customers, which in turn would materially and adversely impact our business and financial performance and the price of our Equity Shares.

2. Any future issuance of Equity Shares may dilute your shareholding and sales of our Equity Shares by our Promoters or other major shareholders may materially and adversely affect the trading price of the Equity Shares.

Any future equity issuances by us, including in a primary or secondary offering or pursuant to a preferential allotment, may lead to the dilution of investors’ shareholdings in our Company. Any future issuances by us or sales of our Equity Shares by our Promoters or other major shareholders may materially and adversely affect the trading price of the Equity Shares. In addition, any perception by investors that such issuances or sales might occur could also materially and adversely affect the trading price of our Equity Shares. Upon completion of the Issue, 20% of our post- Issue paid-up equity capital on a fully diluted basis held by our Promoters, will be

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locked up for a period of three years from the date of allotment of Equity Shares in the Issue. All other remaining Equity Shares that are outstanding prior to the Issue will be locked up for a period of one year from the date of allotment of Equity Shares in the Issue.

3. A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy, which could materially and adversely impact its financial condition.

India’s foreign exchange reserves reached US$200.67 billion at the end of May 2007 (Source: http://www.indiainbusiness.nic.in). Reserves have declined recently and may have negatively impacted the valuation of the rupee. Further declines in foreign exchange reserves could materially and adversely impact the valuation of the rupee and could result in reduced liquidity and higher interest rates that could materially and adversely affect our future financial performance and the market price of the Equity Shares.

4. There is no existing market for the Equity Shares, and we do not know if one will develop to provide you with adequate liquidity. Our stock price may fluctuate after the Issue and as a result, you could lose a significant part or all of your investment.

Prior to the Issue, there has been no public market for our Equity Shares. There can be no assurance that an active trading market on the Stock Exchanges will 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 prices of the Equity Shares on the Stock Exchanges may fluctuate after this Issue as a result of several factors, including: volatility in the Indian and global securities markets; our operations and performance; performance of our competitors, and the perception in the market about investments in the real estate sector; adverse media reports about us or the Indian real estate sector; changes in the estimates of our performance or recommendations by financial analysts; significant developments in India’s economic liberalisation and deregulation policies; and significant developments in India’s fiscal regulations.

5. Conditions in the Indian securities market may affect the price or liquidity of the Equity Shares.

The Indian securities markets are smaller than securities markets in more developed economies, such as the USA and the UK. Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities. Further, the Indian stock exchanges have experienced recent volatility, with the BSE index declining by almost 25% in the summer of 2006 before recovering at the end of December 2006. The market price and liquidity of securities trading on the Indian stock markets may be materially and adversely affected by various events, including broker defaults or delays caused by brokers, settlement delays, restrictions on trading or margin requirements and delays in resolving stock exchange or regulatory issues. If similar problems occur in the future, the market price and liquidity of the Equity Shares could be materially and adversely affected.

6. You will not be able to sell immediately any of the Equity Shares you purchase in this Issue on an Indian stock Exchange.

The Equity Shares will be listed on the NSE and the BSE. Pursuant to Indian regulations, certain actions must be completed before the Equity Shares can be listed and trading may commence. Investors’ book entry or demat accounts with depository participants in India are expected to be credited within two working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. Thereafter, upon receipt of final approval of the stock exchanges, trading in the equity

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shares is expected to commence within seven working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. In case there is any delay in crediting the Equity Shares allocated to the accounts of the investors or in the commencement of trading in the Equity Shares, the investors could be adversely affected.

NOTES TO RISK FACTORS:

Based on our restated financial statements, the net asset value per Equity Share based on our net worth of Rs. 757.88 million as of March 31, 2007 was Rs. 12.03;

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Net Issue shall be allocated on a proportionate basis to QIBs. 5% of the QIB Portion shall be available for allocation to Mutual Funds only and the remaining QIB Portion shall be available for allocation to all the QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further up to 160,000 Equity Shares shall be available for allocation on a proportionate basis to Eligible Employees subject to valid Bids being received at or above the Issue Price. Additionally, 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 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;

Issue of 21,660,000 Equity Shares of Rs. 10 each for cash at a price of Rs. y per Equity Share, including a share premium of Rs. y per Equity Share, aggregating Rs. y million. Out of the Issue, 160,000 Equity Shares, i.e., 0.19% of our post-Issue share capital, have been reserved for Employees on a competitive basis. Any under- subscription in this portion shall spill over to other categories. The Issue will constitute 25.58% of our post Issue paid-up equity share capital;

Other than as stated in "Capital Structure", we have not issued any Equity Shares for consideration other than cash;

The average cost of acquisition of our Equity Shares by our Promoters is Rs. 4.84 per Equity Share. For more information, see the section titled “Capital Structure” on page 14;

Under-subscription, if any, in the QIB Portion, Non-Institutional Portion and Retail Individual Portion would be met with spill-over from other categories at the sole discretion of our Company in consultation with the BRLM;

Investors may note that in case of over-subscription in the Issue, allotment to Qualified Institutional Bidders, Non-Institutional Bidders, Retail Bidders and Bidders in the Employee Reservation Portion shall be on a proportionate basis;

Except as disclosed in the sections titled “Our Promoters and Promoter Group” or “Our Management” beginning on pages 93 and 81, respectively, none of our Promoters, our Directors and our key managerial employees have any interest in the Company except to the extent of remuneration and reimbursement of expenses and to the extent of the Equity Shares held by them or their relatives and associates or held by the companies, firms and trusts in which they are interested as directors, member, partner or trustee and to the extent of the benefits arising out of such shareholding;

For details of the related party transactions, see the section titled “Financial Statements - Related Party Transactions” on page 106;

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For details of transactions in the securities of the Company by our Promoters in the last six months, refer to the section titled “Capital Structure – Notes to Capital Structure”;

Our Company was originally formed as a partnership firm in 1961 as R N Shetty & Company. On August 08, 2003, the partnership firm was converted into a private limited company with the name, R N Shetty & Company Private Limited On December 11, 2005, the name of the Company was changed from R N Shetty & Co. Private Limited to RNS Infrastructures Private Limited. Subsequently on January 10, 2006, the name of Company was changed to RNS Infrastructures Limited. On February 8, 2006, the name of the Company was changed as RNS Infrastructure Limited;

Trading in the Equity Shares of our Company for all investors shall be in dematerialised form only, after the Equity Shares are fully paid-up;

Investors are advised to refer to “Basis for Issue Price” on page 26;

Any clarification or information relating to the Issue shall be made available by the BRLM and our Company to the investors at large and no selective or additional information would be available for a section of investors in any manner whatsoever; and

Investors may contact the BRLM and the Syndicate Members for any complaints pertaining to the Issue.

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SECTION III – INTRODUCTION

SUMMARY OF OUR BUSINESS, STRENGTHS AND STRATEGIES

Summary of Industry

India is the world’s largest democracy in terms of population, with World Bank estimating a population of 1.131 billion people by FY2007. According to the World Bank, India was the twelfth largest economy in the world in the fiscal year ended March 31, 2005. India’s GDP in nominal terms is estimated at approximately US$1070 billion in 2007. (Source: www.worldbank.org.)

Opportunities in the infrastructure sector

Although India has made rapid economic strides over the last decade, it has lagged behind many other developing and developed nations in terms of infrastructure development. According to the Economic Survey 2005-06 published by the Government, “infrastructural inadequacies continued to constrain the full potential for industrial resurgence, pick up in investment and buoyant exports”. Thus India will require a significant boost in infrastructure investment in order to sustain its current pace of growth.

Some key segments of the infrastructure sector are described below:

• Roads: According to CRIS INFAC the investments in roads sector are expected to grow at an annual rate of 15 per cent over the next 5 years, with a likely increase from Rs 1,167 billion in the past 5 years (2001-02 to 2005-06) to Rs 2,306 billion in the next 5 years (Source: CRIS INFAC Annual Construction Review – May 2007).

• Hydropower: According to CEA, there is a large underutilized potential for hydropower generation in India of approximately 120,000 MW. The government is taking initiatives to correct the anomaly in the power sector which currently stands in the favor of thermal power at 25:75 as against the global mix of 40:60 (Source: CRIS INFAC Annual Construction Review – May 2007). The government's thrust on hydel power can be gauged from the fact that 36 per cent of the planned capacity addition during the Tenth Plan and the Eleventh is in hydel power. This translates into a sharp increase in construction activity.

• Irrigation and water supply: According to CRIS INFAC (Source: CRIS INFAC Annual Construction Review – May 2007) the total investment in irrigation for next 5 years is expected to be around Rs 1,240 billion as compared to total investments of Rs 844 billion made over the previous 5 years. Investments in irrigation are likely to lead to a construction demand of Rs 744 billion over the next 5 years. Water supply projects are primarily city specific, with the end-users being industrial and residential entities. The government plans have emphasized the need to provide for the creation of more of these infrastructure facilities and to increase coverage of the urban population with access to better water supply facilities and sewage and sanitation facilities.

The Indian real estate market

The growth in India’s economy, coupled with an increase in disposable income and urbanisation rates, has fueled growth in India’s real estate sector. Real estate involves the purchase, sale and development of land and residential and non-residential buildings. The Indian real estate market covers residential housing, commercial offices, trading spaces, such as theaters, hotels and restaurants, retail outlets, industrial buildings such as factories, and government buildings. The real estate development and construction sectors play an important role in the overall development of a country, especially in the development of the country’s infrastructure. The size of the Indian real estate sector is estimated to be over US$12 billion (Source: Federation of Indian Chambers of Commerce and Industry). Key drivers of India’s real estate market are the following:

• Population growth • Increasing urbanization • Commercial and service industry boom • Growing middle class • Shift in consumer preferences from rented houses to owned houses • Shrinking household size

Summary of Our Business

Overview

We are a civil engineering and construction and real estate development company with principal operations in South India, particularly in the State of Karnataka. Our civil engineering and construction project expertise includes the construction of national highways, bridges, tunnels, powerhouses, canals, dams, irrigation projects, reservoirs and commercial buildings. We believe we have established a successful track record in the civil engineering and construction industry due to our commitment to executing complex projects in a timely manner. We have recently entered the real estate development business with ongoing and planned projects principally located in the Bangalore area. Our real estate development operations are based on a series of joint development agreements and a joint venture agreement that we have entered into with members of our Promoter Group and other affiliates that own land in Karnataka, particularly in and around Bangalore. Though we are a relatively recent entrant to the real estate development business, we believe that our access to lands, civil engineering and construction track record and expertise and understanding of Karnataka position us well to build and grow a real estate development business.

The civil engineering and construction business of the Company was started as a partnership concern in 1961. Over the course of time, we have successfully executed a diverse portfolio of high profile civil engineering and construction projects, including the Supa Dam, Mani Dam, Thatihalla Dam, Gerusoppa Dam, Varahi Underground Power Project, Narayanpur Hydroelectric Power Project, Malaprabha Head Regulator, KLE Society’s super specialty hospital, Taj Residency hotel at Bangalore and RNS Residency hotel at Murudeshwar. Currently, our Order Book contains eight civil engineering and construction projects, including dams, tunnels, roads and a hotel in Yeshwantpur, Bangalore. The estimated value of the unbilled portion of our Order Book as of June 30, 2007 was Rs.5916.04 million.

We are principally focusing our real estate development efforts on the construction of residential and commercial buildings. Through our Promoter Group and other affiliates, we have access to over 35 million sq.ft. of land and have entered into 14 joint development agreements and a joint venture agreement to develop such land. Through a joint venture, we commenced development and construction on the first phase of our first real estate development project in June 2006 in Yeshwantpur, Bangalore, where we are jointly developing a 274-flat residential building. We expect this phase to be completed in 2008. We expect to commence construction of the second phase, which consists of a 176-flat residential building, in September 2007. The third and final phase of this project involves the development and construction of a commercial mall for which have yet to receive the required government approvals. The Yeshwantpur project is expected to be completed in 2009. Subject to the receipt of all requisite government approvals, we expect to commence construction activities on the first phase of our second real estate development project in Channasandra, Bangalore around September 2007. The Channasandra project, which is being jointly developed pursuant to a joint development agreement between the Company and the owners of the subject land, will consist of a 512 flats in four residential buildings in the first phase. Development plans for the second phase of the Channasandra project have not yet been finalised. With respect to the land that is subject to the 13 other joint development agreements, we are in various stages of planning and have not yet sought government approvals.

As of June 30, 2007, our work force consisted of 335 full-time employees and approximately 2,000 temporary contract workers. Among our full-time employees, we have an in-house team of engineers, surveyors and other professionals.

For the year ended March 31, 2007, during which time we entered the real estate development business, our total income from construction and real estate development operations was Rs. 2,190.69 million. For the years ended March 31, 2004, 2005 and 2006, our total income from civil engineering and construction operations was Rs. 1,276.84 million, Rs. 1,339.48 million and Rs. 1,339.74 million, respectively.

Prior to January 2007, we operated an automobile dealership business. In January 2007, we sold this business to a Promoter Group company. Including the automobile dealership business, our total income for the years ended March 31, 2004, 2005, 2006 and 2007, was Rs. 2,958.01 million, Rs. 3,176.46 million, Rs. 3,611.81 million and Rs. 4,215.49 million, respectively.

The table below gives a summary of our total income by business segment for fiscal years 2004, 2005, 2006 and 2007. (Rs. in million) Segment Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended March 31, 2007 March 31, 2006 March 31, 2005 March 31, 2004

Real Estate 630.74 - - - Construction 1,559.95 1,339.74 1,339.48 1,276.84 Automobile 2,024.80 2,272.07 1,836.99 1,681.17 dealership

Our Competitive Strengths

Our principal competitive strengths include the following: • Experience and expertise in the civil engineering and construction business • Real estate development rights in respect of sizeable land resources • Ability to apply construction expertise to real estate development • Focus on the Bangalore region • Established reputation • Qualified and experienced management team and employee base

Our Strategies

We are committed to maintaining our civil engineering and construction business and building our new real estate development business. The key elements of our business strategy are as follows: • Expand the real estate development business through the development of land for which we currently have the right to develop • Focus on higher margin civil engineering and construction projects • Acquire our own land • Focus on performance and project execution • Continue investment in technology

THE ISSUE

Equity Shares offered:

Issue by the Company 21,660,000 Equity Shares

Of which

Employee Reservation Up to 160,000 Equity Shares, available for allocation on a proportionate basis

Therefore, Net Issue to the Public 21,500,000 Equity Shares

Of which

Qualified Institutional Buyers Portion: Not more than 10,750,000 Equity Shares available for allocation on proportionate basis, of which 5% of the QIB Portion, or 537,500 Equity Shares [assuming the QIB Portion is 50% of the Issue] shall be available for allocation on a proportionate basis to Mutual Funds only (Mutual Funds Portion)

Non-Institutional Portion: Not less than 3,225,000 Equity Shares available for allocation on proportionate basis.

Retail Portion: Not less than 7,525,000 Equity Shares available for allocation on proportionate basis.

Equity Shares outstanding prior to the Issue: 63,000,000 Equity Shares

Equity Shares outstanding post the Issue 84,660,000 Equity Shares

Use of Proceeds: See the section titled “Objects of the Issue” on page 22

SUMMARY FINANCIAL INFORMATION

The following tables present the summary financial information of our Company and have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI Guidelines. The summary financial information should be read in conjunction with the Auditor’s reprts and notes thereto contained in the section titled “Financial Statements” appearing on page 106 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing on page 139.

SUMMARY OF RESTATED PROFIT AND LOSS ACCOUNT (Rs. in Million) Particulars Fiscal year ended March 31,

2007 2006 2005 2004 2003

INCOME Income from Real Estate and 2,103.33 1,282.95 1,313.26 1,265.44 680.23 Construction Activities Income from Dealership Activities 2,024.03 2,270.05 1,835.38 1,679.36 1,308.71

Other Income 18.29 42.32 16.30 12.79 18.47 Accretion- (Depletion) in work in 69.84 16.49 11.53 0.42 7.31 progress TOTAL INCOME 4,215.49 3,611.81 3,176.46 2,958.01 2,014.72

Raw Material Consumed 2,654.56 2,643.15 2,319.37 2,021.04 1,369.38 Employee Costs 437.82 362.74 372.30 502.52 291.82

Repairs,Maintainance,Overheads 349.95 233.64 196.41 215.84 148.09 Adminst. Expenses

Selling & Distribution Expenses 35.38 49.15 40.79 34.24 23.76

Financial Expenses 94.35 97.08 88.70 84.33 75.42

Depreciation 68.50 54.07 46.61 41.28 31.50

Preliminary & Deffered Revenue 3.14 2.98 1.72 2.06 2.52 Expenditure Written Off

TOTAL EXPENDITURE 3,643.70 3,442.81 3,065.90 2,901.31 1,942.49

Profit before Taxation 571.79 169.00 110.57 56.70 72.23 Provision for Taxation: Current Tax 83.73 50.29 23.55 9.39 9.22 Deferred Tax 1.11 1.20 12.37 9.37 - Fringe Benefit Tax 1.47 1.85 - - - Profit after taxation as per audited 485.48 115.66 74.65 37.94 63.01 statement of accounts (A) Adjustments on account of incorrect ---- - accounting policies [Refer Annexure V (I) Adjustments on account of audit - - - 4.86 -0.38 qualifications [Refer Annexure V (II) Impact on account of material -0.91 -14.28 0.14 -6.85 -6.62 adjustments and prior period items [Refer Annexure V (III) Total Adjustments -0.91 -14.28 0.14 -1.99 -7.00 Tax impact on adjustments 0.31 4.80 -0.05 0.67 2.36 Total adjustments net of tax impact -0.60 -9.48 0.09 -1.32 -4.64 (B) Adjusted profits (A+B) 484.88 106.18 74.74 36.62 58.37 Surplus brought forward from Previous -13.60 -4.00 -4.24 -4.64 - Year Available for Appropriation 471.28 102.18 70.50 31.98 58.37 Interim Dividend ---- - Final Dividend 63.00 37.50 - - - Tax on Dividend 10.71 5.26 - - - Dividend on Preference Shares 12.02 4.84 - - - Tax on Dividend on Preference Shares 1.68 0.68 - - - General Reserve/Partners Capital a/c 384.00 67.50 74.50 36.22 63.01

Adjusted available surplus carried to -0.13 -13.60 -4.00 -4.24 -4.64 Balance Sheet

SUMMARY OF RESTATED ASSETS AND LIABILITIES

(Rs. in Million) PARTICULARS As at March 31,

2007 2006 2005 2004 2003

Fixed Assets Gross Block 1,002.58 908.61 797.18 744.09 686.69 Less : Depreciation 330.59 296.46 242.45 196.23 154.51 Net Block 671.99 612.15 554.73 547.86 532.18 Less: Revaluation Reserve 8.81 12.88 13.89 15.00 16.22 Net Block after Revaluation 663.18 599.27 540.84 532.86 515.96 Reserve Capital Work in Progress 0.00 0.00 0.00 0.00 0.00 Total (A) 663.18 599.27 540.84 532.86 515.96

Investments Total (B) 267.34 42.38 221.65 264.57 167.21

Current Assets, Loans and Advances

Inventories 288.13 291.41 219.71 235.25 153.22 Sundry Debtors 0.00 82.41 85.55 68.67 19.84 Cash and Bank Balances 134.93 179.78 179.97 118.85 120.24 Loans and Advances 313.21 522.58 275.98 163.85 212.60 Other Current Assets 692.02 57.78 45.08 59.07 52.95 Total (C) 1,428.29 1,133.96 806.29 645.69 558.85 TOTAL ASSETS (A+B+C)=D 2,358.81 1,777.61 1,568.78 1,443.12 1,242.02 Less: Liabilities and Provisions Secured Loans 790.08 747.13 569.48 536.18 687.84 Unsecured Loans 438.80 205.47 323.88 337.97 41.37 Deferred Tax Liabilities 24.05 22.94 21.74 9.37 0.00 Current Liabilities 190.56 322.22 301.77 299.56 250.26 Provisions 157.44 98.56 32.95 17.54 19.10 Total (E) 1,600.93 1,396.32 1,249.82 1,200.62 998.57

Net Worth (D-E) 757.88 379.29 318.96 242.50 243.45 Net worth represented by - Share Capital/Partners Capital 630.00 240.00 240.00 240.00 256.66 Reserves and Surplus General Reserves 151.00 169.88 103.39 30.00 16.22 Profit and Loss Account -0.13 -13.60 -4.00 -4.24 -4.64 Less: Revaluation Reserve 8.81 12.88 13.89 15.00 16.22 Total 772.06 383.40 325.50 250.76 252.02 Less : Miscellaneous Expenditure 14.18 4.11 6.54 8.26 8.57 (to the extent not written off or adjusted) Total Net Worth 757.88 379.29 318.96 242.50 243.45

GENERAL INFORMATION

Registered Office of our Company

604/B, Murudeshwar Bhavan Gokul Road, Hubli 580 030 Karnataka, India Tel: +91 836 233 1615 Fax: +91 836 233 0436 E Mail: [email protected] Website: www.rnsinfrastructure.com

Corporate Office of our Company

Naveen Complex 7th Floor, 14 M.G. Road Bangalore 560 001 Karnataka, India Tel: +91 80 2558 4181 Fax: +91 80 2558 4017 E Mail: [email protected]

Registration number

80-32362

Corporate identification number

U74210KA2003PTC032362

Address of the ROC

The Registrar of Companies, Karnataka E - Wing, 2nd Floor, Kendriya Sadana Koramangala, Bangalore 560 034 Karnataka, India

Our Board

Name, designation and occupation Age Address

Mr. R.N. Shetty 79 122, Cunningham Road Bangalore 560 001 Chairman, Non-Executive Director Karnataka, India

Industrialist

Mr. P.P. Prabhu 67 3279, 12th Main Road HAL 2nd Stage Independent Director Bangalore 560 008 Karnataka, India Retired from Government service

Mr. K. Sundar Naik 82 556, 9th A Main 1st Stage, Indiranagar Independent director Bangalore 560 008 Karnataka, India Business

Dr. S.V. Nadig 81 Gauri Kunj, Ashok Nagar Hubli 580 032 Independent director Karnataka, India

Business

Mr. K.P. Surendranath 76 No. 145, 6th C Main 7th A cross, HMT Layout Independent Director Near R.T. Nagar Bangalore 560 032 Retired from Government service Karnataka, India

Mr. Satish R. Shetty 44 61, Deshpande Nagar Hubli 580029 Whole time director Karnataka, India

Industrialist

Mr. Sunil R. Shetty 42 61, Deshpande Nagar Hubli 580029 Managing director Karnataka, India

Industrialist

Mr. Naveen R. Shetty 38 61, Deshpande Nagar Hubli 580029 Managing Director & Chief Executive Officer Karnataka, India

Industrialist

For further details of the members of our Board, see the section titled “Our Management” on page 81.

Company Secretary and Compliance Officer

Vijayamahantesh V. Khannur Naveen Complex 7th Floor, 14 M.G. Road Bangalore 560 001 Karnataka, India Tel: +91 80 25584181 Fax: +91 80 25584017 Email: [email protected]

Investors can contact the compliance officer in case of any pre-Issue or post-Issue related problems, such as non-receipt of letters of allotment, credit of allotted Equity Shares in the respective beneficiary accounts and refund orders.

Book Running Lead Manager

ICICI Securities Limited ICICI Centre, H.T. Parekh Marg, Churchgate Mumbai 400 020, India Tel: + 91 22 2288 2460 Fax: + 91 22 2282 6580 Email: [email protected] Website: www.icicisecurities.com Contact person: Tathagat Mukhopadhyay

Syndicate Member y

Legal advisors to the Issue

Domestic legal counsel to the Issue

AZB & Partners AZB House, 67-4, 4th Cross 23rd Floor, Express Towers Lavelle Road Nariman Point Bangalore 560 001 Mumbai 400 021 Tel: + 91 80 2212 9782 Tel: +91 22 6639 6880 Fax: + 91 80 2221 3947 Fax: +91 22 6639 6888

International legal counsel to the Underwriters

Dorsey & Whitney 21 Wilson Street London, England EC2M 2TD Tel: +44 20 7588 0800 Fax: +44 207588 0555

Registrar to the Issue

Karvy Computershare Private Limited Karvy House, 46, Avenue 4, Street No.1, Banjara Hills Hyderabad 500 034, India Tel: +91 40 2342 0818 Fax: +91 40 2342 0814 Email: [email protected] Website: http://kcpl.karvy.com Contact Person: M. Murali Krishna

Bankers to the Issue and Escrow Collection Banks y Tel: +91 y Fax: +91 y Email: y

Bankers to the Company

Canara Bank State Bank of India Trinity Circle Branch Commercial Branch, Station Road Shankar Narayan Building Hubli 580 020 M.G.Road, Bangalore 560 001 Karnataka, India Karnataka, India Tel: +91 836 236 2072 Tel: +91 80 2558 4795 Fax:+91 836 226 3610 Fax: +91 80 2558 6033 Email: [email protected] Email: [email protected]

Industrial Development Bank of India ICICI Bank Limited Limited Eureka Junction No. 58, IDBI House Travellers Bunglow Road 1st Floor, Mission Road Deshpande Nagar Bangalore 560 027. Hubli 580 029 Karnataka, India Karnataka, India Tel: +91 80 2210 6138 Tel: +91 836 225 7445 Fax : +91 80 2210 6133 Fax: +91 836 225 7450 E-mail: [email protected] Email: [email protected]

The Lakhsmi Vilas Bank Limited 938/939, OTC Road Nagarathpet Main Road, City Market Bangalore 560 002 Karnataka, India Tel: +91 80 2222 6917 Fax: +91 80 2227 1249 Email: [email protected]

IPO grading agency y Limited Tel: +91 y Fax: +91 y Email: y

Contact person: y

Auditors

B.C. Shetty & Co., Chartered Accountants Plot No. 37, “Ashritha”, Sirur Park Vidyanagar, Hubli 580 021 Karnataka, India Tel: +91 836 425 1897 Fax: +91 836 237 1897 Email: [email protected]

Statement of responsibilities of the BRLM for the Issue

S. No. Activities Responsibility Co-ordinator

1. Capital structuring with the relative components and ISEC ISEC formalities such as type of instruments, etc. 2. Due diligence of the Company’s operations / management / ISEC ISEC business plans/legal etc. Drafting and design of Offer Document and of statutory advertisement including memorandum containing salient features of the Prospectus. The Lead Manager shall ensure compliance with stipulated requirements and completion of prescribed formalities with Stock Exchange, Registrar of Companies and SEBI, including finalisation of Prospectus and filing the same with the Registrar of Companies. 3. Drafting and approval of all publicity material other than ISEC ISEC statutory advertisement as mentioned in (2) above including corporate advertisement, brochure, corporate films etc 4. Appointment of registrar, bankers and advertising agency ISEC ISEC 5. Appointment of printer ISEC ISEC 6. Non institutional and retail marketing of the Offer, which will ISEC ISEC cover inter alia, Formulating marketing strategies, preparation of publicity budget Finalise media and Public relations strategy Finalising centers for holding conferences for brokers, etc. Finalise collection centers Follow-up on distribution of publicity and Offer material including form, prospectus and deciding on the quantum of the Offer material 7. Institutional marketing of the Offer, which will cover, inter ISEC ISEC alia, finalise the list and division of investors for one to one meetings; and finalise road show schedule and investor meeting schedules; Road show presentation and FAQs

8. Finalise Offer Price in consultation with the Company ISEC ISEC 9. Post bidding activities including management of Escrow ISEC ISEC Accounts, co-ordination with registrar and banks, refund to bidders, etc.

10. The post Offer activities of the Offer will involve essential ISEC ISEC follow up steps, which must include finalisation of listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as Registrars to the Offer, Bankers to the Offer and the bank handling refund business. Managers shall be responsible for ensuring that these agencies fulfill their functions and enable him to discharge this responsibility through suitable agreements with the issuer company.

The selection of various agencies like registrar to the issue, bankers to the issue, bank collection centres, legal advisor to the issue, underwriters to the issue, advertising agencies, public relations agencies etc. will be or have been finalised by our Company in consultation with the BRLM.

Credit rating

As the Issue is of equity shares, credit rating is not required.

IPO grading

This Issue being has been graded by y as y (pronounced y), indicating y. Pursuant to Clauses 2.5A, 5.6B and 6.17.3A of the SEBI Guidelines. The rationale furnished by the credit rating agency for its grading will be updated at the time of filing the Red Herring Prospectus with the Designated Stock Exchange.

Trustees

As the Issue is of equity shares, the appointment of trustees is not required.

Monitoring Agency

As the issue size is less than Rs. 500 crores, we have not appointed any monitoring agency.

Book building process

Book building refers to the collection of Bids from investors, which is based on the Price Band, with the Issue Price being finalised after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are:

1. the Company;

2. the Book Running Lead Manager;

3. the Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible to act as Underwriters. Syndicate Members are appointed by the BRLM;

4. the Escrow Collection Bank(s); and

5. the Registrar to the Issue.

The Issue is being made through the 100% Book Building Process. Not more than 50% of the Net Issue size shall be allocated to Qualified Institutional Buyers. Out of the 50% of the Net Issue allocated to Qualified Institutional Buyers on a proportionate basis, 5% shall be available for allocation to Mutual Funds. Further up to 160,000 Equity Shares shall be available for allocation on a proportionate basis to Eligible Employees subject to valid Bids being received at or above the Issue Price. Additionally, at least 15% of the Net Issue would be available for allocation to Non-Institutional Bidders and at least 35% of the Net Issue would be available for allocation to Retail Individual Bidders on a proportionate basis, subject to valid bids being received from them at or above the Issue Price.

While the Book Building Process under the SEBI Guidelines is not new, investors are advised to make their own judgment about investment through this process prior to making a Bid or Application in the Issue. Under the SEBI Guidelines, Qualified Institutional Buyers are not allowed to withdraw their Bid after the Bid/Issue Closing Date. Please refer to the section titled “Terms of the Issue” on page 179 for more details.

In accordance with the SEBI Guidelines, QIBs are not allowed to withdraw their Bid(s) after the Bid/Issue Closing Date. In addition, QIBs are required to pay at least 10% of the Bid Amount upon submission of the Bid cum Application Form during the Bid/Issue Period and allocation to QIBs will be on a proportionate basis. For further details, please refer to the section “Terms of the Issue” on page 179 of this Draft Red Herring Prospectus.

We will comply with the SEBI Guidelines and any other directions issued by SEBI for this Issue. In this regard, we have appointed the BRLM to manage the Issue and procure subscriptions to the Issue.

The process of Book Building under the SEBI Guidelines is subject to change from time to time and the investors are advised to make their own judgment about investment through this process prior to making a Bid or application in the Issue.

Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for illustrative purposes and is not specific to the Issue)

Bidders can bid at any price within the price band. For instance, assume a price band of 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 centres during the bidding period. The illustrative book below shows the demand for the shares of the issuer company at various prices and is collated from bids received from various investors.

Bid Quantity 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 BRLM, will finalise 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

1. Check eligibility for making a Bid (see section titled “Issue Procedure - Who Can Bid?” on page 184 of this Draft Red Herring Prospectus);

2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum Application Form;

3. If your Bid is for Rs. 50,000 or more, ensure that you have mentioned your PAN and attached copies of your PAN card to the Bid cum Application Form (see the section titled “Issue Procedure” on page 184 of this Draft Red Herring Prospectus);

• Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red Herring Prospectus and in the Bid cum Application Form; and

• Bids by QIBs will only have to be submitted to the BRLM.

Withdrawal of the Issue Our Company, in consultation with the BRLM, reserves the right not to proceed with the Issue anytime after the Bid/Issue Opening Date but before the Allotment of Equity Shares without assigning any reason therefore.

Bid/Issue Programme

Bidding Period/Issue Period BID/ISSUE OPENS ON ● BID/ISSUE CLOSES ON ●

12 uploaded until (i) 5.00 p.m. in case of Bids by QIB Bidders, Non-Institutional Bidders and Employees bidding under the Employee Reservation Portion where the Bid Amount is in excess of Rs. 100,000 and (ii) until such time as permitted by the BSE and the NSE, in case of Bids by Retail Individual Bidders and Employees Bidding under the Employee Reservation Portion where the Bid Amount is up to Rs. 100,000. Bids will be accepted only on Business Days.

The Company reserves the right to revise the Price Band during the Bid/Issue Period in accordance with the SEBI Guidelines provided that the Cap Price is less than or equal to 120% of the Floor Price. The Floor Price can be revised up or down to a maximum of 20% of the Floor Price advertised at least one day before the Bid /Issue Opening Date. In case of revision of the Price Band, the Issue Period will be extended for three additional days after revision of the Price Band subject to the total Bid /Issue Period not exceeding 10 days. Any revision in the Price Band and the revised Bid/Issue, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release and also by indicating the changes on the web sites of the BRLM and at the terminals of the Syndicate

Underwriting Agreement

After the determination of the Issue Price and allocation of our Equity Shares but prior to filing of the Prospectus with RoC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfill their underwriting obligations. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain conditions precedent to closing, as specified therein.

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 RoC)

Name and Address of the Underwriters Indicative number of Amount underwritten Equity Shares to be (Rs. million) underwritten

ICICI Securities Limited y y y y Limited y y y

The above mentioned amount is provided for indicative purposes only and will be finalised after determination of Issue Price and actual allocation of the Equity Shares. The Underwriting Agreement is dated y, 2007.

In the opinion of the Board of Directors (based on certificates dated y, 2007 given to them by the Underwriters), the resources of the 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 SEBI Act or registered as brokers with the stock exchanges. The above Underwriting Agreement has been accepted by the Board of Directors and our Company has issued letters of acceptance to the Underwriters.

Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with respect to the Equity Shares allocated to investors procured by them. In the event of any default, the respective Underwriter 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.

CAPITAL STRUCTURE

Our Equity Share capital before the Issue and after giving effect to the Issue, as at the date of filing of this Draft Red Herring Prospectus with SEBI, is set forth below:

(Rs. million, except share data) Aggregate Aggregate value at face value at Issue value Price

A. Authorised equity capital 96,000,000 Equity Shares of face value of Rs. 10 each 960.00

B. Issued, subscribed and paid-up equity capital before the Issue 63,000,000 Equity Shares of Rs. 10 each fully paid-up before the 630.00 Issue

C. Present issue in terms of this Draft Red Herring Prospectus 21,660,000 Equity Shares of Rs. 10 each 216.60 y

Of which

Employee Reservation Portion 160,000 Equity Shares of Rs. 10 each 1.60 y

Net Issue to the Public 21,500,000 Equity Shares of Rs. 10 each 215.00 y

D. Equity capital after the Issue 84,660,000 Equity Shares of face value of Rs. 10 each 846.60 y

E. Securities Premium Account Before the Issue Nil After the Issue y

The present Issue has been authorised by the Board in their meeting on April 20, 2007, and by the shareholders of our Company on May 14, 2007.

(a) Pursuant to a resolution of the shareholders dated August 25, 2005, the initial authorised capital of Rs. 240,000,000, comprising 24,000,000 Equity Shares of Rs. 10 each was, subject to confirmation by the Hon’ble High Court of Karnataka, reduced to Rs. 75,000,000, comprising of 7,500,000 Equity Shares of Rs. 10 each by cancellation of 16,500,000 Equity Shares of Rs. 10 each. Simultaneously, the authorised capital was increased to Rs. 240,000,000 by the creation of 1,650,000 redeemable cumulative preference shares of Rs. 100 each, such that the authorised share capital stood at Rs. 240,000,000, comprising of 7,500,000 Equity Shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each.

(b) The authorised share capital was increased from Rs. 240,000,000, comprising of 7,500,000 Equity Shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each, to Rs. 405,000,000, comprising of 24,000,000 Equity Shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each, pursuant to a resolution passed by the shareholders dated November 22, 2006.

(c) The authorised share capital of Rs. 405,000,000, comprising of 24,000,000 Equity Shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each, was reorganised to Rs. 405,000,000, comprising of 40,500,000 Equity Shares of Rs. 10 each consequent to the conversion of 1,650,000 redeemable cumulative preference shares of Rs. 100 each into 16,500,000 Equity Shares of Rs. 10 each, pursuant to a resolution of the shareholders dated December 22, 2006.

(d) The authorised share capital was increased from Rs. 405,000,000, comprising of 40,500,000 Equity Shares of Rs. 10 each to Rs. 960,000,000, comprising of 96,000,000 Equity Shares of Rs. 10 each, pursuant to a resolution passed by the shareholders dated January 18, 2007.

Notes to capital structure

1. Share capital history of our Company

The following is the history of the paid-up equity share capital of our Company:

(a) Equity share capital of our Company

Date of No. of Face Issue Nature of Reasons for Cumulative Cumulative Cumulative allotment equity value price consideration allotment no. of paid-up share shares (Rs.) (Rs.) equity share premium shares capital (Rs.) (Rs.)

August 06, 2003 24,000,000 10 10 Cash Subscribers 24,000,000 240,000,000 - to the memorandum of association

December 15, (16,500,000) 10 - - Reduction of 7,500,000 75,000,000 - 2005 share capital*

December 11, 7,500,000 10 - Capitalisation Bonus issue 15,000,000 150,000,000 - 2006 of reserves to all shareholders in the ratio of 1:1

December 26, 16,500,000 10 10 Conversion of Conversion of 31,500,000 315,000,000 - 2006 redeemable redeemable cumulative cumulative preference preference shares into shares into equity shares equity shares

January 18, 2007 31,500,000 10 - Capitalisation Bonus issue 63,000,000 630,000,000 - of reserves to all shareholders in the ratio of 1:1

* Pursuant to resolution of the shareholders dated August 25, 2005, the order of the High Court of Karnataka dated November 16, 2005 and a resolution of the Board dated December 15, 2005, the total number of outstanding Equity Shares stood at 7,500,000. Also see notes under “Preference Share Capital of our Company” below in relation to allotment of redeemable cumulative preference shares consequent to cancellation of Equity Shares.

(b) Preference share capital of our Company

Date of No. of Face Issu Nature of Reasons Cumulativ Cumulativ Cumulativ allotmen redeemabl valu e consideratio for e no. of e paid-up e share t e e price n allotmen redeemabl preference premium cumulative (Rs.) (Rs.) t e share (Rs.) preference cumulative capital shares preference (Rs.) shares

Decembe 1,650,000 100 100 Note 1 below Note 1 1,650,000* 165,000,00 - r 15, below 0 2005

Decembe (1,650,000) 100 100 Note 2 below Note 2 Conversion - - r 26, below into Equity 2006 Shares**

* Note1: The allotment of redeemable cumulative preference shares of Rs. 100 each consequent to cancellation of 16,500,000 Equity Shares of Rs. 10, was pursuant to a resolution of the shareholders dated August 25, 2005, the order of the High Court of Karnataka dated November 16, 2005 and a resolution of the Board dated December 15, 2005.

** Note 2: Conversion of 1,650,000 redeemable cumulative preference shares of Rs. 100 each to 16,500,000 Equity Shares of Rs. 10 each, was pursuant to a resolution of the shareholders dated December 22, 2006.

2. Promoter contribution and lock-in

(a) History of the Share Capital held by the Promoters

Name of Date of No. of Equity Face Value Issue / Nature of Promoter Allotment / Shares (Rs. ) acquisition price transaction Transfer

R. N. Shetty August 6, 2003 600 10 10 Cash December 15, - 413 10 - Reduction 2005 December 11, 187 10 - Bonus 2006 December 26, 410 10 10 Conversion of 2006 Preference Shares January 18, 2007 784 10 - Bonus March 2, 2007 3,778,432 10 10 Cash

Sub-total 3,780,000

Satish Shetty August 6, 2003 2,400,000 10 10 Cash December 15, -1,650,000 10 - Reduction 2005 December 11, 750,000 10 - Bonus 2006 December 26, 1,650,000 10 10 Conversion of 2006 Preference Shares January 18, 2007 3,150,000 10 - Bonus

Sub-total 6,300,000

Sunil Shetty August 6, 2003 2,400,000 10 10 Cash December 15, -1,650,000 10 - Reduction 2005 December 11, 750,000 10 - Bonus 2006 December 26, 1,650,000 10 10 Conversion of 2006 Preference Shares January 18, 2007 3,150,000 10 - Bonus

Sub-total 6,300,000

Naveen August 6, 2003 2,400,000 10 10 Cash Shetty December 15, -1,650,000 10 - Reduction 2005 December 11, 750,000 10 - Bonus 2006 December 26, 1,650,000 10 10 Conversion of 2006 Preference Shares January 18, 2007 3,150,000 10 - Bonus

Sub-total 6,300,000

Total 22,680,000

(b) Details of Promoters’ contribution locked in for three years:

All Equity Shares which are being locked in are eligible for computation of Promoter’s contribution and lock in under Clause 4.6 of the SEBI Guidelines.

Name of Date of Nature of No. of Face Issue % of Lock-in promoters allotment/acquisition allotment Equity value price/Purchase post period shares (Rs.) price (Rs.) (per issue (years)* locked in (per share) paid- share) up capital

RN Shetty December 11, 2006 Bonus 187 10 - 0.00 3 years December 26, 2006 Conversion 410 10 10 0.00 3 years of Preference Shares January 18, 2007 Bonus 784 10 - 0.00 3 years

Sub-total 1,381 0.00 (A)

Satish R August 6, 2003 Cash 93,539 10 10 0.11 3 years Shetty December 11, 2006 Bonus 750,000 10 - 0.89 3 years December 26, 2006& Conversion 1,650,000 10 10 1.95 3 years of Preference Shares January 18, 2007 Bonus 3,150,000 10 - 3.72 3 years

Sub-total 5,643,539 6.67 (B)

Sunil R August 6, 2003 Cash 93,540 10 10 0.11 3 years Shetty December 11, 2006 Bonus 750,000 10 - 0.89 3 years December 26, 2006& Conversion 1,650,000 10 10 1.95 3 years of Preference Shares January 18, 2007 Bonus 3,150,000 10 - 3.72 3 years

Sub-total 5,643,540 6.67 (C)

Naveen R August 6, 2003 Cash 93,540 10 10 0.11 3 years Shetty December 11, 2006 Bonus 750,000 10 - 0.88 3 years December 26, 2006& Conversion 1,650,000 10 10 1.95 3 years of Preference Shares January 18, 2006 Bonus 3,150,000 10 - 3.72 3 years

Sub-total 5,643,540 6.66 (D)

TOTAL 16,932,000 20.00 A+B+C+D

& Redeemable cumulative preference shares allotted on December 26, 2006.

* Commencing from the date of the Allotment of the Equity shares in the Issue.

(b) Details of share capital locked in for one year:

In addition to the lock-in of the Promoters’ contribution specified above, the entire pre- Issue Equity Share capital, comprising of 46,068,000 Equity Shares, shall be locked in for a period of one year from the date of allotment of Equity Shares in this Issue.

The locked in Equity Shares held by the Promoters, as specified above, can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided that the pledge of the equity shares is one of the terms of the sanction of the loan.

Provided that securities locked in as minimum promoters’ contribution may be pledged only if, in addition to fulfilling the above requirement, 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 4.16.1(b) of the SEBI Guidelines, the Equity Shares held by the Promoters may be transferred to and amongst the Promoter Group or to new promoters 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 (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable.

In terms of Clause 4.16.1 (a) of the SEBI Guidelines, the Equity Shares held by persons other than the Promoters prior to the Issue may be transferred to any other person holding the Equity Shares which are locked-in as per Clause 4.14 of the SEBI Guidelines, subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable.

In addition, the Equity Shares subject to lock-in will be transferable subject to compliance with the SEBI Guidelines, as amended from time to time.

3. Equity Shares held by top ten shareholders

(a) Our top ten shareholders and the number of Equity Shares held by them as of the date of filing this Draft Red Herring Prospectus with SEBI and ten days prior to filing with SEBI, is as follows:

Name No. of Equity Shares %

R.N. Shetty Family Trust 11,968,432 19.00 Satish R. Shetty 6,300,000 10.00 Sunil R. Shetty 6,300,000 10.00 Naveen R. Shetty 6,300,000 10.00 Geeta S. Malli 5,040,000 8.00 Shobha J. Shetty 5,040,000 8.00 Mamata S. Hegde 5,040,000 8.00 Samata A. Shetty 5,040,000 8.00 R N Shetty 3,780,000 6.00 Sudha R. Shetty 3,151,568 5.00 Mookambu H. Shetty 1,680,000 2.67 Nagaraj H. Shetty 1,680,000 2.67 Anupama S. Shetty 1,680,000 2.66

(b) Our top ten shareholders and the number of equity shares held by them two years prior to date of filing of this Draft Red Herring Prospectus with SEBI is as follows:

Name No. of Equity Shares %

R.N Shetty 4,560,000 19.00 Sudha R. Shetty 2,640,000 11.00 Satish R. Shetty 2,400,000 10.00 Sunil R. Shetty 2,400,000 10.00 Naveen R. Shetty 2,400,000 10.00 Geeta S. Malli 1,920,000 8.00 Shobha J. Shetty 1,920,000 8.00 Mamata S. Hegde 1,920,000 8.00 Samata A. Shetty 1,920,000 8.00 Mookambu H. Shetty 640,000 2.67 Nagaraj H. Shetty 640,000 2.67 Anupama S. Shetty 640,000 2.66

4. Shareholding pattern before and after the Issue

The table below presents our shareholding pattern before the proposed Issue and as adjusted for the Issue.

