LETTER OF OFFER (For private circulation to Equity Shareholders/ Beneficial Owners of the Company only) SRINIVASA SHIPPING AND PROPERTY DEVELOPMENT LIMITED (The Company was incorporated as a “Public Limited Company” vide Registration No.01-18540 on 17th October, 1994 in Hyderabad under the Companies Act, 1956 and obtained certificate for commencement of business on 4th November 1994.The Registered Office of the Company was shifted from 3-5-823, 3rd Floor, Hyderabad Business Center, Hyderguda, Hyderabad - 500 029 to 3-5-823, 4th Floor, Hyderabad Business Center, Hyderguda, Hyderabad - 500 029 with effect from 20th June 1995. With effect from 19th July 2002 the Registered Office was shifted to ‘Srinivasa House’, 1028, Road No.45, Jubilee Hills, Hyderabad - 500 033. With effect from 20th August 2005, the Registered Office of the Company was shifted to 8-2-595/3/5, Eden Gardens, Road No.10, Banjara Hills, Hyderabad - 500 034.Subsequently, the Registered Office was shifted to the present address with effect from 31st January 2007) REGISTERED OFFICE: 8-2-595/3/6, Eden Gardens, Road No.10, Banjara Hills, Hyderabad - 500 034. Tel Nos.: +91 - 40 - 66637560/66507567; Fax No. +91- 40 - 66637969 Email: [email protected] Website: www.sspdl.com Contact Person: Mr. Vishwanath Ganti, Company Secretary CORPORATE OFFICE: “Challa Mall”, 11 Sir Thiyagaraya Road, T. Nagar, Chennai - 600 017. Tel Nos: +91- 44 - 2432 2601/2 Fax No. +91- 44- 2434 8447 ISSUE OF 86,19,500 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PREMIUM OF RS.8/- PER SHARE (“THE ISSUE”) AGGREGATING TO RS. 1551.51 LAKHS ON A “RIGHTS” BASIS TO THE EXISTING EQUITY SHAREHOLDERS/BENEFICIAL OWNERS OF THE COMPANY IN THE RATIO OF TWO EQUITY SHARES FOR EVERY ONE EQUITY SHARE HELD AS ON 3RD MAY 2007 i.e., RECORD DATE. THE FACE VALUE IS RS.10/- PER SHARE AND THE ISSUE PRICE IS 1.8 TIMES OF THE FACE VALUE. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Offer, 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 offering. For taking an investment decision, investors must rely on their own examination of the Issuer and the Offer including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India nor does the Securities and Exchange Board of India guarantee the accuracy or adequacy of this document. Specific attention of the investors is invited to the Risk Factors on Page No. iii of the Letter of Offer. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer contains all information with regard to Srinivasa Shipping and Property Development Limited and the Issue, which is material in the context of the Issue, that the information contained in this Letter of Offer is true and correct in all material respects 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 document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. Lead Manager to the Issue Registrar to the Issue Karvy Investor Services Limited SEBI Regn. No. INM000008365 “Karvy House”, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad - 500 034 Tel: +91 40 2337 4714 /2332 0752 Fax: +91 40 2337 4714 Website: www.karvy.com E-mail: [email protected]Sathguru Management Consultants Private Limited SEBI Regn. No. INR 000000536 Plot No. 15, Hindi Nagar, Punjagutta, Hyderabad - 500 034, Tel : +91 40 2335 0586/ 2335 6507 Fax : +91 40 2335 4042 Email : [email protected]Website: www.sathguru.com LISTING The Company’s existing equity shares are listed on Bombay Stock Exchange Limited (“BSE”) and The Hyderabad Stock Exchange Limited (“HSE’). The Company proposes to get the Rights Shares listed on BSE & HSE. The in-principle approval for listing the rights equity shares has been obtained from BSE (Designated Stock Exchange) and HSE vide their letters dated 29th June, 2006 and 1st July, 2006 respectively. ISSUE OPENS ON Thursday, June 7, 2007 LAST DATE FOR RECEIPT OF REQUESTS FOR SPLIT FORMS Thursday, June 21, 2007 ISSUE CLOSES ON Friday, July 20, 2007 KARVY KARVY KARVY KARVY KARVY INVESTOR SERVICES LTD
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LETTER OF OFFER(For private circulation to Equity Shareholders/
Beneficial Owners of the Company only)
SRINIVASA SHIPPING AND PROPERTY DEVELOPMENT LIMITED(The Company was incorporated as a “Public Limited Company” vide Registration No.01-18540 on 17th October, 1994 in Hyderabad under the CompaniesAct, 1956 and obtained certificate for commencement of business on 4th November 1994.The Registered Office of the Company was shifted from 3-5-823,3rd Floor, Hyderabad Business Center, Hyderguda, Hyderabad - 500 029 to 3-5-823, 4th Floor, Hyderabad Business Center, Hyderguda, Hyderabad - 500 029with effect from 20th June 1995. With effect from 19th July 2002 the Registered Office was shifted to ‘Srinivasa House’, 1028, Road No.45, Jubilee Hills,Hyderabad - 500 033. With effect from 20th August 2005, the Registered Office of the Company was shifted to 8-2-595/3/5, Eden Gardens, Road No.10,Banjara Hills, Hyderabad - 500 034.Subsequently, the Registered Office was shifted to the present address with effect from 31st January 2007)
REGISTERED OFFICE: 8-2-595/3/6, Eden Gardens, Road No.10, Banjara Hills, Hyderabad - 500 034.
* The Lead Manager and the Issuer shall make all information in respect of the present issue available to the public
and investors at large and no selective or additional information would be made available to a section of the
investors in any manner whatsoever including at road shows, presentations, in research or sales report etc.
* The Company and the Lead Manager will keep the public informed of any material changes till the commencement
of the listing and trading of the Equity Shares issued through the Letter of Offer.
* In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a
duplicate CAF on request of the applicant who should furnish the registered folio number / Beneficiary Owner’s
Identification Number and his/ her full name and address to the Registrar to the Issue. Please note that those who
are making the application on duplicate form should not utilize the original CAF for any purpose including
renunciation, in case if it is received subsequently. If the applicant violates any of these requirements, he/she shall
face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications.
* The investors may contact Lead Manager or the Compliance officer for any compliant/clarification/ information
pertaining to the issue who will be obliged to attend the same.
* Related party transactions are given as notes to account in Auditors Report starting on page no. 59 of this Letter of
Offer.
1
SECTION III -INTRODUCTION
1. Summary:
(i) Industry scenario and Business Over view
Industry Overview
Construction activity is an integral part of a country’s infrastructure and industrial development. It includes hospitals, schools,
townships, offices, houses and other buildings; urban infrastructure (including water supply, sewerage, drainage); highways,
roads, ports, railways, airports; power systems; irrigation and agriculture systems; telecommunications etc. Covering as it
does such a wide spectrum, construction becomes the basic input for socio-economic development. Besides, the construction
industry generates substantial employment and provides a growth impetus to other sectors through backward and forward
linkages. It is, essential therefore, that, this vital activity is nurtured for the healthy growth of the economy. With the present
emphasis on creating physical infrastructure, massive investment is planned during the Tenth Plan. The construction industry
would play a crucial role in this regard and has to gear itself to meet the challenges. In order to meet the intended investment
targets in time, the current capacity of the domestic construction industry would need considerable strengthening. The
construction sector is one of the largest employers in the country. In 1999-00, it employed 176.2 Lakhs workers, a rise of 60
Lakhs over 1993-94. The sector also recorded the highest growth rate in generation of jobs in the last two decades, doubling
its share in total employment. (Source: Tenth Five Year Plan: 2002-07)
The share of construction sector in gross domestic product (GDP), which was 5.4 per cent in 1970-71, came down to 4.4
percent in 1990-91. Subsequently it picked up and stood at 5.1 per cent in 1999-00. At present, the industry accounts for 5-6%
of the country’s Gross Domestic Product 38-40% of Gross Domestic capital formation. (Source: Tenth Five Year Plan: 2002-
07)
For further details, please refer Industry overview on page no. 28 of this Letter of Offer.
Business overview
The company is engaged in property development and construction business since its inception and was incorporated in theyear 1994 as a public limited company with its registered office in Hyderabad and corporate office at Chennai. SrinivasaHatcheries group and Mr. Challa Prakash promoted the company initially. In the year 1995 the company made its entry intothe Capital markets with a public issue of Rs 75 lakhs.
The company has constructed prestigious buildings in Chennai namely Capital Towers and FFE Towers with 1,37,000 sft at avalue of Rs. 5500 Lakhs and over 30,000 sft. valued at Rs. 1125 Lakhs respectively. The Company also undertook Rs. 1200Lakhs wind-farm project, which was divested subsequently. Company’s activities took a subdued tone in the subsequent yearsdue to lack of investment opportunities during the IT slump period.
In the year 2002-2003 there was a change in the management / owner ship control, with the Srinivasa Hatcheries Groupdivesting their interest in the company in favour of Mr. Challa Prakash, Mr. Challa Suresh, Mr. E. Bhaskar Rao and M/s. SriKrishnadevaraya Hatcheries Private Limited. Consequent to this change in the management, the Board was reconstituted withfocus on current growth opportunities in real estate sector. The Acquirers have complied with SEBI (SAST) Regulations, 1997for the said acquisition.
With the new Management’s renewed focus coupled with huge demand for commercial and residential properties, the companyhas identified projects in Chennai, Hyderabad and Bangalore and is actively pursuing the same.
(ii) Offering details:
Equity Shares offered
Fresh Issue by the Company 86,19,500 Equity Shares of Rs. 10/- each for cash at a premium of Rs.8/- per share (“the issue”)aggregating to Rs. 1551.51 lakhs on a “rights” basis to the existing equity shareholders/beneficialowners of the company in the ratio of two equity shares for every one equity share held as on 3rdMay 2007 i.e., record date.
Equity Shares outstanding prior to the Issue 43,09,750 Equity Shares of Rs.10/- each
Equity Shares outstanding after the Issue 1,29,29,250 Equity Shares of Rs.10/- each
Utilization of Issue proceeds 1. To finance the capital requirements for developing the Gamma Block of Alpha CityProject, an IT Park at Navalur, Chennai
2. To meet the expenses of the present issue.
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(iii) Summary of Financial Operating and Other Data
STATEMENT OF PROFITS AND LOSSES: (Rs. In Lakhs)
Period ended on 31.03.02 31.03.03 31.03.04 31.03.05 31.03. 06 31.12.06
Income:
Contract Receipts & Other business related turnover 38.90 Nil Nil 193.38 191.58** 2765.65
Other Income (Rent + Others) 10.58 6.14 8.45 6.74 31.62 19.49
Increase (decrease) in inventory (122.28) (11.59) 1.42 (185.23) 506.07 272.10
Total Income (72.80) (5.45) 9.87 14.89 729.27 3057.24
Less: Miscellaneous Expenditure not written off (3.19) (2.08) (0.98) 0.00 (3.36) (2.73)
Total 520.97 496.36 483.86 466.58 1833.14 2206.08
(*) Pursuant to the inspection carried u/s 209A of the Companies Act, 1956 by the Deputy Director (Inspection), Office of the
Regional Director, Ministry of Company Affairs, Chennai, an amount of Rs.10 lakhs borrowed from M/s Sahiti Poultry Breeding
Farm, a sole proprietary of Mr E.Bhaskar Rao one of the Directors of the Company, which was wrongly classified under the
head current liabilities has been rectified and shown under the head “Unsecured Loans”.
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2. General Information
Dear Shareholder(s),
Srinivasa Shipping & Property Development Limited was incorporated as a “Public Limited Company” vide Registration
No.01-18540 on 17th October, 1994 in Hyderabad under the Companies Act, 1956 and obtained certificate for commencementof business on 4th November 1994. The Registered Office of the Company was shifted from 3-5-823, 3rd Floor, HyderabadBusiness Center, Hyderguda, Hyderabad - 500 029 to 3-5-823, 4th Floor, Hyderabad Business Center, Hyderguda, Hyderabad- 500 029 with effect from 20th June 1995. With effect from 19th July 2002 the Registered Office was shifted to ‘SrinivasaHouse’, 1028, Road No.45, Jubilee Hills, Hyderabad - 500 033. With effect from 20th August 2005 the Registered Office ofthe Company was shifted to 8-2-595/3/5, Eden Gardens, Road No.10, Banjara Hills, Hyderabad - 500034. Subsequently, theRegistered Office was shifted to the present address with effect from 31st January 2007.
Pursuant to the resolution passed by the Board of Directors of the Company at its meetings held on 20th August 2005, it hasbeen decided to make the following offer to the Equity Shareholders of the Company.
ISSUE OF 86,19,500 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PREMIUM OF RS.8/- PER SHARE(“THE ISSUE”) AGGREGATING TO RS. 1551.51 LAKHS ON A “RIGHTS” BASIS TO THE EXISTING EQUITYSHAREHOLDERS/BENEFICIAL OWNERS OF THE COMPANY IN THE RATIO OF TWO EQUITY SHARESFOR EVERY ONE EQUITY SHARE HELD AS ON 3RD MAY 2007 i.e., RECORD DATE.
Board of Directors of the Company
Name of the Director Designation Status
Mr. Challa Prakash Managing Director Promoter
Mr. E. Bhaskar Rao Director Promoter
Mr. C. Ramakrishna Director Promoter
Mr. Challa Suresh Director Promoter
Mr. S. Suryanarayana Director Independent
Mr. K. Akmaluddin Sheriff Director Independent
Brief details of Managing Director
Mr. Challa Prakash, aged 54, the Managing Director of the Company is a M.Sc. having a vast experience of over 30 years inthe construction, banking, aquaculture and pisciculture Industry. Having worked for 13 years as senior manager in NationalisedBanks, he commenced the business of exports of tuna fish through tuna longliners and shrimp processing.
Mr. Challa Prakash has started Construction activities since July 1993 through Sri Satya Sai Constructions, a sole proprietorship concern for property development in Chennai and Hyderabad and has successfully undertaken the construction of 12residential/commercial complexes spanning an area of over 4,00,000 sft (approximately).
For the details of other Directors please refer page no 48 of this Letter of Offer.
Issue Management Team
Company Secretary Legal Advisor
Mr. Vishwanath Ganti M/s. Challa Kodanda Ram & Associates
Company Secretary Advocates & Corporate Consultants,
8-2-595/3/6, Eden Gardens, Road No.10, Banjara Hills, 05, Subhodaya Apartment, Boggulkunta,
Contact Person: Mr. L Seshadrinathan Contact Person: Mr. Ch Ravi Kumar
Credit Rating
This being a rights issue of Equity Shares, no credit rating is required.
Details of underwriting, if any
The present issue is not underwritten.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the
applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more
than 8 days after the Company becomes liable to repay the subscription amount, (i.e. forty two days after closure of the Issue),
the Company will pay interest for the delayed period, at prescribed rates in terms of sub-section (2) and (2A) of Section 73 of
the Act.
This Rights Issue will become under-subscribed after considering the number of Equity Shares applied as per entitlement plus
additional Equity Shares by shareholders and renounces. The under-subscribed portion can be applied for only after the close
of the issue.
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3. CAPITAL STRUCTURE OF THE COMPANY
Particulars Nominal Aggregate
Value (Rs.) Value (Rs.)
A AUTHORIZED:
2,50,00,000 Shares of Rs. 10/- each 25,00,00,000
B ISSUED, SUBSCRIBED & PAID UP SHARE CAPITAL
43,09,750 Equity Shares of Rs. 10/- each fully paid up. 4,30,97,500
C NOW OFFERED IN TERMS OF THIS LETTER OF OFFER
86,19,500 Equity shares of Rs.10/- each at a premium of Rs. 8/- per share. 8,61,95,000 15,51,51,000
D PAID-UP CAPITAL AFTER THE PRESENT ISSUE
1,29,29,250 Equity Shares of Rs.10/- each 12,92,92,500
E SHARE PREMIUM ACCOUNT
Before the Issue 15,19,31,000
After the Issue 22,08,87,000
NOTES TO CAPITAL STRUCTURE
i. Increase in authorized capital of the Company
Sl. No. Date of passing of the resolution From (Rs.) To (Rs.)
1 17.10.1994 (on incorporation) 1,00,00,000
2 11.11.1994 1,00,00,000 3,25,00,000
3 29.09.1997 3,25,00,000 9,00,00,000
4 29.09.2005 9,00,00,000 15,00,00,000
5 14.08.2006 15,00,00,000 25,00,00,000
ii. Build up of Share Capital
Date of No. of Face Issue Consi- % of Post Cumulative Nature of LLock inAllotment / Shares Value Price (Rs. deration issue Paid-up Allotmentfully paid-up Issued Per Share) capital Equity shares
7 Water Proof Cladding 20.11.2006 31.12.2006 31.07.2007
8 Site development and road works 19.10.2006 31.12.2006 31.08.2007
9 Electrical 01.06.2006 31.12.2006 31.07.2007
10 Fire Fighting 10.07.2006 02.12.2006 30.06.2007
11 HVAC 01.06.2006 31.12.2006 31.07.2007
12 Plumbing and Sanitary 11.06.2006 22.12.2006 30.06.2007
13 Elevators 01.06.2006 31.12.2006 31.07.2007
Reasons for delay in completion of works as per schedule
The Company has already received approvals for most of the works from the appropriate authorities, however it has to
receive final clearances form Ministry of Environment & Forests (MoEF) and Tamilnadu Pollution Control Board and
final plan approvals.
Other works like masonry, plastering, concreting, shuttering and reinforcement etc got delayed due to seasonal rains/
monsoons and cyclonic storms which resulted in water logging at site. Also the outbreak of chikun gunya virus has
18
resulted in workers being affected by the virus resulting in lean supply of labour hampering the progress of work at site.
Electrical Works/ HVAC/ Elevators works have been rescheduled due to delay in import of imported chillers/ AC units
and elevator machinery.
As other works like Water proof cladding, plumbing and sanitary works and firefighting works etc are simultaneous and
interconnected in nature with other works, their completion is dependent on completion of the above mentioned works.
