DRAFT RED HERRING PROSPECTUS Dated March 20, 2010 Please read Section 60B of the Companies Act, 1956 100% Book Building Issue The Draft Red Herring Prospectus shall be updated upon filing with the RoC MICROSEC FINANCIAL SERVICES LIMITED (Our Company was incorporated as "Satyam Fiscal Services Private Limited" on June 6, 1989 as a private limited company under the Companies Act, 1956. For details of changes in our name and our registered office, see "History and Certain Corporate Matters" on page 81 of this Draft Red Herring Prospectus.) Registered Office: Shivam Chambers, 1st floor, 53 Syed Amir Ali Avenue, Kolkata700 019. Tel: (91 33) 3051 2100; Fax: (91 33) 3051 2020. Corporate Office: Azimganj House, 2nd floor, 7 Camac Street, Kolkata 700 017 Contact Person: Biplab Kumar Mani, Company Secretary and Compliance Officer Tel: (91 33) 2282 9330; Fax: (91 33) 2282 9335; Email: [email protected]; Website: www.microsec.in PROMOTERS OF OUR COMPANY: BANWARI LAL MITTAL AND RAVI KANT SHARMA PUBLIC ISSUE OF 12,500,000 EQUITY SHARES OF Rs. 10 EACH OF MICROSEC FINANCIAL SERVICES LIMITED (THE "COMPANY" OR THE "ISSUER" OR "MFSL") FOR CASH AT A PRICE OF Rs. [] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF Rs. [] PER EQUITY SHARE) AGGREGATING TO Rs. [] MILLION (THE "ISSUE"). THE ISSUE WILL CONSTITUTE 39.30% OF THE POST ISSUE PAID UP CAPITAL OF THE COMPANY. THE FACE VALUE OF EQUITY SHARES IS Rs. 10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY THE COMPANY IN CONSULTATION WITH THE BRLM AND ADVERTISED AT LEAST TWO WORKING DAYS PRIOR TO THE BID/ISSUE OPENING DATE. In case of any revision to the Price Band, the Bid/Issue Period will be extended by three additional working days after such revision of the Price Band, subject to the Bid/ Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bid/Issue Period, will be widely disseminated by notification to the National Stock Exchange of India Limited ("NSE") and the Bombay Stock Exchange Limited ("BSE"), by issuing a press release, and also by indicating the change on the website of the Book Running Lead Manager ("BRLM") and at the terminals of the other members of the Syndicate. The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall be available for allocation on a proportionate basis to Qualified Institutional Buyers ("QIBs"). 5% of the QIB Portion (excluding Anchor Investor Portion) 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 QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Up to 30% of the QIB Portion may be allocated by our Company to Anchor Investors on a discretionary basis. One-third of the Anchor Investor Portion shall be reserved for allocation to domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Issue Price Potential investors may participate in this Issue through an Application Supported by Blocked Amount ("ASBA") providing details about the bank account which will be blocked by the Self Certified Syndicate Bank for the same. All Bidders other than QIB Bidders may participate in this Issue through the ASBA process. For details see "Issue Procedure" on page 273 of this Draft Red Herring Prospectus. RISK IN RELATION TO THE FIRST ISSUE This being the first public issue of our Company, there has been no formal market for the securities of the Issuer. The face value of the Equity Shares is Rs.10 and the Issue Price is [] times of the face value. The Issue Price (has been determined and justified by the BRLM and our Company as stated under the paragraph on "Basis for Issue Price" on page 42) 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 or sustained trading in the Equity Shares of our Company nor regarding the price at which the Equity Shares will be traded after listing. IPO GRADING This Issue has been graded by [] as [], indicating [], through its letter dated []. For details, see "General Information" on page 17 of this Draft Red Herring Prospectus. 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. In taking an investment decision, investors must rely on their own examination of our Company and the Issue, including the risks involved. The Equity Shares offered 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 Draft Red Herring Prospectus. Specific attention of the investors is invited to "Risk Factors" on page x of this Draft Red Herring Prospectus. ISSUER'S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard to our Company and the Issue, which is material in the context of the Issue, that the information contained in this Draft 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 make this Draft 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 offered through this Draft Red Herring Prospectus are proposed to be listed on the NSE and the BSE. We have received an 'in-principle' approval from each of the NSE and the BSE for the listing of the Equity Shares pursuant to letters dated [] and [], respectively. For the purposes of the Issue, the Designated Stock Exchange shall be the BSE. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE SBI CAPITAL MARKETS LIMITED LINK INTIME INDIA PVT. LTD. 202, Maker Tower 'E', Cuffe Parade C-13, Pannalal Silk Mills Compound Mumbai 400 005 LBS Road, Bhandup West Tel: (9122) 2217 8300 Mumbai 400 078. Fax: (91 22) 2218 8332 Tel: (91 22) 2596 0320 E-mail ID: [email protected] Fax: (91 22) 2596 0329 Investor Grievance Id: [email protected] Investor grievance e-mail: [email protected] Website: www.sbicaps.com Website: www.linkintime.co.in Contact Person: Sandeep Onkar/Murtuza Patrawala Contact Person: Chetan Shinde SEBI Registration Number: INM000003531 SEBI Registration No.: INR000004058 BID/ISSUE PROGRAMME* BID/ISSUE OPENS ON [], 2010 BID/ISSUE CLOSES ON [ ], 2010 * The Company may consider participation by Anchor Investors. Anchor Investor Bid/ Issue Period shall be one day prior to the Bid/ Issue Opening Date TABLE OF CONTENTS SECTION I: GENERAL ..........................................................................................................................................I DEFINITIONS AND ABBREVIATIONS ............................................................................................................ I PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ...................................................VIII FORWARD LOOKING STATEMENTS ........................................................................................................... IX SECTION II: RISK FACTORS ............................................................................................................................ X SECTION III: INTRODUCTION ......................................................................................................................... 1 SUMMARY OF INDUSTRY ............................................................................................................................... 1 SUMMARY OF OUR BUSINESS ....................................................................................................................... 3 SUMMARY FINANCIAL INFORMATION ...................................................................................................... 7 THE ISSUE ......................................................................................................................................................... 16 GENERAL INFORMATION ............................................................................................................................. 17 CAPITAL STRUCTURE .................................................................................................................................... 25 OBJECTS OF THE ISSUE ................................................................................................................................. 36 BASIS FOR ISSUE PRICE ................................................................................................................................. 42 STATEMENT OF TAX BENEFITS .................................................................................................................