Equity Shares owned before the Equity Shares owned after the Issue Issue Shareholder Category No. of shares % No. of shares %

Promoter R.N. Shetty 3,780,000 6.00 3,780,000 4.47 Satish N. Shetty 6,300,000 10.00 6,300,000 7.44 Sunil N. Shetty 6,300,000 10.00 6,300,000 7.44 Naveen N. Shetty 6,300,000 10.00 6,300,000 7.44 Sub Total (A) 22,680,000 36.00 22,680,000 26.79

Promoter Group Relatives and other individuals Sudha R Shetty 3,151,568 5.00 3,151,568 3.72 Geeta S Malli 5,040,000 8.00 5,040,000 5.95

Shobha J Shetty 5,040,000 8.00 5,040,000 5.95 Mamata S Hegde 5,040,000 8.00 5,040,000 5.96 Samata A Shetty 5,040,000 8.00 5,040,000 5.96 Mookambu H Shetty 1,680,000 2.66 1,680,000 1.98 Sub Total (B) 24,991,568 39.66 24,991,568 29.52

Promoter Group Companies R N Shetty Family Trust 11,968,432 19.00 11,968,432 14.14

Persons acting in 3,360,000 5.34 3,360,000 3.97 concert(C)

Employees (D) - - 160,000 0.19

Public(E) - - 21,500,000 25.39 Total share capital 6,30,00,000 100.00 84,660,000 100 (A+B+C+D+E)

5. None of our Directors or key managerial personnel hold Equity Shares in the Company, other than as follows:

S.No. Name of the Shareholder No. of Equity Pre-Issue Post-Issue Shares percentage percentage shareholding shareholding

1. Mr. R.N. Shetty 3,780,000 6.00 4.47 2. Mr. Satish R. Shetty 6,300,000 10.00 7.44 3. Mr. Sunil R. Shetty 6,300,000 10.00 7.44 4. Mr. Naveen R. Shetty 6,300,000 10.00 7.44

6. Our Company, our Promoters and the BRLM have not entered into any buy-back and/or standby arrangements for the purchase of Equity Shares of our Company from any person, other than as disclosed in this Draft Red Herring Prospectus.

7. Other than set out in “Capital Structure- Notes to Capital Structure - Share Capital History of the Company”, our Promoters have not been issued Equity Shares for consideration other than cash.

8. There have been no transfers of Equity Shares by the Promoters, Promoter Group and the Directors during a period of six months preceding the date on which this Draft Red Herring Prospectus is filed with SEBI, other than as disclosed below:

Transferor Transferee Number of Price per Date of Equity Shares Equity Share transfer (Rs.)

Sudha R. Shetty R.N. Shetty 3,778,432 10 March 02, 2007

9. Not more than 50% of the Net Issue shall be allocated on a proportionate basis to QIBs, out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. 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. Atleast 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and atleast 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Further, up to 160,000 Equity Shares shall be available for allocation on a proportionate basis to Eligible Employees subject to valid Bids being received at or above the Issue Price. Under subscription in the Employee Reservation Portion shall be allowed to be met through oversubscription in the Retail Portion, Non-Institutional Portion and QIB Portion at the discretion of the Company and the BRLM. Under-subscription, if any, in any category, would be met with spill over from other categories at our sole discretion in consultation with the BRLM.

10. Only Eligible Employees will be eligible to apply in this Issue under the Employee Reservation Portion on a competitive basis. Bids by Eligible Employees can also be made in the “Net Issue” to the public and such Bids shall not be treated as multiple Bids. The allotment in the Employee Reservation Portion will be on a proportionate basis. However, in case of an oversubscription in the Employee Reservation Portion, employees will receive allotment on a proportionate basis subject to a minimum allotment of y Equity Shares. The unsubscribed portion, if any, from the Equity Shares in the Employee Reservation Portion will be treated as part of the Net Issue and Allotment shall be made in accordance with the description in the section entitled “Issue Procedure” commencing at page 184.

11. There are no outstanding warrants, options or rights to convert debentures, loans or other instruments into our Equity Shares.

12. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of Bidder.

13. We have not raised any bridge loan against the proceeds of the Issue.

14. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of this Draft Red Herring Prospectus to SEBI until the Equity Shares issued/ to be issued pursuant to the Issue have been listed.

15. We presently do not intend or propose to alter our capital structure for six months from the date of opening of the Issue, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise. However, during such period or at a later date, we may issue Equity Shares or securities linked to Equity Shares to finance an acquisition, merger or joint venture by us 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 our Board to be in the interest of the Company.

16. Other than set out in “Capital Structure- Notes to Capital Structure - Share Capital History of the Company”, we have not issued any Equity Shares out of revaluation reserves or for consideration other than cash.

17. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law. We shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.

18. We have sought a confirmation from the DIPP by our letter dated February 15, 2007, on FIIs being permitted to participate in the Issue under the portfolio investment scheme.

19. As of July 12, 2007, the total number of holders of Equity Shares is 13.

20. The Company, Directors, Promoters or Promoter Group shall not make any payments direct or indirect, discounts, commissions, allowances or otherwise under this Issue except as disclosed in this Draft Red Herring Prospectus.

21. The Equity Shares held by the Promoters are not subject to any pledge as on date.

OBJECTS OF THE ISSUE

The objects of the Issue are to (a) finance the construction and development costs for some of our real estate projects under development and being planned, (b) fund expenditures for general corporate purposes and (c) achieve the benefits of listing on the Stock Exchanges.

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 activities for which funds are being raised by us through this Issue.

We intend to utilise the proceeds of the Issue, after deducting underwriting and management fees, selling commissions and other expenses associated with the Issue (“Net Proceeds”), which is estimated at Rs. ● million, for financing the growth of our business.

The details of the utilisation of Net Proceeds will be as per the table set forth below:

(Rs. in Million) Estimated Amount Amount Estimated Net to be financed Total Spent as Proceeds S.No. Expenditure Items from Net Proceeds Expenditure on May 31, utilisation as on of the Issue (Rs. 2007 March 31, mn) 2008 2009

Finance the construction 2,674 337 2,337 1,143 1,194 and development costs for 1. some of our real estate projects under development and being planned General corporate 2. y y y purposes* 3. Issue related expenses* y y y

Total y y y * to be finalised after determination of the Issue Price

The above fund requirement and deployment is based on internal management estimates and has not been appraised by any bank or financial institution.

Further, the fund requirement in the table above is based on our current business plan. In view of the dynamic and competitive environment of the industry in which we operate, we may have to revise our business plan from time to time and consequently our capital requirements and deployment of funds may also change. This may include rescheduling of our capital expenditure programs, increase or decrease in the capital expenditure for a particular purpose vis-à-vis current plans at the discretion of our management and requirements that may arise on account of acquisitions, mergers and other strategic initiatives.

In case of any increase in the actual utilisation of funds earmarked for the above activities, such additional fund for a particular activity will be met from a combination of internal accruals, or borrowings. If the actual utilisation towards any of the aforesaid objectives is lower than what is stated above, such balance will be used for future growth opportunities and general corporate purposes.

Means of Finance

The means of finance for the objects of the Issue is as given below: Rs. In million Particulars Total Amount Amount deployed as Amount to be deployed on May 31, 2007 after May 31, 2007 Net proceeds from the Issue ● - ● Term Loan from Bank 99.36 99.36 - Internal Accruals 238.13 238.13 - Total ● 337.49 ●

Based on the certificate dated June 25, 2007 received from B. C. Shetty & Co, Chartered Accountants, we confirm that firm arrangements for at least 75% of the stated means of

22 finance, excluding net proceeds of the Issue, have been made.

Details of the Objects

Development and construction costs for our real estate projects under development and our planned real estate projects.

We are developing real estate projects in Karnataka which are at various stages of construction and development. We propose to deploy an amount aggregating to Rs. 2,337 million out of the Net Proceeds in our projects under development, with total utilisation of such proceeds estimated to be Rs. 1,143 million and Rs. 1,194 million for the year ending on March 31, 2008 and 2009, respectively.

Details of the projects

The details of the projects, such as the total project cost, the costs already incurred, and the estimated balance funds required for completion of the project as set forth in the table below:

(Rs. in million) Name of the Proposed Start Expected Total Cost Funds Schedule of Project Saleable Date Date of Estimated incurred to be utilisation of Area (Sq. Completion cost of as on utilised Funds feet) proposed May from FY FY project* 31,2007 Issue 2008 2009

Yeshwantpur Project, Phase I - RNS Shantinivas, Jun- Bangalore 486,250 06 Mar-08 660 337 323 323 Yeshwantpur Project, Phase II - RNS Block A, Sep- Bangalore 568,862 07 Mar-09 814 - 814 390 424 Channasandra Group Housing Project, Bangalore Sep- (Phase I) 881,664 07 Mar-09 1,200 - 1,200 430 770 Total 2,674 337 2,337 1,143 1,194

*The total development cost of the above construction projects is estimated at Rs. 2,674 million.

The estimate of project costs for the Yeshwantpur Project, Phase I - RNS Shantinivas, Bangalore, is based on a certificate dated March 06, 2007, issued by Mr. K.V. Srinivasan, Chartered Engineer and Registered Valuer details of which are given below.

Total Area Proposed to be constructed (sq. ft.) 486250 Proposed Area in each year (sq. ft.) 233400 252850 Fiscal year 2006-07 2007-08 Amount (Rs. Million) Earthwork 60.30 - Structural Concrete 68.87 57.38 Steel 97.87 64.96 Solid Block Masonry 3.75 70.87 Plastering - 20.24 Flooring - 90.56 Painting - 13.30 Windows & Doors - 12.50 MS Railing - 6.25 Water Proofing 3.30 - Sanitary & Plumbing 15.00 5.50 Electrical & Electromechanical 13.50 5.00 Misc. expenses (approvals etc) 22.50 2.50 Lift etc, Sundry expenses 26.00 - Total Cost of Construction 311.10 349.08

The estimate of project costs for the Yeshwantpur Project, Phase II - RNS Block A, Bangalore, is based on a certificate dated March 06, 2007, issued by Mr. K.V. Srinivasan, Chartered Engineer and Registered Valuer, details of which are given below.

Total Area Proposed to be constructed (sq. ft.) 568862 Proposed Area in each year (sq. ft.) 273042 295820 Fiscal year 2007-08 2008-09 Amount (Rs. Million) Earthwork 72.50 - Structural Concrete 82.33 78.59 Steel 73.23 101.70 Solid Block Masonry 55.12 62.84 Plastering 5.06 20.52 Flooring 24.00 48.51 Painting 4.90 8.82 Windows & Doors 8.50 9.71 MS Railing 4.12 2.23 Sanitary & Plumbing 9.50 17.50 Electrical & Electromechanical 7.50 17.50 Misc. expenses (approvals etc) 23.20 12.50 Lift etc, Sundry expenses 20.00 35.00 Others (Gym etc) - 9.25 Total Cost of Construction 389.98 424.69

The estimate of project costs for the Channasandra Group Housing Project, Bangalore (Phase I), is based on a certificate dated May 17, 2007, issued by Mr. K.M. Rajasekaraiah, Chartered/Consulting Engineer and Registered Valuer, details of which are given below.

Total Area Proposed to be constructed (sq. ft.) 881664 Proposed Area in each year (sq. ft.) 325250 556414 Fiscal year 2007-08 2008-09 Amount (Rs. Million) Earthwork 24.88 - Structural Concrete 62.37 131.00 Steel 70.63 75.06 Solid Block Masonry 31.13 23.98 Water Proofing 3.30 - Plastering 10.35 12.34 Flooring 142.20 485.41 Painting 8.12 9.55 Doors & Windows - 13.12 MS Railings - 6.56 Sanitary & Plumbing 15.00 5.50 Electrical & Electromechanical 13.50 5.00 Misc. expenses (approvals etc) 22.50 2.50 Lift etc, Sundry expenses 26.00 - Total Cost of Construction 430.01 770.05

General corporate purposes

We, in accordance with the policies set up by our Board, will have flexibility in applying the remaining Net Proceeds of this Issue for general corporate purposes, including the acquisition of land, construction of projects, strategic initiatives and acquisitions, brand building exercises and the strengthening of our marketing capabilities.

Issue-related expenses

The expenses of this Issue include, among others, underwriting and management fees, printing and distribution expenses, legal fees, advertisement expenses and listing fees. The estimated Issue expenses are as follows:

(Rs. in million) Activity Expenses* % of Net Issue

Lead management fee and underwriting and selling commissions y y Advertising and Marketing expenses y y Printing and stationery y y Others (Monitoring agency fees, Registrars fee, legal fees, etc.) y y TOTAL y y * To be incorporated after finalisation of the Issue Price

As per the certificate from B. C. Shetty & Co., the Auditors of the Company, dated June 25, 2007, the expenditure incurred by us as on May 31, 2007 towards the objects for which funds are being raised through this Issue is as given below:

Rs. in million Details of Expenditure Amount

Construction cost for Yeshwantpur Project, Phase I, RNS Shantinivas, at Bangalore 337.49

Total 337.49

Sources of Finance Amount a) Term Loan from Lakshmi Vilas Bank Ltd. 99.36 b) Internal Accruals 238.13

Total 337.49

Working capital requirements

The Net Proceeds of this Issue will not be used to meet our working capital requirements as we expect sufficient internal accruals to meet our existing working capital requirements.

Interim use of funds

Pending utilisation for the purposes described above, we intend to invest the funds in high quality interest bearing liquid instruments including money market mutual funds and deposits with banks, for the necessary duration or for reducing overdrafts. We would not employ proceeds of the Issue in the equity capital markets.

Monitoring utilisation of funds

Our Board will monitor the utilisation of the Issue proceeds. We will disclose the details of the utilisation of the Issue proceeds, including interim use, under a separate heading in our financial statements for fiscal 2008 and 2009, specifying the purpose for which such proceeds have been utilised or otherwise disclosed as per the disclosure requirements of our listing agreements with the Stock Exchanges. As per Clause 49 of the listing agreements with the Stock Exchanges, we shall disclose to the Audit Committee, the uses / applications of funds by major category on a quarterly basis as a part of our quarterly declaration of financial results. Further, on an annual basis, we shall prepare a statement of funds utilised for purposes other than those stated in the Red Herring Prospectus and place it before the audit committee. Such disclosure shall be made only until such time as the net proceeds of the issue have been fully spent. This statement shall be certified by our statutory auditors. The audit committee shall make appropriate recommendations to the Board in this regard.

No part of the proceeds from the Issue will be paid by us as consideration to our Promoters, our Directors, Promoter Group or key managerial employees, except in the normal course of our business.

BASIS FOR ISSUE PRICE

The Issue Price will be determined by us in consultation with the BRLM on the basis of assessment of market demand for the Equity Shares offered by the Book Building Process and on the basis of the following qualitative and quantitative factors. The face value of the Equity Shares is Rs. 10 and the Issue Price is y times the face value at the lower end of the Price Band and y times the face value at the higher end of the Price Band.

Qualitative factors

Qualitative factors forming the basis for computing the price include the following:

Experience and expertise in the civil engineering and construction business

We have been in the civil engineering and construction business for more than 45 years. Over the course of time, we have developed expertise in executing complex projects on a timely basis.

Real estate development rights in respect of sizeable land resources

Ability to apply construction expertise to real estate development

We have significant in-house civil engineering and construction expertise. We believe this in- house expertise provides us with a number of skills and resources that will help us to succeed in our real estate development business. These skills and resources include (i) project management expertise and experience, (ii) a team of experienced engineers, managers and workers, (iii) experience in cost control, (iv) success in timely completion of projects, and (v) ownership of building equipment.

Focus on Bangalore region

Bangalore is the IT capital of India spread over 1200 sq km and has a population of approximately 6.7 mn. The city has seen one of the fastest population growths across Indian cities, with a 3.2% average annual increase in population in the last five years (Source: http://www.bmponline.org/). The concentration of our real estate development activities in the Bangalore area offers us a positional advantage due to the high demand for residential and commercial real estate that is occurring during the current economic growth in Bangalore. In addition, we have access to land in towns and cities near Bangalore, which are experiencing their own economic growth.

Established reputation

Qualified and experienced management team and employee base

For further details on the qualitative factors, which form the basis for computing the price, refer to the sections titled “Our Business” on page 50 and “Risk Factors” on page x, respectively.

Quantitative factors

Information presented in this section is derived from the Company’s restated, stand-alone financial statements prepared in accordance with Indian GAAP. The quantitative factors, which form the basis for computing the price, are as follows:

Weighted average earnings per share (EPS)

Financial period EPS (Rs.) Weight

Fiscal year 2005 1.19 1 Fiscal year 2006 1.69 2 Fiscal year 2007 7.70 3 Weighted average 4.61

Notes:

The earnings per share has been computed on the basis of adjusted profits and losses for the respective years / periods after considering the impact of accounting policy changes, prior period adjustments / regroupings pertaining to earlier years, as per the auditor’s report.

The face value of each equity share is Rs. 10.

Price/earning (P/E) ratio in relation to the Issue Price of Rs. y per share of Rs. 10 each

Based on EPS for the fiscal year ended March 31, 2007, of Rs. 7.70:

(a) P/E ratio in relation to the Floor Price : y times

(b) P/E ratio in relation to the Cap Price : y times

Based on the Weighted average EPS of Rs. 4.61:

(a) P/E ratio in relation to the Floor Price : y times

(b) P/E ratio in relation to the Cap Price : y times

Industry P/E*:

(a) Highest : 49.4

(b) Lowest : 0.1

*Source: Capital Market, Volume XXII/09, July 02 –15, 2007 (Industry-Construction)

Weighted average return on net worth (RoNW)*

Financial period RoNW (%) Weight

Fiscal year 2005 23.43 1 Fiscal year 2006 27.99 2 Fiscal year 2007 63.98 3 Weighted average 45.23

* Net worth has been computed by aggregating share capital, reserves and surplus and adjusting for revaluation reserves, intangible assets and deferred tax assets as per our audited restated financial statements.

Minimum Return on Total Net Worth required to maintain pre-Issue EPS

The minimum Return on total Net Worth after issue required to maintain pre-Issue EPS at

Rs. 7.70 is y%.

Net Asset Value (NAV) per Equity Share

NAV per equity share represents shareholders’ equity less miscellaneous expenses as divided by restated weighted average number of equity shares. The NAV per Equity Share as at March 31, 2007 is Rs. 12.03.

NAV per Equity Share after the Issue

The NAV per Equity Share after the Issue is Rs. y.

The Issue Price per Equity Share is Rs. y.

The Issue Price per Equity Share will be determined on conclusion of the Book Building Process.

Comparison of accounting ratios with other listed companies

EPS (Rs.) P/E as on Return on Net NAV (Rs.) Sales (Rs. July 06, 2007 Worth (%) Million)

RNS Infrastructure Limited* 7.70 NA 63.98 12.03 4,215.49

Peer group** Sobha Developers 22.2 40.36 95.0 118.3 11,865 D S Kulkarni 16.0 16.44 62.5 125.6 299 Mahindra Gesco 3.5 156.91 2.1 189.3 1555 Nagarjuna Constructions 7.3 26.15 16.4 49.9 28,711 Unitech 11.8 44.14 35.0 14.9 25,040 Patel Engineering 18.1 23.96 44.7 120.6 11,036

* Our EPS, Return on Net Worth and Book Value per Share have been calculated from our audited restated financial statements for the fiscal year 2007 ending March 31, 2007

** All the figures except for the P/E ratio are as of March 31, 2007. All figures for peer group are extracted from Capital Market, Volume XXII/09, July 02 - 15, 2007 (Industry-Construction).

The BRLM believes that the Issue Price of Rs. y is justified in view of the above qualitative and quantitative parameters. For further details, see the section titled “Risk Factors” on page x and the financials of our Company including important profitability and return ratios, as set out in the auditor’s report beginning on page 106 to have a more informed view.

STATEMENT OF TAX BENEFITS

Date: June 25, 2007

To, The Board of Directors RNS Infrastructure Ltd. 604/B, ‘Murudeshwar Bhavan’ Gokul Road Hubli-580030, India

Dear Sirs,

Subject: Statement of Possible Tax Benefits

We hereby certify that the enclosed annexure states the possible tax benefits available to RNS Infrastructure Limited (formerly R N Shetty and Company Pvt. Ltd./ R N Shetty and Company) (the “Company”) and to the Shareholders of the Company under the provisions of the Income Tax Act, 1961 and other direct and indirect 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 tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill.

The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. A shareholder is advised to consult his/ her/ their own tax consultant with respect to the tax implications of an investment in the equity shares particularly in view of the fact that certain recently enacted legislation may not have a direct legal precedent or may have a different interpretation on the benefits, which an investor can avail.

We do not express any opinion or provide any assurance as to whether:

the Company or its shareholders will continue to obtain these benefits in future; or

the conditions prescribed for availing the benefits have been / would be met with.

The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. This report is intended solely for 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.

For B.C.Shetty & Co. Chartered Accountants

(B.C.Shetty) Partner Membership No. 24296 Hubli

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO RNS INFRASTRUCTURE LIMITED (THE “COMPANY”) AND ITS SHAREHOLDERS UNDER THE INCOME TAX ACT, 1961 (‘the IT Act’)

The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of these benefits are dependent on the company or its shareholders fulfilling the conditions prescribed under the tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions as may be prescribed under the relevant sections of the Income Tax Act, 1961.

I. BENEFITS AVAILABLE TO THE INFRASTRUCTURE, CONSTRUCTION AND REAL ESTATE BUSINESS:

1.1 INCOME TAX :

Subject to the conditions specified under Section 80-IB (10) of the IT Act, the Company is eligible for hundred percent deduction of the profits derived from development and building of housing projects approved before March 31, 2007, by a local authority.

1.2 SERVICE TAX :

Works contract in respect of specified infrastructure projects namely Roads, Airports, Railways, Transport terminals, Bridges, Tunnels and Dams are specifically excluded from the scope of the levy of Service Tax as per sub-clause zzzza of clause 105 of section 65.

1.3 EXCISE DUTY :

Excise duty is exempt as per the Government of India Central Excise Notification No. 108/95 and Customs Notification No. 85/99 for materials construction equipments brought for the work. Such exemption applicable for the works under taken which is approved by competent authority.

1.4 ENTRY TAX :

As per the GOK notification No. FD 35 CSL 98(III), Bangalore dated 01.08.1998 and FD 35 CSL 98(1) Bangalore dated 02.09.1999 and GO No. IDD 1 UIP 97 Bangalore dated 26.12.1997, if the dealer who is undertaking infrastructure project or is authorized to execute works in the infrastructure project, is exempt from payment of Entry Tax.

II. GENERAL BENEFITS AVAILABLE TO THE COMPANY :

INCOME FROM HOUSE PROPERTY

2.1 The Company is eligible for deduction of thirty percent of the annual value of the property (i.e. actual rent received or receivable on the property or any part of the property which is let out) as per the provisions of section 24(a) of the IT Act.

2.2 Wherever the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of interest payable on such capital shall be allowed as a deduction in computing Income from house property, as per the provisions of section 24(b).

II BENEFITS AVAILABLE TO THE COMPANY AND PROSPECTIVE RESIDENT SHAREHOLDERS OTHER THAN DOMESTIC COMPANIES

DIVIDENDS EXEMPT UNDER SECTION 10(34) OF THE ACT

that the losses arising on account of sale/transfer of shares purchased up to three months prior to the record date and sold within three months after such date will be disallowed to the extent of dividend on such shares are claimed as tax exempt by the shareholder.

INCOME FROM CAPITAL GAINS

2.1 Section 48 of the IT Act, categories of capital assets into two major categories viz. Long term Capital Assets and Short Term Capital Assets. If the shares are held for a period more than 12 months it is termed as a long term asset and otherwise as a short term asset. Any profit or loss arising on account of sale/transfer of such Long Term Assets are termed as long term capital gains and short term assets as short term capital gains.

2.2 Section 48 of the IT Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition / improvement and expenses incurred wholly and exclusively in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, as per second proviso to Section 48 of the IT Act, in respect of long term capital gains arising from transfer of shares of Indian Company, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index, as prescribed annually.

2.3 Provisions of Section 112 of the IT Act, permit taxing long term capital gains (which are not exempt under Section 10(38) of the IT Act) arising on transfer of shares in the Company at a rate of 20 percent (plus applicable surcharge , education cess and secondary and higher educations cess.) after factoring the indexation benefit. However, the share holder may opt for the tax on long term gains computed at the rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess. ), if the tax on indexed long term capital gains resulting on transfer of listed securities calculated at the rate of 20 percent exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit.

2.4 Provisions of Section 111A of the IT Act, prescribes for taxing the short-term capital gains arising from sale of equity shares in the Company at a rate of 10 percent (plus applicable surcharge and education cess) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax.

2.5 Provisions of section 10(38) of the IT Act, exempts from tax the long term capital gains arising on sale of equity shares in the Company where the sale transaction has been entered on a recognized stock exchange of India and is liable to securities transaction tax.

2.6 Provisions of Section 54EC of the IT Act exempts long-term capital gains (which are not exempt under section 10(38) of the IT Act from being taxed to the extent specified therein, subject to the conditions as referred to in the section and to the extent such capital gains are invested within 6 months from the date of such transfer in the bonds (long term specified assets) issued by

a. National Highway authority of India constituted under section 3 of The National Highway Authority of India Act, 1988; b. Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956;

(The investment made on or after April 01 2007 in the long term specified asset noted above by an assessee during any financial year cannot exceed of Rs. 50 lakh.)

Subject to the conditions specified under the provisions of section 54F of the IT Act, long

term capital gains ( which are not exempt from tax under Section 10(38) of the IT Act) arising to an individual or a HUF on transfer of shares of the Company will be exempt from capital gains tax if the sale proceeds from transfer of such shares are used for purchase of residential house property within a period of 1 year before or 2 years after the date on which the transfer took place or for construction of residential house property, within a period of 3 years after the date of such transfer.

Provisions of Section 88E provides that where the total income of a person includes income chargeable under the head “Profits and Gains of business or profession” arising from purchase or sale of an equity share in a company entered on a recognized stock exchange, i.e. from taxable securities transactions, the company shall get a rebate equal to the securities transaction tax paid by it in the course of its business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax on such income.

III BENEFITS AVAILABLE TO CORPORATE RESIDENT SHAREHOLDERS (DOMESTIC COMPANIES).

DIVIDENDS EXEMPT UNDER SECTION 10(34) OF THE ACT

1 Any income by way of dividends (declared, distributed or paid on or after 1 April, 2003) from a domestic company are exempt in the hands of the Company/shareholders, if the same is subject to dividend distribution tax as referred to in Section 115-O, as per the provisions of section 10(34) of the IT Act. However, Section 94(7) of the IT Act provides that the losses arising on account of sale/transfer of shares purchased up to three months prior to the record date and sold within three months after such date will be disallowed to the extent dividend on such shares are claimed as tax exempt by the shareholder.

INCOME FROM CAPITAL GAINS

2.1 Section 48 of the IT Act, categories capital assets into two major categories viz. long term capital assets and short term capital assets. If the shares are held for a period more than 12 months it is termed as a long term asset and otherwise short term asset. Any profit or loss arising on account of sale/transfer of such long term assets are termed as long term capital gains and short term assets as short term capital gains.

2.2 Section 48 of the IT Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition / improvement and expenses incurred wholly and exclusively in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. Further, in respect of long term capital gains from transfer of shares of Indian Company, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index, as prescribed annually.

2.3 Provisions of Section 112 of the IT Act, permit taxing long term capital gains (which are not exempt under Section 10(38) of the IT Act) arising on transfer of shares in the Company at a rate of 20 percent (plus applicable surcharge , education cess and secondary and higher educations cess.) after factoring the indexation benefit. However, the share holder may opt for the tax on long term gains computed at the rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess.), if the tax on indexed long term capital gains resulting on transfer of listed securities calculated at the rate of 20 percent exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit.

2.4 Provisions of Section 111A of the IT Act, prescribes for taxing the short-term capital gains arising from sale of equity share in the Company at a rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess.) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax.

2.5 Provisions of section 10(38) of the IT Act, exempts from tax the long term capital gains arising on sale of equity shares in the Company where the sale transaction has been

entered into on a recognized stock exchange of India and is liable to securities transaction tax, subject to the condition that the income by way of long-term capital gain of the company shall be taken into account in computing the book profit and income tax payable under Section 115JB.

a. National Highway authority of India constituted under section 3 of The National Highway Authority of India Act, 1988;

b. Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956;

(The investment made on or after April 01 2007 in the long term specified asset noted above by an assessee during any financial year cannot exceed of Rs. 50 lakh.)

If only part of the capital gain is so reinvested, exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term specified asset is transferred or converted into money within three years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year such transfer or conversion into money takes place. Provisions of Section 88E provides that where the total income of a person includes income chargeable under the head “Profits and Gains of business or profession” arising from purchase or sale of an equity share in a company entered on a recognized stock exchange, i.e. from taxable securities transactions, the company shall get a rebate equal to the securities transaction tax paid by it in the course of its business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax on such income.

IV BENEFITS AVAILABLE TO MUTUAL FUNDS

1. Provisions of Section 10(23D) of the IT Act exempt the Mutual Funds registered under the Securities and Exchange Board of India or Mutual Funds set up by Public Sector Banks or Public Financial Institutions or authorized by the Reserve Bank of India and subject to the conditions specified therein, from income tax on their income.

V BENEFITS AVAILABLE TO FOREIGN INSTITUTIONAL INVESTOR (‘FII’) DIVIDENDS EXEMPT UNDER SECTION 10(34) OF THE ACT

1. Any income by way of dividends (declared, distributed or paid on or after 1 April, 2003) from a domestic company are exempt in the hands of the Company/shareholders, if the same is subject to dividend distribution tax as referred to in Section 115-O, as per the provisions of section 10(34) of the IT Act. However, Section 94(7) of the IT Act provides that the losses arising on account of sale/transfer of shares purchased up to three months prior to the record date and sold within three months after such date will be disallowed to the extent dividend on such shares are claimed as tax exempt by the shareholder.

INCOME FROM CAPITAL GAINS

2.1 Provisions of Section 115AD of the IT Act, provides for taxing income of FII arising from securities (other than income by way of dividends referred to in section 115(O) of the IT Act) at concessional rates, as follows:

Nature of income Rate of tax (%)

Income in respect of securities (other than units referred to in Section 20 115AB) Long Term capital gains 10

Short term capital gains covered by section 111A 10 Short term capital gains (other than short term capital gain referred 30 to in section 111A)

The above tax rates would be increased by the applicable surcharge, education cess and secondary and higher educations cess.. The benefits of indexation and foreign currency fluctuation protection as provided under Section 48 of the IT act are not available to FII.

2.2 Provisions of Section 111A of the IT Act, prescribes for taxing the short-term capital gains arising from sale of equity share in the Company at a rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess.) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax.

2.3 Provisions of the Double Taxation Avoidance Agreement between India and the country of residence of the FII would prevail over the provisions of the IT Act, as per section 90(2) of the IT Act, to the extent they are more beneficial to the FII.

2.4 Provisions of section 10(38) of the IT Act, exempts from tax on long term capital gains arising on sale of equity shares in the Company where the sale transaction has been entered on a recognized stock exchange of India and is liable to securities transaction tax.

2.5 Provisions of Section 54EC of the IT Act exempts long-term capital gains (which are not exempt under section 10(38) of the IT Act from being taxed to the extent specified therein, subject to the conditions as referred to in the section and to the extent such capital gains are invested within 6 months from the date of such transfer in the bonds (long term specified assets) issued by

(The investment made on or after April 01 2007 in the long term specified asset noted above by an assessee during any financial year cannot exceed of Rs. 50 lakh.)

Provisions of Section 88E provides that where the total income of a person includes income chargeable under the head “Profits and Gains of business or profession” arising from purchase or sale of an equity share in a company entered on a recognized stock exchange, i.e. from taxable securities transactions, he shall get a rebate equal to the securities transaction tax paid by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax on such income.

VI BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES/FUNDS

1. Provisions of Section 10(23FB) of the IT Act, exempts any income of Venture Capital companies/Funds (set up to raise funds for investment in venture capital undertaking registered and notified in this behalf) registered with the Securities and Exchange Board of India, subject to conditions specified therein. However, in view of the provisions of Section 115U of the IT Act, any income derived by a person from his investment in venture capital companies/funds would be taxable in the hands of the person making an investment in the same manner as if it were the income received by such person had the investments been made directly in the venture capital undertaking.

VII BENEFITS AVAILABLE TO NON-RESIDENTS / NON-RESIDENT INDIAN

SHAREHOLDERS (OTHER THAN MUTUAL FUNDS, FII AND FOREIGN VENTURE CAPITAL INVESTORS)

DIVIDENDS EXEMPT UNDER SECTION 10(34) OF THE ACT

1. Any income by way of dividends (declared, distributed or paid on or after 1 April, 2003) from a domestic company are exempt in the hands of the Company/shareholders, if the same is subject to dividend distribution tax as referred to in Section 115-O, as per the provisions of section 10(34) of the IT Act. However, Section 94(7) of the IT Act provides that the losses arising on account of sale/transfer of shares purchased upto three months prior to the record date and sold within three months after such date will be disallowed to the extent dividend on such shares are claimed as tax exempt by the shareholder.

INCOME FROM CAPITAL GAINS

2.1 In terms of first proviso to Section 48 of the IT Act, in case of a non-resident, while computing the capital gains arising from transfer of shares in or debentures of the Company acquired in convertible foreign exchange (as per exchange control regulations) protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case. The capital gains/ loss in such a case is computed by converting the cost of acquisition, sales consideration and expenditure incurred wholly and exclusively in connection with such transfer into the same foreign currency which was utilized in the purchase of shares.

2.2 Provisions of Section 112 of the IT Act, permit taxing long term capital gains (which are not exempt under Section 10(38) of the IT Act) arising on transfer of shares in the Company at a rate of 20 percent (plus applicable surcharge , education cess and secondary and higher educations cess.) after factoring the indexation benefit. However, the share holder may opt for the tax on long term gains computed at the rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess.), if the tax on indexed long term capital gains resulting on transfer of listed securities calculated at the rate of 20 percent exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit.

2.3 Provisions of Section 111A of the IT Act, prescribes for taxing the short-term capital gains arising from sale of equity share in the Company at a rate of 10 percent (plus applicable surcharge, education cess and secondary and higher educations cess.) where such transaction of sale is entered on a recognized stock exchange in India and is liable to securities transaction tax. Short term capital gains arising from transfer of shares in a company other than those covered by Section 111A of the IT Act would be subject to tax as calculated under the normal provisions of the IT Act.

2.4 Provisions of the Double Taxation Avoidance Agreement between India and the country of residence of the FII would prevail over the provisions of the IT Act, as per section 90(2) of the IT Act, to the extent they are more beneficial to the FII.

2.5 Provisions of section 10(38) of the IT Act, exempts from tax the long term capital gains arising on sale of equity shares in the Company where the sale transaction has been entered into on a recognized stock exchange of India and is liable to securities transaction tax.

a. National Highway authority of India constituted under section 3 of The National Highway Authority of India Act, 1988;

b. Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956;

(The investment made on or after April 01 2007 in the long term specified asset noted above by an assesses during any financial year cannot exceed of Rs. 50 lakh.)

2.7 Subject to the conditions specified under the Provisions of Section 54F of the IT Act, long-term capital gains (which are not exempt from tax under Section 10(38) of the IT Act) arising to an individual or a Hindu Undivided Family (‘HUF’) on transfer of shares of the Company will be exempt from capital gains tax if the sale proceeds from transfer of such shares are used for purchase of residential house property within a period of 1 year before or 2 years after the date on which the transfer took place or for construction of residential house property within a period of 3 years after the date of such transfer.

3. Where shares of the Company have been subscribed in convertible foreign exchange, Non- Resident Indians (i.e. An individual being a citizen of India or person of Indian origin who is not a resident) have the option of being governed by the provisions of Chapter XII- A of the IT Act, which inter alia entitles them to the following benefits:

• Under Section 115E, where the total income of a non-resident Indian includes any income from investment or income from capital gains of an asset other than a specified asset, such income shall be taxed at a concessional rate of 20 per cent (plus applicable surcharge , education cess and secondary and higher educations cess.). Also, where shares in the company are subscribed for in convertible foreign exchange by a non- resident Indian, long term capital gains arising to the non-resident Indian shall be taxed at a concessional rate of 10 percent (plus applicable surcharge , education cess and secondary and higher educations cess.). The benefit of indexation of cost and the protection against risk of foreign exchange fluctuation would not be available.

• Under Section 115F of the IT Act, long-term capital gains (in cases not covered by section 10(38) of the IT Act) arising to a non-resident Indian from transfer of shares of the company, subscribed in convertible foreign exchange (in case not covered under Section 115E of the IT Act), shall be exempt from income tax, if the entire net consideration is reinvested in specified assets/saving certificates referred to in Section 10(4B) within 6 months of the date of transfer. Where 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/saving certificates are transferred or converted into money within 3 years from the date of their acquisition.

• Under Section 115G of the IT act, it shall not be necessary for a non-resident Indian to furnish his return of income under Section 139(1) if his income chargeable under the IT Act consists of only investment income or long term capital gains or both, arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the IT Act.

• Under Section 115I of the IT Act, a Non-Resident Indian may elect not to be governed by the foregoing provisions for any assessment year by furnishing his return of income for that assessment year under Section 139 of the IT Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the IT Act.

Section 88E provides that where the total income of a person includes income chargeable under the head “Profits and gains of business or profession” arising from purchase or sale of an equity share in a company entered into on a recognized stock exchange, i.e. from taxable securities transactions, he shall get rebate equal to the securities transaction tax paid by him

36 in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax.

BENEFITS AVAILABLE UNDER THE WEALTH TAX ACT, 1957

1. Investment in shares of companies are excluded from the definition of the term “asset” as given under section 2(ea) of the Wealth Tax act, 1957, and hence the shares held by the shareholders would not be liable to Wealth tax.

BENEFITS AVAILABLE UNDER THE GIFT TAX ACT

1. Gift tax is not leviable in respect of any gifts made on or after 1st October, 1998. Therefore, any gift of shares of the Company will not attract Gift tax.

Notes: • The above Statement of Possible Direct Tax benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of equity shares.

• The above Statement of Possible Direct Tax benefits sets out the possible tax benefits available to the Company and its shareholders under the current tax laws presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws.

• This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences, the changing tax laws, each investor is advised to consult his or her own tax consultant with respect of the specific tax implications arising out of their participation in the issue.

• In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any, between India and the country in which the non-resident has fiscal domicile.

SECTION IV – ABOUT US

INDUSTRY OVERVIEW

The information in this section is derived from various government publications and other industry sources. Neither we nor any other person connected with the Issue has verified or attempted to verify this information. Industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Accordingly, investment decisions should not be based to an undue extent on such information. Industry sources and publications are also prepared based on information and estimates as of specific dates and may no longer be current.

The Indian economy

India is the world’s largest democracy in terms of population, with world bank estimating a population of 1.131 billion people by FY2007. According to the World Bank, India was the twelfth largest economy in the world in the fiscal year ended March 31, 2005. India’s GDP in nominal terms is estimated at approximately US$1070 billion in 2007. (Source: www.worldbank.org.)

In 1991, the Government of India initiated a series of major macroeconomic and structural reforms to promote economic stability and growth. The key reforms were focused on implementing fundamental economic reforms, deregulating industry, accelerating foreign investment and pushing forward privatisation programs in various public sector operations. Partly as a result of the reform program, India’s economy has recently registered significant growth, with average real GDP growth (at factor cost) reaching over 8% in the year ended March 31, 2005. Indian GDP growth is illustrated in the following chart and table:

Annual Percentage Increase in Real GDP at Factor Cost

5 years moving average 10

6 (%) 4

0 2001 2002 2003 2004 2005 2006 2007* Forecast Average

* Projected Source: Asian Development Outlook (2006), Asian Development Bank

(Base Year ended March 31, Prices: 2007(Apr- 1999- 2000 2001 2002 2003 2004 2005 2006 2000) Sep)

Real GDP at factor 17,922,920 18,703,870 19,780,550 20,525,860 22,260,410 23,936,710 25,953,390 13,033,530 Cost (Rs. Million)

GDP at current prices 17,922,920 19,301,840 20,974,460 22,555,740 25,433,960 28,438,970 32,093,970 16,733,120 (Rs million) Real GDP per 17,905 18,355 19,056 19,456 20,746 21,960 23,445 NA capita (Rs.) Sources: (http://www.ibef.org/), Office of the Economic Adviser (http://eaindustry.nic.in/) as of July 01, 2007

As the Indian economy continues to grow, the Indian middle class is also growing, along with increased levels of disposable income. Over time, a high proportion of the population has been moving, and is expected to continue to move, into higher income brackets. In particular, higher income groups have grown at a greater rate in urban centers than in rural areas. The growth of the Indian economy and the growth of the Indian middle class have contributed to an increased demand for improved infrastructure and housing. Further, this growth has also resulted in increased consumerism, which in turn has created higher demand for shopping malls, multiplexes and other shopping and entertainment venues. Hence, in general, the growth of the Indian economy has been acting as a catalyst for growth in the overall infrastructure and real estate sectors in India.

Opportunities in the infrastructure sector

Infrastructure Investments Construction Investments (Rs. in billion) FY05-FY06 FY07-FY08 (P) FY05-FY06 FY07-FY08 (P) Roads 383 528 383 528 Irrigation 423 482 254 289 Airports 38 50 16 21 Urban infrastructure 402 512 241 307 Ports 20 40 10 20 Power 771 572 241 183 Thermal 554 390 111 78 Hydel 163 126 114 88 Nuclear 54 56 16 17 Railways 302 280 127 118 Telecom 315 411 31 41 Tourism 12 17 6 9 Total 2,665 2,892 1,310 1,516

Source: CRIS INFAC Construction Update – July 2006

The following graph shows in percentage terms the portion of various segments of infrastructure creation that is comprised of construction activity.

Construction as a Component of Infrastructure Creation

100% 100%

80% 70%

60% 60% 60% 55% 50%

42% 42% 40% 30%

20% 20%

0% Roads and Hydel pow er Irrigation Urban Tourism Ports, Docks & Railw ays & Civ il Aiviation Pow er - Nuclear Pow er - Thermal Buildings Infrastructure Lighthouses Airports

Source: CRIS INFAC Construction Update – December 2006

Total infrastructure construction investments are expected to exceed Rs. 1,586 billion in fiscal 2008, growing at a CAGR of 11% over fiscal years 2007 and 2008) as compared to Rs. 1,290 billion investments in fiscal years 2005 and 2006. (Source: CRIS INFAC Construction Update – December 2006) The following graph details the anticipated 11% growth in amounts that is expected to be spent on construction that is related to infrastructure projects over fiscal years 2007 and 2008.

Infrastructure construction investments to grow by 11 percent

Source: CRIS INFAC Construction Update – December 2006

According to CRIS INFAC the investment in the infrastructure sector is expected to increase at an annual rate of 14 percent for next 5 years (2006-07 to 2010-11). These projects would translate into investments worth Rs 6,129 billion for the construction industry. (Source: CRISINFAC Annual Construction Review – May 2007).

Key segments of the infrastructure sector

Some key segments of the infrastructure sector are described below.

Roads

The Economic Survey 2005-06 of the Government of India states that India has the largest road network in the world. The following table depicts the breakdown among the various categories of roads in India and the entities responsible for creating and maintaining them.