6. Deployment of funds:
The company has incurred an expenditure of Rs.1541.21 Lakhs as on 21.03.2007 on the proposed Project. The fund
deployment on the Project and its Means of Finance have been certified by M/s Karvy & Company, Chartered Accountants,
Hyderabad, the Auditors of the Company vide their certificate dated 14th May 2007, the details of which are as follows:
S.No Particulars Rs. in Lakhs
1 Construction Expenses 1402.40
2 Construction Equipment 96.52
3 Statutory Licenses & Approvals 32.54
4 Rights Issue Expenses 9.75
Total 1541.21
Sources of Financing of Funds already deployed
The funds already deployed have been sourced as under:
Particulars Rs. In lakhs
Proceeds of Preferential Issue of Equity Shares and Convertible Warrants 1278.84
Internal Accruals 262.37
Total 1541.21
Break-up of Cost of Construction incurred:-
S. No. Description (Rs. In Lakhs)
1 Piling 73.00
2 Excavation 19.00
3 Concreting/shuttering/ reinforcement 708.10
4 Masonry/plastering 82.00
5 Waterproofing and Cladding 103.00
6 Site Development and Road Works 7.74
7 Electrical works 202.45
8 Fire fighting 40.00
9 HVAC 89.11
10 Plumbing and Sanitary 32.00
11 Elevators 46.00
Total 1402.40
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Details of balance funds requirement
The break up of funds already deployed and balance funds deployment is mentioned hereunder: (Rs. Lakhs)
Particulars Already deployed till March 22nd 2007 Total 21st March , 2007 - August, 2007
Construction Equipment 96.52 3.48 100.00
Cost of Construction 1402.40 751.24 2153.64
Approvals, Sanctions and Consultancy fees 32.54 136.09 168.63
Marketing and Selling Expenses — 398.71 398.71
Rights Issue Expenses 9.75 50.25 60.00
Total 1541.21 1339.77 2880.98
Monitoring of utilization of Funds
Appointment of a monitoring agency is not required in terms of clause 8.17 of the SEBI (DIP) Guidelines. The Auditcommittee appointed by the Board of Directors will monitor the utilization of the proceeds of the issue.
Deployment of funds pending utilization
Pending any use as described above the proceeds of the issue will be kept in Fixed Deposits with scheduled commercialbanks.
7. TERMS OF THE PRESENT ISSUE
The Equity Shares now being offered are subject to the terms of this Letter of Offer, the CAF, the Memorandum andArticles of the Company, approvals under the Foreign Direct Investment Scheme of Government of India, FEMA, ifapplicable, Guidelines issued by SEBI, the Act, the guidelines, notifications and regulations for the issue of capital andfor the listing of securities issued by the Government and/or other statutory authorities and bodies from time to time andsuch terms and conditions as may be incorporated in the Letter of Allotment/Share Certificate or any deed or documentexecuted by the Company regarding the Rights Issue. The principal terms and conditions of the Offer are as follows:
i. Present Issue: Issue of 86,19,500 equity shares of Rs. 10/- each for cash at a premium of Rs.8/- per share (“theissue”) aggregating to Rs. 1551.51 lakhs on a “rights” basis to the existing equity shareholders/beneficial ownersof the company in the ratio of two equity shares for every one equity share held as on 3rd May 2007 i.e., record date
ii. Face Value: Each Equity Share shall have a face value of Rs.10/-.
iii. Offer Price: Rs.18/- per Share
Authority for the Issue
Pursuant to Section 81(1A) of the Companies Act, 1956, the present Rights Issue has been authorized by the Equityshareholders vide Special Resolution passed at the Extra Ordinary General Meeting of the company held on 10th October2005. The rights issue has been authorized by the Board of Directors at its meeting held on 20th August 2005.
Approvals for the Offer
The Offer is being made in terms of Guidelines issued by the Securities and Exchange Board of India and in accordancewith the Companies Act, 1956 and Listing Agreement entered into with the Stock Exchanges.
Basis of Offer
The Right Issue of 86,19,500 Equity Shares of Rs. 10/- each for cash at a premium of Rs.8/- per share are being offeredon a Rights basis in the ratio of Two Equity Shares for every One Equity Share held to those Equity Shareholders whosenames appear on the Register of Members of the Company and the names of the beneficial Equity Owners as providedby the depositories at the close of business hours on 3rd May 2007 being the Record Date fixed by the Board of theCompany in consultation with the BSE (Designated Stock Exchange).
Rights Entitlement
If your name appears in the Register of Members as an Equity shareholder/Beneficial Owner (as per the list provided by
the Depositories) of the Company on the Record Date i.e. 3rd May 2007 you are entitled to the number of Equity Shares
by way of Rights as shown in Column 4 of Part A of the enclosed Composite Application Form (CAF) on the basis
mentioned above.
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8. BASIS FOR ISSUE PRICE
A. Qualitative Factors
* The Company has experience in real estate and property development business.
* The Company has professionals with experience at various levels in the company.
B. Quantitative Factor
1. Earnings per share for the last three years
Year Ended Earnings Per Share (Rs.) Weight
31.03.04 (0.45) 1
31.03.05 (0.61) 2
31.03.06 2.66 3
The weighted average EPS works out to Rs. 1.05
2. P/E Multiple in relation to the Issue Price of Rs.18/- per share.
Particulars P/ E multiple
Based on 2005-06 EPS 6.77
Based on weighted average EPS 17.14
Industry P/E
- Highest 127.90
- Lowest 1.19
- Average 64.54
Industry average is calculated as average of high and low
(Source: Capital Market Volume XXII/04 (April 23 to May 06, 2007))
The ratios of some of the companies in the same industry group are as follows:
Company EPS (Rs) P/E Ratio NAV (Rs)
M/s. Ansal Properties 8.7 25.7 143.5
M/s. Era Constructions 14.0 10.5 122.6
M/s. D S Kulkarni Property Development 7.7 14.7 86.9
M/s. Marg Constructions 4.1 10.2 20.6
M/s. Prajay Engg 10.2 9.5 49.2
M/s. Prime Property 6.7 — 11.8
M/s. Srinivasa Shipping and Property
Development Limited 2.3 17.4 45.1
(Source: Capital Market Volume XXII/04 (April 23 to May 06, 2007)
3. Return on Net-Worth (RONW) for last three years
Financial Year % Weight
31.03.04 (2.81) 1
31.03.05 (3.91) 2
31.03.06 4.97 3
9 months ended on December 31st 2006 16.88
Weighted Average 0.71
21
4. Minimum Return on increased net worth required to maintain Pre Issue EPS at Rs. 2.66 is 8.33%
5. Net Asset Value (per share)
As at March 31, 2006 53.47
As at December 31, 2006 55.40
After Issue Rs. 31.94
Issue Price Rs. 18/-
6. The face value of the share is Rs.10/- and the issue price is 1.8 times of the face value.
The Lead Manager believes that the Issue price of Rs.18/- is justified in view of the above qualitative and quantitative
parameters. The investors may want to peruse the risk factors and the financials of the Company including important
profitability and return ratios, as set out in the Auditors’ report to have a more informed view of the investment
proposition.
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9. TAX BENEFITS FOR THE COMPANY AND ITS SHAREHOLDERS
M/s Karvy & Company, Chartered Accountants, the Statutory Auditors of the Company, have certified vide their letter
dated 05th May, 2007, that under the current provisions of the Income Tax Act, 1961 and the existing laws for the time
being in force, the following benefits, inter-alia, will be available to the Company and the members.
I. TAX BENEFITS UNDER INCOME TAX ACT, 1961:(‘The Act’)
The company will be entitled to deduction under the sections mentioned hereunder from its total income chargeable to
income tax.
A. TO THE COMPANY:
1. Dividends received by the Company from other domestic companies are exempt in the hands of Company as per
the provisions of Section 10(34) of the Income Tax Act.
2.1. In accordance with the provisions of Section 10 (38), the long term capital gains arising on the transfer of securities
transacted in a recognized stock exchange in India shall be exempt from Income Tax.
2.2. The long-term capital gains accruing to the Company otherwise than as mentioned in 2.1 above, shall be chargeable
to tax in accordance with and subject to the provisions of Section 112 of the Income Tax Act, 1961 plus applicable
surcharge and education cess.
3. Under Section 32 of the Income Tax Act, the Company is entitled to claim depreciation on tangible and intangible
assets as well as claim the unabsorbed depreciation brought forward as explained in the said section.
4. The company is eligible under section 35D of the Act to a deduction equal to one-fifth of certain specified expenditure,
including specified expenditure incurred in connection with the issue for the extension of the industrial undertaking,
for a period of five successive years subject to the limits provided and the conditions specified under the said
section.
5. Subject to compliance with certain conditions laid down in Section 80IA of the Act, the company will enjoy 100%
tax exemption for any 10 consecutive Assessment Years out of 15/20 years , as the case may be, in respect of profits
earned from an undertaking set up for developing or operating and maintaining or developing, operating and
maintaining any notified infrastructure facility.
6. As per the provisions of section 80-IB(10) of the Act, the company is eligible to claim 100% tax benefit with
respect to profit derived from “Developing and Building Housing Projects”. However, the benefit is available
subject to fulfillment of conditions specified in Section 80IB & 80AC of the Act.
7. The short-term capital gains accruing to the company, from the transfer of a short-term capital asset, being securities,
transacted in a recognized stock exchange in India, shall be chargeable to tax at the rate of 10% (plus applicable
surcharge and education cess) as per the provisions of Section 111A.
8. Under Section 115JAA(1A) of the Act, tax credit shall be allowed of any tax paid (MAT) under section 115JB of
the Act. Credit eligible for carry forward is the difference between MAT paid and the tax computed as per the
normal provisions of the Act. Such MAT credit will be available for set-off over a period of 7 years succeeding the
year in which the Tax is paid as per the provisions of Section 115JB.
B. TO THE RESIDENT SHAREHOLDERS:
1. Dividends exempt under section 10(34)
1. Dividends (whether interim or final) declared, distributed or paid by the Company are exempt in the hands of
shareholders as per the provisions of Section 10(34) of the Income Tax Act.
2. Computation of Capital Gains:
2.1 Capital assets may be categorized into short term capital assets and long term capital assets based on the period of
holding. Shares in a company, listed securities or units of UTI or unit of Mutual Fund specified under section
10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period
exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are
considered as “Long term capital gains”. Capital gains arising on sale of these assets held for 12 months or less are
considered as “short term capital gains”.
23
2.2 Section 48 of the Income Tax Act, which prescribes the mode of computation of capital gains, provides for deduction
of cost of acquisition/improvement and expenses incurred in connection with the transfer of a capital asset, from
the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital gains, it
offers a benefit by permitting substitution of cost of acquisition/improvement with the indexed cost of acquisition/
improvement, which adjusts the cost of acquisition/improvement by a cost inflation index as prescribed from time
to time.
2.3 As per the provisions of Section 112 of the Act, long term capital gains as computed above that are not exempt
under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and
education cess). However, as per the proviso to section 112(1), if the tax on long-term capital gains resulting on
transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation benefit
exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such gains
are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
a. As per the provisions 111A of the Act, short-term capital gains on sale of equity shares where the transaction of
sale is chargeable to STT shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education
cess).
2.4 Exemption of Capital Gains from Income-tax:
* Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity
oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable
to STT.
* According to the provisions of section 54EC of the Act and subject to the conditions and to the extent specified
therein, capital gains not exempt under section 10(38) and arising on transfer of a long term capital asset shall not
be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from
the date of transfer. However, such investment in the notified bonds shall not exceed Rupees Fifty Lakhs in a
financial year. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.
* In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the
Act.
However, if the said bonds are transferred or converted into money within a period of three years from the date of
their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital
gains in the year in which the bonds are transferred or converted into money.
* According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case
of an individual, gains arising on transfer of a long term capital asset (not being a residential house) are not
chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in
a residential house. If only a part of such net consideration is invested within the prescribed period in a residential
house, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of the
consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure
incurred wholly and exclusively in connection with such transfer.
3. Rebate under Section 88E
Section 88E provides that where the total income of a person includes income chargeable under the head “Profits
and Gains of Business or Profession” arising from taxable securities transactions, he shall get rebate of STT paid
by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such
transactions calculated by applying average rate of income tax.
C. TO THE NON-RESIDENT INDIAN SHAREHOLDERS (Other than FIIs and Foreign venture capital investors:
1. Dividends exempt under section 10(34)
Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section
115-O of the Act is exempt from income-tax in the hands of the shareholders.
2. Computation of capital gains:
2.1 Capital assets may be categorized into short term capital assets and long term capital assets based on the period of
holding. Shares in a company, listed securities or units of UTI or unit of Mutual Fund specified under section
10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period
24
exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are
considered as “Long term capital gains”. Capital gains arising on sale of these assets held for 12 months or less are
considered as “short term capital gains”.
2.2 Section 48 of the Act contains special provisions in relation to computation of capital gains on transfer of shares of
an Indian Company by non-residents. Computation of capital gains arising on transfer of shares in case of non-
residents has to be done in the original foreign currency, which was used to acquire the shares. The capital gain (i.e.
sale proceeds less cost of acquisition/improvement) computed in the original foreign currency is then converted
into Indian Rupees at the prevailing rate of exchange.
According to the provisions of Section 112 of the Act, long term gains as computed above that are not exempt
under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and
education cess).
2.3 In case investment is made in Indian Rupees, the long-term capital gain is to be computed after indexing the cost.
According to the provisions of Section 112 of the Act, long term capital gains as computed above that are not
exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge
and education cess). However, as per the proviso to section 112(1), if the tax on long-term capital gains resulting
on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation
benefit exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such
gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
2.4 As per the provisions 111A of the Act, short-term capital gains on sale of equity shares where the transaction of
sale is chargeable to STT shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education
cess).
2.5 Options available under the Act
Where shares have been subscribed to in convertible foreign exchange -
Option of taxation under Chapter XII-A of the Act:
* Non-resident Indians [as defined in Section 115C(e) of the Act] being shareholder of an Indian Company, have
the option of being governed by the provisions of Chapter XIIA of the Act, which inter alia entities them to the
following benefits in respect of income from shares of an Indian Company acquired, purchased or subscribed to in
convertible foreign exchange.
* According to the provisions of Section 115D read with Section 115E of the Act and subject to the conditions
specified therein, long term capital arising on transfer of shares in an Indian Company not exempt under section
10(38), will be subject to tax at the are of 10 percent (plus applicable surcharge and education cess) without
indexation benefit.
* According to the provisions of Section 115F of the Act and subject to the conditions specified therein, gains
arising on transfer of capital asset being shares in an Indian company shall not be chargeable to tax if the entire net
consideration received on such transfer is invested within the prescribed period of six months in any specified
asset. If part of such net consideration is invested with the prescribed period of six months in any specified asset
the exemption will be allowed on a proportionate basis. For this purpose, net consideration means full value of the
consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure
incurred wholly and exclusively in connection with such transfer.
* Further, if the specified asset in which the investment has been made is transferred within a period of three years
from the date of investment, the amount of capital gains tax exempted earlier would become chargeable to tax as
long term capital gains in the year in which such specified asset or savings certificates are transferred.
* As per the provisions of Section 115G of the Act, Non-resident Indians are not obliged to file a return of Income,
under section 139(1) of the Act, if their source of income is only investment income or income and/or long term
capital gains defined in section 115C of the Act, provided tax has been deducted at source from such income as per
the provisions of Chapter XVII-B of the Act.
* Under section 115H of the Act, where the Non-resident Indian becomes assessable as a resident in India, he may
furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under section
139 of the Act, to the effect that the provisions of the Chapter XII-A shall continue to apply to him in relation to
25
such investment income derived from any foreign exchange asset being asset of the nature referred to in sub clause
(ii), (iii), (iv) & (v) of section 115C(f) for that year and subsequent assessment years until such assets are converted
into money.
* As per provisions of Section 115-I of the Act, a Non-resident Indian, may elect not to be governed by the
provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment year
under section 139 of the Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that
assessment year and accordingly his total income for that assessment year will be computed in accordance with the
other provisions of the Act.
2.6 Exemption of capital gains from income-tax
* Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity
oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable
to STT.
* According to the provisions of section 54EC of the Act and subject to the conditions and to the extent specified
therein, capital gains not exempt under section 10(38) and arising on transfer of a long term capital asset shall not
be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from
the date of transfer. However, such investment in the notified bonds shall not exceed Rupees Fifty Lakhs in a
financial year. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.
* In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the
Act.
However, if the said bonds are transferred or converted into money within a period of three years from the date of
their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital
gains in the year in which the bonds are transferred or converted into money.
* According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case
of an individual, gains arising on transfer of a long term capital asset (not being a residential house) are not
chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in
a residential house. If only a part of such net consideration is invested within the prescribed period in a residential
house, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of the
consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure
incurred wholly and exclusively in connection with such transfer.
3. Rebate under Section 88E
Section 88E provides that where the total income of a person includes income chargeable under the head “Profits
and Gains of Business or Profession” arising from taxable securities transactions, he shall get rebate of STT paid
by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such
transactions calculated by applying average rate of income tax.
D. TO OTHER NON-RESIDENT INDIAN SHAREHOLDERS: (Other than FIIs and Foreign venture capital
investors:
1. Dividends exempt under section 10(34)
Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in Section
115-O of the Act is exempt from income-tax in the hands of the shareholders.
2. Computation of capital gains:
2.1 Capital assets may be categorized into short term capital assets and long term capital assets based on the period of
holding. Shares in a company, listed securities or units of UTI or unit of Mutual Fund specified under section
10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period
exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are
considered as “Long term capital gains”. Capital gains arising on sale of these assets held for 12 months or less are
considered as “short term capital gains”.
2.2 Section 48 of the Act contains special provisions in relation to computation of capital gains on transfer of shares of
an Indian Company by non-residents. Computation of capital gains arising on transfer of shares in case of non-
residents has to be done in the original foreign currency, which was used to acquire the shares. The capital gain (i.e.
26
sale proceeds less cost of acquisition/improvement) computed in the original foreign currency is then converted
into Indian Rupees at the prevailing rate of exchange.
As per the provisions of Section 112 of the Act, long term gains as computed above that are not exempt under
section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education
cess).
2.3 In case investment is made in Indian Rupees, the long-term capital gain is to be computed after indexing the cost.
According to the provisions of Section 112 of the Act, long term capital gains as computed above that are not
exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge
and education cess). However, as per the proviso to section 112(1), if the tax on long-term capital gains resulting
on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation
benefit exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such
gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess).
2.4 As per the provisions 111A of the Act, short-term capital gains on sale of equity shares where the transaction of
sale is chargeable to STT shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education
cess).
2.5 Exemption of capital gains from income-tax:
* Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity
oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable
to STT.
