drhp- refiling final 070406 1800 cln

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DRAFT RED HERRING PROSPECTUS
Dated April 8, 2006
Please read Section 60B of the Companies Act, 1956
(Draft Red Herring Prospectus will be updated upon RoC filing)
100% Book Building Issue
ODYSSEY INDIA LIMITED
(Our Company was originally incorporated under the Companies Act, 1956 on March 27, 1995 as “Heritage Books Private
Limited”. The registered office of the Company was shifted from 15, First Main road, Gandhinagar, Chennai – 600 020 to the
present address with effect from January 30, 1998. The name of the Company was changed to “Odyssey India Private Limited”
on October 8, 2002. By virtue of Section 44 of the Companies Act, 1956, the Company became a public company and the name
of our Company was further changed to “Odyssey India Limited” on September 30, 2003).
Registered Office: No.6, First Main Road, Gandhi Nagar, Adyar, Chennai – 600 020, Tamil Nadu, India
Tel: (91 44) 4211 4871; Fax: (91 44) 4211 4799
Contact Person and Compliance Officer: Sreejith Janardhanan; Email:[email protected]; Website: www.odyssey.in
PUBLIC ISSUE OF UP TO 26,25,000 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PRICE OF RS. [••] PER
EQUITY SHARE AGGREGATING RS. [••] LAKHS BY ODYSSEY INDIA LIMITED (THE “COMPANY”) (“THE
ISSUE”). THE ISSUE WOULD CONSTITUTE 25.93% OF THE TOTAL POST ISSUE PAID-UP EQUITY CAPITAL
OF THE COMPANY.
PRICE BAND: Rs. [••] TO Rs. [••] PER EQUITY SHARE OF FACE VALUE RS. 10.00
THE FACE VALUE OF THE SHARES IS RS. 10.00 AND THE FLOOR PRICE IS [••] TIMES OF THE FACE VALUE
AND THE CAP PRICE IS [••] TIMES OF THE FACE VALUE.
The Issue is being made through the 100% book building process where at least 50% of the Issue shall be allocated on a proportionate basis to Qualified
Institutional Buyers (“QIBs”) (including 5% of the QIB portion that would be specifically reserved for Mutual Funds). Further, not less than 15% of the
Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for
allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price.
RISK IN RELATION TO FIRST ISSUE
This being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The Issue Price (as
determined by the Company in consultation with the Book Running Lead Managers (the “BRLMs”) and on the basis of assessment of market demand for
the Equity Shares by way of book building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed.
No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be
traded after listing.
We have not opted for the grading of this Issue from a credit rating agency.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to
take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking
an investment decision, investors must rely on their own examination of the Company and the Issue including the risks involved. The Equity Shares offered
in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or
adequacy of the contents of this Draft Red Herring Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in
Risk Factors beginning on page x of this Draft Red Herring Prospectus.
COMPANY’S ABSOLUTE RESPONSIBILITY
The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all
information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this Draft Red
Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed
herein are honestly held and that there are no other facts, the omission of which makes this Draft Red Herring Prospectus as a whole or any of such
information or the expression of any such opinions or intentions misleading in any material respect.
LISTING
The Equity Shares offered through this Draft Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange Limited and the National
Stock Exchange of India Limited. We have received in-principle approval from the Stock Exchanges for the listing of our Equity Shares pursuant to their
letters dated [ ] and [ ]. The Designated Stock Exchange is the Bombay Stock Exchange Limited.
BOOK RUNNING LEAD MANAGER
REGISTRAR TO THE ISSUE
KARVY INVESTOR SERVICES LIMITED
Karvy House, 46 Avenue 4
Street No. 1, Banjara Hills
Hyderabad 500 034, India
Tel: (91 40) 2331 2454/2337 4714
Fax: (91 40) 2337 4714
Email: [email protected]
Website: www.karvy.com
BID/ISSUE OPENS ON
KARVY COMPUTERSHARE PRIVATE LIMITED
Tel: (91 40) 2342 0828
Fax: (91 40) 2342 0814
[•]
ISSUE PROGRAM
BID/ISSUE CLOSES ON
i
[•]
TABLE OF CONTENTS
SECTION I – GENERAL
Definitions And Abbreviations .......................................................................................................................................... iii
Certain Conventions; Use Of Market Data ................................................................................................................... viii
Forward-Looking Statements............................................................................................................................................ ix
SECTION II - RISK FACTORS .........................................................................................................................................x
SECTION III - INTRODUCTION
Summary ................................................................................................................................................................................1
The Issue.................................................................................................................................................................................4
Selected Financial Information ...........................................................................................................................................5
General Information.............................................................................................................................................................7
Capital Structure................................................................................................................................................................ 12
Objects Of The Issue.......................................................................................................................................................... 17
Basis For Issue Price.......................................................................................................................................................... 21
Statement Of Tax Benefits ................................................................................................................................................ 23
SECTION IV - ABOUT US
Retail Industry.................................................................................................................................................................... 25
Our Business ....................................................................................................................................................................... 36
Regulations And Policies ................................................................................................................................................... 45
History And Certain Corporate Matters ........................................................................................................................ 47
Our Management ............................................................................................................................................................... 49
Our Promoter ..................................................................................................................................................................... 58
Related Party Transactions............................................................................................................................................... 62
Currency Of Presentation ................................................................................................................................................. 63
Dividend Policy................................................................................................................................................................... 64
SECTION V - FINANCIAL INFORMATION
Financial Statements.......................................................................................................................................................... 65
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations................................ 85
SECTION VI - LEGAL AND REGULATORY INFORMATION
Outstanding Litigation ...................................................................................................................................................... 93
Material Developments...................................................................................................................................................... 95
Licenses And Approvals .................................................................................................................................................... 96
Other Regulatory And Statutory Disclosures............................................................................................................... 100
SECTION VII - ISSUE RELATED INFORMATION
Terms Of The Issue.......................................................................................................................................................... 108
Issue Structure.................................................................................................................................................................. 110
Issue Procedure ................................................................................................................................................................ 112
Restrictions On Foreign Ownership Of Indian Securities .......................................................................................... 130
SECTION VIII - MAIN PROVISIONS OF ARTICLES OF ASSOCIATION........................................................ 131
SECTION IX - MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION....................................... 143
DECLARATION.............................................................................................................................................................. 145
ii
DEFINITIONS AND ABBREVIATIONS
Definitions
Term
Description
“Odyssey”, the “Company”, Unless the context otherwise requires, refers to, Odyssey India Limited, a
and “our Company”, “we” or public limited company incorporated under the Companies Act
“us”
Company Related Terms
AGM
Articles/
Association
Term
Articles
of
Auditors
Board of Directors/ Board
DCHL
Director(s)
EGM
Memorandum/
of Association
Promoter
Memorandum
Description
Annual General Meeting (s) of Odyssey India Limited
The Articles of Association of Odyssey India Limited
The statutory auditors of the Company being V. Sukumar, Chartered
Accountant
The Board of Directors of our Company or a committee constituted thereof
Deccan Chronicle Holdings Limited, a company incorporated under the
Companies Act and having its registered office at 6-3-898, Raj Bhavan Road,
Somajiguda, Hyderabad – 500 082, Andhra Pradesh, India
Director(s) of Odyssey India Limited, unless otherwise specified
Extraordinary General Meeting(s) of Odyssey India Limited
The Memorandum of Association of Odyssey India Limited
The Promoter of the Company being DCHL
Issue Related Terms and Abbreviations
Term
Description
Unless, the context otherwise requires, the issue of Equity Shares pursuant to
Allotment
this Issue
Banker(s) to the Issue
ICICI Bank Limited and Deutsche Bank AG
An indication to make an offer during the Bidding Period by a prospective
Bid
investor to subscribe to our Equity Shares at a price within the Price Band,
including all revisions and modifications thereto
The highest value of the optional Bids indicated in the Bid cum Application
Bid Amount
Form
The date after which the Syndicate will not accept any Bids for the Issue,
which shall be notified at least one day prior to the Bid Opening Date/Issue
Bid / Issue Closing Date
Opening Date, in [ ], an English language newspaper with wide circulation,
[ ], a Hindi language newspaper with wide circulation and [ ], a Tamil
language newspaper with wide circulation
The form in terms of which the Bidder shall make an offer to subscribe to the
Equity Shares of our Company and which will be considered as the
Bid cum Application Form
application for issue of the Equity Shares pursuant to the terms of this Draft
Red Herring Prospectus
The date on which the Syndicate shall start accepting Bids for the Issue,
which shall be the date notified in [ ], an English language newspaper with
Bid / Issue Opening Date
wide circulation, [ ], a Hindi language newspaper with wide circulation and
[ ], a Tamil language newspaper with wide circulation
Any prospective investor who makes a Bid pursuant to the terms of this Draft
Bidder
Red Herring Prospectus and the Bid cum Application Form
The period between the Bid/ Issue Opening Date and the Bid/ Issue Closing
Bidding Period/ Issue Period
Date inclusive of both days and during which prospective Bidders can submit
their Bids
Book
Building
Process/ Book building route as provided in Chapter XI of the SEBI Guidelines, in
Method
terms of which this Issue is being made
iii
Term
Description
Book Running Lead Managers to the Issue, in this case being Karvy Investor
BRLMs
Services Limited and SREI Capital Markets Limited
Means the note or advice or intimation of allocation of Equity Shares sent to
CAN/
Confirmation
of
the Bidders who have been allocated Equity Shares after discovery of the
Allocation Note
Issue Price in accordance with the Book Building Process
The higher end of the Price Band, above which the Issue Price will not be
Cap Price
finalized and above which no Bids will be accepted
Cut-off Price
The Issue Price finalised by our Company in consultation with the BRLMs
The date on which funds are transferred from the Escrow Account to the
Public Issue Account after the Prospectus is filed with the Registrar of
Designated Date
Companies, following which the Board of Directors shall allot Equity Shares
to successful Bidders
Designated Stock Exchange
The Bombay Stock Exchange Limited, Mumbai
SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by
DIP Guidelines
SEBI effective from January 27, 2000, as amended, including instructions
and clarifications issued by SEBI from time to time
This Draft Red Herring Prospectus issued in accordance with Section 60B of
the Companies Act, which does not contain complete particulars on the price
Draft Red Herring Prospectus
at which the Equity Shares are offered and the size (in terms of value) of the
Issue
Equity shares of our Company of face value of Rs. 10 each unless otherwise
Equity Shares
specified in the context thereof
Account opened with Escrow Collection Bank(s) and in whose favour the
Escrow Account
Bidder will issue cheques or drafts in respect of the Bid Amount when
submitting a Bid and the Allocation Amount paid thereafter
Agreement entered into by our Company, the Registrar, BRLMs, the
Syndicate and the Escrow Collection Bank(s) for collection of the Bid
Escrow Agreement
Amounts and where applicable refunds of the amounts collected to the
Bidders.