Authorities Responsible for Construction & Approximate Network Road Category Maintenance Length (km)

National Highways (including Central Government (through Ministry of 66,790 200 kms of expressways) Shipping, Road Transport and Highways) State Highways State Governments (Public Works Departments 131,899 or PWDs) Major District Roads State Governments / State Government Entities 467,763 Village and Other Roads Rural Engineering Organisations, Local Authorities such as Panchayats and 2,650,000 Municipalities Total 3,300,000 Source: NHAI website (www.nhai.org), as of July 01, 2007

According to the National Highways Authority of India (NHAI), Indian roads currently carry 80% of India’s overland passenger traffic and 65% of its freight traffic.

The strong economic growth witnessed by India over the last decade has been accompanied by a substantial increase in the production and sale of motor vehicles. The annual domestic sales of passenger cars and utility vehicles (UVs) are expected to accelerate over next 5 years, which will increase the demand for road usage. Another factor that is expected to increase the demand for road transport is increased tourism. The government has taken initiatives to increase tourism in India, which, if successful, will increase the traffic on the country’s roads.

The NHAI, which was constituted by an act of the Parliament, is entrusted with the implementation of the National Highways Development Project (NHDP) through a variety of funding options. The primary focus of the NHDP, which was launched in 1999, is the development of international-standard roads with facilities for the uninterrupted flow of traffic with enhanced safety features, better riding surfaces and improved traffic management. The following gives an update on the status of various NHDP phases:

Status of NHDP & Other NHAI projects as on 31st March, 2007 NHDP NS & EW Port Other NHDP GQ Phase Total Corridors Connectivity NHs Phase V IIIA Total length (km) 5,846 7,300 380 945 4,000 6,500 24,971 Completed projects four- laned (Km) 5,556 1,129 148 287 30 0 7,150 Completed 95% 15% 39% 30% 1% 0% 29% Projects under implementation Length (Km) 290 5,149 211 638 1,767 148 8,203 No. of contracts 33 147 7 16 27 2 201 Contracts to be awarded Length (Km) 0 996 21 20 2,203 6,352 9,618 Contracts to be arded 0% 14% 6% 2% 55% 98% 39% Sources: CRIS INFAC Annual Construction Review - .May 2007

According to CRIS INFAC the investments in roads sector are expected to grow at an annual rate of 15 per cent over the next 5 years, with a likely increase from Rs 1,167 billion in the past 5 years (2001-02 to 2005-06) to Rs 2,306 billion in the next 5 years (Source: CRIS INFAC Annual Construction Review – May 2007).

Hydropower

According to the Ministry of Power, the total installed capacity for power generation in India

41 is close to 128.4 GW. Of the total installed capacity, 84.4 GW is thermal power-based capacity and 33.9 GW is hydropower-based capacity. The share of hydropower has decreased over the years. The average power deficit in India from April 2006 to January 2007 was ~9.3%, with the peak power deficit at ~13.9%. The Government has set a target of providing “Power for All” during the Tenth and Eleventh Plans, which would provide a greater portion of the population of India with access to power. Based on the 16th Electricity Power Survey prepared by the Central Electricity Authority, India (CEA), the country would require additional capacity creation of nearly 100,000 MW by 2012 to achieve this goal.

According to CRIS INFAC (Source: CRIS INFAC Annual Construction Review – May 2007) the investment in power sector over next 5 years is expected to be around Rs 3,150 billion vis-à-vis Rs 1,873 billion invested in the previous 5 years. A major portion (71 per cent) of the investment in expected towards generation and the remaining towards transmission and distribution (T&D). These investments in power over the next 5 years will generate construction investments worth Rs 861 billion as shown in the graph below.

1600000

1400000

1200000

1000000

800000

600000

400000

200000

0 Thermal Hydel Nuclear Total Investments Construction Investments

Source: CRIS INFAC Construction Annual Review – May 2007. (Figures in Rs. Million)

Hydropower offers many benefits over more traditional sources of power, such as oil and coal:

It is environmentally friendly;

It is useful for meeting peak load requirements; and

There is no fuel cost during the life of the project.

There is a large underutilised potential for hydropower generation in India of approximately 120,000 MW, according to the following chart published by CEA.The Ministry of Power has taken several steps to accelerate capacity addition from hydropower projects, including:

Increased budgetary allocation for the hydropower sector;

Investment approvals of new hydroelectric projects;

Preparation of pre-feasibility reports of 162 schemes with aggregate capacity of 47,930 MW;

Identification of new projects by the government for advanced action;

Promotion of State Government projects that were languishing or delayed due to inter-State disputes;

Improving tariffs for hydropower projects (including approval of premiums on tariff rates charged during peak periods);

Promotion of a national power trading market to help enable profitable contracting, especially to service peak load requirements;

Simplification of procedure for government clearances; and

Levy of 5% development surcharge approved by the Central Electricity Regulatory Commission to supplement resources for hydropower projects by the National Hydroelectric Power Corporation.

Hydropower Potential in India 148,701 150,000

125,000

100,000

75,000 58,971 53,395 50,000 44,318 (Hydropower Potential in MW)

25,000 20,823 16,458 10,949 8,928 9,865 6,181 3,500 3,946 0 Northern Western Southern Eastern North Eastern Total Regions of India

Potential Assessed Developed & Under development

Source: Central Electricity Authority (CEA) website, data as on 31st March, 2007

The government is taking initiatives to correct the anamoly in the power sector which currently stands in the favor of thermal power at 25:75 as against the global mix of 40:60 (Source: CRIS INFAC Annual Construction Review – May 2007). The government's thrust on hydel power can be gauged from the fact that 36 per cent of the planned capacity addition during the Tenth Plan and the Eleventh is in hydel power. This translates into a sharp increase in construction activity.

Irrigation and water supply

We expect that irrigation and water supply investments will be a major contributor to total infrastructure investment in the next three years. These projects are expected to be funded principally by State Government allocations. The key states leading in this industry sub- segment are Andhra Pradesh, Gujarat, Maharashtra, Karnataka and Uttar Pradesh. The State of Andhra Pradesh alone is expected to spend Rs. 460 billion over the next five years. (Source: www.aponline.gov.in). According to CRIS INFAC (Source: CRIS INFAC Annual Construction Review – May 2007) the total investment in irrigation for next 5 years is expected to be around Rs 1,240 billion as compared to total investments of Rs 844 billion made over the previous 5 years. Investments in irrigation are likely to lead to a construction demand of Rs 744 billion over the next 5 years.

Water supply projects are primarily city specific, with the end-users being industrial and residential entities. The government plans have emphasised the need to provide for the creation of more of these infrastructure facilities and to increase coverage of the urban population with access to better water supply facilities and sewage and sanitation facilities. In addition, the increasing urbanisation of India will lead to increased demand for water supply and sewage services in the urban areas, creating ongoing opportunities for construction companies in this segment. Urban population in India has grown to 27.8 per cent of total population in 2001 from 23.3 per cent in 1981 (Source: CRIS INFAC Annual Construction Review – May 2007). Going forward, it is expected that urbanisation will continue to accelerate, translating into an urban population

43 growth of 2.27 per cent until 2011, as compared with overall population growth of 1.5 per cent. The growth in urbanisation will call for greater provisions of water, sanitation, and other public utility projects.

Infrastructure needs in Bangalore and at the state and national levels

In recent years, Bangalore has enjoyed rapid economic development and has become known as India’s IT center, with the nickname of India’s “Silicon Valley”. Nearly all well-known international IT firms are represented there.

However, the infrastructure of Bangalore has not been able to keep pace with the rapid development of its IT market. The road network, electricity grid and water supplies are overloaded, the local public transport network needs upgrading and the airport needs additional capacity. The Bangalore government has made efforts to improve the city’s transport infrastructure, including building an underground railway, a new airport in northern Bangalore, which is scheduled to open its first phase by the end of 2007, and the rehabilitation, upgrading and strengthening of the region’s roadways. Continued significant infrastructure investment will be required for the foreseeable future to meet Bangalore’s needs.

The infrastructure of the state of Karnataka, in which Bangalore is located, and in the other states in which the Company has undertaken civil engineering and construction projects, is also generally in need of substantial and continuing investment. Investment will come in large part from state-level and national-level government funding.

The Indian real estate market

Overview

The growth in India’s economy, coupled with an increase in disposable income and urbanisation rates, has fueled growth in India’s real estate sector. Real estate involves the purchase, sale and development of land and residential and non-residential buildings. The Indian real estate market covers residential housing, commercial offices, trading spaces, such as theaters, hotels and restaurants, retail outlets, industrial buildings such as factories, and government buildings. The real estate development and construction sectors play an important role in the overall development of a country, especially in the development of the country’s infrastructure. The size of the Indian real estate sector is estimated to be over US$12 billion (Source: Federation of Indian Chambers of Commerce and Industry). Further, average prices for both residential and commercial properties rose significantly between 2000 and 2006 as demand for real estate increased.

Key drivers of India’s real estate market

Population growth

India has a population of approximately 1.13 billion by FY2007 (Source: www.worldbank.org). About one in every sixth person on earth lives in India, and the growth rate of the population is still rapid. One in every three Indians is under the age of 15, and only one in three is older than 35. This ratio compares favourably against China and Europe, where nearly 50% and 60% of the population, respectively, is older than 35. Further, the median age of the Indian population is 24 years, as compared to 33 years in China. The general demographic trends in India of high but falling birth rates, increasing life expectancy and declining infant mortality are expected to persist in the coming years. As a result, by 2030, India is expected to be the most populous country in the world. By 2050, roughly 1.6 billion people will live on the Indian subcontinent, or approximately 200 million more than in China. The already impressive number of 700 million people of employable age in India is expected to grow by another 250 million in the next 20 years. (Source: United Nations Population Division)

Increasing urbanisation

India’s economic development is bringing about a transformation of its cities, with an increasing number of people migrating to urban areas in search of better prospects. According to the last official estimate by the Census of India, there were a total of 27 cities with more than one million inhabitants in 2001, in which nearly 75 million people lived. By 2005, there were 35 cities with a population of more than one million and almost 500 cities with at least 100,000 inhabitants. This trend is just the beginning as there are still many factors that will continue to fuel the ongoing transformation of India’s cities. For example, India is still a predominantly rural society. While more than 300 million Indians now live in an urban environment, this means that nearly 800 million people are still at home in rural areas. Going forward, urbanisation is expected to accelerate with a growth of 2.27 percent till the year 2011 as compared with overall population growth of 1.5 per cent. This difference in growth rates implies that the gap between the urban and rural population will narrow (Source: CRISINFAC Annual Construction Review – May 2007).The growing Indian cities will need to continue to improve and modernise their residential and commercial property capacities and transportation infrastructure, which, in turn, is expected to accelerate the pace of transformation of the cities.

Total Construction Investment 2006-07 to 2010- Growth (Rs billion) 2001-02 to 2005-06 11 (E) (%) Real estate 10,218 18,517 12.6 Housing 9,810 17,338 12.1 Commercial real estate 408 1,179 23.6 Source: CRIS INFAC Annual Construction Review - May 2007

Commercial and service industry boom

The commercial real estate market in India has been continuously evolving in response to a number of changes in the business environment. India is a prime destination for information technology (IT) services outsourcing. According to CRISINFAC, commercial construction is expected to increase over the next 5 years from Rs 408 billion to Rs 1179 billion (Source: CRIS INFAC Annual Construction Review – May 2007). This is likely to be driven by office space projects which include the demand from IT/BPO centres, banking and financial services, FMCG and telecom. Within office space construction, 70-75 percent demand is expected from ITES sector due to India’s emergence as a preferred outsourcing destination. The growth in the sector should translate into substantially higher demand for commercial space. CRIS INFAC believes that the growth in IT/ITES is likely to translate into construction investments of Rs 148 billion (118 million sq.ft.) by 2007-08 as compared with investments of Rs. 74 billion (61 million sq.ft.) in the last three years. This investment forecast is based on manpower/ workspace requirements in the sector. The table below illustrates some of the upcoming ITES projects in India.

Upcoming ITES projects in India Project Cost Company Name Project Name Project Status (Rs.mn )

Clinical Data Management (Cdm) Centre Under Reliance Life Sciences Pvt Ltd 5,000 Project Implementation Enron India Pvt Ltd Internet Data Centre Project Proposed 3,000 Under Cisco Systems India Pvt Ltd Sarjapur I T Campus Project 2,000 Implementation Hexaware Technologies Ltd Airoli It/Ites Campus Project Proposed 2,000 Under Hexaware Technologies Ltd Pune It/Ites Campus Project 2,000 Implementation Teledata Informatics Ltd K P O Centre Project Announcement 2,000 D S S Mobile Communications Ltd Guwahati Call Centre Project Proposed 1,900 Under Bahwan Cybertek Pvt Ltd Global Excellence Centre Project 1,300 Implementation Keane India Ltd Hyderabad Bpo Project Announcement 1,150 A B N Amro Global Trade & Under Chennai Bpo Project 960 Advisory Implementation Techspan India Ltd Call Centre Project Announcement 890 Cbay Systems (India) Pvt Ltd Healthcare Bpo Project Announcement 800 Source: CRIS INFAC Annual Construction Review – May 2007

Currently, almost 60% of India’s growth in commercial office space is concentrated in Bangalore, Chennai and Hyderabad. Infotech cities such as Bangalore, Mumbai and Delhi (the national capital region) are leading the race, adding millions of square feet of quality office space. An increase in activity is also seen in other cities such as Pune, Hyderabad, Chennai, Kolkata, Thiruvananthpuram and Chandigarh. (Source: CRIS INFAC Construction Annual Review February 2006.)

Growing middle class

The increase in per capita annual disposable income has led to corresponding growth in the size of India’s middle class. The burgeoning middle class also serves as an indicator that an increasing number of higher income people will enter the property market. Rapid population growth, rising incomes, decreasing household sizes and a housing shortage of currently 20 million units will call for extensive residential construction. CRIS INFAC estimates that the growth momentum in housing witnessed in the last five years will be sustained over the next five years, with the total expenditure on housing expected to grow at a CAGR of 18.6 percent. New house additions are expected to rise at a CAGR of 4.1% over the next five years to reach 1.93 million by 2009-10 (Source: CRIS INFAC Annual Housing Review -2007). The financing of owner-occupied housing in particular holds out enormous market potential. The increased purchasing power of the middle class is also expected to drive up retail sales.

Shift in consumer preferences from rented houses to owned houses

Due to the changing demographic profile in India, there has been a steady decline in the proportion of households staying in rented premises over the years. To a certain extent, this change in preferences may be attributed to the rising income levels of the population. However, with fewer properties available to rent today and a rise in the rentals charged consumers have found it more prudent to invest in real property. An upward movement in standard of living and easy availability of finance are expected to fuel this trend of declining proportion of households staying in rented premises. (Source: CRIS INFAC Annual Review on Housing Industry, January 2006)

Year Owned Leased Others Total Urban areas (%) 1981 44.6 50.8 4.6 100.0 1991 63.0 34.0 3.0 100.0 2001 60.7 33.8 5.5 100.0 2002 60.0 33.9 6.1 100.0

Rural areas (%) 1981 91.2 3.4 5.4 100.0 1991 95.0 3.0 2.0 100.0 2001 92.9 4.3 2.8 100.0 2002 93.1 4.1 2.8 100.0 (Sources: MUDA, MOSPI, NSSO and CRIS INFAC)

Trends in housing by occupancy status Urban Rural Year Owned Hired Others Owned Hired Others 1981 44.6 50.8 4.6 91.2 3.4 5.4 1991 63.0 34.0 3.0 95.0 3.0 2.0 2001 66.8 28.5 4.7 94.4 3.6 2.1 Source: Census 2001, CRISIL Research

Shrinking household size

The joint family system in India is gradually giving way to nuclear families. Consequently, the average size of an Indian household has shrunk from about 5.52 persons in 1991 to about 5.30 persons in 2001. In addition, factors such as increasing urbanisation and migration for employment opportunities are expected to cause a decrease in the size of the average Indian household to about 5.08 persons by 2011 (Source: CRIS INFAC Housing Annual Review). Given India’s increasing population, the trend toward contraction in the size of the average household should lead to an increase in the demand for housing.

Capital market investments

Real Estate Mutual Funds (REMFs) and Real Estate Investment Trusts (REITs) are expected to be introduced in India by new legislation in the near future. The plan to set up REITs/REMFs has been outlined in the draft National Housing and Habitat Policy 2005, circulated by the Union Ministry of Urban Employment and Poverty Alleviation. The Association of Mutual Funds in India has submitted a draft proposal to SEBI on REMFs. The market regulator, SEBI, is expected to lay down a framework for the introduction of real-estate mutual funds shortly. REITs and REMFs will allow individuals with small amounts of cash to pool their resources to take advantage of returns available from the buoyant housing and real- estate market. Larger funds will become available for investment in housing related projects. Domestic mutual fund players and investors are keenly awaiting the introduction of REITs/REMFs to tap this segment.

We expect these seven key drivers together will encourage a sustainable rate of growth in the real estate market. With a growing population and increasing urbanisation, the joint family system giving way to formation of nuclear families, rise in disposable income, the demand for housing in India as it stands today far exceeds the supply.

Bangalore real estate market

Population pressures have placed a great demand on the Bangalore real estate market. Bangalore’s population has grown at an annual rate of about 9% from 4.1 million in 2001 to about 6.8 million in 2007 (Source: Census of India 2001, http://www.bmponline.org/). Villagers as well as professionals from other major cities have migrated to Bangalore seeking job opportunities as well as a higher standard of living.

Commercial segment

Bangalore is emerging as the highest consumer of Commercial Real Estate space due to the booming IT/ITES sector. The shift has been from the CBD to the suburbs with larger floor plates. The preference is now towards building one’s own campus which is the factor for the development of many business parks with world class facilities. The first office buildings were constructed in the city center (CBD) around Mahatma Gandhi Road. In recent years, office demand has risen faster than supply. As the demand for modern office space has continually increased, new office locations have had to be developed in the southern and eastern areas

47 of Bangalore.

The rents in the Bangalore CBD have risen considerably due to shortage of office space. As tenants are predominantly looking for large and contiguous accommodation and the traffic conditions in the CBD act as a disincentive for some new tenants, rents in the periphery of the city are increasing to the point that they are only marginally less than in the CBD. Also, the ease of developing space in the periphery allows for more stable rents there.

Retail segment

According to A.T. Kearney’s Global Retail Development Index, India has been marked as the most compelling opportunity for retailers in 2005. The strengthening macro-economic scenario and changing demographic profiles have had major roles in the growth and emergence of the retail sector in India. Changing consumption patterns and accessibility to low-cost consumer credit together with improvements in infrastructure and increased availability of retail price will serve as additional catalysts for the retail sector growth.

The retailing sector is experiencing tremendous boost and the key factors driving this growth include – rising disposable incomes, demographic changes (such as a growing number of working women who spend more, the growing number of nuclear families, higher income levels within the urban population), the change in perception of branded products, growth in retail malls, the entry of international players, and the availability of cheap finance.The sector is witnessing an influx of large domestic and international conglomerates that wish to tap Indian retail opportunities and capture market share. In addition, large investment announcements have been made both in respect of front-end as well as back-end operations. Major business groups such as Reliance, Bennet & Coleman, Hindustan Lever, Hero Group and Bharti have announced their intentions to enter the organised retail sector. International retailers such as Metro, Shoprite, Lifestyle and Dairy Farm International have already commenced operations in the country. According to CRIS INFAC Annual Construction Review – May 2007, over the next 5 years, an investment of Rs 176 billion is expected in organised retail construction.

Challenges facing the Indian Real Estate Sector

Regional focus of existing players. Considering the peculiar features of the real estate sector, such as the differing tastes of populations across various geographies, difficulties with respect to mass land acquisition in many locations, the general absence of business infrastructure for the marketing of projects outside home regions, the high number of approvals required to be obtained from different authorities at various stages of construction and the long gestation period of projects, a large number of real estate developers in India are regionally based and active in areas where the conditions are most familiar to them. As a result, currently there are very few players in the country who can claim to have a national area of operations.

Majority of market belonging to unorganised segment. As a result of the high proportion of building activity undertaken by small builders and contractors, there is a lesser degree of transparency in dealings and less sharing of data across players than in industries that are less fragmented.

Demand dependent on many factors. Factors that influence a customer’s choice of property are not restricted to quality alone, but also include a number of additional factors, including proximity to urban areas and amenities such as schools, roads and water supply. Demand for housing units is also influenced by policy decisions relating to housing incentives.

Increasing raw materials prices. Construction activities are often funded by the client, who makes cash advances at different stages of construction. As a result, the final amount of revenue from a project is pre-determined and the realisation of this revenue is spread across the period of construction. As a result, cost increases remain a significant challenge for real estate developers. The real estate sector is dependent on a number of components such as cement, steel, bricks, wood, sand, gravel and paints. As the revenues from the sale of units are pre-determined, adverse price changes in any of raw materials categories directly affect a developer’s bottom line.

Interest rates. One of the main drivers of the growth in demand for housing units is the availability of finance at low rates. Interest rates, however, have shown signs of increasing recently and many leading financial institutions have raised interest rates on housing loans. This trend of rising interest rates may dampen the growth of demand for housing units.

Tax incentives. The existing tax incentives available for housing loans are one of the major factors influencing demand. These tax incentives, however, are based on recommendations of various committees and panels, and are likely to be withdrawn in the future. The Kelkar Panel has recommended phasing out the income tax deduction available on interest paid in respect of housing loans for owner-occupied houses for the assessment years 2004-05 to 2006-07.

OUR BUSINESS

Overview

Any references to “we”, “us” or “our” in this section wherever relating to past history or activities refers to the history of, or activities carried out by, R.N. Shetty & Co. since formation until August 06, 2003, R.N. Shetty & Co. Private Limited from August 06, 2003 to December 21, 2005, RNS Infrastructures Private Limited from December 2, 2005 to January 10, 2006, RNS Infrastructures Limited from January 10, 2006 to February 8, 2006 and thereafter to RNS Infrastructure Limited.

For the year ended March 31, 2007, during which time we entered the real estate development business, our total income from construction and real estate development

50 operations was Rs. 2,190.69 million. For the years ended March 31, 2004, 2005 and 2006, our total income from civil engineering and construction operations was Rs. 1,276.84 million, Rs. 1,339.48 million and Rs. 1,339.74 million, respectively.

Real Estate 630.74 - - - Construction 1,559.95 1,339.74 1,339.48 1,276.84 Automobile 2,024.80 2,272.07 1,836.99 1,681.17 dealership

Our Competitive Strengths

Our principal competitive strengths include the following:

Experience and expertise in the civil engineering and construction business

We have been in the civil engineering and construction business for more than 45 years. Over the course of time, we have developed expertise in executing complex projects on a timely basis. We are in general the primary contractor on our civil engineering and construction projects. Our clients include government and government-related entities and private sector entities.

Real estate development rights in respect of sizeable land resources

In respect of our real estate development business, we have entered into 14 joint development agreements and one joint venture agreement with certain of our Promoter Group companies and other affiliates to develop land held by them. As of June 30, 2007, pursuant to such arrangements, we have access to approximately 35.26 million sq.ft. of land. It is the joint intention of the relevant parties to the joint development agreements and the joint venture agreement to begin developing most of this land in the next four to five years. In addition, over the course of these years, we expect to directly acquire additional land and pursue opportunities to develop land held by others through joint development agreements or other arrangements. The following is a summary of the geographic breakdown of the land covered by our joint development agreements and the joint venture agreement as on June 30, 2007:

City Land (in million sq.ft.) Ongoing projects (in million sq.ft.)

Bangalore 27.664 0.551 Mangalore 0.703 - Hubli 6.715 - Karwar 0.174 - Total 35.257 0.551

Ability to apply construction expertise to real estate development

Focus on the Bangalore region

Established reputation

We believe that we have an established reputation in the Indian construction market, especially in South India, through our track record of timely execution of complex civil engineering and construction projects. Our philosophy is to emphasise performance and project execution in order to help ensure that our quality standards are adhered to at every stage of a project. We believe that our reputation helps us to win new civil engineering and construction projects and to attract professionals and partners to collaborate with us on our projects. We also expect that our reputation will help us to market and sell our real estate development projects.

Qualified and experienced management team and employee base

We have an experienced and qualified management team and employee base. As of June 30, 2007, we employed 335 full-time employees, of which 130, or 38.81%, were engineers. Our Chairman, Mr. R.N. Shetty, managing director and CEO, Mr. Naveen Shetty, and whole time director, Mr. Satish R. Shetty, have approximately 45 years, 14 years and 20 years of experience, respectively, in the construction field. In addition, several members of our management team have over 20 years of experience in the construction field. By capitalising on the collective technical expertise of our staff, we have been able to manage our civil engineering and construction projects and project management functions internally and adapt to the technical requirements of the various projects that we undertake.

Our Strategies

We are committed to maintaining our civil engineering and construction business and building our new real estate development business. The key elements of our business strategy are as follows:

Expand the real estate development business through the development of land for which we currently have the right to develop

Through the 14 joint development agreements and the joint venture agreement that we entered into with our Promoter Group and other affiliates, we have access to over 35 million sq.ft. of land for development. We plan to develop all or most of this land within the next four to five years. Through a joint venture, we commenced development and construction of the first phase of our first real estate development project in June 2006 in Yeshwantpur, Bangalore, where we are jointly developing a 274-flat residential building. We expect this phase to be completed in 2008. We expect to commence construction of the second phase, which consists of a 176-flat residential building, in September 2007. The third and final phase of this project involves the development and construction of a commercial mall for which have yet to receive the required government approvals. The Yeshwantpur project is expected to be completed in 2009. We expect to commence construction activities on our second real estate development project in Channasandra, Bangalore around September 2007, subject to the receipt of all requisite governmental approvals. The first phase of the Channsandra project will consist of 512 flats in four residential buildings. Development plans for the second phase of the Channasandra project have not yet been finalised. The Channasandra project is expected to be completed in March 2011. With respect to the land that is subject to the 13 other joint development agreements, we are in various stages of planning and have not yet sought government approvals.

Focus on higher margin civil engineering and construction projects

We have expertise in executing a number of different types of civil engineering and construction projects. In the future, we intend to focus on bidding for projects where we believe that our particular areas of expertise could help us to achieve higher margins, such as power projects and irrigation and water supply projects.

Acquire our own land

Our strategy is to acquire our own land on which to develop real estate projects. As of June 30, 2007, we own 442,134 sq.ft. of land located in Hubli. We regularly review and evaluate opportunities to acquire land for our future real estate development and construction projects. We will focus on areas where we see value enhancement opportunities and where we believe there will be increased demand for residential or commercial construction. We believe that our knowledge and understanding of the real estate market in and around Bangalore will enable us to seek and capitalise on land acquisition opportunities.

Focus on performance and project execution

We intend to continue to focus on performance and project execution to help maximise client satisfaction. We also intend to continue to control operating and overhead costs to help maximise our operating margins. To facilitate efficient and cost-effective decision-making, we intend to continue to strengthen our internal systems, processes and methodologies.

Continue investment in technology

We intend to continue to upgrade our technology. Even though the civil engineering and construction and real estate development businesses are labor intensive, we believe that there is an increasing need to mechanise processes involved in order to minimise costs and increase efficiency. We intend to continue to invest in mechanised and technological construction capabilities in order to increase the scale of our operations and improve the quality of our products and services.

Our business

Our operations can be divided into two segments:

civil engineering and construction; and

real estate development.

Civil engineering and construction

Our Promoters began, and we continue the business of, providing civil engineering and construction services for infrastructure and civil construction projects, with a combined track record of over 45 years. Our civil engineering and construction project expertise includes the construction of national highways, bridges, tunnels, power houses, canals, dams, irrigation projects, reservoirs and commercial buildings. The portfolio of infrastructure projects that we have successfully executed and are currently executing includes power projects, irrigation and water supply projects and transportation engineering projects. Our portfolio of civil construction projects includes hospitals, hotels and other commercial buildings.

Power projects

We have successfully executed a number of complex power projects involving the construction of hydro electric dams, powerhouses and other power facilities. The following table provides a brief summary of some of the notable power projects that we have undertaken and completed.

Name of Project Client Location(s) Contract Value Completion Date Received (in Rs. million)

Bellary Thermal Karnataka Power Bellary, Karnataka 251.001 2007 Power Station Corporation Limited Sharavathi Tailrace Karnataka Power Uttara Kannada, 1,381.80 2000

Hydro Electric Corporation Limited Karnataka Project (construction of Gerusoppa Dam)

Construction of Murdeshwar Power Narayapur 611.70 1997 Powerhouse at Corporation Limited Narayanapur Dam

Varahi Hydro Karnataka Power Varahi, Shimoga 205.00 1990 Electric Project Corporation Limited (construction of approach channel, intake structure and underground powerhouse)

Kalinadi Hydro Karnataka Power Supa, Shimoga 240.00 1984 Electric Project Corporation Limited (construction of Supa Dam and related water conductor systems)

1 Estimated contract value. The project was completed in June 2007. The final contract value is subject to issuance of the final bill and receipt of completion certificate.

As of June 30, 2007, we are executing one power project involving the construction of the Talamba Dam in the Sindurdurg District of Maharashtra for Konkan Irrigation Development Corporation. The original contract value of this project is Rs. 2,016.00 million. Due to price escalation since the award of the project in 1999, the management of the Company estimates that the total estimated contract value is Rs. 3,100.00 million. This project is expected to be completed in 2009. Including management estimates as to price escalation, our Order Book as of June 30, 2007 for this project is Rs. 2,950.00 million.

Irrigation and water supply projects

We have a long history of successful execution of irrigation and water supply projects. We have successfully completed a number of projects involving the construction of dams, tunnels, canals and other irrigation systems. The following table provides a brief summary of some of the notable irrigation and water supply projects that we have undertaken and completed.

Name of Project Client Location(s) Contract Value Completion Date Received (in Rs. million)

Construction of Krishna Bhagya Jala Indi, Bijapur 2,350.00 1998 Distributory Canal Nigam Limited and No-11 & 13 IBC (Km World Bank 30 to 64)

Construction of IBC Krishna Bhagya Jala Bijapur 94.50 1995 main canal Nigam Limited and World Bank Mani Dam Karnataka Power Shimoga 87.70 1988 Corporation Limited Rajanakolur Tunnel Krishna Bhagya Jala Gulbarga 137.90 1984 (3.00 km length and Nigam Limited 10.1 m diameter)

As of June 30, 2007, we are executing a number of irrigation and water supply projects. Our Order Book as of June 30, 2007 for irrigation and water supply projects is Rs.627.00 million. The following table provides a brief summary of the power projects that we are currently executing.

Name of Project Client Location(s) Estimated Estimated Expected Contract Balance Completion Value Contract Date (in Rs. million) Value (in Rs. million)

Canal for Upper Karnataka Shimoga District, 159.00 10.50 2007 Tunga project Neeravari Karnataka Nigam Limited Canal and Irrigation Mahabubnagar 708.00 616.50 2008 distributory system Department, District, Andhra for Rangasamudram Government of Pradesh Balancing Reservoir Andhra Pradesh (through RNS-GSR Joint Venture) 2 2 The construction agreement with respect to this project was entered into by R.N. Shetty & Company Private Limited, on behalf of the joint venture entity.

Transportation engineering projects

We have successfully executed a number of notable transportation engineering projects involving the construction of national highways, bridges and roads. The following table provides a brief summary of some of the notable power projects that we have undertaken and completed.

Name of Project Client Location(s) Contract Value Completion Date (in Rs. Million)

Rehabilitation of Karnataka State Mariyamanahalli to 315.003 2007 road Highway Ittagi Improvement Project Widening and National Highway Belgaum Bypass 976.004 2007 improvement of Authority of India (Km 495 to 515) certain portions of National Highway 4, including Belgaum Bypass and flyovers (through RNS- SunCon Joint Venture) Widening and National Highway Dharwad to Belgaum 2,048.005 2007 improvement of Authority of India (Km 433 to 495) certain portions of National Highway 4, including construction of concrete road and river bridge (through SunCon- RNS Joint Venture) Rehabilitation of Karnataka State Maski 113.70 2005 Road from Sindhnur Highways to Lingsugur Improvement Project

Construction of National Highway Koppal 50.00 2001 National Highway 63 Division, Bijapur (Km 200 to 223 and 240 to 267.6)

Road improvement National Highway Karwar 41.28 2001 of National Highway Division, Karwar 206 (Km 300 to 312, 331 to 350 and 350 to 365.3)

Konkan Railway Konkan Railway Ratnagiri, Goa 216.70 1995 Project (construction Corporation Limited of tunnels for railways)

3 Estimated contract value. The project was completed in May 2007. The final contract value is subject to issuance of the final bill and receipt of completion certificate. 4 Estimated contract value. The project was completed in April 2007. The final contract value is subject to issuance of the final bill and receipt of completion certificate. 5 Estimated contract value. The project was completed in June 2007. The final contract value is subject to issuance of the final bill and receipt of completion certificate

As of June 30, 2007, we are executing a number of transportation engineering projects. Our Order Book as of June 30, 2007 for transportation engineering projects is Rs. 1,828.24 million. The following table provides a brief summary of the transportation engineering

55 projects that we are currently executing.

Name of Project Client Location(s) Estimated Estimated Expected Contract Value Balance Completion (in Rs. million) Contract Date Value (in Rs. million)

Rehabilitation of Karnataka State Sindhanur to 251.00 2.60 2007 road Highway Devinagar Improvement Project Upgrading of road Tamil Nadu Road Ramanathpur to 1,550.006 1465.34 2008 (through RNS- Sector Project Tuticorin GPL Joint Venture) Rehabilitation and Bangalore South Zone of 478.00 360.30 2008 strengthening of Mahanagar Bangalore 13 roads Palike 6 The original contract value is Rs. 1,192.60 miliion. Due to price escalation since the award of the project in 2005, the management of the Company estimates that the total estimated contract is Rs. 1,550.00 million.

Civil construction projects

The following table provides a brief summary of some of the notable civil construction projects that we have undertaken and completed.

Name of Project Client Location(s) Contract Value Completion Date Received (in Rs. million)

Engineering College RNS Engineering Bangalore 150.00 2005 Building and Hostel College Building

Factory buildings Murudeshwar Hubli, Chalmatti, 380.00 2004 (three) Ceramics Limited Karekal in Pondecheri Commercial RNS Motors Hubli, Bangalore, 71.60 1996, 1998, 1999 buildings for Murudeshwar and and 2000 automobile Bijapur dealerships

Super Specialty KLE Society Belgaum, north 220.00 1998 Hospital Karnataka

Hotel Naveen Naveen Hotels Hubli 78.50 1995 Building Limited

As of June 30, 2007, we are executing one civil construction project involving the construction of a five star hotel in Yeshwantpur, Bangalore for Naveen Hotels Limited (estimated contract value of Rs. 758.70 million). This project is expected to be completed in 2008. Our Order Book as of June 30, 2007 for this project is Rs. 510.80 million.

Our business process for civil engineering and construction projects

Business development

We enter into contracts principally through a competitive bidding process. Government clients typically advertise potential projects in leading national or regional newspapers or on their websites. Our tendering department regularly scans such advertisements to identify projects that could be of interest to us. The tendering department evaluates bid opportunities and decides whether we should pursue a particular project based on various factors, including the client’s reputation and financial strength, the geographic location of the project, the projected scope of work and the degree of difficulty in executing the project in such location, our current and projected workload and the project’s cost and profitability estimates (including cost and availability of raw materials and equipment). Once we have identified projects that meet our criteria, we submit an application to the client according to the procedures set forth in the

56 advertisement.

Tendering

The Company has a centralised tender department that is responsible for applying for all pre- qualifications and tenders. The tender department evaluates whether the credentials of the Company meet the stipulated eligibility criteria in the advertisement seeking bids for the project. We endeavor to qualify on our own for projects in which we propose to bid. In the event that we do not qualify for a project in which we are interested due to eligibility requirements, including due to the size of the project or other reasons, we may seek to form strategic alliances or project-specific joint ventures with other relevant experienced and qualified contractors, using the combined credentials of the cooperating companies to strengthen our chances of pre-qualifying and winning the bid for the project.

Project execution

Once a contract has been awarded and executed to us, we form a project team designated to handle the project. Based on the contract documents, a detailed schedule of construction activities is prepared and resources are allocated accordingly.

Because material procurement plays such a critical part in the success of any project, we place particular emphasis on this function. Procurement is done from project sites. Upon award of a contract, the project manager is provided with the project details along with the budgeted rates for material, services and equipment. The material, services and equipment required for projects are estimated by the engineering personnel from the individual project sites and then passed on to the project manager along with the schedule of requirements.

Construction activity typically commences once the client approves the working designs and issues drawings. The sequence of construction activities largely follows the construction schedule that was prepared initially, subject to changes in scope requested by the client. Projects generally commence with excavation and earthmoving activities. Other major components of a typical construction project include concreting and reinforcement.

The key construction activities involved in a project depend on the nature and scope of the project. For example, in a typical irrigation and water supply project, we engage in the fabrication, lowering, laying, jointing and testing of the pipelines. For an earthen dam project, we perform excavation and earthwork. For a road project, we perform earthwork, granular sub-base, asphalt layers/concrete rigid pavement and road furnitures.

We have a project management system that helps us track the physical and financial progress of our construction projects. Project personnel hold periodic review meetings with the client at sites and also with key head office personnel in our headquarters to discuss the progress being made on the project. The project managers also hold periodic review meetings with our vendors and sub-contractors to review progress and assess future needs.

We consider a project to be “complete” when it is ready to be handed over to the client. We then jointly inspect the project with the client prior to handing over the project to the client.

Types of contracts

For our civil engineering and construction projects, we generally enter into item rate contracts. Item rate contracts are contracts where we need to quote the price of each item presented in a bill of quantities furnished by the client. In item rate contracts the client supplies all the information such as design, drawings and bill of quantities. We are responsible for the execution of the project based on the information provided and technical stipulations laid down by the client at our quoted rates for each respective item. In some instances, we may enter into lump sum contracts, which provide for a single price for the total amount of work, subject to variations pursuant to changes in the client’s project requirements. In lump sum contracts, the client supplies all the information relating to the project, such as designs and drawings. Based on such information, we are required to estimate the quantities of various items, such as raw materials, and the amount of work that would be needed to complete the project, and then prepare our own bill of quantities to arrive at the price to be quoted. We are responsible for the execution of the project based on the information provided and technical

57 stipulations laid down by the client at our quoted price.

Project-specific joint ventures

We often bid for civil engineering and construction projects as the sole contractor of the project with full responsibility for the entire project, including, if required, the overall responsibility and sole discretion to select and supervise sub-contractors. From time to time, on certain larger projects that require resources beyond those we may have available, such as financial strength, equipment, manpower or local content resources, or when we wish to share the risk on a particularly large project, we seek to make alliances through the formation of project-specific joint ventures with other contracting, engineering and construction companies.

In a project-specific joint venture, the joint venture agreement typically stipulates that each member of the joint venture shares the risks and revenues of the project according to a predetermined ratio. The agreements specifically assign the work to be performed by each party and the responsibilities of each party with respect to the joint venture, including how the joint venture will be managed and the equipment, personnel or other assets that each party will contribute or make available to the joint venture. The profits and losses of the joint venture are shared among the members according to a predetermined ratio. The fixed assets that are acquired by the joint venture are generally transferred to the respective joint venture members upon completion of the joint venture project. The agreements also set forth the manner in which any disputes among the members will be resolved. The construction contracts that the joint ventures enter into, or the joint ventures themselves, typically impose joint and several liability on the members. Thus, should the other member(s) of our joint ventures default on its or their duties to perform, we would remain liable for the completion of the project. The project-specific joint venture typically terminates at the completion of the defect liability period, at which point the project-specific joint venture liquidates and dissolves.

As of June 30, 2007, we had entered into the following non-equity joint venture agreements for such projects as described in the table below.

S.No Joint Venture Client Project

1 SunCon-RNS Joint Venture National Highway Authority of Widening and improvement of certain India portions of National Highway 4 (Km 433 to Km 495), including construction of concrete road and river bridge 2 RNS-SunCon Joint Venture National Highway Authority of Widening and improvement of certain India portions of National Highway 4 (Km 495 to Km 515), including Belgaum Bypass and flyovers 3 RNS-GPL Joint Venture Government of Tamil Nadu Upgrading of road 4 AFCONS-RNS Joint Venture National Thermal Power Desilting arrangement package for Kol Corporation Limited Dam Hydroelectric Power Project 56 RNS-GSR Joint Venture Government of Andhra Pradesh Canal and distributory system for Rangasamurdram Balancing Reservoir 6 RNS-GSR Joint Venture Government of Andhra Pradesh Canal and distibutory system for Janjhavathl Reservoir 7 RNS-NMCC- FAC Joint Konkan Irrigation Development Talamba Dam Venture Corporation 6 The construction agreement with respect to this project was entered into by R.N. Shetty & Company Private Limited, not the joint venture entity.

Real estate development

Land acquisition and development

Our real estate development operations are based on a series of joint development agreements and a joint venture agreement that we have entered into with members of our Promoter Group and other affiliates that own land in Karnataka, particularly in and around Bangalore. Except for a parcel of land owned by us in Unkal, Hubli as given in the following table, all land that is available for us to develop is owned by members of our Promoter Group and other affiliates. The following table summarises the details of the lands to which we have access for development.

S.No. Land Area % of total area Estimated % of

(sq.ft. million) developable developable area# (sq.ft. area million)

(i) Land owned by the Company 1. By itself 0.4421 1.25% 0.884 1.85%

2. Through its subsidiaries - - - -

3. Through entities other than - - - - (1) and (2) above

(ii) Land over which the Company has sole development rights 1. Directly by the Company - - - -

2. Through its subsidiaries - - - -

3. Through entities other than - - - - (1) and (2) above

(iii) Memorandum of understanding / Agreements to acquire / letters of acceptance by the Company and/or its subsidiaries and/or its group companies are parties, of which: 1. Land subject to - - - - government allocation

2. Land subject to private - - - - acquisition

(A) Subtotal of (i)+(ii)+(iii) 0.4421 1.25% 0.884 1.85%

Joint developments with partners

(iv) Lands for which joint development agreements have been entered into by: 1. By the Company 34.815 98.75% 46.802 98.15%

2. Through its subsidiaries - - - -

3. Through entities other than - - - - (1) and (2) above

(v) Proportions interest in lands - - - - owned indirectly by the Company through joint ventures

(B) Sub-total of (iv)+(v) 34.815 98.75% 46.802 98.15%

# For the purposes of this document, developable area should be read as saleable area.

A summary of our existing joint development agreements and joint venture agreement to develop lands is provided below.

S. No. Name of the owner of the Date of the Description of property Area (sq.ft. land Agreement million)

‘ 1. Firebricks & Potteries June 20, 2006 as Land situated on Tumkur Road in 0.5510 Private Limited amended by Yeshwanthpur, Tumkur Road, Supplementary Bangalore. Joint venture agreement dated December 26, 2006 2. R. N. Shetty representing January 31, 2007 Land situated at Channasanrda 4.7197 for herself and as agent of as amended by Village, Uttarahalli Hobli, (i) Sudha Rama Shetty; (ii) Amendment No. 01 Bangalore South Taluk.

