CMYK FINAL PROSPECTUS Dated February 27, 2006 Please read Section 60B of the Companies Act, 1956 100% Book Built Issue GITANJALI GEMS LIMITED (The Company was incorporated on August 21, 1986 as a private limited company under the Companies Act. For details of changes in name, please refer to “History and Certain Corporate Matters” beginning on page 90 of this Prospectus) Registered Office: 801/802 Prasad Chambers, Opera House, Mumbai 400 004 Tel: (91) (22) 2363 0272; Fax: (91) (22) 23630363 Contact Person: Kishor Baxi; Tel: (91) (22) 2363 5344 E-mail: [email protected]; Website: www.gitanjaligroup.com PUBLIC ISSUE OF 17,000,000 EQUITY SHARES OF RS.10 EACH OF GITANJALI GEMS LIMITED (“GITANJALI GEMS” OR THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF RS.195 PER EQUITY SHARE, AGGREGATING RS.3,315 MILLION (THE “ISSUE”). 150,000 EQUITY SHARES OF RS.10 EACH WILL BE RESERVED IN THE ISSUE FOR SUBSCRIPTION BY PERMANENT EMPLOYEES AND DIRECTORS OF THE COMPANY WHO ARE INDIAN NATIONALS AND ARE BASED IN INDIA (THE “EMPLOYEE RESERVATION PORTION”, AND THE ISSUE OF EQUITY SHARES OTHER THAN THE EMPLOYEE RESERVATION PORTION, THE “NET ISSUE”). THE FACE VALUE OF THE EQUITY SHARES IS RS.10. THE ISSUE WILL CONSTITUTE 28.81% OF THE FULLY DILUTED POST-ISSUE CAPITAL OF THE COMPANY. ISSUE PRICE : RS. 195 PER EQUITY SHARE OF FACE VALUE RS.10 EACH. THE ISSUE PRICE IS 19.5 TIMES THE FACE VALUE 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 the National Stock Exchange of India Limited (“NSE”) and by issuing a press release and also by indicating the change on the websites of the Book Running Lead Managers and the terminals of the Syndicate. The Issue is being made through the 100% Book Building Process where up to 50% of the Net Issue to the 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 remainder of the QIB Portion 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. Further, at least 15% of the Net Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and at least 35% of the Net Issue to the 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. Further, 150,000 Equity Shares shall be available for allocation on a proportionate basis to the permanent Employees and Directors of the Company, subject to valid Bids being received at or above the Issue Price. RISK IN RELATION TO FIRST ISSUE This being the first issue of 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 per Equity Share and the Issue Price is 19.5 times the face value . The Issue Price 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. 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 Company and the Issue including the risks involved. The Equity Shares issued 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 the contents of this Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in Risk Factors beginning on page viii of this Prospectus. COMPANY’S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Prospectus contains all information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this 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 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 Prospectus are proposed to be listed on the BSE and NSE. We have received in-principle approvals from these Stock Exchanges for the listing of the Company’s Equity Shares pursuant to letters dated January 23, 2006 and January 25, 2006, respectively. For the purposes of the Issue, the Designated Stock Exchange is BSE. BOOK RUNNING LEAD MANAGERS (BRLMs) REGISTRAR TO THE ISSUE ICICI SECURITIES LIMITED KEYNOTE CORPORATE SERVICES LIMITED KARVY COMPUTERSHARE PRIVATE LIMITED ICICI Centre 307, Regent Chambers Karvy House, 46, Avenue 4, Street No.1 H.T. Parekh Marg, Churchgate Nariman Point Banjara Hills, Hyderabad 500 034 Mumbai 400 020 Mumbai 400 021 Tel: +91 40 2343 1546 Tel: +91 22 2288 2460 Tel : +91 22 2202 5230 Fax: +91 40 2343 1551 Fax: +91 22 2282 6580 Fax: +91 22 2283 5467 Email: [email protected] E-mail: [email protected] Email: [email protected] Website: www.karvy.com Website: www.icicisecurities.com Website: www.keynoteindia.net ISSUE PROGRAM BID/ISSUE OPENED ON : THURSDAY, FEBRUARY 16, 2006 BID/ISSUE CLOSED ON : TUESDAY, FEBRUARY 21, 2006 CMYK TABLE OF CONTENTS Section Page Definitions and Abbreviations i Presentation and Financial and Market Data vi Forward Looking Statements vii Risk Factors viii Summary 1 The Issue 7 Summary Financial Information 8 General Information 11 Capital Structure 19 Objects of the Issue 25 Basis for Issue Price 55 Statement of Tax Benefits 57 Industry 63 Business 71 Regulations and Policies in India 88 History and Certain Corporate Matters 90 Management 101 Promoter and Promoter Group 109 Related Party Transactions 129 Dividend Policy 130 Financial Statements 131 Summary of Significant Differences Between Indian GAAP and U.S. GAAP 211 Management’s Discussions and Analysis of Financial Condition and Results of Operations 218 Outstanding Litigation 234 Material Developments 240 Government and Other Approvals 241 Other Regulatory and Statutory Disclosures 244 Issue Structure 253 Terms of the Issue 255 Issue Procedure 258 Main Provisions of Articles of Association of the Company 281 Material Contracts and Documents for Inspection 302 Declaration 304 DEFINITIONS AND ABBREVIATIONS General Terms Term Description “GGL” or “the Company” Gitanjali Gems Limted, a public limited company incorporated under the or the “Issuer” or Companies Act. “Gitanjali Gems Limited” “we” or “us” or “our” Unless the context otherwise requires, Gitanjali Gems Limited and its Subsidiaries, Joint Ventures and Associate Companies, on a consolidated basis as described in this Prospectus. Associate Companies Brightest Circle Jewellery Private Limited and Gili India Limited (Formerly Gitanjali Jewels Limited). Joint Venture D’Damas Jewellery (India) Private Limited. Subsidiaries CRIA Jewellery Private Limited, Fantasy Diamond Cuts Private Limited, Gitanjali Exports Corporation Limited, Hyderabad Gems SEZ Limited and Mehul Impex Limited. Issue Related Terms Term Description Allotment Unless the context otherwise requires, the allotment of Equity Shares pursuant to the Issue. Allottee The successful Bidder to whom Equity Shares are/ have been allotted. Articles/Articles of Articles of Association of the Company. Association Auditors Ford, Rhodes, Parks & Co. Banker(s) to the Issue ICICI Bank Limited, The Hongkong and Shangai Banking Corporation Limited Bid An indication to make an Issue during the Bidding/Issue Period by a prospective investor to subscribe to the Company’s Equity Shares at a price within the Price Band, including all revisions and modifications thereto. Bid Amount The highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid in the Issue. Bid/Issue Closing Date The date after which the Syndicate will not accept any Bids for the Issue, which shall be notified in a widely circulated English national newspaper and Hindi national newspaper. Bid cum Application Form The form in terms of which the Bidder shall make an Issue to subscribe to/purchase the Equity Shares and which will be considered as the application for issue of the Equity Shares pursuant to the terms of this Prospectus. Bidder Any prospective investor who makes a Bid pursuant to the terms of this Prospectus and the Bid cum Application Form. 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. Bid/Issue Opening Date The date on which the Syndicate Members shall start accepting Bids for the Issue, which shall be the date notified in a widely circulated English national newspaper and Hindi national newspaper.