INFORMATION MEMORANDUM GOKAK TEXTILES LIMITED Registered Office: 45/3 Gopalkrishna Complex, 1st Floor, Residency Cross Road, Bangalore-560 025 Corporate Office : Chandivali Estate, Saki Powai Road, Chandivali, Mumbai 400 072 Phone: 022- 2857 6009 Fax: 022 – 2847 0046, Website: www.gokakmills.com Contact person: Mr. S. Raghunathan Email: [email protected] (We were incorporated as a Public Limited Company on March 27, 2006 as ANS Textiles (Bangalore) Limited and the name was changed to GOKAK TEXTILES LIMITED with effect from January 23, 2007) INFORMATION MEMORANDUM FOR LISTING OF 64,99,308 EQUITY SHARES OF RS.10 EACH. NO EQUITY SHARES ARE PROPOSED TO BE SOLD OR OFFERED PURSUANT TO THIS INFORMATION MEMORANDUM GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest in the equity shares of GOKAK TEXTILES LIMITED 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 the shares of GOKAK TEXTILES LIMITED. For taking an investment decision, investors must rely on their own examination of the Company including the risks involved. ABSOLUTE RESPONSIBILITY OF GOKAK TEXTILES LIMITED GOKAK TEXTILES LIMITED having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to GOKAK TEXTILES LIMITED, which is material, that the information contained in this Information Memorandum 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 Information Memorandum 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 of GOKAK TEXTILES LIMITED are proposed to be listed on Bombay Stock Exchange Limited. SHARE TRANSFER AGENT TSR Darashaw Ltd., UNIT: GOKAK TEXTILES LIMITED 6-10, Haji Moosa Patrawala Industrial Estate, 20, Dr. E. Moses Road, Mahalaxmi, Mumbai 400 011. Telephone : 022 – 6656 8484 Fax : 022 – 6656 8494 Email : [email protected] Contact Person: Ms. Nandini Nair 1 TABLE OF CONTENTS PageNos. SECTION I – GENERAL DEFINITIONS, ABBREVIATIONS & INDUSTRY RELATED TERMS 3 - 6 CERTAIN CONVENTIONS; USE OF MARKET DATA 7 FORWARD LOOKING STATEMENTS 8 SECTION II - RISK FACTORS RISK FACTORS 9 – 14 SECTION III – INTRODUCTION SUMMARY (INDUSTRY AND BUSINESS OF THE COMPANY) 15 – 20 GENERAL INFORMATION (SPECIFIC DETAILS OF OUR BUSINESS) 21 – 22 CAPITAL STRUCTURE 23 – 25 SCHEME OF ARRANGEMENT 26 – 30 APPROVALS WITH RESPECT TO THE SCHEME OF ARRANGEMENT 31 STATEMENT OF TAX BENEFITS 32-36 SECTION IV - ABOUT GOKAK TEXTILES LIMITED HISTORY, PROMOTERS AND MAJOR SHAREHOLDERS 37 – 38 MANAGEMENT (INCLUDING BOARD OF DIRECTORS) 39 – 45 COMPENSATION OF MANAGING DIRECTOR / WHOLE TIME DIRECTOR 46 CORPORATE GOVERNANCE 47 – 48 CURRENCY OF PRESENTATION 49 DIVIDEND POLICY 49 SECTION V - FINANCIAL INFORMATION FINANCIAL INFORMATION OF THE COMPANY 50 – 67 GROUP COMPANIES FINANCIAL AND OTHER INFORMATION 68 – 177 MANAGEMENT DISCUSSION & ANALYSIS 178 - 180 SECTION VI - LEGAL & OTHER INFORMATION OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS 181 - 185 GOVERNMENT APPROVALS 186 SECTION VII - OTHER REGULATORY AND STATUTORY DISCLOSURES OTHER REGULATORY AND STATUTORY DISCLOSURES 187 - 189 MAIN PROVISION OF THE ARTICLES OF ASSOCIATION 190 - 211 SECTION VIII - OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 212 DECLARATION 213 2 DEFINITIONS, ABBREVIATIONS & INDUSTRY RELATED TERMS Term Description “GTL” or “Company” or “Our GOKAK TEXTILES LIMITED, a Public Limited Company” or Resulting Company Company incorporated under the provisions of the or GOKAK TEXTILES LIMITED Companies Act, 1956 “We” or “us” and “our” Refers to GOKAK TEXTILES LIMITED Affiliate Includes: Any company, firm, body corporate, association of persons, associates or other entity controlled, directly or indirectly by Group as the case may be. Articles/Articles of Association Articles of Association of GOKAK TEXTILES LIMITED Auditors The Statutory Auditors of GOKAK TEXTILES LIMITED Bankers to the Company The Bankers which are the bankers to GOKAK TEXTILES LIMITED Board of The Board of Directors of GOKAK TEXTILES LIMITED Directors/Board/Directors BSE Bombay Stock Exchange Limited CDSL Central Depository Services (India) Limited Companies Act / Act The Companies Act, 1956, as amended from time to time Current Year April 1, 2007 to March 31, 2008 Demerged Company Forbes Gokak Limited, a Public Limited Company, under the provisions of the Companies Act, 1956 DSE Designated Stock Exchange EPS Earnings per equity share Equity Shares Equity shares of the Company of Rs.10 each unless otherwise specified in the context thereof Financial year/fiscal/FY The twelve months ended 31st March , unless otherwise stated HUF