DRAFT RED HERRING PROSPECTUS Dated January 21, 2011 Please read Sections 60 and 60B of the Companies Act, 1956 The Draft Red Herring Prospectus will be updated upon filing with the RoC 100% Book Built Issue
Joyalukkas India Limited Our Company was incorporated as a private limited company under the Companies Act, 1956 on April 22, 2002, under the name and style of Joy Alukkas Traders (India) Private Limited. Subsequently, pursuant to a fresh certificate of incorporation dated December 23, 2009, the name of our Company was changed to Joyalukkas India Private Limited. Our Company was converted into a public limited company on December 9, 2010, and consequently, our name was changed to Joyalukkas India Limited and our Company was allotted a fresh corporate identity number U51398KL2002PLC015372. For details of changes in our constitution, name and registered office, see “History and Corporate Structure” on page 87. Registered and Corporate Office: Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi 682 031, Kerala, India. Tel: (91 484) 238 5035; Fax: (91 484) 238 5032 Company Secretary and Compliance Officer: Varun T. V.; Website: www.joyalukkasindia.com; Email: [email protected] PROMOTER: ALUKKAS VARGHESE JOY PUBLIC ISSUE OF 18,000,000 EQUITY SHARES OF ` 10 EACH OF JOYALUKKAS INDIA LIMITED (THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF ` [●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF ` [●] PER EQUITY SHARE) (THE “ISSUE”) AGGREGATING TO ` [●] MILLION. THE ISSUE WOULD CONSTITUTE 26.46% OF THE POST ISSUE PAID UP EQUITY CAPITAL OF OUR COMPANY. THE FACE VALUE OF THE EQUITY SHARES IS ` 10. THE FLOOR PRICE IS [●] TIMES THE FACE VALUE AND THE CAP PRICE IS [●] TIMES THE FACE VALUE. THE FACE VALUE OF THE EQUITY SHARES IS ` 10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY THE COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGERS AND WILL BE ADVERTISED AT LEAST TWO WORKING DAYS PRIOR TO THE BID/ ISSUE OPENING DATE. In case of a revision in the Price Band, the Bidding/Issue Period will be extended for at least three additional Working Days after revision of the Price Band, subject to the Bidding/Issue Period not exceeding ten Working Days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”), by issuing a press release, and also by indicating the change on the websites of the Book Running Lead Managers (“BRLMs”) and at the terminals of the other members of the Syndicate. This being an Issue for Equity Shares representing more than 25% of the post-Issue equity share capital of the Company, Equity Shares will be offered to the public for subscription in accordance with Rule 19(2)(b)(i) of the Securities Contracts Regulations Rules, 1957, as amended (“SCRR”). The Issue is being made pursuant to Regulation 26(1) of the SEBI ICDR Regulations through the 100% Book Building Process wherein not more than 50% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”) (“QIB Portion”). 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 QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 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. All potential investors, other than Anchor Investors, may participate in the Issue through an Application Supported by Blocked Amount (“ASBA”) process providing details about the bank account which will be blocked by the Self Certified Syndicate Banks (“SCSBs”) for the same. For details, please see the section titled “Issue Procedure” on page 244. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of the Issuer, there has been no formal market for the Equity Shares of the Issuer. The face value of the Equity Shares is ` 10 and the Floor Price is [●] times of the Face Value. The Issue Price (as determined and justified by the lead merchant banker and the Issuer as stated under the paragraph on “Basis for Issue Price”) should not be taken to be indicative of the market price of the specified securities after the specified securities are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares of the Issuer or regarding the price at which the Equity Shares will be traded after listing. IPO GRADING This Issue has been graded by [●] as [●], indicating [●]. The IPO Grading is assigned on a five point scale from one to five, with IPO Grade 5/5 indicating strong fundamentals and IPO Grade 1/5 indicating poor fundamentals. For details, see “General Information” on page 13. 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 Issuer 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 statement of “Risk Factors” 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. LISTING ARRANGEMENT The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the BSE and the NSE. We have received an in-principle approval from the BSE and the NSE for the listing of our Equity Shares pursuant to their letters dated [●] and [●], respectively. For the purposes of this Issue, the Designated Stock Exchange shall be [●]. BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE
Enam Securities Private Limited Citigroup Global Markets India Private Limited Link Intime India Private Limited 801, Dalamal Tower 12th Floor, Bakhtawar C-13, Pannalal Silk Mills Compound, L.B.S. Marg Nariman Point Nariman Point Bhandup (West), Mumbai 400 078 Mumbai 400 021 Mumbai 400 021 Maharashtra, India Maharashtra, India Maharashtra, India Tel: (91 22) 2596 0320 Tel: (91 22) 6638 1800 Tel: (91 22) 6631 9890 Fax: (91 22) 2596 0329 Fax: (91 22) 2284 6824 Fax: (91 22) 6646 6556 Email: [email protected] Email: [email protected] E-mail: [email protected] Website:www.linkintime.co.in Investor Grievance Email: [email protected] Investor Grievance Email: [email protected] Contact Person: Sachin Achar Website: www.enam.com Website: www.online.citibank.co.in/rhtm/citigroupglobalscreen1.htm SEBI Registration No: INR000004058 Contact Person: Anurag Byas Contact Person: Rajiv Jumani SEBI Registration No.: INM000006856 SEBI Registration No.: INM000010718
BID/ISSUE PROGRAMME BID/ISSUE OPENS ON* [●] BID/ISSUE CLOSES ON: FOR QIB BIDDERS [●]** FOR RETAIL AND NON-INSTITUTIONAL BIDDERS: [●] * Our Company may consider participation by Anchor Investors. Anchor Investor Bid /Issue Period shall be one Working Day prior to the Bid/Issue Opening Date. **Our Company may consider closing the Bid/Issue Period for QIB Bidders one day prior to the Bid/Issue Closing Date
TABLE OF CONTENTS
SECTION I – GENERAL ...... I DEFINITIONS AND ABBREVIATIONS ...... I PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ...... VIII FORWARD-LOOKING STATEMENTS ...... IX SECTION II – RISK FACTORS ...... X SECTION III – INTRODUCTION ...... 1 SUMMARY OF INDUSTRY ...... 1 SUMMARY OF BUSINESS ...... 4 SUMMARY FINANCIAL INFORMATION ...... 9 THE ISSUE ...... 12 GENERAL INFORMATION ...... 13 CAPITAL STRUCTURE ...... 23 OBJECTS OF THE ISSUE ...... 31 BASIS FOR ISSUE PRICE ...... 38 STATEMENT OF TAX BENEFITS ...... 41 SECTION IV – ABOUT THE COMPANY ...... 54 INDUSTRY OVERVIEW ...... 54 OUR BUSINESS ...... 65 REGULATIONS AND POLICIES ...... 82 HISTORY AND CORPORATE STRUCTURE ...... 87 OUR MANAGEMENT ...... 90 OUR PROMOTER ...... 101 GROUP ENTITIES ...... 104 DIVIDEND POLICY ...... 112 SECTION V – FINANCIAL STATEMENTS...... 113 RESTATED STANDALONE FINANCIAL STATEMENTS ...... 113 MANAGEMENT‟S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 157 FINANCIAL INDEBTEDNESS ...... 181 SECTION VI – LEGAL AND OTHER INFORMATION ...... 195 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ...... 195 GOVERNMENT APPROVALS ...... 216 OTHER REGULATORY AND STATUTORY DISCLOSURES...... 228 SECTION VII – ISSUE INFORMATION ...... 238 TERMS OF THE ISSUE ...... 238 ISSUE STRUCTURE ...... 241 ISSUE PROCEDURE ...... 244 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ...... 276 SECTION VIII – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ...... 278 SECTION IX – OTHER INFORMATION ...... 310 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ...... 310 DECLARATION ...... 313 ANNEXURE – GRADING RATIONALE FOR IPO GRADING ...... 314
SECTION I – GENERAL
DEFINITIONS AND ABBREVIATIONS
Unless the context otherwise indicates or implies, the following terms have the following meanings in this Draft Red Herring Prospectus, and references to any statute or regulations or policies shall include amendments thereto, from time to time:
Term Description “We”, “us”, “our” Unless stated otherwise, refers to Joyalukkas India Limited, a public limited “Joyalukkas”, “Issuer”, “the company incorporated under the Companies Act having its registered office at Door Company” or “our Company” No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi 682 031, Kerala, India
Issue Related Terms
Term Description Allotment/Allot/Allotted Unless the context otherwise requires, the allotment of Equity Shares pursuant to the Issue Allotment Advice The advice on intimation of Allotment of the Equity Shares sent to the Bidders who are to be Allotted the Equity Shares after discovery of the Issue Price in accordance with the Book Building process Allottee A successful Bidder to whom the Equity Shares are Allotted Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor category, who has Bid for Equity Shares amounting to at least ` 100.00 million Anchor Investor Bid/Issue The date one day prior to the Bid/Issue Opening Date on which bidding by Anchor Period Investors shall open and shall be completed Anchor Investor Bidding Date The date one day prior to the Bid Opening Date, prior to or after which the Syndicate will not accept any Bids from Anchor Investors Anchor Investor Issue Price The final price at which Equity Shares will be issued and Allotted in terms of the Red Herring Prospectus and the Prospectus to the Anchor Investors, which will be a price equal to or higher than the Issue Price but not higher than the Cap Price. The Anchor Investor Issue Price will be decided by our Company in consultation with the BRLMs prior to the Bid Opening Date Anchor Investor Portion Up to 30% of the QIB Portion which may be allocated by our Company to Anchor Investors on a discretionary basis. One-third of the Anchor Investor Portion shall be reserved for domestic mutual funds, subject to valid Bids being received from domestic mutual funds at or above the price at which allocation is being done to Anchor Investors Application Supported by An application, whether physical or electronic, used by a Bidder to make a Bid Blocked Amount/ ASBA authorizing an SCSB to block the Bid Amount in their ASBA Account ASBA Account Account maintained by an ASBA Bidder with a SCSB which will be blocked by such SCSB to the extent of the Bid Amount as mentioned in the ASBA Bid cum Application Form of the ASBA Bidder ASBA Bidder Any Bidder, other than an Anchor Investor who intends to apply through ASBA ASBA Bid cum Application The form, whether physical or electronic, used by an ASBA Bidder to make a Bid, Form or ASBA BCAF authorising a SCSB to block the Bid Amount in the ASBA account maintained with such SCSB which will be considered as the application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus ASBA Revision Form The form used by the ASBA Bidders to modify the quantity of Equity Shares or the Bid Amount in any of their ASBA Bid cum Application Forms or any previous revision form(s) Banker(s) to the Issue/Escrow The banks which are clearing members and registered with SEBI as Banker to the Issue Collection Bank(s) with whom the Escrow Account will be opened, in this case being [●] Basis of Allotment The basis on which Equity Shares will be Allotted to Bidders under the Issue and which is described in “Issue Procedure – Basis of Allotment” on page 269 Bid An indication to make an offer during the Bidding/Issue Period by a Bidder (including an ASBA Bidder), or on the Anchor Investor Bidding Date by an Anchor Investor, pursuant to submission of a Bid cum Application Form to subscribe to our Equity Shares at a price within the Price Band, including all revisions and modifications thereto
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Term Description Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form Bid /Issue Closing Date The date after which the Syndicate will not accept any Bids for the Issue, which shall be notified in [●] edition of [●] an English national daily newspaper, [●] edition of [●], a Hindi national daily newspaper and [●] edition of [●], a Malayalam newspaper, each with wide circulation Bid /Issue Opening Date The date on which the Syndicate shall start accepting Bids for the Issue, which shall be the date notified in [●] edition of [●] an English national newspaper and [●] edition of [●] a Hindi national newspaper and [●] edition of [●] a Malayalam newspaper, each with wide circulation Bid cum Application Form The form used by a Bidder to make a Bid and which will be considered as the application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus including the ASBA Bid cum Application as may be applicable Bidder Any prospective investor who makes a Bid pursuant to the terms of the Draft Red Herring Prospectus and the Bid cum Application Form, including an ASBA Bidder and Anchor Investor Bidding/Issue Period The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids Book Building Book building process as provided in Schedule XI of the SEBI ICDR Regulations, in Process/Method terms of which this Issue is being made BRLMs/ Book Running Lead Book Running Lead Managers to the Issue, in this case being Enam Securities Private Managers Limited and Citigroup Global Markets India Private Limited CAN/Confirmation of Except in relation to Anchor Investors, the note or advice or intimation of Allotment Allotment Notice of Equity Shares sent to the successful Bidders who have been Allotted Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, including any revisions thereof In relation to Anchor Investors, the note or advice or intimation of Allotment of Equity Shares sent to the successful Anchor Investors who have been Allotted Equity Shares after discovery of the Anchor Investor Issue Price, including any revisions thereof 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, including any revisions thereof Citi Citigroup Global Markets India Private Limited, having its office at 12th floor, Bakhtawar, Nariman Point, Mumbai 400 021, Maharashtra, India Controlling Branches Such branches of the SCSB which coordinates with the BRLMs, the Registrar to the Issue and the Stock Exchanges, a list of which is provided on http://www.sebi.gov.in/pmd/scsb.pdf Cut-off Price Issue Price, finalised by our Company in consultation with the BRLMs. Only Retail Individual Bidders whose Bid Amount does not exceed ` 200,000 are entitled to Bid at the Cut-off Price. QIBs and Non-Institutional Bidders are not entitled to Bid at the Cut-off Price Demographic Details Demographic details of the ASBA Bidders obtained by Registrar to the Issue from the Depository including address, Bidders bank account, MICR code and occupation details Designated Branches Such branches of the SCSBs which shall collect the ASBA Bid cum Application Forms used by ASBA Bidders and a list of which is available on http://www.sebi.gov.in/pmd/scsb.pdf Designated Date The date on which funds are transferred from the Escrow Account to the Public Issue Account and the amount blocked by the SCSB is transferred from the bank account of the ASBA Bidder to the Public Issue Account, as the case may be, after the Prospectus is filed with the RoC, following which the Board of Directors shall Allot Equity Shares to successful Bidders Designated Stock Exchange [●] Draft Red Herring This Draft Red Herring Prospectus dated January 21, 2011 issued in accordance with Prospectus/DRHP Section 60B of the Companies Act, which does not contain complete particulars of the price at which the Equity Shares are issued and the size (in terms of value) of the Issue Eligible NRI NRIs from jurisdictions outside India where it is not unlawful to make an issue or invitation under the Issue and in relation to whom the Draft Red Herring Prospectus constitutes an invitation to subscribe to the Equity Shares Allotted herein Enam Enam Securities Private Limited, having its office at 801, Dalamal Tower, Nariman Point, Mumbai 400 021, Maharashtra, India
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Term Description Equity Shares Equity shares of our Company having a face value of ` 10 each, unless otherwise specified Escrow Account Account to be opened with the Escrow Collection Bank(s) for the Issue and in whose favour the Bidder (excluding the ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount when submitting a Bid Escrow Agreement Agreement to be entered into by our Company, the Registrar to the Issue, the BRLMs, the Syndicate Members and the Escrow Collection Bank(s) for collection of the Bid Amounts and where applicable, refunds of the amounts collected to the Bidders (excluding the ASBA Bidders) on the terms and conditions thereof First Bidder The Bidder whose name appears first in the Bid cum Application Form or Revision Form or the ASBA Bid cum Application Form Floor Price The lower end of the Price Band, at or above which the Issue Price will be finalised and below which no Bids will be accepted Gross Proceeds The gross proceeds of the Issue of ` [●] IPO Grading Agency [●] Issue Public issue of 18,000,000 Equity Shares each of our Company for cash at a price of ` [●] per Equity Share aggregating to ` [●] million Issue Agreement The agreement entered into between our Company and the BRLMs on January 21, 2011, pursuant to which certain arrangements are agreed to in relation to the Issue Issue Price The final price at which Equity Shares will be issued and allotted in terms of the Red Herring Prospectus. The Issue Price will be decided by our Company in consultation with the BRLMs on the Pricing Date Issue Proceeds The proceeds of the Issue that are available to our Company Monitoring Agency [●] Mutual Fund Portion 5% of the QIB Portion or 450,000 Equity Shares available for allocation to Mutual Funds only, out of the QIB Portion Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended Net Proceeds The Issue Proceeds less the Issue expenses. For further information about use of the Issue Proceeds and the Issue expenses see “Objects of the Issue” on page 31 Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than ` 200,000 (but not including NRIs other than eligible NRIs) Non-Institutional Portion The portion of the Issue being not less than 2,700,000 Equity Shares available for allocation to Non-Institutional Bidders Net QIB Portion The portion of the QIB Portion less the number of Equity Shares Allotted to the Anchor Investors, being a minimum of [●] Equity Shares to be Allotted to QIBs on a proportionate basis Non-Resident A person resident outside India, as defined under FEMA and includes a Non Resident Indian Price Band Price Band of a minimum price of ` [●] (Floor Price) and the maximum price of ` [●] (Cap Price) and includes revisions thereof. The price band will be decided by our Company in consultation with the BRLMs and advertised at least two (2) Working Days prior to the Bid/Issue Opening Date in [●] edition of [●] an English national daily newspaper, [●] edition of [●], a Hindi national daily newspaper and [●] edition of [●], a Malayalam newspaper, each with wide circulation Pricing Date The date on which our Company in consultation with the BRLMs, finalizes the Issue Price Prospectus The Prospectus to be filed with the RoC in accordance with Section 60 of the Companies Act, containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of the Issue and certain other information Public Issue Account Account to be opened with the Bankers to the Issue to receive monies from the Escrow Account and the bank account of the ASBA Bidders, on the Designated Date QIB Portion The portion of the Issue being not more than 9,000,000 Equity Shares to be Allotted to QIBs Qualified Institutional Buyers Public financial institutions as specified in Section 4A of the Companies Act, or QIBs scheduled commercial banks, mutual fund registered with SEBI, FIIs and sub-account registered with SEBI, other than which is a foreign corporate or foreign individual, venture capital fund registered with SEBI, state industrial development corporation, insurance company registered with IRDA, provident fund with minimum corpus of `
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Term Description 250 million, pension fund with minimum corpus of ` 250 million and National Investment Fund set up by Government of India, insurance funds set up and managed by army, navy or air force of the Union of India and insurance funds set up by Department of Posts such as Postal Life Insurance Fund and Rural Postal Life Insurance Fund. Foreign Venture Capital Investors registered with SEBI and multilateral and bilateral financial institutions are not eligible to participate in the Issue. Red Herring Prospectus or RHP The Red Herring Prospectus dated [●] issued in accordance with Section 60B of the Companies Act, which does 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 (3) days before the Bid Opening Date and will become a Prospectus upon filing with the RoC after the Pricing Date Refund Account(s) The account opened with the Escrow Collection Bank(s), from which refunds, if any, of the whole or part of the Bid Amount (excluding to the ASBA Bidder) shall be made Refund Banker(s) [●] Refunds through electronic Refunds through NECS, Direct Credit, NEFT, RTGS or the ASBA process, as transfer of funds applicable Registrar/Registrar to the Issue Link Intime India Private Limited having its office at C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup West, Mumbai 400 078, Maharashtra, India Resident Retail Individual Retail Individual Bidder who is a person resident in India as defined under FEMA and Investor or Resident Retail who has not Bid for Equity Shares for an amount more than ` 200,000 in any of the Individual Bidder bidding options in the Issue Restated Financial Statements Our restated standalone financial information as at and for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and the six months period ended September 30, 2010, prepared in accordance with Indian GAAP and the SEBI ICDR Regulations Retail Individual Bidder(s) Individual Bidders (including HUFs applying through their karta, Eligible NRIs and Resident Retail Individual Bidders) who have not Bid for Equity Shares for an amount more than ` 200,000 in any of the bidding options in the Issue Retail Portion The portion of the Issue being not less than 6,300,000 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 any of their Bid cum Application Forms or any previous Revision Form(s) SEBI FII Regulations SEBI (Foreign Institutional Investors) Regulations 1995, as amended SEBI ICDR Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended SEBI VCF Regulations SEBI (Venture Capital Funds) Regulations, 1996 as amended Self Certified Syndicate Bank or The Banks which are registered with SEBI under SEBI (Bankers to an Issue) SCSB Regulations, 1994, as amended and offers services of ASBA, including blocking of bank account and a list of which is available on http://www.sebi.gov.in Stock Exchanges The BSE and the NSE Syndicate The BRLMs and the Syndicate Members (if any) Syndicate Agreement The agreement to be entered into between the Syndicate and our Company in relation to the collection of Bids in this Issue (excluding Bids from the ASBA Bidders) Syndicate Members [●] Takeover Code SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended TRS/Transaction Registration The slip or document issued by a member of the Syndicate or the SCSB (only on Slip demand), as the case may be, to the Bidder as proof of registration of the Bid Underwriters The BRLMs and the Syndicate Members Underwriting Agreement The agreement among the Underwriters and our Company to be entered into on or after the Pricing Date Working Day All days other than a Sunday or a public holiday (except during the Bid/Issue Period where a working day means all days other than a Saturday, Sunday or a public holiday), on which commercial banks in Mumbai are open for business
Issuer and Industry Related Terms
Term Description Articles/Articles of Association The articles of association of our Company Auditors The statutory auditors of our Company, B S R & Co., Chartered Accountants
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Term Description Audit Committee The committee of the Board of Directors constituted as our Company‟s Audit Committee in accordance with Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges Board of Directors/Board The board of directors of our Company or a committee duly constituted thereof Gold Means and includes gold jewellery, used gold purchased from our customers, bullion, standard gold and all other forms of gold held by our Company Group Entities/Group Companies Includes those companies, firms, ventures, etc. promoted by the Promoter, irrespective of whether such entities are covered under section 370 (1)(B) of the Companies Act, and as enumerated in the section titled “Group Entities”, beginning on page 104 Investor Grievance Committee The committee of the Board of Directors constituted as our Company‟s Shareholders‟/Investor Grievance Committee in accordance with Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges JCK India JCK India, April 2007 edition, published by the Reed Infomedia India Joyalukkas Group Entities promoted by our Promoter and engaged in the business of retailing of jewellery and/or textiles Key Management Personnel The officers vested with executive powers and the officers at the level immediately below the Board of Directors and other persons whom our Company has declared as a key management personnel, and as enumerated in the section titled “Our Management”, beginning on page 90 Large Format Store(s) Our retail stores each having a store area of 12,000 sq. ft. or more Listing Agreement Listing agreement to be entered into between our Company and the Stock Exchanges Memorandum/ Memorandum of The memorandum of association of our Company Association Premier Store(s) Our three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft. Promoter Alukkas Varghese Joy Promoter Group Includes such persons and entities who constitute our promoter group pursuant to Regulation 2(1)(zb) of the SEBI ICDR Regulations and are listed in the section titled “Our Promoters - Promoter Group” on page 102 Registered/Corporate Office The registered office of our Company situated at Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi 682 031, Kerala, India Subsidiary Joyal Ornaments and Trades Private Limited Wedding Centre Our retail stores through which we conduct the business of retailing of textiles, apparel and accessories along with jewellery
Conventional and General Terms/Abbreviations
Term Description A/c Account Act or Companies Companies Act, 1956, as amended from time to time Act AED United Arab Emirates dirham AGM Annual General Meeting AS Accounting Standards issued by the Institute of Chartered Accountants of India ASBA Applications Supported by Blocked Amounts AY Assessment Year BRLMs Book Running Lead Managers BSE The Bombay Stock Exchange Limited CAGR Compound Annual Growth Rate CAN Confirmation of Allotment Notice CARE Credit Analysis & Research Limited CARE Report Report on the “Indian Gems and Jewellery Industry” dated June 2010 published by CARE Research CARE Research CARE Research, a division of Credit Analysis & Research Limited CDSL Central Depository Services (India) Limited CESTAT Customs, Excise and Service Tax Appellate Tribunal CIT Commissioner of Income Tax
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Term Description CMC(s) Municipal Councils CRISIL Credit Rating Information Services of India Limited Depositories NSDL and CDSL Depositories Act The Depositories Act, 1996 as amended from time to time DIN Director Identification Number DIPP Department of Industrial Policy and Promotion DP/Depository A depository participant as defined under the Depositories Act, 1996 Participant DP ID Depository Participant‟s Identity EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation NECS National Electronic Clearing Service EGM Extraordinary General Meeting EPS Unless otherwise specified, Earnings Per Share, i.e., Net Profit attributable to equity shareholders as restated divided by the weighted average outstanding number of equity shares outstanding during that fiscal year ESI Act Employees State Insurance Act 1948 FCNR Account Foreign Currency Non Resident Account FDI Foreign Direct Investment FDI Circular The consolidated FDI policy effective from October 1, 2010 FEMA Foreign Exchange Management Act, 1999, as amended read with rules, regulations and notifications issued thereunder, as amended FEMA FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as Regulations amended FICCI Federation of Indian Chambers of Commerce and Industry FII(s) Foreign Institutional Investors as defined under SEBI (Foreign Institutional Investor) Regulations, 1995, as amended and registered with the SEBI under applicable laws in India Financial Period of twelve months ended March 31 of that particular year Year/Fiscal/FY FIPB Foreign Investment Promotion Board FVCI Foreign Venture Capital Investor registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000, as amended GDP Gross Domestic Product GIR Number General Index Registrar Number GoI/Government Government of India Gratuity Act Payment of Gratuity Act, 1972 HNI High Net worth Individual HUF Hindu Undivided Family ICAI Institute of Chartered Accountants of India IFRS International Financial Reporting Standards Income Tax Act The Income Tax Act, 1961, as amended Indian GAAP Generally Accepted Accounting Principles in India IMF International Monetary Fund IPO Initial Public Offering IS Indian Standard IT Information Technology ITAT Income Tax Appellate Tribunal JGEPC Gem and Jewellery Export Promotion Council JV Joint Venture KPCS Kimberley Process Certification Scheme MF Mutual Fund MICR Magnetic Ink Character Recognition Mn Million MoU Memorandum of Understanding NAV Net Asset Value NEFT National Electronic Fund Transfer No. Number NOC No objection certificate NR Non Resident NRE Account Non Resident External Account NRI Non Resident Indian, is a person resident outside India, who is a citizen of India or a person of
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Term Description Indian origin and shall have the same meaning as ascribed to such term in the Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time NRO Account Non Resident Ordinary Account NSDL National Securities Depository Limited NSE The National Stock Exchange of India Limited OCB A company, partnership, society or other corporate body owned directly or indirectly to the extent of up to 60% by NRIs including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly and which was in existence on October 3, 2003 and immediately before such date was eligible to undertake transactions pursuant to the general permission granted to OCBs under the FEMA. OCBs are not allowed to invest in this Issue p.a. per annum P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PAT Profit After Tax Payment of Bonus Payment of Bonus Act, 1965 Act PF Act Employees Provident Fund and Miscellaneous Provisions Act, 1952 PBT Profit Before Tax PIO Persons of Indian Origin PLR Prime Lending Rate PMLA Prevention of Money Laundering Act, 2002 RBI The Reserve Bank of India RoC The Registrar of Companies, Kerala and Lakshadweep at Ernakulam RONW Return on Net Worth Rs./ `/Rupees Indian Rupees RTGS Real Time Gross Settlement SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time SEBI The Securities and Exchange Board of India constituted under the SEBI Act, 1992 SEBI Act Securities and Exchange Board of India Act 1992, as amended from time to time Sq.ft. square feet Stamp Act The Indian Stamp Act, 1899, as amended from time to time State Government The Government of a State of India Stock BSE and/or NSE as the context may refer to Exchange(s) U.S./USA United States of America U.S. GAAP Generally Accepted Accounting Principles in the United States of America USD/US$ United States Dollars VCFs Venture Capital Funds as defined and registered with SEBI under the SEBI (Venture Capital Fund) Regulations, 1996, as amended from time to time WGC World Gold Council WGC Reports “India Gold Report – India: Heart of Gold” and “Gold Demand Trends” prepared by the World Gold Council
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PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA
Financial Data
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our restated standalone financial information as at and for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and the six months period ended September 30, 2010, prepared in accordance with Indian GAAP and the SEBI ICDR Regulations, which are included in this Draft Red Herring Prospectus, and set out in “Restated Standalone Financial Statments” on page 113. Our financial year commences on April 1 and ends on March 31. In this Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. All decimals have been rounded off to two decimal points.
Our Subsidiary Joyal Ornaments and Trades Private Limited, was incorporated on April 28, 2010. It has not commenced operations since its incorporation. It has an equity share capital of Rs. 0.1 million and a loss of Rs. 0.05 million for the period from April 28, 2010 to September 30, 2010. As the Subsidiary is not material, the consolidated financial statements have not been prepared and presented in the DRHP. For further details please refer Annexure IV to the Restated Financial Statements.
There are significant differences between Indian GAAP, US GAAP and IFRS. We have not attempted to explain those differences or quantify their impact on the financials 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 restated standalone 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 GAAP. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this DRHP should accordingly be limited.
Currency and Units of Presentation
All references to “Rupees” or “Rs.” or “`” are to Indian Rupees, the official currency of the Republic of India. All references to “US$”, “USD” or “U.S. Dollar” are to United States Dollars, the official currency of the United States of America. All references to “AED” are to “United Arab Emirates dirham”, the official currency of the United Arab Emirates. All references to “GBP” or “£” or “British Pound” or “Pounds” are to United Kingdom Pounds, the official currency of the United Kingdom. Except where specified, in this DRHP us, all figures have been expressed in “millions”.
Industry and Market Data
Unless stated otherwise, industry and market data used throughout this DRHP has been obtained from industry publications and certain public sources. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable, but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although our Company believes that the industry and market data used in this DRHP is reliable, it has not been verified by us or any independent sources. Further, the extent to which the market and industry data presented in this DRHP is meaningful depends on the reader‟s familiarity with and understanding of methodologies used in compiling such data.
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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”, “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 that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement.
Important factors that could cause actual results to differ materially from our expectations include, among others:
Market price volatility of gold jewellery and bullion; General economic conditions, consumer confidence in future economic conditions and political conditions, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well-being and security, fuel prices, inclement weather, interest rates, sales tax rate increases, inflation etc; Changing industry trends and design preferences of our consumers; Performance of our three Premier Stores situated in Chennai, Bangalore and Coimbatore; Marketing initiatives and brand building exercises; Inventory loss due to third-party or employee theft; Confusion in the minds of customers due to the existence of other Alukkas brands; Failure to manage our inventory; Failure in evaluating the worth, purity and quality of jewellery; Inability to find suitable locations for opening new stores and Wedding Centres; Risks associated with third party suppliers and job-workers; The outcome of legal or regulatory proceedings that we are or might become involved in; Government approvals; Our ability to compete effectively, particularly in new markets and businesses; Our dependence on our Key Management Personnel and Promoter; Conflicts of interest with affiliated companies, the Group Entities and other related parties; Other factors beyond our control; and Our ability to manage risks that arise from these factors.
For a further discussion of factors that could cause our actual results to differ, see “Risk Factors” “Our Business” and “Management‟s Discussion of Financial Condition and Results of Operations” on pages x, 65 and 157 respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company, our Directors, any member of the Syndicate nor any of their respective officers and/or affiliates have 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, the BRLMs and our Company will ensure that investors in India are informed of material developments until such time as the listing and trading permission is granted by the Stock Exchanges.
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SECTION II – RISK FACTORS
An investment in our Equity Shares involves a high degree of risk. 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.
If any of the following risks, or other risks that are not currently known or are now deemed immaterial, actually occur, our business, results of operations and financial condition could suffer, the price of our Equity Shares could decline, and all or part of your investment may be lost. Unless otherwise stated, we are not in a position to specify or quantify the financial or other risks mentioned herein. The numbering of the risk factors has been done to facilitate ease of reading and reference and does not, in any manner, indicate a ranking of risk factors or the importance of one risk factor over another.
This Draft Red Herring Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the considerations described below and elsewhere in this Draft Red Herring Prospectus.
Unless otherwise stated, the financial information of the Company used in this section is derived from our restated financial statements included in “Restated Standalone Financial Statments” on page 113, prepared in accordance with Indian GAAP and requirements of the SEBI ICDR Regulations.
Risks Relating to our Business
1. Our Promoter is a party to a criminal proceeding and any adverse development in relation to the same may materially and adversely affect our reputation.
Our Promoter is a party to a criminal complaint initiated by the State of Kerala before the Judicial First Class Magistrate, Kottayam alleging the commission of certain offences, including criminal conspiracy, instigating the formation of unlawful assembly armed with weapons, trespass, assault and wrongful confinement within the premises of the defacto complainant. Further, vide order dated March 30, 2009, the High Court of Kerala has dismissed a criminal revision petition filed by our Promoter stating that it is too early in the stage of the proceedings to declare that there is insufficient material produced before the court to prosecute the accused. The court further directed our Promoter to file a discharge petition before the learned Magistrate within three weeks and directed not to insist personal appearance of our Promoter. In the event that any adverse order is passed in relation to the said proceedings or any other unfavourable outcome in connection with the same could materially and adversely affect the reputation of our Company. For further details, see Outstanding Litigation and Material Developments on page 195.
2. Our Company is subject to two independent proceedings before the Directorate of Enforcement, PMLA and FEMA, Government of India and our Promoter has been issued a summons in relation to one of them. Any adverse outcome in relation to these proceedings may materially and adversely affect our income and reputation.
Our Company is subject to two independent proceedings initiated by the Directorate of Enforcement, PMLA and FEMA, Government of India (the “DoE”). The first of these proceedings was initiated by the Cochin Zonal Office, Thiruvananthapuram pursuant to a notice dated December 13, 2005 and is in relation to an unsecured loan of ` 373.64 million that was availed by our Company from our Promoter. In that regard, the DoE had required certain details as to the mode of repayment by way of a notice dated December 13, 2005. The Company has provided these details as well as those required by the DoE by way of its subsequent letters to the DoE. The last such letter was dated January 12, 2007. There has been no further communication from the DoE in connection with this matter. The second proceeding was initiated by way of a summons dated July 5, 2007 issued by the DoE against the then finance manager of our Company and is in relation to the issuance of gift vouchers by stores of the Company that could be issued in
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one country and redeemed in another country which has a different currency system. A summons dated October 30, 2007 was also issued to our Promoter to appear in person before the DoE. However, an adjournment to these proceedings was sought by way of a letter dated November 14, 2007 stating that owing to his residence in Dubai, the Promoter would be unable to appear before the DoE. Although we have not received any further communication from the DoE on these matters, any adverse outcome in relation to either of these proceedings may adversely affect our reputation. For further details, see Outstanding Litigation and Material Developments on page 195.
3. Our Company, one of our Group Entities, our Promoter and a Director are involved in certain legal and other proceedings. Any adverse outcome in relation to the said proceedings could adversely affect our business, financial condition, results of operation and/or reputation.
Our Company, Group Entity, Directors and our Promoter are currently involved in a number of legal proceedings in India. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. If any new developments arise, such as, a change in Indian law or rulings against us by the appellate courts or tribunals, we may face losses and may have to make provisions in our financial statements, which could increase our expenses and our liabilities. Decisions in such proceedings adverse to our interests may have a material adverse effect on our business, results of operations and financial condition.
Legal proceedings initiated against our Company, Promoter Director, other Directors, Group Entities and Promoter Group:
Category Company Promoter Other Group Promoter Amount Director Directors Entities Group Involved (In million) Criminal proceedings Nil 1 6 Nil Nil 0.025 Securities law proceedings Nil Nil 1 Nil Nil Nil Civil proceedings 7 1 1 1 Nil 12.25 Tax proceedings 4 Nil Nil Nil Nil 10.49 Motor Vehicle Claims 2 Nil Nil Nil Nil 1.00 Labour proceedings Nil Nil Nil Nil Nil Nil Enforcement Directorate 2 Nil Nil Nil Nil Nil
Legal proceedings initiated by our Company, Promoter Director, other Directors, Group Entities and Promoter Group:
Category Company Promoter Other Group Promoter Amount Director Directors Entities Group Involved (In million) Criminal proceedings 2 Nil Nil Nil Nil 0.52 Securities law proceedings Nil Nil Nil Nil Nil Nil Civil proceedings 7 2 Nil Nil Nil 27.94 Tax proceedings 28 5 Nil Nil 1 245.30 Motor Vehicle Claims Nil Nil Nil Nil Nil Nil Labour proceedings 1 Nil Nil Nil Nil 1.17
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Enforcement Directorate Nil Nil Nil Nil Nil Nil
For further details of these legal proceedings, see Outstanding Litigation and Material Developments on page 195.
4. Our business depends, in part, on factors affecting discretionary consumer spending that are out of our control. Adverse changes in such factors could result in a reduction in our sales and materially and adversely affect our business and results of operation.
Jewellery purchases are discretionary and are often perceived to be a luxury purchase. Consequently, our business is sensitive to a number of factors that influence discretionary consumer spending. In addition, we compete with other retail categories, such as electronics and travel for consumers‟ discretionary expenditure. Therefore, the price of jewellery relative to other discretionary products influences the proportion of consumers‟ expenditure that is spent on jewellery. General economic conditions, consumer confidence in future economic conditions and political conditions, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well-being and security, fuel prices, inclement weather, interest rates, sales tax rate increases, inflation, and war and fear of war also affect consumer‟s discretionary spending decisions. Most of our customers are individuals who purchase jewellery for personal use and who are generally less financially resilient than large corporate entities, and, consequently can be more adversely affected by declining economic conditions. Adverse changes in factors affecting discretionary consumer spending could reduce consumer demand for our products, resulting in a reduction in our sales and could have a material adverse effect on our business and results of operation.
5. If we fail to anticipate, identify or react appropriately or in a timely manner to trends in the jewellery industry, we could experience reduced consumer acceptance of our products, a diminished brand image, higher markdowns and costs to recast overstocked jewellery.
We typically outsource the design and manufacture of our jewellery products. The finished jewellery products purchased from independent jewellers and the jewellery manufactured through job-work arrangements are mostly based on available designs. We cannot assure you that we can consistently keep up with industry trends. If we fail to anticipate, identify or react appropriately or in a timely manner to customer buying decisions, we could experience reduced consumer acceptance of our products, a diminished brand image, higher markdowns and costs to recast overstocked jewellery. These factors could result in lower selling prices and sales volumes for our products, which could adversely affect our financial condition and results of operations. Also, we conduct sales operations in regions which vary significantly in taste. Hence, all our designs may not have comparable demand across all our regions. We are required to constantly create designs that conform to the significantly different taste that is exhibited by our customers across different regions. Any failure to do so could adversely affect our market share.
6. The success of our retail business is dependent on our ability to anticipate and respond to consumer requirements.
The growth of the Indian economy has led to changes in the way businesses operate in India and 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 for jewellery and textile products. Increasingly, consumers are seeking better quality jewellery and textile products, of varying trends. Our role as a manufacturer and retailer of gold and other jewellery products and as a retailer of textile products is to satisfy different consumer expectations. The growth and success of our retail business depends on the provision of high quality products to attract and retain clients who are willing and able to pay at suitable levels, and on our ability to anticipate the future trends and changing customer demand. Accordingly, our inability to meet our customers' preferences or our failure to anticipate and respond to customer needs and trends accordingly could materially and adversely affect our business and results of operations.
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7. A significant portion of our revenue and operations are related to our Premier Stores situated in Chennai, Bangalore and Coimbatore and any decrease in performance by any of these stores could have an adverse impact on our revenue and results of operations.
Our Premier Stores situated in Chennai, Bangalore and Coimbatore together have contributed 43.18%, 40.32% and 36.15% of our total revenues from jewellery sales for Fiscals 2009, 2010 and six month period ended September 30, 2010 respectively. As of Fiscal 2009, 2010 and six months ended September 30, 2010, we maintained an aggregate inventory of 522.88 kg, 452.19 kg and 690.46 kg of Gold, respectively, in addition to platinum, diamond and other jewellery in our three Premier Stores. Any adverse performance by one or more of these Premier Stores could have a material adverse effect on our ability to recover the investment made by us in them as well as on our total revenue and results of operations.
8. Our inability to further continue our marketing initiatives and brand building exercise in the same manner that we have done in the past, could adversely affect our business and financial condition.
Our business significantly depends on our marketing initiatives and brand building exercise, including advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, visual advertisements at prominent locations, advertisements in cinema hall, bus terminals, railway stations etc. For Fiscal 2010 and six months ended September 30, 2010, we had expended ` 480.56 million and ` 333.92 million respectively, for advertising and sales promotions across various media as part of our marketing initiative, which constituted 2.64% and 2.66% respectively of our total income. Though we have been successful in our marketing initiatives and brand building exercises, there can be no assurance that we would be able to continue such initiatives in future in a similar manner and on commercially viable terms. Failure to do so could adversely affect our business and financial condition.
9. We maintain a relatively large inventory of gold, diamond and platinum jewellery. In the event a material amount of this inventory is lost due to theft and such loss is not covered by insurance our results of operations may be adversely affected.
As of September 30, 2010 our aggregate inventory of jewellery including Gold, jewellery with diamond and other precious stones as well as platinum and silver jewellery was ` 5,972.75 million. Although we have security systems in place, we have in the past experienced loss of inventory owing to theft, of approximately ` 11.90 million from our retail store in Hyderabad, and though we recovered a substantial portion of the lost inventory and claimed insurance for the loss incurred, there can be no assurance that we will not experience such loss in future. If we were to incur a significant inventory loss due to third-party or employee theft and if such loss exceeds the limits of, or was subject to an exclusion from, coverage under our insurance policies, it could have a material adverse effect on our results of operations and financial condition. In addition, if we file claims under the insurance policies, it could lead to increases in the insurance premiums payable by us or the termination of coverage under the relevant policy.
10. The brand name, "Alukkas", is also used by other members of the Promoter’s family and any inability to distinguish ourselves from such other brand could impact our identity and positioning.
We believe that one of the principal factors that differentiate us from our competitors in the jewellery industry is our brand name and brand identity. We believe that our customers associate our brand name with high quality products, unique designs and services. If we do not maintain our brand identity or fail to adequately perform our services or perform our services on a timely basis, we may not be able to maintain our competitive edge. If we are unable to compete successfully, we could lose our customers. Whilst we have applied for registering our mark “joyalukkas”, the brand name “Alukkas” continues to be used by other members of our Promoter‟s family in their business operations, including in the jewellery business. Any confusion due to the existence of
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another Alukkas brand could negatively impact our business and results of operations. As there are multiple stores bearing the brand name “Alukkas” and operating in the same geographical locations where we conduct our operations, customers may purchase products from our competitors under the assumption that the entity is a part of our Company. Any loss of customers or confusion due to the existence of different “Alukkas” brands could adversely impact our financial performance, profitability and our brand. Our ability to control this risk is limited, which could materially and adversely affect our financial condition and results of operations.
11. Our auditors have qualified their opinion on our audited unconsolidated financial statements as at and for the fiscal years ended 2006, 2007, 2008 and 2009.
The audit report our auditors issued on our audited unconsolidated financial statements for Fiscals ended 2006, 2007 and 2008 contained a qualification which stated that our Company did not have an internal audit system commensurate with the size and nature of our business. Further, the audit report our auditors issued on our audited unconsolidated financial statements for Fiscal ended 2009 contained a qualification which stated that, though our Company had an internal audit system, it had to be further strengthened in order to be commensurate with the size and nature of our business. However, these qualifications did not require any adjustments to be made to our Restated Financial Statements. For details of all audit qualifications we have received and the respective management comments see the section titled Financial Statements - Annexure IV on page 124.
12. Conflicts of interest may arise out of common business objects shared by our Company and certain of our Group Entities.
Our Promoter has interests in other companies and entities that may compete with us, including other Group Entities that conduct businesses with operations that are similar to ours. There is no requirement or undertaking for our Promoter, Promoter Group or Group Entities or such similar entities to conduct or direct any opportunities in the retailing of jewellery business only to or through us. As a result, conflict of interests may arise in allocating or addressing business opportunities and strategies amongst our Company and our Group Entities in circumstances where our interests differ from theirs. In cases of conflict, our Promoter may favour other companies in which our Promoter has an interest. While our Promoter has entered into a non-competition agreement dated January 3, 2011 with our Company, there can be no assurance that the interests of our Promoter will be aligned in all cases with the interests of our minority shareholders or the interests of our Company. There can be no assurance that our Promoter or our Group Entities will not compete with our existing business or any future business that we may undertake or that their interests will not conflict with ours.
13. We procure part of our jewellery merchandise as finished products from independent suppliers. Although we carry out quality assurance tests on such products, any deficiency in their quality could adversely affect our reputation and income from operations.
A significant portion of the jewellery merchandise we sell is procured in the form of finished products from independent suppliers. For instance, 41.29%, 44.40% and 46.39% of our total jewellery were procured from independent suppliers in Fiscal 2009, 2010 and six months ended September 30, 2010 respectively. While we carry out quality assurance tests on such merchandise before affixing our brand name on them, any deficiency in the quality or purity of the jewellery could adversely affect our reputation and income from operations.
14. Failure to manage our inventory could have an adverse effect on our net sales, profitability, cash flow and liquidity.
The results of operations of our retail businesses are dependent on our ability to effectively manage our inventory. To effectively manage our inventory, we must be able to accurately estimate customer demand and supply requirements and purchase new inventory accordingly. If our management has misjudged expected customer demand it could adversely impact the results
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by causing either a shortage of merchandise or an accumulation of excess inventory. Further, if we fail to sell the inventory we manufacture or purchase, we may be required to write-down our inventory or pay our suppliers without new purchases, or create additional vendor financing, which could have an adverse impact on our income and cash flows.
15. A portion of our business entails the purchase of old jewellery from our customers as part of exchange schemes and any deficiency in the quality of the jewellery so purchased could adversely affect our reputation and income from operations.
We purchase old jewellery from our customers. We subsequently manufacture jewellery from the raw material obtained from melting down the purchased jewellery. Although we conduct quality assurance tests on such jewellery before purchasing it, there can be no assurance that the verification of the quality/purity of such products will be accurate. In the event we end up purchasing spurious, defective, or otherwise inferior jewellery, our profits and results of operation may be adversely affected.
16. Appraisal of the merchandise purchased by us from third party vendors and from our customers is subjective and inaccurate appraisal of the same by our personnel may adversely affect our income and profitability.
The accurate appraisal of the merchandise that we procure from third party vendors and from our customers is vital to our operations. However, appraisal of gold requires skilled manpower and hence we are dependent upon our workforce for the same. Evaluating the worth, purity and quality of the jewellery purchased for resale is subjective and requires high degrees of expertise and experience. Inaccurate appraisal of the jewellery by our workforce entails the risk of it being overvalued which could result in financial losses as well as damage to our reputation.
17. We do not own our registered and corporate offices and the premises on which most of our stores are situated and we may suffer if we are unable to renew our commercial leases on favourable terms.
Out of our 22 retail stores, 18 are not situated on premises owned by us. We typically enter into lease agreements for these stores for a term ranging from five to 25 years. Further, we do not own the premises on which our registered and corporate offices are situated. In the event that we are unable to renew our leases or obtain retail space to satisfy our business requirements on favourable terms, or at all, or are required to vacate the premises, we may have to seek new premises and we may suffer a disruption in our operations, which may adversely affect our business and increase our operating expenses. For further details, see Our Business – Property on page 80.
18. Past store performance may not be comparable to or indicative of future performance and there can be no assurance that the opening of new retail stores will result in increased profitability.
Various factors affect sales in our retail stores including the location of a retail store and competition. These factors will have an influence on existing and future stores and thus past sales figures may not be indicative of future sales figures. Upon the opening of a new store, there may be an initial period of market adjustment while the store forms a customer base and engages in initial advertising and marketing campaigns. During this period, the sales revenue may not exceed the overall expenses of the store. This could lead to a decrease in the overall profitability of the Company. In addition, even after this initial period, there can be no assurance that a new store will contribute to the overall profitability of our Company.
19. We are subject to risks arising from hedging arrangements.
We do not completely hedge our exposure to losses arising from gold price variations. We may, in future, enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales. We cannot
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assure you that the mechanisms we put in place will be able to effectively and/or adequately cover such losses. Further, we cannot assure you that we would not incur losses pursuant to these hedging mechanisms.
20. We may experience difficulties in expanding our business into additional geographic markets in India.
As of December 31, 2010, we had 22 jewellery stores, spread across 21 cities in India, including eight in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon, of which four are Wedding Centres. Our Large Format Stores are typically situated at strategic locations in prominent cities, such as Chennai, Bangalore and Coimbatore. We plan to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013. We intend to introduce several large retail stores in key cities in India to offer a comprehensive product range of diamond, platinum and other jewellery products to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery. We also evaluate attractive growth opportunities in other geographic areas on a case by case basis, and have recently launched stores in Bangalore and Mangalore. Should we decide to further expand our operations, we may not be able to leverage our experience in south India to expand our operations into other cities. Factors such as competition, culture, regulatory regimes, business practices and customs, customer tastes, behaviour and preferences in these cities where we may plan to expand our operations may differ from our operations in our current locations, and our current experience may not be applicable to such new locations. In addition, as we enter new markets and geographical areas, we are likely to compete not only with national retailers, but also local retailers who have an established local presence, are more familiar with local regulations, business practices and customs, have stronger relationships with local contractors, suppliers, relevant government authorities or are in a stronger financial position than us, all of which may give them a competitive advantage over us.
If we plan to expand our geographical footprint, our business will be exposed to various additional challenges, including obtaining necessary governmental approvals under unfamiliar regulatory regimes; identifying and collaborating with local suppliers with whom we may have no previous working relationship; successfully gauging market conditions in local retail markets with which we have no previous familiarity; attracting potential customers in a market in which we do not have significant experience or visibility; being susceptible to local taxation in additional geographical areas of India; and adapting our marketing strategy and operations to different regions of India. Our inability to expand into areas outside the retail market of south India may adversely affect our business prospects, financial conditions and results of operations and could constrain our long term growth prospects.
21. Our inability to find locations to open and operate our retail stores and Wedding Centres on commercially viable terms could adversely affect our results of operation and business.
Our Company intends to set up Large Format Stores and Wedding Centres in various locations. The success of these Large Format Stores would be highly dependent on finding optimum retail locations on competitive viable terms. Moreover, our Company has to compete with other jewellery retailers and other retailers to book locations for our retail stores on a continuous basis. There is no assurance that we would be able to find locations that we believe will be necessary for implementing our expansion plans on commercially viable terms or at all. Our inability to find such locations for our retail stores and Wedding Centres could adversely affect our results of operation, financial condition and business.
22. We have made certain issuances of Equity Shares below the Issue Price in the past one year.
We have made certain issuances of Equity Shares to a few of our employees in November 2010 at face value. These issuances may thus have occurred at a price below the Issue Price.
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23. We will be controlled by our Promoter so long as he controls a majority of our Equity Shares.
After the completion of this Issue, our Promoter will control, directly or indirectly, a majority of our outstanding Equity Shares. As a result, our Promoter will continue to exercise significant control over us, including being able to control the composition of our board of directors and determine decisions requiring simple or special majority voting, and our other shareholders will be unable to affect the outcome of such voting. Our Promoter may take or block actions with respect to our business, which may conflict with our interests or the interests of our minority shareholders, such as actions which delay, defer or cause a change of our control or a change in our capital structure, merger, consolidation, takeover or other business combination involving us, or which discourage or encourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. We cannot assure you that our Promoter and members of our Promoter Group will act in our interest while exercising their rights in such entities, which may in turn materially and adversely affect our business and results of operations. We cannot assure you that our Promoter will act to resolve any conflicts of interest in our favour. If our Promoter sells a substantial number of the Equity Shares in the public market, or if there is a perception that such sale or distribution could occur, the market price of the Equity Shares could be adversely affected. No assurance can be given that such Equity Shares that are held by the Promoter will not be sold any time after the Issue, which could cause the price of the Equity Shares to decline.
24. We rely on the experience and skills of our Directors and senior management team. Our success depends on our ability to attract and retain skilled personnel.
We believe we have a team of professionals to effectively oversee the operations and growth of our business. Our success is substantially dependent on the expertise and services of our Directors and our senior management team. They provide expertise which enables us to make well informed decisions in relation to our business and our future prospects. We cannot assure you that we will be able to retain any or all, or that our succession planning will help to replace, the key members of our management. The loss of the services of such key members of our management team and the failure of any succession plans to replace such key members could have an adverse effect on our business and the results of our operations. Moreover, we do not maintain key man insurance policy for any of our executive directors and our key managerial personnel. For details of our insurance coverage, please see section titled Business – Insurance on page 80 of this Draft Red Herring Prospectus.
25. Our Company’s indebtedness, inability to make payments or refinance our debt and the conditions and restrictions imposed by the financing arrangements could adversely affect our ability to conduct our business and operations.
As of December 31, 2010 our Company‟s outstanding indebtedness was ` 3,511.95 million, out of which ` 242.57 million was unsecured and ` 3,269.38 million was secured. Our Company may incur additional indebtedness in the future. Our Company‟s indebtedness could have several consequences, including but not limited to the following:
. a portion of our cash flow will be used towards repayment of our existing debt, which will reduce the availability of cash to fund working capital needs, capital expenditures, acquisitions and other general corporate requirements; . our ability to obtain additional financing in the future on reasonable terms may be restricted; . fluctuations and increase in prevailing interest rates may affect the cost of our borrowings, with respect to existing floating rate obligations and new loans; and . we are required to make certain additional payments with regard to certain financing arrangements in the event of withholding tax being imposed on such financing arrangements.
Our Company has entered into agreements with certain banks and financial institution for short term loans, working capital loans, cash credit, letters of credit, and treasury limit facilities which contain restrictive covenants, including, but not limited to, requirements that we obtain consent
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from the lenders prior to altering our capital structure, further issuing any shares, effecting any scheme of amalgamation or reconstitution, declaring dividends, or creating any charge or lien on our assets. Many of our Company‟s lenders retain the right to withdraw the payment of the loan amount, and in some cases this could be done without notice to us. One of our lenders is entitled to appoint a nominee director on the Board from time to time. In addition, some of the loan agreements contain financial covenants that require us to maintain, among other things, specified debt equity ratios. There can be no assurance that we will be able to comply with these financial or other covenants or that we will be able to obtain consents necessary to take the actions that we believe are required to operate and grow our business. Furthermore, in the event our Company diverts the funds to purposes not permitted under certain financing arrangements, the lenders have a right to withdraw the facilities forthwith and also impose liquidated damages. Many of our loan agreements allow our lenders to call upon additional security in relation to existing facilities.
As of December 31, 2010 our Company had unsecured loans amounting to ` 242.57 million and repayment of these loans may be recalled by lenders at any time. In such event, we may have to raise funds to refinance these obligations. This requirement to refinance loans on short notice may have a material and adverse effect on our business operations and financial condition. Furthermore, our Company‟s ability to make payments on and refinance our indebtedness will depend on our ability to generate cash from our future operations. We may not be able to generate enough cash flow from operations or obtain enough capital to service our debt. In addition, lenders under our credit facility could foreclose on and sell our assets if we default under our credit facilities. For further details, see Financial Indetedeness on page 181.
26. Our Promoter and his spouse have given personal guarantees, and one of our Group Entities has executed a corporate guarantee in relation to certain debt facilities provided to us, which if revoked may require alternative guarantees, repayment of amounts due or termination of the facilities.
Our Promoter and his spouse have given personal guarantees in relation to certain debt facilities provided to us. One of our Group Entities, Cochin Smart Properties Private Limited, has executed a corporate guarantee in favour of one of our lenders as security for a loan availed by us. In the event that any of these guarantees are revoked, the lenders for such facilities may require alternate guarantees, repayment of amounts outstanding under such facilities, or even terminate such facilities. We may not be successful in procuring guarantees satisfactory to the lenders, and as a result may need to repay outstanding amounts under such facilities or seek additional sources of capital, which could affect our financial condition and cash flows.
27. The requirement of funds in relation to the objects of the Issue has not been appraised, and are based on current conditions which are subject to change.
We intend to use the net proceeds of the Issue for the purposes described in the section titled Objects of the Issue on page 31. The objects of the Issue have not been appraised by any bank or financial institution. These are based on current conditions and are subject to changes in external circumstances or costs, or in other financial condition, business or strategy, as discussed further below. Based on the competitive nature of the industry, we may have to revise our management estimates from time to time and consequently our funding requirements may also change. Our management estimates for our operations may exceed fair market value or the value that would have been determined by third party appraisals, which may require us to reschedule or reallocate our expenditure, which may have an adverse impact on our business, financial condition and results of operations.
28. Our operations are subject to risks associated with the engagement of third party job-work contractors.
We engage independent third party contractors for the manufacture of gold and other jewellery products from bullion or for re-processing of old jewellery products. We do not have direct control
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over the day to day activities of such contractors and are reliant on such contractors performing these services. Accordingly, the timing and quality of our products depends on the availability and skills of those contractors. Further, not all our job-work arrangements with third party contractors are not on a written contract basis. If we fail to enter into such arrangements or if the contractors fail to perform their obligations in a manner consistent with such arrangements or to the standards we require, our manufacturing operations may not be completed to the standards required or in the anticipated timeframe, which could cause time and cost overruns. Further, we cannot assure you that skilled contractors will continue to be available at reasonable rates and in the areas in which we conduct our operations. As a result, we may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of contracted services and any such delay could adversely affect our profitability. If we are unable to negotiate with our suppliers and job-workers, it could result in work stoppages or increased operating costs as a result of higher than anticipated wages or benefits. These factors could adversely affect our business, financial position, results of operations and cash flows.
29. Our inability to procure the premises required for our proposed outlets for which a part of the Net Proceeds are proposed to be deployed, in commercially favourable terms, in a timely manner or at all may affect our future growth plans.
We intend to expand our retail business by launching new outlets in different parts of the country. Pursuant to the same, we intend to deploy ` 4,201.93 million from the Net Proceeds for establishing 14 outlets in 14 cities by September 2013. The premises for the proposed new outlets will be taken on lease or on the basis of leave and license agreements. While we have entered into memorandum of understanding/letters of intent/leave and license agreement/lease agreements for the purpose of taking properties on lease or leave and license for seven outlets, we are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds. Further, we have executed memoranda of understanding dated October 8, 2010 and August 24, 2010 with one of our Group Entities, Cochin Smart City Properties Private Limited, for our proposed outlets in Thiruvananthapuram and Kozhikode. For further details see Objects of the Issue on page 31.
We cannot assure you that we will be able to obtain undisputed legal title to and possession of such premises best suited for our proposed outlets. Our inability to execute lease and/or leave and license agreements on commercially favourable terms, in a timely manner or at all could adversely affect our competitive position, business, financial condition, results of operation and growth prospects. Further, any failure to enter into formal lease deeds and/or leave and license agreements in connection with the properties with respect to which we have entered into memoranda of understanding and/or letters of intent, and/or to recover the partial payment made by us with respect to such memoranda of understanding and/or letters of intent, could adversely affect our business, prospects, financial condition and results of operations.
30. Our consumer base is comprised of persons who purchase jewellery for use and who are generally more likely to be affected by declining economic conditions.
Most of our customer base comprises of individuals who purchase jewellery for use and who are generally less financially resilient as compared to larger corporate entities, and, as a result, they can be more adversely affected by declining economic conditions. In addition to that, gold jewellery is not perceived to be a „necessity‟ in the situation of an economic downturn which may result in a significant fall in demand in case of adverse economic conditions as opposed to demand for those goods that are perceived as a „necessity‟ by all classes of the public and at all times. Any such fall in demand could adversely affect our income from operations.
31. We are required to obtain, renew and maintain statutory and regulatory permits, licenses and approvals for our business operations from time to time.
We require certain statutory and regulatory permits, licenses and approvals to carry out our business operations and applications for their renewal need to be made within certain timeframes.
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While we have applied for a few of these approvals and permits, we cannot assure you that we will receive these approvals in a timely manner or at all. Further, in the future we will be required to apply for renewal of these approvals and permits for our business operations to continue. If we are unable or renew necessary permits, licenses and approvals on acceptable terms, in a timely manner or at all, our business may be adversely affected. For further details, see Government Approvals on page 216.
32. Availability and cost of quality gold and other jewellery and bullion may affect our results of operations.
In our business, timely procurement of materials such as gold jewellery or bullion, the quality of the material and the price at which it is procured, plays an important role in the successful operation of our business. We typically execute purchase orders on a spot basis with our suppliers for such materials and have not entered into any long-term contracts with our suppliers. Accordingly, our business is affected by the availability, cost and quality of such materials. The prices and supply of these and other materials depend on factors beyond our control, including general economic conditions, competition, production levels and import duties. There has been a significant increase in the cost of such materials, in the last few months which have resulted in an increase in our operations-cost. We cannot assure you that we shall be able to procure quality materials at competitive prices or at all, which may adversely affect our business. In addition, if for any reason, our primary suppliers of materials should curtail or discontinue their delivery of such materials to us in the quantities we need and at prices that are competitive, our reputation and ability to meet our material requirements for our operations could be impaired, our delivery schedules could be disrupted and our business could suffer.
33. We do not register our jewellery designs under the Designs Act, 2000 and we may lose revenue if our designs are duplicated by competitors.
Most of our finished jewellery products procured from independent jewellery suppliers or manufactured through job-work arrangements are based on their designs. We select the jewellery designs from amongst the designs made available to us by the suppliers/job-workers, based on market trends and our requirements in each of our retail stores, or obtain designs through leading design houses. Consequently, jewellery designs change on a frequent basis and these designs are not registered under the Designs Act, 2000. Our designs therefore cannot be protected and if competitors copy our designs it could lead to loss of revenue, which could adversely affect our reputation and our results of operations.
34. Our ability to access capital depends on our credit ratings.
The cost and availability of capital is, amongst other factors, also dependent on our credit ratings. We are currently rated by CRISIL and our current ratings are A-/Stable for working capital, P2+ for letter of credit and A-/Stable for term loans. Ratings reflect a rating agency‟s opinion of our financial strength, operating performance, strategic position, and ability to meet our obligations. Any downgrade of our credit ratings would increase borrowing costs and constrain our access to capital and lending markets and, as a result, could adversely affect our business. In addition, downgrades of our credit ratings could increase the possibility of additional terms and conditions being added to any new or replacement financing arrangements.
35. Our insurance policies provide limited coverage and we may not be insured against some business risks.
Our insurance policies cover physical loss or damage to our stock, cash, furniture and fixtures, building and other fixed assets arising from a number of specified risks including burglary, fire, landslides and other perils. Notwithstanding the insurance coverage that we carry, we may not be fully insured against some business risks and the occurrence of an accident that causes losses in excess of limits specified under the relevant policy, or losses arising from events not covered by
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insurance policies, could materially and adversely affect our financial condition and results of operations. For further details, see section Business - Insurance on page 80.
36. We have entered and may continue to enter into certain related party transactions.
We have entered into transactions with several related parties, including our Promoter, Directors and Promoter Group entities. For instance, our Promoter has provided certain bank guarantees as security for some of our borrowings and also we have executed certain lease agreements with our Promoter in relation to three of our retail stores. The transactions we have entered into and any future transactions with our related parties have involved or could potentially involve conflicts of interest. The value of merchandise sold to our overseas Group Entities amounted to ` 216.92 million, ` 653.76 million, ` 638.55 million and ` 299.36 million for the six month period ended September 30, 2010 and Fiscals 2010, 2009 and 2008 respectively. For more information regarding our related party transactions, see Related Party Transactions on page 150.
37. Our ability to pay dividends in the future may be affected by any material adverse effect on our future earnings, financial condition or cash flows.
Our ability to pay dividends in future will depend on our earnings, financial condition and capital requirements, and that of our Subsidiary and the dividends they distribute to us. Our business is working capital intensive. We further propose to incur capital expenditure in setting up more retail stores. We are required to obtain consents from certain of our lenders prior to the declaration of dividend as per the terms of the agreements executed with them. We may be unable to pay dividends in the near or medium term, and our future dividend policy will depend on our capital requirements and financing arrangements in respect of our operations, financial condition and results of operations.
38. Any failure or disruption of our information technology systems could adversely impact our operations.
Any delay in implementation or disruption of the functioning of our IT systems could disrupt our ability to track, record and analyze work in progress or cause loss of data and disruption to our operations, process financial information or manage creditors/debtors or engage in normal business activities. This could have a material adverse effect on our operations. Further, bar coding of products enables us to track, record and analyze sales of our products to consumers across all stores owned by us. Any failure, disruption or manipulation of our bar coding system could disrupt our ability to track, record and analyze sales of our products. This could have a material adverse effect on our business.
39. All of our overseas Group Entities use our brand name “joyalukkas”. Any negative publicity in relation to the same could adversely affect our reputation and results of operations.
Our business is dependent on the trust our customers have in the quality of our merchandise and our brand “joyalukkas”. Out of our 13 overseas Group Entities, 12 use the same brand name and are engaged in the same line of business as ours. Any negative publicity regarding the brand name by virtue of actions of any of the aforementioned Group Entities or otherwise could tarnish our reputation. This could adversely affect the demand for our products as well as our reputation and results of operations.
40. Our contingent liabilities and capital commitments which have not been provided for in our financial statements could adversely affect our financial condition.
Our contingent liabilities and capital commitments appearing in our financial statements as of September 30, 2010 aggregated to ` 143.01 million. The contingent liabilities consist principally of sales tax and service tax claims. In the event that any of these contingent liabilities materialize, our results of operation and financial condition may be adversely affected. For further information,
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see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 157.
As of September 30, 2010, we had the following contingent liabilities that have not been provided for in our financial statements: (` in millions) Claims against the Company not acknowledged as debts - Sales tax 103.64 - Service tax 25.89 Total 129.53
Further, as of September 30, 2010, we had the following additional liabilities that have not been provided for in our financial statements: (` in millions) Estimated amount of contracts remaining to be executed on capital account (net of 13.48 advances) and not provided for
41. Certain of our Group Entities have incurred losses in the past
The following Group Entities have incurred losses in the past:
Profit/Loss after Tax (` in million) No Name of the company Fiscal 2010 Fiscal 2009 Fiscal 2008 1 Joyal Properties Private limited 0.01 0.14 0.01 Mythri Entertainers and Enterprises Private 0.02 0.04 0.02 2 Limited 3 Fusion Technosoft Private Limited 0.07* 0.03* 0.01* Jyothi Aviation and Developers Private 0.08* Non-operative Non-operative 4 Limited 5 Dalia Hotels and Resorts Private Limited 0.04* Non-operative Non-operative 6 Mudita Trades Private Limited 0.03* Non-operative Non-operative 7 Cochin Smart City Properties Private Limited - 0.28* 0.3* Calender year Calender year Calender year 2009 2008 2007 8 Alukkas Exchange LLP, Dubai 14.38** * The company has not started commercial operations and hence profit and loss account has not been drawn. The figure represents the total expenses incurred during the Fiscal, capitalised as pre-operative expenses. ** Loss incurred during calendar year 2007 and converted in to ` at RBI exchange rate as of December 31, 2007
They may continue to incur losses in future periods, which may have an adverse effect on our results of operations.
42. We have experienced negative cash flows in the past
We have experienced negative cash flows (only negative flows are indicated for each period), in the past, as follows:
September 30, 2010 Fiscal 2010 (` Fiscal 2009 (` Fiscal 2008 (` (` in million) in million) in million) in million)
Net cash from/(used in) (118.02) (172.27) Operating Activities Net cash from/(used in) (10.32) (286.19) (6.49) (72.87) Investing Activities Net cash from/(used in) (206.33)
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Financing Activities
Any negative cash flows in the future could adversely affect our financial condition and the trading price of our Equity Shares. During the course of our business, we have entered into various capital commitments. In the event that the proposed Issue is not completed or is delayed and we are unable to make other alternative arrangements to raise funds to meet our cash flows requirements, it could have an adverse effect on our business, financial condition and results of operations
43. Our inability to manage our growth strategy effectively could disrupt our business and reduce profitability.
Our business growth strategy includes setting up of new Large Format Stores in select geographic markets across India. As we grow and diversify, we may not be able to execute our business operations efficiently on such increased scale, which could result in delays, increased costs and diminished quality, adversely affecting our reputation. This future growth may strain our managerial, operational, financial and other resources. Growth in our business would require us to expand, train and manage our employee base. Our expansion could cause problems related to our operational and financial systems and controls and could cause us to encounter working capital issues, as we will need increased liquidity to finance the purchase of inventory, establishment of new showrooms and the hiring of additional employees. If we are unable to manage our growth strategy effectively, our business, financial condition and results of operations may be adversely affected.
44. We have not executed definitive agreements with all our jewellery suppliers and job-workers.
We have entered into supply agreements with some of our major suppliers of finished jewellery products and job work agreements with some of our major job workers. We have not entered into definitive agreements with all our jewellery suppliers or job-workers. Therefore, in the event of any deficiency in the supply of jewellery by such third party supplier or manufacturer, we may not have any enforceable remedy against them. This could adversely affect our profitability and results of operations.
45. Due to geographic concentration of our operations in the southern regions of India, our results of operations and financial condition are subject to fluctuations in such regional markets.
A significant percentage of our total sales are made in the southern regions of India. Our concentration of sales in these regions heightens our exposure to adverse developments related to competition, as well as economic and demographic changes in these regions, which may adversely affect our business prospects, financial conditions and results of operations.
46. We have applied for and are awaiting registration for our trademark, “joyalukkas,” which may affect our business operations.
We believe that the primary factors in determining customer buying decisions in India‟s jewellery sector include price, confidence in the merchandise sold, and the level and quality of customer service. The ability to differentiate our products from competitors by our brand-based marketing strategies is a key factor in attracting consumers. However our brand “joyalukkas” and “World‟s Favourite Jeweller”, the associated logo and our various sub-brands have not been registered. Our application for registration of our trademark “joyalukkas” and “World‟s Favourite Jeweller” are currently pending before the registry. Therefore, we may not be able to prevent infringement of our trademark and a passing off action may not provide sufficient protection. Additionally, we may be required to litigate to protect our brands, which may adversely affect our business operations. Loss of the rights to use the trademark and the logo may affect our reputation, goodwill, business and our results of operations.
External Risks
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1. The Finance Act, 2010 has proposed certain changes which may impact our results of operations.
The customs duty on gold has changed substantially in the recent years. As per the Finance Act, 2010 the customs duty on serially numbered gold bars and gold coins has increased from ` 200 per 10 gram to ` 300 per 10 gram. Further, the price on all other forms of gold has increased from ` 500 per 10 gram to ` 750 per 10 gram and the customs duty on silver has increased from ` 1,000 to ` 1,500. Such increases in customs duty may impact our business, profits and results of operations.
2. We are subject to risks relating to the economic, political, legal or social environments of the locations in which we operate.
Our operations are presently conducted primarily in the states of Kerala and Tamil Nadu which may be subject to political, social, economic and market conditions which may differ significantly from other regions where we have lesser operations. Out of a total of 22 stores in India, 16 are situated in the two aforementioned states. Our business, earnings, asset values and prospects and the value of our Equity Shares may be materially and adversely affected by developments with respect to inflation, interest rates, currency fluctuations, government policies, price and wage controls, exchange control regulations, retail laws and regulations, taxation, expropriation, social instability and other political, legal or economic developments in or affecting the States in which we primarily operate. We have no control over such conditions and developments and can provide no assurance that such conditions and developments will not have a material adverse effect on our operations or the price of or market for our Equity Shares.
We are subject to a broad range of specific risks. These risks include, among others, the following:
political, social and economic instability;
external acts of warfare and civil clashes;
government interventions, including tariffs, protectionism and subsidies;
the ability of our management to deal with the regulatory regimes;
regulatory, taxation and legal structure changes;
difficulties and delays in obtaining new permits and consents for our operations or renewing existing ones;
arbitrary or inconsistent governmental action, including unexpected changes in governmental laws and regulations;
cancellation of contractual rights;
expropriation of assets; and
inability to repatriate profits and/or dividends.
Any unexpected changes in the political, social, economic or other conditions may have a material adverse effect on the investments that we have made or may make in the future, which may in turn have a material adverse effect on our business, financial condition and results of operations.
3. A slowdown in economic growth in India could cause our business to suffer.
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Our performance and growth are dependent on the health of the Indian economy. The economy could be adversely affected by various factors such as political or 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 the Indian economy may adversely affect our business and financial performance and the price of our Equity Shares.
4. Volatility in the market price of gold and other raw materials has a bearing on the value of our inventory and could affect our income, profitability and scale of operations.
Since there is a time lapse between the procurement of our merchandise and its sales to our customers, we are exposed to the risk of volatility in gold prices affecting the value of our inventory. Further, the fluctuation in the price of other raw materials required for the manufacture of gold, diamond, platinum and other jewellery may also affect the value of our inventory. A sudden fall in the market price of gold or increase in the price of other raw materials may adversely affect our ability to recover the cost incurred in procuring the same. Further there are no hedging mechanisms provided under our long term arrangements with independent suppliers and job workers. Consequently, any such fluctuation in the price of gold or other raw materials may adversely affect our income, profitability and results of operations.
5. Retail business is subject to extensive foreign exchange regulations.
The retail sector in India is regulated by the Government of India, state governments and local authorities. Further, investments made by non-residents into India are governed by the Foreign Exchange Management Act, 1999 (“FEMA”) and the rules and regulations thereunder, the Consolidated Foreign Direct Investment Policy (“FDI Policy”) issued by the Department of Industrial Policy and Promotion (“DIPP”) effective from October 1, 2010 and the provisions of the policy statements issued by the Government of India, through Press Notes. As per the provisions contained in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (the “FEMA Regulations”), FDI is specifically prohibited in the retail sector, except to the extent of 51% in single brand product retailing, with prior Governmental approval, subject to the satisfaction of certain conditions. This may potentially affect our Company in obtaining FDI investments into its retail jewellery business and for any broader capital raising exercise.
Although we believe that our operations are in compliance with applicable laws and regulations, there could be instances of non-compliance, which may subject us to regulatory action in the future, including penalties and other legal proceedings. Further, due to the possibility of unanticipated regulatory developments, the amount and timing of future expenditure to comply with these regulatory requirements may vary substantially from those currently in effect.
6. Eligible non-resident investors will be able to participate in this Issue only if relevant approvals are received from the regulators.
We propose to make an application to the RBI, for allowing eligible non-resident investors, such as FIIs and eligible NRIs to participate in this Issue subject to any conditions that may be prescribed by the RBI in this regard. In the event we are unable to obtain such approval from the RBI, eligible non-resident investors will not be able to participate in this Issue.
7. We face intense competition in our business and we may not be able to compete effectively.
We operate in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. The jewellery industry is still an unorganized sector in India and therefore we face competition not only from other jewellery companies, but also from local jewellers and craftsmen, which affects our business prospects and margins. The Indian retail jewellery industry is highly fragmented and dominated by the
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unorganized sector, from which the organized retail jewellery sector faces intense competition. The players in the unorganized sector offer their products at highly competitive prices and many of them are well established in their local sectors. We also compete against organised national, regional and local players. There can be no assurance that we can continue to effectively compete with our competitors in the future, and the failure to compete effectively may have an adverse effect on our business, financial condition and results of operations.
Also, a significant component of our business strategy is the continued establishment and promotion of existing brands. Due to the competitive nature of the diamonds and jewellery industry, if we do not continue to sustain and further develop our brands and branded product lines, we may fail to increase our sales. To promote brands and branded products, we have incurred and will continue to incur substantial expenses related to advertising and other marketing efforts as well as in relation to distribution channels and retail stores. In future, we may introduce a new product category that is not accepted by consumers which could adversely affect our goodwill, sales and result of operations.
Although, our operations have historically been focused in south Indian cities, we are expanding in other cities across India. As we intend to diversify our regional focus and grow our domestic operations, we face the risk that some of our competitors, who are also engaged in the jewellery manufacturing and retailing business, may be better known in other regional markets and enjoy better relationships with job-work contractors and suppliers. Some of our competitors may have greater financial resources than we do. They may also benefit from greater economies of scale and operating efficiencies. Competitors may, whether through consolidation or growth, present more attractive and/or lower cost solutions than we do, causing us to lose market share to our competitors. There can be no assurance that we can continue to compete effectively with our competitors in the future, and failure to compete effectively may have a material adverse effect on our business, financial condition and results of operations.
8. Regional hostilities, terrorist attacks, civil disturbances or social unrest, regional conflicts could adversely affect the financial markets and the trading price of the Equity Shares could decrease.
Certain events that are beyond our control, such as terrorist attacks and other acts of violence or war, may adversely affect worldwide financial markets and could potentially lead to a severe economic recession, which could adversely affect our business, results of operations, financial condition and cash flows, and more generally, any of these events could lower confidence in India's economy.
India has also experienced social unrest in some parts of the country. If such tensions occur in other parts of the country leading to overall political and economic instability, it could have a materially adverse effect on our business, future financial performance and the price of the Equity Shares.
9. Our business is significantly dependent on the availability of financing in India and the failure to obtain financing in the form of debt or equity and adverse changes in financing terms may affect our growth and future profitability. Difficult conditions in the global financial markets and the economy generally have affected and may continue to materially and adversely affect our business and results of operations.
Since the second half of 2007, the global financial markets, particularly the credit markets, have experienced, and may continue to experience, significant dislocations and liquidity disruptions which have originated from the liquidity disruptions in the United States and the European Union credit and sub-prime residential mortgage markets. Although economic conditions differ in each country, investors' reactions to any significant developments in one country can have adverse effects on the financial and market conditions in other countries. These and other related events, such as the collapse of a number of financial institutions, have had and continue to have a significant adverse impact on the availability of credit, globally as well as in India. Indian financial markets have also experienced the contagion effect of the global financial turmoil, evident from the sharp decline in the Sensex, BSE's benchmark index. Any prolonged financial crisis may have an adverse impact on the Indian economy, thereby resulting in a material and adverse effect on our business, operations,
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financial condition, profitability and price of our Equity Shares. We cannot assure you that global economic conditions will not deteriorate further and, accordingly, that our financial condition and results of operations will not be further adversely affected. On account of the prevailing conditions of the global and Indian credit markets, buyers of our products may remain cautious, consumer sentiment and market spending may turn more cautious in the near-term. If this trend continues, our results of operations and business prospects may be materially and adversely affected.
10. Fluctuations in the exchange rate between the Rupee and the U.S. dollar could have a material adverse effect on the value of the Equity Shares and our financial condition, independent of our operating results.
In Fiscal 2010, 3.59% of our revenues were in foreign currencies. The exchange rate between the Rupee and the US dollar has been substantially volatile recently and may fluctuate substantially in the future.
We may incur losses due to foreign exchange differences arising from the settlement of forward contracts or restatement/settlement of monetary items at rates different from those at which they were initially recorded in the financial statements. We cannot assure you that investors will be able to effectively mitigate the adverse impact of currency fluctuations on the results of our operations. Consequently, any fluctuation in the exchange rate could have a material impact on our Company„s profitability.
Further, the Equity Shares are quoted in Rupees on the BSE and the NSE. Any dividends in respect of the Equity Shares will be paid in Rupees and subsequently converted into US dollars for repatriation. Any adverse movement in exchange rates during the time it takes to undertake such conversion may reduce the net dividends to shareholders. In addition, any adverse movement in exchange rates during a delay in repatriating the proceeds from a sale of Equity Shares outside India, for example, because of a delay in regulatory approvals that may be required for the sale of Equity Shares may reduce the net proceeds received by shareholders.
11. Natural calamities could have an adverse impact on the economies of the countries in which we operate.
The occurrence of natural disasters, including hurricanes, tsunamis, floods, earthquakes, tornadoes, fires, explosions, pandemic disease and man-made disasters, including acts of terrorism and military actions, could adversely affect our results of operations or financial condition, including in the following respects:
(i) Catastrophic loss of life due to natural or man-made disasters could cause us to pay benefits at higher levels and/or materially earlier than anticipated and could lead to unexpected changes in persistency rates.
(ii) A natural or man-made disaster could result in losses in our investment portfolio, or the failure of our counterparties to perform, or cause significant volatility in global financial markets.
We cannot assure the prospective investors that such events will not occur in the future or that our results of operations and financial condition will not be adversely affected.
12. There may be less information available about the companies listed on the Indian securities markets compared with information that would be available if we were listed on securities markets in developed countries.
There may be differences between the level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants and that of more developed countries. SEBI is responsible for approving and improving disclosure and other regulatory
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standards for the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about companies listed on an Indian stock exchange compared with information that would be available if that company was listed on a securities market in a developed country. As a result, shareholders may have access to less information about our business, results of operations and financial condition than if we were listed on securities markets in developed countries.
13. Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
Our articles of association, regulations of our board of Directors and Indian law govern our corporate affairs. Legal principles related to these matters and the validity of corporate procedures, directors' fiduciary duties and liabilities, and shareholders' rights may differ from those that would apply to a company in another jurisdiction. Shareholders' rights under Indian law may not be as extensive as shareholders' rights under the laws of other countries or jurisdictions. Investors may have more difficulty in asserting their rights as shareholder in an Indian company than as shareholder of a corporation in another jurisdiction.
14. Investors may not be able to enforce a judgment of a foreign court against us.
We are a limited liability company incorporated under the laws of India. Substantially all of the directors and executive officers named herein are residents of India and a substantial portion of its assets and such persons are situated in India. As a result, it may not be possible for investors to effect service of process upon us or such persons outside India or enforce judgments obtained against such parties outside India.
Recognition and enforcement of foreign judgment is provided for under Section 13 and Section 44A of the Civil Procedure Code on a statutory basis. Section 13 of the Civil Code provides that foreign judgments shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii)where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or refusal to recognize the law of India in cases to which such law is applicable; (iv) where the proceedings in which the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the judgment sustains a claim founded on a breach of any law then in force in India. Under the Civil Procedure Code, a court in India shall, upon the production of any document purporting to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record.
Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court, within the meaning of that Section, in any country or territory outside India which the Government has by notification declared to be in reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the same nature of amounts payable in respect of taxes, other charges of a like nature or in respect of a fine or other penalties.
The United Kingdom, Singapore and Hong Kong have been declared by the Government to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code. A judgment of a court of a country which is not a reciprocating territory may be enforced in India only by a suit upon the judgment under Section 13 of the Civil Procedure Code, and not by proceedings in execution. The suit must be brought in India within three years from the date of judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian Court would enforce foreign judgment if it viewed the amount of damages awarded as excessive or inconsistent with public policy. A party seeking to enforce a foreign
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judgment in India is required to obtain approval from the RBI under FEMA to repatriate outside India any amount recovered and any such amount may be subject to income tax in accordance with applicable laws.
15. Any downgrading of India’s debt rating by an international rating agency could have a negative impact on the trading price of the Equity Shares.
Any adverse revisions to India's credit ratings for domestic and international debt by international rating agencies may adversely impact our ability to raise additional financing, and the interest rates and other commercial terms at which such additional financing may be available. This could have an adverse effect on our business and future financial performance, its ability to obtain financing for capital expenditures and the trading price of the Equity Shares.
16. Outbreaks of epidemic diseases may adversely affect our operations.
Pandemic disease, caused by a virus such as H5N1 (the “avian flu” virus), or H1N1 (the “swine flu” virus), could have a severe adverse effect on our business. A new and prolonged outbreak of such diseases may have a material adverse effect on our business and financial conditions and results of operations. Although the long-term effect of such diseases cannot currently be predicted, previous occurrences of avian flu and swine flu had an adverse effect on the economies of those countries in which they were most prevalent. In the case of any of such diseases, should the virus mutate and lead to human-to-human transmission of the disease, the consequence for our business could be severe. An outbreak of a communicable disease in India or in the particular region in which we have operations could adversely affect our business and financial conditions and the results of operations.
17. Significant differences exist between Indian GAAP and other accounting principles, such as IFRS, which may be material to investors' assessments of our financial condition.
Our financial statements, including the restated financial statements provided in this Draft Red Herring Prospectus, are prepared in accordance with Indian GAAP. US GAAP and IFRS differ in significant respects from Indian GAAP.
As a result, our financial statements and reported earnings could be different from those which would be reported under IFRS or US GAAP. Such differences may be material. We have not attempted to quantify the impact of US GAAP or IFRS on the financial data included in this Draft Red Herring Prospectus, nor do we provide a reconciliation of our financial statements to those of US GAAP or IFRS. 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. Had the financial statements and other financial information been prepared in accordance with IFRS or US GAAP, the results of operations and financial position may have been materially different. Because differences exist between Indian GAAP and IFRS or US GAAP, the financial information in respect of our Company contained in this Draft Red Herring Prospectus may not be an effective means to compare us with other companies that prepare their financial information in accordance with IFRS or US GAAP. 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. In making an investment decision, investors must rely upon their own examination of our Company, the terms of this Issue and the financial information relating to our Company. Potential investors should consult their own professional advisers for an understanding of these differences between Indian GAAP and IFRS or US GAAP, and how such differences might affect the financial information contained herein.
18. We will be required to prepare our financial statements in accordance with IFRS in accordance with a specified timeline. There can be no assurance that our adoption of IFRS will not adversely affect our reported results of operations or financial condition and any failure to successfully
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adopt IFRS in accordance with the timeline could have an adverse effect on the price of the Equity Shares.
The Institute of Chartered Accountants of India, the accounting body that regulates the accounting firms in India, has announced a road map for the adoption of and convergence with the IFRS, pursuant to which some public companies in India will be required to prepare their annual and interim financial statements under IFRS beginning with the fiscal period commencing April 1, 2011. There is currently a significant lack of clarity on the adoption of and convergence with IFRS and we currently do not have a set of established practices on which to draw on in forming judgments regarding its implementation and application. We have not determined with any degree of certainty the impact that such adoption will have on our financial reporting. There can be no assurance that our financial condition, results of operations, cash flows or changes in shareholders‟ equity will not appear materially worse under IFRS than under Indian GAAP. As we transition to IFRS reporting, we may encounter difficulties in the ongoing process of implementing and enhancing our management information systems. Moreover, there is increasing competition for the small number of IFRS-experienced accounting personnel as more Indian companies begin to prepare IFRS financial statements. There can be no assurance that our adoption of IFRS will not adversely affect our reported results of operations or financial condition and any failure to successfully adopt IFRS in accordance with the aforesaid road map could have an adverse effect on the price of the Equity Shares.
Risks Associated with the Equity Shares
1. An active trading market for the Equity Shares may not develop and the price of the Equity Shares may be volatile.
An active public trading market for the Equity Shares may not develop or, if it develops, may not be maintained after the Issue. Our Company, in consultation with the BRLMs, will determine the Issue Price. The Issue Price may be higher than the trading price of our Equity Shares following this Issue. As a result, investors may not be able to sell their Equity Shares at or above the Issue Price or at the time that they would like to sell. The trading price of the Equity Shares after the Issue may be subject to significant fluctuations in response to factors such as, variations in our results of operations, market conditions specific to the sectors in which we operate, economic conditions of India and volatility of the BSE, NSE and securities markets elsewhere in the world.
2. The price of the Equity Shares may be highly volatile after the Issue.
The price of the Equity Shares on the Indian stock exchanges may fluctuate after this Issue as a result of several factors, including: volatility in the Indian and global securities market; our operations and performance; performance of our competitors and the perception in the market about investments in the retail industry; adverse media reports on us or the Indian retail industry; changes in the estimates of our performance or recommendations by financial analysts; significant developments in India's economic liberalization and deregulation policies; and significant developments in India's fiscal and environmental regulations. There can be no assurance that the prices at which the Equity Shares are initially traded will correspond to the prices at which the Equity Shares will trade in the market subsequently.
3. Economic developments and volatility in securities markets in other countries may cause the price of the Equity Shares to decline
The Indian economy and its securities markets are influenced by economic developments and volatility in securities markets in other countries. Investor‟s reactions to developments in one country may have adverse effects on the market price of securities of companies situated in other countries, including India. For instance, the recent financial crisis in the United States and European countries lead to a global financial and economic crisis that adversely affected the market prices in the securities markets around the world, including Indian securities markets. Negative economic
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developments, such as rising fiscal or trade deficits, or a default on national debt, in other emerging market countries may affect investor confidence and cause increased volatility in Indian securities markets and indirectly affect the Indian economy in general.
The Indian Stock Exchanges have experienced temporary exchange closures, broker defaults, settlement delays and strikes by brokerage firm employees. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.
4. There is no guarantee that the Equity Shares issued pursuant to the Issue will be listed on the Stock Exchanges in a timely manner, or at all.
In accordance with Indian law and practice, permission for listing and trading of the Equity Shares issued pursuant to the Issue will not be granted until after the Equity Shares have been issued and allotted. Approval for listing and trading will require all relevant documents authorizing the issuing of Equity Shares to be submitted. There could be a failure or delay in listing the Equity Shares on either or both the Stock Exchanges. Any failure or delay in obtaining the approval could restrict the shareholders ability to dispose of their Equity Shares.
5. You will not be able to immediately sell any of the Equity Shares you purchase in the 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 NSE and BSE. Thereafter, upon receipt of final approval from the NSE and the BSE, trading in the Equity 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. We cannot assure you that the Equity Shares will be credited to investors‟ demat accounts, or that trading in the Equity Shares will commence, within the time periods specified above. Any failure or delay in obtaining the approval may restrict your ability to dispose of your Equity Shares as allotted.
6. The requirements of being a listed company may strain our resources.
We are not a listed company and have not been subjected to the increased scrutiny of our affairs by shareholders, regulators and the public at large that is associated with being a listed company. As a listed company, we will incur significant legal, accounting, corporate governance and other expenses that we did not incur as an unlisted company. We will be subject to the listing agreements with the Stock Exchanges, which require us to file audited annual and unaudited quarterly reports with respect to our business and financial condition. If we experience any delays, we may fail to satisfy our reporting obligations and/or we may not be able to readily determine and accordingly report any changes in our results of operations as timely as other listed companies.
Further, as a listed company we will need to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, including keeping adequate records of daily transactions to support the existence of effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. As a result, management‟s attention may be diverted from other business concerns, which could adversely affect our business, prospects, results of operations and financial condition and the price of our Equity Shares. In addition, we may need to hire additional legal and accounting staff with appropriate listed company
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experience and technical accounting knowledge, but we cannot assure you that we will be able to do so in a timely manner.
7. Future issuances or sales of the Equity Shares by any existing shareholders could significantly affect the trading price of the Equity Shares.
The future issuances of Equity Shares by us or the disposal of Equity Shares by any of the major shareholders or the perception that such issuance or sales may occur may significantly affect the trading price of the Equity Shares. There can be no assurance that we will not issue further Equity Shares or that the shareholders will not dispose of, pledge or otherwise encumber their Equity Shares.
8. A third party could be prevented from acquiring control of us because of anti-takeover provisions under Indian law.
There are provisions in Indian law that may delay, deter or prevent a future takeover or change in control of the Company, even if a change in control would result in the purchase of your Equity Shares at a premium to the market price or would otherwise be beneficial to you. These provisions may discourage or prevent certain types of transactions involving actual or threatened change in control of us. Under the takeover regulations an acquirer has been defined as any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights or control over a company, whether individually or acting in concert with others. Although these provisions have been formulated to ensure that interests of investors/shareholders are protected, these provisions may also discourage a third party from attempting to take control of the Company. Consequently, even if a potential takeover of the Company would result in the purchase of the Equity Shares at a premium to their market price or would otherwise be beneficial to its stakeholders, it is possible that such a takeover would not be attempted or consummated because of Indian takeover regulations.
9. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect a shareholder's ability to sell, or the price at which it can sell, Equity Shares at a particular point in time.
Subsequent to listing, our Company will be subject to a daily circuit breaker imposed on listed companies by all stock exchanges in India which does not allow transactions beyond certain volatility in the price of the Equity Shares. This circuit breaker operates independently of the index- based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on our Company‟s circuit breaker is set by the stock exchanges based on the historical volatility in the price and trading volume of the Equity Shares. The stock exchanges are not required to inform our Company of the percentage limit of the circuit breaker from time to time, and may change it without its knowledge. This circuit breaker would effectively limit the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, there can be no assurance regarding the ability of shareholders to sell the Equity Shares or the price at which shareholders may be able to sell their Equity Shares.
10. You may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares.
Sale of Equity Shares by any holder may give rise to tax liability in India, as discussed in the section titled Statement of Tax Benefits on page 41.
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Prominent Notes
1. The Investors may contact any of the BRLMs who have submitted the due diligence certificate to SEBI, for any complaint pertaining to the Issue.
2. Our net worth is ` 1,954.69 million as at March 31, 2010 and ` 2,499.43 million as at September 30, 2010, as per our Restated Financial Statements under Indian GAAP in "Financial Statements" on page 113.
3. The average cost of acquisition of our Company‟s Equity Shares by the Promoter is ` 10 per Equity Share. The average cost of acquisition of Equity Shares by the Promoter has been calculated by taking the average of the amount paid by them to acquire the Equity Shares issued by us.
4. The net asset value/book value per Equity Share is ` 39.09 as at March 31, 2010 and ` 49.99 as at September 30, 2010, as per our Restated Financial Statements under Indian GAAP in the "Financial Statements" on page 113.
5. The details of the transactions entered into by the Company with its Group Entities or its Subsidiary, the nature of such transactions as well as the value of the same has been disclosed in Annexure XIV to the Restated Financial Statements on page 113. The following table lists the nature and value of such transactions as per our Restated Financial Statements for the year ended March 31, 2010 and for the six month period ended September 30, 2010:
Disclosures of significant transactions with related parties (Rs in millions) Particulars Entity For the year ended 31 March 2010 From 1 April 2010 to 30 September 2010
Sale of goods Joy Alukkas Jewellery LLC, Dubai 568.05 188.40 Joy Alukkas Centre LLC, Sharjah 85.71 28.23 Alukkas Ltd. London - 0.29
Managerial Alukkas Varghese Joy remuneration 12.00 6.00 Joseph Christo 0.17 0.34
Rent paid Alukkas Varghese Joy 0.15 0.08 Cochin Smart City Properties Private Ltd 0.12 0.06
Sale / (Purchase) of Joyal Ornaments and Trades Investments Private Ltd., India - (0.10)
Rental deposits Cochin Smart City Properties placed Private Ltd - 10.00
Advances recovered Fusion Technosoft Private Limited 2.40 -
Unsecured loans Alukkas Varghese Joy received 15.15 60.00 Jolly Joy 30.00 -
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Unsecured loans Alukkas Varghese Joy repaid 46.24 87.12 Jolly Joy - 30.00
Notes 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, 2006.
Details of related parties outstanding balances (Rs in millions ) Particulars Entity As at 31 March 2010 As at 30 Septem ber 2010 Sundry debtors Joy Alukkas Jewellery 240.18 LLC, Dubai 181.42 Joy Alukkas Centre LLC, 29.37 19.62 Sharjah Alukkas Ltd., London - 0.28
Sundry creditors Cochin Smart City 0.03 0.01 Properties Pvt Ltd
Rental deposits Cochin Smart City 35.00 Properties Private Ltd 25.00
Investment in subsidiary Joyal Ornaments and - 0.10 Trades Private Ltd., India
Loans outstanding Alukkas Varghese Joy - 27.12 Jolly Joy - 30.00
Managerial Alukkas Varghese Joy - 0.11 remuneration payable Joseph Christo 0.04
Note 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. Note 2: Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, 2006.