* According to the provisions of section 54EC of the Act and subject to the conditions and to the extent specified
therein, capital gains not exempt under section 10(38) and arising on transfer of a long term capital asset shall not
be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from
the date of transfer. However, such investment in the notified bonds shall not exceed Rupees Fifty Lakhs in a
financial year. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.
* In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the
Act.
However, if the said bonds are transferred or converted into money within a period of three years from the date oftheir acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capitalgains in the year in which the bonds are transferred or converted into money.
* According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the caseof an individual, gains arising on transfer of a long term capital asset (not being a residential house) are notchargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period ina residential house. If only a part of such net consideration is invested within the prescribed period in a residentialhouse, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of theconsideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditureincurred wholly and exclusively in connection with such transfer.
3. Rebate under Section 88E
Section 88E provides that where the total income of a person includes income chargeable under the head “Profitsand Gains of Business or Profession” arising from taxable securities transactions, he shall get rebate of STT paidby him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of suchtransactions calculated by applying average rate of income tax.
E. TO FOREIGN INSTITUTIONAL INVESTORS:
1. Dividends exempt under section 10(34)
Under Section 10(34) of the Act, income earned by way of dividend from domestic company refereed to in Section115-O of the Act is exempt from income tax in the hands of shareholders.
2. Taxability of capital gains
2.1 Under Section 10 (38) of the Income Tax Act (Act) long term capital gains arising out of sale of equity shares or aunit of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or
unit is chargeable to STT.
27
2.2 The income by way of short term capital gains or long term capital gains [in cases not covered under section 10(38)
of the Act] realized by FIIs on sale of shares of the company would be taxed at the following rates as per section115 AD of the Act:
* Short term capital gains, other than those referred to under section 111A of the Act shall be taxed 30% (plusapplicable surcharge and education cess)
* Short term capital gains, referred to under section 111A of the Act shall be taxed @ 10% (plus applicablesurcharge and education cess)
* Long term capital gains @ 10% (plus applicable surcharge and education cess) (without cost indexation)
It may be noted here that the benefits of indexation and foreign currency fluctuation protection as provided bysection 48 of the Act are not applicable.
2.3 According to the provisions of section 54EC of the Act and subject to the conditions and to the extent specifiedtherein, capital gains not exempt under section 10(38) and arising on transfer of a long term capital asset shall notbe chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months fromthe date of transfer. However, such investment in the notified bonds shall not exceed Rupees Fifty Lakhs in afinancial year. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.
However, if the assessee transfers or converts the notified bonds into money within a period of three years from thedate of their acquisition, the amount of capital gains exempted earlier would be come chargeable to tax as longterm capital gains in the year in which the bonds are transferred or converted into money.
4. Rebate under Section 88E
Section 88E provides that where the total income of a person includes income chargeable under the head “Profitsand Gains of Business or Profession” arising from taxable securities transactions, he shall get rebate of STT paidby him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of suchtransactions calculated by applying average rate of income tax.
F. TO MUTUAL FUNDS:
As per the provisions of Section 10(23D) of the Income Tax Act, any income of Mutual Funds registered under theSecurities and Exchange Board of India Act, 1992 or regulations made there under, Mutual funds set up by Public sectorbanks or public financial institutions or authorized by the Reserve Bank of India, would be exempt from income-tax.However, the mutual funds shall be liable to pay tax on distributed income to unit holders under section 115R of the Act.
G. TO VENTURE CAPITAL COMPANIES/FUND:
Under section 10(23FB) of the Income Tax Act, all Venture Capital Companies / Funds registered with the Securities andExchange Board of India, subject to the conditions specified, are eligible for exemption from income-tax in respect ofincome from investment in the equity shares of the company.
H. TAX TREATY BENEFITS:
An investor has an option to be governed by the provisions of the Act or the provisions of a Tax Treaty that India hasentered into with another country of which the investor is a tax resident, whichever is more beneficial.
II. TAX BENEFITS UNDER WEALTH TAX ACT, 1957:
Shares of the Company held by the shareholder will not be treated as an asset within the meaning of Section 2(ea) of theWealth Tax Act, 1957, hence no Wealth Tax will be payable on the market value of shares of the Company held by theshareholders of the company.
NOTES :
1) All the above benefits are as per the current tax laws as amended by the Finance Act, 2007.
2) The stated benefits available only to the sole/first named holder in case the shares are held by the joint holders.
for KARVY AND COMPANY,
Chartered Accountants
(K. AJAY KUMAR)
P A R T N E R
Place : Hyderabad.
28
SECTION - IV. ABOUT THE COMPANY
1. Industry Overview
General
Land and gold have been the two most coveted objects for Indians since recorded history. India occupies only 2.4% of the
world’s land area while accounting for 16% of global population. India’s average population density is much higher than that
of other nations of comparable size including China, Mexico, and Brazil. Such demographic and economic trends have caused
a surge in demand thereby increasing prices of real estate. Also the discovery of India as a IT / ITES destination in the last
decade is perhaps the biggest significant factor driving the real estate market. (Source: Karvy Stock Broking Limited - Real
Estate Report, 2006)
Construction activity is an integral part of a country’s infrastructure and industrial development. It includes hospitals, schools,
townships, offices, houses and other buildings; urban infrastructure (including water supply, sewerage, drainage); highways,
roads, ports, railways, airports; power systems; irrigation and agriculture systems; telecommunications etc. Covering as it
does such a wide spectrum, construction becomes the basic input for socio-economic development. Besides, the construction
industry generates substantial employment and provides a growth impetus to other sectors through backward and forward
linkages. It is, essential therefore, that, this vital activity is nurtured for the healthy growth of the economy. With the present
emphasis on creating physical infrastructure, massive investment is planned during the Tenth Plan. The construction industry
would play a crucial role in this regard and has to gear itself to meet the challenges. In order to meet the intended investment
targets in time, the current capacity of the domestic construction industry would need considerable strengthening. Construction
is one of the sectors that have shown a sizeable addition to its work force - by close to 5.5 million. Of this increase, over 60
percent has been in the rural areas. However, less than 10 percent of the incremental work force in this sector was women
workers. The prospects for jobs are quite with the real estate development being carried out by private developers on a large
scale. This is in addition to the government plans for infrastructure development in the country under various schemes like the
“Bharat Nirman programme”. The construction sector is one of the largest employers in the country. In 1999-00, it employed
176.2 Lakhs workers, a rise of 60 Lakhs over 1993-94. The sector also recorded the highest growth rate in generation of jobs
in the last two decades, doubling its share in total employment. (Source: TENTH FIVE YEAR PLAN: 2002-07 and Karvy
Stock Broking Limited - Real Estate Report, 2006)
The main advantage of the construction sector in employment generation lays in the fact that it:
� Absorbs rural labour and unskilled workers (in addition to semi-skilled and some skilled);
� Provides opportunity for seasonal employment thereby supplementing workers’ income from farming; and
� Permits large-scale participation of women workers.
The share of construction sector in gross domestic product (GDP), which was 5.4 per cent in 1970-71, came down to 4.4
percent in 1990-91. Subsequently it picked up and stood at 5.1 per cent in 1999-00. At present, the industry accounts for 5-6%
of the country’s Gross Domestic Product 38-40% of Gross Domestic capital formation. (Source: Tenth Five Year Plan: 2002-
07)
THE REAL ESTATE SECTOR IN INDIA
The Indian real estate industry is on a high growth path with a current market size of $15 bn approximately. Moving on, it is
expected to be over $50 bn by 2010, growing at a CAGR of 35-40%. The growth of this sector is crucial for the economy as
1 rupee spent in it adds 78 paisa to the GDP. The growth is being propelled by a variety of factors including the political
reforms, favorable interest rate regime leading to easy finance availability, rising income levels and the market getting more
organised. But it has not been like that since long. Historically, the real estate sector in India was unorganized and characterised
by various factors that impeded organised dealing, such as
o The absence of a centralised title registry providing title guarantee
o Lack of uniformity in local laws and their application
o Non-availability of bank financing
o High interest rates and transfer taxes
o The lack of transparency in transaction values.
29
In recent years however, the real estate sector in India has exhibited a trend towards greater organization and transparency,
accompanied by various regulatory reforms. These reforms include:
o GoI support for the repeal of the Urban Land Ceiling Act 1976, with nine state governments having already
repealed the Act;
o Liberalization of the FDI norms and extensive approval of setting up SEZs;
o Modifications in the State Rent Control Acts to protect homeowners wishing to rent out their properties;
o Rationalization of property taxes in a number of states;
o The proposed computerisation of land records.
The trend towards greater organisation and transparency has contributed to the development of reliable indicators of value and
the organised investment in the real estate sector by domestic and international financial institutions, and has also resulted in
the greater availability of financing for real estate developers. Regulatory changes permitting foreign investment are expected
to further increase investment in the Indian real estate sector.
These trends have benefited from the substantial recent growth in the Indian economy, which has stimulated demand for land
and developed real estate across our business lines. Demand for residential, commercial and retail real estate is rising throughout
India, accompanied by increased demand for hotel accommodation and improved infrastructure. Additionally, the tax and
other benefits applicable to SEZs are expected to result in a new source of real estate demand. The Real estate demand
comprises of mainly three aspects:
o Consumption demand: It comes from the strong growth in urban areas, higher disposable income, higher retail
lending, lower interest rates and higher demand for real estate.
o Demand from outsourcing: It comes from business process outsourcing in IT & ITES and Pharma. Further, with
the growth in Knowledge Process Outsourcing of skilled and high-end functions in finance and biotechnology.
o Investment demand: It comes from high Capex plans and infrastructure investments by government and public-
private initiatives.
(Source: Karvy Stock Broking Limited - Real Estate Report, 2006)
The real estate boom has gradually percolated from the big metros to tier II cities. The rapid growth of BPO (call center)
industry and expansion of the insurance industry have helped generate stronger demand for mortgage, and consequently
pushed up demand for housing. High economic growth has fuelled the demand for real estate. Cities continue to attract interest
from IT and ITES companies that are either establishing a base or are looking to expand. The changing demographics, low
interest rate regime, rising disposable incomes, and fiscal incentives have also provided huge demand for housing.
The government had also played a pivotal role in the development of this sector. It had aided the sector by giving income tax
benefits to the consumer and benefits to developers. It initiated the rationalization of stamp duty and repealed the Urban Land
Ceiling Act in nine states. A number of state governments are moving towards computerization of land records.
There is a perceptible shift in the profile of real estate developers in the last one decade. With the corporatisation of the
industry, transparency has increased in the sector. This has enhanced the comfort level of the investors putting in money in the
real estate sector. This also led to increased supply of funds to the sector. With the entry of foreign investors transparency
levels would improve.
The strong growth in real estate has led to it emerging as an alternate investment class in the country. Investment in the realty
sector has been growing steadily over the last four-five years with real estate becoming the most preferred investment destination
as compared to bonds and other funds. Apart from conventional investors, it attracted investments from corporate as well as
from high net-worth individuals (HNIs). A favorable reform in the property market was the decision of the Government to
allow 100% FDI in real estate with certain restrictions, which gathered the interest of many, who have invested in the potent
realty segment through direct investments or through the venture capital funds like ICICI Ventures, Kshitij and HDFC Realty.
Property development grows with the growth in the real estate sector. There is huge potential in the segment.
MAIN CHARACTERISTICS OF THE INDIAN REAL ESTATE SECTOR
The Indian real estate market is still in its infancy, largely unorganized and dominated by a large number of small players, with
very few corporates or large players having national presence. The Indian real estate market, as compared to the other more
developed Asian and Western markets is characterized by smaller size and higher prices.
30
1. Highly fragmented market dominated by regional players
Rapid growth in the last decade has seen the emergence of larger players that have differentiated themselves through
superior execution and branding. The larger players are able to capitalize on their early mover advantage. However,
these players continue to operate in local/regional markets. While these players are now initiating efforts to develop a
broader presence, their ‘home’ markets continue to support the majority of their profitability.
2. Local know-how critical success factor in the development phase
One of the key reasons for emergence of local leaders is the criticality of local know how and relationships in ensuring
successful and timely development. Each development is dependent on a number of local clearances (e.g. municipal
corporation, water, electricity) that requires strong experience and relationships
3. High transaction costs and significant cash transactions
The sector has been burdened with high transaction cost in the form of stamp duty that varies across the country (state-
wise). These transaction costs have resulted in poor liquidity in this market. These transaction costs have led to significant
cash transactions to reduce the stamp duty burden.
AREAS OF REAL ESTATE DEVELOPMENT
Residential Real Estate Development
The residential real estate market in India occupies the lion’s share and comprises of approximately 80% of the total real estate
market in India. The demand supply gap in housing space is estimated to be 41 bn Sq ft as compared to 66 mn Sq ft in the office
market. During the Ninth 5- year Plan (1997-2002), India was facing shortage of houses around 41 million in both urban and
rural out of which shortage of about 33 million was only in urban. This supply demand gap describes the increasing prices of
real estate. The growth in the residential real estate market in India has been largely driven by rising disposable incomes, a
rapidly growing middle class, and low interest rates, fiscal incentives on both interest and principal payments for housing
loans, heightened customer expectations, as well as increased urbanisation and nuclearisation. Most of these demand drivers
have been discussed above, in the economic and socio-cultural factors. The key demand drivers for the Residential Real Estate
in India are:
o Demographics
o Urbanization
o Rising Disposable Incomes
o Easier access to finance
o Fiscal Incentives
Commercial Real Estate Development
The recent growth of the commercial real estate sector in India has been fuelled by increased revenues of companies in the
services business, particularly in the IT and ITES sectors. Industry sources expect the IT and ITES sectors to continue to grow
and generate additional employment, which we expect will result in increased demand for commercial space.
Within the IT and ITES sectors, the Indian off-shoring operations of multinational companies are expected to increase demand
for commercial space. The trend for these companies has been to set up world class business centres to house their growing
work force.
Retail Real Estate Development
Retail spending in India in fiscal 2005 was Rs. 9.9 trillion, of which organised retail accounted for Rs. 349 billion, or
approximately 3.5%. The organised retail segment in India is expected to grow at a rate of 25% to 30% over the next five fiscal
years. The growth of organised retail is expected to be driven by demographic factors, increasing disposable incomes, changes
in shopping habits, the entry of international retailers into the market and the growing number of retail malls.
The key demand drivers for the retail real estate, in the Indian scenario are:
o Relaxation of strict FDI regime
o Organized retailing gaining share
(Source: Karvy Stock Broking Limited - Real Estate Report, 2006)
31
FOREIGN DIRECT INVESTMENT IN REAL ESTATE
In March 2005, Government has permitted Foreign Direct Investment (FDI) under automatic route in real estate sector. This
will help to organise the real estate sector, bridge demand and supply gap, create more professionalism, bring superior technology,
induce healthy competition and ensure availability of funds. This will help growth of country’s GDP. A large number of
companies are looking at the opportunity to invest in India. Some of the foreign players who have already tied up with Indian
developers are Lee Kim Tah Holdings, CESMA International Pvt. Ltd., Evan Kim, Keppel Land from Singapore, Salim group
from Indonesia, Edaw Ltd. From USA, Emaar from Dubai, IJM, Ho Hup Construction Co. from Malaysia, etc. A number of
real estate venture capital funds are looking at opportunities in India. Some private funds have applied to SEBI for approval
and few of them have already received the approval and started investing in real estate. This will ensure more availability of
funds to the developers and faster growth of real estate sectors. Some examples are HDFC Real Estate Fund, ICICI - Tishman
Speyer, Ascends India IT Park Fund, Kotak Mahindra Realty Fund, Kshitij Venture Fund, IDFC, Edelweiss Capital, etc
2. Business Overview
The Company is engaged in property development and construction business. The company was promoted by Srinivasa
Hatcheries Group and Mr. Challa Prakash. In 1995, the company made its maiden offer of Rs. 75 lakhs.
The Company has constructed buildings in Chennai - namely Capital Towers and FFE Towers with 1,37,000 s.ft. at a value of
Rs. 5500 lakhs and over 30,000 sft. valued at Rs. 1125 lakhs respectively. The Company also undertook a Rs. 1200 lakhs on
wind farm project which was divested subsequently with a ROI of over 20% to the company.
Company’s activities took a subdued tone in the subsequent years due to lack of investment opportunities during the IT slump
period. In the year 2002-2003 there was a change in the management / owner ship control with the Srinivasa Hatcheries Group
divesting their interest in the company in favour of Mr. Challa Prakash, Mr. Challa Suresh, Mr. E. Bhaskar Rao and Sri
Krishnadevaraya Hatcheries Private Limited.
The company engages various consultants and third party companies for various aspects of the construction activities. As it is
engaged in this business for several years, it enjoys good working relationship with all its vendors, suppliers and contractors.
The company would like to undertake project related to developing IT Park, Commercial buildings, Residential colonies, etc.
The company currently has four major projects in hand i.e., Alpha City-IT Park, Chennai Central, the Retreat (a residential
villa project at Bangalore) and an IT Park at Perungudi, Chennai.
Proposed Projects/Projects under execution
1. Alpha City - Navalur, Chennai
The company proposes to develop an IT park i.e. suitable for information Technology (BPO) for which it has entered into a
development agreement on March 30, 2005 with Mrs. Rahila S.M.A and Mrs. Falila S.M.A for development of 5.46 acres of
land identified by it at old Mahabalipuram Road, Navalur village, Chingleput Taluk Kancheepuram district. The total super
built up area will be approximately 4,00,000 Square feet which shall be shared between the owners and the company in the
30:70 ratio. The architects, M/s Edifice of Chennai have been appointed for the design. The proposed project is to be completed
in a period of 36 months in three phases.
For Salient Features of the development agreement, please refer to the section “Objects of the issue” on Page No. 13
2. Chennai Central
The company has entered into a contract with M/S Anchor Malls Private Ltd., to act as the “Development & Project Management
Consultant” for the construction of a shopping mall “Chennai Central” at Nungambakkam High Road Chennai dated March
29, 2006. The project is to be completed in 14 months in three phases with a built up area of 1,22,981 Square feet (super
structure) with 57,396 square feet basement built up area. The funds requirements for this project are minimal, as Anchor
Malls Private Limited will fund the project.
There is no relation between any of the parties to the agreements.
3. The Retreat, Bangalore
The Company has entered into an agreement with Sri Satya Sai Constructions on May 6, 2006 for construction of villas and
Club houses in the Retreat Township being developed at Tarbanahalli village, near Devanahalli, new international Airport, and
Bangalore. The total area to be constructed would be 6,22,000 Square feet, which would be completed within 36 months from
the date of written notice to proceed from Sri Satya Sai Constructions. This development contains 200 plots and will house
Mediterranean-style villas. This gated community will combine landscaped and well-manicured lawns & parks, with a sports
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club and an artificial lake making this a secure and self-contained environment.