Hindu Undivided Family Information Memorandum This document filed with the Stock Exchange is known as and referred to as the Information Memorandum I.T. Act The Income-tax Act, 1961, as amended from time to time, except as stated otherwise ITAT Income Tax Appellate Tribunal Investee Companies or Refers to GOKAK TEXTILES LIMITED Operating Companies along with their subsidiaries, associates and affiliates, as applicable. Memorandum/Memorandum of The Memorandum of Association of GOKAK TEXTILES Association LIMITED NSDL National Securities Depository Limited NSE The National Stock Exchange of India Limited RBI Reserve Bank of India Registered office of our 45/3 Gopalkrishna Complex, 1st Floor, Residency Cross Company Road, Bangalore 560 025. ROC Registrar of Companies, Maharashtra, at Mumbai and Registrar of Companies, Karnataka, at Bangalore, as may be applicable in the context 3 Scheme Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956 between Forbes Gokak Ltd. and GOKAK TEXTILES LIMITED and their respective shareholders and creditors, sanctioned by the High Court, Bombay on May 4, 2007 and the High Court of Karnataka at Bangalore on July 13, 2007 and effective from April 1, 2007. SEBI Securities and Exchange Board of India constituted under the Securities and Exchange Board of India Act,1992 SEBI Act Securities and Exchange Board of India Act, 1992 as amended from time to time SEBI Guidelines Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 issued by Securities and Exchange Board of India effective from January 27, 2000, as amended, including instructions and clarifications issued by Securities and Exchange Board of India from time to time Stock Exchanges BSE and NSE Textiles Undertaking Textiles Undertaking of Forbes Gokak Limited set out in the Scheme and reproduced in the attachment hereto under the caption ‘Textiles Undertaking’. General Industry Terms BSS Business Support System CAGR Compounded Annual Growth Rate CAPEX Capital Expenditure GoI Government of India Net debt Long terms debt less cash and cash equivalents PIN Personal Identification Number SCN Show Cause Notice 4 Definition of ‘Textiles Undertaking’ The Textiles Division of FGL comprising of the business activity of textiles being carried on by FGL on a going concern basis and including the manufacturing and/or allied activities of the following subdivisions, as on the Appointed Date: - Yarn division engaged in manufacturing and marketing of cotton yarn including but not limited to dyed yarn, grey yarn, canvas, terry towels, etc. - Knitwear division engaged in all the operations from knitting to making of garments like polo shirts, T-shirts etc. manufactured and sold under the ‘Campbell’ brand; and otherwise - Shall include (without limitation): (a) All assets wherever situated, whether movable or immovable, real or personal, in possession or reversion, corporeal or incorporeal, tangible or intangible, present or contingent and including land, buildings, residential properties (more particularly described in the Schedule of this Scheme), offices, all the power generation plants whether hydro power or multi-fuel electricity plant located at factory site or otherwise, mills, power looms, dornier looms, plant and machinery including spindles, capital work-in-progress, warehouses, godowns, depots, power lines, vehicles, other fixed assets but without being limited to factory licences, brands, trademarks, patents, copyrights and other intellectual property rights, investments (including the investment in P.T. Gokak Indonesia), leases, tenancy rights, premises, hire purchase and lease arrangements, computers, office equipment, furniture, telephones, telexes, facsimile connections, communication facilities, electrical and other installations, inventories, current assets, sundry debtors, deposits, receivables, funds, cash, bank balances, accounts and all other rights, benefits of all agreements, subsidies, grants, taxes, tax credits (including but not limited to credits in respect of income tax, sales tax, value added tax, turnover tax, excise duty, service tax, etc.), bills of exchange, letters of intent and loans and advances appearing in the books of accounts of FGL pertaining to or relatable to the Textiles Division. ( b ) All liabilities present, future and the specified contingent liabilities including the liabilities of FGL allocable or pertaining to the business of Textiles Division including guarantees in respect of borrowings of P.T.Gokak