The banks which are clearing members and registered with SEBI as Banker to
Escrow Collection Bank(s)
the Issue with whom the Escrow Account for the Issue will be opened
The Bidder whose name appears first in the Bid cum Application Form or
First Bidder
Revision Form
The lower end of the Price Band below which the Issue Price will not be
Floor Price
finalised and below which no Bids will be accepted
A committee of the Board of Directors comprising T.S. Ashwin, P.K. Iyer
IPO Committee
and S. Balasubramaniyan appointed for the purpose of carrying out various
actions in relation to the Issue
The fresh issue of 26,25,000 new Equity Shares of Rs. 10 each at the Issue
Issue
Price by our Company under this Draft Red Herring Prospectus
The final price at which Equity Shares will be issued and allotted in terms of
Issue Price
the Prospectus. The Issue Price will be decided by our Company in
consultation with the BRLMs on the Pricing Date
Karvy Investor Services Limited, a company incorporated under the
KISL
Companies Act and having its registered office as indicated on the cover page
of this Draft Red Herring Prospectus
The amount paid by the Bidder at the time of submission of his/her Bid, being
Margin Amount
10% to 100% of the Bid Amount
Mutual funds registered with SEBI under the SEBI (Mutual Funds)
Mutual Fund(s)
Regulations, 1996
Members of the Syndicate
The BRLMs and the Syndicate Members
All Bidders that are not QIBs or Retail Individual Bidders and who have Bid
Non Institutional Bidders
for Equity Shares for an amount more than Rs. 1,00,000
The portion of the Issue being 3,93,750 Equity Shares of Rs. 10 each
Non Institutional Portion
available for allocation to Non Institutional Bidders
Non Residents
All Bidders who are not NRIs or FIIs and are not persons resident in India
Bid Closing Date or the last date specified in the CAN sent to Bidders, as
Pay-in Date
applicable
iv
Term
Pay-in-Period
Price Band
Pricing Date
Prospectus
Public Issue Account
Qualified Institutional Buyers
or QIBs
QIB Portion
RBI
RHP
or
Prospectus
Registrar
Registrar
Red
to
the
Herring
Issue
or
Retail Individual Bidder(s)
Retail Portion
Revision Form
RoC or Registrar of Companies
SREI
Stock Exchanges
Syndicate
Syndicate Agreement
Syndicate Members
TRS/ Transaction Registration
Slip
Underwriters
Underwriting Agreement
Description
This term means (i) with respect to Bidders whose Margin Amount is 100%
of the Bid Amount, the period commencing on the Bid/Issue Opening Date
and extending until the Bid/Issue Closing Date, and (ii) with respect to
Bidders whose Margin Amount is less than 100% of the Bid Amount, the
period commencing on the Bid/Issue Opening Date and extending until the
closure of the Pay-in Date
Price band of a minimum price (floor of the price band) of Rs. [•] and the
maximum price (cap of the price band) of Rs. [•] and includes revisions
thereof
The date on which Company in consultation with the BRLMs finalizes the
Issue Price
The Prospectus to be filed with the RoC containing, inter alia, the Issue Price
that is determined at the end of the Book Building process, the size of the
Issue and certain other information
Account opened with the Bankers to the Issue to receive monies from the
Escrow Account for the Issue on the Designated Date
Public financial institutions as specified in Section 4A of the Companies Act
scheduled commercial banks, mutual funds registered with SEBI, venture
capital funds registered with SEBI, state industrial development corporations,
insurance companies registered with Insurance Regulatory and Development
Authority, provident funds with minimum corpus of Rs. 2,500 lakhs and
pension funds with minimum corpus of Rs. 2,500 lakhs
available for allocation to QIBs
Reserve Bank of India
The Red Herring Prospectus which will be filed with RoC at least 3 days
before the Bid/ Issue Opening Date
Registrar to the Issue, in this case being Karvy Computershare Private
Limited having its registered office as indicated on the cover page of this
Draft Red Herring Prospectus
Individual Bidders (including HUFs) who have not Bid for Equity Shares for
an amount more than or equal to Rs. 1,00,000, in any of the bidding options
in the Issue
available for allocation to Retail Individual Bidder(s)
The form used by the Bidders to modify the quantity of Equity Shares or the
Bid Price in any of their Bid cum Application Forms or any previous
Revision Form(s)
Registrar of Companies, Tamil Nadu at Chennai situated at Block No. 6, B
Wing, 2nd Floor, Shastri Bhavan, No. 26 Haddows Road, Chennai – 600 034,
Tamil Nadu, India
SREI Capital Markets Limited, a company incorporated under the Companies
Act and having its registered office at Vishwakarma, 86C, Topsia Road
(South), Kolkata 700 046, West Bengal, India
BSE and NSE
The BRLMs and the Syndicate Members
Agreement between the Syndicate and our Company
[TO BE APPOINTED]
The slip or document issued by the Syndicate to the Bidder as proof of
registration of the Bid
The BRLMs and Syndicate Members
The Agreement between the Underwriters and our Company to be entered
into on the Pricing Date
Glossary of Technical and Industry Terms
Term
Description
A commercial retail business which carries a wide range of merchandise that
Department Store
is organised into separate departments like apparel for men, women, children,
home furnishing etc. and the focus wherein is placed on customer service.
Lifestyle Products / Life style Products that meet the way of living centered around certain activities
v
merchandise
Term
Description
Conventional/General Terms
Term
AS
AY
BSE
CAGR
Capex
CDSL
Companies Act
Depositories Act
Depository
Depository Participant
ECS
FEMA
FII/ Foreign
Investor
Institutional
Financial year/fiscal/FY
GIR Number
GoI
HUF
I.T. Act
Indian GAAP
Indian National
NAV
Non Resident
NRI/Non Resident Indian
NSDL
NSE
OCB/
Body
Overseas
Corporate
P/E Ratio
PAN
Person/Persons
PIO/ Person of Indian Origin
RTGS
SCRA
SCRR
SEBI
SEBI Act
SEBI Guidelines
Description
Accounting Standards as issued by the Institute of Chartered Accountants of
India
Assessment Year
Bombay Stock Exchange Limited
Compounded Annual Growth Rate
Capital expenditure proposed to be incurred
Central Depository Services (India) Limited
The Companies Act, 1956, as amended from time to time
The Depositories Act, 1996, as amended from time to time
A depository registered with SEBI under the SEBI (Depositories and
Participant) Regulations, 1996, as amended from time to time
A depository participant as defined under the Depositories Act
Electronic Clearing System
Foreign Exchange Management Act, 1999, as amended from time to time, and
the regulations framed thereunder
Foreign institutional investor (as defined under SEBI (Foreign Institutional
Investors) Regulations, 1995) registered with SEBI under applicable laws in
India
The twelve months ended September of a particular year
General Index Registry Number
Government of India
Hindu Undivided Family
The Income Tax Act, 1961, as amended from time to time
Generally accepted accounting principles in India
A citizen of India as defined under the Indian Citizenship Act, 1955, who is
not an NRI (as defined under the Foreign Exchange Management (Deposit)
Regulations, 2000).
Net Asset Value
Non Resident is a Person resident outside India, as defined under FEMA and
includes a Non- Resident Indian
A Person resident outside India, as defined under FEMA, and who is a citizen
of India or a Person of Indian origin and such term as defined under the
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000
National Securities Depository Limited
The National Stock Exchange of India Limited
A company, partnership, society or other corporate body owned directly or
indirectly to the extent of at least 60% by NRIs, including overseas trusts in
which not less than 60% of beneficial interest is irrevocably held by NRIs
directly or indirectly as defined under Foreign Exchange Management
(Deposit) Regulations, 2000. OCBs are not permitted to invest in this Issue
Price/Earnings Ratio
Permanent Account Number
Any individual, sole proprietorship, unincorporated association,
unincorporated organization, body corporate, corporation, company,
partnership, limited liability company, joint venture, or trust or any other
entity or organization validly constituted and/or incorporated in the
jurisdiction in which it exists and operates, as the context requires
Shall have the same meaning as is ascribed to such term in the Foreign
Exchange Management (Investment in Firm or Proprietary Concern in India)
Regulations, 2000
Real Time Gross Settlement
Securities Contracts (Regulation) Act, 1956, as amended from time to time
Securities Contracts (Regulation) Rules, 1957, as amended from time to time
The Securities and Exchange Board of India constituted under the SEBI Act
Securities and Exchange Board of India Act, 1992, as amended from time to
time
SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by
SEBI effective from January 27, 2000, as amended, including instructions and
vi
Term
Takeover Code
Description
clarifications issued by SEBI from time to time
Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeover) Regulations, 1997
vii
CERTAIN CONVENTIONS; USE OF MARKET DATA
Unless stated otherwise, the financial data in this Draft Red Herring Prospectus is derived from our financial
statements prepared in accordance with Indian GAAP and included in this Draft Red Herring Prospectus. The
statistical and operational data in this Draft Red Herring Prospectus is presented on an unconsolidated basis. Our
fiscal year commences on October 1 and ends on September 30, so all references to a particular fiscal year are to the
twelve-month period ended September 30 of that year. In this Draft Red Herring Prospectus, any discrepancies in
any table between the total and the sums of the amounts listed are due to rounding-off.
All references to “India” contained in this Draft Red Herring Prospectus are to the Republic of India. All references
to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India.
For definitions, please see the section titled “Definitions and Abbreviations” on page iii of this Draft Red Herring
Prospectus.
Unless stated otherwise, industry data used throughout this Draft Red Herring Prospectus has been obtained from
industry publications and internal Company reports. Industry publications generally state that the information
contained in those publications has been obtained from sources believed to be reliable but that their accuracy and
completeness are not guaranteed and their reliability cannot be assured. Although the Company believes that
industry data as well as internal Company reports used in this Draft Red Herring Prospectus are reliable, the same
have not been independently verified.
viii
FORWARD-LOOKING STATEMENTS
We have included statements in this Draft Red Herring Prospectus, that contain words or phrases such as “will”,
“aim”, “will likely result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”,
“contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions
or variations of such expressions that are “forward-looking statements”.
All forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to
differ materially from those contemplated by the relevant forward-looking statement. Important factors that could
cause actual results to differ materially from our expectations include, among others:
•
•
•
•
•
•
•
•
•
Variation in sales volumes on account of our product mix;
Failure in forecasting and correctly understanding customer preference;
Failure of products to perform;
Failure of our supply chain;
Growing and new competition from domestic and potential international players;
Performance of the retail sector in India;
Changes in laws and regulations that apply to the retail sector in India;
General economic and business conditions in India and other countries; and
The occurrence of natural disasters or calamities affecting the areas in which we have operations.
For further discussion of factors that could cause our actual results to differ, see the section titled “Risk Factors”
beginning on page x of this Draft Red Herring Prospectus. By their nature, certain market risk disclosures are only
estimates and could be materially different from what actually occurs in the future. As a result, actual future gains
or losses could materially differ from those that have been estimated. The Company, the members of the Syndicate
and their respective affiliates do not have any obligation to, and do not intend to, update or otherwise revise any
statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events,
even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company
and the BRLMs will ensure that investors are informed of material developments until such time as the grant of
listing and trading permission by the Stock Exchanges in respect of the Equity Shares allotted in this Issue.
ix
RISK FACTORS
An investment in equity shares involves a high degree of risk. You should carefully consider all of the information in
this Draft Red Herring Prospectus, including the risks and uncertainties described below, before making an
investment in our Equity Shares. To obtain a complete understanding of our Company, you should read this section
in conjunction with the sections entitled “Our Business” beginning on page 36 of this Draft Red Herring
Prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
beginning on page 85 of this Draft Red Herring Prospectus as well as the other financial information contained in
this Draft Red Herring Prospectus. If any of the following risks actually occur, our business, financial condition
and results of operations could suffer, the trading price of our Equity Shares could decline, and you may lose all or
part of your investment.
This Draft Red Herring Prospectus also includes statistical and other data regarding the Indian Retail Industry.
This data was obtained from industry publications, reports and other sources that we and the BRLMs believe to be
reliable. Neither we nor the BRLMs have independently verified such data. All of the financial data presented in
this section is based on our Company’s restated unconsolidated financial statements included in this Draft Red
Herring Prospectus on page 65.
INTERNAL RISK FACTORS
Variations in our sales volumes on account of our product mix that may adversely affect our revenues.
The success of our Company is dependent upon our product mix which ensures that we meet our customer
requirements on a continued basis. Our product mix is the joint responsibility of our merchandising team as well as
our operations department and is aimed at satisfying the diversified and manifold demands of our customers. This
mix is dependent on accurately predicting the demand, the class of market as well as the availability of retail space.
Any error in judgement in any of these parameters may lead to allocation of an inappropriate product risk which
may affect our ability to meet the demand of the customers.
Further, our product mix also comprises of a substantial number of international goods. The manufacturers of such
international goods base their products on trends, fashions and historical data. Any mismatch on their part in terms
of product design with the expectations of the market may create adversity. Also, our distributors and importers
largely belong to the unorganised sector. We are dependent on them to source product from foreign publishers and
foreign brands. Any failure on their part to supply products to us on a timely manner may further adversely affect
our product mix. In addition to the above, as well as repeated failure of our product mix to anticipate and respond to
our customer demands would adversely affect our sales volume and consequently our revenues.
Our merchandise is driven by current trends and novelty and these parameters cannot be quantified or
benchmarked. Any let down in forecasting and correctly understanding customer preference could affect us
adversely.