Salient features of the Agreement entered into with Sri Satya Sai Constructions for construction of Villas and Club
House in Bangalore is as under:
The company has entered into an Agreement with Sri Satya Sai Constructions, a partnership firm on 6th May, 2006 for
construction of Villas and Club House in the Retreat Township being developed at Tarbanahalli village, near Devanahalli New
International Airport, Bangalore. The total area to be constructed would be 6,22,000 sq. ft, to be completed within 36 months
from the date of receipt of communication from the SSSC. The total value of the contract is Rs. 7700 lakhs which will be paid
on completion of various landmarks as stipulated in the agreement.
This being a related party transaction, the company, in terms of the proviso (1) of section 297 of the Companies Act, 1956
obtained approval from the Office of Regional Director, Southern Region, Chennai and Ministry of Company Affairs,
Government of India for entering into contract with SSSC vide letter no. F.NO.2/AP-9568/2006 dated 23rd March, 2006.
Sri Satya Sai Constructions is a partnership firm represented by partners Mr. E. Bhaskar Rao and Mr. Challa Prakash who are
also the directors of Srinivasa Shipping and Property Development Limited
4. Perungudi IT Project, Chennai
The Company has identified property to the extent of 1.08 acres at Perungudi in Chennai and has entered into a Joint Development
agreement on February 17,2006 with M/s Shelat Brothers for building and marketing an I.T park admeasuring 1,52,700
square feet. The proposed project is to be completed in 18 months from the date of registration of the General power of
attorney to be issued in favor of the company. The developed property shall be shared in proportion of 44:56 for M/s Shelat
brothers and the company respectively.
There is no relation between any of the parties to the agreements.
In addition to the above,
a. The Company has entered into a MOU with Spire Realty Hyderabad Retreat Limited under FDI Scheme by US based
investors for developing a residential township of 90 plus acres in Hyderabad.
b. The Company has received Power of Attorney from M/s. Bhagyanagar Investments and Trading Private Limited, M/s. G
B Trading and Investment Private Limited, M/s. Infotech Infin and Trading Private Limited; M/s. Golkonda Finance and
Trading Private Limited and Sri P V Ramana Reddy to development a residential layout in acres 19.25 guntas at
Mamidipally Village, Ranga Reddy District, Near Shamshabad International Airport, Hyderabad wherein the Company
shall be entitled to 40% of the developed plots and 60% to the landowners.
COMPANY’S COMPETITIVE STRENGTHS
1. Proven performance and experience from earlier projects
The company has executed two commercial complex projects and gained experience in handling such projects.
2. Experience promoters with proven track record
The main promoters of the Company have considerable experience in real estate industry.
3. Experienced, skilled, qualified motivated team with low attrition rates
The company’s key management personnel have good experience in various aspects of the industry. The attrition levels
of key managerial personnel have been low because of company’s ability to motivate and retain the employees.
(ii) Business strategy:
The Company till date has executed two projects namely, Capital Towers and FFE Towers in Chennai, which were fully sold.
The expertise gained by the company in completing previous projects has opened up scope for similar projects in future which
require special skills that have been acquired during the execution of these projects.
The acquisition of land at the right price level is one of the most critical factors that can spell the difference between highly
successful projects versus the not-so-successful ones. The company endeavors to ensure that it gets right property at the right
price.
The company has adopted new construction methods like pre-stressed concrete, post tension concrete, slip form work, ready
mix concrete and various water proofing methodologies. As such the company has no key processes, technology and collaboration
agreements with any other parties for technology transfers. The construction technologies and methods for the projects are
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selected depending on type, quantum of work and site specific situation.
With the high growth real estate market the company identifies tremendous potential for itself. Towards this direction the
company has entered into development/construction agreement for Development of Alpha City IT Park at Navalur, Chennai
with the landowners, Mrs. Rahila S.M.A and Mrs. Falila S.M.A., a Memorandum of Understanding with Anchor Malls Pvt.
Ltd for development of Chennai Central Mall, a Development Agreement with M/s Sri Satya Sai Constructions for construction
and development of Residential Villas at Tarbanahalli Village, Bangalore and an IT park at Perungudi, Chennai.
Future Prospects
The year 2006 started on a promising note when the Government of India opened the construction and development sector and
allowed 100 percent Foreign Direct Investment (FDI).
At present the construction and property development sector accounts for nearly 7-8% of India’s GDP and is emerging as one
of the key growth segments in the economy. Construction firms have shot into limelight with a strong surge in order inflows.
The company has also to its credit the construction of buildings in Chennai - namely Capital Towers and FFE Towers with
1, 37,000 sq. ft at a value of Rs. 5500 Lakhs and over 30,000 sq. ft valued at Rs. 1125 Lakhs respectively.
The Company expects huge potential in infrastructure development over next five years. In order to maximize these opportunities
and to put SSPDL in the higher orbit of growth, the company has targeted JVs with a strategic fit. Seizing this opportunity, the
company has entered into a Memorandum of Understanding with Glomac Berhard, a Malaysian organization, for formation of
consortium for submission of EOI and RFQ to Government of Andhra Pradesh for development of integrated township.
The Company is also planning to foray into the global markets with such alliances with international players.
Marketing strategy:
As part of its marketing strategy, the company engages in direct marketing and generally concentrates on negotiating at
corporate levels where large blocks of space are booked. The Company also uses the services of real estate consulting firms.
Further, the company focuses on building and maintaining cordial relationships with the Architects and consultants. Quality
work and execution of the project in the stipulated time would provide the company with the word of mouth publicity. The
company constantly keeps watch on developments in the corporate sector and collects market information. Based on the
information and data it approaches the corporate clients and presents its offerings.
Apart from this, the company has over a period of years has developed excellent relationships with more than 25 Architects
and consultants. The relationship provides the Company with various opportunities to participate in marketing its development
ideas.
The Company has set up a marketing team headed by AGM- Marketing. The team identifies prospective customers especially
IT/ITES and BPO Companies and engages in personalized marketing pitch. Also the Company takes part in IT/ITES Expos
and sets up stalls and displays the features of projects of the company. Once the message is communicated to the prospective
customers, the company involves in one to one interaction.
Promotion Strategy
The Company spends resources upfront to create the right marketing message, which starts from the naming of the project to
developing the theme for the project and creating messages around the theme which results in the development of a marketing
brochure and a power point presentation and / or a short animated film. The collateral is augmented with print ads supplemented
with a dedicated website for each project.
Also the Company engages services of outdoor media and gets extensive coverage about the projects by using print media like
large hoardings , display panels at vantage points of city like prime commercial areas, airports and near project site. This
would generate interest among IT and Corporate clients. The Company also releases print ads in IT / Financial magazines
giving much needed coverage.
Competition
The Company operates in the niche and growing markets like IT Parks, Shopping Malls, Residential Township Projects etc.
where the competition is fragmented between a few large players and multiple small builders. The main competitors which the
Company perceives are Marg Constructions Limited, Mantri Developers Private Limited, Ansal Properties and Infrastructure
Limited among others. The differentiating factor for companies operating in this sphere is expertise in construction and
property development and identification of right property. The company’s promoters have several years of experience in
property development and have been successful in identifying the right property at right price, thus creating an edge over its
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competitors. The company is in the process of negotiating with various foreign investors and partners to tie up for developing
various projects to help deal with competition. Further, the Company is relying on quality work, close relationship, modern
technologies and speedy execution of its projects to sustain competition.
Business Model
After identifying a property, the Company conceives a specific project tailor made to market needs and demand and prepares
a detailed project report. This report addresses various aspects of project implementation commencing from due diligence of
title to property, obtaining necessary clearances, determining scope of work, technical parameters, etc., to related costs which
define the approximate estimated cost of the project.
Technology
There are no key processes, technology and collaboration agreements with any parties for technology. The Company‘s client
normally specify proven technologies and methods for their project, therefore, it does not entail the need for any collaboration
agreements for technology to be used.
PROCESS OF BUSINESS
The company is mainly engaged in property development which includes location identification, site selection, land acquisition,
planning, outsourcing, construction activities, and marketing strategies for its projects.
The business process contains the following stages:
1. Location Hunting
2. Land identification
3. Price negotiation with vendor
4. Legal due diligence
5. Execution of development agreement/POA/Sale Deed.
6. Selection of Architects
7. Approval of Drawings
8. Statutory clearances
9. Selection and appointment of Sub-Contractors
10. Project planning & monitoring
11. Project marketing
Location Hunting:
The process of identification of the appropriate location is considered to be the key for the success of development. To short
list the location, the Company’s planning team gathers data /information on various cities where they find that the location is
friendly in terms of easy accessibility, sound infrastructure facilities, suitable government policies, current demand and future
prospects.
Land Identification
Upon identifying the location, the planning team steps into the next stage of land identification, wherein they collect the city-
planning map which furnishes the details of the land use such as industrial, agricultural, residential etc. From this city
planning map, areas are selected and the planning team takes the assistance of the local brokers for selection of the appropriate
site. The planning team conducts a site visit for the detailed analysis of the land, surroundings, and environment suitable for
the project.
After this exercise, the planning team would compile the details of various statutory approvals that are to be obtained such as
soil quality, water availability etc.
Price negotiation with vendor
Once the site is considered to be fit for development the price is negotiated with the landowners for outright purchase or joint
development. In case of joint development, prices are set such that the costs are adjusted for construction cost, marketing cost
and finance cost and also specifically state the benchmark figure above which prices are not to be negotiated.
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Legal Due Diligence
This procedure involves the research work conducted by the company’s legal department. They verify the records of the
vendor to the property so as to ensure its compliances with the required Property Acts and laws that govern land ownership.
Execution of Power of Attorney and Development Agreement / Sale Deed
With the receipt of the legal clearance given by the Company’s legal department and the negotiated prices, an MOU
(Memorandum of Understanding) is entered into, between the Company & owners after paying an initial token advance, if any
to the owner. The Company then moves on by entering into a development agreement and also takes the Power of Attorney in
its favour.
Selection of Architects
As soon as the development agreement is executed and Power of Attorney is obtained, the architect is selected. For this
purpose, the Company identifies architects who are best suited for the project being undertaken.
Approval of Drawings
The architect is assigned with the job of preparing the preliminary drawings for discussions. These are evaluated in a general
meeting with the Engineering, Planning, Marketing and Finance Department taking into consideration the cost and the market
acceptability.
The architect incorporates all the agreed suggestions and modifications during the general meeting and submits revised drawings
which are deliberated upon for all minor details. Upon approval of the revised drawings, the architect prepares 3 sets of
drawings as under:
i) Working drawing for execution
ii) Marketing drawing for sales
iii) Drawings for the approval by legal authorities /Statutory Authorities
Statutory Clearances
Various statutory clearances are obtained for each project. The details of various clearances required are mentioned in the
section titled ‘Government Approvals’ beginning on page no. 95 of this Offer Document.
Selection and Appointment of sub-contractors
The Company has a list of sub-contractors for RCC, painting, electrical works, environment, landscape, etc. The Company as
a matter of policy adopts the labour contract model retaining within its scope the supply of the materials so as to ensure quality.
Project Planning & Monitoring
During the process of the statutory approval(s)/sanction(s) and the appointment of the sub-contractors the budget of the
project is decided. The budget includes the following:
i) Budget of materials with all tolerances
ii) Pert Chart for execution
iii) Finance/quantitative budgets
iv) Daily reporting format from the site
The projects are monitored by Vice President assisted by other executives on a day-to-day basis to ensure timely supply of
materials, proper usage of the materials and progress of work as per the project schedule.
Project Marketing:
Marketing of the project would involve the analysis of the rate prevailing in the area so as to bring about a competitive price
structure that would fetch brand equity to the company.
The floor rate/benchmark rate will be decided by the company considering the premium so as to enhance the initial booking of
the premises.
Collaborations:
The Company has not entered into any technical Collaboration.
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INFRASTRUCTURE FACILITIES
Raw Materials
The Major raw materials used by the company for its various activities are as under:-
a. Cement
b. Steel
c. Sand.
Plant & Machinery
The cost of plant and machinery required for construction purpose is insignificant compared to the cost of the project. The
Company has already deployed adequate machinery and centering equipments at its present site. In addition to this, Company’s
offices are equipped with computers for accounting, designing, estimation and management of projects.
The additional requirement for plant and machinery would be met by the Company depending upon the size of the projects
and the needs.
Utilities
The main utilities required in the project are power and water.
Power
The Company will temporarily procure the Electricity from State Electricity Board for the proposed project.
Water
Water usage is largely project specific and is procured locally by way of boring wells at the site.
Manpower:
The total employee strength of the Company as on 31.03.2007 is 78. The details are as follows:
Sr. No Location No. of Employees Technical Non- technical Site (Chennai) Site (Bangalore) Site (Hyderabad)
1 Registered Office
(Hyderabad) 15 3 12 — — 3
2 Corporate Office
(Chennai) 59 39 20 41 — —
3 Bangalore 4 3 1 — 3 —
As and when required, the company recruits the manpower through placement agencies, paper advertisements and various HR
websites.
Purchase of Property
Except as stated in the section titled “Objects of the Issue” in this Letter of Offer, there is no property which the Company has
purchased or acquired or propose to purchase or acquire which is to be paid for wholly, or in part, from the net proceeds of the
Issue or the purchase or acquisition of which has not been completed on the date of this Letter of Offer, other than property in
respect of which:
� The contracts for the purchase or acquisition were entered into in the ordinary course of the business, and the contracts
were not entered into in contemplation of the Issue nor is the Issue contemplated in consequence of the contracts; or
� The amount of the purchase money is not material; or
� Disclosure has been made earlier in this Letter of Offer.
Property:
The Company owns an office space measuring 681 sq. ft. with undivided share of land 23.84 Square Yards, in the premises
bearing no.3-5-823 in Second Floor of the Commercial Complex, “Hyderabad Business Centre” Old MLA Quarters Road,
Near Basheerbagh, Hyderabad.
37
Key Industry Regulations and Policies
There are no specific regulations in India governing the real estate industry. Certain significant legislation and regulations that
generally govern this industry in India are as under:
General
The Company is engaged in the business of real estate development. The Company undertakes construction by sub-contracting
all the activities. Thus most of the legal requirements are taken care by such sub contractors. For the purpose of executing the
work, the company may be required to obtain licenses and approvals depending upon the prevailing laws and regulations
applicable in the relevant state and/or local governing bodies like Municipal Corporations, Fire Department, Environmental
Department, etc. For details of such approvals please see “ Government Approvals” on page 95 of this Letter of Offer.
Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
The Central Government enacted the Building and Other Construction Workers (Regulation of Employment and Conditions
of Service) Act, 1996 (“BOCWA”) as a comprehensive central legislation governing construction worker. The BOCWA aims
at regulating the employment and conditions of service of construction workers and to provide for their safety, financial health
among other welfare measures.
Under the BOCWA every employer employing ten or more building workers for building or construction work in the past
twelve months must apply for registration of the establishment. The BOCWA vests the responsibility of providing for immediate
assistance in case of accidents, old age pension, loans for construction of house, premia for group insurance, financial assistance
for education, to meet medical expenses, maternity benefits etc to beneficiaries under the BOCWA on the Building and Other
Construction Workers Welfare Board.
The BOWCA also prescribes health and safety measures for the construction workers. For this purpose comprehensive Central
Rules i.e. Building and other Construction Workers (Regulation of Service and Conditions of Service) Central Rules, 1998
have been notified by the Central Government.
Building and Other Construction Workers’ Welfare Cess Act, 1996
The Building and Other Construction Workers Welfare Cess Act, 1996 (“Cess Act”) came into force with effect from August
19, 1996 to provide for the levy and collection of cess on the cost of construction incurred by the employer with a view to
augmenting the resources of the Building and Other Construction Workers Welfare Board constituted under the BOCWA.
Under the Cess Act, cess amount is levied and collected from the employer, within 30 days of completion of construction
project, at such rate not exceeding two per cent but not less than one per cent of the cost of the construction.
Contract Labour (Regulation and Abolition) Act, 1970
The Contract Labour (Regulation and Abolition) Act, 1970 (“CLRA”) has been enacted to regulate the employment of contract
labour in certain establishments and to provide for its abolition in certain circumstances. The CLRA applies to every establishment
in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour.
The CLRA vests the responsibility on principal employer of an establishment to make an application to the registered officer
in the prescribed manner for registration of the establishment. Likewise, every contractor to whom the CLRA applies is
required to obtain a license and not to undertake or execute any work through contract labour except under and in accordance
with the license issued.
To ensure the welfare and health of the contract labour, the CLRA imposes certain obligations on the contractor in relation to
establishment of canteens, rest rooms, drinking water, washing facilities, first aid, other facilities and payment of wages.
However, in the event the contractor fails to provide these amenities, the principal employer is under an obligation to provide
these facilities within a prescribed time period.
Employee State Insurance Act, 1948
The Employee State Insurance Act, 1948 (“ESIA”) aims to provide benefits for employees or their beneficiaries in case of
sickness, maternity, disablement and employment injury and to make provision for the same. Every factory or establishment
to which the ESIA applies is required to be registered in the manner prescribed in the ESI Act.
Under the ESIA every employee (including casual and temporary employees), whether employed directly or through a contractor,
who is in receipt of wages upto Rs. 6,500 per month is entitled to be insured.
38
The ESIA contemplates a contribution payable by the principal employer in the first instance and contribution payable by the
employee in respect of an employee to the Employee State Insurance Corporation. The ESIA further states that a principal
employer, who has paid contribution in respect of an employee employed by or through an immediate employer, shall be
entitled to recover the amount of the contribution so paid from the immediate employer, either by deduction from any amount
payable to him by the principal employer under any contract, or as a debt payable by the immediate employer.
Payment of Wages Act, 1936
The object of the Payment of Wages Act, 1936 (“PWA”) is to regulate payment of wages to certain classes of employed
persons. The PWA makes every employer responsible for the payment of wages to person employed by him. No deductions
can be made from the wages nor can any fine be levied on wages earned by a person employed except as provided under the
PWA.