Geeta Sandip Malli; (iii) dated July 06, 2007 Shobha Jeevan Shetty; (iv) Satish Rama Shetty; (v) Sunil Rama Shetty; (vi) Mamtha Sudesh Hegde; (vii) Samata Abhayanand Shetty; (viii) Naveen Rama Shetty; (ix) Seetha Narayan Shetty; (x) Kanaka S. Shetty; and (xi) R.N. Shetty Trust for and on behalf of the Association of Persons 3. Naveen Hotels Limited February 5, 2007 Land situated at Ulsoor Road, Civil 0.0137 as amended by Station, Bangalore. Amendment No. 01 dated July 06, 2007 4. Mrs. Samatha A. Shetty January 24, 2007 Land situated at Bukka Sagara 0.1481 as amended by Village, Jigani Hobli, Anekal Taluk, Amendment No. 01 Bangalore dated July 06, 2007 5. Murudeshwar Ceramics January 24, 2007 Land situated at Bukka Sagara, 0.4628 Limited as amended by Jigani, Bangalore District. Amendment No. 01 dated July 06, 2007 6. Murudeshwar Ceramics January 24, 2007 Land situated at Kallabalu, Jigani, 0.2080 Limited as amended by Bangalore district. Amendment No. 01 dated July 06, 2007 7. Sudha R Shetty February 3, 2007 Land situated at Madenahalli, 12.6792 representing for herself as amended by Lingadaveeranahalli and Kashapur and as agent of (i) Geeta Amendment No. 01 in Koratagere Taluk. Sandip Malli; (ii) Shobha dated July 06, 2007 Jeevan Shetty; (iii) Mamtha Sudesh Hegde; (iv) Samata Abhayanand Shetty; (v) Bhavani S. Shetty; (vi) Anisha S. Shetty; (vii) Shilpa S. Shetty; (viii) Sharmila S Shetty; and (ix) Maitri N Shetty for and on behalf of the Association of Persons 8. Sudha R Shetty February 3, 2007 Land situated at Hunisekkunte 8.8819 representing for herself as amended by village in Gouribidanur Taluk. and as agent of (i) Geeta Amendment No. 01 Sandip Malli; (ii) Shobha dated July 06, 2007 Jeevan Shetty; (iii) Mamtha Sudesh Hegde; (iv) Samata Abhayanand Shetty; (v) Bhavani S. Shetty; (vi) Kanaka S. Shetty; (vii) Shilpa S. Shetty; (viii) Sharmila S Shetty; and (ix) Maitri N Shetty for and on behalf of the Association of Persons 9. Murudeshwar Ceramics January 24, 2007 Land situated at Chalamatti, Hubli. 0.6305 Limited* as amended by Amendment No. 01 dated July 06, 2007 10. Naveen Hotels Limited January 24, 2007 Land situated at Unkal, Hubli. 0.2592 as amended by Amendment No. 01 dated July 06, 2007 11. R N Shetty Trust January 23, 2007 Land situated at Chalamatti and 4.2057 as amended by Kadankoppa near Hubli. Amendment No. 01 dated July 06, 2007 12. Naveen Structural & January 24, 2007 Land situated at Gokul Road, 0.4051 Engineering Company as amended by Hubli. Private Limited Amendment No. 01 dated July 06, 2007 13. Murudeshwar Ceramics January 24, 2007 Land situated at Rayanal Village 0.7732 Limited as amended by near Hubli Taluk. Amendment No. 01 dated July 06, 2007 14. Naveen Hotels Limited January 25, 2007 Land situated at Kodibagh, 0.1742

as amended by Karwar. Amendment No. 01 dated July 06, 2007 15. Naveen Hotels Limited January 25, 2007 Land situated at Suratkal near 0.7026 as amended by Mangalore. Amendment No. 01 dated July 06, 2007 Total 34.815 * Murudeshwar Ceramics Limited has leased the land that is the subject of the joint development agreement from Karnataka Industrial Areas Development Board for a term of 21 years, commencing on June 18, 1993 and expiring on June 17, 2014.

Status of real estate development projects

As of June 30, 2007, we have begun construction activities for one real estate development project and have applied for government approvals for another real estate development project. With respect to the land that is subject to our 13 other joint development agreements, we are in various stages of planning and have not yet sought government approvals.

The following is an illustrative location map of our Yeshwantpur and Channasandra projects.

The Yeshwantpur project

We commenced development on the first phase of our first real estate development project, the Yeshwantpur project, in June 2006. The Yeshwantpur project is being developed by the FBPL-RNS Joint Venture, which was formed pursuant to a joint venture agreement between us and Fire Bricks & Potteries Private Limited, a Promoter Group company (“FBPL”). The Yeshwantpur project involves the construction and sale of two residential buildings and a commercial mall in Yeshwantpur, Bangalore on land that is owned by FBPL. Under the terms of the joint venture agreement, we will bear the entire cost of the development of the site. FBPL, as the owner of the land, will be entitled to receive Rs. 50 per sq.ft. of saleable built up area of apartments when the same are sold to any purchasers plus 20% of the saleable built up area of apartments as consideration. Our Company will receive the remainder of saleable built up area from the Yeshwantpur project and retain the proceeds from the sale of any such property. If for any reason the project is not completed, we must surrender possession of the land back to FBPL free from any encumbrances. Additionally, if any part of the land is not

61 developed, the unutilised area of land must be handed back to FBPL free from any encumbrances.

For the first phase of the Yeshwantpur project, we are jointly developing a 274-flat residential building. We expect this phase to be completed in 2008. The two following phases of this project involve the development and construction of an additional residential building and a commercial mall, which have received initial approvals. The total estimated cost for the development and construction of the first two phases of the Yeshwantpur project is Rs. 1,474.00 million.

A summary of the details of the various phases of the Yeshwantpur project are as follows:

Sl Name of Phase Type of Project Start date / Estimated Land no Estimated completion (million sq.ft.) start date date

1. RNS Shanthinivas Residential June 2006 2008 0.2178 2. RNS A-Block Residential Sept. 2007 2009 0.2396 3. Commercial Mall Commercial April 2008 2009 0.0936

(i) Phase I – RNS Shanthinivas

Development of the first phase of the Yeshwantpur project, RNS Shantinivas, began in June 2006. The RNS Shanthinivas phase consists of the construction of 274 residential flats on 0.2178 million sq.ft. of land. We expect that the construction period for this phase will be completed in March 2008. We started pre-sales of the RNS Shanthinivas residential development in the May 2007. The estimated cost of the RNS Shanthinivas phase is Rs. 660.00 million.

(ii) Phase II – RNS Block A

The second phase of the Yeshwantpur project, RNS Block A, consists of the construction and sale of 176 residential flats on 0.2396 million sq.ft. of land. We expect to commence construction of RNS Block A in September 2007 and expect that the construction period will take approximately two years. The estimated cost of the RNS Block A is Rs. 814.00 million.

(iii) Phase III – Commercial Mall

The third phase of the Yeshwantpur project consists of the construction and sale of retail and office spaces in a commercial mall located on 0.0936 million sq.ft. of land. We expect to commence construction of the third phase in April 2008 and that the construction period will take approximately one year.

The Channasandra Project

We have applied for government approvals for our second real estate development project, the Channasandra project. Subject to the receipt of such approvals, we expect to commence construction activities on the first phase of the Channasandra project in September 2007. The first phase of the Channasandra project involves the construction and sale of 512 residential units in four buildings on 0.3485 million sq.ft. of land. Development plans for the second phase of the Channasandra project have not yet been finalised. The entire project will be developed on 4.7197 million sq.ft. of land owned by several owners, who are represented by R.N. Shetty, our Chairman. The Channasandra project is being jointly developed with such owners pursuant to a joint development agreement. Under the terms of the joint development agreement, we will bear the entire cost of the development of the site. Our Company and the owners of the land will be entitled to 80% and 20%, respectively, of the legal and actual possession of the developed property and in the undivided portion of the subject land as may be specified for the common utility of the purchaser.

We expect the first phase of the Channasandra project to commence in September 2007, subject to receipt of all required government approvals, and to be completed in two years. The estimated construction cost of the first phase is Rs. 1,200.06 million.

Our potential real estate development projects

We are in the preliminary planning stages of each of the following projects. We have entered into joint development agreements with respect to 13 of these projects.

The lands described below are owned by our Promoter Group companies (except the land with respect to the project beside RNS Motors in Unkal, Hubli which is owned by the Company). Given the early stage of these projects, their development plans are subject to change and receipt of government approvals, including conversion of land use, where applicable.

Bangalore:

S.No. Location Type of Project Land (million sq.ft.)

1 Bukkasagar, Jigani Residential / Commercial 0.148 2 Bukkasagar, Jigani Residential 0.463 3 Kallubal, Jigani Residential 0.207 4 Gouribidanur Farm House 8.88 5 Korategere Farm House 12.67 6 Ulsoor Road Commercial / Residential 0.0136

Hubli:

S.No. Location Type of Project Land (million sq.ft.)

1 Gokul Road Residential / Commercial 0.40 2 Beside RNS Motors, Unkal Residential 0.44 3 Unkal Residential /Commercial 0.26 4 Chalamatti Residential 0.63 5 Chalamatti and Kadanakoppa Farm House 4.20 6 Rayanal Residential / Commercial 0.77

Mangalore:

S.No. Location Type of Project Land (million sq.ft.)

1 Near Suratkal Residential/ Commercial 0.702

Karawar:

S.No. Location Type of Project Land (million sq.ft.)

1 Kodibag Residential/ Commercial 0.174

Project development

Although the nature and sequence of specific planning and execution activities will vary among projects, the following is a summary of the core elements of our typical project development process for our projects:

Project Selection Pre-construction Construction Sales and After-sale and Design Marketing Services?

- Market research - Obtain permits and - Construction work - Marketing and Maintenace of flats and studies approvals - Quality assurance promotion - Prepare proposal - Cost control - Determine market (including blueprints rates and interior design) - Obtain sales - Internal approvals permits

Project Selection and Design

We conduct market research and feasibility studies on potential real estate development projects, which consists of gathering, analyzing and assessing the information about the area in which the proposed project is located that we believe would be critical to the success of the project, such as latest trends in residential development and consumer preferences, demographic growth, expected supply and demand, overall development, potential for future development and availability of infrastructure. With respect to the particular land that is

63 proposed for development, we attempt to determine the quality and suitability of the land for development, including geological features and location, ownership of and title to the land, acquisition cost and joint development potential.

If a potential real estate development project meets our feasibility requirements, we consider the type of project (i.e., residential, commercial or a mix of both) that we believe to be most suitable for development on the subject land. Our in-house design and technical team prepares a design proposal for the project, which may involve consultation of independent architects and consultants for certain specialised expertise. The design proposal will typically include detailed blueprints and proposed interior design of the structures to be built. Project proposals must be evaluated and approved by the Company’s senior management before undertaking the project and initiating the government and regulatory approval process.

Pre-construction

Once a project is approved by management for development, we submit the project plans for government and regulatory approval. In general, we must obtain the approval for our project plans from various regulatory authorities. For those lands that require conversion from agricultural land to non-agricultural land, we must also obtain the necessary regulatory approvals to convert the usage of such land for residential and/or commercial development, as the case may be.

Construction operations

We act as the general contractor for our real estate development projects and typically hire subcontractors when specific needs arise. In particular, we hire subcontractors to undertake the following activities: (i) form fabrication and erection; (ii) bar bending and erection; (iii) block work; (iv) plastering; and (v) post tensioning of reinforcement. Our project managers and deputy managers coordinate and supervise the activities of subcontractors and suppliers, establish and subject the development and construction work to quality assurance and cost controls and monitor compliance with building codes and safety regulations. Our project coordinator is responsible for liaising with various inter-department and local governmental authorities. His duties also include employee relations for our construction personnel and coordination of activities between the construction and sales and marketing departments.

We require that quality, durable materials be used in the construction of our structures. For example, we require our steel and cement supplies to be procured from suppliers that possess ISI certification. When possible, we negotiate price and volume discounts with manufacturers and suppliers to take advantage of production volume. We do not maintain significant inventories of construction materials, except for work in process materials for projects under construction. Historically, access to our principal raw materials and supplies has been readily available. Prices for raw materials may fluctuate due to various factors, including supply and demand shortages that may be beyond the control of our suppliers. We believe that we have good relationships with our suppliers and subcontractors. In addition, we are in the process of setting up our own production plant to meet some of our raw materials requirements, which we believe will help partially reduce our dependence on independent suppliers.

As part of our ongoing efforts to maintain cost controls and flexibility, we perform some of the manufacturing and fabrication work on-site, including the fabrication of reinforcement for concrete structures and the manufacturing of pre-cast elements of various building components, such as solid blocks, lintels and concrete planks.

We place importance on the quality of and safety at our construction projects and have instituted quality control and quality assurance measures. At each of our project sites, we establish a field laboratory to monitor the ongoing work and inspect the materials being used in the construction.

Our current projects have estimated construction schedules of approximately two years from start to completion. However, construction schedules may vary depending on the availability of labor, raw materials and supplies and weather. We have not entered into any derivative contracts to hedge against raw materials fluctuations.

Sales and marketing

We commenced pre-sales of residential flats from the RNS Shanthinivas residential building in May 2007. As at June 30, 2007, we have a dedicated sales and marketing team of four employees responsible for determining the appropriate advertising and sales plans for our real estate development projects. Our sales and marketing team is responsible for marketing and promotion, determination of market prices, obtaining any necessary sales permits and after-sales services.

Our marketing team is fully apprised of the details of the various features and amenities of the project. For projects that have residential units, such as our Yeshwantpur project, we establish an on-site marketing office and model flat conforming to the standards of the project’s residential units. The marketing staff is trained to explain the highlights of the project, including pricing and location advantages, and describing the available financing options. The advertising methods that we use include placing targeted advertisements in local newspapers and placing outdoor billboards in strategic locations. Full brochures are prepared and distributed to prospective clients who visit the model flat to help explain to prospective purchasers the advantages of the designs and features of our residential units. Our marketing team responds to the needs of customers from the beginning of the sales process to the handing over of the flats.

After-sales service

As the developers of a project, we will undertake to handle the maintenance responsibilities of the flats from the date of sale until the residents form their own residential association to take over such matters.

Joint development agreements

We have entered into 14 joint development agreements with our Promoter Group companies to develop lands owned by them principally in and around the Bangalore and Hubli area. All of the land that is the subject of these joint development agreements is owned by members of our Promoter Group. If we are unable to come to an agreement with a land owner, or if an existing agreement is terminated or otherwise expires, we will be unable to develop the land. Furthermore, if we are unable to complete a project within the specified period of time, we may be required to make certain payments to the land owners. For further details, please refer to the section titled “Risk Factors” beginning on page x. We have not experienced any material disputes with any of the parties to our joint development agreements.

The following is a summary of the key terms common to each joint development agreement. For further details on our joint development agreement, refer to the section titled “Our Business - Real Estate Development - Land Acquisition and Development“ on page 50.

The parties agree to share in the legal and actual possession of the developed property and in the undivided portion of the subject land as may be specified for the common utility of the purchasers. The Company’s share is typically 70-80%. The land owner’s share is typically 20-30%. Such division is done upon receipt of [government] approval of the particular project’s plan and recorded in writing in a separate agreement.

The Company must bear all costs of development of the land.

The parties must separately enter into a working agreement on mutually acceptable terms and conditions stating all specifications, designs, drawings, responsibilities, etc.

If applicable, the land must be converted from agricultural or other zoning that is inappropriate for the purposes of the intended development of the land to non- agricultural use. The cost of conversion and the change of land use is borne by the land owner.

We must use all reasonable efforts to obtain all necessary approvals, licences and sanctions by no later than six months from the date of conversion of the land use or

within six months from the date of the amendment no.1 to the joint development agreement if no conversion is required.

We must commence development and construction of the land within six months from conversion of the land use or within six months from the date of the amendment no. 1 to the joint development agreement if no conversion is required.

We must complete the development of the land and obtain all necessary certificates of completion within 24 months from the date of commencement of construction of the land.

In the event of a continuing delay in completion of development of the land exceeding 12 months of the due date, other than for the reasons specified in the agreement, the land owner will be entitled to one of the following options by delivery of written notice no later than [18] months from the due date:

(a) we will pay lease rent on the area falling to the share of the land owner as set forth in the agreement for the entire period of such delay at a rate of 50% of the prevailing market rental rates in the area of the land, or

(b) we will complete the development / construction to hand over the saleable area falling to the share of the land owner as set forth in the agreement within the reasonable time frame set forth in the written notice delivered by the land owner; and for the period of delay we shall pay compensation to the land owner at a rate of 12% per annum of the portion of the construction costs incurred by us attributable to the share of the land owner’s as set forth in the agreement; or

(c) we will purchase the land from the land owner at the prevailing market price in the area of the land within the reasonable time frame set forth in the written notice delivered by the land owner.

(d) Neither the land owner nor us shall be entitled to terminate the joint development agreement without cause , which shall mean the following:

(e) any failure by us to comply with the requirements made by the land owner pursuant to the agreement in the event of a continuing delay in completion of development of the land exceeding 12 months of the due date other than for the reasons specified in the agreement;

(f) any failure by us to develop and construct the land in accordance with the agreement; or

(g) any failure by the land owner to secure conversion of land use of the land.

In the event of an occurrence of an event giving rise to cause, the non-breaching party shall be entitled to terminate the agreement with immediate effect by delivery of written notice to the breaching party describing the cause and the failure of such breaching party to correct such non-compliance with 60 days of receipt of written notice.

Upon termination of the agreement by the parties by mutual agreement or by the Company for cause, the land owner shall pay us an amount equal to 90% of the cost of development / construction work as certified by the auditors pursuant to the agreement and the aggregate amount of all payments paid to the land owner by us during the development / construction of the land through the date of termination.

Guarantees

We are often required to provide financial and performance guarantees guaranteeing our performance and financial obligations in relation to a project. The amount of guarantee facilities available to us depends upon our financial condition and the availability of adequate security for the banks and financial institutions that provide us with such facilities. There have

66 been zero instances where our performance guarantees have been invoked by our clients.

Employees

As of June 30, 2007, we had approximately 335 permanent employees, compared to 342 and 316 employees as of March 31, 2007 and March 31, 2006, respectively. We do not count among our employees any manpower employed by our sub-contractors or any outside consultants whom we use for specialised services, such as architecture and design. We expect that with the growth of our business, our human resources and employee recruitment activities will increase. On most of our construction sites, manual labor is generally undertaken by the employees of our sub-contractors or temporary contract labor engaged by us. In order to engage contract laborers for projects sites, we are required to be registered under certain regulations. The table below sets out the functional breakdown of our employees as on June 30, 2007:

Category Number of employees

Technical 130 Managerial and Administrative staff 65 Non Technical 140 TOTAL 335

None of our employees are in a union. We consider relations with our employees to be good.

Insurance

Our operations are subject to hazards inherent in the construction industry, such as risk of equipment failure, work accidents, fire, earthquake, flood and other force majeure events, acts of terrorism and explosions, including hazards that may cause injury and loss of life, severe damage to and the destruction of property and equipment and environmental damage. We generally maintain insurance covering our assets and operations at levels that we believe to be appropriate. We have also obtained workmen’s compensation policies for some employees.

Competition

The real estate development industry in India, while fragmented, is highly competitive. We expect to face competition from large domestic as well as international property development and construction companies as a consequence of, among other things, the relaxation of the foreign direct investment policy for the real estate sector, rising government expenditures on infrastructure and various other policy initiatives.

In the construction industry, we face a similarly intense competitive environment, though our primary competitors are principally domestic construction companies.

For more information on our competition, see the section titled “Risk Factors” beginning on page x.

Properties occupied by us

Our registered office is located at 604/B, Murudeshwar Bhavan, Gokul Road, Hubli 580030, which is a leased premises owned by a member of our Promoter Group. The lease is optionally extendable by a mutual consent. Our corporate office is located at Naveen Complex, 7th Floor, 14, M.G. Road, Bangalore 560001. The Company owns the portion of the floor on which the corporate offices are located. The rest of the Naveen Complex building is owned by Naveen Hotels Limited, a Promoter Group company. Additionally, we conduct our business from several premises, which we occupy on leased bases.

REGULATIONS AND POLICIES

The Government of India, the Government of Karnataka and the respective local bodies have framed various regulations and policies all of which apply to our Company. A summary of these regulations and policies is detailed below. The following information has been obtained from the various local legislations and the bye laws of the respective local authorities that are available in the public domain. The regulations set out below are not exhaustive, and are only intended to provide general information to Bidders and is neither designed nor intended to be a substitute for professional legal advice. Taxation statutes such as the Income Tax Act, 1961, Central Sales Tax Act, 1956 and applicable local sales tax statutes, labour regulations such as the Employees State Insurance Act, 1948 and the Employees Provident Fund and Miscellaneous Act, 1952, and other miscellaneous regulations such as the Trade and Merchandise Marks Act, 1958 and applicable shops and establishments statutes apply to us as they do to any other Indian company. For details of government approvals obtained by our Company in compliance with these regulations, see the section titled “Government Approvals” on page 166

Real Estate Regulations

Several legislations, framed by the Central and the respective State Governments, govern the real estate and construction sector in India. These legislations regulate, among others, the substantive and procedural aspects of acquisition and transfer of land and construction of housing and commercial establishments. As is described in further detail below, each State in India is competent to prescribe its own rules and regulations to govern the real estate and construction activities within its territories. This leads to numerous fragmented legislations. The present discussion is restricted to laws and regulations that are currently applicable to our Company for carrying on our business in the State of Karnataka, where the Registered Office of our Company is located.

The Land Acquisition Act, 1894 (“Land Acquisition Act”)

The Land Acquisition Act provides for the compulsory acquisition of land by the appropriate government (which may be Central or the State Government as the case may be) for public purposes, which includes planned development and town and rural planning. The provisions of this Act apply to various land holdings. The Land Acquisition Act also provides that such acquisitions by the appropriate government are not absolute and any person with an interest in the acquired land is entitled to object and claim the right to compensation.

The Urban Land (Ceiling & Regulation) Act, 1976 (“Urban Land Ceiling Act”)

The Urban Land Ceiling Act prescribes the limits to urban areas that can be acquired by a single entity. Accordingly, an entity may only acquire land in the urban areas within the prescribed limits imposed. However some States and Union Territories have repealed these Urban Land Ceiling Acts under the Urban Land (Ceiling and Regulation) Repeal Act, 1999. While the State of Karnataka has repealed the Urban Land Ceiling Act, it has enacted the Karnataka Land (Restriction on Transfer) Act, 1991 to implement the Land Acquisition Act by prohibiting the transfer of lands that have been so acquired.

Transfer of Property Act, 1882 (“T.P. Act”)

There are various modes for the transfer of immovable property between individuals, firms and companies such as sale, gift and exchange. Similarly, an interest in the property can be transferred by way of a ‘lease’ or ‘mortgage’. All transfers of property in its various modes, including transfer of immovable property or any interest in relation to that property, is governed by the T.P. Act. Thus, the T.P. Act governs transfers between persons as distinct from the transfer of property or interest by the operation of law. Further, the T.P. Act also provides the general principles relating to the transfer of property, the categories of property that are capable of being transferred, the persons competent to transfer property, the validity of restrictions and conditions imposed on the transfer and the creation of contingent and vested interest in the property.

Registration Act, 1908 (“Registration Act”)

The Registration Act has been enacted with the object of providing public notice of the execution of documents affecting transfer of interest in immoveable property. The purpose of the Registration Act is the conservation of evidence, assurances, title, and publication of documents and prevention of fraud. It details the formalities for registering an instrument. Section 17 of the Registration Act identifies documents for which registration is compulsory and includes, among other things, any non-testamentary instrument which purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, in immovable property of the value of one hundred rupees or more, and a lease of immovable property for any term exceeding one year or reserving a yearly rent. A document will not affect the property comprised in it, nor be treated as evidence of any transaction affecting such property (except as evidence of a contract in a suit for specific performance or as evidence of part performance under the T.P. Act or as collateral), unless it has been registered.

The Indian Stamp Act, 1899 (“Stamp Act”)

Stamp duty must be paid on all documents specified under the Stamp Act and at the rates specified in the Schedules thereunder. The rate of stamp duty varies from state to state. The applicable rates for stamp duty on these instruments, including those relating to conveyance, are prescribed by state legislation. Each State Government is competent to prescribe the stamp duty payable in relation to the leasing or conveyancing of any immovable property if the land in question is situated in that State. Instruments chargeable to duty under the Stamp Act which are not duly stamped or are insufficiently stamped are precluded from being admitted in a court of law as evidence of the transaction contained therein. The Stamp Act also provides for impounding of instruments which are not sufficiently stamped or not stamped at all.

The Karnataka Stamp Act, 1957 (“KSA”) prescribes the stamp duty payable on instruments in the State of Karnataka. Some of the instruments on which the KSA levies stamp duty include instruments of a conveyance of land, lease of immoveable property, etc. The stamp duty payable on conveyance in the State of Karnataka is eight and a half percent, plus any other prevailing interest/cess at present and is subject to revision by the government from time to time.

The Easements Act, 1882 (“Easements Act”)

The right of easement is derived from the ownership of property and is governed by the Easements Act. The Easements Act defines the right of easement to mean a right which the owner or occupier of land possesses for the beneficial enjoyment of that land and which permits him to do or to prevent something from being done in respect of certain other land not his own. The “dominant owner” (i.e., the owner of immovable property, or on his behalf, the person in possession of the property) may acquire an easement. Such a right may also arise out of necessity or by virtue of a local custom.

Property Related Laws enacted by the State of Karnataka

Laws applicable to the housing and the real estate sector in the State of Karnataka are also applicable to us.

There are various legislations with which we must comply at different stages of a project, for instance, in relation to the availability of land, obtaining no objection certificates prior to the commencement of construction, approvals required during and after construction and completion and occupancy certificates. Some of the important legislations enacted by the State of Karnataka are provided below.

Comprehensive Development Plan (“CDP”)

In order to promote public health and safety and to help ensure the economic and healthy development of Bangalore, the city is divided into a number of use zones, such as residential, commercial, industrial, public and semi-public. In addition, the Karnataka Government has imposed limitations on the use of land and buildings.

Prior to the revised approval in 1995 by the Bangalore Development Authority (“BDA”), the CDP for Bangalore was earlier approved by the Government of Karnataka in 1984. As per Section 25 of the Karnataka Town and Country Planning Act, 1961 (“KTCP Act”), the BDA is the Planning Authority for the metropolitan area of Bangalore. The CDP covers a total area of 1,279 square kilometres and tends to be revised at least once every ten years.

The land requirement for different uses like residential, commercial, industrial, public and semi-public, traffic and transportation, parks and open spaces have been worked out. The CDP lays down the policies and programmes for the overall development of the area within its ambit taking into consideration the long term requirements of the city. In each use / zone, certain uses are normally permitted and certain other uses may be permitted by the BDA under special circumstances.

Clause (iii) sub section 2 of section 12 of the KTCP Act provides for regulation of the Bangalore Local Planning Area. According to section 12 of the KTCP Act, the master plan should consist of a series of maps and documents and must indicate the manner in which the development and improvement of the entire planning area within the planning authority is carried out. For the purpose of the KTCP Act, a planning authority includes the BDA and any such other local planning authority that is constituted under the KTCP Act.

Karnataka Land Revenue Act, 1964 (“KLR Act”)

Though the KLR Act was enacted in order to consolidate and amend the laws relating to land and the revenue administration in the State of Karnataka, the KLR Act regulates the use of agricultural land for non agricultural purposes. Under the KLR Act, permission of the relevant Deputy Commissioner must be obtained by the owner of any agricultural land in order to convert the use of such land for any purpose other than agriculture. Approval for conversion must be granted by the Deputy Commissioner if the agricultural lands fall within the CDP. In the “green belt areas”, prior consent of the relevant authority is required if the activity sought to be carried out is other than certain permitted activities, such as construction of places of worship, hospitals, libraries, sports clubs and cultural buildings.

Karnataka Town and Country Planning Act, 1961 (“KTCP Act”)

The main objective of the KTCP Act is to regulate planned growth of land use and to develop and execute town planning schemes in the State of Karnataka. The KTCP Act operates through a planning authority constituted under the KTCP Act for every local planning area and such areas are to be governed by its own local bye laws, rules and/or regulations. Every local planning authority is required to create a master plan and to ensure that all activities carried out are done in accordance with the master plan.

Bangalore Development Authority Act, 1976 (“BDA Act”)

The BDA Act was enacted for the establishment of a development authority to provide for the development of the city of Bangalore (as defined in the BDA Act) and areas adjacent to it. The BDA was established pursuant to the BDA Act as the local planning authority for the local planning area for the city of Bangalore.

Bangalore Metropolitan Region Development Authority Act, 1985 (“BMRDA Act”)

The BMRDA Act was enacted for the purpose of establishing the Bangalore Metropolitan Region Development Authority (“BMRDA”) to plan, co-ordinate and supervise the proper and orderly development of the “Bangalore Metropolitan Region” (as defined in the BMRDA Act). Any development in the Bangalore district and the Bangalore rural district requires the prior permission of the BMRDA.

Karnataka Municipal Corporation Act, 1976 (“KMC Act”)

The KMC Act was established to consolidate and amend the laws relating to the establishment of ‘Municipal Corporations’ in the State of Karnataka. Chapter II of the KMC Act provides that a “Corporation” is established based on certain criteria, which include the population of the area, the density of the population and certain other factors. Under the KMC

Act, the construction industry is regulated by the Municipal Corporations which impose mandatory requirements such as approvals, building bye-laws, regulation of future constructions, etc. Pursuant to the provisions contained in Chapter XV of the KMC Act, the Municipal Corporations have been given the powers to regulate buildings and other related activity. Further, section 295 of the KMC Act empowers a Municipal Corporation to make bye laws for the use of sites and buildings. Municipal Corporations have the power to make bye laws, regulate or restrict the use of sites or buildings and perform all matters that are required or allowed to be carried on under this Act.

Bangalore Mahanagara Palike Building Bye Laws - 2003 (“BMP Bye Laws”)

All land use and real estate development within the jurisdiction of the Bangalore Mahanagara Pallike (“Authority”) requires compliance with the BMP Bye Laws. The Authority is a Corporation under the BMP Bye Laws. There are in total about 100 wards in Bangalore to which the BMP Bye Laws are applicable at present. Land use classification is provided for in Schedule 1 of the BMP Bye Laws. Land use under the schedule is classified as (i) residential, (ii) commercial (including retail and wholesale business), (iii) industrial, (iv) public and semi- public use, (v) parks, open spaces and playgrounds, (vi) transport and communication, (vii) utilities and services and (viii) agricultural zone. The construction of residential buildings is permitted in the commercial (retail business) zone.

Every person who intends to erect or re-erect a building or make material alterations to a building is required to obtain a licence from the Commissioner of the Authority under Part II of the BMP Bye Laws. Compliance with various details under the BMP Bye Laws is necessary in order to carry out any construction activity within its jurisdiction.

Under clause 3 of the BMP Bye Laws, several other documents are required to be submitted with the plans and documents at the time of submission of an application by any person to the Authority to erect a building or such other construction activity. These documents include:

title deeds or the possession issued by a competent authority;

property card and the sketch issued by the Department of Survey and Settlement and land records and the latest assessment book extract issued by the Corporation;

receipt of the property tax paid to the Corporation;

attested copy of any previously sanctioned plan; and

drawings, key plans, site plans (which are drawn to a scale of 1:500) for sites up to an area of one hectare and building plans (which are drawn to a scale of 1:500). Particulars such as floor plans of all the floors, use or occupancy of all parts of the building, sectional drawings of thickness of the walls, spacing of the column and such other details are also required to be included in the building plan.

In addition to the above, the following certificates must be submitted along with the application to erect a building:

Certificate from the BDA in the event any of the conditions as specified are satisfied;

No Objection Certificate (“NOC”) from The Bangalore Water Supply and Sewerage Board, Bangalore Electricity Supply Company, Fire Services Department, and Airport Authority of India in case of a high-rise building. In the event that the high-rise building is above seven floors, an NOC must also be obtained from the Telecommunication Department.

According to Clause 2.46 of the BMP Bye Laws, a high-rise building is a building with a ground floor plus four or more floors above the ground floor.

Compliance with the approved plan and specifications is necessary on the grant of the licence by the Authority. The construction of the building must commence within a period of two years after the grant of the licence. The Authority then issues an occupancy certificate after the physical inspection of the building.

Technical Requirements: Requirements specified in the BMP Bye Laws must be complied with in respect of the building proposed to be constructed. In relation to the construction of any building, the Floor Area Ratio (“FAR”) means the ‘quotient obtained by dividing the total covered area of all the floors by the area of the plot’. The “set back line” means ‘a line prescribed beyond which nothing can be constructed towards the plot boundary except those not included under the definition of coverage.’ Details in relation to the set backs required on all sides of the buildings, the maximum plot coverage, the maximum FAR, the maximum number of floors, and maximum height of the building that are permissible for different dimensioned sites and width are specified in tables 4 to 6 referred to in clause 9.2 of the BMP Bye Laws. Table 4 deals with details regarding exterior open spaces and the setback in metres for all buildings including residential, commercial, public and semi-public buildings up to a height of 9.5 metres.

Table 5 provides the relevant details for all buildings above 9.5 metres. Table 6 provides the coverage and the FAR for all buildings including residential, commercial, public and semi- public. All high-rise buildings must comply with the requirements specified in table 5. Further, the minimum depth or width of a site for high-rise building must be 21 metres. Further, the minimum road width facing a high-rise building must be 12 metres. All buildings with a ground floor and three floors and above (or height of 15 metres and above), must also obtain clearance from the Director of Fire Services regarding the Fire Protection Provision in the building.

Karnataka Apartment Ownership Act, 1972 (“KAO Act”)

Every owner of an apartment in the State of Karnataka is required to execute a declaration to adhere to the provisions of the KAO Act. The KAO Act states that the administration of every property shall be bound by its own bye laws.

Karnataka Rent Control Act, 2001 (“Rent Act”)

The earlier legislation, the Karnataka Rent Control Act, 1961, was replaced by the Rent Act in order to encourage further construction and balance the interests of the landlord and the tenant. Under the Rent Act, the “Standard rent” in relation to any premises is calculated on the basis of 10% per annum of the aggregate amount of the cost of construction and the market price of the land comprised in the premises on the date of commencement of the construction subject to other charges payable as specified in Sections 7, 8 and 9 of the Rent Act.

General

Our Company is also engaged in the business of infrastructure projects and is primarily engaged in the building of roads and construction of highways and other civil construction. Contracts by the Company are executed in pursuance of tenders issued by the Government, Government agencies, government-related companies and private bodies or by orders placed by any of them. For the purpose of executing the work undertaken by the Company, the Company may be required to obtain licences and approvals depending upon the prevailing laws and regulations applicable in the relevant State and depending on the project required to be executed.

Regulation for the construction of National Highways

The primary central legislations governing the construction of national highways are the National Highways Act, 1956 and the National Highway Authority of India Act, 1988.

National Highways Act, 1956 ("NHA")

Under the NHA, the central government is vested with the power to declare a highway as a national highway and also to acquire land for this purpose. The Central Government may, by notification, declare its intention to acquire any land when it is satisfied that for a public purpose such land is required for the building, maintenance, management or operation of a national highway. NHA prescribes the procedure for the same. Such procedure relates to the declaration of an intention to acquire, enter and inspect such land, hearing of objections,

72 declaration required to be made for the acquisition and the mode of taking possession. The Central Government is responsible for the development and maintenance of national highways. However, it may direct that such functions may also be exercised by State Governments. Further, the Central Government has the power to enter into an agreement with any person for the development and maintenance of a part or whole of the highway. Such person would have the right to collect and retain fees at such rates as may be notified by the Central Government. The National Highways (Collection of Fees by any Person for the use of Section of National Highways / Permanent Bridge/ Temporary Bridge on National Highways) Rules, 1997 provides that the Central Government may enter into agreements with persons for development and maintenance of the whole or part of a national highway / permanent bridge / temporary bridge on national highway. Such person may invest his own funds for development or maintenance and is allowed to collect and retain the fees at agreed rates from different categories of vehicles for an agreed period for the use of the facilities created herein. The rates of fees and the period of collection are decided by the Central Government and the factors taken into account to decide the same include expenditure involved in building; maintenance, management and operation of the whole or part of such section; interest on the capital invested; reasonable return, the volume of traffic; and the period of such agreement. Once the period of collection of fees by the person is completed, all rights pertaining to a section, permanent bridge or the temporary bridge on the national highway would be deemed to have been taken over by the Central Government.

National Highways Authority of India ("NHAI Act")

The NHAI Act provides for the constitution of an authority for the development, maintenance and management of national highways. Pursuant to the same, the National Highways Authority of India (“NHAI”) was set up in 1995. Under the NHAI Act, the Central Government carries out development and maintenance of the national highway system through NHAI, an autonomous body. Pursuant to the same, NHAI has the power to enter into and perform any contract necessary for the discharge of its functions under the NHAI Act. The NHAI commenced the National Highway Development Project involving the conversion of 14,279 kilometers of national highways to 4/6-lanes, at a total estimated cost of Rs. 5,400 billion. This development program is founded on a revenue model comprising tolls and a cess on fuel, to build roads which deliver sustained performance. In an effort to provide for additional financing of its projects, the NHAI has taken measures to attract private sector participation in development of projects. The NHAI Act prescribes a limit in relation to the value of the contracts that may be entered into by NHAI. However, such contracts can exceed the value so specified with the prior approval of the Central Government. The NHAI provides that the contracts for acquisition, sale or lease of immovable property cannot exceed a term of 30 days. The Government aims to attract both foreign and domestic private investments in construction and maintenance of national highways. Projects may be offered on a Build Own Transfer ("BOT") basis to private agencies. The concession period can be up to a maximum of 30 years, after which the road is transferred back to NHAI by the concessionaries. The bidding for the projects takes place in two stages as per the process provided below:

in the pre-qualification stage, NHAI selects certain bidders on the basis of technical and financial expertise, prior experience in implementing similar projects and previous track record; and

in the second stage, NHAI invites commercial bids from the pre-qualified bidders on the basis of which the right to develop the project is awarded.

Private sector participation in the road sector is sought to be promoted through various initiatives including the following:

the Government ensures that all preparatory work, including land acquisition and utility removal, is completed before awarding of the project;

right of way is made available to the concessionaires free from all encumbrances;

NHAI/Government may provide capital grant up to 40% of project cost to enhance viability on a case to case basis;

100% tax exemption for five years and 30% relief for following five years, which may

be availed of in 20 years; and

duty free import of specified modern high capacity equipment for highway construction.

REGULATIONS REGARDING FOREIGN INVESTMENT

Real estate sector

The GoI has permitted FDI of up to 100% under the automatic route in townships, housing, built-up infrastructure and construction-development projects (“Real Estate Sector”), subject to certain conditions contained in Press Note No. 2 (2005 series) (“Press Note 2”). A short summary of the conditions is as follows:

(a) Minimum area to be developed is 10 hectares in the case of serviced housing plots and 50,000 square metres in the case of construction development projects. Where the development is a combination project, the minimum area can be either 10 hectares or 50,000 square metres.

(b) Minimum capitalisation of US$10 million for wholly owned subsidiary and US$5 million for a joint venture has been specified and it is required to be brought in within six months of commencement of business of the company.

(c) Further, the investment is not permitted to be repatriated within three years of completion of minimum capitalisation except with prior approval from FIPB.

(d) At least 50% of the project is required to be developed within five years of obtaining all statutory clearances and the responsibility for obtaining it is cast on the foreign investor. Further, the sale of undeveloped plots is prohibited.

(e) Compliance with rules, regulations and bye-laws of state government, municipal and local body has been mandated and the investor is given the responsibility for obtaining all necessary approvals.

We have sought a confirmation from the DIPP by letter dated February 15, 2007 on FIIs being permitted to participate in the Issue.

For further details on restriction on foreign ownership of securities in our Company, please refer to the section titled “Restrictions on Foreign Ownership of Indian Securities” on page 213.

HISTORY AND CERTAIN CORPORATE MATTERS

History of the Company

Our Company was originally formed as a partnership firm in 1961 as R N Shetty & Company. On August 08, 2003, the partnership firm was converted into a private limited company under the name R N Shetty & Company Private Limited. The name of our Company was changed from R. N. Shetty & Company Private Limited to RNS Infrastructures Private Limited pursuant to resolutions passed in meeting of the Board held on October 4, 2005 and extraordinary general meeting held on November 25, 2005. A fresh certificate of incorporation consequent to the change of name was issued on December 21, 2005. Our Company was converted into a public company and the name of the Company was changed from RNS Infrastructures Private Limited to RNS Infrastructures Limited pursuant to resolution passed in the extraordinary general meeting held on December 28, 2005. A fresh certificate of incorporation consequent to the change of name was issued on January 10, 2006. Subsequently, the name of our Company was changed from RNS Infrastructures Limited to RNS Infrastructure Limited pursuant to resolutions passed in meeting of the Board held on January 21, 2006 and extraordinary general meeting held on February 4, 2006. A fresh certificate of incorporation consequent to the change of name was issued on February 8, 2006.

Since incorporation, our registered office is situated at Murudeshwar Bhawan, 604-B, Gokul Road, Hubli 580 030, Karnataka, India.

The Company has a history of over five decades, having commenced its operations in 1960 as a partnership firm in the name of R. N. Shetty & Company.

Our Company entered into a slump sale agreement on December 26, 2006 with RNS Motors Limited, a Promoter Group company, by which the business of authorised dealers and service centre for Maruti vehicles including all assets, liabilities, contracts, securities, employees and title and interest in the business was sold and transferred to RNS Motors Limited. RNS Motors Limited issued in favour of our Company 144,222 debentures of the face value of Rs. 1,000 each carrying interest @ 9% per annum.