Ability to meet our customers’ requirements is critical to our business. Also, merchandise such as watches,
jewellery and perfumes being Lifestyle Products are affected by current trends. We plan our products based on
forecasts of customers buying patterns as well as on forecasts of trends for forthcoming seasons. Any mismatch
between our forecasts, our planning and the actual purchase by customers can impact us adversely, leading to
excess inventory and requiring us to resort to higher markdown and thus lower margins in order to clear such
inventory. Customer preferences are susceptible to change with change in trends and service level expectations of
customers too can change from time to time.
Our success depends partly upon our ability to forecast, anticipate and respond to such changing consumer
preferences and trends in a timely manner. Any failure by us to identify and respond to such emerging trends in
consumer preferences could have a material adverse effect on our business, financial condition and results of
operations..
The success of our business is dependent on supply chain management.
Inefficient supply chain management may lead to unavailability of merchandise. Ensuring shelf availability for the
products sold by us warrants quick turnaround time and high level of coordination with suppliers. Inefficient supply
chain management could adversely affect our business, financial condition and results of operations.
Failure of products to perform can also affect our over all performance.
Whilst the failure of seasonal products and introduction of new products create fluctuations in our turnover, these
are typically short lived and the entry of other products compensates for these failed products. Any repeated failure
x
of our seasonal products or the failure of our new products to compensate for the loss in such sales would adversely
impact our business, financial condition and results of operations.
We cater to the higher end of the customer segment, retailing Lifestyle Products and leisure merchandise. Any
change in the economic conditions of the market can affect our performance.
The disposable income in the market today is on the rise on account of the conducive economic scenario of India.
Any change in the general economic conditions prevailing in the country on account of legislation/regulation or
otherwise may result in a significant reduction in the disposable income and consequent consumer spending thereby
adversely affecting our sales and our business, financial condition and results of operations .
We face growing and new competition from domestic and potential international players that may adversely
affect our competitive position and our profitability.
Significant additional competition in the retail industry may result in reduced prices and thereby negatively affect
our revenues and profitability. Some of our competitors, especially from the unorganised sector, may undersell their
products and such underselling may cause us to reduce our prices thereby decreasing our margins. We may have to
offer better infrastructure and facilities to our customers to ensure that we are offering the same products in a better
store thereby increasing our overhead and reducing our margin. This would reflect in low profitability during the
period of such investments.
We face significant competition from Indian players. These market participants include other small, limited-service
providers and a number of full-service global companies. The larger competitors have a much broader portfolio of
business, greater resources and more experience than smaller companies.
Further, the introduction of foreign participation in the retail sector may result in the entry of multinational retail
companies into the Indian market. We cannot assure you that we will be able to compete with large multinational
players. International competitors may enjoy many of the same advantages that we do and may even have lower
cost structures, enabling them to compete vigorously vis-à-vis pricing. Global companies are significantly larger
than us and have significantly stronger international market positions, production capacities and greater financial
resources than we do. We also face significant competition from Indian players. These market participants include
other small, limited-service providers and a number of full-service global companies. The larger competitors have a
much broader portfolio of business, greater resources and more experience than smaller companies.
Competition from any of the above competitors may adversely impact our business, financial condition and results
of operations.
Loss on account of shrinkage can negatively impact our profitability.
Shrinkage in the retail business is defined as the loss in inventory through a combination of shoplifting by
customers, pilferage by employees and errors in documents and transactions that go un-noticed.
The retail industry world over is affected by shrinkage. Any increase in shrinkage levels at our existing and future
stores can adversely impact results from operations.
We rely extensively on our standard operating procedures and failures could adversely impact our business.
We rely extensively on our standard operating procedures for the overall functioning of our stores, distribution
centres, merchandising, etc. and any deviation from these procedures may disrupt the functioning of our stores
thereby affecting our performance adversely.
The success of our business is substantially dependent on our management team and our inability to retain them
could adversely affect our business.
We believe that there is significant demand for personnel who possess the skills needed to perform the services we
offer. Our inability to hire and retain additional qualified personnel will impair our ability to continue to expand our
business. An increase in the rate of attrition for our experienced employees, would adversely affect our growth
strategy.
Also, given the fact that the retail sector competes for trained manpower with all emerging service sectors including
the information technology sector, the pressure on existing players, including on us to recruit trained manpower
would increase.
We cannot assure you that we will be successful in recruiting and retaining a sufficient number of personnel with
the requisite skills to replace those personnel who leave. Further, we cannot assure you that we will be able to rexi
deploy and re-train our personnel to keep pace with continuing changes in our business.. The loss of the services of
such personnel and our inability to hire and retain additional qualified personnel may have an adverse effect on our
business, financial condition and results of operations.
Our inability to deliver as per our business plan could have an adverse impact on our business.
Our business plan includes opening of new stores, and expanding and renovating some of our existing stores over
the next few years. Our success in achieving future growth through these methods is dependent upon our ability to
obtain suitable store sites and in setting up our new stores, and where applicable, hiring appropriate store personnel.
There can be no assurance that we would be able to renovate existing stores or acquire, open or operate new stores
on a timely or profitable basis or that comparable store sales will increase in the future.
We also rely on various real estate developers for our store sites. We have, in the past, been faced with instances of
delays in obtaining possession of the store sites. Any delay by the developers in handing over the possession of
store sites to us may lead to delays in the opening of our stores and would further impact our roll out schedules and
cause cost and time overruns. Any failure by our management to effectively implement an expansion strategy could
have a material adverse effect on our business and operations.
Our business plans may need substantial capital and additional financing in the form of debt and/or equity to
meet our requirements.
Our proposed business plans are being substantially funded through this Issue and partly by our internal cash
accruals/unsecured loans from our promoters. However, the actual amount and timing of future capital requirements
may differ from estimates including but not limited to unforeseen delays or cost overruns, unanticipated expenses,
market developments or new opportunities in the industry. We may also not be able to generate internal cash as
estimated and may have to resort to alternate sources of funds. Sources of additional financing may include
commercial borrowings, vendor financing, or issue of equity or debt instruments. If we decide to raise additional
funds through the debt route, the interest obligations would increase and we may be subject to additional covenants,
which could limit our ability to access cash flows from the operations. If we decide to raise additional funds through
the equity route, your shareholding in us could get diluted.
Any inability to manage our growth could disrupt our business.
Our inability to manage our growth could have a material adverse effect on our business, financial condition and
results of operations. A larger number of stores will increase our fixed operating costs and there can be no assurance
that we will experience a commensurate increase in revenue or derive operational synergies to offset these higher
costs. Also, our future growth plans may place significant demands on our management and other resources. There
can be no assurance that we will be able to execute our strategy on time and within the stipulated budget or that we
will meet the expectations of the customers and achieve our planned growth.
Non-receipt of Government and other regulatory approvals may affect our proposed expansion plan.
We have not yet applied for and/or received/renewed all the government and other regulatory approvals required
for/with regard to the new stores proposed by us and/or the renovation of our existing stores. Further, we have not
obtained registrations under the Tamil Nadu Shops and Establishments Act, 1947 for our Chennai outlets. Also, the
registration for our store at Varanasi under the Uttar Pradesh Shops and Commercial Establishments Act, 1962 has
expired. Any liability that we may face on account of such non-registration or in case of non receipt or delayed
receipt of government approvals, we may not be able to implement our proposed expansion plan as scheduled,
which may lead to cost overrun and have impact on our operations, growth and financial condition.
The objects of the Issue for which the funds are being raised has not been appraised by any bank or financial
institution.
The objects of the Issue for which the funds are being raised have not been appraised by any bank or financial
institution. In the absence of any such independent appraisal, the requirement of funds raised through this Issue as
stated in the section titled “Objects of the Issue” on page 17 of this Draft Red Herring Prospectus are based on our
estimates.
We have not yet executed the required definitive agreements or arrangements for fully utilising Issue proceeds.
Also, we have not yet finalised consultants and contractors for several of our proposed new stores as well as our
stores being renovated.
We have not entered into any definitive agreements to utilise the proceeds from the Issue. We cannot provide a
definitive long-term estimate of the use of a certain portion of proceeds from the Issue and the priorities or
contingencies affecting them due to the dynamic nature of our industry. We intend to use part of the proceeds of the
xii
Issue for our general corporate purposes. We also propose to use part of our proceeds to fund joint ventures and
other strategic acquisitions, as and when the opportunities arise. Apart from the above, we have not yet identified
any potential targets for the above. We may also spend a portion of the proceeds of the Issue on expansion of our
business instead of financing acquisitions or joint ventures with strategic partners. Further, whilst we do propose to
utilize a portion of the proceeds for the Issue for opening new outlets, we are yet to execute contractual agreements
for such new store sites. Also, we have not yet finalized consultants and contractors for several of our proposed new
stores as well as those of our existing stores that are being renovated or expanded, nor have we placed orders for the
equipment and furniture that we may require. In case of any delay in the execution of our plans in relation to our
proposed outlets, there could be time and cost overruns affecting our performance.
Our Promoters will collectively own the majority of our Equity Shares and will continue to control us after the
Issue.
After the completion of the Issue, our Promoter will own the majority of our Equity Shares. As a result, our
Promoter will have the ability to determine the outcome of all actions requiring the approval of our shareholders,
other than those actions requiring a super majority of the votes of our shareholders and the appointment of our
Board of Directors. The interest of our Promoter may conflict with interest of our other investors.
Negative publicity if any, would adversely affect the value of our brand, and our sales.
Our business is dependent on the trust our customers have in the quality of our merchandise as well as on our ability
to maintain our brand value. Any negative publicity regarding us, the brands that we stock, or products, including
those arising from a drop in quality of merchandise from our vendors, disputes concerning the ownership of
intellectual property, mishaps at our stores, or any other unforeseen events and operational risks could adversely
affect our reputation, our brand value, our operations and our results from operations.
We face the risk of potential liabilities from lawsuits or claims by consumers
We may face the risk of legal proceedings and claims being brought against us by our customers/consumers for any
defective product sold or any deficiency in our services to them. We could face liabilities should our
customers/consumers face any loss or damage due to any unforeseen incident such as fire or accidents in our stores,
which could cause financial or other damage to our customers / consumers. Any commencement of lawsuits as
envisaged above against us could adversely affect our profitability.
Any adverse impact on the title/ ownership rights/ developments rights of our landlords from whose real estate
premises we operate may impede our company’s effective operations of our stores/offices/distribution centres in
the future.
All the real estate from which we operate our stores/offices/distribution centres are taken by us on lease or leave and
licence or rental basis from third parties. However, none of the agreements dealing with our leases or leave and
licences or rentals have been registered. This may adversely affect our title to those premises from which we
currently operate our stores/offices/distribution centres. We may in future also enter into such transactions with
third parties. Any adverse impact on the title /ownership rights/ development rights of our landlords from whose
real estate premises we operate our stores may impede our Company’s effective operations. The financial impact of
such aforesaid risk cannot be quantified.
We seek to be completely computerised and IT driven and such aim makes us vulnerable to system failure which,
can affect operations adversely.
We are driven by new technology based on high speed data transfer online communications and real time
transactions, which technology is critical in managing day to day operations of all our outlets. Any disruptions in
the functioning of such technology could disrupt our ability to track, record and analyze the merchandise that we
sell and cause disruptions of operations, including, among others, an inability to process shipments of goods,
process financial information or credit card transactions, deliver products or engage in similar normal business
activities which may materially adverse affect our operations, our business and profitability.
Further, any drastic and unforeseen change in the licensing fees of critical software could increase our overheads.
Any future equity offerings by us or our existing shareholders, or the issue of options under an employee stock
option plan, may lead to dilution of your shareholding in us or affect the market price of our Equity Shares.
You may experience dilution in your shareholding to the extent that we make future equity offerings or issue stock
options under any employee stock option plan.
The following outstanding litigations or disputes are pending against our Promoters and our Directors.
xiii
As at March 31, 2006, there are three cases against our Promoter, DCHL. Of these, two are criminal cases that have
been filed against our Promoter alleging defamation. Further, there is one civil case that has been filed against the
Promoter alleging defamation.
There is one case that has been filed against T. Vinayak Ravi Reddy, our Executive Director in relation to a
property dispute.
