RED HERRING PROSPECTUS Dated: 28th January, 2008 Please read section 60 B of the Companies Act, 1956 100% Book Building Issue V-GUARD INDUSTRIES LIMITED (Our Company was originally incorporated as V- Guard Industries Limited on February 12, 1996 under the Companies Act, 1956, with the Registration No. 09-10010 of 1996.With effect from Novermber15, 2001 our Company was converted into a Private Limited Company and subsequently got converted into a Public Limited Company on August 1, 2007 and received a fresh certificate of incorporation in the name of “V-Guard Industries Limited”. Our Corporate Identity Number is U31200KL1996PLC010010) Registered cum Corporate Office : 44/1037, Little Flower Church Road, Kaloor, Cochin- 682017, Kerala, India; Our Company has not changed its registered office since its incorporation. Tel. No. +91-484-2539911, 2530912; Fax No.+ 91-484-2539958, Website: www.vguard.in Contact Person & Compliance Officer : Mr. T. Nandakumar, E-mail: [email protected] PUBLIC ISSUE OF 80,00,000 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PRICE OF RS. [●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [●] PER EQUITY SHARE) FOR CASH AGGREGATING TO RS. [●] LAKHS (THE “ISSUE”) OUT OF WHICH 4,00,000 EQUITY SHARES HAVE BEEN RESERVED FOR ELIGIBLE EMPLOYEES OF OUR COMPANY (“EMPLOYEE RESERVATION PORTION”). THE NET ISSUE TO THE PUBLIC SHALL BE 76,00,000 EQUITY SHARES OF RS.10 EACH FOR CASH AT A PRICE OF RS.[●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF RS. [●] PER EQUITY SHARE) FOR CASH AGGREGATING TO RS. [●] LAKHS (THE “NET ISSUE TO PUBLIC”) THE ISSUE WILL CONSTITUTE 26.80 % OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF OUR COMPANY AND THE NET ISSUE TO PUBLIC WILL CONSTITUTE 25.46 % OF THE FULLY DILUTED POST ISSUE PAID -UP CAPITAL OF OUR COMPANY. PRICE BAND: RS. 80 to Rs. 85 PER EQUITY SHARE OF FACE VALUE OF RS.10/- THE ISSUE PRICE IS 8 TIMES THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND 8.5 TIMES THE FACE VALUE AT THE HIGHER END OF THE PRICE BAND In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited (“BSE”), and 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 (“BRLM”) and the terminals of the member(s) of the Syndicate. This Issue is being made through a 100% Book Building Process wherein up to 50% of the Net Issue to public shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”). 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only and the remaining QIB portion shall be available for allocation on a proportionate basis to QIB bidders including Mutual Funds subject to valid bids being received at or above the Issue Price. Further, not less than 15% of the Net Issue to public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Issue to public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. RISK IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of our Company, there has been no formal market for our Equity Shares. The face value of the shares is Rs. 10 and the Issue Price is 8 times of the face value at the lower end of the Price Band and 8.5 times of the face value at the higher end of the Price Band. The Issue Price (as determined by our Company, in consultation with the BRLM on the basis of assessment of market demand for the Equity Shares by way of Book Building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares of our Company or regarding the price at which the Equity Shares will be traded after listing. 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 our Company and this Issue including the risks involved. The Equity Shares issued in this 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 Red Herring Prospectus. Specific attention of the investors is invited to the statements in the chapter titled ‘Risk Factors’ beginning on page no. x of this Red Herring Prospectus. OUR COMPANY’S ABSOLUTE RESPONSIBILITY Our Company having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to our Company and this Issue, which is material in the context of this 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 issued through this Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”). We have received in-principle approvals from these Stock Exchanges for the listing of our Equity Shares pursuant to letters nos. DCS/IPO/MT/IPO-IP/1495/2007-08 and NSE/LIST/63136 dated December 18, 2007 and December 24, 2007 respectively. For purposes of this Issue, BSE is the Designated Stock Exchange. IPO GRADING CRISIL has assigned “IPO Grade 3, indicating average fundamentals, to the proposed IPO of V-Guard Industries Limited (VIL), through its letter dated January 14, 2008. For more information on our IPO grading, please refer to the chapter titled “General Information” beginning on page no. 6 of this Red Herring Prospectus. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE Anand Rathi Securities Limited Intime Spectrum Registry Limited 11th Floor, Times Tower, C-13, Pannalal Silk Mills Compound, Senapati Bapat Marg, Lower Parel, LBS Marg, Bhandup (West), Mumbai - 400 013. Mumbai - 400 078 Tel: +91- 22 4047 7000; Fax: +91- 22 4047 7070 Tel: +91- 22-2586 0320; Fax: +91- 22- 2596 0329 Email:[email protected]; Email: [email protected]; Website: www.rathi.com Website: www.intimespectrum.com SEBI Registration No. : INM 000010478 SEBI Registration No. : INR 000003761 ISSUE PROGRAMME BID / ISSUE OPENS ON February 18, 2008 BID / ISSUE CLOSES ON February 21, 2008 TABLE OF CONTENTS Table of Contents Page No. Section I - Definitions and Abbreviations Conventional / General Terms i Issue Related Terms ii Company / Industry related Terms v Abbreviations vi Presentation of Financial Information and Use of Market Data viii Section II - Risk Factors Forward looking Statements ix Risk Factors x Section III - Introduction Summary 1 General Information 6 Capital Structure 14 Objects of this Issue 27 Basic Terms of this Issue 40 Basis for Issue Price 41 Statement of Tax Benefits 43 Section IV - About us Industry Overview 51 Business Overview 62 Key Industry Regulations and Policies 99 Our History and Corporate Structure 101 Our Management 106 Our Promoters 118 Related Party Transactions 120 Dividend Policy 120 Section V - Financial Statements Financial Information 122 Group Companies/Other Ventures Promoted by our Promoters 163 Management’s Discussion and Analysis of the Financial Conditions 170 Section VI - Legal and Regulatory Information Outstanding Litigation, Material Developments and Other Disclosures 187 Government/Statutory and other Business Approvals 206 Section VII -Other Regulatory and Statutory Disclosures 225 Section VIII - Issue Related Information Terms of the Issue 235 Issue Structure 238 Issue Procedure 241 Section IX - Main Provisions of the Articles of Association of our Company 272 Section X - Other Information Material Contracts and Documents for Inspection 297 Declaration 300 SECTION I – DEFINITIONS AND ABBREVIATIONS Unless the context otherwise requires, the terms and abbreviations stated hereunder shall have the meanings as assigned therewith. Term Description “VIL”, “V-Guard” “our V-Guard Industries Limited, a company incorporated under the Companies Act, Company”, “the Company”, 1956, having its registered cum corporate office at 44/1037, Little Flower Church “Issuer”, “we” or “us” Road, Kaloor, Cochin- 682017, Kerala, India. “our Promoters” Mr. Kochouseph Chittilappilly and Mrs. Sheela Kochouseph Chittilappilly Promoter Director Mr. Kochouseph Chittilappilly “ The Group” or “ Group Unless the context otherwise requires, refers to those companies/entities mentioned Companies” in the chapter titled “Group Companies/Other Ventures Promoted by the Promoters” on page no. 163 of this Red Herring Prospectus “you”, “your” or “yours” Prospective investors in this Issue CONVENTIONAL / GENERAL TERMS Term Description Articles/ Articles of Association Articles of Association of the Company, as amended from time to time Board of Directors / Board The Board of Directors of our Company or a committee thereof Companies Act The Companies Act, 1956, as amended from time to time.