6. Our Company has changed its name from Joy Alukkas Traders (India) Private Limited to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, 2009. Our Company was converted into a public limited company on December 9, 2010 with the
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name Joyalukkas India Limited and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC.
7. For changes in the objects clause of the Memorandum of Association, see the section titled History and Corporate Structure on page 87.
8. See the sections titled "Related Party Transactions" and "Group Entities" on pages 150 and 104, respectively, for details of transactions by the Issuer with Group Entities or Subsidiary during the last year, the nature of transactions and the cumulative value of transactions.
9. There are no financing arrangements whereby the Promoter Group, our Directors or their relatives have financed the purchase by any other person of securities of the Issuer other than in the normal course of the business of the financing entity during the period of six months immediately preceding the date of filing this Draft Red Herring Prospectus.
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SECTION III – INTRODUCTION
SUMMARY OF INDUSTRY
This section summarizes the “Industry Overview” on page 54, which in turn summarizes or quotes information set forth in the “Indian Gems and Jewellery Industry” dated June 2010 (“CARE Report”), prepared by CARE Research, a division of Credit Analysis & Research Limited ("CARE Research”), “India Gold Report – India: Heart of Gold” and “Gold Demand Trends” prepared by the World Gold Council (“WGC Reports”) and “Unlocking the Potential of India‟s Gems & Jewellery Sector, FICCI and Technopak (“FICCI Technopak Report”). We have not commissioned any reports for purposes of this Draft Red Herring Prospectus. Except for the CARE Report, the WGC Reports and the FICCI Technopak Report, market and industry related data used in this Draft Red Herring Prospectus has been obtained or derived from the websites of and publicly available documents from various industry sources. Neither we nor any other person connected with the Issue has independently verified the information provided in this chapter. The CARE Report, the WGC Reports, FICCI Technopak Report and other 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 and accordingly, investment decisions should not be based on such information.
The Indian Economy
The Indian economy is one of the largest economies in the world with a GDP at current prices in Fiscal 2010 estimated at ` 57.91 trillion (approximately US$1.3 trillion) (Source: Ministry of Statistics and Programme Implementation). It is one of the fastest growing economies in the world, with a real GDP growth rate of 5.7% for calendar year 2009 and a projected 9.7% growth rate for calendar year 2010 (Source: International Monetary Fund, World Economic Outlook, October 2010 Update).
Per capita GDP at factor cost (at constant prices) in India has grown from around ` 12,031.72 billion for the year 1991 at the time of liberalisation to an estimated ` 41,039.70 billion for the year 2010 (Source: International Monetary Fund, World Economic Outlook Database, April 2010). During the first quarter of Fiscal 2011, India‟s GDP grew by 8.8%, compared with a growth rate of 6.0% during the first quarter of Fiscal 2010. (Source: Ministry of Statistics and programme Implementation, Press Note Q1 2010-2011)
The IMF believes that four principal factors have supported Asia‟s recovery: first, the rapid normalization of trade, following the financial dislocation in late 2008, benefited Asia‟s export-driven economies; second, the bottoming out of the inventory cycle, both domestically and in major trading partners such as the United States, is boosting industrial production and exports; third, a resumption of capital inflows into the region has created abundant liquidity in many economies; and fourth, domestic demand has been resilient, owing to strong public and private companies in many of the region‟s economies. The IMF believes that, in both China and India, particularly, strong domestic demand will support the recovery. In India, the growth in real GDP will be supported by rising private demand, with consumption strengthening as a result of improvements in the labor market, and a boost to investment brought about by strong profitability, rising business confidence and favorable financing conditions. (Source: IMF World Economic Outlook 2010)
Indian Gems and Jewellery Industry
Precious metals and gemstones have been an integral part of the Indian civilisation throughout its recorded history. Gems and jewellery has been consumed by Indians for centuries for both their aesthetic as well as investment value. India has the distinction of being the first country to introduce diamonds to the world. The country was also the first to mine, cut, polish and trade in diamonds. (Source: CARE Report)
The Indian gems and jewellery industry can be classified into various sub segments for diamonds, coloured stones, gold and silver jewellery, pearls, and others. However, the two major industry segments in India are gold jewellery and diamonds. India dominates the diamond processing trade with 11 out of 12 diamonds being cut and polished in India (around 80% in terms of carats and around 55% in terms of volume). India
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also dominates gold and silver consumption globally with consumption of approximately 700 tonnes (gold) per year. As a major foreign exchange earner, the industry also provides employment to approximately 1.5 million people directly and indirectly. (Source: CARE Report)
The Indian gems and jewellery industry is one of the world‟s most competitive markets due to the low cost of production and highly skilled labour. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian Gems and Jewellery industry - consisting of the domestic and the export market has the potential to grow from the current US$45 billion to US$100 billion by 2015.
As per the FICCI Technopak Report India‟s current dominant position lies in low value processed raw materials, as depicted on the Gems and Jewellery Value Addition Ladder below:
(Source: FICCI Technopak Report)
Being on this position also shows that India has a great opportunity to move up and be present across all the points in the value addition chain. Doing so can generate the next wave of growth and profitability as India consolidates its position in low-value gem processing and captures a greater share of high-value gem processing and Jewellery making. This move is also important as other low cost countries like China are striving hard to wrest share from India in its current areas of strength. (Source: FICCI Technopak Report)
The domestic market of gems and jewellery is estimated to be in the US$ 18-20 billion range. Given the fragmented nature of the industry it is difficult to put a finger on the exact size. The industry is expected to grow at around 13% annually and at this rate it could reach US$ 35-40 billion by 2015. Currently the domestic gems and jewellery market is fragmented across the value chain. There are more than 300,000 players across the gems and jewellery sector, with majority of them being small unorganised players who are operating on wafer thin margins. Organised retail of jewellery thus presents a significant opportunity to create additional value through higher margins, which would be possible through differentiation and branding. With the onset of organised retail in the last decade, lots of new players have entered the space. Currently modern retail players in jewellery space have only 5%-7% share of the total jewellery market, but this number would increase considerably in the near future. (Source: FICCI Technopak Report)
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(Source: FICCI Technopak Report)
The industry is characterised by a significantly large unorganised sector, labour-intensive operations, high working capital & raw material intensiveness, gold price volatility and export orientation. The demand for gold and diamond jewellery is driven by festivals, weddings and gifts, the increasing affluence of the middle class population and the increase in per capita on luxury items. (Source: CARE Report)
Though India plays a dominant role in the gems and jewellery industry in terms of processing and consumption, India‟s role in mining gold and diamonds is amongst the lowest in the world. Gold is imported from countries like Switzerland, South Africa, Australia and the United Arab Emirates, and rough diamonds are imported from Belgium, the United Kingdom, Israel and the United Arab Emirates. There has been an impact on the demand for gold due to the record high price of gold in the last couple of years, but consumers have continued to demand the precious metal and there is an increased investment-related demand for gold. The key drivers for growth in the industry are increasing disposable income, conscious marketing efforts, rising population with the urge to spend on jewellery as a fashion accessory.
The following outlines the changing trends in the Indian retail jewellery market:
Traditional Practice Emerging Trend Gold jewellery consumption emanates from traditional It is regarded as a fashion accessory by the growing and investment-related demand. young population. Demand peaks during weddings and festival seasons. They still remain the main demand drivers but its use for regular wearing and gifting has evened out the demand throughout the year. Consumption of pure gold – s preferred 22-carat. Lower caratage & light-weight jewellery preferred. Trend Traditional & ethnic designs preferred. is more towards fashionable and contemporary designs Purchase from neighbourhood jewellers dominated. Growing preference for brands, retail stores & e-retailing. Hence the industry lacked transparency Introduction of hallmarking & certifications. Pre-dominance of gold (yellow)-based jewellery. Acceptance of white gold, platinum and diamond-studded jewellery. Even imitation jewellery is gaining acceptance. Jewellery largely sold on prevailing gold price, per gram, Branded players sell on a fixed-price basis. plus labour charges. (Source: CARE Report)
3
SUMMARY OF BUSINESS
The Company‟s ability to successfully implement its business strategy growth and exopansion plans may be affected by various factors. The Company‟s business overview, strengths and strategies must be read along with the risk factors provided in the section entitled “Risk Factors” on page x.
Overview
We are one of the leading south India based jewellery companies with focus on Large Format Stores. Our jewellery business consists of the sale of jewellery made of gold, diamond and other precious stones, platinum and silver. We are also engaged in the business of selling textiles, apparels and accessories through our Wedding Centres in Kerala. We offer a wide range of products across various price points and cater to customers across all market segments. In Fiscal 2008, 2009 and 2010, we sold 7,154.35 kg, 8,430.05 kg and 8,807.46 kg of Gold, respectively. In Fiscal 2008, 2009 and 2010, our total income from sale of Gold was ` 7,500.64 million, ` 11,248.35 million and ` 14,468.25 million, respectively, representing a CAGR of 38.89% over the aforesaid period.
We conduct our jewellery retail business under the brand name “joyalukkas”. We started retailing jewellery in India in the year 2002 with the launch of our first retail store at Kottayam in Kerala.
The following table depicts the details of our jewellery, and textiles, apparels and accessories business operations as of and for Fiscal 2008, 2009, 2010 and as of and for the six month period ended September 30, 2010:
Sr. No. Particulars Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, 2010 1. Number of stores 13 15 20 21 2. Floor area (sq. ft.) Jewellery 185,713 200,893 235,438 261,752 Textiles, Apparels and 104,617 104,617 104,617 104,617 Accessories* 3. Gold Sales (in kg) 7,154.35 8,430.05 8,807.46 5,223.05 4. Revenue (` in million) Jewellery 8,345.53 12,843.45 16,730.07 11,765.13 Textiles, Apparels and 1,280.90 1,428.29 1,490.52 779.49 Accessories *As per the certificate obtained from Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai 400 601.
As of December 31, 2010 we had 22 retail stores, of which 10 are Large Format Stores, each having a floor area of 12,000 sq. ft. or more. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area of 12,000 sq. ft. or more. For further details, see Objects of the Issue on page 31.
Our Premier Stores are the three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft.
We sell our textiles, apparels and accessories through our four Wedding Centres situated in Kerala (Angamaly, Thiruvalla, Kollam and Ernakulam) having an aggregate floor area of 157,593 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, textiles, apparels and accessories for weddings and other festive occasions in the same store. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. Further, our Wedding Centres cater to the textile and apparel requirements of an entire family, with their wide collection of men‟s, women‟s and children‟s apparel.
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As of March 31, 2010 and September 30, 2010, we maintained an aggregate inventory of 2,222.74 kg and 2,385.47 kg of Gold, respectively. In addition we maintained an inventory of jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs.
The Joyalukkas Group was established in the year 1988 by our Promoter, Alukkas Varghese Joy and commenced operations in the United Arab Emirates in jewellery retail business. Our Promoter has over 22 years of experience in the jewellery retail business. We have built on his experience and reputation to create strong brand equity and a wide customer base.
We received the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We had also received the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai. We also received the first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala, the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala. We were recognized with the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai, the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon, and the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & GoldSouk. We also received an award in Kerala adfest, 2007 instituted by Advertising Industries Media and the award for Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala.
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department.
In Fiscal 2008, 2009 and 2010, our PAT was ` 167.24 million, ` 496.08 million and ` 673.52 million respectively, while in the six months ended September 30, 2010 our PAT was ` 544.74 million. In Fiscal 2008, 2009 and 2010, our EBITDA was ` 563.82 million, ` 1,162.50 million and ` 1,422.25 million respectively.
Our Competitive Strengths
We believe that our primary competitive strengths include the following:
Large Format Stores and Wedding Centres at strategic locations
As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more. Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. As of September 30, 2010, we maintained an aggregate inventory of 690.46 kg of Gold at our three Premier Stores. This is in addition to the jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. Our store in Chennai has a floor area of 57,430 sq. ft. across five floors with 190 employees as of December 31, 2010. Our store in Bangalore has a floor area of 26,314 sq. ft. across five floors with 150 employees as of December 31, 2010. Our store in Coimbatore has a floor area of 12,565 sq. ft. across four floors with 138 employees as of December 31, 2010. Our Premier Stores with an aggregate floor area of 96,309 sq. ft. display a wide range of jewellery products at any given point in time. Our Large Format Stores enhance our efficiency as they require less managerial staff in proportion to the large inventory of jewellery products. We believe that our Large Format Stores provide a luxury retail shopping experience, in addition to the inventory that these retail stores are able to offer, enables us to attract customers to our product offerings.
Of our 22 retail stores, we sell our textile products through four Wedding Centres situated in Kerala with an aggregate floor area of 104,617 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, premium festive clothing and accessories for
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weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of the entire family, with its wide collection of men‟s, ladies‟ and children‟s apparel. We believe that this is an innovative concept, which enables us to cross sell a wide range of our product offerings to our customers.
Experience of our Promoter and a strong management team
Our Promoter, Alukkas Varghese Joy has over 22 years of experience and is well known in the retail jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. The Joyalukkas Group was established in United Arab Emirates in the year 1988 by our Promoter and entered jewellery retailing business in India in the year 2002. The Joyalukkas Group includes 39 retail stores and one textile outlet outside of India, 25 of which are situated in United Arab Emirates, two in Qatar, four in Kuwait, two in Bahrain, five in Oman and one in the United Kingdom. We have leveraged on our Promoter‟s experience, reputation and industry contacts to create strong brand equity in the jewellery sector in India and outside, with a wide customer base. Our Promoter won the NRI Retailer Award of the Year 2007 at the Retail Jeweller Awards 2007.
We also have a dedicated management team, who are responsible for the overall strategic planning and business development of our Company. Our qualified senior management with significant industry experience has been instrumental in the consistent growth in our revenues and operations.
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. We believe that a motivated and dedicated employee base is key to our success in managing our Large Format Stores and allows us to provide a quality luxury shopping experience for our customer base.
Strong track record and established brand equity with robust sales and marketing network
Our prominent presence as a jewellery retailer in south India has been a result of our strong branding, our marketing efforts and a favorable response from our customer base. We have further strengthened our brand portfolio with the launch of internal brands aimed at different customer profiles, various markets and price segments and for various uses and occasions.
We have won several awards, including, the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We have also won the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai; first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala; the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala; the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai; the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon; the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & Gold Souk; the Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala.
Our marketing initiatives also include our customer loyalty programs such as golden rewards program, Business to Business Solutions (“B2B Solutions”), discount sales, easy gold schemes and others. For further details see “Our Business-Marketing” on page 78.
In addition to our sales to a wide range of customers through our retail stores mostly spread throughout south India, our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, advertisements in cinema hall, bus terminals, railway stations and similar displays. Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller ring tones. We believe that effective marketing is an important investment in
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future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive cost-effective manner.
Use of efficient internal processes to leverage our sales
We rely on our internal processes for activities ranging from the procurement of bullion, finished jewellery and textile products, identification of craftsmen and jewellery suppliers, specifications and design, selection of store location, conduct constant market analysis to ascertain market perception, change and competitiveness, inventory management as well as activities like purity testing, hallmarking, bar coding, branding, packaging, store design and management. We believe that our understanding of the jewellery, textile and apparel industry helps us in assessing market opportunities and positioning ourselves accordingly. Our retail operations network are supported by our inventory management system that enables us to move our inventory to and from, and channel our sales through, our various retail stores depending on the relevant festive and other occasions and the demographic nature of our customers. We have evolved and continue to improve our internal processes which drive our business efficiency and profitability.
We believe that our effort to predict market expectations, in-house order projections, customer preferences towards specific stones and jewellery products enables us to undertake effective inventory management, ahead of our delivery schedule. We believe that our internal processes such as an effective Enterprise Resource Planning (“ERP”) system to manage finance and accounting, inventory of gold and other jewellery, internal and external resources, including tangible assets, human resources and financial resources, our internal audit systems, sales and distribution and extensive domain knowledge of our Promoter and Key Managerial Personnel has substantially contributed to the growth of our business operations.
Corporate tie-ups with leading companies as part of our Business to Business program
We maintain corporate tie-ups with certain key corporate clients through our B2B Solutions program for providing loyalty and retention related services. For the customers or clients of our B2B Solutions, we offer discount vouchers or options to earn loyalty points based on various loyalty programs. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners‟ outlets or stores and to redeem such points on purchase of our jewellery or textile or apparel products at our retail outlets. For instance, we have entered into a similar agreement with a leading hotel group, offering its members the option to redeem their gift vouchers against the purchase of jewellery at our retail stores. We also offer certain customized gifting options for our corporate-partners, based on their requirements. Our B2B Solutions aims at enhancing our corporate clientele and in turn a wide range of customers and also result in the creation of strong brand equity and increase our customer foot fall and revenues. We have followed a structured approach for our product development which involves market research, sales analysis, brand development, media campaigns and promotions. We believe that this has helped us forge strong relationships with key corporate customers and gaining increased business through their customers/clients. We believe that our structured approach towards brand development through our B2B Solutions and our execution capabilities has enabled us to create long term relationships with leading corporate clients.
OUR STRATEGY
The key elements of our business strategy are as follows:
Continue to expand our network of Large Format Stores and Wedding Centres
We intend to continue to develop our existing branded jewellery lines and introduce additional sub-brands and product offerings to cater to our customers and price segments in the diamond and platinum jewellery markets through expansion of our retail operations. We intend to capitalize on our significant experience and expertise in developing the branded jewellery market in India. Further we intend to leverage our goodwill associated with our existing brands, to further develop our various sub-brands in target markets and product segments in India. We seek to achieve this through expansion of our retail operations, increased marketing initiatives, innovative promotional campaigns and extensive advertising.
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Our Large Format Stores are typically situated at strategic locations in prominent cities, such as in Chennai, Bangalore and Coimbatore. By September 2013 we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram, each with an estimated floor area of 12,000 sq. ft. or more. Our Large Format Stores in India offer comprehensive product range of jewellery made of gold, diamond and other precious stones, platinum and silver to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery.
Our Wedding Centres are Large Format Stores that house a wide range of jewellery, textiles, apparels and accessories that specially cater to customers looking for wedding related purchases. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, apparel and accessories for weddings and other festive occasions under one roof. In Fiscal 2010 and for the six month period ended September 30, 2010, our total income from sale of textiles, apparel and accessories in our Wedding Centres was ` 1,404.81 million and ` 751.26 million respectively, which constituted 7.70% and 5.98% respectively of our total income.
Further increase our percentage contribution of diamond and platinum jewellery business to our total revenues
The sustained growth of Indian economy coupled with growing employment levels, income levels and availability of credit in India has resulted in greater consumer spending and disposable income. This has boosted the retail business in India and consequently resulted in the growth of retail jewellery business and increasing demand for jewellery made of diamond, platinum and other precious stones. In Fiscal 2009, 2010 and six months ended September 30, 2010, our revenue from the sale of jewellery made of diamond, platinum and other precious stones constituted 10.61%, 11.98% and 13.50% respectively of our total revenue. We intend to continue increasing our diamond and platinum jewellery retailing business and use our ability to provide a wide range of jewellery products of various grades, designs and price segments, our strong branded jewellery lines and our wide retail trade operations to increase our market share in diamond and platinum jewellery in India. We also intend to capitalize on the gradual shift of consumer preferences in India from traditional gold jewellery to jewellery made of diamond, platinum and other precious stones.
Continue to invest in our marketing initiatives and brand building exercise
We intend to continue investing in our marketing initiatives and brand building exercise, including advertising through various media. In Fiscal 2010, and for the six month period ended September 30, 2010, we had expended ` 480.56 million and ` 333.92 million respectively, towards advertising and sales promotions expenses, which constituted 2.64% and 2.66% respectively of our total income. Further we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We believe that effective marketing is important for future revenue growth, to improve our Company‟s brand visibility, to establish relationships with target markets and to sell a great number of our products in a competitive cost- effective manner.
Set up service centres in Bangalore and Chennai
We intend to set up specialized service centres in our Large Format Stores situated in Bangalore and Chennai. These service centres would cater to our wide range of customers by providing free service on our jewellery products. This may also increase the number of repeat customers, establish long term relationships with our repeat customers and increase the sales of a wider range of jewellery products.
Hedging arrangements to mitigate risks associated with gold price fluctuations
We do not completely hedge our exposure to losses arising from gold price variations. We intend to enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales.
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SUMMARY FINANCIAL INFORMATION
SUMMARY STATEMENT OF ASSETS AND LIABILITIES, AS RESTATED (` in million) Particulars As at 30 As at 31 March September 2006 2007 2008 2009 2010 2010 Fixed assets Gross block 478.22 692.26 727.13 781.39 969.49 1,086.35 Less: accumulated depreciation 77.62 154.41 245.68 351.89 451.48 510.55 Net block 400.60 537.85 481.45 429.50 518.01 575.80 Capital work-in-progress including capital advances 93.06 32.16 52.97 22.61 145.18 32.25 Total 493.66 570.01 534.42 452.11 663.19 608.05 Investments - - - - - 0.10 Deferred tax assets, net 1.57 - - 7.31 - 1.70 Current assets, loans and advances Inventories 1,545.63 2,287.65 3,399.67 3,272.06 5,202.06 6,209.73 Sundry debtors 18.71 34.96 49.41 322.76 284.74 231.94 Cash and bank balances 75.62 117.28 314.82 331.48 248.66 139.84 Current assets, loans and advances 191.29 173.61 229.64 229.28 250.57 331.55 Total 1,831.25 2,613.50 3,993.54 4,155.58 5,986.03 6,913.06 Liabilities and provisions Secured loans 1,000.81 1,564.59 1,905.39 1,982.00 2,612.01 2,807.33 Unsecured loans 418.15 304.61 108.80 58.21 57.12 94.74 Current liabilities and provisions 779.66 898.44 1,689.77 1,205.87 2,022.80 2,121.41 Deferred tax liability, net - 10.27 1.16 - 2.60 - Total 2,198.62 2,777.91 3,705.12 3,246.08 4,694.53 5,023.48
Net worth 127.86 405.60 822.84 1,368.92 1,954.69 2,499.43 Net worth represented by Share capital Equity share capital 100.00 200.00 450.00 500.00 500.00 500.00 Reserves and surplus General reserve - - - - 67.82 67.82 Balance in profit and loss account 27.86 205.60 372.84 868.92 1,386.87 1,931.61 Net worth 127.86 405.60 822.84 1,368.92 1,954.69 2,499.43
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SUMMARY STATEMENT OF PROFIT AND LOSS ACCOUNTS, AS RESTATED (` in million) Particulars For the For the year ended 31 March period from 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Income Sales of: Jewellery (Refer Note 3(E) of Annexure IV) 2,610.42 5,574.83 8,345.53 12,843.45 16,730.07 11,765.13 Textiles and accessories - traded 829.50 1,180.91 1,280.90 1,428.29 1,490.52 779.49 Other income 5.06 4.95 11.46 53.23 15.87 7.77 Total 3,444.98 6,760.69 9,637.89 14,324.97 18,236.46 12,552.39
Expenditure Cost of goods sold 2,908.83 5,612.66 8,296.12 12,127.71 15,600.58 10,671.39 Personnel cost 103.55 137.27 169.86 269.76 328.37 239.16 Operating expenses 250.75 508.34 608.09 765.00 885.26 602.15 Finance cost 81.06 135.00 211.49 292.63 268.01 165.07 Depreciation 45.70 79.29 94.63 108.96 102.81 65.99
Total 3,389.89 6,472.56 9,380.19 13,564.06 17,185.03 11,743.76
Profit before tax 55.09 288.13 257.70 760.91 1,051.43 808.63 Less: provision for tax Current tax / minimum alternate tax 23.77 96.72 97.61 271.50 367.96 268.19 Fringe benefit tax 2.36 1.79 1.92 1.77 - - Deferred tax charge / (benefit) (2.16) 11.84 (9.11) (8.47) 9.91 (4.30) Wealth tax 0.01 0.04 0.04 0.03 0.04 - Total provision for tax 23.98 110.39 90.46 264.83 377.91 263.89
Net profit as restated 31.11 177.74 167.24 496.08 673.52 544.74 Add: Balance in profit and loss account (3.25) 27.86 205.60 372.84 868.92 1,386.87 brought forward, as restated Amount available for appropriation 27.86 205.60 372.84 868.92 1,542.44 1,931.61
Appropriations a) Dividend - - - - 75.00 - b) Tax on dividend - - - - 12.75 - c) Bonus shares issued by capitalization of ------profits d) Transfer to general reserve - - - - 67.82 - Balance carried forward to balance sheet, as restated 27.86 205.60 372.84 868.92 1,386.87 1,931.61
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SUMMARY STATEMENT OF CASH FLOWS, AS RESTATED (` in million) Particulars For the For the year ended 31 March period from 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010 Cash flows from operating activities Net profit before tax, as restated 55.09 288.13 257.70 760.91 1,051.43 808.63 Adjustments for: Depreciation 45.70 79.29 94.63 108.96 102.81 65.99 Interest expense 73.30 126.61 189.28 262.47 257.28 144.71 Interest income (0.83) (1.25) (1.01) (4.35) (8.88) (2.04) (Profit) / loss on sale of fixed assets 0.04 2.07 (1.46) 1.40 (1.32) (2.14) Loss on aircraft insurance recovery - - - 4.36 - - Insurance claim received - - - - (8.99) - Mark to market loss on derivative instruments, net - - - 19.88 - - Unrealized foreign exchange loss / (gain) 0.33 0.11 (1.00) (2.43) 4.80 7.04 Operating profit before working capital changes 173.63 494.96 538.14 1,151.20 1,397.13 1,022.19 Decrease / (increase) in inventories (777.75) (742.02) (1,112.01) 127.61 (1,930.00) (1,007.66) Decrease / (increase) in sundry debtors 4.81 (16.53) (13.45) (270.92) 33.02 44.93 Decrease / (increase) in loans and advances and (91.61) 1.32 (26.65) (33.31) (22.74) (100.36) other current assets Increase /(decrease) in current liabilities and 499.61 106.45 826.66 (612.38) 786.53 184.01 provisions Cash generated from / (used in) operations (191.31) (155.82) 212.69 362.20 263.94 143.11 Adjustments for: Income taxes paid (21.46) (41.41) (144.98) (144.51) (436.21) (261.13) Net cash generated from / (used in) operating (212.77) (197.23) 67.71 217.69 (172.27) (118.02) activities [A]
Cash flows from investing activities Purchase of fixed assets (159.15) (158.65) (104.96) (31.97) (308.74) (26.01) Proceeds from sale of fixed assets 0.03 0.93 31.37 21.64 4.16 13.74 Sale / (purchase) of investments, net 7.96 - - - - (0.10) Interest received 0.41 1.50 0.72 3.84 9.40 2.05 Insurance claim received - - - - 8.99 - Net cash used in investing activities [B] (150.75) (156.22) (72.87) (6.49) (286.19) (10.32)
Cash flows from financing activities: Proceeds from issue of share capital - 100.00 250.00 50.00 - - Dividends paid - - - - - (75.00) Dividend distribution tax paid - - - - - (12.75) Secured loans availed , net 389.12 563.78 340.80 56.73 630.01 195.32 Unsecured loans availed / (repaid), net 67.56 (110.93) (195.82) (50.59) (1.09) 38.35 Interest paid (71.73) (129.22) (189.28) (262.47) (257.28) (143.38) Net cash generated from / (used in) financing 384.95 423.63 205.70 (206.33) 371.64 2.54 activities [C]
Net increase / (decrease) in cash and cash equivalents [A+B+C] 21.43 70.18 200.54 4.87 (86.82) (125.80) Cash and cash equivalents at the beginning of the 20.82 42.25 112.43 312.97 317.84 231.02 year / period Cash and cash equivalents at the end of the year 42.25 112.43 312.97 317.84 231.02 105.22 / period Cash and cash equivalents comprise: Cash and bank balances 75.62 117.28 314.82 331.48 248.66 139.84 Restricted deposits - - (0.95) (10.39) (11.34) (30.70) Book overdraft (33.37) (4.85) (0.90) (3.25) (6.30) (3.92) 42.25 112.43 312.97 317.84 231.02 105.22
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THE ISSUE
The following table summarises the Issue details:
Equity Shares offered: Issue by our Company 18,000,000 Equity Shares Of which A) QIB portion1 Not more than 9,000,000 Equity Shares Of Which Available for allocation to Mutual Funds only 450,000 Equity Shares Balance for all QIBs excluding Mutual Funds 8,550,000 Equity Shares B) Non-Institutional Portion2 Not less than 2,700,000 Equity Shares C) Retail Portion2 Not less than 6,300,000 Equity Shares Equity Shares outstanding prior to the Issue 50,034,200 Equity Shares Equity Shares outstanding after the Issue 68,034,200 Equity Shares Use of Issue Proceeds See “Objects of the Issue” on page 31 Allocation to all categories except the Anchor Investor Portion will be made on a proportionate basis. (1) Our Company may allocate up to 30% of the QIB Portion, i.e. 2,700,000 Equity Shares, to Anchor Investors on a discretionary basis in accordance with the SEBI ICDR Regulations. For details see “Issue Procedure” on page 244. (2) Subject to valid Bids being received at or above the Issue Price, under subscription, if any, in any other category would be allowed to be met with spill-over from other categories or a combination of categories, at the discretion of our Company, in consultation with the Book Running Lead Managers and the Designated Stock Exchange.
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GENERAL INFORMATION
Our Company was incorporated as a private limited company under the Companies Act on April 22, 2002 under the name and style of Joy Alukkas Traders (India) Private Limited with its registered and corporate office at 42/1385 A, Kurians Cottage, St. Benedict Road, Ernakulam District, Kochi 682 018, Kerala, India and was allotted the corporate identity number U51398KL2002PTC015372. The initial subscribers to the memorandum of association of the Company were Alukkas Varghese Joy and Jolly Joy. Subsequently, our name was changed to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, 2009. Our Company was converted into a public limited company on November 15, 2010 with the name Joyalukkas India Limited and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC and was allotted a corporate identity number of U51398KL2002PLC015372.
Registered and Corporate Office of our Company
Door No. 40/2096 A&B, Peevees Triton Shanmugham Road Marine Drive Ernakulam District Kochi 682 031 Kerala, India Tel: (91 484) 238 5035 Fax: (91 484) 238 5032 Website: www.joyalukkasindia.com Email: [email protected] Corporate Identity Number: U51398KL2002PLC015372
Address of the Registrar of Companies
Our Company is registered with the Registrar of Companies, Kerala and Lakshadweep at Ernakulam situated at the following address:
The Registrar of Companies Company Law Bhawan BMC Road Thrikkakara Ernakulam District Kochi 682 021, Kerala
Board of Directors of our Company
The Board of Directors comprises the following:
Name and Designation Age (years) DIN Address Alukkas Varghese Joy 54 00313967 Alukkas House Managing Director Kuriachira P.O. Thrissur 680 006 Kerala, India John Paul Joy Alukkas 25 00314046 Alukkas House Non Executive Director Kuriachira P.O. Thrissur 680 006 Kerala, India D. K. Manavalan 69 00021240 Flat No A-231 Non executive director Shriniketan Society Plot I, Sector 7, Dwaraka New Delhi 110075
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Name and Designation Age (years) DIN Address C. J. George 51 00003132 12A, Skyline Elysium Gardens Non Executive Director Stadium Link Road, Kaloor Ernakulam 682 017 Kerala, India K.P. Padmakumar 66 00023176 3F Skyline Topaz, Non Executive Director Kaloor Kadavanthara Road Kaloor, Ernakulam 682 017 Kerala, India
For further details of the Directors, see “Our Management” on page 90.
Company Secretary and Compliance Officer
Varun T. V. is the Company Secretary and Compliance Officer of our Company and his contact details are as follows:
Door No. 40/2096 A&B, Peevees Triton Shanmugham Road Marine Drive Ernakulam District Kochi 682 031 Kerala, India. Tel: (91 484) 238 5035 Fax: (91 484) 238 5032 Email: [email protected]
Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre or post-Issue related problems, including non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account and refund orders.
All grievances relating to the ASBA process may be addressed to the Registrar to the Issue, with a copy to the SCSB, giving full details such as name, address of the applicant, number of Equity Shares applied for, Bid Amount blocked, ASBA account number and the designated branch of the SCSB where the ASBA Form was submitted by the ASBA bidders.
Book Running Lead Managers
Enam Securities Private Limited 801, Dalamal Tower Nariman Point Mumbai 400 021 Maharashtra, India Tel: (91 22) 6638 1800 Fax: (91 22) 2284 6824 Email: [email protected] Investor Grievance Email: [email protected] Website: www.enam.com Contact Person: Anurag Byas SEBI Registration No.: INM000006856
Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar Nariman Point Mumbai 400 021, Maharashtra, India Tel: (91 22) 6631 9890
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Fax: (91 22) 6646 6556 E-mail: [email protected] Investor Grievance Email: [email protected] Website: www.online.citibank.co.in/rhtm/citigroupglobalscreen1.htm Contact Person: Rajiv Jumani SEBI Registration No.: INM000010718
Syndicate Members
[●]
Self Certified Syndicate Banks
The list of banks that have been notified by SEBI to act as SCSB for the ASBA Process are provided on http://www.sebi.gov.in. For details on designated branches of SCSBs collecting the ASBA Bid cum Application Form, please refer the above mentioned SEBI link.
Legal Advisors
Domestic Legal Counsel to the Company Amarchand & Mangaldas & Suresh A. Shroff & Co. 201, Midford House, Midford Garden Off M.G. Road Bangalore 560 001 Karnataka, India Tel: (91 80) 2558 4870 Fax: (91 80) 2558 4266 Domestic Legal Counsel to the BRLMs J. Sagar Associates Vakils House 18, Sprott Road Ballard Estate Mumbai 400 001 Maharashtra, India Tel: (91 22) 4341 8600 Fax: (91 22) 4341 8617 International Legal Counsel to the Company Dorsey & Whitney LLP 250 Park Avenue New York NY 10177-1500 Tel: (212) 415.9252 Fax: (646) 3906575
Registrar to the Issue
Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West) Mumbai 400 078 Maharashtra, India Tel: (91 22) 2596 0320 Fax: (91 22) 2596 0329 Email: [email protected] Website: www.linkintime.co.in Contact Person: Sachin Achar SEBI Registration No: INR000004058
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Bankers to the Issue and Escrow Collection Banks
[●]
Bankers to the Company
Citibank N. A. Union Bank of India 38/1581, Padma Junction Overseas Branch M. G. Road, Ernakulam Union Bank Bhavan 682 035 1st floor, P. B. No. 3683 Tel: (0484) 441 1234 M. G. Road, Ernakulam Fax: (0484) 236 6202 Kochi 682 035 Email: [email protected] Tel: (0484) 228 5217 Fax: (0484) 238 5214 Email: [email protected]
State Bank of Travancore Standard Chartered Bank Commercial Branch 4th floor, 19, Rajaji Salai Malankara Centre Chennai 600 001 M. G. Road, Ernakulam Tel: (044) 2534 9298 Tel: (0484) 235 5939 Fax: (044) 2534 0877 Fax: (0484) 238 0176 Email: [email protected] Email: [email protected]
ING Vysya Bank Limited IDBI Bank Limited No. 185, Anna Salai Specialised Corporate Branch Chennai 600 006 Panampilly Nagar Tel: (044) 2852 0459 P. B. 4253, kochi 682 036 Fax: (044) 2859 3322 Tel: (0484) 231 8889 Email: [email protected] Fax: (0484) 231 9042 Email: [email protected]
Dhanalaxmi Bank Limited Yes Bank Limited Industrial Finance Branch 2nd Floor, Tiecion House M. G. Road, Ernakulam Dr. E. Moses Road Kochi 682 035 Mahalaxmi Tel: (0484) 645 3556 Mumbai 400 011 Fax: (0484) 236 4033 Tel: (022) 6622 9031 Email: [email protected] Fax: (022) 2497 4875 Email: [email protected]
HDFC Bank Limited ICICI Bank Limited 1st Floor, Sudha Building Emgee Square Banerji Road M. G. Road, Ernakulam Kochi 682 018 682 035 Tel: (0484) 236 0470 Tel: (0484) 402 2494 Fax: (0484) 236 0470 Fax: (0484) 403 1279 Email: [email protected] Email: [email protected]
The Royal Bank of Scotland N. V 4th Floor, Sakhar Bhavan Nariman Point Mumbai 400 021 Tel: (022) 2281 9120
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Fax: (022) 2284 6604 Email: [email protected]
Refund Banker
[●]
Statutory Auditors to the Company
B S R & Co. Chartered Accountants Maruthi Info-Tech Centre 11/1 & 12/1, East Wing, II Floor Koramangala, Inner Ring Road Bangalore 560 071, Karnataka, India Tel: (91 80) 3980 6000 Fax: (91 80) 3980 6999 Email: [email protected]
Monitoring Agency
The Monitoring Agency, if required under applicable provisions of the SEBI ICDR Regulations will be appointed prior to the filing of the Prospectus with the RoC.
Inter se allocation of responsibilities among the Book Running Lead Managers
The following table sets forth the inter se allocation of responsibilities for various activities among the Book Running Lead Managers:
Activities Reponsibility Co-ordination Capital structuring with the relative components and formalities such as Enam, Citi Enam composition of debt and equity, type of instruments, etc. Due diligence of the Company‟s operations/ management/ business Enam, Citi Enam plans/ legal etc. Drafting & Design of offer document containing salient features of the Prospectus. The designated Lead Manager shall ensure compliance with stipulated requirements and completion of prescribed formalities with Stock Exchange, Registrar of Companies and SEBI Drafting and approval of statutory advertisements Enam, Citi Enam Drafting and approval of all publicity material other than statutory Enam, Citi Citi advertisement as mentioned in (3) above including corporate advertisement, brochures, etc. Appointment of Ad Agency, Registrar and Bankers to the Issue Enam, Citi Enam Appointment of Printer Ensure availability of adequate number of forms at all the centres Follow-up on distribution of publicity and issue material including form, Prospectus and deciding on the quantum of the issue material Domestic Institutional Marketing Enam, Citi Enam Finalise the list and division of investors for one to one meetings and Finalising domestic QIB roadshow schedule International Institutional Marketing Enam, Citi Citi Finalise the list and division of investors for one to one meetings and Finalising international QIB roadshow schedule
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Activities Reponsibility Co-ordination Domestic Retail marketing Enam, Citi Enam Formulating marketing strategies, preparation of publicity budget Finalize Media & PR strategy Finalizing centers for holding conferences for brokers, etc. Finalize collection centers Domestic marketing to HNI Enam, Citi Citi Preparation of road show presentation, Preparation of FAQs Enam, Citi Citi Co-ordination with stock exchanges for Book Building Software Enam, Citi Citi Finalizing of Pricing Enam, Citi Enam Post-Bidding activities, which shall involve essential follow-up steps, Enam, Citi Citi including follow-up with Bankers to the Issue and Self Certified Syndicate Banks to get quick estimates of collection and advising the Company about the closure of the Issue, based on correct figures, finalisation of the Basis of Allotment or weeding out of multiple applications, listing of instruments, dispatch of certificates or demat credit and refunds and coordination with various agencies connected with the post-Bidding activity, such as Registrar to the Issue, Bankers to the Issue, Self Certified Syndicate Banks, including responsibility for underwriting arrangements, as applicable. The BRLMs shall be responsible for ensuring that these agencies fulfill their functions and discharge this responsibility through suitable agreements with the Company.* * In case of under-subscription in an issue, the lead merchant banker responsible for underwriting arrangements shall be responsible for invoking underwriting obligations and ensuring that the notice for devolvement containing the obligations of the underwriters is issued in terms of these regulations
Even if any of these activities are handled by other intermediaries, the designated BRLMs shall be responsible for ensuring that these agencies fulfil their functions and enable them to discharge this responsibility through suitable agreements with our Company.
Credit Rating
As this is an Issue of Equity Shares, there is no credit rating for this Issue.
IPO Grading
This Issue has been graded by [●] a SEBI registered credit rating agency, as [●], indicating [●] fundamentals. Pursuant to SEBI ICDR Regulations, the rationale/description furnished by the credit rating agency will be updated at the time of filing the Red Herring Prospectus with the RoC.
Trustee
As this is an Issue of Equity Shares, the appointment of a trustee is not required.
Book Building Process
The Book Building Process, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red Herring Prospectus within the Price Band which will be decided by our Company in consultation with the BRLMs and advertised at least two (2) days prior to the Bid/Issue Opening Date. The Issue Price is finalised after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are:
Our Company; The BRLMs; Syndicate Members who are intermediaries registered with SEBI or registered as brokers with
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BSE/NSE and eligible to act as Underwriters; Registrar to the Issue; Escrow Collection Banks; and SCSBs.
This is an Issue for more than 25% of the post Issue Equity Share capital of our Company and is being made pursuant to Rule 19(2)(b)(i) of the SCRR through the 100% Book Building Process wherein upto 50% of the Issue size will be allocated to QIBs on a proportionate basis. Provided that, our Company may, allocate up to 30% of the QIB Portion to Anchor Investors at the Anchor Investor Issue Price on a discretionary basis, out of which at least one-third will be available for allocation to Mutual Funds only. Further, not less than 15% and 35% of the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and Retail Individual Bidders, respectively, subject to valid Bids being received at or above the Issue Price. Under-subscription, if any, in any category, except the QIB Portion, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLMs and the Designated Stock Exchange.
In accordance with the SEBI ICDR Regulations, QIBs bidding in the QIB Portion are not allowed to withdraw their Bid(s) after the Bid Closing Date and are required to pay the Bid Amount upon submission of the Bid. Anchor Investors are not allowed to withdraw their Bids after the Anchor Investor Bidding Date and are required to pay the Bid Amount at the time of submission of the Bid. For further details, see “Issue Structure” on page 241.
Our Company shall comply with regulations issued by SEBI for this Issue. In this regard, our Company has appointed Enam and Citi as the BRLMs to manage the Issue and to procure subscriptions to the Issue.
The process of Book Building under the SEBI ICDR Regulations 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 ` 20 to ` 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 (`) Cumulative Quantity Subscription 500 24 500 16.67% 1,000 23 1,500 50.00% 1,500 22 3,000 100.00% 2,000 21 5,000 166.67% 2,500 20 7,500 250.00%
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., ` 22 in the above example. The Issuer, in consultation with the BRLMs, will finalise the issue price at or below such cut-off price, i.e., at or below ` 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 (For further details see “Issue Procedure - Who Can Bid”) on page 245.
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2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum Application Form or the ASBA Bid cum Application Form, as the case may be.
3. Except for Bids on behalf of the Central or State Government, residents of Sikkim and the officials appointed by the courts, for Bids of all values ensure that you have mentioned your PAN allotted under the I.T. Act in the Bid cum Application Form and the ASBA Bid cum Application Form (see “Issue Procedure – Permanent Account Number or PAN” on page 264).
4. 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 the ASBA Bid cum Application Form.
5. Ensure the correctness of your demographic details (as defined in the “Issue Procedure-Bidders Depository Account Details” on page 259) given in the Bid cum Application Form and the ASBA Bid cum Application Form, with the details recorded with your Depository Participant.
6. Bids by QIBs shall be submitted only to the members of the Syndicate, other than Bids by QIBs who Bid through the ASBA process, who shall submit the Bids to the Designated Branch of the SCSBs.
7. Bids by ASBA Bidders will have to be submitted to the designated branches of the SCSBs. ASBA Bidders should ensure that their bank accounts have adequate credit balance at the time of submission to the SCSB to ensure that the ASBA Bid cum Application Form is not rejected.
Withdrawal of the Issue
Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue anytime after the Bid/Issue Opening Date. In such an event our Company would issue a public notice in the newspapers, in which the pre-Issue advertisements were published, within two days of the Bid/ Issue Closing Date, providing reasons for not proceeding with the Issue. Our Company shall also inform the Stock Exchanges on which the Equity Shares are proposed to be listed of its decision not to proceed with the Issue.
Any further issue of Equity Shares by our Company shall be in compliance with applicable laws.
Bid/ Issue Programme
Bid opens on: [●]* Bid closes on: For QIB Bidders [●] For Retail and Non-Institutional Bidders: [●] * 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. *Our Company may consider closing the Bid/Issue Period for QIB Bidders one day prior to the Bid/Issue Closing Date
Bids and any revision in Bids shall be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard Time, “IST”) during the Bid/ Issue Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form.
On the Bid/ Issue Closing Date, the Bids shall be accepted only between (i) 10.00 a.m. to 3.00 p.m. (IST) and uploaded until 4.00 p.m. (IST) in case of Bids by QIB Bidders and in case of Bids by Non-Institutional Bidders and (iii) 10.00 a.m. to 3.00 p.m. (IST) and uploaded until 5.00 p.m. (IST) or such extended time as permitted by the BSE and the NSE, in case of Bids by Retail Individual Bidders. In the event the Company decides to close the Bidding Period for QIBs one day prior to the Bid/Issue Closing Date, then bids would be uploaded till 5.00 p.m. on the Bid closing day for QIB.
It is clarified that the Bids not uploaded in the book would be rejected. Bids by the Bidders applying
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through ASBA process shall be uploaded by the SCSB in the electronic system to be provided by the Stock Exchanges.
Due to limitation of time available for uploading the Bids on the Bid/ Issue Closing Date, the Bidders are advised to submit their Bids one day prior to the Bid/ Issue Closing Date and, in any case, no later than 3.00 p.m. (IST) on the Bid/ Issue Closing Date. Bidders are cautioned that in the event a large number of Bids are received on the Bid/ Issue Closing Date, as is typically experienced in public offerings, some Bids may not get uploaded due to lack of sufficient time. Such Bids that cannot be uploaded will not be considered for allocation under the Issue. Bids will be accepted only on Working Days.
On the Bid/ Issue Closing Date, extension of time will be granted by the Stock Exchanges only for uploading the Bids received by Retail Individual Bidders after taking into account the total number of Bids received up to the closure of time period for acceptance of Bid cum Application Forms as stated herein and reported by the BRLMs to the Stock Exchange within half an hour of such closure.
Our Company, in consultation with the BRLMs, reserves the right to revise the Price Band during the Bid/ Issue Period, provided that the Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the face value of the Equity Shares. The revision in Price Band shall not exceed 20% on the either side i.e. the floor price can move up or down to the extent of 20% of the floor price disclosed at least two Working Days prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly.
In case of revision of the Price Band, the Bid/ Issue Period will be extended for at least three additional Working Days after revision of Price Band subject to the Bid/ Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/ Issue Period, if applicable, will be widely disseminated by notification to the Stock Exchanges, by issuing a press release and also by indicating the changes on the websites of the BRLMs and at the terminals of the Syndicate.
Underwriting Agreement
After the determination of the Issue Price and allocation of the Equity Shares, but prior to the filing of the Prospectus with the RoC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be offered through the Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfil their underwriting obligations. The underwriting shall be to the extent of the Bids uploaded by the Underwriters including through its Syndicate/Sub Syndicate. The Underwriting Agreement is dated []. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and are subject to certain conditions specified therein.
The Underwriters have indicated its intention to underwrite the following number of Equity Shares:
This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the RoC.
Name and Address of the Underwriter Indicated Number of Equity Shares to be Amount Underwritten Underwritten (` in Millions) Enam Securities Private Limited [●] [●] 801, Dalamal Tower Nariman Point Mumbai 400 021 Maharashtra, India Citigroup Global Markets India Private Limited 12th Floor, Bakhtawar [●] [●] Nariman Point Mumbai 400 021
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Name and Address of the Underwriter Indicated Number of Equity Shares to be Amount Underwritten Underwritten (` in Millions) Maharashtra, India
The abovementioned is indicative underwriting and this would be finalised after the pricing and actual allocation.
In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the resources of the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. The Underwriters are registered with the SEBI or have been granted a Certificate of Registration by the SEBI to act as an underwriter in accordance with the SEBI (Underwriters) Regulations 1993 or the SEBI (Stock-Brokers and Sub-Brokers) Regulations 1992 or the SEBI (Merchant Bankers) Regulations 1992 and such certificate is valid and in existence and the Underwriters are hence entitled to carry on business as underwriters or registered as brokers with the Stock Exchange(s). Our Board of Directors, at its meeting held on [●] has accepted and entered into the Underwriting Agreement with the Underwriters.
Allocation among the Underwriters may not necessarily be in proportion to their underwriting commitments set forth in the table above. Notwithstanding the above table, the Underwriters shall be responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them. In the event of any default in payment, the respective Underwriter, in addition to other obligations defined in the Underwriting Agreement, will also be required to procure subscriptions for/subscribe to Equity Shares to the extent of the defaulted amount.
The underwriting arrangements mentioned above shall not apply to the subscriptions by the ASBA Bidders in this Issue.
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CAPITAL STRUCTURE
Our Equity Share capital before the Issue and after giving effect to the Issue, as at the date of this Draft Red Herring Prospectus, is set forth below: (in `million) Aggregate Aggregate Value nominal value at Issue Price A) Authorised Share Capital 100,000,000 Equity Shares 1,000.00 B) Issued, subscribed and paid up share capital before the Issue 50,034,200 Equity Shares 500.34 C) Present Issue in terms of this Draft Red Herring Prospectus 18,000,000 Equity Shares fully paid up 180.00 [●] D) Equity Capital after the Issue 68,034,200 Equity Shares fully paid up 680.34 E) Share premium account Before the Issue Nil After the Issue [●]
This Issue has been authorised by a resolution of our Board of Directors dated November 15, 2010 and a resolution of our shareholders in their Extraordinary General Meeting dated November 15, 2010 and a resolution of our Board dated January 3, 2011.
Changes in the Authorised Share Capital of our Company since incorporation
Sl. Date of Shareholder Changes in the Authorised Share Capital No. Meeting 1. September 20, 2002 The initial authorized share capital of our Company of ` 1.00 million divided into 2,000 equity shares of ` 500 was increased to ` 50.00 million divided into 100,000 equity shares of ` 500 each. 2. March 30, 2005 The authorized share capital of our Company was increased from ` 50.00 million divided into 100,000 equity shares of ` 500 each to ` 100.00 million divided into 200,000 equity shares of ` 500 each. 3. January 29, 2007 The authorized share capital of our Company was increased from ` 100.00 million divided into 200,000 equity shares of ` 500 each to ` 250.00 million divided into 500,000 equity shares of ` 500 each. 4. September 28, 2007 Each equity share of ` 500 was sub-divided into 50 Equity Shares of ` 10 each 5. October 30, 2007 The authorized share capital of our Company was increased from ` 250.00 million divided into 25 million Equity Shares of ` 10 each to ` 650.00 million divided into 65 million Equity Shares of ` 10 each. 6. November 15, 2010 The authorized share capital of our Company was increased from ` 650.00 million divided into 65 million Equity Shares of ` 10 each to ` 1,000 million into 100 million Equity Shares of ` 10 each
For details in change of the authorised capital of our Company, see “History and Corporate Structure” on page 87.
Notes to Capital Structure:
1. Share capital history of our Company
(a) Equity share capital history
Date of Cumulative allotment Cumulative Issued Cumulative of the No. of Face Issue Nature number of Capital Share Equity Equity Value Price of Reasons for Equity (` in Premium Shares Shares (`) (`) Payment allotment Shares million) (`)
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Date of Cumulative allotment Cumulative Issued Cumulative of the No. of Face Issue Nature number of Capital Share Equity Equity Value Price of Reasons for Equity (` in Premium Shares Shares (`) (`) Payment allotment Shares million) (`) April 22, Subscribers to 2002 200 500 500 Cash Memorandum(1) 200 0.10 Nil September Preferential 25, 2002 99,800 500 500 Cash Allotment(2) 100,000 50.00 Nil March 30, Further 2005 100,000 500 500 Cash Allotment(3) 200,000 100.00 Nil March 1, Further 2007 200,000 500 500 Cash Allotment(4) 400,000 200.00 Nil September Subdivision of 28, 2007 - 10 - - share capital(5) 20,000,000 200.00 Nil November Further 5, 2007 25,000,000 10 10 Cash Allotment(6) 45,000,000 450.00 Nil February Further 19, 2009 5,000,000 10 10 Cash Allotment(7) 50,000,000 500.00 Nil November Preferential 8, 2010 20,900 10 10 Cash Allotment(8) 50,020,900 500.21 Nil November Preferential 12, 2010 13,300 10 10 Cash Allotment(9) 50,034,200 500.34 Nil (1) Allotment of 100 Equity Shares to Alukkas Varghese Joy and 100 Equity Shares to Jolly Joy. (2) Allotment of 89,900 Equity Shares to Alukkas Varghese Joy and 9,900 Equity Shares to Jolly Joy. (3) Allotment of 90,000 Equity Shares to Alukkas Varghese Joy and 10,000 Equity Shares to Jolly Joy. (4) Allotment of 180,000 Equity Shares to Alukkas Varghese Joy and 20,000 Equity Shares to Jolly Joy. (5) Sub-division of each Equity Share of ` 500 into 50 Equity Shares of ` 10 each. (6) Allotment of 22,500,000 Equity Shares to Alukkas Varghese Joy and 2,500,000 Equity Shares to Jolly Joy. (7) Allotment of 4,500,000 Equity Shares to Alukkas Varghese Joy and 500,000 Equity Shares to Jolly Joy. (8) Allotment of 20,900 Equity Shares to 49 employees of the Company. (9) Allotment of 13,300 Equity Shares to 49 employees of the Company.
(b) Equity Shares allotted for consideration other than cash
There has been no allotment of Equity Shares for consideration other than cash.
2. Promoter’s Contribution and Lock-in
(a) History of the Share Capital held by our Promoter
Face Nature of Date of Allotment / No. of Equity Value Issue/Acquisiti Considerati Transfer Shares (`) on Price (`) on Nature of Transaction Alukkas Varghese Joy April 22, 2002 100 500 500 Cash Subscriber to Memorandum September 25, 2002 89,900 500 500 Cash Preferential allotment March 30, 2005 90,000 500 500 Cash Further allotment March 1, 2007 180,000 500 500 Cash Further allotment Pursuant to resolution dated September 28, 2007 passed by the shareholders of our Company at an Annual General Meeting, the equity shares of face value of ` 500 each of our Company were subdivided into the Equity Shares of ` 10 each. Hence, after the sub division, our Promoter held 18,000,000 Equity Shares. November 5, 2007 22,500,000 10 10 Cash Further allotment February 19, 2009 4,500,000 10 10 Cash Further allotment August 7, 2010 (10,300)(1) 10 10 Cash Transfer November 12, 2010 (9,000)(2) 10 10 Cash Transfer TOTAL 44,980,700 (1) Transfer of 10,000 Equity Shares to John Paul Joy Alukkas and 100 shares each to P. P. Jose, P. D. Jose and P. D Francis (2) Transfer of 1,000 Equity Shares each to Elsy Antony, Mary Jacob, Tresa Mathew, Rosily Joseph, Lucy Tomy, Jacintha Johnson, Clara Johnson, Reena Joby and Pauly Antony
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(b) Details of Promoter‟s contribution locked in for three years
The Equity Shares, which are being locked-in are not ineligible for computation of minimum promoter‟s contribution under Regulation 33 of the SEBI ICDR Regulations.
Pursuant to Regulations 32 and 36 of the SEBI ICDR Regulations, an aggregate of 20% of the fully diluted post-Issue capital of our Company held by the Promoter shall be locked in for a period of three years from the date of Allotment of Equity Shares in the Issue and the Promoter‟s shareholding in excess of 20% shall be locked-in for a period of one year.
The details of the three year lock in mentioned above are as follows: Name Date of Nature of Nature of No. of Face Issue Percenta Date allotment/acq allotment considerati shares value Price/Purch ge of upto uisition and on locked in* (`) ase Price (`) post- which when made Issue specified fully paid-up paid-up securities capital are subject to lock- in Alukkas November 5, Further Cash 13,606,840 10 10 20.00 [●] Varghese 2007 allotment Joy TOTAL 13,606,840 20.00 * Commencing from the date of the Allotment of the Equity shares in the Issue.
(a) The Promoter contribution has been brought in to the extent of not less than the specified minimum lot and from the persons defined as promoters under the SEBI ICDR Regulations.
(b) Our Company has obtained specific written consent from our Promoter for inclusion of the Equity Shares held by him in the minimum Promoter‟s contribution subject to lock-in. Further, our Promoter has given undertakings to the effect that he shall not sell/transfer/dispose of in any manner, Equity Shares forming part of the minimum Promoter‟s contribution from the date of filing the Draft Red Herring Prospectus till the date of commencement of lock-in in accordance with SEBI ICDR Regulations.
(c) Any Equity Shares allotted to Anchor Investors in the Anchor Investor Portion shall be locked-in for a period of 30 days from the date of Allotment of Equity Shares in the Issue.
(d) In terms of Regulation 37 of the SEBI ICDR Regulations, our entire pre-Issue Equity Share capital held by persons other than the Promoter consisting of 5,053,500 Equity Shares will be locked-in for a period of one year from the date of Allotment in this Issue except for the Promoter‟s contribution as specified in clause 2(b) above shall be locked in for a period of three years from the date of Allotment in this Issue.
(e) In terms of Regulation 40 of the SEBI ICDR Regulations:
the Equity Shares held by persons other than the Promoter prior to the Issue may be transferred to any other person holding the Equity Shares of our Company which are locked-in as per Regulation 37 of the SEBI ICDR Regulations, 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.
the Equity Shares held by the Promoter may be transferred among the Promoter Group or to a new promoter or persons in control of our Company which are locked-in as per Regulation 36 of the SEBI ICDR Regulations, subject to continuation of the lock-in in
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the hands of the transferees for the remaining period and compliance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, as applicable.
(f) Locked-in Equity Shares of our Company held by the Promoter can be pledged with scheduled commercial banks or public 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. Further, the Equity Shares constituting 20% of the fully diluted post-Issue capital of our Company held by the Promoter that is locked in for a period of three years from the date of Allotment of Equity Shares in the Issue, may be pledged only if, in addition to complying with the aforesaid conditions, the loan has been granted by the banks or financial institutions for the purpose of financing one or more objects of the Issue.
3. The shareholding pattern of our Company
The table below presents the shareholding pattern of our Company before the proposed Issue and as adjusted for the Issue:
Cate Category of shareholder Pre - Issue Post – Issue gory Number of Equity % Number of Equity % code Shares Shares
A. Shareholding of Promoter and Promoter Group 1. Indian a. Individuals/ Hindu Undivided Family Promoter Alukkas Varghese Joy 44,980,700 89.90% [●] [●] Promoter Group - - - - Elsy Antony 1,000 Negligible Mary Jacob 1,000 Negligible Tresa Mathew 1,000 Negligible Rosily Joseph 1,000 Negligible Lucy Tomy 1,000 Negligible Jacintha Johnson 1,000 Negligible Clara Johnson 1,000 Negligible Reena Joby 1,000 Negligible Pauly Antony 1,000 Negligible b. Central Government/ State [●] [●] Government(s) - - c. Bodies Corporate - - [●] [●] Promoters - - [●] [●] Promoter Group - - [●] [●] d. Financial Institutions/ Banks - - [●] [●] e. Any Other (specify) - - [●] [●] Sub-Total (A)(1) 44,989,700 89.92% [●] [●] 2. Foreign a. Individuals (Non-Resident - - Individuals/ Foreign Individuals) - - Jolly Joy 4,999,500 9.99% John Paul Joy Alukkas 10,000 0.02% Jolly Joy/ Mary Jeny Joy 500 Negligible b. Bodies Corporate - - - - c. Institutions - - - - d. Any Other (specify) - - - - Sub-Total (A)(2) 5,010,000 10.01 - - Total Shareholding of Promoter 49,999,700 99.93% [●] [●]
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Cate Category of shareholder Pre - Issue Post – Issue gory Number of Equity % Number of Equity % code Shares Shares
and Promoter Group (A)= (A)(1)+(A)(2) B. Public shareholding 1. Institutions a. Mutual Funds/ UTI - - [●] [●] b. Financial Institutions/ Banks - - [●] [●] c. Central Government/ State - - [●] [●] Government(s) d. Venture Capital Funds - - [●] [●] e. Insurance Companies - - [●] [●] f. Foreign Institutional Investors - - [●] [●] g. Foreign Venture Capital Investors - - [●] [●] h. Any Other (specify) Sub-Total (B)(1) - - [●] [●]
2. Non-institutions a. Bodies Corporate - - [●] [●] Sub-total (a) - - [●] [●] b. Individuals – i. Individual shareholders holding nominal share capital up to ` 100,000
Shares arising out of ESOP - - [●] [●] Employees 34,500 0.07% [●] [●] Former Employees [●] [●]
Others - - [●] [●]
ii. Individual shareholders holding - - [●] [●] nominal share capital in excess of ` 100,000
Shares arising out of ESOP - - - - Employees - - [●] [●] Former Employees - - [●] [●]
Others - - [●] [●] Sub-total (b) 34,500 0.07% [●] c. Any Other ESOP Trust - - - - Sub Total (c) - - - -
d. Issue of Shares at the IPO Sub-Total (B)(2) 34,500 0.07% [●] [●] Total Public Shareholding (B)= 34,500 0.07% [●] [●] (B)(1)+(B)(2) TOTAL (A)+(B) 34,500 0.07% [●] [●] C. Equity Shares held by Custodians - - [●] [●] and against which depository receipts have been issued TOTAL (A)+(B)+(C) 50,034,200 100.00% [●] [●]
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For further details of Equity Shares held by our Promoter, see note one of “Capital Structure – Notes to Capital Structure” on page 23.
Except the allotment of 34,200 Equity Shares to 98 employees of the Company, the details of which are indicated under the Section “Capital Structure-Notes to Capital Structure” on page 23 above, the Company has made no issuance that may be below the issue price during the period of one year immediately preceding the date of this DRHP. Please also see “Risk Factors” on page x.
4. Equity Shares held by top ten shareholders
On the date of filing this Draft Red Herring Prospectus with SEBI:
S. No. Name Number of Equity Shares Percentage of Equity Share capital 1. Alukkas Varghese Joy 44,980,700 89.90 2. Jolly Joy 4,999,500 9.99 3. John Paul Joy Alukkas 10,000 0.02 4 Elsy Antony 1,000 Negligible 5 Mary Jacob 1,000 Negligible 6 Tresa Mathew 1,000 Negligible 7 Rosily Joseph 1,000 Negligible 8 Lucy Tomy 1,000 Negligible 9 Jacintha Johnson 1,000 Negligible 10 Clara Johnson 1,000 Negligible
Ten days prior to the date of filing this Draft Red Herring Prospectus with SEBI:
S. No. Name Number of Equity Shares Percentage of Equity Share capital 1. Alukkas Varghese Joy 44,980,700 89.90 2. Jolly Joy 4,999,500 9.99 3. John Paul Joy Alukkas 10,000 0.02 4 Elsy Antony 1,000 Negligible 5 Mary Jacob 1,000 Negligible 6 Tresa Mathew 1,000 Negligible 7 Rosily Joseph 1,000 Negligible 8 Lucy Tomy 1,000 Negligible 9 Jacintha Johnson 1,000 Negligible 10 Clara Johnson 1,000 Negligible
Two years prior to the date of filing this Draft Red Herring Prospectus with SEBI:
S. No. Name Number of Equity Shares Percentage of Equity Shares 1. Alukkas Varghese Joy 40,500,000 90.00 2. Jolly Joy 4,499,500 9.99 3 Jolly Joy/ Mary Jeny Joy 500 Negligible
5. The Company does not have an Employee Stock Option Plan.
6. Details of Transactions in Equity Shares by our Promoter and our Promoter Group
There has been no purchase or sale of Equity Shares by Promoter, Promoter Group, our Directors and their immediate relatives during the six month period immediately preceding the date on which the Draft Red Herring Prospectus was filed with SEBI except as indicated below as well in this chapter under the head “Share Capital History of our Company” in the section on “Notes to Capital Structure”:
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No. of Face Equity Value Issue/Acquisition Nature of Transferor Date of Transfer Transferee Shares (`) Price (`) Consideration Alukkas August 7, 2010 John Paul Varghese Joy Joy Alukkas 10,000 10 10 Cash Alukkas August 7, 2010 P. P. Jose Varghese Joy 100 10 10 Cash Alukkas August 7, 2010 P. D. Jose Varghese Joy 100 10 10 Cash Alukkas August 7, 2010 P. D. Varghese Joy Francis 100 10 10 Cash Alukkas Other Varghese Joy November 12, 2010 relatives(1) 9,000 10 10 Cash TOTAL 19,300 (1) Transfer of 1,000 Equity Shares each to Elsy Antony, Mary Jacob, Tresa Mathew, Rosily Joseph, Lucy Tomy, Jacintha Johnson, Clara Johnson, Reena Joby and Pauly Antony
7. Details of Equity Shares held by our Directors and Key Management Personnel
The table below sets forth the details of Equity Shares that are held by our Directors and Key Management Personnel as of the date of this Draft Red Herring Prospectus:
Number of Equity Pre-Issue Equity Post-Issue Equity S. No. Name Shares Share Capital % Share Capital % 1. Alukkas Varghese Joy 44,980,700 89. 90 [●] 2. John Paul Joy Alukkas 10,000 0.02% [●] 3. P. P. Jose 700 Negligible [●] 4. P. D. Jose 700 Negligible [●] 5. P.D. Francis 700 Negligible [●] 6. T. Nandakumar 1,000 Negligible [●] 7. Deepak Xavier 600 Negligible [●] 8. H. Sanjay 600 Negligible [●] 9. Varun T.V. 600 Negligible [●] 10. Joseph Christo 800 Negligible [●]
This disclosure is made in accordance with Schedule VIII - Part A of the SEBI ICDR Regulations.
8. There are no financing arrangements whereby the Promoter, the Promoter Group, the directors of our Company or their relatives have financed the purchase by any other person of securities of our Company other than in the normal course of the business of the financing entity during the period of six months immediately preceding the date of filing draft offer document with the Board.
9. Neither our Company, our Promoter, Directors nor the BRLMs have entered into any buy-back, safety net and/or standby arrangements for the purchase of Equity Shares from any person.
10. Our Company has not raised any bridge loans against the proceeds of the Issue.
11. Except as disclosed in this Draft Red Herring Prospectus, there will 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 with SEBI until the Equity Shares to be issued pursuant to the Issue have been listed.
12. Our Company presently does not intend or propose to alter the capital structure for a period of six months from the Bid/Issue Opening Date, 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 or issue of bonus or rights or further public issue of specified securities or qualified institutional placements, except that if we enter into acquisitions, joint ventures or other arrangements, we may,
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subject to necessary approvals, consider raising additional capital to fund such activity or use Equity Shares as currency for acquisitions or participation in such joint ventures.
13. There are no outstanding warrants, options or other financial instruments or rights that may entitle any person to receive any Equity Shares in our Company.
14. Our Company has not issued any Equity Shares out of revaluation reserves or for consideration other than cash.
15. The Equity Shares held by our Promoter are not subject to any pledge.
16. In terms of Rule 19(2)(b)(i) of the SCRR and the SEBI ICDR Regulations, this being an Issue for more than 25% of the post-Issue capital, the Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue will be allocated on a proportionate basis to QIBs. Provided that our Company may allocate up to 30% of the QIB Portion, to Anchor Investors, on a discretionary basis. 5% of the QIB Portion, less Anchor Investor 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 Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 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.
17. Under-subscription, if any, in any category other than the QIB Portion, would be met with spill- over from other categories or combination of categories at the discretion of our Company in consultation with and the BRLMs.
18. Over-subscription to the extent of 10% of the Issue can be retained for the purpose of rounding off while finalising the basis of Allotment.
19. A Bidder cannot make a Bid for more than the number of Equity Shares offered in this Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor.
20. Our Promoter and members of our Promoter Group will not participate in the Issue.
21. There will be only one denomination of Equity Shares unless otherwise permitted by law and our Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.
22. The Equity Shares will be fully paid up at the time of allotment failing which no allotment shall be made.
23. The BRLMs do not hold any Equity Shares as on the date of this DRHP.
24. Our Company, our Directors, our Promoter 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.
25. For details of our related party transactions, see “Related Party Transactions” on page 150.
26. Our Company has 111 shareholders as of the date of this Draft Red Herring Prospectus.
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OBJECTS OF THE ISSUE
The Objects of the Issue are to: a) Finance the establishment of new retail outlets; b) To repay/prepay existing borrowings; and c) General Corporate purposes.
The main objects clause of our Memorandum of Association and objects incidental to the main objects as provided therein, enable us to undertake our existing activities and the activities for which funds are being raised by us through this Issue.
The estimated Issue related expenditure is as follows:
S. Activity Expense Amount* Percentage of Total Percentage of Issue No. (in ` million) Estimated Issue Size* Expenditure* 1 Fees of the BRLMs, [●] [●] [●] underwriting commission, brokerage and selling commission 2 Fees to the Bankers to Issue [●] [●] [●] 4 Advertising and marketing [●] [●] [●] expenses, printing and stationery, distribution, postage etc. 5 Registrar to the Issue [●] [●] [●] 6 Other expenses (Grading [●] [●] [●] Agency, Monitoring Agency, Legal Advisors, Auditors and other Advisors etc: ) Total Estimated Issue [●] [●] [●] Expenditure *To be completed after finalization of the Issue Price
The details of the proceeds of the Issue are as follows: (` in million) S. Description Amount No. 1 Gross Proceeds of the Issue [●] 2 Issue related Expenditure [●] 3 Net Proceeds of the Issue [●]
Use of Net Proceeds
The utilization of the Net Proceeds of this Issue is as follows:
(` in million) Sl. Expenditure Items Total Amounts Amount up Estimated Net Proceeds No. estimated deployed/utilized as to which will utilization as on March 31, cost on December 31, be financed 2012 2013 2014 2010* from Net Proceeds of the Issue 1.Finance the establishment of new retail outlets 4,257.10 55.17 4,201.93 2,304.43 1,376.50 521.00 2.Repayment/prepayment of Existing Borrowings 1,048.10 Nil 1,048.10 1,048.10 Nil Nil
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Sl. Expenditure Items Total Amounts Amount up Estimated Net Proceeds No. estimated deployed/utilized as to which will utilization as on March 31, cost on December 31, be financed 2012 2013 2014 2010* from Net Proceeds of the Issue 3.General Corporate purposes [●] [●] [●] [●] [●] [●] TOTAL [●] 55.17 [●] [●] [●] [●] * As per the certificate of C. I. Francis, Chartered Accountant (membership No. 204086) dated January 11, 2011. For details, see “Material Contracts and Documents for Inspection” on page 310.
Means of Finance
We intend to utilize the Net Proceeds of the Issue estimated at ` [●] for financing the growth of our business. We propose to finance the establishment of 14 new outlets completely from the Net Proceeds of the Issue. We also propose to utilise a portion of our Net Proceeds towards the repayment of existing debt facilities of our Company.
Our fund requirements and deployment of the Net Proceeds of the Issue is based on internal management appraisals and estimates. These are based on current conditions and are subject to change in light of changes in external circumstances or costs, or in other financial condition, business or strategy.
In case of variations in the actual utilization of funds earmarked for the purposes set forth above, increased fund requirements for a particular purpose may be financed by surplus funds, if any, available in respect of the other purposes for which funds are being raised in this Issue. If surplus funds are unavailable, the required financing will be through our internal accruals through cash flow from our operations and/or debt, as required. In the event that estimated utilization out of the Net Proceeds in a Fiscal is not completely met, the same shall be utilized in the next Fiscal. In the event of a shortfall in raising the requisite capital from the Net Procceds towards meeting the objects of the Issue, the extent of shortfall will be met by way of incremental debt or through internal accruals.
We operate in highly competitive and dynamic market conditions and may have to revise our estimates from time to time on account of external circumstances or costs in our financial condition, business or strategy. Consequently, our fund requirements may also change accordingly. Any such change in our plans may require rescheduling of our expenditure programs and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net Proceeds.
Details of the Objects
Finance the establishment of new outlets
We intend to expand our retail business by launching new outlets in different parts of the country. Pursuant to the same, we intend to deploy ` 4,201.93 million from the Net Proceeds for establishing 14 outlets in 14 cities by September 2013. The premises for the proposed new outlets will be taken on lease or on the basis of leave and license agreements. The size of our proposed outlets may vary between 2,455 sq. ft. and 80,000 sq. ft. The list of cities where our new outlets are proposed to be launched and the proposed year of launch is as set out below:
SI. No City Proposed Year of Launch Built up Area (in square feet) Kerala 1. Thiruvananthapuram September 2013 70,000 2. Thrissur September 2012 70,000 3. Kozhikode September 2011 80,000 4. Kochi December 2011 2,455 Tamil Nadu 5. Kumbakonam September 2012 12,000
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6. Nagercoil September 2013 5,000 7. Trichy April 2011 10,000 Karnataka 8. Mysore December 2011 10,000 9. Hubli December 2011 20,200 10. Davengere April 2012 7,000 11. Shimoga February 2012 6,000 Andhra Pradesh 12. Vizag September 2012 10,000 13. Rajahmundry June 2012 5,000 Others 14. New Delhi April 2011 12,600
We have entered into letters of intent/leave and license agreement/lease agreements for the purpose of taking properties on lease or leave and license for seven outlets, details of which are as below:
For further details, see “Material Contracts and Documents for Inspection” on page 310.
SI No. City Area/Location Built up Expected year of Details of Agreements Area (in launch square feet) 1. Thiruvanantha Manacaud 70,000 September 2013 Memorandum of Understanding dated puram Village, October 8, 2010 entered into by our Thiruvananthap Company with Cochin Smart City uram Taluk Properties Private Limited 2. Thrissur Survey numbers 70,000 September 2012 Memorandum of Understanding dated 1064, 983, 982 November 2, 2009 entered into by our and 1063 Company with Celine Louis and others situated at Thrissur Taluk, Thrissur Village, Thrissur Corporation Ward No. 33 3. Kozhikode Sy. No. 80,000 September 2011 Memorandum of Understanding dated 1215/2A, August 24, 2010 entered into by our 1216/2, 2A, 3, Company with Cochin Smart City 4A, 5A, Kasaba Properties Private Limited Village, Kozhikode Taluk 4. Kochi Lulu 2,455 December 2011 Letter of Intent dated May 21, 2010 International entered into by our Company with Lulu Shopping Mall International Shopping Mall Private Private Limited, Limited 50/2392, N. H. 17, Edapally, Kochi 682 024 5. New Delhi Door Nos. 12,600 April 2011 Agreement of Lease dated December 21, 2713,2714,2715 2010 entered into by our Company with & 2716, Bank Padam Chand Garg and others Street, Karol Bagh, Delhi 110 005 6. Kumbakonam No. 3, 12,000 September 2012 Memorandum of Understanding dated Nageswaran May 17, 2010 entered into by our North Street, Company with K. Alamelu and others Kumbakonam, 612 001 7. Hubli CTS Ward No. 20,200 December 2011 Memorandum of Understanding dated
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1, Station Road, December 17, 2010 entered into by our Hubli Company with Prakash and others
We are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds.
Estimated cost of establishment and deployment of funds
The break down of the average cost for establishment of a new outlet is given below: (` in million) SI. No. Location CAPITAL EXPENDITURE INVENTORY TOTAL RENT RENT RENT DEPOSIT DEPOSIT DEPOSIT PAYABLE PAID*** Jewellery Estimated Size of Total showrooms costs per the cost sq ft. (in store (c ) = `) (in sq. a*b (a)* ft.) (b) 1. Kochi 2,600 2,455 6.38 100.0 4.20 2.97 1.23 2. Kumbakonam 2,600 12,000 31.20 200.0 7.50 6.5 1.00 3. Nagarcoil 2,600 5,000 13.00 210.0 3.00 3 NIL 4. Trichy 2,600 10,000 26.00 350.0 8.00 8 NIL 5. Mysore 2,600 10,000 26.00 230.0 10.50 10.5 NIL 6. Hubli 2,600 20,200 52.52 230.0 13.13 9.43 3.7 7. Davengere 2,600 7,000 18.20 260.0 3.50 3.5 NIL 8. Shimoga 2,600 6,000 15.60 260.0 3.00 3 NIL 9. Vizag 2,600 10,000 26.00 270.0 7.20 7.2 NIL 10. Rajamundry 2,600 5,000 13.00 270.0 2.40 2.4 NIL 11. New Delhi 2,700 12,600 34.02 400.0 6.75 NIL 6.75 Wedding Centres 12. Thiruvananthapuram 1,500** 70,000 105.00 190.0 25.00 NIL 25.00 13. Kozhikode 1,500** 80,000 120.00 420.0 21.00 NIL 10.00 14. Thrissur 1,500** 70,000 105.00 150.0 10.00 13.5 7.50 Total 591.92 3,540.00 125.18 70.00 55.17 *as per quotation dated December 30, 2010 given by Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai 400 601. **excluding air conditioning and as per design *** As per the certificate of C. I. Francis, Chartered Accountant (membership No. 204086) dated January 11, 2011
For all the 14 outlets that are proposed to be financed from the Net Proceeds, we have received a quotation dated December 30, 2010 from Molekules Interior Studios for the fitting out of the store on a turn-key basis. For more details, see “Material Contracts and Documents for Inspection” on page 310. The average cost of establishment of each outlet is approximately ` 2,600 per sq. ft. for a jewellery showroom and ` 1,500 per sq. ft. for the proposed wedding centres as per the estimates contained in this quotation. The total cost is inclusive of the cost incurred on civils, false ceiling, paints, polish, carpentry, glass, hardwares, plumbing, air conditioning, security systems, electrical cables, facade works and other miscellaneous heads.
We typically stock all our outlets with sufficient inventory. Based on our internal estimates, the minimum cost of inventory per outlet varies from ` 100.00 million to ` 800.00 million, based on the size and location of a particular outlet. We will acquire additional inventory as and when required. The inventory stored in our regular showrooms range from approximately 40 kgs to 123 kgs for gold jewellery and has diamond jewellery ranging approximately from ` 17 million to ` 132 million. The inventory stored in our large format showrooms range from approximately 81 kgs to 325 kgs for gold jewellery and has diamond jewellery ranging approximately from ` 31 million to ` 336 million. In cases where we have an existing store in the same city where a new store is proposed, a part of the inventory for the new store may be transferred from the existing store and only the balance has been taken into consideration to arrive at the estimate. We have arrived at the value of inventory mentioned herein by taking into account the cost incurred in procuring all the inventory displayed at a particular showroom at a particular point in time. We have estimated one kg of gold to be worth ` 2.00 million in arriving at the value of the inventory. We have assumed an inventory worth ` 100 million in the textiles, apparel and accessories for each Wedding Centre.
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We are in the process of identifying the locations and other requirements in relation to the rest of the seven outlets sought to be financed from the Net Proceeds. We have obtained certificates of prevailing lease rentals in locations where these showrooms are proposed to be situated. The details of the same are as below:
SI. Location of the Area in sq. ft. Details of the certificate Rent in ` per sq. ft. No. proposed showroom received from the consultant 1. Trichy 10,000 Certificate dated December 29, 70 to 80 2010 from Revival Reals 2. Mysore 10,000 Certificate dated December 29, 90 to 105 2010 from Shri Ram Associates 3. Vizag 10,000 Certificate dated December 29, 105 to 120 2010 from Shri Ram Associates 4. Rajamundry 5,000 Certificate dated December 29, 70 to 80 2010 from Shri Ram Associates 5. Nagarcoil 5,000 Certificate dated December 29, 50 to 60 2010 from Diamond Properties 6. Shimoga 6,000 Certificate dated December 29, 40 to 50 2010 from Chetak Real Estates 7. Davengere 7,000 Certificate dated December 29, 40 to 50 2010 from Chetak Real Estates
Repayment/prepayment of loans
Our business is working capital intensive and we avail majority of our working capital in the ordinary course of business under facilities from various banks and financial institutions. As on December 31, 2010, our Company‟s working capital facility consisted of aggregate fund based limits of ` 3,650 million and aggregate non-fund based limits of ` 50 million and sanctioned term loan facility of ` 1,000 million. As on that date, the aggregate amount outstanding under the fund based limits excluding vehicle loans of ` 12.92 million, was ` 3,499.03 million and there was no outstanding on non-fund based working capital facilities. For further details of the working capital facility availed by us, see section titled “Financial Indebtedness” on page 181. Given the nature of these borrowings and the terms of repayment, the aggregate outstanding amount varies from time to time.
The Company intends to utilize the proceeds of the issue up to ` 1,048.10 million towards repayment and/or prepayment of a portion of debt as given below. Some of the Company‟s financing arrangements contain provisions relating to prepayment penalty. The Company will take these provisions into considerations in pre-paying its debt from the proceeds of the Issue:
Details of outstanding amounts under these borrowings as on December 31, 2010: (` In million) S. No. Secured Loans Amount outstanding as on Pre-payment penalty December 31, 2010 1. Yes Bank Limited 254.26 Not applicable 2. State Bank of Travancore 350.83 Not applicable 3. IDBI Bank Limited 330.95 Not applicable 4. Standard Chartered Bank 962.51 The facility may be prepaid with Limited prior written consent of the lender and subject to the payment of prepayment costs as may be specified by the lender. 5. Citibank N.A. 242.57 Not applicable 6. The Royal Bank of Scotland 271.84 All prepayments shall be subject to N.V. (erstwhile ABN Amro breakage costs as may be levied by Bank N.V.) the lender at the lender‟s sole discretion 7. Union Bank of India 2.17 Not applicable 8. ING Vysya Bank Limited 739.78 Not applicable
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S Project Plot Area Total cost of Amount Amount Balance Nature of Status of . Name (acres) Land Paid till Paid as payable Contract/ property N development May 15, percentage after Documentation ** o rights (Rs. 2008* of Total May 15, . Mn) (Rs. Mn) Cost of Land 2008 Developmen t Rights (%) Agreement for Forthcomin Godrej grant of g project 2,750.0 1 Ahmedaba 330.00 3,250.00 500.00 15.38 development 0 d Township rights dated April 15, 2008 Memorandum of Forthcomin Godrej Understanding g project 2 Greater 76.04 800.00 - - 800.00 dated May 2, Noida -I 2008 3,550.0 Total 406.04 4,050.00 500.00 12.35 0 * As per certificate from Kalyaniwalla & Mistry, Chartered Accountants dated May 28, 2008
S Project Plot Area Total cost of Amount Amount Balance Nature of Status of . Name (acres) Land Paid till Paid as payable Contract/ property N development May 15, percentage after Documentation ** o rights (Rs. 2008* of Total May 15, . Mn) (Rs. Mn) Cost of Land 2008 Developmen t Rights (%) Agreement for Forthcomin Godrej grant of g project 2,750.0 1 Ahmedaba 330.00 3,250.00 500.00 15.38 development 0 d Township rights dated April 15, 2008 Memorandum of Forthcomin Godrej Understanding g project 2 Greater 76.04 800.00 - - 800.00 dated May 2, Noida -I 2008 3,550.0 Total 406.04 4,050.00 500.00 12.35 0 * As per certificate from Kalyaniwalla & Mistry, Chartered Accountants dated May 28, 2008
9. Dhanalaxmi Bank Limited 344.12 Not applicable Total 3,499.03 *As per the certificate dated January 7, 2011 received from C.I. Francis, Chartered Accountant (membership no. 204086) all the aforementioned loans have been utilised for the purposes indicated in the respective loan documents.
In addition to the above, we may, from time to time, enter into further financing arrangements and draw down funds thereunder.
General Corporate Purposes
We, in accordance with the policies of our Board, will have flexibility in applying the remaining Net Proceeds of this Issue, for general corporate purposes including strategic initiatives, brand building exercises and strengthening of our marketing capabilities.
The quantum of utilization of funds towards each of the above purposes will be determined by the Board of Directors based on the amount actually available under the head “General Corporate Purposes” and the business requirements of the Company, from time to time.
In case of variations in the actual utilization of funds designated for the purposes set forth above, increased fund requirements for a particular purpose may be financed by surplus funds, if any which are not applied to the other purposes set out above.
Our management, in response to the competitive and dynamic nature of the industry, will have the discretion to revise its business plan from time to time and consequently our funding requirement and deployment of funds may also change. This may also include rescheduling the proposed utilization of Net Proceeds and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net Proceeds. In case of a shortfall in the Net Proceeds, our management may explore a range of options including utilizing our internal accruals or seeking debt from future lenders. Our management expects that such alternate arrangements would be available to fund any such shortfall. Our management, in accordance with the policies of our Board, will have flexibility in utilizing the proceeds earmarked for general corporate purposes.
Interim Use of Funds
Our management, in accordance with the policies established by our Board of Directors from time to time, will have flexibility in deploying the Net Proceeds. Pending utilization for the purposes described above, we intend to invest the funds in high quality interest bearing liquid instruments including investment in money market mutual funds, deposits with banks and other interest bearing securities for the necessary duration. Such investments will be approved by the Board or its committee from time to time, in accordance with its investment policies. Our Company confirms that pending utilization of the Net Proceeds, it shall not use the funds for any investment in equity or equity linked securities.
Bridge Loan
We have not raised any bridge loans which are required to be repaid from the Net Proceeds.
Monitoring Utilization of Funds from Issue
The Company, if required will appoint a monitoring agency in relation to the Issue. The Board and such monitoring agency will monitor the utilization of the proceeds of the Issue. The Company will disclose the utilization of the proceeds of the Issue, including interim use, under a separate head along with details, for all such proceeds of the Issue that have not been utilized. The Company will indicate investments, if any, of unutilized proceeds of the Issue in the balance sheet of the Company for the relevant Financial Years subsequent to the listing.
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Pursuant to clause 49 of the Listing Agreement, the Company shall on a quarterly basis disclose to the Audit Committee the uses and applications of the proceeds of the Issue. On an annual basis, the Company shall prepare a statement of funds utilised for purposes other than those stated in this Red Herring Prospectus and place it before the Audit Committee. Such disclosure shall be made only until such time that all the proceeds of the Issue have been utilised in full. The statement will be certified by the statutory auditors of the Company. In addition, the report submitted by the Monitoring Agency will be placed before the Audit Committee of the Company, so as to enable the Audit Committee to make appropriate recommendations to the Board of Directors of the Company.
The Company shall be required to inform material deviations in the utilisation of Issue proceeds to the stock exchanges and shall also be required to simultaneously make the material deviations/adverse comments of the Audit committee/Monitoring Agency public through advertisement in newspapers.
Except in case of the proposed new outlets at Thiruvananthapuram and Kozhikode, which are both situated on the premises owned by one of our Group Entities, and except as otherwise stated in this DRHP, no part of the proceeds from the Issue will be paid by the Company as consideration to its Promoter, Directors, Group Entities or key managerial employees. For further details, see “Material Documents Agreements for Inspection” on page 310.
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BASIS FOR ISSUE PRICE
The Issue Price of ` [●] will be determined by our Company in consultation with the BRLMs, on the basis of assessment of market demand from the investors for the offered Equity Shares by way of Book Building Process. The face value of the Equity Shares is ` 10 and the Issue Price is [●] times the face value at the lower end of the Price Band and [●] times the face value at the higher end of the Price Band.
Qualitative Factors
Some of the qualitative factors which form the basis for computing the prices are:
Large format retail stores and Wedding Centres at strategic locations Experience of our Promoter and a strong management team Strong track record and established brand equity with robust sales and marketing network Our efficient internal processes to leverage our sales Corporate tie-ups with leading companies as part of our Business to Business program
For further details, refer to “Our Business” and “Risk Factors” on pages 65 and x respectively.
Quantitative Factors
Information presented in this section is derived from our restated audited financial statements prepared in accordance with Indian GAAP.
Some of the quantitative factors which may form the basis for computing the Issue Price are as follows:
Basic and Diluted Earnings Per Share (“EPS”)
As per our restated standalone audited financial statements
Basic and Diluted EPS:
Particulars Basic and Diluted Earning Per Share (Face Value ` 10 per share) Weight Year ended March 31, 2008 5.56 1 Year ended March 31, 2009 10.89 2 Year ended March 31, 2010 13.47 3 Weighted Average 11.29 6 months ended September 30, 2010 10.89* * Not Annualised
Note: EPS calculations have been done in accordance with Accounting Standard 20 -“Earning per share” issued by the Institute of Chartered Accountants of India
Price Earning Ratio (P/E) in relation to the Issue Price of ` [●] per share o P/E ratio in relation to the Floor Price: [●] times o P/E ratio in relation to the Cap Price: [●] times o P/E based on the EPS as per our Restated Financial Statements for the year ended March 31, 2010: [●] times o P/E ratio based on Weighted average EPS as per our Restated Financial Statements for the year ended March 31, 2010: [●] times
o Peer Group * P/E: a. Highest: 62.26 b. Lowest: 14.00
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c. Peer Group Average: 38.13
Source: Capital Markets Vol XXV/22 dated December 27,2010 to January 9,2011, (Industry – Diamond Cutting/jewellery, Miscellaneous
* Peer Group includes Titan Industries Limited and Thangamayil Jewellery Limited.
Return on Average Net Worth (RoNW) as per restated standalone financial statements
RoNW:
As per our restated standalone audited financial statements
Particulars RONW % Weight Year ended March 31, 2008 20.32 1 Year ended March 31, 2009 36.24 2 Year ended March 31, 2010 34.46 3 Weighted Average 32.70 6 months ended September 30, 2010 21.79* *Not Annualised.
Minimum Return on Increased Net Worth required for maintaining pre-issue EPS as at March 31, 2010 is [●].
Net Asset Value Per Share*
o Net Asset Value per Equity Share as of March 31, 2010 is ` 39.09* o After the Issue: [●] o Issue Price: ` [●] #
* Net Asset Value per Equity Share represents networth, as restated, divided by the number of Equity Shares as at year end.
# Issue Price will be determined on the conclusion of the Book Building Process.
Comparison with Industry Peers
RONW Fiscal 2010 EPS (`) NAV (per share)(`) P/E (%) Joyalukkas India Limited 13.47 39.09 [●] 34.46 Peer Group(1) Titan Industries Limited 54.4 163.2 62.26 39.3 Thangamayil Jewellery Limited 11.0 54.6 14.00 29.8 Note: The EPS, RONW and NAV figures for Joyalukkas India Limited are based on the restated audited standalone financial statements for the year ended March 31, 2010. (1)Source: Capital Markets Vol XXV/22 dated December 27, 2010 to January 9, 2011, (Industry – Diamond Cutting/Jewellery, Miscellaneous ). Note: The EPS, RONW and NAV figures for the peer group are based on the latest audited results (standalone) for the year ended March 31, 2010 and P/E is computed based on the market price as on December 20, 2010 and EPS for the year ended March 31, 2010 as reported in Capital Markets, Vol XXV/22 dated December 27,2010 to January 9,2011, (Industry – Diamond CuttingJjewellery , Miscellaneous ).
The peer group above has been determined on the basis of listed public companies comparable in size to our Company or whose business portfolio is comparable with that of our business.
Since the Issue is being made through the 100% Book Building Process, the Issue Price will be determined on the basis of investor demand.
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The face value of our Equity Shares is ` 10 each and the Issue Price is [●] times of the face value of our Equity Shares.
The Issue Price of ` [●] has been determined by us, in consultation with the BRLMs on the basis of the demand from investors for the Equity Shares through the Book-Building Process and is justified based on the above accounting ratios. For further details, see the “Risk Factors” on page x and the financials of the Company including important profitability and return ratios, as set out in the “Financial Statements” on page 113 to have a more informed view. The trading price of the Equity shares of the company could decline due to the factors mentioned in “Risk Factors” and you may lose all or part of your investments.
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STATEMENT OF TAX BENEFITS
To, The Board of Directors Joyalukkas India Limited Marine Drive Cochin-680 031
Dear Sirs,
Statement of possible Tax Benefits available to Joyalukkas India Limited and its shareholders
We hereby report that the enclosed statement states the possible tax benefits available to Joyalukkas India Limited (“the Company‟) under the Income-tax Act, 1961 presently in force in India and to the shareholders of the Company under the Income tax Act, 1961 and other Direct 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 provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which is based on business imperatives the Company may face in the future and accordingly, 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. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue.
We do not express any opinion or provide any assurance as to whether:
1 The Company or its shareholders will continue to obtain these benefits in future; or
2 The conditions prescribed for availing the benefits have been / would be met with.
The contents of the enclosed statement 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.
Our views expressed herein are based on the facts and assumptions indicated to us. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to the Company for any claims, liabilities or expenses relating to this assignment except to the extent of fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. We will not be liable to any other person in respect of this statement.
The enclosed annexure is intended solely for your information and for inclusion in the Draft Red herring Prospectus in connection with the proposed issue and is not to be used, referred to or distributed for any other purpose without prior written consent.
For B S R & Co. Chartered Accountants
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Zubin Shekary Partner Membership No: 048814 Firm Registration No: 101248W
Place: Bangalore Date: January 3, 2011
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STATEMENT OF TAX BENEFITS AVAILABLE TO JOYALUKKAS INDIA LIMITED (“THE COMPANY”) AND ITS SHAREHOLDERS
I Special Tax Benefits available to the Company
The Company is not entitled to any special tax benefits under the Act.
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II. General tax benefits to the Company
Under the Income Tax Act 1961 (the Act)
1 Dividend income referred to in section 115O earned by the Company from another domestic Company/ Companies is exempt under section 10(34) of the Act.
2 As per section 10(35) of the Act, the following incomes are exempt from tax in the hands of the Company: Income received in respect of the units of a Mutual Fund specified under section 10(23D); or Income received in respect of units from the Administrator of the “specified undertaking”; or Income received in respect of units from the “specified company”.
3 As per section 10(38) of the Act, long term capital gains arising to the Company from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt in the hands of the Company. The equity shares or units of an equity oriented fund are treated as long term assets if it is held for a period of more than 12 months prior to the date of transfer. However the said exemption will not be available to the Company while computing the book profit and the tax payable under section 115JB of the Act.
4 As per section 112 of the Act, the long term capital gains arising to the Company from the transfer of listed securities or units, as defined, not covered under paragraph 3 above (ie, where the transaction is not chargeable to securities transaction tax) shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10 percent (plus applicable surcharge and education cess) of the capital gains before indexing the cost of acquisition, whichever is lower.
5 The long term capital gains not covered under paragraph 3 and 4 above shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition/ improvement.
6 As per section 111A of the Act, short term capital gains arising to the Company from the sale of equity shares or units of an equity oriented mutual fund held by the Company will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess), if securities transaction tax is chargeable on such transaction.
7 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, long- term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-term capital asset will be exempt from tax subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a “long term specified asset” within a period of six months after the date of such transfer.
For the above purposes a “long term specified asset” inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956.
8 Under section 32 of the Act, the Company is entitled to claim depreciation subject to the conditions specified therein, at the prescribed rates on its specified assets used for its business.
9 Under section 35D of the Act, the Company will be entitled to a deduction equal to 1/5th of the expenditure incurred of the nature specified in the said section, including expenditure incurred on present issue, such as underwriting commission, brokerage and other charges, as specified in the
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provision, by way of amortisation over a period of 5 successive years, beginning with the previous year in which the business commences or after the commencement of its business in connection with the extension of its industrial undertaking or in connection with setting up a new industrial unit, subject to the stipulated limits.