For further details, please refer to the section entitled “Outstanding Litigation” as appearing on page 93 of this Draft
Red Herring Prospectus.
Risk related to non-registration of our trademark.
We applied in August 2004 to the Registrar of Trademarks, Chennai for registration of our trademark ‘Odyssey’.
Until registration is granted, during the interim period, we may not be able to prohibit persons from using the said
trademark to their advantage and any unfavorable use of such trademark may adversely affect our goodwill and
business.
We reported negative cash flows from operating activities for the period ended January 31, 2006 of Rs. 83.12
lakhs.
We have not provided for gratuity as per AS15.
Our Auditors have stated in their audit report for the period ended January 31, 2006 that their report is subject to
non provision of gratuity on accrual basis by us. As per our accounting policies, we do not provide gratuity on
accrual basis and the same is accounted for on cash basis. The amount of gratuity payable as determined by the Life
Insurance Corporation of India is Rs. 8.25 lakhs.
EXTERNAL RISK FACTORS
The success of our business is highly dependent on the number of customers that visit our stores.
Various factors affect the customer footfalls, including choice of location and nature of floor layout. Factors such as
the regional economy, weather conditions, natural disasters, social unrest as well as government regulations specific
to the states in which we operate also affect our result from operations.
Force majeure events, particularly those affecting the states where our facilities are located, could adversely
affect our business.
Our outlets are located across India. It is possible that earthquakes, cyclones, floods or other natural disasters in
India, particularly those that directly affect the areas in which our outlets are located, could result in substantial
damage to our stores and other assets and adversely affect our operations and financial results.
Our business and activities will be regulated by the Competition Act, 2002 as and when it is notified.
The Parliament of India has enacted the Competition Act, 2002 for the purpose of preventing practices having an
adverse effect on competition. Under the Competition Act, 2002, any arrangement, understanding or action whether
or not formal or informal which causes or is likely to cause an appreciable adverse effect on competition is void and
attracts substantial penalties. Any agreement inter alia which directly or indirectly determines purchase or sale
prices, limits or controls production, shares the market by way of geographical area or market or number of
customers in the market is presumed to have an appreciable adverse effect on competition. It is unclear as to how
the Competition Act, 2002 will affect industries in India.
We are subject to adverse impact of economic and political conditions.
Global economic and political factors that are beyond our control influence the forecasts and directly affect
performance. These factors include interest rates, rates of economic growth, fiscal and monetary policies of
governments, inflation, deflation, consumer credit availability, consumer debt levels, tax rates and policy,
unemployment trends, terrorist threats and activities, worldwide military and domestic disturbances and conflicts,
and other matters that influence consumer confidence, spending and tourism. Increasing volatility in financial
markets may cause these factors to change with a greater degree of frequency and magnitude. The taxation system
within the country still remains complex. Multi-point octroi and tax evasion by smaller stores are some of the
concerns faced by organized retailers. Changes in these local taxes and levies can impact the performance of
xiv
retailers adversely. Retailers also have apprehensions about the co-existence of Value Added Tax (VAT) and
Maximum Retail Price (MRP).
We are subject to risks arising from exchange rate fluctuations.
The exchange rate between the Rupee and other currencies is variable and may continue to fluctuate in the future.
We may place orders with overseas contractors or consultants or for buying equipments for our new as well as
existing stores, as well as source some of our products from overseas markets for sale in our stores.
Public places such as malls in which our stores are located could be likely targets for unforeseen acts of violence
which may impact the retail business.
Any violence in public places such as retail stores and malls could cause damage to life and property, and also
impact consumer sentiment and their willingness to visit public places. Any reduction in the number of people
visiting our outlets on account of such violence in public places may adversely effect our sales and revenue.
Stability of policies and political situation in India determine the fortunes of the industry.
The Indian Central and State Governments play an important role for the sector by regulating policies and
regulations governing businesses, including retail. We cannot assure that the current policies will continue in future.
The rate of economic liberalisation could change and specific laws and policies affecting our industry and other
policies affecting investment in our securities could change as well. A significant change in India’s economic
liberalisation and deregulation policies could disrupt the business and economic conditions in India and thereby
affect our business.
Any change in the current policies pertaining to foreign direct investment in the retail sector could also impact our
business.
Unstable internal and international political environment could impact the economic performance in both short term
and long term.
Multiplicity of legislations have impacted the growth of organised retail.
The retail sector functions under multiple laws and regulations. Multiple licenses and clearances are required before
a store can be opened. Thereafter, stringent laws pertaining to labour, hours of work etc. limit flexibility and add to
overall costs and can impact retail operations of the retail sector in India.
We may experience fluctuations in our stock price, which may affect the trading price of the equity shares issued
in this Issue.
The stock market in general and the market for shares of companies in retail trade in particular, have from time to
time experienced considerable price fluctuations. Often, these changes have been unrelated to the operating
performance of the affected companies. In addition, factors such as competition, new store openings, general
regional and national economic conditions, bulk dealing in our stocks, consumer trends and preferences, new
product introductions and changes in our product mix, timing the effectiveness of promotional events and lack of
new product introductions to spur growth in sales and weather may have an adverse effect on the market price of
our shares.
Notes to Risk Factors:
•
Public issue of up to 26,25,000 Equity Shares for cash at a price of Rs. [ ] per Equity Share aggregating
Rs. [ ]. The Issue constitutes 25.93% of the post-Issue paid up capital of the Company.
•
The net worth of the Company as of January 31, 2006 was Rs. 1,406.96 lakhs as per our restated financial
statements included in this Draft Red Herring Prospectus.
•
The Net Asset Value per Equity Share of our Company as of January 31, 2006 was Rs. 115.15 as per our
restated financial statements included in this Draft Red Herring Prospectus.
•
As the Company has consolidated the nominal value of its share from Re. 1 to Rs. 10 vide a resolution
passed in the Extraordinary General Meeting dated April 3, 2006 the average cost of acquisition of Equity
Shares of Rs. 10 each by our Promoter as of January 31, 2006 was Rs. 80.81 per Equity Share. The same
has been computed by taking into account
xv
o
the acquisition of 11,51,414 Equity Shares of Rs. 10 each at a price of Rs. 530.15 per share
aggregating to Rs. 6,120.00 lakhs on October 1, 2005;
o
issue of 23,02,828 bonus shares of Rs.10 each in the ratio of 2:1 on January 30, 2006 by capitalising
the free reserves of the Company; and
o
issue of 40,45,758 Equity Shares of Rs. 10 each at a premium of Rs. 2.00 per Equity Share
aggregating to Rs. 4,85,49,096.
For further details, please see the section entitled “Capital Structure – Notes to Capital Structure – Share
Capital History of the Company” on page 12 of this Draft Red Herring Prospectus.
•
The Issue is being made through the 100% Book Building Process, wherein at least 50% of the Issue shall
be allocated on a proportionate basis to QIBs. Of the QIB Portion, 5% shall be available for allocation on
a proportionate basis to Mutual Funds. Further, not less than 15% of the Issue shall be available for
allotment on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be
available for allotment on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Issue Price.
•
Trading in Equity Shares of our Company for all investors shall be in dematerialized form only.
•
Refer to the notes to our financial statements relating to related party transactions in the section titled
“Related Party Transactions” on page 62 of this Draft Red Herring Prospectus.
•
Investors may contact the BRLMs for any complaints, information or clarifications pertaining to the Issue.
•
Investors are advised to refer to the section titled “Basis for Issue Price” on page 21 of this Draft Red
Herring Prospectus, before making an investment in our Equity Shares.
•
Investors should note that in case of oversubscription in the Issue, allotment would be made on a
proportionate basis to Qualified Institutional Bidders, Retail Individual Bidders and Non–Institutional
Bidders. For more details, please refer to the section entitled “Issue Procedure - Basis of Allotment” on
page 125 of this Draft Red Herring Prospectus.
•
All information shall be made available by the BRLMs and us to the public and investors at large and no
selective or additional information would be available for a section of the investors in any manner
whatsoever.
•
Other than as set out in Note 7 to “Capital Structure – Notes to Capital Structure” on page 12 of this Draft
Red Herring Prospectus, our Promoters have not been issued Equity Shares issued for consideration other
than cash.
xvi
SUMMARY
Overview
Odyssey is a leading leisure store chain having 12 branches in six cities of India. Odyssey stocks and sells books,
music, cards, stationery, gifts, toys, multimedia and magazines. Odyssey was started in the year 1995 with a 3,500
square feet store in the southern suburb of Chennai – Adyar. Now we occupy approximately 60,000 square feet of
retail space in six cities, viz., Chennai, Hyderabad, Coimbatore, Trichy, Salem and Varanasi.
We continue to be predominantly a book store giving our customers a relatively wide range on subjects ranging
from popular fiction, non-fiction, computing, self-help, health, management, food and drink, travel, art and
architecture, activity and children’s books apart from others. Even within children’s books, one can find a wide
range of fiction, fairy tales, activity books, work books, encyclopaedia etc.
Book sales account for 40% of our revenue. Other categories like gifts, toys, music, movies, stationery contribute
the balance. This is achieved because we get over 5,000 walk-ins every day and historically over 50% of the same
are converted into sales.
Our Company has maintained a good mix of products to suit our customer’s requirements. We endeavour to keep
abreast with the market dynamics and latest trends. For instance, when the trend in the music industry was moving
towards CDs from cassettes we started stocking more CDs than cassettes.
During the financial year 2004-05, we changed our store design concept to bring in a contemporary feel and
enhance brand visibility through the same. Last year, we opened a store in Anna Nagar, northern suburb in Chennai,
an upmarket locality with our new design. The same layout and design would be carried forward in other stores. We
have re-located our flagship store at Adyar, Chennai expanding from 6,500 square feet to 18,232 square feet in the
month of October 2005 with this new design concept.
Our Competitive Strengths
We believe that the following are our primary competitive strengths:
Strong position in the Indian retail sector
Odyssey is one of the largest book retail chains in India. We have started our expansion operations in other cities
with the same product categories. We started our expansion in the year 2002 by entering Hyderabad, Varanasi and
Trichy. We believe that we have always stood apart from our competitors in terms of service delivery by improving
the bench mark on customer service. We also believe that we have consistently provided better service than our
competitors, and have successfully withstood the competition in the markets where we have presence.
Store Design Concept
Our stores are designed to be user-friendly with an aesthetic feel to them. Every section has adequate seating area so
that our customers can take their time whether they are browsing for their favourite books or looking for toys for
their children.
Most importantly, our stores give the feeling of space - which is core to our brand promise. The gift section has
merchandise displayed in a manner it would be displayed in the home of its owners. Child friendly environment is
ensured with small details like, lower hand rails for kids on staircases and racks at a much lower level. Some of our
stores also provide for a playpen where kids can play while their parents shop at the other sections.
The book section has ample seating space. The unique part of the music section is that it has listening posts with
seating, so that our customers can take their time listening to the music they love. Two of the stores also have a
restaurant called Café Odyssey where the element of space is pervasive. The theme of this restaurant is ‘slow food’
i.e. eating at Café Odyssey is more about the entire experience than, just the food. The ambience helps our
customers relax and they can enjoy their meal while reading a book which they can order from the store or listen to
music of their choice. There are also some gift items on display which are available for purchase.
The new format stores have cafes, large spaces, inviting interiors and comfortable seating, making it enjoyable for
the customer to spend long '
browsing hours'in the store. We feel that constant innovation encourages our customers
to return to us.
1
Experienced and Professional Managers
We have a team of professionals with vast experience in analyzing the market trends and stocking the store
accordingly. The operations team, which runs the stores, has a good understanding of the customers and seeks to
provide them with the right product. They have established their credentials by attracting more walk-ins to the
stores and conversion at the stores.
