C M Y K RED HERRING PROSPECTUS Please read Section 60B of the Companies Act, 1956 Dated September 1, 2007 100% Book Built Issue KOUTONS RETAIL INDIA LIMITED (Incorporated on November 25, 1994 under the Companies Act, 1956, as amended, as Charlie Creations Private Limited. The name of the Company was changed to Koutons Retail India Private Limited with effect from February 7, 2006. The Company was converted into a public limited company and its name was changed to Koutons Retail India Limited with effect from June 27, 2006.) The registered office of the Company was changed from T-60/1, D.C.M. School Road, New Rohtak Road, Karol Bagh, New Delhi 110 005, India to J-2 Udyog Nagar, Peera Garhi Chowk, New Delhi 110 041, India on November 26, 2001 and thereafter on February 1, 2006 to its current registered office at T-60/1, D.C.M. School Road, New Rohtak Road, Karol Bagh, New Delhi 110 005, India. Tel: + (91) (11) 6545 1320; Fax: + (91) (11) 2362 6149. Corporate Office: 274-275, Udyog Vihar, Phase-VI, Sector-37, Gurgaon 122 001 (Haryana), India; Tel: + (91) (124) 413 9300; Fax: + (91) (124) 413 9399; Website: www.koutons.com; Contact Person: Mr. Ajay Mahajan; E-mail: [email protected] PUBLIC ISSUE OF 3,524,439 EQUITY SHARES OF Rs. 10 EACH (“EQUITY SHARES”) OF KOUTONS RETAIL INDIA LIMITED (THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF RS. [] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [] PER EQUITY SHARE), CONSISTING OF A FRESH ISSUE OF 2,607,897 EQUITY SHARES (“FRESH ISSUE”) AND AN OFFER FOR SALE OF 916,542 EQUITY SHARES BY MR. DPS KOHLI, MR. BS SAWHNEY AND MR. GS SAWHNEY (THE “SELLING SHAREHOLDERS”), AGGREGATING RS. [] MILLION (THE “ISSUE”). UPTO 50,000 EQUITY SHARES WILL BE RESERVED IN THE ISSUE FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (THE “EMPLOYEE RESERVATION PORTION”). THE ISSUE LESS THE EMPLOYEE RESERVATION PORTION IS REFERRED TO AS THE “NET ISSUE”. THE ISSUE WILL CONSTITUTE APPROXIMATELY 11.54% OF OUR POST-ISSUE CAPITAL. THE NET ISSUE WILL CONSTITUTE APPROXIMATELY 11.37% OF OUR POST-ISSUE CAPITAL PRICE BAND: RS. 370 TO RS. 415 PER EQUITY SHARE OF FACE VALUE RS. 10 EACH THE FACE VALUE OF THE EQUITY SHARES IS RS. 10 AND THE FLOOR PRICE IS 37.0 TIMES OF THE FACE VALUE AND THE CAP PRICE IS 41.5 TIMES OF THE FACE VALUE. In case of revision of the Price Band, the Bid/Issue Period will be extended for three additional Business Days after such revision, subject to the Bid/Issue Period not exceeding 10 Business Days. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited (the “BSE”) and the National Stock Exchange of India Limited (the ”NSE”), by issuing a press release and also by indicating the change on the websites of the Book Running Lead Manager and the Co-Book Running Lead Manager (as defined below) and at the terminals of the members of the Syndicate. Pursuant to Rule 19(2)(b) of the SCRR (as defined below), this Issue consists of an issue for less than 25% of the post- Issue capital and is being made through a 100% Book Building Process wherein at least 60% of the Net Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only and the remainder shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. In addition, in accordance with Rule 19(2) (b) of the SCRR, a minimum of two million securities are being offered to the public and the size of the Net Issue shall aggregate to at least Rs. 1,000 million. If at least 60% of the Net Issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further, not less than 10% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and not less than 30% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first public issue of the Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the Equity Shares is Rs.10 each and the Issue Price is [] times the face value. The Issue Price (as determined by the Company and the Selling Shareholders in consultation with the Book Running Lead Manager on the basis of the assessment of market demand for the Equity Shares by way of Book Building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares of the Company or regarding the price at which the Equity Shares will be traded after listing. The Company has not opted for the IPO grading of this Issue. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. Before taking an investment decision, investors must rely on their own examination of the Company and the Issue including the risks involved. The Equity Shares issued/offered in the Issue have not been recommended or approved by the SEBI, nor does the SEBI guarantee the accuracy or adequacy of the contents of this Red Herring Prospectus. Specific attention of the investors is invited to the statements in the section titled “Risk Factors” beginning on page xi of this Red Herring Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to the Issuer and the Issue that is material in the context of the Issue, that the information contained in this 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 Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offererd through this Red Herring Prospectus are proposed to be listed on the BSE and the NSE. The Company has received in-principle approvals from the BSE and the NSE for the listing of the Equity Shares pursuant to letters dated May 22, 2007 and July 11, 2007, respectively. For the purposes of this Issue, the Designated Stock Exchange is the BSE. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE JM Financial Consultants Private Limited Karvy Computershare Private Limited 141, Maker Chambers III Plot No. 17 to 24, Vithalrao Nagar, Madhapur Nariman Point, Mumbai 400 021, India Hyderabad - 500 081, India Tel: +(91) (22) 6630 3030 Tel: + (91) (40)-23420815 - 820 Fax: +(91) (22) 2204 7185 Fax: + (91) (40) 23420814 E-mail: [email protected] Email: [email protected] Website: www.jmfinancial.in Website: www.karvy.com Contact Person: Mr. Vikas Kothari Contact Person: Mr. M. Murali Krishna ISSUE SCHEDULE BID / ISSUE OPENS ON : TUESDAY, SEPTEMBER 18, 2007 BID / ISSUE CLOSES ON : FRIDAY, SEPTEMBER 21, 2007 C M Y K TABLE OF CONTENTS 1. DEFINITIONS AND ABBREVIATIONS .......................................................................................................... i 2. CERTAIN CONVENTIONS, USE OF FINANCIAL INFORMATION AND MARKET DATA, CURRENCY OF PRESENTATION AND EXCHANGE RATES ....................................... viii 3. FORWARD LOOKING STATEMENTS ........................................................................................................... x 4. RISK FACTORS .............................................................................................................................................. xi 5. SUMMARY OF INDUSTRY, BUSINESS, COMPETITIVE STRENGTHS AND STRATEGY ...................... 1 6. SUMMARY FINANCIAL INFORMATION ....................................................................................................... 4 7. THE ISSUE ...................................................................................................................................................... 6 8. GENERAL INFORMATION ............................................................................................................................. 7 9. CAPITAL STRUCTURE ................................................................................................................................. 17 10. OBJECTS OF THE ISSUE .............................................................................................................................. 33 11. BASIS FOR ISSUE PRICE ............................................................................................................................. 46 12. STATEMENT OF TAX BENEFITS .................................................................................................................. 49 13. INDUSTRY OVERVIEW ................................................................................................................................. 59 14. OUR BUSINESS ............................................................................................................................................