10 Section 72 of the Act provides that the business loss shall be carried forward to the following assessment year to be set off against the profits and gains of business and profession and the balance shall be allowed to be carried forward for next 8 assessment years subject to the provisions of the Act. Unabsorbed depreciation, if any, for any assessment year can be carried forward and set off against any source of income of subsequent assessment years as per section 32 of the Act.
11 As per section 74 of the Act, short-term capital loss can be set-off against short-term as well as long- term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‟ short term as well as long term capital gains. Long term capital loss suffered during the year can be set-off only against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‟ long - term capital gains only.
12 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.
13 Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchased within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.
14 The amount of tax paid under section 115JB by the Company for any assessment year commencing from 01 April 2006 and any subsequent assessment year, will be available as credit to the extent specified in section 115JAA for ten years succeeding the assessment year in which MAT credit becomes allowable in accordance with the provisions of Section 115JAA of the Act.
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III Tax benefits available to the members of the Company
(A) Resident Members of the Company (including domestic Companies)
General Tax Benefits
1 As per section 10(34) of the Act, income earned by the resident member by way of dividend referred to in section 115-O of the Act from a domestic company is exempt from tax.
2 As per section 10(38) of the Act, long term capital gains arising to the resident member from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt in the hands of such members. However, the said exemption will not be available to a member being a company while computing the book profit and the tax payable under section 115JB of the Act.
3 As per section 112 of the Act, the long term capital gains arising to the shareholders of the Company from the transfer of listed securities or units, as defined, not covered under paragraph 2 above shall be chargeable to tax at the rate of 20 percent (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10 percent (plus applicable surcharge and education cess) of the capital gains before indexing the cost of acquisition, whichever is lower.
4 In case of an individual or a Hindu Undivided Family, where the total taxable income as reduced by the long term capital gains is less than the basic exemption limit, the long term capital gains will be reduced to the extent of the shortfall and only the balance long term capital gains will be subject to tax in accordance with the proviso to sub section (1) of section 112 of the Act.
5 Short-term capital gains arising on transfer of the shares (i.e. held for less than 12 months) of the Company will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess) as per the provisions of section 111A of the Act, if securities transaction tax is chargeable on such transaction. In case of an individual or Hindu Undivided Family, where the total taxable income as reduced by short-term capital gains is below the basic exemption limit, the short-term capital gains will be reduced to the extent of the shortfall and only the balance short-term capital gains will be subjected to such tax in accordance with the proviso to sub-section (1) of section 111A of the Act.
6 The short-term capital gains accruing to the shareholders of the Company from the transfer of the shares of the Company otherwise than as mentioned in Paragraph 5 above shall be chargeable to the capital gains tax at the normal tax rate applicable.
7 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, long- term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-term capital asset will be exempt from tax subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a “long term specified asset” within a period of six months after the date of such transfer.
For the above purposes a “long term specified asset” inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956.
8 As per the provisions of section 54F of the Act, long term capital gains (in cases not covered under section 10(38)) arising on the transfer of the shares of the Company held by an individual or Hindu Undivided Family will be exempt from tax if the net consideration is utilised, with in a period of one year before, or two years after the date of transfer, in the purchase of a residential house, or for construction of a residential house within three years.
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9 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1)(xv) of the Income- Tax Act.
10 As per Section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‟ short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set- off against subsequent years‟ long term capital gains.
11 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Income-Tax Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt..
Special Tax Benefits
There are no special tax benefits available to the resident members of the Company (including domestic companies).
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(B) Tax benefits available to Non-Resident Indian Members/ Non Resident Shareholders (including foreign companies) [Other than FIIs and Foreign Venture Capital Investors] under the Act
General tax benefits
1 As per section 10(34) of the Act, income earned by the shareholders by way of dividend referred to in section 115-O of the Act from a domestic company is exempt from tax.
2 As per section 10(38) of the Act, long term capital gains arising to the shareholder from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt in the hands of shareholders. However, the said exemption will not be available to a member being a company while computing the book profit and the tax payable under section 115JB of the Act.
3 In accordance with, and subject to section 48 of the Income-Tax Act, capital gains arising on transfer of shares of the Company which are acquired in convertible foreign exchange and not covered under Paragraph 2 above shall be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer into the same foreign currency as was initially utilised in the purchase of shares and the capital gains computed in such foreign currency shall be reconverted into Indian currency, such that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing / arising from every reinvestment thereafter and sale of shares of the Company.
4 The long-term capital gains accruing to the shareholders of the Company from the transfer of the shares of the Company otherwise than as mentioned in Paragraphs 2 and 3 above shall be chargeable to tax at the rate of 20% (plus applicable surcharge and education cess) of the capital gains computed after indexing the cost of acquisition or at the rate of 10% (plus applicable surcharge and education cess) of the capital gains computed before indexing the cost of acquisition, whichever is lower.
5 As per section 111A of the Act, short term capital gains arising from the sale of equity shares or units of an equity oriented mutual fund, will be chargeable to tax at the rate of 15% (plus applicable surcharge and education cess), if securities transaction tax is chargeable on such transaction.
6 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, long- term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-term capital asset will be exempt from tax subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a “long term specified asset” within a period of six months after the date of such transfer.
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For the above purposes a “long term specified asset” inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956.
7 As per the provisions of section 54F of the Act, long term capital gains (in cases not covered under section 10(38)) arising on the transfer of the shares of the Company held by an individual or Hindu Undivided Family will be exempt from tax if the net consideration is utilised, with in a period of one year before, or two years after the date of transfer, in the purchase of a residential house, or for construction of a residential house within three years.
8 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1)(xv) of the Income- Tax Act.
9 As per Section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‟ short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set- off against subsequent years‟ long term capital gains.
10 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Income-Tax Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.
Special tax benefits
1 The tax rates and consequent taxation mentioned below will be further subject to any benefits available under the Tax Treaty, if any, between India and the country in which the non-resident has fiscal domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Double Taxation Avoidance Agreement (“DTAA”) to the extent they are more beneficial to the non-resident.
2 Besides the above benefits available to non-residents, Non-Resident Indians (NRIs) have the option of being governed by the provisions of Chapter XII-A of the Income-Tax Act which inter alia entitles them to certain benefits in respect of income from shares of an Indian Company acquired, purchased or subscribed to in convertible foreign exchange.
3 As per section 115A of the Act, where the total income of a Non-resident (not being a company) or of a foreign company includes dividends (other than dividends referred to in section 115O of the Act), tax payable on such income shall be aggregate of amount of income-tax calculated on the amount of income by way of dividends included in the total income, at the rate of 20 per cent (plus applicable surcharge and education cess).
4 In accordance with section 115E of the Act, income from investment or income from long- term capital gains on transfer of assets other than specified asset shall be taxable at the rate of 20% (plus applicable surcharge and education cess). Income by way of long term capital gains in respect of a specified asset (as defined in section 115C (f) of the act), shall be chargeable at 10% (plus applicable surcharge and education cess).
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5 In accordance with section 115F of the Act, subject to the conditions and to the extent specified therein, long-term capital gain arising from transfer of shares of the company acquired out of convertible foreign exchange, and on which securities transaction tax is not chargeable, shall be exempt from capital gains tax, if the net consideration is invested within six months of the date of transfer in any specified asset.
6 In accordance with section 115G of the Act, it is not necessary for a Non resident Indian to file a return of income under section 139(1), if his total income consists only of investment income earned on shares of the company acquired out of convertible foreign exchange or income by way of long term capital gains earned on transfer of shares of the company acquired out of convertible foreign exchange or both, and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the Act.
7 As per section 115H of the Act, where a non-resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under section 139 of the Act to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are transferred or converted into money.
8 In accordance with section 115-I, where a Non Resident Indian opts not to be governed by the provision of chapter XII-A for any assessment year, his total income for that assessment year (including income arising from investment in the company) will be computed and tax will be charged according to the other provisions of the Income-tax Act.
(C) Benefits available to Foreign Institutional Investors (FII’s) under the Act
1 As per section 10(34) of the Act, income earned by way of dividend referred to in section 115-O of the act is exempt from tax.
2 As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt.
3 Under section 115AD(1)(b)(iii) of the Income-Tax Act, income by way of long-term capital gains arising from the transfer of shares held in the Company not covered under Paragraph 2 above will be chargeable to tax at the rate of 10% (plus applicable surcharge and education cess) without indexation benefit.
4 As per section 115AD read with section 111A of the Act, short term capital gains arising from the sale of equity shares of the Company transacted through a recognized stock exchange in India, where such transaction is chargeable to securities transaction tax, will be taxable at the rate of 15% (plus applicable surcharge and education cess).
5 Under section 115AD(1)(b)(ii) of the Income-Tax Act, income by way of short- term capital gains arising from the transfer of shares held in the Company not covered under Paragraph (iv) above will be chargeable to tax at the rate of 30% (plus applicable surcharge and education cess).
6 The tax rates and consequent taxation mentioned above will be further subject to any benefits available under the Tax Treaty, if any between India and the country in which the FII has fiscal domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the FII.
7 As per Section 74 of the Act, short-term capital loss suffered during the year is allowed to be set-off against short-term as well as long-term capital gains of the said year. Balance loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‟ short-term as well as long-term capital gains. Long-term capital loss suffered during the year is allowed to be set-off against
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long-term capital gains. Balance loss, if any, could be carried forward for eight years for claiming set- off against subsequent years‟ long-term capital gains.
8 Where the business income of an assessee includes profits and gains of business arising from transactions on which securities transaction tax has been charged, such securities transaction tax shall be a deductible expense from business income as per the provisions of section 36(1) (xv).
9 As per section 54EC of the Act and subject to the conditions and to the extent specified therein, long- term capital gains (in cases not covered under section 10(38) of the Act) arising on the transfer of a long-term capital asset will be exempt from tax subject to the limit of Rs. 50 lakhs in a year if the capital gains are invested in a “long term specified asset” within a period of six months after the date of such transfer.
For the above purposes a “long term specified asset” inter-alia means any bond, redeemable after three years and issued on or after the first day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988, or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956.
10 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.
(D) Benefits available to Mutual Funds
1 As per section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorised by the Reserve Bank of India will be exempt from income tax, subject to such conditions as the Central Government may by notification in the Official Gazette, specify in this behalf. 2 As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.
(E) Specific benefits available to Venture Capital Companies/ Funds under the Act
1 Any income received by venture capital companies or venture capital funds set up to raise funds for investment in a venture capital undertaking registered with the Securities and Exchange Board of India, subject to conditions specified in section 10(23FB) of the Act, is eligible for exemption from income- tax. However, the income distributed by the Venture Capital Companies/ Funds to its investors would be taxable in the hands of the recipient. As per Section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Also, Section 94(7) of the Act provides that losses arising from the sale/ transfer of shares or units purchases within a period of three months prior to the record date and sold/ transferred within three months or nine months respectively after such date, will be ignored to the extent dividend income on such shares or units is claimed as tax exempt.
(F) Benefits to shareholders of the Company under the Wealth-tax Act, 1957
Shares of the Company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of The Wealth Tax Act, 1957. Hence the shares are not liable to Wealth Tax.
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(G) Benefits under the Gift Tax Act, 1958
Gift tax is not leviable in respect of any gifts made on or after October 1, 1998. Therefore, any gift of shares will not attract gift tax under the Gift Tax Act, 1958. However, as per section 56(1)(vii)(c) of the Act, gift of shares to an individual or Hindu undivided family would be taxable in the hands of the donee as “Income From Other Sources” subject to the provisions of the Act.
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Notes:
(i) 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.
(ii) Several of these benefits are dependent on the company and its shareholders fulfilling the conditions prescribed under the provisions of the relevant sections under the relevant tax laws.
(iii) All the above benefits are as per the current tax laws legislation, its judicial interpretation and the policies of the regulatory authorities are subject to change from time to time, and these may have a bearing on the benefits listed above. Accordingly, any change or amendment in the law or relevant regulations would necessitate a review of the above.
(iv) In respect of non-residents, the tax rates and the consequent taxation mentioned above will be further subject to any benefits available under the relevant DTAA, if any, between India and the country in which the non-resident has Fiscal domicile.
(v) This statement is only extended 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 tax consequences, being based on all the facts, in totality, of the investors, each investor is advised to consult his/her/its own tax advisor with respect to specific tax consequences of his/her/its investments in the shares of the Company.
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SECTION IV – ABOUT THE COMPANY
INDUSTRY OVERVIEW
The “Industry Overview” summarizes or quotes information set forth in the “Indian Gems and Jewellery Industry” dated June 2010 (“CARE Report”), prepared by CARE Research, a division of Credit Analysis & Research Limited ("CARE Research”), “India Gold Report – India: Heart of Gold” and “Gold Demand Trends” prepared by the World Gold Council (“WGC Reports”) and “Unlocking the Potential of India‟s Gems & Jewellery Sector, FICCI and Technopak (“FICCI Technopak Report”). We have not commissioned any reports for purposes of this Draft Red Herring Prospectus. Except for the CARE Report, the WGC Reports and the FICCI Technopak Report, market and industry related data used in this Draft Red Herring Prospectus has been obtained or derived from the websites of and publicly available documents from various industry sources. Neither we nor any other person connected with the Issue has independently verified the information provided in this chapter. The CARE Report, the WGC Reports, FICCI Technopak Report and other 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 and accordingly, investment decisions should not be based on such information.
The Indian Economy
The Indian economy is one of the largest economies in the world with a GDP at current prices in Fiscal 2010 estimated at ` 57.91 trillion (approximately US$1.3 trillion) (Source: Ministry of Statistics and Programme Implementation). It is one of the fastest growing economies in the world, with a real GDP growth rate of 5.7% for calendar year 2009 and a projected 9.7% growth rate for calendar year 2010 (Source: International Monetary Fund, World Economic Outlook, October 2010 Update).
Per capita GDP at factor cost (at constant prices) in India has grown from around ` 12,031.72 billion for the year 1991 at the time of liberalisation to an estimated ` 41,039.70 billion for the year 2010 (Source: International Monetary Fund, World Economic Outlook Database, April 2010). During the first quarter of Fiscal 2011, India‟s GDP grew by 8.8%, compared with a growth rate of 6.0% during the first quarter of Fiscal 2010. (Source: Ministry of Statistics and programme Implementation, Press Note Q1 2010-2011)
The IMF believes that four principal factors have supported Asia‟s recovery: first, the rapid normalization of trade, following the financial dislocation in late 2008, benefited Asia‟s export-driven economies; second, the bottoming out of the inventory cycle, both domestically and in major trading partners such as the United States, is boosting industrial production and exports; third, a resumption of capital inflows into the region has created abundant liquidity in many economies; and fourth, domestic demand has been resilient, owing to strong public and private companies in many of the region‟s economies. The IMF believes that, in both China and India, particularly, strong domestic demand will support the recovery. In India, the growth in real GDP will be supported by rising private demand, with consumption strengthening as a result of improvements in the labor market, and a boost to investment brought about by strong profitability, rising business confidence and favorable financing conditions. (Source: IMF World Economic Outlook 2010)
Indian Gems and Jewellery Industry
Precious metals and gemstones have been an integral part of the Indian civilisation throughout its recorded history. Gems and jewellery has been consumed by Indians for centuries for both their aesthetic as well as investment value. India has the distinction of being the first country to introduce diamonds to the world. The country was also the first to mine, cut, polish and trade in diamonds. (Source: CARE Report)
The Indian gems and jewellery industry can be classified into various sub segments for diamonds, coloured stones, gold and silver jewellery, pearls, and others. However, the two major industry segments in India are gold jewellery and diamonds. India dominates the diamond processing trade with 11 out of 12 diamonds being cut and polished in India (around 80% in terms of carats and around 55% in terms of volume). India
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also dominates gold and silver consumption globally with consumption of approximately 700 tonnes (gold) per year. As a major foreign exchange earner, the industry also provides employment to approximately 1.5 million people directly and indirectly. (Source: CARE Report)
The Indian gems and jewellery industry is one of the world‟s most competitive markets due to the low cost of production and highly skilled labour. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian Gems and Jewellery industry - consisting of the domestic and the export market has the potential to grow from the current US$45 billion to US$100 billion by 2015.
As per the FICCI Technopak Report India‟s current dominant position lies in low value processed raw materials, as depicted on the Gems and Jewellery Value Addition Ladder below:
(Source: FICCI Technopak Report)
Being on this position also shows that India has a great opportunity to move up and be present across all the points in the value addition chain. Doing so can generate the next wave of growth and profitability as India consolidates its position in low-value gem processing and captures a greater share of high-value gem processing and Jewellery making. This move is also important as other low cost countries like China are striving hard to wrest share from India in its current areas of strength. (Source: FICCI Technopak Report)
The domestic market of gems and jewellery is estimated to be in the US$ 18-20 billion range. Given the fragmented nature of the industry it is difficult to put a finger on the exact size. The industry is expected to grow at around 13% annually and at this rate it could reach US$ 35-40 billion by 2015. Currently the domestic gems and jewellery market is fragmented across the value chain. There are more than 300,000 players across the gems and jewellery sector, with majority of them being small unorganised players who are operating on wafer thin margins. Organised retail of jewellery thus presents a significant opportunity to create additional value through higher margins, which would be possible through differentiation and branding. With the onset of organised retail in the last decade, lots of new players have entered the space. Currently modern retail players in jewellery space have only 5%-7% share of the total jewellery market, but this number would increase considerably in the near future. (Source: FICCI Technopak Report)
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(Source: FICCI Technopak Report)
The industry is characterised by a significantly large unorganised sector, labour-intensive operations, high working capital & raw material intensiveness, gold price volatility and export orientation. The demand for gold and diamond jewellery is driven by festivals, weddings and gifts, the increasing affluence of the middle class population and the increase in per capita on luxury items. (Source: CARE Report)
Though India plays a dominant role in the gems and jewellery industry in terms of processing and consumption, India‟s role in mining gold and diamonds is amongst the lowest in the world. Gold is imported from countries like Switzerland, South Africa, Australia and the United Arab Emirates, and rough diamonds are imported from Belgium, the United Kingdom, Israel and the United Arab Emirates. There has been an impact on the demand for gold due to the record high price of gold in the last couple of years, but consumers have continued to demand the precious metal and there is an increased investment-related demand for gold. The key drivers for growth in the industry are increasing disposable income, conscious marketing efforts, rising population with the urge to spend on jewellery as a fashion accessory.
The following outlines the changing trends in the Indian retail jewellery market:
Traditional Practice Emerging Trend Gold jewellery consumption emanates from traditional It is regarded as a fashion accessory by the growing and investment-related demand. young population. Demand peaks during weddings and festival seasons. They still remain the main demand drivers but its use for regular wearing and gifting has evened out the demand throughout the year. Consumption of pure gold – s preferred 22-carat. Lower caratage & light-weight jewellery preferred. Trend Traditional & ethnic designs preferred. is more towards fashionable and contemporary designs Purchase from neighbourhood jewellers dominated. Growing preference for brands, retail stores & e-retailing. Hence the industry lacked transparency Introduction of hallmarking & certifications. Pre-dominance of gold (yellow)-based jewellery. Acceptance of white gold, platinum and diamond-studded jewellery. Even imitation jewellery is gaining acceptance. Jewellery largely sold on prevailing gold price, per gram, Branded players sell on a fixed-price basis. plus labour charges. (Source: CARE Report)
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Precious Metals and Gems
Gold
Gold is more than a precious metal in Indian culture and is truly entrenched in India‟s culture. For hundreds of years, gold has been an important part of the Indian society and fused well into the psyche of an Indian. There is a tradition of buying gold during auspicious occasions such as Diwali, Akshaya Tritiya, Dussehra, and also during weddings. In rural India, farmers typically buy gold jewellery after a successful harvesting season as it is valued for its investment characteristics and as a hedge against inflation.
In 2009, total Indian gold consumption reached US$19bn or ` 974 bn equivalent at the end of 2009. Over the past decade, this has increased at an average rate of 13% per year, outpacing the country‟s real GDP, inflation and population growth by 6%, 8% and 12% respectively.
Gold jewellery demand in India, the world‟s largest gold jewellery market, rose 67% year-on-year to 272 tonnes in the first half of 2010. Over the same period, the average domestic gold price surged to almost ` 52,800/oz, before hitting a new high of ` 60,460/oz on October 15, 2010. Despite the higher gold price, market sentiment remains positive, especially with the local gold market also benefitting from the strengthening of the rupee against the US dollar. (Source: World Gold Council - www.gold.org)
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(Source: World Gold Council - www.gold.org)
India is the biggest consumer of gold in the world. To meet Indian consumption requirements for jewellery and investments, India imported 590 tonnes of gold in fiscal 2009. Almost 95% of the gold imported to India is used for jewellery. The major countries which supply gold to India are Switzerland, South Africa, Australia and the United Arab Emirates. A majority of gold in India is sold in retail sales and a small portion is held as reserves with the central government treasury.
Gold imports by value and tonnes
Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009
Gold (` cr) 39,712 52,156 65,889 80,553 88,243 86,140
In Tonnes 649 808 739 862 720 590
` per 10 gm 6,119 6,455 8,916 9,345 12,256 14,600
(Source: GJEPC Annual Report 2008-09 and industry sources)
According to the CARE Report, the consumption of gold in India has doubled over the past two decades - going up from approximately 400 tonnes in 1987 to about 800 tons in 2007. In 2009, gold demand in India was severely affected due to the global financial crisis, record high prices of approximately ` 18,232 per 10 grams during November 2009 and high volatility in gold prices (with gold prices increasing in the third quarter of fiscal 2010 by an annualised average of 19.7%). During the fourth quarter of fiscal 2010, gold imports in India increased 74% year-on-year to 126 tonnes and the CARE Report predicts that this growth will continue through the third quarter of fiscal 2011 assuming relative gold price stability and the rising demand for gold as an investment.
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Gold demand in India (Tonnes) CY 2004 2005 2006 2007 2008 2009 Jewellery 517.5 587.1 526.2 558.2 501.6 405.8 Consumption Net Retail Investment 100.2 134.5 195.7 215.4 211.0 74.2 Total 617.7 721.6 721.9 773.6 712.6 480.0 (Source: World Gold Council)
Gold Jewellery
Gold jewellery accounted for around 75% of total Indian gold demand in 2009, the remainder being investment (23%) and decorative and industrial (2%). Indian consumers also regard gold jewellery as an investment and are well aware of gold‟s benefit as a store of value. Wedding-related demand accounts for a substantial proportion of overall jewellery demand. This is particularly true in the south of India, where the most popular wedding jewellery sets tend to be the more traditional, intricate but bulky styles in heavier weights. In the northern cities more „western‟ styles, lighter wedding sets, as well as diamond-set pieces, are becoming increasingly popular. (Source: World Gold Council - www.gold.org)
(Source: World Gold Council - www.gold.org)
Silver
The CARE Report indicates that along with gold, silver enjoys a special place in the psyche of the Indian consumer and is considered the second-best investment option in precious metals. In the last two years, silver prices have grown significantly in line with the rise in gold prices resulting in a decline in demand for jewellery and fashion accessories. Going forward, CARE Research expects that the silver price movement will tend to follow the gold prices as the prices of silver and gold in Rupees have shown a correlation of 0.98 in the last 10 years.
Diamonds
India is one of the leading diamond processors in the world. With the rise in gold prices, consumers are turning to diamond-studded jewellery which gives them a higher perception of luxury and value. The craftsmanship and low cost of Indian diamond processors has given India a competitive edge in diamond cutting and polishing. The CARE Report indicates that India accounts for approximately 55% of the global polished diamonds market in terms of value, 80% share in terms of caratage and 92% in terms of pieces.
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India‟s dominance in the cutting and polishing segment has been attributed to superior craftsmanship, low cost of Indian labour and superior technology. (Source: The CARE Report)
Due to the global slowdown, diamonds are comparatively less expensive than they were in 2007. With only a gradual recovery from developed markets for diamonds, especially the US, Indian manufacturers have now focused in on the ever-growing demand from domestic market for diamond-studded jewellery. Given these new trends for diamond jewellery, diamond jewellery sales have increased by a multiple of four, from USD 1 billion to USD 4.2 billion in the last four years according to industry experts. (Source: The CARE Report)
According to some estimates, about 25% of the gold jewellery purchasers have switched to diamond- studded jewellery because diamond-studded jewellery is typically created in less-pure 18-carat gold compared to gold jewellery which is made from 22-carat gold.
Demand and Supply
India experienced the highest growth in jewellery demand, posting an increase of 36%. A rise in the value of the rupee against the US dollar offered Indian consumers some degree of protection from the full extent of the rise in the US$ price during the quarter. Demand increased to 184.5 tonnes from 135.2 tonnes a year earlier. In local currency value terms demand reached a remarkable ` 338bn, 67% higher than the same period of 2009. Restocking by the trade ahead of the fourth quarter festive season was a key driver of growth. The India International Jewellery Show (IIJS) in August in particular witnessed enthusiastic demand. Given the dual purpose of Indian jewellery, as both an adornment and an investment, the rising price helped to support demand for jewellery. Furthermore, consumers have adjusted their price expectations and are anticipating yet higher prices. This has had the twin effects of further reinforcing investment-related demand for gold jewellery while also encouraging consumers to purchase gold now rather than defer purchases to a time when prices are higher. (Source: Gold Demand Trends, November 2010)
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(Source: World Gold Council - www.gold.org)
According to the CARE Report, global retail sales value of jewellery, including diamonds and gemstones, is expected to reach US$185 billion in 2010 and US$230 billion by the year 2015 growing at CAGR of 4.6% between 2010 and 2015. In 2005, sales totalled US$146 billion and grew at a CAGR of 4.8% between 2005 and 2010 period. During 2009, the world GDP decreased by 0.8% to US$57,228.37 billion while for 2010 and 2011, world GDP is estimated to grow by 3.9% and 4.3%, respectively, according to International Monetary Fund (IMF). Historically, it has been observed that the correlation between the global jewellery sales and world GDP was very high at 0.99.
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Of total global sales of US$146 billion in 2005, diamond-studded jewellery was the largest segment, representing 47% of total jewellery consumption. By type of jewellery, diamond-studded jewellery accounted for the largest share of the global jewellery market, followed by plain gold jewellery.
According to data from the World Gold Council, the consumption of gold in India has doubled over the past two decades - going up from approximately 400 tons in 1987 to about 800 tons in 2007. In 2009, gold demand in India was severely affected due to global financial crisis, record high prices of approximately ` 18,232 per 10 grams during November 2009 and high volatility in gold prices (with gold price volatility increasing in the fourth quarter of calendar 2009 to an annualised average of 19.7%). Consumers have a tendency in India to postpone their purchases until the prices show rationality and restrain from panic buying. It has been observed that consumers lay emphasis on stability of gold prices rather than absolute prices of gold to make their purchases.
Demand Drivers for the Gems and Jewellery Industry
The CARE Report states that, as of June 2010, CARE Research predicts strong future demand for gems and jewellery will be due to the following demand drivers:
• The US is the world‟s largest market for jewellery followed by China, India and the Middle East. Europe, the UK and Italy are the largest consumers. These markets account or about 80% of the total worldwide sales. Since the demand for jewellery is showing only gradual sign of recovery in the US,
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the focus for the future growth in jewellery for future growth in jewellery industry depends on emerging markets like India, China, Latin America, Middle East and South East Asia. CARE Research predicts that these regions will develop as the largest consuming markets for both traditional as well as branded jewellery and overtake the US in gems and jewellery consumption by next decade. (Source: The CARE Report)
• The global retail sales value of jewellery, including diamonds and gemstones, is expected to reach US$185 billion in 2010 and US$230 billion by the year 2015 growing at CAGR of 4.6% between 2010 and 2015. In 2005, sales totalled US$146 billion and grew at a CAGR of 4.8% between 2005 and 2010 period. During 2009, the world GDP decreased by 0.8% to US$57,228.37 billion while for 2010 and 2011, the world GDP is estimated to grow by 3.9% and 4.3%, respectively, according to International Monetary Fund (IMF). Historically, it has been observed that the correlation between global jewellery sales and world GDP was very high at 0.99. (Source: The CARE Report)
• Increased urbanization, higher percentage of younger population, multiple-income families and more women in the workforce is giving rise to higher disposable income level leading to impulse buying and a preference for improved lifestyle. These factors are currently driving the demand for gems and jewellery, especially diamond-studded jewellery. Individuals with increased disposable income have become more inclined to purchase jewellery in modern and aesthetic designs as a fashion accessory, which is in contrast to rural Indians who buy jewellery as an alternate medium of investment. According to the National Sample Survey, the share of essential items in urban India, such as food, clothing, electricity, fuel and footwear, has decreased in the total average annual per capita consumption, whereas the share of durable goods has increased, reflecting the changing preferences of consumers. The increased consumer awareness and consciousness generated through the vigilant government campaigns are expected to drive the demand for branded and hallmarked jewellery. (Source: The CARE Report)
Manufacture of Jewellery
Jewellery manufacture, diamond polishing and setting is a process that requires significant skill. Although machines can perform some part of the work, the process is very labour intensive. India, with its availability of low-cost skilled labour is in a position to deliver products of good design and quality at a low cost.
India has well-established capabilities in manufacturing hand-made jewellery in traditional as well as modern designs. Indian hand-made jewellery has ethnic demand in various geographies with a high Indian population like Middle East, the US and Canada. With traditional hand-made jewellery, India has also progressed in using the latest technologies in diamond-processing and jewellery-making. Many of India‟s jewellery manufacturing companies are now equipped with latest Computer Aided Design /Computer Aided Manufacture systems and other advanced software programmes. The diamond processing companies have modern equipment, such as laser machines, automatic and semi-automatic bruiting machines and auto planners. India also has an ample professionally-trained workforce which is well-versed to operate the latest equipment.
Jewellery Retail
Branded jewellery has been a relatively recent phenomenon in India because most jewellery is sold in the unorganized sector. Consumers have become more informed about the quality and certification of gold jewellery and are now insisting on certification. Traditionally, gold has been purchased because of its investment value along with aesthetic value, unlike in countries other than India, where it is bought only for ornamental purposes. With changing demographics, the branding of jewellery and the retail revolution, young customers (from age groups of 20-40 years) prefer buying jewellery for fashion rather than for investment. Many companies have started investing in brand-building exercises for their products. All these efforts are expected to result in higher growth in the branded and therefore also organised jewellery market.
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The branding of jewellery in India follows the pattern in the international market where 90% of the jewellery is sold as a fashion accessory or as everyday wear and not as an investment. Branded jewellery in India is positioned as a lifestyle and personality statement. There has also been a shift in consumer preference towards diamond-studded jewellery due to the extensive positioning of diamond-studded jewellery as both affordable and contemporary. Another key development in branded jewellery has been the introduction of value added services such as the certification of gold and diamonds, and lifetime return and buy-back schemes. These trade practices have resulted in the perception of superior quality being associated with branded jewellery. The new generation of jewellery purchasers does not have ongoing relationships with local jewellers and prefers to buy branded jewellery. (Source: The CARE Report)
Retail Formats
In India, organised retailers account for a mere 4% of the total jewellery retail market. This is because of the buyers‟ preference and trust in their neighborhood goldsmith. Even the standardisation of designs is not possible due to varying local tastes. There are about 15,000 vendors across the country in the gold processing industry, with over 450,000 gold smiths spread across the country. There are also more than 6,000 vendors in the diamond-processing industry (Source: The CARE Report). Organised vendors have been growing steadily, carving a market share of 4% of the industry (Source: The CARE Report). With consumer preference for fine quality goods, branded jewellery, hallmark certification and maturity in the jewellery market, organised retail share is expected to grow. Elevated gold prices, higher borrowing and operating costs, makes the survival of family-owned jewellers difficult as well.
Pricing
Gold is a renowned metal not only for its traditional use for adornment but also for its stance as a time- tested investment-class asset. The price of gold is determined by the fundamental demand-supply dynamics of the gold bullion market. Gold is considered to be a relatively safe investment in times of economic volatility and uncertainty. With the recent weakness and high fiscal debt levels of major western paper currencies, gold has attracted many investors, as evidenced by gold‟s record high prices in the last two years. The Indian consumer is generally regarded as sophisticated and price sensitive and remains very risk averse when the prices are volatile. When prices are high an increase in sales of scrap gold is often observed and conversely when prices fall or show signs of stability, it results in an increase in demand. (Source: The CARE Report).
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OUR BUSINESS
Overview
We are one of the leading south India based jewellery companies with focus on Large Format Stores. Our jewellery business consists of the sale of jewellery made of gold, diamond and other precious stones, platinum and silver. We are also engaged in the business of selling textiles, apparels and accessories through our Wedding Centres in Kerala. We offer a wide range of products across various price points and cater to customers across all market segments. In Fiscal 2008, 2009 and 2010, we sold 7,154.35 kg, 8,430.05 kg and 8,807.46 kg of Gold, respectively. In Fiscal 2008, 2009 and 2010, our total income from sale of Gold was ` 7,500.64 million, ` 11,248.35 million and ` 14,468.25 million, respectively, representing a CAGR of 38.89% over the aforesaid period.
We conduct our jewellery retail business under the brand name “joyalukkas”. We started retailing jewellery in India in the year 2002 with the launch of our first retail store at Kottayam in Kerala.
The following table depicts the details of our jewellery, and textiles, apparels and accessories business operations as of and for Fiscal 2008, 2009, 2010 and as of and for the six month period ended September 30, 2010:
Sr. No. Particulars Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, 2010 1. Number of stores 13 15 20 21 2. Floor area (sq. ft.) Jewellery 185,713 200,893 235,438 261,752 Textiles, Apparels and 104,617 104,617 104,617 104,617 Accessories* 3. Gold Sales (in kg) 7,154.35 8,430.05 8,807.46 5,223.05 4. Revenue (` in million) Jewellery 8,345.53 12,843.45 16,730.07 11,765.13 Textiles, Apparels and 1,280.90 1,428.29 1,490.52 779.49 Accessories *As per the certificate obtained from Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai 400 601.
As of December 31, 2010 we had 22 retail stores, of which 10 are Large Format Stores, each having a floor area of 12,000 sq. ft. or more. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area of 12,000 sq. ft. or more. For further details, see Objects of the Issue on page 31.
Our Premier Stores are the three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft.
We sell our textiles, apparels and accessories through our four Wedding Centres situated in Kerala (Angamaly, Thiruvalla, Kollam and Ernakulam) having an aggregate floor area of 157,593 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, textiles, apparels and accessories for weddings and other festive occasions in the same store. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. Further, our Wedding Centres cater to the textile and apparel requirements of an entire family, with their wide collection of men‟s, women‟s and children‟s apparel.
As of March 31, 2010 and September 30, 2010, we maintained an aggregate inventory of 2,222.74 kg and 2,385.47 kg of Gold, respectively. In addition we maintained an inventory of jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs.
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The Joyalukkas Group was established in the year 1988 by our Promoter, Alukkas Varghese Joy and commenced operations in the United Arab Emirates in jewellery retail business. Our Promoter has over 22 years of experience in the jewellery retail business. We have built on his experience and reputation to create strong brand equity and a wide customer base.
We received the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We had also received the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai. We also received the first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala, the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala. We were recognized with the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai, the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon, and the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & GoldSouk. We also received an award in Kerala adfest, 2007 instituted by Advertising Industries Media and the award for Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala.
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department.
In Fiscal 2008, 2009 and 2010, our PAT was ` 167.24 million, ` 496.08 million and ` 673.52 million respectively, while in the six months ended September 30, 2010 our PAT was ` 544.74 million. In Fiscal 2008, 2009 and 2010, our EBITDA was ` 563.82 million, ` 1,162.50 million and ` 1,422.25 million respectively.
Our Competitive Strengths
We believe that our primary competitive strengths include the following:
Large Format Stores and Wedding Centres at strategic locations
As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more. Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. As of September 30, 2010, we maintained an aggregate inventory of 690.46 kg of Gold at our three Premier Stores. This is in addition to the jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs. Our store in Chennai has a floor area of 57,430 sq. ft. across five floors with 190 employees as of December 31, 2010. Our store in Bangalore has a floor area of 26,314 sq. ft. across five floors with 150 employees as of December 31, 2010. Our store in Coimbatore has a floor area of 12,565 sq. ft. across four floors with 138 employees as of December 31, 2010. Our Premier Stores with an aggregate floor area of 96,309 sq. ft. display a wide range of jewellery products at any given point in time. Our Large Format Stores enhance our efficiency as they require less managerial staff in proportion to the large inventory of jewellery products. We believe that our Large Format Stores provide a luxury retail shopping experience, in addition to the inventory that these retail stores are able to offer, enables us to attract customers to our product offerings.
Of our 22 retail stores, we sell our textile products through four Wedding Centres situated in Kerala with an aggregate floor area of 104,617 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, premium festive clothing and accessories for weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of the entire family, with its wide collection of men‟s, ladies‟ and children‟s apparel. We believe that this is an innovative concept, which enables us to cross sell a wide range of our product offerings to our customers.
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Experience of our Promoter and a strong management team
Our Promoter, Alukkas Varghese Joy has over 22 years of experience and is well known in the retail jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. The Joyalukkas Group was established in United Arab Emirates in the year 1988 by our Promoter and entered jewellery retailing business in India in the year 2002. The Joyalukkas Group includes 39 retail stores and one textile outlet outside of India, 25 of which are situated in United Arab Emirates, two in Qatar, four in Kuwait, two in Bahrain, five in Oman and one in the United Kingdom. We have leveraged on our Promoter‟s experience, reputation and industry contacts to create strong brand equity in the jewellery sector in India and outside, with a wide customer base. Our Promoter won the NRI Retailer Award of the Year 2007 at the Retail Jeweller Awards 2007.
We also have a dedicated management team, who are responsible for the overall strategic planning and business development of our Company. Our qualified senior management with significant industry experience has been instrumental in the consistent growth in our revenues and operations.
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department. We believe that a motivated and dedicated employee base is key to our success in managing our Large Format Stores and allows us to provide a quality luxury shopping experience for our customer base.
Strong track record and established brand equity with robust sales and marketing network
Our prominent presence as a jewellery retailer in south India has been a result of our strong branding, our marketing efforts and a favorable response from our customer base. We have further strengthened our brand portfolio with the launch of internal brands aimed at different customer profiles, various markets and price segments and for various uses and occasions.
We have won several awards, including, the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We have also won the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai; first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala; the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala; the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai; the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon; the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & Gold Souk; the Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala.
Our marketing initiatives also include our customer loyalty programs such as golden rewards program, Business to Business Solutions (“B2B Solutions”), discount sales, easy gold schemes and others. For further details see “Our Business-Marketing” on page 78.
In addition to our sales to a wide range of customers through our retail stores mostly spread throughout south India, our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, advertisements in cinema hall, bus terminals, railway stations and similar displays. Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller ring tones. We believe that effective marketing is an important investment in future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive cost-effective manner.
Use of efficient internal processes to leverage our sales
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We rely on our internal processes for activities ranging from the procurement of bullion, finished jewellery and textile products, identification of craftsmen and jewellery suppliers, specifications and design, selection of store location, conduct constant market analysis to ascertain market perception, change and competitiveness, inventory management as well as activities like purity testing, hallmarking, bar coding, branding, packaging, store design and management. We believe that our understanding of the jewellery, textile and apparel industry helps us in assessing market opportunities and positioning ourselves accordingly. Our retail operations network are supported by our inventory management system that enables us to move our inventory to and from, and channel our sales through, our various retail stores depending on the relevant festive and other occasions and the demographic nature of our customers. We have evolved and continue to improve our internal processes which drive our business efficiency and profitability.
We believe that our effort to predict market expectations, in-house order projections, customer preferences towards specific stones and jewellery products enables us to undertake effective inventory management, ahead of our delivery schedule. We believe that our internal processes such as an effective Enterprise Resource Planning (“ERP”) system to manage finance and accounting, inventory of gold and other jewellery, internal and external resources, including tangible assets, human resources and financial resources, our internal audit systems, sales and distribution and extensive domain knowledge of our Promoter and Key Managerial Personnel has substantially contributed to the growth of our business operations.
Corporate tie-ups with leading companies as part of our Business to Business program
We maintain corporate tie-ups with certain key corporate clients through our B2B Solutions program for providing loyalty and retention related services. For the customers or clients of our B2B Solutions, we offer discount vouchers or options to earn loyalty points based on various loyalty programs. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners‟ outlets or stores and to redeem such points on purchase of our jewellery or textile or apparel products at our retail outlets. For instance, we have entered into a similar agreement with a leading hotel group, offering its members the option to redeem their gift vouchers against the purchase of jewellery at our retail stores. We also offer certain customized gifting options for our corporate-partners, based on their requirements. Our B2B Solutions aims at enhancing our corporate clientele and in turn a wide range of customers and also result in the creation of strong brand equity and increase our customer foot fall and revenues. We have followed a structured approach for our product development which involves market research, sales analysis, brand development, media campaigns and promotions. We believe that this has helped us forge strong relationships with key corporate customers and gaining increased business through their customers/clients. We believe that our structured approach towards brand development through our B2B Solutions and our execution capabilities has enabled us to create long term relationships with leading corporate clients.
OUR STRATEGY
The key elements of our business strategy are as follows:
Continue to expand our network of Large Format Stores and Wedding Centres
We intend to continue to develop our existing branded jewellery lines and introduce additional sub-brands and product offerings to cater to our customers and price segments in the diamond and platinum jewellery markets through expansion of our retail operations. We intend to capitalize on our significant experience and expertise in developing the branded jewellery market in India. Further we intend to leverage our goodwill associated with our existing brands, to further develop our various sub-brands in target markets and product segments in India. We seek to achieve this through expansion of our retail operations, increased marketing initiatives, innovative promotional campaigns and extensive advertising.
Our Large Format Stores are typically situated at strategic locations in prominent cities, such as in Chennai, Bangalore and Coimbatore. By September 2013 we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram, each with an estimated floor area of 12,000 sq. ft. or more. Our Large Format Stores
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in India offer comprehensive product range of jewellery made of gold, diamond and other precious stones, platinum and silver to target various jewellery categories and different customer and price segments as well as to provide custom made jewellery.
Our Wedding Centres are Large Format Stores that house a wide range of jewellery, textiles, apparels and accessories that specially cater to customers looking for wedding related purchases. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, apparel and accessories for weddings and other festive occasions under one roof. In Fiscal 2010 and for the six month period ended September 30, 2010, our total income from sale of textiles, apparel and accessories in our Wedding Centres was ` 1,404.81 million and ` 751.26 million respectively, which constituted 7.70% and 5.98% respectively of our total income.
Further increase our percentage contribution of diamond and platinum jewellery business to our total revenues
The sustained growth of Indian economy coupled with growing employment levels, income levels and availability of credit in India has resulted in greater consumer spending and disposable income. This has boosted the retail business in India and consequently resulted in the growth of retail jewellery business and increasing demand for jewellery made of diamond, platinum and other precious stones. In Fiscal 2009, 2010 and six months ended September 30, 2010, our revenue from the sale of jewellery made of diamond, platinum and other precious stones constituted 10.61%, 11.98% and 13.50% respectively of our total revenue. We intend to continue increasing our diamond and platinum jewellery retailing business and use our ability to provide a wide range of jewellery products of various grades, designs and price segments, our strong branded jewellery lines and our wide retail trade operations to increase our market share in diamond and platinum jewellery in India. We also intend to capitalize on the gradual shift of consumer preferences in India from traditional gold jewellery to jewellery made of diamond, platinum and other precious stones.
Continue to invest in our marketing initiatives and brand building exercise
We intend to continue investing in our marketing initiatives and brand building exercise, including advertising through various media. In Fiscal 2010, and for the six month period ended September 30, 2010, we had expended ` 480.56 million and ` 333.92 million respectively, towards advertising and sales promotions expenses, which constituted 2.64% and 2.66% respectively of our total income. Further we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We believe that effective marketing is important for future revenue growth, to improve our Company‟s brand visibility, to establish relationships with target markets and to sell a great number of our products in a competitive cost- effective manner.
Set up service centres in Bangalore and Chennai
We intend to set up specialized service centres in our Large Format Stores situated in Bangalore and Chennai. These service centres would cater to our wide range of customers by providing free service on our jewellery products. This may also increase the number of repeat customers, establish long term relationships with our repeat customers and increase the sales of a wider range of jewellery products.
Hedging arrangements to mitigate risks associated with gold price fluctuations
We do not completely hedge our exposure to losses arising from gold price variations. We intend to enter into suitable forward contracts or other hedging mechanisms with banks, commodity exchanges and other financial institutions, to hedge risks arising out of fluctuations in gold prices, market value of bullion and foreign currency conversion rates for our export sales.
Our Operations
Our business operations can be broadly categorized into two verticals, namely, (a) manufacture and retail trading of jewellery and (b) retail trading of textiles, apparels and accessories.
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Our Business
Jewellery Textile/Apparels
Gold Diamond Platinum and Silver Precious Stones
Wedding and Accessories other apparels
We conduct our jewellery retail business under the brand name “joyalukkas”. As of December 31, 2010 we operated 22 retail stores with an aggregate floor area of 270,852 sq. ft. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013. These new stores would be Large Format Stores with an estimated floor area of 12,000 sq. ft. or more.
The following table summarizes the jewellery retail business of our Company:
Sr. Store Location Floor Date of Gold Sales (In Rupees Million) No. Area Launch Inventory Fiscal Fiscal Fiscal Six (sq.ft.) (In Kg) as 2008 2009 2010 months on ended September September 30, 2010* 30, 2010 Kerala 1. Kollam 19,771 October 89.75 592.83 587.38 445.53 389.65 31, 2004 2. Ernakulam 23,358 April 2, 113.27 711.82 766.48 530.33 462.68 2006 3. Thiruvalla 4,846 May 9, 86.17 460.71 539.97 457.31 429.21 2004 4. Angamaly 5,002 October 83.57 278.85 376.07 271.14 247.54 27, 2002 5. Kottayam 12,046 August 81.04 313.83 303.02 257.72 187.97 18, 2002 6. Thrissur, Palace 7,009 November 98.34 - - 167.45 279.84 Road 10, 2009 7. Thiruvananthapuram 6,096 August 122.68 - - 374.12 445.50 16, 2009 8. Thrissur, Round, 2,000 March 5, 57.98 254.87 609.48 196.28 128.54 East 2006 Tamil Nadu 9. Chennai 57,430 March 16, 324.88 352.13 3,738.98 4,041.10 2,242.9 2008 10. Salem 29,005 March 25, 114.03 1,134.01 853.8 1,000.88 644.52 2007 11. Coimbatore 12,565 May 30, 160.48 1,726.46 1,806.8 2,703.65 1,447.92 2004
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12. Madurai 6,642 December 103.46 862.45 767.54 1,094.87 619.1 17, 2006 13. Thirunelveli 4,454 June 24, 82.50 624.04 598.68 820.99 512.93 2007 14. Karur 8,640 January 78.51 - - 119.88 280.69 17, 2010 15. Kanchipuram 3,800 March 7, 75.40 - - 45.19 281.57 2010 16. Vellore 9,000 January 122.64 - - 294.81 684.02 10, 2010 Other Regions 17. Bangalore 26,314 July 4, 205.10 - - - 561.85 2010 18. Hyderabad 4,645 March 26, 81.10 328.36 571.5 681.81 466.44 2006 19. Puducherry 14,080 February 101.15 - 196.26 1,384.52 628.74 15, 2009 20. Gurgaon 3,949 October 39.60 127.33 164.41 210.59 126.01 15, 2005 21. Mangalore 9,100 October - - - - - 24, 2010 22. Mumbai 1,100 May 4, 46.29 - 204.72 274.88 168.56 2008 TOTAL 270,852 2,267.94 7,767.69 12,085.09 15,373.05 11,236.18 *excludes gold held in our purchase divisions, melting units and with job workers.
The following table summarizes store-wise sales of jewellery made of gold, diamond, platinum and precious stones in Fiscals 2008, 2009, 2010 and six months ended September 30, 2010:
Sr. Store Location Gold sales (In Rupees Million) Diamond, Platinum and Precious Stones No. sales (In Rupees Million) Fiscal Fiscal Fiscal Six Fiscal Fiscal Fiscal Six 2008 2009 2010 months 2008 2009 2010 months ended ended September September 30, 2010 30, 2010 1. Kollam 532.41 541.00 394.91 350.47 60.38 46.72 50.61 39.18 2. Ernakulam 643.20 705.85 447.45 408.58 68.57 62.05 83.79 54.36 3. Thiruvalla 418.51 498.43 406.97 375.96 42.13 41.67 50.34 53.32 4. Angamaly 248.34 341.07 229.86 216.72 30.50 35.28 41.36 30.83 5. Kottayam 285.00 272.95 225.17 170.30 28.82 30.15 32.55 17.67 6. Thrissur, Palace - - 40.71 39.07 Road - - 126.81 240.77 7. Thiruvananthapuram - - 296.04 391.47 - - 78.15 53.67 8. Thrissur, Round, 17.99 22.12 22.81 8.96 East 236.87 587.53 173.53 119.59 9. Chennai 292.70 3,082.26 3,288.35 1,812.19 59.36 614.75 710.78 399.99 10. Salem 1,033.50 757.16 856.86 561.37 97.07 88.10 136.17 78.15 11. Coimbatore 1,572.57 1,618.77 2,434.31 1,244.55 153.35 178.78 266.27 190.51 12. Madurai 760.55 656.18 926.58 508.25 97.68 101.90 157.49 102.67 13. Thirunelveli 577.11 540.49 734.45 457.75 46.04 54.91 80.49 50.85 14. Karur - - 99.92 242.12 - - 18.72 33.64 15. Kanchipuram - - 38.51 242.48 - - 4.80 28.18 16. Vellore - - 251.98 591.65 - - 40.60 85.20 17. Bangalore - - - 402.96 - - - 155.12 18. Hyderabad 256.68 425.98 514.10 336.25 71.67 145.88 168.02 130.37 19. Puducherry - 178.36 1,252.28 547.89 - 17.87 131.88 77.01 20. Gurgaon 98.15 129.97 174.22 93.45 29.18 34.46 36.45 32.56 21. Mangalore ------22. Mumbai - 174.49 242.37 139.73 - 30.23 32.51 28.82 TOTAL 6,955.59 10,510.49 13,114.69 9,454.52 802.74 1,504.85 2,184.49 1,690.13
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The following table summarizes the textiles, apparels and accessories retail business of our Company through our Wedding Centres:
Sr. Store Floor Area Sales (In Rupees Million) No. Location (sq.ft.) Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, 2010 1. Kollam 39,896 477.46 556.58 639.09 372.37 2. Ernakulam 23,181 328.38 311.73 227.20 106.67 3. Thiruvalla 28,396 294.50 350.16 394.53 188.23 4. Angamaly 13,144 120.74 137.48 143.99 83.99 Export Sales 59.81 72.34 85.71 28.23 TOTAL 104,617 1,280.90 1,428.29 1,490.52 779.49
Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area 12,000 sq. ft. or more.
Following is the map of India highlighting our existing retail stores:
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Our Jewellery Stores
As of December 31, 2010, we had 22 retail stores in 21 cities in India, eight of which are situated in Kerala, eight in Tamil Nadu and one each in Puducherry, Bangalore, Mangalore, Hyderabad, Mumbai and Gurgaon. Further, out of our 22 retail stores, 10 are Large Format Stores each having a floor area of 12,000 sq. ft. or more.
Our three Premier Stores are the Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate floor area of 96,309 sq. ft. We believe that the large format, luxury retail shopping experience and the inventory that these stores offer, enables us to attract customers to our product offerings.
Our Premier Stores
Coimbatore Store -
Our Large Format Store situated in Coimbatore was the first retail store that we set up in Tamil Nadu, situated at Cross Cut Road in Coimbatore having an aggregate floor area of 12,565 sq. ft. The store started its operations on May 30, 2004. This is one of our Large Format Stores in Coimbatore with ample car parking facility. As of December 31, 2010, we had 138 employees working in the Coimbatore store. The store has four levels, ground plus three floors. The ground floor sells generic gold and antique jewellery. The first floor is exclusively dedicated to jewellery made of diamond, platinum and other precious stones. The second floor comprises regular gold and silver jewellery. The store also has a prayer room, feeding room and restrooms for the convenience of our customers.
Chennai Store -
Our Large Format Store situated in Chennai is known for its wide collection of jewellery, size of the store and its ambience. The store has five levels, having an aggregate floor area of 57,430 sq. ft. with an ample car parking facility. As of December 31, 2010, we had 190 employees working in the Chennai store. On the ground floor we sell generic 22 carat gold jewellery, while on the first floor we sell gold brands, gold watches, 24 carat gold statues, traditional gold jewellery and jewellery made from other precious stones. The second floor is exclusively dedicated to diamond and platinum jewellery. On the third floor we sell silver jewellery, gift articles, silver furniture and we have a VIP lounge and a unique diamond cave. Our purchase division, regional office and B2B Solutions division are situated on the fourth floor. The diamond cave gives information to our interested customers on the history of diamonds including mining, cutting, polishing and designing of diamond jewellery.
This is our largest jewellery retail store, in terms of store size, gold and diamond jewellery stock, car parking facility, number of staff and by quantity of our sales. Apart from these, there are facilities such as a feeding room, prayer rooms, and restrooms etc. to cater to the comfort of our customers. Further, we have won the „Best Single Retail Store of the Year‟ award for our Chennai store at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation.
Bangalore Store -
Our Large Format Store situated on M. G. Road, Bangalore is spread over an aggregate floor area of 26,314 sq. ft. Our Bangalore store was inaugurated on July 4, 2010. As of December 31, 2010, we had 150 employees working in the Bangalore store. The building has five levels with ample car parking facility. On the ground floor we sell generic antique, traditional and contemporary gold jewellery. The first floor features exclusive branded collections and jewellery made from other precious stones. The second floor showcases diamond bridal sets and premium diamond sets. The third floor houses the joyalukkas branded collections in pearls, diamonds and platinum. It also features a dedicated section for silver artifacts, utensils and jewellery. The store also has feeding rooms, prayer rooms and refreshment corners to cater to the comfort of our customers.
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Our Jewellery Business
Our jewellery products consist of four product segments:
(a) Gold jewellery;
(b) Diamond jewellery;
(c) platinum jewellery and jewellery made from other precious stones; and
(d) silver jewellery.
Sourcing of Jewellery
Gold jewellery
We source our inventory of gold jewellery through the following routes:
(a) Purchase of bullion/standard gold from bullion suppliers and converting them into finished jewellery through job-work arrangements;
(b) Purchase of finished gold jewellery from independent jewellers/ suppliers; and
(c) Purchase of old gold jewellery from customers and converting them into finished jewellery through job-work arrangements.
We place orders for the purchase of bullion/standard gold from gold suppliers or finished gold jewellery from a large number of local independent jewellery manufacturers, based on our requirements received from each of our retail stores, through our centralized purchase division having regional offices. The bullion/standard gold is converted into finished gold jewellery through job-work arrangements with our dedicated group of goldsmiths/ job-workers. We select the jewellery designs, based on market trends and our requirements in each of our retail stores, or we obtain designs through leading design houses. The raw materials required for the manufacture of gold jewellery products, such as, standard gold/bullion, copper and colored-stones are provided by us to the job-workers, based on our requirements. We have entered into agreements with major suppliers of bullion, such as, with the Bank of Nova Scotia for spot purchase of bullion and also entered into supply agreements with some of our major suppliers of finished jewellery and job-workers. Additionally, we procure old jewellery from our customers who intend to exchange their old jewellery for new designs or against payment of cash.
We currently have five purchase divisions for the purchase of gold, situated at Thrissur, Coimbatore, Chennai, Bangalore and Hyderabad.
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The following flowchart indicates the mode of procurement of raw materials for the manufacture of gold jewellery:
Gold Jewellery - Raw Materials
Standard Gold Old Gold Copper Loose Stones
Outsourced for purification
Standard Gold
Finished Jewellery through Job-work arrangements
Diamond Jewellery
We source our inventory of diamond jewellery through the following routes:
(a) Purchase of finished diamond jewellery from independent jewellers/suppliers; and
(b) Job-work arrangements for manufacture of diamond jewellery.
The procedure followed for the sourcing of diamond jewellery is similar to that of gold jewellery. We currently have four regional purchase divisions for the purchase of diamond jewellery, situated at Thrissur, Chennai, Hyderabad and Bangalore. We have entered into supply agreements with some of our major suppliers of finished diamond jewellery.
Platinum Jewellery and Jewellery made from other precious stones
We source our inventory of jewellery made of platinum and other precious stones completely through purchase of finished jewellery from independent jewellers/suppliers. The procedure followed for the sourcing of jewellery made of platinum and other precious stones is similar to that of gold and other jewellery products. We currently have three regional purchase divisions for the purchase of jewellery made of platinum and other precious stones, situated at Thrissur, Chennai and Bangalore. We have entered into supply agreements with some of our major suppliers of jewellery made of other precious stones.
Silver Jewellery
We source our inventory of silver jewellery through the following routes:
(a) Purchase of finished silver jewellery from independent jewellers/suppliers; and
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(b) Purchase of old silver jewellery from customers and converting them into finished jewellery through job-work arrangements.
The procedure followed for the sourcing of silver jewellery is similar to that of gold jewellery. Our purchase division for the purchase of silver jewellery is currently situated in Chennai.
Processes undertaken by the Company
Upon receipt of finished jewellery from job-workers/independent jewellers, we undertake the following measures, prior to final sale of jewellery products to end-customers:
A. Quality control
Quality control involves physical verification and inspection of the finished jewellery products and mechanized purity check of the finished jewellery products on a random basis. The physical and mechanized verification is to ascertain the craftsmanship, finishing and purity of the jewellery products. Apart from the regular quality control measures, finished diamond jewellery products are tested on a four- point scale: carat, color, cut and clarity. Based on this test, the diamond jewellery is given a grade such as Flawless (FL), Internally Flawless (IF), Very Very Slightly Included (VVS), Very Slightly Included (VS), Slightly Included (SI) or Included (I).
B. BIS Hallmarking/ IGI and PGI certifications
Hallmarking is a gold purity assurance certification obtained from certain agencies certified by the Bureau of Indian Standards (“BIS”), a Central Government authority. BIS is a recognized certification authority in the gold jewellery industry. The hallmarking agencies test the purity of gold contained in the finished gold jewellery products and certifies such purity for each product. Our Company typically sells hallmarked gold jewellery through its retail stores.
Diamond jewellery is certified by International Gemological Institute (“IGI”). The IGI certification is a purity assurance certification. All diamond jewellery sold at our retail stores is certified by IGI except very small ornaments like nosepins etc.
Our platinum jewellery is certified by Platinum Guild International (“PGI”). The PGI certification is a purity assurance certification. All platinum jewellery sold at our retail stores is certified by PGI except very small ornaments like nosepins etc.
Further, we obtain purity assurance certification for our silver jewellery products from certain outside agencies. The purity assurance certification will specify the purity of silver contained in the finished silver jewellery products.
C. Bar-coding
The hallmarked jewellery products are bar-coded by our Company. Bar-coding is a process of categorizing, branding and pricing of the jewellery products, prior to distributing the finished jewellery products for sale in our retail stores. Bar-coding provides the maximum price at which a finished jewellery product can be sold. Further, bar-coding also enables the tracking of the finished jewellery products from the time of bar- coding until the sale of the jewellery product by invoicing the bar-coded details. Details such as gold content, item code, description of the item, weight, the name of the supplier, brand name, price, and stone value are typically included in the bar-coding of the finished jewellery products. Bar-coding is carried out prior to distribution to our retail stores.
D. Packaging
We package our jewellery products prior to their sale to our end-customer. Our packaging carries the “joyalukkas” brand name and is carried out at our retail stores.
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The following flowchart indicates the manufacturing process for gold jewellery:
Gold Jewellery
Finished Jewellery Job-works
Quality Control
Hallmarking
Bar-coding
Packaging
Sales
Our Product Portfolio
Our portfolio of finished jewellery products includes, among others, studs, chains, bangles, necklaces, bracelets, rings and anklets.
Our Textiles and Apparels Business
Our textiles, apparels and accessories business operations are carried out through our four Wedding Centres situated in Kerala. Our largest Wedding Centre is situated in Kollam having a floor area of approximately 39,896 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, clothing and accessories for weddings and other festive occasions in the same store. Further, our Wedding Centres cater to the textile requirements of an entire family, with its wide collection of men‟s, women‟s and children‟s apparel. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base.
The purchase division for the Wedding Centres is spread across our four stores. The Manager (Textiles) heads the textile division. All purchases for the Wedding Centres are directly controlled by the Manager (Textiles) and orders for purchase are placed based on the requirements received from each of the Wedding Centres.
As of December 31, 2010, our textile and apparel division comprised of 535 employees.
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Our textile and apparel purchases can be broadly categorized into: (a) seasonal purchases, (b) non-seasonal purchases and (c) purchase for export sales.
A. Seasonal purchases - These are bulk purchases made to fulfill our seasonal requirements, such as during Onam, Christmas and New Year seasons. Based on the previous years‟ sales figures, our purchase division prepares a purchase budget for the upcoming season. The purchase requisitions and purchase orders are prepared and approved based on this budget.
B. Non-seasonal purchases - These purchases are made based on our stock position and the anticipated marketability of certain unique and new products.
C. Export sales - These purchases are made for the purpose of our export sales of textiles and apparels to Joy Alukkas Center LLC, Sharjah.
Product Portfolio
Our textile product portfolio comprises of saris, men‟s wear, ladies wear, kids wear and life style clothing.
Human Resources
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department.
Marketing
Our marketing initiatives include advertising through various media, such as, television, radio, newspapers and magazines, interactive website, hoardings and display, CCTV visual advertisements at prominent locations, advertisements in cinema hall, bus terminals, railway stations and similar displays.
Further, we shall continue to consult external agencies on the optimum allocation of our marketing resources by determining the appropriate media vehicle for reaching out to our retail customers. We also have a professionally composed jingle used for electronic advertisements and as caller-tones. We believe that effective marketing is an important investment in future revenue growth, to improve our brand visibility, to establish relationships with target markets and to sell our products in a competitive cost- effective manner. Further we have won the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 from the Retail Jeweller Magazine, Mumbai.
In Fiscal 2010 and in the six month period ended September 30, 2010, we had expended ` 480.56 million and ` 333.92 million respectively for advertising and sales promotions across various media as part of our marketing initiative.
Competition
We operate in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. The jewellery industry is still an unorganized sector in India and therefore we face competition not only from other jewellery companies, but also from local jewellers and craftsmen, which affects our business prospects and margins. The Indian retail jewellery industry is highly fragmented and dominated by the unorganized sector, from which the organized retail jewellery sector faces intense competition. The players in the unorganized sector offer their products at highly competitive prices and many of them are well established in their local sectors. We also compete against certain organised national, regional and local players.
Intellectual Property Rights
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We have received a certificate of registration of trademark bearing number 512886 dated January 20, 2006 for the trademark “Alukkas” held by Joyalukkas Traders India Private Limited, P.O. Box 3014, Kurian Towers, Banerji Road, Kochi, Kerala. We have also applied for the following trademarks:
1. Application for trademark registration dated September 3, 2010 made by the Company in relation to the registration of trademark for “Joyalukkas” under 14, 24, 25 and 35.
2. Application for trademark registration dated July 3, 2006 made by the Company in relation to the registration of trademark for “joy alukkas” under classes 35, 36 and 14.
3. Application for trademark registration dated December 28, 2004 made by the Company in relation to the registration of trademark for “Dazzle” under class 42.
4. Application for trademark registration dated September 14, 2007 made by the Company in relation to the registration of trademark for “World‟s Favourite Jeweller” under classes 14 and 35.
5. Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for “Alukkas Wedding Centre” under class 14.
6. Application for trademark registration dated September 8, 2003 made by the Company n relation to the registration of the trademark for “Alukkas” under classes 14 and 25.
7. Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for “Ponnum Pudavayum Orumichu” under class 14 and 25.
Loyalty and Promotion Programs
Golden Rewards Program: This is a loyalty program of our Company where the customer is offered a „smart card‟ which offers the customer a wide range of benefits and privileges. To earn reward points, the customer presents the card at the time of purchase at any of our stores and receives points, which can later be redeemed by the customer, against future purchases at any of our stores. For every 10,000 points the customer will be eligible for a discount of ` 1,000.
B2B Program: „B2B Solutions‟ is a division of our Company dedicated towards customized corporate sales. It began operations in July 2008. We maintain corporate tie-ups with certain key corporate customers as part of our B2B Solutions program, for providing loyalty and retention related services. We offer the customers or clients of our B2B corporate-partners, discount vouchers or options to earn loyalty points based on various loyalty programs including credit and debit card usage or purchasing merchandise at various identified outlets in India. We offer reward points against such purchases/usage in order to enable the customers to earn points from purchases at the program partners‟ outlets or stores and to redeem such points on purchase of jewellery or textile products at our retail outlets. We also offer certain customized gifting options for our corporate-partners, based on their requirements. B2B is aimed at corporate clientele and with a view of creating strong brand equity and increasing customer foot falls and revenues.
Annual Clearance Sales: We periodically evaluate the stock position of the textile division of our Company. Non-moving items or old stocks are identified and ear marked for discount sales. We typically hold discount sales once a year.
Easy Gold Plan: Our easy gold plan enables the purchase of jewellery by a customer based on fixed monthly installment payments, starting from ` 500, for a specified period of time (12 or 18 or 24 months), for the purchase of gold or other jewellery products worth the total amount including a certain bonus from the Company, upon maturity of the plan at the then prevailing market price. Under the plan, purchase of 22 or 24 carat gold coins or bars is not permitted. Further, pre-payment of installments at one time and redemption (with bonus) thereafter on or before the indicated day of maturity is not allowed. Purchases can be made only after 30 days from the last installment paid under the plan. In case of default in payment of installments, the eligibility for purchase is proportionately reduced. Late payments are treated as defaults
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for that month and are taken into account in reducing the calculation of bonus under the plan. As per the plan, cash will not be refunded to the customer.
Corporate Social Responsibility
Joyalukkas Foundation is a public charitable trust created under the deed of declaration of trust dated August 12, 2009. It is a registered charitable trust under the provisions of the Income Tax Act. The objects of the trust include, among others, to give financial aid and assistance to establish, promote, set up, maintain and support the running of educational institutions, orphanages, schools and old age homes. Our Promoter, Alukkas Varghese Joy and our Promoter‟s spouse, Jolly Joy are the trustees of Joyalukkas Foundation. The employees of our Company voluntarily contribute a fixed sum out of their monthly salary to the Joyalukkas Foundation and the Company also contributes towards the same. The fund is mainly utilized for the medical aid and treatment of needy patients. Our Company has also formed a blood donation forum amongst its employees which has organized blood donation camps. Our Company has also organized green campaigns with the objective of improving the environment.
Property
Our Company holds several properties on lease hold and free hold basis, including our registered and corporate offices, retail stores, staff quarters and guest houses.
Registered and Corporate Office:
Our registered and corporate office, situated at door nos. 40/2096A, 40/2096B, first and second floors, Peevees Triton, Survey No. 843, Ernakulam Village, Kanayannur Taluk, Ernakulam District, India, has been leased from Pee Vee Holdings and Property Developers Limited pursuant to a continuing lease agreement dated December 9, 2004. The lease agreement is valid till January 31, 2014.
Retail Stores:
Our Company holds 18 leased and four owned premises for our retail operations. Our lease agreements are typically for terms ranging from five to 25 years and all such lease agreements are valid as of the date of this Draft Red Herring Prospectus.
Others:
We have also entered into 13 lease agreements for our staff quarters, 23 lease agreements for our guest houses, two license/lease agreements for parking facilities. These lease agreements are typically for terms ranging from 11 months to 15 years and all such agreements are valid as of the date of this Draft Red Herring Prospectus.
For details in relation to risks associated with our properties, see Risk Factor on page x and for interests of our Promoter in our properties see Our Promoter – Common pursuits and interest of our Promoter on page 101.
Insurance
We maintain the following insurance policies subject to specified limits, including an aggregate limit of ` 10,482.92 million on our insurance policies and vehicle insurance of ` 40.01 million: (a) standard fire and special perils policy to insure our stock of all kinds, including textiles and readymade, garments, personnel effects and such other goods; (b) jewellers‟ block insurance policy, which provides insurance cover against loss or damage by fire, explosion, lightning, riot and strikes, malicious damage, burglary, theft, robbery and hold up risks, including our stocks on display in our stores. It also covers property outside the premises while in the custody of its directors, employees, goldsmith etc. The policy also covers the stock whilst in transit with in India by air freight and also for furniture and fittings and trade equipments in the premises; (c) burglary insurance policies to insure our stock of ornaments made of gold, pearl, diamond and other precious stones, kept or displayed on window and displayed at night in our stores. Our policies also insure us against loss or damage suffered during transit of our stock, (d) We also have money insurance policies to
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insure the money in the personal custody of the insured or the authorized employee of the insured whilst in transit between premises and bank or post office or vice versa and (e) machine insurance for insuring our transformers, airconditioners and chiller plants. We have procured our insurance policies from New India Assurance Company Limited and Oriental Insurance Company Limited. There can be no assurance that our insurance coverage will be sufficient to cover the losses we may incur. For further details in relation to risks associated with insurance policies of the Company, see Risk Factor on page x.
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REGULATIONS AND POLICIES
The Government of India, the Government of Kerala and other State Governments and the respective local authorities have framed various regulations and policies all of which apply to us. A summary of these regulations and policies is detailed below. The following information has been obtained from the various statutes, regulations and/or local legislations and the bye laws of the relevant authorities that are available in the public domain. The regulations and policies set forth below may not be exhaustive and are only intended to provide general information to the investors and are neither designed nor intended to substitute for professional legal advice.
Our Company is involved in the business and manufacture and retailing of jewellery and the retailing of textiles.
Foreign Direct Investment
Under the extant foreign direct investment policy, foreign direct investment up to 100% is permitted in the gems and jewellery business under the automatic route subject to applicable laws/sectoral rules/regulations/security conditions. Multibrand retailing is a prohibited sector for foreign direct investment under the applicable foreign exchange regulations and the FDI Policy in India.
Investment by Foreign Institutional Investors
Foreign institutional investors (“FIIs”) including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated, institutional portfolio managers can invest in securities traded on the primary and secondary markets in India subject to various requirements of SEBI and RBI. FIIs are required to obtain an initial registration from SEBI and a general permission from RBI to engage in transactions regulated under Foreign Exchange Management Act, 2000. FIIs must also comply with the provisions of the SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time. The initial registration and RBI‟s general permission together enable a registered FII to buy (subject to the ownership restrictions discussed below) and sell freely securities issued by Indian companies, to realise capital gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares, to appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income received by way of interest and any compensation received towards sale or renunciation of rights issues of shares.
Non residents such as FVCIs, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per the existing regulations, OCBs cannot participate in this Issue.
Ownership restrictions of FIIs
Under the portfolio investment scheme, the overall issue of equity shares to FIIs on a repatriation basis should not exceed 24% of post-issue paid-up capital of the company. However, the limit of 24% can be raised up to the permitted sectoral cap for that company after approval of the board of directors and approval of the shareholders of the company by way of a special resolution. The holding of equity shares of a single FII should not exceed 10% of the post issue paid-up capital of the company. In respect of an FII investing in equity shares of a company on behalf of its sub-accounts, the investment on behalf of each sub- account shall not exceed 10% of the total issued capital of that company.
The Company will file an application with the RBI seeking its permission for participation by FIIs in the Issue under the portfolio investment scheme and for participation by NRIs in the Issue under the portfolio investment scheme as well as on a non repatriable basis under Schedule IV of 4 of the FEMA (Transfer or Issue of a Security by a Person Resident outside India) Regulations, 2000.
Investment by NRIs
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As per Section 5(3) of the Foreign Exchange Management Act (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA 20”), a NRI may purchase shares or convertible debentures of an Indian company either (a) on a stock exchange under the Portfolio Investment Scheme (“PIS”), subject to the terms and conditions set out in Schedule 3 of FEMA 20; or (b) on a non – repatriation basis other than under PIS, subject to terms and conditions set out in Schedule 4 of FEMA 20. Paragraph 2 of Schedule 4 of FEMA 20 provides that a NRI may, without limit, purchase on non- repatriation basis, shares or convertible debentures of an Indian company, issued whether by public issue or private placement or rights issue. The permission granted to NRIs is however subject to prior permission from the Central Government if the NRI has, as on January 12, 005, an existing joint venture or technology transfer / trademark agreement in the same field as the company, whose shares or convertible debentures are being acquired by the NRI.
The amount of consideration for the acquisition of shares by the NRI on non – repatriation basis is paid by way of an inward remittance through normal banking channels from abroad or out of funds held in NRE / FCNR / NRO / NRSR / NRNR account maintained with an authorized dealer or as the case may be with an authorized dealer in India. Please note that if the NRI is resident in Nepal or Bhutan, the payment can be made only by way of inward remittance in foreign exchange through normal banking channels.
The amount invested in the shares or convertible debentures and the capital appreciation thereon shall not be allowed to be repatriated abroad. NRIs are not permitted to invest in shares or convertible debentures of an Indian company on a non – repatriation basis under Schedule 4 of FEMA 20, if the company concerned is a chit fund or a nidhi company or is engaged in agricultural / plantation activities or real estate business or construction of farm houses or dealing in transfer of development rights.
Foreign Trade Policy 2009-2014
The revised foreign trade policy for the period 2009-2014 issued by the Ministry of Commerce and Industry includes gems and jewellery within the initiatives identified for special focus. The other sectors that are so identified include agriculture, handicrafts, handlooms, leather and footwear. The objective behind declaring a sector as a sector with special focus is to increasing the percentage share of global trade in relation to that sector and expanding employment opportunities within the sector. As per this policy:
(i) Import of gold of 8 carat and above is allowed under replenishment scheme subject to import being accompanied by a specified certificate specifying purity, weight and alloy content;
(ii) Duty free import entitlement of consumables and tools, for jewellery made out of:
a) Precious metals (other than gold & platinum) 2%
b) Gold and platinum 1%
c) Rhodium finished Silver 3%
d) Cut and Polished Diamonds 1%
(iii) Duty free import entitlement of commercial samples is ` 300,000;
(iv) Duty free re-import entitlement for rejected jewellery is 2% of FOB value of exports;
(v) Import of diamonds on consignment basis for certification/ grading and re-export by the authorized offices/agencies of Gemological Institute of America in India or other approved agencies is permitted;
(vi) Personal carriage of gems and jewellery products in case of holding/participating in overseas exhibitions increased to USD 5,000,000 and to USD 1,000,000 in case of export promotion tours;
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(vii) Extension in number of days for re-import of unsold items in case of participation in an exhibition in USA increased to 90 days; and
(viii) Endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse(s)”.
Gem and Jewellery Export Promotion Council
The Government of India has designated the Gem and Jewellery Export Promotion Council (“GJEPC”) as the importing and exporting authority in India in keeping with its international obligations under Section IV(b) of the Kimberley Process Certification Scheme (“KPCS”). The GJEPC has been notified as the nodal agency for trade in rough diamonds under para 2.2, chapter 2 of the foreign trade policy (2009-2014). The KPCS is a joint government, international diamond and civil society initiative to stem the flow of conflict diamonds, which are rough diamonds used by rebel movements to finance wars against legitimate governments. The KPCS comprises participating governments that represent 99.8% of the world trade in rough diamonds. The KPCS has been implemented in India from January 1, 2003 by the Government of India through communication No. 12/13/2000-EP (GJ) dated November 13, 2002. However, under the SEZ Rules, the Development Commissioners have been delegated powers to issue Kimberley Process Certificates for units situated in respective SEZs.
Labour Laws
A list of labour / industrial laws are applicable to Indian industries which includes the Industries (Development and Regulation) Act, 1951, Industrial Disputes Act 1947, the Employees’ Provident Funds and Miscellaneous Provisions Act 1952, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, Workmen Compensation Act, 1923, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936 and the Factories Act, 1948, amongst others.
The Employees State Insurance Act, 1948
The Employees State Insurance Act 1948, (“ESI Act”) provides for certain benefits to employees in case of sickness, maternity and employment injury. The ESI Act extends to the whole of India. It applies to all factories (including government factories but excluding seasonal factories) employing ten or more persons and carrying on a manufacturing process with the aid of power or employing 20 or more persons and carrying on a manufacturing process without the aid of power and such other establishments as the Government may specify.
A factory or other establishment, to which the ESI Act applies, shall continue to be governed by its provisions even if the number of workers employed therein falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power, subsequently.
The ESI Act does not apply to the following:
(i) Factories working with the aid of power wherein less than 10 persons are employed;
(ii) Factories working without the aid of power wherein less than 20 persons are employed;
(iii) Seasonal factories engaged exclusively in any of the following activities, cotton ginning, cotton or jute pressing, decortication of groundnuts, the manufacture of coffee, indigo, lacs, rubber, sugar (including gur.) or tea or any manufacturing process incidental to or connected with any of the aforesaid activities, and including factories engaged for a period not exceeding seven months in a year in blending, packing or repackaging of tea or coffee, or in such other process as may be specified by the Central Government;
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(iv) A factory which was exempted from the provisions of the Act as being a seasonal factory will not lose the benefit of the exemption on account of the amendment of the definition of seasonal factory;
(v) Mines subject to the Mines Act, 1952;
(vi) Railway running sheds; and
(vii) Government factories or establishments, whose employees are in receipt of benefits similar or superior to the benefits provided under the Act and Indian naval, military or air forces.
The appropriate Government may exempt any factory or establishments or class of factories or establishments or and employee or class of employees from the provisions of the ESI Act. Every employee (including casual and temporary employees), whether employed directly or through a contractor, who is in receipt of wages upto ` 10,000 per month is entitled to be insured under the ESI Act. However, apprentices engaged under the Apprentices Act are not entitled to the ESI benefits. Coverage of part time employees under the ESI Act will depend on whether they have contract of service or contract for service with the employer. The former is covered whereas the latter are not covered under the ESI Act.
Shops and Establishments legislations in various states
The provisions of various Shops and Establishments legislations, as applicable, regulate the conditions of work and employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures and wages for overtime work.
Payment of Gratuity Act, 1972
Under the Payment of Gratuity Act, 1972 (the “Gratuity Act”), an employee in a factory is deemed to be in, continuous service‟ for a period of at least 240 days in a period of 12 months or 120 days in a period of six months immediately preceding the date of reckoning, whether or not such service has been interrupted during such period by sickness, accident, leave, absence without leave, lay-off, strike, lock-out or cessation of work not due to the fault of the employee. An employee who has been in continuous service for a period of five years will eligible for gratuity upon his retirement, superannuation, death or disablement. The maximum amount of gratuity payable shall not exceed ` 1 million.
Payment of Bonus Act, 1965
Under the Payment of Bonus Act, 1965 (the “ Payment of Bonus Act” ) an employee in a factory who has worked for at least 30 working days in a year is eligible to be paid bonus. „Allocable surplus‟ is defined as 67% of the available surplus in the financial year, before making arrangements for the payment of dividend out of profit of our Company. The minimum bonus to be paid to each employee is 8.33% of the salary or wage or ` 100, whichever is higher, and must be paid irrespective of the existence of any allocable surplus. If the allocable surplus exceeds minimum bonus payable, then the employer must pay bonus proportionate to the salary or wage earned during that period, subject to a maximum of 20% of such salary or wage. Contravention of the Act by a company will be punishable by proceedings for imprisonment up to six months or a fine up to `1,000 or both against those individuals in charge at the time of contravention of the Payment of Bonus Act.
Minimum Wages Act, 1948
The State Governments may stipulate the minimum wages applicable to a particular industry. The minimum wages generally consist of a basic rate of wages, cash value of supplies of essential commodities at concession rates and a special allowance, the aggregate of which reflects the cost of living index as notified in the Official Gazette. Workers are to be paid for overtime at overtime rates stipulated by the
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appropriate State Government. Any contravention may result in imprisonment of up to six months or a fine of up to ` 500.
Workmen’s Compensation Act, 1923
If personal injury is caused to a workman by accident during employment, his employer would be liable to pay him compensation. However, no compensation is required to be paid if the injury did not disable the workman for three days or the workman was at the time of injury under the influence of drugs or alcohol, or the workman willfully disobeyed safety rules. Where death results from the injury the workman is liable to be paid the higher of 60% of the monthly wages multiplied by the prescribed relevant factor (which bears an inverse ratio to the age of the affected workman, the maximum of which is 228.54 for a worker aged 16 years) or ` 80,000. Where permanent total disablement results from injury the workman is to be paid the higher of 60% of the monthly wages multiplied by the prescribed relevant factor or ` 90,000. The maximum wage which is considered for the purposes of reckoning the compensation is ` 4,000.
Employees Provident Fund and Miscellaneous Provisions Act, 1952
The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (the “PF Act”) is applicable to every establishment which is a factory engaged in any industry specified in Schedule I of that legislation and in which twenty or more persons are employed, as well as to any other establishment employing twenty or more persons or class of such establishments which the Central Government may by notification in the Official Gazette specify in that behalf. The Central Government may notify schemes under the PF Act whereby the employer as well as the employee is required to make a contribution to a common pool of fund. The employee would be entitled to this fund on the occurrence of a specified event or at a stipulated time period. The contribution which is to be made by the employer to the fund is twelve percent of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees and the employee‟s contribution is equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding twelve percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the provisions of the PF Act.
Environmental Laws
Manufacturing concerns and other concerns that emit any form of an affluent as defined by the Water (Prevention and Control of Pollution) Act 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the Environment Protection Act, 1986 must also ensure compliance with the same.
Taxation
Taxation statutes such as the Income Tax Act, 1961, Central Sales Tax Act, 1956, the Finance Act, 1994, and applicable local sales tax statutes, and other miscellaneous regulations and statutes such as the Trade Marks Act, 1999 apply to us as they do to any other Indian company.
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HISTORY AND CORPORATE STRUCTURE
Our History
Our Company was incorporated as a private limited company under the Companies Act on April 22, 2002 under the name and style of Joy Alukkas Traders (India) Private Limited with its registered and corporate office at 42/1385 A, Kurians Cottage, St. Benedict Road, Ernakulam District, Kochi 682 018, Kerala, India. The shareholders of our Company at the time of its incorporation were Alukkas Varghese Joy and Jolly Joy. Our Company was allocated the corporate identity number U51398KL2002PTC015372. Subsequently, the name of our Company was changed to Joyalukkas India Private Limited pursuant to a certificate of change of name dated December 23, 2009. Our Company was converted into a public limited company on November 15, 2010 with the name “Joyalukkas India Limited” and received a fresh certificate of incorporation consequent upon change in status on December 9, 2010 from the RoC and was allotted a corporate identity number of U51398KL2002PLC015372.
Changes in Registered Office
Following are the details regarding shifting of our Registered Office:
From To With effect from Reasons for Change 42/1385 A, Kurians Cottage, St. 41/4108–E6, Kurian Towers December 17, 2003 To facilitate the business Benedict Road, Ernakulam Banerjee Road, Ernakulam of our Company District, Kochi 682 018, Kerala, District, Kochi 682 018 India Kerala, India 41/4108–E6, Kurian Towers, Door No. 40/2096, A&B June 6, 2005 To facilitate the business Banerjee Road, Ernakulam Peevees Triton, Shanmugham of our Company District, Kochi 682 018, Kerala, Road Marine Drive India Ernakulam District, Kochi 682 031 Kerala, India
Key Events, Milestones and Achievements
Year Key Events, Milestones and Achievements 2002 Incorporated as a private limited company under the name and style of Joy Alukkas Traders (India) Private Limited 2003 Implemented a new concept of “wedding centres” by opening our first “wedding centre” (at Angamaly, Kerala) 2004 Opened the first showroom in Tamil Nadu , at Coimbatore 2006 Opened a showroom in Hyderabad, Andhra Pradesh, which increased the total number of showrooms to 10 2007 Opened the fourth showroom in Tamil Nadu at Thirunelveli, which increased the total number of showrooms to 15 2008 Opened the Company‟s largest showroom in Chennai, with an area of 57,430 sq. ft. 2009 Achieved a turnover of ` 10,000 million for the year ended March 31, 2009. This was the first time our turnover crossed ` 10,000 million 2009 Opened a showroom in Puducherry and which increased the total number of showrooms to 20 2009 Underwent name change to „Joyalukkas India Private Limited‟ 2010 Opened the Company‟s first showroom in Karnataka, at Bangalore 2010 Converted into a public limited company and changed name to Joyalukkas India Limited
Awards and Accreditations
Fiscal Award Year 2011 „Best Single Retail Store of the Year‟ award to our Chennai showroom at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation 2011 „Best Retail Jewellery Chain of the Year‟ award at the National Jewellery Awards 2011 organized by the All India Gems and Jewellery Trade Federation 2010 Retail Chain of the Year Award at the Retail Jeweller India Awards 2010 instituted by the Retail Management Group‟
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Fiscal Award Year 2010 Highest Commercial Tax Payer in Jewellery Retail at the Kerala Trade Awards 2010 organised by the Government of Kerala 2009 Retail Jeweller India Awards for the television campaign, 2009 instituted by the „Retail Management Group‟ 2009 360 Degree Marketing Campaign for the Year 2009 at the Retail Jeweller India Awards instituted by the „Retail Management Group‟ 2009 Kerala‟s Highest VAT Payer in Gem & Jewellery Industry at the Kerala Gem & Jewellery Show – Gold Souk Awards 2008 Best Consumer Choice Award at the Retail Jeweller Awards, 2008 instituted by the „Retail Management Group‟ 2008 Best Overseas Retailer of the Year at the Kerala Gem & Jewellery Awards, 2008 at the Kerala Gem & Jewellery Awards, 2008 2007 Best Retailer of the Year at the JJS Gold Souk Awards, 2007 2006 Best Retail Promotion of the Year at the Retail Jeweller Awards, 2006 instituted by the „Retail Management Group‟
Main Objects
Our main objects enable us to carry on our current business. The main objects of our Company as contained in our Memorandum of Association are as follows:
“To carry on the business of wholesale and retail dealers, manufacturers, importers and exporters of gold and silver ornaments, diamond and precious stones, platinum and white gold ornaments and accessories and of acquiring and trading in textiles, fashion articles, perfumes, cosmetics, watches, cutlery, utensils, curio articles, antiques and other consumer articles.”
Amendments to Memorandum of Association
Since incorporation, the following changes have been made to our Memorandum of Association:
Date of Shareholders’ Amendment Approval September 20, 2002 Increase in authorised capital from ` 1,000,000 divided into 2,000 Equity Shares of ` 500 each to ` 50,000,000 divided into 100,000 Equity Shares of ` 500 each March 30, 2005 Increase in authorised capital from ` 50,000,000 divided into 100,000 Equity Shares of ` 500 each to ` 100,000,000 divided into 200,000 Equity Shares of ` 500 each January 29, 2007 Increase in authorised capital from ` 100,000,000 divided into 200,000 Equity Shares of ` 500 each to ` 250,000,000 divided into 500,000 Equity Shares of ` 500 each September 28, 2007 Sub-division of each Equity Share of ` 500 into 50 Equity Shares of ` 10 each October 30, 2007 Increase in authorised capital from ` 250,000,000 divided into 25,000,000 Equity Shares of ` 10 each to ` 650,000,000 divided into 65,000,000 Equity Shares of ` 10 each December 16, 2009 Change of name of our Company from „Joy Alukkas Traders (India) Private Limited‟ to „Joyalukkas India Private Limited‟ November 15, 2010 Change of status of our Company from private to public and change in name of our Company from Joyalukkas India Private Limited to Joyalukkas India Limited November 15, 2010 Increase in authorised capital from ` 650,000,000 divided into 65,000,000 Equity Shares of ` 10 each to ` 1,000,000,000 divided into 100,000,000 Equity Shares of ` 10 each
Total Number of Shareholders of our Company
As of the date of filing of this DRHP, the total number of holders of Equity Shares are 111. For more details on the shareholding of the members, please see the section titled “Capital Structure” at page 23.
For details on the corporate profile of the Company regarding its history, description of the activities, services, products, market, growth of the Company etc. see “Our Business” at page 65.
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The Company is not party to or aware of any shareholders‟ agreement and/or any other agreement not executed in the ordinary course of business in the two years immediately preceding the date of this DRHP.
Strategic Partners
Our Company does not have any strategic partners or joint venture agreements with any entity.
Financial Partners
Our Company does not have any financial partners.
Details of our Subsidiary
Wholly Owned Subsidiary
Joyal Ornaments and Trades Private Limited
Joyal Ornaments and Trades Private Limited, a company registered under the laws of India, is presently not engaged in any business. This company has been incorporated with the object of improving exports by opening a 100% export oriented unit within a special economic zone. The authorised share capital of Joyal Ornaments and Trades Private Limited is ` 1,000,000 divided into 100,000 equity shares of ` 10 each. The issued, subscribed and paid up share capital is ` 100,000 divided into 10,000 equity shares of ` 10 each. Our Company holds 9,999 equity shares aggregating to 99.99% of the issued, subscribed and paid up share capital of Joyal Ornaments and Trades Private Limited.
Joyal Ornaments and Trades Private Limited, our Subsidiary, was incorporated on April 28, 2010. It has not commenced operations since its incorporation. It has an equity share capital of Rs. 0.1 million and a loss of Rs. 0.05 million for the period from April 28, 2010 to September 30, 2010. As the Subsidiary is not material, the consolidated financial statements have not been prepared and presented in the DRHP. For further details please refer Annexure IV to Restated Financial Statements.
Financial Performance (` in millions except per share data) For the period from April 28, 2010 to September 30, 2010 Equity capital 0.10 Loss for the period (0.05) Loss per share (not annualised) (4.75) Book value per share 5.27
Our Associates
Our Company does not have any Associates.
Partnership Firms
Our Company is not a partner in any partnership firm.
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OUR MANAGEMENT
Board of Directors
Under our Articles of Association, we are required to have not less than three and not more than twelve directors. We currently have five directors on our Board.
The following table sets forth details regarding our Board of Directors:
Name, Father’s Name, Designation, Other Directorships/ S. DIN, Residential Address, Occupation, Age Proprietorships/Partnerships/Trus No. Term Nationality (years) ts 1. Alukkas Varghese Joy Indian 54 Domestic Companies (S/o. Late A. J. Varghese) 1. KIMS Health Care Management Limited; Managing Director 2. Joyal Properties Private Limited; DIN: 00313967 3. Mythri Entertainers & Enterprises Private Limited; Alukkas House 4. Cochin Smart City Properties Kuriachira P.O. Private Limited; Thrissur 680 006 5. Fusion Technosoft Private Kerala, India Limited; 6. Jyothi Aviation & Developers Business Private Limited; 7. Mudita Trades Private Term: Non-retiring Director for a period Limited; of five years with effect from November 8. Joyal Ornaments & Trades 15, 2010. Private Limited; 9. Dalia Hotels & Resorts Private Limited; and 10. Joyalukkas Foundation.
Offshore Companies 1. Joy Alukkas Holdings Inc. British Virgin Islands; 2. Joy Alukkas Centre LLC, Sharjah; 3. Alukkas Exchange LLP, Dubai UAE; 4. Joy Alukkas Jewellery LLC, Dubai; 5. Joy Alukkas Diamonds LLC, Sharjah; 6. Joy Alukkas Jewellery LLC, Abu Dhabi; 7. Joy Alukkas Jewellers LLC, Ras Al Khaimah; 8. Joy Alukkas Jewellery LLC, Oman; 9. Joy Alukkas Jewellery WLL, Bahrain; 10. Joy Alukkas Jewellery WLL, Qatar; 11. Joy Alukkas Jewellery WLL, Kuwait; 12. Alukkas Limited, United Kingdom; and
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Name, Father’s Name, Designation, Other Directorships/ S. DIN, Residential Address, Occupation, Age Proprietorships/Partnerships/Trus No. Term Nationality (years) ts 13. Joy Alukkas Jewellery LLC, Ajman. 2. John Paul Joy Alukkas Indian 25 Domestic Companies (S/o Alukkas Varghese Joy) 1. Mudita Trades Private Limited; and Director (Non executive) 2. Jyothi Aviation & Developers Private Limited DIN: 00314046 Offshore Companies Alukkas House 1. Joy Alukkas Jewellery LLC, Kuriachira P.O. Ajman; Thrissur 680 006 2. Joy Alukkas Diamonds LLC, Kerala, India Sharjah; 3. Joy Alukkas Jewellery LLC, Business Dubai; 4. Joy Alukkas Jewellery LLC, Term: Re-appointed as Director on Abu Dhabi; September 26, 2009, liable to retire by 5. Joy Alukkas Jewellery WLL, rotation Bahrain; 6. Joy Alukkas Jewellery WLL, Kuwait; 7. Joy Alukkas Jewellers LLC, Ras Al Khaimah; and 8. Joy Alukkas Jewellery LLC, Oman. 9. Alukkas Limited, London 10. Joy Alukkas Holdings INC., BVI
3. D.K Manavalan Indian 69 Domestic Company (S/o. Kurian Sebastian Manavalan) 1. The South Indian Bank Limited Chairman (Independent Director)
DIN: 00021240
Flat No A-231, Shriniketan Society, PlotI, Sector 7, Dwaraka, New Delhi – 110075
Service
Term: Appointed as Additional Director on October 15, 2010 to hold office upto the date of next Annual General Meeting.
4. C. J. George Indian 51 Domestic Companies (S/o. Late Mathew John) 1. Geojit BNP Paribas Financial Services Limited (Independent Director) 2. Geojit Credits Private Limited 3. Geojit Investment Services DIN: 00003132 Limited 4. Geojit Financial Distribution 12A, Skyline Elysium Gardens Private Limited Stadium Link Road, Kaloor 5. Geojit Financial Management Ernakulam District Services Private Limited Kochi 682 017 6. V-Guard Industries Limited Kerala, India 7. CJG Holdings India Private Limited Business 8. Geojit Comtrade Limited
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Name, Father’s Name, Designation, Other Directorships/ S. DIN, Residential Address, Occupation, Age Proprietorships/Partnerships/Trus No. Term Nationality (years) ts 9. Cochin Chamber of Appointed as Director on September 18, Commerce and Industry 2010, liable to retire by rotation Offshore Companies 1. Barjeel Geojit Securities LLC 2. Al-Oula Geojit Brokerage Company, Saudi Arabia 3. Sigma Systems International FZ LLC
5. K.P. Padmakumar Indian 66 Domestic Companies (S/o. Pallakkal Velayudha Menon) 1. Muthoot Vehicle & Asset Finance Limited (Independent Director) 2. Muthoot Securities Limited 3. Muthoot Commodities Limited DIN: 00023176 4. Jyothy Laboratories Limited
3F Skyline Topaz, Kaloor Kadavanthara Road, Kaloor, Ernakulam – 682017
Business
Appointed as Director on September 18, 2010, liable to retire by rotation
Directorships in companies suspended/delisted
None of our Directors hold directorships in listed companies whose shares have been/were suspended from trading /delisted from the stock exchanges within a period of five years immediately preceding the date of this Draft Red Herring Prospectus.