Entering new markets
We started expanding since the year 2002 and we now are a 12 store chain. We plan to expand our presence to more
cities and towns in the coming years. We have finalized plans to open 17 more stores in the next 3 years. The table
below provides for the same:
Location
Chennai (Hotel Stores)
Vashi, Mumbai
Varanasi
Nagpur East
Nagpur West
Thane
Calicut
Coimbatore
Hyderabad
Cochin
Bangalore
New Delhi
Visakhapatnam
Pune
Mumbai
Aurangabad
Mysore
Size of the Store (in square feet)
140
11,400
1,555
16,238
13,771
30,000
17,981
15,000
30,000
22,000
28,000
30,000
30,000
12,516
23,750
25,000
21,000
Expected fit out by
February 2006
April 2006
May 2006
May 2006
August 2006
September 2006
November 2006
December 2006
January 2007
January 2007
February 2007
May 2007
September 2007
October 2007
January 2008
June 2008
September 2008
Strong Management Team and Motivated Work Force
Our Company is managed by a team of professional managers focusing on different aspects of the retail business
including buying and merchandising, operations, marketing, human resources, information technology and systems,
inventory control, warehousing, projects, customer relations, e-business and accounts and finance. Our management
team includes some experienced hands in the retail sector. The management of our company have vast experience
in operating retail business. For further details, please see the section titled “Our Management” on page 49 of this
Draft Red Herring Prospectus. Our Company’s human resource policy revolves around commitment to creating an
organization that nurtures talents and motivate its people. We have a very low employee turnover ratio which has
provided us continuity and stability.
Focused Retail Company
We have adopted a focused approach for our business and concentrate our efforts on the retail service business
which we believe to be our core strength. We are focused in providing our customers the best service with the right
product at the right price and also with world class ambience. We have retained our seven core categories – books,
music, toys, cards, gifts, stationery and multimedia. Our business strategy of high growth coupled with optimal
planning provides us with the ability to perform in all the phases of business cycle. We are located in the up-market
locations of the cities where we have presence and we cater to Sections A and B who have high disposable incomes.
Established Business
Our decade-old brand “Odyssey” has a significant recall amongst its target group and enjoys considerable loyalty
from our customers. Over the years, we have also built strong relationships with some of the leading suppliers/
manufacturers in each of the product categories we deal in.
Operational performance
Our Company has sought to maintain stringent control over the operating costs thereby resulting in better
profitability for our Company. Our strengths lie in key areas such as buying and merchandising, operations of our
stores, warehousing, marketing and human resources. Our information technology system assists us in achieving
2
higher operational efficiencies. We have systems and standard operating procedures that help our management in
driving the business.
Zero Defect Culture
Odyssey is committed to providing a varied portfolio of products at multiple price points that satisfy the growing
needs and expectations of customers. All levels of personnel are involved in the implementation of the Quality
Management System by adopting the Zero Defect Culture. At Odyssey, we endeavour to continually improve our
range of products and services.
The Indian Retail Story
India is the fourth largest economy in the world in Purchasing Power Parity (PPP) terms after USA, China and
Japan. It has grown steadily since economic reforms were initiated in the early 1990s. Gross Domestic Product
(GDP) has averaged a growth of around 6 percent per annum in the last 10 years, and has picked up further
momentum in the last three years, achieving between 6 and 8.4 percent growth. In 2003, India became the second
fastest growing economy in the world with a growth rate of 8.2 percent. The outlook for the future is equally
buoyant given GDP growth forecasts for the current year at 7 percent and for the next 5 years at 7-8 percent per
year.
One of the key developments during India'
s growth path has been a favorable shift towards the services sector,
which now accounts for almost 50 percent of the total GDP. Led by services such as IT, telecommunication,
healthcare and retailing, these sectors are likely to play an even more important role in the Indian economy.
With a huge and growing consuming class, India is considered to be one of the preferred destinations for
investments in the world. According to UNCTAD'
s World Investment Report 2004, Foreign Direct Investment
(FDI) inflows to India grew by 24 percent to USD 4.26 Billion in 2003 over USD 3.44 Billion in 2002, putting
India among the top 10 FDI destinations among developing economies and fourth among Asian nations.
(Source: Images Retail – KSA Technopak)
For further details please refer to the sections entitled “Retail Industry” and “Our Business” on pages 25 and
36 respectively, of this Draft Red Herring Prospectus.
3
THE ISSUE
Equity Shares issued by the Company .........................26,25,000 Equity Shares
of which:
QIB Portion .......................................................... At least 13,12,500 Equity Shares (allocation on proportionate
basis)
of which:
Reservation for Mutual Funds ................65,625 Equity Shares (allocation on proportionate basis)
Balance for all QIBs including Mutual Funds……………. 12,46,875 Equity Shares (allocation on
proportionate basis)
Non-Institutional Portion .....................................At least 3,93,750 Equity Shares (allocation on proportionate
basis)
Retail Portion .......................................................At least 9,18,750 Equity Shares (allocation on proportionate
basis)
Equity Shares outstanding prior to the Issue ............... 75,00,000 Equity Shares
Equity Shares outstanding after the Issue.....................1,01,25,000 Equity Shares
Use of proceeds by the Company……………………….See the section titled “Objects of the Issue” on page 17 of
this Draft Red Herring Prospectus.
4
SELECTED FINANCIAL INFORMATION
SUMMARY OF PROFIT AND LOSS ACCOUNT, AS RESTATED
(Rs. In Lakhs)
Particulars
Period Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
31-Jan-06
30-Sep-05
30-Sep-04
30-Jun-03
31-Mar-02
31-Mar-01
Income
Revenue
1,033.38
1,854.87
1,320.51
950.96
545.13
Other Income
2.85
23.47
12.06
19.38
0.61
507.37
.06
Total Income
1,036.23
1,878.34
1,332.57
970.34
545.74
507.43
Employee Cost
126.64
182.68
175.94
105.74
36.47
17.89
Cost of Goods Sold
500.01
936.97
720.45
634.64
403.26
402.02
Expenditure
Administrative & Other Costs
227.50
426.82
315.25
175.72
82.63
65.73
Total Expenditure
854.15
1,546.47
1,211.64
916.10
522.36
485.64
Profit – EBITDA
182.08
331.87
120.93
54.24
23.38
21.79
42.03
95.33
65.53
23.86
6.82
5.75
-
-
0.67
0.34
0.34
0.34
140.05
236.54
54.73
30.04
16.22
15.70
Depreciation
51.48
114.50
44.55
12.81
7.39
7.53
Net Profit before Tax
88.57
122.04
10.18
17.23
8.83
8.17
Current Tax
12.28
41.00
0.78
6.94
3.50
5.00
Deferred Tax
17.53
8.95
4.70
1.84
-
-
Net Profit as per audited Statement of Account (A)
Adjustment on account of changes in accounting
Policies
58.76
72.09
4.70
8.45
5.33
3.17
Impact of Prior Period Items
-
-
3.42
1.81
-
-
Total Adjustments
-
-
3.42
1.81
-
-
58.76
72.09
8.12
10.26
5.33
3.17
Interest & Financial Charges
Preliminary Expenses written off
Proft before Depreciation and Tax
Adjusted Profit
5
SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED
(Rs. In Lakhs)
As at
As at
As at
As at
As at
As at
31-Jan-06
30-Sep-05
30-Sep-04
30-Jun-03
31-Mar-02
31-Mar-01
Gross Block
992.26
890.22
469.35
208.73
76.70
69.38
Less: Depreciation
264.07
212.60
98.09
56.37
43.56
36.16
Net Block
728.19
677.62
371.26
152.36
33.14
33.22
15.05
15.05
15.05
15.04
-
-
713.14
662.57
356.21
137.32
33.14
33.22
-
-
-
-
-
-
713.14
662.57
356.21
137.32
33.14
33.22
-
-
-
-
-
-
1475.00
1,278.00
660.42
357.11
109.46
92.61
27.53
40.39
144.92
29.69
7.38
11.49
Sundry Debtors
131.26
305.80
83.86
61.07
6.61
4.82
Loans and Advances
250.44
162.38
164.13
44.95
29.06
23.82
1,884.23
1,786.57
1,053.33
492.82
152.51
132.74
862.37
1,050.89
600.89
144.13
43.43
19.17
-
-
-
-
3.50
3.50
30.74
13.21
4.26
(0.44)
-
-
297.30
422.17
391.29
346.98
116.12
123.10
Total
1,190.41
1,486.27
996.44
490.67
163.05
145.77
NETWORTH
1,406.96
962.87
413.10
139.47
22.60
20.19
Share Capital
750.00
215.30
93.39
74.17
18.10
19.55
Reseverves & Surplus
974.08
1,064.69
377.51
81.01
5.51
1.98
15.05
15.05
15.05
15.04
-
-
959.03
1,049.64
362.46
65.97
5.51
1.98
Total
Less: Miscellaneous Expenditure (to the extent not
written off or adjusted)
1,709.03
1,264.94
455.85
140.14
23.61
21.53
302.07
302.07
42.75
0.67
1.01
1.34
NET WORTH
1,406.96
962.87
413.10
139.47
22.60
20.19
Fixed Assets
Less: Revaluation Reserve
Net Block after adjustment for Revaluation Reserve
Capital Work In Progress
Total
Investments
Current Assets, Loans and Advances
Inventory
Cash and Bank Balances
Liabilites and Provisions
Secured Loans
Unsecured Loans
Deferred Tax Liability
Current Liabilities & Provisions
Represented By
Reserves (Net of Revaluation Reserves)
6
GENERAL INFORMATION
Registered Office of our Company
Odyssey India Limited
No.6, First Main Road
Gandhi Nagar
Adyar
Chennai – 600 020
Tamil Nadu, India
Tel: (91 44) 24420393
Fax: (91 44 )4211 4799
Registration Number: 18-30683
Name and Address of the Registrar of Companies with whom the Company is registered :
Registrar of Companies, Tamil Nadu at Chennai
Block No. 6, B Wing
2nd Floor, Shastri Bhavan
No. 26 Haddows Road
Chennai – 600 034
Tamil Nadu, India
Board of Directors
1.
2.
3.
4.
5.
6.
7.
8.
T. Venkattram Reddy - Chairman
T. Vinayak Ravi Reddy - Executive Director
P. K. Iyer - Executive Director
T. S. Ashwin - Managing Director
E. Venkatram Reddy - Non-Executive Independent Director
P. Siddhartha - Non-Executive Independent Director
S. Balasubramaniyan – Non-Executive Independent Director
K. Madhavan - Non-Executive Independent Director
For further details, please refer to the section entitled “Our Management” beginning on page 49 of this Draft Red
Herring Prospectus.
Compliance Officer and Company- Secretary
Sreejith Janardhanan
Odyssey India Limited,
No.6, First Main Road
Gandhi Nagar
Adyar
Chennai – 600 020
Tel: (91 44) 4211 4871
Fax: (91 44) 4211 4799
E-mail: [email protected]
Investors can contact the Compliance Officer in case of any pre-Issue or post-Issue related problems such as non-receipt
of letters of Allotment, credit of allotted shares in the respective beneficiary account, refund orders, etc.
7
Legal Advisors to the Issue
Amarchand & Mangaldas & Suresh A. Shroff & Co.
5th Floor, Peninsula Chambers
Peninsula Corporate Park
Ganpatrao Kadam Marg
Lower Parel
Mumbai – 400 013
India
Tel: (91 22) 2496 4455
Fax: (91 22) 2496 3666
Amarchand & Mangaldas & Suresh A. Shroff & Co.
