Draft Red Herring Prospectus

DRAFT RED HERRING PROSPECTUS Please read Section 60B of the Companies Act, 1956 Dated XXX (The Draft Red Herring Prospectus will be updated upon RoC filing) 100% Book Built Issue TANLA SOLUTIONS LIMITED was incorporated under the Companies Act, 1956 as a public limited company in the name of Maruti Dairy Products Limited on 28th July 1995 in Hyderabad, Andhra Pradesh, India vide Registration No. 01 – 21262 and obtained Certificate of Commencement of Business on 11th August 1995. The name of the Company was changed to Prism Foods Limited and received a fresh Certificate of Incorporation dated 18th March, 1996. Subsequently, name of the Company was changed to Tanla Solutions Limited and obtained a fresh Certificate of Incorporation dated 16th March, 2000. REGISTERED OFFICE: Tanla Technology Centre, Hitech City Road, Madhapur, Hyderabad - 500 081, Andhra Pradesh, India. The Company has shifted its registered office from Plot No. 11, Type–A, Film Nagar, Jubilee Hills, Hyderabad 500 033 w.e.f. Decmber 3, 2005 to the present address. The Company had earlier shifted its registered office in June, 1999 from 103, Vijay Kiran Apartmetns, Srinagar Colony, Hyderabad – 500 073 to 301,Vamsi Residency, Srinagar Colony, Hyderabad-500073 and in November, 1999 shifted to Plot No. 11, Type–A, Film Nagar, Jubilee Hills, Hyderabad 500 033 Tel: +91 40 40099999 Fax: +91 40 23122999 Website: www.tanlasolutions.com; E-mail: [email protected] PUBLIC ISSUE OF15,885,000 EQUITY SHARES OF RS.2 EACH (“EQUITY SHARES”) FOR CASH AT A PRICE OF RS. [•] PER EQUITY SHARE AGGREGATING RS. [.] BY TANLA SOLUTIONS LIMITED (“TSL” or “THE COMPANY” OR “THE ISSUER”). THE ISSUE COMPRISES PROMOTERS’ CONTRIBUTION OF [•] EQUITY SHARES AGGREGATING RS. [•] (“PROMOTERS CONTRIBUTION”) AND THE NET OFFER TO THE PUBLIC OF [•] EQUITY SHARES AGGREGATING RS. [•] (“NET ISSUE”). THE ISSUE WILL CONSTITUTE [•] % of THE FULLY DILUTED CAPITAL OF THE COMPANY AFTER THE ISSUE. PRICE BAND: RS. [•] TO RS. [•] PER EQUITY SHARE OF RS. 2 EACH The Issue is being made through the 100% book building process where at least 50% of the Issue Size shall be allocated to Qualified Institutional Buyers (“QIBs”) (including 5% of the QIB portion that would be specifically reserved for Mutual Funds) on a proportionate basis. Further, up to 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and up to 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THE ISSUE The Issue Price (as determined by the Company in consultation with the Book Running Lead Managers on the basis of assessment of market demand for the Equity Shares by way of book building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares allotted pursuant to the Issue 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 of the Equity Shares allotted pursuant to the Issue. 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 section titled “Risk Factors” beginning on page [•] of this Draft Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this 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. LISTING The existing Equity Shares of the Company are listed on the Hyderabad, Chennai and Ahmedabad Stock Exchanges. The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the above stock exchanges as well as on The Bombay Stock Exchange Limited (BSE) – the designated Exchange and The National Stock Exchange of India Ltd. (NSE) . We have applied for in-principle approvals from the concerned Stock Exchanges for the listing of the existing Equity Shares as well as the new Equity Shares to be allotted pursuant to the Issue. BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE KARVY COMPUTERSHARE PRIVATE SBI CAPITAL MARKETS LIMITED LIMITED 202, Maker Tower “E”, “Karvy House” 46, Avenue 4, Street No.1, Cuffe Parade, Banjara Hills Hyderabad – 500 034 Mumbai – 400005 Andhra Pradesh, India Tel: 91 22 22189166, Tel.No.+9140-23320251/23312454 Fax: 91 22 22188332 Fax No. : +91 40 23431551 E-mail: [email protected] E-mail : [email protected] Website: www.sbicaps.com Website: www.karvy.com ISSUE SCHEDULE BID / ISSUE OPENS ON [●] BID / ISSUE CLOSES ON [●] 1 2 TABLE OF CONTENTS I DEFINITIONS AND ABBREVIATIONS.........................................................................................4 I.1 Conventional / General Terms ........................................................................... 4 I.2 Offering-Related Terms...................................................................................... 4 I.3 Company/Industry Related Terms...................................................................... 8 I.4 Abbreviations ................................................................................................... 10 II RISK FACTORS ..........................................................................................................................12 II.1 FORWARD-LOOKING STATEMENTS AND MARKET DATA......................... 12 II.2 RISK FACTORS............................................................................................... 13 III INTRODUCTION .........................................................................................................................18 III.1 SUMMARY....................................................................................................... 18 III.2 GENERAL INFORMATION.............................................................................. 22 III.3 CAPITAL STRUCTURE ................................................................................... 28 III.4 OBJECTS OF THE ISSUE............................................................................... 37 IV ABOUT THE COMPANY.............................................................................................................60 IV.1 INDUSTRY OVERVIEW................................................................................... 60 IV.2 OUR BUSINESS .............................................................................................. 64 IV.3 KEY INDUSTRY REGULATION ...................................................................... 93 IV.4 BRIEF HISTORY OF THE COMPANY AND OTHER CORPORATE INFORMATION ................................................................................................ 94 IV.5 MANAGEMENT................................................................................................ 99 IV.6 PROMOTERS AND SUBSIDIARY COMPANIES .......................................... 111 IV.7 EXCHANGE RATES...................................................................................... 117 IV.8 CURRENCY OF PRESENTATION................................................................ 117 IV.9 DIVIDEND POLICY........................................................................................ 117 V FINANCIAL STATEMENTS ......................................................................................................118 V.1 FINANCIAL INFORMATION OF THE COMPANY ......................................... 118 V.2 FINANCIAL INFORMATION OF GROUP COMPANIES................................ 142 V.3 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................................... 148 VI LEGAL & OTHER INFORMATION ...........................................................................................167 VI.1 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS .............. 167 VI.2 GOVERNMENT AND OTHER APPROVALS................................................. 168 VII OTHER REGULATORY AND STATUTORY DISCLOSURES ..................................................170 VIII ISSUE INFORMATION..............................................................................................................178 VIII.1 TERMS OF THE ISSUE................................................................................. 178 VIII.2 ISSUE PROCEDURE....................................................................................

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