Minimum Wages Act, 1948
The Minimum Wages Act, 1948 (“MWA”) came into force with an objective to provide for the fixation of a minimum wage
payable by the employer to the employee. Under the MWA, every employer is mandated to pay the minimum wages to all
employees engaged to do any work skilled, unskilled, manual or clerical (including out-workers) in any employment listed in
the schedule to the MWA, in respect of which minimum rates of wages have been fixed or revised under the MWA.
Workmen’s Compensation Act, 1923:
The Workmen’s Compensation Act, 1923 (“WCA”) has been enacted with the objective to provide for the payment by certain
classes of employers to their workmen or their survivor’s compensation for industrial accidents and occupational diseases
resulting in death or disablement.
The WCA makes every employer liable to pay compensation in accordance with the WCA if a personal injury/disablement/
loss of life is caused to a workman (including those employed through a contractor) by accident arising out of and in the course
of his employment. In case the employer fails to pay compensation due under the WCA within one month from the date it falls
due the Commissioner may direct the employer to pay the compensation amount along with interest and may also impose a
penalty.
Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 (“PGA”) was enacted with the objective to regulate the payment of gratuity, to an employee
who has rendered for his long and meritorious service, at the time of termination of his services. Gratuity is payable to an
employee on the termination of his employment after he has rendered continuous service for not less than five years:
a. on his/her Superannuation;
b. on his/her retirement or resignation;
c. on his/her death or disablement due to accident or disease (in this case the minimum requirement of five years does not
apply).
Payment of Bonus Act, 1965
The Payment of Bonus Act, 1965 (“PBA”) was enacted with the objective of providing of payment of bonus to employees on
the basis of profit or on the basis of productivity. The provisions of the PBA ensure that a minimum annual bonus is payable
to every employee regardless of whether the employer has made a profit or a loss in the accounting year in which the bonus is
payable. Under the PBA every employer is bound to pay to every employee, in respect of the accounting year, a minimum
bonus which is 8.33% of the salary or wage earned by the employee during the accounting year or Rs.100, whichever is higher.
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPFA”) was introduced with the object to institute
provident fund for the benefit of employees in factories and other establishments. The EPFA empowers the Central Government
to frame the “Employee’s Provident Fund Scheme”, “Employee’s Deposit linked Insurance Scheme’ and the “Employees’
Family Pension Scheme” for the establishment of provident funds under the EPFA for the employees. The EPFA also prescribes
that contributions to the provident fund are to be made by the employer and the employee.
39
REGULATION OF FOREIGN INVESTMENT
Foreign Ownership
Subject to certain conditions and guidelines, the Economic Policy and FEMA permit up to 100% foreign direct investment in
development of townships, infrastructure and development projects which include construction of houses, commercial, premises,
hotels, resort, hospitals, educational institutions, recreational facilities and city and regional level infrastructure.
Investment by Foreign Institutional Investors
Foreign Institutional Investors (“FIIs”) including institutions such as pension funds, investment trusts, asset management
companies, nominee companies and incorporated, institutional portfolio managers can invest in all the securities traded on the
primary and secondary markets in India subject to certain restrictions. FIIs are regulated by FEMA and SEBI. FIIs are required
to obtain an initial registration from the SEBI and a general permission from the RBI to engage in transactions regulated under
FEMA. FIIs are required to comply with the provisions of the SEBI (Foreign Institutional Investors) Regulations, 1995, as
amended from time to time. The initial registration and the RBI’s general permission together enable the registered FII to buy
(subject to the ownership restrictions discussed below) and sell freely securities issued by Indian companies, to realise capital
gains or investments made through the initial amount invested in India, to subscribe or renounce rights issues for shares,
appoint a domestic custodian for custody of investments held and to repatriate the capital, capital gains, dividends, income
received by way of interest and any compensation received by way of interest and any compensation received towards sale or
renunciation of rights issues of shares.
Ownership restrictions of FIIs
Under the portfolio investment scheme, the overall issue of equity shares to FIIs on a repatriation basis should not exceed 24%
of post-issue paid-up capital of the company. However, the limit of 24% can be raised up to the permitted sectoral cap for that
company after approval of the board of directors and shareholders of the company. The offer of equity shares to a single FII
should not exceed 10% of the post-issue paid-up capital of the Company or 5% of the total paid-up capital in case such sub-
account is a foreign corporate or an individual. In respect of an FII investing in equity shares of a company on behalf of its sub-
accounts, the investment on behalf of each sub-account shall not exceed 10% of the total issued capital of that company.
Quality Control System
The Company recognizes quality as crucial differentiator in the industry it operates in. Keeping in line with this principle, the
Company is meeting the quality control norms laid down by the markets.
The Company believes in maintaining quality for all the services it provides with a focus on Quality and Innovation. Towards
this the company has obtained ISO 9001:2000 certification from Moody International Certification Limited on 20th April
2006 vide certificate no. 29156 and the same is valid till 19th April 2009.
Insurance
The Company has taken the following insurance policies for its assets from National Insurance of India:
Sr. No Property/risk insured Sum Amount Insured
(Rs. Lakhs)
Validity till 20/8/2007
Policy No:
500502/48/05/1500001263
1. Fixed assets 3.02
2. Electronic equipments 2.20
3. All other contents 4.62
4. Infidelity/dishonesty 0.16
5. Machinery breakdown 1.60
6. Baggage 0.10
7. Wages and salaries (in transit from/to the offices) 0.25
Total 11.95
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The Company has also taken Insurance Policy for its proposed project at Navalur, Chennai for its assets from IFFCO-TOKIO
General Insurance Company Ltd.:
Sr. No Property/risk insured Sum Amount Insured
(Rs. Lakhs)
Validity till 26/12/2007
Policy No:
91/ICA/0506/CS/000009
1. Materials or items supplied by the principal & contract value including of cost of construction 6442.00
2. Construction Plant & machinery 10.00
3. Earthquake 6442.00
4. Third party Liability incase of accidents arising out of one event 20.00
Total 12914.00
3. History and Corporate Structure of the Company
(i) History and major events
The Company was incorporated on 17th October, 1994 as a Public Limited Company with the Registrar of Companies,
Andhra Pradesh at Hyderabad for carrying on the business of Shipping, Real Estate Promotion and Development and
Construction of buildings, commercial complexes/ residential complexes, plots, farm houses, etc. The certificate of
commencement of business was obtained on 4th November 1994.
The company was originally promoted by Srinivasa Hatcheries Group and Mr. Challa Prakash. Presently, the promoters of the
Company are Mr. Challa Prakash, Mr. Challa Suresh, Mr. C. Ramakrishna, Mr. E Bhaskar Rao and Sri Krishnadevaraya
Hatcheries Private Limited. The company made its maiden Public issue in May 1995 to raise a capital of Rs 75 lakhs and got
its shares listed on Bombay, Hyderabad and Madras Stock Exchanges. The shares of the Company were delisted from Madras
Stock Exchange with effect from 2nd April 2004.
On 10th April 2003, Srinivasa Hatcheries Group has divested its holding in favour of Mr. Challa Prakash, Mr. Challa Suresh,
Mr. E Bhaskar Rao and M/s. Sri Krishnadevaraya Hatcheries Private Limited (Acquirers). The Acquirers have complied with
SEBI (SAST) Regulations, 1997 for the said acquisition.
In 1994, the Company has identified tremendous opportunity in the pressing need for several companies search for corporate
office space in Chennai. Out of this, came up its maiden venture capital towers, which is an aesthetically designed 1,40,000 sft
building with all office amenities like Central air conditioning, Comfortable car parking, etc., at a central location in
Nungambakkam area in Chennai. Immediately after that, in the year 1996 the company took up another project, a 30,000 sq.ft.
air conditioned building at G.N. Chetty Road, T. Nagar, which was sold to an American Multinational company at a sale value
of Rs 1120 Lakhs.
Major Events of the Company
� Srinivasa Shipping & Property Development Limited (SSPDL) was incorporated in 1994 and made its maiden Public
Issue in May 1995 to raise a capital of Rs. 75 lakhs. The Company has commenced its commercial operations in January
1995.
� In the year 1995-96 the Company undertook the construction of Capital Towers Project at Nungambakkam , Chennai.
The project was funded through proceeds of Public Issue, promoters contribution, loan from Global Trust Bank, Fixed
Deposits , advance from customers and internal accruals. The project was completed in October 1998.
� In the year 1995, the Company has setup a Wind Farm Project at Vadavalli village near Coimbatore with 1.8 M.W
capacity at a total outlay of Rs 9.00 Crores. Of which, Rs 4.56 Crores was funded by way of a rupee loan by Indian
Renewable Energy Development Agency (IREDA) and the balance was funded out of internal accruals. The said project
was commissioned and synchronized with Tamil Nadu Electricity Board Grid on 29th March, 1996. The said project
was divested subsequently by way of slump sale with a ROI of over 20% to the Company. The windfarm was subsequently
sold on slump sale basis for Rs.404 lakhs after obtaining approval of the Members at the EGM held on 31st March 2000.
� In the year 1996-97, the Company undertook construction of Fuller Towers, Chennai. The project was funded by fixed
deposits, unsecured loans and internal accruals. The project was completed in August 1999.
41
� There was a change in the management of the company and re-constitution of the board of directors with effect from
June 2004.
� During the phase of the IT slump, the company ‘s activities took a subdued tone due to lack of appropriate investment
opportunities. The company did not undertake any project during the period 2000-2005.
� The company has four major projects on hand:
- Alpha City - IT Park at Navalur, Chennai: 6,00,000 sq. ft. Complex for IT Industry.
- Chennai Central, a 1,20,000 sq. ft. shopping mall, is being developed for M/s. Anchor Malls Pvt Ltd.
- The Retreat, a residential villa project at Bangalore.
- IT Park at Perungudi, Chennai.
Changes in Registered Office
From To With effect from
3-5-823, 3rd Floor, Hyderabad Business 3-5-823, 4th Floor, Hyderabad Business Center, 20th June 1995.
Mr. S. Suryanarayana 41 B.Com, 10 17th June 2004 State Bank of Hyderabad
(S/o. Mr. S Krishna Murthy) CA years. Liable to retire by Rotation.
Director
Independent Director
Occupation: Professional
Address: C1, Millennium House,
8-2-601/B/C1, Near Jaheer Nagar
Cross Roads, Road No.10,
Banjara Hills, Hyderabad - 500 034
Mr. C. Ramakrishna 55 MBA 30 17th June 2004 Pallavi Perfumes and Cosmetics Pvt Ltd
(S/o. Mr.. C. Veeraju) years Liable to retire by Rotation. New York Fragrance Inc
Director
Promoter Director
Occupation: Business
Address: Plot No. 1142/A, Road No. 54,
Jubilee Hills, Hyderabad - 500 033
Mr. K.Akmaluddin Sheriff 45 B.Com, 10 14th August 2006 Crescent Information and Management
(S/o Mr.K.K.Sheriff) MBA. years Liable to retire by Rotation. Centre Pvt Ltd.
Director
Independent Director
Occupation: Business
Address: Flat No. 32, Lakeview Apartment
116, Gangadhar Chetty Road, Ulsoor,
Bangalore - 560 042.
Brief Profile of the Board of Directors is given below.
Mr. Challa Prakash, aged 54, the Managing Director of the Company is an M.SC having a vast experience of over 30 years
in the construction, banking, aquaculture and pisciculture Industry. Having worked for 13 years as senior manager in Nationalised
Banks, he commenced the business of exports of tuna fish through tuna longliners and shrimp processing.
Mr. Challa Prakash has started Construction activities since July 1993 through Sri Satya Sai Constructions, a sole proprietor
ship concern for property development in Chennai and Hyderabad and has successfully undertaken the construction of 12
residential/commercial complexes spanning an area of over 4,00,000 sft (approximately).
Mr. E. Bhaskar Rao, aged about 45 years in on the Board of the Company since inception. He is a Commerce graduate. He
has varied experience in the business of poultry breeding, real estate and construction spanning more than a decade.
Mr. Challa Suresh, aged about 46 years had done his Bachelors Degree in Mechanical Engineering from Jawaharlal Nehru
Technology University, India and Masters in Industrial Engineering from University of Texas. He has varied experience
spanning over 16 years in the areas of software, manufacturing and real estate development.
Mr. S. Suryanarayana , aged about 41 years had done his Graduation in Commerce and is a Fellow Member of the Institute
of Chartered Accountants in India. He is practicing as a Chartered Accountant and has a decade of experience in the areas of
Finance and Taxation.
Mr. C. Ramakrishna, aged about 55 years, holds a Masters Degree in Business Administration. He has varied experience of
30 years in the areas of perfumes and cosmetic business in USA and India.
Mr. K. Akmaluddin Sheriff, aged about 45 years holds a Masters Degree in Business Administration. He has experience in
the field of construction and real estate field. He manages firms and is actively engaged in real estate in Bangalore.
(ii) Details of borrowing powers
The members of the company have passed a resolution under the provisions of Section 293(1)(d) of the Companies Act, 1956
in the Annual General Meeting held on 14th August 2006 enabling the Board of Directors to borrow from time to time any
sum or sums of money so that the total amounts of monies so borrowed at any time shall not exceed the sum of Rs. 200 Crores
(Rupees Two Hundred Crores Only) apart from the temporary loans obtained from Company’s bankers in the ordinary course
of business.
49
Compensation of Managing Directors/Whole time Directors/Non Executive Directors for the year ended 31st March
2007.
Name of the Director Designation Sitting Fees Commission Salary/Bonus
Mr. Challa Prakash Managing Director NA Nil 12,00,000
Mr. E. Bhaskar Rao Director Rs.87,500 Nil Nil
Mr. Challa Suresh Director Rs.87,500 Nil Nil
Mr. S. Suryanarayana Rao Director Rs.87,500 Nil Nil
Mr. C. Ramakrishna Director Nil Nil Nil
Mr. K Akmaluddin Sheriff Director Rs.87,500 Nil Nil
1. Appointment of Mr. Challa Prakash as Managing Director
A. Compensation of Managing Director
Name Challa Prakash
Designation Managing Director
Period 5 years w.e.f. 23.10.2004
Remuneration (a) SALARY: Rs. 1,00,000 per month including dearness andother allowances.
(b) PERQUISITES : In addition to the salary, Mr. ChallaPrakash, shall be entitled to the following perquisites:-
* Contribution to provident fund, super-annuation fund orannuity fund to the extent these either singly or put togetherare not taxable under the Income Tax Act, 1961.
* Gratuity payable at a rate not exceeding half a month’s salaryfor each completed year of service, and
* Encashment of leave at the end of the tenure.
There are no service agreements with the directors of the company providing for benefits upon termination of tenure.
(iii) Corporate Governance
The Company has complied with SEBI Guidelines in respect to Corporate Governance especially with respect to broad basingits Board of Directors and setting up of necessary committees such as Audit Committee, Shareholders/Investor GrievanceCommittee and Compensation Committee and made necessary disclosures as required under Corporate Governance in itsAnnual Report for the Financial Year 2005-06.
Company’s philosophy
The Company’s philosophy of Corporate Governance is aimed at strengthening the confidence among shareholders, customers,employees and ensuring a long term relationship of trust by maintaining transparency and disclosures.
Constitution of Board of Directors
The Board comprises of 4 Promoter Directors and 2 Non-executive independent directors.
Board of Directors of the Company
Name of the Director Designation Executive/Non-Executive/Independent
Mr. Challa Prakash Managing Director Executive
Mr. E. Bhaskar Rao Director Non-Executive
Mr. C. Ramakrishna Director Non-Executive
Mr. Challa Suresh Director Non-Executive
Mr. S. Suryanarayana Director Non-Executive & Independent
Mr. K. Akmaluddin Sheriff Director Non-Executive & Independent
50
Committees of the Board
Audit Committee
The Audit committee comprises of Mr. S. Suryanarayana, a Chartered Accountant as Chairman and Mr. E. Bhaskar Rao,Director and Mr. K Akmaluddin Sheriff, Director as the members. The scope of this committee is to oversee the Company’sfinancial reporting process and ensure correct, adequate and credible disclosure of financial information; recommendingappointment and removal of external auditors and fixing their fees, reviewing with Management the annual financial statementswith special emphasis on accounting policies and practices, compliances with accounting standards and other legal requirementsconcerning financial statements, reviewing the adequacy of the audit and compliance functioning including their policies,procedures, techniques and other regulatory requirements and reviewing the adequacy of internal control systems and significantaudit findings. The terms of reference of the Committee cover the matters specified under Clause 49 of the Listing agreementread with Section 292A of the Companies Act, 1956. The Committee periodically interacts with the statutory auditors, reviewsthe Company’s financial and risk management policies and adequacy of internal controls with the management and is responsiblefor effective supervision of the financial reporting process and compliance with financial policies.
Shareholders and Investor Grievances Committee
This committee deals with the transfer of shares, issue of duplicate share certificates, dematerialization of shares, and allmatters concerning shareholders. The committee comprises of three members i.e. Mr. Suresh Challa as the Chairman, Mr. EBhaskar Rao and Mr. S. Suryanarayana as members for complying with the requirements of the Securities and ExchangeBoard of India and requirements of the listing agreement with the stock exchanges.
Remuneration Committee
The Committee consists of 3 members, Mr.E Bhaskar Rao, Chairman, Mr. S Suryanarayana and Mr.Suresh Challa. TheCommittee determines on behalf of Board and Shareholders, the Company’s policy on specific remuneration packages forExecutive Directors and Non-Executive Directors, including pension rights and any compensation payment. The terms ofreference of the Committee shall be to fix and approve the payment of remuneration of managerial personnel from time totime and also covers the matters specified under Clause 49 of the Listing Agreement. The Committee also functions asRemuneration Committee under Schedule XIII of the Companies Act, 1956. The Committee recommends to the Board regardingremuneration to be paid to the Board Members and the grant of stock options to the employees based on an evaluation of theirperformance, potential for future contributions, commitment shown to work, conduct and such other factors as may be specified.
Compliance with the Listing Agreement
The Company confirms that it has complied with all the applicable clauses of the Listing agreement. The Company furtherconfirms that it has complied with Clause 49 of the listing agreement with respect to corporate governance.
iv. Details of Shares held by the Directors
Names No. of shares held % of post issue shareholding
Mr. Challa Prakash 8,14,490 6.30
Mr. E. Bhaskar Rao 6,92,500 5.36
Mr. C. Ramakrishna 1,25,000 0.97
Mr. Challa Suresh 2,59,200 2.00
Mr. S. Suryanarayana 100 Negligible
Mr. K. Akmaluddin Sheriff — —
(v) Interest of Directors
All the Non Executive Directors may be deemed to be interested to the extent of fees payable to them for attending the meetingof the Board or Committee thereof, Commission on net profits and reimbursement of traveling and other incidental expenses,if any, for such attendance as per the Articles of Association of the Company.