Key events and milestones

A chronology of some key events and milestones are as follows:

1976 Construction of Hidkal earthen dam worth Rs. 69 million

1984 Construction of Supa Dam of height of 100 metes using 465,000 cubic metres of concrete worth Rs. 245 million

1990 Construction of Varahi underground power house involving more than 20 KM Tunnel awarded by Karnataka Power House Corporation Limited worth Rs. 225 million

1998 Construction of distributaries for the Krishna river awarded by Krishna Bhagya Jala Nigam under World Bank Aided projects. The cost of the project was Rs. 2.3 billion

1999 Construction of Narayanpur Hydro Electric Power Project for a group Company (Murdeshwar Power Corporation Limited) in a span of 15 months. The cost of the project was Rs. 612 million

2006 The business of authorised dealers and service centre for maruti vehicles including all asset, liabilities, contracts, securities, employees and title and interest in the business was sold and transferred to RNS Motors Limited

2006 Commencement of real estate development activities

2007 Four laning of National Highway for the Belgaum By pass & Dharwad Belgaum work awarded by National Highway Authority of India

Main objects

The main objects of our Company, as contained in its Memorandum of Association, are as

75 follows:

to carry on the business of engineers, architects, contractors, builders, developers, valuers, designers, consultants, supervisors in all fields, branches and disciplines of engineering and technology, including but not limited to civil structural, electrical, power , aeronautics, aviation, water works, foundries, dams, reservoirs, irrigation projects, recreation centres, and all other branches of engineering and/or technology, directly or indirectly connected with or can be clubbed with any other objects mentioned in our Memorandum of Association;

to acquire, purchase, amalgamate, take on lease or otherwise take over as a going concern, any undertaking, firm, company or any other entities, or any part of the business and affairs carried on by such undertaking, firm, company, etc., along with all pending works, stocks in trade, rights, assets, receivables, bank limits, interest, goodwill, licences, and privileges and all contracts, registrations, import licences, plant, machinery, equipment together with all liabilities due to any banks, financial institutions or to any other lending institutions/companies and other amounts due to trade creditors, depositors, bills payable etc., and to carry on the said business along with other businesses mentioned in the other clauses of our Memorandum of Association;

to construct, erect, build, repair, remodel, demolish, develop, improve, grade, curve, pave, macadamize, cement and maintain buildings, structures, houses, apartments, townships, multistoried complexes, landscapes, hospitals, hotels, electrical projects, schools, places of worship, highways, roads, paths, streets, side ways, sea ports, air ports, dams, storage tanks and/or reservoirs, diaphragm walls, check dams, bridges, flyovers, reclamations, subways, tramways, tunnels, alleys, pavements;

to construct, build, repair, maintain and do leveling, flooring and/or paving work and erection works or execute any other kind of works for and/or in connection with railways, waterways, electrical works, tunnels, canals, wharves, ports, piers, docks, water-works, drainage works, light houses, power houses;

to undertake, execute and/or do all kinds of excavating, extracting, dredging and digging works and other related works in connection with or independent of any of the objects stated in other clauses of our Memorandum of Association;

to undertake, carryout, execute, make and/or supply all kinds of metals, materials, and/or equipments made of iron, wood, glass, machinery, electrical, electronic, water works, plumbing works and/or any earthen material as may be necessary for construction, designing, devising, decorating, planning, modeling and/or provide engineers, electricians, plumbers, consultants, skilled and/or unskilled labourers, technicians, experts, supervisors, masons, designers, decorators, founders, painters, engravers, sheet metal workers, welders or any other kind of manpower for any kind of civil works, electrical works, mechanical works, erection of any plant and machinery, foundation, basement and/or any other works relating to any branch of engineering and/or technology;

to carry out the business and/or to act as valuers, appraisers, referees, designers, decorators, and assessors for any buildings, lands, orchards, constructions, structures and/or any kind of works/contracts and to investigate into the conditions of buildings and other structures, constructions, works, services of all kinds and to supply efficient and honest arbitrators amongst its personnel;

to construct, establish, acquire, takeover, purchase, get on lease, sublease, tenancy and/or license, run, maintain, supervise and/or in any other manner turn to account hospitals, hotels, resorts, schools, colleges, universities, sports clubs, recreation clubs and/or related facilities, health clubs, gymnasiums, residential complexes, residential layouts, industrial parks, commercial complexes, sea-sports, swimming pools, rehabilitation centers and all kinds of facilities that may be conveniently clubbed with any kind of business stated in any clauses of our Memorandum of Association;

to establish, equip, takeover, purchase, acquire, get on lease, sublease and/or license, run, maintain, supervise and/or in any other manner turn to account the business of transporters, movers, packers, cargo-movers, shipping, air-freight, of tiles, clay and/or any kind of earth materials, plant and machinery, equipments, any kind of agro products, firebricks, stones, granite, petrol, diesel or any other kind of petroleum products, motor cycles, cars, jeeps and any kind of automobile vehicles, all kinds of electric and/or electronic items and/or components, communications systems or any kind of other products as may be relevant to and/or connected with any objects of our Memorandum of Association;

to establish, acquire, takeover, purchase, get on lease, sublease, tenancy and/or license, run, maintain, supervise and/or in any other manner turn to account the business of dealers, agents, sellers, buyers, brokers, booking agents, service agents, workshops, garages, consultants, franchisees and/or any kind of service providers, for all types of light vehicles, commercial vehicles, heavy vehicles, earth moving machinery, including but not limited to motor cycles, scooters, mopeds, cars, jeeps, buses, lorries, mini busses, tempos, tractors and the like other vehicles, including parts, spares, equipments, attachments, enclosures, casings, electrical and/or electronic components, gadgets, fittings, fixtures or any thing that may be attached to or connected with anything and/or any items mentioned in this or any clauses of our Memorandum of Association;

to undertake and/or carryout the business/contract to mine, quarry, grind, excavate, dig and take therefrom sand, gravel, stone, gypsum, feldspar or any building material, paving or any other natural minerals, metals, materials or any other kind of extracts and to own, acquire or take on lease areas of lands, mining and/or quarry bases and acquire licences, leases and/or any other kind of rights in or over such lands/bases and to wash, grind, screen and process the sand, gravel, stone/s, gypsum, feldspar and other natural minerals, metals, materials or any other such kind of products and/or extracts and to deal in and/or dispose off the same in any manner whatsoever;

to purchase, acquire, takeover, exchange, get in any other lawful manner any area, land, buildings, structures and to turn the same into account, develop the same and dispose of and/or to maintain the same and to build townships, markets, buildings, complexes and/or any other conveniences thereon and to equip the same or any part thereof with all or any amenities or conveniences, drainage facility, electric, telegraphic, telephonic, television and all kinds of communication installations and to deal with the same in any manner whatsoever;

to manufacture and deal in any kind of construction material/s, including but not limited to cement, steel, aluminium, firebricks, other building materials, construction equipments, construction plant and machinery, building components such as doors, windows, ventilators, centering and scaffolding materials, electrical material and equipments, water and/or plumbing material/s etc. made of any material whatsoever;

to carry on all or any of the businesses as manufacturers, transporters, exporters, importers, buyers, sellers, dealers in LPG cylinders, drums, barrels, cans including plastic tubes, containers and vessels made of or capable of being manufactured from iron and steel, stainless steel, tin plate, aluminium, plastic and/or other sheet metal, cardboard and paper, including general line containers, plain and lithographed containers and enclosures thereof of all descriptions for both industrial and domestic usages;

to manufacture, repair, buy, sell, distribute, prepare for marketing, import, export or otherwise deal in all kinds of plant and machinery and equipments including pressure vessels, accessories, tools, appliances and apparatus for their manufacture and other relative equipments for industrial, domestic or other application and to manufacture and deal in raw material and components required to manufacture any of the foregoing;

to carry on all or any business as manufacturers, designers and decorators, embossers, painters, printers and lithographers of, and exporters, buyers, sellers and dealers in tin and all types of metal plates like copper, aluminium, steel and other

articles made of tin, metal or other material of any kinds and descriptions, and as designers and draughtsmen, engravers, photographers, electrotypers, photographic printers, photolithographers, cardoox makers, stereotypers, and printers on paper, cardboard, polythene polyvinyl compounds, aluminium, tin plates and other metals and alloy sheets and on any other materials and articles;

to carry on in India or elsewhere the business to generate, receive, produce, improve, buy, sell, resell, acquire, use, transmit, accumulate, employ, distribute, develop, handle, protect, supply and to act as agent, broker, representative, consultant, collaborator, or otherwise to deal with, in electric power in all its branches at such place or places as may be convenient to the Company and/or permitted by appropriate authorities by establishment of thermal power plants, hydel power plants, atomic power plants, wind power plants, solar power plants and other power plants based on any source of energy as may be developed or invented in future. To construct, laydown, establish, promote, erect, build, install, commission, carry out and run all necessary power substations, work shops, repair shops, wires, cables, transmission lines, accumulators, street lights for any purpose, including but not limited to conservation, distribution, and supply of electricity of participating industries, state electricity boards and of any other board/s for any purpose including repairing and maintenance of all distribution and supply lines. To acquire concessions, facilities or licences from electricity boards, government, semi governments or local authorities for generation distribution, production, transmission or use of electric power and to take over along with all movable and immovable properties, the existing facilities on mutually agreed terms from aforesaid authorities and to do all acts, deeds and things necessary for the attainment of the said objects;

to carry on in India or elsewhere the business of manufacture, produce, prepare, polish, cut, finish, process, mine, treat, acquire, convert, commercialize, crush, engrave, design, develop, export, import, buy, sell, resell, explore, excavate, quarry, grind, handle, transport, turn to account, market, promote, manage, organize, store, shape and to act as agent, broker, distributor, stockist, mine owner, consultants, vendor, consignors, collaborators, export house, warehouses or otherwise to deal in all shapes, sizes and varieties of rough and polished stones, slabs, logs, rocks of natural stones such as marble, granite etc and to undertake, search, find out and to acquire by concession, grant, purchase, lease, licence, decrees and tenders the allotment or otherwise of land or water area from government, semi government, local authorities, private bodies, corporations and other persons such rights, powers, and privileges for the accomplishment of any objects whatsoever including exploitation of minerals both minor and major export of minerals both raw and processed, processing of minerals and setting up of minerals and rock based industries;

to establish, acquire, takeover, purchase, get on lease, sublease, tenancy and/or license, run, maintain, supervise and/or in any other manner turn to account the business as dealers, agents, sellers, buyers, brokers, booking agents, service agents, whether as owners, lessors, lessees, franchisees or otherwise to manufacture and deal with power tillers, diesel engines, harvesters, reapers, binders, transplanters/planters, trench cutters, front end loaders and all kinds of allied agricultural plantation and horticultural machinery including attachments, components, accessories, spares, implements and other equipments required for the satisfactory functioning of the agricultural equipments and processes;

to own, set up, develop, maintain farms, agricultural and horticultural houses, orchards, gardens, seeds, processing plants and to deal in, import and export of all kinds of agricultural products, horticultural products and to do all other things incidental to the agricultural activities and to carry on the business as horticulturist, and to grow, improve, produce and deal in all types of flowers, agricultural seeds of vegetables, cereals, pulses, plants, pots, flower seeds and fertilizers and to manufacture, purchase, sell, repair, import, export or deal in agricultural, horticultural and dairy machinery, tools, equipments and implements;

to acquire whether as proprietors, lessees, licencees, contractors, service agents or otherwise of agricultural, gardening, pissiculture and plantation properties whether situated in India or abroad and to carry on the business of developers and managers

of agricultural, floricultural, horticultural and plantation industry in all its branches and kinds including development and management of estates and flats for the cultivation and production of agricultural produces like tea, coffee, cardamom, rubber, cocoa, pepper, arecanut, flower, particularly roses, carnations, anthenium, jasmine, orchids and the like and to generally carry on the business of producers, dealers, agents, exporters, and importers of floricultural and plantation products and to develop orchards, vineyards and to carry on other horticultural activities including the activities of cereals, vegetables, edible roots, legumes and the like;

to carry on the business of developers of orchards, plantations, agricultural, horticultural farming in all its branches and kinds and to establish modern agricultural, horticultural farms, gardens and orchards and demonstrate and undertake modern methods of agriculture, horticulture, floriculture, pissiculture and utilize and deal in, modern agricultural machinery and equipments and to establish and/or undertake the development of dairy farming, poultry farming, poultry products, and to carry on business as producers of dairy product and to maintain dairies of all kinds and in particular to deal in milk, condensed milk, cream, butter, curd, cheese and other agriculture, horticulture, floriculture and the like;

to survey, explore, exploit and turn to account or otherwise deal in agricultural and garden produce, flowers, fruits, vegetables, forest resources, timber and generally to expand, improve and develop through preservation, canning or conversion of food, flower, fruit and vegetable industry in the country and to manufacture on commercial scale all kinds of flower, food, fruits and vegetables, to manufacture and deal in all kinds of machinery and equipments used for processing, storing, maintaining and preserving the agricultural produce, flowers, fruits, vegetables and other consumable materials;

to carry on any agency representation business and to act as agents/representatives for Indian and foreign principals for sale, purchase, export, import of commodities, goods and merchandise of all kinds of description including engineering goods, raw materials, machinery and equipment, electronic goods, equipments, components, computer spares, computer software, consumer goods/products, building materials, agricultural products, processed goods, pharmaceutical products, textiles, garments, handicrafts etc and/or to act as export house;

to establish, acquire, takeover, purchase, get on lease, sublease, license, run, maintain, supervise and/or in any other manner turn to account the business as dealers, agents, consultants, franchisees, sellers, buyers, brokers, booking agents, service agents for any business and/or services of all kinds of insurance whether life insurance or non-life insurance including but not limited to medical, motor vehicles, transportation, shipping, air freight and/or the business and/or services of real estate/ property dealers, commission agency, brokers, financiers, lenders, under writers and/or any other such business stated in any other clauses of our Memorandum of Association;

to act as principals, agents, brokers, consultants, dealers, service agents and/or other service providers, and turn to account the same for supply and/or distribution of skilled and/or unskilled manpower, material, technicians, expertise, technical or any kind of support or in connection with any business stated in any clauses of our Memorandum of Association; and

to take and/or give on hire, licence, lease or in any other manner any assets including but not limited to equipments, plant and machinery, light vehicles, heavy vehicles, commercial vehicles, spares, tools, implements for such consideration and on such terms and conditions as the Board of Directors may deem fit.

Our main and ancillary objects, as contained in our Memorandum of Association, enable us to undertake our existing activities and the activities for which the funds are being raised through this Issue.

Changes in the Memorandum of Association

The following changes have been made to our Memorandum since fiscal 2004:

Date Amendment

August 25, 2005 Change in the authorised share capital of the Company to Rs. 240,000,000 consisting of 7,500,000 equity shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each.

November 25, 2005 Name of the Company changed from ‘R N Shetty & Company Private Limited’ to ‘RNS Infrastructures Private Limited’

December 28, 2005 Conversion to public limited company and consequential change in the name of the Company from ‘RNS Infrastructures Private Limited’ to ‘RNS Infrastructures Limited’

February 04, 2006 Name of the Company changed from ‘RNS Infrastructures Limited’ to ‘RNS Infrastructure Limited’

November 22, 2006 Increase in authorised capital to Rs. 405,000,000 divided into 24,000,000 equity shares of Rs. 10 each and 1,650,000 redeemable cumulative preference shares of Rs. 100 each.

December 22, 2006 Reorganisation of authorised capital by cancellation of 1,650,000 redeemable cumulative preference shares and simultaneous increase in authorised capital by creation of 16,500,000 equity shares of Rs. 10 each.

January 18, 2007 Increase in authorised capital to Rs. 960,000,000 consisting of 96,000,000 equity shares of Rs. 10 each.

Strategic / Financial Partners

Our Company does not have any strategic or financial partners.

Shareholders’ agreements

No shareholder of the Company has entered into any shareholders’ agreements.

Details of our Subsidiaries

Our Company has no direct and indirect subsidiaries.

OUR MANAGEMENT

Board of Directors

Under our Articles of Association, we are required to have no less than three Directors and no more than 12 Directors. We currently have eight Directors on our Board. The following table sets forth details regarding our Board of Directors:

Name, father's name, address, Nationality Age Other directorships designation, occupation and term

Mr. Rama Nagappa Shetty Indian 79 Murudeshwar Ceramics Limited S/o Nagappa Shetty Naveen Hotels Limited Murudeshwar Power Corporation Limited 122, Cunningham Road, Naveen Mechanised Construction Company Bangalore 560 001 Private Limited Karnataka, India Naveen Structural & Engineering Company Private Limited Chairman, non-executive director Shri Murudeshwar Tiles Private Limited Fire Bricks & Potteries Private Limited Industrialist Murudeshwar Infosystem Limited Murudeshwar Finance & Leasing Limited Liable to retire by rotation RNS Motors Limited Sairam Mines & Minerals Private Limited

Mr. Pandurang Palimar Prabhu Indian 67 Triton Valves Limited S/o P. Ananth Prabhu Subex Systems Limited Bhoruka Power Corporation Limited 3279, 12th Main Road HAL 2nd Stage Bangalore 560 008 Karnataka, India

Independent director

Retired from Government service

Liable to retire by rotation

Mr. Sundar Naik Kudlu Indian 82 Murudeshwar Ceramics Limited S/o Mahalinga Naik K.

556, 9th A Main 1st Stage, Indiranagar Bangalore 560 008

Independent director

Business

Liable to retire by rotation

Dr. Sadanand Venkat Rao Nadig Indian 81 Murudeshwar Ceramics Limited S/o Venkat Rao Gangolli Tile Works Private Limited

Gauri Kunj, Ashok Nagar Hubli 580 032 Karnataka, India

Independent director

Business

Liable to retire by rotation

Mr. K.P. Surendranath Indian 76 Murudeshwar Ceramics Limited S/o K C Puttaiah Davangere Sugars Limited Gokak Sugars Limited No. 145, 6th C Main 7th A Cross, HMT Layout Near R T Nagar Bangalore 560 032 Karnataka, India

Independent director

Name, father's name, address, Nationality Age Other directorships designation, occupation and term

Retired from Government service

Liable to retire by rotation

Mr. Satish Rama Shetty Indian 44 Murudeshwar Ceramics Limited S/o Mr. R.N. Shetty Naveen Hotels Limited Murudeshwar Power Corporation Limited 61, Deshpande Nagar Naveen Mechanised Construction Company Hubli 580029 Private Limited Karnataka, India Naveen Structural & Engineering Company Private Limited Whole time director Shri Murudeshwar Tiles Private Limited Fire Bricks & Potteries Private Limited Industrialist Murudeshwar Infosystem Limited Murudeshwar Finance & Leasing Limited Liable to retire by rotation RNS Motors Limited Sairam Mines & Minerals Private Limited Indian Council of Ceramic Tiles & Sanitaryware Limited

Mr. Sunil Rama Shetty Indian 42 Murudeshwar Ceramics Limited S/o Mr. R.N. Shetty Naveen Hotels Limited Murudeshwar Power Corporation Limited 61, Deshpande Nagar Naveen Mechanised Construction Company Hubli 580029 Private Limited Karnataka, India Naveen Structural & Engineering Company Karnataka, India Private Limited Shri Murudeshwar Tiles Private Limited Managing Director Fire Bricks & Potteries Private Limited Murudeshwar Infosystem Limited Industrialist Murudeshwar Finance & Leasing Limited RNS Motors Limited Liable to retire by rotation Sairam Mines & Minerals Private Limited

Mr. Naveen Rama Shetty Indian 38 Murudeshwar Ceramics Limited S/o. Mr. R.N. Shetty Naveen Hotels Limited Murudeshwar Power Corporation Limited 61, Deshpande Nagar Naveen Mechanised Construction Company Hubli 580 029 Private Limited Karnataka, India Naveen Structural & Engineering Company Private Limited Managing Director & Chief Executive Shri Murudeshwar Tiles Private Limited Officer Fire Bricks & Potteries Private Limited Murudeshwar Infosystem Limited Industrialist Murudeshwar Finance & Leasing Limited RNS Motors Limited Liable to retire by rotation Sairam Mines & Minerals Private Limited

Profiles of our Directors

Mr. Rama Nagappa Shetty, matriculate, is a first generation industrialist and the founder and chairman of our Company and the RNS Group. With a career spanning over 46 years in the construction industry, with an impetus on execution of infrastructure projects such as roads, bridges, aqueducts, dams and irrigation canals, Mr. R.N. Shetty provides direction to the overall strategy and vision of our Company. Mr. R.N. Shetty is also primarily responsible for the diversification of the RNS Group into areas such as manufacture of ceramic and vitrified floor tiles, hospitality, automobile dealerships and construction. He is also a philanthropist and has been recognised as a key contributor to the development of Murudeshwar into a renowned pilgrimage spot in India on the picturesque Arabian Sea coast. Mr. R.N. Shetty has been awarded the ‘Vishvesharayya Memorial Award’ in recognition of his outstanding contribution to the growth and development of industries. Additionally, in recognition of his valuable contribution to the development of small scale industries in the State of Karnataka, Mr. R.N. Shetty was conferred the ‘KASSIA Industrial Man’ award. Mr. R.N. Shetty was also an awardee of the 'Karnataka Rajyotsava Prashasti', a prestigious award of the Government of Karnataka.

Mr. Pandurang Palimar Prabhu holds a masters degree in commerce from the Madras University and is a retired officer of the Indian Administration Services. While working with the Indian Administration Services in 1964, he held various offices in both State and Central

Governments, including those of Commerce Secretary to the Government of India, Managing Director of Karnataka State Road Transport Corporation, Managing Director of Karnataka Power Corporation and Chairman of the Coffee Board. In the corporate sector, Mr. Prabhu was the Chairman and Managing Director of Vikrant Tyres Limited (now a part of J.K. Tyres Limited), and is presently the Chairman of Triton Valves Limited and a director of Subex Azure Limited and Bhoruka Power Corporation Limited.

Mr. Sundar Naik Kudlu is a graduate in civil engineering from the University of Madras. He commenced his professional career in 1946 as an Assistant Engineer under the Madras Government. In 1956, he was assigned the office of Assistant Executive Engineer, Public Works Department of the Government of Mysore (now known as the Government of Karnataka), and has since then held positions such as Executive Engineer, Superintending Engineer and Chief Engineer in various governmental offices. He retired from Government service in 1979 as the Administrator (Engineer-in-Chief), Upper Krishna Project, Command Area Development Authority. After his retirement he has been associated as a consultant in civil engineering consultancy works and infrastructure projects and also a practicing arbitrator and valuer.

Dr. Sadanand Venkat Rao Nadig is an MBBS and a doctor by profession with a practice spanning over 51 years. Dr. Nadig serves as chairman and/or member of governing bodies of several institutions, including the Cancer Hospital, Hubli, the School of Deaf and Dumb, Hubli and the Natish Lehari Educational Socitey, Hubli. Dr. Nadig is a Director on the Board of Directors of Murudeshwar Ceramics Limited and Gangolli Tile Works Private Limited.

Mr. K.P. Surendranath holds a B.A. (Hons.) in Economics and also an M.A. (Educational Psychology) from the University of Minnesota (USA). During the earlier years of his service, he served in the field of education and training for about 20 years in senior levels. Since his selection to the Indian Administartive Services in 1975, he has held various senior positions under the Government of Karnataka, include that of the Deputy Commissioner, Registrar of Co-operative Societies, and Secretary, Rural Development and Co-operation. He has also acted as the Chairman and Managing Director of Mysore Paper Mills Limited and Managing Director of Mangalore Chemicals & Fertilisers Limited. He has also acted as the Chairman of Second Finance Commission, Government of Karnataka.

Mr. Satish Rama Shetty, a Whole time Director of the Company, is a graduate in mechanical engineering from Karnataka University, Dharwad and has nearly 20 years of experience in the construction industry. Mr. Satish Shetty, along with Mr. Sunil Shetty and Mr. Naveen Shetty, has played an active role in the implementation of major civil engineering projects undertaken by the Company, including dams, irrigation canals and highway projects and is instrumental in development of the real estate business of the Company in Bangalore. He has worked in various positions with Murudeshwar Ceramics Limited and has been its Managing Director since 1997.

Mr. Sunil Rama Shetty is a graduate in civil engineering from the Karnataka University, Dharwad and has an aggregate experience of 17 years in the construction industry. He is presently the Managing Director of our Company along with Mr. Naveen Shetty and a joint managing director of Murudeshwar Ceramics Limited since 1993. Apart from playing an active role in the implementation of major civil engineering projects undertaken by the Company, Mr. Sunil Shetty focuses on the two other business lines of the RNS Group – hospitality and motor dealerships.

Mr. Naveen Rama Shetty is a graduate in mechanical engineering from Bangalore University, Bangalore. He is the Managing Director and Chief Executive Officer of our Company and has more than 14 years of professional experience in the construction industry. He has also been a director of Murudeshwar Ceramics Limited since 1995. Mr. Naveen Shetty, along with Mr. Sunil Shetty and Mr. Satish Shetty, has played an active role in the implementation of major engineering projects undertaken by the Company, including dams, irrigation canals and highway projects. Additionally, he is involved in and supervises the operations of Murudeshwar Power Corporation Limited, where he is a director.

Appointment of and remuneration payable to our Directors

Name of Director Contract/appointment Details of Term

letter/resolution remuneration

Mr. R.N. Shetty% By a resolution passed by the No remuneration Liable to retire by Shareholders on September 29, 2006 paid by the rotation Company except sitting fees of Rs. 5,000/- per meeting of the Board / Committee attended along with reimbursement of travel, staly local conveyance and such other expenses as may be incurred by the director for each meeting attended at actuals.

Mr. P.P. Prabhu By a resolution passed by the No remuneration Liable to retire by Shareholders on September 29, 2006 paid by the rotation Company except sitting fees of Rs. 5,000/- per meeting of the Board / Committee attended alongwith reimbursement of travel, staly local conveyance and such other expenses as may be incurred by the director for each meeting attended at actuals.

Mr. K. Sundar Naik By a resolution passed by the No remuneration Liable to retire by Shareholders on September 29, 2006 paid by the rotation Company except sitting fees of Rs. 5,000/- per meeting of the Board / Committee attended alongwith reimbursement of travel, staly local conveyance and such other expenses as may be incurred by the director for each meeting attended at actuals.

Dr. S.V. Nadig By a resolution passed by the Board on No remuneration Liable to retire by January 18, 2007 paid by the rotation Company except sitting fees of Rs. 5,000/- per meeting of the Board / Committee attended alongwith reimbursement of travel, staly local conveyance and such other expenses as may be incurred by the director for each meeting attended at actuals.

Mr K P Surendranath By a resolution passed by the Board on No remuneration Liable to retire by April 20, 2007 paid by the rotation Company except sitting fees of

Rs. 5,000 per meeting of the Board/Committee attended alongwith reimbursement of travel, stay, local conveyance and such other expenses as may be incurred by the director for each meeting attended at actuals

Mr. Satish R. Shetty*% Appointed as a Wholetime Director by a Rs. 100,000 per Liable to retire by resolution passed by the Board on month, in addition to rotation August 30, 2006 house rent allowance of Rs. 6,000 per month and perquisites as per Company policy*

Mr. Sunil R. Shetty% Appointed as the Managing Director for Rs. 200,000 per Liable to retire by a term of five years commencing month, in addition to rotation September 01, 2003 by a resolution and perquisites as passed by the shareholders on per Company February 04, 2006 policy*

Mr. Naveen R. Shetty% Appointed as the Managing Director & Rs. 200,000 per Liable to retire by Chief Executive Officer for a term of five month, in addition to rotation years commencing September 01, 2003 and perquisites as by a resolution passed by the per Company shareholders on February 04, 2006 policy*

*% Mr. Satish R. Shetty was initially appointed as a Joint Managing Director of our Company, and his appointment and remuneration was approved by the Shareholders on February 04, 2006. Subsequently, he has been redesignated by the Board as a Wholetime Director with effect from August 30, 2006.

% Mr. R N Shetty, Mr.Satish R Shetty, Mr.Sunil R Shetty and Mr.Naveen R Shetty have been on the Board of the Company since the date of incorporation. The above dates against their names indicate certain regularisations consequent upon the Company becoming a Public Company effective from January 10, 2006.

* The above details of remuneration exclude sitting fees and reimbursement of travel, other expenses incurred in connection with attending board meetings. Further, our executive directors are entitled to certain benefits such as gratuity, leave and leave encashment, leave travel concession and super annuation and provident fund contribution (subject to a maximum of 12% contribtion from the Company) as per the rules of the Company. Our executive directors also receive medical reimbursement for actual expenses incurred for self, wife and dependent children subject to a maximum of one month salary per year. Further, our executive directors are entitled to benefits such as club memberships, use of car facilities and telephone bill reimbursements.

Borrowing powers of the Board

Pursuant to a resolution passed by our shareholders at an EGM dated November 22, 2006, our Board has been authorised to borrow sums of money for the purpose of the Company upon such terms and conditions and with or without security as the Board may think fit. Our Company may borrow monies up to Rs. 8,000 million, upon such terms and in such manner as they think fit and may grant any mortgage, charge or standard security over its undertaking, property and uncalled capital or any part thereof and to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the company or of any third party.

Corporate governance

The provisions of the Listing Agreement to be entered into with NSE and BSE with respect to corporate governance and the SEBI Guidelines in respect of corporate governance will be applicable to our Company immediately upon the listing of our Equity Shares on the Stock Exchanges. Our Company undertakes to adopt the corporate governance code as per Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges upon listing.

Currently, our Board has eight directors, of which the chairman of the Board is a non-

85 executive director, and in compliance with the requirements of Clause 49 of the Listing Agreement, we have three executive directors and five non-executive directors of which four are independent directors on our Board.

In terms of the Clause 49 of the Listing Agreement, the Company has already appointed Independent Directors and constituted the following committees:

audit committee;

shareholders’/investors’ grievance committee; and

remuneration committee.

Audit committee

The audit committee was constituted on January 18, 2007 and presently comprises:

Mr. P.P. Prabhu, independent director and chairman;

Dr. S.V. Nadig, independent director and member; and

Mr. R.N. Shetty, non-executive director and member.

Terms of reference of the audit committee include:

regular review of accounts, accounting policies and disclosures;

review of the major accounting entries, based on exercise of judgment by management and review of significant adjustments arising out of audit;

establishing and reviewing the scope of the independent audit, including the observations of the auditors and review of the quarterly, half-yearly and annual financial statements before submission to the Board;

post-audit discussions with the independent auditors to ascertain areas of concern;

establishing the scope and frequency of internal audit, reviewing findings of the internal auditors and ensuring the adequacy of internal control systems;

to look into reasons for any substantial defaults in the payment to depositors, debenture holders, shareholders and creditors;

to look into the matters pertaining to the Director’s Responsibility Statement with respect to compliance with Accounting Standards and accounting policies;

ensuring compliance with Stock Exchange legal requirements concerning financial statements, to the extent applicable;

to look into any related party transactions (i.e., transactions of the company of material nature, with promoters or management, their subsidiaries or relatives etc.) that may have a potential conflict with the interests of the Company at large;

appointment and remuneration of statutory and internal auditors; and

such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by the audit committee.

Shareholders’/Investors’ grievance committee

The shareholders’/investors’ grievance committee was constituted on January 18, 2007 and presently comprises:

Mr. R.N. Shetty, non-executive director and chairman;

Mr. K. Sundar Naik, independent director and member; and

Dr. S.V. Nadig, independent director and member.

The shareholders’/investors’ grievance committee is responsible for the redressal of shareholders and investors’ grievances such as non-receipt of share certificates and balance sheet dividend. The committee oversees performance of the registrars and transfer agents of the Company and recommends measures for overall improvement in the quality of investor services. The committee also monitors the implementation and compliance of our code of conduct for prohibition of insider trading in pursuance of SEBI (Prohibition of Insider Trading) Regulations, 1992.

Remuneration committee

The remuneration committee was constituted on January 18, 2007 and presently comprises:

Mr. K. Sundar Naik, independent director and chairman;

Mr. P.P. Prabhu, independent director and member; and

Dr. S.V. Nadig, independent director and member.

The remuneration committee determines the Company’s remuneration policy, having regard to performance standards and existing industry practice. Under the existing policies of our Company, the remuneration committee, among other things, determines the remuneration payable to our Directors.

Apart from discharging the above-mentioned basic functions, the remuneration committee also discharges the following functions:

framing policies and compensation including salaries and salary adjustments, incentives, bonuses, promotion, benefits, stock options and performance targets of the top executives; and

formulating strategies for attracting and retaining employees, employee development programmes.

Shareholding of our Directors in the Company

As on the date of filing this Draft Red Herring Prospectus, none of our Directors hold any Equity Shares in the Company, except as stated below:

Name No. of Equity Shares % of pre-Issue equity share capital

Mr. R.N. Shetty 3,780,000 6.00 Mr. Satish R. Shetty 6,300,000 10.00 Mr. Sunil R. Shetty 6,300,000 10.00 Mr. Naveen R. Shetty 6,300,000 10.00

Interest of our Directors

All our Directors, including independent Directors, may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them.

Some of our Directors may also be deemed to be interested to the extent of Equity Shares, if any, already held by them and also to the extent of any dividend and other distributions payable to them in respect of the Equity Shares. Some of our Directors, including independent directors, may also be regarded as interested in the Equity Shares, if any, held by or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors, members, partners or trustees.

Some of our Directors may be deemed to be interested to the extent of consideration received/paid or any loans or advances provided to any body corporate including companies and firms, and trusts, in which they are interested as directors, members, partners or trustees. For details, refer to the section titled “Financial Statements – Related Party Transactions” on page 106. Further, please refer to the section titled “Our Promoters - Interests of Promoters and Common Pursuits” on page 93.

Changes in our Board in the last three years

Name Date of appointment Date of cessation Reason

Mr. Geeta S Malli August 06, 2003 December 12, 2005 Resigned Mr. Shobha J Shetty August 06, 2003 December 12, 2005 Resigned Mr. Mamata S Hegde August 06, 2003 December 12, 2005 Resigned Mr. Samata A Shetty August 06, 2003 December 12, 2005 Resigned Mr. Sudha R Shetty August 06, 2003 December 12, 2005 Resigned Mr. R.N. Shetty August 06, 2003 September 29, 2006 Retired by rotation Mr. R.N. Shetty September 29, 2006 - Reappointed Mr. P.P. Prabhu September 29, 2006 - Appointed Mr. K. Sundar Naik September 29, 2006 - Appointed Dr. S.V. Nadig January 18, 2007 - Appointed Mr K P Surendranath April 20, 2007 - Appointed

Managerial organisational structure

Our managerial organisational structure is as follows:

CHAIRMAN

Managing Director Managing Director Whole Time Director (Operations) & CEO (real estate)

Vice President Company Vice President Chief Mechanical (Fin) and CFO Secretary (Technical) Engineer General Manager General (Projects) Manager Manager (HRD) (Marketing) Resident General Manager Project Engineer Engineer (Works) (Site) Manager Manager Senior Engineer (Finance) Project Engineer (Marketing) (Planning) Project Engineer Q .C. (Site) Senior Project Engineer Engineer Project Engineer Billing & QS (Contracts) Q .C.

Project Engineer Billing & QS

Key managerial personnel

Key managerial personnel of the Company

Details regarding our key managerial personnel are set out below. All key managerial personnel are permanent employees of our Company:

Name Designation Age Educational Total Gross (years) qualifications experience remuneration in (years) financial year 2006-2007 (Rs.)

S. Rajamohan Vice President 61 B.E. (Civil) 34 743,000 (Technical)

Name Designation Age Educational Total Gross (years) qualifications experience remuneration in (years) financial year 2006-2007 (Rs.)

Sunil Vice President 46 B.Com, Fellow 21 164,000* D. Sahasrabudhe (Finance) and Member of Institute Chief Financial of Chartered Officer Accountants of India

Sanjeev Shetty General 65 M.A. (Economics) 36 445,690 Kelukunjal Manager (Marketing).

B.V. Pattanshetty Chief 71 B.E. (Mechanical) 46 352,000 Mechanical Engineer

Raghuram Shetty Manager (HRD 44 B.Com 18 56,400** & IR)

K. Karunakar Shetty Project Manager 51 B.E. (Civil) 25 477,333***

K.T. Shetty General 55 B.E. (Civil) 30 345,760 Manager

Suresh Shetty Project Manager 47 B.E. (Civil) 20 410,000

Ratnakar Shetty Project Manager 59 B.E. (Electrical) 33 360,655

Rangadamayya Project Manager 40 B.E. (Civil) 16 300,000****

S.B. Katteppanavar Project Manager 42 B.E. (Civil) 18 350,000

H.R. Mallikarjun Project Engineer 43 B.E. (Civil) 18 349,300

Rajendra Anchatageri Project Engineer 46 B.E. (Civil) 24 350,000

S.R. Patil Project Engineer 42 B.E. (Civil) 18 106,896

R.B. Patil Senior Engineer 45 B.E. (Civil) 18 247,710 (Contracts)

Pranesh S. Kulkarni Senior Engineer 37 M.E. (Structures 14 350,000 (Contracts & Engineering) Planning)

Vijayamahantesh V. Company 28 B. Com, Associate 0 17,000 Khannur Secretary Member of Institute of Company Secretaries of India

* Joined the Company in December 2006. ** Joined the Company in January 2007. *** Joined the Company in April 2006. **** Joined the Company in June 2006. ***** Joined the Company in March 2007.

Brief profiles of our key managerial personnel are given below:

S. Rajamohan joined our Company as a Senior Project Manager in February 2003 and presently acts as the Vice President (Technical) and is in charge of the Bangalore residential project and other contractual projects that our Company is presently executing. He commenced his professional career as an assistant engineer with Karnataka Power Corporation Limited in 1972 and worked there in various capacities (including that of chief engineer) until 1999, when he was transferred to the Bangalore Mahanagara Palike as its chief engineer.

Sunil D. Sahasrabudhe is the Chief Financial Officer and Vice President (Finance) of the Company. He is a rank holder in the B.Com. examinations conducted by the Karnataka University and has extensive knowledge of taxation matters, budgeting, financial planning, costing, auditing, working capital management, estimates, MIS reporting, formulation of

89 financial policies, finalisation of accounts and preparation of project reports. He is a fellow member with the Institute of Chartered Accountans of India. Prior to joining our Company in December 2006, he worked with Canara Bank for over four years and as vice president (accounts) in Murudeshwar Ceramics Limited for over 17 years.

Sanjeev Shetty Kelukunjal joined our Company in 2001 as General Manager (Marketing- Real Estate) and presently oversees marketing and related functions of our Company. Prior to joining the Company, he worked with Andhra Bank at its various offices for 30 years. He retired from the Hyderabad head office of Andhra Bank as its deputy general manager in 2001.

B.V. Pattanshetty joined our Company in 1998 and is presently the Chief Mechanical Engineer, which involves overseeing the Transport and Heavy Machinery Division of the Company. He commenced his career in 1971 as an assistant engineer with the Steel Authority of India, Bokaro, Steel Authority of India Limited with them in various capacities for over 20 years, including as its deputy chief engineer (transport and mobile equipment). Subsequently, he joined as a deputy general manager with Jaiprakash Industries Limited and worked there for over 18 years in various positions, including Vice President.

Raghuram Shetty joined our Company in January 2007 as Manager (HRD & IR). In April 1988, he joined Naveen Mechanised Construction Company Private Limited as an assistant industrial relation officer and was promoted to manager (HRD & IR) in 1995. His scope of work involves handling all matters relating to human resource development and industrial relations.

K. Karunakar Shetty has been with our Company since April 2006 as a Project Manager. He has 25 years of total experience and is presently working on a residential apartment project at Bangalore and is in charge of project management. He has significant experience in the construction industry, specifically in the construction of high-rise buildings. Prior to joining our Company, he was engaged himself independently in execution of civil engineering projects (buildings) for over 9 years.

K.T. Shetty joined our Company in 2002 as a General Manager. He has commenced his career with this Company in 1980 and is presently working on the Bellary Thermal Power Project, where the Company is undertaking the construction of a reservoir tank for Karnataka Power Corporation Limited.

Suresh Shetty commenced his professional career with our Company over 20 years ago as a Project Manager. He is presently working on a state highway project being undertaken by our Company. He has significant experience in the construction industry, with a focus of irrigation and highway projects. In his tenure, he has assisted in the construction of the World Bank-aided irrigation project for the Upper Krishna, the NH-4 Dharwad-Belgaum Four Lane Concrete Road Project, a part of the Golden Quadrilateral Project, and the Talamba Dam Project at Maharastra.

Ratnakar Shetty commenced his career at our Company 33 years ago. Presently, he acts as a project manager in Andhra Pradesh for the construction of a canal as part of an irrigation project. He has significant experience in the construction industry, with a focus of irrigation and highway projects. In his tenure, he has assisted in the construction of the World Bank- aided irrigation project for the Upper Krishna, the Belgaum Bypass Project - a part of the Golden Quadrilateral Project, the Gerusoppa Dam Project of Karnataka Power Trading Corporation Limited.

Rangadamayya joined our Company in May 2006 as a Project Engineer. He has an aggregate of 16 years of professional experience and is presently working as a project engineer on a residential apartment project at Bangalore. Prior to joining our Company, he worked with U B Shetty & Co., as a Civil Engineer for about Eight years. He has significant experience in the construction industry, specialising in irrigation projects, high-rise building projects and commercial complex.

S.B. Katteppanavar commenced his career at our Company in 1988 as a Project Engineer. He has significant experience in the construction industry, with a focus on irrigation projects, dams and highway projects. He has assisted in the construction of the Gerusoppa Dam

Project of Karnataka Power Trading Corporation Limited and worked as a project engineer for the Belgaum Bypass Project - a part of the Golden Quadrilateral Project.

H.R. Mallikarjun, Project Engineer, has been with the Company since the inception of his professional career in 1988. He has experience in quality control and safety measurements and liaising with supervision consultants and the National Highways Authority of India. He also has specific experience in irrigation projects, dams and highway projects. In his tenure, he has assisted in the construction of the Gerusoppa Dam Project of Karnataka Power Trading Corporation Limited.

Rajendra Anchatageri has been with the Company since 1986, acting as a Project Engineer. He has an aggregate 24 years of professional experience and at present working at Construction of Canal for PJIP irrigation project at Andhra Pradesh as Project Engineer. He has experience in quality control and safety measurements and liaising with supervision consultants and the National Highways Authority of India. Prior to joining the Company, he worked as a materials engineer with Mahalinga Shetty & Co., for Narmada Irrigation Project.

S.R. Patil commenced his career in 1989 as a Project Engineer with our Company. He is presently acting as a project engineer on the construction of thirteen roads on a World Bank- aided project in the south zone of Bangalore City. He has significant experience in the construction industry, specialising in irrigation projects, high-rise buildings and highway projects.

R.B. Patil joined our Company in 1991 as a Senior Engineer (Contracts). He has experience in project planning, estimating and costing, and also project execution. Prior to joining our Company, he was a lecturer at Maratha Mandal Polytechnic College, Belgaum and also worked in the Indian Aluminium Company Limited, Belgaum as a site engineer.

Pranesh S. Kulkarni joined our Company in 1993 and is presently a Senior Engineer (Contracts & Planning). He has 14 years of total experience and represents the Company on arbitration matters, claims and correspondence with clients on technical, legal and financial issues. Prior to joining the Company, he worked with Essar Oil Limited as a civil engineer, and for Oil and Natural Gas Corporation Limited at Bombay High.

Vijayamahantesh V. Khannur joined our Company in March 2007 and is our company secretary and compliance officer. Prior to joining the company he worked as a junior assistant with the Karnataka University of Dharwad.

Shareholding of key managerial personnel

None of our key managerial personnel hold Equity Shares. All key managerial personnel are on the rolls of the Company as permanent employees.

Familial relationships

Except as provided below, none of the Directors and the key managerial personnel has any familial relationships amongst them:

Mr. R N Shetty (Chariman);

Mr. Satish R Shetty (son of Mr. R.N. Shetty);

Mr. Sunil R Shetty (son of Mr. R.N. Shetty); and

Mr. Naveen R Shetty (son of Mr. R.N. Shetty).

Bonus or profit sharing plan for key managerial personnel

No specific bonus or profit sharing plans are offered to the key managerial personnel of our Company.

Interest of key managerial personnel

The key managerial personnel of our Company do not have any interest in our 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.

We have not entered into any contract, agreement or arrangement during the preceding two years from the date of this Draft 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.

Changes in our key managerial employees

The changes in the key managerial employees of our Company during the last three years are as follows:

Name Designation Date of change Reason

H.R. Balsubramanya Project Engineer November 26, 2006 Resigned H.R. Bhatt Sr. Bridge Engineer June 09, 2004 Resigned D.H. Phadnavis Sr. Material Engineer April 01, 2005 Resigned Ravindra R. Bhatt General Manager-Civil June 01, 2005 Resigned V. Jagdeesh Project Manager May 23, 2006 Resigned Susheela Godbole Company Secretary December 23, 2005 Joined Sunil D. Sahasrabudhe C.F.O. & V.P.(Finance) December 01, 2006 Joined K. Karunakar Shetty Project Manager April 03, 2006 Joined Rangadamayya Project Engineer June 01, 2006 Joined Raghuram Shetty Manager HRD & IR January 01, 2007 Joined Susheela Godbole Company Secretary November 01, 2006 Resigned S. Vasudev Resident Engineer April 01, 2007 Resigned Vijayamahantesh V. Company Secretary March 01, 2007 Joined Khannur

Payment or benefit to our officers

Except statutory benefits upon termination of their employment in our Company or superannuation, no officer of our Company is entitled to any benefit upon termination of his employment in our Company.

OUR PROMOTERS AND PROMOTER GROUP

Our Promoters are Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty.

Mr. R.N. Shetty (Passport No. A4696082. He does not have a voter’s identification number or driving licence). For further details of Mr. R.N. Shetty, please refer to the section titled “Our Management” on page 81.

Mr. Satish R. Shetty (Passport No. A4038344. He does not have a voter’s identification number or driving licence). For further details of Mr. Satish R. Shetty, please refer to the section titled “Our Management” on page 81.

Mr. Sunil R. Shetty (Passport No. A3684024. He does not have a voter’s identification number or driving licence). For further details of Mr. Mr. Sunil R. Shetty, please refer to the section titled “Our Management” on page 81.

Mr. Naveen R. Shetty (Passport No. A8812449. He does not have a voter’s identification number or driving licence). For further details of Mr. Naveen R. Shetty, please refer to the section titled “Our Management” on page 81.

For details of the background, educational qualifications, experience, terms of appointment Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty as Directors, see the section titled “Our Management” commencing on page 81.

Other confirmations

We confirm that the details of the permanent account numbers, bank account numbers and passport numbers will be submitted to the Stock Exchanges at the time of filing this Draft Red Herring Prospectus with the Stock Exchanges.

Further, our Promoters have confirmed that they have not been detained as willful defaulters by the Reserve Bank of India or any other Governmental authority and there are no violations of securities laws committed by them in the past or are pending against them.

Promoter Group Individuals, Companies and Entities

In addition to our Promoters, the following individuals (being the immediate relatives of our Promoters), companies and entities shall form part of our Promoter Group:

Sudha R Shetty (wife of R. N. Shetty) Geeta S Malli (daughter of R. N. Shetty)

Shoba J Shetty (daughter of R. N. Shetty) Mamata S Hegde (daughter of R. N. Shetty) Samata A Shetty (daughter of R. N. Shetty) Sharmila S Shetty (wife of Satish R. Shetty) Anvita S Shetty (daughter of Satish R. Shetty) Karan S Shetty (son of Satish R. Shetty) Shilpa S Shetty (wife of Sunil R. Shetty) Anchal S Shetty (daughter of Sunil R. Shetty) Anmol S Shetty (son of Sunil R. Shetty) Maitri N Shetty (wife of Naveen R. Shetty) Rushab N Shetty (son of Naveen R. Shetty) Yukta N Shetty (daughter of Naveen R. Shetty) Murudeshwar Ceramics Limited Naveen Hotels Limited Murdeshwar Power Corporation Limited Naveen Mechanised Construction Co.Private Limited Naveen Structural & Engineering Co.Private Limited RNS Motors Limited Shri Murudeshwar Tiles Private Limited Fire Bricks & Potteries Private Limited Murudeshwar Infosystem Limited Murudeshwar Finance & Leasing Limited Shri Murdeshwar Finance Corporation R N Shetty Family Trust R.N. Shetty Trust R.N.S. Trust Sairam Mines & Minerals Private Limited

The details of our Promoter Group companies and entities are as below:

Murudeshwar Ceramics Limited

Murudeshwar Ceramics Limited was incorporated on June 29, 1983 for the purpose of manufacturing and distribution of ceramics, vitrified tiles and granite slabs and engaging in the business of engineers, architects, contractors, builders, developers, valuers, designers, consultants and supervisors, in all fields, branches and disciplines of engineering and technology. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of the company are listed on NSE and BSE.

