Sundaram Brake Linings Limited Our Company Was Originally Incorporated As Sundaram Abex Limited on September 5, 1974 Under the Companies Act, 1956
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LETTER OF OFFER May 15, 2009 For Equity Shareholders of our Company only Sundaram Brake Linings Limited Our Company was originally incorporated as Sundaram Abex Limited on September 5, 1974 under the Companies Act, 1956. The name of our Company was changed to “Sundaram Brake Linings Limited” pursuant to the provisions of Section 21 of the Companies Act, 1956 and special resolution passed by the members at the extra-ordinary general meeting held on June 12, 1995. Our Company received a fresh certificate of incorporation on June 23, 1995. (For further details, see “Our History and Main Objects” on page 46 of this Letter of Offer) Registered Office: 180, Anna Salai, Chennai 600 006; Factory and Office: Padi, Chennai 600 050. Tel: +91-44-4220 5300; Fax: +91-44-4220 5572; Website: www.tvsbrakelinings.com ; Email: [email protected] Company Secretary and Compliance Officer: Mr. R. Mani Parthasarathy FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY LETTER OF OFFER ISSUE OF 1,221,075 EQUITY SHARES WITH A FACE VALUE OF RS. 10 EACH AT AN ISSUE PRICE OF RS.122 PER EQUITY SHARE (INCLUDING A PREMIUM OF RS.112 PER EQUITY SHARE, PAYABLE IN CASH) AGGREGATING RS.148,971,150 ON RIGHTS BASIS IN THE RATIO OF 9 FULLY PAID-UP EQUITY SHARES FOR EVERY 20 FULLY PAID-UP EQUITY SHARES OF RUPEES 10/- EACH HELD BY EXISTING EQUITY SHAREHOLDERS OF OUR COMPANY ON THE RECORD DATE i.e. MAY 21, 2009, (“ISSUE”). THE ISSUE PRICE IS 12.2 TIMES OF THE FACE VALUE OF EQUITY SHARE. FOR MORE DETAILS, PLEASE REFER TO THE SECTION TITLED “TERMS OF ISSUE” BEGINNING ON PAGE 142 OF THIS LETTER OF OFFER. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in the 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 the Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities 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 document. Investors are advised to refer to the section titled “Risk Factors” on page vi of this Letter of Offer before making an investment in this Issue. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects 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 Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of our Company are listed on National Stock Exchange of India Limited (“NSE”) (the Designated Stock Exchange), and Madras Stock Exchange Limited (“MSE”). Our Company has received “in-principle” approval from NSE and MSE for listing the Equity Shares arising from this Issue vide letter dated March 30, 2009 and March 23, 2009 respectively. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE Spark Capital Advisors (India) Private Limited Integrated Enterprises (India) Limited “Reflection”, New No.2, Leith Castle Center Street, II Floor, “Kences Towers”No.1, Ramakrishna Street, North Santhome High Road, Santhome, Chennai 600 028 Usman Road, T Nagar, Chennai 600 017 Tel: +91-44-4344 0000; Fax: +91+44-4344 0090 Phone: +91-44-2814 0801; Fax: +91-44-2814 2479 Contact Person: Mr. K. Ganesh Contact Person: Mr. Suresh Babu Email: [email protected] Email: [email protected] Website: www.sparkcapital.in Website: www.iepindia.com SEBI Reg. No.: INM000011138 SEBI Reg. No.: INR000000544 ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON June 3 , 2009 June 8 , 2009 June 17, 2009 TABLE OF CONTENTS SECTION I- GENERAL ............................................................................................................................................. I DEFINITIONS AND ABBREVIATIONS.................................................................................................................. I CERTAIN CONVENTIONS; PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ........... IV FORWARD-LOOKING STATEMENTS ................................................................................................................. V SECTION II- RISK FACTORS .............................................................................................................................. VI RISK FACTORS ...................................................................................................................................................... VI SECTION III – INTRODUCTION ............................................................................................................................ 1 SUMMARY OF OUR INDUSTRY ........................................................................................................................... 1 SUMMARY OF OUR BUSINESS ............................................................................................................................ 3 THE ISSUE ................................................................................................................................................................ 4 SUMMARY FINANCIAL INFORMATION ............................................................................................................ 5 GENERAL INFORMATION .................................................................................................................................... 9 CAPITAL STRUCTURE ......................................................................................................................................... 14 OBJECTS OF THE ISSUE ...................................................................................................................................... 18 BASIS FOR ISSUE PRICE ...................................................................................................................................... 21 STATEMENT OF TAX BENEFITS ........................................................................................................................ 23 SECTION IV – ABOUT US...................................................................................................................................... 29 INDUSTRY OVERVIEW ....................................................................................................................................... 29 OUR BUSINESS ..................................................................................................................................................... 34 OUR HISTORY AND MAIN OBJECTS ................................................................................................................. 46 OUR MANAGEMENT ............................................................................................................................................ 48 OUR PROMOTERS AND PROMOTER GROUP .................................................................................................. 54 DIVIDEND POLICY ............................................................................................................................................... 65 REGULATIONS AND POLICIES .......................................................................................................................... 66 SECTION V – AUDITORS REPORT AND FINANCIAL INFORMATION ..................................................... 70 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ....................................................................................................................................................... 108 SECTION VI – LEGAL AND OTHER INFORMATION .................................................................................. 123 OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS .......................................................... 123 GOVERNMENT APPROVALS AND LICENSES ............................................................................................... 129 SECTION VII - OTHER REGULATORY AND STATUTORY DISCLOSURES ........................................... 133 TERMS OF THE ISSUE ........................................................................................................................................ 142 SECTION VIII – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ....................................... 164 SECTION IX – OTHER INFORMATION ........................................................................................................... 174 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ............................................................... 174 DECLARATION ................................................................................................................................................... 175 SECTION I- GENERAL DEFINITIONS AND ABBREVIATIONS Term Description “We”, “us”, “our”, “Issuer”, Unless the context otherwise indicates or implies, refers to Sundaram Brake “the