All the Directors of the Company shall be deemed to be interested to the extent of shares held by them and/or their andrelatives which may be allotted to them out of the present issue and are deemed to be interested to the extent of remunerationand perquisites being drawn by them from the Company.
The whole time Directors are interested to the extent of remuneration paid to them for services rendered to the Company.
Further, the Whole time Directors are interested to the extent of equity shares held by them and also to the extent of any
dividend payable to them and other distributions in respect of the said equity shares.
Mr. Challa Prakash and Mr. E. Bhaskar Rao, directors of the company are also partners of M/s Sri Satya Sai Constructions
(Firm), which has recently entered into a development and construction agreement with the Company for construction of
51
residential villas at Bangalore. Necessary approvals u/s 297 of the Companies Act, 1956 has been received from the Regional
Director, Ministry of Company Affairs approving the said agreement.
Except as stated above, the company has not entered into any contract, agreements or arrangements during the preceding two
years from the date of the Letter of Offer in which the directors are interested directly or indirectly and no payments have been
made to them in respect of these contracts, agreements or arrangements which are proposed to be made to them.
Changes in the Board of Directors during the last three years
Sl. No. Name of the Director Designation held Reasons of Change Date of Change Reason for Change
1 Mr.C.Jagapati Rao Chairman Resignation 17.06.2004 Resignation due to change in management
2 Mr. C. Suresh Rayudu Director Resignation 17.06.2004 Resignation due to change in management
3 Mr. Sudit K Parekh Director Resignation 17.06.2004 Resignation due to change in management
4 Mrs. E. Padmaja Director Resignation 17.06.2004 Resignation due to change in management
5 Mr. Challa Suresh Additional Director Appointment 17.06.2004 Appointed as Additional Director
6 Mr. C. Ramakrishna Additional Director Appointment 17.06.2004 Appointed as Additional Director
7 Mr. S. Suryanarayana Additional Director Appointment 17.06.2004 Appointed as Additional Director
8 Mr. Challa Suresh Director Appointment 30.09.2004 Appointed as Director
9 Mr. C. Ramakrishna Director Appointment 30.09.2004 Appointed as Director
10 Mr. S. Suryanarayana Director Appointment 30.09.2004 Appointed as Director
11 Mr. K Akmaluddin Sheriff Additional Director Appointment 31.12.2005 Appointed as Additional Director
12 Mr. K Akmaluddin Sheriff Director Appointment 14.08.2006 Appointed as Director
7 Sri Satya Sai Constructions Mr. Challa Prakash 100.00(Sole Proprietory Concern)
8 Sri Satya Sai Constructions Mr. Challa Prakash 50.00(Partnership Concern) Mr. E Bhaskar Rao 50.00
9 SVS Real Estate Traders Mr. E Bhaskar Rao (HUF) 70.00
(Partnership Concern) Mr. C Suresh Rayudu 5.00
Ms. C Usha Lakshmi 15.00
Mr. M Sharath Babu 10.00
In the above mentioned entities except, Sri Satya Sai Constructions (Firm) there are no major commercial transactions oroperations and some of them were incorporated recently and also they do not deal with the company in any manner whichcould have conflict with company’s business interest. However in future once these companies begin commercial operationsthere could be conflict of interest
Nature and extent of the interest of the promoters of the company
All the Promoters of the Company shall be deemed to be interested to the extent of shares held by them and/or their andrelatives which may be allotted to them out of the present issue and are deemed to be interested to the extent of remunerationand perquisites being drawn by them from the Company except that
Mr. Challa Prakash and Mr. E. Bhaskar Rao, directors of the company are also partners of M/s Sri Satya Sai Constructions(Firm), which has recently entered into a development and construction agreement with the Company for construction ofresidential villas at Bangalore. Necessary approvals u/s 297 of the Companies Act, 1956 has been received from the RegionalDirector, Ministry of Company Affairs approving the said agreement. The value of the said contract is estimated at Rs.7700lakhs.
Related Party Transactions
Related party transactions are given as notes to accounts in Auditors Report on page No. 59 of this Letter of Offer.
Currency of Presentation
In this Letter of Offer all references to “Rupees” and “Rs” are the legal currency of India.
6. Dividend policy
The declaration and payment of dividends will be recommended by the Board of Directors and approved by the shareholdersof the company, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital
requirements and overall financial condition.
The company has not declared any dividends during the past 5 years.
59
SECTION - V. FINANCIAL STATEMENTS
1. FINANCIAL INFORMATION OF THE COMPANY
AUDITOR’S REPORT
To
The Board of Directors,
M/s. Srinivasa Shipping and Property Development Ltd.,
‘EDEN GARDENS’, 8-2-595/3/6,
Road No 10, Banjara Hills,
Hyderabad - 500 034.
Andhra Pradesh
Dear Sirs,
Re: Proposed Rights Issue
Offer to issue and allot 86,19,500 Equity Shares of Rs.10/- each at a premium of Rs.8/- each on the Rights basis in the ratio of
2 Equity shares for every 1 Equity Share held.
We have examined the following financial information of M/s. SRINIVASA SHIPPING AND PROPERTY DEVELOPMENT
LIMITED (“the Company”) as attached to this report stamped and initialed by us for identification, which has been prepared
by the company in compliance with Securities Exchange Board of India (Disclosure and Investor Protection) Guidelines,
2000 as amended from time to time and in accordance with the requirements of Clause B of Part II of schedule II of Companies
Act, 1956, for the purpose of disclosure in the Letter of Offer being issued by the Company in connection with the Rights issue
of Equity shares.
1) Statement of Profit and Losses Annexure I
2) Statement of Assets and liabilities Annexure II
3) Details of Reserves & Surplus Annexure III
4) Details of other income Annexure IV
5) Statement of notes to the accounts Annexure V
6) Details of Secured & Unsecured loans Annexure VI
7) Details of age wise debtors Annexure VII
8) Cash Flow Statements Annexure VIII
9) Accounting ratios Annexure IX
10) Details of loans and advances Annexure X
11) Statement regarding quoted/unquoted investment Annexure XI
12) Capitalisation statement Annexure XII
13) Statement of Tax Shelters Annexure XIII
14) Related Party Disclosure Annexure XIV
15) Contingent Liabilities Annexure XV
In respect of financial information contained in this report, we have relied upon the financial statements for the years ended
31st March, 2002, 2003 & 2004 which were audited by M/s. CHANDRAKANT & SEVANTHILAL, Chartered Accountants.
The accounts for the year ended 31st March, 2005 & 2006 and for the period ended 31st December, 2006 have been audited by
us.
Based on the verification of the above with the respective audited financial statements, Submissions made by the company
subsequent to the inspection U/s.209A of the Companies Act, 1956 by the Deputy Director (Inspection), O/o the Regional
Director, Southern Region, Ministry of Company Affairs, Government of India, Chennai, and on the basis of information and
explanations given to us, we report as under:
60
a) In our opinion the above financial information of the company read with significant accounting policies attached in
Annexure V to this report, after making adjustments and re-grouping as considered necessary and appropriate has been
prepared out of audited financial statements for the years and in accordance with Part II of Schedule II of the Act and the
SEBI Guidelines.
b) all notes to the accounts and significant accounting policies and auditors qualifications have been incorporated and
further there is no other material note which has bearing on the financial status of the company
c) there are no changes in the activities of the company which may have had the material effect on the statement of
profitability of the company
This report is intended solely for your information and for inclusion in the Letter of Offer in connection with the specific
Rights Offer of equity shares of the Company and is not to be used, referred to or distributed for any other purpose, without our
written consent.
for KARVY & COMPANY
Chartered Accountants
(K.AJAY KUMAR)
P A R T N E R
M.No. 21989
Place : Hyderabad
Date : 05-05-2007
61
Annexure - I
STATEMENT OF PROFITS AND LOSSES: (Rs. In Lakhs)
Period ended on 31.03.02 31.03.03 31.03.04 31.03.05 31.03.06 31.12.06
Income:
Contract Receipts & Other business related turnover 38.90 Nil Nil 193.38 191.58** 2765.65
Other Income (Rent + Others) 10.58 6.14 8.45 6.74 31.62 19.49
Increase (decrease) in inventory (122.28) (11.59) 1.42 (185.23) 506.07 272.10
Total Income (72.80) (5.45) 9.87 14.89 729.27 3057.24
Note : ** Includes Rs.100 lakhs received on account of relinquishment of rights in land, which the Officials of Ministry of Company Affairs opine that this
is not a regular business activity. The Company had furnished its reply to the same contending that it is a regular business Income, covered under its main
objects.
62
Annexure - II
STATEMENT OF ASSETS AND LIABILITIES: (Rs. In Lakhs)
Less: miscellaneous expenditure not written off (3.19) (2.08) (0.98) 0.00 (3.36) (2.73)
Total 520.97 496.36 483.86 466.58 1833.14 2206.08
(*) Pursuant to the inspection carried u/s 209A of the Companies Act, 1956 by the Deputy Director (Inspection) , Office of the Regional Director, Ministry of
Company Affairs, Chennai, an amount of Rs.10 lakhs borrowed from M/s Sahiti Poultry Breeding Farm, a sole proprietary of Mr E.Bhaskar Rao one of the
Directors of the Company, which was wrongly classified under the head current liabilities has been rectified and shown under the head “Unsecured Loans”.
63
Annexure - III
DETAILS OF RESERVES & SURPLUS: (Rs. In Lakhs)
Sl. No Particulars 31.03.02 31.03.03 31.03.04 31.03.05 31.03.06 31.12.06
1. General Reserve 147.84 147.84 147.84 147.84 147.84 147.84
6 Miscellaneous Income 1.98 0.02 Nil Nil 6.92 0.04
7 Profit on sale of investments Nil 1.51 3.66 Nil Nil Nil
Total 10.58 6.14 8.45 6.74 31.62 19.49
Annexure - V
SIGNIFICANT ACCOUNTING POLICIES & NOTES TO THE STATEMENT OF ASSETS AND LIABILITIES AND
PROFITS AND LOSSES AS STATED.
1 Accounting Policies
1.1 Financial statements are prepared on historical cost convention with generally accepted accounting principles on
accrual basis.
1.2 Fixed assets are stated at cost less depreciation.
1.3 Depreciation is charged for by the Straight Line Method at the rates and in the manner prescribed in Schedule
XIV of the Companies Act, 1956.
1.4 Investments are classified into current and long term investments. Current investments are stated at lower of cost
and fair value. Long term investments are stated at cost.
1.5 Revenue recognition
(a) In respect of construction contracts, the company follows the percentage of completion method.
(b) Dividend Income is accounted for in the year in which it is declared.
1.6 Inventories are valued as under:
a. Land - at cost less cost of undivided share of land transferred to customers.
b. In respect of construction contracts, the company follows the percentage of completion method of accounting.
However, in respect of contracts under which the work executed up to the end of the financial year is less than 25%
of the total estimated cost of contracts, work in progress is valued at cost.
64
c. Work in progress for contracts other than construction contracts, are valued at cost or net realizable value which-
ever is lower.
d. Finished properties are valued at lower of cost and net realizable value.
1.7 Miscellaneous Expenditure
Preliminary Expenses and Public Issue Expenses are being amortized over a period of ten years.
1.8 Retirement Benefits
Retirement benefit in the form of Gratuity & Leave encashment has been charged to Profit & Loss Account of the
period on estimation basis carried out at the close of period.
Retirement benefit in the form of Provident Fund is accounted on accrual basis and charged to Profit & Loss
Account.
1.9 Accounting for Taxes on Income
Deferred tax is recognized on timing differences keeping in view the matching concept and the principles of
prudence.
Deferred tax assets and liabilities are accounted for based on the difference between taxable income and accounting
income that originate in one period and are reasonably expected to reverse in the subsequent periods.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively
enacted as of the Balance Sheet date.
1.10 Impairment of Assets
Pursuant to Accounting Standard (AS-28) on - Impairment of Asset issued by the Institute of Chartered Accountants
of India (ICAI), the Company assessed its Fixed Assets for impairment as at the end of the period and there has
been no significant impaired fixed assets that need to be recognized in the books of accounts.
2. Contingent Liabilities not provided for
Contingent Liability not provided for in respect of Sales Tax demand pending before Appellate Authority Rs.3,20,340/- (Previous Year Rs.3,20,340/-).
3 Estimated amount of contracts remaining to be executed on Capital account and not provided as on 31.12.2006 (net ofadvances) Rs. NIL (Previous Year (as on 31.3.2006) Rs.NIL )
4. Notes on Segment Report
Since the company has only one Segment i.e., Property Development, separate disclosure on Segment reporting as perAccounting Standard 17 issued by the ICAI is not required.
5 Dues to Small Scale Industrial undertakings
As per the information available with company, no amounts are due to Small Scale industrial undertakings.
6 Related Party Disclosures
a) List of related parties
Associates:
1) M/s.Sri Satya Sai Constructions.- Partnership Firm
2) M/s.Sri Satya Sai Constructions.- Sole Proprietary Concern
3) SSPDL Ventures Private Limited
4) SSPDL Retreat Private Limited
5) Sri Krishnadevaraya Hatcheries Pvt Ltd (*)
6) Monisha Sri Durga Farms Pvt Ltd (*)
7) Sahiti Poultry Breeding (*)
65
Key Managerial Personnel:
1) Mr. Challa Prakash - Managing Director,
2) Mr. E. Bhaskar Rao - Director (*)
(*) Identified as related parties consequent to the submissions made by the company subsequent to Inspection U/s.209A
of the Companies Act, 1956.
b) Disclosure of transactions between the company and the related parties and the status of outstanding balances
(*) Identified as related party transactions consequent to the submissions made by the company subsequent to Inspection
U/s.209A of the Companies Act, 1956.
7. Statement of Deferred Tax (Rs in Lakhs)
Particulars As at 31.03.2005 As at 31.03.2006 As at 31.12.2006
Deferred Tax Asset
Unabsorbed business loss 72.64 20.97 0.00
Unabsorbed depreciation loss 5.03 5.02 0.00
Employee benefits 0.39 0.54 0.56
Total Deferred Tax Asset 78.06 26.53 0.56
Deferred Tax Liability
Depreciation 3.01 5.08 10.15
Net Deferred Tax Asset/(Liability) 75.05 21.45 (9.59)
Based on the properties intended to be developed by the company for which the company has already invested certainamounts, it is of the view that the carry forward losses would be absorbed in near future.
8. Earnings per Share (EPS) (Rs in Lakhs)
Upto 31.12.2006 2005-06 2004-05 2003-04
a) Net profit \ (Loss) available for equityshareholders (Numerator used for 372.32 91.07 (18.26) (13.60)calculation)
b) Weighted average No. of shares equity 39.28 34.28 30.00 30.00shares used as denominator to calculateEarning per share.
c) Basic and Diluted earning per share 9.35 2.66 & 2.55 (0.61) (0.45)
d) Nominal Value of Equity Share 10.00 10.00 10.00 10.00
66
9. Payments to and provisions for employees includes (Rs in Lakhs)
Upto 31.12.2006 2005-06 2004-05 2003-04
Managerial Remuneration
Salary 9.00 15.69 3.60 3.60
Directors’ sitting fees 2.48 0.12 0.22 0.30
Total 11.48 15.81 3.82 3.90
10. Interest Expenses on (Rs in Lakhs)
Upto 31.12.2006 2005-06 2004-05 2003-04
Fixed Loans 0.11 0.34 0.22 2.71
Other Loans 60.30 0.69 - 0.05
Total 60.41 1.03 0.22 2.76
11. Audit fee shown under is towards (Rs in Lakhs)
2005-06 2004-05 2003-04
Audit Fee 0.55 0.50 0.50
Tax Audit Fee 0.27 0.25 0.00
Other Services 0.58 0.03 0.04
Total 1.40 0.78 0.54
12. Consequent to the inspection U/s 209A of the Companies Act,1956 the Company accepted that the transaction entered
into with ICICI Bank, comes under the purview of the AS-19 ‘ Accounting for Leases’ issued by the Institute of Chartered
Accountants of India (AS-19). Consequently, the additional details to be disclosed are as under:
a. Carrying cost of the Asset as on the date of Balance Sheet Rs.10,05,559/-
b. Financial Charges debited to the Profit & Loss Account during the year Rs.26,997/-
c. Future installments payable and their present value as on the date of the Balance Sheet.
Particulars Minimum Installments Payable Present Value of Minimum Installments
31-03-2006 31-03-2005 31-03-2006 31-03-2005
Not later than 1 year 3,38,124/- 3,23,979/- 3,23,652/- 3,10,113/-
Between 1 to 5 years 1,15,956/- 4,54,080/- 1,15,906/- 4,34,645/-
Above 5 years Nil Nil Nil Nil
13. Previous year figures have been regrouped / reclassified wherever considered necessary in order to conform to the
For the period 1st January, 2007 to 31st March, 2007, the company has received 5 complaints pertaining to change of address,
Query relating to NSDL operations, Request for transmission of shares among others and all the complaints have been redressed
to and no complaints are pending as on 31st March, 2007.
Changes in Auditors in the Last Three Years
Date of resolution Appointment Reason
29.09.2005 M/s Karvy & Company M/s Chandrakant & Sevantilal
Chartered Accountants, Expressed their unwillingness
No. 2, Bhooma, Plaza, to be re-appointed as statutory
St No. 4, Avenue 7, auditors, due to personal reasons.
Banjara Hills,
Hyderabad- 500 034
Capitalisation of reserves
The company has not capitalization any of its reserves or profits till date.
Revaluation Of assets
The Company has not revalued any of its assets since its incorporation.
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SECTION - VIII. ISSUE INFORMATION
1. TERMS OF THE ISSUE
The Equity Shares now being offered are subject to the provisions of the Act and the terms and conditions of this Letter of
Offer, the CAF, the Memorandum and Articles of Association of the Company, the approvals from the Government of India,
FIPB and RBI, if applicable, the provisions of the Act, guidelines issued by SEBI, guidelines, notifications and regulations for
issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from
time to time, Listing Agreements entered into by the Company with Stock Exchanges, terms and conditions as stipulated in the
allotment advise or letter of allotment or Security Certificate and rules as may be applicable and introduced from time to time,
the FEMA and the Letters of Allotment/Equity Shares to be issued. Over and above such terms and conditions, the Equity
Shares shall also be subject to applicable laws, guidelines, notifications and regulations relating to issue of capital and listing
of securities issued from time to time by SEBI, the Government of India, RBI and or other authorities.