All the Directors of our Company are Indian nationals. Except John Paul Joy Alukkas who is the son of Alukkas Varghese Joy, none of our Directors are related to each other.
There are no arrangements or understanding with major shareholders, customers, suppliers or others, pursuant to which any of our Directors were selected as a Director or member of the senior management except as per the Articles of Association of our Company.
Brief biographies of our Directors
Alukkas Varghese Joy, aged 54 years, is responsible for the establishment of our Company and was appointed as the first Managing Director of our Company on May 1, 2002. He has an experience of about 22 years in the jewellery industry. The trade magazine JCK India has recognized our Promoter as among the 20 most powerful people in Indian jewellery industry. He was also awarded the „Retail Jeweller Award 2007 – NRI Retailer of the Year by the Retail Management Group. He was also awarded the K3A Top 10 Businessman Award in 2008. He was also selected as the „Best Keralite Entrepreneur 2010 by the Indian Accounting Association. This award is presented through a screening of Kerala based entrepreneurs who operate enterprises globally.
John Paul Joy Alukkas aged 25 years, was appointed as a Director on December 5, 2003. He holds a bachelors‟ degree in business administration from the Manipal University. He has been involved in the business of the Company with a special focus on marketing and brand related initiatives. He currently manages the operational and administrative aspects of the Promoter‟s business in the middle east. He is also one of the members of the board of directors of the Dubai Gold and Jewellery Group.
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D. K. Manavalan aged 69 years, was appointed as an additional director of our Company on October 15, 2010. He belongs to the 1965 batch of the Indian Administrative Service, and was assigned to the West Bengal cadre. He holds a bachelor‟s degree (Honours) in Science from the University of Kerala. He has also undergone training in public administration from the National Acedemy of Administration, Mussorrie. He was a fellow of the Economic Development Institute, World Bank, Washington D. C, U.S.A in 1973. He held the position of Special Secretary, Finance and Commissioner Commercial Taxes, Secretary, Rural Development and Panchayats and Principal Secretary, Commerce and Industries, under the Government of West Bengal. He also held the position of Joint Secretary to the Government of India, Ministry of Human Resource Development, in charge of youth affairs and sports, Additional Secretary, Ministry of Welfare, Secretary to Social Justice and Empowerment and Secretary to the Department of Youth Affairs and Sports. He presently heads a national level NGO by the name of „AFPRO-Action for Food Production‟, that works for natural resource management, watershed and livelihood programmes for tribals, scheduled castes and the marginalized population of the country.
C. J. George aged 51 years, was appointed as an additional Director on May 22, 2010. He is also the Managing Director of Geojit BNP Paribas Financial Services Limited, a company founded by him in 1987 and joined by BNP Paribas in 2007. He holds a membership on many professional bodies. He was an executive committee member of the NSE. He is an executive committee member of the NSDL, a managing committee member of the Associated Chambers of Commerce & Industry of India, New Delhi, a member of the executive committee of BNP Paribas Personal Investors, Paris, a member of the Confederation of Indian Industry, an executive member of the Cochin Chamber of Commerce, a managing committee member of the Kerala Management Association and a member of the capital markets committee of Federation of Indian Chambers of Commerce and Industry.
K. P. Padmakumar aged 66 years, was appointed as an additional Director on May 22, 2010. He is a banker with over 42 years of experience in India and abroad in commercial banking, treasury management, capital markets and mutual funds. He holds a bachelors‟degree in Agricultural Science and is a certified associate of the Indian Institute of Bankers. During his 27 year tenure with the State Bank of India, he handled many operational assignments including the treasury managership of the bank‟s Bahrain offshore banking unit and that of the fund manager of the SBI mutual fund. He was Chairman of the Federal Bank Limited for six years from 1999 to 2005. He joined the Muthoot group in 2005 and continues as an executive director therein. He has held various positions including that of a member of the Indian Banking Association management committee, President of the Kerala Chapter of the Indian Banking Association, member of the management committee of the Cochin Chamber of Commerce and Industry, President of the Association of Private Sector Banks in India, Chairman of the governing board of the Southern India Bankers‟ Training College and that of a member on the advisory board of the Guruvayoorappan Institute of Management. He has been awarded the „Management Leadership Award‟ by the Kerala Management Association, Kochi and the „Life Time Achievement Award‟ instituted by the Kerala Darshana Vedi, Kochi.
Remuneration of our Executive Directors
Alukkas Varghese Joy was re-appointed as the Managing Director from November 15, 2010 for a term of five years, pursuant to an agreement entered into by the Company with him dated November 15, 2010. The terms of his employment and remuneration, include the following:
Particulars Remuneration Salary ` 2,000,000 per month, with an annual increase not exceeding 20% of the last drawn salary as may be decided by the Board or any committee thereof Commission At the rate of 1% of the net profits of the Company calculated in accordance with the provisions of the Companies Act Perquisites Includes accommodation, gas, electricity, water and other amenities, medical reimbursement, club fees, leave travel allowance, insurance coverage and car with chauffeur
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Alukkas Varghese Joy received an annual remuneration aggregating to ` 12.00 million for Fiscal 2010.
Except as stated above, there are no service contracts entered into by the Directors with our Company providing for benefits upon termination of employment.
Details of Borrowing Powers of our Board
Our Articles, subject to the provisions of Section 293(1)(d) of the Companies Act authorize our Board, to borrow or raise money or secure the payment of any sum or sums of money for the purposes of our Company. The shareholders of our Company, through a resolution passed at the EGM dated November 15, 2010, authorized our Board to borrow monies, together with monies already borrowed by us, in excess of the aggregate of the paid up capital of our Company and our free reserves, not exceeding ` 5,000 million at any time.
Interest of Directors
All of our Directors may be deemed to be interested to the extent of fees 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 under our Articles, and to the extent of remuneration paid to them for services rendered as an officer or employee of our Company.
Our Directors may also be regarded as interested in the Equity Shares, if any, held by them or that may be subscribed by or allotted to the companies, firms, trusts, in which they are interested as directors, members, partners, trustees and promoter, pursuant to this Issue. All of our Directors may also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares.
For details of interests of our Promoter who is also our executive Director, see “Our Promoter” on page 101.
Except as stated in “Related Party Transactions” on page 150, and to the extent of shareholding in our Company, if any, our Directors do not have any other interest in our business. Further, see “Our Promoter - Interests of our Promoter and Common Pursuits” on page 101.
Except as stated in this Draft Red Herring Prospectus, our Directors have no interest in any property acquired by us two years prior to the date of this Draft Red Herring Prospectus.
For details of interests of our Promoter who is also our Managing Director, see “Our Promoters” on page 101.
Details of compensation paid to directors
None of our non executive Directors were paid any remuneration in Fiscal 2010. . Corporate Governance
We have complied with the Listing Agreement with respect to corporate governance especially with respect to broad basing of our Board, constituting committees such as the Audit Committee, Remuneration Committee and Investor Grievance Committee. Further, the provisions of the Listing Agreement to be entered into with the Stock Exchanges with respect to corporate governance will be applicable to us immediately upon the listing of our Equity Shares on the Stock Exchanges. We have complied with such provisions, including with respect to the appointment of independent Directors to our Board and the constitution of committees of our Board.
Our Company undertakes to take all necessary steps to comply with all the requirements of Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges.
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Currently, our Board has five Directors, consisting of, our Managing Director, one non executive director and three independent Directors. Further, in compliance with Clause 49 of the Listing Agreement, the following Committees have been formed.
Audit Committee
The Audit Committee of our Board was reconstituted by our Directors by way of a resolution passed by the Board dated November 15, 2010 pursuant to Section 292A of the Companies Act. The Audit Committee comprises:
Name of the Director Designation on the Committee Nature of Directorship K.P.Padmakumar Chairman Independent Director C.J.George Member Independent Director D.K. Manavalan Member Independent Director
Terms of reference of the Audit Committee include:
Overseeing the Company‟s financial reporting process and disclosure of its financial information. Regular review of accounts, accounting policies, disclosures, etc. Regular review of the major accounting entries based on exercise of judgment by management. Review of qualifications in the draft audit report. Establishing and reviewing the scope of the statutory audit including the observations of the auditors and review of the quarterly, half-yearly and annual financial statements before submission to the Board, with particular reference to matters required to be included in the Directors Responsibility Statement to be included in the Board‟s report in terms of clause 2(AA) of S.217 of the Companies Act, 1956, changes in the accounting policies and practices and reasons for the same, significant adjustments made in the financial statements arising out of audit findings, and qualifications in the draft audit report. The Committee shall have post audit discussions with the statutory auditors to ascertain any area of concern. Regular review of the performance of statutory and internal auditors together with the management. Discussion and follow up on any important findings with the internal auditors. In case there is a suspected case of fraud or irregularity, review of the findings of the internal auditors and reporting the matter to the board. Establishing the scope and frequency of internal audit, reviewing the findings of the internal auditors and ensuring the adequacy of internal control systems including structure of the internal audit department, frequency of internal audit, staffing and seniority of the official heading the department. Review the functioning of the whistle blower mechanism, in case the same is existing. To look into reasons for 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 applicable accounting standards and accounting policies. Compliance with Stock Exchange legal requirements concerning financial statements, to the extent applicable. The Committee shall look into any related party transactions i.e., transactions of the company of material nature and disclose such transactions, with promoters or management, their subsidiaries or relatives etc., that may have potential conflict with the interests of company at large. Recommending to the Board the appointment, re-appointment, and replacement of the statutory auditor and the fixation of audit fee. Approval of payments to the statutory auditors for any other services rendered by them. Review of management discussion and analysis of financial condition and results of operations, statements of related party transactions submitted by management, management letters/letters of internal control weaknesses issued by the statutory auditors, internal audit reports relating to
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internal control weaknesses, and the appointment, removal and terms of remuneration of the chief internal auditor. 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.
Investor Grievance Committee
The Investor Grievance Committee was constituted by our Directors by a board resolution dated November 15, 2010 and comprises:
Name of the Director Designation on the Committee Nature of Directorship C.J.George Chairman Independent Director K.P.Padmakumar Member Independent Director D.K.Manavalan Member Independent Director Alukkas Varghese Joy Member Managing Director
Terms of reference of the Investor Grievance Committee include the following:
1. Investor relations and Redressal of shareholders grievances in general and relating to non receipt of dividends, interest, non- receipt of balance sheet etc.; 2. Approve requests for share transfers and transmission and those pertaining to rematerialisation of shares/ sub-division/ consolidation/ issue of renewed and duplicate share certificates etc.; and 3. Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by such committee.
Remuneration Committee
The Remuneration Committee was constituted by our Directors by a board resolution dated November 15, 2010 and comprises:
Name of the Director Designation on the Committee Nature of Directorship D.K.Manavalan Chairman Independent Director K.P.Padmakumar Member Independent Director Alukkas Varghese Joy Member Managing Director C.J. George Member Independent Director
Terms of reference of the Remuneration Committee include the following:
Framing suitable policies and systems to ensure that there is no violation, by an Employee of the Company of any applicable laws in India or overseas, including: a) The Securities and Exchange Board of India (Insider Trading) Regulations, 1992; or b) The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities market) Regulations, 1995. Determine on behalf of the Board and the shareholders the company‟s policy on specific remuneration packages for executive directors including pension rights and any compensation payments. Perform such functions as are required to be performed under Clause 5 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Such other matters as may from time to time be required by any statutory, contractual or other regulatory requirements to be attended to by such committee.
IPO Committee
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The IPO Committee was constituted by our Board in terms of their resolution dated August 7, 2010. The IPO Committee consists of Alukkas Varghese Joy, C. J. George and K. P. Padmakumar.
The terms of reference of the IPO Committee include:
To decide on the actual size of the Issue, including any reservation on a firm or competitive basis, timing, pricing and all the terms and conditions of the issue of the Equity Shares, including the price, and to accept any amendments, modifications, variations or alteration thereto; To appoint and enter into arrangements with the book running lead managers, co-managers to the Issue, underwriters to the Issue, syndicate members to the Issue, stabilizing agent, brokers to the Issue, escrow collection bankers to the Issue, registrars, legal advisers and any other agencies, intermediaries or persons; To finalise and settle and to execute and deliver or arrange the delivery of the DRHP, the RHP, the Prospectus, agreement with the book running lead managers, memorandum of understanding with registrar, syndicate agreement, underwriting agreement, escrow agreement, stabilization agreement and all other documents, deeds, agreements and instruments as may be required or desirable in connection with the Issue; To issue advertisement in such newspapers as it may deem fit and proper about the future prospects of the Company and the proposed issue conforming to the guidelines issue by SEBI; To open a separate current account(s) with a scheduled bank(s) to receive applications along with application monies in respect of the Issue or any other account with any name and style as required during or after process of forthcoming initial public offering of the shares of the Company; and To do all such acts, deeds, matters and things as it may, in its absolute discretion, deem necessary or desirable for such purpose, including without limitation, allocation, finalizing the basis of allocation and allotment of the shares as permissible in law, issue of share certificates in accordance with the relevant rules.
Shareholding of our Directors in our Company
Except as provided hereunder, no other Directors hold any shares in the share capital of our Company.
In terms of our Articles of Association, the Directors are not required to hold any qualification shares. The table below sets forth the details of Equity Shares that are held by our Directors.
Pre-Issue Percentage Post-Issue Number of Equity Share Percentage Equity S. No. Name Equity Shares Capital Share Capital
a) Alukkas Varghese Joy 44,980,700 89.90% [●] b) John Paul Joy Alukkas 10,000 0.02% [●]
There are no outstanding vested options granted to our Directors.
Changes in our Board of Directors during the last three years
Name Date of Appointment Date of Change/ Cessation Reason Jacob. V. Palayoor March 5, 2004 November 30, 2007 Resignation Francis C. I September 28, 2007 September 14, 2009 Resignation Jolly Joy April 22, 2002 May 22, 2010 Resignation Reena Joby September 18, 2009 May 22, 2010 Resignation Joseph Christo November 19, 2009 October 15, 2010 Resignation K. P. Padmakumar May 22, 2010 - Appointment C. J. George May 22, 2010 - Appointment Appointed as D. K. Manavalan October 15, 2010 - an Additional
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Name Date of Appointment Date of Change/ Cessation Reason Director
Managerial Organisation Structure
Our Company‟s management organisation structure is given below:
Board of Directors
Managing Director Alukkas Varghese Joy
Chief Financial Chief Operating Officer Officer T. Nandakumar P.P. Jose
Manager Manager Company Manager Manager General Accounts & Finance Secretary HR Retail Manager Taxation Deepak Xavier Varun T. V Joseph Christo P.D. Francis Jewellery H. Sanjay P.D. Jose
Key Management Personnel of our Company
The biographies of our other key management personnel are set forth below:
Nandakumar. T, Chief Financial Officer, aged 41 years, joined our Company on February 1, 2010. He is currently responsible for the planning and development of organisational strategies as well as for financial GM Jewellery control and taxes. He acts as a point of contact for banking institutions and auditors and ensures transparent P.D. Jose monthly financial reports. He holds a bachelors‟ degree in commerce from the University of Calicut and is a qualified chartered accountant. He has an experience of more than 15 years in the field of accounts and finance. Prior to joining our Company, he was the chief financial officer of Wendt India Limited. Prior to that, he held the post of chief financial officer with V-Guard Industries Limited. He has also worked in various capacities with the Dhanalakshmi Bank Limited. The remuneration paid to him in Fiscal 2010 in the capacity of the Chief Financial Officer of our Company was ` 0.40 million.
P. P. Jose, Chief Operating Officer, aged 66 years, joined our Company as General Manager (Operations) on April 2, 2007. He is responsible for the strategic planning function of the organisation and oversees process execution. His other responsibilities include the laying down guidelines for organisational development. He holds a bachelors‟ degree in Physics and a masters‟ degree in English from the University of Kerala. Prior to that, he was associated with Vijaya Kumar Mills as an Assistant Manager for two and a half years. He also worked for 26 years in various capacities with Madura Coats. The remuneration paid to him in Fiscal 2010 in the capacity of the General Manager (Operations) of our Company was ` 1.13 million.
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H. Sanjay, Manager Accounts and Taxation, aged 36 years joined our Company on April 1, 2010. He is responsible for the accounting of revenue and expenses, finalization of accounts and statutory and tax audits. He represents the Company before indirect and direct tax regulatory authorities in relation to various issues and disputes. He holds a bachelors‟ degree in Science from the Mahatma Gandhi University and is a qualified chartered accountant. He has over nine years of experience in the field of accounts and finance. Prior to joining our Company, he was associated with the Malabar Group, Calicut as finance manager and prior to that he was working with the corporate office of Muthoot Finance Private Limited, New Delhi. Since he joined our Company in April 2010, he has not received any remuneration in Fiscal 2010.
Deepak Xavier, Finance Manager, aged 28 years, joined our Company on December 1, 2006. He is responsible for the daily fund management of our Company. His responsibilities include management of the receivables and payables, cash flow management, preparation of budgets and financial statements. He reports to the Chief Financial Officer. He holds a bachelors‟ degree in Commerce from the Mahatma Gandhi University, Kerala and a Post Graduate Diploma in Management from Indira Gandhi National Open University. He is a qualified chartered accountant. He has over five years of experience in the field of accounts and finance. The remuneration paid to him in Fiscal 2010 in the capacity of the Finance Manager of our Company was ` 0.95 million.
Varun T. V., Company Secretary, aged 24 years, holds a masters degree in Finance from Annamalai University and is a qualified company secretary. He has two years of experience in the field of secretarial practice and corporate compliance. He is designated as the Company Secretary and the Compliance Officer and his responsibilities include administration of secretarial and compliance teams. Since he joined our Company in April 2010, he has not received any remuneration in Fiscal 2010.
Joseph Christo, Human Resource Manager, aged 28 years, joined our Company on May 2, 2006. His responsibility entails the training and development of our personnel to meet the standards of the market. His profile also includes the conducting of interviews, appraisals and performance review. He holds a bachelors‟ degree in Commerce from the Calicut University and a masters‟ degree in Sociology from the Pondicherry University. He holds a masters‟ degree in business administration from the National Institute of Business Management. He has over seven years of experience in the field of human resource management. Prior to joining our Company, he assisted STC Technologies Private Limited as their HR Team Leader. The remuneration paid to him in Fiscal 2010 in the capacity of the Human Resource Manager of our Company was ` 0.49 million.
P. D. Francis, Retail Manager, aged 44 years, joined our Company on August 1, 2003. His profile includes management of his team to increase sales and ensure efficiency. He analyzes sales figures and forecasts future sales volumes in order to maximize profits. He analyzes and interprets trends to facilitate planning. He works towards ensuring that standards for quality, customer service, health and safety are met. He responds to customer complaints and comments. He is entrusted with the responsibility of organising special promotions, displays and events. The remuneration paid to him in Fiscal 2010 in the capacity of the Retail Manager of our Company was ` 0.87 million.
P. D. Jose, General Manager Jewellery Division, aged 53 years, joined our Company as Purchase Manager-Jewellery Division on October 1, 2003. He is responsible for supplier selection, product selection, purchase, pricing of products and inventory management. He is also responsible for ensuring the product quality, maintaining an even supply chain and timely replacement of inventory. He has been associated with our overseas Group Entities for 20 years before being appointed as Purchase Manager-Jewellery Division of our Company. The remuneration paid to him in Fiscal 2010 in the capacity of the General Manager-Jewellery Division of our Company was ` 1.13 million.
All our Key Managerial Personnel are permanent employees of our Company and except P. D. Jose and P. D. Francis who are brothers, none of our Key Management Personnel are related to each other.
Shareholding of the Key Management Personnel
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The table below sets forth the details of Equity Shares that are held by our Key Management Personnel:
Number of Pre-Issue Equity Post-Issue Equity S. No. Name Equity Shares Share Capital Share Capital % 1. P. P. Jose 700 Negligible [●] 2. P. D. Jose 700 Negligible [●] 3. P.D. Francis 700 Negligible [●] 4. T. Nandakumar 1,000 Negligible [●] 5. Deepak Xavier 600 Negligible [●] 6. H. Sanjay 600 Negligible [●] 7. Varun T.V. 600 Negligible [●] 8. Joseph Christo 800 Negligible [●]
Bonus or profit sharing plan of the Key Management Personnel
There is no bonus or profit sharing plan of the key management personnel.
Changes in the Key Management Personnel
The changes in the Key Management Personnel in the last three years are as follows:
Name of the Key Date of Change Reason for change Management Person Rolf W Schneebeli August 9, 2010 Resignation Tom Jose December 1, 2008 Resignation Antony Louis May 31, 2008 Resignation Rajesh Kurup G May 31, 2008 Resignation N R Achan April 30, 2008 Resignation
Other than the above changes, there have been no changes to the Key Management Personnel of our Company that are not in the normal course of employment.
Payment or benefit to officers of our Company
Except as stated in this Draft Red Herring Prospectus, no amount or benefit has been paid or given or is intended to be paid or given to any of our Company‟s employees including the Key Management Personnel and our Directors. None of the beneficiaries of loans and advances and sundry debtors are related to the Directors of our Company.
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OUR PROMOTER
Alukkas Varghese Joy
Driving License: 5/1695/1977
Passport No.: Z1849041
PAN: ACNPJ7972K
Voter‟s Identity: Our Promoter does not have a voters‟ identity.
Our Company confirms that the Permanent Account Number, Bank Account Number and Passport Number of our Promoter will be submitted to the BSE and the NSE at the time of filing this Draft Red Herring Prospectus with them.
For further details in relation to our Promoter see “Our Management” on page 90.
Common Pursuits and Interest of Our Promoter
Our Promoter is interested in us to the extent that he has promoted our Company and his shareholding in us. Further, our Promoter, Alukkas Varghese Joy, who is also the Managing Director of our Company, may be deemed to be interested to the extent of remuneration and compensation paid to him and fees, if any, payable to him for attending meetings of the Board or a committee thereof as well as to the extent of expenses payable to him.
Our Promoter may be deemed to be interested in our Company to the extent of his shareholding in our Subsidiary and our Group Entities with which our Company transacts during the course of our operations. For details, see “Details of our Subsidiary” on page 89 and “Group Entities” on page 104.
Our Promoter is further interested in the operations of our Company to the extent of the bank guarantees issued by him as security for certain of our borrowings. For details, see “Financial Indebtedness” on page 181.
One of our Group Entities, Cochin Smart City Properties Private Limited, has executed a corporate guarantee in favour of a lender from whom the Company has availed of a loan. We have also entered into two lease agreements with Cochin Smart City Properties Private Limited for obtaining on lease the land on which our proposed showrooms at Thiruvananthapuram and Kozhikode are to be situated. For details, see Objects of the Issue on page 31.
Except the three lease agreements that have been entered into by our Company with Alukkas Varghese Joy in relation to obtaining on lease property to run its business, the aforementioned lease agreements entered into with Cochin Smart City Properties Private Limited, and except as stated otherwise in this Draft Red Herring Prospectus, we have not entered into any contract, agreements or arrangements during the preceding two years from the date of this Draft Red Herring Prospectus in which our Promoter is directly or indirectly interested and no payments have been made to him in respect of the contracts, agreements or arrangements which are proposed to be made with him including the properties purchased by us other than in the normal course of business.
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Confirmations
Our Promoter has confirmed that he has not been declared as a wilful defaulter by the RBI or any other governmental authority and there are no violations of securities laws committed by him in the past and no proceedings pertaining to such penalties are pending against him.
Additionally, our Promoter has not been restrained from accessing the capital markets for any reasons by the SEBI or any other authorities.
Further, our Promoter neither was nor is a promoter, director or person in control of any other company which is debarred from accessing the capital markets under any order or directions made by the Board. Payment or Benefit to our Promoter
Except as stated in “Related Party Transactions” on page 150, no amount or benefit has been paid or given to our Promoter within the two years preceding the date of filing of this Draft Red Herring Prospectus and no such amount or benefit is intended to be paid.
Disassociation by the Promoter in the last three years
There has been no disassociation by our Promoter in the last three years.
Promoter Group
Promoter Group individuals
Relatives of the Promoter who form part of the Promoter Group under Regulation 2(1)(zb) of the SEBI Regulations are as follows:
Promoter Name of the Relative Relationship with the Promoter Alukkas Varghese Joy Jolly Joy Spouse P. R. George Brother of spouse P. R. Pauly Brother of spouse P. R. Baby Brother of spouse P. R. Babu Brother of spouse P. R. Davy Brother of spouse John Paul Joy Alukkas Son Mary Jeny Joy Daughter Elsa Joy Daughter Pauli Jose Sister of spouse Agnus Joy Sister of spouse Sheela George Sister of spouse Elsy Antony Sister Mary Jacob Sister Treesa Mathew Sister Rosily Joseph Sister Jacintha Johnson Sister Lucy Tomy Sister Philomina Davis Sister Clera Johnson Sister Reena Joby Sister Pauly Antony Sister
Promoter Group Entities
Entities forming part of our Promoter Group under Regulation 2(1)(zb) of the SEBI Regulations are as follows:
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(a) Fusion Technosoft Private Limited; (b) Jyothi Aviation and Developers Private Limited; (c) Cochin Smart City Properties Private Limited; (d) Joyal Properties Private Limited; (e) Mythri Entertainers and Enterprises Private Limited; (f) Mudita Trades Private Limited; (g) Dalia Hotels and Resorts Private Limited; (h) Joy Alukkas Centre LLC Sharjah; (i) Joy Alukkas Holdings Inc., British Virgin Islands; (j) Alukkas Exchange LLP, Dubai UAE; (k) Joy Alukkas Jewellery LLC, Dubai, UAE; (l) Joy Alukkas Diamonds LLC, Sharjah, UAE; (m) Joy Alukkas Jewellery LLC, Abu Dhabi, UAE; (n) Joy Alukkas Jewellers LLC, Ras Al Khaimah, UAE; (o) Joy Alukkas Jewellery LLC, Oman; (p) Joy Alukkas Jewellery WLL, Bahrain; (q) Joy Alukkas Jewellery WLL, Qatar; (r) Joy Alukkas Jewellery WLL, Kuwait; (s) Alukkas Limited, United Kingdom; and (t) Joy Alukkas Jewellery LLC, Ajman.
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GROUP ENTITIES
The following are the list of entities forming part of our Group Entities: Indian Entities Companies 1. Cochin Smart City Properties Private Limited 2. Joyal Properties Private Limited 3. Fusion Technosoft Private Limited 4. Jyothi Aviation and Developers Private Limited 5. Mudita Trades Private Limited 6. Mythri Entertainers and Enterprises Private Limited 7. Dalia Hotels and Resorts Private Limited
Others
8. Joyalukkas Foundation
Foreign Entities
Companies 1. Joy Alukkas Holdings Inc. British Virgin Islands, into which the following entities are consolidated
(i) Joy Alukkas Jewellery LLC, Dubai, UAE (ii) Joy Alukkas Diamonds LLC, Sharjah, UAE (iii) Joy Alukkas Jewellery LLC, Abu Dhabi, UAE (iv) Joy Alukkas Jewellers LLC, Ras Al Khaimah, UAE (v) Joy Alukkas Jewellery LLC, Oman, (vi) Joy Alukkas Jewellery WLL, Bahrain (vii) Joy Alukkas Jewellery WLL, Qatar (viii) Joy Alukkas Jewellery WLL, Kuwait, (ix) Alukkas Limited, United Kingdom (x) Joy Alukkas Jewellery LLC, Ajman; and
2. Joy Alukkas Centre LLC, Sharjah
Partnership Firm 1. Alukkas Exchange LLP, Dubai UAE
None of the equity shares of our Group Entities are listed on any stock exchange and they have not made any public or rights issue of securities in the preceding three years.
Top five Group Entities based on turnover are as follows:
1. Joy Alukkas Holdings Inc. British Virgin Islands 2. Joy Alukkas Centre LLC, Sharjah, UAE 3. Alukkas Exchange LLP, Dubai, UAE 4. Cochin Smart City Properties Private Limited 5. Joyal Properties Private Limited
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Details of our top five Group Entities based on turnover are provided below. Except as otherwise stated AED numbers have been converted into Indian Rupees at the Conversion rate as on December 31, 2010: 1 AED = ` 12.20.
Joy Alukkas Holdings Inc., British Virgin Islands
Joy Alukkas Holdings Inc., a company incorporated on August 3, 2006 under the British Virgin Islands Business Companies Act, 2004, is engaged in the retail trading of jewellery.
The authorised share capital of Joy Alukkas Holdings Inc. is AED 1,102,050,000 (`13,445.01 million) divided into 300,000,000 equity shares of AED 3.67 (` 44.82) each and the paid up capital of Joy Alukkas Holdings Inc. is AED 107,284,568 (` 1,308.87 million) divided into 29,205,000 equity shares of AED 3.67 each (`44.82). Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital of Joy Alukkas Holdings Inc. The remaining equity shares of Joy Alukkas Holdings Inc. are held by Jolly Joy and John Paul Joy Alukkas.
Joy Alukkas Holdings Inc., British Virgin Islands acquired a stake in all the entities consolidated into it with effect from April 1, 2009.
Financial Performance (AED/`* in millions except per share data) For the years ended March 31, 2010 March 31, 2009 March 31, 2008 AED ` AED ` AED ` Equity capital 107.28 1,318.47 - - - - Sales and other income 1,240.92 15,250.91 - - - - Profit/Loss after tax 34.49 423.88 - - - - Reserves and Surplus 34.49 423.88 - - - - Earnings per share 1.18 14.50 - - - - Book value per share 4.77 58.62 - - - - INR exchange rate for 12.29 - 13.87 - 10.88 - AED* *The aforementioned exchange rate is arrived on the basis of RBI reference rates for USD in the respective dates which is converted to AED at a fixed percentage rate of 3.6735.
Alukkas Exchange LLP, Dubai, UAE
Alukkas Exchange LLP, Dubai, is a partnership firm that was registered on May 24, 2005 under the federal laws of United Arab Emirates and is engaged in the business of purchase and sale of foreign currencies and remittance business.
The authorised share capital of Alukkas Exchange LLP, Dubai is AED 3,300,000 (` 40.26 million) divided into 3,300 equity shares of AED 1,000 (` 12,200) each and the paid up capital of Alukkas Exchange LLP, Dubai is AED 3,300,000 (` 40.26 million) divided into 3,300 equity shares of AED 1,000 (`12,200) each. Our promoter Alukkas Varghese Joy holds 40.00% of the issued and paid up capital of the Alukkas Exchange, LLP, Dubai.
Financial Performance (AED/`* in millions except per share data) For the years ended December 31, 2009 December 31, 2008 December 31, 2007 AED ` AED ` AED ` Equity capital 3.30 41.94 3.30 43.53 3.30 35.41 Sales and other income 4.44 56.43 3.94 51.97 1.91 20.49 Profit/Loss after tax 0.67 8.52 0.57 7.52 (1.34) (14.38) Reserves and Surplus 0.72 9.15 0.06 0.79 (1.34) (14.38) Earnings per share 202.00 2,567.00 171.00 2,255.00 (405.00) (4,346.00) Book value per share 2,890.00 36,732.00 2,646.00 34,901.00 2,130.00 22,855.00
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For the years ended December 31, 2009 December 31, 2008 December 31, 2007 AED ` AED ` AED ` INR exchange rate for 12.71 - 13.19 - 10.73 - AED* *The aforementioned exchange rates are arrived on the basis of RBI reference rates for USD in the respective dates which are converted to AED at a fixed percentage rate of 3.6735.
Joy Alukkas Centre LLC, Sharjah, UAE
Joy Alukkas Centre LLC, Sharjah, is a company incorporated on May 17, 2005 under the federal laws of United Arab Emirates and is engaged in the business of trading of textiles, leather goods, cosmetics, perfumes and accessories.
The authorised share capital of Joy Alukkas Centre LLC, Sharjah is AED 300,000 (` 3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each and the paid up capital of Joy Alukkas Centre LLC, Sharjah is AED 300,000 (`3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each. Our promoter Alukkas Varghese Joy holds 49.00 % of the issued and paid up capital of Joy Alukkas Centre LLC, Sharjah. The rest of the shares are held by another individual.
Financial Performance (AED/`* in millions except per share data) For the years ended March 31, 2010 March 31, 2009 March 31, 2008 AED ` AED ` AED ` Equity capital 0.30 3.69 0.30 4.16 0.30 3.26 Sales and other 16.59 203.89 17.22 238.84 16.16 175.82 income Profit/Loss after tax 1.85 22.74 1.52 21.08 0.26 2.83 Reserves and Surplus 0.07 0.86 (1.78) (24.69) (3.30) (35.90) Earnings per share 6,162.00 75,730.98 5,065.00 70,251.55 853.00 9,280.64 Book value per share (3,649.00) (44,846.21) (9,807.00) (136,023.09) (12,033.00) (130,919.04) INR exchange rate 12.29 - 13.87 - 10.88 - for AED* *The aforementioned exchange rate is arrived on the basis of RBI reference rates for USD in the respective dates which are converted to AED at a fixed percentage rate of 3.6735.
Cochin Smart City Properties Private Limited
Cochin Smart City Properties Private Limited, a company incorporated on January 11, 2006 under the laws of India is engaged in the business of real estate development.
The authorised share capital of Cochin Smart City Properties Private Limited is ` 7.50 million divided into 75,000 equity shares of ` 100 each and the paid-up capital of Cochin Smart City Properties Private Limited is ` 7.35 million divided into 73,500 equity shares of ` 100 each. Our Promoter Alukkas Varghese Joy holds 99.99% of the issued and paid up capital of Cochin Smart City Properties Private Limited.
Financial Performance (Amount in `) For the year ended March 31, 2010 March 31, 2009 March 31, 2008 Equity capital (par value ` 100 per share) 7,350,000 100,000 100,000 Sales and other income 120,000 - - Profit/Loss after tax 74,606 - - Reserves and Surplus 74,606 - - Earnings per share (Rs) 12.10 NA NA Book Value per share (Rs) 101.02 - -
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Joyal Properties Private Limited
Joyal Properties Private Limited, a company originally incorporated as Alukkas Hotels Private Limited‟ on June 7, 1994 under the laws of India, underwent change of name and was awarded a fresh certificate of incorporation on September 3, 2008. It is engaged in the business of real estate development.
The authorised share capital of Joyal Properties Private Limited is ` 10.00 million divided into 10,000 equity shares of ` 1,000 each and the paid-up capital of Joyal Properties Private Limited is ` 4,511,000 divided into 4,511 equity shares of ` 1,000 each. Our Promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital of Joyal Properties Private Limited.
Financial Performance (.Amount in `) For the year ended March 31, 2010 March 31, 2009 March 31, 2008 Equity capital (par value ` 1000 per share) 4,511,000 4,011,000 4,011,000 Sales and other income - - - Profit/Loss after tax (10,247.56) (137,539) (7,014) Reserves and Surplus 40,0285.44 410,533 548,072 Earnings per share (Rs) (2.27) (34.29) (1.75) Book Value per share (Rs) 1,088.74 1,102.35 1,136.64
Other Group Entities
Indian Entities
Jyothi Aviation and Developers Private Limited
Jyothi Aviation and Developers Private Limited, a company originally incorporated as Jyothi Habitats and Developers (India) Private Limited‟ on June 19, 2009 under the laws of India, underwent change of name and was awarded a fresh certificate of incorporation on July 16, 2010. It is engaged in the business of maintenance and operation of air transport services.
The authorised share capital of Jyothi Aviation and Developers Private Limited is ` 100.00 million divided into 10,000,000 equity shares of ` 10 each and the paid-up capital of Jyothi Aviation and Developers Private Limited is ` 20.00 million divided into 2,000,000 equity shares of ` 10 each. Our Promoter Alukkas Varghese Joy holds 49.98% of the issued and paid up capital of Jyothi Aviation and Developers Private Limited. 50.00% of the issued and paid up capital of Jyothi Aviation and Developers Private Limited is held by Jolly Joy. The remaining equity shares of Jyothi Aviation and Developers Private Limited are held by two other individuals.
Fusion Technosoft Private Limited
Fusion Technosoft Private Limited, a company incorporated on December 8, 2005 under the laws of India is engaged in the business of developing and trading in softwares.
The authorised share capital of Fusion Technosoft Private Limited is ` 500,000 divided into 5,000 equity shares of ` 100 each and the paid-up capital of Fusion Technosoft Private Limited is ` 100,000 divided into 1,000 equity shares of ` 100 each. Our Promoter Alukkas Varghese Joy holds 49.00% of the issued and paid up capital of Fusion Technosoft Private Limited and the remaining 50.00% held by Jolly Joy and 1.00% is held by P. P. Jose.
Mudita Trades Private Limited
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Mudita Trades Private Limited, a company incorporated on July 11, 2009 under the laws of India is engaged in the business of dealing in home appliances, electronic and other consumer goods.
The authorised share capital of Mudita Trades Private Limited is ` 100,000 divided into 10,000 equity shares of ` 10 each and the paid-up capital of Mudita Trades Private Limited is ` 100,000 divided into 10,000 equity shares of ` 10 each. Our Promoter Alukkas Varghese Joy holds 90.00% of the issued and paid up capital of Mudita Trades Private Limited. The remaining 10.00% of the issued and paid up capital of Mudita Trades Private Limited is held by John Paul Joy Alukkas.
Mythri Entertainers and Enterprises Private Limited
Mythri Entertainers and Enterprises Private Limited, a company incorporated on November 6, 1979 under the laws of India is engaged in the business of providing entertainment by organising cultural shows, dances, dramas and sports.
The authorised share capital of Mythri Entertainers and Enterprises Private Limited is ` 3.00 million divided into 3,000 equity shares of ` 1,000 each and the paid-up capital of Mythri Entertainers and Enterprises Private Limited is ` 989,000 divided into 989 equity shares of ` 1,000 each. Our Promoter Alukkas Varghese Joy holds 98.99% of the issued and paid up capital of Mythri Entertainers and Enterprises Private Limited. The remaining equity shares of Mythri Entertainers and Enterprises Private Limited are held by another individual.
Dalia Hotels and Resorts Private Limited
Dalia Hotels and Resorts Private Limited, a company incorporated on November 9, 2009 is engaged in the business of running hotels and resorts.
The authorised share capital of Dalia Hotels and Resorts Private Limited is ` 100,000 divided into 10,000 equity shares of ` 10 each and the paid-up capital of Dalia Hotels and Resorts Private Limited is ` 100,000 divided into 10,000 equity shares of ` 10 each. Our Promoter Alukkas Varghese Joy holds 50.00% of the issued and paid up capital of Dalia Hotels and Resorts Private Limited. The remaining equity shares of Dalia Hotels and Resorts Private Limited are held by another individual.
Joyalukkas Foundation
Joyalukkas Foundation is a public charitable trust created under the deed of declaration of trust dated August 12, 2009. The object of the trust is to give financial aid and assistance to establish, promote, set up, maintain and support the running of educational institutions, orphanages, schools, old age homes etc. Alukkas Varghese Joy and Jolly Joy are the trustees of Joyalukkas Foundation.
Foreign Entities
The following entities are consolidated with Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery LLC, Dubai – UAE
Joy Alukkas Jewellery LLC, Dubai, a company incorporated on October 20, 1994 under the federal laws of United Arab Emirates is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery LLC, Dubai is AED 300,000 (`3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each and the paid up capital of Joy Alukkas Jewellery LLC, Dubai is AED 300,000 (` 3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49%. The remaining equity shares of Joy Alukkas Jewellery LLC, Dubai are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
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Joy Alukkas Diamonds LLC, Sharjah – UAE
Joy Alukkas Diamonds LLC, Sharjah, a company incorporated on October 11, 2003 under the federal laws of United Arab Emirates is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Diamonds LLC, Sharjah is AED 300,000 (` 3.66 million) divided into 100 equity shares of AED 3,000 (` 36,600) each and the paid up capital of Joy Alukkas Diamonds LLC, Sharjah is AED 300,000 (` 3.66 million) divided into 100 equity shares of AED 3,000 (` 36,600) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Diamonds LLC, Sharjah are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery LLC, Ajman – UAE
Joy Alukkas Jewellery LLC, Ajman, a company incorporated on March 4, 2008 under the federal laws of United Arab Emirates is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery LLC, Ajman is AED 300,000 (` 3.66 million) divided into 100 equity shares of AED 3,000 (` 36,600) each and the paid up capital of Joy Alukkas Jewellery LLC, Ajman is AED 300,000 (` 3.66 million) divided into 100 equity shares of AED 3,000 (` 36,600) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery LLC, Ajman are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery LLC, Abudhabi – UAE
Joy Alukkas Jewellery LLC, Abudhabi, a company incorporated on September 27, 1992 under the federal laws of United Arab Emirates is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery LLC, Abudhabi is AED 300,000 (` 3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each and the paid up capital of Joy Alukkas Jewellery LLC, Abudhabi is AED 300,000 (`3.66 million) divided into 300 equity shares of AED 1,000 (`12,200) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery LLC, Abudhabi are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellers LLC, Ras Al Khaima – UAE
Joy Alukkas Jewellers LLC, Ras Al Khaima, a company incorporated on August 26, 2009 under the federal laws of United Arab Emirates is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery LLC, Ras Al Khaima is AED 200,000 (` 2.44 million) divided into 2,000 equity shares of AED 100 (` 1,220) each and the paid up capital of Joy Alukkas Jewellery LLC, Ras Al Khaima is AED 200,000 (` 2.44 million) divided into 2,000 equity shares of AED 100 (`1,220) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery LLC, Ras Al Khaima are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery WLL, Qatar
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Joy Alukkas Jewellery WLL, Qatar, a company incorporated on November 16, 2006 under the laws of Qatar is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery WLL, Qatar is AED 250,000 (` 3.05 million) divided into 500 equity shares of AED 500 (` 6,100) each and the paid up capital of Joy Alukkas Jewellery WLL, Qatar is AED 250,000 (` 3.05 million) divided into 500 equity shares of AED 500 (`6,100) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery WLL, Qatar are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery LLC, Oman
Joy Alukkas Jewellery LLC, Oman, a company incorporated on August 30, 1999 under the laws of Oman is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery LLC, Oman is AED 1,428,000 (`17.42 million) divided into 150,000 equity shares of AED 9.52 (`116.14) each and the paid up capital of Joy Alukkas Jewellery LLC, Oman is AED 1,428,000 (`17.42 million) divided into 150,000 equity shares of AED 9.52 (`116.14) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 70% of this company. The remaining equity shares of Joy Alukkas Jewellery LLC, Oman are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery WLL, Bahrain
Joy Alukkas Jewellery WLL, Bahrain, a company incorporated on August 30, 2008 under the laws of Bahrain is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery WLL, Bahrain is AED 8,757,000 (` 106.84 million) divided into 9,000 equity shares of AED 973 (` 11,871) each and the paid up capital of Joy Alukkas Jewellery WLL, Bahrain is AED 8,757,000 (` 106.84 million) divided into 9,000 equity shares of AED 973 (` 11,871) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery WLL, Bahrain are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Joy Alukkas Jewellery WLL, Kuwait
Joy Alukkas Jewellery WLL, Kuwait, a company incorporated on November 16, 2004 under the laws of Kuwait is engaged in the business of retail trading of jewellery.
The authorised share capital of Joy Alukkas Jewellery WLL, Kuwait is AED 367,500 (`4.48 million) divided into 100 equity shares of AED 3,675 (`44,835) each and the paid up capital of Joy Alukkas Jewellery WLL, Kuwait is AED 367,500 (` 4.48 million) divided into 100 equity shares of AED 3,675 (` 44,835) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 49% of this company. The remaining equity shares of Joy Alukkas Jewellery WLL, Kuwait are held by another individual on behalf of Joy Alukkas Holdings Inc., British Virgin Islands.
Alukkas Limited, UK
Alukkas Limited UK, a company incorporated on March 14, 2002 under the laws of UK is engaged in the business of retail trading of jewellery.
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The authorised share capital of Alukkas Limited, UK is AED 7,070,000 (` 86.25 million) divided into 1,000,000 equity shares of AED 7.07 (` 86.25) each and the paid up capital of Alukkas Limited, UK is AED 70,700 (` 0.86 million) divided into 10,000 equity shares of AED 7.07 (` 86.25) each. Our promoter Alukkas Varghese Joy holds 99.98 % of the issued and paid up capital Joy Alukkas Holdings Inc., British Virgin Islands which holds 100% of this company.
Other Confirmations
Except as disclosed in this DRHP, our Promoter and Group Entities have confirmed that they have not been declared as wilful defaulters by the RBI or any other governmental authority and there are no violations of securities laws committed by them in the past and no proceedings pertaining to such penalties are pending against them.
Additionally, neither the Promoter nor the Group Entities have been restrained from accessing the capital markets for any reasons by the SEBI or any other authorities.
Litigation
For details relating to material legal proceedings involving the Promoter and Group Entities, see “Outstanding Litigation and Material Developments” on page 195.
Common Pursuits
Some of our Group Entities have common pursuits and are involved in the jewellery business. We shall adopt necessary procedures and practices as permitted by law to address any conflict situations, as and when they may arise. For, further details on the related party transactions, to the extent of which our Company is involved, see “Related Party Transactions” on page 150.
Our Promoter has entered into a non compete agreement dated January 3, 2011 with our Company whereby our Promoter has undertaken to not compete with the business of the Company in India. For details, please see “Material Contracts and Documents for Inspection” on page 310.
Sick Company
None of the Group Entities have become sick companies under the Sick Industrial Companies (Special Provisions) Act, 1985 and no winding up proceedings have been initiated against them. Further no application has been made, in respect of any of the Group Entities, to the RoC for striking off their names. Additionally, none of our Group Entities have become defunct in the five years preceding the filing of this Draft Red Herring Prospectus.
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DIVIDEND POLICY
Under the Companies Act, our Company can pay dividends upon a recommendation by our Board of Directors and approval by a majority of the shareholders at the annual general meeting, who have the right to decrease but not to increase the amount of the dividend recommended by the board of directors. The dividends may be paid out of profits of a company in the year in which the dividend is declared or out of the undistributed profits or reserves of previous fiscal years or out of both. The Articles of Association of our Company also gives the discretion to our Board of Directors to declare and pay interim dividends without shareholder‟s approval at an annual general meeting.
The declaration and payment of dividend will be recommended by our Board and approved by the shareholders of our Company at their discretion and will depend on a number of factors, including the results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions, applicable Indian legal restrictions and other factors considered relevant by the Board. The Board may also from time pay interim dividend. All dividend payments are made in cash to the shareholders of our Company. Since incorporation, our Company has not paid any dividend except for the interim dividend paid on June 24, 2010 for Fiscal 2010, the details of which are as below:
Face value of Equity Shares (in ` per Equity Share) 10 Interim Dividend (in million) 75.00 Interim Dividend Rate (%) 15.00 Dividend Tax (in million) 12.75
The amounts paid as dividend in the past are not necessarily indicative of our dividend policy or dividend amounts payable, if any, in the future.
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SECTION V – FINANCIAL STATEMENTS
RESTATED STANDALONE FINANCIAL STATEMENTS
The Board of Directors Joyalukkas India Limited Door No. 40/2096 Peevees Triton Marine Drive Kochi – 682 031
Dear Sirs
We have examined the attached restated financial information of Joyalukkas India Limited (“the Company”) (formerly known as Joyalukkas India Private Limited) as approved by the Board of Directors of the Company, prepared in terms of the requirements of Paragraph B, Part II of Schedule II to the Companies Act, 1956, as amended ('the Act') and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the „SEBI Regulations‟), the Guidance note on “Reports in Company‟s Prospectus (Revised)” issued by the Institute of Chartered Accountants of India („ICAI‟), to the extent applicable („Guidance Note‟) and in terms of our engagement agreed upon with you in accordance with our engagement letter dated October 26, 2010 in connection with the proposed issue of Equity Shares of the Company. These information have been extracted by the Management from the standalone financial statements for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and the six months period ended September 30, 2010. 1. In accordance with the requirements of Paragraph B, Part II of Schedule II to the Act, the SEBI Regulations and terms of our engagement agreed with you, we further report that:
a) The Restated Summary Statement of Assets and Liabilities as at March 31, 2006, 2007, 2008, 2009, 2010 and September 30, 2010, examined by us, as set out in Annexure I to this report read with the significant accounting policies in Annexure IV (1) are after making such adjustments and regrouping as in our opinion were appropriate and more fully described in the Notes to the Restated Standalone Financial Statements enclosed as Annexure IV (2) and (3) to this report
a) The Restated Summary Statement of profit or losses of the Company for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and for the six months period ended September 30, 2010 are as set out in Annexures II to this report read with the significant accounting policies in Annexure IV (1) are after making such adjustments and regrouping as in our opinion were appropriate and more fully described in the Notes to the Restated Standalone Financial Statements enclosed as Annexure IV (2) and (3) to this report. 2. Based on the above, we are of the opinion that the Restated Standalone Financial Statements have been made after incorporating:
i) adjustments for the changes in accounting policies retrospectively in respective financial years / period to reflect the same accounting treatment as per the changed accounting policy for all the reporting periods; ii) adjustments for prior period and other material amounts in the respective financial years / period to which they relate; and iii) there are no extra-ordinary items that need to be disclosed separately in the Restated Standalone Financial Statements and no qualifications requiring adjustments.
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3. We have also examined the following standalone financial information as set out in the Annexures prepared by the management and approved by the Board of Directors relating to the Company for the years ended March 31, 2006, 2007, 2008, 2009, 2010 and for the six months period ended September 30, 2010.
i) Statement of cash flows, as restated, included in Annexure III ii) Statement of dividends paid, included in Annexure V iii) Statement of accounting ratios, as restated, included in Annexure VI iv) Statement containing details of other income, as restated, included in Annexure VII. v) Statement containing details of investment, included in Annexure VIII vi) Statement containing details of secured loans, as restated, included in Annexure IX vii) Statement containing details of unsecured loans, as restated, included in Annexure X viii) Statement of sundry debtors, as restated, included in Annexure XI ix) Statement containing details of other current assets and loans and advances, as restated, included in Annexure XII x) Capitalization statement as at September 30, 2010 included in Annexure XIII xi) Statement containing details of related party transactions and balances outstanding with the related parties included in Annexure XIV xii) Statement of tax shelter included in Annexure XV. 4. The report should not in any way be construed as a re-issuance or re-dating of any of the previous audit reports issued by us.
5. We have no responsibility to update our report for events and circumstances occurring after the date of the report.
6. In our opinion, the above financial information contained in Annexures I to XV of this report read along with the significant accounting policies (Refer Annexure IV (1)) and Notes to the Restated Standalone Summary Statements (Refer Annexure IV (2) to IV (9)) are prepared after making adjustments and regrouping as considered appropriate and have been prepared in accordance with Paragraph B, Part II of Schedule II of the Act and the SEBI Regulations except that sales of manufactured goods and of traded goods for the years ended 31 March 2006, 2007 and 2008 have not been separately disclosed due to unavailability of information as explained in Annexure IV(3)(E).
Our report is intended solely for use of the management and for inclusion in the offer document in connection with the proposed issue of Equity Shares of the Company. Our report should not be used, referred to or distributed for any other purpose except with our consent in writing. for B S R & Co. Chartered Accountants Registration No. 101248W
Zubin Shekary Partner Membership No. 048814 Bangalore 3 January 2011
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Annexure I
Statement of assets and liabilities, as restated (Rs in millions) Particulars As at 31 March As at 30 September 2006 2007 2008 2009 2010 2010
Fixed assets Gross block 478.22 692.26 727.13 781.39 969.49 1,086.35 Less: accumulated depreciation 77.62 154.41 245.68 351.89 451.48 510.55 Net block 400.60 537.85 481.45 429.50 518.01 575.80 Capital work-in-progress 93.06 32.16 52.97 22.61 145.18 32.25 including capital advances Total 493.66 570.01 534.42 452.11 663.19 608.05
Investments - - - - - 0.10
Deferred tax assets, net 1.57 - - 7.31 - 1.70
Current assets, loans and advances Inventories 1,545.63 2,287.65 3,399.67 3,272.06 5,202.06 6,209.73 Sundry debtors 18.71 34.96 49.41 322.76 284.74 231.94 Cash and bank balances 75.62 117.28 314.82 331.48 248.66 139.84 Current assets, loans and 191.29 173.61 229.64 229.28 250.57 331.55 advances Total 1,831.25 2,613.50 3,993.54 4,155.58 5,986.03 6,913.06
Liabilities and provisions Secured loans 1,000.81 1,564.59 1,905.39 1,982.00 2,612.01 2,807.33 Unsecured loans 418.15 304.61 108.80 58.21 57.12 94.74 Current liabilities and provisions 779.66 898.44 1,689.77 1,205.87 2,022.80 2,121.41 Deferred tax liability, net - 10.27 1.16 - 2.60 - Total 2,198.62 2,777.91 3,705.12 3,246.08 4,694.53 5,023.48
Net worth 127.86 405.60 822.84 1,368.92 1,954.69 2,499.43
Net worth represented by
Share capital Equity share capital 100.00 200.00 450.00 500.00 500.00 500.00
Reserves and surplus General reserve - - - - 67.82 67.82 Balance in profit and loss account 27.86 205.60 372.84 868.92 1,386.87 1,931.61
Net worth 127.86 405.60 822.84 1,368.92 1,954.69 2,499.43
Note: The above statement should be necessarily read with the notes to the restated summary statements and the significant accounting policies as appearing in Annexure IV.
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Annexure II Statement of profit and loss account, as restated (Rs in millions) Particulars For the For the year ended 31 March period from 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Income Sales of: Jewellery (Refer Note 3(E) of Annexure IV) 2,610.42 5,574.83 8,345.53 12,843.45 16,730.07 11,765.13 Textiles and accessories - traded 829.50 1,180.91 1,280.90 1,428.29 1,490.52 779.49 Other income 5.06 4.95 11.46 53.23 15.87 7.77 Total 3,444.98 6,760.69 9,637.89 14,324.97 18,236.46 12,552.39
Expenditure Cost of goods sold 2,908.83 5,612.66 8,296.12 12,127.71 15,600.58 10,671.39 Personnel cost 103.55 137.27 169.86 269.76 328.37 239.16 Operating expenses 250.75 508.34 608.09 765.00 885.26 602.15 Finance cost 81.06 135.00 211.49 292.63 268.01 165.07 Depreciation 45.70 79.29 94.63 108.96 102.81 65.99
Total 3,389.89 6,472.56 9,380.19 13,564.06 17,185.03 11,743.76
Profit before tax 55.09 288.13 257.70 760.91 1,051.43 808.63 Less: provision for tax Current tax / minimum alternate tax 23.77 96.72 97.61 271.50 367.96 268.19 Fringe benefit tax 2.36 1.79 1.92 1.77 - - Deferred tax charge / (benefit) (2.16) 11.84 (9.11) (8.47) 9.91 (4.30) Wealth tax 0.01 0.04 0.04 0.03 0.04 - Total provision for tax 23.98 110.39 90.46 264.83 377.91 263.89
Net profit as restated 31.11 177.74 167.24 496.08 673.52 544.74 Add: Balance in profit and loss account (3.25) 27.86 205.60 372.84 868.92 1,386.87 brought forward, as restated Amount available for appropriation 27.86 205.60 372.84 868.92 1,542.44 1,931.61
Appropriations a) Dividend - - - - 75.00 - b) Tax on dividend - - - - 12.75 - c) Bonus shares issued by capitalization of ------profits d) Transfer to general reserve - - - - 67.82 - Balance carried forward to balance sheet, as restated 27.86 205.60 372.84 868.92 1,386.87 1,931.61 Note 1: The above statement should be necessarily read with the notes to the restated summary statements and the significant accounting policies as appearing in Annexure IV.
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Annexure III Statement of cash flows, as restated (Rs in millions) Particulars For the For the year ended 31 March period from 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010 Cash flows from operating activities Net profit before tax, as restated 55.09 288.13 257.70 760.91 1,051.43 808.63 Adjustments for: Depreciation 45.70 79.29 94.63 108.96 102.81 65.99 Interest expense 73.30 126.61 189.28 262.47 257.28 144.71 Interest income (0.83) (1.25) (1.01) (4.35) (8.88) (2.04) (Profit) / loss on sale of fixed assets 0.04 2.07 (1.46) 1.40 (1.32) (2.14) Loss on aircraft insurance recovery - - - 4.36 - - Insurance claim received - - - - (8.99) - Mark to market loss on derivative instruments, net - - - 19.88 - - Unrealized foreign exchange loss / (gain) 0.33 0.11 (1.00) (2.43) 4.80 7.04 Operating profit before working capital changes 173.63 494.96 538.14 1,151.20 1,397.13 1,022.19 Decrease / (increase) in inventories (777.75) (742.02) (1,112.01) 127.61 (1,930.00) (1,007.66) Decrease / (increase) in sundry debtors 4.81 (16.53) (13.45) (270.92) 33.02 44.93 Decrease / (increase) in loans and advances and (91.61) 1.32 (26.65) (33.31) (22.74) (100.36) other current assets Increase /(decrease) in current liabilities and 499.61 106.45 826.66 (612.38) 786.53 184.01 provisions Cash generated from / (used in) operations (191.31) (155.82) 212.69 362.20 263.94 143.11 Adjustments for: Income taxes paid (21.46) (41.41) (144.98) (144.51) (436.21) (261.13) Net cash generated from / (used in) operating (212.77) (197.23) 67.71 217.69 (172.27) (118.02) activities [A]
Cash flows from investing activities Purchase of fixed assets (159.15) (158.65) (104.96) (31.97) (308.74) (26.01) Proceeds from sale of fixed assets 0.03 0.93 31.37 21.64 4.16 13.74 Sale / (purchase) of investments, net 7.96 - - - - (0.10) Interest received 0.41 1.50 0.72 3.84 9.40 2.05 Insurance claim received - - - - 8.99 - Net cash used in investing activities [B] (150.75) (156.22) (72.87) (6.49) (286.19) (10.32)
Cash flows from financing activities: Proceeds from issue of share capital - 100.00 250.00 50.00 - - Dividends paid - - - - - (75.00) Dividend distribution tax paid - - - - - (12.75) Secured loans availed , net 389.12 563.78 340.80 56.73 630.01 195.32 Unsecured loans availed / (repaid), net 67.56 (110.93) (195.82) (50.59) (1.09) 38.35 Interest paid (71.73) (129.22) (189.28) (262.47) (257.28) (143.38) Net cash generated from / (used in) financing 384.95 423.63 205.70 (206.33) 371.64 2.54 activities [C]
Net increase / (decrease) in cash and cash equivalents [A+B+C] 21.43 70.18 200.54 4.87 (86.82) (125.80) Cash and cash equivalents at the beginning of the 20.82 42.25 112.43 312.97 317.84 231.02 year / period Cash and cash equivalents at the end of the year 42.25 112.43 312.97 317.84 231.02 105.22 / period Cash and cash equivalents comprise: Cash and bank balances 75.62 117.28 314.82 331.48 248.66 139.84 Restricted deposits - - (0.95) (10.39) (11.34) (30.70) Book overdraft (33.37) (4.85) (0.90) (3.25) (6.30) (3.92)
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42.25 112.43 312.97 317.84 231.02 105.22 Note: 1. The cash flow statement has been prepared under the indirect method as set out in Accounting Standard - 3 on Cash Flow Statements as prescribed by the Companies (Accounting Standards) Rules, 2006. 2. The above statement should be necessarily read with the notes to the restated summary statements and the significant accounting policies as appearing in Annexure IV.
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Annexure IV (continued) 1. Significant accounting policies (continued) 1.1 Background Joyalukkas India Limited („the Company‟) was incorporated as Joy Alukkas Traders (India) Private Limited on 22 April 2002 as a private limited company. The registered office of the Company is situated at Kochi, Kerala, India. The Company changed its name to Joyalukkas India Private Limited on 23 December 2009. Further the Company has been converted into a public limited company on 9 December 2010. The Company is primarily engaged in the trading of jewellery and textiles.
The restated financial statements relate to the Company and have been specifically prepared for inclusion in the document to be filed by the Company with the Securities and Exchange Board of India (“SEBI”) in connection with its proposed Initial Public Offering. The restated financial statements consist of the restated summary statement of assets and liabilities of the Company as at 31 March 2006, 2007, 2008, 2009, 2010 and 30 September 2010, the related restated summary statement of profits and losses for the years ended 31 March 2006, 2007, 2008, 2009, 2010 and the six months period from 1 April 2010 to 30 September 2010 and the related restated summary statement of cash flows for each of the years ended 31 March 2006, 2007, 2008, 2009, 2010 and the six months period from 1 April 2010 to 30 September 2010 (these restated financial statements hereinafter are collectively referred to as “Restated Summary Statements”).
The Restated Summary Statements have been prepared to comply in all material respects with the requirements of Schedule II to the Companies Act, 1956 (the “Act”) and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,2009 (the “SEBI Regulations”) notified by SEBI on August 26, 2009, as amended from time to time. The Act and the SEBI Regulations require the information in respect of the assets and liabilities and profits and losses of the Company for each of the five years / periods immediately preceding the issue of the Prospectus. 1.2 Basis for preparation The Restated Summary Statements have been prepared in accordance with generally accepted accounting principles in India and presented under the historical cost convention, on the accrual basis of accounting and comply with the mandatory Accounting Standards prescribed in the Companies (Accounting Standard) Rules 2006 and other pronouncements of the Institute of Chartered Accountants of India (“ICAI”). The Restated Summary Statements are presented in Indian rupees in millions. The Company, on 28 April 2010, formed a wholly owned subsidiary, Joyal Ornaments and Trades Private Limited ("Joyal"). The Company had invested a sum of Rs 0.1 million as on 30 September 2010 as share capital in Joyal and Joyal had a net worth of Rs 0.05 million as at 30 September 2010. Up to 30 September 2010, Joyal has only incurred incorporation and setting up expenses amounting to Rs 0.05 million which represents 0.006% of the Company's results for the six months period ended 30 September 2010. Further, the net worth of Joyal is 0.002% of the Company's net worth as at 30 September 2010. Joyal is yet to commence operations as at 3 January 2011 and does not have any contingent liabilities as on that date. The Company believes that Joyal, both alone and in aggregate, is immaterial to the overall financial position, results and cash flows of the Company. Given this and the fact that Joyal hasn‟t commenced operations, the restated consolidated financial statements of the Company have not been prepared and presented in the DRHP. 1.3 Use of estimates The preparation of Restated Summary Statements in conformity with generally accepted accounting principles in India (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the
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financial statements and the results of operations during the reporting year end. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. 1.4 Fixed assets Fixed assets are carried at cost of acquisition or construction less accumulated depreciation and provision for impairment, if any. Cost comprises the purchase price and includes freight, duties, taxes and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of the fixed asset not ready for their intended use before such date, are disclosed under capital work-in-progress. 1.5 Depreciation Depreciation is provided using straight line method as per the useful life of the assets estimated by the management, or at the rates prescribed under Schedule XIV of the Companies Act, 1956, whichever is higher. Pursuant to this policy, depreciation on assets has been provided at the rates based on the estimated useful lives of fixed assets given below:
Class of fixed assets Useful life in years Buildings 20 Plant and machinery 7 Computer equipments 3 Electrical fittings 8 Office equipments 7 Furniture and fixtures 7 Motor vehicles 5
Leasehold improvements are amortised over the lease term or useful life of 3 years, whichever is shorter. Fixed assets individually costing Rs 5,000 or less are depreciated at 100%. Pro-rata depreciation is provided on all fixed assets purchased and sold during the year. 1.6 Impairment The Company assesses at each balance sheet date whether there is any indication that an asset forming part of its cash generating units may be impaired. If any such indications exist, the Company estimates the recoverable amount of the asset or the group of asset comprising, a cash generating unit. For an asset or a group of assets that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the assets belongs is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. An impairment loss is reversed only to the extent that the
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carrying amount of the asset does not exceed the book value that would have been determined; if no impairment loss has been recognized. 1.7 Inventories Inventories are valued at the lower of cost and net realisable value. Cost of inventories comprises purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition. The methods of determination of cost of various categories of inventories are as follows:
Raw materials Weighted average method Finished goods - Gold and silver jewellery Weighted average method - Diamond, precious stones and platinum jewellery Specific identification - Textiles and other accessories Specific identification
Packing materials Specific identification
The comparison of cost and net realisable value is made on an item-by-item basis. Raw materials and packing materials held for use in production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. 1.8 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer. The amount recognised as sale is net of sales tax and sales returns. Interest on deployment of surplus funds is recognized using the time proportionate method, based on the transactional interest rates. 1.9 Foreign currency transactions (i) Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. (iii) Exchange differences Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year. (iv) Forward exchange contracts The premium or discount arising at the inception of forward exchange contracts entered into to hedge the foreign currency risk of the underlying asset or liability at the balance sheet date is amortised as expense or income over the life of the contract. The exchange difference on such forward exchange
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contract is calculated as the difference between the foreign currency amounts of the contract translated at the exchange rate at the reporting date and is recognised in the profit and loss account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. (v) Derivative contracts In accordance with the ICAI Announcement – Accounting for derivatives, the Company provides for losses in respect of all outstanding derivative contracts at the balance sheet date by marking them to market. 1.10 Employee benefits Liability for gratuity, which is a defined benefit scheme, is provided for by the Company based on actuarial valuation carried out by an independent actuary at the balance sheet date. Actuarial gains/ losses are recognised immediately in the profit and loss account and are not deferred. The rules of the Company do not permit encashment or carry forward of unutilised leave. Contributions to recognised provident fund and employee‟s state insurance, which are defined contribution schemes, are charged to the profit and loss account on an accrual basis. 1.11 Taxation The current income tax charge is determined in accordance with the relevant tax regulations applicable to the Company in India. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which give rise to future economic benefits in the form of tax credit against future income tax liability, is recognised in the balance sheet if there is convincing evidence that the Company will pay normal tax in subsequent years and the resultant assets can be measured reliably. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward business loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets/ liabilities are reviewed at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised. Assets and liabilities representing current and deferred tax are disclosed on a net basis when there is a legally enforceable right to set - off and management intends to settle the asset and liability on a net basis. Tax expense also comprises Fringe Benefit Tax (FBT) for the period until 31 March 2009. Provision for FBT until 31 March 2009 is made in accordance with the provisions of Income-tax Act, 1961 and the Guidance Note on FBT issued by ICAI. Effective 1 April 2009, the provisions of FBT have been withdrawn. 1.12 Earnings per share The basic and diluted earnings or loss per share is computed by dividing the net profit or loss attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. 1.13 Leases Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased item, are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. 1.14 Cash flow statement
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Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. 1.15 Provisions and contingent liabilities The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When the likelihood of outflow of resources, in case of a possible obligation or a present obligation is remote no provision or disclosure is made. Provision for onerous contracts i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is possible that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a reliable estimate of such obligation. 1.16 Investments Long- term investments are carried out at cost less any other-than-temporary diminution in value, determined separately for each individual investment. Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments.
Annexure IV (continued)
2. Impact of material adjustments (Rs in millions) Particulars For the period from For the year ended 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Profit after tax as per audited profit and loss account 34.32 198.83 163.24 486.81 678.21 524.50
Adjustments on account of: A. Change in accounting estimates (refer Note 3 A) Change in estimated useful lives of the assets (0.55) 1.34 0.82 (0.88) - -
B. Other material adjustments (refer Note 3 B) a) Income tax - - - - (1.43) - b) Sales tax (2.66) (15.52) (8.36) 5.79 5.73 20.24 c) Insurance claims - (6.91) 11.54 4.36 (8.99) -
Total impact of the adjustments (3.21) (21.09) 4.00 9.27 (4.69) 20.24
Net profit after tax, as restated 31.11 177.74 167.24 496.08 673.52 544.74
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3. Notes on adjustments to the restated summary statements and other disclosures
A) Change in accounting policies and estimates
The estimated useful life of leasehold improvements has been revised by the Company with effect from 1 April 2006 and the change was given effect to on a proportionate basis in the audited financial statements for the year ended 31 March 2007. For the purpose of the Restated Summary Statements, the impact of the change in the estimated useful life of lease hold improvements has been adjusted in the relevant years with retrospective effect. The accumulated depreciation and net block of the relevant years have also been adjusted in the Restated Summary Statements.
B) Prior period items
(i) Income tax
The Company, during the year ended 31 March 2010, has reversed the excess provision for Minimum Alternate Tax (MAT) pertaining to the year ended 31 March 2005. The effect of the reversal of this excess provision has been appropriately adjusted in the opening reserve of 1 April 2005.
(ii) Sales tax
The audited Profit and Loss Accounts of certain years include amounts paid / provided for in respect of shortfall / excess sales tax arising out of assessments, appeals etc of earlier years. The effects of the amounts paid / provided for in respect of the shortfall / excess has been appropriately adjusted in the results of the respective years in the Restated Summary Statements.
(iii) Accounting for insurance claims
Any loss / additional write-off required on account of any shortfall in insurance claims received is accounted for in the year in which the insurance claim is finally settled. For the purpose of the Restated Summary Statements, insurance claims received, losses and additional write-offs have been appropriately adjusted in the results of the respective years in which the insurance claim first arose.
C) Auditors qualification which do not require any adjustment
During the years ended 31 March 2006, 2007, 2008 and 2009, the internal audit system is not commensurate with the size and nature of its business.
D) Regrouping
Figures have been regrouped / recast for the consistency of presentation
E) Details of manufacturing and trading sales (Rs in millions) Particulars For the period from 1 April For the year ended 2010 to 30 Septembe r 2010 2006 * 2007 * 2008 * 2009 2010 Sales of products manufactured through the contract manufacturer - - - 7,364.50 9,365.91 6,297.43 of products traded by the Company - - - 5,478.95 7,364.16 5,467.70
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Total 2,610.42 5,574.83 8,345.53 12,843.45 16,730.07 11,765.13 * The Company purchases jewellery from various vendors / suppliers and also manufactures jewellery through contract manufacturers . While purchase of jewellery has always been tracked separately, for better realization, manufactured and purchased jewellery are pooled under various lots on the basis of shape, design and quality. At times the jewellery stock is melted / re-manufactured to create new lots for better realisation. During the financial year beginning, 1 April 2008, the Company installed an ERP system to track sale of manufactured and traded jewellery, however this segregation is not available for the years ended 31 March 2006, 2007 and 2008. Accordingly, the breakup of sales into traded jewellery and manufactured jewellery as required under SEBI (ICDR) Regulations have not been furnished for these years.
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Annexure IV (continued) 4. Contingent liabilities (Rs in millions) Particulars As at As at 31 March 30 September 2006 2007 2008 2009 2010 2010
Claims against the Company not acknowledged as debts - Sales tax matters - - - - 97.70 103.64 - Service tax matters - - 2.27 16.95 25.89 25.89 - Others 22.46 22.46 22.46 - - -
5. Capital commitments The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is as follows: (Rs in millions) Particulars As at As at 31 March 30 September 2006 2007 2008 2009 2010 2010
Capital commitments 45.71 20.32 13.67 90.92 48.68 13.48
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Annexure IV (continued)
6. Segment reporting
Business segments: The Company has organised its operations into two businesses: jewellery and textiles and accessories
Geographic segments: The Company operates in two principal geographical areas of the world: India and Rest of the world
The accounting principles used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. Income and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while the remainder of costs are apportioned on an appropriate basis. Certain expenses are not specifically allocable to the individual segments as these expenses are common in nature. The Company therefore believes that it is not practicable to provide segment disclosure relating to such expenses and accordingly such expenses are separately disclosed as unallocated and directly charged against total income.
Certain segment assets and liabilities are directly attributable to the segment. Segment assets include all operating assets used by the segment and consist principally of fixed assets, inventories, sundry debtors and loans and advances. Segment liabilities include trade creditors, creditors for expenses and other operating liabilities and provisions. Certain assets and liabilities that are not specifically allocable to the individual segments have been separately disclosed as unallocated. a) Primary segment information: (Rs in millions) For the period For the year ended from 1 April 2010 to 30 September Particulars 2006 2007 2008 2009 2010 2010 Segment revenues Jewellery 2,610.42 5,574.83 8,345.53 12,843.45 16,730.07 11,765.13 Textiles and accessories 829.50 1,180.91 1,280.90 1,428.29 1,490.52 779.49 3,439.92 6,755.74 9,626.43 14,271.74 18,220.59 12,544.62
Segment profits Jewellery 128.64 677.92 771.26 1,394.74 1,726.45 1,362.96 Textiles and accessories 91.83 231.51 280.60 231.13 335.52 140.81 220.47 909.43 1,051.86 1,625.87 2,061.97 1,503.77
Other unallocable expenditure, net of unallocable income (89.38) (491.25) (594.13) (625.56) (759.82) (537.84) Operating profits 131.09 418.18 457.73 1,000.31 1,302.15 965.93 Interest income 0.83 1.25 1.01 4.35 8.88 2.04 Other income 4.23 3.70 10.45 48.88 6.98 5.73 Finance cost (81.06) (135.00) (211.49) (292.63) (268.01) (165.07) Taxation (23.98) (110.39) (90.46) (264.83) (376.48) (263.89) Net profit, as restated 31.11 177.74 167.24 496.08 673.52 544.74
Segment assets Jewellery 1,349.64 2,340.96 3,702.41 3,854.50 5,881.61 6,934.18 Textiles and accessories 554.40 537.31 459.30 375.00 447.73 380.81 Corporate – unallocated 422.44 305.24 366.25 385.50 319.88 207.92 2,326.48 3,183.51 4,527.96 4,615.00 6,649.22 7,522.91
Segment liabilities Jewellery 366.57 595.66 1,457.53 808.71 1,551.05 1,684.13 Textiles and accessories 302.38 144.45 139.27 166.36 197.08 177.12 Corporate – unallocated 1,529.67 2,037.80 2,108.32 2,271.01 2,946.40 3,162.23 2,198.62 2,777.91 3,705.12 3,246.08 4,694.53 5,023.48 Depreciation charge for the year / period Jewellery 15.43 24.01 40.78 56.08 63.60 45.41
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Textiles and accessories 17.33 41.40 38.30 41.15 26.89 13.73 Corporate – unallocated 12.94 13.88 15.55 11.73 12.32 6.85 45.70 79.29 94.63 108.96 102.81 65.99 Capital expenditure (including capital work in progress) Corporate – unallocated 153.15 158.65 114.29 28.70 316.73 22.46 153.15 158.65 114.29 28.70 316.73 22.46 b) Geographical segment information Segment revenues India 3,330.19 6,643.82 9,327.07 13,633.19 17,566.82 12,323.85 Rest of world 109.73 111.92 299.36 638.55 653.77 220.77 3,439.92 6,755.74 9,626.43 14,271.74 18,220.59 12,544.62 Segment assets India 2,317.97 3,162.23 4,484.75 4,303.32 6,379.67 7,317.87 Rest of world 8.51 21.28 43.21 311.68 269.55 205.04 2,326.48 3,183.51 4,527.96 4,615.00 6,649.22 7,522.91
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Annexure IV (continued)
7. Leases
Assets taken on non - cancellable operating lease
The Company is obligated under non-cancellable operating leases for its showrooms, residential premises and office premises. Total expense under non-cancellable operating leases amounted to: (Rs in millions) Particulars For the period from 1 April For the year ended 2010 to 30 September 2006 2007 2008 2009 2010 2010
Lease rental expense 18.37 37.45 47.66 93.63 87.95 81.34
Future minimum lease payments due under non-cancellable operating leases are as follows: (Rs in millions) As at 31 March As at 30 September Particulars 2006 2007 2008 2009 2010 2010 Not later than one year 21.89 57.85 95.00 94.15 97.78 110.89 Later than one year and not later than five years 81.77 165.47 299.93 270.45 274.30 318.17 Later than five years 103.92 79.00 237.91 181.83 135.31 103.92 Total 207.58 302.32 632.84 546.43 507.39 532.98
Assets taken on cancellable operating lease
The Company is also obligated under cancellable operating leases for office and residential premises. Total expense under cancellable operating leases amounted to:
Lease rental expense 9.42 23.02 25.72 21.20 21.16 10.38
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Annexure IV (continued)
8. Gratuity
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure at 15 days salary (last drawn basic salary and dearness allowance) for each completed year of service or part thereof in excess of six months. These benefits are unfunded. (Rs in millions) Particulars For the period from 1 For the year ended April 2010 to 30 Septembe r 2006 2007 2008 2009 2010 30 Septembe r 2010
Obligations at beginning of the year / period 0.64 2.56 3.92 6.19 8.44 13.45 Current service cost 2.04 1.45 2.44 2.32 4.65 4.52 Interest cost on defined benefit obligation 0.05 0.19 0.31 0.42 0.65 0.51 Benefits paid - - (0.06) (0.33) (0.16) (0.79) Net actuarial (gain) / loss for the year / period (0.17) (0.28) (0.42) (0.16) (0.13) (0.14) Obligations at end of the year / period 2.56 3.92 6.19 8.44 13.45 17.55
Reconciliation of present value of the obligation and the fair value of the plan assets: Closing obligations (2.56) (3.92) (6.19) (8.44) (13.45) (17.55) Closing fair value of plan assets ------
Asset / (liability) recognized in the balance sheet (2.56) (3.92) (6.19) (8.44) (13.45) (17.55)
Gratuity cost for the year / period Current service cost 2.04 1.45 2.44 2.32 4.65 4.52 Interest cost on defined benefit obligation 0.05 0.19 0.31 0.42 0.65 0.51 Expected return on plan assets ------Net actuarial (gain) / loss for the year / period (0.17) (0.28) (0.42) (0.16) (0.13) (0.14) Net gratuity cost 1.92 1.36 2.33 2.58 5.17 4.89
Assumptions Discount rate 7.50 7.50 8.00 7.01 % % % % 7.82% 7.85% Estimated rate of return on plan assets NA NA NA NA NA NA Salary increase 6.00 6.00 6.00 6.00 % % % % 6.00% 6.00% Attrition rate 2.00 2.00 % % 5% 15% 15% 15% Retirement age 59 59 59 59 59 59
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Annexure IV (continued)
9. Subsequent events
1. Issue of equity shares of the Company to certain employees
The Board of Directors of the Company, in their meetings held on 8 November 2010 and 12 November 2010, recommended and approved the allotment of 34,200 equity shares of the Company to 98 employees of the Company. These shares have been allotted to the employees at the par value of the equity share i.e. Rs.10/-.
2. Conversion of status from Private Limited to a Public Limited Company
Pursuant to the necessary approvals received from the Registrar of Companies, the Company has been converted into a public limited company with effect from 9 December 2010.
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Annexure V
Statement of dividend paid (Rs in millions) Particulars As at As at 31 March 30 September 2006 2007 2008 2009 2010 2010
Number of fully paid equity shares* 200,000 400,000 45,000,000 50,000,000 50,000,000 50,000,000 Equity share capital 100.00 200.00 450.00 500.00 500.00 500.00 Face value (Rs.) 500 500 10 10 10 10 Rate of dividend % - - - - 15% - Amount of dividend - - - - 75 - * Each equity share of the Company with face value of Rs.500 has been sub-divided into 50 equity shares of the face value of Rs.10 each (stock split) with effect from 15 October 2007.
Note: The figures disclosed above are based on the restated financial information of Joyalukkas India Limited.
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Annexure VI Statement of accounting ratios (Rs in millions) Particulars As at and for six month As at and for the year ended 31 March period ended 30 September 2006 2007 2008 2009 2010 2010
Net worth (A) 127.86 405.60 822.84 1,368.92 1,954.69 2,499.43
Restated profit after tax (B) 31.11 177.74 167.24 496.08 673.52 544.74
Weighted average number of equity shares outstanding during the year / period For basic earnings per share (C) 10,000,000 10,833,333 30,068,493 45,561,644 50,000,000 50,000,000 For diluted earnings per share (D) 10,000,000 10,833,333 30,068,493 45,561,644 50,000,000 50,000,000
Earnings Per Share Rs. 10 each (refer note 4) Basic earnings per share (Rs.) (E = B/C) 3.11 16.41 5.56 10.89 13.47 10.89 Diluted earnings per share (Rs.) (F = B/D) 3.11 16.41 5.56 10.89 13.47 10.89
Return on net worth (%) (G = B/A) (refer note 4) 24.33% 43.82% 20.32% 36.24% 34.46% 21.79%
Number of shares outstanding at the end of the year / period (H) (refer note 5) 10,000,000 20,000,000 45,000,000 50,000,000 50,000,000 50,000,000
Net assets value per share of Rs.10 each 12.79 20.28 18.29 27.38 39.09 49.99
Face value (Rs.) (refer note 5) 10 10 10 10 10 10 Notes:
1. The above ratios are calculated as under:
(a) Earnings per share = Net profit after tax, as restated / Weighted average number of shares outstanding for the year/ period. (b) Return on Net worth (%) = Net profit after tax, as restated / Net worth as restated as at year / period end. (c) Net asset value (Rs.) = Net worth as restated / Number of equity shares as at year / period end.
2. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 3. Earning per shares (EPS) calculation is in accordance with Accounting Standard 20 "Earnings per share" prescribed by the Companies (Accounting Standards) Rules, 2006. 4. The EPS and return on net worth for the six months period ended 30 September 2010 are not annualised. 5. Each equity share of the Company with face value of Rs.500 has been sub-divided into 50 equity shares of the face value of Rs.10 each (stock split) with effect from 15 October 2007. Pursuant to this the number of shares outstanding for the year ended 31 March 2006 and 31 March 2007 have been adjusted to reflect the changes as prescribed by Accounting standard 20 - “Earnings per share” issued by Institute of Chartered Accountants of India („ICAI‟).
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Annexure VII Details of other income, as restated (Rs in millions) Particulars For the year ended 31 March For the period from 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Other income, as restated 5.06 4.95 11.46 53.23 15.87 7.77
Profit before tax, as restated 55.09 288.13 257.70 760.91 1,051.43 808.63
Percentage 9% 2% 4% 7% 2% 1%
Sources of other income
Recurring Interest - from banks 0.83 1.25 1.01 4.35 8.88 2.04 Foreign exchange gain on translation of foreign currency transactions 1.07 - - 36.10 - 1.09 DEPB incentive received on export sales 2.17 1.51 1.94 4.07 3.49 1.04
Non-recurring Profit on sale of fixed assets, net - - 1.46 - 1.32 2.14 Insurance claim received - - 4.63 - - - Gain from commodity trading in futures - - - 6.14 - - Miscellaneous income 0.99 2.19 2.42 2.57 2.18 1.46 Total 5.06 4.95 11.46 53.23 15.87 7.77
Note: The figures disclosed above are based on the restated financial information of Joyalukkas India Limited.
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Annexure VIII Details of investment, as restated (Rs in millions) Particulars As at 31 March As at 30 September 2006 2007 2008 2009 2010 2010
Long term investment, unquoted
Investment in equity shares of subsidiary companies: Joyal Ornaments and Trades Private Ltd. - - - - - 0.10
Notes: The figures disclosed above are based on the restated financial information of Joyalukkas India Limited.
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Annexure IX Statement of secured loans, as restated (Rs in millions) Particulars As at As at 31 March 30 September 2006 2007 2008 2009 2010 2010
Long term loans - from banks and financial institutions 469.73 498.55 378.59 508.63 495.10 346.26 - vehicle loans - 2.60 3.31 1.24 15.68 13.82 469.73 501.15 381.90 509.87 510.78 360.08
Short term loans - from banks 531.08 1,063.44 1,523.49 1,472.13 2,101.23 2,447.25 531.08 1,063.44 1,523.49 1,472.13 2,101.23 2,447.25
From promoters and group companies of promoters ------
Total 1,000.81 1,564.59 1,905.39 1,982.00 2,612.01 2,807.33 Note: 1. Amount repayable within one year as at 30 September 2010: Rs. 2,703.75 2. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited.
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Annexure - IX (continued) Details of secured loans outstanding as at 30 September 2010 (Rs in millions) SI. Name of Amount Amount Rate of Repayment Prepayment Default Security No the lender sanctioned outstanding Interest terms charges charges . Demand Loans 1 Yes Bank 350.00 1.91 10.5 On Not specified 1.First Ltd. 0% demand in the paripassu agreement charge with Penal other lenders interest as on the current stipulated assets of the by the bank Company from time to more time will be particularly charged in described in case of the schedule default in to deed of payment of hypothecatio interest/ n. installments 2. Second
, non paripassu submission charge on all of stock moveable statements/ fixed assets prescribed of the returns or company defaults in including observing plant and any of the machinery. terms and 3. Personal conditions guarantee of of the Mr. Alukkas advance Varghese sanction. Joy. 2 ING Vysya 750.00 9.07 10.7 On Not specified Penal 1.The whole Bank Ltd 5% demand in the interest of of the current 700.00 8.50 agreement 24% p.a. for assets of the % delayed Company submission namely, of monthly stocks of raw stock materials, statements / stocks in QIS. process, semi finished goods, stores and spares not relating to plant and machinery (consumable stores and spares), bills receivable and book debts and all other assets and movables both present
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and future or stored at various places. 2. Personal guarantee of Mr. Alukkas Varghese Joy and Mrs. Jolly Joy. 3 IDBI Bank 300.00 192.18 10.0 On Not specified Penal 1. First Limited 0% demand in the interest of charge over 100.00 8.25 agreement 24% p.a. for the whole of % delayed the current submission assets of the of monthly Company in stock paripassu statements / with other QIS. banks in the Multiple Banking Arrangement 2.First charge over all present and future of the movable properties of the company
including its movable plant and machinery, machinery spares, tools and accessories, and other movables. 3. Personal guarantee of Mr. Alukkas Varghese Joy and Mrs. Jolly Joy. 4 State Bank 350.00 2.57 11.7 On Not specified Penal 1. First of 5% demand in the Interest @1 paripassu Travancore 311.76 8.50 agreement % p.a. charge over % (overall stock of ceiling 2%) finished will be goods of gold charged for ornaments/ entire textiles at quarter/ various period for showrooms
any of the and godowns. following 2. Paripassu defaults: a) equitable overdrawin mortgage on gs in the following sanctioned properties: limits. b) a) Land &
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delay / non- building in submission Sy.Nos 8/12 of stock measuring statements. 26.45 cents c) delay / situated at non Kottayam. submission b) Land & of renewal building in data. d) Non Sy.Nos 168 payment of 18/2, 168 quarterly 18/2 & 168 interest. 19 measuring 25 cents situated at Kollam. c) Land & building in S.Y No.164/02 measuring 49 cents situated at Thodupuzha. d) Land & building in T.S. No.107 ward no. 38 measuring 2227 sq.ft situated at Madurai. 3. Personal guarantee of Mr. Alukkas Varghese Joy and Mrs. Jolly Joy. 4. Equitable mortgage on personal properties of Mr. Alukkas Varghese Joy. 5 The 350.00 0.34 10.2 On Charges fixed Penal 1. Dhanalaxmi 5% demand by the bank interest as Hypothecatio Bank 300.00 8.60 from time to stipulated n of stock of Limited % time is binding by the bank gold, silver, as advised by from time to diamond and the bank. time will be textiles, with charged in a margin of case of 25 % on fully default in paid-up payment of stock, on interest/ paripassu installments basis. , non 2. Paripassu submission equitable of stock mortgage on statements/ the following prescribed properties: returns or a) Land &
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defaults in building in observing Sy.Nos any of the 168/18/2 & 3 terms and and 168/19 conditions measuring 25 of the cents situated advance at Kollam. sanction. b) Land & building in S.Y No.164/02 measuring 49 cents situated at Thodupuzha. c) Land & building in T.S. No.107 ward no. 38 measuring 2227 sq.ft situated at Madurai. 3. Personal guarantee and equitable mortgage on personal properties of Mr. Alukkas Varghese Joy. 6 Standard 44.42 10.2 On Charges fixed 2% penal 1.Paripassu Chartered 1,000.00 5% demand by the bank interest will first Bank 735.00 8.25 from time to be charged hypothecatio Limited % time is binding if (a) failure n charge over 50.00 8.75 as advised by to pay on all current % the bank. the due assets, book date; or (b) debts and drawing in stocks. the excess 2.Paripassu of the first sanctioned hypothecatio limit. n charge over all, present and future, movable properties of the Company including without limitation its movable plant and machinery, furniture & fittings, equipment, computer hardware, computer software,
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machinery spares, tools and accessories, and other movables.3. Personal guarantee of Mr. Alukkas Varghese Joy and Mrs. Jolly Joy. Term Loans 7 The Royal 500.00 49.68 10.6 Repayable Charges fixed Interest at a 1. Equitable Bank of 9% in 60 by the bank rate to be mortgage on Scotland monthly from time to advised at the following N.V.(erstwh installment time is binding the relevant properties: ile ABN s of Rs. as advised by time but a) Undivided Amro Bank 8.33 the bank. subject to interest over N.V.) together 20%p.a. or land & with 2 % higher building in monthly than Blk-59 in interest normally SY.Nos. 58, maturing applicable 94, 95, 96, on rate, 97, 98, 99, 31.03.201 whichever 100, 101,102, 1 is higher for 103 & 104 8 The Royal 100.00 30.00 14.5 Repayable each default measuring Bank of 0% in 60 as per the 45.095 cents Scotland monthly agreement. bearing N.V.(erstwh installment document ile ABN s of Rs. No.2872/02 Amro Bank 1.67, situated at N.V.) maturing Kottayam. on b) Land & 31.03.201 building in 2 Sy ward - 9 9 The Royal 400.00 266.58 12.5 Repayable New TS Bank of 0% in 27 No.417/2 Scotland monthly Municipal N.V.(erstwh installment ward -28 ile ABN s of Rs. measuring 7 Amro Bank 14.81 cents bearing N.V.) maturing document on No.3180/04 31.03.201 situated at 2 Anuparpalay am Village, Coimbatore. c) Land &
building in Block.No- 167 SY.No. 27/4 measuring 10.239 cents bearing document No.2188/04 situated at Kollam. d) Land &
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building in SY.No. 413/57-2 measuring 10.8 cents bearing document No.2665/02 situated at Angamaly. e) Land & building in TS No.11/704, Plot No.566 measuring 20.8 cents bearing document No.1614/05 & 1615/05 situated at the Taluka and district of Coimbatore. f) Land & building in Blk-200 SY. No.30 measuring 25 cents bearing document No.2450/04 situated at Thiruvalla. 2. Personal guarantee of Mr. Alukkas Varghese Joy and Mrs. Jolly Joy. 3. Corporate guarantee of Cochin Smart City Properties Private Ltd. 10 HDFC 0.93 0.15 10.4 36 Charges fixed The bank is Secured by 5% monthly by the bank entitled to way of installment from time to take hypothecatio s of Rs. time. repossessio n of vehicles 0.03 n of the acquired out
maturing hypothecate of the loan on d vehicles. proceeds. 07/02/201 1 11 ICICI 9.90 5.27 9.98 36 Charges fixed The bank is Secured by % monthly by the bank entitled to way of installment from time to take hypothecatio s of Rs. time. repossessio n of vehicles 0.32 n of the acquired out maturing hypothecate of the loan
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on d vehicles. proceeds. 01/04/201 2 12 Kotak 2.70 1.79 8.30 36 Charges fixed The bank is Secured by Mahindra % monthly by the bank entitled to way of Prime installment from time to take hypothecatio Limited s of Rs. time. repossessio n of vehicles 0.08 n of the acquired out
maturing hypothecate of the loan on d vehicles. proceeds. 10/08/201 2 13 Kotak 1.80 1.34 9.10 36 Charges fixed The bank is Secured by Mahindra % monthly by the bank entitled to way of Prime installment from time to take hypothecatio Limited s of Rs. time. repossessio n of vehicles 0.06 n of the acquired out
maturing hypothecate of the loan on d vehicles. proceeds. 10/10/201 2 14 Kotak 1.92 1.03 10.2 Repayable Charges fixed The bank is Secured by Mahindra 8% in by the bank entitled way of Prime installment from time to totake hypothecatio Limited s as time. repossessio n of vehicles follows:Fir n of acquired out st 18 thehypothec of the loan months ated proceeds. EMI of vehicles. Rs.0.10,
Next 18 months EMI of Rs.0.02, maturing on 10/12/201 2 15 Kotak 1.00 0.62 9.82 Repayable Charges fixed The bank is Secured by Mahindra % in by the bank entitled to way of Prime installment from time to take hypothecatio Limited s as time. repossessio n of vehicles follows: n of the acquired out First 12 hypothecate of the loan months d vehicles. proceeds. EMI of Rs.0.07, Next 6 months
EMI of Rs.0.02, Next 18 months EMI of Rs.0.01 maturing on 10/03/201 3 16 Kotak 0.98 0.62 10.5 Repayable Charges fixed The bank is Secured by Mahindra 6% in by the bank entitled to way of
Prime installment from time to take hypothecatio
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Limited s as time. repossessio n of vehicles follows: n of the acquired out First 18 hypothecate of the loan months d vehicles. proceeds. EMI of Rs.0.05, Next 18 months EMI of Rs.0.01, maturing on 01/01/201 3 17 Kotak 1.12 0.36 10.6 Repayable Charges fixed The bank is Secured by Mahindra 7% in by the bank entitled to way of Prime installment from time to take hypothecatio Limited s as time. repossessio n of vehicles follows: n of the acquired out First 18 hypothecate of the loan months d vehicles. proceeds. EMI of Rs.0.05,
Next 18 months EMI of Rs.0.01, maturing on 01/06/201 2 18 Kotak 2.06 1.70 10.3 Repayable Charges fixed The bank is Secured by Mahindra 8% in by the bank entitled to way of Prime installment from time to take hypothecatio Limited s as time. repossessio n of vehicles follows: n of the acquired out First 18 hypothecate of the loan months d vehicles. proceeds. EMI of Rs.0.10,
Next 18 months EMI of Rs.0.02, maturing on 01/05/201 3 19 Kotak 1.92 0.94 10.4 Repayable Charges fixed The bank is Secured by Mahindra 1% in by the bank entitled to way of Prime installment from time to take hypothecatio Limited s as time. repossessio n of vehicles follows: n of the acquired out First 18 hypothecate of the loan months d vehicles. proceeds. EMI of Rs.0.10, Next 18 months EMI of Rs.0.02, maturing
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on 10/10/201 2 2,807.33
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Annexure X Details of unsecured loans, as restated (Rs in millions) Particulars As at As at 31 March 30 September 2006 2007 2008 2009 2010 2010
From promoters 418.15 304.61 108.80 58.21 57.12 - From group companies of promoters ------Others- from banks - - - - - 94.74
Total 418.15 304.61 108.80 58.21 57.12 94.74
Rate of interest on promoters group loans (refer note 4) ------Rate of interest on other loans - - - - - 2% - 10% Notes:
1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. Amount repayable within one year as at 30 September 2010: Rs.94.74 3. The list of persons/entities classified as 'Promoters' and 'Group Companies of Promoters' has been determined by the Management and relied upon by auditors. The auditors have not performed any procedures to determine whether this list is accurate or complete. 4. Loans from promoters and group companies of promoters are interest free.