Shareholding pattern

Category No. of Total no. of Category of shareholder % Code shareholders shares

(A) Shareholding of Promoter and Promoter Group 2 (1) Indian (a) Individuals/Hindu Undivided Family 33 2710072 15.48 (b) Central Government/State Government(s) 0 0 0 (c) Bodies Corporate 1 1270233 7.26 (d) Financial Institutions/Banks 1 2200 0.01 (e) Any Other (specify) 2 4358182 24.9 Sub-Total (A)(1) 37 8340687 47.66 (2) Foreign Individuals (Non-Resident Individuals / Foreign (a) 0 0 0 Individuals) (b) Bodies Corporate 0 0 0 (c) Institutions 0 0 0 (d) Any Other (specify) 0 0 0 Sub-Total (A)(2) 0 0 0 Total Shareholding of Promoter and Promoter Group 37 8340687 47.66 (A)=(A)(1)+(A)(2) (B) Public Shareholding 3 (1) Institutions (a) Mutual Funds / UTI 2 700 0 (b) Financial Institutions / Banks 4 600 0 (c) Central Government / State Government(s) 0 0 0

(d) Venture Capital Funds 0 0 0 (e) Insurance Companies 2 371087 2.12 (f) Foreign Institutional Investors 5 446877 2.55 (g) Foreign Venture Capital Investors 0 0 0 (h) Any Other (specify) 0 0 0 Sub-Total (B)(1) 13 819264 4.68 (2) Non-institutions (a) Bodies Corporate 543 3158809 18.05 (b) Individuals i. Individual shareholders holding nominal share 10628 3570852 20.4 capital up to Rs. 1 Lakh. ii. Individual shareholders holding nominal share 33 938699 5.36 capital in exces of Rs. 1 Lakh. (c) Any Other (specify) 157 673650 3.85 Sub-Total (B)(2) 11361 8342010 47.66 Total Public Shareholding (B)=(B)(1)+(B)(2) 11374 9161274 52.34 Shares held by Custodians and against which (C) 0 0 0 Depository Receipts have been issued

Grand Total (A)+(B)+(C) 11411 17501961 100

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Dr. K Sandip Malli, Mr. K Jeevan Shetty, Mr. B Sudesh Hegde, Mr. K P Surendranath, Justice K Jagannatha Shetty, Mr. K Sundar Naik, Mr. S V Nadig, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman of the board of directors and Mr. Satish R. Shetty is the Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales Turnover 2,029.52 1,791.35 1,523.67 Gross Income 2,036.86 1,794.69 1,527.62 Profit/(Loss) before tax 280.53 192.36 131.17 Profit/(Loss) after tax 238.25 164.28 110.16 Paid up equity capital 460.21 310.09 310.09 Reserves 1,804.70 1,606.94 1,473.75 Net worth 2,264.91 1,917.03 1,783.84 Earnings per share (Rs.) 15.64 10.75 7.68 Book value per equity share (Rs.) 123.48 107.26 93.84

Stock Market data

Month Share price Volume of shares traded Highest (Rs.) Lowest (Rs.)

June 2007 104.20 90.00 397,322 May 2007 108.00 85.15 814,561 April 2007 93.50 78.60 200,198 March 2007 100.25 81.10 446,248 February 2007 124.90 95.50 635,680 January 2007 118.45 108.25 628,736 Source : BSE

The closing share price on the BSE on July 10, 2007 was Rs. 90.75, and the market capitalisation was Rs. 1.59 billion.

Promise vis-a-vis Performance

Murudeshwar Ceramics Limited came out with a rights issue of its equity shares in January 1996. The total issue was for 61,85,396 equity shares of Rs. 10 each at a premium of Rs. 70 per share aggregating to Rs. 49,48,31,680. The objects of the issue were to part finance the expansion for manufacture of Vitrified tiles/Manoporasa tiles and to meet long term working capital requirements. Murudeshwar ceramics Limited met with all objects of the issue. A projection was made in the issue that the net current assets (excluding cash) would increase

95 from Rs. 310.9 million to Rs. 439.2 million by July 31, 1995. The company met with the projections.

Naveen Hotels Limited

Naveen Hotels Limited was incorporated on March 31, 1975. The main object of the company includes establishment and running of hotels, resorts and golf course. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of Naveen Hotels Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

Satish R Shetty 27,600 3.45 Sunil R Shetty 24,100 3.01 Naveen R Shetty 24,100 3.01 Associate companies & 712,400 89.05 relatives Others 11,800 1.48 Total 800,000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Dr. K Sandip Malli, Mr. B Sudesh Hegde, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004 Sales Turnover 146.36 125.45 103.04 Gross Income 159.15 135.412 111.038 Profit/(Loss) before tax 40.57 17.39 19.39 Profit/(Loss) after tax 30.60 11.89 11.63 Paid up equity capital 8.00 8.00 8.00 Reserves 161.82 125.27 113.70 Net worth 169.82 133.27 121.70 Earnings per share (Rs.) 38.25 14.86 14.54 Book value per equity share (Rs.) 187.35 151.37 138.80

Murdeshwar Power Corporation Limited

Murdeshwar Power Corporation Limited was incorporated on May 26, 1993. The main object of the company includes establishment and generation of hydel power and distribution of the same. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of Murdeshwar Power Corporation Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 12 0.00 Satish R Shetty 35 0.00 Sunil R Shetty 35 0.00 Naveen R Shetty 35 0.00 Associate companies & 8,441,320 99.99 relatives Others 1,243 0.01 Total 8,442,680 100.00

Board of Directors

The board of directors comprises Mr. R. N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty

96 and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 154.369 118.55 111.40 Gross income 165.81 126.72 114.07 Profit/(Loss) before tax 86.87 43.42 28.22 Profit/(Loss) after tax 86.89 47.40 34.08 Paid up equity capital 84.43 84.43 84.43 Reserves 363.25 276.36 228.96 Net worth 447.68 360.79 313.39 Earnings per share (Rs.) 10.29 5.61 4.03 Book value per equity share (Rs.) 52.37 42.18 36.74

Naveen Mechanised Construction Co. Private limited

Naveen Mechanised Construction Co. Private Limited was incorporated on June 14, 1966. The main object of this company includes civil construction and engineering works. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of Naveen Mechanised Construction Co. Private Limited are not listed on any stock exchange. Mr. R.N. Shetty is the Chairman of the board of directors of the company.

Shareholding pattern

Shareholder No.of Shares Percentage

Satish R Shetty 13,500 9.00 Sunil R Shetty 13,500 9.00 Naveen R Shetty 13,500 9.00 Associate companies & 77,370 51.58 relatives Others 32,130 21.42 Total 150,000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty, Mr. Naveen R. Shetty, Mr. K. Anand Shetty, Mr. K. Sanjeev Shetty, Mrs. Sudha R. Shetty, Mrs. Geeta S. Malli, Mrs. Shobha J. Shetty, Mrs. Mamata S. Hegde and Mrs. Samata A. Shetty.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 64.42 211.32 125.27 Gross income 70.43 212.72 128.40 Profit/(Loss) before tax 5.10 6.04 3.56 Profit/(Loss) after tax 0.124 3.53 2.12 Paid up equity capital 1.50 1.50 1.50 Reserves 118.86 121.42 121.48 Net worth 120.36 122.92 122.98 Earnings per share (Rs.) 0.83 23.53 14.12 Book value per equity share (Rs.) 677.92 677.09 653.56

Naveen Structural & Engineering Co. Private Limited

Naveen Structural & Engineering Co. Private Limited was incorporated on February 7, 1981. The main object of this company includes fabrication, repairs and maintainence of machineries, equipments and vehicles. The company has its registered office at 604/B

Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India.

The shares of Naveen Structural & Engineering Co. Private Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

Satish R Shetty 200 4.00 Sunil R Shetty 190 3.80 Naveen R Shetty 190 3.80 Associate companies & 4198 83.96 relatives Others 222 4.44 Total 5000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 6.62 6.22 4.85 Gross income 10.41 9.97 7.88 Profit/(Loss) before tax 0.90 0.10 0.07 Profit/(Loss) after tax 0.07 0.07 0.05 Paid up equity capital 1.00 1.00 1.00 Reserves 1.85 1.84 1.70 Net worth 2.85 2.84 2.70 Earnings per share (Rs.) 14.28 15.45 9.73 Book value per equity share (Rs.) 469.07 454.78 439.33

Sairam Mines & Minerals Private Limited

Sairam Mines & Minerals Private Limited was incorporated on August 02, 1999. The main object of the company includes extracting, processing and transportation and selling of mines, minerals, clays and any other material. The company has its registered office at Naveen Complex, 7th Floor, 14 M.G. Road, Bangalore, Karnataka, India. The shares of Sairam Mines & Minerals Private Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 14 0.28 Satish R Shetty 1,194 23.88 Sunil R Shetty 1,194 23.88 Naveen R Shetty 1,194 23.88 Associate companies & 1,404 28.08 relatives TOTAL 5,000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr Satish R Shetty, Mr Sunil R Shetty and Mr. Naveen R Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data)

Fiscal year ended March 31, 2006 2005 2004

Sales and other income - - 7.81 Gross income - - 8.14 Profit/(Loss) before tax -0.70 -0.77 0.36 Profit/(Loss) after tax -0.70 -0.77 0.33 Paid up equity capital 0.50 0.50 0.50 Reserves -2.42 -1.72 -0.99 Net worth -1.92 -1.22 -0.49 Earnings per share (Rs.) -139.43 -154.57 71.99 Book value per equity share (Rs.) -384.14 -244.71 -97.10

RNS Motors Limited

RNS Motors Limited was incorporated on July 15, 2006. The main object of the company includes dealership in automobiles and repairs and maintainence of vehicles. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of RNS Motors Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 49,200 98.40 Satish R Shetty 100 0.20 Sunil R Shetty 100 0.20 Naveen R Shetty 100 0.20 Associate companies & 500 1.00 relatives Others - - Total 50,000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

Since RNS Motors Limited was incorporated on July 15, 2006, it has no results to report for the fiscal years ended March 31, 2004, March 31, 2005 and March 31, 2006.

Shri Murudeshwar Tiles Private Limited

Shri Murudeshwar Tiles Private Limited was incorporated on October 14, 1980. The main object of this company includes manufacturing of roofing tiles and bricks. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of Shri Murudeshwar Tiles Private Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 40 0.40 Satish R Shetty 450 4.50 Sunil R Shetty 400 4.00 Naveen R Shetty 350 3.50 Associate companies & 7,960 79.60 relatives Others 800 8.00 Total 10,000 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty,

Mr. Naveen R. Shetty and Mr. K Anand Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 0.00 1.03 9.32 Gross income 0.00 1.04 9.54 Profit/(Loss) before tax -0.34 -9.63 0.36 Profit/(Loss) after tax -0.37 -9.77 0.79 Paid up equity capital 1.00 1.00 1.00 Reserves -3.39 -3.02 6.75 Networth -2.39 -2.02 7.75 Earnings per share (Rs.) -37.43 -976.84 35.98 Book value per equity share (Rs.) -239.18 -201.75 775.09

Fire Bricks and Potteries Private Limited

Fire Bricks and Potteries Private Limited was incorporated on April 1, 1943. The main object of this company includes manufacturing of bricks and real estate development. The company has its registered office at Naveen Complex, 7th Floor, 14, M.G. Road Bangalore 560 001, Karnataka, India. The shares of the Fire Bricks and Potteries Private Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 473 1.32 Satish R Shetty 1,100 3.08 Sunil R Shetty 1,100 3.08 Naveen R Shetty 1,177 3.29 Associate companies & 31,394 87.81 relatives Others 506 1.42 Total 35,750 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 0.53 0.53 0.53 Gross income 0.54 0.54 0.62 Profit/(Loss) before tax (3.21) (7.52) (2.71) Profit/(Loss) after tax (3.22) (7.52) (2.74) Paid up equity capital 0.32 0.32 0.32 Reserves (34.15) (30.93) (23.41) Net worth (33.83) (30.61) (23.09) Earnings per share (Rs.) (991.04) (2314.79) (843.34) Book value per equity share (Rs.) (10,408.85) (9,417.81) (7103.02)

Murudeshwar Infosystem Limited

Murudeshwar Infosystems Limited was incorporated on March 15, 2000. The main object of this company includes software development and marketing. The company has its registered office at Naveen Complex, 7th Floor, 14, M.G. Road, Bangalore 560 001, Karnataka, India. The shares of Murudeshwar Infosystems Limited are not listed on any stock exchange.

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Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 60 0.04 Satish R Shetty 20 0.01 Sunil R Shetty 20 0.01 Naveen R Shetty 20 0.01 Associate companies & 174,425 99.91 relatives Others 30 0.02 Total 174,575 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 0.35 0.65 0.32 Gross income 0.35 0.65 0.44 Profit/(Loss) before tax 0.01 0.02 -2.06 Profit/(Loss) after tax 0.05 0.04 -2.08 Paid up equity capital 1.74 1.74 1.74 Reserves 0.18 0.13 0.09 Net worth 1.92 1.87 1.83 Earnings per share (Rs.) 0.29 0.23 -11.94 Book value per equity share (Rs.) 21.05 20.75 20.42

Murudeshwar Finance and Leasing Limited

Murudeshwar Finance and Leasing Limited was incorporated on October 01, 1993. The company is registered as a non-banking financial company with RBI (registration number B- 02-00099) and was in the business of lending, hire purchase and lease business. The company has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India. The shares of Murudeshwar Finance and Leasing Limited are not listed on any stock exchange.

Shareholding pattern

Shareholder No.of Shares Percentage

R N Shetty 15 0.00 Satish R Shetty 16,426 1.25 Sunil R Shetty 26 0.00 Naveen R Shetty 98,880 7.54 Associate companies & 923,500 70.45 relatives Others 272,203 20.76 Total 1,311,050 100.00

Board of Directors

The board of directors comprises Mr. R.N. Shetty, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty. Mr. R.N. Shetty is the Chairman and Managing Director of the company.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

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Sales and other income 0.37 0.18 1.99 Gross income 0.37 0.18 2.21 Profit/(Loss) before tax -4.35 -2.7 1.55 Profit/(Loss) after tax -4.71 -3.56 0.94 Paid up equity capital 13.11 13.11 13.11 Reserves 1.65 6.35 9.9 Net worth 14.76 19.46 23.01 Earnings per share (Rs.) -3.59 -2.71 0.72 Book value per equity share (Rs.) 11.26 14.84 18.14

Shri Murudeshwar Finance Corporation

Shri Murudeshwar Finance Corporation was formed on April 1, 1978. The main object of the firm includes money lending. The firm has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India.

Constitution

The partners of the firm are Mr. R.N. Shetty, Mr. Satish R Shetty, Mr. Sunil R Shetty, Mr. Naveen R Shetty, Mrs. Geeta S Malli, Mrs. Shobha J Shetty, Mrs. Mamata S Hedge and Mrs. Samata A Shetty.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 1.25 1.2 1.84 Gross income 1.25 1.2 1.84 Profit/(Loss) before tax 0.15 0.18 0.2 Profit/(Loss) after tax 0.09 0.11 0.19 Paid up equity capital 6.75 6.67 6.56 Reserves 0 0 0 Net worth 6.71 6.62 6.51 Earnings per share (Rs.) Not Applicable Not Applicable Not Applicable Book value per equity share (Rs.) Not Applicable Not Applicable Not Applicable

R.N. Shetty Family Trust

R N Shetty Family Trust was formed on July 22, 1995. The main object of the trust includes investments. The trust has its registered office at 604/B Murudeshwar Bhavan, Gokul Road, Hubli 580 030, Karnataka, India.

Constitution

The trustees are Mr. R.N. Shetty (Author of the Trustee), Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales Turnover 10.28 12.37 12.23 Gross income 10.28 12.37 12.23 Profit Before Tax 2.24 6.3 6.54 Profit After Tax 2.24 6.26 6.37 Paid up Captal Not Applicable Not Applicable Not Applicable Reserves 135.75 71.89 65.62 Net worth 135.75 71.89 65.62 EPS (Rs) Not Applicable Not Applicable Not Applicable Book Value Per Share (Rs) Not Applicable Not Applicable Not Applicable

R.N. Shetty Trust

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R N Shetty Trust was formed on May 2, 1975. The main object of the trust includes charitable and religious activities and running educational institutions. The trust has its registered office at 61, Deshpande Nagar, Hubli 580 029, Karnataka, India.

Constitution

The trustees are Mr. R.N. Shetty (Managing Trustee), Mrs. Sudha R. Shetty, Mrs. Geeta S. Malli, Mr. Satish R. Shetty, Mr. Sunil R. Shetty and Mr. Naveen R. Shetty.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004

Sales and other income 47.68 32.93 20.94 Gross income 60.11 46.32 22.12 Profit/(Loss) before tax 43.46 32.04 2.11 Profit/(Loss) after tax 43.46 32.04 2.11 Paid up equity capital Not Applicable Not Applicable Not Applicable Reserves 562.7 530.9 504 Net worth 562.7 530.9 504 Earnings per share (Rs.) Not Applicable Not Applicable Not Applicable Book value per equity share (Rs.) Not Applicable Not Applicable Not Applicable

RNS Trust

R.N.S. Trust was formed on December 28, 1998. The main object of the trust includes establishing and running hospitals. The trust has its registered office at Naveen Complex, 7th Floor, 14, M.G. Road, Bangalore 560 001, Karnataka, India.

Constitution

The trustees are Mr. R.N. Shetty (Managing Trustee), Mr. Satish R. Shetty, Mr. Sunil R. Shetty, Mr. P.P. Prabhu and Mr. S.V. Nadig.

Financial performance

(Rs. million except per share data) Fiscal year ended March 31, 2006 2005 2004 Sales and other income 4.9 0.14 Nil Gross income 5.09 0.39 0.3 Profit/(Loss) before tax -6.44 -1.23 0.3 Profit/(Loss) after tax -6.44 -1.23 0.3 Paid up equity capital Nil Nil Nil Reserves 73.33 29.51 1.45 Net worth 73.33 29.51 1.45 Earnings per share (Rs.) Not Applicable Not Applicable Not Applicable Book value per equity share (Rs.) Not Applicable Not Applicable Not Applicable

Sick companies

None of the Promoter Group entities listed above has been declared as a sick company under the the Sick Industrial Companies Act, 1985 and there are no winding up proceedings against any of the Promoter Group companies.

Disassociation by the Promoters in the last three years

Our Promoters have not disassociated themselves from any company in the past three years.

Conflict of interest

Our Promoters are actively involved in the management of other business operations carried on by companies in our Promoter Group, some of which conduct businesses and operations

103 similar to ours within the real estate development industry. Accordingly, there may be potential conflicts of interest between our operations and those of our Promoter Group companies. There is no requirement or undertaking made by the Promoters or other entities in our Promoter Group not to compete with our business. In addition, there is no requirement or undertaking for our Promoters or such entities to conduct or direct any opportunities in the real estate industry only to or through us. As a result, conflicts of interest may arise in allocating or addressing business opportunities and strategies amongst our Company, our Promoters and other entities in our Promoter Group in circumstances where our interests differ from theirs.

Interests of our Promoters

Our Promoters are interested in our Company to the extent that they have promoted our Company, their shareholding in our Company and to extent of them being directors of our Company. For further interest of our Directors, see section “Our Management - Interests of Directors” on page 81.

Payment of benefits to our Promoters during the last two years

Except as stated in the section titled “Financial Statements” commencing on page 106, there has been no payment of benefits to our Promoters during the last two years from the date of filing of this Draft Red Herring Prospectus.

Related party transactions

For details of related party transactions, see the section titled “Financial Statements” commencing on page 106.

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DIVIDEND POLICY

Our Company has no stated dividend policy. The declaration and payment of dividends on our Equity Shares will be recommended by our Board of Directors and approved by our shareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits, capital requirements and overall financial condition.

The table below provides information of dividends declared by our Company during the last five financial years.

Year ended March 31, 2007 2006 2005 2004 2003

Face value of Equity 10 10 - - - Shares (Rs. per share) Dividend (Rs. million) 63.00 37.50 - - - Dividend tax (Rs. Million) 10.71 5.26 - - - Dividend per Equity Share 1 5 - - - (Rs.) final Dividend rate (%) 10% 50% - - -

The amounts paid as dividends in the past are not necessarily indicative of our dividend policy or dividend amounts, if any, in the future.

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SECTION V – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

To, The Board of Directors, RNS Infrastructure Limited 604/B, Murudeshwar Bhavan Gokul Road Hubli – 580 030

Dear Sirs,

A. We have examined the books and account of RNS Infrastructure Limited (the “Company”) for the fiscal years ended March 31, 2007, 2006, 2005, 2004 and 2003 being the last date to which the accounts of the company have been made up.

We have carried out the examination of the attached Restated Statement of Assets and Liabilities of the Company as at March 31, 2007, 2006, 2005, 2004 and 2003 and the Restated Statement of Profits and Losses and the Restated Statement of Cash Flows of the Company for each of the years ended on those dates (collectively, the “Restated Financial Statements”) (see Annexures I, II and III) as prepared by the Company and approved by the Board of Directors. We have audited the financial statements of the Company for the years ended March 31, 2007, 2006, 2005, 2004 and 2003.

In accordance with the requirements of: a. Paragraph B (1) of part II of schedule II to the Companies Act, 1956 (“the Act”); b. The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000, issued by SEBI on January 19, 2000 in pursuance of Section 11 of The SEBI Act, 1992 (“the SEBI Guidelines”); and c. Instructions dated January 10, 2007 received from the Company, requesting us to carry out work relating to the offer document being issued by the Company in connections with its initial public offer of equity shares in the Company, we confirm that:

i. The Restated Financial Statements have to be read in conjunction with the notes given in Annexure IV to this report; ii. The Restated Financial Statements have been restated with retrospective effect to reflect the significant accounting policies being adopted by the Company as at March 31, 2007 as stated in the Notes forming part of the Restated Financial Statements vide Annexure IV to this report; iii. The restated profits have been arrived at after charging all expenses including depreciation and after making such adjustments and regroupings as in our opinion are appropriate in the year/period to which they are related as described in notes 1 to 14 of the Notes Forming Part of the Restated Financial Statements appearing in Annexure IV; iv. The prior period items have been adjusted in the Restated Financial Statements in the years to which they relate; v. There are no extraordinary items which need to be disclosed separately in the Restated Financial Statements; and vi. The auditors’ qualifications in the auditors’ report have been adjusted in the Restated Financial Statements.

The financial statements of the partnership firm R. N. Shetty & Co. (converted/ merged with RNS Infrastructure Limited) for the period April 1, 2002 till August 05, 2003 have been revised to conform to the format prescribed for companies under the Companies Act, 1956 and we certify that:

1) adequate disclosures have been made in the financial statements relating to the above period as are required to be made by the companies as per Schedule VI of the Companies Act, 1956; and

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2) the accounting standards of the Institute of Chartered Accountants of India (ICAI) have been followed and that the financial statements present a true and fair picture of the firm’s accounts.

B. Other Financial Information We have examined the following information of the Company for the fiscal years ended March 31, 2007, 2006, 2005, 2004 and 2003, unless otherwise stated, proposed to be included in the offer document being issued by the Company, approved by you and annexed to this report:

1. Notes regarding adjustments made in the Restated Financial Statements enclosed as Annexure V 2. Restated Schedule of Investment enclosed as Annexure VI 3. Restated Schedule of Sundry Debtors enclosed as Annexure VII 4. Restated Schedule of Loans and Advances enclosed as Annexure VIII 5. Restated Schedule of Secured Loans enclosed as Annexure IX 6. Restated Schedule of Unsecured Loans enclosed as Annexure X 7. Restated Schedule of Other Income enclosed as Annexure XI 8. Schedule of Dividend Paid enclosed as Annexure XII 9. Summary of Accounting Ratios enclosed as Annexure XIII 10. Tax Shelter Statement enclosed as Annexure XIV 11. Capitalization Statement as on 31st March 2007 enclosed as Annexure XV 12. Related Party Transactions enclosed as Annexure XVI 13. Segmental information enclosed as Annexure XVII 14. Details of Secured and Unsecured Loans as on 31st March 2007 enclosed as Annexure XVIII

The preparation and presentation of the Restated Financial Statements as mentioned in paragraph (A) above, based on the audited financial statements of the Company in accordance with the provisions of the Act and the financial information as mentioned in paragraph (B) above are the responsibility of the management of the Company.

In our opinion, the financial information of the Company mentioned in paragraphs (A) and (B) above, read with respective significant accounting policies and notes to the accounts and after making appropriate groupings and adjustments, have been prepared in accordance with Part II of Schedule II to the Act and the SEBI Guidelines.

This report is provided solely for the purpose of assisting the Company to which it is addressed in discharging their responsibilities under the SEBI Guidelines and paragraph B(1) of Part II of the Schedule II to the Act.

For B. C. Shetty & Co., Chartered Accountants,

B. C. Shetty Partner Membership No.24296 Place: Hubli Date: June 25, 2007

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ANNEXURE – I

SUMMARY OF RESTATED ASSETS AND LIABILITIES

(Rs. in Million) PARTICULARS As at March 31,

2007 2006 2005 2004 2003

Investments Total (B) 267.34 42.38 221.65 264.57 167.21

Current Assets, Loans and Advances

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ANNEXURE - II SUMMARY OF RESTATED PROFIT AND LOSS ACCOUNT

(Rs. in Million) Particulars Fiscal year ended March 31,

2007 2006 2005 2004 2003

INCOME Income from Real Estate and 2,103.33 1,282.95 1,313.26 1,265.44 680.23 Construction Activities Income from Dealership Activities 2,024.03 2,270.05 1,835.38 1,679.36 1,308.71

Other Income 18.29 42.32 16.30 12.79 18.47 Accretion- (Depletion) in work in 69.84 16.49 11.53 0.42 7.31 progress TOTAL INCOME 4,215.49 3,611.81 3,176.46 2,958.01 2,014.72

Raw Material Consumed 2,654.56 2,643.15 2,319.37 2,021.04 1,369.38 Employee Costs 437.82 362.74 372.30 502.52 291.82

Repairs,Maintainance,Overheads 349.95 233.64 196.41 215.84 148.09 Adminst. Expenses

Selling & Distribution Expenses 35.38 49.15 40.79 34.24 23.76

Financial Expenses 94.35 97.08 88.70 84.33 75.42

Depreciation 68.50 54.07 46.61 41.28 31.50

Preliminary & Deffered Revenue 3.14 2.98 1.72 2.06 2.52 Expenditure Written Off

TOTAL EXPENDITURE 3,643.70 3,442.81 3,065.90 2,901.31 1,942.49

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ANNEXURE – III

RESTATED STATEMENT OF CASH FLOWS

(Rs. in Million) PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

A. Cash Flow From Operating Activities:

Net Profit As Per Profit & Loss Accounts 571.79 169.00 110.57 56.70 72.23 Add: Adjustments for: Pre Incorporation Expenses 0.35 0.35 - 0.35 -

Deferred Revenue Expenditure 2.79 2.63 0.35 1.71 2.52 Interest Paid 94.35 97.08 88.70 70.35 55.69 Depreciation 68.50 54.07 46.61 41.28 31.50 Loss on Sale of Investments [Net] - 0.00 1.37 23.31 13.31 Discarded assets written off 0.35 - - - - Loss on Sale of Asset [Net] 0.35 1.50 - 0.22 0.11

740.47 324.63 247.60 193.92 175.36 Less: Adjustments for :

Dividend Received 0.94 21.55 4.76 0.34 0.97

Interest Received 13.79 18.53 8.77 10.69 14.21

Profit on Sale of investment - 0.26 - - -

Profit on Sale of Assets 0.42 0.21 0.85 - 0.13

Operating Profit Before Working Capital Changes 725.33 284.07 233.21 182.89 160.05 Adjustments for: Add: Increase in Current Liabilities &Decrease In Current Assets Current Liability - 13.15 18.51 59.39 1.46

Other current assets - - - 66.98 23.00

Loans & Advances 209.39 - - 36.40 -

Inventories 3.27 - - - -

Sundry Debtors 82.41 3.14 - 2.32 9.63 Less: Increase In Current Assets & Decrease In Current Liability

Inventories - 71.69 - 82.03 28.57

Sundry Debtors - - - 39.87 -

Other current assets 644.44 13.60 121.62 77.16 -

Current Liability 123.99 - - - -

Loans & Advances - 246.63 - 38.88 98.33

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PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

Cash Generated From Operational Activities 249.97 -31.56 130.09 110.03 67.25

Wealth Tax For Earlier Year 0.38 0.15 - - -

Fringe Benefit Tax 1.47 1.85 - - -

Dividend on equity shares 37.50 - - - -

Dividend on preferred shares 16.86 - - - -

Dividend Tax 7.62 - - - -

Income Tax For Earlier Years 56.77 33.83 0.64 - 0.99

Net Cash Flow From Operating Activities 129.36 -67.39 129.46 110.03 66.26

B. Cash Flow From Investing Activities:

Inflow:

Sale of investment 182.80 46.38 21.89 36.65

Sale of Fixed Assets 90.29 2.10 3.12 2.81 0.25

Interest Received 13.79 18.53 8.77 10.69 14.21

Dividend Received 0.94 21.55 4.76 0.34 0.97

Outflow: -- - -

Pre Incorporation expenditure/public issue expenses 12.42 - 0.35 1.75 -

Deferred revenue expenditure 0.79 0.55 - - 5.09 Purchase of Investments 224.97 3.52 3.75 120.72 0.18 Purchase of Fixed Assets 222.98 115.88 57.78 61.13 246.21

Net Cash Outflow from Investing Activities -356.14 105.03 1.15 -147.87 -199.40

C. Cash Flow From Financing Activities:

Partner Contribution - - -34.65 212.27

Secured Loans 42.95 177.65 33.30 -144.94 302.84

Unsecured Loans 233.33 -118.41 -14.09 289.87 -309.32

Share Capital - - - -3.49 -

Interest Paid 94.35 -97.08 -88.70 -70.35 -55.69

Net Cash Used In/From Financing Activities 181.93 -37.84 -69.49 36.44 150.11

Net Decrease In Cash and Cash Equivalents A + B + C -44.85 -0.19 61.12 -1.39 16.96

Cash and Cash Equivalents at the Beginning of the Year 179.78 179.97 118.85 120.24 103.28

Cash and Cash Equivalents at the End of the Year 134.93 179.78 179.97 118.85 120.24

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Annexure IV

Significant Accounting Policies and Notes for Restated Financial Statements:

1. Significant Accounting Policies a. Basis of Preparation of Financial Statements: The financial statements are prepared under the historical cost convention on accrual basis in accordance with applicable Accounting Standards in India, the accounting standard and relevant guidance notes issued by the institute of chartered accountants of India, the relevant provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection Guidelines), 2000, issued by the Securities and Exchange Board of India. b. Use of estimates: The preparation of financial statements requires the management to make estimates and assumptions that affects the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known/materialized. c. Basis of Accounting: The Company maintains its accounts on an accrual basis following the historical cost convention in accordance with generally accepted accounting principles and in compliance with the accounting standards referred to in Section 211(3C) and other requirements of the Companies Act, 1956 d. Fixed Assets: The fixed assets are stated at cost less accumulated depreciation. Cost inclusive of freight, duties and taxes, incidental expenses related to acquisition and directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price related to acquisition.

Subsequent expenditure related to fixed assets represents improvements that ought to be added to the gross book value or repairs that ought to be charged to the profit and loss statement. All upgrades/enhancements are generally charged off as revenue expenditure unless they bring similar significant additional benefits. e. Depreciation: The method of depreciation is consistently applied by the company and there is no deviation in the method of depreciation during the earlier years. The depreciation on fixed assets is provided on straight line method at the rates and in the manner prescribed in schedule XIV to the Companies Act, 1956. f. Inventories: Inventories are valued after providing for obsolescence as under: • Raw materials, components, construction materials, stores, spares and loose tools at cost. • Work in progress: ¾ Work in progress (other than project and construction-related) at cost including related overheads. ¾ Project and construction-related work in progress at cost until a major portion of the relevant project is completed and thereafter at realizable value.

In case of qualifying assets, cost includes applicable borrowing cost vide policy relating to borrowing costs. g. Borrowing Costs: Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalized as part of cost of such asset till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as expenses in the period in which they are incurred.

112 h. Investment: Current investments are valued at the lower of cost or fair market value. Long-term investments are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature. On disposal of an investment, the difference between the carrying amount of investment and the disposal proceeds, net of expenses, is recognized in the profit and loss statement. Interest, dividends and rentals on investments are shown separately as income from long term and current investments and are stated in gross. i. Employees Retirement Benefits: Contributions to provident fund, gratuities, group gratuity insurance and leave encashment benefits are charged to the profit and loss account each year. Provisions for gratuity are made based on the actuarial valuation. j. Taxes on Income:

Provision for current tax is made after taking into consideration benefits available under the provisions of the Income Tax Act, 1961. Deferred tax resulting from timing differences between accounting income and taxable income are accounted for using the tax rates and tax laws that are enacted or substantially enacted as on the balance sheet date. So far as the Company is concerned, deferred tax is created on timing differences between depreciation as per the straight line method of the Companies Act, 1956 and the written down value of the Income Tax Act, 1961. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised on the carry-forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized. k. Segment Accounting Policies: Segment accounting policies are in line with the accounting policies of the Company. However, the following specific policies have been followed for segment reporting:

• Segment revenue includes sales and other income directly identifiable with/allocable to the segment including inter-segment revenue. • Expenses that are directly identifiable with /allocable to segments are considered for determining the segment result. The expenses, which relate to the company as whole and not allocable to segments, are included under “other unallocable expenditure”. • Income, which relates to the company, as a whole and not allocable to segments is included in “unallocable corporate income”. • Segment result includes margins on inter-segment capital jobs, which are reduced in arriving at the profit before tax of the company. • Segment Assets and liabilities include those directly identifiable with the respective segments. Unallocable corporate assets and liabilities represent the assets and liabilities that relate to the company as whole and not allocable to any segment. l. Revenue Recognition: • Long-term contracts: The Company accounts for income on the percentage of completion basis, which necessarily involves technical estimates of the percentage of completion and costs to completion of each contract activities, on the basis of which profits /losses are accounted.

Such estimates, made by the company and certified to the auditors, have been relied upon by them, as these are of technical nature.

• The Company started its real estate development business during the fiscal year ended March 31, 2007. It recognizes the revenue generated from its residential and commercial projects on the ‘Percentage Completion Method’ of accounting. Under this method, sales revenue is recognized on the basis

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of the percentage of the actual construction cost incurred compared to the total estimated cost of construction of the project. In addition, revenue is recognized only if the actual construction cost incurred on the relevant date of the financial statements is at least 30% of the total construction cost of the project as estimated by management. We cannot assure you that these estimates will match with the actual cost incurred in respect of these projects. The effect of such changes to estimates is recognised in the financial statements of the period in which such changes are determined. Therefore, its revenue recognition is based on the number of projects that qualify for such revenue recognition that are under execution during a period. This may lead to significant fluctuations in its revenues from period to period. Amounts received from customers for projects, which do not qualify for revenue recognition under this method, or amounts paid by customers in advance of the amounts recognized under the method described above, are accounted for as liabilities as part of the unsecured loans. Currently, the Company follows Accounting Standard 7 (“AS7”). In the event of any change in law or Indian GAAP, which requires a change in the method of revenue recognition, the financial results of the Company’s operations may be materially and adversely affected.

• The company re-evaluates project costs periodically, particularly when, in our opinion, there have been significant changes in market conditions viz, costs of labour, materials and other contingencies. Material re-evaluations will affect revenues in the relevant fiscal periods. If its estimates of project costs are inaccurate or if contingencies occur that materially impact its estimates, its revenues may fluctuate significantly from period to period. Such estimates, made by the company and certified to the auditors, have been relied upon by them, as these are of technical nature.

• Finance commissions are recognized on due basis. • Insurance agency commissions are recognized on the effective commencement or renewal dates of the policies. • Interest accrues, in most circumstances, on the time basis determined by the amount outstanding and the rate applicable • Dividends from investments in shares are not recognized in the statement of profit and loss until a right to receive payment. • Incentive is recognized on accrual bases. m. Miscellaneous Expenditure: Miscellaneous expenditure such as Pre-Incorporation and deferred revenue expenditure included during period, which amortized as under- • Pre-Incorporation expenditure to be written off over a period of five years. • Deferred revenue expenditure is incurred to get the award of works contract and the same is written off over a period of five years. n. Grant: Grants and subsidies are recognized when there is a reasonable assurance that the grant or subsidy will be received and that all underlying conditions thereto will be complied with. When the grant or subsidy relates to assets, its value is deducted in arriving at the carrying amount of related assets. o. Provision, Contingent Liability & Contingent Assets: Provisions involving substantial degree of estimation in measurement are recognized when there is present obligation as results of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes to accounts. Contingent assets are neither recognized nor disclosed in the financial statements. p. Leased Assets: Operating lease: Lease rentals are expensed in profit and loss account with reference to lease terms and conditions

114 q. Intangible assets: An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its useful life. The cost of software purchased for internal use comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable by the enterprise from the taxing authorities) and any directly attributable expenditure on making the software ready for its use. Any trade discounts and rebates are deducted in arriving at the cost

2. Notes to Restated Financial Statements:

a. 1) During the year ended March 31st 2003 the company has received an amount of Rs.5.43 million as refund of sales tax relating to the previous year 1999-2000 and the company has received an amount of Rs.1.49 million as refund of income tax including interest which pertains to earlier years.

2) During the year ended March 31st 2003 the company has claimed an amount of Rs.0.04 millions as bad debts relating to the earlier years.

3) During the year ended March 31st 2004 the company has received an amount of Rs.1.73 millions as refund of income tax relating to Assessment year 1998-1999

4) During the year ended March 31st 2004 the company has paid an amount of Rs0.08 million as income tax relating to previous years.

5) During the year ended March 31st 2005 the company has received an amount of Rs.0.79 millions as sales tax refund and an amount of Rs.0.51 millions as interest on income tax refund relating to earlier years.

6) During the year ended March 31st 2005 the company has paid an amount of Rs.0.64 millions as income tax and an amount of Rs.0.15 millions as wealth tax relating to earlier years.

7) During the year ended March 31st 2006 the company has received an amount of Rs.14.17 millions as sales tax refund and an amount of Rs.0.18 millions as VAT claim adjusted against opening stock relating to earlier years.

8) During the year ended March 31st 2006 the company has paid an amount of Rs.2.50 millions as income tax and an amount of Rs.0.20 millions as wealth tax relating to earlier years.

9) During the year ended march 31st 2007 the company has receive an amount of Rs 0.34 millions as income tax refund and amount of Rs 6.73 millions as sales tax refund relating to earlier years.

10) During the year ended March 31st 2007 the company has paid an amount of Rs 5.00 millions as sales tax and an amount of Rs 0.65 millions as interest on service tax.

11) During the year ended March 31st 2007 the company has paid an amount of Rs.6.61 millions as income tax, Rs.0.38 millions as wealth Tax and an amount of Rs.0.39 millions as EPF relating to earlier years.

12) The tax rate applicable for the financial year ended March 31st 2007, has been used to calculate the notional tax impact of the adjustments.

b. Certain parties accounts included in sundry debtors, loans and advances [Other than Secured Loans] and sundry creditors are under reconciliation. In the opinion of the management, the adjustments will be accounted in the period in which the reconciliations are completed.

115

c. In the opinion of the Board of Directors, all items of current assets, loans and advances continue to have a realizable value of at least the amounts at which they are stated in the Balance Sheet, unless otherwise stated.

d. The Company converted from a partnership firm into a private limited company on August 06, 2003 and subsequently converted into a public limited company on January 10, 2006. Thereafter, the name of the company was changed to RNS Infrastructure Limited with effect from February 8, 2006.

e. Leases: i. For Construction Division:

The Company received a lease deposit of Rs. 7.01 million from Canara Bank, Bangalore for the Naveen Complex Building situated at No 14 M. G. Road, Bangalore pursuant to a lease agreement among Canara Bank, as lessee, and NAVEEN HOTELS LTD and the Company, as joint lessors. The term of the lease is 99 years, commencing on August 01, 1992. After expiry of the lease term, the Company must repay the lease deposit subject to certain exceptions. Lease rent received for every year is Rs. 0.94 million.

The Company has entered into operating lease agreements with certain parties and pursuant to which the Company pays lease rent to those parties. The leases are for construction purposes.

(Rs. in Million) Particular Fiscal year ended March 31, 2007 2006 2005 2004 2003

Lease charges 13.13 4.10 6.19 8.55 5.31

ii. For Motors Division:

The Company acquired a building for car showroom purposes, which is situated in Hosur Road, Bangalore Branch, under an operating lease for which company paid a lease deposit of Rs. 2.39 million. The lease period is for 15 years, commencing from November 1, 2002. Hence it is an operating lease, so company does not recognize the property as an asset and does not claim any depreciation on that building. Any rent paid by the Company is charged as an expense.

(Rs. in Million) Particular Fiscal year ended March 31, 2007 2006 2005 2004 2003

Lease rent 2.47 2.49 2.25 2.05 0.78 paid

f. As per the information provided by the Company, it does not owe monies to small-scale industries. There may be certain SSI units under sundry creditors, which can not be identified.

Under the head of Sundry creditors, the amount due in excess of rupees one lakh for the period exceeding 30 days as at 31st March 2007 stands as under:

No. of parties Rs. in Millions 92 97.27

g. The Company has properly disclosed ordinary activities and extraordinary activities in profit & loss account. Extraordinary activities are those activities which are distinct from ordinary activities, which are properly disclosed and wherever needed shown as notes to accounts. The Company has considered prior period items of income and expenditure including sales tax, wealth tax, income tax, bad debts etc. and the same is accounted in the respective years in the restated financial statements.

Extraordinary Items:

116

(Rs. in Million) Particular Fiscal year ended March 31, 2007 2006 2005 2004 2003

Fringe 1.47 1.85 - - - benefit tax

h. Loans:

i. Secured Loans: The Company has taken secured loans from financial institutions, which are secured by hypothecation of materials, movable/immovable property (viz, plant & machinery, land & building, cars) and including personal guarantees of directors.

The motors division of the Company has taken secured loans, which are secured by hypothecation of stock, movable/immovable property (viz, land & building situated at Bangalore) and personal guarantees of directors.

ii. Unsecured Loans: The Company has taken unsecured loans from banks/financial institutions / other companies and which is secured by personal guarantee of the directors.

i. The Company applied AS7 “Construction Contracts (Revised)” for revenue recognition to all contracts received on or after April 1, 2005 and, for the balance sheet and other disclosures, to all contracts.

j. Accounting Standard 22 on “Accounting for tax on income ‘” issued by the Institute of Chartered Accountants of India came into being with effect from the period commencing on April 1, 2003. The Company created deferred tax liabilities for the year/period, mainly considering the permanent timing differences at the balance sheet date without considering the minor temporary timing differences. The break up of such is shown in restated summary statement of profits and losses, i.e. as under:

(Rs. in Million) Particular Fiscal year ended March 31, 2007 2006 2005 2004 2003

Provision for 1.11 1.20 12.37 9.37 - Deferred tax Liability

k. Additional information provided pursuant to the provisions of Paragraph 3 and 4D of Part II of Schedule VI of the Companies Act, 1956 is as follows:

Details of closing stock, production turnover and Quantitative details of stores, spares, and raw material consumed consumable etc, of construction division have not been provided as they relate to multiple construction projects of non-standard specifications.