Ranking of the Equity Shares
The Equity Shares shall be subject to the Memorandum and Articles of Association of the Company. The Equity Shares
allotted pursuant to this offer shall rank pari-passu in all respects with the existing Equity Shares of the Company including in
respect of dividends.
Mode of payment of Dividend
The declaration and payment of dividends will be paid in cash which will be recommended by the Board of Directors and its
shareholders, at their discretion, and will depend on a number of factors, including but not limited to Company’s earnings,
capital requirements and overall financial condition.
Principal Terms and Conditions of the Issue
Equity Shares Face value
Each Equity Share shall have the face value of Rs.10/-
Issue Price
Each equity share is of face value of Rs.10/- each and is being offered at a premium of Rs.8/- per share.
Entitlement Ratio
The Equity Shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of two
Equity Share for every one equity share held as on the Record Date.
Rights to Equity Shareholders
Subject to the applicable laws, the Equity Shareholders shall have the following rights
� Right to receive dividend, if declared;
� Right to receive notices, annual reports and to attend general meetings and exercise voting powers, unless prohibited by
law;
� Right to vote on a poll either in person or by proxy;
� Right to receive offers for rights shares and be allotted bonus shares, if announced;
� Right to receive surplus on liquidation;
� Right of free transferability; and
� Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and our
Memorandum and Articles.
Market lot
The Equity Shares of the Company are tradable only in dematerialized form. The market lot for the Equity Shares in
dematerialized mode is one. In case of physical certificates, the Company would issue one certificate for the Equity Shares
allotted to one folio (“Consolidated Certificate”).
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In respect of the Consolidated Certificate, the Company will upon receipt of a request from the Equity Shareholder, be returning
the share certificates issued for the entire holding, duly split as desired by the shareholders within a week’s time from the
request of the Equity Shareholder. No fee would be charged by the Company for splitting the Consolidated Certificate.
INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON
THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.
Terms of payment
100% of the issue price per Equity Share shall be payable on application.
Nomination Facility
In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any
person by filling the relevant details in the CAF in the space provided for this purpose.
The sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders (being individual(s) may
nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall
become entitled to the Equity Shares. Person(s), being a nominee, becoming entitled to the Equity Shares by reason of the
death of the original Equity Shareholder(s), shall be entitled to the same rights to which he would be entitled if he/she were the
registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination
to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said
holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale/disposal of he Equity Share by
the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When two or more
persons hold the Equity Share(s), the nominee shall become entitled to receive the shares only on the demise of all the holders.
Fresh nominations can be made only in the prescribed form available on request at the Registered Office of the Company
located at: 8-2-595/3/6, Eden Gardens, Road No.10, Banjara Hills, Hyderabad - 500 034. India or such other place at such
addresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion in the
CAF.
Only one nomination would be applicable for one folio. Hence, in case the shareholder(s) has (have) already registered the
nomination with the Company, no further nomination need to be made for Equity Shares to be allotted in this Issue under the
same folio.
In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the
Equity Shares to be allotted in this Issue. Nominations registered with respective Depository Participant of the applicant
would prevail. If the applicant requires to change the nomination, they are requested to inform their respective Depository
Participant.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the
applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more
than 8 days after the Company becomes liable to repay the subscription amount, (i.e. forty two days after closure of the Issue),
the Company will pay interest for the delayed period, at prescribed rates in sub-section (2) and (2 A) of Section 73 of the Act.
This Rights Issue will become undersubscribed after considering the number of Equity Shares applied as per entitlement plus
additional Equity Shares by shareholders and renouncees. The undersubscribed portion can be applied for only after the close
of the issue.
Some members of the promoter group intend to subscribe to additional shares beyond their entitlement if the issue is under-
subscribed. The acquisition of additional securities in such an event shall be exempt from making an open offer in terms of
proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Further this
acquisition will not result in change of control of the management of the Company.
The above is subject to the terms mentioned under the “Basis of Allotment”.
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Act, which is
reproduced below:
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Any person who -
a) makes in a fictitious name an application to a company for acquiring or subscribing for, any shares therein, or
b) otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a
fictitious name,
shall be punishable with imprisonment for a term which may extend to five years.
Arrangement for Odd Lot Equity Shares
The Company has not made any arrangements for the disposal of odd lot Equity Shares arising out of this Issue. The Company
will issue certificates of denomination equal to the number of Equity Shares being allotted to the Equity Shareholder.
Restriction on Transfer and Transmission of Shares.
Nothing contained in the Articles of Association of the Company shall prejudice any power of the Company to refuse to
register the transfer of any share.
No fee shall be charged for sub-division and consolidation of share certificates (physical form), debenture certificates and
detachable warrants and for sub-division of letters of allotment and split, consideration, renewal and pucca transfer receipts
into denomination corresponding to the market units of trading.
Basis of the Offer
The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as
beneficial owners as per the list to be furnished by the depositories in respect of the Equity Shares held in the electronic form
and on the Register of Members of the Company in respect of Equity Shares held in the physical form at the close of business
hours on the Record Date. The Company has in consultation with the Designated Stock Exchange fixed the Record Date for
determining the shareholders who are entitled to receive this offer for Equity shares on a rights basis.
The shareholders whose names appear as beneficial owners as per the list furnished by the depositories in respect of the Equity
Shares held in electronic form and on the register of members of the Company in respect of the shares held in physical form on
3rd May 2007, at the close of business hours shall be entitled to the equity shares on the Rights basis in the ratio of two equity
shares for every one equity share held by them.
Option to subscribe
The Equity Shareholders are given the option to receive the share certificates or hold securities in dematerialised form with a
depository.
Option to subscribe in dematerialised form
The Investors have an option to subscribe to the shares of the Company either in the physical form or dematerialized form. The
Composite application form contains space for indicating number of shares subscribed for in demat mode and physical mode
or both.
Applicants must indicate in the application form the number of shares they wish to receive in dematerialised and physical form
out of the total number of shares applied for. In case of partial allotment, shares will be first allotted in dematerialised form and
the balance equity shares, in excess of the applicant’s request for equity shares in dematerialised form will be allotted in
physical form. Shareholders opting to receive equity shares in physical mode will be issued a consolidated equity share
certificate for all the equity shares allotted to them in this Offer.
Option to receive the Rights equity shares in Dematerialised form
Applicants have the option to hold the equity shares of the Company in the electronic form under the Depository System. The
Company has signed agreements with National Securities Depository Limited (NSDL) and Central Depository Services (India)
Limited (CDSL), which enable an investor to hold and trade in securities in dematerialized (Electronic) form, instead of
holding equity shares in the form of physical certificates.
In the Rights Issue, an option is being provided to the shareholders to receive their Rights equity shares in the form of an
electronic credit to their beneficiary account with any of the depository participant (NSDL/CDSL) instead of receiving these
equity shares in the form of physical certificates. Investor can opt for this facility by filling up the relevant particulars in the
CAF.
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Trading in Dematerialized Form
The equity shares of the Company have been under compulsory dematerialized trading for all investors with effect from 25th
January, 2001. The Company has an agreement with National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL) and its equity shares bear the ISIN No.INE838C01011. Trading of securities upon listing
shall only be in dematerialized form. However, the investors have an option to hold the shares in physical form or demat form.
Rights Entitlement
As your name appears as beneficial owner in respect of the shares held in the electronic form or appears in the register of
members as an equity shareholder of the Company on the Record Date, you are entitled to this Rights Offer. The number of
Equity Shares to which you are entitled is shown in Block I of Part A of the enclosed CAF and as shown in part A of the
enclosed CAF.
Joint-Holders
Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed (so far as the company is
concerned) to hold the same as joint-tenants with benefits of survivorship subject to provisions contained in the Articles.
Offer to Non-Resident Equity Shareholders/ Applicants
Applications received from NRIs and other NR shareholders for allotment of Equity Shares shall be, inter alia, subject to the
conditions imposed from time to time by the RBI under the FEMA in the matter of refund of application moneys, allotment of
Equity Shares, issue of Letter of Allotment / share certificates, payment of interest, dividends, etc. General permission has
been granted to any person resident outside India to apply shares offered on rights basis by an Indian Company in terms of
FEMA and the rules and regulations there-under. Vide notification dated June 18, 2003, bearing number FEMA 94/2003, RBI
has granted general permission to Indian companies to issue rights/bonus shares to existing non-resident shareholders. The
existing non-resident shareholders may apply for issue of additional shares and the Company may allot the same subject to the
condition that the overall issue of shares to nonresidents in the total paid up capital does not exceed the sectoral cap. In other
words, non-residents may subscribe for additional shares over and above shares offered on rights basis by the company and
renounce the shares offered in full or part thereof in favour of a person named by them. Residents may subscribe for additional
shares over and above the shares offered on rights basis by the Company and also renounce the shares offered either in full or
part thereof in favour of a person named by them.
The Equity Shares issued under the Rights Issue and purchased by NR shall be subject to the same conditions including
restrictions in regard to the repatriability as are applicable to the previously held Equity Shares against which Equity Shares
under the Rights Issue are issued. However, as per the provisions of AP DIR circular No. 14 dated September 16, 2003 (issued
by the RBI), such shareholders who have been allotted the Equity Shares as OCBs would not be permitted to participate in the
Rights Issue. Accordingly, shareholders/ applicants who are OCBs and wishing to participate in the Rights Issue would be
required to submit approvals in relation thereto from the FIPB and the RBI.
The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while
approving the allotment of Equity Shares, payment of dividend etc. to the Equity Shareholders who are NR.
Notices
All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one English national daily
with wide circulation, one Hindi national daily with wide circulation and one Telugu Newspaper daily with wide circulation/
or, will be sent by ordinary post to the registered holders of the Equity Share(s) from time to time.
Issue of Duplicate Equity Share Certificate
If any Equity Share Certificate(s) is/are mutilated or defaced or the pages for recording transfers of Equity Shares are fully
utilized, the Company against the surrender of such Certificate(s) may replace the same, provided that the same will be
replaced as aforesaid only if the Certificate numbers and the Distinctive numbers are legible.
If any Equity Share Certificate(s) is/are destroyed, stolen, lost or misplaced, then upon production of proof thereof to the
satisfaction of the Company and upon furnishing such indemnity/ surety and/or such other documents as the Company may
deem adequate, duplicate Equity Share Certificate(s) shall be issued.
Printing of Bank Particulars on refund orders
As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars
of the applicant’s bank account are mandatorily required to be given for printing on refund orders. Bank account particulars
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will be printed on the refund orders / refund warrants, which can then be deposited only in the account specified. The Company
will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery
or fraud.
Option Available to the Equity Shareholders
The Composite Application Form clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to. If
the Equity Shareholder applies for an investment in Equity Shares, then he can:
� Apply for his entitlement in part
� Apply for his entitlement in part and renounce the other part
� Apply for his entitlement in full
� Apply for his entitlement in full and also apply for additional Equity Shares
� Renounce the entire entitlement (or part of entitlement).
� Renouncees for Equity Shares can apply for the Equity Shares renounced to them and also apply for additional Equity
Shares.
For Resident Indian Shareholders
Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed inall respects, as explained in the instructions indicated in the CAF. Applications will not be accepted by the Lead Managers orby the Registrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions givenin the Letter of Offer.
All cheques/Bank drafts accompanying the CAFs should be crossed “A/C payee only” and made payable to “Bank - SSPDLRights Issue”.
Payment should be made in cash (not more than Rs.20,000) or by cheque/bank draft/ drawn on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the bankers clearing house located at the centre wherethe CAF is submitted and which is participating in the clearing at the time of submission of the application. Outstationcheques/money orders/postal orders will not be accepted and CAFs accompanied by such cheques/money orders/postal ordersare liable to be rejected.
For Non-Resident Shareholders on Non-Repatriation basis
Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, inter alia, besubject to the conditions as may be imposed from time to time by the Reserve Bank of India, in the matter of Refund ofapplication moneys, allotment of Equity Shares, issue of Letters of Allotment/ certificates/ payment of dividends etc.
For NRIs holding shares on non-repatriation basis, payment may also be made by way of cheque drawn on Non-ResidentOrdinary (NRO) Account maintained in Mumbai or Rupee Draft purchased out of NRO Account maintained elsewhere inIndia but payable at Hyderabad. In such cases, the allotment of shares will be on non-repatriation basis. If the payment is madeby a draft purchased from an NRO account, an Account Debit Certificate from the bank issuing the draft, confirming that thedraft has been issued by debiting the NRO account, should be enclosed with the CAF. In the absence of the above, theapplication shall be considered incomplete and is liable to be rejected.
All cheques/bank drafts accompanying the CAFs should be crossed “A/c Payee Only” and made payable to “SSPDL RightsIssue NR”. The CAF duly completed together with the amount payable on application must be deposited with the collectingbank/collection centers indicated on the reverse of the CAF, on or before the close of banking hours on or before the Issueclosing date. A separate cheque or bank draft must accompany each CAF. Reference number of CAF should be mentioned onthe reverse of the Cheque/Draft. New Demat account shall be opened for holders who have had a change of status fromResident Indian to NRI.
The CAF consists of four parts
Part A: Form for accepting the Equity Shares offered and for applying for additional Equity Shares
Part B: Form for renunciation
Part C: Form for application for renounces
Part D: Form for request for split application forms
Acceptance of the Rights Issue
You may accept the Offer and apply for Equity Shares offered, either in full or in part by filling Block III of Part “A” of theenclosed CAF and submit the same along with the application money payable to the “Bankers to the Issue” or any of thebranches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Date orsuch extended time as may be specified by the Board thereof in this regard. Applicants at centers not covered by the branches
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of collecting banks can send their CAF together with the cheque drawn on a local bank at Hyderabad /demand draft payable atHyderabad (net of demand draft charges and postal charges) to the Registrar to the Issue by registered post.
Renunciation
As an equity shareholder on the Record Date, you have the right to renounce your entitlement of the Equity Shares in full orin part in favour of any other person(s) including individuals non resident Indians, limited companies, statutory corporations/institutions, Trusts (registered under the Indian Trust Act, 1882) and societies (registered under the Societies Registration Act,1860 or other applicable laws) minors (through their legal guardians) provided that such Trusts, Societies or legal entities areauthorized under their constitution/ rules/ bye-laws to hold Equity Shares in the Company. Renouncee(s) need not be existingmembers of the Company. However, renunciation in favour partnership firms, and HUFs, foreign nationals (unless approvedby RBI or other relevant authorities) or any person situated or having jurisdiction where the offering in terms of this Letter ofOffer could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by theBoard will not be accepted. Joint renunciation in favour of more than three individuals will not be accepted.
As per notification no. FEMA 20/2000-RB dated May 3, 2000 and notification no. FEMA 94/2003-RB dated June 18, 2003,issued by RBI, RBI has granted general permission to Indian companies to issue rights/ bonus equity shares to existing nonresident Indians and non-residents may apply for issue of additional shares and the investee company may allot the samesubject to the condition that the overall issue of shares to non residents in the total paid up capital does not exceed the sectoralcap. In other words, non-residents may subscribe for additional shares over and above shares offered on rights basis by thecompany and renounce the shares offered in full or part thereof in favour of a person named by them. Residents may subscribefor additional shares over and above, the shares offered on rights basis by the company and also renounce the shares offeredeither in full or part thereof in favour of person named by them. However, this facility would not be available to investors whohave been allotted such shares as OCBs.
Residents may subscribe for additional shares over and above the shares offered on rights basis by the Company and alsorenounce the shares offered either in full or part thereof in favour of a person named by them. The Board reserves the right toreject the request for allotment to renouncees in its sole and absolute discretion without assigning any reasons therefore. PartA of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this willrender the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specifiedon the reverse of the CAF with the Form of Renunciation (Part B of the CAF) duly filled in shall be conclusive evidence infavour of the Company of the person(s) applying for Equity Shares in Part C to receive allotment of such Equity Shares. Therenouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part ‘A’must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right torenounce any shares in favour of any other person.
Procedure for Renunciation
To renounce the whole offer in favour of one renouncee
If you wish to renounce this offer in whole, please complete Part B of the CAF. In case of joint holders, all joint holders mustsign this part of the CAF in the same order as per the specimen signatures recorded with the Company. The person in whosefavour renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncesmust sign this part of the CAF.
To renounce in part/or renounce the whole to more than one person(s)
If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or morerenouncees, the CAF must be first split by applying to the Registrars to the Issue.
Please indicate your requirement for Split Forms in the space provided for this purpose in Part D of the CAF and return theentire CAF to the Registrars to the Issue so as to reach them latest by the close of business hours on July 20, 2007. On receiptof the required number of split forms from the Registrars, the procedure as mentioned in para (a) above shall have to befollowed.
In case the signature of the Equity Shareholder(s), who has/have renounced the Equity Shares, does not match with thespecimen signature(s) as per the records of the Company, the application is liable to be rejected.
Change and/or introduction of additional holders
If you wish to apply for Equity Shares jointly with any other person, or persons, not more than three, who is/are not alreadyjoint holders with you, it shall amount to renunciation and the procedure as stated above shall have to be followed. Even achange in the sequence of the joint holders shall amount to renunciation and the procedure for renunciation, as stated aboveshall have to be followed.
Renouncee(s)
The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the Application Form andsubmit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the applicationmoney. However, any right of renunciation is subject to the express condition that the Board/Committee of Directors of theCompany shall be entitled in its absolute discretion to reject the request for allotment from the renouncees without assigningany reasons therefore.
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Please note that:
(a) Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used,this will render the application invalid.
(b) Only the person to whom this Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounceand to apply for Split Application Forms. Forms once split cannot be split again.
(c) Split form(s) will be sent to the applicant(s) by post at the applicant’s risk.
Additional Equity Shares
You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to,provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of anyother person(s). Applications for additional Equity Shares shall be considered and allotment shall be made in the mannerprescribed in the under the paragraph titled “Basis of Allotment” on Page no. 115 of this Letter of Offer. The renounceesapplying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares.
In case of application for additional Equity Shares by non-resident Equity Shareholders, the allotment of additional securitieswill be subject to the permission of the Reserve Bank of India.
Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would bemade on a fair and equitable basis in consultation with the Designated Stock Exchange.
You may exercise any of the following options with regard to the Equity Shares offered to you, using the enclosed CAF.