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Annexure XI Statement of sundry debtors, as restated (Rs in millions) Particulars As at 31 March As at 30 September 2006 2007 2008 2009 2010 2010 Unsecured, considered good
Debts outstanding for a period exceeding six months from - From promoters and group companies of promoters ------Directors ------Others 4.17 0.09 0.32 1.67 2.00 1.52 Total (A) 4.17 0.09 0.32 1.67 2.00 1.52
Other debts - From promoters and group companies of promoters 8.44 21.29 43.21 311.68 269.55 201.32 - Directors ------
- Others 6.10 13.58 5.88 9.41 13.19 29.10
Total (B) 14.54 34.87 49.09 321.09 282.74 230.42
TOTAL (A+B) 18.71 34.96 49.41 322.76 284.74 231.94 Note: 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. The list of persons/entities classified as 'Promoters' and 'Group Companies of Promoters' has been determined by the Management and relied upon by auditors. The auditors have not performed any procedures to determine whether this list is accurate or complete.
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Annexure XII Statement of other current assets and loans and advances, as restated (Rs in millions ) Particulars As at 31 March As at 30 Septem ber 2006 2007 2008 2009 2010 2010 Loans and advances (Unsecured, considered good) Advances recoverable in cash or in kind or for value to be received - From promoters and group companies of promoters - 2.33 2.40 2.40 - - - Directors ------Others 94.19 49.10 63.91 30.26 18.06 43.32 Prepaid expenses - From promoters and group companies of promoters ------Directors ------Others 5.38 12.76 14.43 5.66 5.90 29.16 Rental deposits - From promoters and group companies of promoters - - - 25.00 25.00 35.00 - Directors ------
- Others 69.94 102.20 136.59 152.62 189.58 211.47 Other deposits - From promoters and group companies of promoters ------Directors ------Others 5.22 7.02 7.12 7.04 7.67 8.26 Advance tax and tax deducted at source (net of provision for tax) - From promoters and group companies of promoters ------Directors ------Others 16.12 - 4.71 4.71 3.28 3.28 Fringe benefit tax (net of provision for tax) - From promoters and group companies of promoters ------Directors ------Others - - - 0.60 0.60 0.60 Interest accrued from fixed deposits with banks - From promoters and group companies of promoters ------Directors ------Others 0.44 0.20 0.48 0.99 0.48 0.46
TOTAL 191.29 173.61 229.64 229.28 250.57 331.55 Note: 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. The list of persons/entities classified as 'Promoters' and 'Group Companies of Promoters' has been determined by the Management and relied upon by auditors. The auditors have not performed any procedures to determine whether this list is accurate or complete.
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Annexure XIII
Capitalisation statement (Rs in millions) Particulars Pre-issue as at Post issue (refer note 2) 30 September 2010
Short term debt 2,798.49 Long term debt (A) 103.58 Total debt (B) 2,902.07
Shareholders funds Share capital 500.00 Reserves and surplus 1,999.43 Total shareholders funds (C) 2,499.43
Long term debt/ shareholders funds (A/C) 0.04 Total debt/ shareholders funds (A/C) 1.16
Note: 1. The figures disclosed above are based on the restated summary of assets and liabilities of company as at 30 September 2010. 2. The corresponding post issue figures are not determinable at this stage pending the completion of the Book building process and hence have not been furnished.
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Annexure XIV
Details of the list of related parties and nature of relationships Particulars Year ended Year Year Year From 1 31 March 2007 ended ended ended April 2010 Year ended 31 March 31 March 31 March to 31 March 2006 2008 2009 2010 30 September 2010 Subsidiary Joyal Ornaments and Trades Private Ltd., India Key management Alukkas Alukkas Alukkas Alukkas Alukkas Alukkas personnel Varghese Varghese Varghese Varghese Varghese Joy - Varghese Joy - Joy - Joy - Joy - Joy - Managing Managing Managing Managing Managing Managing Director Director Director Director Director Director Jolly Joy - Jolly Joy - Jolly Joy - Jolly Joy - Jolly Joy - Jolly Joy - Director Director Director Director Director Director (up to 22 May 2010) Joseph Joseph Christo - Christo - Director Director John Paul - Director K P Padmakuma r - Director (from 22 May 2010) C J George - Director (from 22 May 2010) Reena Joby - Director (up to 22 May 2010) Relatives of key A V Anto - management personnel Brother of MD Enterprises where Mythri control exists Entertainers and
Enterprises Pvt Ltd. Joyal Properties Private Limited (formerly Alukkas Hotels Private Limited) Companies over which Joy Joy Joy Joy Joy Alukkas the key managerial Joy Alukkas Alukkas Alukkas Alukkas Alukkas Jewellery LLC, personnel and relatives Jewellery LLC, Jewellery Jewellery Jewellery Jewellery Dubai have control/ Dubai (formerly LLC, LLC, LLC, LLC, Dubai (formerly significant influence Alukkas Dubai Dubai Dubai (formerly Alukkas (associates) Jewellery LLC, (formerly (formerly (formerly Alukkas Jewellery LLC, Dubai) Alukkas Alukkas Alukkas Jewellery Dubai) Jewellery Jewellery Jewellery LLC,
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LLC, LLC, LLC, Dubai) Dubai) Dubai) Dubai) Joy Joy Joy Joy Alukkas Alukkas Alukkas Alukkas Joy Alukkas Joy Alukkas Centre Centre Centre Centre Centre LLC, Centre LLC, LLC, LLC, LLC, LLC, Sharjah Sharjah Sharjah Sharjah Sharjah Sharjah (formerly (formerly (formerly (formerly (formerly (formerly Alukkas Centre Alukkas Centre Alukkas Alukkas Alukkas Alukkas LLC, Sharjah) LLC, Sharjah) Centre Centre Centre Centre LLC, LLC, LLC, LLC, Sharjah) Sharjah) Sharjah) Sharjah) Fusion Fusion Fusion Fusion Fusion Alukkas Technosoft Technosoft Technosof Technosof Technosof Ltd., Private Limited Private Limited t Private t Private t Private London Limited Limited Limited Cochin Cochin Cochin Cochin Jeevan Smart Smart Smart Smart City Telecasting City City City Properties Corporation Properties Properties Properties Private Limited Private Private Private Ltd., India Ltd Ltd Ltd Jyothi Aviations and
Developers Private Ltd., India Note:
1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. 2. Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, 2006.
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Annexure XIV (continued) Disclosures of significant transactions with related parties (Rs in millions) Particulars Entity For the year ended 31 March From 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Sale of goods Joy Alukkas Jewellery LLC, Dubai 23.43 43.34 239.55 566.21 568.05 188.40 Joy Alukkas Centre LLC, Sharjah 86.30 68.58 59.81 72.34 85.71 28.23 Alukkas Ltd. London - - - - - 0.29
Purchase of goods Anto's Alukkas Jewellery, Calicut 52.69 - - - - - Alukkas Centre LLC, Sharjah - 2.26 - - - -
Reimbursement of Joy Alukkas Jewellery LLC, expenses Dubai 0.41 - - - - -
Managerial Alukkas Varghese Joy remuneration 1.20 1.20 1.20 1.80 12.00 6.00 Joseph Christo - - - - 0.17 0.34
Interest expense Alukkas Varghese Joy 2.02 1.56 - - - -
Rent paid Alukkas Varghese Joy 0.12 0.15 0.15 0.15 0.15 0.08 Cochin Smart City Properties Private Ltd - - - - 0.12 0.06
Sale / (Purchase) of Alukkas Varghese Joy Investments 7.96 - - - - - Joyal Ornaments and Trades Private Ltd., India - - - - - (0.10)
Rental deposits Cochin Smart City Properties placed Private Ltd - - - 25.00 - 10.00
Loans and Jeevan Telecasting advances repaid Corporation Limited 19.15 - - - - -
Advances given Fusion Technosoft Private Limited - 2.33 0.07 - - -
Advances recovered Fusion Technosoft Private Limited - - - - 2.40 -
Unsecured loans Alukkas Varghese Joy received 196.78 85.67 125.67 48.34 15.15 60.00 Jolly Joy - - - - 30.00 -
Unsecured loans Alukkas Varghese Joy repaid 129.22 199.21 71.48 98.93 46.24 87.12 Jolly Joy - - - - - 30.00
Subscription to Alukkas Varghese Joy share capital - 90.00 225.00 45.00 - - Jolly Joy - 10.00 25.00 5.00 - -
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Notes 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. 2. Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, 2006.
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Annexure XIV (continued) Details of related parties outstanding balances (Rs in million s) Particulars Entity As at 31 March As at 30 Septe mber 2006 2007 2008 2009 2010 2010 Sundry debtors Joy Alukkas Jewellery LLC, Dubai - 9.49 31.33 293.49 240.18 181.42 Joy Alukkas Centre LLC, Sharjah 8.44 11.80 11.88 18.19 29.37 19.62 Alukkas Ltd., London - - - - - 0.28
Sundry creditors Joy Alukkas Centre LLC, Sharjah - 2.26 - - - - Anto's Alukkas Jewellery 7.99 - - - - - Cochin Smart City Properties Pvt Ltd - - - - 0.03 0.01
Advances recoverable in cash or kind Fusion Technosoft Private Limited - 2.33 2.40 2.40 - -
Rental deposits Cochin Smart City Properties Private Ltd - - - 25.00 25.00 35.00
Investment in subsidiary Joyal Ornaments and Trades Private Ltd., India - - - - - 0.10
Loans outstanding Alukkas Varghese Joy 415.55 304.61 108.80 58.21 27.12 - Jolly Joy 30.00 -
Managerial Alukkas Varghese Joy remuneration payable - - - - - 0.11 Joseph Christo 0.04 Interest accrued and due Alukkas Varghese Joy 2.61 - - - - -
Note 1. The figures disclosed above are based on the restated financial information of Joyalukkas India Limited. Note 2: Above disclosures are made in accordance with Accounting Standard (AS) 18 "Related Parties" prescribed by the Companies (Accounting Standards) Rules, 2006.
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Annexure - XV Statement of tax shelter (Rs in millions) Particulars For the year ended 31 March From 1 April 2010 to 30 September 2006 2007 2008 2009 2010 2010
Profit before tax 58.30 309.22 253.70 751.64 1,054.69 788.39
Less: capital gains considered separately - - 1.77 - 0.18 -
Profit eligible for normal income tax rates (A) 58.30 309.22 251.93 751.64 1,054.51 788.39 Income tax rates (including surcharge and education cess) applicable (B) 33.66% 33.66% 33.99% 33.99% 33.99% 33.22%
Notional income tax (C) = (A) x (B) 19.62 104.08 86.23 255.48 358.49 261.90
Notional capital gains tax - - 0.60 - 0.06 -
Total (D) 19.62 104.08 86.83 255.48 358.55 261.90 Permanent differences Donations disallowed under the Income Tax Act 0.47 1.66 2.32 3.19 2.70 2.72
Income exempt under section 10A (1.02) - (0.58) (11.08) - -
Interest on income taxes - - - 0.01 - -
Others 0.25 0.75 2.08 - 0.07 (0.15)
Total Permanent differences (E) (0.30) 2.41 3.82 (7.88) 2.77 2.57
Temporary differences Difference between book depreciation and tax depreciation 5.63 (36.01) 18.55 38.07 (38.03) (20.50)
Provision for inventory obsolescence 13.40 - (19.27) - - - Deduction under section 43B of the Income Tax Act, 1961 3.51 0.22 2.06 2.05 4.97 4.10 (Profit) / loss on sale of assets - - (1.46) 4.68 (1.32) (2.14)
Exchange loss forward exchange contracts - - 25.35 (25.35) - -
Lease reserve - - - - - 20.40
Others (0.41) (2.03) (1.47) (0.04) 0.05 14.54
Total Temporary differences (F) 22.13 (37.82) 23.76 19.41 (34.33) 16.40
Total differences (G= E+F) 21.83 (35.41) 27.58 11.53 (31.56) 18.97
Brought forward loss set off / MAT credit availed (8.48) - - - - -
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Total differences (H) 13.35 (35.41) 27.58 11.53 (31.56) 18.97
Notional income tax impact (I) = (G) x (B) 4.49 (11.92) 9.37 3.92 (10.73) 6.29
Tax payable = (D) + (I) 24.11 92.16 96.20 259.40 347.82 268.19
Interest under section 234B/234C 0.14 4.75 0.29 14.56 10.48 -
Total tax payable 24.25 96.91 96.49 273.96 358.30 268.19
Notes
1. The aforesaid Statement of Tax Shelters is not based on the profits as per the Restated Summary Statement. It has been prepared based on the standalone audited accounts of Joyalukkas India Limited. 2. The above tax adjustments have been considered based on the information from Income tax computations filed with the tax returns for the previous years 2005-06, 2006-07, 2007-08,2008-09 and 2009-10. The figures for the six months period ended 30 September 2010 are based on the provisional computation of total income prepared by the Company and are subject to any changes that may be considered at the time of final filing of the return of income for the year ending 31 March 2011
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations is based on, and should be read in conjunction with our audited standalone financial statements, as restated as of and for the years ended March 31, 2008, 2009, 2010 and for the six month period ended September 30, 2010, see “Financial Statements” on page 113 of this DRHP. Unless otherwise stated, the financial information used in this section is derived from the Company's Restated Financial Statements. The Company currently has one subsidiary, which has no material assets and the Company does not derive any income from this subsidiary.
We prepare our financial statements in accordance with Indian GAAP, which differs in certain material respects from U.S. GAAP and IFRS. We have not attempted to quantify the impact of IFRS or U.S. GAAP on the financial data included in this Draft Red Herring Prospectus, nor do we provide a reconciliation of our financial statements to those of U.S. GAAP or IFRS.
This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth in the section “Risk Factors” on page x.
Overview
We are one of the leading south India based jewellery companies with focus on Large Format Stores. Our jewellery business consists of the sale of jewellery made of gold, diamond and other precious stones, platinum and silver. We are also engaged in the business of selling textiles, apparels and accessories through our Wedding Centres in Kerala. We offer a wide range of products across various price points and cater to customers across all market segments. In Fiscal 2008, 2009 and 2010, we sold 7,154.35 kg, 8,430.05 kg and 8,807.46 kg of Gold, respectively. In Fiscal 2008, 2009 and 2010, our total income from sale of Gold was ` 7,500.64 million, ` 11,248.35 million and ` 14,468.25 million, respectively, representing a CAGR of 38.89% over the aforesaid period.
We conduct our jewellery retail business under the brand name “joyalukkas”. We started retailing jewellery in India in the year 2002 with the launch of our first retail store at Kottayam in Kerala.
The following table depicts the details of our jewellery, and textiles, apparels and accessories business operations as of and for Fiscal 2008, 2009, 2010 and as of and for the six month period ended September 30, 2010:
Sr. No. Particulars Fiscal 2008 Fiscal 2009 Fiscal 2010 Six months ended September 30, 2010 1. Number of stores 13 15 20 21 2. Floor area (sq. ft.) Jewellery 185,713 200,893 235,438 261,752 Textiles, Apparels and 104,617 104,617 104,617 104,617 Accessories* 3. Gold Sales (in kg) 7,154.35 8,430.05 8,807.46 5,223.05 4. Revenue (` in million) Jewellery 8,345.53 12,843.45 16,730.07 11,765.13 Textiles, Apparels and 1,280.90 1,428.29 1,490.52 779.49 Accessories *As per the certificate obtained from Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai 400 601.
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As of December 31, 2010 we had 22 retail stores, of which 10 are Large Format Stores, each having a floor area of 12,000 sq. ft. or more. Further, we intend to set up three new Large Format Stores in Kumbakonam, Hubli and New Delhi and three new Wedding Centres in Kozhikode, Thrissur and Thiruvananthapuram by September 2013, each with an estimated floor area of 12,000 sq. ft. or more. For further details, see Objects of the Issue on page 31.
Our Premier Stores are the three Large Format Stores situated in Chennai, Bangalore and Coimbatore, having an aggregate total floor area of 96,309 sq. ft.
We sell our textiles, apparels and accessories through our four Wedding Centres situated in Kerala (Angamaly, Thiruvalla, Kollam and Ernakulam) having an aggregate floor area of 157,593 sq. ft. Our Wedding Centres aim to offer an integrated shopping experience where our customers can purchase premium jewellery, textiles, apparels and accessories for weddings and other festive occasions in the same store. We believe this is an innovative concept and enables our Company to cross sell our products and also to create a loyal customer base. Further, our Wedding Centres cater to the textile and apparel requirements of an entire family, with their wide collection of men‟s, women‟s and children‟s apparel.
As of March 31, 2010 and September 30, 2010, we maintained an aggregate inventory of 2,222.74 kg and 2,385.47 kg of Gold, respectively. In addition we maintained an inventory of jewellery made of diamond and other precious stones, platinum and silver, all with an extensive array of designs.
The Joyalukkas Group was established in the year 1988 by our Promoter, Alukkas Varghese Joy and commenced operations in the United Arab Emirates in jewellery retail business. Our Promoter has over 22 years of experience in the jewellery retail business. We have built on his experience and reputation to create strong brand equity and a wide customer base.
We received the Best Single Retail Store of the Year 2011 Award for our Chennai showroom and the Best Retail Jewellery Chain of the Year 2011 Award at the National Jewellery Awards 2011 instituted by the All India Gems and Jewellery Trade Federation. We had also received the Retail Chain of the Year 2010 Award at the Retail Jeweller India Awards 2010, instituted by the Retail Jeweller Group, Mumbai. We also received the first prize under gold category in Kerala Trade Awards 2010 instituted by the Government of Kerala, the Highest VAT Paying Jewellery Group Award in 2009 at the Kerala Gem and Jewellery Show, instituted by the Department of Industries and Commerce, the Government of Kerala. We were recognized with the Best T.V. Campaign and the Best 360 Degree Marketing Award in 2009 by the Retail Jeweller Magazine, Mumbai, the Consumers Choice Award in 2008 by Retail Jeweller India in association with Dimexon, and the JJS & Gold Souk Jeweller Award in 2007 by Jaipur Jewellery Show & GoldSouk. We also received an award in Kerala adfest, 2007 instituted by Advertising Industries Media and the award for Best Overseas Retailer, 2008 at the Kerala Gem and Jewellery Show, 2008 instituted by the Government of Kerala.
As of December 31, 2010, we had 2,347 employees, comprising 1,311 employees working in our jewellery division, 535 employees in our textile division, 420 employees in our administrative office and 81 employees in our purchase department.
In Fiscal 2008, 2009 and 2010, our PAT was ` 167.24 million, ` 496.08 million and ` 673.52 million respectively, while in the six months ended September 30, 2010 our PAT was ` 544.74 million. In Fiscal 2008, 2009 and 2010, our EBITDA was ` 563.82 million, ` 1,162.50 million and ` 1,422.25 million respectively.
Factors Affecting Results of Operations
Our business, results of operations and financial condition are affected by a number of factors, including the following:
Market price of gold and diamonds
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Gold and diamonds are primary raw materials used in our inventory of jewellery. Since there is a time gap between the procurement of our merchandise and its purchase by our customers, any change in the market price of gold or diamonds during the aforementioned period has a bearing upon the value of our inventory. A sudden fall in the market price of gold or diamonds would adversely affect our ability to recover the cost incurred in procuring the same and a sudden rise in the market price of gold/diamonds would have an impact on our sales. Further, the effect of a change in the market price of gold on our results of operations is also dependent upon the hedging mechanisms that we may consider entering into if gold prices cross certain internally determined thresholds. Our Company follows the replenishment system of stock management. Hence, any downfall in the market price of gold which affects the market within a period of time is naturally hedged. Further, the Company also has a documented internal policy whereby our Company will start forward cover through commodity exchanges when the difference between the current market price and the average price of gold in the books of the Company is less than 5% and progressively cover the entire stock when the above said difference is close to zero.
General economic conditions and consumer spending on luxury products
Since we compete with the consumers‟ other discretionary spending categories such as electronics and travel, the price of jewellery as related to other products has an influence on consumer expenditure on jewellery. Other factors include tax rate increases, general economic conditions, consumer confidence in future economic conditions and political conditions, recession and fears of recession, consumer debt, disposable consumer income, conditions in the housing market, consumer perceptions of personal well- being and security, fuel prices, interest rates and inflation. Continued changes in factors affecting discretionary consumer spending could have a bearing upon consumer demand for our products, further determining our sales and results of operation.
Rental expenses and ability to identify suitable locations for new stores
Most of our retail stores are situated on leased premises. We typically enter into lease agreements for each of these leased properties. In certain cases, we have also entered into leases that require us to make a security deposit. As a result, our financial performance is affected by our rental costs as well as our ability to renew our leases on favourable terms. Any inability to renew our leases or to procure retail spaces satisfying our operational and financial criteria and to successfully renegotiate the leases, could adversely affect our business, financial conditions and results of operation. In the event that we are unable to renew our leases on favourable terms, or are required to vacate the premises, we may have to seek new premises at short notice, which may adversely affect our business or increase our operating expenses.
Risk of attrition and our ability to retain experienced salespersons
We believe our team of sales persons/professionals are important to effectively oversee the operations and growth of our business. Our success is substantially dependent on the expertise and services of our sales persons and our ability to retain such sales persons would determine our income, profits and results of operations.
Change in trends in the jewellery industry and variation in tastes amongst different regions
We typically outsource the designing of our jewellery products. The finished jewellery products purchased from independent jewellers and the jewellery manufactured through job-work arrangements are mostly based on available designs. Hence, any change in trends of the jewellery industry may have a bearing upon the selling prices and sales volumes for our products, which could affect our financial condition and results of operations. We also conduct sales operations in regions which vary significantly in demographics and consequentially in choice/ preferences. Hence, all our designs will not have comparable demand across all of our regions. As a result, our market share is also determined by our ability to create designs that conform to the significantly different preferences our customers across different regions.
Performance of the retail market generally in India and south India in particular
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Our business is significantly dependent on the performance of the retail market generally in India, and particularly in south India, where a majority of our stores are situated. The retail business is significantly affected by changes in government policies and other conditions, such as economic trends, demographic trends, employment levels, changing income levels, availability of financing, interest rates, or the public perception in relation to these events. These factors can determine the demand for, and pricing of, our products and, as a result, our financial condition, results of operations, cash flows and the trading price of our Equity Shares.
Competition in our business
We operate in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. The jewellery industry is still an unorganized sector in India and therefore we face competition not only from other jewellery companies, but also from the unorganised jewellery sector which affects our business prospects and margins. We also compete against organised national, regional and local players. Our results of operations are dependent upon our ability to compete effectively against the aforementioned entities.
Dependence on Premier Stores for a significant portion of revenue
Our Premier Stores, situated in Chennai, Bangalore and Coimbatore have contributed 40.32% and 36.15% of our total revenues from sale of jewellery in Fiscal 2010 and six month period ended September 30, 2010 respectively. We maintained an inventory of 690.46 kg of Gold in addition to platinum and diamond jewellery as of September 30, 2010. These stores have also incurred significantly more investment as compared to our other outlets. Hence, our results of operations would significantly depend upon the performance of these stores.
Inventory management
Maintaining inventory is one of our significant operating costs and an increase in the inventory will increase our operating cost. With the launch of our proposed stores for expansion, we will maintain inventory of jewellery at these stores. In order to maintain adequate inventory, our working capital may increase substantially, thereby impacting our leverage and thus reducing our profits.
Significant Accounting Policies
Basis for preparation
The Restated Summary Statements have been prepared in accordance with generally accepted accounting principles in India and presented under the historical cost convention, on the accrual basis of accounting and comply with the mandatory Accounting Standards prescribed in the Companies (Accounting Standard) Rules 2006 and other pronouncements of the Institute of Chartered Accountants of India (“ICAI”). The Restated Summary Statements are presented in Indian rupees in millions.
The Company, on 28 April 2010, formed a wholly owned subsidiary, Joyal Ornaments and Trades Private Limited ("Joyal"). The Company had invested a sum of ` 0.1 million as on 30 September 2010 as share capital in Joyal and Joyal had a net worth of ` 0.05 million as at 30 September 2010. Up to 30 September 2010, Joyal has only incurred incorporation and setting up expenses amounting to ` 0.05 million which represents 0.006% of the Company's results for the six months period ended 30 September 2010. Further, the net worth of Joyal is 0.002% of the Company's net worth as at 30 September 2010. Joyal is yet to commence operations as at 3 January 2011 and does not have any contingent liabilities as on that date. The Company believes that Joyal, both alone and in aggregate, is immaterial to the overall financial position, results and cash flows of the Company. Given this and the fact that Joyal hasn‟t commenced operations, the restated consolidated financial statements of the Company have not been prepared and presented in the DRHP.
Use of estimates
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The preparation of Restated Summary Statements in conformity with generally accepted accounting principles in India (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the reporting year end. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
Fixed assets
Fixed assets are carried at cost of acquisition or construction less accumulated depreciation and provision for impairment, if any. Cost comprises the purchase price and includes freight, duties, taxes and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of the fixed asset not ready for their intended use before such date, are disclosed under capital work-in- progress.
Depreciation
Depreciation is provided using straight line method as per the useful life of the assets estimated by the management, or at the rates prescribed under Schedule XIV of the Companies Act, 1956, whichever is higher. Pursuant to this policy, depreciation on assets has been provided at the rates based on the estimated useful lives of fixed assets given below:
Class of fixed assets Useful life in years
Buildings 20 Plant and machinery 7 Computer equipments 3 Electrical fittings 8 Office equipments 7 Furniture and fixtures 7 Motor vehicles 5 Leasehold improvements are amortised over the lease term or useful life of three years, whichever is shorter.
Fixed assets individually costing ` 5,000 or less are depreciated at 100%. Pro-rata depreciation is provided on all fixed assets purchased and sold during the year.
Impairment
The Company assesses at each balance sheet date whether there is any indication that an asset forming part of its cash generating units may be impaired. If any such indications exist, the Company estimates the recoverable amount of the asset or the group of asset comprising, a cash generating unit. For an asset or a group of assets that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the assets belongs is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. The reduction is treated as an
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impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. An impairment loss is reversed only to the extent that the carrying amount of the asset does not exceed the book value that would have been determined; if no impairment loss has been recognized.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost of inventories comprises purchase price, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
The methods of determination of cost of various categories of inventories are as follows:
Raw materials Weighted average method Finished goods - Gold and silver jewellery Weighted average method - Diamond, precious stones and platinum jewellery Specific identification - Textiles and other accessories Specific identification
Packing materials Specific identification The comparison of cost and net realisable value is made on an item-by-item basis. Raw materials and packing materials held for use in production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably.
Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer. The amount recognised as sale is net of sales tax and sales returns.
Interest on deployment of surplus funds is recognized using the time proportionate method, based on the transactional interest rates.
Foreign currency transactions
(i) Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. (ii) Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. (iii) Exchange differences Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially
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recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year. (iv) Forward exchange contracts The premium or discount arising at the inception of forward exchange contracts entered into to hedge the foreign currency risk of the underlying asset or liability at the balance sheet date is amortised as expense or income over the life of the contract. The exchange difference on such forward exchange contract is calculated as the difference between the foreign currency amounts of the contract translated at the exchange rate at the reporting date and is recognised in the profit and loss account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. (v) Derivative contracts In accordance with the ICAI Announcement – Accounting for derivatives, the Company provides for losses in respect of all outstanding derivative contracts at the balance sheet date by marking them to market. Employee benefits
Liability for gratuity, which is a defined benefit scheme, is provided for by the Company based on actuarial valuation carried out by an independent actuary at the balance sheet date. Actuarial gains/ losses are recognised immediately in the profit and loss account and are not deferred.
The rules of the Company do not permit encashment or carry forward of unutilised leave.
Contributions to recognised provident fund and employee‟s state insurance, which are defined contribution schemes, are charged to the profit and loss account on an accrual basis.
Taxation
The current income tax charge is determined in accordance with the relevant tax regulations applicable to the Company in India. Minimum Alternative Tax (MAT) paid in accordance with the tax laws, which give rise to future economic benefits in the form of tax credit against future income tax liability, is recognised in the balance sheet if there is convincing evidence that the Company will pay normal tax in subsequent years and the resultant assets can be measured reliably.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward business loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets/ liabilities are reviewed at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised.
Assets and liabilities representing current and deferred tax are disclosed on a net basis when there is a legally enforceable right to set - off and management intends to settle the asset and liability on a net basis.
Tax expense also comprises Fringe Benefit Tax (FBT) for the period until 31 March 2009. Provision for FBT until 31 March 2009 is made in accordance with the provisions of Income-tax Act, 1961 and the Guidance Note on FBT issued by ICAI. Effective 1 April 2009, the provisions of FBT have been withdrawn.
Earnings per share
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The basic and diluted earnings or loss per share is computed by dividing the net profit or loss attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year.
Leases
Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased item, are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term.
Cash flow statement
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
Provisions and contingent liabilities
The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When the likelihood of outflow of resources, in case of a possible obligation or a present obligation is remote no provision or disclosure is made.
Provision for onerous contracts i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is possible that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a reliable estimate of such obligation.
Investments
Long- term investments are carried out at cost less any other-than-temporary diminution in value, determined separately for each individual investment. Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments.
Results of Operations
Our restated audited financial statements for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and our unaudited financial statements as of and for the six month period ended September 30, 2010 included in this Draft Red Herring Prospectus have been presented in compliance with paragraph B(1) of Part II of Schedule II to the Companies Act, Indian GAAP and the SEBI ICDR Regulations. The effect of such restatement is that our financial statements included in this Draft Red Herring Prospectus have been restated to conform to methods used in preparing our latest financial statements, as well as to conform to any changes in accounting policies and estimates. For further information relating to such restatement adjustments, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Restatement Adjustments" below.
The following table sets forth certain information with respect to our results of operations for the periods indicated:
Year Percentage Year Percentage Year Percentage Year Percent Six month ended to total ended to total ended to total ended age to period
March 31, income March 31, income March 31, income March 31, total ended 2007 2008 2009 2010 income September
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(` in (` in (` in (` in 30, 2010 (` millions) millions) millions) millions) in millions) Income 6,760.69 - 9,637.89 - 14,324.97 18,236.46 12,552.39 Income from sale of jewellery 5,574.83 82.46 8,345.53 86.59 12,843.45 89.66 16,730.07 91.74 11,765.13 Income from sale of textiles and accessories 1,180.91 17.47 1,280.90 13.29 1,428.29 9.97 1,490.52 8.17 779.49 Other Income 4.95 0.07 11.46 0.12 53.23 0.37 15.87 0.09 7.77 Expenditure 6,472.56 95.74 9,380.19 97.33 13,564.06 94.69 17,185.03 94.23 11,743.76 Cost of Goods Sold 5,612.66 83.02 8,296.12 86.08 12,127.71 84.66 15,600.58 85.55 10,671.39 Personnel Cost 137.27 2.03 169.86 1.76 269.76 1.88 328.37 1.80 239.16 Operating Expenses 508.34 7.52 608.09 6.31 765.00 5.34 885.26 4.85 602.15 Finance Cost 135.00 2.00 211.49 2.19 292.63 2.04 268.01 1.47 165.07 Depreciation 79.29 1.17 94.63 0.98 108.96 0.76 102.81 0.56 65.99 Restated Profit before Tax 288.13 4.26 257.70 2.67 760.91 5.31 1,051.43 5.77 808.63 Net profits as restated profits for the year 177.74 2.63 167.24 1.74 496.08 3.46 673.52 3.69 544.74
Income
Our income is comprised of income from the sale of jewellery, income from the sale of textiles and accessories as well as other income.
The following table shows the breakdown of our Income for Fiscal 2008, 2009 and 2010 and for the six month period ended September 30, 2010.
(` in million) Six month period Year ended March 31, ended September 30, 2008 2009 2010 2010
Income Sale of: Jewellery 8,345.53 12,843.45 16,730.07 11,765.13 Textiles and Accessories 1,280.90 1,428.29 1,490.52 779.49 Other Income 11.46 53.23 15.87 7.77 Total 9,637.89 14,324.97 18,236.46 12,552.39
Other Income
Our other income comprises of recurring sources as well as non recurring sources. Our recurring sources of other income comprised of interests from banks, net foreign exchange gains and export incentives. Our non recurring sources of other income comprises of profit on the sale of fixed assets, insurance claim received, gain from commodity trading in fixtures and miscellaneous income.
The following table shows the breakdown of our Other Income for Fiscal 2008, 2009 and 2010 and for the six month period ended September 30, 2010.
(` in million) Year ended March 31, Six month period ended September 30, Other Income 2008 2009 2010 2010
Recurring Interest earned from banks 1.01 4.35 8.88 2.04 Net foreign exchange gain - 36.10 - 1.09 Export incentives 1.94 4.07 3.49 1.04
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Non Recurring Profit on sale of fixed assets 1.46 - 1.32 2.14 Insurance claim received 4.63 - - - Gain from commodity trading in futures - 6.14 - - Miscellaneous income 2.42 2.57 2.18 1.46
Expenditure
Our expenditure comprises of the cost of goods sold, personnel cost, operating expenses, finance cost and depreciation.
The following table shows the breakdown of our Expenditure for Fiscal 2008, 2009 and 2010 and for the six month period ended September 30, 2010.
(` in million) Six month period ended September Year ended March 31, 30, Expenditure 2008 2009 2010 2010
Cost of goods sold 8,296.12 12,127.71 15,600.58 10,671.39 Personnel cost 169.86 269.76 328.37 239.16 Operating expenses Advertisement and sales promotion 318.77 374.51 480.56 333.92 Rent 73.38 114.83 109.11 91.72 Sales tax paid 61.36 66.08 47.70 29.84 Power and fuel 43.21 57.60 55.83 34.20 Repairs and maintenance - building 9.49 29.74 23.28 19.43 - others 12.62 18.00 19.49 12.25 Credit card commission 12.20 22.75 29.09 20.28 Legal and professional charges 11.70 11.56 11.10 4.92 Director's sitting fees 0.00 0.00 0.00 0.09 Travel and conveyance 11.93 12.96 16.04 15.76 Security expenses 8.73 12.73 14.84 9.81 Vehicle running expenses 7.81 6.60 8.42 5.23 Printing and stationary 6.94 6.36 10.01 6.03 Communication 6.14 7.03 7.34 4.94 Insurance 5.22 5.96 6.29 3.91 Rates and taxes 3.55 4.23 9.61 3.14 Loss on sale of fixed assets, net 0.00 1.40 0.00 0.00 Foreign exchange loss, net 2.79 0.00 27.61 0.00
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Donations 3.45 3.54 3.13 2.88 Miscellaneous expenses* 8.80 9.12 5.81 3.80 Total 608.09 765.00 885.26 602.15 Finance cost 211.49 292.63 268.01 165.07 Depreciation 94.63 108.96 102.81 65.99 Total 9,380.19 13,564.06 17,185.03 11,743.76 * Miscellaneous items also include loss due to theft at Hyderabad branch
Restatement Adjustments
The following table sets forth certain information relating to the restatement adjustments applied for the periods indicated:
(` in million) Six month period ended Restatement Adjustment Particulars Year ended March 31, September 30, 2008 2009 2010 2010
Profit after tax as per audited profit and loss account 163.24 486.81 678.21 524.50 Adjustments on account of: A. Adjustment on account of change in accounting estimates Impact of change in depreciation on account of change in estimated useful life of assets. 0.82 (0.88) - - B. Prior period items a) Income tax - - (1.43) - b) Sales taxes (8.36) 5.79 5.73 20.24 c) Insurance claims 11.54 4.36 (8.99) - Total impact of the adjustments 4.00 9.27 (4.69) 20.24 Net profit post restatement adjustments 167.24 496.08 673.52 544.74
The principal restatement adjustments are as follows:
Restatement adjustments
The details of the restated adjustments are as follows:
(i) The estimated useful life of leasehold improvements was revised by the Company with effect from April 1, 2006 and the change was given effect to on a proportionate basis in the audited financial statements for the year ended March 31, 2007. For the purpose of the restated summary statement, the impact of the change in the estimated useful life of lease hold improvements has been adjusted in the relevant years with retrospective effect. The accumulated depreciation and net block of the relevant years have also been adjusted in the restated summary statement.
(ii) The Company, during the year ended March 31, 2010, has reversed the excess provision for MAT pertaining to the year ended March 31, 2005. The effect of the reversal of this excess provision has been appropriately adjusted in the opening reserve of April 1, 2005.
(iii) The audited profit and loss accounts of certain years include amounts paid/ provided for in respect of shortfall/ excess sales tax arising out of assessments and appeals of earlier years. The effects of the amounts paid / provided for in respect of the shortfall / excess has been appropriately adjusted in the results of the respective years.
(iv) Any loss / additional write-off required on account of any shortfall in insurance claims received is accounted for in the year in which the insurance claim is finally settled. For the purpose of this restated summary statement, insurance claims received, losses and additional write-offs have been
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appropriately adjusted in the results of the respective years in which the insurance claim first arose.
Results of Operations for the six month period ended September 30, 2010
Significant Events
The following significant events occurred in the six month period ended September 30, 2010, each which had an impact on our revenue, expenses and results of operations for the period:
We opened our new showroom in Bangalore during the aforementioned time period. This showroom had earned revenue of ` 561.90 million.
Income
Total income was `12,552.39 million for the six month period ended September 30, 2010, comprising an income from the sale of jewellery of ` 11,765.13 million, income from the sale of textiles and accessories of ` 779.49 million and other income of ` 7.77 million. Income from the sale of jewellery contributed to 93.73% of our total income and income from the sale of textiles and accessories contributed to 6.21% of our total income for the six month period ended September 30, 2010.
Other income
For the six month period ended September 30, 2010, our other income comprised of income from interest on bank deposits, profit on sale of fixed assets, foreign exchange gain and export incentives. Other income was ` 7.77 million for the six month period ended September 30, 2010.
Other income contributed 0.06% of our total income for the six month period ended September 30, 2010.
Expenditure
Cost of Goods Sold
Cost of goods sold was ` 10,671.39 million for the six month period ended September 30, 2010. Cost of goods sold as a percentage of total income was 85.01% for the six month period ended September 30, 2010.
Personnel cost
Personnel cost was ` 239.16 million for the six month period ended September 30, 2010, comprising primarily of ` 212.32 million of salaries, wages and bonus paid to employees and ` 13.64 million of contribution made to the provident fund. Personnel cost as a percentage of total income was 1.91% for the six month period ended September 30, 2010.
Operating Expenses
Operating expenses were ` 602.15 million for the six month period ended September 30, 2010, comprising primarily of ` 333.92 million of advertisement and sales promotion expenses and ` 91.72 million of lease rentals paid. Operating expenses as a percentage of total income were 4.80% for the six month period ended September 30, 2010.
Finance cost
Finance costs was ` 165.07 million for the six month period ended September 30, 2010, comprising primarily of ` 115.95 million of interest paid on cash credit and short term loans and ` 26.78 million of
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interest paid on term loans. Finance cost as a percentage of total income was 1.32% for the six month period ended September 30, 2010.
Depreciation
Depreciation cost was ` 65.99 million for the six month period ended September 30, 2010, comprising primarily of ` 24.73 million incurred as depreciation on leasehold improvements and ` 10.34 million of depreciation cost on office equipments. Depreciation as a percentage of total income was 0.53% for the six month period ended September 30, 2010.
As a result of the above, total expenditure was ` 11,743.76 million for the six month period ended September 30, 2010. Expressed as percentage of total income, total expenditure was 93.56% for the six month period ended September 30, 2010.
Restated profit before tax
For the six month period ended September 30, 2010, restated profit before taxes was ` 808.63 million.
Restated profit after tax for the period
Restated profit was ` 544.74 million for the six month period ended September 30, 2010.
Fiscal 2010 compared to Fiscal 2009
Significant Events
The following significant events occurred in Fiscal 2010, each which had an impact on our revenue, expenses and results of operations for the period:
Our Company opened five new showrooms at Thiruvananthapuram, Thrissur, Velloor, Karur and Kanchipuram during the aforementioned time period. Our showroom at Thiruvananthapuram earned a revenue of `374.16 million. Our new showroom at Thrissur earned a revenue of ` 167.46 million. Our new showroom at Vellore earned a revenue of ` 294.83 million. Our new showroom at Karur earned a revenue of ` 119.89 million. Our new showroom at Kancheepuram earned a revenue of ` 45.19 million.
The following significant events occurred in Fiscal 2009, each which had an impact on our revenue, expenses and results of operations for the period:
Our Company opened two new showrooms at Mumbai and Puducherry during the aforementioned time period. Our new showroom at Mumbai earned a revenue of ` 204.73 million. Our new showroom at Puducherry earned a revenue of ` 196.26 million.
Income
Total income increased by ` 3,911.49 million, or by 27.31 %, from ` 14,324.97 million in Fiscal 2009 to ` 18,236.46 million in Fiscal 2010, primarily due to increase in the number of stores from 15 to 20.
Income from sale of jewellery
Income from the sale of jewellery increased by ` 3,886.62 million, or by 30.26%, from ` 12,843.45 million in Fiscal 2009 to ` 16,730.07 million in Fiscal 2010, primarily due to increase in quantity of Gold sold by 377.41 kg from 8,430.05 kg in Fiscal 2009 to 8,807.46 kg in Fiscal 2010 and an increase in the value of gold sold driven by an increase in the unit price of gold. This increase in sales was driven by increased sales in existing stores as well as the opening of five additional stores.
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Income from sale of Textiles and Accessories
Income from the sale of textiles and accessories increased by ` 62.23 million, or by 4.36%, from ` 1,428.29 million in Fiscal 2009 to ` 1,490.52 million in Fiscal 2010, primarily due to an increase in the value of products sold in our existing stores.
Other income
In Fiscal 2010, our Other Income comprised of income from interest earned from bank deposits, export incentives, DEPB incentives received on export sale, profit on sale of fixed assets, insurance claim received and miscellaneous income. Our other income was ` 53.23 million in Fiscal 2009 and comprised of income from interest earned from banks, gain from foreign exchange, DEPB incentive received, gain from commodity trading in futures and miscellaneous income. Other income contributed to 0.09% and 0.37% of our total income in Fiscal 2010 and 2009, respectively.
Expenditure
Cost of Goods Sold
The cost of goods sold increased by ` 3,472.87 million, or 28.64 %, from ` 12,127.71 million in Fiscal 2009 to ` 15,600.58 million in Fiscal 2010, primarily due to the growth of business. Further, the cost of goods sold as a percentage of total income in Fiscal 2010 was 85.55% as against 84.66% in Fiscal 2009 due to increase in conversion costs (includes making charges paid to smiths, costs of hallmarking, testing, melting and certification charges) and direct costs.
Personnel cost
Personnel costs increased by ` 58.61 million, or 21.73 %, from ` 269.76 million in Fiscal 2009 to ` 328.37 million in Fiscal 2010 due to increase in number of employees from 1,652 to 2,107 and routine increment in salary. Further, personnel cost as a percentage of total income in Fiscal 2010 was 1.80% as against 1.88% in Fiscal 2009 due to the marginal increase in the operational efficiency.
Operating Expenses
Operating expenses increased by ` 120.26 million, or 15.72 %, from ` 765.00 million in Fiscal 2009 to ` 885.26 million in Fiscal 2010 primarily due to increase in lease rentals paid, advertisement and sales promotion expenses, increase in travel expenditure, credit card commission and amount of sales tax paid. Further, operating expenses as a percentage of total income in Fiscal 2010 was 4.85% as against 5.34% in Fiscal 2009 due to an increase in the number of our showrooms from 15 to 20.
Finance Cost
Finance cost decreased by ` 24.62 million, or 8.41 %, from ` 292.63 million in Fiscal 2009 to ` 268.01million in Fiscal 2010 primarily due to a decrease in the marked-to-market loss on derivate instruments to ` nil in Fiscal 2010 as opposed to ` 19.88 million in Fiscal 2009. This was partially offset by an increase in interest paid on cash credit and short term loans, term loans, processing charges and other bank charges. Further, finance cost as a percentage of total income in Fiscal 2010 was 1.47% as against 2.04% in Fiscal 2009 due to a loss of ` 19.88 million incurred by the Company on derivative instruments which was treated as finance charges.
Depreciation
Depreciation costs decreased by ` 6.15 million, or 5.64%, from ` 108.96 million in Fiscal 2009 to ` 102.81 million in Fiscal 2010 due to the fact that out of the additions to lease hold improvements of ` 82.09 million, ` 41.92 million has been made during the last quarter of Fiscal 2010 and pursuant to sale of fixed assets amounting to ` 6.06 million and their consequent reduction from our gross block. Further,
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depreciation as a percentage of total income in Fiscal 2010 was 0.56% as against 0.76% in Fiscal 2009 due to due to an increase in the number of our showrooms from 15 to 20, all of which were situated on leased premises.
As a result of the above, total expenditure increased by ` 3,620.97 million, or 26.70%, from ` 13,564.06 million in Fiscal 2009 to ` 17,185.03 million in Fiscal 2010.
Restated profit before tax
For the reasons discussed above, our restated profit before tax was ` 760.91 million and ` 1,051.43 million in Fiscal 2009 and 2010, respectively.
Net profit as restated profits for the year
For the reasons discussed above, our net profit as restated for the year was ` 496.08 million and ` 673.52 million in Fiscal 2009 and 2010, respectively.
Fiscal 2009 compared to Fiscal 2008
Significant Events
The following significant events occurred in Fiscal 2008, each which had an impact on our revenue, expenses and results of operations for the period:
Our new showrooms at Thirunelveli and Chennai were opened during the aforementioned time period. Our new showroom at Thirunelveli earned a revenue of ` 624.18 million. Our showroom at Chennai earned a revenue of ` 352.13 million.
See above for a description of the significant events in Fiscal 2009.
Income
Total income increased by ` 4,687.08 million, or 48.63 %, from ` 9,637.89 million in Fiscal 2008 to ` 14,324.97 million in Fiscal 2009, primarily due to an increase in sales driven by an increase in our number of stores from 13 to 15 and an increase in total turnover from ` 9,626.43 million in Fiscal 2008 to ` 14,271.74 million in Fiscal 2009.
Income from sale of jewellery
Income from the sale of jewellery increased by `4,497.92 million, or 53.90%, from ` 8,345.53 million in Fiscal 2008 to `12,843.45 million in Fiscal 2009, primarily due to increase in the quantity of Gold sold by 1,275.7 kg from 7,154.35 kg in Fiscal 2008 to 8,430.05 kg in Fiscal 2009 driven by increased sales in existing stores as well as due to the opening of two additional stores. The increase in our Income from sale of Jewellery was also driven by an increase in the per gram price of gold.
Income from sale of Textiles and Accessories
Income from the sale of textiles and accessories increased by ` 147.39 million, or 11.51 %, from ` 1,280.90 million in Fiscal 2008 to ` 1,428.29 million in Fiscal 2009, primarily due to increase in the value of products sold through our stores.
Other income
In Fiscal 2009, Other Income comprised of income earned by way of interest from bank deposits of `4.35 million, gains from foreign exchange of ` 36.10 million, DEPB incentives of ` 4.07 million, gains from
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commodity trading of 6.14 million and miscellaneous income `2.57 million. Other income contributed 0.37% of our total income in Fiscal 2009.
Expenditure
Cost of Goods Sold
The cost of goods sold increased by ` 3,831.59 million, or 46.19%, from ` 8,296.12 million in Fiscal 2008 to ` 12,127.71 million in Fiscal 2009, primarily due to the growth of our business. Further, the cost of goods sold as a percentage of total income in Fiscal 2009 was 84.66% as against 86.08% in Fiscal 2008 due to better realizations and increased value addition to jewellery.
Personnel cost
Personnel costs increased by ` 99.90 million, or 58.81%, from ` 169.86 million in Fiscal 2008 to ` 269.76 million in Fiscal 2009 due to increase in salaries, wages and bonus of the employees. Further, personnel cost as a percentage of total income in Fiscal 2009 was 1.88% as against 1.76% in Fiscal 2008 due to the increment in payroll and allowances.
Operating Expenses
Operating expenses increased by ` 156.91 million, or 25.80%, from ` 608.09 million in Fiscal 2008 to ` 765.00 million in Fiscal 2009 due to increase in lease rentals paid, advertisement and sales promotion expenses, increase in travel expenditure, credit card commission, sales tax paid and costs incurred on repairs and maintenance of buildings. Further, operating expenses as a percentage of total income in Fiscal 2008 was 6.31 % as against 5.34% in Fiscal 2009 due to better realizations, i.e, increased revenue from ` 9,637.89 million to ` 14,324.97 million.
Finance cost
Finance cost increased by ` 81.14 million, or 38.37%, from ` 211.49 million in Fiscal 2008 to ` 292.63 million in Fiscal 2009 due to increase in the interest paid on short term loans, increase in other finance charges as well as in the cost of finance. Further, finance cost as a percentage of total income in Fiscal 2008 was 2.19% as against 2.04%in Fiscal 2009 due to better realizations i.e increased revenue from ` 9,637.89 million to ` 14,324.97 million.
Depreciation
Depreciation costs increased by ` 14.33 million, or 15.14%, from ` 94.63 million in Fiscal 2008 to ` 108.96 million in Fiscal 2009 due to addition of fixed assets amounting to `59.06 million. Further, depreciation as a percentage of total income in Fiscal 2009 was 0.76% as against 0.98% in Fiscal 2008 due to increased revenue from ` 9,637.89 million to ` 14,324.97 million.
As a result of the above, total expenditure increased by ` 4,183.87 million, or 44.60%, from ` 9,380.19 million in Fiscal 2008 to ` 13,564.06 million in Fiscal 2009.
Restated profit before tax
For the reasons discussed above, our restated profit before tax was ` 257.70 million and ` 760.91 million in Fiscal 2008 and 2009, respectively.
Net profit as restated profits for the year
For the reasons discussed above, our net profit as restated for the year was ` 167.24 million and ` 496.08 million in Fiscal 2008 and 2009, respectively.
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Fiscal 2008 compared to Fiscal 2007
Income
Total income increased by ` 2,877.20 million, or 42.56%, from ` 6,760.69 million in Fiscal 2007 to ` 9,637.89 million in Fiscal 2008, primarily due to increases in our income from sales of jewellery and textiles for the reasons described below.
Income from sale of jewellery
Income from the sale of jewellery increased by ` 2,770.70 million, or 49.70%, from ` 5,574.83 million in Fiscal 2007 to ` 8,345.53 million in Fiscal 2008, primarily due to an increase in the quantity of Gold sold by us from 5,098.55 kg to 7,154.35 kg. This growth was driven by increased sales from our existing stores as well as the opening of two new stores at Chennai and Thirunelveli.
Income from sale of Textiles and Accessories
Income from the sale of textiles and accessories increased by ` 99.99 million, or 8.47%, from ` 1,180.91 million in Fiscal 2007 to ` 1,280.90 million in Fiscal 2008, primarily due to increase in the value of products sold in our existing stores.
Other income
In Fiscal 2008, our Other Income comprised of income from interest earned from banks deposits `1.01 million, `1.94 million DEPB incentives received on export sale, `1.46 million profit on sale of fixed assets, insurance claim received ` 4.63 million and miscellaneous income of ` 2.42 million. Our other income was ` 4.95 million in Fiscal 2007 and comprised income from interest earned from Bank interest of `1.25 million, DEPB incentive received of `1.51 million and `2.19 million of miscellaneous income. Other income contributed to 0.12% and 0.07% of our total income in Fiscal 2008 and 2007, respectively.
Expenditure
Cost of Goods Sold
The cost of goods sold increased by ` 2,683.46 million, or 47.81%, from ` 5,612.66 million in Fiscal 2007 to ` 8,296.12 million in Fiscal 2008, primarily due to the growth of business. Further cost of goods sold as a percentage of total income in Fiscal 2008 was 86.08% as against 83.02% in Fiscal 2007 due to a steep fall in the price of gold in Fiscal 2008 and the inability of our Company to realize the cost of its investment in its gold inventory.
Personnel cost
Personnel costs increased by ` 32.59 million, or 23.74%, from ` 137.27 million in Fiscal 2007 to ` 169.86 million in Fiscal 2008 due to increase in number of employees from 1,328 to 1,822 and routine increment in salary. Further, personnel cost as a percentage of total income in Fiscal 2008 was 1.76% as against 2.03% in Fiscal 2007.
Operating Expenses
Operating expenses increased by ` 99.75 million, or 19.62%, from ` 508.34 million in Fiscal 2007 to ` 608.09 million in Fiscal 2008 due to increase in the amount of lease rentals paid, advertisement and sales promotion expenses, increase in travel expenditure, credit card commission and sales tax paid. Further, operating expenses as a percentage of total income in Fiscal 2008 was 6.31% as against 7.52% in the Fiscal 2007.
Finance cost
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Finance cost increased by ` 76.49 million, or 56.66%, from ` 135.00 million in Fiscal 2007 to ` 211.49 million in Fiscal 2008 due to increase in the amount of interest paid on short term loans and was partially offset by mark to market loss on derivative instruments. Further, finance cost as a percentage of total income in Fiscal 2008 was 2.19% as against 2.00% in Fiscal 2007 due to an increase in interest payable as a result of enhancement of our total cash credit facility by ` 460.05 million.
Depreciation
Depreciation costs increased by ` 15.34 million, or 19.35%, from ` 79.29 million in Fiscal 2007 to ` 94.63 million in Fiscal 2008 due to the addition of fixed assets amounting to 34.86 million (net of deletion `58.62). Further, depreciation as a percentage of total income in Fiscal 2008 was 0.98% as against 1.17% in Fiscal 2007 due to increased revenue from ` 6,760.69 million to ` 9,637.89 million.
As a result of the above, total expenditure increased by ` 2,907.63 million, or 44.92%, from ` 6,472.56 million in Fiscal 2007 to ` 9,380.19 million in Fiscal 2008.
Restated profit before tax
For the reasons discussed above, our restated profit before tax was ` 288.13 million and ` 257.70 million in Fiscal 2007 and 2008, respectively.
Net profit as restated profits for the year
For the reasons discussed above, our net profit as restated for the year was ` 177.74 million and ` 167.24 million in Fiscal 2007 and 2008, respectively.
Liquidity and Capital Resources
Our requirement for liquidity and capital primarily arises for capex required for store opening , maintaining inventory levels etc. Historically, we have relied upon cash generated from operations and debt to fund our requirements.
Cash flow statement for financial statements
The following table sets forth certain information relating to our cash flows for the periods indicated:
(` in million) Six month Year ended March 31, period ended September 30, 2008 2009 2010 2010 Cash Flows
Net cash flow generated from / (used in) operating activities 67.71 217.69 (172.27) (118.02) Net cash generated from / (used in) investing activities (72.87) (6.49) (286.19) (10.32) Net cash generated from / (used in) from financing activities 205.70 (206.33) 371.64 2.54 Net Increase / (decrease) in cash and cash equivalents 200.54 4.87 (86.82) (125.80) Cash and cash equivalents at the end of the year / period 312.97 317.84 231.02 105.22
Operating activities
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Net cash used in operating activities was ` 118.02 million for the six month period ended September 30, 2010, and consisted of net profit before taxation of ` 808.63 million, as adjusted for a number of non-cash items, primarily, depreciation of ` 65.99 million , and other items, including interest expense of ` 144.71 million. Working capital adjustments included a decrease in trade and other receivables of ` 44.93 million, negative cash flow from inventories of ` 1,007.66 million and an increase in current liabilities and provisions of ` 184.01 million. Negative cash flow from loans and advance and other current assets was ` 100.36 million.
Net cash used in operating activities was ` 172.27 million for Fiscal 2010, and consisted of net profit before taxation of `1,051.43 million, as adjusted for a number of non-cash items, primarily depreciation of ` 102.81 million and other items, including interest expense of ` 257.28 million. Working capital adjustments included a decrease in trade and other receivables of ` 33.02 million, increase in inventories of ` 1,930.00 million, an increase in current liabilities and provisions of ` 786.53 million and an increase in loans and advance and other current assets of ` 22.74 million.
Net cash generated from operating activities was ` 217.69 million for Fiscal 2009, and consisted of net profit before taxation of ` 760.91 million, as adjusted for a number of non-cash items, primarily, depreciation of ` 108.96 million, mark to market loss on derivative instruments of ` 19.88 million and other items, primarily interest expenses of ` 262.47 million. Working capital adjustments included increase in trade and other receivable of `270.92 million, decrease in inventories of ` 127.61 million, decrease in current liabilities and provisions of ` 612.38 million and an increase in loans and advances and other current assets of ` 33.31 million.
Net cash generated from operating activities was ` 67.71 million for Fiscal 2008, and consisted of net profit before taxation of ` 257.70 million, as adjusted for a number of non-cash items, depreciation of ` 94.63 million and other items, primarily, interest expenses of `189.28 million. Working capital adjustments included an increase in trade and other receivables of `13.45 million, an increase in inventories of ` 1,112.01 million, and an increase in trade payables of `826.66 million, increase in loans and advances and other current assets of ` 26.65 million.
Investing Activities
Net cash used in investing activities was `10.32 million for the six month period ended September 30, 2010, primarily as a result of the purchase of fixed assets (net) of `12.27 million offset by the sale of fixed assets and a small amount of interest received on investments.
Net cash used in investing activities was ` 286.19 million for Fiscal 2010, primarily as a result of the purchase of fixed assets (net) of ` 304.58 million offset by small amount of interest received on investments and an insurance claim received on aircraft insurance.
Net cash used in investing activities in Fiscal 2009 was ` 6.49 million. This was primarily as a result of the purchase of fixed assets (net) of ` 10.33 million offset by a small amount of interest received on investments.
Net cash used in investing activities in Fiscal 2008 was ` 72.87 million. This was primarily as a result of the purchase of fixed assets (net) of ` 73.59 million offset by a small amount of interest received on investments.
Financing activities
Net cash generated from financing activities was ` 2.54 million for the six month period ended September 30, 2010, primarily due to the availment of secured loans (net) of ` 195.32 million and unsecured loan (net) of ` 38.35 million and partially offset by finance charges paid of ` 143.38 million and dividend payment of `75.00 million.
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Net cash generated from financing activities was ` 371.64 million for Fiscal 2010, primarily due to the availment of secured loans (net) of ` 630.01 million as partially offset by finance charges paid of ` 257.28 million.
Net cash used in financing activities in Fiscal 2009 was ` 206.33 million, primarily due to payment of finance charges amounting to ` 262.47 million, repayment of unsecured loan (net) of ` 50.59 million, and partially offset by proceeds from short term borrowings (net) of ` 56.73 million and proceeds from issue of Equity Shares of ` 50 million.
Net cash generated from financing activities was `205.70 million for Fiscal 2008, primarily due to payment of finance charges amounting to `189.28 million, repayment of unsecured loan of ` 195.82 million, offset by proceeds from secured borrowings (net) of `340.80 million and proceeds from issue of Equity Shares of ` 250 million.
Indebtedness
The following table sets forth information relating to our total indebtedness as of September 30, 2010:
(` in million) Payment due by Total indebtedness as of September 30, Less than More than 5 2010 1 year 1-3 years 3-5 years years
Secured 2,807.33 2,703.75 103.58 NIL NIL Unsecured 94.74 94.74 NIL NIL NIL
We maintain debt levels that we establish through the consideration of a number of factors, including requirements for working capital support, cash flow expectations, cash requirements for operations and our overall cost of capital. See the section “Financial Indebtedness” on page 181 and Annexure IX of our Restated Financial Statements on page 136 for additional information about our borrowings. The following table sets forth information relating to future payments due under our financing agreements as of September 30, 2010:
(` in million) Payment due by Total contractual obligations as Less than More than of September 30, 2010 1 year 1-3 years 3-5 years 5 years
Non-cancellable operating lease 532.98 110.89 183.40 134.77 103.92 obligations
Capital Expenditure
Planned Capital Expenditure
We expect to incur capital expenditure of ` 2,304.43 million and ` 1,376.50 million in Fiscal 2012 and Fiscal 2013, respectively. For further information, see “Objects of the Issue” on page 31.
Our capital expenditure plans are based on management estimates and are subject to a number of variables, including availability of financing on acceptable terms, desirability of current plans and macroeconomic
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factors such as the economy or factors affecting the our industry. For additional information relating to our capital expenditure plans, see "Objects of the Issue" on page 31.
Certain Balance Sheet Items as restated
(` in million) As at March 31, As at September 30, 2008 2009 2010 2010
Fixed assets 534.42 452.11 663.19 608.05 Investments 0.10 Deferred tax assets, net - 7.31 - 1.70 Current assets, loans and advances Inventories 3,399.67 3,272.06 5,202.06 6,209.73 Sundry debtors 49.41 322.76 284.74 231.94 Cash and bank balances 314.82 331.48 248.66 139.84 Current assets, loans and advances 229.64 229.28 250.57 331.55 Total 3,993.54 4,155.58 5,986.03 6,913.06 Liabilities and provisions Secured loans 1,905.39 1,982.00 2,612.01 2,807.33 Unsecured loans 108.80 58.21 57.12 94.74 Current liabilities and provisions 1,689.77 1,205.87 2,022.80 2,121.41 Deferred tax liability, net 1.16 - 2.60 - Total 3,705.12 3,246.08 4,694.53 5,023.48
Fixed assets
The value of our total fixed assets (net) was ` 534.42 million, ` 452.11 million, ` 663.19 million and ` 608.05 million as of March 31, 2008, March 31, 2009, March 31, 2010 and September 30, 2010 respectively. Our fixed assets consist of freehold land, buildings, leasehold improvements, plant and machinery, computer equipment, electrical fittings, office equipment, furniture and fixtures and motor vehicles.
The value of fixed assets decreased by 15.40% from Fiscal 2008 to Fiscal 2009 due to a reduction in fixed assets amounting by ` 4.8 million. The value of fixed assets increased by 46.69% from Fiscal 2009 to Fiscal 2010 by ` 211.08 million due to the addition in fixed assets in the form of additions in leasehold improvements, computers, electrical fittings, and office equipment in newly opened branches. The value of fixed assets decreased by 8.31 % from Fiscal 2010 to September 30, 2010 due to a reduction in fixed assets by ` 18.52 million.
The value of fixed assets decreased by 6.24% from Fiscal 2007 to Fiscal 2008 due to sale of land of value ` 28.38 million and ` 27.57 million being suffered as loss due to the crash of an aircraft owned by us.
Liabilities and Provisions
Our liabilities and provisions were ` 3,705.12 million, ` 3,246.08 million, ` 4,694.53 million and ` 5,023.48 million as of March 31, 2008, March 31, 2009, March 31, 2010 and September 30, 2010 respectively.
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Liabilities and provisions increased by 33.38% from Fiscal 2007 to Fiscal 2008 due to an increase in the value of secured loans and amounts owed to sundry creditors. Our liabilities and provisions decreased by 12.39% from Fiscal 2008 to Fiscal 2009 due to a decrease in amounts owed to sundry creditors.Our liabilities and provisions increased by 44.62% from Fiscal 2009 to Fiscal 2010 due to an increase in the value of secured loans availed and in current liabilities and provisions. Our liabilities and provisions increased by 7.01% from Fiscal 2010 to September 30, 2010 due to an increase in the value of secured loans and current liabilities.
Net Worth
Our net worth was ` 822.84 million, ` 1,368.92 million, ` 1,954.69 million and ` 2,499.43 million as of March 31, 2008, March 31, 2009, March 31, 2010 and September 30, 2010, respectively.
Our net worth increased by 102.87% from Fiscal 2007 to Fiscal 2008 due to an increase in our profit and loss account by 81.34% and in our equity share capital by 125.00%. Our net worth increased by 66.37% from Fiscal 2008 to Fiscal 2009 due to an increase in our profit and loss account by 133.05% and increase in equity share capital by 11.11%. Our net worth increased by 42.79% from Fiscal 2009 to Fiscal 2010 due to an increase in profit and loss account by 59.61% and in our general reserves by ` 67.82. Our net worth increased by 27.87% from Fiscal 2010 to September 30, 2010 due to an increase in our profit and loss account.
Contingent Liabilities and Off Balance Sheet Arrangements
Contingent liabilities as of September 30, 2010 included the following:
Particulars Amount
(` in millions) Claims against the company not acknowledged as debts 129.53
For further information, see Annexure IV to our Restated Financial Statements on page 126.
Besides contingent liabilities, we do not have any off-balance sheet arrangements that would have been established for the purpose of facilitating off-balance sheet arrangements.
Related Party Transactions
We have entered into and expect to enter into transactions with a number of related parties, including our Promoter. For further information regarding our related party transactions, see “Related Party Transactions” at Annexure XIV of our Restated Financial Statements on page 150.
Qualitative Disclosure about Market Risks
General
Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the foreign currency exchange rates, interest rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including debt.
Exchange Rate Risk
Changes in currency exchange rates influence our results of operations. While our revenues are denominated in Indian rupees, a significant portion of our expenses in relation to purchase of bullion, , are
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denominated in currencies other than Indian rupees, most significantly U.S. Dollar. Depreciation of the Indian rupee against the U.S. dollar and other foreign currencies may adversely affect our results of operations by increasing the cost of our manufacturing.
Price Risk
Changes in the market price of gold influence our results of operations. Since there is a time gap between the procurement of our merchandise and its purchase by our customers, any change in the market price of gold during the aforementioned period has a bearing upon the value of our inventory.
Interest rate risk
As of September 30, 2010, ` 2,541.99 million, or 87.59% of our total debt was subject to variable rates. An increase in interest expenses may have an adverse effect on our results of operations.
Inflation
In recent years, although India has experienced fluctuation in inflation rates, inflation has not had material impact on our business and results of operations.
Known Trends or Uncertainties
Other than as described in this Draft Red Herring Prospectus, particularly in the sections “Risk Factors” and “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page x and page 157, respectively, to our knowledge, there are no trends or uncertainties that have or had or are expected to have a material adverse impact on our income from continuing operations.
Unusual or Infrequent Events or Transactions
Except as described in this Draft Red Herring Prospectus, to our knowledge, there have been no events or transactions that may be described as “unusual” or “infrequent”.
Seasonality of Business
Our business is not seasonal.
Future Relationship between Costs and Income
Other than as described in the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages x and 157, respectively, to our knowledge, there are no known factors which will have a material adverse impact on our operations and finances.
Significant Dependence on a Single or Few Suppliers
We have a wide supplier base and our business is not dependent on any significant supplier.
Significant Dependence on a Single or Few Customers
We have a wide customer base and our business is not dependent on any significant customer.
Competitive Conditions
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We expect competition in the Indian jewellery and textile retail markets from existing and potential competitors to intensify. For further details regarding our competitive conditions and our competitors, see the sections “Risk Factors” and “Business” beginning on pages x and 65, respectively.
Significant developments after September 30, 2010 that may affect our future results of operations
The Board in its meeting held on November 8, 2010 and November 12, 2010 respectively recommended and approved the allotment of 34,200 equity shares of the Company to 98 employees of the Company. These shares have been granted to the employees at par value.
Further, pursuant to the necessary approvals received from the RoC, our Company has been converted into a public limited company with effect from December 9, 2010.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that are expected to impact our accounting policies or the manner of our financial reporting. However, the Institute of Chartered Accountants of India has announced a road map for the adoption of, and convergence of Indian GAAP with, IFRS, pursuant to which certain public companies in India, will be required to prepare their annual and interim financial statements under IFRS beginning with financial year commencing April 1, 2011. Because there is significant lack of clarity on the adoption of and convergence with IFRS and there is not yet a significant body of established practice on which to draw in forming judgments regarding its implementation and application, we have not determined with any degree of certainty the impact that such adoption will have on our financial reporting.
Auditor Qualification
The report given by the auditors for the periods ended March 31, 2006, March 31, 2007 and March 31, 2008 contain a qualification in relation to our internal audit system not being commensurate with the size and nature of the business of our Company. The report given by the auditors for the period ended March 31, 2009 contains a qualification that states that whilst the Company has an internal audit system, the same needs to be strengthened further in order to be commensurate with the size and nature of the business of the Company. For further information, see Risk Factors on page x of this DRHP.
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FINANCIAL INDEBTEDNESS
As on December 31, 2010, the aggregate outstanding borrowings of our Company based on our financial statements were as follows: (` In million) SI. No. Nature of Borrowing Amount 1. Secured Borrowings 3,269.38 2. Unsecured Borrowings 242.57
I. IDBI Bank Limited (Total sanctioned amount of ` 300.00 million)
Sanction Letter June 23, 2010, Facility Agreement dated June 29, 2010, Deed of Hypothecation dated June 29, 2010, modification to the Sanction Letter dated July 30, 2010, Guarantee Agreement executed by Jolly Joy dated October 25, 2010, Guarantee Agreement executed by Alukkas Varghese Joy dated August 17, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010.
(` In million) Sanctioned Amount Interest Purpose of Loan/Repayment/Security Amount outstanding as Rate on December 31, 2010 Fund Based The cash credit, the short term loan and the letter of credit facilities have been availed of for funding our working capital requirements. The tenure of the cash credit facility is one year and is repayable on demand. The short term loan facility is valid for one year and is repayable on due dates. The letter of credit facility is repayable on due dates. The treasury limit is for booking forward contracts and derivatives. The treasury limit facility is valid till January 28, 2011. The facilities have been secured by: (a) First charge on entire current assets of the Company ranking pari passu with other lenders in the multiple lending arrangement; (b) Equitable mortgage on pari passu basis over specific immovable properties of the Company as follows: i. Land and building (residential) admeasuring nine cents situated at 168, 18/3, Kollam east village, staff quarters; ii. Land and building (residential) admeasuring 5.5 cents situates at 168, 18/2 Kollam east village, staff quarters; iii. Land and building (residential) admeasuring 10.50 cents situated at 168, 19, Kollam east village, staff quarters; iv. Land and building (commercial) admeasuring 49 cents situated at survey number. 164/2, at Thodupuzha village, Idukki district: v. Land and building (commercial) admeasuring 2,227 square feet situated at door number. 107 TS No: 757, ward 38, Madurai south, reg district; and vi. Land (commercial) admeasuring 26.453 cents situated at survey number. 10, block number 66, Kottayam village, car parking (all the property listed in (b)(i) – (b)(vi) above are hereinafter referred to as the “Secured Property”); and
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(c) Personal guarantees executed by Alukkas Varghese Joy and Jolly Joy. Cash 330.95 Base rate Credit: plus 200 300.00 basis points
Inner Limit Short Term Nil N.A. Loan: 300.00 Non Fund Based Letter of Nil N.A. Credit: 50.00 Inner limit Treasury Nil N.A. Limit: 5.00
The following restrictive covenants are also applicable in relation to the above facilities availed of by the Company from IDBI Bank Limited:
(a) During the currency of the facilities, the Company shall not, without the prior permission in writing of the lender: i. effect any change in the its capital structure or formulate any scheme of amalgamation or reconstruction; ii. make any corporate investments or investment by way of share capital or debentures or lend or advance funds to or place on security deposits in the normal course of business or make advances to employees, except those required by law, or undertake guarantee obligations on behalf of any third party or any other company; iii. the Company has agreed that the money brought in by the principal shareholders/directors/depositors/other associated firms/group companies for financing the programmes and the working capital needs of the Company will not be allowed to be withdrawn, during the currency of the facilities without the permission of the lender; iv. in the event of the Company diverting the funds availed of from the facilities towards inter- corporate deposits, debentures, stocks and shares, real estate business, capital expenditure, etc., the facilities shall be withdrawn and would attract a penal interest of 2% over and above the interest rate charged till repayment; v. the Company shall not declare any dividend on its share capital, if it fails to meet its obligations to pay the interest and/or commission and/or installment and/or moneys payable to the lender, so long as it is in such default; and vi. so long as the said cash credit account(s) continue in the books of the lender in respect of the said facilities, the Company shall not avail of any additional working capital facility from any other lenders without the previous permission in writing of the lender.
II. State Bank of Travancore (Total sanctioned amount of ` 350.00 million)
Sanction letter dated June 24, 2010, Agreement of Loan for Overall Working Capital Limit dated June 29, 2010, Agreement of Hypothecation of Goods and Assets dated June 29, 2010, Agreement of Pledge of Goods and Assets dated June 29, 2010, Letter of Declaration cum Undertaking dated June 29, 2010 and Agreement to Create an Equitable Mortgage dated June 29, 2010, Two Deeds of Guarantee for Overall Working Capital Limit both dated June 29, 2010 issued by each of Alukkas Varghese Joy and Jolly Joy, Deed of Guarantee for Overall Working Capital Limit dated June 29, 2010, Letter Regarding the Grant of Individual Limits within the Overall Working Capital Limit dated June 29, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010 and letter dated September 25, 2010.
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(` In million) Sanctioned Amount Interest Purpose of Loan/Repayment/Security Amount outstanding as on Rate December 31, 2010 Fund Based The cash credit and short term loan facilities have been availed of for funding our working capital requirements. The short term loan facility is repayable in six months. The cash credit facility is repayable on demand. The facilities have been secured by: (a) First pari passu charge over stock of finished goods of gold ornaments/ textiles and receivables at various showrooms and godowns of the Company; (b) Equitable mortgage on pari passu basis over the Secured Property; and (c) Personal guarantees executed by Alukkas Varghese Joy and Jolly Joy. Cash 28.53 Base rate Credit: plus 200 350.00 basis points
Inner limits Short Term 322.30 8.50% p.a. Loan: 320.00
The following restrictive provisions also applicable in relation to the above loan availed of by the Company from State Bank of Travancore:
(a) The lender shall have a right to appoint and remove from time to time, a director or directors on the Board of Directors of the Company as nominee director(s). (b) The Company under the financing agreement shall not do the following without the written consent of the lender: i. change or in any way alter the capital structure of the Company or affect any scheme of amalgamation or reconstitution; ii. implement a new scheme of expansion or take up an allied line of business or manufacture; iii. declare a dividend or distribute profits after deduction of taxes, except where all payments due to the lender have been duly made as per the financing arrangement; iv. enlarge the scope of the other manufacturing/ trading activities, if any, undertaken at the time of application and notified to the lender; v. the Company shall not withdraw/ permit the promoters to withdraw their investment in the Company except with the lender‟s prior permission in writing; vi. invest in any funds by way of deposits, or loans or in share capital of any other concern (including subsidiaries) so long as any money is due to the lender; vii. alter its Memorandum of Association and Articles of Association; viii. borrow or obtain credit facilities granted of any description from any other branch of the lender or any other credit agency or money-lenders or enter into any hire-purchase arrangement; or ix. divert the funds for any other purpose other than in accordance with the proposal submitted by the Company to the lender.
III. ING Vysya Bank Limited (Total sanctioned amount of ` 750.00 million)
Sanction letter dated April 6, 2010, General Counter Guarantee and Indemnity Covering Several Guarantees within the Sanctioned Guarantee Limit dated June 2, 2010, Guarantee Bond executed by Alukkas Varghese Joy dated June 3, 2010, Guarantee Bond executed by Jolly Joy dated June 30, 2010, Take Delivery Letter to Demand Promissory Note dated June 2, 2010, Undertaking to furnish pari passu
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letters dated June 2, 2010, General Hypothecation Agreement dated June 2, 2010, Demand Promissory Note dated June 2, 2010 and Facility Agreement dated June 2, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010.
(` In million) Sanctioned Amount Interest Purpose of Loan/Repayment/Security Amount outstanding as on Rate December 31, 2010 Fund Based The cash credit, working capital and letter of credit facilities have been availed of for funding our working capital requirements. This cash credit facility is repayable on demand. The tenor of the working capital demand loan facility is 364 days. The tenor of the letter of credit facility is up to 90 days. The bank guarantee is for commercial and statutory purposes. The bank guarantee is valid for one year. The facilities have been secured by: (a) First ranking pari passu charge on the entire current assets of the Company, both present and future with other working capital lenders; (b) Equitable mortgage on pari passu basis over the Secured Property; and (c) Personal guarantees executed by Alukkas Varghese Joy and Jolly Joy. Cash Credit: 389.78 IVRR 750.00 minus 5% Sub Limits Working 350.00 10.45% Capital Demand p.a. Loan: 750.00 Letter of Credit: Nil N.A. 100.00 Bank Nil N.A. Guarantee: 100.00
The following restrictive covenants are applicable in relation to the above facility availed of by the Company from ING Vysya Bank Limited:
(a) The Company shall not without the consent of the lender: i. Change the Company‟s status, constitution, controlling ownership or nature of business and operation; ii. apply short term working capital funds for acquiring fixed assets and other long term uses; iii. pay commission to the directors in consideration for the personal guarantee furnished to the lender; iv. not embark upon further expansion of project for which the credit facilities have been granted under the financing arrangement or incur any capital expenditure; or v. withdraw moneys or funds brought into the business of the Company by the Company, principal shareholders, directors, partners and/or depositors of the Company. (b) The lender is entitled to a penal interest of 2% p.a. for delay/ default in the submission of stock statements, deviation from sanction terms, excess advance and default in payment of interest and installment or in the event the Company commits any breach of the covenants under the financing arrangement; and (c) The lender has reserved the right to encash or withdraw the monies lying in the accounts of the Company with the lender even before the maturity period.
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IV. Dhanalaxmi Bank (Total sanctioned amount of `. 350.00 million)
Sanction letter dated May 25, 2010, Term Loan Agreement with Hypothecation dated May 29, 2010, Overdraft/Cash Credit Agreement dated May 29, 2010, Demand Promissory Note dated May 29, 2010, General Hypothecation Agreement dated May 29, 2010, Letter of Continuity dated May 29, 2010, Deed of Guarantee by Alukkas Varghese Joy dated June 3, 2010, Confirmation Letter from the Mortgagor dated October 9, 2010, Memorandum of Entry for First time Mortgage dated October 8, 2010.
(` In million) Sanctioned Amount outstanding Interest Rate Purpose of Loan/Repayment/Security Amount as on December 31, 2010 Fund Based The cash credit and the short term loan facilities have been availed of for funding our working capital requirements. The tenor of the cash credit facility is one year. The tenor of the short term loan facility is for 90 days and is repayable on demand. The facilities have been secured by: (a) Hypothecation of stock of gold, silver, diamond and textiles on pari passu basis; (b) Equitable mortgage on pari passu basis over the Secured Property; and (c) Personal guarantee executed by Alukkas Varghese Joy. Cash Credit: 344.12 10.25% fixed 350.00 with annual reset clause Sub Limits Short Term Nil Not applicable Loan: 350.00
The following restrictive covenants are also applicable in relation to the above loan availed of by the Company from Dhanalaxmi Bank:
(a) Penal interest in addition to the normal interest rate is payable by the Company to the lender in the event of default in payment of interest/installments, non submission of prescribed return or default in observing any of the terms and conditions of the facility. (b) The Company shall not without the consent of the lender: i. Change its constitution; ii. extend any guarantee for the credit facilities extended to the friends/relatives/groups/allied concerns; or iii. declare or pay any dividend to the shareholders.
V. Citibank N.A. (Total sanctioned amount of ` 250.00 million)
Sanction letter dated June 24, 2010 and Sanction Letter dated August 8, 2010, Loan Agreement dated June 29, 2010, Personal Guarantee furnished by our Promoter dated June 29, 2010 and Letter of Continuity dated June 29, 2010, Continuing Agreement – Cum – Indemnity for Trade dated August 09, 2010, Demand Promissory Note dated June 29, 2010.
(` In million) Sanctioned Amount Amount Interest Purpose of Loan/Repayment/Security outstanding as on Rate December 31, 2010 Fund Based This cash credit/working capital demand loan/buyers credit as well as the export finance
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facilities are for funding our working capital requirements. The cash credit is subject to revolving payment. The working capital demand loan is payable within 180 days. The buyers credit is payable within 180 days. The export finance facility is payable within 180 days. The facilities have been secured by: (a) Personal guarantee executed Alukkas Varghese Joy; and (b) Demand promissory note and letter of continuity for ` 250.00 million. Cash Credit/Working 171.08 Base rate Capital Demand plus 275 Loan/Buyers’ Credit: basis points 250.00 Sub Limits Export Finance: 71.49 8.25% p.a. 150.00
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from Citibank N.A.:
(a) The Company shall not without the prior written consent/permission of the lender: i. Incur additional borrowings; ii. change its equity, shareholding pattern, management or operating structure; and iii. the Company or affiliate companies not to issue any guarantee of any kind. (b) The lender is entitled to charge 2% p.a. above the lender‟s prime lending rate for any amount not paid in respect of the letter of credit facility. (c) In respect of the export finance facility, an additional interest rate of 4% p.a. is payable by the Company in addition to the interest payable under the financing arrangement on overdues, delays, default in payment of amounts outstanding.
VI. Yes Bank Limited (Total sanctioned amount of `. 350.00 million)
Sanction letter dated May 18, 2010 and Addendum to Sanction Letter dated September 27, 2010, Deed of Hypothecation dated June 4, 2010, Master Facility Agreement dated June 4, 2010, Supplemental Master Facility Agreement dated September 30, 2010, Demand Promissory Note dated June 4, 2010, Letter of Continuity for Demand Promissory Note dated June 4, 2010, Letter of Continuing Guarantee dated June 4, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010.
(` In million) Sanctioned Amount Interest Rate Purpose of Loan/Repayment/Security Amount outstanding as on December 31, 2010 Fund Based The working capital demand loan and cash credit facilities have been availed of for funding our working capital requirements. The tenor of the working capital demand loan facility is three months. The tenor of the cash credit facility is 12 months. The security terms will be in line with other participating lenders. This facility has been secured by: (a) First pari passu charge on current
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assets of the Company with other lenders; (b) Equitable mortgage on pari passu basis over the Secured Property; and (c) Personal guarantee executed by Alukkas Varghese Joy.
Working 250.00 10.75% and 11.00% Capital respectively for the two Demand Loan: short term loans 350.00 availed Sub Limits Cash Credit: 4.26 Base rate plus 350 100.00 basis points
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from Yes Bank Limited:
(a) The Company under the financing agreement shall not do the following without the written consent of the lender: i. amend or modify its constitutional documents, if any; ii. contract, create, incur, assume or suffer to exist any indebtedness or avail of any credit facilities or accommodation from any lender in any manner except as provided under the financing arrangement; iii. undertake or permit any merger, de-merger, consolidation, reorganization, scheme of arrangement or compromise with the Company‟s creditors or shareholders or effect any scheme of amalgamation or reconstruction including creation of any subsidiary or permit any company to become the Company‟s subsidiary; iv. declare or pay any dividend or authorize or make any distribution to the Company‟s shareholders, or permit withdrawal of amounts brought in by the promoters and members: (a) unless the Company has paid all the dues in respect of the facilities and; (b) there has been no event of default; v. pay any commission to its promoters, directors, managers or other persons for furnishing guarantees, counter guarantees or indemnities or for undertaking any other liability in connection with any indebtedness incurred by the Company or in connection with any other obligation undertaken for by the Company; vi. undertake any new project, diversification, modernization, which are material in nature, or substantial expansion of any of its projects; vii. engage in any business or activities other than those which the Company is currently engaged in, nor acquire any ownership interest in any other entity or enter into any profit- sharing or royalty agreement or other similar arrangement; viii. the Company shall not recognize or register any transfer of shares in the Company‟s capital by the promoters and their associates except as may be permitted by the lender; or ix. the Company shall not buy back, cancel, retire, reduce, redeem, re-purchase, purchase or otherwise acquire any of its share capital from the date of signing the financing agreement or any future outstanding, or set-aside any funds for the preceding purposes, or (ii) issue any further share capital whether on a preferential basis or any other method, or change the Company‟s capital structure in any way and (iii) the Company shall not delist its shares. (b) The occurrence of an event of default would have a bearing on the Company‟s ability to pay dividend or authorize or make any distribution to the Company‟s shareholders, members, partners or permit withdrawal of amounts brought in. the following events, amongst others, constitute events of default under the financing arrangement: i. the security tendered to the lender or the charges created in favour of the lender becoming wholly or partially invalid or unenforceable for any reason, or is prejudiced for any reason;
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ii. the Company shall for any reason cease or be unable to carry on business, or a receiver is appointed on behalf of the Company‟s assets, or the Company fails to maintain the financial covenants stipulated under the financing agreements; iii. the security created under the financing agreements ceasing to constitute acceptable security to the lender, in the opinion of the lender, and the Company does not upon demand made by the lender furnish acceptable additional or alternate security; iv. there exist circumstances which in the opinion of the lender prejudicially affects or may affect the Company‟s ability to pay or repay the amounts due under the financing arrangement and interest on the amounts due, or pay any amount due to the lender; v. there is a change in ownership, management and control of the Company including without limitation any change in the chief executive officer, managing director, by whatever name called without prior written consent of the lender; vi. the Company has, or there is a reasonable apprehension that the Company has, voluntarily or involuntarily become the subject of proceedings under any bankruptcy or insolvency law; or has been reorganized, liquidated or dissolved; or proceedings have been initiated for the recovery of dues from the Company or if one or more judgments or decrees have been rendered or entered against the Company; or vii. if an accountant appointed by the lender certifies that the liabilities of the Company exceed the Company‟s assets or that the Company is carrying on business at a loss. Further, the lender is entitled and authorized to appoint an accountant at any time under the financing arrangement. (c) The Company shall be liable to pay liquidated damages as stipulated by the lender from time to time.
VII. Standard Chartered Bank (Total sanctioned amount of ` 1000.00 million)
Facility Letter dated May 27, 2010, Unattested Memorandum of Hypothecation dated June 4, 2010, Letter of Personal Guarantee executed by Alukkas Varghese Joy dated June 4, 2010, Letter of Guarantee executed by Jolly Joy dated July 5, 2010, General Letter of Hypothecation dated June 4, 2010, Letter of Credit Indemnity June 4, 2010, Demand Promissory Note dated June 4, 2010, Facility Agreement dated June 4, 2010, Letter of Continuity for Demand Promissory Note dated June 4, 2010, Counter Guarantee and Indemnity dated June 4, 2010, Counter Guarantee and Indemnity covering several bank guarantees within the sanctioned gurantee limits dated June 4, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010.
(` In million) Sanctioned Amount Amount Interest Purpose of Loan/Repayment/Security outstanding as on Rate December 31, 2010 Facility I The short term money market facility and the overdraft facility are for funding our working capital requirements. The short term money market loan is for a tenor of up to 90 days. The tenor of the overdraft facility is up to a maximum of one day. The bond and guarantee facility is to procure bullion from approved institutions and the tenor of the same is up to 180 days. The packing credit in foreign currency facility is to cover expenditure incurred for purchase and processing of goods for export up to the pre-shipment stage and the tenor of the same is up to 180 days. The export bills discounting facility is for post-shipment advances covering exports and the tenor of the same is up to 180 days. The import invoice financing facility is for invoice discounting for financing payables and the tenor of the
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same is up to 120 days. The import letter of credit facility may be used for establishing letter of credit favouring domestic/overseas suppliers of raw materials, including gold and the tenor of the same is up to seven months. The financial guarantees/SBLC facility is for payment undertaking favouring overseas lender to finance import of goods and the tenor of the same is up to one year. This facility has been secured by: (a) Equitable mortgage on pari passu basis over the Secured Property; (b) First pari passu charge on all current assets (excluding credit card receivables) of the Company, present and future; and (c) Personal guarantees executed by Alukkas Varghese Joy and Jolly Joy Short Term Money Nil N.A. Market Loan: 800.00 Sub Limits Overdraft: 912.51 11.00% 800.00 Bond and Nil N.A. Guarantees: 40.00 Facility II Packing Credit in Nil N.A. Foreign Currency: 200.00 Sub limits Nil N.A. Export Bills Discounting: 200.00 Import Invoice Nil N.A. Financing: 200.00 Import Letter of Nil N.A. Credit: 200.00 SBLC/Financial Nil N.A. Guarantees: USD 4.30 million Short Term Money 50.00 10.15% Market Loan: 200.00 Overdraft: Nil* N.A. 200.00 *Included in overdraft above The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from Standard Chartered Bank:
(a) The Company shall pay additional interest at 2% p.a. in the event of default by the Company in making payments falling due under the financing arrangement. (b) The Company shall pay penal charges at the rates specified by the lender, in the event of non or late submissions of audited financials, the financials together with the cash flow projections for the next year and in case of certain other specified events. (c) The Company has not executed a separate Memorandum of Entry and has not paid the stamp duty. The lender in order to protect its interests against any claim arising later on or over the property secured in favour of the lender due to non payment/short payment of stamp duty, has requested the
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Company to execute indemnity bond and an undertaking. Further, the Company shall on demand made by the lender pay the lender stamp duty due to non/payment/short payment of stamp duty. (c) The Company under the financing agreement shall not do the following without the written consent of the lender or without prior notice to the lender: i. create any security ranking senior or pari passu in favour other lenders; ii. change its constitution or management; iii. prepayments or part payments of the outstanding amounts. Further, the Company has to bear the prepayment charges as specified by the lender; iv. enter into any scheme of expansion, merger, amalgamation, compromise or reconstruction or sell, lease, transfer (or grant any option to do the same) all or substantial portion of its fixed and other assets; v. change its ownership or control, or make any change in the shareholding or the management, or majority of directors, and not make any change to the general nature of the business of the Company; or vi. make any material amendments in the Memorandum of Association and Articles of Association of the Company.
VIII. Union Bank of India (Total sanctioned amount of ` 300.00 million)
Sanction Letter dated July 12, 2010, Letter of Continuity dated October 4, 2010, Demand Promissory Note October 4, 2010, Composite Hypothecation Deed dated October 4, 2010, Hypothecation Agreement of Goods and Debts dated October 4, 2010, Hypothecation (Goods) Agreement dated October 4, 2010, Hypothecation (Book Debts) Agreement dated October 4, 2010, Letter of Guarantee executed by Alukkas Varghese Joy dated October 7, 2010, Memorandum of Entry first time Mortgage by the Borrower by Deposit of Title Deeds with the Dhanalakshmi Bank dated October 8, 2010.
(` In million) Sanctioned Amount Interest Purpose of Loan/Repayment/Security Amount outstanding as Rate on December 31, 2010 Cash 2.17 Base rate The cash credit facility has been availed of for funding our Credit: plus 375 working capital requirements. 300.00 basis points The cash credit facility is repayable on demand. The cash credit facility has been secured by: (a) Hypothecation of stock of gold, diamond, precious stones, platinum, old gold, standard gold, silver, and textiles at various showrooms, present and future on pari passu basis. (b) Equitable mortgage on pari passu basis over the Secured Property; and (c) The above mentioned properties have been mortgaged in favour of the lender with all buildings and structures thereon, fixtures, fittings and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth, both present and future.
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from Union Bank of India:
(a) The Company under the financing agreement shall not do the following without the written consent of the lender: i. Sell or alienate the hypothecated property; and ii. not release or compound the book debts.
IX. Royal Bank of Scotland erstwhile ABN AMRO Bank N.V.
Term Loan I (Total sanctioned amount of ` 400.00 million)
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Sanction Letter dated February 2, 2010 and Fourth Supplemental Memorandum of Entry dated February 8, 2010, Term Loan Agreement dated February 8, 2010, Letter of Guarantee executed by Alukkas Varghese Joy and Jolly Joy dated February 8, 2010, Letter of Guarantee executed by Cochin Smart City Properties Private Limited dated February 8, 2010, Power of Attorney dated February 6, 2010, and Declaration cum Confirmation for the Extension of Mortgage dated February 8, 2010.
Term Loan II (Total sanctioned amount of ` 100.00 million)
Sanction Letter dated February 19, 2007, Term Loan Agreement dated February 21, 2007, Memorandum of Entry dated March 14, 2007, Power of Attorney dated March 5, 2007, Demand Promissory Note dated February 21, 2007, Letter of Continuity dated February 21, 2007, Corporate Guarantee executed by Alukkas Jewelley LLC, Dubai dated February 21, 2007, Letter of Guarantee executed by Jolly Joy dated April 10, 2007, Term Loan Agreement dated February 21, 2007, Declaration cum Confirmation for the Extension of Mortgage dated March 12, 2007.
Term Loan III (Total sanctioned amount of ` 500.00 million)
Sanction Letter dated September 24, 2005, Term Loan Agreement dated October 1, 2005, Declaration cum Deed of Confirmation for the creation of Mortgage dated August 21, 2006, Power of Attorney dated August 21, 2006, Memorandum of Entry dated September 1, 2006, Corporate Guarantee executed by Alukkas Jewellery LLC, Dubai dated September 29, 2005, Demand Promissory Note dated September 28, 2005, Facility cum Hypothecation Agreement dated September 28, 2005, Letter of Continuity dated September 28, 2005, Letter of Guarantee executed by Alukkas Varghese Joy dated September 28, 2005, Letter of Guarantee executed by Jolly Joy dated September 28, 2005, Standby Letter of Credit dated November 9, 2004. (` In million) Sanctioned Amount Interest Purpose of Loan/Repayment/Security Amount outstanding as on Rate December 31, 2010 Term Loan 222.16 12.50% p.a. The term loan facilities has been availed of for meeting the I: working capital requirements of the Company. 400.00 The term loan I facility is repayable in twenty seven months or on March 31, 2012 whichever is earlier. The term II loan facility is repayable in sixty months or on March 31, 2012 whichever is earlier. The term loan III facility is repayable in sixty months or on March 31, 2011 whichever is earlier. This facility has been secured by: (a) Personal guarantees executed by Alukkas Varghese Joy and Jolly Joy; (b) Corporate guarantee executed by Cochin Smart City Properties Limited; and (c) Extended equitable mortgage over specific immovable properties of the Company. For further details on properties charged please refer to Annexure IX of the chapter titled “Restated Standalone Financial Statments” on page 136. Term Loan 24.99 14.5% p.a. II: 100.00 Term Loan 24.69 Ranging III: from 10% to 500.00 12.1% p.a.
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from ABN AMRO Bank N.V.:
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(a) The Company shall have the option to prepay the entire outstanding principal amount of the loan under the financing arrangement subject to payment of prepayment charges to the lender on such rates as may be mutually agreed by the lender and the Company. (b) The Company under the financing agreement shall not do the following without the written consent of the lender: i. Encumber, transfer, sell, dispose of or otherwise deal with the documents and goods; ii. declare dividends or distribute projects except where the instalments of principal interest are being paid regularly and there are no irregularities in respect of the loan; iii. create, incur or assure any further indebtedness for borrowed money or for deferred purchases except any indebtedness which arises in the ordinary course of business; iv. effect any merger, acquisition, divestment of assets, sale, disposal, of whole or part of the undertaking or assets of the Company, amalgamation, reconstruction or consolidation which would significantly alter the nature of operation in view of the lender; v. assume, guarantee, endorse or in any manner become directly or contingently liable for or in connection with the obligation of any person other than the Company or extend loans or indemnities in favour of third parties; vi. effect any material change in the management or ownership of the Company; and vii. effect any change in the statutory auditors of the Company.
The following restrictive covenants are applicable in respect all of the above loans:
(a) The lenders may set off and apply any and all deposits standing in the account of the Company towards satisfaction of liability of the Company under the financing arrangement. (b) The lender may set off and apply any and all deposits standing in the account of the guarantors towards satisfaction of liability of the guarantors under the financing arrangement. (c) The lenders have reserved the right to rank as creditors in the event of the Company entering into liquidation or winding up, or entering into composition with creditors of the Company. (d) The securities under the financing arrangements shall operate as a continuing security. (e) The Company shall not divert the amounts granted under the financing arrangement to any other purpose other than for which it has been granted. (f) Attempt or purport to create any mortgage, charge, pledge, hypothecation, lien or encumbrance ranking in priority to or pari passu with the lenders, or create any mortgage, charge, pledge. hypothecation, lien or encumbrance in favour of third parties.
