Information Memorandum RANE BRAKE LINING LIMITED Registered Office: “Maithri”, 132, Cathedral Road, Chennai – 600 086.Tel.: (044) 28112472-73 Fax: (044) 28112449.Website: www.rane.co.in Email: [email protected] (Incorporated as a Private Limited company on December 17, 2004 under the Companies Act, 1956 as “EMS Logistics (India) Private Limited”. On September 20,2005 the name of the company was changed to M/s Richfield Logistics Line Private Limited. The name of the company was changed to M/s Rane Brake Products Private Limited w.e.f. September 24, 2007. The status of the company was changed from “Private Limited” to “ Public Limited” and the company became a public limited company on September 26, 2007. In terms of the Scheme of Demerger, Merger and Amalgamation for transfer of the manufacturing undertaking of erstwhile Rane Brake Linings Limited, as approved by the Hon’ble High Court of Judicature at Madras vide its order dated December 20, 2007, the name of the Company was changed to Rane Brake Lining Limited w.e.f 6th February, 2008) INFORMATION MEMORANDUM FOR LISTING OF 7,214,980 EQUITY SHARES OF RS. 10 EACH FULLY PAID-UP GENERAL RISKS Investment in equity and equity-related securities involve a degree of risk and investors should not invest in the equity shares of Rane Brake Lining 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 Rane Brake Lining Limited. For taking an investment decision, investors must rely on their own examination of the Company including the risks involved..The securities 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 document. ABSOLUTE RESPONSIBILITY OF RANE BRAKE LINING LIMITED Rane Brake Lining Limited having made all reasonable inquiries, accepts responsibility for, and confirms that this Information Memorandum contains all information with regard to Rane Brake Lining 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 Rane Brake Lining Limited are proposed to be listed on Madras Stock Exchange Limited (MSE), National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited, Mumbai (BSE). SHARE TRANSFER AGENT Integrated Enterprises (India) Ltd. 2nd Floor, “Kences Towers”, No.1 Ramakrishna Street, North Usman Road, T Nagar, Chennai 600017. Tel: (044) 28140801 Fax: (044) 28142479 E-mail: [email protected] 1 Information Memorandum TABLE OF CONTENTS SECTION I- GENERAL .........................................................................................................................................3 GLOSSARY OF TERMS AND ABBREVIATIONS ............................................................................................3 FORWARD LOOKING STATEMENTS ..............................................................................................................5 SECTION II –RISK FACTORS .............................................................................................................................7 RISK FACTORS......................................................................................................................................................7 SECTION III- INTRODUCTION ........................................................................................................................11 SUMMARY.............................................................................................................................................................11 INDUSTRY AND BUSINESS OVERVIEW........................................................................................................11 GENERAL INFORMATION................................................................................................................................12 CAPITAL STRUCTURE:.....................................................................................................................................14 OBJECTS OF THE SCHEME..............................................................................................................................20 STATEMENT OF TAX BENEFITS ....................................................................................................................21 SUBJECT: STATEMENT OF POSSIBLE TAX BENEFITS............................................................................21 SECTION IV- ABOUT THE COMPANY...........................................................................................................25 OUR BUSINESS.....................................................................................................................................................25 HISTORY OF THE COMPANY..........................................................................................................................30 OUR MANAGEMENT..........................................................................................................................................34 OUR PROMOTER.................................................................................................................................................42 CURENCY OF PRESENTATION .......................................................................................................................45 DIVIDEND POLICY .............................................................................................................................................45 SECTION V - FINANCIAL STATEMENTS ......................................................................................................46 FINANCIAL INFORMATION OF OUR GROUP COMPANIES....................................................................64 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS..................................68 SECTION VI - LEGAL AND OTHER INFORMATION..................................................................................71 OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS......................................................71 GOVERNMENT APPROVALS ...........................................................................................................................84 OTHER REGULATORY AND STATUTORY DISCLOSURES......................................................................85 SECTION VII- MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION .........................................91 SECTION VIII .....................................................................................................................................................100 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION.........................................................100 DECLARATION..................................................................................................................................................100 2 Information Memorandum SECTION I- GENERAL GLOSSARY OF TERMS AND ABBREVIATIONS BSE The Bombay Stock Exchange Limited, Mumbai Company / RBL Rane Brake Lining Limited CDSL Central Depository Services (India) Limited DIP Guidelines The SEBI (Disclosure and Investor Protection ) Guidelines 2000 DP Depository Participant Demerged Company 1 Erstwhile Rane Engine Valves Limited Demerged Company 2 Erstwhile Rane Brake Linings Limited FEMA Foreign Exchange Management Act, 1999 HCV Heavy Commercial Vehicle The Investor Grievance Committee set up to attend to the grievances of Investor Grievance Committee investors. The issue of equity shares of RBL in terms of the Scheme of Demerger, Merger and Amalgamation sanction by the Hon’ble High Court of Judicature at Madras Issue vide order dated December 20, 2007. LCV Light Commercial Vehicle MSE Madras Stock Exchange Limited MUV Multi Utility Vehicle NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited OEM Original Equipment Manufacturer PCV Passenger Car Vehicles PACs Persons Acting in Concert RIL Rane Investments Limited RBL Rane Brake Linings Limited RBI Reserve Bank of India Registrar / IEP Integrated Enterprises (India) Ltd. 3 Information Memorandum REVL Rane Engine Valve Limited (formerly known as Techcons Limited) RHL Rane Holdings Limited RoC Registrar of Companies, Tamil Nadu, Chennai SCHEME Scheme of Demerger, Merger and Amalgamation sanctioned by the High Court of Madras, vide order dated December 20, 2007. SEBI Securities and Exchange Board of India SEBI Act Securities and Exchange Board of India Act, 1992 SIAM Society of Indian Automobile Manufacturers Shares Fully paid-up equity shares of Rs. 10/- each of RBL TPM Total Productivity Management TQM Total Quality Management UV Utility Vehicle 4 Information Memorandum FORWARD LOOKING STATEMENTS Unless stated otherwise, the financial data in this Information Memorandum is derived from our financial statements prepared in accordance with Indian GAAP. Our current financial year commenced on April 1, 2007 and shall end on March 31, 2008. In this Information Memorandum, any discrepancies in any table between the total and sums of the amounts