Fill in and sign Part D of the CAF or Split Forms after
indicating the required number of Split Application
Forms and send the entire CAF to the Registrars to the
Issue so as to reach them on or before the last date for
receiving requests for Split Forms indicated in the CAF.
On receipt of the Split Forms take action as indicated
below:
i) For the Equity Shares, if any, which you want to
accept, fill in and sign ‘Part A’ of one Split
Composite Application Form.
ii) For the Equity Shares you want to renounce, fill
in and sign ‘Part B’ in the required number of Split
Composite Application Forms indicating the
number of Equity Shares renounced to each
renouncee.
iii) Each of the renouncee should then fill in and sign
‘Part C’ of the respective Split Composite
Application Form for the Equity Shares accepted
by the renouncee.
Sl.No. Options available Action required
1 Accept your entitlement to all the Equity Shares Fill in and sign ‘Part A’ of the CAF offered to you.
Accept your entitlement to all the Equity Shares offered
to you and apply for additional Shares
2 Fill in and sign ‘Part A’ of the CAF after indicating in
Block IV the number of additional Equity Shares applied
for.
3 Accept only a part of your entitlement of the Equity
Shares offered to you (without renouncing the balance).Fill in and sign ‘Part A’ of the CAF Mention in column
no. III the number of shares applied for
4 Renounce all the Equity Shares offered to you to one
person (Renouncee) (Joint Renouncees considered as
one renouncee) (Joint renouncee cannot exceed more
than three) without applying for any equity shares
offered to you.
Fill in and sign ‘Part B’ of the CAF indicating the number
of Equity Shares renounced and hand over the entire CAF
to the renouncee. The renouncee must fill in and sign
Part C of the CAF.
5 Accept a part of the Equity Shares offered to you and
then renounce the balance to one Renouncee or
renounce all the Equity Shares offered to you to more
than one renouncee.
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Applications for Equity Shares should be made only on the CAF, which are provided by the Company. The CAF should be
completed in all respects as explained under the head “INSTRUCTIONS” indicated on the reverse of the CAF before submission
to the Banker to the Issue at its collecting branches mentioned on the reverse of the CAF on or before the closure of the
subscription list. Non-resident shareholders/ Renouncee should forward their applications to Banker to the Issue as mentioned
in the CAF for Non Resident Equity Shareholders. No part of the CAF should be detached under any circumstances.
For applicants residing at places other than designated Bank Collecting branches.
Applicants residing at places other than the cities where the bank collection centers have been opened should send their
completed CAF by registered post to the Registrars to the Issue, Sathguru Consultants Private Limited, along with bank drafts
net of demand draft and postal charges payable at Hyderabad in favour of “Bank - SSPDL Rights Issue” crossed “A/c Payee
only” so that the same are received on or before Closure of the Issue on 20th July, 2007.
The Company will not be liable for any postal delays and applications received through mail after the closure of the Issue, are
liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as
mentioned above:
All application forms duly completed together with cash/cheque/demand draft for the application money must be submitted
before the close of the Subscription List to the Bankers to the Issue named herein or to any of its branches mentioned on the
reverse of the CAF. The CAF along with application money must not be sent to the Company or the Lead Managers to the
Issue or the Registrars to the Issue except as mentioned above. The applicants are requested to strictly adhere to these instructions.
Failure to do so could result in the applications being liable to be rejected with the Company, the Lead Managers and the
Registrar not having any liability to such applicants.
In case the original CAF is not received by the applicant or is misplaced by the applicant, the applicant may request the
Registrars to the Issue, Sathguru Consultants Private Limited, for issue of a duplicate CAF, by furnishing the registered folio
number, DP ID Number, Client ID Number and their full name and address. In case the original and duplicate CAFs are lodged
for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored.
Availability of Duplicate CAF
In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF
on the request of the applicant who should furnish the registered folio number/ DP and Client ID no. and his / her full name and
address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should not
utilise the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the applicant
violates any of these requirements, he/ she shall face the risk of rejection of both the applications as well as forfeiture of
amounts remitted along with the applications.
Applications under Power Of Attorney
In case of applications made under a Power of Attorney or by limited companies or bodies corporate or registered societies or
mutual fund or trust, the relevant Power of Attorney or the relevant resolution or authority to make the application, as the case
may be, together with a certified true copy thereof along with a copy of the Memorandum and Articles of Association and/or
Bye-Laws must be attached to the CAF and the banks branch where the application has been submitted at the time of making
the application or lodged for scrutiny separately indicating the serial number of the CAF with the Registrars to the Issue after
submission of the CAF to the Bankers to the Issue or any of the designated branches as mentioned on the reverse of the CAF,
failing which the applications are liable to be rejected. Such authority should reach the Registrar to the issue within 10 days
from the date closure of the subscription list and such authority received be thereafter, may not be considered. The original(s)
will be returned to the applicant after retaining the certified copy thereof.
Sl.No. Options available Action required
6 Accept a part of the Equity Shares offered to and
renouncee the balance to more than one renouncee.
(Joint renouncees are considered as one)
Follow the procedures stated in (5) above for obtaining
the required number of Split Composite Application
Forms follow the procedure as stated in (5) (ii) and (iii)
above.
7 Introduce a joint holder or change the sequence This will be treated as a renunciation. Fill in and sign
Part B of joint holders and the renouncees must fill in
and sign Part C.
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Application on Plain Paper
An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make
an application to subscribe to the Rights Issue on plain paper, along with an Account Payee Cheque drawn on a local bank at
Hyderabad /Demand Draft payable at Hyderabad which should be drawn in favour of the Company and send the same by
registered post directly to the Registrar to the Issue.
The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen
recorded with the Company, must reach the office of the Registrar to the Issue before the Date of Closure of the Issue and
should contain the following particulars:
� Name of Issuer
� Name and address of the Equity Shareholder including joint holders
� Registered Folio Number/ DP and Client ID no.
� Number of Equity Shares held as on Record Date
� Number of Rights Equity Shares entitled
� Number of Rights Equity Shares applied for
� Number of additional Equity Shares applied for, if any
� Total number of Equity Shares applied for
� Total amount paid @ Rs.18 per Equity Share
� Particulars of Cheque/ Draft
� Savings/ Current Account Number and name and address of the bank where the Equity Shareholder will be depositing
the refund order
� PAN/GIR number and Income Tax Circle/Ward/District where the application is for Equity Shares of a total value of
Rs.50,000/- or more for the applicant and for each applicant in case of joint names, and
� Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company
Payments in such cases, should be through a cheque/ demand draft payable at Hyderabad be drawn in favour of the Bankers to
the Issue marked “A/c Payee” and marked “Bank - SSPDL Rights Issue”.
Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their
Rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the
applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications as well as forfeiture
of amounts remitted along with the applications.
Last Date of Application
The last date for submission of CAF is 20th July, 2007 The Board/ Committee of Directors will have the right to extend the
said date for such period as it may determine from time to time but not exceeding sixty days from the date the Issue opens.
If the CAF together with the amount payable is not received by the Bankers to the Issue/ Registrar on or before the close of
banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offer
contained in this Letter of Offer shall be deemed to have been declined and the Board/ Committee of Directors shall be at
liberty to dispose off the Equity Shares hereby offered, as provided under the heading “Basis of Allotment”.
Few reasons for technical rejections
a) If the signature is not matching with the signatures already registered with the Company;
b) In case of joint holders, if the signatures are not made in the same order as registered with the Company;
c) If cash above Rs.20,000/- is remitted toward share application money;
d) PAN/GIR No. is not mentioned if the value of the application is more than Rs.50,000/-;
e) Amount paid does not tally with the amount payable for;
f) Bank account details are not given;
g) Applications not duly signed by sole/joint applicants
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General Instructions for Applicants
(a) Please read the instructions printed on the enclosed CAF carefully.
(b) Application should be made on the printed CAF, provided by the Company and should be completed in all respects. The
CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed
in conformity with the terms of this Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof
will be refunded without interest if refunded within stipulated period. The CAF must be filled in English and the names
of all the applicants, details of occupation, address, and father’s / husband’s name must be filled in block letters.
(c) The CAF together with cheque/demand draft should be sent to the Bankers to the Issue / Collecting Bank or to the
Registrar and not to the Company or Lead Managers to the Issue. Applicants residing at places other than cities where
the branches of the Bankers to the Issue have been authorised by the company for collecting applications, will have to
make payment by Demand Draft payable at Hyderabad (net of demand draft charges and postal charges) and send their
application forms to the Registrar to the Issue by REGISTERED POST. If any portion of the CAF is / are detached or
separated, such application is liable to be rejected.
(d) Applications for a total value of Rs. 50,000 or more, i.e. where the total number of securities applied for multiplied by
the Issue price, is Rs. 50,000 or more the applicant or in the case of application in joint names, each of the applicants,
should mention his/her PAN number allotted under the Income-Tax Act, 1961 and also submit a photocopy of the PAN
card(s) or a communication from the Income Tax authority indicating allotment of PAN (“PAN Communication”) along
with the application for the purpose of verification of the number. Applicants who do not have PAN are required to
provide a declaration in Form 60/Form 61 prescribed under the I.T. Act along with the application. Applications without
this photocopy/PAN Communication/declaration will be considered incomplete and are liable to be rejected.
(e) Applicants are advised to provide information as to their savings/ current account number and the name of the Bank with
whom such account is held in the CAF to enable the Registrar to print the said details in the Refund Orders, if any, after
the names of the payees. Application not containing such details is liable to be rejected.
(f) The payment against the application should not be effected in cash if the amount to be paid is Rs.20,000/- or more. In
case payment is effected in contravention of this, the application may be deemed invalid and the application money will
be refunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions
as mentioned above, should be made only to the Bankers to the Issue.
(g) Signatures should be either in English or Hindi or in any other language specified in the 8th Schedule of the Constitution
of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a
Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen
signature recorded with the Company.
(h) In case of an application under power of attorney or by a body corporate or by a society, a certified true copy of the
relevant power of attorney or relevant resolution or authority to make investment and sign the application along with a
copy of the Memorandum & Articles of Association and / or bye laws must be lodged with the Registrar to the Issue
giving reference of the serial number of the CAF. In case these papers are sent to any other entity besides the Registrar
to the Issue or are sent after the Issue Closure Date, then the application is liable to be rejected.
(i) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen
signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants
should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all
communication will be addressed to the first applicant.
(j) Application(s) received from Non-Residents / NRIs, or persons of Indian origin residing abroad for allotment of Equity
Shares shall, interalia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the
matter of refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares,
interest, export of Equity Share certificates, etc. In case a Non-Resident or NRI Equity Shareholder has specific approval
from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF.
(k) All communication in connection with application for the Equity Shares, including any change in address of the Equity
Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the
name of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation for
change of address of Equity Shareholders, after the date of allotment, should be sent to the Registrar and Transfer Agents
of the Company or Registrar to Issue (Sathguru Management Consultants Private Ltd.) in the case of equity shares held
in physical form and to the respective DP, in case of equity shares held in dematerialised form.
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(l) Split forms cannot be re-split.
(m) Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain
split forms.
(n) Applicants must write their CAF number at the back of the cheque / demand draft.
(o) Only one mode of payment per application should be used. The payment must be either in cash or by cheque / demand
draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of
the Bankers Clearing House located at the center indicated on the reverse of the CAF where the application is to be
submitted.
(p) A separate cheque /draft must accompany each CAF. Outstation cheques or post-dated cheques and postal /money orders
will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will
be rejected. The Registrar will not accept payment against application if made in cash. (For payment against application
in cash please refer point (f) above)
(q) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will
acknowledge receipt of the same by stamping and returning the acknowledgement slip at the bottom of the CAF.
(r) An applicant which is a mutual fund can make a separate application in respect of each scheme of the fund and such
applications shall not be treated as multiple applications. The application made by the asset management company or
custodians of a mutual fund shall clearly indicate the name of the concerned scheme for which application is being
made.
(s) Mode of payment for Resident Equity Shareholders/ Applicants All cheques / drafts accompanying the CAF should be
drawn in favour of the Collecting Bank (specified on the reverse of the CAF), crossed “A/c Payee only” and marked
“Bank - SSPDL Rights Issue”. Applicants residing at places other than places where the bank collection centers have
been opened by the Company for collecting applications, are requested to send their applications together with Demand
Draft, net of demand draft and postal charges, for the full application amount favouring the Bankers to the Issue, crossed
“A/c Payee only” and marked “Bank - SSPDL Rights Issue” payable at Hyderabad directly to the Registrar to the Issue
by registered post so as to reach them on or before the Issue Closing Date. The Company or the Registrar will not be
responsible for postal delays or loss of applications in transit, if any.
(t) Mode of payment for Non-Resident Equity Shareholders/ Applicants As regards the application by non-resident Equity
Shareholders, the following further conditions shall apply: Payment by Non-Residents must be made by demand draft
/ cheque payable at Hyderabad (net of demand draft charges and postal charges) or funds remitted from abroad in any of
the following ways:
1. Application with repatriation benefits
(a) By Indian Rupee drafts purchased from abroad and payable at Hyderabad or funds remitted from abroad (submitted
along with Foreign Inward Remittance Certificate); or
(b) By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in Hyderabad; or
(c) By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable at Hyderabad; or
(d) FIIs registered with SEBI must remit funds from special non-resident rupee deposit account.
2. Application without repatriation benefits
As far as non-residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above,
payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account maintained in Mumbai or Rupee
Draft purchased out of NRO Account maintained elsewhere in India but payable at Hyderabad. In such cases, the allotment of
Equity Shares will be on non-repatriation basis.
All cheques/drafts submitted by non-residents should be drawn in favour of the Bankers to the Issue and marked “Bank -
SSPDL Rights Issue-NR” payable at Hyderabad and must be crossed “A/c Payee only” for the amount payable. The CAF
duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the
reverse of the CAF before the close of banking hours on the Issue Closing Date. A separate cheque or bank draft must
accompany each CAF.
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Applicants may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case may be,
an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/
FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incomplete and is liable
to be rejected.
Note:
In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares
can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961.
In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be
remitted outside India.
The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank
indicated on the reverse of the CAF before the close of banking hours on the aforesaid Issue Closing Date. A separate cheque
or bank draft must accompany each CAF.
In case application received from Non-Residents, allotment, refunds and other distribution, if any, will be made in accordance
with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to
necessary approvals.
Payment by Stock Invest
In terms of the Reserve Bank of India Circular No.DBOD No.FSC BC 42/27.47.00/2003-04 dated November 05,2003 the
option to use the Stock Invest instrument in lieu of cheques or bank drafts for payment of bid money has been withdrawn.
Hence, payment through Stock Invest would not be accepted in this issue.
Disposal of Application and Application Money
No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue /
Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at
the bottom of each CAF.
In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application
is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be
refunded to the applicant within six weeks from the close of the Issue.
Basis of Allotment
1. Subject to provisions contained in this Letter of Offer, the Articles of Association of the Company and approval of the
Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority:
a. Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part
and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part.
b. Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as rights and
have also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far
as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record
Date, provided there is an under-subscribed portion after making full allotment in (a) above. The allotment of such
Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated
Stock Exchange, as a part of the rights Issue and not preferential allotment.
c. Allotment to the renouncees, who having applied for the Equity Shares renounced in their favour have also applied
for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in (a) & (b)
above. The allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion
of the Board/ Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the
rights Issue and not preferential allotment.
2. The Company shall retain no over subscription.
3. The issue will become under subscribed after considering the number of shares applied as per entitlement plus additional
shares. The under subscribed portion shall be applied for only after the close of the issue. The promoters shall subscribe
to such under subscribed portion as per the relevant provisions of the law. If any person presently in control of the
company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 1997, such allotment of the undersubscribed portion will be governed
by the provisions of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
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4. After taking into account the allotments made under 1(a), 1(b) and 1(c) above, if there is still any under subscription, the
Unsubscribed portion shall be disposed off by the Board or Committee of Directors authorised in this behalf by the
Board upon such terms and conditions, through such securities (Equity Shares) and to such person / persons and in such
manner as the Board/ Committee of Directors may in its absolute discretion deem fit, as a part of the rights Issue and not
preferential allotment.
Allotment to promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with
Clause 40A of the Listing Agreement.
Allotment and Refund Orders
The Company agrees that it shall pay interest at the rate of 15% per annum if the allotment has not been made and/or the equity
share allotment letters/share certificates/refund orders have not been dispatched/ refunds through the ECS facility or RTGS or
Direct Credit has not been done and relevant Equity Shares have not been credited to the beneficiary account of the investors
within 42 days from the date of closure of the issue. All the pay orders / refund orders and Letter(s) of Allotment / Share
Certificates will be despatched to the first named / sole applicant at his / her own risk. The Refund Orders will be payable at par
in India at all the centres where the applications were originally accepted. The instruments will be marked “Account Payee
Only” and in the name of the sole/ first applicant. Bank charges, if any, for encashing such refund orders / pay orders will be
payable by the applicants. The Company undertakes that the requisite funds will be made available to the Registrar for
complying with the requirement of despatch of refund orders / allotment letters. The Company shall ensure despatch of refund
orders of value over Rs.1,500/- by Registered Post only and adequate funds will be made available to the Registrar.
The Company undertakes to despatch share certificates/refund orders, complete demat credits and submit the allotment and
listing documents to the Stock Exchange within 2 working days of the finalisation of the basis of allotment. Further, the
Company undertakes to ensure that all steps for completion of the necessary formalities for listing and commencement of
trading at the Stock Exchange where the securities are to be listed are taken within 7 working days of finalisation of basis of
allotment.
Mode of making refunds
Applicants should note that on the basis of name of the Applicants, Depository Participant’s name, Depository Participant-
Identification number and Beneficiary Account Number provided by them in the CAF, the Registrar to the Issue will obtain
from the Depository the Applicant’s bank account details including nine digit MICR code. Hence, Applicants are advised to
immediately update their bank account details as appearing on the records of the depository participant. Please note that
failure to do so could result in delays in credit of refunds to Applicants at the Applicants sole risk and neither the Lead
Manager nor the Bank shall have any responsibility and undertake any liability for the same.
The payment of refund, if any, would be done through various modes in the following order of preference.
I. Direct Credit - For investors having their Bank Account with the Banker to the Issue, the refund amount would be
credited directly to their Bank Account with the Banker to the Issue.
II. RTGS - Investors desirous of taking direct credit of refund through RTGS, will have to provide the IFSC code in the
CAF.
III. ECS - Payment of refund would be done through ECS for applicants residing at one of the 15 centres, namely Ahmedabad,