X. Vehicle loan taken by our Company from Kotak Mahindra Prime Limited
Loan Agreements dated September 29, 2009, September 29, 2009, December 30, 2009, November 28, 2009, November 28, 2009, April 13, 2010, June 30, 2009, January 30, 2010, November 12, 2009, November 12, 2009, May 31, 2010, May 31, 2010, November 13, 2009, September 30, 2010, September 29, 2010, January 8, 2010.
All the below mentioned vehicle loans have been availed of for purchasing vehicles and are each repayable in 36 monthly instalments. All the loans have been secured by hypothecation in favour of the lender of the car financed by the loan. (` In million) Sl. Date of Sanction and Sanctioned Amount outstanding as on December 31, Interest No. Amount 2010 Rate 1. September 29, 2009: 0.90 0.52 8.29% p.a. 2. September 29, 2009: 0.90 0.52 8.29% p.a. 3. December 30, 2009: 0.90 0.59 8.24% p.a. 4. November 28, 2009: 0.90 0.57 9.07% p.a. 5. November 28, 2009: 0.90 0.57 9.07% p.a. 6. January 8, 2010: 0.96 0.42 10.28% p.a. 7. April 13, 2010: 1.00 0.43 10.88 % p.a. 8. June 30, 2009: 1.12 0.23 10.67 % p.a.
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9. January 30, 2010: 0.97 0.48 10.56 %p.a. 10. November 12, 2009: 0.96 0.34 10.25% p.a. 11. November 12, 2009: 0.96 0.34 10.43% p.a. 12. May 31, 2010: 1.03 0.69 10.62% p.a. 13. May 31, 2010: 1.03 0.69 10.62% p.a. 14. November 13, 2009: 0.96 0.34 10.43% p.a. 15. September 30, 2010: 1.01 0.85 9.06% p.a. 16. September 29, 2010: 0.99 0.84 11.65% p.a.
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from Kotak Mahindra Prime Limited:
(a) In the event of a default, the Company shall pay liquidated damages of an amount equal to all unpaid monthly instalments and other charges which is payable by the Company to the lender under the financing agreement. Furthermore, an interest at the rate of 36% (Thirty Six percent) per annum is applicable till the Company pays all the outstanding instalments and other charges under the financing agreement to the lender. (b) The Company shall pay to the lender, an amount equal to 3% (Three percent) per month of the amount that has remained outstanding beyond the due date, as late payment interest which is payable till the date of payment. (c) A prepayment interest of 5.75% (Five point Seventy Five percent) on the principal outstanding is applicable in the event of prepayment of loan by the Company.
XI. Vehicle loan taken by our Company from HDFC Bank Limited
Agreement for Auto Loan dated March 4, 2008. (` In million) Sanctioned Amount Interest Rate Purpose of Loan/Repayment/Security amount outstanding as on December 31, 2010 0.93 0.06 10.45% p.a. This loan has been availed for the purchase of a car. The loan is repayable in 36 monthly instalments of ` 29,978 (Rupees Twenty Nine Thousand Nine Hundred and Seventy Eight only) each commencing from March 7, 2008. The loan has been secured by hypothecation in favour of the lender of the car financed by the loan.
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from HDFC Bank Limited:
(a) The lender shall be entitled to charge additional late payment charges at 2% per month on unpaid monthly instalments in the event of delay in repayment of the outstanding amounts by the Company. (b) Prepayment charges of 3% to 6% on the principal outstanding is payable by the Company under the financing arrangement. (c) The Company shall in the event of loan reschedulement under the financing arrangement pay loan reschedulement charges at 3% on the amount paid towards principal loan.
XII. Vehicle loan taken by our Company from ICICI Bank Limited
Loan Agreement dated April 30, 2009. (` In million) Sanctioned Amount Interest Rate Purpose of Loan/Repayment/Security amount outstanding as on
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December 31, 2010 9.90 4.41 10.25% p.a. This loan has been availed for the purchase of a car. The loan is repayable in 36 monthly instalments of ` 0.31 million (Rupees Zero point Three One million only) each commencing from June 1, 2009. The loan has been secured by hypothecation in favour of the lender of the car financed by the loan.
The following restrictive provisions are also applicable in relation to the above loan availed of by the Company from ICICI Bank Limited:
(a) The Company under the financing agreement shall not do the following without the prior consent of the lender: i. undertake or permit any merger, consolidation, reorganisation, scheme of arrangement or compromise with its creditors or shareholders, or effect any scheme of amalgamation and or reconstruction including creation of any subsidiary or permit any company to become its subsidiary. (b) The lender shall have the paramount right of set off and lien, irrespective of any other lien or charge on the deposits, monies, securities, bonds and all other assets, documents, properties lying in any of the accounts of the Company held by the lender under the financing arrangement.
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SECTION VI – LEGAL AND OTHER INFORMATION
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS
Except as stated below there are no outstanding litigation, suits, criminal or civil prosecutions, proceedings or tax liabilities against our Company, our Directors, our Promoter, Group Entities, our Subsidiary and there are no defaults, non- payment of statutory dues, overdues to banks/financial institutions/small scale undertaking(s), defaults against banks/financial institutions/small scale undertaking(s), defaults in dues payable to holders of any debentures, bonds or fixed deposits or arrears on preference shares issued by our Company, our Directors, our Promoter, Group Entities, our Subsidiary, defaults in creation of full security as per terms of issue/other liabilities, proceedings initiated for economic/civil/any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (I) of Part 1 of Schedule XIII of the Act) other than unclaimed liabilities of our Company, our Directors, our Promoter, Group Entities, our Subsidiary and no disciplinary action has been taken by SEBI or any stock exchanges against our Company, our Directors, our Promoter, Group Entities, our Subsidiary that would result in a material adverse effect on our consolidated business taken as a whole.
Further, except as disclosed hereunder Company, our Directors, our Promoter, Group Entities, our Subsidiary have not been declared as wilful defaulters by the RBI or any government authority and there have been no violations of securities laws in the past or pending against them.
For details of contingent liabilities of our Company, please refer to the financial statements of our Company on page 113.
Cases filed against Our Company
Criminal litigation
Nil
Civil litigation
Suits filed
1. A consumer complaint bearing CC No. 65 of 2008 dated July 28, 2008 has been filed by Suresh against our Company before the District Consumer Disputes Redressal Forum Thirunelveli under Section 13 of the Consumer Protection Act, 1986 (the “Consumer Protection Act”). The complainant alleges that a gold bracelet that was bought by him from one of the outlets of the Company contained steel strings which were put in place to increase the weight and cost of the bracelet. Hence, the complainant sought to recover from our Company a new bracelet of the same worth and type as the one purchased by him, and further damages to the tune of ` 0.53 million for the pain and mental agony suffered by the complainant as a result of the deficiency in the bracelet. Our Company filed a counter statement to the complaint on April 17, 2009 stating that the complaint by the complainant is baseless since he has failed to produced the concerned piece of jewellery before the outlet from which it was purchased and such failure would fall short of the requirement contained under Section 13 (c) of the Consumer Protection Act which requires that goods that need to undergo analysis or test in order to determine their quality are required to be produced before the forum before which any deficiency in their quality is alleged. The case is pending.
2. A suit bearing CS (OS) No. 1670 of 2010 dated August 2, 2010 has been filed against our Company by Prabhu Dayal Gupta (HUF) before the High Court of Delhi for recovery of money on account of alleged unpaid rent arrears. Our Company had entered into a lease agreement dated January 20, 2006 with the plaintiff in relation to the premises situated at WS 9A, ground floor,
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Wedding Souk Complex, Plot No. 1, Local Shopping Center, Sharda Niketan, Pitampura, New Delhi. As per the terms of the lease agreement, the tenure of the lease is nine years with an initial lock in period of three years. As per the agreement, if our Company seeks to terminate the agreement during the lock in period, the plaintiff is entitled to liquidated damages at a predetermined rate. The plaintiff alleges that our Company terminated the lease by way of a letter dated November 4, 2008, within the lock in period, which entitles the plaintiff to the liquidated damages as indicated in the lease agreement. However, our Company contends that by way of letter dated August, 2008, our Company has intimated plaintiff in connection with closure of the business. In addition to that, the plaintiff also alleges failure to pay rent from September 2008 and other maintenance charges by the Company. The total amount sought to be recovered by the plaintiff from the Company by way of this suit is in the tune of ` 3.73 million. The case is pending.
3. A suit bearing CS (OS) No. 1671 of 2010 dated August 2, 2010 has been filed against our Company by Prabhu Dayal Gupta before the High Court of Delhi for recovery of money on account of alleged unpaid rent arrears. Our Company had entered into a lease agreement dated January 20, 2006 with the plaintiff in relation to the premises situated at WS 11, ground floor, Wedding Souk Complex, Plot No. 1, Local Shopping Center, Sharda Niketan, Pitampura, New Delhi. As per the terms of the lease agreement, the tenure of the lease is nine years with an initial lock in period of three years. As per the agreement, if our Company seeks to terminate the agreement during the lock in period, the plaintiff is entitled to liquidated damages at a predetermined rate. The plaintiff alleges that our Company terminated the lease by way of a letter dated November 4, 2008, within the lock in period, which entitles the plaintiff to the liquidated damages as indicated in the lease agreement. However, our Company contends that by way of letter dated August 2008, our Company has intimated plaintiff in connection with closure of the business. In addition to that, the plaintiff also alleges failure to pay rent from September 2008 and other maintenance charges by the Company. The total amount sought to be recovered by the plaintiff from the Company by way of this suit is in the tune of ` 4.05 million together with pendent lite and interest at the rate of 18% per annum from the date of filing the suit till its realisation. The case is pending.
4. A suit bearing CS (OS) No. 1669 of 2010 dated August 2, 2010 has been filed against our Company by Rajni Gupta before the High Court of Delhi for recovery of money on account of alleged unpaid rent arrears. Our Company had entered into a lease agreement dated January 20, 2006 with the plaintiff in relation to the premises situated at WS 9, ground floor, Wedding Souk Complex, Plot No. 1, Local Shopping Center, Sharda Niketan, Pitampura, New Delhi. As per the terms of the lease agreement, the tenure of the lease is nine years with an initial lock in period of three years. As per the agreement, if our Company seeks to terminate the agreement during the lock in period, the plaintiff is entitled to liquidated damages at a predetermined rate. The plaintiff alleges that our Company terminated the lease by way of a letter dated November 4, 2008, within the lock in period, which entitles the plaintiff to the liquidated damages as indicated in the lease agreement. However, our Company contends that by way of letter dated August, 2008, our Company has intimated plaintiff in connection with closure of the business. In addition to that, the plaintiff also alleges failure to pay rent from September 2008 and other maintenance charges by the Company. The total amount sought to be recovered by the plaintiff from the Company by way of this suit is in the tune of ` 3.74 million. The case is pending.
Tax litigation
1. By way of a transfer petitions (civil) No. 807 to 821 of 2008, the Supreme Court of India is yet to transfer the petitions pending before the different high courts assailing the constitutional validity of Section 65 (90a) and 65 (105) of the Finance Act, 2007 be transferred to the High Court of Delhi. This would include the writ petition Union of India v. Retailers Association of India and others, to which our Company is a party. By way of a notice dated January 20, 2009, the Supreme Court of India has summoned the Company to appear before it either in person or through an advocate on record. Further, the notice states that the Supreme Court has passed an interim order
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staying further proceedings pending different high courts, pending disposal of application for stay. The matter is currently pending.
2. The Commissioner of Income Tax, Kochi has passed an order dated March 4, 2010 bearing file no. CIT/CHN/RP 263/45/09-10 holding that the assessment order dated December 5, 2007 for the assessment year 2005-06 passed by the Assessing Officer under 143(3) of the IT, Act is erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, invoking provisions of section 263 of the IT, Act, the Commissioner of Income Tax has set-aside the assessment order passed by the Assessing Officer with a direction to the Assessing Officer to re-do the same afresh after affording an opportunity of being heard to the Company. The Assistant Commissioner of Income Tax, Kochi has issued a notice under 142(1) of the IT, Act dated May 4, 2010 to the Company to furnish details as contained in the annexures to the notice. The Assistant Commissioner, Kochi has issued an assessment order dated December 28, 2010 claiming an amount of ` 0.37 million as tax payable for the assessment year 2005-06 pursuant to the assessment order dated December 28, 2010.
3. The Intelligence Inspector, Squad No. VI has issued a notice dated December 27, 2005 bearing number ET VC VI 903/05-06 claiming an amount of ` 0.23 million from the Company as liability to pay entry tax on import of dismantled furnishing furniture. The Company had filed writ petitions dated January 4, 2006 bearing W.P. (c) No. 486/2006 against the Intelligence Inspector, Squad No. VI and others before the Hon‟ble High Court of Kerala, Ernakulam. The Hon‟ble High Court by an order dated January 6, 2006 has stated that the Assessing Officer, if deemed fit to issue a revised notice, is at liberty to do so. However, the High Court has further directed that the goods shall be released to the Company subject to the Company furnishing a bond to satisfy the demand. The department has filed a special leave to appeal bearing special leave petition (Civil) no. 17981 of 2007 dated June 21, 2007, against this order before the Hon‟ble Supreme Court of India. The writ petition bearing W.P. (c) No. 486/2006 filed before the Hon‟ble High Court of Kerala is connected to civil appeal No. 3453 of 2002 filed before the Hon‟ble Supreme Court of India which has a direct bearing on the order issued by the Hon‟ble High Court of Kerala, Ernakulam.
4. The Commercial Tax Officer, Gandhipuram Circle, Coimbatore has passed an order dated September 6, 2007 imposing a penalty of ` 0.33 million under section 10-A of the Central Sales Tax Act, 1956 for the assessment year 2004-05. Further, the assessing authority has issued a notice of demand of penalty dated September 6, 2007. The Company has filed an appeal bearing number CST 6/2008 dated July 15, 2008 against the order passed by the Commercial Tax Officer, Gandhipuram Circle, Coimbatore before the Tamil Nadu Sales Tax Appellate Tribunal, Coimbatore. The Tamil Nadu Sales Tax Appellate Tribunal has passed an order dated June 18, 2008 confirming the levy of penalty imposed by the order of the Commercial Tax Officer, but has reduced the same to 0.01 million. The Company has further filed an appeal bearing number 31/2008 dated July 15, 2008 against the order passed by the Tamil Nadu Sales Tax Appellate Tribunal before the Sales Tax Appellate Tribunal (AB), Coimbatore. The Company has appealed against the order stating that the packing materials had already been included by the Commercial Tax Officer, Chepauk Circle, effective from July 4, 2004 and therefore there is no question of false representation warranting levy of penalty. The Commercial Tax Officer, Coimbatore has filed an appeal bearing no. CTSA 79/2009 dated November 6, 2008 against the order passed by Appellate Assistant Commissioner before the Sales Tax Appellate Tribunal, Coimbatore. The matter is currently pending.
Legal Notices issued
1. The Assistant Commissioner (CT), Gandhipuram Circle, Coimbatore has issued a notice bearing TIN No. 33442182689/2009-10 dated March 3, 2010, claiming an amount of ` 9.56 million together with interest at 1.25% per month. The Assistant Commissioner has rejected the input tax credit claimed by the Company for period of October 2009 to February 2010 under section 19 (16) of the Tamil Nadu VAT Act, 2006. The Company has by a letter dated April 13, 2010 replied to
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the notice requesting the Assistant Commissioner to consider the submissions made out by the Company and drop further actions.
2. The Kerala Water Authority has issued a notice dated October 20, 2009 bearing number KWA/PHC/AWTS/1/05, stating that the Company has taken an unauthorised extension of the pipe line without permission and consent of the authority.
3. S. Anantha Subramanian has issued a notice dated October 10, 2010 against the Company alleging deficiency in service and unfair trade practices and has claimed a compensation of 0.10 million. The petitioner has alleged that the Company charged the petitioner differential prices in gold than from what has been advertised in the media. The matter is currently pending.
4. The Debt Recovery Tribunal has by an order dated December 23, 2009 issued an ad-interim stay restraining Andhra Bank from proceeding with any further action in respect of the possession notice dated November 17, 2009 issued against the leased store premises of the Company situated at no. 160/2A, resurvey number 32/205, M.C. Road and T.K. Road Junction, Paliakkara muri, Thiruvalla, Pathanamthitha subject to Varghese Thomas (the “Lessor”) depositing a sum of ` 1.60 million. Further, the Manager, Andhra Bank, Thiruvalla branch has issued a notice to the Company requesting the Company to pay the rent due on the leased premises to the Manager, Andhra Bank, Thiruvalla branch failing which legal proceedings would be initiated against the Company.
Proceedings under the Motor Vehicles Act
1. An application bearing number OP (MV) 628/2006 has been filed by C. Krishnan and others before the Motor Accidents Claim Tribunal, Ernakulam under sections 140 and 166 of the Motor Vehicles Act, 1988 against our Company claiming a compensation amount to the tune of ` 1.00 million for the death of Pradeep Krishnan, a sales staff of our Company and son of the applicant. The application alleges that Pradeep Krishnan sustained several injuries while travelling in a vehicle recklessly driven by the second respondent and finally succumbed to his injuries on October 20, 2005. The applicant and the others are dependents of the deceased and hence claims the aforementioned compensation from the Company, the driver of the offending vehicle and the insurance company. The Motor Accidents Claim Tribunal, Ernakulam had issued a summons dated September 8, 2010 asking the Manager of our Company to appear before it in person. The case is pending.
FIR Filed
1. There has been a first information report filed against the driver who was driving a vehicle owned by the Company for causing death of a person named Madasamy by way of an accident caused in the jurisdiction of Kayathar Police station limits, Tuticorin, Tamil Nadu. The matter is due to come up before the Motor Accidents Claims Tribunal.
Summons Received
1. The Company has received four summons/letters starting from 2005 till 2007 from the Directorate of Enforcement (Prevention of Money Laundering Act & Foreign Exchange Management Act) (the “DoE”) seeking certain details and clarifications in relation to proceedings initiated by it pursuant to a notice dated December 13, 2005 under Section 37 (3) of the FEMA read with Section 133 of the IT Act. Additional information was sought by the DoE by way of letters dated January 12, 2006 and November 9, 2006. In its letter dated November 9, 2006, the DoE has stated that they have perused all the documents sent by the Company by way of letter dated February 13, 2006 and that they have gathered from a perusal of the documents that an unsecured loan of Rs. 37,36,39,000 has been availed of by the Company from our Promoter. The DoE further called upon the Company to give details of the repayment of the aforementioned loan from the Promoter. The Company has provided the details required by way of all the aforementioned letters from the DoE, the last one of which was dated
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January 12, 2007. There has been no further communication from the DoE in connection with this matter.
2. The Company has received 11 summons/letters starting from 2007 till 2009 from the Directorate of Enforcement (Prevention of Money Laundering Act & Foreign Exchange Management Act) (the “DoE”) seeking certain details and clarifications in relation to proceedings initiated by it by way of a summons dated July 5, 2007 against the then finance manager of our Company. These proceedings are in relation to the issuance of gift vouchers by stores of the Company that could be issued in one country and redeemed in another country which has a different currency system. A summons dated October 30, 2007 was also issued to our Promoter to appear in person before the DoE. However, an adjournment to these proceedings was sought by way of a letter dated November 14, 2007 stating that owing to his residence in Dubai, the Promoter would be unable to appear before the DoE. Further, our Promoter was served a summons dated November 4, 2009 to appear in person before the DoE along with his immovable property and bank account details. This was replied to on May 28, 2010 and we have received no further communication from the DoE in this regard.
Cases filed by Our Company
Criminal Litigation
1. The Company has filed a complaint dated November 18, 2010 bearing S.T. number 2253/2010 for dishonour of cheque issued to the Company for an amount of ` 0.52 million against Raj Television Networks Limited and D.S. Maharajan under sections 138 and 142 of the Negotiable Instruments Act, 1938 before the Chief Judicial Magistrate Court, Ernakulam.
2. Pursuant to a complaint filed by the Company on January 13, 2011, the Police Sub Inspector, Thiruvalla, has registered a first information report bearing number 61/2011 against Vijaya Lakshmi and Rakhi before the Police Sub Inspector, Thiruvalla Police Station limits, alleging offences under Sections 420 and 34 of the Indian Penal Code, 1860. The Company has alleged that Vijaya Lakshmi and Rakhi had tried to cheat the Company by giving gold of less purity and wrong address in order to exchange the same against a gold chain of higher purity.
Civil litigation
Suits filed
1. By way of a judgement dated January 1, 2009 that was passed by the II Additional Sub Judge Ernakulum in O. S. No. 260/05, the court had decreed that Alukkas Varghese Joy and our Company (who were the plaintiffs in the original suit) are entitled to recover an amount of ` 19.00 million along with interest at the rate of 6% applicable from the date of the decree till the date of realisation of the decree amount from the defendant, Jeevan Telecasting Corporation Limited on account of financial and other aid that had been provided by the plaintiffs in the past to the defendant and not subsequently repaid by the defendant. Upon the failure of the defendant to comply with the decree, our Promoter and our Company had filed an execution petition bearing E. P. No. 385/2009 under Order XXI Rules 10 and 11 before the Sub Court at Ernakulam for the execution of the decree dated January 1, 2009. By way of an objection dated November 25, 2009, the defendant had objected to the aforementioned execution petition by stating that an appeal had been filed by it against the decree passed by the II Additional Sub Judge Ernakulum in O. S. No. 260/05 and that the same is pending before the High Court of Kerala, Ernakulum.
2. A civil suit bearing R.F.A. No. 511 of 2007 has been filed by our Company before the High Court of Kerala for realization of an amount of ` 0. 54 million with interest against the order bearing number O.S. No. 111/04 dated January 23, 2007 passed by the Principal Sub Court, North Paravur. The Principal Sub Court has dismissed the claim of the Company and the counter claim of the defendant, Joy. The Company has contended that an agreement for sale dated April 8, 2003 was executed between the Company and the defendant for purchase of property measuring 4,000
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(approximate) sq.ft and bearing building no. 5/243 and 5/244 of the Angamaly Municipality, and situated on the first floor of building known as “Kallukaran Shopping Complex” situated within Angamaly Municipality including the undivided share with easement. Further, the Principal Sub Court has admitted the existence of the agreement for sale executed between the Company and the defendant. The Company has contended that the defendant received an advance of ` 0.10 million and further amounts of ` 0.40 million under the agreement of sale. The defendant has accepted to receiving an amount of ` 0.10 million but has denied receiving any further amounts on the ground that he has not authorized any person to receive such further amounts. The Principal Sub Court has held that the agreement between the parties was not intended to purchase the property, but agreed to take the same on monthly rent. Further, the Principal Sub Court has denied the counter claim of the defendant for ` 0.75 million due to the lack of evidence to establish the counter claim.
3. The Company has filed a miscellaneous writ petition before the Hon‟ble High Court of Kerala at Ernakulam, bearing W.P. (c) No. 31205 of 2009 dated October 2, 2009 against the State of Kerala and others for issuing a notice under the Kerala Shops and Commercial Establishments Act, 1960. By virtue of the notice dated October 27, 2009 bearing number 433/09 issued to the Company, the authorities have contended that the Company is in violation of section 11 of the Kerala Shops and Commercial Establishments Act, 1960. The Company has replied to the notice issued by the authorities by a letter dated October 31, 2009 stating that several establishments in the sub urban areas are open on all days and similar exemption should also be extended to the Company. The Company has prayed before the Hon‟ble High Court of Kerala to issue directions restraining the defendants from proceeding further with any actions as specified in the notice dated October 27, 2009 issued by the defendants. Further, the Company has prayed before the Hon‟ble High Court of Kerala to issue an interim order staying the operation of the notice dated October 27, 2009 pending disposal of the writ petition. The Hon‟ble High Court has by an order dated November 13, 2009 referred the matter to the Labour Commissioner to decide the same within a month. The Hon‟ble High Court has further stated that in the interim the Assistant Labour Officer would be entitled to hear the matter. However, as per the order the Assistant Labour Officer shall not issue a final order without obtaining the decision of the Labour Commissioner. The Secretary to Government by an order dated March 8, 2010 bearing number 3826/E3/2010/LBR rejected the request of the Company claiming exemption under the Kerala Shops and Commercial Establishment Act, 1960. The Assistant Labour Officer has by an order dated May 12, 2010 rejected the request of the Company. Further, the Company has filed a writ petition bearing number 15976/2010 dated May 24, 2010 against the orders passed by the Secretary to the Government, Government of Kerala and the Labour Commissioner. The matter is currently pending.
4. The Company has filed a writ petition dated August 13, 2008 bearing W.P. (c) No. 24690 of 2008 before the High Court of Kerala, Ernakulam against the State of Kerala and others challenging the amendment to section 3 of the Kerala Shops and Commercial Establishments Workers Welfare Fund Act, 2006. Our Company has contended that the amendment is unconstitutional as the additional burden is similar in nature to the other sizeable contributions already being made. Further, our Company has submitted that imposing this burden retrospectively is unconstitutional. The Company has prayed before the Hon‟ble High Court to issue appropriate directions quashing the amendment to section 3 of the Kerala Shops and Commercial Establishments Workers Welfare Fund Act, 2006 and also to issue appropriate directions restraining the defendants from realizing any amounts or taking any further action against the Company. Further, the Company has filed an interim application dated January 4, 2010 bearing I.A. No. 58 of 2010 seeking directions from the High Court to restrain the defendants from commencing proceedings for recovery of the amounts under the Kerala Shops and Commercial Establishments Workers Welfare Fund Act, 2006 till disposal of the writ petition filed by the Company. The Hon‟ble High Court has issued an interim order dated January 27, 2010 staying the operation of the amendment to the Kerala Shops and Commercial Establishments Workers Welfare Fund Act, 2006 against the Company. Further, the Hon‟ble High Court has by an order dated March 1, 2010 extended the interim order dated January 27, 2010. The matter is currently pending before the High Court of Kerala, Ernakulam.
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5. The Company has filed a writ petition dated August 13, 2010 bearing W.P. (c) No. 25702 of 2010 before the Hon‟ble High Court of Kerala, Ernakulam against the State of Kerala and others. This writ petition has been filed pursuant to the demand notice issued by the Corporation of Cochin dated March 9, 2010 bearing number MOR5/1319/09 and legal notice issued by Paul Joseph dated March 22, 2010 to the Company claiming an amount of ` 0.03 million towards advertisement tax payable to the Corporation of Cochin. The Company has contended that the revision of advertisement tax by the defendants is discriminatory and without rationale. The Company has contended that the defendants have revised the advertisement tax in respect of the Thiruvananthapuram Municipal Corporation by a nominal margin whereas the same is not true in respect of the Kochi Municipal Corporation. The Company has contended that the defendants have discriminatorily increased the advertisement tax in respect of Cochin Corporation by 300 times. The Company has contended that such an increase in advertisement tax is violative of the fundamental rights guaranteed under the Constitution of India. The Company has prayed before the Hon‟ble High Court of Kerala, Ernakulam seeking directions to quash the notification dated May 2, 2009 bearing G.O. (P) No. 71/2009/LSGD issued by the defendants increasing the advertisement tax in respect of the Kochi Municipal Corporation. Further, the Company has prayed before the Hon‟ble High Court of Kerala, Ernakulam for directions against the defendants to impose taxes, if warranted, at the rates specified in the notification dated January 13, 2009 bearing G.O. (P) No. 3/09/LSGD issued by the defendants in respect of the Thiruvananthapuram Municipal Corporation. The matter is currently pending before the High Court of Kerala, Ernakulam.
Labour Proceedings
1. The Deputy Director, Employees State Insurance Corporation, Kaloor, Cochin has issued an order dated March 5, 2010 bearing number 47000137760000910/MEC claiming an amount of ` 1.17 million as contribution payable by the Company for the period from 2003 to 2004. The Company has made an application dated April 22, 2010 bearing I.C. No. 42/2010 before the Hon‟ble Employees‟ Insurance Court, Alapuzha against the order passed by the Deputy Director, Employees State Insurance Corporation. The Company has contended that the contribution claimed by the defendant is related to actual costs incurred by the Company and therefore the same cannot be claimed as contribution by the defendant. The Company has prayed before the Employees‟ Insurance Court for directions to declare that the Company is not liable to pay the amount and set aside the order of the defendant. Further, the Company had prayed for an interim order to restrain the defendant from realizing the amounts claimed till disposal of the main application. The Hon‟ble Employees State Insurance Court by an order dated April 23, 2010 has issued an interim stay against the order of the defendant which is subject to the Company depositing ` 0.20 million. The matter is currently pending before the Hon‟ble Employees‟ Insurance Court, Alapuzha.
Legal Notices issued
1. The Company has issued a legal notice dated June 23, 2010 to Cicily John for the repayment of deposit of an amount of ` 0.26 million from the total security deposit of ` 2.00 million which the Company had deposited under the lease agreement dated March 15, 2006 executed by and between the Company and Cicily John. The Company has alleged that despite the termination of the lease agreement, Cicily John is withholding a repayment amount of ` 0.26 million. The Company has sought repayment from Cicily John of an amount of ` 0.26 million with interest within fifteen days from the date of receipt of notice, failing which the Company would be constrained to approach the courts for realization of the same. The matter is currently pending.
2. The Promoter and the Company have issued a statutory notice dated November 15, 2010 under section 434 read with section 433(e) of the Companies Act, 1956 to Jeevan Telecasting Corporation Limited. The Company have stated that they had filed O.S. No. 260 of 2005 before the Sub Court, Ernakulam for recovery of a sum of ` 19.00 million with interest at 18% p.a. and that the suit was decreed on January 1, 2009 in favour of the Company allowing the Company to
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recover the said sum of ` 19.00 million with future interest at 6% till realization from Jeevan Telecasting Corporation Limited. The Company has called upon Jeevan Telecasting Corporation to pay the decreed amount of ` 19.00 million with future interest at 6% from January 1, 2009 till the date of payment, and also the cost of ` 1.16 million awarded in the suit, within 21 days from the date of receipt of the notice, failing which it shall be deemed that Jeevan Telecasting Corporation Limited is unable to pay and satisfy the liability, and that the Promoter and Company would be constrained to take appropriate steps under the Companies Act, 1956.
Tax litigation
1. The High Court of Kerala, Ernakulam has by a judgment dated November 11, 2009 in appeal bearing ST. Rev. No. 219 of 2009 upheld the orders passed by the Deputy Commissioner, Commercial Taxes, Ernakulam and Kerala Sales Tax Appellate Tribunal, Ernakulam for claim against the Company for sales tax of an amount of ` 3.60 million. The Deputy Commissioner by an order dated December 22, 2008 bearing number C1-3707/08 has set aside the assessment under Kerala General Sales Tax Act, 1963 (“KGST”) of the Company for the year 2003-04 as per proceedings dated July 20, 2006 of Assistant Commissioner, Special Circle-1, Ernakulam. The Company has filed a special leave petition dated May 8, 2010 bearing S.L.P. (Civil) No. 16478 of 2010 before the Supreme Court of India against the State of Kerala aggrieved by the decision of the High Court of Kerala, Ernakulam in appeal bearing ST. Rev. No. 219 of 2009. The Company has prayed before the Hon‟ble Supreme Court to grant special leave to appeal against the order of the Hon‟ble High Court, Ernakulam dated November 11, 2009. The Company has further filed an application dated July 12, 2010 for amendment of the earlier special leave petition and prayed before the Hon‟ble Supreme Court to accept the amendment.
2. The Company has filed several writ petitions against the Union of India and others before the Hon‟ble High Court of Kerala, Ernakulam against levy of service tax on letting out of immoveable properties by the defendants. The total amount of exemption claimed by the Company is an amount of ` 20.00 million. The Union of India has filed an application for transfer of all the writ petitions filed by the Company before the Hon‟ble High Court of Kerala by virtue of a transfer petition before the Hon‟ble Supreme Court of India.
3. The Assistant Commissioner Commercial Taxes, Special Circle – 1, Ernakulam has issued a notice of demand to the Company dated September 29, 2009 bearing demand No. 32070242395/29/09/2009 claiming an amount of ` 13.42 million on disallowance of input tax on interstate stock transfer to be paid within 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated October 15, 2009 bearing number KVATA 2570/09 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam. The Hon‟ble High Court of Kerala, Ernakulam has issued an order dated October 26, 2009 in an appeal filed by the Company bearing W.P. (c) No. 30167 of 2009, directing the Assistant Commissioner not to take any steps for realisation of the amount of tax in dispute from the Company till the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam passes orders on the stay petition filed by the Company. The Deputy Commissioner has issued an order dated March 11, 2010 bearing order No. KVATA – 2570/09 staying the collection of tax due from the Company till disposal of the appeal by the Deputy Commissioner. Further, the order issued by the Deputy Commissioner is subject to the Company remitting 1/3rd of the amount of tax in dispute and on furnishing security for the balance amount due. The matter is currently pending before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam.
4. The Assistant Commissioner (Assmnt.), Commercial Taxes, Special Circle –1, Ernakulam has issued a notice of demand to the Company dated February 20, 2010 bearing demand No. 83/2009- 10 claiming an amount of ` 0.11 million towards disallowance of sales return to be paid with 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated April 5, 2010 bearing number KVATA 1344/10 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam against the assessment order of the Assistant Commissioner and the matter is currently pending.
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5. The Assistant Commissioner (Assmnt.), Commercial Taxes, Special Circle –1, Ernakulam has issued a notice of demand to the Company dated October 28, 2009 bearing demand No. 10/2009- 10 claiming an amount of ` 11.79 million on disallowance of input tax on interstate stock transfer to be paid within 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated November 24, 2009 bearing number KVATA No. 05/10 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam against the assessment order of the Assistant Commissioner. The High Court of Kerala, Ernakulam has issued an order dated December 10, 2009 in an appeal filed by the Company bearing W.P. (c) No. 35178 of 2009, directing the Assistant Commissioner to suspend all further steps for realisation of the amount of tax in dispute from the Company till the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam disposes the appeal filed by the Company. The High Court order is subject to the Company remitting 1/3rd of the amount of tax in dispute and on furnishing security for the balance amount due. The matter is currently pending before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam.
6. The Assistant Commissioner (Assmnt.), Commercial Taxes, Special Circle –1, Ernakulam has issued a notice of demand to the Company dated November 25, 2009 bearing demand No. 14/2009-10 (06/09) claiming an amount of ` 9.48 million on disallowance of input tax on interstate stock transfer to be paid within 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated December 1, 2009 bearing number KVATA No. 06/10 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam against the assessment order of the Assistant Commissioner. The Hon‟ble High Court of Kerala, Ernakulam has issued an order dated December 10, 2009 in an appeal filed by the Company bearing W.P. (c) No. 35178 of 2009, directing the Assistant Commissioner to suspend all further steps for realisation of the amount of tax in dispute from the Company till the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam disposes the appeal filed by the Company. The High Court order is subject to the Company remitting 1/3rd of the amount of tax in dispute and on furnishing security for the balance amount due. The matter is currently pending before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam.
7. The Assistant Commissioner (Assmnt.), Commercial Taxes, Special Circle –1, Ernakulam has issued a notice of demand to the Company dated February 2, 2010 bearing demand No. 63/2009- 10 claiming an amount of ` 4.04 million on disallowance of input tax on interstate stock transfer to be paid within 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated February 20, 2010 bearing KVATA No. 823/2010 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam against the assessment order of the Assistant Commissioner. The Hon‟ble High Court of Kerala, Ernakulam has issued an order dated March 10, 2010 in an appeal filed by the Company bearing W.P. (c) No. 7755 of 2010, directing the Deputy Commissioner to consider and pass appropriate orders on the stay petition filed by the Company within one month from the date of receipt of the judgment copy. Further, the High Court has under the order directed that all further proceedings for recovery of the amount of tax due shall be suspended. The Deputy Commissioner has issued an order dated May 19, 2010 bearing KVATA – 823/2010 and 925/2010 staying the collection of tax due from the Company till disposal of the appeal by the Deputy Commissioner. Further, the order issued by the Deputy Commissioner is subject to the Company remitting 1/3rd of the amount of tax in dispute and on furnishing security for the balance amount due. The matter is currently pending before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam.
8. The Assistant Commissioner (Assmnt.), Commercial Taxes, Special Circle –1, Ernakulam has issued a notice of demand to the Company dated February 16, 2010 bearing demand No. 80/2009- 10 claiming an amount of ` 3.33 million on disallowance of input tax on interstate stock transfer to be paid within 15 (Fifteen) days of receipt of the notice. The Company has filed an appeal dated February 25, 2010 bearing KVATA No. 925/2010 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam against the assessment order of the Assistant Commissioner. The Hon‟ble High Court of Kerala, Ernakulam has issued an order dated March
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10, 2010 in an appeal filed by the Company bearing W.P. (c) No. 7755 of 2010, directing the Deputy Commissioner to consider and pass appropriate orders on the stay petition filed by the Company within one month from the date of receipt of the judgment copy. The Deputy Commissioner has issued an order dated May 19, 2010 bearing KVATA – 823/2010 and 925/2010 staying the collection of tax due from the Company till disposal of the appeal by the Deputy Commissioner. Further, the order issued by the Deputy Commissioner is subject to the Company remitting 1/3rd of the amount of tax in dispute and on furnishing security for the balance amount due. The matter is currently pending before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam.
9. The Sales Tax Officer (E&I), O/o. Deputy Commissioner (Int.), Dept. of Commercial Taxes, Ernakulam has issued a notice dated September 25, 2004 bearing number E&I/113/2004-2005 claiming entry tax under the Kerala Entry of Goods into Local Areas Act 1994 of an amount of ` 0.64 million to be paid within seven days of receipt of the notice. Further, the notice stipulates a proposed imposition of penalty of an amount of ` 1.28 million for the year 2004-2005. The Company has filed a writ petition dated November 29, 2007 bearing W.P. (c) 36265 of 2007 before the Hon‟ble High Court of Kerala, Ernakulam against the Sales Tax Officer (E&I) and others. The Company has prayed before the Hon‟ble High Court for directions to quash the notice issued by the defendants and to refund the tax collected by the defendants from the Company. The matter is currently pending before the Hon‟ble High Court of Kerala, Ernakulam.
10. The Commercial Tax Officer, Gandhipuram Circle, Coimbatore has issued a notice of demand dated August 29, 2007 bearing number 2182689 claiming an amount of ` 2.57 million and a penalty of ` 5.27 million. The Company has filed an appeal dated November 16, 2007 bearing A.P. No. 158/2007 before the Appellate Assistant Commissioner (CT) (MAIN), Coimbatore, against the assessment order passed by the Commercial Tax Officer. The Appellate Assistant Commissioner has issued an order dated July 30, 2008 modifying the order of the assessing officer. The Appellate Assistant Commissioner has modified the demand as ` 13.49 million involving tax, surcharge and a penalty of ` 0.85 million. The Company has filed an appeal dated November 7, 2008 bearing number 20/2008 before the Tamil Nadu Sales Tax Appellate Tribunal (AB), Coimbatore against the order of the Appellate Assistant Commissioner. The Appellate Deputy Commissioner (CT), Coimbatore has issued an order dated November 21, 2008 bearing number M.P. 20/08 in A.P. No. 158/07 setting aside the penalty fixed at ` 0.85 million and refixed the same at ` 0.09 million, and refixed the difference tax payable at ` 0.36 million. The High Court of Judicature, Madras has issued an order dated January 22, 2008 directing that the writ petition filed by the Company bearing W.P. No 1651 of 2008 to be disposed within two weeks i.e., February 5, 2008. Further, the High Court has granted an interim stay on collection of tax and penalty for the assessment year 2004-05 demanded by the Commercial Tax Officer in M.P. No. 1/2008 pending the disposal of W.P. No. 1651 of 2008. The matter is currently pending.
11. Commercial Tax Officer (FAC), Gandhipuram Circle, Coimbatore has issued an order under the Tamil Nadu Value Added Tax Rules, 2007 to the Company dated October 1, 2007 bearing number TIN 334422182689/2007-2008, claiming an amount of ` 2.27 million to be paid immediately without any notice of demand. The Hon‟ble High Court of Judicature, Madras has issued an order for interim stay dated October 16, 2007 in an appeal filed by the Company bearing M.P. No. 1 of 2007 and No. W.P. 33512/2007, granting interim stay against the order of the assessing officer.
12. The Commercial Tax Officer has issued a provisional assessment order under the Tamil Nadu Value Added Tax Act, 2006 to the Company dated November 9, 2009 bearing TIN number 33442182689/09-10, claiming an amount of ` 13.83 million along with interest at 1.25% per month with proposed penalty at an appropriate rate. The Hon‟ble High Court of Judicature, Madras has issued an order dated December 10, 2010, in appeals filed by the Company bearing W.P. No. 23873 of 2010 and M.P. No.1 of 2010, against the decision of the Joint Commissioner (CT), Coimbatore Division and Assistant Commissioner (CT), Gandhipuram Circle, Coimbatore. The High Court has ordered that the assessment order passed by the respondents have been set- aside. The High Court has further ordered the respondents to pass final orders of assessment in
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accordance with law within a period of eight weeks from the date of receipt of the High Court order.
13. We had received a show cause notice dated October 23, 2007 bearing number C.No.V/ST/15/137/2007 from the Joint Commissioner, Office of the Commissioner of Central Excise and Customs, Cochin, alleging that our Company had received sponsorship service from a Malayalam newspaper, “Mathrubhubi” since our Company has sponsored a contest through the newspapers and the prizes for the winners were gold coins and gift vouchers given by our Company. Further, the notice alleged that since the same the same amounts to receipt of “sponsorship service” by the newspaper, our Company is required to obtain service tax registration and would also be liable to pay service tax to the tune of ` 1.90 million and education cess amounting to ` 0.03 million (with interest on both). By way of a reply dated November 21, 2007, we had represented to the Office of the Commissioner of Central Excise and Customs, Cochin that the prizes and gift vouchers given to the winners of the contest were not sponsored by us and were sold to the newspaper for which we were paid, and hence the same would not qualify as “sponsorship service” under service tax laws. By way of an order dated October 27, 2008 passed by the Office of the Commissioner of Central Excise and Customs, Cochin our Company was called upon to pay service tax amounting to ` 1.90 million and education cess amounting to ` 0.03 million along with a penalty of ` 0.0002 million for every day of failure to pay the penalty or 2% of such tax per month, whichever is higher. We have filed an appeal against the aforementioned order on February 26, 2009 objecting to the order on the ground that there was no sponsorship service provided and the consideration that the newspaper had to pay for the prizes was only set off against the fee for advertisement that our Company owed to the newspaper. The case is pending.
14. By way of an assessment order dated July 21, 2009, the Commercial Taxes Department of the Government of Andhra Pradesh had directed our Company to pay undeclared output tax of ` 1.00 million within 30 days from the date of that order. Our Company had filed an appeal dated August 28, 2009 before the Appellate Deputy Commissioner, Panjagutta, Hyderabad against the aforementioned assessment order on the grounds that the order has overstated the gross profits of the Company and that there is no evidence therein besides what was noted from the sales bills of the Company. By way of an order dated October 26, 2009, the Appellate Deputy Commissioner, Panjagutta, Hyderabad dismissed the appeal filed by our Company. We have, therafter, filed a revision petition for the stay of collection of disputed tax dated November 5, 2009 on the grounds of overstatement of gross profits and lack of evidence. The Appellate Deputy Commissioner, Panjagutta, Hyderabad has issued an order dated December 18, 2010 bearing number ADC 2813 setting aside the order passed by the Commercial Tax Officer.
15. By way of an assessment order dated July 21, 2009, the Commercial Taxes Department of the Government of Andhra Pradesh had called upon the Company to pay an amount of ` 2.71 million as total tax due under the AP Value Added Tax Act, 2005 on inter state sales of gold and precious stones. It has been alleged in the order that personnel of the Company have been transferring gold and precious stones from one State to another without notifying the customs or the air transport authorities. Our Company had filed an appeal dated September 7, 2009 against the aforementioned order before the the Appellate Deputy Commissioner, Panjagutta Division, Hyderabad staing that the transfers are not sales and are mere transfers from outlet of the Company to another and that Form F has been filed under the provisions of the AP Value Added Tax Act, 2005 clarifying the same. An application for the stay of collection of disputed tax was also filed on September 7, 2009 before the Appellate Deputy Commissioner, Panjagutta Division, Hyderabad. The same was rejected by the Appellate Deputy Commissioner by way of an order dated November 16, 2009 on the grounds that the burden of proof to show that the goods were transferred from one State to another not as a result of sales is on the Company and the Company has failed to prove the same to the satisfaction of the concerned tax authorities. On December 2, 2009, our Company filed a writ of mandamus before the High Court of Andhra Pradesh declaring that the rejection of the revision petition filed by the Company by the Additional Joint Commissioner, Government of Andhra Pradesh. In addition to that, by way of this writ, the Company has also prayed before the
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High Court that the recovery of the balance amount of disputed tax of ` 2.37 million is stayed until the disposal of the writ petition. The Appellate Deputy Commissioner, Panjagutta, Hyderabad has issued an order dated December 18, 2010 bearing number ADC 2814 setting aside the order passed by the Commercial Tax Officer.
16. By way of an assessment order dated September 8, 2008, the Commercial Taxes Department, Government of Andhra Pradesh, had called upon our Company to pay sales tax amounting to ` 1.09 million on inter state sales under the provisions of the AP Value Added Tax Act, 2005. Our Company had filed an appeal against the aforementioned order on October 20, 2008 before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad, on the ground that since the declaration in Form F had been filed by the Company under the sales tax legislation, the authority cannot levy the tax unless it had either given an opportunity to the Company to resubmit the declaration or had conducted due enquiry to prove that the declaration was incorrect or false. Our Company also filed an application before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad for grant of stay of collection of the disputed tax of ` 1.09 million. Pursuant to a revised order passed by the authority, a revised appeal dated February 5, 2009 and a revised application for stay dated February 5, 2009 have been filed by the Company. The proceedings are pending.
17. By way of an assessment order dated September 8, 2008, the Commercial Taxes Department, Government of Andhra Pradesh, had called upon our Company to pay sales tax amounting to ` 13.81 million on inter state sales under the provisions of the AP Value Added Tax Act, 2005. Our Company had filed an appeal against the aforementioned order on February 5, 2009 before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad, on the ground that since the declaration in Form F had been filed by the Company under the sales tax legislation, the authority cannot levy the tax unless it had either given an opportunity to the Company to resubmit the declaration or had conducted due enquiry to prove that the declaration was incorrect or false. Our Company also filed an application before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad for grant of stay of collection of the disputed tax of ` 13.81 million. By way of an order dated March 26, 2009, Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad dismissed the appeal made by our Company. Subsequently, our Company filed a writ petition dated March 28, 2009 bearing number 6673 of 2009 under Article 226 of the Constitution of India before the High Court of Andhra Pradesh praying for setting aside of the dismissal order of the Appellate Deputy Commissioner of Commercial Taxes. The proceedings are pending.
18. By way of an assessment order dated September 8, 2008, the Commercial Taxes Department, Government of Andhra Pradesh, had called upon our Company to pay sales tax amounting to ` 1.80 million on inter state sales under the provisions of the AP Value Added Tax Act, 2005. Our Company had filed an appeal against the aforementioned order on February 5, 2009 before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad, on the ground that since the declaration in Form F had been filed by the Company under the sales tax legislation, the authority cannot levy the tax unless it had either given an opportunity to the Company to resubmit the declaration or had conducted due enquiry to prove that the declaration was incorrect or false. Our Company also filed an application before the Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad for grant of stay of collection of the disputed tax of ` 1.80 million. By way of an order dated March 26, 2009, Appellate Deputy Commissioner of Commercial Taxes, Panjagutta Division, Hyderabad dismissed the appeal made by our Company. Subsequently, our Company filed a writ petition dated March 28, 2009 bearing number 6652 of 2009 under Article 226 of the Constitution of India before the High Court of Andhra Pradesh praying for setting aside of the dismissal order of the Appellate Deputy Commissioner of Commercial Taxes. The proceedings are pending.
19. By way of a suo moto revision dated December 22, 2008 proposed by the Deputy Commissioner, Commercial Taxes Department, Ernakulam, the aforementioned authority sought to re assess the sales tax determined for assessment year 2003-04 on the grounds that, (i) while the Company had
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paid tax at a compounded rate for two of its branches, it had paid the same on the regular manner for the other branches and compounding can be allowed only on the total turnover of the business and not with respect to each branch; and (ii) that the rate of assessment of diamond ornaments are 8% as opposed to the original assessment rate of 4%. Our Company had filed an appeal against the same before the Sales Tax Appellate Tribunal, Ernakulam, on January 15, 2009. The appeal was partly allowed by the order dated June 12, 2009 passed by the tribunal by holding in favour of the Company only on the second ground concerning the rate of taxability of diamond jewellery. Our Company filed a revision petition bearing number 219/2009 before the High Court of Kerala against the aforementioned order on September 7, 2009. The High Court of Kerala, by way of a judgement passed on November 11, 2009 held that sales tax can be paid at a compounded rate only on the total turnover of the business and not branch wise. Our Company filed a special leave petition dated May 10, 2010 and bearing number 16478/2010 against the order of the High Court. The petition is pending. By way of an assessment order dated September 29, 2009, the Department of Commercial Taxes, Special Circle I, Ernakulam, had called upon our Company to pay an amount of ` 2.57 million as the differential tax payable based on the revised assessment mentioned in the suo moto revision dated December 21, 2008. Subsequently, a notice of demand was also served in relation to the payment of the aforementioned amount. By way of appeal dated November 6, 2009 and bearing number 289/2009, our Company appealed against the order of assessment dated September 29, 2009 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam. The same was dismissed by way of an order dated March 24, 2010 since the legal benefit fund court fee amounting to ` 0.02 had not been paid by our Company along with the appeal. Subsequently, our Company filed a writ petition before the High Court of Kerala bearing number 21871/2010 on July 7, 2010 for setting aside of the order of dismissal of the appeal and regularisation of the appeal preferred before the Deputy Commissioner (Appeals). The High Court of Kerala passed a judgement on July 14, 2010 granting our Company a time period of two weeks to cure the defect of non payment of the legal benefit fund court fee and regularisation of the appeal conditional on such payment. The appeal is pending.
20. By way of a notice dated February 20, 2010, the Assistant Commissioner I, Commercial Taxes, Special Circle I, Ernakulam had disallowed claim on input tax made by the Company on inter alia the ground that our Company had claimed input tax credit on stock of ornaments that had been transferred outside the State and the same was not allowed as per Section 11 (13) of the Kerala Value Added Tax Act, 2003. Subsequently, a notice of demand dated March 17, 2010 was also served on our Company calling upon the payment of the balance amount of tax payable to the tune of ` 4.89 million. Our Company has, by way of an appeal dated April 5, 2010 questioned the aforementioned notice before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam. The appeal is pending.
21. By way of an assessment order dated March 17, 2010, the Department of Commercial Taxes, Circle I, Ernakulam called upon our Company to pay sales tax along with interest amounting to about ` 0.02 million since no declaration under Form F under the central sales tax legislation was filed in relation to a stock transfer of ornaments, bullion and packing materials of value of ` 0.06 million. Our Company had, by way of an appeal dated April 21, 2010 questioned the aforementioned assessment order before the Deputy Commissioner of Commercial Taxes (Appeals), Ernakulam on the grounds that a Form F declaration was not required to be filed given the facts of the stock transfer. The appeal is pending.
22. By way of a notice dated February 25, 2010, the Assistant Commissioner I, Commercial Taxes Special Circle I, Ernakulam had disallowed the claim for input tax refund made by the Company demanded the payment of ` 42.14 million towards the same. The claim was disallowed inter alia on the ground that the stock on which input tax has been claimed by the Company has been purchased from unregistered dealers and hence the same cannot be eligible for refund. Our Company had filed an application for stay before the Deputy Commissioner of Commercial Taxes (Appeals), Ernakulam on April 5, 2010. An appeal against the contents of the notice has also been filed on April 5, 2010 before the Deputy Commissioner of Commercial Taxes (Appeals). The appeal is pending.
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23. By way of an assessment order dated November 27, 2007, the Assistant Commissioner, Special Circle I, Ernakulam, rejected the application that had been made by our Company claiming a refund of excess input tax unadjusted to the extent of ` 8.89 million. The rejection was on the grounds that the annual returns filed by our Company had no nexus with the contents of the application for refund. Subsequently, our Company had filed a writ petition dated January 25, 2008 before the High Court of Kerala against the aforementioned assessment order on the grounds that the finance bill under the provisions of which the claim was disallowed by the tax authority has itself lapsed and a new finance bill has been issued in its place. The latter contains no provision to disallow the claim of the Company. The writ petition is pending.
24. By way of an order of assessment dated March 24, 2010, the Department of Commercial Taxes had called upon our Company to pay sales tax with interest amounting to ` 0.21 million on the grounds that the Company had overstated amounts to an identified extent in the Form F declaration filed by it under sales tax legislation, that exempts the payment of sales tax on inter state transfer of goods. Subsequently, our Company had filed an application for stay as well as an appeal, both dated April 21, 2010 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam on the grounds that the error in the records of the Company in relation to the value of inter state stock transfer had been modified and hence the Form F declaration filed by the Company was correct. The appeal is pending.
25. By way of a notice dated February 27, 2010, the Assistant Commissioner I, Commercial Taxes Special Circle I, Ernakulam had called upon our Company disallowing input tax credit claimed by the Company to an extent of ` 56.93 million on inter alia the ground that a portion of the input tax credit has been claimed on stock that was purchased from unregistered dealers. Our Company has, subsequently, filed an appeal against the aforementioned order on June 3, 2010 before the Deputy Commissioner (Appeals), Department of Commercial Taxes, Ernakulam on the grounds that the department has erroneously calculated the value of the stock that has been subjected to inter state transfer. The appeal is pending.
26. The Company has filed an appeal dated January 16, 2010 bearing number 63/R-1/E/CIT(A)-II/09- 10 before the Commissioner of Income Tax (Appeals) against the order passed by the Transfer Pricing Officer – II, Kochi whereby an addition of ` 9.09 million was considered necessary to the value of international transactions engaged into by the Company for the assessment year 2006-07. The matter is currently pending before the Commissioner of Income Tax (Appeals).
27. The Commissioner of Income Tax, Kochi has passed an order against the Company dated March 4, 2010 setting aside the assessment order dated December 5, 2007 for the assessment year 2005- 06 that was passed by the assessing officer. The assessing officer had admitted that a nil total income was payable by the Company for the assessment year 2005-06. The Commissioner of Income Tax (Appeals) – II has passed an order dated March 31, 2008 allowing the appeal partly and accordingly confirming disallowance of 30% of depreciation i.e., ` 0.01 million and deleting the balance amount ` 0.06 million. Further, the Commissioner of Income Tax (Appeals) – II has deleted the disallowance of ` 0.04 million. The matter is currently pending.
28. The Assessing Officer, Ernakulam has passed an order against the Company dated December 24, 2009 claiming an amount of ` 0.06 million for the assessment year 2004-05 for defect in computation of profit for the export unit under section 10A of the IT, Act. The Company has filed an appeal dated January 8, 2010 bearing number 124/R-1/E/CIT(A)-II/06-07 against the assessment order before the Commissioner of Income Tax (Appeals), Cochin. The matter is currently pending before the Commissioner of Income Tax (Appeals), Cochin.
Arbitration Matters
Nil
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Cases involving our Subsidiary
Criminal Litigation
Nil
Civil Litigation
Nil
Cases involving our Group Entities
Cases filed against our Group Entities
Criminal Litigation
Nil
Civil Litigation
Fusion Technosoft Private Limited
1. A suit bearing A.S. No. 59/2010 dated June 8, 2010 has been filed by Sreedharan against Fusion Technosoft Private Limited and others for declaration of easement and for consequential prohibitory injunction from obstructing a pathway that leads to the plot of the plaintiff by the defendants. The plaintiff is the owner of a particular property and the defendants (Jayaraj and Gopinath) own the property situated around it. Fusion Technosoft Private Limited had purchased a portion of the property owned by the other defendants. The Principal Munsif Irinjalakkuda, by way of a judgment dated March 23, 2010, dismissed the case of the plaintiff and held in favour of the defendants. The present suit is an appeal against the same filed by Sreedharan against the same before the Sub-Ordinate Judges Court, Irinjalakkuda.
Cases filed by our Group Entities
Criminal Litigation
Nil
Civil Litigation
Nil
Contingent liabilities as at March 31, 2010
Subsidiary
Joyal Ornaments and Trades Private Limited Nil
Group Entities
Indian Entities
Fusion Technosoft Private Limited Nil Jyothi Aviation and Developers Private Limited Nil Cochin Smart City Properties Private Limited Nil Joyal Properties Private Limited Nil
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Mythri Entertainers and Enterprises Private Limited Nil Mudita Trades Private Limited Nil Dalia Hotels and Resorts Private Limited Nil
Foreign Entities
Joy Alukkas Centre LLC Sharjah Nil Joy Alukkas Holdings Inc., British Virgin Islands: Nil Alukkas Exchange LLP, Dubai UAE Nil Joy Alukkas Jewellery LLC, Dubai, UAE Nil Joy Alukkas Diamonds LLC, Sharjah, UAE Nil Joy Alukkas Jewellery LLC, Abu Dhabi, UAE Nil Joy Alukkas Jewellers LLC, Ras Al Khaimah, UAE Nil Joy Alukkas Jewellery WLL, Oman Nil Joy Alukkas Jewellery WLL, Bahrain USD 35,000,000 (` 15,683.50 million)* Joy Alukkas Jewellery WLL, Qatar Nil Joyalukkas Jewellery WLL, Kuwait Nil Alukkas Limited, United Kingdom Nil Joy Alukkas Jewellery LLC, Ajman Nil *The exchange rate has been arrived at on the basis of the RBI reference rate for USD ($1=` 44.81) as on December 31, 2010
Cases involving our Promoter
Cases filed against our Promoter
Criminal Litigation
1. A criminal complaint bearing CC No. 486/2007 has been initiated before the Judicial Magistrate of the First Class III, Kottayam pursuant to a charge sheet filed by the Circle Inspector of Police, Kottayam West Police Station alleging the commission of offences under Sections 143, 147, 148, 452, 427, 323, 342 and 506 (ii) read with Sections 120B, 110 and 149 of the Indian Penal Code, 1860. The charge sheet alleges that Alukkas Varghese Joy conspired with the other two accused and instigated the the other accused to form an unlawful assembly armed with weapons, and with a common object trespassed into the premises of Rashtra Deepika Limited at Kottayam, and caused mischief within the compound of Rashtra Deepika Limited and committed assault and wrongful confinement and intimidation causing fear of instant death. It is also alleged that as a result of the same Rashtra Deepika Limited suffered a loss of about ` 0.02 million. By way of an order dated March 30, 2009, the High Court of Kerala has disposed the criminal revision petition bearing number 1071/2009 filed by Alukkas Varghese Joy with direction to file discharge petition before the learned Magistrate that it is too early in the stage of the proceedings to declare that there is insufficient material produced before the court to prosecute the accused. A discharge petition dated April 8, 2009 was filed by Alukkas Varghese Joy before the Judicial Magistrate of the First Class III, Kottayam stating that the allegations made against him is baseless and made with ulterior motives since no materials have been placed before the court to prove the same.
Civil Litigation
1. T. C Alexander and others had filed a company petition bearing number 69 of 2007 before the Chennai Bench of the Company Law Board against Rashtra Deepika Limited (“Rashtra Deepika”) and others against the mismanagement of Rashtra Deepika by its directors. Our Promoter was a director of Rashtra Deepika from April 12, 2002 to December 18, 2006. Hence, he was also impleaded as a defendant in the aforementioned company petition. Our Promoter has, by way of a counter affidavit dated October 5, 2009 stated that owing to his residence outside the country, he has not been involved in the business of Rashtra Deepika to any extent and that he has not been present on any of the board meetings of Rashtra Deepika. He was appointed as director of Rashtra
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Deepika only on account of the 5% stake that he held in that company at the time of his appointment. The matter is now pending before the Chennai Bench of the Company Law Board.
Cases filed by our Promoter
Criminal Litigation
Nil
Civil Litigation
1. By way of a judgement dated January 1, 2009 that was passed by the II Additional Sub Judge Ernakulum in O. S. No. 260/05, the court had decreed that Alukkas Varghese Joy and our Company (who were the plaintiffs in the original suit) are entitled to recover an amount of ` 19.00 million along with interest at the rate of 6% applicable from the date of the decree till the date of realisation of the decree amount from the defendant, Jeevan Telecasting Corporation Limited on account of financial and other aid that had been provided by the plaintiffs in the past to the defendant and not subsequently repaid by the defendant. Upon the failure of the defendant to comply with the decree, our Promoter and our Company had filed an execution petition bearing E. P. No. 385/2009 under Order XXI Rules 10 and 11 before the Sub Court at Ernakulam for the execution of the decree dated January 1, 2009. By way of an objection dated November 25, 2009, the defendant had objected to the aforementioned execution petition by stating that an appeal had been filed by it against the decree passed by the II Additional Sub Judge Ernakulum in O. S. No. 260/05 and that the same is pending before the High Court of Kerala, Ernakulum.
2. A suit for recovery bearing OS No. 722 of 2009 dated December 2, 2009 has been filed by the Promoter against the A. P. Gems and Jewellery Park Private Limited for recovery of an amount of ` 8.11 million that was paid by our Promoter to the defendant towards procuring the allotment of two shops to be used as the outlets of the Company within the Gems and Jewellery Park‟ proposed to be developed by the defendant pursuant to a Government Order passed by the Government of Andhra Pradesh. As per the plaint, on failure by the defendants to allot the stipulated shops to our Promoter, our Promoter had required the defendants to return the amounts paid by it. This suit was instituted on the failure of the defendants to make such repayment. The defendants have filed a written statement dated October 1, 2010 stating that their inability to repay the amounts due to the Company is owing to the economic downturn and the following recession in the world market. In the written statement, the defendants have prayed for permitting them to repay the amounts to the plaintiff in monthly instalments at a rate fixed by the court.
Tax Litigation
1. Alukkas Varghese Joy received a notice from the Assistant Commissioner, Wealth Tax, Ernakulam dated November 2, 2007 stating that the net wealth chargeable to tax for assessment year 2006-07 has escaped assessment within the meaning of section 17 of the Wealth Tax Act, 1957. The Deputy Commissioner of Wealth Tax, Ernakulam has issued a notice of demand dated December 23, 2008 claiming an amount of ` 0.97million for assessment year 2006-07 towards wealth tax. Alukkas Varghese Joy has filed an appeal dated January 9, 2010 against the order passed by the Deputy Commissioner, Wealth Tax, Ernakulam before the Appellate Assistant Commissioner of Wealth Tax and Commissioner of Wealth Tax (Appeals). The matter is currently pending before the same authority.
2. Alukkas Varghese Joy received a notice from the Assistant Commissioner, Wealth Tax, Ernakulam dated October 11, 2007 stating that the net wealth chargeable to tax for assessment year 2005-06 has escaped assessment within the meaning of section 17 of the Wealth Tax Act, 1957. The Deputy Commissioner of Wealth Tax, Ernakulam has issued a notice of demand dated December 23, 2008 claiming an amount of ` 0.64 million for assessment year 2005-06 towards
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wealth tax. Alukkas Varghese Joy has filed an appeal dated January 9, 2010 against the order passed by the Deputy Commissioner, Wealth Tax, Ernakulam before the Appellate Assistant Commissioner of Wealth Tax and Commissioner of Wealth Tax (Appeals). The matter is currently pending before the same authority.
3. Alukkas Varghese Joy received a notice from the Assistant Commissioner, Wealth Tax, Ernakulam dated February 12, 2008 stating that the net wealth chargeable to tax for assessment year 2004-05 has escaped assessment within the meaning of section 17 of the Wealth Tax Act, 1957. The Deputy Commissioner of Wealth Tax, Ernakulam has issued a notice of demand dated December 23, 2008 claiming an amount of ` 0.68 million for assessment year 2004-05 towards wealth tax. Alukkas Varghese Joy has filed an appeal dated January 9, 2010 against the order passed by the Deputy Commissioner, Wealth Tax, Ernakulam before the Appellate Assistant Commissioner of Wealth Tax and Commissioner of Wealth Tax (Appeals). The matter is currently pending before the same authority.
4. The Assistant Commissioner, Wealth Tax, Ernakulam has issued an order demand dated February 12, 2008 to Alukkas Varghese Joy claiming an amount of ` 0.27 million towards wealth tax for the assessment year 2003-04. Alukkas Varghese Joy has filed an appeal dated January 21, 2008 against the order passed by the Assistant Commissioner of Wealth Tax, Ernakulam before the Appellate Assistant Commissioner of Wealth Tax and Commissioner of Wealth Tax (Appeals). The matter is currently pending.
5. The Assistant Commissioner, Wealth Tax, Ernakulam has issued a notice of demand dated December 31, 2007 to Alukkas Varghese Joy claiming an amount of ` 0.28 million towards wealth tax for the assessment year 2002-03. Alukkas Varghese Joy has filed an appeal dated February 18, 2008 against the order passed by the Assistant Commissioner, Wealth Tax, Ernakulam before the Appellate Assistant Commissioner of Wealth Tax and Commissioner of Wealth Tax (Appeals). The matter is currently pending.
Cases involving our Directors
For cases involving our Director Alukkas Varghese Joy, please see section titled “Cases involving our Promoter” on page 210 above.
Cases filed against our other Directors
Criminal Litigation
1. Antony Louis has lodged Police complaints bearing number Cr 523/2001 against 16 officials of Geojit BNP Paribas Financial Services Limited including our Director C.J. George in the capacity of Managing Director of Geojit BNP Paribas at Powai Police station, Mumbai alleging fraud on the parties stating that the payout of 1,000 shares of Steel Authority of India Limited was not given to the petitioner and that Geojit BNP Paribas Financial Services Limited used the complainant‟s money without informing him. Against the complaint, Geojit BNP Paribas Financial Services Limited filed a writ petition no. 530 of 2008 before the High Court at Mumbai to quash the proceeding. The Writ Petition is now posted for final hearing on January 17, 2011.
2. Antony Louis has lodged a Police complaint bearing number Cr 588/2001 against 16 officials of Geojit BNP Paribas Financial Services Limited including C.J. George in the capacity of Managing Director of Geojit BNP Paribas at Powai Police station, Mumbai. The complainant has alleged fraudulent transactions on purchase of 8 Power Grid Corporation shares. Against the complaint, company filed a writ petition no. 1007 of 2008 before the High Court at Mumbai to quash the proceeding. The Writ Petition is now posted for final hearing on January 17, 2011.
3. Antony Louis has initiated proceedings against Geojit BNP Paribas Financial Services Limited on the grounds that it had failed and refused to pay the amount of ` 0.004 million, due to his wife
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despite repeated reminders and demands. Antony Louis has lodged a Police complaint bearing number Cr 589/2001 against 16 officials of Geojit BNP Paribas Financial Services Limited including our Dierctor C.J. George in the capacity of Managing Director of Geojit BNP Paribas at Powai Police station, Mumbai alleging fraud. Against the complaint, Geojit BNP Paribas Financial Services Limited filed a writ petition no. 1008 of 2008 before the High Court at Mumbai to quash the proceeding. The Writ Petition is now posted for final hearing on January 17, 2011.
4. Antony Louis has lodged a Police complaint bearing number Cr 560/2001 against 16 officials of Geojit BNP Paribas Financial Services Limited including C.J. George in the capacity of Managing Director of Geojit BNP Paribas at Powai Police station, Mumbai alleging fraud on the grounds that a sum of ` 0.001 million was debited from the account of his wife without authorization. Against the complaint, Geojit BNP Paribas Financial Services Limited filed a writ petition number 1009 of 2008 before the High Court at Mumbai to quash the proceeding. The writ petition is now posted for final hearing on January 17, 2011.
5. Seshagiri Rao has filed a complaint bearing number C.C No. 693/2005 before the Magistrate Court, Bellary against Bobby, Branch Manager of Geojit BNP Paribas and our Director C.J. George in the capacity of Managing Director of the Geojit BNP Paribas Financial Services Limited alleging the offence of cheating, and committing criminal breach of trust, creating false evidence and forged cheque. Against the complaint, Geojit BNP Paribas Financial Services Limited filed a Criminal Petition to quash the proceeding in C.C. no.693/2005 before the High Court of Karnataka, Bangalore (Criminal Petition No.875/2006). The criminal petition was dismissed. The C.C. is now posted on January 28, 2011 for appearance of C.J. George.
6. V. K. Varkey has filed a complaint bearing number C.C No. 15/2007 before the Judicial First Class Magistrate Court, Thiruvalla against Isaac Abraham, a client of Geojit BNP Paribas and our Director C.J. George in the capacity of Managing Director of Geojit BNP Paribas Financial Services Limited and George Joseph, former Branch Manager of Geojit BNP Paribas alleging the offence of cheating the complainant, and committing criminal breach of trust and forgery. The C.C. is now posted for appearance of on January 27, 2011.
Securities law proceedings
1. A notice under section Rule 4(1) of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 read with Section 15 I of Securities and Exchange Board of India Act, 1992, SEBI has issued a notice dated September 15, 2010 to Geojit BNP Paribas Financial Limited along with Networth Stock broking Limited - Mumbai, Destimony Securities Private Limited- Mumbai and Tata Securities Limited - Mumbai in connection with the investigation conducted by SEBI in respect of trading in shares of RTS Power Corporation Limited during the period September 1, 2008 and February 11, 2009. It was observed by SEBI that the above mentioned Trading Members allowed the major buyers and sellers of RTS Power during the said period to take huge positions. It was further observed by SEBI that the clients involved in the RTS Power Transactions failed to meet in the pay in obligation and put the entire stock exchange mechanism under risk which amounts to failure of risk management. In the light of the above notice has been issued to show cause why an inquiry must not be against the above referred trading members.
Civil Litigation
1. Vijayachandran Nair has filed an appeal bearing number 212/2010 against C.J. George and Geojit BNP Paribas Financial Services Limited before the State Consumer Dispute Redressal Commission, Thiruvananthapuram against the order of the District Consumer Forum, Allapuzha. The appeal is filed for recovery of loss amount of ` 0.10 million that is alleged to have been caused due to deficiency of service on the part of C.J. George and Geojit BNP Paribas Financial Services Limited. The matter is posted for hearing on January 5, 2011.
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Cases filed by our other Directors
Criminal Litigation
Nil
Civil Litigation
Nil
Cases involving our Promoter Group
Cases filed against our Promoter Group
Criminal Litigation
Nil
Civil Litigation
Nil
Cases filed by our Promoter Group
Criminal Litigation
Nil
Civil Litigation
Nil
Tax Litigation
1. The Assessing Officer, Kochi has passed an order against Jolly Joy dated January 13, 2010 claiming an amount of ` 11.07 million as difference on returned income for the assessment year 2007-08. Jolly Joy has filed an appeal bearing number ITA 55/INTER/KOCHI/CITA(A)-III/2009- 10 dated February 2, 2010 against the order passed by the Assessing Officer before the Commissioner of Income – Tax (Appeals), Kochi. The matter is currently pending before the same authority.
Proceedings initiated against our Company for economic offences
There are no proceedings initiated against our Company for any economic offences.
Outstanding litigation against other companies whose outcome could have an adverse effect on our Company
There is no outstanding litigation, suits, criminal or civil prosecutions, statutory or legal proceedings including those for economic offences, tax liabilities, prosecution under any enactment in respect of Schedule XIII of the Companies Act, show cause notices or legal notices pending against any company whose outcome could affect the operation or finances of our Company or have a material adverse effect on the position of our Company.
Adverse findings against any persons/entities connected with our Company as regards non compliance with securities laws
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There are no adverse findings involving any persons/entities connected with our Company as regards non compliance with securities law except as disclosed above in the section titled “Cases Involving other Directors” on page 212.
Disciplinary action taken by SEBI or stock exchanges against our Company
There is no disciplinary action taken by SEBI or stock exchanges against our Company.
Material developments since the last balance sheet date
Except as disclosed in the section titled “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” at page 157, in the opinion of our Board, there have not arisen, since the date of the last financial statements disclosed in this Draft Red Herring Prospectus, any circumstances that materially or adversely affect or are likely to affect our profitability taken as a whole or the value of its consolidated assets or its ability to pay its material liabilities within the next 12 months.
Outstanding dues to small scale undertaking(s) or any other creditors
There are no outstanding dues above ` 100,000 to small scale undertaking(s) or any other creditors by our Company, for more than 30 days.
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GOVERNMENT APPROVALS
In view of the approvals listed below, we can undertake this Issue and our current business activities and no further major approvals from any governmental or regulatory authority or any other entity is required to undertake the Issue or continue our business activities. Unless otherwise stated, these approvals are all valid as of the date of this Draft Red Herring Prospectus. Our Company requires approvals from various governmental and local bodies in relation to the showrooms/offices operated by it.
Approvals related to the Issue
1. Approval from the National Stock Exchange dated [●].
2. Approval from the Bombay Stock Exchange dated [●].
3. Our Board of Directors has, pursuant to a resolution passed at its meeting held on November 15, 2010, authorised the Issue subject to the approval by the shareholders of our Company under Section 81 (1A) of the Companies Act, such other authorities as may be necessary.
4. The shareholders of our Company have pursuant to a resolution dated November 15, 2010, under Section 81(1A) of the Companies Act, authorised the Issue.
Applications made in relation to which approvals are pending
Applications made in relation to our business
We have made the following applications for registration of trademark:
1. Application for trademark registration dated September 3, 2010 made by the Company in relation to the registration of trademark for “Joyalukkas” under 14, 24, 25 and 35.
2. Application for trademark registration dated July 3, 2006 made by the Company in relation to the registration of trademark for “joy alukkas” under classes 35, 36 and 14.
3. Application for trademark registration dated December 28, 2004 made by the Company in relation to the registration of trademark for “Dazzle” under class 42.
4. Application for trademark registration dated September 14, 2007 made by the Company in relation to the registration of trademark for “World‟s Favourite Jeweller” under classes 14 and 35.
5. Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for “Alukkas Wedding Centre” under class 14.
6. Application for trademark registration dated September 8, 2003 made by the Company n relation to the registration of the trademark for “Alukkas” under classes 14 and 25.
7. Application for trademark registration dated September 8, 2003 made by the Company in relation to the registration of trademark for “Ponnum Pudavayum Orumichu” under class 14 and 25.
8. Application dated December 20, 2010 vide SRN B01107523 made to the Central Government under Section 269 read with Schedule XIII of the Companies Act for the appointment of Alukkas Varghese Joy as the managing director of our Company.
Applications made in relation to our outlet in Mangalore
1. Application for license for hallmark for gold jewellery and artefacts dated September 17, 2010 made to the Bureau of Indian Standards in relation to Joyalukkas Jewellery, Falnir, Mangalore.
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Applications made in relation to our outlet in Tirunelveli
1. Receipt dated July 22, 2010 issued by the Bureau of Indian Standards acknowledging the fees received against the renewal of license no. 6731473 issued to Joyalukkas Traders India (Private) Limited, 314/315, West Car Street, Lalachatramukku, Tirunelveli, Tamil Nadu.
Applications made in relation to our outlet in Kollam
1. Application for renewal of license under the Kerala Shops and Commercial Establishments Act 1960 dated December 21, 2010 made by Joyalukkas Wedding Centre, Convent Junction Main Road, Kollam.
Applications made in relation to our outlets in Thrissur
1. Application for consent/authorisation/registration dated November 18, 2010 made to the Kerala State Pollution Control Board for Joyalukkas India Private Limited, near Kalliyath Square, Palace Road, Thrissur.
2. Application for renewal dated November 10, 2010 made to the Kerala State Pollution Control Board for integrated clearance under the Water Act, Air Act, Bio Medical Waste Rules, Hazardous Wastes Rules and the Recycled Plastic Manufacturing and Usage Rules for Joyalukkas India Private Limited, Round East, Thrissur.
Applications made in relation to our outlets in Thiruvananthapuram
1. Application for D&O dated August 27, 2009 and application for a generator license dated December 26, 2009 made to the Thiruvananthapuram Corporation for Joyalukkas Jewellery, Chala, Thiruvananthapuram.
Approvals to carry on our Business
1. Our Company has been allotted PAN number AABCJ1087G.
2. Our Company has been allotted TAN number CHNJ00285F for the State of Kerala under Income Tax Act, 1961 issued by the Income Tax Department.
3. Our Company has been allotted Tax Deduction Account Number as CMBJ03421F for the State of Tamil Nadu under Income Tax Act, 1961 issued on May 13, 2010 by the Income Tax Department.
4. Certificate of registration dated January 1, 2007 issued under the Tamil Nadu Value Added Tax Act 2006 to Joyalukkas Traders (India) Private Limited, Cross Cut Road, Gandhipuram, Coimbatore. This registration has been further extended to the outlets at Karur, Kancheepuram and Vellore. The TIN allotted to our Company is 33442182689.
5. Certificate of registration dated December 10, 2008 bearing number 34140012026 issued under the Central Sales Tax Act, 1956 to Joyalukkas Traders (India) Private Limited, No. 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry.
6. Allotment of Tax Deduction Account Number BLRJ03989G for the State of Karnataka as per the Income Tax Act, 1961. Further, authorizing the Company to act in the capacity of a dealer dated October 17, 2010 valid until cancelled.
7. VAT Registration Certificate dated March 17, 2006 bearing number 28967218094 issued by the Commercial Tax Officer, Somajiguda, Hyderabad, valid with effect from March 1, 2006.
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8. VAT Registration certificate dated May 13, 2010 bearing number 29870776358 issued by the Assistant Commissioner of Commercial Taxes, Bangalore, valid with effect from October 17, 2007.
9. Certificate of Registration bearing number 855211 dated May 2, 2005 issued by the Commercial Tax Officer, Gandhipuram, Coimbatore, under Rule 5 (1) of the Central Sales Tax (Registration and Turnover Rules), 1956 registering Joy Alukkas Traders (India) Private Limited, Cross Cut Road, Gandhipuram, Coimbatore as a dealer under the provisions of the aforementioned legislation.
10. Central sales tax registration certificate bearing number 27380654586C dated October 8, 2008 issued by the Sales Tax Officer, Registration Authority, Mumbai valid with effect from April 21, 2008.
11. Central sales tax registration certificate bearing number 06521825694 dated January 3, 2006 issued by the Assessing Authority, Gurgaon, valid with effect from October 13, 2005.
12. VAT Registration Certificate dated December 2, 2008 bearing number 34140012026 issued by the Deputy Commercial Tax Officer, Commercial Taxes Department, Puducherry, valid with effect from December 10, 2008 to Joyalukkas Traders (India) Private Limited, No. 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry.
13. VAT Registration Certificate dated May 30, 2007 bearing number 32070242395 issued by the Assistant Commissioner, Sales Tax Office, Special Circle, Ernakulam, Cochin valid with effect from April 1, 2007.
14. VAT Registration certificate dated October 8, 2008 bearing number 27380654586V issued by the Sales Tax Officer, Registration Authority, Mumbai valid with effect from April 21, 2008.
15. VAT Registration certificate dated January 3, 2006 bearing number 06521825694 issued by the Assessing Authority, Gurgaon, valid with effect from October 13, 2005.
16. Certificate of Registration under Form 4 under the Kerala Value Added Tax Rules, 2005. The certificate is issued for the principal place of business, the branch offices and the Company‟s godowns, dated May 30, 2007 bearing number 32070242395C issued by the Assistant Commissioner, Sales Tax Office, Special Circle I, Ernakulam valid until cancelled, suspended, surrendered and subject to renewal.
17. Certificate of Registration of trademark bearing number 512886 dated January 20, 2006 in relation to the trademark to the term “Alukkas” under Class 42 held by Joyalukkas Traders India Private Limited, P.O. Box 3014, Kurian Towers, Banerji Road, Kochi, Kerala.
18. Registration certificate bearing number KR/KC/19611/Enf I (5)/02 dated December 20, 2002 issued by the Assistant Provident Fund Commissioner, Kochi under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for Joy Alukkas (Traders) India Private Limited, Kurian Towers, Banerji Road, Kochi 18.
19. Registration certificate bearing number 54-13776-102-INSP dated February 11, 2003 issued by the Assistant Director, Regional Office (Kerala), under the Employees State Insurance Act, 1948 for Joy Alukkas (Traders) India Private Limited, Kurian Towers, Banerji Road, Kochi 18.
20. Registration cum membership certificate bearing number HEPC/R-5961/M-RTE-13941/06-07 dated August 8, 2006 issued by the Handloom Export Promotion Council to Joy Alukkas Traders (India) Private Limited. This license is valid upto March 31, 2011.
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21. Registration cum membership certificate bearing number 204504 dated August 21, 2006 issued by the Apparel Export Promotion Council to Joy Alukkas Traders (India) Private Limited. This license is valid upto March 31, 2011.
22. Certificate of Importer Exporter Code (“IEC Code”) bearing IEC number 1002003725 dated April 9, 2010 issued by the Ministry of Commerce and Industry to Joyalukkas India Private Limited.
Approvals in relation to our outlets
Approvals for our outlets in Ernakulam
1. Fire NOC bearing number G2 1107/06 dated January 18, 2006 issued by the Director, Fire and Rescue Services, Thiruvananthapuram to the property situated at ward number 763/1,2,3, 1131/1- 7, 1133/4,5 1134/1 and 1895/2, Cochin Corporation, Ernakulam district.
2. Certificate of verification bearing number 887/2010 dated April 9, 2010 issued by the Senior Inspector Legal Metrology, Government of Kerala to Joyalukkas Wedding Centre, High Court Road Junction, Ernakulam.
3. License bearing number HC18/10/2010-2011 dated March 1, 2010 issued by the Health Officer, Corporation of Cochin, under the provisions of the Kerala Municiplaity Act, 1994 to the building located at division no. 6127A, Shanmugham Road, Kochi. This certificate is valid upto March 1, 2011.
4. Renewal of certification marks license bearing number CM/L-6586187 dated July 14, 2009 issued by the Bureau of Indian Standards to Joyalukkas Wedding Centre, 40/6127A, High Court Junction, Marine Drive, Cochin 682031. This certificate is valid upto July 13, 2012.
5. Renewal of registration dated December 1, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, Ernakulam II circle to Joyalukkas Wedding Centre, High Court junction, Ernakulam.
6. Renewal of registration dated December 1, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, Ernakulam II circle to Joyalukkas Traders (India) Private Limited, Kurian Towers, Banerjee Road, Ernakulam. This certificate is valid upto December 31, 2011.
Approvals for our outlets in Angamaly
1. Certificate of renewal dated December 15, 2010 issued by the Assistant Labour Officer, Angamaly, under the Kerala Shops and Establishments Act to the textile and jewellery divisions of Joyalukkas Traders (India) Private Limited, Main Road, Angamaly. This license is valid upto December 31, 2011.
2. Certificate of verification bearing number 2261/2010 dated August 16, 2010, issued by the Assistant Controller/Inspector, Legal Metrology, to Joyalukkas Traders (India) Private Limited, Main Road, Angamaly.
3. License bearing number 16/2010-2011 dated April 20, 2010 issued by the Secretary, Municipal Office, Angamaly, under the provisions of the Kerala Municiplaity Act, 1994 to the jewellery division of Joyalukkas, V/260 B, Angamaly. This license is valid upto March 31, 2011.
4. License bearing number 17/2010-2011 dated April 20, 2010 issued by the Secretary, Municipal Office, Angamaly, under the provisions of the Kerala Municiplaity Act, 1994 to the textile division of Joyalukkas, V/260 B, Angamaly. This license is valid upto March 31, 2011.
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5. Fire NOC bearing number G1 4254/03 dated June 3, 2003 issued by the Command General, Fire and Rescue Services, Thiruvananthapuram to Joyalukkas, the property situated at Sy. No. 413, Angamaly Village.
6. Renewal of certification marks license to use hallmark for gold, gold alloys, jewellery artefacts (fineness and making specifications) bearing number CM/L-6562880 dated March 19, 2009 issued by the Bureau of Indian Standards to Joyalukkas Wedding Centre, Door No. V/260B, Main Road, Angamaly, Ernakulam District. This certificate is valid upto March 30, 2012.
Approvals for our outlets in Thrissur
1. Certificate of registration dated November 30, 2010 issued by the Assistant Labour Officer (first circle) Chembukavu, Thrissur under the Kerala Shops and Establishments Act to Joyalukkas Traders India (Private) Limited, Palace Road, Thrissur. This license is valid upto December 31, 2011.
2. No objection certificate dated October 21, 2009 issued by the Assistant Divisional Officer Fire and Rescue Services Thrissur to Joyalukkas Traders India (Private) Limited, Palace Road, Thrissur.
3. Sanction bearing number Order No. B1 8816/09/EIR dated December 4, 2009 issued by the Electrical Inspector, Thrissur for the energisation of one passenger lift installed at the premises of Joyalukkas Jewellery, Palace Road, Thrissur, subject to certain conditions.
4. Certificate of verification bearing number 489/2009 dated October 6, 2009 issued by the Assistant Controller of Legal Metrology, Government of Kerala to Joyalukkas Traders (India) Private Limited, Palace Road, Thrissur.
5. Certificate of grant of license to use hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 6978612 dated October 15, 2009 issued by the Bureau of Indian Standards to Joyalukkas Jewellery, Palace Road, Thrissur. This certificate is valid upto October 30, 2012.
6. Certificate of registration dated December 30, 2010 issued by the Assistant Labour Officer (first circle) Chembukavu, Thrissur under the Kerala Shops and Establishments Act to Joyalukkas Traders India (Private) Limited, Round East, Thrissur. This license is valid upto December 31, 2011.
7. Certificate of verification bearing number 3172/2009 dated August 12, 2010 issued by the Senior Inspector Legal Metrology, Government of Kerala to Joyalukkas Traders (India) Private Limited, Round East, Thrissur.
8. License bearing number 58/IIC/08 dated October 13, 2010 issued under the Kerala Panchayats (Licensing of Dangerous and Offensive Trades and Factories) Rules, 1963 to Joy Alukkas Traders (India) Private Limited, XXVII 599, Thrissur.
9. License for industries, factories and other trades dated October 22, 2010 issued by the Health Officer, Corporation of Thrissur to Joyalukkas Jewellery, Round East, Thrissur.
10. Certificate of grant of license to use hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 6914582 dated March 12, 2009 issued by the Bureau of Indian Standards to Joyalukkas Jewellery, Round East, Thrissur. This certificate is valid upto March 10, 2012.
Approvals for our outlet in Kollam
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1. License dated July 8, 2010 issued by the Kollam Corporation Council under Section 447 of the Kerala Municipality Act, 1994 to the jewellery, textiles and canteen of Joyalukkas Traders (India) Private Limited, Convent Junction, Kollam.
2. Certificate of verification bearing number 2463/2009 dated October 21, 2009, issued by the Senior Inspector, Legal Metrology, Kollam, to Joyalukkas Traders (India) Private Limited, Convent Junction, Kollam.
3. Fire NOC bearing number G1 12555/07 dated October 20, 2007 issued by the Command General, Fire and Rescue Services, Thiruvananthapuram to Joyalukkas, XVI/1652/459A, Vadalambhagam, Kollam.
4. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L-6515871 dated July 14, 2009 issued by the Bureau of Indian Standards to Joyalukkas Wedding Centre, near Archana-Aradhana theatre, Kollam. This certificate is valid upto July 11, 2012.
Approvals for our outlet in Thiruvalla
1. Certificate of registration dated December 1, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, Thiruvalla to the jewellery division of Joyalukkas Wedding Centre, SCS junction, Thiruvalla. This certificate is valid upto December 31, 2011.
2. Certificate of registration dated December 1, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, Thiruvalla to the textiles division of Joyalukkas Wedding Centre, SCS junction, Thiruvalla. This certificate is valid upto December 31, 2011.
3. Certificate of verification bearing number 1062/2010 dated June 29, 2010 issued by the Inspector Legal Metrology, Government of Kerala to Joyalukkas Traders (India) Private Limited, SCS Junction, Thiruvalla.
4. License bearing number VI/22/2010 dated January 23, 2010 issued under the Kerala Panchayats (Licensing of Dangerous and Offensive Trades and Factories) Rules, 1963 to Joyalukkas Wedding Centre, SCS Junction, Thiruvalla.
5. Fire NOC bearing number G1 14453/07 dated May 3, 2008 issued by the Command General, Fire and Rescue Services, Thiruvananthapuram to Joyalukkas Wedding Centre, SCS Junction, Thiruvalla.
6. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L-6485585 dated January 5, 2010 issued by the Bureau of Indian Standards to Joyalukkas Wedding Centre, SCS Junction, Thiruvalla. This certificate is valid upto December 12, 2012.
Approvals for our outlet in Kottayam
1. Renewal of registration dated December 17, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, First Circle, Civil Station, Kottayam to Joyalukkas Traders (India) Private Limited, T. B. Road, Kottayam. This certificate is valid upto December 31, 2011.
2. Certificate of verification bearing number 1799/2009 dated August 13, 2009 issued by the Senior Inspector of Legal Metrology, Government of Kerala to Joyalukkas Traders (India) Private Limited, Muthoot Crown Plaza, Kottayam.
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3. License bearing number 3/XIII-10-11 dated May 29, 2010 issued under the Kerala Panchayats (Licensing of Dangerous and Offensive Trades and Factories) Rules, 1963 to Joyalukkas Traders (India) Private Limited, T. B. Road, Kottayam.
4. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L-6489189 dated January 15, 2009 issued by the Bureau of Indian Standards to Joyalukkas Jewellery, T. B. Road, Kottayam. This certificate is valid upto January 5, 2012.
Approvals for our outlet in Thiruvananthapuram
1. Renewal of registration dated December 13, 2010 issued under the Kerala Shops and Establishments Act by the Assistant Labour Officer, First Circle, Thiruvananthapuram, to Joyalukkas Jewellery, Chala, Thiruvananthapuram. This certificate is valid upto December 31, 2011.
2. Certificate of verification bearing number 308/2010 dated February 19, 2010 issued by the Inspector Legal Metrology, Government of Kerala to Joyalukkas Traders (India) Private Limited, Chala, Thiruvananthapuram.
3. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L6960084 dated August 14, 2009 issued by the Bureau of Indian Standards to Joyalukkas Jewellery, East Fort, Thiruvananthapuram. This certificate is valid upto August 12, 2012.
4. Consent for establishment dated December 10, 2009 bearing number PCB/TVM- DO/ICO/CB/750/2009 issued by the Environmental Engineer, Kerala State Pollution Control Board, Thiruvananthapuram to Joyalukkas Jewellers, Attankulangara, Thiruvananthapuram. This license is valid upto December 2, 2012.
Approvals for our outlet in Chennai
1. License renewal under Section 287 of the Chennai City Municipal Corporation Act bearing number O126065815/2008/09 issued by the Corporation of Chennai to the manufacturing of ornaments at Door No. 39, North Osman Road, T. Nagar, Chennai. This license is valid upto March 31, 2011.
2. Certificate of verification bearing number 3603092 dated February 2, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, 39, North Osman Road, T. Nagar, Chennai. This certificate is valid upto February 2, 2011.
3. License renewal under Section 287 of the Chennai City Municipal Corporation Act bearing number O126068777/2008/09 issued by the Corporation of Chennai to the centralised air- conditioning at Door No. 39 and 40, North Osman Road, T. Nagar, Chennai. This license is valid upto March 31, 2011.
4. License renewal under Section 287 of the Chennai City Municipal Corporation Act bearing number O126066511/2009/10 issued by the Corporation of Chennai for running a jewellery shop at Door No. 39 and 40, North Osman Road, T. Nagar, Chennai. This license is valid upto March 31, 2011.
5. License renewal under Section 287 of the Chennai City Municipal Corporation Act bearing number O126068776/2008/09 issued by the Corporation of Chennai to the snack bar at Door No. 39, North Osman Road, T. Nagar, Chennai. This license is valid upto March 31, 2011.
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6. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L6804777 dated March 24, 2008 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, 39, Prasanth Real Gold Tower, North Usman Road, T. Nagar, Chennai. This certificate is valid upto March 23, 2011.
Approvals for our outlet in Coimbatore
1. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number 65/L 6471271 dated August 14, 2009 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, Cross Cut Road, Gandhipuram, Coimbatore. This certificate is valid upto August 31, 2012.
2. Certificate of verification bearing number 5705822 dated June 29, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, Cross Cut Road, Gandhipuram, Coimbatore. This certificate is valid upto June 29, 2011.
3. License dated February 12, 2010 issued by the Coimbatore Corporation to Joyalukkas Jewellery, Cross Cut Road, Coimbatore for running a shop. This license is valid upto March 31, 2011.
4. License dated February 12, 2010 issued by the Coimbatore Corporation to Joyalukkas Jewellery, Cross Cut Road, Coimbatore for the use of a generator. This license is valid upto March 31, 2011.
5. Renewal certificate dated October 4, 2010 issued by the Assistant Wireless Advisor, the Ministry of Communications and Information Technology to the mobile station license No. USR- 215(SR)/1-02 of Joyalukkas Traders (India) Private Limited, Cross Cut Road, Gandhipuram, Coimbatore. This certificate is valid upto September 30, 2011.
Approvals for our outlet in Salem
1. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 6721571dated July 2, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, 228/1, Omalur Main Road, Opposite New Bus Stand, Salem, Tamil Nadu. This certificate is valid upto June 26, 2013.
2. Certificate of verification bearing number 5374862 dated January 21, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, , 228/1, Omalur Main Road, Opposite New Bus Stand, Salem, Tamil Nadu. This certificate is valid upto January 21, 2011.
3. License dated February 9, 2010 issued by the Salem Corporation to Joyalukkas India Private Limited, 228/1, Omalur Main Road, Opposite New Bus Stand, Salem, Tamil Nadu for the running of a shop. This license is valid upto March 31, 2011.
4. License dated February 9, 2010 issued by the Salem Corporation to Joyalukkas India Private Limited, 228/1, Omalur Main Road, Opposite New Bus Stand, Salem, Tamil Nadu for installing generators. This license is valid upto March 31, 2011.
Approvals for our outlet in Madurai
1. License dated February 15, 2010 issued by the Madurai Corporation to Joyalukkas India Private Limited, 107, Netaji Road, Madurai, Tamil Nadu for the running of a shop. This license is valid upto March 31, 2011.
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2. License dated February 15, 2010 issued by the Madurai Corporation to Joyalukkas India Private Limited, 107, Netaji Road, Madurai, Tamil Nadu for installing a generator. This license is valid upto March 31, 2011.
3. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number MDC-I/L-6644579 dated January 27, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, 107, Netaji Road, Madurai, Tamil Nadu. This certificate is valid upto January 21, 2013.
4. Certificate of verification bearing number 4826403 dated June 10, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, Netaji Road, Madurai, Tamil Nadu. This certificate is valid upto March 10, 2011.