1-10-20/2B, 4th floor
Pooja Edifice
Chickoti Gardens
Begumpet
Hyderabad - 500 016
India
Tel: (91 40) 5533 6622
Fax: (91 40) 5549 2727
Book Running Lead Managers
Karvy Investor Services Limited
Tel: (91 40) 2332 2454/ 2337 4714
Fax: (91 40) 2337 4714
Contact Person: V. Madhusudhan Rao
SREI Capital Markets Limited
Vishwakarma, 86C
Topsia Road (South)
Kolkata 700 046,
West Bengal, India
Tel: (91 33) 2285 0112
Fax: (91 33) 2285 7542
Website: www.srei.com
Contact Person: Manoj Agarwal
Syndicate Members
TO BE APPOINTED
Registrar to the Issue
Karvy Computershare Private Limited
Hyderabad - 500 034, India
Tel: (91 40) 2342 0828
Fax: (91 40) 2342 0814
Contact: Murali Krishna
Auditors
V. Sukumar, Chartered Accountant
36, III Street, Abhirampuram
Chennai – 600 018, India
Tel: (91 44) 2440 4155
Fax: (91 44) 2815 5788
Bankers to the Issue and Escrow Collection Bank
ICICI Bank Limited
Capital Markets Division
30, Mumbai Samachar Marg
Fort
Mumbai – 400 001
Maharashtra, India
Tel: (91 22) 2265 5285
Fax: (91 22) 2261 1138
Website: www.icicibank.com
Contact Person: Sidhartha Routray
Deutsche Bank AG
Global Transaction Banking
Cash Management
Kodak House, 222, Dr. D.N. Road
Fort
Mumbai – 400 001
Maharashtra, India
Tel: (91 22) 5658 4000
Fax: (91 22) 2207 6553
Website: www.deutschebank.com
Contact Person: Shyamal Malhotra
8
Bankers to the Company
ICICI Bank Limited
No.1, Cenotaph Road
Chennai – 600 018, India
Tel: (91 44) 4203 0884
Fax: (91 44) 2434 4710
Website: www.icicibank.com
Contact Person: Shobana Srinivasan
Statement of Inter Se Allocation of Responsibilities for the Issue
The following table sets forth the distribution of responsibility and coordination for various activities amongst the
BRLMs:
Sl. No.
1
2
3
4
5
6
7
8
9
10
11
12
Activities
Responsibility
Coordination
Capital structuring with the relative components and
formalities such as type of instruments, etc.
Due diligence of the company’s operations /
management / business plans / legal etc.
Drafting and design of Offer Document and of
statutory advertisement including memorandum
containing salient features of the Prospectus. The
designed Lead Managers shall ensure compliance
with stipulated requirements and completion of
prescribed formalities with
Stock Exchanges,
Registrar of Companies and SEBI
Drafting and approval of Issue and statutory publicity
material, etc.
Drafting and approval of all corporate advertisements,
brochure and other publicity material
Appointment of Registrar, Bankers and Ad agency
Appointment of printers
Marketing of the Issue, which will cover inter alia,
formulating marketing strategies, preparation of
publicity budget, finalizing media and PR strategy,
finalizing centers for holding conferences for brokers,
finalizing collection centers, follow-up on distribution
of publicity and Issue material including forms,
prospectus and deciding on the quantum of the Issue
material
Finalizing the list of QIBs, divisions of QIBs for one
to one meetings, road show related activities and
order procurement
Finalizing of Pricing and Allocation
Post bidding activities including management of
Escrow Accounts, co-ordination with Registrar and
Banks, Refund to Bidders, etc.
The Post Issue activities of the Issue will involve
essential follow-steps, which include finalization of
listing of instruments and dispatch of certificates and
refunds, with the various agencies connected with the
work such as Registrars to the Issue, Bankers to the
Issue and the bank handling the refunds. The BRLMs
shall be responsible for ensuring that these agencies
fulfil their functions and enable them to discharge this
responsibility through suitable agreements with the
issuer Company.
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL
KISL and SREI
KISL
KISL
KISL
KISL and SREI
KISL
KISL
KISL
KISL
KISL
SREI
SREI
Monitoring Agency
The Company has appointed Deutsche Bank AG, Kodak House, 222, Dr. D.N. Road, Fort, Mumbai – 400 001 as
the monitoring agency for the issue to monitor the utilization of funds.
9
Credit Rating
As the Issue is of Equity Shares, a credit rating is not required.
IPO Grading
We have not opted for the grading of this Issue from a credit rating agency.
Trustees
As the Issue is of Equity Shares, the appointment of trustees is not required.
Book Building Process
Book building refers to the process of collection of Bids, on the basis of the Red Herring Prospectus within the
Price Band. The Issue Price is fixed after the Bid Closing Date/Issue Closing Date.
The principal parties involved in the Book Building Process are:
•
•
•
•
•
The Company;
The Book Running Lead Managers;
Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/NSE
and eligible to act as Underwriters. Syndicate Members are appointed by the BRLMs;
Escrow Collection Bank; and
Registrar to the Issue.
The SEBI Guidelines have permitted an issue of securities to the public through the 100% Book Building Process,
wherein at least 50% of the Issue shall be allocated on a proportionate basis to QIBs. Of the QIB Portion, 5% would
be available for allocation to Mutual Funds. Further, not less than 15% of the Issue shall be available for allotment
on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for
allotment on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the
Issue Price. We will comply with the SEBI Guidelines for this Issue. In this regard, we have appointed the BRLMs
to manage the Issue and to procure subscriptions to the Issue.
Pursuant to amendments to the SEBI Guidelines, QIB Bidders are not allowed to withdraw their Bid(s) after the Bid
Closing Date/Issue Closing Date and for further details see the section titled “Terms of the Issue” beginning on
The process of Book Building under SEBI Guidelines though not new, investors are advised to make their
own judgment about investment through this process prior to making a Bid or Application in the Issue.
Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for
illustrative purposes and is not specific to the Issue)
Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs. 24 per share,
issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown in the table
below. A graphical representation of the consolidated demand and price would be made available at the bidding
centres during the bidding period. The illustrative book as shown below shows the demand for the shares of the
company at various prices and is collated from bids from various investors.
Bid Quantity
500
1,000
1,500
2,000
2,500
Bid Price (Rs.)
24
23
22
21
20
Cumulative Quantity
500
1,500
3,000
5,000
7,500
Subscription
16.67%
50.00%
100.00%
166.67%
250.00%
The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue
the desired number of shares is the price at which the book cuts off i.e. Rs. 22 in the above example. The issuer, in
consultation with the book running lead managers, will finalise the issue price at or below such cut off price, i.e. at
or below Rs. 22. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation
in the respective categories.
Steps to be taken for bidding:
•
Check eligibility for bidding, see the section titled “Issue Procedure-Who Can Bid?” on page 112 of this Draft
Red Herring Prospectus;
10
•
Ensure that the Bidder has a demat account; and
•
Ensure that the Bid cum Application Form is duly completed as per instructions given in this Draft Red
Herring Prospectus and in the Bid cum Application Form.
Withdrawal of the Issue
Our Company, in consultation with the BRLMs reserves the right not to proceed with the Issue at anytime after the
Bid/Issue Opening Date but before Allotment, without assigning any reason therefore.
Underwriting Agreement
After the determination of the Issue Price and allocation of Equity Shares, but prior to filing of the Prospectus
with the ROC, our Company will enter into an Underwriting Agreement with the Underwriters for the Equity
Shares proposed to be offered through this Issue. The obligations of the Underwriters would be subject to relevant
law and terms and conditions contained in the said Underwriting Agreement.
The Underwriters have indicated their intention to underwrite the following number of Equity Shares:
(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the ROC)
[
[
[
[
]
]
]
]
Name and Address of the
Underwriters
[
[
[
[
Indicative Number of Equity
Shares to be Underwritten
]
]
]
]
Amount Underwritten
[
[
[
[
]
]
]
]
The above-mentioned amount is indicative underwriting and this would be finalized after pricing and actual
allocation. The above Underwriting Agreement is dated [•] 2006.
In the opinion of our Board of Directors (based on a certificate given by the Underwriters), the resources of all the
above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations
in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the Securities and
Exchange Board of India Act, 1992 or registered as brokers with the Stock Exchanges.
Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. In the
event of any default, the respective Underwriter in addition to other obligations to be defined in the Underwriting
Agreement will also be required to procure/subscribe to the extent of the defaulted amount. Notwithstanding the
above table, the Underwriters shall be severally responsible for ensuring payment with respect to Equity Shares
allocated to investors procured by them, provided, however, it is proposed that pursuant to the terms of the
Underwriting Agreement, the BRLMs shall be responsible for bringing in the amount devolved in the event that
their respective Syndicate Members, being [ ], do not fulfil their underwriting obligations.
11
CAPITAL STRUCTURE
Share capital as at the date of filing of Draft Red Herring Prospectus with SEBI is set forth below.
Aggregate nominal value
A) AUTHORISED EQUITY SHARE CAPITAL
1,50,00,000 Equity Shares of Rs. 10 each
B) ISSUED AND SUBSCRIBED EQUITY SHARE
CAPITAL
75,00,000 Equity Shares of Rs. 10 each
C) PAID UP CAPITAL
75,00,000 Equity Shares of Rs. 10 each
D) PRESENT ISSUE IN TERMS OF THIS DRAFT RED
HERRING PROSPECTUS(1)
26,25,000Equity Shares of Rs. 10 each fully paid-up
E) EQUITY CAPITAL AFTER THE ISSUE
1,01,25,000 Equity Shares of Rs. 10 each fully paid-up
F) SHARE PREMIUM ACCOUNT
Before the Issue
After the Issue
(Rs. in lakhs)
Aggregate Value at
Issue Price
1,500.00
750.00
750.00
2,62.50
[•]
1,012.50
[•]
1,032.30
[ ]
(1)
Our Board of Directors authorised a fresh issue of up to 26,25,000 Equity Shares of Rs. 10 each pursuant
to a resolution passed at its meeting held on March 31, 2006. Our shareholders subsequently authorised the
fresh issue of up to 26,25,000 Equity Shares of Rs. 10 each, by a resolution passed unanimously at the
EGM of our Company held on April 3, 2006.
a)
The following table provides the changes in the authorised share capital of the Company since its
incorporation:
1.
2.
3.
4.
5.
4.
b)
S.No.
Particulars of Increase
Rs. 20,00,000
Rs. 20,00,000 to Rs 50,00,000
Rs. 50,00,000 to Rs. 75,00,000
Rs. 75,00,000 to Rs. 1,00,00,000
Rs. 1,00,00,000 to Rs. 1,25,00,000
From 1,25,00,000 to 15,00,00,000
Date of Shareholder’s Meeting
On Incorporation
September 2, 2002
May 30, 2003
May 28, 2004
December 15, 2004
January 30, 2006
The shareholders at the EGM held on January 30, 2006 have approved a bonus issue in the ratio of 2:1.
The Company has therefore issued 23,028,280 Equity Shares of Re. 1 each.
Notes to Capital Structure
1. Share Capital History of our Company
Date of
Allotment
Number of
Equity
Shares
Face
Value
(Rs.)
Issue
Price
(Rs.)
Nature of
payment of
Consideration
March
1995
27,
10
1,000
1,000
Cash
Initial
Subscribers to
the
Memorandum
10,000
Percentage
of PostIssue
Capital
(%)
Negligible
February
1996
January
2003
19,
1,800
1,000
1,000
Cash
18,10,000
Negligible
18,
16,00,000
1^
1
Further issue of
shares
Acquisition of
Bytelogics, the
partnership
firm@
34,10,000
1.58
Other than
cash
12
Nature/
Reasons for
Allotment
Cumulative
Paid – up
Capital
(Rs.)
Date of
Allotment
Number of
Equity
Shares
Face
Value
(Rs.)
Issue
Price
(Rs.)
Nature of
payment of
Consideration
January
2003
18,
42,000
1*
1
Cash
January
2003
18,
2,50,000
1*
10
Cash
January
2003
18,
70
1*
100
Cash
May 24, 2003
6,250
1*
1,000
Cash
May 30, 2003
37,08,320
1*
1
June 24, 2004
19,22,500
1*
16
December 24,
2004
21,75,000
1*
29.28
Cash
Other Than
Cash
Cash
January
2006
30,
2,30,28,280
1
-
Other
cash
January
2006
31,
4,04,57,580
1
1.20
Cash
than
Nature/
Reasons for
Allotment
Cumulative
Paid – up
Capital
(Rs.)
Further
allotment of
shares
Further
allotment of
shares
Further
allotment of
shares
Further
allotment of
shares
Bonus issue
Further
allotment of
shares
Further
allotment of
shares
Bonus Issue
Allotted
Promoter
to
34,52,000
Percentage
of PostIssue
Capital
(%)
0.04
37,02,000
0.25
37,02,070
Negligible
37,08,320
Negligible
74,16,640
3.66
93,39,140
1.90
1,15,14,140
2.15
3,45,42,420
22.74
7,50,00,000
39.96
*
The Company had split the face value of its Equity Shares from Rs.1,000 to Rs.10 per share after obtaining
necessary approval from Shareholders at an Extraordinary General Meeting held on September 2, 2002 and
subsequently the Company had again split its face value of its Equity Shares from Rs.10 to Re.1 per share
after obtaining necessary approval from Shareholders at an Extraordinary General Meeting held on
December 9, 2002. The Company further consolidated the face value of its Equity Shares from Re. 1 to Rs.