CIF value of imported raw materials –NIL Expenditure in foreign currency -NIL Earnings in foreign currency -NIL

l. The Company has contingent liabilities in the nature of guarantees executed, as follows:

(Rs. in Million) Particular As at March As at March As at March As at March As at March 31, 2007 31, 2006 31, 2005 31, 2004 31, 2003

1) Guarantees Executed by 988.37 1,081.37 780.50 564.53 640.88 Banks. 2) Letter of credit - 130.00 100.00 90.00 90.00 3) Murdeshwar Power 122.00 122.00 122.00 122.00 122.00 Corporation Ltd – Corporate guarantee 4) On account of demand of - - - 9.74 -

117 income tax

The Company has made a provision based on actual liability not on substantial degree of estimation. As per the information given to us, the Company has not recognized any contingent assets during the accounting years.

m. The Company has executed a slump sale agreement and has transferred its motor division business to RNS Motors Limited with effect from January 1, 2007. As per the above agreement, the entire movable assets and all the liabilities were transferred to RNS Motors Limited at their book values.

n. The breakup of contracts in progress as at the reporting date as per the requirements of disclosure of AS7 on "Construction Contracts" area as follows:

(Rs. in Million) PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

Revenue recognized 2,103.33 1,282.95 1,313.26 1,265.44 680.23 Cost incurred 1,509.60 1,072.87 1,143.11 1,155.98 567.78 Advance received 526.80 290.18 294.37 670.55 399.53 Gross Amount due from Customers for 682.12 32.90 17.09 147.33 30.87 Contract Work

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ANNEXURE V Notes regarding adjustments made in the restated financial statements:

a) Adjustments / Regroupings arising out of changes in accounting policies, audit qualifications and prior period items.

(Rs. in Million) Particulars Fiscal year ended March 31, 2007 2006 2005 2004 2003 Profit After Taxation as per 485.48 115.66 74.65 37.94 63.01 audited statement of accounts– (A) Adjustments on account of: I) Change in accounting policies - - - - -

Tax impact on adjustments

Total Adjustments net of tax impact – (B)

II) Audit Qualifications - - - - 0.04 On account of provision for doubtful debts, advances and deposits. (Refer Annexure IV 2 Notes to Restated Financial statements a. 2)

Provision for Gratuity 4.86 -0.42

III) Tax impact on -1.64 0.13 adjustments (Refer Annexure IV 2 Notes to Restated Financial statements a. 12)

Total Adjustments net of tax - - - 3.22 -0.25 impact-(C) IV) Prior Period Items -0.91 -14.28 0.14 -6.85 -6.62 Prior Period expenses / (Income) (Refer Annexure IV 2 Notes to Restated Financial statements a. 1 to 11)

V) Tax impact on 0.31 4.80 -0.05 2.31 2.23 adjustments (Refer Annexure IV 2 Notes to Restated Financial statements a. 12)

Total Adjustments net of tax -0.60 -9.48 0.09 -4.54 -4.39 impact – (D) Total Adjustments-Net of tax -0.60 -9.48 0.09 -1.32 -4.64 impact- (E) = (B+C+D) Adjusted Profit (A+E) 484.88 106.18 74.74 36.62 58.37

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ANNEXURE VI

RESTATED SCHEDULE OF INVESTMENTS

(Rs. in Million) PARTICULARS As at March 31, 2007 2006 2005 2004 2003 I. PROMOTOR GROUPS COMPANIES a. Unquoted 157.34 12.85 193.12 236.80 116.19 b. Quoted 104.92 24.45 22.07 18.88 18.88 II. OTHERS a. Unquoted 4.98 4.98 5.21 7.73 30.98 b. Quoted 0.10 0.10 1.25 1.16 1.16 TOTAL 267.34 42.38 221.65 264.57 167.21

ANNEXURE VII

RESTATED SCHEDULE OF SUNDRY DEBTORS

(Rs. in Million) PARTICULARS As at March 31, 2007 2006 2005 2004 2003 (Unsecured, considered doubtful) - Outstanding for a period of less than ---- - or equal to six months - Outstanding for a period exceeding ---- - six months (Unsecured, considered good)

- Outstanding for a period of less than - 82.41 85.55 68.67 19.84 or equal to six months - Outstanding for a period exceeding ---- - six months TOTAL - 82.41 85.55 68.67 19.84 Amount due from related parties - 19.80 5.46 4.50 4.13 (See Annexure – XVI)

Outstanding for more than 6 months ---- -

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ANNEXURE VIII RESTATED SCHEDULE OF LOANS AND ADVANCES

(Rs. in Million) PARTICULARS As at March 31, 2007 2006 2005 2004 2003 Unsecured -Considered Good 65.91 399.00 96.68 61.52 96.80 Due from Group Entities 83.19 9.90 63.54 5.59 3.09 Deposits 79.06 58.04 84.37 75.04 79.37 Taxes -Advance tax/TDS 85.05 55.64 31.39 21.70 33.34 TOTAL 313.21 522.58 275.98 163.85 212.60 Amount due from related parties 87.27 127.92 101.10 23.21 68.53 (See annexure XVI)

ANNEXURE IX

RESTATED SCHEDULE OF SECURED LOANS

(Rs. in Million) PARTICULARS As at March 31, 2007 2006 2005 2004 2003

A. FROM DEPARTMEMT: Construction Division:- Mob. Adv. NH-4 Km 433-495 Dwd-Bgm - - 51.25 209.87 286.90 Security : Bank Guarantee Mob. Adv. NH-4 Km 433-495 Dwd-Bgm - 49.51 97.25 17.23 6.96 Security : Bank Guarantee Material Adv. NH-4 Km 495-515 Bgm-Bypass - 1.49 13.19 44.03 21.66 Security : Hypothecation of construction Material and bank guarantee

Material Adv. NH-4 Km 433-495 Dwd-Bgm - 4.89 8.90 - - Security : Hypothecation of construction Material and bank guarantee Material Adv. NH-4 for supplies - 12.69 27.00 5.12 0.98 Security : Bank Guarantee Water Pipe Line Shifting Adv. NH-4 Bgm-Bypass - - 5.39 - - Security: Nil Mob. Adv. BTPS-KPCL – Kudthini 10.76 13.94 25.00 - - Security : Bank Guarantee Addi.mob adv BTPS-KPCL,Kudthini - 12.65 - - - Security : Bank Guarantee Mob. Ad K'SHIP - M 14 ( H B Halli) - 20.19 30.99 - - Security : Bank Guarantee Mob Adv package 16 BLIP - PEBBAIR - AP - 35.40 35.40 35.40 - - Security : Bank Guarantee Mob. Ad K'SHIP - M 11 ( Siruguppa) - 20.16 - - - Security : Bank Guarantee Mob Adv TNRSP04 (Suranguddi) 215.30 119.26 - - - Security : Bank Guarantee Mob Adv: KSHIP, M12 - - - - 7.98 Security : Bank Guarantee Mob Adv; Bgm Bypass 495-515 - - - - 75.05 Security : Bank Guarantee Mob.Adv.BMP Work Bangalore 34.84 - - - -

121

PARTICULARS As at March 31, 2007 2006 2005 2004 2003 Security : Bank Guarantee

B. FROM BANKS: Construction Division:- IDBI, Hubli (formerly United Western Bank (O.D.) 9.87 10.21 10.09 10.10 - Security : Personal Guarantee of Directors Canara Bk M.LN. A/cNo.ABGA03(MLNP01) - 4.62 9.36 - - (BLR) Security : Corporate Guarantee of NMCC,NHL,MCL and hyp of plant and mach valued at Rs 85.75 million and EMT of land and building of NSEC & Personal guarantee of directors Canara Bank Clean OD A/c b'lore 32.75 42.48 50.50 - 48.83 Hyp: Plant and Machinery Canara Bk M.LN. A/cNo.ABGA03(MLNP02) 34.17 48.75 7.93 75.83 75.59 (BLR) Security : Hypothecation of Plant & Machineries, personal guarantee of directors, corporate guarantee of NHL, NSEC, NMCC, EMT of land and building of NSEC , Hyp of mach Rs 111.81 milion Canara Bank TC B'lore FCLR No.9/04 - - 13.72 43.02 61.90 Security : Hypothecation of Plant & Machineries, personal guarantee of directors, corporate guarantee of NHL, NSEC, NMCC, EMT of land and building of NSEC , Hyp of plant and machinery valued at Rs 85.75 million

Canara Bank TC B'lore FCLR No. 10/04 - - 55.82 - - Security : Hypothecation of Plant & Machineries, personal guarantee of directors, corporate guarantee of NHL, NSEC, NMCC, EMT of land and building of NSEC, Hyp of mach Rs 111.81 million Kotak Mahindra Bank - H.P.Loan (10 Tippers) - 4.03 7.76 10.93 - Security : Hypothecation of 10 Ashok Leyland Tippers

Kotak Mahindra Bank – Loan CV 703722 0.24 2.97 5.47 - - Security : Hypothecation of Machineries / Vehicles I.C.I.CI - Machinery Loan (7 Nos) 5.18 11.65 17.65 - - Security : Hypothecation of Machineries / Vehicles ICICI Loan (14 Hyva tippers) 10.13 14.91 - - - Security: Hyp of vehicles IDBI Loan 100.00 101.29 - - - Sec:Personal guarantee of 4 directors, Hyp of receivables, pledge of shares of Market Value of Rs 30 million of MCL ICICI Loan (8 mach) 9.01 14.89 - - - Sec: Hyo of machinery ICICI Loan V002564 (25 Ley veh) - 33.75 - - - Sec: Hyp of veh ICICI LQHBL3619222 (5 tippers) 2.76 5.60 - - - Sec: Hyo of veh ICICI 4082985 (Y'pur) 2.40 4.32 - - - Sec: Hyo of machinery ICICI 4082411 (Y'pur) 0.30 0.55 - - -

122

PARTICULARS As at March 31, 2007 2006 2005 2004 2003 Sec: Hyo of machinery ICICI 4082289 (Y'pur) 0.30 0.55 - - - Sec: Hyo of machinery ICICI 4089536 (Y'pur) 0.65 1.16 - - - Sec: Hyo of machinery Sirsi Urban Bank - - - 27.29 44.61 Sec: Mort of land ICICI Bank - - - 8.33 25.00 Sec: Hyp of mach/veh ICICI (concr mix plant) 4.65 - - - - sec: Hyp of machinery ICICI - (Shirke potain tower crane) 3.80 - - - - sec: Hyp of machinery ICICI - Loan 6787718 0.93 - - - - Sec: Hyp of machinery ICICI (Batch Mix Plant-Gujarat) 10.11 - - - - sec: Hyp of machinery ICICI - Loan 6855399 1.79 - - - - Sec: Hyp of machinery ICICI - Loan 7606662 4.70 - - - - Sec: Hyp of machinery ICICI - Loan 7488133/136/156 5.59 - - - - Sec: Hyp of machinery Lakshmi Vilas Bank - Loan 99.36 - - - - Sec: Mort of land Lakshmi Vilas Bank OD 43.47 - - - - Sec. Mort of land ICICI - Loan 207 & 407 1.21 - - - - Sec: Hyp of veh Centurian Bank of Punjab 2.15 - - - - Sec: Hyp of veh ICICI Bank 16.46 - - - - Sec: Hyp of 23 tippers ICICI Bank 4.02 - - - -

Sec: Hyp of machinery ICICI Bank 2.27 - - - -

Sec: Hyp of machinery ICICI Bank 7.55 - - - - Sec: Hyp of machinery

Motors Division:- Bank of Baroda Bangalore CC - 10.68 27.59 - - Secured by Building of RNS Motors at Yeshwanthpur, Stock of veh, spares, machinery and book debts of RNS Motors and EMT of Modi land of NHL & personal guarantee of directors, corp guarantee of NHL, FBPL Bank of Baroda Hubli CC - 2.30 7.21 20.44 11.43 Secured by stock of veh, accessories, spares, machinery, book debts, mort of land and bld at

123

PARTICULARS As at March 31, 2007 2006 2005 2004 2003 Unkal, Hubli, personal guarantee of directors HDFC Bank- Inventory Finance - 38.00 14.86 18.71 6.73

Secured by personal guarantee of directors and Post dated cheques ICICI Bank Inventory Finance - 57.14 29.38 13.19 - Secured by personal guarantee of directors and Post dated cheques United Western Bank –Cash Credit - - - 5.58 8.73 Hyp of veh and mort of land and bld Lakshmi Vilas Bank - Cash Credit - - - 3.94 2.41 Hyp of Jigani land C. CAR LOANS : Construction Division:- I.C.I.C.I Loan 0.10 0.24 0.37 0.24 0.92 Sec: Hyp of veh H.D.F.C B'lore Loan A/c No.87355 - - 0.01 0.14 0.26 Security : Hypothecation of 1 no. Bolero Camper H.D.F.C B'lore Loan A/c No.87349 - - 0.01 0.15 0.27 Security : Hypothecation of 1 no. Tata Specio H.D.F.C B'lore Loan A/c No.87365 - - 0.02 0.20 0.36 Security : Hypothecation of 1 no. Toyota Qualis H.D.F.C B'lore Loan A/c No.87371 - - 0.01 0.14 0.26 Security : Hypothecation of 1 no. Bolero Camper H.D.F.C B'lore Loan A/c No.111832(Ford Ikon) - - 0.06 0.24 0.41 Security : Hypothecation of Ford Ikon H.D.F.C Loan Baleno Vehs.(2 No's) 0.50 0.77 1.01 1.25 - Security : Hypothecation of 2 Vehicles Baleno H.D.F.C Loan B'lore - 685437 0.34 0.62 0.87 - - Security : Hypothecation of Cars HDFC Hubli (2 Tavera veh) 0.75 1.19 - - - Security: Hyo of cars HDFC Hubli 10113262 (bolero) 0.64 0.96 - - - Sec: Hyp of car HDFC Hubli 10140982 (TN) 0.31 0.46 - - - Sec: Hyp of car HDFC Hubli 10140964 (TN) 0.31 0.46 - - - Sec: Hyp of car HDFC Hubli 10141111 (TN) 0.36 0.51 - - - Sec: Hyp of car HDFC Hubli 10141016 (TN) 0.36 0.51 - - - Sec: Hyp of car HDFC Hubli 10110922 (TN) 0.36 0.51 - - - Sec: Hyp of car HDFC Hubli 10141076 (TN) 0.36 0.51 - - - Sec: Hyp of car HDFC Hubli 10141049 (TN) 0.34 0.49 - - - Sec: Hyp of car HDFC Hubli 10141140 (TN) 0.34 0.49 - - - Sec: Hyp of car

124

PARTICULARS As at March 31, 2007 2006 2005 2004 2003 ICICI (2 Bolero & 1 Touri vehicle) 0.92 - - - - Sec: Hyp of car ICICI (5 Bolero vehicle) 1.94 - - - - Sec: Hyp of car ICICI (Bolero Camper) 0.38 - - - - Sec: Hyp of car HDFC Bank Loan No. 10753822 0.34 - - - - Sec: Hyp of car ICICI (Maruti Alto) 0.27 - - - - Sec: Hyp of car ICICI Bank 0.52 - - - - Sec: Hyp of sumo car Motors Division:- HDFC Bank - Car Loan 0.00 0.26 0.91 1.07 - Secured by PDC and Vehicles HP ICICI Bank - Car Loan 0.00 0.51 1.31 1.35 0.40 Secured by PDC and Vehicles HP MUL Car Loan - - - - 0.21 Hyp of car

D.HP VEHICLES / MACHINERY LOANS : Construction Division:- TELCO- HPA No.802685 LPT-709 - 0.03 0.23 0.43 - Security : Hypothecation of LPT Service Van - 709 TELCO-HPA No.802686 LPT-207 - 0.02 0.12 0.26 - Security : Hypothecation of LPT Tata Light Goods Vehicle- 207 TELCO-HPA No.802684 LPT-207 - 0.02 0.12 0.26 - Security : Hypothecation of LPT Tata Light Goods Vehicle- 207 Sundram Finance Ltd (10 Tippers) - 2.19 6.25 9.94 - Security : Hypothecation of 10 Tata 2516 Taurus Tippers

Sundram Finance Ltd (5 Tippers) - 1.27 3.29 5.12 - Security : Hypothecation of 5 Tata 2516 Taurus Tippers

Sundram Finance Ltd - Hitachi - 0.91 1.80 - Security : Hypothecation of Tata Hitachi Excavator Ex-70

Sundram Finance Ltd HP Loan - 0.09 1.06 - - Security - of Tata Hitachi Hyd. Escavtor M. EX 70 Sundram Finance Ltd WH 3227 - 0.18 1.20 - - Security : Hypothecation of BEML B- 71 Hyd. Excavatore. Ex-70 Sundaram Fin (12 tippers) 4.14 10.34 - - - Sec: Hyp of tippers Sund Fin (mobile crane alpha service) 0.66 1.00 - - - Sec: Hyo of crane Sund Fin (15 veh) - 18.38 - - - Sec: Hyp of tippers

125

PARTICULARS As at March 31, 2007 2006 2005 2004 2003 Sund Fin (Greaves tandom roller) 0.60 0.88 - - - Sec: Hyo of machine Sund Fin (L & T 1107 vib) 0.95 1.44 - - - Sec: Hyp of machine Sund Fin (L & T 851 loader) 0.84 1.28 - - - Sec: Hyo of machine Sund Fin (L & T 851 loader) 0.96 1.46 - - - Sec: Hyo of machine Sund Fin (7 mach) 9.88 - - - - Sec: Hyo of machine L & T Finance ( Mot Grader) 2.85 - - - - Sec: Hyo of machine L & T Finance (TLA06256) 4.28 - - - - Sec: Hyp of machine L & T Finance ( Komatsu) 1.56 - - - - Sec: Hyp of machine Sund Fin ( Potain crane) 4.29 - - - - Sec: Hyp of machine Sund Fin (BB 2806) 1.27 - - - - Sec: Hyp of machine Sund Fin 25.55 - - -

Sec: Hyp of mach and veh Sund Fin 10.69 - - - - Sec: Hyp of mach 790.08 747.13 569.48 536.18 687.84

ANNEXURE X

RESTATED SCHEDULE OF UNSECURED LOANS

(Rs. in Million) PARTICULARS As at March 31, 2007 2006 2005 2004 2003

Corporate Bodies 51.81 12.85 7.01 7.01 9.67 Promoters/Directors 378.98 186.17 292.77 292.34 4.67 Banks 7.85 6.30 23.94 34.60 19.26 Others 0.16 0.15 0.15 4.02 7.77 438.80 205.47 323.88 337.97 41.37

Note: Unsecured loans are interest free. None of these unsecured loans are repayable on demand

ANNEXURE XI

RESTATED SCHEDULE OF OTHER INCOME

(Rs. in Million) PARTICULARS NATURE Fiscal year ended March 31,

2007 2006 2005 2004 2003

Interest Received Recurring 13.79 18.53 8.78 10.98 14.21

126

Dividend Received Non-recurring 0.94 21.55 4.76 0.34 0.97 Miscellaneous Non-recurring 0.24 0.65 0.77 0.45 2.16 Receipts Fines From Staff Non-recurring 0.11 0.01 0.01 0.04 0.02 Rent Recurring 2.78 1.11 0.69 0.98 0.98 Profit on Sale of Non-recurring 0.43 0.47 1.28 - 0.13 Assets Total 18.29 42.32 16.30 12.79 18.47

ANNEXURE XII

SCHEDULE OF DIVIDEND PAID

(Rs. in Million) PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

Equity Share Capital Issued, Subscribed & Paid-up (In 630.00 75.00 240.00 240.00 - Million) Final Dividend in % 10%* 50 % - - - Amount of Dividend (In million) 63.00* 37.50 - - - Dividend Tax (in Million) 10.71* 5.26 - - -

Preference Share Capital Issued, Subscribed & Paid-up (In -** 165.00 - - - Million) Final Dividend in % 10% 10 % - - - Amount of Dividend (in Million) 12.02 4.84 - - - Dividend Tax (in Million) 1.68 0.68 - - -

* Proposed dividend on equity shares ** During the year entire preference share were converted into equity shares

ANNEXURE XIII

SUMMARY OF ACCOUNTING RATIOS

PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

Earnings per share (Basic & Diluted) (Rs.) 7.70 1.69 1.19 0.58 0.93 Net Assets Value per share (Rs) 12.03 6.02 5.06 3.85 3.86 Return on Net worth (%) 63.98 27.99 23.43 15.10 23.98 Total Debt/Equity Ratio 1.62 2.51 2.80 3.60 3.00 Weighted average number of Equity 63,000,000 63,000,000 63,000,000 63,000,000 63,000,000 Shares in the period (in Nos.)

Notes:

1. The above ratios have been computed as below:

Earnings per share (Rs.) Net Profit attributable to Equity Shareholders

127

Weighted average number of equity shares outstanding during the period

Net Asset Value per share (Rs.) Net worth excluding revaluation reserve at the end of the period/year Weighted Average No. of equity shares outstanding during the period

Return on Net worth (%) Net Profit attributable to Equity Shareholders Net worth excluding revaluation reserve at the end of the period/year

2. The above ratios have been calculated based on the restated financial statements.

3. On December 15, 2005, the Company converted 16,500,000 equity shares of Rs. 10 each into 1,650,000 preference shares of Rs. 100 each. Subsequently on December 26, 2006, the Company converted 1,650,000 preference shares of Rs 100 each into 16,500,000 equity shares of Rs. 10 each.

4. The Company issued 7,500,000 bonus shares to the shareholders in the ratio of one equity share for every one share held by them on December 11, 2006. Since the bonus issue is an issue without consideration, it has been treated as if it had occurred prior to the beginning of the year 2002, the earliest period reported.

5. Pursuant to para 44 of Accounting Standard (AS20) Earnings Per Share, the earnings per share of the Company has been computed after considering the following event, which occurred subsequent to the balance sheet date:

6. On January 18, 2007, the Company issued 31,500,000 bonus shares to the shareholders in the ratio of one equity share for every one share held by them. Since the bonus issue is an issue without consideration, it has been treated as if it had occurred prior to the beginning of the year 2002, the earliest period reported.

Calculation of weighted average number of shares outstanding during the year PARTICULARS Fiscal year ended March 31,

2007 2006 2005 2004 2003

Nominal value of Equity shares 10 10 10 10 - (in Rs.) (A) Total Number of equity 7,500,000 24,000,000 24,000,000 24,000,000 - shares outstanding at the beginning of the year

(B) Bonus Equity Shares 7,500,000 - - - - Issued on 11.12.2006 (Refer Note 4 above) (C) Preference Shares 16,500,000 - - - - converted into Equity Shares on 26.12.2006 (Refer Note 3 above) (D) Bonus Equity Shares 31,500,000 - - - - Issued on 18.1.2007 (Refer Note 5 above) (E) Weighted average number 63,000,000 63,000,000 63,000,000 63,000,000 63,000,000 of Equity Shares outstanding during the year – Considered for calculation of EPS & NAV (A+B+C+D)

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ANNEXURE XIV

TAX SHELTER STATEMENT

(Rs. in Million) Fiscal year ended March 31,

PARTICULARS 2007 2006 2005 2004 2003

Profit before tax 571.79 169.00 110.57 56.69 72.23 Rate of Tax (%) 33.66% 33.66% 36.59% 35.88 36.75% Tax at notional rate on profits 192.46 56.89 40.46 20.34 26.54 Permanent Differences: Dividend (exempt from tax) -0.93 -21.55 -4.76 -0.34 0.00 Donations disallowed 0.38 0.23 0.41 0.19 0.53 Loss on sale of 0.35 1.51 0.09 23.41 13.42 assets/investment Int and disallowances 0.80 2.06 1.37 0.20 0.00 Profit on sale os -0.42 -0.48 -1.29 0.00 -0.13 assets/investment Repairs on house property -0.78 -0.29 -0.17 -0.22 -0.21 Capital Receipts (IT Refund) -0.34 0.00 0.00 -1.39 -1.40 Income exempt. U/s. 80IB -318.91 - - - - Total Permanent Difference -319.85 -18.51 -4.35 21.84 12.22 (A) Timing Differences: Difference between tax dep and -5.92 -3.57 -42.51 -57.99 -59.35 book dep Unpaid gratuity 2.69 2.47 0.66 5.64 0.00 Total timing Difference (B) -3.23 -1.09 -41.86 -52.35 -59.35 Total Adjustment (A+B) -323.08 -19.60 -46.20 -30.50 -47.13 Tax Expense/Savings thereon -108.75 -6.60 -16.91 -10.94 -17.32

Tax payable for the year 83.73 50.29 23.55 9.39 9.22

Interest u/s 234 B and 234 C 0.00 0.00 0.98 0.00 0.00

Total Taxation 83.73 50.29 24.54 9.39 9.22 Provision for taxation made as 83.73 50.29 23.55 9.39 9.22 per books

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ANNEXURE XV

CAPITALISATION STATEMENT

(Rs. in Million) Particulars Pre Issue as at Post Issue as at March 31, March 31, 2007 2007

Long Term Debts - Term Loans 181.87 181.87 - Cash Credit 86.09 86.09 - Working Capital Loans 73.12 73.12 - Vehicle Loans 5.42 5.42 TOTAL (A) 346.50 346.50

Short Term Debts [Refer to Note No. 2 below?] - Term Loans 347.96 347.96 - Working Capital Loans 90.67 90.67 - Unsecured Loans 438.80 438.80 - Vehicle Loans 4.95 4.95 TOTAL (B) 882.38 882.38

TOTAL DEBTS (A+B) 1228.88 1228.88

Shareholder's Funds Share Capital 630.00 Refer Note No. 1 below General Reserve 151.00 Refer Note No. 1 below Profit and Loss Account -23.12 Refer Note No. 1 below TOTAL 757.88 Refer Note No. 1 below

Total debt/Total shareholder's Funds (Ratio) 1.62

Long Term debt/Total Shareholder's Funds 0.46 (Ratio)

Notes: 1 Share capital, Reserves and total shareholders funds would be calculated on conclusion of the book building process. 2 Short term debts are debts which are maturing within the next twelve months from the date of the respective statement of accounts.

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ANNEXURE XVI

RELATED PARTY TRANSACTIONS

A) LIST OF RELATED PARTIES:

1) Entities over which the Company or key management personnel or their relatives, exercise significant influence: Naveen Machanised Construction Company Private Limited. Murdeshwar Power Corporation Limited. Naveen Hotels Limited Fire Bricks and Potteries Private Limited Shri Murudeshwar Tiles Private Limited Murudeshwar Finance & Leasing Limited Murudeshwar Ceramics Limited Naveen Structural & Engineering Company Private Limited R N Shetty Trust ® R N S Trust Shri. Murudeshwar Finance Corporation Murudeshwar Infosystems Limited R N Shetty Family Trust RNS Motors Limited

2) Key Management Personnel R N Shetty [Chairman] Sunil R Shetty [Managing Director] Naveen R Shetty [Managing Director] Satish R Shetty (Whole Time Director)

3) Relatives of Key Management Personnel H N Shetty Sudha R Shetty Geeta S Malli Shobha J Shetty Mamata S Hegde Samata A Shetty

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B) BALANCE OUTSTANDING/TRANSACTIONS WITH RELATED PARTIES:

(Rs. in Million) SL. Name Of Company / Nature of Fiscal year ended March 31, NO Transaction

2007 2006 2005 2004 2003

A) Entities over which Key management personnel is able to exercise significant influence 1 Naveen Mechanised Construction Co Pvt Ltd Work Advance 12.38 26.79 - - - Purchases - - - 0.02 - Rent Paid - - 0.06 0.06 - Sub Contract works - - 103.83 105.92 64.82 2 Murudeshwar Ceramics Limited Rent Received 0.10 0.10 - - - Purchases 11.47 0.27 - - 5.34 Sub Contract wages Paid - 64.51 - - - Contract Receipts 111.86 253.84 - - - Fund Transaction 17.95 27.11 - - - 3 Shri Murudeshwar Finance Corp Interest Paid 0.02 - - - 4 Murudeshwar Finance & Leasing Limited Interest Paid 0.15 0.12 0.07 0.05 5 Murudeshwar Power Corp Ltd Electricity Bill - Adjusted 10.31 9.57 - - - Interest Paid 11.43 8.17 2.66 - Fund Transaction/Flat Adv 230.00 59.04 - - - 6 Naveen Hotel Ltd Transportation Charges Paid 1.00 - - 0.08 Service Tax Paid 0.03 - - - Contract Receipts 104.38 66.93 - - - Fund Transaction 134.40 38.02 - - - Maintenance Charges - 0.19 0.10 0.08 Interest Paid / Received - 3.02 1.96 - Rent Paid - 0.01 0.01 0.01 7 Naveen Structural & Engineering Co.Pvt .Ltd Repairs & Maintenance Charges 9.91 4.83 3.23 2.88 3.34 Paid Rent Paid 0.01 0.01 0.01 0.01 0.01 Interest - - 0.17 - Sub Contract wages - 1.10 1.12 - Fund Transaction 0.33 - - - 8 R N Shetty Trust (regd.) Contract Receipts 30.04 11.98 - - - Rent Received 0.07 0.07 - - - Fund Transaction 23.64 20.36 - - -

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9 R N S Trust Contract Receipts 0.06 12.89 - - - Fund Transfer 0.33 10 Sri Murudeshwar Tiles Pvt Ltd Sub Contract Wages - - 8.64 - Tiles Purcshases - - - 0.39 Fund Transaction 0.04 1.15 - - - 11 Fire Bricks & Potteries Pvt Ltd Lease Rent Paid 0.50 - - 0.50 Interest Received 1.93 3.19 - - - Fund Transaction 12.36 0.63 - - - 12 RNS Motors Ltd. Interest Received 3.24 - - - - Rent Received 1.91 Repairs charges Paid 0.01 B) Key Management Personnel

Sunil R Shetty 2.40 1.60 1.20 0.70 - Managerial Remuneration Naveen R Shetty 2.40 1.20 0.60 0.35 - Managerial Remuneration Satish R Shetty 1.27 0.87 0.67 0.39 - Managerial Remuneration

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ANNEXURE XVII - SEGMENTAL INFORMATION The Company is engaged in Construction/project related activities, Motors Dealership and real estate development activities. (Rs. in Million) Real Estate Business Segment Construction division Motors Division Total Division

Fiscal year ended March 31, Fiscal year ended March 31, Fiscal year ended March 31,

2007 2006 2005 2004 2003 2007 2006 2005 2004 2003 2007 2007 2006 2005 2004 2003

Revenue from customer 1,472.59 1,282.95 1,313.26 1,265.44 680.23 2,024.02 2,270.05 1,835.38 1,679.36 1,308.71 630.74 4,127.35 3,553 3,148.64 2,944.8 1,988.94

Inter Segment Revenue Total Revenue 1,472.59 1,282.95 1,313.26 1,265.44 680.23 2,024.02 2,270.05 1,835.38 1,679.36 1,308.71 630.74 4,127.35 3,553 3,148.64 2,944.8 1,988.94 Operating Expenses 905.50 886.59 994.44 967.59 434.26 1,890.62 2,102.81 1,685.70 1,555.55 1,219.63 226.42 3,022.54 2,989.4 2,680.14 2,523.14 1,653.89

Depreciation 62.38 47.15 40.83 36.18 27.58 6.10 6.92 5.78 5.10 3.92 0.02 68.50 54.07 46.61 41.28 31.5

Segmental Operating Profit/Loss 504.71 349.21 277.99 261.67 218.39 127.30 160.32 143.90 118.71 85.16 404.30 1,036.32 509.53 421.89 380.38 303.55

Interest income/ (Expenses).net -62.74 -60.34 -64.14 -57.27 -45.05 -17.81 -18.21 -15.77 -16.38 -16.17 -0.02 -80.56 -78.55 -79.91 -73.65 -61.22

Other Income/ (Expenses) Net -221.69 -166.28 -144.29 -175.80 -112.80 -76.90 -95.71 -87.12 -74.21 -57.30 -85.38 -383.96 -261.99 -231.41 -250.01 -170.1

Profit / (Loss) before tax 220.28 122.59 69.56 28.60 60.54 32.60 46.40 41.01 28.12 11.69 318.91 571.79 168.99 110.57 56.72 72.23 Taxation

Current Tax 83.73 50.29 23.55 9.39 9.22 Deferred Tax 1.11 1.2 12.37 9.37 0 Fringe Benefit Tax 1.47 1.85 0 0 0

Net Profit / (Loss) after taxation 485.48 115.65 74.65 37.96 63.01

Other information As at March 31, As at March 31, As at March As at March 31, 31, 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003 2007 2007 2006 2005 2004 2003

Segment Assets 1,358.66 1,535.30 1,380.80 1,285.14 1,145.82 - 263.69 213.90 187.82 123.7 242.27 1,600.93 1,798.99 1,594.70 1,472.96 1,269.52

Capital Expenditure 245.13 89.98 42.72 40.10 229.10 - 25.90 15.06 10.48 17.11 1.06 246.20 115.88 57.78 50.58 246.21

Depreciation/ amortisation 62.38 47.15 40.83 36.18 27.58 6.10 6.92 5.78 5.10 3.92 0.02 68.50 54.07 46.61 41.28 31.50

Segment Liabilities 1,358.66 1,132.62 1,035.92 1,012.8 874.87 - 263.7 213.9 187.82 123.70 242.27 1,600.93 1,396.32 1,249.82 1,200.62 998.57

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ANNEXURE XVIII

DETAILS OF SECURED AND UNSECURED LOANS AS ON MARCH 31, 2007

A. DETAILS OF SECURED LOANS

FUND BASED LIMITS FROM BANKS AND FINANCIAL INSTITUTIONS:

(Rs. in Million) Name of Nature of Limits Present Security Rate of Date of Date of Period of Bank/Financia Facility Sanctione Outstandin Int/Com loan Closure of installment l Institution d g bal loan

Canara Bank, Mort Loan 75.00 34.17 Hyp of plant & 10.75% Jun-04 Mar-09 Qtly Rs 3.75 Million Trinity Circle mach Rs 111.8.1 Branch, Million Bangalore Canara Bank, Cash Credit 50.00 32.75 Equitable mort of 10.75% - - Renewal yearly Trinity Circle land & building Branch, NSEC at Hubli Bangalore (MV 107.81million as on 5.11.98 & hyp of plant & mach, equipments

IDBI Bank Ltd., Cash Credit 10.00 9.87 - do - 10.50% - - Renewal yearly Coen Road, Hubli IDBI Bangalore Term Loan 100.00 100.00 Pledge of shares 10% Sep-05 1.9.07 Single installment & hyp of receivables Lakshmi Vilas Term Loan 100.00 99.36 EMT of land 11.00% 8.9.06 7.9.07 Single installment Bank, Bangalore Lakshmi Vilas OCC 42.50 43.47 Mort of Land at 11.50% 27.7.06 27.7.07 Renewal yearly Bank, Yeshwanthpur, Bangalore Bangalore

ICICI Bank Veh Loan 16.70 10.13 Hyp of 14 tippers 7% 15.10.05 15.2.09 40 Monthly Instl ICICI Bank Mort Loan 17.72 9.01 Hyp of 8 mach 7% 15.9.05 15.8.08 35 Monthly instl ICICI Bank Mort Loan 6.30 4.65 Hyp of 8.90% 5.5.06 5.4.09 35 Monthly instl machinery ICICI Bank Mort Loan 5.15 3.80 Hyp of 8.90% 22.5.06 22.4.09 35 Monthly instl machinery ICICI Bank Veh Loan 1.25 0.93 Hyp of veh 9.51% 5.5.06 5.5.09 36 Monthly Instl ICICI Bank Veh Loan 1.19 0.92 Hyp of veh 10% 22.6.06 22.6.09 36 Monthly Instl ICICI Bank Veh Loan 2.42 1.94 Hyp of veh 10% 5.7.06 5.7.09 36 Monthly Instl ICICI Bank Mort Loan 13.20 10.11 Hyp of 10% 22.6.06 22.5.09 35 Monthly instl machinery ICICI Bank Mort Loan 2.42 1.79 Hyp of 9.40% 10.5.06 10.4.09 35 Monthly instl machinery ICICI Bank Mort Loan 5.74 4.70 Hyp of 9.25% 16.8.06 16.7.09 35 Monthly instl machinery ICICI Bank Veh Loan 0.46 0.38 Hyp of Vehicles 10.01% 22.8.06 22.7.09 35 Monthly instl ICICI Bank Mort Loan 6.93 5.59 Hyp of 9.70% 22.8.06 22.7.09 35 Monthly instl machinery ICICI Bank Car Loan 0.28 0.27 Hyp of car 10.69% 5.12.07 5.11.11 36 Monthly Instl ICICI Bank Veh Loan 1.43 1.21 Hyp of Vehicles 10.01% 15.9.06 15.8.09 35 Monthly instl ICICI Bank Veh Loan 0.40 0.10 Hyp of 1 veh 6.87% 1.1.05 1.12.07 35 Monthly instl ICICI Bank Mort Loan 18.60 5.18 Hyp of 7 mach 8% 15.1.05 15.12.07 35 Monthly instl ICICI Bank Mort Loan 8.26 2.76 Hyp of veh/mach 8% 22.3.05 22.2.08 35 Monthly instl

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Name of Nature of Limits Present Security Rate of Date of Date of Period of Bank/Financia Facility Sanctione Outstandin Int/Com loan Closure of installment l Institution d g bal loan

ICICI Bank Mort Loan 5.68 2.40 Hyp of 7.10% 22.6.05 22.5.08 35 Monthly instl machinery ICICI Bank Mort Loan 0.72 0.30 Hyp of shirke 7.10% 35 Monthly instl transit Mix 22.6.05 22.5.08 ICICI Bank Mort Loan 0.72 0.30 Hyp of 7.10% 22.6.05 22.5.08 35 Monthly instl machinery

ICICI Bank Mort Loan 1.53 0.65 Hyp of 7.10% 22.6.05 22.5.08 35 Monthly instl machinery ICICI Bank Veh Loan 16.85 16.46 Hyp of 23 tippers 12.16% 22.2.07 22.2.10 36 Monthly instl ICICI Bank Mort Loan 4.25 4.02 Hyp of mach 12.49% 22.2.07 22.7.08 17 monthly instl ICICI Bank Mort Loan 2.43 2.27 Hyp of mach 12.5% 22.2.07 22.4.08 14 monthly instl ICICI Bank Mort Loan 8.45 7.55 Hyp of mach 12.5% 22.2.07 22.11.07 9 monthly instl ICICI Bank Car Loan 0.52 0.52 Hyp of sumo car 11.53% 5.3.07 5.3.10 36 monthly instl. HDFC Bank Veh Loan 1.37 0.75 Hyp of 2 veh 5.83% 5.11.05 2.10.08 36 Monthly Instl HDFC Bank Veh Loan 1.02 0.64 Hyp of 1 veh 6.50% 2.2.06 2.1.09 36 Monthly Instl HDFC Bank Veh Loan 0.46 0.31 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.46 0.31 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.51 0.36 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.51 0.36 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.51 0.36 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.51 0.36 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.49 0.34 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.49 0.34 Hyp of veh 6.60% 2.4.06 2.3.09 36 Monthly Instl HDFC Bank Veh Loan 0.37 0.34 Hyp of veh 10.95% 2.11.06 2.11.09 36 Monthly Instl HDFC Bank Veh Loan 1.31 0.50 Hyp of 2 veh 6.32% 2.1.04 2.12.08 60 Monthly instl HDFC Bank Veh Loan 1.08 0.34 Hyp of veh 6.50% 18.5.04 18.3.07 35 Monthly instl Kotak Mort Loan 7.37 0.24 Hyp of 9.25% 29.4.04 10.4.07 35 Monthly instl Mahindra Bank machinery

Centurian Bank Mort Loan 2.46 2.15 Hyp of 10.10% 25.10.06 25.9.09 35 Monthly instl of Punjab machinery

Sundaram Veh Loan 14.99 4.14 Hyp of 12 tippers 6.95% 10.6.05 10.11.07 35 Monthly instl Finanance

Sundaram Mort Loan 1.00 0.66 Hyp of mobile 7.50% 17.3.06 17.2.09 35 Monthly instl Finanance crane

Sundaram Mort Loan 0.88 0.60 Hyp of vibratory 8.75% 17.4.06 17.3.09 35 Monthly instl Finanance roller

Sundaram Mort Loan 1.44 0.95 Hyp of L & T 7.75% 17.3.06 17.2.09 35 Monthly instl Finanance 1107 mach

Sundaram Mort Loan 1.28 0.84 Hyp of loader 8.25% 17.3.06 17.2.09 35 Monthly instl Finanance

Sundaram Mort Loan 1.46 0.96 Hyp of 8.25% 22.3.06 22.2.09 35 Monthly instl Finanance machinery

Sundaram Mort Loan 29.54 9.88 Hyp of 9.85% 17.5.06 17.4.09 35 Monthly instl Finananc machinery

Sundaram Mort Loan 6.00 4.29 Hyp of 8.75% 3.5.06 3.4.09 35 Monthly instl Finanance machinery

Sundaram Mort Loan 1.71 1.27 Hyp of 9.85% 17.6.06 17.5.09 35 Monthly instl Finanance machinery

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Name of Nature of Limits Present Security Rate of Date of Date of Period of Bank/Financia Facility Sanctione Outstandin Int/Com loan Closure of installment l Institution d g bal loan

Sundaram Mort Loan 26.30 25.55 Hyp of mach & 13.5% 17.2.07 17.1.10 35 monthly instl Finanance vehicle

Sundaram Mort Loan 11.00 10.69 Hyp of mach 13.5% 5.3.07 8.2.10 35 monthly instl Finanance

L & T Finance Mort Loan 3.58 2.85 Hyp of 9.50% 9.7.06 9.6.09 35 Monthly instl machinery L & T Finance Mort Loan 5.39 4.28 Hyp of 9.50% 18.7.06 18.6.09 35 Monthly instl machinery L & T Finance Mort Loan 1.96 1.56 Hyp of 9.50% 18.7.06 18.6.09 35 Monthly instl machinery TOTAL 652.55 493.78

FUND BASED LIMITS FROM DEPARTMENT (Rs. in Millions) Name of Employer Nature of Limits Present Security Rate of Date of Date of Period of who has granted Facility Sanctioned Outstandin Int/Com loan Closure of installment loan g bal loan

KPCL, Bellary Mob Adv 25.10 10.76 Bank Interest free 10.12.04 31.3.07 Recovereable Guarantee in monthly bills Irrigation Dept. Mob Adv 35.40 35.40 Bank 10% 3.3.05 31.3.08 Recovereable Andhra Guarantee in monthly bills

TNRSP, Chennai Mob Adv 224.72 215.30 Bank Interest free 12.12.05 31.12.08 Recovereable Guarantee in monthly bills

BMP,Bangalore Mob Adv 73.26 34.84 Bank Interest free 22.3.06 30.11.07 Recovereable Guarantee in monthly bills

TOTAL 358.48 296.30

NON FUND LIMITS

(Rs. in Million) Name of Bank Nature of Limits Present Security Rate of Date of Date of Period of limit Sanctioned Outstand Int/Com loan Closure installment ing bal of loan

Canara Bank, Trinity Bank 1250.00 933.60 Equitable mort of land & 1% perf - - Renewal Circle Branch, Guarante building NSEC at Hubli (MV &1.5% yearly Bangalore e 107.81Million as on 5.11.98 financial & hyp of plant & mach, guarantee equipments IDBI Bank Ltd., Coen Bank 50.00 13.00 Equi.mort of land at 2% Perf & - - Renewal Road, Hubli (Formerly Guarante Bangalore of Sunil (MV 3% yearly United Western Bank) e 15.44 Million), NSEC Land Financial at Hubli (MV 55.8 Million), guarantee Land & Bld bailanapanavar nagar or RNS (MV 8 Million)

Allahabad Bank, Old Bank 30.00 0.00 Land & Bld of Satish Shetty 1% per & - - Renewal Hubli, Hubli Guarante at Bangalore (MV 1.5% yearly e 15.68Million) financial guarantee IDBI Bangalore Bank 250.00 41.77 Second charge on Plant & 0.75% - - Renewal Guarante Mach, Personal guarantee yearly e of four directors

TOTAL 1580.00 988.37

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B. DETAILS ON UNSECURED LOANS

(Rs. in Million) Name of Company Nature of Limits Present Securit Rate of Date of Date of Period of limit Sanctioned Outstandin y Int/Com loan Closure of installment g bal loan

FROM OTHER COMPANIES Mahashakti Traders Clean Loan 0.13 0.13 Nil Int free 31.3.08 Single inst. Sri Sirsi Const.Co Clean Loan 0.03 0.03 Nil Int Free 31.3.08 Single Inst.