5. Fire and rescue service license dated November 23, 2010 issued by the Divisional Officer, Fire and Rescue Services, Madurai to Joyalukkas Traders (India) Private Limited, Netaji Road, Madurai, Tamil Nadu. This certificate is valid upto November 22, 2011.
Approvals for our outlet in Tirunelveli
1. Certificate of verification bearing number 4538818 dated June 10, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, West Car Street, Lalachathramukku, Tirunelveli, Tamil Nadu. This certificate is valid upto June 10, 2011.
2. License dated January 29, 2010 issued by the Thirunelveli Corporation to Joyalukkas India Private Limited, 5, 5A, Puttarathi Amman Kovil Street, Thirunelveli, Tamil Nadu for the running of a shop. This license is valid upto March 31, 2011.
3. License dated January 29, 2010 issued by the Thirunelveli Corporation to Joyalukkas India Private Limited, 5, 5A, Puttarathi Amman Kovil Street, Thirunelveli, Tamil Nadu for installing a generator. This license is valid upto March 31, 2011.
4. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L-6731473 dated July 22, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited West Car Street, Lalachathramukku, Tirunelveli, Tamil Nadu. This certificate is valid upto July 29, 2013.
Approvals for our outlet in Karur
1. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 3322239 dated February 22, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, S. F. No. 163, Door No. 128, Innamkarur, Kovai Road, LNS Village, Karur, Tamil Nadu. This certificate is valid upto January 21, 2013.
2. Trade license bearing number 100006 dated April 5, 2010 issued by the Karur Municipality to Joy Alukkas Trdaers India Private Limited, S. F. No. 163, Door No. 128, Innamkarur, Kovai Road, LNS Village, Karur, Tamil Nadu.
3. Certificate of verification bearing number 2099675 dated March 9, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, 128, Kovai Road, Karur. This certificate is valid upto March 9, 2011.
Approvals for our outlet in Vellore
1. Renewal of certification marks license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 3322340 dated February 22, 2010
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issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, T. S. No. 310, Revenue Ward No. 5, Municipal Ward No. 7, Officers Line Road, Keelandai Vadai, Vellore, Tamil Nadu. This certificate is valid upto February 18, 2013.
2. Trade license bearing number 004 dated April 1, 2010 issued by the Vellore Municipality to Joy Alukkas, T. S. No. 310, Revenue Ward No. 5, Municipal Ward No. 7, Officers Line Road, Keelandai Vadai, Vellore, Tamil Nadu for running a shop.
3. Trade license bearing number 004 dated April 1, 2010 issued by the Vellore Municipality to Joy Alukkas, T. S. No. 310, Revenue Ward No. 5, Municipal Ward No. 7, Officers Line Road, Keelandai Vadai, Vellore, Tamil Nadu for installing a generator.
4. Certificate of verification bearing number 2916857 dated January 22, 2010 issued by the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, T. S. No. 310, Revenue Ward No. 5, Municipal Ward No. 7, Officers Line Road, Keelandai Vadai, Vellore, Tamil Nadu. This certificate is valid upto January 22, 2011.
Approvals for our outlet in Kanchipuram
1. License dated February 26, 2010 issued by the Kanchipuram Municipality to Joyalukkas Traders (India) Private Limited, T. SY No. 1797, 9, Kamarajar Street, Kanchipuram, Tamil Nadu for running a shop.
2. License dated February 26, 2010 issued by the Kanchipuram Municipality to Joyalukkas Traders (India) Private Limited, T. SY No. 1797, 9, Kamarajar Street, Kanchipuram, Tamil Nadu for installing a generator.
3. Certificate of grant of license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 3333244 dated March 18, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, T. SY No. 1797, 9, Kamarajar Street, Kanchipuram, Tamil Nadu. This certificate is valid upto March 14, 2013.
4. Certificate of verification bearing number 4997211 dated April 23, 2010 issued by the Office of the Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, 19, Kamaraj Road, Kanchipuram, Tamil Nadu. This certificate is valid upto April 23, 2011.
5. Labour certificate dated April 28, 2010 issued under the Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, 1959 to Joyalukkas Traders (India) Private Limited, T. SY No. 1797, 9, Kamarajar Street, Kanchipuram, Tamil Nadu.
Approvals for our outlet in Puducherry
1. Renewal of registration dated May 10, 2010 issued by the Assistant Inspector of Labour, Puducherry, under the Pondicherry Shops and Establishments Rules, 1964 to Joyalukkas Traders (India) Private Limited, No. 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry. This certificate is valid upto March 31, 2011.
2. Certificate of verification bearing number 011135 dated February 17, 2010 issued by the Inspector of Legal Metrology, to Joyalukkas Traders (India) Private Limited, No. 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry. This certificate is valid upto February 16, 2011.
3. Renewal license bearing number 1207/PM/AE(I)/TL/2009 dated January 25, 2010 issued by the Assistant Engineer, Pondicherry Municipality, under the provisions of the Pondicherry Municipality Act, 1973 to Joyalukkas Traders (India) Private Limited, No. 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry. This license is valid upto March 31, 2011.
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4. Certificate of grant of license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 6988514 dated November 23, 2009 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, 54-56, Ravikumar Complex, Kamaraj Salai, Puducherry. This license is valid upto November 19, 2012.
Approvals for our outlet in Hyderabad
1. Certificate of renewal of registration dated January 1, 2011 and bearing number DCL/II/HYD/310/2010 issued by the Deputy Commissioner of Labour, Hyderabad II, under the Andhra Pradesh Shops and Establishments Act, 1988.
2. Trade license dated June 24, 2010 issued by the Greater Hyderabad Municipal Corporation to Joyalukkas Traders (India) Private Limited, 6-3-678/1/1, Panjagutta, Hyderabad. This license is valid upto March 31, 2011.
3. Certificate of registration bearing number DCLI/44/2009/PE dated December 11, 2009 issued by the Deputy Commissioner of Labour, Hyderabad, under the provisions of Rule 18 (1) of the Contract Labour (Regulation and Abolition) Act, 1970 to Joyalukkas Traders (India) Private Limited, 6-3-678/1/1, Panjagutta, Hyderabad.
4. Certificate of grant of license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 6953592 dated July 23, 2009 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, 6-3-678/1/1, Panjagutta, Hyderabad. This certificate is valid upto July 22, 2012.
5. Certificate of verification bearing number 1020944 dated January 7, 2010 issued by the Officer of the Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, 6-3-678/1/1, Panjagutta, Hyderabad. This certificate is valid upto March 31, 2011.
Approvals for our outlet in Bangalore
1. Trade license certificate bearing number TR252/0780 issued by the Health Department, Bruhat Bangalore Mahanagar Palike to Joyalukkas Traders (India) Private Limited, 98, Anil Kumble circle, M. G. Road, Bangalore. This certificate is valid upto March 31, 2011.
2. Certificate of verification bearing number 0519037 dated July 6, 2010 issued by the Office of the Assistant Controller of Legal Metrology, to Joyalukkas Traders (India) Private Limited, Anil Kumble circle, M. G. Road, Bangalore. This certificate is valid upto July 5, 2011.
3. License for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L BNBO/L3374763 dated July 2, 2010 issued by the Bureau of Indian Standards to Joyalukkas India Limited, EGK Prestige 98, MG Road, Bangalore, Karnataka. This license is valid upto June 30, 2013.
4. Order dated September 6, 2010 bearing number 2/RV/CR-305/10-11 passed by the Deputy Commissioner of Labour under the Karnataka Shops and Establishments Act, 1961 laying down requirements in relation to a weekly holiday and working hours for the outlet located at M.G. Road, Bangalore.
5. Certificate of Establishment bearing number 76/5895 dated August 3, 2010 issued under the Karnataka Shops and Establishments Act, 1961 to Joyalukkas Traders India Private Limited, M. G. Road, Bangalore. This license is valid upto December 31, 2014.
Approvals for our outlet in Mangalore
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1. Trade license bearing number 2010COM-23784 dated October 23, 2010 issued by the Mangalore City Corporation to Joyalukkas India Private Limited, Opposite Indian Oil Petrol Pump, Near James and Co., Falnir, Mangalore.
2. Certificate of establishment dated November 19, 2010 bearing number 18/00/0175 issued under the Karnataka Shops and Establihsments Act, 1961 to Joyalukkas India Private Limited, Opposite Indian Oil Petrol Pump, Near James and Co., Falnir, Mangalore. This certificate is valid upto December 31, 2014.
Approvals for our outlet in Mumbai
1. Certificate of grant of license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L 7886511 dated November 17, 2008 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, Dev Rup Building, 36, Turner Road, Bandra West, Mumbai, Maharashtra. This license is valid upto November 16, 2011.
2. Renewal of license under Sections 328, 328A of the Mumbai Municipal Corporation Act dated September 28, 2010. This license is valid from June 7, 2010 to June 30, 2011.
3. Certificate of verification bearing number 564 dated December 18, 2010 issued by the Senior Inspector of Legal Metrology, Mumbai to Joyalukkas Traders (India) Private Limited, Dev Rup Building, 36, Turner Road, Bandra West, Mumbai, Maharashtra. This license is valid upto December 31, 2011.
4. Certificate of registration dated July 4, 2008 bearing number 760056267 issued by the Inspector, Bombay Shops and Establishments Act, 1948 to Joyalukkas Traders (India) Private Limited, Dev Rup Building, 36, Turner Road, Bandra West, Mumbai, Maharashtra. This license is valid upto December 31, 2011.
Approvals for our outlet in Gurgaon
1. Renewal of registration certificate bearing number PSA/REG/GGNL/L1 GGN 3-7/0003559 dated March 11, 2010 issued under the Punjab Shops and Establishments Act, 1958 to Joyalukkas Traders (India) Private Limited, shop numbers 16, 17 and 18, Teh, Gurgaon. This license is valid upto March 31, 2011.
2. Certificate of verification bearing number 001624 dated March 10, 2010 issued by the Inspector of Legal Metrology, Gurgaon, to Joyalukkas Traders (India) Private Limited, shop numbers 16, 17 and 18, Teh, Gurgaon. This license is valid upto March 1, 2011.
3. Certificate of grant of license for use of hallmark for gold, gold alloys, jewellery/artefacts (fineness and making specification) bearing number CM/L9769517 dated January 1, 2010 issued by the Bureau of Indian Standards to Joyalukkas Traders (India) Private Limited, Gold Souk, Phase 1, Block C, Sushant Lok, Gurgaon, Haryana. This license is valid upto December 22, 2012.
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OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Issue
The Issue has been authorised by a resolution of the Board of Directors passed at their meeting held on November 15, 2010, subject to the approval of shareholders of our Company through a special resolution to be passed pursuant to Section 81 (1A) of the Companies Act.
The shareholders of our Company have authorised the Issue by a special resolution passed pursuant to Section 81(1A) of the Companies Act, passed at the EGM of our Company held on November 15, 2010, at Door No. 40/2096, A&B Peevees Triton, Shanmugham Road, Marine Drive, Ernakulam, Kochi 682 031, Kerala, India approved an Issue for an amount of upto ` 8,000 million. Further, our Board has on January 3, 2011, pursuant to the above authority, authorised this Issue of 18,000,000 Equity Shares.
We have received in-principle approvals from the BSE and the NSE for the listing of our Equity Shares pursuant to letters dated [●] and [●], respectively.
The Company will file an application with the RBI seeking its permission for participation by FIIs in the Issue under the portfolio investment scheme and for participation by NRIs in the Issue under the portfolio investment scheme as well as on a non repatriable basis under Schedule IV of 4 of the FEMA (Transfer or Issue of a Security by a Person Resident outside India) Regulations, 2000.
Prohibition by SEBI, RBI or Other Governmental Authorities
Our Company, its Promoter, the Directors and the Promoter Group, have not been prohibited from accessing or operating in capital markets under any order or direction passed by SEBI or any other regulatory or governmental authority.
The companies with which our Promoter, Directors or persons in control of our Company are or were associated as promoter, directors or persons in control, as well as our Group Entities have not been prohibited from accessing or operating in capital markets under any order or direction passed by SEBI or RBI or any other regulatory or governmental authority.
Except C. J. George, K. P. Padmakumar and D. K. Manavalan, none of our Directors are associated with securities related business. Details of the entities that our Directors are associated with, which are enagaged in the securities market business and are registered with SEBI for the same, as well as details of past penalties, if any, have been provided to SEBI.
Prohibition by RBI
Neither our Company nor our Promoter or relatives (as defined under the Companies Act) of the Promoter have been identified as wilful defaulters by the RBI or any other governmental authority. There are no violations of securities laws committed by them in the past or are pending against them.
Eligibility for the Issue
The Company is eligible for the Issue in accordance with the Regulation 26(1) of the SEBI ICDR Regulations as explained under the eligibility criteria calculated in accordance with restated standalone financial statements under Indian GAAP: The Company has net tangible assets of at least ` 30 Million in each of the preceding three full years (of 12 months each), of which not more than 50% are held in monetary assets.
The Company has a track record of distributable profits in terms of Section 205 of the Companies
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Act, for at least three out of the immediately preceding five years.
The Company has a net worth of at least ` 10 Million in each of the preceding three full years (of 12 months each).
The aggregate of the proposed Issue and all previous issues made in the same financial year in terms of the issue size is not expected to exceed five times the pre-Issue net worth of the Company.
The Company has not changed its name in the last fiscal year.
Our Company‟s net profit, net worth, net tangible assets and monetary assets derived from the Restated Financial Statements included in this Draft Red Herring Prospectus as at, and for the last five Fiscal years as set forth below:
(In ` Million) Particulars Fiscal Fiscal Fiscal Fiscal Fiscal 2010 2009 2008 2007 2006 Distributable Profits (1) 1,542.44 868.92 372.84 205.60 27.86 Net Worth(2) 1,954.69 1,368.92 822.84 405.60 127.86 (3) Net Tangible assets 1,957.29 1,361.61 824.00 415.87 126.29 (4) Monetary assets 248.66 331.48 314.82 117.28 75.62 Monetary assets as a percentage of the net tangible assets (%) 12.70 24.34 38.21 28.20 59.88 (1) Distributable profits have been defined in terms of Section 205 of the Companies Act. (2) „Net worth‟ has been defined as the aggregate of equity share capital and reserves. (3) „Net tangible assets‟ means the sum of all net assets of our Company excluding deferred tax liabilities/liabilities and intangible assets as defined under Accounting Standard 26 issued by the Institute of Chartered Accountants of India. (4) Monetary assets comprises of cash and bank balances
Further, we shall ensure that the number of prospective allottees to whom the Equity Shares will be Allotted shall not be less than 1,000; otherwise the entire application money will be refunded forthwith. In case of delay, if any, in refund our Company shall pay interest on the application money at the rate of 15% p.a. for the period of delay.
In terms of Rule 19(2)(b)(i) of the SCRR, this is an issue for more than 25% of the post-Issue paid-up equity share capital. The Issue is being made through the Book Building Process wherein not more than 50% of the Issue shall be available for allocation on a proportionate basis to QIB Bidders. 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 QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 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.
Disclaimer Clause of SEBI
AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD
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MANAGERS, ENAM SECURITIES PRIVATE LIMITED AND CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED, HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE.
IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE OUR COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS, ENAM SECURITIES PRIVATE LIMITED AND CITIGROUP GLOBAL MARKETS INDIA PRIVATE LIMITED, ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT OUR COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGERS, HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED JANUARY 21, 2011 WHICH READS AS FOLLOWS:
WE, THE LEAD MERCHANT BANKER(S) TO THE ABOVE MENTIONED FORTHCOMING ISSUE, STATE AND CONFIRM AS FOLLOWS:
(1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS (IN CASE OF A BOOK BUILT ISSUE) / DRAFT PROSPECTUS (IN CASE OF A FIXED PRICE ISSUE) / LETTER OF OFFER (IN CASE OF A RIGHTS ISSUE) PERTAINING TO THE SAID ISSUE;
(2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT:
(a) THE DRAFT RED HERRING PROSPECTUS FILED WITH THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;
(b) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE REGULATIONS, GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND
(c) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS.
(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID.
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(4) WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.
(5) WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTER HAS BEEN OBTAINED FOR INCLUSION OF HIS SPECIFIED SECURITIES AS PART OF PROMOTER’S CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF PROMOTER’S CONTRIBUTION SUBJECT TO LOCK- IN SHALL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTER DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK- IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS.
(6) WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTER CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS.
(7) WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTER’S CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTER’S CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. NOT APPLICABLE
(8) WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE,MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.
(9) WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 73 OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE PROSPECTUS. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO AMONG THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION. NOTED FOR COMPLIANCE
(10) WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE. NOT APPLICABLE.
AS THE OFFER SIZE IS MORE THAN ` 10 CRORES, HENCE UNDER SECTION 68B OF THE COMPANIES ACT, 1956, THE EQUITY SHARES ARE TO BE ISSUED IN DEMAT
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ONLY.
(11) WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION.
(12) WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS:
(A) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUER; AND (B) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME.
(13) WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE.
(14) WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTER EXPERIENCE, ETC.
(15) WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING PROSPECTUS WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY.
The filing of the Draft Red Herring Prospectus does not, however, absolve our Company from any liabilities under Section 63 or Section 68 of the Companies Act or from the requirement of obtaining such statutory and/or other clearances as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up at any point of time, with the BRLMs, any irregularities or lapses in the Draft Red Herring Prospectus.
All legal requirements pertaining to the Issue will be complied with at the time of filing of the Red Herring Prospectus with the RoC in terms of Section 60B of the Companies Act. All legal requirements pertaining to the Issue will be complied with at the time of registration of the Prospectus with the RoC in terms of Sections 56, 60 and 60B of the Companies Act.
Disclaimer from our Company and the BRLMs
Our Company, the Directors and the BRLMs accept no responsibility for statements made otherwise than in this Draft Red Herring Prospectus or in the advertisements or any other material issued by or at our instance and anyone placing reliance on any other source of information, including our website www.joyalukkas.com, would be doing so at his or her own risk.
The BRLMs accept no responsibility, save to the limited extent as provided in the agreement entered into among the BRLMs and our Company on January 21, 2011 and the Underwriting Agreement to be entered
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into among the Underwriters and our Company.
All information shall be made available by our Company and the BRLMs to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in research or sales reports, at bidding centres or elsewhere.
Investors who Bid in the Issue will be required to confirm and will be deemed to have represented to our Company, the Underwriters and their respective directors, officers, agents, affiliates, and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of our Company and will not issue, sell, pledge, or transfer the Equity Shares of our Company to any person who is not eligible under any applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of our Company. Our Company, the Underwriters and their respective directors, officers, agents, affiliates, and representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to acquire Equity Shares of our Company.
The BRLMs and their respective associates and affiliates may engage in transactions with, and perform services for, our Company and the affiliates or associates in the ordinary course of business and have engaged, or may in the future engage, in commercial banking and investment banking transactions with our Company and the affiliates or associates, for which they have received, and may in the future receive, compensation.
Disclaimer in respect of Jurisdiction
This Issue is being made in India to persons resident in India (including Indian nationals resident in India who are not minors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in shares, Indian Mutual Funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), or trusts under applicable trust law and who are authorised under their constitution to hold and invest in shares, permitted insurance companies and pension funds) and to Eligible NRIs and FIIs. This Draft Red Herring Prospectus does not, however, constitute an invitation to purchase shares offered hereby in any jurisdiction other than India to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Draft Red Herring Prospectus comes is required to inform himself or herself about, and to observe, any such restrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of appropriate court(s) in Mumbai only.
No action has been, or will be, taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Draft Red Herring Prospectus has been filed with SEBI for its observations and SEBI shall give its observations in due course. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and this Draft Red Herring Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of our Company since the date hereof or that the information contained herein is correct as of any time subsequent to this date.
The Equity Shares have not been and will not be registered under the Securities Act, or any state securities laws of the United States and may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are being offered and sold outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction.
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Disclaimer Clause of BSE
As required, a copy of the Draft Red Herring Prospectus has been submitted to BSE. The disclaimer clause as intimated by BSE to our Company, post scrutiny of this Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to the RoC filing.
Disclaimer Clause of the NSE
As required, a copy of the Draft Red Herring Prospectus has been submitted to NSE. The disclaimer clause as intimated by NSE to our Company, post scrutiny of this Draft Red Herring Prospectus, shall be included in the Red Herring Prospectus prior to the RoC filing.
Filing
A copy of the Draft Red Herring Prospectus has been filed with SEBI at Corporation Finance Department, Plot No.C4-A,‟G‟ Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051.
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the Companies Act, would be delivered for registration to the RoC and a copy of the Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration with RoC at the Office of the Registrar of Companies, at Company Law Bhawan, BMC Road, Thrikkakara, Ernakulam District, Kochi 682 021, Kerala.
Listing
Applications have been made to the Stock Exchanges for permission to deal in and for an official quotation of the Equity Shares. [●] will be the Designated Stock Exchange with which the Basis of Allotment will be finalised.
If the permissions to deal in and for an official quotation of the Equity Shares are not granted by any of the Stock Exchanges mentioned above, our Company will forthwith repay, without interest, all moneys received from the applicants in pursuance of the Red Herring Prospectus. If such money is not repaid within eight days after our Company become liable to repay it, then our Company and every Director of our Company who is an officer in default shall, on and from such expiry of eight days, be liable to repay the money, with at the rate of interest of 15% p.a. on application money, as prescribed under Section 73 of the Companies Act.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within 12 Working Days of Bid/Issue Closing Date.
Consents
Consents in writing of: (a) our Directors, our Company Secretary and Compliance Officer, the Auditors, the legal advisors, the Bankers to the Issue, the Bankers to our Company; and (b) the BRLMs, the Syndicate Members, the Escrow Collection Bankers and the Registrar to the Issue to act in their respective capacities, will be obtained and will be filed along with a copy of the Red Herring Prospectus with the RoC as required under Sections 60 and 60B of the Companies Act and such consents shall not be withdrawn up to the time of delivery of the Red Herring Prospectus for registration with the RoC.
B S R & Co., Chartered Accountants, statutory auditors, have given their written consent to statement of the tax benefits available to our Company and its members in the form and context in which it appears in this Draft Red Herring Prospectus and such consent has not been withdrawn up to the time of submission of the Draft Red Herring Prospectus with SEBI.
B S R & Co., Chartered Accountants, statutory auditors have given their written consent to the inclusion of
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their report on financial statements in the form and context in which it appears in this Draft Red Herring Prospectus and such consent and report has not been withdrawn up to the time of submission of the Draft Red Herring Prospectus with SEBI.
Expert to the Issue
Except the report of [●] in respect of the IPO grading of this Issue annexed herewith, and such persons that are deemed to be experts under the Companies Act disclosed in this Red Herring Prospectus, the Company has not obtained any expert opinions.
[●], the IPO grading agency engaged by us for the purpose of obtaining IPO grading in respect of this Issue, have given their written consent as experts to the inclusion of their report in the form and context in which they will appear in the Red Herring Prospectus and such consents and reports will not be withdrawn upto the time of delivery of the Red Herring Prospectus and Prospectus to the Designated Stock Exchange.
Expenses of the Issue
The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertisement expenses and listing fees. For details of total expenses of the Issue, see the section “Objects of the Issue” beginning on page 31 of this Draft Red Herring Prospectus.
Fees Payable to the Syndicate
The total fees payable to the Syndicate (including underwriting commission and selling commission and reimbursement of their out-of-pocket expense) will be as per the engagement letter, Issue Agreement and the Syndicate Agreement, a copy of which is available for inspection at the Registered Office.
Fees Payable to the Registrar to the Issue
The fees payable by our Company to the Registrar to the Issue for processing of application, data entry, printing of CAN/refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as per the agreement signed among our Company and the Registrar to the Issue, a copy of which is available for inspection at the Registered Office.
The Registrar to the Issue will be reimbursed for all out-of-pocket expenses including cost of stationery, postage, stamp duty and communication expenses. Adequate funds will be provided to the Registrar to the Issue to enable it to send refund in any of the modes described in the Red Herring Prospectus or Allotment advice by registered post/speed post/under certificate of posting.
Underwriting commission, brokerage and selling commission on Previous Issues
Since this is an initial public offering of our Company, no sum has been paid or is payable as commission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares.
Particulars regarding Public or Rights Issues by our Company during the last Five Years
Our Company has not made any public or rights issues during the five years preceding the date of this Draft Red Herring Prospectus.
Previous issues of Equity Shares otherwise than for cash
Except as disclosed in the section “Capital Structure” beginning on page 23 of this Draft Red Herring Prospectus, our Company has not issued any Equity Shares for consideration otherwise than for cash.
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Commission and Brokerage paid on previous issues of the Equity Shares
Since this is the initial public issue of Equity Shares, no sum has been paid or has been payable as commission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares since our Company‟s inception.
Previous capital issue during the previous three years by listed Subsidiary and Associates of our Company
Our Subsidiary is not listed on any stock exchange and we do not have Associates.
Promise vis-à-vis objects – Public/ Rights Issue of our Company and/ or listed Subsidiaries and Associates of our Company
Our Company has not undertaken any previous public or rights issue. We have no Associates and the Subsidiary of our Company is not listed on any stock exchange.
Outstanding Debentures or Bonds
Our Company does not have any outstanding debentures or bonds as of the date of filing this Draft Red Herring Prospectus.
Outstanding Preference Shares
Our Company does not have any outstanding Preference Shares as of the date of filing this Draft Red Herring Prospectus.
Stock Market Data of Equity Shares
This being an initial public issue of our Company, the Equity Shares are not listed on any stock exchange.
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Issue and our Company will provide for retention of records with the Registrar to the Issue for a period of at least six months from the last date of despatch of the letters of allotment, demat credit and refund orders to enable the investors to approach the Registrar to the Issue for redressal of their grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name, address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or collection centre where the application was submitted.
All grievances relating to the ASBA process may be addressed to the SCSB, giving full details such as name, address of the applicant, application number, number of Equity Shares applied for, amount paid on application and the Designated Branch or the collection centre of the SCSB where the ASBA Bid cum Application Form was submitted by the ASBA Bidders.
Disposal of Investor Grievances by our Company
Our Company estimates that the average time required by our Company or the Registrar to the Issue for the redressal of routine investor grievances shall be 10 working days from the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are involved, our Company will seek to redress these complaints as expeditiously as possible. Our Company has constituted the Investor Grievance Committee on November 15, 2010. The members of the Investor Grievance Committee are:
1. C.J.George;
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2. K.P.Padmakumar; 3. D.K.Manavalan; and 4. Alukkas Varghese Joy
Our Company has appointed Varun T. V, Company Secretary of our Company as the Compliance Officer for this Issue and he may be contacted in case of any pre-Issue or post-Issue related problems at the following address:
Door No. 40/2096 A&B, Peevees Triton Shanmugham Road Marine Drive Ernakulam District Kochi 682 031 Kerala, India. Tel: (91 484) 238 5035 Fax: (91 484) 238 5032 Email: [email protected]
Changes in Auditors
There has been no change in the Auditors of our Company during the last three years.
Capitalisation of Reserves or Profits
Our Company has not capitalised our reserves or profits at any time during the last five years.
Revaluation of Assets
Our Company has not re-valued its assets in the last five years.
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SECTION VII – ISSUE INFORMATION
TERMS OF THE ISSUE
The Equity Shares being issued pursuant to the Issue shall be subject to the provisions of the Companies Act, the Memorandum and Articles of Association, the terms of this Draft Red Herring Prospectus, the Red Herring Prospectus and the Prospectus, Bid cum Application Form, ASBA Bid cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the Allotment advices and other documents/ certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, the Government, Stock Exchanges, RoC, RBI and/or other authorities, as in force on the date of the Issue and to the extent applicable.
Ranking of Equity Shares
The Equity Shares being issued in the Issue shall be subject to the provisions of the Companies Act and the Memorandum and Articles of Association and shall rank pari-passu with the existing Equity Shares of our Company including rights in respect of dividend. The Allotees in receipt of Allotment of Equity Shares under this Issue will be entitled to dividends and other corporate benefits, if any, declared by our Company after the date of Allotment. For further details, see “Main Provisions of the Articles of Association” on page 278 of this Draft Red Herring Prospectus.
Mode of Payment of Dividend
Our Company shall pay dividends, if declared, to its shareholders in accordance with the provisions of the Companies Act and the Memorandum and Articles of Association.
Face Value and Issue Price
The face value of the Equity Shares is ` 10 each and the Issue Price is ` [●] per Equity Share. The Anchor Investor Issue Price is ` [●] per Equity Share.
At any given point of time there shall be only one denomination for the Equity Shares.
Compliance with SEBI ICDR Regulations
Our Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time.
Rights of the Equity Shareholder
Subject to applicable laws, the equity shareholders shall have the following rights:
Right to receive dividends, if declared;
Right to attend general meetings and exercise voting powers, unless prohibited by law;
Right to vote on a poll either in person or by proxy;
Right to receive offers for rights shares and be allotted bonus shares, if announced;
Right to receive surplus on liquidation, subject to any statutory and preferential claim being satisfied;
Right of free transferability subject to applicable law, including any RBI rules and regulations; and
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Such other rights, as may be available to a shareholder of a listed public company under the Companies Act, the terms of the listing agreement executed with the Stock Exchanges and our Company‟s Memorandum and Articles of Association.
For a detailed description of the main provisions of the Articles of Association relating to voting rights, dividend, forfeiture and lien and/or consolidation/splitting, see “Main Provisions of the Articles of Association” on page 278 of this Draft Red Herring Prospectus.
Market Lot and Trading Lot
In terms of Section 68B of the Companies Act, the Equity Shares shall be Allotted only in dematerialised form. As per the SEBI ICDR Regulations, the trading of the Equity Shares shall only be in dematerialised form. Since trading of the Equity Shares is in dematerialised form, the tradable lot is one Equity Share. Allotment in this Issue will be only in electronic form in multiples of one (1) Equity Share subject to a minimum Allotment of [] Equity Shares.
The Price Band and the minimum Bid Lot size for the Issue will be decided by our Company in consultation with the BRLMs and advertised in [●] edition of English national daily [●], [●] edition of Hindi national daily [●], and [●] edition of regional language newspaper [●], at least two working days prior to the Bid/ Issue Opening Date.
Jurisdiction
Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Mumbai.
Nomination Facility to Investor
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, may nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death of all the Bidders, as the case may be, the Equity Shares Allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale of equity share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the Registered Office/Corporate Office of our Company or to the Registrar and Transfer Agent of our Company.
In accordance with Section 109A of the Companies Act, any person who becomes a nominee by virtue of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either:
To register himself or herself as the holder of the Equity Shares; or
To make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity Shares, until the requirements of the notice have been complied with.
Since the Allotment of Equity Shares in the Issue will be made only in dematerialised form, there is no need to make a separate nomination with our Company. Nominations registered with respective depository
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participant of the applicant would prevail. If the investors require changing their nomination, they are requested to inform their respective depository participant.
Minimum Subscription
If our Company does not receive 90% subscription of the Issue, including devolvement of underwriters, our Company shall forthwith refund the entire subscription amount received. If there is a delay beyond eight days after our Company becomes liable to pay the amount, our Company shall pay interest as prescribed under Section 73 of the Companies Act.
Further, we shall ensure that the number of prospective Allotees to whom Equity Shares will be Allotted shall not be less than 1,000.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction.
Arrangement for disposal of Odd Lots
There are no arrangements for disposal of odd lots.
Restriction on transfer of Equity Shares
Except for lock-in of the pre-Issue Equity Shares, Promoter‟s minimum contribution and Anchor Investor lock-in in the Issue as detailed in the section “Capital Structure” beginning on page 23 of this Draft Red Herring Prospectus, and except as provided in the Articles of Association, there are no restrictions on transfers of Equity Shares. There are no restrictions on transmission of shares and on their consolidation/ splitting except as provided in the Articles of Association. For details, see “Main Provisions of the Articles of Association” on page 278 of this Draft Red Herring Prospectus.
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ISSUE STRUCTURE
Issue of 18,000,000 Equity Shares for cash at a price of ` [●] per Equity Share (including share premium of ` [●] per Equity Share) aggregating to ` [●] Million. The Issue will constitute more than 25% and [●]% of the post-Issue paid-up equity share capital of our Company.
The Issue is being made through the Book Building Process.
QIBs# Non-Institutional Bidders Retail Individual Bidders Number of Equity Shares* Not more than 9,000,000 Not less than 2,700,000 Not less than 6,300,000 Equity Shares Equity Shares available for Equity Shares available allocation or Issue less for allocation or Issue allocation to QIB Bidders and less allocation to QIB Retail Individual Bidders. Bidders and Non- Institutional Bidders. Percentage of Issue Size Not more than 50% of the Not less than 15% of Issue or Not less than 35% of the available for Issue Size being available the Issue less allocation to Issue or Issue less Allotment/allocation for allocation to QIBs. QIB Bidders and Retail allocation to QIB However, up to 5% of the Individual Bidders. Bidders and Non- QIB Portion (excluding the Institutional Bidders. Anchor Investor Portion) will be available for allocation proportionately to Mutual Funds only.
Basis of Proportionate as follows: Proportionate Proportionate Allotment/Allocation if (a) 450,000 Equity Shares respective category is shall be allocated on a oversubscribed proportionate basis to Mutual Funds only; and (b) 8,550,000 Equity Shares shall be allotted on a proportionate basis to all QIBs including Mutual Funds receiving allocation as per (a) above.
Minimum Bid Such number of Equity Such number of Equity [] Equity Shares and Shares that the Bid Amount Shares that the Bid Amount in multiples of [●] exceeds ` 200,000 and in exceeds ` 200,000 and in Equity Shares multiples of [] Equity multiples of [] Equity thereafter Shares thereafter. Shares thereafter.
Maximum Bid Such number of Equity Such number of Equity Such number of Equity Shares not exceeding the Shares not exceeding the Shares, whereby the Issue, subject to applicable Issue, subject to applicable Bid Amount does not limits. limits. exceed ` 200,000.
Mode of Allotment Compulsorily in Compulsorily in Compulsorily in dematerialised form. dematerialised form. dematerialised form.
Bid Lot [●] Equity Shares and in [●] Equity Shares and in [●] Equity Shares and in multiples of [●] Equity multiples of [●] Equity Shares multiples of [●] Equity Shares thereafter. thereafter. Shares thereafter.
Allotment Lot [●] Equity Shares and in [●] Equity Shares and in [●] Equity Shares and in multiples of one Equity multiples of one Equity Share multiples of one Equity Share thereafter thereafter Share thereafter
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QIBs# Non-Institutional Bidders Retail Individual Bidders
Trading Lot One Equity Share One Equity Share One Equity Share
Who can Apply ** Public financial institutions Resident Indian individuals, Resident Indian as specified in Section 4A of Eligible NRIs, HUFs (in the individuals, Eligible the Companies Act, name of Karta), companies, NRIs and HUFs (in the scheduled commercial corporate bodies, scientific name of Karta) banks, mutual fund institutions societies and registered with SEBI, FIIs trusts, and sub-account registered sub-accounts of FIIs with SEBI, other than a sub- registered with SEBI, which account which is a foreign are foreign corporates or corporate or foreign foreign individuals. individual, VCFs, state industrial development corporation, insurance company registered with IRDA, provident fund (subject to applicable law) with minimum corpus of ` 250 Million, pension fund with minimum corpus of ` 250 Million, in accordance with applicable law, National Investment Fund set up by Government of India and insurance funds set up and managed by army, navy or air force of the Union of India and insurance funds set up by Department of Posts such as Postal Life Insurance Fund and Rural Postal Life Insurance Fund.
Terms of Payment Full Bid Amount shall be Full Bid Amount shall be Full Bid Amount shall payable at the time of payable at the time of be payable at the time of submission of Bid cum submission of Bid cum submission of Bid cum Application Form to the Application Form.## Application Form.## Syndicate Members. (except for Anchor Investors) ##
# Our Company may allocate up to 30% of the QIB Portion to Anchor Investors on a discretionary basis. One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the price at which allocation is being done to other Anchor Investors. For details, see the section “Issue Procedure” beginning on page 244 of this Draft Red Herring Prospectus.
## In case of ASBA Bidders, the SCSB shall be authorised to block such funds in the bank account of the Bidder that are specified in the ASBA Bid cum Application Form.
* Subject to valid Bids being received at or above the Issue Price. This Issue is being made in accordance with Rule 19(2)(b)(i) of the SCRR, as amended and under the SEBI ICDR Regulations, where the Issue will be made through the Book Building Process wherein not more than 50% of the Issue will be available for allocation on a proportionate basis to QIBs. Out of the QIB Portion (excluding the Anchor Investor Portion), 5% will be available for allocation on a proportionate basis to Mutual Funds only. The remainder will be available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. However, if the aggregate demand from Mutual Funds is less than 450,000 Equity Shares, the balance Equity Shares available for Allotment in the Mutual Fund Portion will be added to the QIB Portion and allocated proportionately to the QIB Bidders in proportion to their Bids. Further, not less than 15% of the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above
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the Issue Price.
Under-subscription, if any, in any category would be met with spill-over from other categories at the discretion of our Company in consultation with the BRLMs and the Designated Stock Exchange.
Withdrawal of the Issue
Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue at anytime after the Bid/Issue Opening Date. In such an event our Company would issue a public notice in the newspapers in which the pre-Issue advertisements were published, within two days of the Bid/ Issue Closing Date, providing reasons for not proceeding with the Issue. The BRLMs, through the Registrar to the Issue, shall notify the SCSBs to unblock the bank accounts of the ASBA Bidders within one day of receipt of such notification. Our Company shall also inform the same to Stock Exchanges on which the Equity Shares are proposed to be listed.
If our Company withdraw the Issue after the Bid/Issue Closing Date and thereafter determine that they will proceed with an issue of our Company‟s Equity Shares, our Company shall file a fresh draft red herring prospectus with SEBI. Notwithstanding the foregoing, the Issue is also subject to obtaining (i) the final listing and trading approvals of the Stock Exchanges, which our Company shall apply for after Allotment, and (ii) the final RoC approval of the Prospectus after it is filed with the RoC.
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ISSUE PROCEDURE
This section applies to all Bidders. Please note that all Bidders can participate in the Issue through the ASBA process. ASBA Bidders should note that the ASBA process involves application procedures that may be different from the procedure applicable to Bidders other than the ASBA Bidders. Bidders applying through the ASBA process should carefully read the provisions applicable to such applications before making their application through the ASBA process. Please note that all the Bidders are required to make payment of the full Bid Amount along with the Bid cum Application Form. In case of ASBA Bidders, an amount equivalent to the full Bid Amount will be blocked by the SCSB. Also, please note that the SEBI circular no. CIR/CFD/DIL/8/2010 dated October 12, 2010 shall not be applicable to this Issue until further clarification on the procedure for Syndicate Members to procure ASBA forms from the ASBA Bidders.
Book Building Procedure
In terms of Rule 19(2)(b)(i) of the SCRR, this Issue is for more than 25% of the post-Issue capital of our Company. The Issue is being made through the Book Building Process wherein not more than 50% of the Issue shall be available for allocation to QIBs on a proportionate basis. Out of the QIB Portion (excluding the Anchor Investor Portion), 5% will be available for allocation on a proportionate basis to Mutual Funds only. The remainder will be available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Allocation to Anchor Investors shall be on a discretionary basis and not on a proportionate basis.
All Bidders other than the ASBA Bidders are required to submit their Bids through the Syndicate. ASBA Bidders are required to submit their Bids through the SCSBs.
Investors should note that the Equity Shares will be Allotted to all successful Bidders only in dematerialised form. The Bid cum Application Forms which do not have the details of the Bidders‟ depository account, including DPID, PAN and Beneficiary Account Number, shall be treated as incomplete and will be rejected. Bidders will not have the option of being Allotted Equity Shares in physical form.
Bid cum Application Form and ASBA Form
Bidders (other than ASBA Bidders) are required to submit their Bids through the Syndicate. Such Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of the Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids.
ASBA Bidders shall submit an ASBA Bid cum Application Form through the SCSBs authorising blocking of funds that are available in the bank account specified in the ASBA Bid cum Application Form only. QIBs participating in the Anchor Investor Portion cannot submit their Bids in the Anchor Investor Portion through the ASBA process.
No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the Syndicate will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder.
Upon the filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the Application Form. Upon completion and submission of the Bid cum Application Form to a Syndicate or the SCSB, the Bidder or the ASBA Bidder is deemed to have authorised our Company to make the necessary
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changes in the Red Herring Prospectus as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder or the ASBA Bidder.
Bidders can also submit their Bids through the ASBA by submitting ASBA Forms, either in physical or electronic mode, to the SCSB with whom the ASBA Account is maintained. An ASBA Bidder shall use the ASBA Form obtained from the Designated Branches for the purpose of making a Bid. ASBA Bidders can submit their Bids, either in physical or electronic mode. In case of application in physical mode, the ASBA Bidder shall submit the ASBA Form at the relevant Designated Branch. In case of application in electronic form, the ASBA Bidder shall submit the ASBA Form either through the internet banking facility available with the SCSB, or such other electronically enabled mechanism for bidding and blocking funds in the ASBA Account held with SCSB, and accordingly registering such Bids. The SCSB shall block an amount in the ASBA Account equal to the Bid Amount specified in the ASBA Form. Upon completing and submitting the ASBA Form to the SCSB, the ASBA Bidder is deemed to have authorised our Company to make the necessary changes in the Red Herring Prospectus and the ASBA Form, as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the ASBA Bidder.
The prescribed colour of the Bid cum Application Form and the ASBA Form for the various categories is as follows:
Category Colour of Bid cum Application Form/ASBA Form Resident Indians including resident QIBs, Non-Institutional Bidders and Retail White Individual Bidders and Eligible NRIs applying on a non-repatriation basis* Eligible NRIs, FIIs, their Sub-Accounts (other than Sub-Accounts which are foreign Blue corporate or foreign individuals bidding under the QIB Portion) under the Portfolio Investment Scheme Anchor Investors** White ASBA Bidders bidding through physical form White *Bid cum Application forms for ASBA Bidders will also be available on the website of the NSE (www.nseindia.com) and BSE (www.bseindia.com) **Bid cum Application forms for Anchor Investors have been made available at the offices of the BRLMs
Who can Bid?
Indian nationals resident in India who are not minors in single or joint names (not more than three);
Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals;
Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in equity shares;
Mutual Funds registered with SEBI;
Limited liability partnerships;
Eligible NRIs on a non repatriation basis subject to applicable laws. NRIs other than eligible NRIs are not eligible to participate in this issue;
Indian financial institutions, scheduled commercial banks (excluding foreign banks), regional rural banks, co-operative banks (subject to RBI regulations and the SEBI ICDR Regulations and other laws, as applicable);
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FIIs and sub-accounts registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual under the QIB category;
Venture Capital Funds registered with SEBI;
State Industrial Development Corporations;
Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts/societies and who are authorised under their respective constitutions to hold and invest in equity shares;
Scientific and/or industrial research organisations authorised in India to invest in Equity Shares;
Insurance companies registered with Insurance Regulatory and Development Authority;
Provident Funds with a minimum corpus of ` 250 Million and who are authorised under their constitution to hold and invest in equity shares;
Pension Funds with a minimum corpus of ` 250 Million and who are authorised under their constitution to hold and invest in equity shares;
National Investment Fund;
Insurance funds set up and managed by the army, navy or air force of the Union of India; and
Insurance funds set up by Department of Posts such as Postal Life Insurance Fund and Rural Postal Life Insurance Fund.
Note: Non residents such as FVCIs, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per the existing regulations, OCBs cannot participate in this Issue.
Participation by associates and affiliates of the BRLMs and the Syndicate Members
The BRLMs and the Syndicate Members shall not be allowed to subscribe to this Issue in any manner except towards fulfilling their underwriting obligations. However, the associates and affiliates of the BRLMs and Syndicate Members may, subject to applicable regulatory requirements subscribe to or purchase Equity Shares in the Issue, either in the QIB Portion or in Non-Institutional Portion as may be applicable to such Bidders, where the allocation is on a proportionate basis.
The BRLMs and any persons related to the BRLMs or the Promoter and the Promoter Group cannot apply in the Issue under the Anchor Investor Portion.
Bids by Mutual Funds
An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Fund Portion. In the event that the demand in the Mutual Funds portion is greater than [●] Equity Shares, allocation shall be made to Mutual Funds proportionately, to the extent of the Mutual Fund Portion. The remaining demand by the Mutual Funds shall, as part of the aggregate demand by QIBs, be available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual Fund Portion.
Bids made by asset management companies or Custodians of Mutual Funds shall specifically state names of the concerned schemes for which such bids are made.
One-third of the Anchor Investor Portion shall be reserved for allocation to domestic Mutual Funds, subject
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to valid Bids being received from domestic Mutual Funds at or above the price at which allocation is being done to other Anchor Investors.
In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made.
No Mutual Fund scheme shall invest more than 10% of its net asset value in equity shares or equity related instruments of any single company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes should own more than 10% of any company’s paid-up share capital carrying voting rights.
Bids by Eligible NRIs
Eligible NRIs should note that applications that are accompanied by payment in free foreign exchange should use the Bid cum Application Form which is blue in colour. Eligible NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts should use the form meant for Resident Indians.
Bids by FIIs
As per the current regulations, the following restrictions are applicable for investments by FIIs:
The issue of Equity Shares to a single FII should not exceed 10% of total post-Issue paid-up share capital. In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our total paid-up share capital or 5% of our total paid-up share capital in case such sub-account is a foreign corporate or a foreign individual. As of now, the aggregate FII holding in our Company cannot exceed 24% of our total paid-up share capital. With the approval of the Board and the shareholders by way of a special resolution, the aggregate FII holding can go up to 100%.
Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of Regulation 15A(1) of the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as amended (the “SEBI FII Regulations”), an FII, as defined in the SEBI FII Regulations, may issue or otherwise deal in or hold, offshore derivative instruments (as defined under the SEBI FII Regulations as any instrument, by whatever name called, which is issued overseas by a FII against securities held by it that are listed or proposed to be listed on any recognised stock exchange in India, as its underlying) directly or indirectly, only in the event (i) such offshore derivative instruments are issued only to persons who are regulated by an appropriate regulatory authority; and (ii) such offshore derivative instruments are issued after compliance with „know your client‟ norms. An FII is also required to ensure that no further issue or transfer of any offshore derivative instrument is made by or on behalf of it to any persons that are not regulated by an appropriate foreign regulatory authority as defined under the SEBI FII Regulations. Associates and affiliates of the underwriters including the BRLMs and the Syndicate Members that are FIIs may issue offshore derivative instruments against Equity Shares Allotted to them in the Issue. Any such Offshore Derivative Instrument does not constitute any obligation or claim or claim on or an interest in, our Company.
Bids by SEBI registered Venture Capital Funds
The SEBI (Venture Capital Funds) Regulations, 1996 as amended inter alia prescribe the investment restrictions on VCFs registered with SEBI.
Accordingly, the holding by any individual VCF registered with SEBI in one venture capital undertaking should not exceed 25% of the corpus of the venture capital fund. Further, venture capital funds can invest only up to 33.33% of the investible funds by way of subscription to an initial public offering of a venture capital undertaking whose shares are proposed to be listed.
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The above information is given for the benefit of the Bidders. Our Company and the BRLMs are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and Bidders are advised to ensure that any single Bid from them does not exceed the applicable investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in this Draft Red Herring Prospectus.
Maximum and Minimum Bid Size
(a) For Retail Individual Bidders: The Bid must be for a minimum of [] Equity Shares and in multiples of [] Equity Shares thereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed ` 200,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed ` 200,000. In case the Bid Amount is over ` 200,000 due to revision of the Bid or revision of the Price Band or on exercise of Cut-off Price option, the Bid would be considered for allocation under the Non-Institutional Portion. The Cut- off Price option is an option given only to the Retail Individual Bidders indicating their agreement to Bid for and purchase the Equity Shares at the final Issue Price as determined at the end of the Book Building Process.
(b) For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount exceeds ` 200,000 and in multiples of [] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. A QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date and is required to pay the Bid Amount upon submission of the Bid.
In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the Bid Amount is greater than ` 200,000 for being considered for allocation in the Non- Institutional Portion. In case the Bid Amount reduces to ` 200,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Portion would be considered for allocation under the Retail Portion. Non-Institutional Bidders and QIBs are not allowed to Bid at Cut-off Price‟.
(c) For Bidders in the Anchor Investor Portion: The Bid must be for a minimum of such number of Equity Shares such that the Bid Amount is at least ` 100 Million and in multiples of [] Equity Shares thereafter. Bids by Anchor Investors under the Anchor Investor Portion and the QIB Portion shall not be considered as multiple Bids. A Bid cannot be submitted for more than 30% of the QIB Portion under the Anchor Investor Portion. Anchor Investors cannot withdraw their Bids after the Anchor Investor Bid/ Issue Period and are required to pay the Bid Amount at the time of submission of the Bid. In case the Anchor Investor Price is lower than the Issue Price, the balance amount shall be payable as per the pay-in-date mentioned in the revised Anchor Investor Allocation Notice.
Information for the Bidders:
(a) Our Company and the BRLMs shall declare the Bid/Issue Opening Date and Bid/Issue Closing Date in the Red Herring Prospectus to be registered with the RoC and also publish the same in two national newspapers (one each in English and Hindi) and in one Malayalam newspaper with wide circulation. This advertisement shall be in the prescribed format.
(b) Our Company will file the Red Herring Prospectus with the RoC at least three days before the Bid/Issue Opening Date.
(c) Copies of the Bid cum Application Form and copies of the Red Herring Prospectus will be available with the Syndicate. For ASBA Bidders, Bid cum Application Forms will be available on
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the websites of NSE and BSE.
(d) Any eligible Bidder who would like to obtain the Red Herring Prospectus and/ or the Bid cum Application Form can obtain the same from the Registered Office of our Company.
(e) Eligible Bidders who are interested in subscribing for the Equity Shares should approach any of the BRLMs or Syndicate Members or their authorised agent(s) to register their Bids. Bidders (other than Anchor Investors) who wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their Bids.
(f) The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms (other than the ASBA Bid cum Application Forms) should bear the stamp of the Syndicate, otherwise they will be rejected. Bids by ASBA Bidders shall be accepted by the Designated Branches of the SCSBs in accordance with the SEBI ICDR Regulations and any circulars issued by SEBI in this regard. Bidders (other than Anchor Investors) applying through the ASBA process also have an option to submit the ASBA Bid cum Application Form in electronic form.
(g) The demat accounts of Bidders for whom PAN details have not been verified, excluding persons resident in the state of Sikkim, who, may be exempted from specifying their PAN for transacting in the securities market, shall be “suspended for credit” and no credit of Equity Shares pursuant to the Issue will be made into the accounts of such Bidders.
The applicants may note that in case the DP ID and Client ID and PAN mentioned in the Bid cum Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate do not match with the DP ID and Client ID and PAN available in the database of Depositories, the application is liable to be rejected.
Information specific to ASBA Bidders
(a) ASBA Bidders who would like to obtain the Red Herring Prospectus and/or the ASBA Form can obtain the same from the Designated Branches. ASBA Bidders can also obtain a copy of this Red Herring Prospectus and/or the ASBA Form in electronic form on the websites of the SCSBs.
(b) The Bids should be submitted to the SCSBs on the prescribed ASBA Form. SCSBs may provide the electronic mode of bidding either through an internet enabled bidding and banking facility or such other secured, electronically enabled mechanism for bidding and blocking funds in the ASBA Account.
(c) The SCSBs shall accept Bids only during the Bid/Issue Period and only from the ASBA Bidders.
(d) The Book Running Lead Managers shall ensure that adequate arrangements are made to circulate copies of the Red Herring Prospectus and ASBA Form to the SCSBs. The SCSBs will then make available such copies to investors intending to apply in this Offer through the ASBA process. Additionally, the Book Running Lead Managers shall ensure that the SCSBs are provided with soft copies of the abridged prospectus as well as the ASBA Forms and that the same are made available on the websites of the SCSBs.
(e) The ASBA Form shall bear the stamp of the SCSBs and/or the Designated Branch, if not, the same shall be rejected.
Method and Process of Bidding
(a) Our Company in consultation with the BRLMs will decide the Price Band and the minimum Bid lot size for the Issue and the same shall be advertised in two national newspapers (one each in English and Hindi) and in one Malayalam newspaper with wide circulation at least two working
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days prior to the Bid/ Issue Opening Date. The Syndicate and the SCSBs shall accept Bids from the Bidders during the Bid/Issue Period.
(b) The Bid/Issue Period shall be for a minimum of three working days and shall not exceed 10 working days. The Bid/ Issue Period maybe extended, if required, by at least an additional three working days, subject to the total Bid/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bid/ Issue Period, if applicable, will be published in two national newspapers (one each in English and Hindi) and one Malayalam newspaper with wide circulation and also by indicating the change on the websites of the BRLMs and at the terminals of the Syndicate.
(c) During the Bid/Issue Period, Bidders, other than QIBs, who are interested in subscribing for the Equity Shares should approach the Syndicate or their authorised agents to register their Bids. The Syndicate shall accept Bids from all Bidders and have the right to vet the Bids during the Bid/ Issue Period in accordance with the terms of the Red Herring Prospectus. Bidders (other than Anchor Investors) who wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their Bids.
(d) Each Bid cum Application Form will give the Bidder the choice to Bid for up to three optional prices (for details refer to the paragraph titled “Bids at Different Price Levels” below) within the Price Band and specify the demand (i.e., the number of Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation/Allotment and the rest of the Bid(s), irrespective of the Bid Amount, will become automatically invalid.
(e) The Bidder cannot Bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been submitted to any member of the Syndicate or the SCSBs. Submission of a second Bid cum Application Form to either the same or to another member of the Syndicate or SCBS will be treated as multiple Bids and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the paragraph entitled “Build up of the Book and Revision of Bids”.
(f) Except in relation to the Bids received from the Anchor Investors, the Syndicate/the SCSBs will enter each Bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.
(g) The BRLMs shall accept the Bids from the Anchor Investors during the Anchor Investor Bid/ Issue Period i.e. one working day prior to the Bid/ Issue Opening Date. Bids by QIBs under the Anchor Investor Portion and the QIB Portion shall not be considered as multiple Bids.
(h) Along with the Bid cum Application Form, all Bidders (other than ASBA Bidders) will make payment in the manner described in “Escrow Mechanism - Terms of payment and payment into the Escrow Accounts” in the section “Issue Procedure” beginning on page 244 of the Draft Red Herring Prospectus.
(i) Upon receipt of the ASBA Bid cum Application Form, submitted whether in physical or electronic mode, the Designated Branch of the SCSB shall verify if sufficient funds equal to the Bid Amount are available in the ASBA Account, as mentioned in the ASBA Bid cum Application Form, prior to uploading such Bids with the Stock Exchanges.
(j) If sufficient funds are not available in the ASBA Account, the Designated Branch of the SCSB
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shall reject such Bids and shall not upload such Bids with the Stock Exchanges.
(k) If sufficient funds are available in the ASBA Account, the SCSB shall block an amount equivalent to the Bid Amount mentioned in the ASBA Bid cum Application Form and will enter each Bid option into the electronic bidding system as a separate Bid and generate a TRS for each price and demand option. The TRS shall be furnished to the ASBA Bidder on request.
(l) The Bid Amount shall remain blocked in the aforesaid ASBA Account until finalisation of the Basis of Allotment and consequent transfer of the Bid Amount against the Allotted Equity Shares to the Public Issue Account, or until withdrawal/failure of the Issue or until withdrawal/rejection of the ASBA Bid cum Application Form, as the case may be. Once the Basis of Allotment is finalized, the Registrar to the Issue shall send an appropriate request to the SCSB for unblocking the relevant ASBA Accounts and for transferring the amount allocable to the successful Bidders to the Public Issue Account. In case of withdrawal/failure of the Issue, the blocked amount shall be unblocked on receipt of such information from the Registrar to the Issue.
Bids at Different Price Levels and Revision of Bids
(a) Our Company in consultation with the BRLMs and without the prior approval of, or intimation, to the Bidders, reserves the right to revise the Price Band during the Bid/ Issue Period, provided that the Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the Face Value of the Equity Shares. The revision in Price Band shall not exceed 20% on the either side i.e. the floor price can move up or down to the extent of 20% of the floor price disclosed at least two days prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly.
(b) Our Company, in consultation with the BRLMs will finalise the Issue Price within the Price Band, without the prior approval of, or intimation, to the Bidders.
(c) Our Company, in consultation with the BRLMs, can finalise the Anchor Investor Issue Price within the Price Band, without the prior approval of, or intimation, to the Anchor Investors.
(d) The Bidders can Bid at any price within the Price Band. The Bidder has to Bid for the desired number of Equity Shares at a specific price. Retail Individual Bidders may Bid at the Cut-off Price. However, bidding at Cut-off Price is prohibited for QIB and Non-Institutional Bidders and such Bids from QIB and Non-Institutional Bidders shall be rejected.
(e) Retail Individual Bidders, who Bid at Cut-off Price agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders shall submit the Bid cum Application Form along with a cheque/demand draft for the Bid Amount based on the Cap Price with the Syndicate. In case of ASBA Bidders (excluding Non-Institutional Bidders and QIB Bidders) bidding at Cut-off Price, the ASBA Bidders shall instruct the SCSBs to block an amount based on the Cap Price.
Investments by Insurance Companies
The exposure norms for insurers, prescribed under the Insurance Regulatory and Development Authority (Investment) Regulations, 2000, as amended (the "IRDA Investment Regulations"), are broadly set forth below:
(a) equity shares of a company: the least of 10% of the investee company's subscribed capital (face value) or 10% of the respective fund in case of life insurer or 10% of investment assets in case of general insurer or reinsurer;
(b) the entire group of the investee company: the least of 10% of the respective fund in case of a life insurer or 10% of investment assets in case of a general insurer or reinsurer (25% in case of
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ULIPS); and
(c) The industry sector in which the investee company operates: 10% of the insurer's total investment exposure to the industry sector (25% in case of ULIPS).
Further, w.e.f. August 1, 2008, no investment may be made in an initial public offer ("IPO") if the issue size, including offer for sale, is less than ` 2,000 million. In addition, the IRDA partially amended the exposure limits applicable to investments in public limited companies in the infrastructure and housing sectors, w.e.f. December 26, 2008, providing, among other things, that the exposure of an insurer to an infrastructure company may be increased to not more than 20%, provided that in case of equity investment, a dividend of not less than 4% including bonus should have been declared for at least five preceding years. In case of an IPO of a wholly owned subsidiary of a corporate or public sector enterprise, the above track record would be applied to the holding company. This limit of 20% would be combined for debt and equity taken together, without sub-ceilings. Further, investments in equity including preference shares and the convertible part of debentures shall not exceed 50% of the exposure norms specified under the IRDA Investment Regulations.
Investments by Banking Companies
The investment limit for banking companies as per the Banking Regulation Act, 1949, as amended, is 30% of the paid-up share capital of the investee company or 30% of the banks' own paid-up share capital and reserves, whichever is less (except in case of certain specified exceptions, such as setting up or investing in a subsidiary company, which requires RBI approval). Additionally, any investment by a bank in equity shares must be approved by such bank's investment committee set up to ensure compliance with the applicable prudential norms for classification, valuation and operation of investment portfolio of banks (currently reflected in the RBI Master Circular of July 1, 2010).
Escrow mechanism, terms of payment and payment into the Escrow Accounts
For details of the escrow mechanism and payment instructions, see “Payment Instructions” in this section.
Electronic Registration of Bids
(a) The Syndicate and the SCSBs will register the Bids using the on-line facilities of the Stock Exchanges.
(b) The Syndicate and the SCSBs will undertake modification of selected fields in the Bid details already uploaded within one Working Day from the Bid/Issue Closing Date.
(c) There will be at least one on-line connectivity facility in each city, where a stock exchange is located in India and where Bids are being accepted. The Syndicate Members and/or SCSBs shall be responsible for any acts, mistakes or errors or omission and commissions in relation to, (i) the Bids accepted by the Syndicate Members and the SCSBs, (ii) the Bids uploaded by the Syndicate Members and the SCSBs, (iii) the Bids accepted but not uploaded by the Syndicate Members and the SCSBs or (iv) with respect to Bids by ASBA Bidders, Bids accepted and uploaded without blocking funds in the ASBA Accounts. It shall be presumed that for Bids uploaded by the SCSBs, the Bid Amount has been blocked in the relevant ASBA Account.
(d) The Stock Exchanges will offer an electronic facility for registering Bids for the Issue. This facility will be available with the Syndicate and their authorised agents and the SCSBs during the Bid/ Issue Period. The Syndicate Members and the Designated Branches of the SCSBs can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently upload the off-line data file into the on-line facilities for Book Building on a regular basis. On the Bid/ Issue Closing Date, the Syndicate and the Designated Branches of the SCSBs shall upload the Bids till such time as may be permitted by the Stock Exchanges.
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(e) Based on the aggregate demand and price for Bids registered on the electronic facilities of the Stock Exchanges, a graphical representation of consolidated demand and price as available on the websites of the Stock Exchanges would be made available at the Bidding centres during the Bid/Issue Period.
(f) At the time of registering each Bid other than ASBA Bids, the Syndicate shall enter the following details of the Bidders in the on-line system:
Investor Category – Individual, Corporate, FII, NRI, Mutual Fund, etc. Numbers of Equity Shares Bid for. Bid Amount. Cheque Details. Bid cum Application Form number. DP ID and client identification number of the beneficiary account of the Bidder. PAN.
With respect to Bids by ASBA Bidders, at the time of registering such Bids, the SCSBs shall enter the following information pertaining to the ASBA Bidders into the online system:
Application Number; PAN (of First ASBA Bidder, in case of more than one ASBA Bidder); Investor Category and Sub-Category- Individual, Corporate, FII, NRI, Mutual Funds, etc.: DP ID and client identification number of the beneficiary account of the Bidders; Numbers of Equity Shares Bid for; Quantity; Bid Amount; and Bank account number;
(g) TRS will be generated for each of the bidding options when the Bid is registered. It is the Bidder‟s responsibility to obtain the TRS from the Syndicate or the Designated Branches of the SCSBs. The registration of the Bid by the member of the Syndicate or the Designated Branches of the SCSBs does not guarantee that the Equity Shares shall be allocated/Allotted either by the Syndicate or our Company.
(h) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
(i) In case of QIB Bidders, only the BRLMs and their affiliate Syndicate Members have the right to accept the Bid or reject it. However, such rejection shall be made at the time of receiving the Bid and only after assigning a reason for such rejection in writing. In case of Non-Institutional Bidders and Retail Individual Bidders, Bids will be rejected on technical grounds listed herein. The members of the Syndicate may also reject Bids if all the information required is not provided and the Bid cum Application Form is incomplete in any respect. The SCSBs shall have no right to reject Bids, except on technical grounds.
(j) The permission given by the Stock Exchanges to use their network and software of the online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by our Company and/or the BRLMs are cleared or approved by the Stock Exchanges; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, the Promoter, the management or any scheme or project of our Company; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges.
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(k) Only Bids that are uploaded on the online IPO system of the Stock Exchanges shall be considered for allocation/ Allotment. Members of the Syndicate and the SCSBs will be given up to one day after the Bid/Issue Closing Date to verify DP ID and Client ID uploaded in the online IPO system during the Bid/Issue Period after which the Registrar to the Issue will receive this data from the Stock Exchanges and will validate the electronic bid details with depository‟s records.
(l) Details of Bids in the Anchor Investor Portion will not be registered on the on-line facilities of the electronic facilities of the Stock Exchanges.
Build up of the book and revision of Bids
(a) Bids received from various Bidders through the Syndicate and the SCSBs shall be electronically uploaded to the Stock Exchanges‟ mainframe on a regular basis.
(b) The book gets built up at various price levels. This information will be available with the BRLMs at the end of the Bid/Issue Period.
(c) During the Bid/Issue Period, any Bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the Price Band using the printed Revision Form, which is a part of the Bid cum Application Form.
(d) Revisions can be made in both the desired number of Equity Shares and the Bid Amount by using the Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum Application Form and such Bidder is changing only one of the options in the Revision Form, the Bidder must still fill the details of the other two options that are not being revised, in the Revision Form. The Syndicate and the Designated Branches of the SCSBs will not accept incomplete or inaccurate Revision Forms.
(e) The Bidder can make this revision any number of times during the Bid/Issue Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate or the SCSB through whom such Bidder had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof.
(f) In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had Bid at Cut-off Price could either (i) revise their Bid or (ii) shall make additional payment based on the cap of the revised Price Band (such that the total amount i.e., original Bid Amount plus additional payment does not exceed ` 200,000 if the Bidder wants to continue to Bid at Cut- off Price), with the Syndicate to whom the original Bid was submitted. In case the total amount (i.e., original Bid Amount plus additional payment) exceeds ` 200,000, the Bid will be considered for allocation under the Non-Institutional Portion in terms of this Red Herring Prospectus. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the cap of the Price Band prior to revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of allocation, such that no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut- off Price.
(g) In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders who have Bid at Cut-off Price could either revise their Bid or the excess amount paid at the time of bidding would be refunded from the Escrow Account.
(h) Our Company in consultation with the BRLMs, shall decide the minimum number of Equity Shares for each Bid to ensure that the minimum application value is within the range of ` 5,000 to
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` 7,000.
(i) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. With respect to the Bids by ASBA Bidders, if revision of the Bids results in an incremental amount, the relevant SCSB shall block the additional Bid Amount. In case of Bids, other than ASBA Bids, the Syndicate shall collect the payment in the form of cheque or demand draft if any, to be paid on account of the upward revision of the Bid at the time of one or more revisions by the QIB Bidders. In such cases, the Syndicate will revise the earlier Bids details with the revised Bid and provide the cheque or demand draft number of the new payment instrument in the electronic book. The Registrar will reconcile the Bid data and consider the revised Bid data for preparing the Basis of Allotment.
(j) When a Bidder revises his or her Bid, he or she should surrender the earlier TRS request for a revised TRS from the Syndicate or the SCSB, as proof of his or her having revised the previous Bid.
Price Discovery and Allocation
(a) Based on the demand generated at various price levels, our Company in consultation with the BRLMs, shall finalise the Issue Price and the Anchor Investor Issue Price.
(b) Under-subscription, if any, in any other category, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company in consultation with the BRLMs and the Designated Stock Exchange.
(c) Allocation to Non-Residents, including Eligible NRIs and FIIs registered with SEBI, applying on repatriation basis will be subject to applicable law, rules, regulations, guidelines and approvals.
(d) Allocation to Anchor Investors shall be at the discretion of our Company in consultation with the BRLMs, subject to compliance with the SEBI ICDR Regulations.
(e) QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date. Further, the Anchor Investors shall not be allowed to withdraw their Bids after the Anchor Investor Bid/Issue Period.
Signing of the Underwriting Agreement and the RoC Filing
(a) Our Company, the BRLMs and the Syndicate Members shall enter into an Underwriting Agreement on or immediately after the finalisation of the Issue Price.
(b) After signing the Underwriting Agreement, our Company will update and file the updated Red Herring Prospectus with the RoC in accordance with the applicable law, which then would be termed as the „Prospectus‟. The Prospectus will contain details of the Issue Price, the Anchor Investor Issue Price, Issue size, and underwriting arrangements and will be complete in all material respects.
Pre-Issue Advertisement
Subject to Section 66 of the Companies Act, our Company shall, after registering the Red Herring Prospectus with the RoC, publish a pre-Issue advertisement, in the form prescribed by the SEBI ICDR Regulations, in one English language national daily newspaper, one Hindi language national daily newspaper and one Malayalam language daily newspaper, each with wide circulation.
Advertisement regarding Issue Price and Prospectus
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Our Company will issue a statutory advertisement after the filing of the Prospectus with the RoC. This advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the Issue Price and the Anchor Investor Issue Price. Any material updates between the date of the Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.
Issuance of Confirmation of Allotment Note (“CAN”)
(a) Upon approval of the Basis of Allotment by the Designated Stock Exchange, the Registrar shall send to the Syndicate a list of the Bidders who have been Allotted Equity Shares in the Issue.
(b) The Registrar will dispatch CANs to the Bidders who have been Allotted Equity Shares in the Issue.
(c) The dispatch of CAN shall be deemed a valid, binding and irrevocable contract for the Bidder.
(d) The Issuance of CAN is subject to “Notice to Anchor Investors - Allotment Reconciliation and CANs” as set forth below.
Notice to Anchor Investors: Allotment Reconciliation and CANs
A physical book will be prepared by the Registrar on the basis of the Bid cum Application Forms received from Anchor Investors. Based on the physical book and at the discretion of our Company in consultation with the BRLMs, selected Anchor Investors will be sent an Anchor Investor Allocation Notice and if required, a revised Anchor Investor Allocation Notice. All Anchor Investors will be sent Anchor Investor Allocation Notice post Anchor Investor Bid/Issue Period and in the event that the Issue Price is higher than the Anchor Investor Issue Price, the Anchor Investors will be sent a revised Anchor Investor Allocation Notice within one day of the Pricing Date indicating the number of Equity Shares allocated to such Anchor Investor and the pay-in date for payment of the balance amount. Anchor Investors should note that they shall be required to pay any additional amounts, being the difference between the Issue Price and the Anchor Investor Issue Price, as indicated in the revised Anchor Investor Allocation Notice within the pay- in date referred to in the revised Anchor Investor Allocation Notice. The revised Anchor Investor Allocation Notice will constitute a valid, binding and irrevocable contract (subject to the issue of CAN) for the Anchor Investor to pay the difference between the Issue Price and the Anchor Investor Issue Price and accordingly the CAN will be issued to such Anchor Investors. In the event the Issue Price is lower than the Anchor Investor Issue Price, the Anchor Investors who have been Allotted Equity Shares will directly receive CAN. The CAN shall be deemed a valid, binding and irrevocable contract for the Allotment of Equity Shares to such Anchor Investors.
The final allocation is subject to the physical application being valid in all respect along with receipt of stipulated documents, the Issue Price being finalised at a price not higher than the Anchor Investor Issue Price and Allotment by the Board of Directors.
Designated Date and Allotment of Equity Shares:
(a) Our Company will ensure that: (i) the Allotment of Equity Shares; and (ii) credit to the successful Bidder‟s depositary account will be completed within 12 Working Days of the Bid/Issue Closing Date. After the funds are transferred from the Escrow Account to the Public Issue Account on the Designated Date, our Company will ensure the credit to the successful Bidder‟s depository account is completed within two working days from the date of Allotment.
(b) In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be made only in the dematerialised form to the Allottees.
(c) Allottees will have the option to re-materialise the Equity Shares so Allotted as per the provisions of the Companies Act and the Depositories Act.
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Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated/ Allotted to them pursuant to this Issue.
GENERAL INSTRUCTIONS
Do’s:
(a) Check if you are eligible to apply;
(b) Ensure that you have Bid within the Price Band;
(c) Read all the instructions carefully and complete the Bid cum Application Form;
(d) Ensure that the details about the Depository Participant and the beneficiary account are correct as Allotment of Equity Shares will be in the dematerialised form only;
(e) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate or with respect to ASBA Bidders, ensure that your Bid is submitted at a Designated Branch of the SCSB where the ASBA Bidder or the person whose bank account will be utilised by the Bidder for bidding has a bank account;
(f) With respect to Bids by ASBA Bidders ensure that the ASBA Bid cum Application Form is signed by the account holder in case the applicant is not the account holder. Ensure that you have mentioned the correct bank account number in the ASBA Bid cum Application Form;
(g) Ensure that you request for and receive a TRS for all your Bid options;
(h) Ensure that you have funds equal to the Bid Amount in your bank account maintained with the SCSB before submitting the ASBA Bid cum Application Form to the respective Designated Branch of the SCSB;
(i) Ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate and funds equivalent to the Bid Amount are blocked in case of any Bids submitted though the SCSBs.
(j) Instruct your respective banks to not release the funds blocked in the bank account under the ASBA process;
(k) Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised TRS;
(l) Except for Bids submitted on behalf of the Central Government or the State Government and officials appointed by a court, all Bidders should mention their PAN allotted under the IT Act;
(m) Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects;
Don’ts:
(a) Do not Bid for lower than the minimum Bid size;
(b) Do not Bid/ revise Bid Amount to less than the Floor Price or higher than the Cap Price;
(c) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the Syndicate or the SCSBs, as applicable;
(d) Do not pay the Bid Amount in cash, by money order or by postal order or by stockinvest;
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(e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate or the SCSBs only;
(f) Do not Bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders, for Bid Amount in excess of ` 200,000);
(g) Do not Bid for a Bid Amount exceeding ` 200,000 (for Bids by Retail Individual Bidders);
(h) Do not fill up the Bid cum Application Form such that the Equity Shares Bid for exceeds the Issue Size and/ or investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations;
(i) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground; and
(j) Do not submit the Bids without the full Bid Amount.
INSTRUCTIONS SPECIFIC TO ASBA BIDDERS
Do’s:
(a) Check if you are eligible to Bid under ASBA.
(b) Ensure that you use the ASBA Form specified for the purposes of ASBA.
(c) Read all the instructions carefully and complete the ASBA Form.
(d) Ensure that your ASBA Form is submitted at a Designated Branch where the ASBA Account is maintained and not to the Escrow Collecting Banks (assuming that such bank is not a SCSB), to our Company, or the Registrar to the Offer or the Book Running Lead Managers.
(e) Ensure that the ASBA Form is signed by the ASBA Account holder in case the ASBA Bidder is not the account holder.
(f) Ensure that you have mentioned the correct ASBA Account number in the ASBA Form.
(g) Ensure that you have funds equal to the Bid Amount in the ASBA Account before submitting the ASBA Form to the respective Designated Branch.
(h) Ensure that you have correctly checked the authorisation box in the ASBA Form, or have otherwise provided an authorisation to the SCSB via the electronic mode, for the Designated Branch to block funds in the ASBA Account equivalent to the Bid Amount mentioned in the ASBA Form.
(i) Ensure that you receive an acknowledgement from the Designated Branch for the submission of your ASBA Form.
(j) Ensure that the name(s) given in the ASBA Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the ASBA Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the ASBA Form. Don'ts:
(a) Do not Bid on another ASBA Form or on a Bid cum Application Form after you have submitted a Bid to a Designated Branch.
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(b) Payment of Bid Amounts in any mode other than through blocking of Bid Amounts in the ASBA Accounts shall not be accepted under the ASBA.
(c) Do not send your physical ASBA Form by post. Instead submit the same to a Designated Branch.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM
Bids must be:
(a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable.
(b) Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected. Bidders should note that the Syndicate and / or the SCSBs, as appropriate, will not be liable for errors in data entry due to incomplete or illegible Bid cum Application Forms or Revision Forms.
(c) Information provided by the Bidders will be uploaded in the online IPO system by the Syndicate and the SCSBs, as the case may be, and the electronic data will be used to make allocation/ Allotment. The Bidders should ensure that the details are correct and legible.
(d) For Retail Individual Bidders, the Bid must be for a minimum of [] Equity Shares and in multiples of [] thereafter subject to a maximum Bid Amount of ` 200,000.
(e) For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds ` 200,000 and in multiples of [] Equity Shares thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of Equity Shares that can be held by them under the applicable laws or regulations.
(f) For Anchor Investors, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds or equal to ` 100 Million and in multiples of [] Equity Shares thereafter.
(g) In single name or in joint names (not more than three, and in the same order as their Depository Participant details).
(h) Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.
Bidder’s PAN, Depository Account and Bank Account Details
Bidders should note that on the basis of PAN of the Bidders, DP ID and beneficiary account number provided by them in the Bid cum Application Form, the Registrar will obtain from the Depository the demographic details including address, Bidders bank account details, MICR code and occupation (hereinafter referred to as “Demographic Details”). These bank account details would be used for giving refunds (including through physical refund warrants, direct credit, NECS, NEFT and RTGS) or unblocking of ASBA Account. Hence, Bidders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays in despatch/ credit of refunds to Bidders or unblocking of ASBA Account at the Bidders sole risk and neither the BRLMs or the Registrar or the Escrow Collection Banks or the SCSBs nor our Company shall have any responsibility and undertake any liability for the same. Hence, Bidders should carefully fill in their Depository Account details in the Bid cum Application Form.
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These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/CANs/allocation advice and printing of bank particulars on the refund orders or for refunds through electronic transfer of funds, as applicable. The Demographic Details given by Bidders in the Bid cum Application Form would not be used for any other purpose by the Registrar.
By signing the Bid cum Application Form, the Bidder would be deemed to have authorised the Depositories to provide, upon request, to the Registrar, the required Demographic Details as available on its records.
Refund orders/ CANs would be mailed at the address of the Bidder as per the Demographic Details received from the Depositories. Bidders may note that delivery of refund orders/ CANs may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In such an event, the address and other details given by the Bidder (other than ASBA Bidders) in the Bid cum Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at such Bidder’s sole risk and neither our Company, the Escrow Collection Banks, Registrar, the BRLMs shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay.
In case no corresponding record is available with the Depositories, which matches the two parameters, namely, PAN of the Bidder and the DP ID/Client ID, then such Bids are liable to be rejected.
Bids by Non-Residents including Eligible NRIs and FIIs on a repatriation basis
Bids and revision to Bids must be made in the following manner:
1. On the Bid cum Application Form or the Revision Form, as applicable (blue in colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.
2. In a single name or joint names (not more than three and in the same order as their Depositary Participant Details).
3. Bids on a repatriation basis shall be in the names of individuals, or in the name of FIIs but not in the names of minors, OCBs, firms or partnerships, foreign nationals (excluding NRIs) or their nominees.
Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.
There is no reservation for Eligible NRIs and FIIs and all Bidders will be treated on the same basis with other categories for the purpose of allocation.
Bids under Power of Attorney
In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, FIIs, Mutual Funds, insurance companies and provident funds with a minimum corpus of ` 250 Million (subject to applicable law) and pension funds with a minimum corpus of ` 250 Million, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum of association and articles of association and/or bye laws must be lodged along with the Bid cum Application Form. Failing this, our Company reserves the right to accept or
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reject any Bid in whole or in part, in either case, without assigning any reason thereof.
In addition to the above, certain additional documents are required to be submitted by the following entities:
(a). With respect to Bids by FIIs and Mutual Funds, a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form.
(b). With respect to Bids by insurance companies registered with the Insurance Regulatory and Development Authority, in addition to the above, a certified copy of the certificate of registration issued by the Insurance Regulatory and Development Authority must be lodged along with the Bid cum Application Form.
(c). With respect to Bids made by provident funds with a minimum corpus of ` 250 Million (subject to applicable law) and pension funds with a minimum corpus of ` 250 Million, a certified copy of a certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the Bid cum Application Form.
Our Company in its absolute discretion, reserves the right to relax the above condition of simultaneous lodging of the power of attorney along with the Bid cum Application form, subject to such terms and conditions that our Company, the BRLMs may deem fit.
PAYMENT INSTRUCTIONS
Escrow Mechanism for Bidders other than ASBA Bidders
Our Company and the Syndicate shall open Escrow Account(s) with one or more Escrow Collection Bank(s) in whose favour the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders would be deposited in the Escrow Account.
The Escrow Collection Banks will act in terms of the Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Banks for and on behalf of the Bidders shall maintain the monies in the Escrow Account until the Designated Date. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the funds represented by allocation of Equity Shares (other than ASBA funds with the SCSBs) from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue Account with the Bankers to the Issue. The balance amount after transfer to the Public Issue Account shall be transferred to the Refund Account. Payments of refund to the Bidders shall also be made from the Refund Account as per the terms of the Escrow Agreement and the Draft Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between our Company, the Syndicate, the Escrow Collection Banks and the Registrar to facilitate collections from the Bidders.
Payment mechanism for ASBA Bidders
The ASBA Bidders shall specify the bank account number in the ASBA Bid cum Application Form and the SCSB shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Bid cum Application Form. The SCSB shall keep the Bid Amount in the relevant bank account blocked until withdrawal/ rejection of the ASBA Bid or receipt of instructions from the Registrar to unblock the Bid Amount. In the event of withdrawal or rejection of the ASBA Bid cum Application Form or for unsuccessful ASBA Bid cum Application Forms, the Registrar shall give instructions to the SCSB to unblock the application money in the relevant bank account within one day of receipt of such instruction. The Bid Amount shall remain blocked in the ASBA Account until finalisation of the Basis of Allotment in
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the Issue and consequent transfer of the Bid Amount to the Public Issue Account, or until withdrawal/ failure of the Issue or until rejection of the Bids by ASBA Bidder, as the case may be.
Payment into Escrow Account for Bidders other than ASBA Bidders
Each Bidder shall draw a cheque or demand draft or remit the funds electronically through the RTGS mechanism for the Bid Amount payable on the Bid as per the following terms:
1. All Bidders would be required to pay the full Bid Amount at the time of the submission of the Bid cum Application Form.
2. The Bidders shall, with the submission of the Bid cum Application Form, draw a payment instrument for the Bid Amount in favour of the Escrow Account and submit the same to the Syndicate. If the payment is not made favouring the Escrow Account along with the Bid cum Application Form, the Bid of the Bidder shall be rejected.
3. The payment instruments for payment into the Escrow Account should be drawn in favour of:
(a) In case of Resident QIB Bidders: “[●]”
(b) In case of Non-Resident QIB Bidders: “[●]”
(c) In case of Resident Retail and Non-Institutional Bidders: “[●]”
(d) In case of Non-Institutional Bidders: “[●]”
4. Anchor Investors would be required to pay the Bid Amount at the time of submission of the Bid cum Application Form. In the event of the Issue Price being higher than the price at which allocation is made to Anchor Investors, the Anchor Investors shall be required to pay such additional amount to the extent of shortfall between the price at which allocation is made to them and the Issue Price as per the pay-in date mentioned in the revised Anchor Investor Allocation Notice. If the Issue Price is lower than the price at which allocation is made to Anchor Investors, the amount in excess of the Issue Price paid by Anchor Investors shall not be refunded to them.
5. For Anchor Investors, the payment instruments for payment into the Escrow Account should be drawn in favour of:
(a) In case of resident Anchor Investors: “[●]”
(b) In case of non-resident Anchor Investors: “[●]”
6. In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non- Resident Bidder bidding on a repatriation basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE Account or FCNR Account.
7. In case of Bids by NRIs applying on non-repatriation basis, the payments must be made through Indian Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support
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of the remittance or out of a Non-Resident Ordinary (NRO) Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting an NRE or FCNR or NRO Account.
8. In case of Bids by FIIs, the payment should be made out of funds held in a Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting the Special Rupee Account.
9. The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the Designated Date.
10. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to the Issue.
11. Payments should be made by cheque, or a demand draft drawn on any bank (including a co- operative bank), which is situated at, and is a member of or sub-member of the bankers‟ clearing house located at the centre where the Bid cum Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ stockinvest/money orders/postal orders will not be accepted.
Submission of Bid cum Application Form and ASBA Forms
All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid. With respect to the ASBA Bidders, the ASBA Form or the ASBA Revision Form shall be submitted to the Designated Branches. No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder.
OTHER INSTRUCTIONS
Joint Bids in the case of Individuals
Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communications will be addressed to the First Bidder and will be dispatched to his or her address as per the Demographic Details received from the Depository.
Multiple Bids
A Bidder should submit only one (and not more than one) Bid
In case of a Mutual Fund, a separate Bid may be made in respect of each scheme of the Mutual Fund and such Bids in respect of over one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. Bids by QIBs under the Anchor Investor Portion and the QIB Portion (excluding the Anchor Investor Portion) will not be treated as multiple Bids.
After submitting a bid using an ASBA Bid cum Application Form either in physical or electronic mode, where such ASBA Bid has been submitted to the SCSBs and uploaded with the Stock Exchanges, an
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ASBA Bidder cannot Bid, either in physical or electronic mode, whether on another ASBA Bid cum Application Form, to either the same or another Designated Branch of the SCSB, or on a non-ASBA Bid cum Application Form. Submission of a second Bid in such manner will be deemed a multiple Bid and would be rejected. However, ASBA Bidders may revise their Bids through the Revision Form, the procedure for which is described in “Build Up of the Book and Revision of Bids” below.
More than one ASBA Bidder may Bid for Equity Shares using the same ASBA Account, provided that the SCSBs will not accept a total of more than five ASBA Bid cum Application Forms with respect to any single ASBA Account.
Duplicate copies of ASBA Bid cum Application Forms downloaded and printed from the website of the Stock Exchanges bearing the same application number shall be treated as multiple Bids and are liable to be rejected.
Our Company, in consultation with the BRLMs, reserves the right to reject, in its absolute discretion, all or all except one of such multiple Bid(s) in any or all categories. In this regard, the procedures which would be followed by the Registrar to the Issue to detect multiple Bids are provided below:
1. All Bids will be checked for common PAN as per the records of Depository. For Bidders other than Mutual Funds and FII sub-accounts, Bids bearing the same PAN will be treated as multiple Bids and will be rejected.
2. For Bids from Mutual Funds and FII sub-accounts, which are submitted under the same PAN, as well as Bids on behalf of the Central or State Government, an official liquidator or receiver appointed by a court and residents of Sikkim, for whom the submission of PAN is not mandatory, the Bids are scrutinised for DP ID and Beneficiary Account Numbers. In case such Bids bore the same DP ID and Beneficiary Account Numbers, these would be treated as multiple Bids and will be rejected.
Permanent Account Number or PAN
Except for Bids on behalf of the Central or State Government and the officials appointed by the courts, the Bidders, or in the case of a Bid in joint names, each of the Bidders, should mention his/ her PAN allotted under the I.T. Act. In accordance with the SEBI ICDR Regulations, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of transaction. Any Bid cum Application Form without the PAN is liable to be rejected, except for residents in the state of Sikkim, may be exempted from specifying their PAN for transactions in the securities market. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground.
Withdrawal of ASBA Bids
ASBA Bidders can withdraw their Bids during the Bid/ Issue Period by submitting a request for the same to the SCSBs who shall do the requisite, including deletion of details of the withdrawn ASBA Form from the electronic bidding system of the Stock Exchanges and unblocking of the funds in the ASBA Account. In case an ASBA Bidder (other than a QIB bidding through an ASBA Form) wishes to withdraw the Bid after the Offer Closing Date, the same can be done by submitting a withdrawal request to the Registrar to the Offer. The Registrar to the Offer shall delete the withdrawn Bid from the Bid file and give instruction to the SCSB for unblocking the ASBA Account after approval of the „Basis of Allotment‟.
REJECTION OF BIDS
In case of QIB Bidders, our Company, in consultation with the BRLMs, may reject Bids provided that the reasons for rejecting the same shall be provided to such Bidders in writing. In case of Non-Institutional Bidders and Retail Individual Bidders, our Company has a right to reject Bids based on technical grounds. Consequent refunds shall be made by RTGS/NEFT/NES/Direct Credit/cheque or pay order or draft and
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will be sent to the Bidder‟s address at the Bidder‟s risk. With respect to Bids by ASBA Bidders, the Designated Branches of the SCSBs shall have the right to reject Bids by ASBA Bidders if at the time of blocking the Bid Amount in the Bidder‟s bank account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not available in the Bidder‟s bank account maintained with the SCSB. Subsequent to the acceptance of the Bid by ASBA Bidder by the SCSB, our Company would have a right to reject the ASBA Bids only on technical grounds.
Grounds for Technical Rejections
Bidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:
Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for. With respect to Bids by ASBA Bidders, the amounts mentioned in the ASBA Bid cum Application Form does not tally with the amount payable for the value of the Equity Shares Bid for;
In case of partnership firms, Equity Shares may be registered in the names of the individual partners and no firm as such shall be entitled to apply;
Bid by persons not competent to contract under the Indian Contract Act, 1872, as amended including minors, insane persons;
PAN not mentioned in the Bid cum Application Form;
GIR number furnished instead of PAN;
Bids for lower number of Equity Shares than specified for that category of investors;
Bids at a price less than the Floor Price;
Bids at a price more than the Cap Price;
Signature of sole and/or joint Bidders missing;
Submission of more than five ASBA Bid cum Application Forms per bank account;
Submission of Bids by Anchor Investors through ASBA process
Bids at Cut-off Price by Non-Institutional and QIB Bidders;
Bids for number of Equity Shares which are not in multiples of [];
Category not indicated;
Multiple Bids as defined in the Draft Red Herring Prospectus;
In case of Bids under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted;
Bids accompanied by Stockinvest/money order/postal order/cash;
Bid cum Application Forms does not have the stamp of the BRLMs or Syndicate Members or the SCSB;
Bid cum Application Forms does not have Bidder‟s depository account details;
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Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid cum Application Forms, Bid/Issue Opening Date advertisement and the Draft Red Herring Prospectus and as per the instructions in the Draft Red Herring Prospectus and the Bid cum Application Forms;
In case no corresponding record is available with the Depositories that matches the Depository Participant‟s identity (DP ID) and the beneficiary‟s account number;
With respect to ASBA Bids, inadequate funds in the bank account to block the Bid Amount specified in the ASBA Bid cum Application Form at the time of blocking such Bid Amount in the bank account;
Bids for amounts greater than the maximum permissible amounts prescribed by the regulations;
Bids where clear funds are not available in Escrow Accounts as per final certificate from the Escrow Collection Banks;
Bids by QIBs not submitted through the BRLMs or in case of ASBA Bids for QIBs not intimated to the BRLMs;
Bids by persons in the United States excluding “qualified institutional buyers” as defined in Rule 144A of the Securities Act or other than in reliance of Regulation S under the Securities Act;
Bids by any person outside India if not in compliance with applicable foreign and Indian Laws;
Bids not uploaded on the terminals of the Stock Exchanges; and
Bids by persons prohibited from buying, selling or dealing in the shares directly or indirectly by SEBI or any other regulatory authority.
IN CASE THE DP ID, CLIENT ID AND PAN MENTIONED IN THE BID CUM APPLICATION FORM AND ENTERED INTO THE ELECTRONIC BIDDING SYSTEM OF THE STOCK EXCHANGES BY THE SYNDICATE/THE SCSBs DO NOT MATCH WITH THE DP ID, CLIENT ID AND PAN AVAILABLE IN THE RECORDS WITH THE DEPOSITARIES, THE APPLICATION IS LIABLE TO BE REJECTED.
EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL
As per the provisions of Section 68B of the Companies Act, the Allotment of Equity Shares in this Issue shall be only in a de-materialised form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode).
In this context, two agreements have been signed among our Company, the respective Depositories and the Registrar:
Agreement dated [●] among NSDL, our Company and the Registrar;
Agreement dated [●], among CDSL, our Company and the Registrar.
All Bidders can seek Allotment only in dematerialised mode. Bids from any Bidder without relevant details of his or her depository account are liable to be rejected.
(a) A Bidder applying for Equity Shares must have at least one beneficiary account with either of the Depository Participants of either NSDL or CDSL prior to making the Bid.
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(b) The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository Participant‟s identification number) appearing in the Bid cum Application Form or Revision Form.
(c) Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.
(d) Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the Depository.
(e) If incomplete or incorrect details are given under the heading, „Bidders Depository Account Details‟ in the Bid cum Application Form or Revision Form, it is liable to be rejected.
(f) The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum Application Form vis-à-vis those with his or her Depository Participant.
(g) Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where the Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.
(h) The trading of the Equity Shares of our Company would be in dematerialised form only for all Bidders in the demat segment of the respective Stock Exchanges.
(i) Non transferable advice or refund orders will be directly sent to the Bidders by the Registrar to the Issue.
Communications
All future communications in connection with Bids made in this Issue should be addressed to the Registrar quoting the full name of the sole or First Bidder, Bid cum Application Form number, Bidders Depository Account Details, number of Equity Shares applied for, date of Bid cum Application Form, name and address of the member of the Syndicate or the Designated Branch of the SCSBs where the Bid was submitted and cheque or draft number and issuing bank thereof or with respect to ASBA Bids, bank account number in which the amount equivalent to the Bid Amount was blocked.
Bidders can contact the Compliance Officer or the Registrar in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of Allotment, credit of Allotted shares in the respective beneficiary accounts, refund orders etc. In case of ASBA Bids submitted to the Designated Branches of the SCSBs, the Bidders can contact the Designated Branches of the SCSBs.
PAYMENT OF REFUND
Bidders other than ASBA Bidders must note that on the basis of Bidder‟s DP ID and beneficiary account number provided by them in the Bid cum Application Form, the Registrar will obtain, from the Depositories, the Bidders‟ bank account details, including the nine digit Magnetic Ink Character Recognition (“MICR”) code as appearing on a cheque leaf to make refunds.
On the Designated Date and no later than 12 Working Days from the Bid/Issue Closing Date, the Escrow Collection Bank shall despatch refund orders for all amounts payable to unsuccessful Bidders (other than ASBA Bidders) and also the excess amount paid on bidding, if any, after adjusting for allocation/Allotment to such Bidders.
Mode of making refunds for Bidders other than ASBA Bidders
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The payment of refund, if any, for Bidders other than ASBA Bidders would be done through various modes in the following order of preference:
1. NECS – Payment of refund would be done through NECS for applicants having an account at any of the centres where such facility has been made available. This mode of payment of refunds would be subject to availability of complete bank account details including the MICR code as appearing on a cheque leaf, from the Depositories. The payment of refunds is mandatory for applicants having a bank account at any of the centres where clearing houses are managed by the RBI, except where the applicant is eligible and opts to receive refund through direct credit or RTGS.
2. Direct Credit – Applicants having bank accounts with the Refund Bank (s), as mentioned in the Bid cum Application Form, shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Company.
3. RTGS – Applicants having a bank account at any of the centres where clearing houses are managed by the RBI and whose refund amount exceeds ` 200,000 will be considered to receive refund through RTGS. For such eligible applicants, IFSC code will be derived based on the MICR code of the Bidder as per depository records/RBI master. In the event the same is not available as per depository records/RBI master, refund shall be made through NECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by our Company. Charges, if any, levied by the applicant‟s bank receiving the credit would be borne by the applicant.
4. NEFT – Payment of refund shall be undertaken through NEFT wherever the applicants‟ bank has been assigned the Indian Financial System Code (IFSC), which can be linked to a MICR, if any, available to that particular bank branch. IFSC will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever the applicants have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC of that particular bank branch and the payment of refund will be made to the applicants through this method.
5. For all other applicants, including those who have not updated their bank particulars with the MICR code, the refund orders will be despatched under certificate of posting for value upto ` 1,500 and through Speed Post/ Registered Post for refund orders of ` 1,500 and above. Such refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.
Mode of making refunds for ASBA Bidders
In case of ASBA Bidders, the Registrar shall instruct the SCSBs to unblock the funds in the relevant ASBA Accounts to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within 12 Working Days of the Bid/Issue Closing Date.
DISPOSAL OF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF DELAY
With respect to Bidders other than ASBA Bidders, our Company shall ensure dispatch of Allotment advice, refund orders (except for Bidders who receive refunds through electronic transfer of funds) and give benefit to the beneficiary account with Depository Participants of the Bidders and submit the documents pertaining to the Allotment to the Stock Exchanges within 12 working days of Bid/ Issue Closing date.