10 per share after obtaining the necessary approval from its shareholders at an Extraordinary General
Meeting held on April 3, 2006.
^
Equity Shares of Re.1 each issued to our Managing Director, T.S. Ashwin for consideration other than
cash in pursuance of the acquisition of the business of the firm, M/s Bytelogics. Please see the section
entitled “History and Certain Corporate Matters” on page 47 of this Draft Red Herring Prospectus.
#
The Company issued bonus shares in the following ratios vide respective Board Resolutions on the
following dates:
Sr. No
1.
2.
2.
No. of Shares
37,08,320
2,30,28,280
Bonus Share to each Equity Share held
1:1
2:1
Date of Board Resolution
May 30, 2003
January 30, 2006
Promoters Contribution and Lock-in:
Name of
Promoter
Date of
Allotment/Acquisition
Number
of shares
held #
Face
value
(Rs.)
Issue
Price
(Rs.)
Nature of
Payment/Consideration
Lockin
period
(Years)
Cash
Percentage
of Post
Issue paidup Capital
(%)
11.37
DCHL
September 1, 2005
11,51,414
10.00
530.15
DCHL
DCHL
DCHL
January 30, 2006
January 30, 2006
January 30, 2006
20,25,000
2,77,828
40,45,758
10.00
10.00
10.00
12.00
Bonus
Bonus
Cash
20.00
2.74
39.96
3
1
1
The locked in Equity Shares held by the Promoter, as specified above, can be pledged with banks or financial
13
1
institutions as collateral security for loans granted by such banks or financial institutions, provided such pledge is
one of the terms of sanctions of loan.
In terms of Clause 4.16.1 (a) of the SEBI Guidelines, the Equity Shares held by persons other than Promoters, prior
to the Issue may be transferred to any other person holding the Equity Shares which are locked-in as per Clause
4.14 of the SEBI Guidelines, subject to continuation of the lock-in in the hands of the transferees for the remaining
period and compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as
applicable.
In terms of Clause 4.16.1(b) of the SEBI Guidelines, the Equity Shares held by the Promoter may be transferred to
and amongst the Promoter Group or to new promoters or persons in control of the Company subject to continuation
of the lock-in in the hands of the transferees for the remaining period and compliance with SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997, as applicable.
3.
The list of the shareholders of the Company and the Equity Shares held by them is as follows:
(a)
Our shareholders and the number of Equity Shares held by them as of the date of filing this Draft Red
Herring Prospectus with SEBI and ten (10) days prior of filing this Draft Red Herring Prospectus with
SEBI is as follows:
Sl. No
1.
2.
3.
4.
5.
6.
7.
Name of Shareholders
No. of Equity Shares
Deccan Chronicle Holdings Limited
T.S. Ashwin*
P.K. Iyer*
T. Venkattram Reddy*
T.Vinayak Ravi Reddy*
T. Urmila Reddy*
T. Manjula Reddy*
TOTAL
Percentage
(%)
74,99,994
1
1
1
1
1
1
75,00,000
100
0.00
0.00
0.00
0.00
0.00
0.00
100.00
* (Holding shares under Section 187C of Companies Act, 1956 on behalf of DCHL)
(b)
Our shareholders and the number of Equity Shares held by them two years prior to the date of filing this
Draft Red Herring Prospectus with SEBI is as follows:
S.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
4.
Name of Shareholders
No. of Equity Shares*
T.S. Ashwin
T. Priya Ashwin
B. Balamurugan
B. Bhaggyalakhsmi
T. Hemalatha Suresh
M.B. Vaijayanthi
Megashyam
T. Suresh
DC Investment and Finance Private Limited
Percentage (%)
6,37,264
1400
1000
1000
20,000
20,000
20,000
41,000
4,09,750
11,51,414
TOTAL
55.35
0.12
0.09
0.09
1.74
1.74
1.74
3.56
35.59
100
Shareholding Pattern of the Company as of the date of filing the Draft Red Herring Prospectus with SEBI:
Shareholder Category
Promoter(2)
Sub Total (A)
Equity Shares owned prior to
the Issue
Number
Percentage
(%)
75,00,000
100.00
75,00,000
100.00
Non-Promoter holding (Institutional
Investors)
Mutual Funds (including Unit Trust of
India)
Banks, Financial Institutions,
Insurance Companies (Central/ State
Government Institutions/
Non Government Institutions)
14
Equity Shares owned after the
Issue(1)
Number
Percentage (%)
75,00,000(3)
75,00,000
74.07
74.07
Nil
Nil
Nil
[ ]
Nil
Nil
Nil
[ ]
Shareholder Category
Sub Total (B)
Equity Shares owned prior to
the Issue
Number
Percentage
(%)
Nil
Nil
Equity Shares owned after the
Issue(1)
Number
Percentage (%)
Nil
[
[
[
[
[
[
]
]
]
]
]
]
Others
Private Corporate Bodies
Indian Public
Trade Unions/Trusts/Clearing
Members/HUFs
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Sub Total (C)
Nil
Nil
Nil
75,00,000
100.00
-
-
-
-
26,25,000
1,01,25,000
25.93
100.00
Total pre Issue share capital
(D=A+B+C)
Public Issue (E)
Total post-Issue share capital
(F=D+E)
(1)
The break up of the Equity Shares allotted pursuant to the Issue is not included.
(2)
Our Promoter is DCHL which currently holds 100% of our issued and paid up equity capital.
(3)
Pursuant to a resolution of the board of our Promoter passed on February 20, 2006, DCHL
resolved to distribute Equity Shares of the Company that would be held by the Promoter after the
completion of this Issue to the shareholders of the Promoter (regardless of whether they hold
Equity Shares of the Company) by way of scheme of arrangement under Sections 391-394 of the
Companies Act. The board of DCHL plans to distribute Equity Shares of the Company up to
74.00% of the post-Issue paid up capital of the Company. The scheme is proposed to be
implemented after the completion of the Issue. The said resolution states that Promoter is
cognizant of the fact that on account of the Issue, the Equity Shares that are proposed to be made
the subject matter of the aforementioned distribution would be locked for a period of one (1) year
in terms of the relevant provisions of the SEBI Guidelines and further that the lock in would
continue to apply to the Equity Shares of the Company even after the proposed distribution of the
Equity Shares to the shareholders of the Promoters (regardless of whether they hold Equity Shares
of the Company) in terms of the scheme, for the balance period. However, the relevant provisions
of the SEBI Guidelines stipulate that inter se transfer of the Equity Shares among the Promoters
or Promoter Group or to a new promoter or persons in control of the company, subject to the
continuation of the aforementioned lock-in and relevant provisions of the Takeover Code.
5.
Except as disclosed in the section entitled “Our Management” on page 49 of this Draft Red Herring
Prospectus, none of our Directors or Key Managerial Personnel hold any shares in the Company.
6.
Our Company, our Directors and the BRLMs have not entered into any buy-back and/or standby
arrangements for purchase of Equity Shares of our Company from any person, other than as disclosed in
this Draft Red Herring Prospectus.
7.
Other than set out above in “Capital Structure - Notes to Capital Structure - Share Capital History of our
Company” on page 12 of this Draft Red Herring Prospectus, our Promoter has not been issued Equity
Shares for consideration other than cash.
8.
None of our Promoters, members of our Promoter Group or our Directors have purchased or sold any
Equity Shares, during a period of six months preceding the date on which this Draft Red Herring
Prospectus is filed with SEBI
9.
The Issue is being made through the 100% Book Building Process wherein at least 50% of the Issue shall
be allotted to Qualified Institutional Buyers on a proportionate basis out of which 5% shall be available for
allocation on a proportionate basis to Mutual Funds. The remainder shall be available for allotment on a
proportionate basis to QIBs and Mutual Funds, subject to valid bids being received from them at or above
the Issue Price. Further, not less than 15% of the Issue would be allocated to Non-Institutional Bidders and
not less than 35% of the Issue would be allocated to Retail Individual Bidders on a proportionate basis,
subject to valid bids being received from them at or above the Issue Price. Under-subscription, if any, in
the Non-Institutional category and the Retail Individual category would be met with the spill over from
any other category, except the QIB Portion, at the sole discretion of the Company in consultation with the
15
[
]
BRLMs.
10.
There are no outstanding warrants, options or rights to convert debentures, loans or other instruments in
our Equity Shares.
11.
A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue, subject
to the maximum limit of investment prescribed under relevant laws applicable to each category of investor.
12.
We have not raised any bridge loan against the proceeds of the Issue.
13.
There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment,
rights issue, and exercise of employee stock options or in any other manner during the period commencing
from submission of this Draft Red Herring Prospectus with SEBI until the Equity Shares issued have been
listed.
14.
The Company presently does not have any intention or proposal to alter its capital structure for a period of
six months commencing from the date of opening of this Issue, by way of split/ consolidation of the
denomination of Equity Shares or further issue of Equity Shares or securities convertible into Equity
Shares, whether on a preferential basis or otherwise. However, during such period or at a later date, we
may undertake an issue of shares or securities linked to equity shares to finance an acquisition, merger or
joint venture by us or as consideration for such acquisition, merger or joint venture, or for regulatory
compliance or such other scheme of arrangement if an opportunity of such nature is determined by our
Board to be in the interest of the Company.
15.
There shall be only one denomination of the Equity Shares of our Company, unless otherwise permitted by
law. We shall comply with such disclosure and accounting norms as may be specified by SEBI from time
to time.
16.
An over-subscription to the extent of 10% of the Issue can be retained for the purposes of rounding off to
the nearest multiple of [.] Equity Shares while finalising the basis of allotment.
17.
We have not issued any Equity Shares out of revaluation reserves or for consideration other than cash
except for bonus issues out of free reserves and on acquisition of firm
18.
We have seven (7) members as of date.
16
OBJECTS OF THE ISSUE
The objects of the Issue are to raise capital for the expansion of our existing chain of our stores, renovation and
expansion of some of our existing stores, advertisement and marketing, expenses that may be incurred on entering
new territories, consolidating our position in existing markets, setting up new regional offices/distribution centres,
upgrading the IT infrastructure, development and implementation of the Odyssey e-commerce website and other
general corporate purposes including strategic initiatives and acquisitions. The objects of the Issue also include
creating a public trading market for the Equity Shares of our Company by listing them on the Stock Exchanges. We
believe that the listing of our Equity Shares will enhance our visibility and brand name and enable us to use our
Equity Shares for strategic growth opportunities.
The net proceeds of the Issue after deducting underwriting and management fees, selling commissions and all other
Issue-related expenses, is estimated at Rs. [ ].
The main objects clause and objects incidental or ancillary to the main objects clause of our Memorandum of
Association enable us to undertake our existing activities and the activities for which funds are being raised by us
through this Issue.
Funds Requirement
Sl. No.
1.
2.
3.
4.
5.
6.
7.
(Rs. In Lakhs)
Estimated Funds Requirement
Description
Store Capex
Renovation and expansion of existing stores
Setting up of regional office/ warehouses
Upgradation of IT infrastructure
Odyssey E-commerce website
General corporate purposes
Issue expenses
Total
7,722.29
456.46
755.00
700.00
300.00
[.]
[.]
[.]
The fund requirement and deployment are based on internal management estimates and have not been appraised by
any bank or financial institution. In case of any variations in the actual utilization of funds earmarked for the above
activities, increased fund deployment for a particular activity may be met with by surplus funds, if any available in
the other areas and/or the Company’s internal accrual, and/ or the term loans/working capital loans that may be
availed from the Banks/ Financial Institutions. The balance proceeds of the Issue in addition to the abovementioned
requirements, if any, will be used for general corporate purposes including strategic initiatives and acquisitions.
Capex towards New offices/Distribution centres
The store operations are supported by a backend setup comprising various departments including buying and
merchandising, human resources, finance, systems, inventory control and warehouses. As we expand into newer
regions, there is a necessity to set-up more regional offices and regional distribution centres. We have already
finalised and entered into a contractual agreement and commenced work for the regional office and distribution
centre in Chennai for the Tamil Nadu region. We are in the process of identifying/finalising office/distribution
centres for the other regions we are entering.
