RED HERRING PROSPECTUS Please read Section 60B of the Companies Act, 1956 Dated 27 November, 2006 100% Book Built Issue CAIRN INDIA LIMITED (Incorporated as a public limited company under the Companies Act, 1956 on 21 August, 2006) The registered office of the Company was changed from Lentin Chambers, 3rd Floor, Dalal Street, Fort, Mumbai 400 023 to 401 Dalamal Towers, Nariman Point, Mumbai 400 021, India, its current registered office on 12 October, 2006 Tel: +(91) (22) 2287 2001; Fax: +91 (22) 2287 2002 Principal Business Office: 3rd and 4th Floor, Orchid Plaza, Suncity, Sector 54, Gurgaon, 122 002 Tel: +(91) (124) 414 1360; Fax: +(91) (124) 288 9320; Website: www.cairnindia.com Contact Person: Preeti Chheda; E-mail: [email protected] PUBLIC ISSUE OF 328,799,675 EQUITY SHARES OF RS. 10 EACH (‘‘EQUITY SHARES’’) FOR CASH AT A PRICE OF RS. [ɀ] PER EQUITY SHARE OF CAIRN INDIA LIMITED (THE ‘‘COMPANY’’) AGGREGATING TO RS. [ɀ] (THE ‘‘ISSUE’’). THERE WILL ALSO BE A GREEN SHOE OPTION OF UP TO 49,319,951 EQUITY SHARES FOR CASH AT A PRICE OF RS. [ɀ] PER EQUITY SHARE AGGREGATING TO RS. [ɀ] (THE ‘‘GREEN SHOE OPTION’’). THE ISSUE AND THE GREEN SHOE OPTION, IF EXERCISED IN FULL, WILL AGGREGATE TO 378,119,626 EQUITY SHARES AMOUNTING TO RS. [ɀ]. THE ISSUE WILL CONSTITUTE 18.63% OF THE FULLY DILUTED POST-ISSUE EQUITY SHARE CAPITAL OF THE COMPANY ASSUMING THAT THE GREEN SHOE OPTION IS NOT EXERCISED AND 20.84% ASSUMING THAT THE GREEN SHOE OPTION IS EXERCISED IN FULL. PRICE BAND: RS. 160 TO RS. 190 PER EQUITY SHARE OF FACE VALUE RS. 10 EACH THE FACE VALUE OF THE EQUITY SHARES IS RS. 10 AND THE FLOOR PRICE IS 16 TIMES OF THE FACE VALUE AND THE CAP PRICE IS 19 TIMES OF THE FACE VALUE. In case of revision of the Price Band, the Bid/Issue Period will be extended for three additional 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 Managers (as defined below), 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 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 Issue shall aggregate to at least Rs. 100 crore. If at least 60% of the Issue cannot be allocated to QIBs, then the entire application money will be refunded forthwith. Further, not less than 10% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 30% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO THE 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 and the Issue Price is [ɀ] times the face value. The Issue Price (as determined by the Company in consultation with the Book Running Lead Managers 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 grading of this Issue from a Securities and Exchange Board of India (‘‘SEBI’’) registered credit rating agency. 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 offered in the Issue have not been recommended or approved by the SEBI, nor does the SEBI guarantee the accuracy or adequacy of this Red Herring Prospectus. Specific attention of the investors is invited to the statements in the section entitled ‘‘Risk Factors’’ at page xiv 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 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 13 November 2006 and 13 November 2006, respectively. For the purposes of this Issue, the Designated Stock Exchange is the NSE. GLOBAL COORDINATORS AND BOOK RUNNING LEAD BOOK RUNNING LEAD REGISTRAR TO THE ISSUE MANAGERS MANAGER 14SEP200613445019 18SEP200606432075 DSP Merrill Lynch Limited ABN AMRO Securities (India) 14SEP200613445669 10th Floor Mafatlal Centre Private Limited JM Morgan Stanley Private Nariman Point 81 Sakhar Bhavan Limited Mumbai 400 021 230 Nariman Point 141 Maker Chambers III 18SEP200606433621 Tel: +(91) (22) 2262 1071 Mumbai 400 021 Nariman Point Intime Spectrum Registry Limited Fax: +(91) (22) 2262 1187 Tel: +(91) (22) 2281 6352 Mumbai 400 021 C-13, Pannalal Silk Mills Website: www.dspml.com Fax: +(91) (22) 2281 6343 Tel: +(91) (22) 6630 3030 Compound E-mail: Website: Fax: +(91) (22) 2204 7185 L.B.S. Marg [email protected] www.abnamroindia.com Website: Bhandup (West) Contact Person: N. S. Shekhar E-mail: cairnenergy.ipo www.jmmorganstanley.com Mumbai 400 078 @in.abnamro.com E-mail: cairnindia.ipo Tel: +(91) (22) 2596 0320 Contact Person: Navin Wadhwani @jmmorganstanley.com Fax: +(91) (22) 2596 0329 Contact Person: Purti Vijaywargiya Website: www.intimespectrum.com E-mail: [email protected] Contact Person: Haren Modi BID/ISSUE PROGRAMME BID/ISSUE OPENS ON: 11 December, 2006 BID/ISSUE CLOSES ON: 15 December, 2006 TABLE OF CONTENTS Page No. DEFINITIONS AND ABBREVIATIONS ...................................... ii CERTAIN CONVENTIONS, USE OF FINANCIAL INFORMATION AND MARKET DATA, CURRENCY OF PRESENTATION AND EXCHANGE RATES ............... xii FORWARD-LOOKING STATEMENTS ....................................... xiii RISK FACTORS ........................................................ xiv SUMMARY OF THE BUSINESS, COMPETITIVE STRENGTHS AND STRATEGY ..... 1 THE ISSUE ........................................................... 5 GREEN SHOE OPTION .................................................. 6 SUMMARY FINANCIAL INFORMATION .................................... 9 GENERAL INFORMATION ............................................... 13 CAPITAL STRUCTURE .................................................. 25 OBJECTS OF THE ISSUE ................................................ 31 BASIS FOR ISSUE PRICE ................................................ 35 STATEMENT OF TAX BENEFITS .......................................... 38 INDUSTRY OVERVIEW .................................................. 48 OUR BUSINESS ........................................................ 50 ESTIMATION OF RESERVES AND RESOURCES .............................. 89 REGULATIONS AND POLICIES ........................................... 91 HISTORY AND CORPORATE STRUCTURE .................................. 95 MANAGEMENT........................................................ 113 PROMOTERS AND PROMOTER GROUP .................................... 132 RELATIONSHIP WITH CAIRN ENERGY PLC ................................ 141 DIVIDEND POLICY ..................................................... 149 FINANCIAL INFORMATION .............................................. 150 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .............................................. 303 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ................ 329 GOVERNMENT AND OTHER APPROVALS .................................. 333 OTHER REGULATORY