In case of applicants who receive refunds through NECS, direct credit or RTGS, the refund instructions will be given to the clearing system within 12 Working Days from the Bid/ Issue Closing Date. A suitable
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communication shall be sent to the Bidders receiving refunds through this mode within 12 Working Days of Bid/ Issue Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund.
Our Company shall ensure that all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed, are taken within 12 Working Days of the Bid/Issue Closing Date.
In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI ICDR Regulations, our Company further undertakes that:
Allotment of Equity Shares shall be made only in dematerialised form within 12 Working Days of the Bid/Issue Closing Date; and
With respect to Bidders other than ASBA Bidders, dispatch of refund orders or in a case where the refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing system within 12 Working Days of the Bid/Issue Closing Date would be ensured. With respect to the ASBA Bidders, instructions for unblocking of the ASBA Bidder‟s Bank Account shall be made within 12 Working Days from the Bid/Issue Closing Date.
Our Company shall pay interest at 15% p.a. for any delay beyond 15 days or 12 working days, whichever is later from the Bid/Issue Closing Date, if Allotment is not made and refund orders are not dispatched or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the clearing system in the disclosed manner and/or demat credits are not made to investors within the 12 Working Days prescribed above. If such money is not repaid within eight days from the day our Company becomes liable to repay, our Company and every Director of our Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money with interest as prescribed under the applicable law.
IMPERSONATION
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the Companies Act, which is reproduced below:
“Any person who:
(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or
(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”
BASIS OF ALLOTMENT
A. For Retail Individual Bidders
Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all the successful Retail Individual Bidders will be made at the Issue Price.
The Issue size less Allotment to Non-Institutional and QIB Bidders will be available for Allotment to Retail Individual Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.
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If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.
If the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, the Allotment shall be made on a proportionate basis up to a minimum of [] Equity Shares. For the method of proportionate Basis of Allotment, refer below.
B. For Non-Institutional Bidders
Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to determine the total demand under this category. The Allotment to all successful Non-Institutional Bidders will be made at the Issue Price.
The Issue size less Allotment to QIBs and Retail will be available for Allotment to Non- Institutional Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.
If the aggregate demand in this category is less than or equal to [●] Equity Shares at or above the Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent of their demand.
In case the aggregate demand in this category is greater than [●] Equity Shares at or above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of [] Equity Shares, and in multiples of [●] Equity Shares thereafter. For the method of proportionate Basis of Allotment refer below.
C. For QIBs (other than Anchor Investors)
Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the total demand under this portion. The Allotment to all the successful QIB Bidders will be made at the Issue Price.
The QIB Portion will be available for Allotment to QIB Bidders who have Bid in the Issue at a price that is equal to or greater than the Issue Price.
Allotment shall be undertaken in the following manner:
(a) In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion (excluding Anchor Investor Portion) shall be determined as follows:
(i) In the event that Bids by Mutual Fund exceeds 5% of the QIB Portion (excluding Anchor Investor Portion), allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion (excluding Anchor Investor Portion).
(ii) In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB Portion (excluding Anchor Investor Portion) then all Mutual Funds shall get full Allotment to the extent of valid Bids received above the Issue Price.
(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds will be available for Allotment to all QIB Bidders as set out in (b) below;
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(b) In the second instance Allotment to all QIBs shall be determined as follows:
(i) In the event that the oversubscription in the QIB Portion, all QIB Bidders who have submitted Bids above the Issue Price shall be allotted Equity Shares on a proportionate basis for up to 95% of the QIB Portion.
(ii) Mutual Funds, who have received allocation as per (a) above, for less than the number of Equity Shares Bid for by them, are eligible to receive Equity Shares on a proportionate basis along with other QIB Bidders.
(iii) Under-subscription below 5% of the QIB Portion (excluding Anchor Investor Portion), if any, from Mutual Funds, would be included for allocation to the remaining QIB Bidders on a proportionate basis.
The aggregate Allotment (other than spill over in case of under-subscription in other categories) to QIB Bidders shall be up to [●] Equity Shares.
D. For Anchor Investor Portion
Allocation of Equity Shares to Anchor Investors at the Anchor Investor Issue Price will be at the discretion of our Company in consultation with the BRLMs, subject to compliance with the following requirements:
o not more than 30% of the QIB Portion will be allocated to Anchor Investors;
o one-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the price at which allocation is being done to other Anchor Investors; and
o allocation to Anchor Investors shall be on a discretionary basis and subject to a minimum number of two Anchor Investors for allocation upto ` 2,500 Million and minimum number of five Anchor Investors for allocation more than ` 2,500 Million.
The number of Equity Shares allocated to Anchor Investors and the Anchor Investor Issue Price, shall be made available in the public domain by the BRLMs before the Bid/ Issue Opening Date by intimating the same to the Stock Exchanges.
Method of Proportionate Basis of Allotment in the Issue
In the event of the Issue being over-subscribed, our Company shall finalise the Basis of Allotment in consultation with the Designated Stock Exchange. The executive director (or any other senior official nominated by them) of the Designated Stock Exchange along with the BRLMs and the Registrar shall be responsible for ensuring that the Basis of Allotment is finalised in a fair and proper manner.
The Allotment shall be made in marketable lots, on a proportionate basis as explained below: a) Bidders will be categorised according to the number of Equity Shares applied for. b) The total number of Equity Shares to be Allotted to each category as a whole shall be arrived at on a proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders in the category multiplied by the number of Equity Shares applied for)
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multiplied by the inverse of the over-subscription ratio. c) Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the over-subscription ratio. d) In all Bids where the proportionate Allotment is less than [] Equity Shares per Bidder, the Allotment shall be made as follows:
(a) The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of Equity Shares Allotted in that category is equal to the number of Equity Shares calculated in accordance with (b) above; and
(b) Each successful Bidder shall be Allotted a minimum of [] Equity Shares. e) If the proportionate Allotment to a Bidder is a number that is more than [] but is not a multiple of one (which is the marketable lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0.5 it would be rounded off to the lower whole number. Allotment to all in such categories would be arrived at after such rounding off. f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares Allotted to the Bidders in that category, the remaining Equity Shares available for Allotment shall be first adjusted against any other category, where the Allotted Equity Shares are not sufficient for proportionate Allotment to the successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of Equity Shares. g) Subject to valid Bids being received, allocation of Equity Shares to Anchor Investors shall be at the sole discretion of our Company, in consultation with the BRLMs.
Illustration of Allotment to QIBs and Mutual Funds (“MF”)
A. Issue Details
Sr. No. Particulars Issue details 1. Issue size 200 million equity shares 3. Allocation to QIB (50%) 100 million equity shares Of which: a. Allocation to MF (5%) 5 million equity shares b. Balance for all QIBs including MFs 95 million equity shares 6. No. of QIB applicants 10 7. No. of shares applied for 500 million equity shares
B. Details of QIB Bids (Number of equity shares in million) Sr. No. Type of QIB bidders# No. of shares bid for 1 A1 50 2 A2 20 3 A3 130 4 A4 50 5 A5 50 6 MF1 40 7 MF2 40
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Sr. No. Type of QIB bidders# No. of shares bid for 8 MF3 80 9 MF4 20 10 MF5 20 Total 500 # A1-A5: (QIB bidders other than MFs), MF1-MF5 ( QIB bidders which are Mutual Funds)
C. Details of Allotment to QIB Bidders/ Applicants
(Number of equity shares in million) Type of Shares Allocation of 5 million Allocation of balance 95 Aggregate QIB bid for Equity Shares to MF million Equity Shares to allocation to bidders proportionately (please see QIBs proportionately (please MFs note two below) see note four below) (I) (II) (III) (IV) (V) A1 50 0 9.60 0 A2 20 0 3.84 0 A3 130 0 24.95 0 A4 50 0 9.60 0 A5 50 0 9.60 0 MF1 40 1 7.48 8.48 MF2 40 1 7.48 8.48 MF3 80 2 14.97 16.97 MF4 20 0.50 3.74 4.24 MF5 20 0.50 3.74 4.24 500 5 95 42.41
Please note:
1. The illustration presumes compliance with the requirements specified in this Draft Red Herring Prospectus in “Issue Structure” on page 241.
2. Out of 100 million Equity Shares allocated to QIBs, 5 million (i.e. 5%) will be allocated on proportionate basis among Mutual Fund applicants who applied for 200 shares in QIB category.
3. The balance 95 million Equity Shares (i.e. 100 - 5 (available for MFs)) will be allocated on proportionate basis among 10 QIB applicants who applied for 500 Equity Shares (including five MF applicants who applied for 200 Equity Shares).
4. The figures in the fourth column titled “Allocation of balance 95 million Equity Shares to QIBs proportionately” in the above illustration are arrived as under:
For QIBs other than Mutual Funds (A1 to A5)= No. of shares bid for (i.e. in column II) X 95 / 495.
For Mutual Funds (MF1 to MF5)= [(No. of shares bid for (i.e. in column II of the table above) less Equity Shares allotted ( i.e., column III of the table above)] X 95 / 495.
The numerator and denominator for arriving at allocation of 95 million shares to the 10 QIBs are reduced by 5 million shares, which have already been allotted to Mutual Funds in the manner specified in column III of the table above.
Letters of Allotment or Refund Orders or instructions to the SCSBs
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Our Company shall credit the Allotted Equity Shares to the beneficiary account with depository participants within 12 Working Days from the Bid/Issue Closing Date. Applicants residing at the centres where clearing houses are managed by the RBI, will get refunds through NECS only except where applicant is otherwise eligible to get refunds through direct credit and RTGS. Our Company shall ensure dispatch of refund orders, if any, of value up to ` 1,500, by “Under Certificate of Posting”, and shall dispatch refund orders equal to or above ` 1,500, if any, by registered post or speed post at the sole or First Bidder‟s sole risk within 12 Working Days of the Bid/Issue Closing Date. Bidders to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post, intimating them about the mode of credit of refund within 12 Working Days of the Bid/ Issue Closing Date. In case of ASBA Bidders, the Registrar shall instruct the relevant SCSBs to, on the receipt of such instructions from the Registrar, unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Form or the relevant part thereof, for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within 12 Working Days of the Bid/Issue Closing Date.
Interest in case of delay in despatch of Allotment Letters or Refund Orders/ instruction to the SCSBs by the Registrar.
Our Company agree that (i) Allotment of Equity Shares; and (ii) credit to the successful Bidders‟ depositary accounts will be completed within 12 Working Days of the Bid/ Issue Closing Date. Our Company further agree that it shall pay interest at the rate of 15% p.a. if the Allotment letters or refund orders have not been despatched to the applicants or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given in the disclosed manner within 15 days from the Bid/ Issue Closing Date.
Our Company will provide adequate funds required for dispatch of refund orders or Allotment advice to the Registrar.
Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by our Company as a Refund Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.
UNDERTAKINGS BY OUR COMPANY
Our Company undertakes the following:
That the complaints received in respect of this Issue shall be attended to by our Company expeditiously and satisfactorily;
That all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed within 12 Working Days of the Bid/Issue Closing Date;
That funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available to the Registrar by the Issuer;
That where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 12 Working Days of the Bid/ Issue Closing Date, as the case may be, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund;
That the certificates of the securities/ refund orders to Eligible NRIs shall be despatched within specified time;
That no further issue of Equity Shares shall be made till the Equity Shares offered through the Red Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing,
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under-subscription etc.; and
That adequate arrangement shall be made to collect all ASBA Bid cum Application Forms and to consider them similar to non-ASBA applications while finalising the Basis of Allotment.
Utilisation of Issue proceeds
The Board of Directors certify that:
all monies received out of the Issue shall be credited/transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Companies Act;
details of all monies utilised out of Issue shall be disclosed, and continue to be disclosed till the time any part of the issue proceeds remains unutilised, under an appropriate head in our balance sheet indicating the purpose for which such monies have been utilised;
details of all unutilised monies out of the Issue, if any shall be disclosed under an appropriate separate head in the balance sheet indicating the form in which such unutilised monies have been invested;
the utilisation of monies received under Promoter‟s contribution shall be disclosed, and continue to be disclosed till the time any part of the Issue proceeds remains unutilised, under an appropriate head in the balance sheet of our Company indicating the purpose for which such monies have been utilised; and
the details of all unutilised monies out of the funds received under Promoter‟s contribution shall be disclosed under a separate head in the balance sheet of the issuer indicating the form in which such unutilised monies have been invested.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of GoI and FEMA. While the Industrial Policy, 1991 prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy 1991, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. As per current foreign investment policies, foreign direct investment in retail sector is specifically prohibited except to the extent of 51% in single brand product retailing, with prior Governmental approval, subject to satisfaction of certain conditions. However, FIIs can invest under the portfolio investment scheme in compliance with the provisions of Schedule 2 of the Foreign Exchange Management (Transfer of Issue of Security by a person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) and Eligible NRIs can invest on a repatriation or non-repatriation basis in compliance with the provisions of Schedules 3 and 4, respectively of the FEMA Regulations.
By way of Circular No. 53 dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indian company in a public offer without the prior approval of the RBI, so long as the price of the equity shares to be issued is not less than the price at which the equity shares are issued to residents.
Foreign Investment in the Jewellery Sector
Foreign investment in the jewellery sector is governed by the FEMA, the FEMA Regulations, the Consolidated Foreign Direct Investment Policy (“FDI Policy”) issued by the Department of Industrial Policy and Promotion (“DIPP”) effective from October 1, 2010 and the relevant Press Notes issued by the Secretariat for Industrial Assistance, GoI. Under these rules, regulations and policies, foreign direct investment up to 100% is permitted in the jewellery industry.
Foreign Investment in Multi Brand Retail Sector
The Industrial Policy, 1991 prescribed the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy. The Government of India has since amended the Industrial Policy, 1991 from time to time in order to enable FDI in various sectors in a phased manner gradually allowing higher levels of foreign participation in Indian companies. The FEMA regulates the precise manner in which such investment may be made.
Foreign investment in the retail sector is governed by the FEMA, the FEMA Regulations, the Consolidated Foreign Direct Investment Policy (“FDI Policy”) issued by the Department of Industrial Policy and Promotion (“DIPP”) effective from October 1, 2010 and the relevant Press Notes issued by the Secretariat for Industrial Assistance, GoI.
FEMA Regulations
As per the FEMA Regulations and the FDI Policy, FDI is permitted up to 100% under the automatic route in case of a company engaged in the manufacture of jewellery products. However, FDI is specifically prohibited in the retail sector, except to the extent of 51% in single brand product retailing, with prior Governmental approval, subject to the satisfaction of certain conditions.
As per Regulation 5(2) of the FEMA Regulations, FIIs may purchase or transfer shares of an Indian company under the portfolio investment scheme, in compliance with the provisions of Schedule 2 of the FEMA Regulations.
Further, as per Regulation 5(3) of the FEMA Regulations, NRIs may purchase or transfer shares of an Indian company by either of the following routes:
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(i) Purchase of shares or debentures under the portfolio investment scheme in accordance with the provisions contained in Schedule 3 of the FEMA Regulations; or
(ii) Purchase of shares or debentures on a non-repatriation basis, other than under the portfolio investment scheme in accordance with the provisions contained in Schedule 4 of the FEMA Regulations.
Further, Schedule 4 of the FEMA Regulations outlines certain specific sectors within which NRI investment are not permitted, but does not expressly restrict investment in multi brand retail.
Note: As per the existing policy of the Government of India, OCBs cannot participate in this Issue. Non-residents such as FVCIs, multilateral and bilateral development financial institutions are not permitted to participate in the Issue.
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction, except in compliance with the applicable laws of such jurisdiction.
The Equity Shares have not been and will not be registered under the US Securities Act of 1933 and may not be offered or sold within the United States (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered outside the United States in offshore transactions in compliance with Regulation S under the Securities Act and the applicable laws of the jurisdiction where those offers and sales occur.
The above information is given for the benefit of the Bidders. Our Company and the BRLMs are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares Bid for do not exceed the applicable limits under laws or regulations.
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SECTION VIII – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION
DEFINITIONS & INTERPRETATIONS
1. Definitions
In the Articles unless repugnant to the context or otherwise excluded:
i. “Act” shall mean the Companies Act, 1956 and any statutory modifications thereto or re- enactments thereof for the time being in force.
ii. “Articles/Articles of Association” shall mean the Articles of Association of the Company, as contained herein, or as amended from time to time, as provided in the Act and in these Articles.
iii. “Annual General Meeting shall mean a General Meeting of the Members held in accordance with the provisions of Section 166 of the Act or any adjourned Meeting thereof;
iv. “Applicable Law” shall mean the laws of India, including any statute, law, ordinance, rule, administrative interpretation, regulation, policy statement or guidelines, print media guidelines, order, writ, injunction, directive, judgment or decree (whether central, state, local municipal or otherwise), as the case may be;
v. “Beneficial Owner” shall mean a Person Or Persons whose name is recorded as such with a Depository
vi. “Board of Directors or Board” shall mean the Board of Directors of the Company duly constituted for the time being;
vii. “Chairman” shall mean the Chairman of the Board of Directors of the Company; viii. “Company” shall mean Joyalukkas India Limited;
ix. “Contract or contracting” shall include any legally enforceable contract, agreement, commitment, obligation, undertaking or understanding, including without limitation, any note, bond, mortgage, indenture, license or lease;
x. “Debenture” shall include debenture stock;
xi. “Depository” shall mean a company formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration to act as depository under the Securities & Exchange Board of India Act, 1992; and wherein the securities of the Company are dealt with in accordance with the provisions of the Depositories Act, 1996;
xii. “Director” shall mean a Member of the Board of Directors of the Company; xiii. “Encumbrances” shall include any mortgage, pledge, hypothecation, equitable interest, prior assignment, conditional sales contract, right of others, claim, security interest, encumbrance, title defect, title retention agreement, voting trust agreement, interest, option, lien , charge, litigation, right of minor persons or other condition, commitment, restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership;
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xiv. “Equity Share” shall mean equity shares, as defined in Section 85 of the Act.
xv. “Equity Share Capital” shall mean the issued and paid up capital of the Company, other than preference share capital of the Company, from time to time being.
xvi. “Executive Chairman” shall mean the Executive Chairman of the Company.
xvii. “Extraordinary General Meeting” shall mean an extraordinary general meeting of the Members duly called and constituted and any adjourned General meeting thereof;
xviii. “Governmental Authority” shall mean the Republic of India, any State of India and any local authority or any political sub-division thereof and includes (i) any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to the government, including without limitation, the Reserve Bank of India, or any other government or statutory or regulatory authority, agency department, board, commission or instrumentality of the Republic of India, any State or India, any local authority or any political sub-division thereof, and/or any court, tribunal or arbitrator(s) of competent jurisdiction, and (ii) any governmental, statutory or non-governmental autonomous or self-regulatory organization, agency, Person or authority discharging such functions;
xix. “Individual” shall mean a natural person.
xx. “Managing Director” shall mean the Managing Directors of the Company appointed in terms of Article 94.
xxi. “Meeting” or “General Meeting” shall mean a meeting of Members.
xxii. “Members” shall mean the Shareholders of the Company whose names appear in the Register of Members of the Company.
xxiii. “Memorandum of Association” shall mean the Memorandum of Association of the Company for the time being in force;
xxiv. “Month” shall mean the calendar month.
xxv. “Paid-Up capital” shall be such amount which shall not be less than Rs. 5 lakhs or such sum as may be prescribed by the Act.
xxvi. “Person” shall mean any individual and corporate person
xxvii. “Preference Shares” shall mean preference shares as defined in Section 85 of the Act; xxviii. “Proxy” shall mean an instrument under which any person is authorized to vote for a member at a General meeting on a poll and includes attorney duly constituted under a power of attorney.
xxix. “Registered Office” shall mean the registered office for the time being of the Company.
xxx. “Regulatory Approvals” shall mean all consents, permits, permissions, approvals and authorizations required under Applicable Law from any Governmental Authority for doing any act, deed or thing.
xxxi. “Seal” shall mean the Common Seal of the Company.
xxxii. “Secretary” shall mean the duly qualified Company Secretary, appointed as such for the time being, of the Company.
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xxxiii. “Security” shall mean such security including warrants as may be specified by SEBI from time to time.
xxxiv. “SEBI” shall mean the Securities and Exchange Board of India.
xxxv. ”Special Resolution” shall have the meaning assigned thereto by Section 189 of the Act;
xxxvi. “Year” shall mean a calendar year and Financial year shall have the meaning assigned thereto by the Act.
Interpretation
i. Unless repugnant to the context or otherwise excluded, the words and phrases used in these Articles but not defined herein shall have, mutatis mutandis, the same meaning ascribed to them in the Act.
ii. The heading and sub-headings in these Articles are included for convenience and identification only and are intended to describe, interpret, define or limit the scope, extent or intent of these Articles or any provision hereof in any manner whatsoever.
iii. (a) The definitions in Clause 1 shall apply equally to both the singular and plural form of the terms defined.
(b) Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter form.
(c) The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.
(d) Unless the context otherwise requires (a) all references to Clauses, are to Clauses of these Articles; and (b) the terms “herein” “hereof” “hereunder” and words of similar import refer to these Articles as a whole.”
SHARE CAPITAL
Share Capital 3. The Authorized Share Capital of the Company is as expressed in the Clause V of the Memorandum of Association with power to increase or reduce the Capital and to divide the shares in the Capital into such classes subject to the provisions of the Companies Act, 1956. Increase of capital 4. by the Company The company may from time to time by ordinary resolution increase the share capital by such sum, how carried to to be divided into shares of such amount as may be specified in the resolution. effect Non Voting Shares 5. In the event it is permitted by the law to issue shares with non-voting rights attached to them, the Directors may issue such shares upon such terms and conditions and with such rights and privileges annexed thereto as thought fit and as may be permitted by law. Redeemable 6. Preference Shares. Subject to the provisions of Section 80 of the Act and all other applicable provisions of the Companies Act, 1956, the Company shall have the power to issue preference shares which are or at the option of the Company, liable to be redeemed and the resolution authorising such issue shall
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prescribe the manner, terms and conditions of redemption. Provisions to apply 7. on issue of On the issue of redeemable preference shares under the provisions of Article 6 hereof, the Redeemable following provisions shall take effect. Preference Shares a) No such Shares shall be redeemed except out of profits of the Company which would otherwise be available for dividend or out of proceeds of a fresh issue of shares made for the purpose of the redemption. b) No such Shares shall be redeemed unless they are fully paid. c) The premium, if any payable on redemption shall have been provided for out of the profits of the Company or out of the Company's share premium account, before the Shares are redeemed. d) Where any such Shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall out of profits which would otherwise have been available for dividend, be transferred to a reserve fund, to be called "the Capital Redemption Reserve Account", a sum equal to the nominal amount of the Shares redeemed, and the provisions of the Act relating to the reduction of the share capital of the Company shall, except as provided in Section 80 of the Act apply as if the Capital Redemption Reserve Account were paid-up share capital of the Company. e) Subject to the provisions of Section 80 of the Act. The redemption of preference shares hereunder may be effected in accordance with the terms and conditions of their issue and in the absence of any specific terms and conditions in that behalf, in such manner as the Directors may think fit. Reduction of 8. Capital The company may (subject to provision of Section 78,80 and 100 to 105 both inclusive, and other applicable provisions of the Act, if any) from time to time by special resolution reduce in any manner and subject to, any incident, authorization and consent required by law, - 1) its share capital; 2) any capital redemption reserve account; or 3) any securities premium account Sub-division, 9. consolidation and Subject to the provisions of Section 94 and other applicable provisions of the Act, the Company cancellation of may by ordinary resolution passed in general meeting- shares a) Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; b) Subdivide its existing shares or any of them into shares of smaller amount than is fixed by its memorandum, subject, nevertheless, to the provisions of clause (d) of subsection (1) of section 94. c) Cancel any shares which, at the date of passing of the resolution, have not been taken or agreed to be taken by any person Purchase of own 10. Shares Notwithstanding anything contained in these articles, but subject to the conditions, restrictions and/or limitations contained in Sections 77A, 77AA, and 77B and other applicable provisions, if any, of the Companies Act, 1956 and the provisions of any other statutes, as may be amended from time to time, the Company may purchase its own shares or securities (referred to as Buy- Back) under section 77A(1).
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Modification of 11. rights a) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of sections 106 and 107, and whether or not the company is being wound up, be varied with the consent in writing of the holders of three fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. b) To every such separate meeting, the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class in question. c) The rights conferred upon the holders of the Shares (including preference shares, if any) of any class issued with preferred or other rights or privileges shall, unless otherwise expressly provided by the terms of the issue of Shares of that class, be deemed not to be modified, commuted, affected, dealt with or varied by the creation or issue of further Shares ranking pari passu therewith. Shares under 12. control of Subject always to the provisions of Section 81 of the Act and these Articles, the shares in the Directors capital of the Company for the time being shall be under the control of the Directors who may issue, allot or otherwise dispose of the same or any of them to such persons, in such proportion and on such terms and conditions and either at a premium or at par or (subject to the compliance with the provisions of Section 79 of the Act) at a discount and at such time as they may from time to time think fit and with the sanction of the Company in the General Meeting to give to any person or persons the option or right to call for any shares either at par or premium during such time and for such consideration as the Directors think fit, and may issue and allot shares in the capital of the company on payment in full or part of any property sold and transferred or for any services rendered to the Company in the conduct of its business and any shares which may so be allotted may be issued as fully paid up shares and if so issued, shall be deemed to be fully paid shares. Provided that option or right to call of shares shall not be given to any person or persons without the sanction of the company in the General Meeting. Restriction on 13. allotment and The Board of Directors shall observe the restrictions on allotment of Shares to the public contained return of allotment in Sections 69 and 70 of the Act, and shall cause to be made the returns as to allotment provided for in Section 75 of the Act. Further Issue of 14. Shares (1) Where at any time after the expiry of two years from the formation of the Company or at any time after the expiry of one year from allotment of Shares in the Company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the Company by allotment of further Shares whether out of unissued share capital or out of increased share capital then: a) Such further Shares shall be offered to the persons who at the date of the offer are holders of equity shares of the Company, in proportion, as nearly as circumstances admit, to the capital paid up on those Shares at that date. b) Such offer shall be made by a notice specifying the number of Shares offered and limiting a time not being less than fifteen days from the date of the offer and the offer, if not accepted, will be deemed to have been declined. c) The offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the Shares offered to him in favour of any other person, and the notice referred to in sub-clause (b) shall contain a statement of this right, provided that the
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Directors may decline, without assigning any reason, to allot any Shares to any person in whose favour any Member may renounce the Shares offered to him. d) After the expiry of the time specified in the aforesaid notice or on receipt of earlier intimation from the person to whom such notice is given declines to accept the Shares offered, the Board of Directors may dispose them off in such manner and to such person(s) as they may think in their sole discretion fit. (2) Notwithstanding anything contained in sub-clause (1) hereof, the further Shares aforesaid may be offered to any person(s) (whether or not those person include the person referred to in clause (a) sub-clause (1) in any manner whatsoever. a) If a special resolution to that effect is passed by the Company in the General Meeting; or b) Where no such special resolution is passed, if the votes cast (whether on show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that General meeting (including the casting vote, if any, of the Chairman) by Members who, being entitled to do so, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by Members so entitled and voting and the Central Government is satisfied, on an application made by the Board of Directors in this behalf, that the proposal is beneficial to the Company. (3) Nothing contained in sub-clause 1(c) above shall be deemed: (a) To extend the time within which the offer should be accepted; (b) To authorize any person to exercise the right of renunciation for a second time on the ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation. (4) Nothing contained in this Article shall apply to the increase of the subscribed capital caused by the exercise of an option attached to the debentures issued or loans raised by the Company: i. To convert such debentures or loans into shares in the Company; or ii. To subscribe for shares in the Company (whether such option is conferred in these Articles or otherwise). Provided that the terms of issue of such debenture or the terms of such loans include a term provided for such option and such term: a) Either has been approved by the Central Government before the issue of the debentures or the raising of the loans or is in conformity with Rules: if any, made by, that Government in this behalf; and b) In the case of debentures loans or other than debentures issued to or loans obtained from Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the Company in General Meeting before the issue of the debentures or raising of the loans. Power to offer 15. Shares/options to (i) Without prejudice to the generality of the powers of the Board under Article 12 or in any acquire Shares other Article of these Articles of Association, the Board or any Committee thereof duly constituted may, subject to the applicable provisions of the Act, rules notified thereunder and any other applicable laws, rules and regulations, at any point of time, offer existing or further Shares (consequent to increase of share capital) of the Company, or options to acquire such Shares at any point of time, whether such options are granted by way of warrants or in any other manner (subject to such consents and permissions as may be required) to its employees, including Directors (whether whole-time or not), whether at par, at discount or at a premium, for cash or for consideration other than cash, or any combination thereof as may be permitted by law for the time being in force.
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(ii) In addition to the powers of the Board under Article 15(i), the Board may also allot the Shares referred to in Article 15(i) to any trust, whose principal objects would inter alia include further transferring such Shares to the Company‟s employees [including by way of options, as referred to in Article 15(i)] in accordance with the directions of the Board or any Committee thereof duly constituted for this purpose. The Board may make such provision of moneys for the purposes of such trust, as it deems fit.
(iii) The Board, or any Committee thereof duly authorised for this purpose, may do all such acts, deeds, things, etc. as may be necessary or expedient for the purposes of achieving the objectives set out in Articles 15(i) and (ii) above.
Power of General 16. Meeting to (i) Without prejudice to the generality of the powers of the General Meeting under Article 12 or authorize Board to in any other Article of these Articles of Association, the General Meeting may, subject to the offer shares/options applicable provisions of the Act, rules notified there under and any other applicable laws, to employees. rules and regulations, determine, or give the right to the Board or any Committee thereof to determine, that any existing or further Shares (consequent to increase of share capital) of the Company, or options to acquire such Shares at any point of time, whether such options are granted by way of warrants or in any other manner (subject to such consents and permissions as may be required) be allotted/granted to its employees, including Directors (whether whole- time or not), whether at par, at discount or a premium, for cash or for consideration other than cash, or any combination thereof as may be permitted by law for the time being in force. The General Meeting may also approve any Scheme/Plan/ other writing, as may be set out before it, for the aforesaid purpose (ii) In addition to the powers contained in Article 16(i), the General Meeting may authorise the Board or any Committee thereof to exercise all such powers and do all such things as may be necessary or expedient to achieve the objectives of any Scheme/Plan/other writing approved under the aforesaid Article. Issue of shares at a 17. discount The Company may issue at a discount Shares in the Company of a class already issued, if the following conditions are fulfilled, namely: (a) The issue of the Shares at discount is authorised by resolution passed by the Company in the General Meeting and sanctioned by the Company Law Board; (b) The resolution specifies the maximum rate of discount (not exceeding ten percent or such higher percentage as the Company Law Board may permit in any special case) at which the Shares are to be issued; and (c) The Shares to be issued at a discount are issued within two months after the date in which the issue is sanctioned by the Company Law Board or within such extended time as the Company Law Board may allow. The Board may 18. issue shares as Subject to the provisions of the Act, Applicable Laws and these Articles, the Board may issue, fully paid up for allot or otherwise dispose of the shares to such Persons, in such proportion and on such terms and consideration other conditions, either at a premium or at par or (subject to the compliance with the provision of the than cash. Act) at a discount and at such time as they may from time to time think fit and with the sanction of the Company in a General meeting to give to any person or Persons the option or right to call for any Shares either at par or premium during such time and for such consideration as the Board think fit and may issue and allot Shares in the capital of the Company on payment in full or part of any property sold and transferred or for any services rendered to the Company in the conduct of its business and any Shares which may so be allotted may be issued as fully paid shares. Provided that option or right to call for shares shall not be given to any Person or Persons without the
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sanction of the Company in the General Meeting. Acceptance of 19. shares An application signed by or on behalf of the applicant for shares in the company, followed by an allotment of shares therein shall be acceptance of the shares within the meaning of these Articles, and every person who thus or otherwise accepts any shares and whose name is in the Register shall for the purpose of these Articles be a member. Liability of 20. Members Every Member or his heirs, executors, assignees or other representatives shall pay to the Company the portion of the capital represented by his Share or Shares which may for the time being remain unpaid thereon, in such amounts at such time or times and in such manner as the Board shall, from time to time, in accordance with the Company‟s regulations require or fix for the payment thereof and so long as any monies are due, owing and unpaid to the Company by any Member on any account. However, such Member in default shall not be entitled at the option of the Board, to exercise any rights or privileges available to him.
SHARE CERTIFICATES AND REGISTER OF MEMBERS Share Certificate 21. (a) Every Member shall be entitled, without payment to one or more certificates in the marketable lots, for all the Shares of each class or denomination registered in his name, or if the board so approves (upon paying such fee as the Board may from time to time determine) to several certificates, each for one or more of such Shares and the Company shall complete and have ready for delivery such certificates within three months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within one month of the receipt of applications for registration of transfer, transmission, sub-division, consolidation or renewal of any of its Shares as the case may be. Every certificate of Shares shall be under the Seal of the Company and shall specify the number and distinctive numbers of Shares in respect of which it is issued and amount paid-up thereon and shall be in such form as the Board may prescribe or approve, provided that in respect of a Share or Shares held jointly by several Persons, the Company shall not be bound to issue and deliver more than one certificate and delivery of a certificate of Shares of one of several joint holders shall be sufficient delivery to all such holders. (b) Any two or more joint allottees of a share shall for the purpose of this Articles, be treated as a single member, and the certificate of any share, which may be subject of joint ownership may be delivered to anyone of such joint owners on behalf of all of them. (b) Any two or more joint allotees of a share shall, for the purpose of this Article, be treated as a single member, and the certificate of any share, which may be the subject of joint ownership may be delivered (c) A Director may sign a share certificate by affixing his signature thereon by means of any machine, equipment or other mechanical means, such as engraving in metal or lithography; but not by means of a rubber stamp provided that the Director shall be responsible of the safe custody of such machine, equipment or other material used for the purpose. (d) No certificate of any share or shares in the company shall be issued except in pursuance of resolution passed by the Board. Issue of New 22. Certificate in place If any certificate be worn out, defaced, mutilated or torn or if there be no further space on the back of One Defaced, thereof for endorsement of transfer, then upon production and surrender thereof to the Company, a Lost or Destroyed new certificate may be issued in lieu thereof, and if any certificate lost or destroyed then upon proof thereof to the satisfaction of the company and on execution of such indemnity as the company deem adequate, being given, and a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed certificate. Every Certificate under the Article shall be issued without payment of fees if the Directors so decide, or on payment of such fees (not exceeding Rs.2/- for each certificate) as the Directors shall
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prescribe. Provided that no fee shall be charged for issue of new certificates in replacement of those which are old, defaced or worn out or where there is no further space on the back thereof for endorsement of transfer. Provided that notwithstanding what is stated above, the Directors shall comply with such Rules or Regulation or requirements of any Stock Exchange or the Rules made under the Act or the rules made under Securities Contracts (Regulation) Act, 1956 or any other Act, or rules applicable in this behalf. The provisions of this Article shall mutatis mutandis apply to debentures of the Company. The first named 23. joint holder deemed If any shares stand in the name of two or more Persons, the one first named in the Register of sole holder Members shall, as regard receipt of dividend, bonus or service of notice and all or any other matters connected with the Company, except voting at Meetings and the transfer of Shares, be deemed the sole-holder thereof but joint-holder of Shares shall be severally as well as jointly liable for the payment of the installments and calls in respect of such Shares and for all incidents thereof according to the Company‟s regulations. Funds of Company 24. not to be applied in No funds of the Company shall except as provided by Section 77 of the Act, be employed in the purchase of Shares purchase of its own Shares, unless the consequent reduction of capital is effected and sanction in of the Company pursuance of Sections 78, 80 and 100 to 105 of the Act and these Articles or in giving either directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any Share in the Company in its holding Company. Interest out of 25. capital Where any Shares are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provisions of any plant which cannot be made profitable for lengthy period, the Company may pay interest on so much of that share capital as is for the time being paid-up, for the period at the rate and subject to the conditions and restrictions provided by Section 208 of the Act and may charge the same to capital as part of the cost of construction of the work or building or the provisions of the plant. Terms of Issue of 26. Debentures Any Debenture, debenture stock or other securities may be issued at a discount, premium or otherwise and may be issued on the condition that they shall be convertible into Shares of any denomination, with any privileges and conditions as to redemption, surrender, drawing, allotment of Shares, attending (but not voting) at the General Meeting, appointment of Directors and otherwise. Debentures with a right of conversion into or allotment of shares shall be issued only with the consent of the company in general meeting accorded by Special Resolution.
CALLS Directors may make 27. calls (a) Subject to the provisions of Section 91 of the Act, the Board of Directors may from time to time by a resolution passed at a meeting of a Board (and not by a circular resolution)make such calls as it thinks fit upon the Members in respect of all moneys unpaid on the Shares or by way of premium, held by them respectively and not by conditions of allotment thereof made payable at fixed time and each Member shall pay the amount of every call so made on him to person or persons and at the times and places appointed by the Board of Directors. A call may be made payable by installments. A call may be postponed or revoked as the Board may determine. No call shall be made payable within less than one month from the date fixed for the payment of the last preceding call.
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(b) The joint holders of a Share shall be jointly and severally liable to pay all calls in respect thereof.
(c) The option or right to call on shares shall not be given to any person except with the sanction of the Company in general meetings. Notice of call 28. when to make Not less than one month notice in writing of any call shall be given by the Company specifying the time and place of payment and the person or persons to whom such call shall be paid. Call deemed to 29. have been made A call shall be deemed to have been made at the time when the resolution authorising such call was passed at a meeting of the Board of Directors and may be made payable by the Members of such date or at the discretion of the Directors on such subsequent date as shall be fixed by the Board of Directors Directors may 30. extend time The Board of Directors may, from time to time at its discretion, extend the time fixed for the payment of any call and may extend such time to call on any of the Members, the Board of Directors may deem fairly entitled to such extension but no Member shall be entitled to such extension as of right except as a matter of grace and favour. Amount payable at 31. fixed time or by If by the terms of issue of any Share or otherwise any amount is made payable at any fixed time or instalments to be by instalments at fixed time (whether on account of the amount of the Share or by way of treated as calls premium) every such amount or instalment shall be payable as if it were a call duly made by the Directors and of which due notice has been given and all the provisions herein contained in respect of calls shall apply to such amount or instalment accordingly. Interest on calls or 32. instalments If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being or allottee of the Share in respect of which the call shall have been made or the installment shall be due, shall pay interest on the same at such rate not exceeding 9% percent per annum as Directors shall fix from the day appointed for the payment thereof upto the time of actual payment but the Directors may waive payment of such interest wholly or in part. Evidence in action 33. by company On the trial of hearing of any action or suit brought by the Company against any Member or his against shareholder Legal Representatives for the recovery of any money claimed to be due to the Company in respect of his Shares, it shall be sufficient to prove that the name of the Member in respect of whose Shares the money is sought to be recovered is entered on the Register of Members as the holder or as one of the holders at or subsequent to the date at which the money sought to be recovered is alleged to have become due on the Shares in respect of which the money is sought to be recovered, that the resolution making the call is duly recorded in the minute book and the notice of such call was duly given to the Member or his legal representatives sued in pursuance of these Articles and it shall not be necessary to prove the appointment of Directors who made such call, nor that a quorum of Directors was present at the Board meeting at which any call was made nor that the meeting at which any call was made was duly convened or constituted nor any other matter whatsoever but the proof of the matters aforesaid shall be conclusive evidence of the debt. Payment in 34. anticipation of The Directors may, if they think fit, subject to the provisions of Section 92 of the Act, agree to and calls may carry receive from any member willing to advance the same, whole or any part of the moneys due upon interest
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the shares held by him beyond the sums actually called for, and upon the amount so paid or satisfied in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made, the company may pay interest at such rate, as the member paying such sum in advance and the Directors agree upon provided that money paid in advance of calls shall not confer a right to participate in profits or dividend. The Directors may at any time repay the amount so advanced. The members shall not be entitled to any voting rights in respect of the moneys so paid by him until the same would but for such payment, become presently payable. The provisions of this Article shall mutatis mutandis apply to the calls on Debentures of the Company.
LIEN Company to have 35. lien on Shares/ The Company shall have a first and paramount lien upon all the Shares/Debentures (other than Debentures fully paid-up Shares/Debentures) registered in the name of each Member (whether held solely or jointly with others) and upon the proceeds of sale thereof, for all monies (whether presently payable or not) called or payable at a fixed time in respect of such Shares/Debentures and no equitable interest in any Shares shall be created except upon the footing and condition that this Article will have full affect. Any such lien shall extend to all dividends and bonuses from time to time declared in respect of such Shares/ Debentures. Unless otherwise agreed, the registration of a transfer of Shares/ Debentures shall operate as waiver of the Company‟s lien, if any, on such Shares/Debentures. The Board may at any time declare any Shares/Debentures wholly or in part to be exempt from the provisions of this clause.
FORFIETURE OF SHARES If money payable 36. on Shares not paid If any Member fails to pay the whole or any part of any call or any installments of a call on or notice to be given before the day appointed for the payment of the same or any such extension thereof, the Board of Directors may, at any time thereafter, during such time as the call for installment remains unpaid, give notice to him requiring him to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment.
Sum payable on 37. allotment to be For the purposes of the provisions of these Articles relating to forfeiture of Shares, the sum deemed a call payable upon allotment in respect of a share shall be deemed to be a call payable upon such Share on the day of allotment. Form of notice 38. The notice shall name a day, (not being less than fourteen days from the day of the notice) and a place or places on and at which such call in installment and such interest thereon at such rate not exceeding eighteen percent per annum as the Directors may determine and expenses as aforesaid are to be paid. The notice shall also state that in the event of the non-payment at or before the time and at the place appointed, Shares in respect of which the call was made or installment is payable will be liable to be forfeited. In default of 39. payment shares to If the requirements of any such notice as aforesaid are not complied with, any Share or Shares in be forfeited respect of which such notice has been given may at any time thereafter before payment of all calls or installments, interests and expenses due in respect thereof, be forfeited by a resolution of the Board of Directors to that effect. Such forfeiture shall include all dividends declared or any other
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moneys payable in respect of the forfeited Shares and not actually paid before the forfeiture. Notice of forfeiture 40. to a member When any Share shall have been so forfeited, notice of the forfeiture shall be given to the Member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith be made in the Register of Members, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make any such entry as aforesaid. Forfeited shares to 41. be the property of Any Share so forfeited, shall be deemed to be the property of the Company and may be sold, re- the company and allotted or otherwise disposed of, either to the original holder or to any other person, upon such may be sold etc terms and in such manner as the Board of Directors shall think fit.
Member still liable 42. for money owing Any Member whose Shares have been forfeited shall notwithstanding the forfeiture, be liable to at the time of pay and shall forthwith pay to the Company on demand all calls, installments, interest and forfeiture expenses owing upon or in respect of such Shares at the time of the forfeiture together with interest thereon from the time of the forfeiture until payment, at such rate not exceeding 9% percent per annum as the Board of Directors may determine and the Board of Directors may enforce the payment of such moneys or any part thereof, if it thinks fit, but shall not be under any obligation to do so. Effects of 43. forfeiture The forfeiture of a Share shall involve the extinction at the time of the forfeiture, of all interest in and all claims and demand against the Company in respect of the Share and all other rights incidental to the Share, except only such of those rights as by these Articles are expressly saved. There shall not be any forfeiture of unclaimed dividends before the claim becomes barred by law. Power to annul 44. forfeiture The Board of Directors may at any time before any Share so forfeited shall have been sold, re- allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit. Declaration of 45. forfeiture (a) A duly verified declaration in writing that the declarant is a Director, the Managing Director or the Manager or the Secretary of the Company, and that Share in the Company has been duly forfeited in accordance with these Articles, on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the Share. (b) The Company may receive the consideration, if any, given for the Share on any sale, re- allotment or other disposal thereof and may execute a transfer of the Share in favour of the person to whom the Share is sold or disposed off. (c) The person to whom such Share is sold, re-allotted or disposed of shall thereupon be registered as the holder of the Share. (d) Any such purchaser or allotee shall not (unless by express agreement) be liable to pay calls, amounts, instalments, interests and expenses owing to the Company prior to such purchase or allotment nor shall be entitled (unless by express agreement) to any of the dividends, interests or bonuses accrued or which might have accrued upon the Share before the time of completing such purchase or before such allotment. (e) Such purchaser or allottee shall not be bound to see to the application of the purchase money, if any, nor shall his title to the Share be affected by the irregularity or invalidity in the
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proceedings in reference to the forfeiture, sale re-allotment or other disposal of the Shares. Forfeiture to apply 46. in case of non- The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum payment of any which by the terms of issue of a Share becomes payable at a fixed time, whether on account of the sum nominal value of Share or by way of premium, as if the same had been payable by virtue of a call duly made and notified. Cancellation of 47. forfeited share Upon sale, re-allotment or other disposal under the provisions of these Articles, the certificate or certificates certificates originally issued in respect of the said Shares shall (unless the same shall on demand by the Company have been previously surrendered to it by the defaulting Member) stand cancelled and become null and void and of no effect and the Directors shall be entitled to issue a new certificate or certificates in respect of the said Shares to the person or persons entitled thereto.
Evidence of 48. forfeiture The declaration as mentioned in Article 45(a) of these Articles shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the Share. Validity of sale 49. Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers hereinbefore given, the Board may appoint some person to execute an instrument of transfer of the Shares sold and cause the purchaser's name to be entered in the Register of Members in respect of the Shares sold, and the purchasers shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after his name has been entered in the Register of Members in respect of such Shares, the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. Surrender of shares 50. The Directors may subject to the provisions of the Act, accept a surrender of any share from any Member desirous of surrendering on such terms and conditions as they think fit.
TRANSFER OF SHARES Form of transfer 51. The instrument of transfer shall be in writing and all the provision of Section 108 of the Act and of any statutory modification thereof for the time being, shall be duly complied with in respect of all transfer of shares and the registration thereof. Applicability of 52. the Articles in case In case of transfer of shares or other marketable securities where the Company has not issued any of Demat certificates and where such shares or securities are being held in an electronic and fungible form, securities. the provisions of Depositories Act, 1996, shall apply. Nothing contained in these Articles shall apply to transfer of security effected by the transferor and the transferee, both of whom are entered as beneficial owners in the records of a Depository. Certificate to 53. accompany the Every instrument of transfer duly stamped must be accompanied by the certificate of shares instrument of proposed to be transferred and such other evidence as the board may require to prove the title of transfer. the transferor or his right to transfer the shares. No fees for 54. registration No fee shall be charged for registration of transfer, transmission, probate, succession certificate
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and letter of administration, certificate of death or marriage, power of attorney or similar other document.
Execution of 55. transfer Every such instrument of transfer shall be executed both by transferor and the transferee and the transferor shall be deemed to remain the holder of such Share until the name of the transferee have been entered in the register of Members in respect thereof. The Board shall not issue or register a transfer of any share in favour of a minor (except in case when they are fully paid up). Closure of register 56. The Board shall have power on giving seven days prior notice by advertisement in some newspapers circulating in the district in which the Registered Office is situated, to close the transfer books, the register of Members or register of debenture holders at such time or times and for such period or periods, not exceeding thirty days at a time and not exceeding in the aggregate forty-five days in each year, as it may deem expedient. Indemnity to 57. Company on The Company shall incur no liability or responsibility whatsoever in consequence of its registering transfer or giving effect to any transfer of Shares made or purporting to be made by any apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of Persons having or claiming any equitable right, title or interest to or in the said Shares, notwithstanding that the Company may have had notice of such equitable right, title or interest or notice prohibiting registration of such transfer, and may have entered such notice which may be given to it of any equitable right or interest, or be under any liability whatsoever for refusing or neglecting so to do, though it may have been entered or referred to in some book of the Company; but the Company shall nevertheless be at liberty to regard and attend to any such notice and give effect thereto, if the Board shall so think fit. Right of refusal of 58. the Board to Notwithstanding anything stated elsewhere in these Articles, the Directors shall be entitled to take register a transfer all necessary steps to ensure compliance with Applicable Laws and subject to the provisions of the Act, provision of Securities Contract (Regulations) Act, 1956 and the other provisions of Applicable Laws, the Board may, at its absolute and uncontrolled discretion and by giving reasons, inter alia, decline to register or acknowledge any transfer of Shares whether fully paid or not. The right of refusal of the Board shall not be affected by the circumstances that the proposed transferee is already a Member of the Company, but in such cases the Board shall within one month from the date on which the instrument of transfer was lodged with the Company, send to the transferee and the transferor notice of the refusal to register such transfer provided that registration of a transfer shall not be refused on the ground of the transferor being either alone or jointly with any other Person or Persons, indebted to the Company on any account whatsoever, except when the Company has lien on the Shares. However, no transfer of shares/debentures shall be refused on the ground of them not being held in marketable lots.
Register of 59. Members The Company shall keep at its Registered Office the Register of Members and therein shall firmly and distinctly enter the particulars of every transfer or transmission of shares. Subject to the provision of the Act, the Board shall have power to close the register of Members for such period, not exceeding forty five days in aggregate in a year and thirty days at any one time, as may seem expedient to them.
TRANSMISSION OF SHARES
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Nomination 60. facility. Every holder of Shares in, or Debentures of the Company may at any time nominate, in the manner prescribed under the Act, a Person to whom his Shares in or Debentures of the Company shall vest in the event of death of such holder. Where the shares in, or debentures of the Company are held by more than one Person jointly, the joint holders may together nominate, in the prescribed manner, a Person to whom all the rights in the Shares or Debentures of the Company, as the case may be, held by them shall vest in the event of death of all joint holders. Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, or in these Articles, in respect of such Shares in or Debentures of the Company, where a nomination made in the prescribed manner purports to confer on any Person the right to vest the Shares in, or Debentures of the Company, the nominee shall, on the death of the Shareholders or holder of Debentures of the Company or, as the case may be, on the death of all the joint holders become entitled to all the rights in the Shares or Debentures of the Company to the exclusion of all other Persons, unless the nomination is varied or cancelled in the prescribed manner under the provisions of the Act. Where nominee is 61. a minor Where the nominee is a minor, it shall be lawful for the holder of the Shares or holder of Debentures to make the nomination to appoint, in the prescribed manner under the provision of the Act, any Person to become entitled to the Shares in or Debentures of the Company, in the event of death, during the minority. Nominee to elect 62. i) Any Person who becomes a nominee by virtue of the provisions of these Articles upon production of such evidence as may be required by the Board and subject as hereinafter provided, elect either; a) to be registered himself as holder of the shares or Debentures, as the case may be; b) to make such transfer of Shares or Debentures, as the case may be, as the deceased Shareholder or Debenture holder, as the case may be, could have made; ii) If the nominee, so becoming entitled, elects himself to be registered as holder of the Shares or Debentures, as the case may be, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects and such notice shall be accompanied with death certificate of the deceased shareholder or Debenture holder and the certificates of the Shares or Debentures, as the case may be, held by the deceased in the Company. Registration of 63. shares in the name Subject to the provisions of the Act and these Articles, the Board may register the relevant Shares of nominee or Debentures in the name of the nominee of the transferee as if the death of the registered holder of the Shares or Debentures had not occurred and the notice or transfer were a transfer signed by that Shareholder or Debenture holder, as the case may be. Person entitled 64. may receive A Person entitled to Share by transmission shall, subject to the right of the Directors to retain such dividend without dividend or money as hereinbefore provided, be entitled to receive and may give full discharge for being registered as any dividends or other monies payable in respect of the Share. a Member Withholding of 65. dividend etc. in The Board may, at any time, give notice requiring any such Person to elect either to be registered case of non- himself or to transfer the Shares or Debentures and if the notice is not complied with within ninety election. days, the Board may thereafter withhold payment of all dividend, bonuses, interest or other monies payable or rights accrued or accruing in respect of the relevant Shares or Debentures, until the requirements of the notice have been complied with.
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Registration of 66. persons entitled to Subject to the provisions of these Articles, any Person becoming entitled to Shares in consequence Shares otherwise of the death, lunacy, bankruptcy or insolvency of any Member, or by any lawful means other than than by transfer by transfer in accordance with these presents, may with the consent of the Board (which it shall not be under any obligation to give) upon producing such evidence that he sustains the character in respect of which he proposes to act under this Article of his title, act, as the holder of the Shares or elect to have some Person nominated by him and approved by the Board, registered as such holder, provided nevertheless, that if such Person shall elect to have his nominee registered he shall testify the election by executing to his nominee an instrument of transfer in accordance with the provisions herein contained and until he does so, he shall not be freed from any liability in respect of the Shares.
DEMATERIALISATION OF SECURITIES Dematerialisation of 67. Securities The provisions of this Article shall apply notwithstanding anything to the contrary contained in any other Articles. a) The Company shall be entitled to dematerialize the securities and to offer securities in a dematerialized form pursuant to the Depositories Act, 1996. b) Every holder of or subscriber to securities of the Company shall have the option to receive certificates for such securities or to hold the securities with a Depository. Such a Person who is the Beneficial Owner of the securities can at any time opt out of a Depository, if permitted by law, in respect of any securities in the manner provided by the Depositories Act, 1996 and the Company shall, in the manner and within the time prescribed, issue to the Beneficial Owner the required certificates for the securities. If a Person opts to hold his securities with the Depository, the Company shall intimate such Depository the details of allotment of the securities, and on receipt of the information, the Depository shall enter in its record the name of the allotees as the Beneficial Owner of the securities. c) All securities held by a Depository shall be dematerialized and be in fungible form. Nothing contained in the Act shall apply to a Depository in respect of the securities held by on behalf of the Beneficial Owners. d) (i) Notwithstanding anything to the contrary contained in the Act or these Articles, a Depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of the securities on behalf of the beneficial Owner (ii) Save as required by the Applicable Law, the Depository as the registered owner of the securities shall not have any voting rights or any other rights in respect of securities held by it. (iii) Every person holding securities of the Company and whose name is entered as the Beneficial Owner of securities in the record of the Depository shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of the securities which are held by a Depository and shall be deemed to be a Member of the Company. e) Notwithstanding anything contained in the Act or these Articles to the contrary, where securities of the Company are held in a Depository, the records of the Beneficial Ownership may be served by such Depository on the Company by means of electronic mode or by delivery of floppies or discs. f) Nothing contained in the Act or these Articles, shall apply to a transfer of securities effected by a transferor and transferee both of whom are entered as Beneficial Owners in the records of a Depository. g) Notwithstanding anything contained in this Act or these Articles, where securities are dealt with by a Depository, the Company shall intimate details thereof to the Depository
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immediately on allotment of such securities. h) Notwithstanding anything contained in this Act or these Articles regarding the necessity of having distinctive numbers for securities issued by the Company shall apply to securities held with a Depository. i) The Register of Members and Index of beneficial Owners maintained by a Depository under the Depositories Act, 1996 shall be deemed to be the Register and Index of Members and Security Holders for the purpose of these Articles. j) If a Beneficial Owner seeks to opt out of a Depository in respect of any Security, the Beneficial Owner shall inform the Depository accordingly. The Depository shall on receipt of information as above make appropriate entries in its Records and shall inform the Company. The Company shall, within thirty days of the receipt of intimation from the depository and on fulfillment of such conditions and on payment of such fees as may be specified by the regulations, issue the certificate of securities to the Beneficial Owner or the transferee as the case may be.
GENERAL MEETING Length of notice 68. (1) A General Meeting of the Company may be called by giving not less than twenty-one days clear notice in writing.
(2) A General Meeting may be called after giving shorter notice than that specified in clause (1) hereof, if consent is accorded thereto:
(i) In the case of Annual General Meeting by all the Members entitled to vote thereat; and
(ii) In the case of any other Meeting, by Members of the Company holding not less than ninety-five percent of such part of the paid up share capital of the Company as gives a right to vote at the Meeting.
Provided that where any Members of the Company are entitled to vote only on some resolution, or resolutions to be moved at a Meeting and not on the others, those Members shall be taken into account for the purposes of this clause in respect of the former resolutions and not in respect of the later. Signing of Notice 69. Any notice to be given by the Company shall be signed by the Secretary or by such Director or officer as the Board may appoint. No items other 70. than in Notice to No General Meeting, Annual or Extraordinary shall be competent to enter upon, discuss or be transacted. transact any business which has not been mentioned in the notice or notices upon which it was commenced. Extra Ordinary 71. General Meetings All general meetings other than Annual General Meetings shall be called Extra Ordinary General Meetings. Requisitions‟ 72. meeting The Board may, whenever it thinks fit, call an Extra Ordinary General Meeting and it shall do so upon writing by any Member or Members holding in the aggregate not less than one-tenth of such paid up capital as at the date carries the right of voting in regard to the matter in respect of which
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the requisition has been made.
Valid requisition 73. Any valid requisition so made by Members must state the objects of the meeting proposed to be called and must be signed by the requisitionists and be deposited at the Registered Office provided that such requisition may consist of several documents in file for each signed by one or more requisitionists. Calling of EGM 74. Upon the receipt of any such requisition, the Board shall forthwith call an Extraordinary General meeting, and if they do not proceed within twenty one days from the date of the requisition being deposited at the Registered Office to cause a Meeting to be called on a day not later than forty-five days from the date of deposit of requisition, the requisitionists, or such of their number as represents either a majority in value, of paid-up share capital of the Company as is referred to in the Act, whichever is less, may themselves call the Meeting, but in either case, any Meeting so called shall be held within three months from the date of the delivery of the requisition as aforesaid. Any meeting called under the foregoing Articles by the requisitionists shall be called in the same manner, as nearly as possible, as that in which General Meetings are to be called by the Board. Quorum 75. Subject to the Articles for the time being in force, the quorum for a General meeting shall be five shareholders present in Person or by attorney. If the quorum is not present within half an hour of the scheduled time for holding the General Meeting, the meeting, if called by or upon requisition of the Members shall stand dissolved and in any other case the Meeting shall stand, adjourned to the same day in the next week or if that day is a public holiday until the next succeeding day which is not a public holiday, at the same time and place or to such other day and at such other time and place as the Board may determine. If at such rescheduled Meeting quorum is not present within thirty minutes of the time scheduled for the Meeting, the Shareholders present shall form the quorum for the General Meeting. Chairman of the 76. General Meeting The Chairman, if any, of the Board of Directors shall preside as Chairman at every general meeting of the Company. If there is no such chairman or if he is not present within fifteen minutes after the time appointed for holding the meeting, or he is unwilling to act as the Chairman of the meeting, the directors present shall elect one of their numbers to be the Chairman of the meeting. If at any meeting no Director is willing to act as chairman, or if no Director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their numbers to be chairman of the meeting. Adjournment of 77. General Meeting 1) The Chairman may, with the consent of any meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place.
2) No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
3) When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting.
4) Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.
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Representation in 78. case of Body A body corporate being a Member shall be deemed to be personally present if it is represented in corporate accordance with the Act. Casting Vote 79. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, shall be entitled to a second or casting vote.
VOTES OF MEMBERS Voting right 80. Subject to any rights or restrictions for the time being attached to any class or classes of shares,- (a) on a show of hands, every member present in person shall have one vote; and (b) on a poll, the voting rights of members shall be as laid down in section 87 and other applicable provisions of the Act. Votes of joint 81. Members In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which the name stands in the Register of Members. Voting by a 82. member of A member of unsound mind, or in respect of whom an order has been made by any court having unsound mind jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee or other legal guardian, any such committee or guardian may, on a poll, vote by proxy. Right to vote 83. No member shall be entitled to vote at any general meeting unless all calls or other sums presently payable by him in respect of shares in the company have been paid. Objection on 84. qualification of (1) No objection shall be raised to the qualification of any voter except at the meeting or adjourned vote to be raised at meeting at which the vote, if any, objected to is given or tendered, and every vote not the meeting. disallowed at such meeting shall be valid for all purposes. (2) Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive. Proxy 85. A Member present by proxy shall be entitled to vote only on a poll. Instrument of 86. proxy The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or if such appointer is a corporation either under the common seal or under the hand of any officer or attorney so authorized shall be deposited at the registered office of the company not less than 48 hours before the time for holding the meeting and in default the instrument of proxy shall not be treated as valid. Validity of votes 87. given by proxy A vote given in accordance with the terms of an instrument of proxy shall be valid, notwithstanding the previous death or insanity of the principal or the revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the shares in respect of which the proxy is given. Provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by the company at its office before the commencement of the
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meeting or adjourned meeting at which the proxy is used. Demand for poll 88. Before or on the declaration of the result of the voting on any resolution on a show of hands a poll may be ordered to be taken by the Chairman of the Meeting on his own motion and shall be ordered to be taken by him on a demand made in that behalf by any Member or Members present in person or by proxy and holding Shares in the Company which confer a power to vote on the resolution not being less than one-tenth of the total voting power in respect of the resolution, or on which an aggregate sum of not less than fifty thousand rupees has been paid up. The demand for a poll may be withdrawn at any time by Person or Persons who made the demand. Any poll duly demanded on the election of Chairman of a Meeting or on any question of adjournment shall be taken at the meeting forthwith. Time and place of 89. taking a poll If a poll is demanded as aforesaid, the same shall, subject to these Articles be taken at such time (not later than forty eight hours from the time when the demand was made) and place in the city or town in which the Registered Office is for the time being situated and either by open voting or by ballot, as the Chairman shall direct, and either at once or after an interval or adjournment or otherwise, and the result of the poll shall be deemed to be the resolution of the General meeting at which the poll was demanded. Scrutinisers for the 90. poll Where poll is to be taken, the Chairman of the Meeting shall appoint two scrutinizers, one of whom so appointed shall always be a Member (not being an officer or employee of the Company) present at the Meeting provided such Member is available and willing to be appointed. The Chairman shall have power, at any time before the result of the poll is declared, to remove a scrutinizer from the office and fill such vacancies. Demand of poll 91. shall not prevent The demand for a poll except on the questions of the election of the Chairman and of an continuance of a adjournment shall not prevent the continuance of a Meeting for the transaction of any business meeting. other than the question on which the poll has been demanded. Postal Ballot 92. Notwithstanding anything contained in the foregoing, the Company shall transact such business, as may be specified by the Central Government from time to time through the means of postal ballot. In case of resolutions to be passed by postal ballot, no Meeting need to be held at a specified time and space requiring physical presence of Members to form a quorum. Where a resolution will be passed by postal Ballot the Company shall, in addition to the requirements of giving notice, send to all the Members the following a) Draft resolution and relevant explanatory statement clearly explaining the reasons thereof. b) Postal ballot for giving assents or dissents, as may be prescribed by the Act and the relevant Rules there under. c) Postage prepaid envelope (by registered post) for communication of assents or dissents on the postal ballot to the Company with a request to the Members to send their communications within thirty days from the date of dispatch of notice. Procedure for 93. conducting postal The Company shall also follow such procedure, for conducting vote by postal ballot and for ballot ascertaining the assent or dissent, as may be prescribed by the Act and the relevant Rules made there under.
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Validity of vote 94. The Chairman of any meeting shall be the sole judge of the validity of every vote tendered at such Meeting. The Chairman present while taking a poll shall be the sole judge of the validity of every vote tendered at such poll.
DIRECTORS Number of 95. Directors The number of Directors shall neither be less than three and not more than twelve. Increase or 96. reduction of The Company may from time to time in General Meeting increase or reduce the number of number of Directors, subject to the provisions of the Act. Directors. First Directors 97. The first directors of the Company shall be: 1. Mr. Alukkas Varghese Joy 2. Mrs. Jolly Joy Sitting fees to 98. Directors. The remuneration of the Directors by way of sitting fees for attending the Board meetings and its Committee meetings shall be such sums as may be fixed from time to time by the Board of Directors. They shall also be entitled to be repaid all hotel and traveling expenses incurred by them respectively in attending the Board meeting. Powers of the 99. Board. The Board may exercise all such powers of the Company and do all such acts and things as are not, by the Act, or any other Act or by the Memorandum or by the Articles of the Company required to be exercised by the Company in General Meeting, subject nevertheless to these Articles, to the provisions of the Act, or any other Act and to such regulations being not inconsistent with the aforesaid Articles, as may be prescribed by the Company in General Meeting but no regulation made by the Company in General Meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. Qualification 100. shares No qualification share is required for appointment as a director. Office or place of 101. profit Subject to the provisions of the Companies Act the Directors may be paid remuneration for holding any office or place of profit in the Company. Nominee Director 102. Notwithstanding anything to the contrary contained in these Articles, so long as any moneys by way of loans remain owing by the Company to any financial institution as defined under the Act, the financial institutions shall jointly have a right to appoint such number of nominees as directors on the Board of the Company (hereinafter described as Financial Institutions‟ Directors), as may be agreed to by the Directors. The directors, so appointed or nominated by the financial institution(s) will not be liable to retire by rotation. The financial institutions may at any time and from time to time remove the nominee or nominees appointed by them and on a vacancy being caused in such office from any cause, whether by resignation, removal or otherwise, appoint another or others in his/their place. Such appointment or removal shall be by notice in writing to the Company. The Board of Directors of the Company shall have no power to remove such nominee or nominees from office. Each such nominee shall be entitled to the same rights, privileges and obligations as any other Director of the Company, and shall also be entitled to
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attend any general meeting of the Company. The Company shall pay to such Directors normal fees and reimbursement of expenses to which the other Directors are entitled.
Debenture 103. Directors Any Trust Deed for securing Debentures may if so arranged, provide for the appointment, from time to time by the Trustees thereof or by the holders of Debentures, of some person to be a Director of the Company and may empower such Trustees or holder of Debentures, from time to time, to remove and re-appoint any Director so appointed. The Director appointed under this Article is herein referred to as "Debenture Director" and the term “Debenture Director” means the Director for the time being in office under this Article. The Debenture Director shall not be liable to retire by rotation or be removed by the Company. The Trust Deed may contain such ancillary provisions as may be agreed between the Company and the Trustees and all such provisions shall have effect notwithstanding any of the other provisions contained herein. Rotation of 104. Directors Subject to the provisions of Section 255 of the Act not less than two third of the total number of Directors shall (a) be persons whose period of the office is liable to termination by retirement by rotation and (b) save as otherwise expressly provided in the Articles be appointed by the Company in General Meeting. Retiring Director 105. Subject to the provisions of Section 256 of the Act and provisions of these Articles, at every Annual General Meeting of the Company, one-third or such of the Directors for the time being as are liable to retire by rotation; or if their number is not three or a multiple of three the number nearest to one-third shall retire from office. The Debenture Directors, Nominee Directors, Corporation Directors, Managing Directors if any, subject to Article 124, shall not be taken into account in determining the number of Directors to retire by rotation. The directors so liable to retire by rotation shall be called the “Retiring Directors”.The Directors retiring by rotation under this Article shall be those, who have been longest in office since their last appointment, but as between those who became Directors on the same day, those who are to retire shall in default of and subject to any agreement amongst themselves be determined by lot. Notice of 106. candidature for 1) No person not being a retiring Director shall be eligible for election to the office of Director office of Directors at any General Meeting unless he or some other Member intending to propose him has given except in certain atleast fourteen days notice in writing under his hand signifying his candidature for the office cases of a Director or the intention of such person to propose him as Director for that office as the
case may be, along with a deposit of five hundred rupees which shall be refunded to such
person or, as the case may be, to such Member, if the person succeeds in getting elected as a Director. 2) The Company shall inform its Members of the candidature of the person for the office of Director or the intention, of a Member to propose such person as candidate for that office by serving individual notices on the Members not less than seven days before the Meeting provided that it shall not be necessary for the Company to serve individual notices upon the Members as aforesaid if the Company advertises such candidature or intention not less than seven days before the Meeting in at least two newspapers circulating in the place where the registered office of the Company is located of which one is published in the English language and the other in the regional language of that place. 3) Every person (other than Director retiring by rotation or otherwise or person who has left at the office of the Company a notice under Section 257 of the Act signifying his candidature for the office of a Director) proposed as a candidate for the office a Director shall sign and file with the Company his consent in writing to act as a Director, if appointed.
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4) A person other than:- a) a Director appointed after retirement by rotation or immediately on the expiry of his term of office, or b) an Additional or Alternate Director or a person filling a casual vacancy in the office of a Director under Section 262 of the Act, appointed as a Director re- appointed as an additional or alternate Director immediately on the expiry of his term of office shall not act as a Director of the Company unless he has within thirty days of his appointment signed and filled with the Registrar his consent in writing to act as such Director. Removal of 107. Directors The Company may subject to the provisions of Section 284 and other applicable provisions of the Act and these Articles by Ordinary Resolution remove any Director not being a Director appointed by the Central Government in pursuance of Section 408 of the Act before the expiry of his period of office.
PROCEEDING OF DIRECTORS Meetings of 108. Directors The Board shall meet at least once in every three months for the dispatch of business and may adjourn and otherwise regulate its meetings and proceedings as it thinks fit. Notice in writing of every meeting of the Board shall be given to every Director for the time being in India, and at his usual address in India to every other Director. Resolution by 109. circulation Subject to the provisions of Companies Act, 1956, a written resolution that has been circulated in draft to all Directors (together with necessary documents, if any) and signed by a majority of Directors shall be valid and effectual as if it is a resolution passed at a duly convened meeting of the Directors. For the purposes of this Article “signed” shall include signature transmitted through facsimile. Meetings through 110. video conferencing Subject to the applicable provisions of the Act or any other applicable provisions as may be or tele- stipulated by the regulated authorities, the Company shall have power to hold the meeting of the conferencing. Board and committees thereof through video conferencing or tele-conferencing. Quorum of 111. meeting. The quorum for a meeting of the Board shall be determined in accordance with the provisions of Section 287 of the Act. If quorum is not present within fifteen minutes from the time appointed for holding a meeting of the Board, it shall be adjourned until such date and time as the Chairman of the Board shall decide. A meeting of the Board at which a quorum be present shall be competent to exercise all or any of the authorities , powers and discretions by or under these Articles or the Act, for the time being vested in or exercisable by the Board. Interested 112. Directors not to No Director shall as a Director take part in the discussion of or vote on any contract arrangement participate or vote or proceedings entered into or to be entered into by or on behalf of the Company, if he is in any in Board‟s way, whether directly or indirectly, concerned or interested in such contract or arrangement, not proceedings shall his presence count for the purpose of forming a quorum at the time of any such discussion or voting, and if he does vote, his vote shall be void. Provided however, that nothing herein contained shall apply to:- 1) any contract of indemnity against any loss which the Directors, or any one or more of them, may suffer by reason of becoming or being sureties or a surety for the Company; 2) any contract or arrangement entered into or to be entered into with a public company or a
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private company which is a subsidiary of a public company in which the interest of the Director consists solely; i) in his being; a) a director of such company; and b) the holder of not more than shares of such number of value therein as is requisite to qualify him for appointment as a director, thereof, he having been nominated as director by the company, or ii) in his being a member holding not more than two percent of its paid-up share capital. Minutes to be 113. placed at the The minutes of the proceedings of the Board of Directors of the Company shall be placed at the subsequent subsequent meeting of the Board of Directors of the Company. meeting. Decision at Board 114. meeting Subject to the provisions of Section 316,375 (5) and 386 of the Act, questions arising at any meeting shall be decided by a majority of votes and, in case of an equality of votes the Chairman shall have a second or casting vote. POWERS OF THE BOARD OF DIRECTORS Powers of the 115. Directors Directors shall be competent to carry out all such objects set forth in the Memorandum of Association as may lawfully be carried out by them and in particular to do the following acts and things; (a) To pay all expenses incurred for the formation and registration of the Company and for procuring its Capital to be subscribed; (b) To have the superintendence, control and direction over the Managing Director, Managers and all other officers of the company. (c) To appoint Agents or Attorneys for the company in this country or abroad with such powers (including powers to sub- delegate upon such terms and conditions as the Directors shall think fit) and to revoke such appointments. (d) To acquire by lease, mortgage, purchase or exchange or otherwise any property, rights or privileges which the company is authorized to acquire at such price and on such terms and conditions as the Board may think fit and to sell, let, exchange or otherwise dispose of absolutely or conditionally any property rights or privileges or the undertaking of the company for such price and upon terms and conditions as the Board shall think fit, subject ,however, to the restrictions imposed by Section 293. (e) To open on behalf of the company any account or accounts with such Bank or Banks as the Board may select or appoint, to operate such accounts, to make, sign, draw, accept, endorse or otherwise execute all cheques, promissory notes, drafts, hundies, orders, bills of exchange, bill of lading and other negotiable instruments, to make and give receipts, releases and other discharges for moneys payables to the company and for claims and demands of the company, to make contracts and to execute deeds; (f) To invest and deal with any of the moneys of the company in such manner as they may think fit and to realize or vary such investments subject to the provisions of Sections 42, 49, 77, 292, 293, 295, 360 and 372A of the Companies Act, 1956. (g) To pay and reimburse the Managing Director and other Directors or officers of the company in respect of any expenses incurred by them on behalf of the company. (h) To establish, maintain, support and subscribe to any charitable or public object or any institution, society or club which may be for the benefit of the company or its employees and
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subject to section 293 to contribute to any charitable or other fund. (i) To engage and in their discretion to remove, suspend, dismiss and remunerate bankers, legal advisers, agents, commission agents, dealers, brokers, servants, employees of every description and to employ such professional or technical or skilled assistants as from time to time may in their opinion be necessary or advisable in the interest of the Company and upon such terms as to duration of employment, remuneration or otherwise and may require security in such instances and to such amounts as the Directors think fit. Delegation of 116. powers In furtherance of and without prejudice to the general powers conferred by or implied in the immediately proceeding Article and any other powers conferred by these Articles, it is hereby expressly declared that subject to section 292 and other applicable provisions of the Act, the Board shall delegate all or any of its powers to any Committee of Directors, the Managing Director, Manager or Secretary or any other officer of the Company upon such terms and conditions as the Directors shall deem fit. Authorisation to 117. sue or defend on Any Managing Director or the Secretary for the time being or any other person duly authorized by behalf of the the Directors shall be entitled to make, give, sign and execute all and every warrant to sue or Company and to defend on behalf of the Company, all and every legal proceedings and compositions or be indemnified out compromise, agreement and submission to arbitration and agreement to refer to arbitration as may of the funds of the be requisite, and for the purpose aforesaid, the Secretary, or such other person may be empowered Company to use their or his own name on behalf of the Company, and they or he shall be saved harmless and indemnified out of the funds and property of the Company, from and against all costs and damages which they may incur or be liable to by reason of their or his name being so used as aforesaid. Chairman of the 118. Board of Directors The Board may appoint one among them as Chairman of the Board of Directors of the Company. The Chairman so appointed shall preside the Board meetings and General Meetings of the Company subject to the provisions of the Act. He will occupy the office of Chairman till his term of Directorship expires or till the Board of Directors appoints another chairman, whichever is earlier. Powers to borrow 119. or raise money. Subject to the provisions of the Companies Act, 1956, the Directors may exercise all the powers of the Company to borrow or raise money whether bearing interest or otherwise at rates to be fixed by them, to secure repayment thereof by the issue of debentures or other security charges upon all or any part of the undertaking and assets of the Company including any capital for the time being uncalled for. Alternate Director 120. Subject to the provisions of Section 313 of the Act the Board of Directors shall have the power to appoint an Alternate Director to act for a Director during his absence for a period of not less than three months. Power for the 121. acquisition of any The Directors shall have the power to enter into agreements for the acquisition of any existing existing concern concern. Additional 122. Director The Directors shall have the power at any time and from time to time to appoint any other person to be a Director as an addition to the Board so that the total number of Directors shall not at any time exceed the maximum fixed by these Articles. Any person so appointed as an Additional Director to the Board shall hold office only upto the date of the next Annual General Meeting and
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shall be eligible for election at such meeting.
MANAGING DIRECTOR Powers to appoint 123. Managing Director Subject to the provisions of the Act, the Board of Directors may appoint Managing Director or Managing Directors, Whole Time Director or Whole Time Directors on such terms and conditions as may be fixed by the Board from time to time. The Managing Director shall hold office for a maximum period of 5 years at a time or the expiry of the term as Director of the Company, whichever is earlier. Remuneration of 124. Managing Director Subject to the provisions of the Act, the remuneration of the Managing Director shall be fixed by the Board of Directors of the Company. The Board shall also have power to provide remuneration to the Managing Director for any special services availed, subject to the provisions of the Act. Managing Director 125. not to retire by A Managing Director shall not, while he continues to hold that office, be subject to retirement by rotation rotation, and he shall not be reckoned as a Director for the purpose of determining the rotation of retirement of Directors or in fixing the number of Directors to retire, but (subject to the provisions of any contract between him and the company) he shall be subject to the same provisions as to resignation and removal as the other directors of the company, and he shall, ipso facto and immediately, cease to be a Managing Director or whole time Director if he ceases to hold the office of Director from any cause. General powers of 126. supervision and Subject to the provisions of the Act and to the general supervision and control of the Board, any control Managing Director or Managing Directors or Whole time Director or Whole time Directors shall have the general direction, management and superintendence of the business of the company with power to do all acts, matters and things deemed necessary, proper or expedient for carrying on the business and concerns of the company, including power to appoint, suspend and dismiss officers, staff and workmen of the Company, to make and sign all contracts and receipts and to draw, accept, endorse and negotiate on behalf of the Company all such Bills of Exchange, Promissory Notes, Hundies, Cheques, Drafts, Government Promissory Notes, or other Government papers and other instruments as shall be necessary, proper or expedient for carrying on the business of the company and to operate on the bank accounts of the Company and to represent the Company in all suits and all other legal proceedings and to engage Solicitors, Advocates and other Agents and to sign the necessary papers, documents and instruments of authority, to appoint agents or other attorneys and to delegate to them such powers as the Managing Director or Managing Directors, Whole time Director or Whole time Directors may deem fit and at pleasure, such powers to revoke and generally to exercise all such powers and authorities as are not by the Companies Act for the time being in force or by these Articles expressly directed to be exercised by the Board of Directors or by the Company in General Meeting. Director may fill in 127. casual vacancies Subject to the section 262 and other applicable provision of the Act, the Director shall have power at any time and from time to time to appoint any person to be a Director to fill a casual vacancy. Such casual vacancy shall be filled by the Board of Directors at a meeting of the Board. Any person so appointed shall hold office only upto the date to which the Director in whose place he is appointed would have held office, if it had not been vacated as aforesaid. However, he shall then be eligible for re-election. Appointment of 128. Secretary The Board shall have power to appoint as the Secretary a person fit in their opinion for the said office, for such period and on such terms and conditions as regards remuneration and otherwise as
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they may determine. The Secretary shall have such powers and duties as may from time to time, be delegated or entrusted to him by the Directors.
COMMON SEAL Seal 129. (a) Seal
The Board shall provide a Common Seal for the purpose of the Company and shall have power from time to time to destroy the same and substitute a new seal in lieu thereof. (b) Safe Custody of Seal
The Common Seal shall be in the safe custody of the Director or the Secretary for the time being of the Company. (c) Affixing of Seal on deeds and instruments’ On every deed or instrument on which the Common Seal of the Company is required to be affixed, the Seal be affixed in the presence of a Director or a Secretary or any other person or persons Authorised in this behalf by the Board, who shall sign every such deed or instrument to which the Seal shall be affixed. (d) Affixing of Seal on Share Certificates Notwithstanding anything contained in Clause (c) above, the Seal on Share Certificates shall be affixed in the presence of such persons as are Authorised from time to time to sign the Share Certificates in accordance with the provisions of the Companies (Issue of Share Certificates) Rules in force for the time being. (e) Removal of Common Seal outside the office premises The Board may authorize any person or persons to carry the Common Seal to any place outside the Registered Office inside or outside for affixture and for return to safe custody to the Registered Office. SERVICE OF DOCUMENTS AND NOTICE Service of 130. document (i) A document may be served on the Company or any officer of the Company by sending it to the registered office of the Company by post, under certificate of posting or by registered post or by leaving it at the registered office. (ii)A document may be served or sent by the company to any member either personally or by sending it by post to him/her to his/her registered address with in India delivered by him or her to the company.
DIVIDENDS AND RESERVE Dividend to be 131. declared in The company in general meeting may declare dividends, but no dividend shall exceed the amount General meeting recommended by the Board. Interim Dividend 132. The Board may from time to time pay to the members such interim dividends as appears to it to be justified by the profits of the company. Transfer to 133. Reserves (1) The Board of Directors may, before recommending any dividend, set aside out of the profits of the company such sums as they thinks proper as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the company may be properly applied, including provision for meeting contingencies and pending such
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application, may, at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the Board may, from time to time, think fit. (2) The Board may also carry forward any profits which it may think prudent not to divide, without setting them aside as a reserve. Retention of 134. dividend The Board of Directors may retain any dividend or other monies payable in respect of share on which the Company has a lien, and may apply the same in or towards satisfaction of debts, liabilities or engagements in respect of which the lien exists. Notice of divided 135. Notice of any dividend that may have been declared shall be given to the persons entitled to share therein in the manner mentioned in the Act. Depreciation to be 136. provided before If the Company has not provided for depreciation for any previous Financial Year or years, it declaration of shall, before declaring or paying a dividend for any Financial Year, provide for such depreciation dividend out of profits of the Financial Year or years. Who can give 137. effectual receipts Any one of two or more joint holders of a share may give effectual receipts for any dividends, for any dividends bonuses or other moneys payable in respect of such share. No right for capital 138. paid in advance Where capital is paid in advance of calls, such capital may carry interest but shall not in respect thereof confer a right to dividend or participate in profits. Effect of transfer 139. of shares A transfer of Shares shall not pass the right to any dividend thereon before the registration of the transfer. Dividend how 140. remitted Any dividend, interest or other monies payable in cash in respect of Shares, may be paid by cheque or warrant or by a pay order or receipt having the force of a cheque or warrant, sent through internationally or nationally recognized courier service providers, to the registered address of the Member or Person entitled or in case of joint Shareholders to the registered address of that one of the joint Shareholders who is first named on the Register of Members or to such Person and to such address as the Shareholders of the joint Shareholders may in writing direct. Every such cheque or warrant shall be made payable to the order of the Person to whom it is sent. The Company shall not be liable or responsible for any cheque / warrant or the forged signature of any pay order or receipt or the fraudulent recovery of the dividend by any other means. Unpaid or 141. Unclaimed Where the Company has declared a dividend which has not been paid or the dividend warrant in dividend respect thereof has not been posted within thirty days from the date of declaration to any Shareholder entitled to the payment of the dividend, the Company shall within seven days from the date of expiry of the said period of thirty days, open a special account in that behalf in any scheduled bank called “Unpaid Dividend Account of Joyalukkas India Limited” and transfer to the said account, the total amount of dividend which remains unpaid or in relation to which no dividend warrant has been posted. Transfer to 142. Investor Education Any money transferred to the unpaid dividend account of the Company which remain unpaid or and Protection
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Fund unclaimed for a period of seven years from the date of such transfer, shall be transferred by the Company to the fund known as the Investor Education and Protection Fund established under the provisions of the Act. A claim to any money so transferred to the Investor Education and Protection Fund may be preferred to the Central Government by the Shareholder to whom the money is due. No interest 143. No dividend shall bear interest against the company.
Forfeiture of 144. Dividend No unclaimed or unpaid dividend shall be forfeited by the Board
ACCOUNTS AND AUDIT Place of keeping 145. books of accounts The Company shall keep at its Registered Office proper books of accounts as would give a true and fair view of the state of affairs of the Company or its transactions.
Laying of accounts 146. The Board of Directors shall from time to time in accordance with Sections 210,211,212, 216 and 217 of the Act, cause to be prepared and laid before each Annual General Meeting a profit and loss account for the financial year of the Company and a balance sheet made up as at the end of the financial year which shall be a date which shall not precede the day of the Meeting by more than six months or such extended period as shall have been granted by the Registrar under the provisions of the Act. Amendment of 147. audited accounts The Directors shall, if they consider it to be necessary and in the interest of the Company, be entitled to amend the audited accounts of the Company, of any Financial Year which have been laid before the Company in General Meeting. The amendments to the accounts effected by the Directors pursuant to these Articles shall be placed before the Members in the General Meeting for their consideration and approval. Appointment of 148. Auditors The company at each Annual General Meeting shall appoint an Auditor or Auditors to hold office from the conclusion of that meeting until the conclusion of the next Annual General Meeting. Casual vacancy in 149. the office of The Board may fill any casual vacancy in the office of an Auditor, so however that while any such Auditor vacancy continues, the remaining auditor or auditors (if any) may act but where such a vacancy is caused by the resignation of the Auditor, the vacancy shall only be filled by the Company in General Meeting. Remuneration to 150. Auditor The remuneration of the auditor shall be fixed and/or authorized by the Company in General meeting or by the Board, if so decided at the General meeting, except that the remuneration of an auditor appointed by the directors may be fixed by the Director. Removal of 151. Auditor The Company in General Meeting may remove any Auditor from the office before the expiry of
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his term after obtaining the previous approval of the Central Government in that behalf. Inspection by 152. Directors and (a) The Books shall be open for inspection by any Director during the business hours. Members (b) The Board shall, from time to time, determine whether and to what extent and at what time and place and under what conditions or regulations, the Books of the Company shall be open for the inspection by the Members other than Directors and no Members (not being a Director) shall have any right of inspection any Books of the Company except as conferred by law or authorized by the Board or by the Company in General Meeting.
CAPITALISATION OF PROFIT Capitalisation of 153. Profit (1) The company in general meeting may, upon the recommendation of the Board, resolve that, it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the Company‟s reserve accounts or to the credit of the profit and loss account, and available for dividend or representing premiums received on the issue of Share and standing to the credit of the Securities Premium Account, be capitalized and distributed amongst such of the Members as would be entitled to receive the same if distributed by way of dividend in the same proportions on the footing that they become entitled thereto as capital and that all or any part of such capitalized fund be applied on behalf of such Members in paying up in full any unissued Shares, Debentures of the Company which shall be distributed accordingly or in or towards payment of the uncalled liability on any issued Shares, so that such distribution or payment shall be accepted by such Members in full satisfaction of their interest in the said capitalized sum. Provided that any sum standing to the credit of a Securities Premium Account or a Capital Redemption Reserve Fund may, in accordance with the applicable provisions of the Act for the purposes of this Article, only be applied in the paying up of unissued Shares to be issued to Members of the Company as fully paid bonus Shares. (2) The sum aforesaid shall not be paid in cash but shall be applied, subject to provision contained in clause (3), either in or towards- (i) paying up any amounts for the time being unpaid on any shares held by such members respectively; (ii) paying up in full, unissued shares of the company to be allotted and distributed, credited as fully paid up, to and amongst such members in the proportions aforesaid; or (iii) partly in the way specified in sub-clause (i) and partly in that specified in sub- clause (ii). (3) The Board shall give effect to the resolution passed by the Company in pursuance of this Article.
Distribution of 154. surplus money General Meeting may resolve that any surplus money arising from realization of any capital asset of the Company or any investments representing the same, or any other undistributed profits of the Company, be distributed among the Members. Fractional 155. Certificates The Board shall have power: a) To make such provision for the issue of fractional certificate or for payment in cash or otherwise as they think fit, in case shares become distributable in fractions and also:
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b) To accept authorization of any Person to enter on behalf of all the Member entitled thereto, into an agreement with the Company providing for allotment to them respectively as fully paid up of any further shares to which they may be entitled upon such capitalization or as the case may require for the paying up by the Company on their behalf by the application thereto, their respective proportions of the profits resolved to be capitalized of the amounts or any part of the amounts remaining unpaid on these existing shares. c) An agreement as such shall be effective and binding on all such Members.
INSPECTION Inspection of 156. registers etc. Subject to the provisions of the Act, any person, whether a member of the Company or not, is entitled to inspect any register, return certificate, deed instrument or document required to be kept or maintained by the Company on his giving to the Company notice in writing of not less than twenty-four hours, of his intention, be permitted to inspect the same during business hours.
AUTHENTICATION OF DOCUMENTS Who shall 157. authenticate Save as otherwise expressly provided in the Act or these Articles, a document or any resolution passed by the Company or the Board and any Books of the Company requiring authentication by the Company or the Board and any Books of the Company requiring authentication by the Company may be signed by a Director or Secretary or an authorized officer as appointed by the Board, and need not be under the its Seal.
INDEMNITY Indemnity to 158. Directors, Subject to the provisions of the Section 201of the Companies Act, 1956 every Director, Managing Managing Director, Manager, Auditor, Secretary and other officer or servant of the Company shall be Directors, etc indemnified by the company against all costs, losses and expenses which any such Director, Managing Director, Auditor, Secretary and other officer or servant may incur or become liable to by reason of any contract entered into or act or thing done by him defending any proceedings whether civil or criminal in which judgment given is in his favour or on which he is acquitted or in connection with any application under Section 633 of the Act, if such relief is granted to him by the Court.
SECRECY Observation of 159. secrecy a) Every Director, Secretary, Manager, Member of the Company, Officer, Servant, Agent, Accountant or any other person employed in the business of the Company shall be pledged to observe strict secrecy respecting all transactions of the Company and statement of accounts with individuals and in all matters relating thereto and shall pledge himself not to reveal any of the matters which may have come to his knowledge in the discharge of his duties except in so far these may be necessary in order to comply with any of the provisions of these Articles of Association. b) No member or person (unless he is a Director of the Company) shall be entitled to inspect or examine the Company's premises or properties of the Company without as to require discovery of any information respecting any detail of the Company's trading or any matter whatsoever which may relate to the conduct of business of the Company and which in the opinion of the Managing Director will be in expedient in the interests of the members of the Company to communicate. Action against 160.
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disclosing of Any officer or employee of the Company proved to the satisfaction of the Managing Director to secrets. have been guilty of disclosing the secrets of the Company shall be liable to instate dismissal without notice or payment of damage and/or may be charged for breach of trust or may be subjected to such other legal proceedings as may be called for.
WINDING UP Winding up 161. In the event of the Company being wound up, the Liquidator may, with sanction of a special resolution of the Company and any other sanction required by the Act, divide among the members in specie or kind the whole or any part of the assets of the Company, whether they shall consist of the same kind or not.
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SECTION IX – OTHER INFORMATION
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following Contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of this Draft Red Herring Prospectus) which are or may be deemed material have been entered or to be entered into by our Company. These Contracts, copies of which have been attached to the copy of this Draft Red Herring Prospectus, delivered to the Registrar of Companies, Kerala and Lakshadweep, at Ernakulam for registration and also the documents for inspection referred to hereunder, may be inspected at the registered office of our Company from 10.00 am to 4.00 pm on Working Days from the date of the Red Herring Prospectus until the Bid/Issue Closing Date.
Material Contracts to the Issue
1. Letters of appointment dated January 12, 2011 to the BRLMs from our Company appointing them as the BRLMs.
2. Issue Agreement dated January 21, 2011 among our Company and BRLMs.
3. Registrar Agreement dated December 31, 2010 executed by our Company with the Registrar to the Issue.
4. Letter dated [●] appointing the Monitoring Agency.
5. Escrow Agreement dated [] among our Company, the BRLMs, the Escrow Collection Banks and the Registrar to the Issue.
6. Syndicate Agreement dated [] among our Company, the BRLMs and the Syndicate Members.
7. Underwriting Agreement dated [] among our Company, the BRLMs and the Syndicate Members.
Material Documents
1. Memorandum and Articles of Association of our Company as amended.
2. Certificate of incorporation dated December 23, 2009 and certificate dated December 9, 2010 for the subsequent name changes.
3. Shareholders‟ resolution dated November 15, 2010 in relation to the Issue and other related matters.
4. Resolution of the Board of Directors dated November 15, 2010 authorising the Issue.
5. Report of the Auditor, B S R & Co., Chartered Accountants, dated January 3, 2011 prepared as per Indian GAAP and mentioned in this Draft Red Herring Prospectus.
6. Report on statement of tax benefits for India dated January 3, 2011 as contained in the Draft Red Herring Prospectus.
7. Copies of annual reports of our Company for the last five fiscal years.
8. Non-competition agreement dated January 3, 2011 entered into by our Company with our Promoter.
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9. Memorandum of Understanding dated October 8, 2010 entered into by our Company with Cochin Smart City Properties Private Limited.
10. Memorandum of Understanding dated November 2, 2009 entered into by our Company with Celine Louis and others.
11. Memorandum of Understanding dated August 24, 2010 entered into by our Company with Cochin Smart City Properties Private Limited.
12. Letter of Intent dated May 21, 2010 entered into by our Company with Lulu International Shopping Mall Private Limited.
13. Agreement of Lease dated December 21, 2010 entered into by our Company with Padam Chand Garg and others.
14. Memorandum of Understanding dated May 17, 2010 entered into by our Company with K. Alamelu and others.
15. Memorandum of Understanding dated December 17, 2010 entered into by our Company with Prakash and others.
16. Quotation dated December 30, 2010 given by Molekules Interior Studios, Sai Lake Residency, Near Adarsh Nagar, Kolbad, Thane (West), Mumbai 400 601 in relation to the fit out expenses for new stores of the Company proposed to be set up.
17. Certificate dated January 11, 2011 issued by C. I. Francis in relation to funds deployed as on December 31, 2010 on new stores.
18. Consents of the Auditor, B S R & Co., Chartered Accountants, for inclusion of their report on accounts in the form and context in which they appear in this Draft Red Herring Prospectus.
19. General Powers of Attorney executed by the Directors of our Company in favour of person(s) for signing and making necessary changes to this Draft Red Herring Prospectus and other related documents.
20. Consents of Auditor, Bankers to the Company, the BRLMs, the Syndicate Members, Registrar to the Issue, Banker to the Issue, Bankers to the Company, Domestic Legal Counsel to the Company, Domestic Legal Counsel to the Underwriters, Directors of the Company, Company Secretary and Compliance Officer, as referred to, in their respective capacities.
21. In-principle listing approval dated [●] and [●]. From the NSE and BSE repectively.
22. Agreement among NSDL, the Company and the Registrar to the Issuse dated [●].
23. Agreement among CDSL, the Company and the Registrar to the Issue dated [●].
24. Due diligence certificate dated January 21, 2011 to SEBI from the BRLMs.
25. SEBI observation letter dated [●]
26. IPO Grading report by [●] dated [●]
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Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at any time if so required in the interest of our Company or if required by the other parties, without reference to the shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.
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DECLARATION
We, the Directors of the Company, declare that all relevant provisions of the Companies Act, 1956, and the guidelines issued by the GoI or the regulations issued by Securities and Exchange Board of India, applicable, as the case may be, have been complied with and no statement made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or the rules made thereunder or regulations issued, as the case may be, and that all approvals and permissions required to carry on our business have been obtained, are currently valid and have been complied with.
We further certify that all the statements in this Draft Red Herring Prospectus are true and correct.
Signed by the Directors of our Company
Alukkas Varghese Joy John Paul Joy Alukkas D.K. Manavalan C. J. George K. P. Padmakumar
Nandakumar. T Chief Financial Officer
Varun T. V. Company Secretary and Compliance Officer
Date: January 21, 2011 Place: Kochi
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ANNEXURE – GRADING RATIONALE FOR IPO GRADING
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