RED HERRING PROSPECTUS Dated: June 20, 2012 Please read Section 60 B of Companies Act, 1956 100% Book Building Issue VKS PROJECTS LIMITED (Our Company was incorporated in India as “Chaitanya Contractors & Engineers Private Limited” on February 17, 1998 under the Companies Act, 1956) (For details of the changes in our name and Registered Office, see “History and Other Corporate Matters” on page 125 of this Red Herring Prospectus) Registered Office: 507, “B” Wing, Sai Sangam, Sector 15, CBD Belapur (E), Navi Mumbai – 400614, Maharashtra, India. Contact Person: Ms. Supriya A. Tatkar, Company Secretary and Compliance Officer. Tel: 91-22-41267000; Fax: 91-22-41267030; Email: [email protected]; Website: www.vksprojects.com Our Promoters: Dr. V.K. Sukumaran and Dr. Saritha Sukumaran THE ISSUE PUBLIC ISSUE OF [●] EQUITY SHARES OF ` 10/- EACH (THE “EQUITY SHARES”) FOR CASH AT A PRICE OF ` [●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF ` [●] PER EQUITY SHARE) AGGREGATING TO ` 5500.00 LACS (“HEREIN AFTER REFFERED TO AS “THE ISSUE”) BY VKS PROJECTS LIMITED (HEREINAFTER REFERRED TO AS “VKSPL” OR THE “COMPANY” OR THE “ISSUER”). THE ISSUE SHALL CONSTITUTE [●] % OF THE POST ISSUE SHARE CAPITAL OF OUR COMPANY. PRICE BAND: ` [●] TO ` [●] PER EQUITY SHARE OF FACE VALUE ` 10 EACH. The Price Band will be decided by our Company in consultation with our Book Running Lead Manager and advertised at least two working days prior to bid/issue opening date. This Issue is being made in terms of regulation 26(2)(a)(i) and b(i) of SEBI (ICDR) Regulations, 2009, as amended from time to time, whereby, at least 50% of the offer to public shall be allotted to QIBs, failing which the full subscription monies shall be refunded. (In case of delay, if any in refund, VKS Projects Limited shall pay interest on the application money at the rate of 15% per annum for the period of delay). In case of revision in the Price Band, the Bidding Period/ Issue Period will be extended for three additional working days after such revision, subject to the total Bidding Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding Period, if applicable, will be widely disseminated by notification to the BSE Limited (the “BSE”) and National Stock Exchange of India Limited (the “NSE”), whose online IPO System will only be available for bidding, by issuing press release and also by indicating the change on the website of Book Running Lead Manager (the “BRLM”) and the terminals of the members of Syndicate. The Issue is being made through the 100% Book Building Process wherein at least 50% of the offer to the public shall be allocated on a proportionate basis to eligible Qualified Institutional Buyers, out of which 5% of the QIB Portion (excluding Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all eligible Qualified Institutional Buyers, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, upto 15% of the Issue shall be available for allocation on a proportionate basis to Non- Institutional Bidders and upto 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of the company, there has been no formal market for the securities of the company. The face value of the shares is ` 10/- per Equity Share and the issue price is [●] times of the face value. The Issue Price (as determined and justified by the Issuer, in consultation with the BRLM, on the basis of assessment of market demand for the Equity Shares by way of Book Building Process) 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 or sustained trading in the shares of the company nor regarding the price at which the equity shares will be traded after listing. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this offer 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 offering. For taking an investment decision investors must rely on their own examination of the issuer and the offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India nor does Securities and Exchange Board of India guarantee the accuracy or adequacy of this document. Specific attention of the Investors is invited to the statement of Risk Factors pertaining to Company, its business and this Issue on Page 13 of this Red Herring Prospectus. ISSUER'S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Offer Document 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 Offer Document is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. IPO GRADING This issue has been graded by CRISIL Limited and has been assigned the “IPO Grade 1” indicating that the fundamentals of the Issue are poor relative to other listed equity securities in India, through their letter dated May 9, 2012. For further details in this regard please refer “General Information” and “Material Contracts and Documents for Inspection” on page 44 and 281 respectively of this Red Herring Prospectus. LISTING The Equity Shares offered through this Red Herring Prospectus are proposed to be listed on the BSE Limited (“BSE”) and the National Stock Exchange of India (“NSE”). Our company has received an in-principle approval for listing of the equity shares from BSE and NSE vide their letters dated September 14, 2011 and October 07, 2011 respectively. For the purpose of this Issue, the designated Stock Exchange will be the BSE Limited (“BSE”). BOOK RUNNING LEAD MANAGER REGISTRAR TO THIS ISSUE Aryaman Financial Services Limited Bigshare Services Private Limited. 60, Khatau Building, Ground Floor, E-2/3 Ansa Industrial Estate, Alkesh Dinesh Modi Marg, Fort, Saki Vihar Road, Saki Naka, Mumbai – 400 001. Andheri (E), Mumbai – 400072 Tel No.: 91 – 22 – 2261 8264 / 8635 Tel. No.: 91-22-4043 0200 Fax No.: 91 – 22 – 2263 0434. Fax No.: 91-22-2847 5207 Web: www.afsl.co.in Web: www.bigshareonline.com Email: [email protected] Email: [email protected] Contact Person: Mr. Gaurav Khandelwal / Ms. Nehar Sakaria Contact Person: Mr. N V K Mohan SEBI Registration No. INM000011344 SEBI Registration No: INR000001385 BID/ISSUE OPENS ON BID/ISSUE CLOSES ON JUNE 29, 2012 JULY 04, 2012 * Our Company may consider participation by Anchor Investors. The Anchor Investor Bid/ Issue Period shall be one Working Day prior to the Bid/ Issue Opening Date. TABLE OF CONTENTS SECTION CONTENTS PAGE NO. I GENERAL DEFINITIONS AND ABBREVIATIONS 1 PRESENTATION OF FINANCIAL INFORMTION AND USE OF MARKET DATA 11 FORWARD LOOKING STATEMENTS 12 II RISK FACTORS 13 III INTRODUCTION SUMMARY OF OUR INDUSTRY OVERVIEW 29 SUMMARY OF OUR BUSINESS 32 SUMMARY OF OUR FINANCIAL INFORMATION 38 BRIEF DETAILS OF THE ISSUE 43 GENERAL INFORMATION 44 CAPITAL STRUCTURE 54 OBJECTS OF THE ISSUE 64 BASIS OF ISSUE PRICE 76 STATEMENT OF TAX BENEFITS 79 IV ABOUT THE ISSUER COMPANY INDUSTRY OVERVIEW 87 BUSINESS OVERVIEW 99 KEY INDUSTRY REGULATIONS AND POLICIES 119 HISTORY AND OTHER CORPORATE MATTERS 125 OUR MANAGEMENT 128 OUR PROMOTERS AND PROMOTERS GROUP 141 DIVIDEND POLICY 146 V FINANCIAL STATEMENTS AUDITOR’S REPORT 147 MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF 177 OPERATIONS OF THE COMPANY FINANCIAL INDEBTEDNESS 193 VI LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 194 GOVERNMENT & OTHER KEY APPROVALS 196 OTHER REGULATORY AND STATUTORY DISCLOSURES 200 VII ISSUE RELATED INFORMATION TERMS OF THE ISSUE 211 ISSUE STRUCTURE 215 ISSUE PROCEDURE 220 VIII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF OUR COMPANY 258 IX OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 281 DECLARATION 283 SECTION I: GENERAL DEFINITIONS & ABBREVIATIONS In this Red Herring Prospectus, the terms “we”, “us”, “our”, “the Issuer”, “the Company”, “our Company” or “VKSPL”, unless the context otherwise implies, refers to VKS Projects Limited on a standalone basis. All references to “Rupees”, “`” refer to Indian Rupees, the official currency of Republic of India; references to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words “Lacs” or “Lakhs” mean “100 thousand” and the word “million” means “10 lac” and the word “crore” means “10 million” or “100 Lacs” and the word “billion” means “1,000 million” or “100 crores”. Any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. Term / Abbreviation Description “We”, “us”, “our”, “the Unless the context otherwise indicates or implies, refers to VKS Projects Issuer”, “the Company”, Limited. “our Company” or “VKSPL” Unless the context otherwise requires, refers to Dr.