WORK ADVANCE BTPS, Kudthini Work adv 52.00 51.81 Nil Int Free 30.8.07 Recoverable in bills

R N S Trust Work adv 7.50 6.02 Nil Int Free 30.9.07 Recoverable in bills

Naveen Hotels Ltd Clean Loan 120.00 111.78 Nil Int Free 31.12.08 Recoverable in bills

Murdeshwar Ceramics Ltd Work adv 31.00 30.68 Nil Int free 31.3.08 Recoverable in bills

230.50 230.50 Nil Adjusted against Advance from Flat Booking Booking Adv Nil N.A. N.A. sale LEASE DEPOSIT Canara Bank Lease Dep 7.01 7.01 Nil Int Free 17.5.85 16.5.2084 99 years lease

TEMPORARY OD FROM CURRENT A/CS N.A. 0.84 Nil Nil N.A. N.A. N.A. Cheques issued but not presented hence shown as account overdrawn No Limits TOTAL UNSECURED LOANS: 448.17 438.80

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our audited financial statements and the reports thereon and annexures thereto, which have been restated in accordance with paragraph B(1) of Part II of Schedule II to the Companies Act and with the SEBI Guidelines, and which are all included in this Draft Red Herring Prospectus.

Our financial statements are prepared in conformity with Indian GAAP. Indian GAAP differs in certain significant respects from IFRS, U.S. GAAP and other accounting principles and auditing standards in other countries with which prospective investors may be familiar. The degree to which the financial statements included in this Draft Red Herring Prospectus will provide meaningful information is dependent on the reader’s level of familiarity with Indian accounting practices, Indian GAAP, the Companies Act and the SEBI Guidelines. Any reliance on the financial disclosures presented in this Draft Red Herring Prospectus by persons not familiar with these Indian practices, law and rules should be limited. We have not attempted to explain these differences or quantify their impact on the financial data included herein, and we urge you to consult your own advisors regarding such differences and their impact on the financial data herein.

Overview

We are a civil engineering and construction and real estate development company operating in South India, particularly Karnataka. Our civil engineering and construction project expertise includes the construction of national highways, bridges, tunnels, powerhouses, canals, dams, irrigation projects, reservoirs and commercial buildings. We have recently entered the real estate development business with ongoing and planned projects principally located in the Bangalore area. Our real estate development operations are based on a series of joint development agreements and a joint venture agreement that we have entered into with members of our Promoter Group and other affiliates that own land in Karnataka, particularly in and around Bangalore. We are principally focusing our real estate development efforts on the construction of residential and commercial buildings.

Prior to January 2007, we operated an automobile dealership business. In January 2007, we sold this business to a Promoter Group company.

Factors affecting our results of operations

Following the commencement of our real estate development business and the disposal of our automobile dealership business, our income is generated principally from our civil engineering and construction activities and from our real estate development activities. Our results of operations in these business areas can be affected by a number of factors.

Income from our construction activities is affected by multiple factors. One factor is the demand for our construction services in Bangalore and other locations in the state of Karnataka. This in turn depends on the need for new construction, particularly in respect of infrastructure, in Bangalore and Karnataka, which is currently high; the ability and willingness of the relevant governments and other funding sources to pay for new construction, which is generally high but can vary due to political and economic factors; and competition with other construction companies for the available work, which is intense. We compete with others on

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the basis of price, timeliness of project completion, quality of construction, market knowledge, reputation and other measures of competitive strength.

Another factor affecting our construction income is the cost of providing our services. Fluctuations in the prices and timely availability of raw materials, including steel, cement, petroleum products, and other items, and delays in completing our projects caused by inclement weather can significantly affect our profitability. The cost and timely availability of skilled labour can also have a significant effect on our profitability. Additionally, the availability of finance at acceptable rates and for acceptable lengths of time is essential for us, as we must finance construction projects pending periodic payments from customers and must finance the acquisition of necessary construction equipment. Our financing capabilities can be burdened if a significant number of our customers fail to pay their bills on time.

Income from our real estate development activities is affected by most of the factors mentioned above, and by others. In real estate development, we generally do not deal with governments as customers, so political factors may not have as direct an effect on our income. The success of our real estate development business will depend in part on our ability to discern and satisfy the particular demands of private customers for residential and commercial space, to identify and acquire suitable parcels of land for development, to obtain all requisite approvals, licences, consents and land use conversions, among others, for our projects and, in particular, to obtain adequate funding, as we must finance and develop our real estate projects generally without advance sales. The ability of customers to finance their purchases from us is also important, and is dependent on macroeconomic trends such as interest rates as well as more local economic factors such as the general health of the economy in Bangalore and elsewhere in Karnataka. In addition, as we are new entrants to the real estate development business, we must work to establish and maintain a good reputation with customers in our new market.

For further discussion of factors that may affect our results of operations, see the section entitled “Risk Factors” in this Draft Red Herring Prospectus.

Critical accounting policies

The Company maintains its accounts on an accrual basis following the historical cost convention in accordance with Indian GAAP and in compliance with the accounting standards referred to in Section 211(3c) and other provisions of the Companies Act, 1956. The Company seeks to apply its accounting policies consistently from period to period.

In order to prepare our financial statements in accordance with Indian GAAP, the applicable accounting standards issued by the ICAI and the relevant provisions of the Companies Act require our management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of our assets and liabilities, disclosures of contingent liabilities and the reported amounts of revenues and expenses during the reporting period. Our accounting policies as a whole are more fully described in the section entitled “Financial Information”.

Some of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant management assumptions and estimates. Herein, we refer to these accounting policies as our “critical accounting policies”. Our management uses our historical experience and analyses the terms of existing contracts, historical cost conventions, industry trends, information provided by our agents and others and information available from outside sources, as appropriate, to formulate its assumptions and estimates. However, the task is inexact, because our management is making assumptions and providing estimates on matters that are inherently uncertain. Actual results could differ from management’s assumptions and estimates. While all aspects of our financial statements and accounting policies should be understood in assessing our current and expected financial condition and results of operations, we believe that the following critical accounting policies warrant additional attention:

Revenue recognition in respect of our real estate development and construction

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businesses

We recognise the revenue generated from our real estate development projects and our civil engineering and construction projects according to the “percentage of completion method” of accounting. Under this method, a portion of our anticipated revenue is recognised on the basis of the percentage of the actual construction cost incurred compared to the total estimated cost of construction of the project. In addition, revenue is recognised only if the actual construction cost incurred on the relevant date for our financial statements is at least 30% of the total construction cost of the project as estimated by management. In respect of our civil engineering and construction projects, revenue is typically not recognised until our customers inspect the project and certify their agreement to the percentage of completion achieved (which we seek to have occur on such projects on a monthly basis). In respect of our real estate development projects, there is typically no customer for which we are undertaking building from the outset. Therefore, our estimates as to percentages of completion are entirely our own. We may need to revise our assumptions and estimates periodically, including when there have been changes in market conditions that may affect sales prices for residential flats or cost items such as labour and materials.

We cannot assure you that our revenue and cost estimates and estimates of work completed will at any time match the actual revenues that will be earned, actual costs incurred and actual stages of completion reached in respect of any projects. Therefore, the recognition of substantially all of our revenues going forward will be subject at all times to the accuracy of multiple estimates made by us, and to the uncertainties inherent in the estimation process.

Moreover, recognizing revenue pursuant to the percentage of completion method may lead to significant fluctuations in our income from period to period. Amounts received from customers for projects which do not yet qualify for revenue recognition under this method, or amounts paid by customers in advance of the amounts recognised under the method described above, are accounted for by us as liabilities, and specifically in the “advances from customers” portion of the unsecured loans line item in our statements of assets and liabilities.

In the event of any change in applicable law or Indian GAAP that requires a change in our method of revenue recognition, the Company’s financial condition and results of operations may be materially and adversely affected.

Expense recognition

All expenses are recognised on an accrual basis.

Inventories

Our inventories comprise raw materials, components, stores, spares, loose tools and similar items used in construction, and work in progress. Generally, raw materials and similar items are valued at cost. Generally, work in progress is valued at cost until a major portion of the relevant project is completed, and thereafter at realisable value. Realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and of making the sale. Our management values our inventories based on the physical verification of stock. Our auditors audit our inventory verifications annually on a random basis.

Accounting for taxes on income

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Our tax expense comprises both current and deferred taxes. The current charge for income taxes is calculated in accordance with relevant tax regulations. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and the reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised on the carry-forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.

Summary of results of operations

The table below sets forth our profit and loss information for the fiscal years ended March 31, 2007, 2006, 2005 and 2004.

During fiscal 2004 we changed our form of organisation. For the period from April 1, 2003 to August 06, 2003, we operated as a partnership firm. Since August 07, 2004, we have operated as a company. We undertook this change principally to help ensure that we could obtain adequate financing as banks and other credit providers could more easily analyse our operations as a prospective borrower in company form. We do not believe that any material difference has arisen or should have arisen in our accounts as a consequence of our change in form. In presenting our fiscal 2004 financial data in this Draft Red Herring Prospectus, we have combined the partnership data from April 1, 2003 to August 06, 2003 with the company data from August 07, 2003 to March 31, 2004.

Throughout the periods shown, we have not had any subsidiaries. Therefore, our financial data has not required consolidation.

(Rs. in Million) Fiscal year ended March 31,

2007 2006 2005 2004 INCOME Operating Income: from Construction Activities 1,472.59 1,282.95 1,313.26 1,265.44 630.74 0.00 0.00 0.00 from Real Estate Development (commenced April 2006) (1)

SUBTOTAL 2,103.33 1,282.95 1,313.26 1,265.44 from Motor Dealership 2,024.03 2,270.05 1,835.38 1,679.36 (disposed of in Jan. 2007) (2) Other Income 18.29 42.32 16.30 12.79 Accretion- (Depletion) in 69.84 16.49 11.53 0.42 work in progress TOTAL INCOME 4,215.49 3,611.81 3,176.46 2,958.01 EXPENDITURE (3) Raw Material Consumed 2,654.56 2,643.15 2,319.37 2,021.04 Employee Costs 437.82 362.74 372.30 502.52 Repairs, Maintenance, 349.95 233.64 196.41 215.84 Overheads, Administrative Expenses Selling & Distribution Expenses 35.38 49.15 40.79 34.24 Financial Expenses 94.35 97.08 88.70 84.33 Depreciation 68.50 54.07 46.61 41.28 Preliminary & Deferred Revenue Expenditure Written Off (4) 3.14 2.98 1.72 2.06 TOTAL EXPENDITURE 3,643.70 3,442.81 3,065.90 2,901.31

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PROFIT BEFORE TAXATION 571.79 169.00 110.57 56.70 Taxes 86.31 53.34 35.92 18.76 PROFIT AFTER TAXATION 485.48 115.66 74.65 37.94

(1) We commenced our real estate development business in April 2006. (2) See the tables below for a breakdown of our expenditures by segment (i.e., construction, real estate development and motor dealership activities). (3) We sold our motor dealership business to a Promoter Group company in January 2007. (4) Preliminary & Deferred Revenue Expenditure Written Off includes expenses incurred by the Company at the time of its formation in fiscal 2004, which are being written off over a five-year period, and other write-offs relating to a project in Maharashtra. The write-offs are reflected in the Company’s annual financial statements but not in its interim financial statements.

The table below sets forth our profit and loss information, as a percentage of total income, for the fiscal years ended March 31, 2007, 2006, 2005 and 2004.

(As a percentage of total income) Fiscal year ended March 31,

2007 2006 2005 2004 INCOME Operating Income: from Construction Activities 34.93% 35.52% 41.34% 42.78% from Real Estate Development -- - (commenced April 2006) (1) 14.96% SUBTOTAL 49.89% 35.52% 41.34% 42.78% from Motor Dealership 62.85% 57.78% 56.77% (disposed of in Jan. 2007) (2) 48.01% Other Income 0.43% 1.17% 0.52% 0.44% Accretion- (Depletion) in 1.67% 0.46% 0.36% 0.01% work in progress TOTAL INCOME 100% 100% 100% 100% EXPENDITURE (3) Raw Material Consumed 62.97% 73.18% 73.02% 68.32% Employee Costs 10.39% 10.04% 11.72% 16.99% Repairs, Maintenance, 6.47% 6.18% 7.30% Overheads, Administrative Expenses 8.30%

Selling & Distribution Expenses 1.36% 1.28% 1.15% 0.84% Financial Expenses 2.25% 2.69% 2.79% 2.85% Depreciation 1.62% 1.50% 1.47% 1.40% Preliminary & Deferred Revenue 0.07% 0.08% 0.05% 0.07% Expenditure Written Off (4) TOTAL EXPENDITURE 86.44% 95.32% 96.52% 98.08% PROFIT BEFORE TAXATION 13.56% 4.68% 3.48% 1.92% Taxes 2.05% 1.48% 1.13% 0.63% PROFIT AFTER TAXATION 11.51% 3.20% 2.35% 1.29%

(1) We commenced our real estate development business in April 2006. (2) See the tables below for a breakdown of our Expenditures by construction, real estate development and motor dealership activities. (3) We sold our motor dealership business to a Promoter Group company in January 2007. (4) Preliminary & Deferred Revenue Expenditure Written Off includes expenses incurred by the Company at the time of its formation in fiscal 2004, which are being written off over a five-year period, and other write-offs relating to a project in Maharashtra. The write-offs are reflected in the Company’s annual financial statements but not in its interim financial statements.

Breakdown of income and expenditure by business segment

We commenced our real estate development business in April 2006 and sold our motor dealership business to a Promoter Group company in January 2007. The tables below set forth our income, expenditures and profit before taxation for the fiscal years ended March 31, 2007, 2006, 2005 and 2004, broken down among the three business segments that we have

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operated during those periods.

(Rs. in Million) Construction Activities Fiscal year ended March 31,

2007 2006 2005 2004 INCOME Operating Income 1,472.59 1,282.95 1,313.26 1,265.44 Other Income 17.52 40.30 14.69 10.98 Accretion- (Depletion) in 69.84 16.49 11.53 0.42 work in progress TOTAL INCOME 1,559.95 1,339.74 1,339.48 1,276.84 EXPENDITURE Raw Material Consumed 638.52 562.52 651.68 482.46 Employee Costs 336.82 340.56 354.29 485.55 Repairs, Maintenance, Overheads, Administrative 222.48 186.28 149.44 175.43 Expenses Selling & Distribution Expenses 0.00 0.00 0.00 0.00 Financial Expenses 76.33 77.66 71.96 66.56 Depreciation 62.38 47.15 40.83 36.18 Preliminary & Deferred Revenue 3.14 2.98 1.72 2.06 Expenditure Written Off (4) TOTAL EXPENDITURE 1,339.67 1,217.15 1,269.92 1,248.24 PROFIT BEFORE TAXATION 220.28 122.59 69.56 28.60

(Rs. in Million) Real Estate Development Activities (commenced April 2006) Fiscal year ended March 31,

2007 2006 2005 2004 INCOME Operating Income 630.74 - - - Other Income 0.00 - - - Accretion- (Depletion) in 0.00 - - - work in progress TOTAL INCOME 630.74 -- - EXPENDITURE Raw Material Consumed 152.16 - - - Employee Costs 74.26 - - - Repairs, Maintenance, Overheads, Administrative 85.38 - - - Expenses Selling & Distribution Expenses 0.00 - - - Financial Expenses 0.02 - - - Depreciation 0.02 - - - Preliminary & Deferred Revenue 0.00 - - - Expenditure Written Off (4) TOTAL EXPENDITURE 311.84 -- - PROFIT BEFORE TAXATION 318.90 -- -

(Rs. in Million) Motor Dealership Activities (disposed of in January 2007) Fiscal year ended March 31,

2007 2006 2005 2004 INCOME Operating Income 2,024.03 2,270.05 1,835.38 1,679.36

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Other Income 0.77 2.02 1.61 1.81 Accretion- (Depletion) in 0.00 0.00 0.00 0.00 work in progress TOTAL INCOME 2,024.80 2,272.07 1,836.99 1,681.17 EXPENDITURE Raw Material Consumed 1,863.88 2,080.63 1,667.69 1,538.58 Employee Costs 26.74 22.18 18.01 16.97 Repairs, Maintenance, Overheads, Administrative 42.09 47.36 46.97 40.41 Expenses Selling & Distribution Expenses 35.38 49.15 40.79 34.24 Financial Expenses 18.00 19.42 16.74 17.77 Depreciation 6.10 6.92 5.78 5.10 Preliminary & Deferred Revenue 0.00 0.00 0.00 0.00 Expenditure Written Off (4) TOTAL EXPENDITURE 1,992.19 2,225.66 1,795.98 1,653.07 PROFIT BEFORE TAXATION 32.61 46.41 41.01 28.10

Income

Following the commencement of our real estate development business in April 2006 and the disposal of our motor dealership business in January 2007, our income consists of income from construction activities, income from real estate development activities and other income.

Our income from construction activities includes contract revenue from engineering, procurement and construction services provided to our construction clients. Typically, we bill these clients on a monthly basis for our progress on their construction projects following their monthly certification to the extent of the progress made.

We expect our income received from real estate development to include amounts received from the sale of residential and commercial units in our projects. We began pre-sales of residential flats being constructed in the first phase of our Yeshwantpur project in May 2007. In addition, we are continuing construction activities on our Yeshwantpur project. Nevertheless, we have accrued income from real estate development activities in our profit and loss account for the fiscal year ended March 31, 2007. This is because we recognise revenue from these projects according to the percentage of completion method, and based on our application of this method a certain amount of real estate development revenue is already eligible to be recognised, even though no sales were made in the period. See “Critical Accounting Policies”, above. Pursuant to the joint development agreements under which we are conducting our real estate development projects, income from our real estate development activities generally accrues 80% to us and 20% to our joint development co- parties, who are members of our Promoter Group and the owners of the land we are developing.

Our other income includes interest earned from securities and bank deposits, dividends received on investments made, miscellaneous income and penalties recovered. Our other income fluctuates principally depending upon the investments we make in various securities and the dividends declared on them.

Expenditure

Our total expenditure consists principally of: raw materials consumed; employee costs; repairs, maintenance, overheads and administrative expenses; selling and distribution expenses; financial expenses; and depreciation.

Raw materials consumed

Raw materials consumed includes steel, cement, petroleum products, and other items. The Company has taken various measures to help reduce the costs of its raw materials, including

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adopting practices to help minimise inventory and developing close relationships with certain major suppliers.

Steel is an important component in the construction of buildings and the cost of steel typically comprises the largest fraction of our costs of raw materials consumed. The price of steel is dependant on international demand and supply. The market price of steel has increased from an average of Rs. 16,900 per metric ton in fiscal 2003 to an average of Rs. 27,600 per metric ton in fiscal 2006. As of June 1, 2007 the market price of steel was approximately Rs. 28,800 per metric ton (company estimates).

Cement is a critical component in the construction of buildings, the cost of which typically comprises a portion of our raw materials costs that is similar to the portion of costs represented by steel. The price of cement varies across regions due to variations in demand and supply and local rates of growth.

Employee costs

Employee costs consist of: salaries, wages and bonuses; the Company’s contribution to provident funds; worker and staff welfare costs; group insurance; gratuity; and remuneration to Directors. The cost of contract and other temporary workers on construction sites is also included in this line item.

Repairs, maintenance, overheads and administrative expenses

Repairs, maintenance, overheads and administrative expenses include: transport and freight charges; repairs and maintenance, principally of machinery and vehicles; power and electricity; remuneration to auditors; rates, fees and taxes other than income taxes; legal and professional charges; insurance (machinery, vehicles and premises), miscellaneous land compensation and land lease charges, printing and stationery, royalties, office rent, advertisements, sales tax, value-added tax, entry tax, service tax, hire charges to private parties, watch and ward charges and administrative expenses.

Selling & distribution expenses

Our selling and distribution expenses have historically been incurred only through our motor dealership activities, which we sold in January 2007.

Financial expenses

Financial expenses consist of bank interest charges, bank guarantee commission charges, other bank charges, other interest charges and letter-of-credit charges.

Depreciation

Depreciation includes depreciation on building, plant and machinery, vehicles, furniture and fixtures, computers and office equipment and other fixed assets. Depreciation on our fixed assets is charged on a written-down value basis, at the rates specified in Schedule XIV of the Companies Act, which are based on the useful lives of the assets. The Company follows a straight line method of depreciation calculation.

Results of operations

Due to the nature of the construction and real estate development activities undertaken by us, the completion schedules of our projects, the way we recognise revenue, the nature of expenditure involved in a particular project, the specific terms of a particular construction contract (including payment terms) and other factors that affect our income and expenditures on specific projects, our results of operations may vary significantly from period to period.

Fiscal year ended March 31, 2007 compared with Fiscal Year ended March 31, 2006

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Income. Our total income increased to Rs. 4,215.49 million in fiscal 2007, from Rs. 3,611.81 million in fiscal 2006, an increase of 16.71%. This increase was principally due to increases in income from our construction activities and the commencement of our real estate development activities in April 2006, which was offset by a decrease in income from our motor dealership business, due to the disposal of our motor dealership in January 2007.

Our total income from construction activities increased to Rs. 1,472.59 million in fiscal 2007, from Rs. 1,282.95 million in fiscal 2006, an increase of 14.78%. This increase was principally due to the commencement of two new construction projects and a lower amount of downtime caused by inclement weather.

Our total income from real estate development activities was Rs. 630.74 million in fiscal 2007, compared to nil in fiscal 2006, as we commenced this business only in April 2006. We expect our operating income from real estate development activities to include amounts received from the sale of residential and commercial units in our projects. We began pre-sales of residential flats in our Yeshwantpur project in May 2007. We are still constructing our Yeshwantpur project. We have, however, accrued income from real estate development in our profit and loss account for fiscal 2007 because we recognise revenue from projects according to the percentage of completion method. Based on our application of this method, real estate development revenue is already eligible to be recognised. See “Critical Accounting Policies”, above.

Expenditure. Our total expenditure increased to Rs. 3,643.70 million in fiscal 2007, from Rs. 3,442.81 million in fiscal 2006, an increase of 5.84%. As a percentage of total income, expenditure decreased from 95.32% in fiscal 2006 to 86.44% in fiscal 2007. The increase in expenditure was principally the result of increased expenditures in our construction activities and the commencement of our real estate development activities in April 2006.

Our total construction expenditure increased to Rs. 1,339.67 million in fiscal 2007, from Rs. 1,217.15 million in fiscal 2006, an increase of 10.07%, which was less than the rate of increase of our total income from construction activities over the same period. As a percentage of total construction income, total construction expenditure decreased from 90.85% in fiscal 2006 to 85.88% in fiscal 2007. As a percentage of total income, total construction expenditure decreased from 33.70% in fiscal 2006 to 31.78% in fiscal 2007. The increase in construction expenditure was principally due to increases in the cost of raw materials, repairs, maintenance, overheads and administrative expenses. For our construction business, the raw materials consumed and repairs, maintenance, overheads and administrative costs increased by 13.51% and 19.43%, respectively, while employee costs and financial expenses decreased slightly, in fiscal 2007 compared to fiscal 2006. As a percentage of total income, raw materials consumed for our construction business decreased slightly from 41.99% in fiscal 2006 to 40.93% in fiscal 2007; repairs, maintenance, overheads and administrative costs for our construction business remained relatively flat at 13.90% in fiscal 2006 and 14.26% in fiscal 2007; and employee costs and financial expenses for our construction business decreased from 25.42% and 5.80%, respectively, in fiscal 2006, to 21.59% and 4.89%, respectively, in fiscal 2007.

Our total real estate development expenditure was Rs. 311.84 million in fiscal 2007, compared to nil in fiscal 2006, as we commenced this business only in April 2006. Total real estate development expenditure was 49.44% of total income from real estate development activities in fiscal 2007. Raw materials costs was the highest component of expense in our real estate development business in fiscal 2007 at 24.12% of total income from real estate development activities. Repairs, maintenance, overheads and administrative expenses and employee costs represented the other principal cost components of our real estate development business at 13.54% and 11.77%, respectively, of total income from real estate development activities in fiscal 2007. Raw material costs, overhead and administrative expenses and employee costs constituted 3.61%, 2.03% and 1.76%, respectively, of total income in fiscal 2007.

Profit before taxation. Principally for the reasons discussed above, our profit before taxation increased to Rs. 571.79 million in fiscal 2007 from Rs. 169.00 million in 2006, an increase of

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238.34%. Our profit before taxation as a percentage of total income was 13.56% in fiscal 2007, compared to 4.68% in fiscal 2006.

Taxes. Taxes include income tax, wealth tax, fringe benefit tax and deferred tax charges. In fiscal 2007, we incurred an aggregate of Rs. 86.31 million in taxes, which is an increase of 61.81% over the aggregate of Rs. 53.34 million in taxes incurred in fiscal 2006. This resulted in effective tax rates for us of 2.05% and 1.48% for fiscal 2007 and fiscal 2006, respectively. These changes from period to period were principally due to higher profits earned from our construction business.

The major tax benefit available to us is provided under Section 80-IB of the Income Tax Act, 1961. Under this section, a tax exemption is available for the income earned on qualifying real estate development projects. The following criteria must be met in order to claim such tax benefits: (1) the project must be approved by a local authority before March 31, 2007; (2) the size of the plot of land must be a minimum of one acre; (3) the development and construction of the housing project must be commenced after September 30, 1998 and must be completed within four years from the date of approval; (4) the built-up area of shops and other commercial establishments included in the housing project must not exceed 5% of the aggregate built up area of the housing project or 2,000 sq.ft., whichever is less; and (5) the built up area of each residential unit must be within the following maximum limits – (a) within the cities of Delhi and Mumbai, 1,000 sq.ft., (b) within 25 kilometres of the local limits of Delhi and Mumbai, 1,000 sq.ft., (c) at any other place, 1,500 sq.ft. The first phase (i.e., 274 flats) of our Yeshwantpur real estate development project meets the criteria set forth above, including the size of the residential units. As a result, during fiscal year ended March 31, 2007, total income tax savings from such benefit was Rs. 107.34 million. We do not anticipate any further tax savings from this tax benefit for future tax periods.

Profit after taxation. Principally for the reasons discussed above, our profit after taxation increased to Rs. 485.48 million in fiscal 2007, from Rs. 115.66 million in fiscal 2006, an increase of 319.75%. Our profit after taxation as a percentage of total income was 11.52% in fiscal 2007, compared to 3.20% in fiscal 2006.

Fiscal year ended March 31, 2006 compared with fiscal year ended March 31, 2005

Income. Our total income increased to Rs. 3,611.81 million in fiscal 2006, from Rs. 3,176.46 million in fiscal 2005, an increase of 13.71%. This increase was principally due to increases in income from our motor dealership activities. We disposed of our motor dealership in January 2007.

Our total income from construction activities was Rs. 1,339.74 million in fiscal 2006, which was virtually unchanged from our total income of Rs. 1,339.48 million in fiscal 2005. Our construction income was almost flat from year to year principally as a result of work stoppages at some of our project sites on account of delays in land handover from clients.

Expenditure. Our total expenditure increased to Rs. 3,442.81 million in fiscal 2006, from Rs. 3,065.90 million in fiscal 2005, an increase of 12.29%. As a percentage of total income, expenditure decreased slightly from 96.52% in the fiscal year ended March 31, 2005 to 95.32% in the fiscal year ended March 31, 2006. The increase in expenditure was principally the result of increased expenditures in our motor dealership activities. We disposed of our motor dealership in January 2007.

Our total construction expenditure decreased to Rs. 1,217.15 million in fiscal 2006, from Rs. 1,269.92 million in fiscal 2005, a decrease of 4.16%. As a percentage of total construction income, total construction expenditure decreased from 94.81% in the fiscal year ended March 31, 2005 to 90.85% in the fiscal year ended March 31, 2006. As a percentage of total income, total construction expenditure decreased from 39.98% in the fiscal year ended March 31, 2005 to 33.70% in the fiscal year ended March 31, 2006. The slight decrease in construction expenditure compares favourably to the consistent level of our total income from construction activities over the same period. The decrease was principally due to a decrease in the average lead area that we worked during the year, which led to a lower consumption of

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raw materials. Raw materials costs in our construction business decreased by 13.68% from fiscal 2005 to fiscal 2006. As a percentage of total income, raw materials consumed for our construction business decreased from 20.52% in fiscal 2005 to 15.57% in fiscal 2006, and employee costs decreased slightly from 11.15% in fiscal 2005 to 9.43% in fiscal 2006.

Profit before taxation. Principally for the reasons discussed above, our profit before taxation increased to Rs. 169.00 million in fiscal 2006, from Rs. 110.57 million in fiscal 2005, an increase of 52.84%. Our profit before taxation as a percentage of total income was 4.68% in fiscal 2006, compared to 3.48% in fiscal 2005.

Taxes. In fiscal 2006, we incurred an aggregate of Rs. 53.34 million in taxes, which is an increase of 45.50% over the aggregate of Rs. 35.92 million in taxes incurred in fiscal 2005. This resulted in effective tax rates for us of 1.48% and 1.13% in fiscal 2006 and fiscal 2005, respectively. These changes from period to period were principally due to a higher allowable deduction for depreciation.

Profit After Taxation. Principally for the reasons discussed above, our profit after taxation increased to Rs. 115.66 million in fiscal 2006, from Rs. 74.65 million in fiscal 2005, an increase of 154.93%. Our profit after taxation as a percentage of total income was 3.20% in fiscal 2006, compared to 2.35% in fiscal 2005.

Fiscal year ended March 31, 2005 compared with fiscal year ended March 31, 2004

Income. Our total income increased to Rs. 3,176.46 million in fiscal 2005, from Rs. 2,958.00 million in fiscal 2004, an increase of 7.38%. This increase was principally due to increases in income from our construction and motor dealership activities. We disposed of our motor dealership in January 2007.

Our total income from construction activities increased to Rs. 1,339.48 million in fiscal 2005, from Rs. 1,276.84 million in fiscal 2004, an increase of 4.91%. This increase was principally due to new projects awarded and work commenced during fiscal 2005.

Expenditure. Our total expenditure increased to Rs. 3,065.90 million in fiscal 2005, from Rs. 2,901.31 million in fiscal 2004, an increase of 5.67%. As a percentage of total income, expenditure decreased slightly from 98.08% in the fiscal year ended March 31, 2004 to 96.52% in the fiscal year ended March 31, 2005. The increase in expenditure was principally the result of increased expenditures in our construction and motor dealership activities. We disposed of our motor dealership in January 2007.

Our total construction expenditure increased to Rs. 1,269.92 million in fiscal 2005, from Rs. 1,248.24 million in fiscal 2004, an increase of 1.74%, which was less than the rate of increase of our total income from construction activities over the same period. As a percentage of total construction income, total construction expenditure decreased from 97.76% in the fiscal year ended March 31, 2004 to 94.81% in the fiscal year ended March 31, 2005. As a percentage of total income, total construction expenditure decreased from 42.20% in the fiscal year ended March 31, 2004 to 39.98% in the fiscal year ended March 31, 2005. The increase in expenditure was principally due to higher consumption of raw materials, particularly cement and steel for the execution of road work. Raw materials costs in our construction business increased by 35.07%, while repairs, maintenance, overheads and administrative costs decreased slightly. Employee costs decreased by 27.03% in fiscal year 2005 as compared to fiscal year 2004, mainly because the Company began a new round of machinery deployment in order to save on labour costs and a large proportion of the work performed was mechanical in nature, which did not require significant manual labor. As a percentage of total income, raw materials costs for our construction business increased from 16.31% in fiscal 2004 to 20.52% in fiscal 2005, employee costs decreased from 16.41%% in fiscal 2004 to 11.15% in fiscal 2005, and repairs, maintenance, overheads and administrative costs decreased from 5.93% in fiscal 2004 to 4.70% in fiscal 2005.

Profit before taxation. Principally for the reasons discussed above, our profit before taxation increased to Rs. 110.57 million in fiscal 2005, from Rs. 56.70 million in fiscal 2004, an

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increase of 95.01%. Our profit before taxation as a percentage of total income was 3.48% in fiscal 2005, compared to 1.92% in fiscal 2004.

Taxes. In fiscal 2005, we incurred an aggregate of Rs. 35.92 million in taxes, which is an increase of 91.47% over the aggregate of Rs. 18.76 million in taxes incurred in fiscal 2004. This resulted in effective tax rated for us of 1.13% and 0.63% in fiscal 2005 and fiscal 2004, respectively. These changes from period to period were principally due to a higher allowable deduction for depreciation.

Profit after taxation. Principally for the reasons discussed above, our profit after taxation increased to Rs. 74.65 million in fiscal 2005, from Rs. 37.94 million in fiscal 2004, an increase of 96.76%. Our profit after taxation as a percentage of total income was 2.35% in fiscal 2005, compared to 1.29% in fiscal 2004.

Liquidity and capital resources

Historically, our principal liquidity and capital resources requirements have been to finance our working capital needs and our capital expenditures. Our business requires a significant amount of working capital to finance the purchase of materials and the performance of engineering, construction and other work on projects before payment is received from clients. On the construction side, we tend to receive payments on a monthly basis as work is completed. On the real estate development side, we may not receive payments until units are completed and sold, and we also must pay for land or development rights. Accordingly, our capital needs will become greater as our real estate development activities increase in proportion to our business as a whole. To the extent we have commenced our real estate development activities without buying land, but instead by entering into joint development agreements with some of our affiliates who own land, we have been able to accommodate our need for land without borrowing as much as we might have had to do otherwise.

To fund our capital needs, we have relied on short-term and long-term borrowings with one to four year terms, working capital financing and cash flows from operating activities. Out of the net proceeds of the Issue, we intend to use Rs. 2,337 million to finance our real estate development projects under development and being planned. Out of the remainder of the net proceeds of the Issue, we intend to use Rs. y million for general corporate purposes and Rs. y million to pay public issue expenses. In the future, as we expand our real estate development business, our capital needs will increase and we may need to raise additional capital through further debt finance and additional issues of Equity Shares.

Cash flows

The table below sets forth our cash flows for the periods indicated. In presenting our fiscal 2004 financial data, we have, as in the tables above, combined the partnership data from April 1, 2003 to August 06, 2003 with the company data from August 7, 2003 to March 31, 2004.

(Rs. in millions) Fiscal year ended March 31, 2007 2006 2005 2004 Net cash from / (used in) operating 129.36 -67.39 129.46 110.03 activities Net cash from / (used in) investing -356.14 105.03 1.15 -147.87 activities Net cash from / (used in) financing 181.93 -37.84 -69.49 36.44 activities Net increase / (decrease) in cash and -44.85 -0.19 61.12 -1.39 cash equivalents

Cash flows from / (used in) operating activities

Our net cash from operating activities in fiscal 2007 was Rs. 129.36 million, although our profit before taxation for that year was Rs. 571.79 million. The difference was mainly

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attributable to increases in inventories and other current assets, loans and advances and payment of dividends. As discussed above, we apply the percentage of completion method of revenue recognition method in respect of our real estate development business. As a result, we are already recognising some income from that business, even though we have not yet completed any projects or had not sold any part of any projects as of March 31, 2007. As our real estate development business grows, we expect that our inventory and other current asset levels to increase proportionately.

Our net cash used in operating activities in fiscal 2006 was Rs. 67.39 million, although our profit before taxation for that year was Rs. 169.00 million. The difference was attributable to an increase in inventories and loans and advances.

Our net cash from operating activities in fiscal 2005 was Rs. 129.46 million, although our profit before taxation for that year was Rs. 110.57 million. The difference was attributable to payment of taxes from prior years and increases in loans and advances.

Cash flows from / (used in) investing activities

Our net cash used in investing activities in fiscal 2007 was Rs. 356.14 million. Our net cash used in investing activities during this period reflects our purchase of fixed assets consisting of various plant and machinery assets. During the period, we have procured cranes, tippers, earth-moving machinery and other plants required for the execution of real estate development and other contractual projects.

Our net cash from investing activities in fiscal 2006 was Rs. 105.03 million. Our net cash from investing activities during this period reflects the sale of investments and purchase of plant and machinery.

Our net cash from investing activities in fiscal 2005 was Rs. 1.15 million. Our net cash from investing activities during this period reflects sales of investments and certain fixed assets.

Cash flows from / (used in) financing activities

Our net cash from financing activities in fiscal 2007 was Rs. 181.93 million. This cash flow reflects an increase in borrowings by our Company for the execution of contractual projects. The clients often provide us with a mobilisation and machinery advance against the production of a bank guarantee for an equivalent amount. The advance amounts are generally recovered monthly on a fixed percentage basis. Most of the advances are interest free.

Our net cash used in financing activities in fiscal 2006 was Rs. 37.84 million. This cash flow reflects the repayment of unsecured loans, interest payments and the receipt of secured loans.

Our net cash used in financing activities in fiscal 2005 was Rs. 69.49 million. This cash flow reflects the repayment of unsecured loans, interest payments and the receipt of secured loans.

Capital expenditures

We need to make capital expenditures on a regular basis in order to acquire needed machinery and vehicles. In fiscal 2007, we invested Rs. 246.20 million in various plant and machinery, vehicles and equipment. In fiscal 2006, we invested Rs. 115.88 million in machinery, vehicles and other equipment. In fiscal 2005, we invested Rs. 57.78 million in plant, machinery, vehicles and other equipment. We expect in future years to continue to make capital expenditures for machinery on a regular basis, and at possibly an increasing rate. We propose to finance these expenditures principally through secured loans from banks and financial institutions.

Balance sheet Items

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Fixed assets. Our total fixed assets after depreciation were Rs. 671.99 million for fiscal 2007. Our fixed assets consist of plant and machinery, such as earth-moving machinery, buildings, some land, a hot mix plant, a batching plant, office equipment, computers, furniture and fixtures and motor vehicles. Our fixed assets are increasing gradually as we procure additional construction-related assets. We are also importing some machinery for the execution of large contracts.

Investments. We have invested in government securities and in the equity shares of certain listed and unlisted companies, including certain companies in our Promoter Group. Our total investments were Rs. 267.34 million for fiscal 2007.

Loans and advances. Our total loans and advances for fiscal 2007 were Rs. 313.21 million. Loans and advances include deposits for tenders, earnest money deposits, tax deducted at source, security deposits and receivables from Promoter Group companies. The amount of receivables from Promoter Group companies for fiscal 2007 was Rs. 83.19 million.

Other current assets. Our other current assets for fiscal 2007 were Rs. 692.02 million. Our other current assets include receivables from sales of flats, bills receivable, interest receivables and other items. Our receivables are generally paid on a 30-60 day period. For fiscal 2007, we credited Rs. 630.73 million against income from real estate development activities on the percentage completion method, and debited the same to receivables from the sale of flats under other current assets.

Current liabilities. Our current liabilities for fiscal 2007 were Rs. 190.56 million. Our current liabilities include sundry creditors, advances from customers, security deposits, retention money withheld by us and other liabilities.

Secured Loans. Our secured loans for fiscal 2007 were Rs. 790.08 million. Secured loans include bank term borrowings, machinery borrowings, loans from government departments and cash credit loans. Due to increases in the volume of our civil engineering and construction work during the last four years, the borrowings of the Company have increased.

Most of our financing arrangements are secured by our present and future current assets, certain of our movable assets, certain immovable assets of our Promoter Group companies and personal guarantees of our directors. Our accounts receivable and inventories are subject to charges created in favor of specific secured lenders.

Unsecured Loans. Our unsecured loans for fiscal 2007 were Rs. 438.80 million. Unsecured loans include borrowings from our Promoter Group companies and temporary overdrafts in current accounts with banks.

Total Indebtedness

The following table sets forth our repayment obligations under the terms of our secured and unsecured indebtedness as of March 31, 2007:

(Rs. in millions) Payments due during the year ending March 31, Indebtedness 2008 2009 2010 After 2010 Secured 291.76 256.99 155.25 86.08 Unsecured 156.84 133.00 103.50 45.45

Many of our financing agreements contain conditions and restrictive covenants that require us to obtain the prior permission of such banks or financial institutions or to inform them with respect to various activities, including, inter alia, alteration of our capital structure, raising of fresh capital or debt, payment of dividend, undertaking new projects, undertaking any merger or amalgamation, restructuring and change in management. These financing agreements further permit the concerned lenders to seek early repayments of, or recall the said loans or

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enhance the interest rates applicable thereto. Additionally, certain financing agreements require us to meet and maintain identified financial ratios. Further, under these financing agreements during the subsistence of the facility the lender has a right to appoint from time to time a director/directors on our Board, as nominee director, and/or remove such director/directors so appointed and appoint another person in his/their place to protect the interest of the lender, subject however that the director so appointed by the lender shall not be liable to retire by rotation and need not possess any share qualification prescribed by our Articles. Furthermore, our financing arrangements may contain cross default provisions which could automatically trigger defaults under other financing arrangements, in turn magnifying the effect of an individual default.

Contingent obligations

Our contingent liabilities consist of guarantees given by banks in support of our bids and ongoing construction activities and a corporate guarantee given by us in favour of one of our Promoter Group companies. As at March 31, 2007, an aggregate amount of Rs. 988.37 million of bank guarantees and letters of credit was outstanding.

Other contingent obligations include a Rs. 122.00 million corporate guarantee given on behalf of Murdeshwar Power Corporation Ltd. to State Bank of India to secure a term loan.

Top five customers

Set forth below are our top five customers, measured by amounts billed, for each of the periods indicated.

(Rs. in millions) Fiscal 2007 Name of Customer Billed Amount National Highway Authority of India - Dharwad 454.72 Karnataka State Highway Improvement Project - Bangalore 358.63 Murudeshwar Ceramics Ltd. - Hubli 111.86 Naveen Hotels Ltd. – Bangalore (hotel project) 108.53 Karnataka Power Corporation Ltd. – Kudutini (Bellary) 97.39

(Rs. in millions) Fiscal 2006

Name of Customer Billed Amount

National Highway Authority of India - Dharwad 652.66

Murudeshwar Ceramics Ltd. - Hubli 253.84

Karnataka Power Corporation Ltd. – Kudutini (Bellary) 105.24

Karnataka State Highway Improvement Project - Bangalore 104.56

Naveen Hotels Ltd. – Hubli 66.93

(Rs. in millions) Fiscal 2005

Name of Customer Billed Amount

National Highway Authority of India – Dharwad 1,035.33

Murudeshwar Ceramics Ltd. – Hubli 141.58

Karnataka Neeravari Nigam Ltd. - Shimoga 46.64

Karnataka Power Corporation Ltd. – Kudutini (Bellary) 43.56

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Karnataka State Highway Improvement Project - Bangalore 22.04

(Rs. in millions) Fiscal 2004

Name of Customer Billed Amount

National Highway Authority of India - Dharwad 1,063.89

Karnataka State Highway Improvement Project - Bangalore 86.87

Murudeshwar Ceramics Ltd. - Hubli 80.01

Talmaba Majour Irrigation Project Ambapal - Kudal (MH) 10.47

Krishna Bhagya Jala Nigam Limited - Indi 4.95

Inflation

In recent years, although India has experienced fluctuations in inflation rates, inflation has not had a material impact on our business and results of operations. According to the Office of the Economic Advisor, Department of Industrial Policy and Promotion, the inflation rate in India was approximately 3.6%, 3.4%, 5.4%, 6.4%, 4.4% and 5.0% in the fiscal years 2002, 2003, 2004, 2005, 2006 and 2007 (April to December 2007), respectively.

Unusual or Infrequent Events or Transactions

Except as described in this Draft Red Herring Prospectus, there have been no other events or transactions that, to our knowledge, may be described as “unusual” or “infrequent”.

Known trends or uncertainties

Except as described in “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.

Future relationship between cost and income

Except as described in “Risk Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, to our knowledge there are no known factors that will have a material adverse impact on our operations and finances.

Competitive conditions

Please refer to the sections titled “Our Business – Competition”, “Industry” and “Risk Factors” in this Draft Red Herring Prospectus for discussions regarding competition.

Significant developments after March 31, 2007

Except as stated elsewhere in this Draft Red Herring Prospectus, to our knowledge no circumstances have arisen since March 31, 2007, which is the date of the most recent financial statements included in this Draft Red Herring Prospectus, which materially and adversely affect or are likely to affect our profitability, our financial condition or our ability to pay our material liabilities within the next 12 months.

Except as stated elsewhere in this Draft Red Herring Prospectus, there are no subsequent developments after the date of the Auditor’s report dated June 25, 2007, that we believe are expected to have material impact on our reserves, profits, earnings per share or book value.

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DESCRIPTION OF CERTAIN FINANCIAL INDEBTEDNESS

DETAILS OF SECURED LOANS

(Rs. in Million) Name of Nature of Limits Present Security Rate of Date of Date of Period of Bank/Financia Facility Sanctione Outstandin Int/Com loan Closure of installment l Institution d g bal loan

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Name of Nature of Limits Present Security Rate of Date of Date of Period of Bank/Financia Facility Sanctione Outstandin Int/Com loan Closure of installment l Institution d g bal loan

ICICI Bank Mort Loan 0.72 0.30 Hyp of 7.10% 22.6.05 22.5.08 35 Monthly instl machinery