Renovation and expansion of our existing stores
We have already commenced expansion and renovation of our existing store on East Coast Road in Chennai and
paid a total amount of Rs. 55.46 lakhs towards the same. We intend renovating our existing stores at Hyderabad
(Punjagutta), Salem, Trichy and Coimbatore in the year 2006-2007. This will include changing the interiors of these
existing stores based on the new store design, air-conditioning, lighting and electrical, power backup systems,
security systems, computer hardware and software systems, signage and other visual display fixtures and data
connectivity. While this renovation will not effectively any add retail space, it will give a new contemporary look to
the stores and thereby retain and increase customer interest in those stores and thereby the sales.
Keeping in mind the nature of our business involving a large number of SKU’s, current business volumes, planned
expansion and with a view to increasing operational efficiencies, we have decided to go in for an enterprise-wide
ERP solution covering all major functions like Buying, Front-end sales, HR, Accounts and Projects. This ERP will
also come with built-in work flow management tools, email solutions, etc. Some of the prominent solution
providers we engaged in talks with were TCS, Patni, Vernalis, Accel Frontline, E-Solutions, Covansys and IRMC.
The products considered included JDA, SAP Retail, Retail Pro apart from proprietary solutions. The project is in
17
RFP (Request for Proposal) stage and we hope to be able to finalise the vendor by end of March’06. The project
will be implemented in phases over the next 1 ½ years.
Store Capex
Store Capex signifies the costs that would be incurred by us in setting up operations in our stores and includes costs
towards furniture, fixtures, electrical fittings, computer systems, insurance, fire and safety equipment, generators,
closed circuit television systems and communication equipment. We also intend to enter into definitive long-term
lease, leave and license, rental/conducting or other arrangements with the developers / property owners for all our
planned stores and have already forwarded requisite letters of intent as part of the contractual agreements with the
property developers/owners for the planned stores and paid them lease advance/earnest moneys totalling
approximately Rs. 78.30 lakhs as on January 31, 2006.
Setting up of new stores
The following is the schedule for expansion by opening new stores:
Year ending
Sept 30, 2006
Sept 30, 2007
Sept 30, 2008
Locations
Chennai, Mumbai (Vashi), Varanasi, Nagpur East,
Nagpur West and Thane
Calicut,
Coimbatore,
Hyderabad,
Cochin,
Bangalore, East Delhi and Visakhapatnam
Pune, Mumbai
Aurangabad
Total
(Ghatkopar),
Mysore
and
No. of stores
6
7
4
17
Total Built Up
Area(square feet)
73,104
Capex in
Rs. (in
Lakhs)
1,704.17
1,72,981
4,097.30
82,266
1,920.82
3,28,351
7,722.29
Development of Odyssey E-Commerce Website
Since our core product categories include books and music – categories that account for a sizeable volume of sale
through the Internet, we have decided to start work on developing our own E-Commerce website. We have also
entered into an agreement with a website developer to design and develop our website www.odyssey.in to facilitate
internet sale of all our merchandise. The payment gateway has been finalised with ICICI Bank. Other service
providers to handle customer service, logistics providers, etc have also been shortlisted and await final negotiations
and wrap-up. The web site url – www.odyssey.in – has also been registered by the Company. We expect the first
phase of the web site to go online in August or September 2006 and the full site to be online by the middle of 2007.
General Corporate Purpose including Strategic Initiatives and Acquisitions
Our management, in accordance with the policies of our Board, will have flexibility in applying the balance
proceeds of this Issue, for general corporate purposes including strategic initiatives and acquisitions.
We seek to further enhance our position as a leading Indian retailer. In addition to continued investments in
expansion of our retail chain, we intend to enhance our capabilities and address gaps in Indian retail industry,
enhance our technical expertise, rationalize manpower and explore strategic acquisitions, investments or joint
ventures. We also plan to continue investing in and developing the “Odyssey” brand in Indian retail industry. The
balance funds will be utilised for this purpose. The interim use of the balance funds is explained in the section titled
“Objects of the Issue - Interim Use of Funds” as appearing on page 19 of this Draft Red Herring Prospectus.
As at the date of this Draft Red Herring Prospectus, we have not entered into any letter of intent or any other
commitment for any such acquisition/investments/joint ventures or definitive commitment for any such strategic
initiatives and acquisitions and the Board of Directors reviews such opportunities periodically.
Issue expenses
The expenses of this Issue include, among others, underwriting and management fees, selling commission and
brokerage, printing and distribution expenses, legal fees, statutory advertisement expenses, depository charges and
listing fees to the Stock Exchanges. The estimated Issue expenses are as follows:
Activity
Lead management, underwriting commission* ...............................
Advertising and Marketing expenses ...............................................
Printing and stationery ......................................................................
18
Expense (in Rs. Lakhs)
[•]
[•]
[•]
Activity
Registrars fee, legal fee, etc..............................................................
Others…………………………………………………………
Total estimated Issue expenses ......................................................
*To be incorporated after finalisation of Issue Price
Expense (in Rs. Lakhs)
[•]
[•]
[••]
All expenses with respect to the Issue would be borne by the Company.
Interim use of funds
The management, in accordance with the policies set up by the Board, will have flexibility in deploying the net
proceeds received by us from the Issue. Pending utilization for the purposes described above, we propose to create a
fixed deposit of the proceeds of the Issue with a scheduled commercial bank.
Monitoring of Utilisation of funds
We have appointed Deutsche Bank AG Kodak House, 222, Dr. D.N. Road, Fort, Mumbai – 400 001 as the
monitoring agency to monitor the Issue proceeds.
No part of the Issue proceeds will be paid by us as consideration to our Promoters, Directors, Key Management
Personnel or companies promoted by our Promoters, except in the course of normal business.
Means of Finance
Particulars
Amount
(Rs. in lakhs)
Public Issue
Internal accruals
Total
[•]
[•]
[•]
The entire requirement of the funds is proposed to be funded through the Issue. In case of shortfall, if any, the same
shall be met out of internal accruals. Excess money, if any, will be utilized for general corporate purpose. The
project has not been appraised by external agencies and as such all the fund requirements are based on management
estimate.
Appraisal
Our expansion project is an on-going activity and institutional support is not sought in this regard. Hence, the
project has not been appraised.
Schedule of Implementation
Activity
Store Capex
Renovation and expansion of existing
stores
Setting up of regional office/
warehouses
Odyssey E-commerce website
Commencement
January 2006
January 2006
Completion
September 2008
August 2007
April 2006
July 2007
April 2006
April 2006
August 2007
August 2007
Deployment of funds
The Company has incurred expenditure of Rs. 133.75 lakhs as on January 31, 2006 in the proposed expansion and
the same has been certified by the Auditors vide their certificate dated April 6, 2006.
Particulars
Amount
(Rs. in Lakhs)
Store Capex
Sources of financing of funds already deployed
Particulars
Amount
(Rs. in Lakhs)
19
133.75
133.75
Internal Sources
Proposed Utilisation of Issue Proceeds and Details of Balance Fund Deployment
Activities
Amount for the
period (Rs. In
Lakhs)
Total
Project
Cost
Already
Spent upto
January 31,
2006
Balance Amount
7,722.29
78.29
February
1,
2006
to.
September 30,
2006
2,088.00
Renovation
and
expansion
of
existing stores
456.46
55.46
50.00
351.00
Setting
up
of
regional
office/
warehouses
755.00
-
428.00
327.00
Upgradation of IT
infrastructure
700.00
-
200.00
500.00
300.00
-
200.00
100.00
General corporate
purposes
[.]
-
[.]
[.]
[.]
Issue expenses
[.]
-
[.]
Total
[.]
13,375
[.]
[.]
[.]
Store Capex
Odyssey
Ecommerce website
Year
ending
September 30, 2007
Year ending September 30,
2008
3,632.00
1,924.00
Shortfall of Funds
Any shortfalls in meeting the project cost will be met through further internal accruals and unsecured loans from
Promoters.
20
BASIS FOR ISSUE PRICE
Qualitative Factors
For some of the qualitative factors, which may form the basis for computing the price refer to the section entitled
“Summary” on page 1 of the Draft Red Herring Prospectus.
Quantitative Factors
Information presented in this section is derived from our audited restated standalone financial statements prepared
in accordance with Indian GAAP.
1.
Earnings per share*
Financial Year
EPS (Rs.)
Weightage
June 30, 2003 #
1.21
1
September 30, 2004 #
0.49
2
September 30, 2005
7.42
3
Weighted average EPS
4.075
# Figures have been provided on an annualized basis.
* The weighted average number of Equity Shares has been considered for calculation of EPS.
2.
Price/Earning (P/E) ratio in relation to Issue Price of Rs. [ ]
a.
Based on twelve months ended September 30, 2005 is [ ]
b.
Industry P/E
i)
Highest:
124.20
ii)
Lowest:
63.20
iii)
Average (composite):
94.43
Source: Capitalline
3.
Weighted average return on average net worth
Period
Return on Average Net Worth (%) Weight
June 30, 2003
September 30, 2004
September 30, 2005
Weighted Average
4.
5.89
1.14
7.49
5.25
1
2
3
Minimum Return on Increased Net Worth Required to maintain pre-Issue EPS.
The minimum return on increased net worth required to maintain pre-Issue EPS is [•] % to [•] %.
5.
The Net Asset Value per Equity Share of our Company as of January 31, 2006 was Rs. 115.15 as per
our restated financial statements included in this Draft Red Herring Prospectus.
6.
Net Asset Value per Equity Share after Issue
The net asset value per Equity Share after the Issue is [•]
Issue Price per Equity Share: Rs. [•]
Issue Price per Equity Share will be determined on conclusion of book building process.
7.
Comparison of accounting ratios of the Company with industry average and accounting ratios of
peer group for Financial Year 2005.
21
Strictly, the Company cannot be compared with the other listed companies, as the Company does not have
an apparent competitor in the segment in which it is operating.
The Issue Price of Rs. [•] has been determined on the basis of the demand from investors through the
book-building process and is justified based on the above accounting ratios. The face value of the Equity
Shares is Rs. 10 each and the Issue Price is [•] times of the face value.
The BRLMs believe that the Issue Price of Rs. [•] is justified in view of the above qualitative and
quantitative parameters. See the section titled “Risk Factors” on page x of this Draft Red Herring
Prospectus and the financials of the Company including important profitability and return ratios, as set out
in the Auditors’ report on page 65 of this Draft Red Herring Prospectus to have a more informed view.
22
STATEMENT OF TAX BENEFITS
We have been advised by V. Sukumar, Chartered Accountant in his certificate dated April 6, 2006, that under the
current tax laws, the following tax benefits inter-alia, will be available to us and the members of the Company. A
member is advised to consider in his / her / its own case the tax implications of an investment in the Equity Shares,
particularly in view of the fact that certain recently enacted legislations may not have direct legal precedent or may
have a different interpretation on the benefits which an investor can avail.
To The Share Holders of the Company – Under the Income-tax Act, 1961
(A)
Resident Share Holders
(1)
Under Section 10(34) of the Act, dividends (whether interim or final) declared, distributed or paid by the
company are exempt in the hands of the individual shareholders.
(2)
Computation of Capital Gains
Capital Assets may be categorized into Short Term Capital Assets and Long Term Capital Assets based on
the period of holding. All capital assets (except shares held in a company or any other listed securities or
units of UTI or specified Mutual Fund units) are considered to be long-term capital assets if they are held
for a period in excess of 36 months. Shares held in a company, any other listed securities, units of UTI and
specified Mutual Fund units are considered as long term capital assets if these are held for a period
exceeding 12 months. Consequently capital gains arising on sale of shares held in a company or any other
listed securities, or units of UTI or specified Mutual Fund units held for more than 12 months are
considered as “long term capital gains”.
Section 48 of the 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 a 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.
(a)
Under Section 10(38) of the Act, long term capital gains arising on sale of shares where the transaction of
sale is entered into on a recognized Stock Exchange in India, on or after the date on which Chapter VII of
the Finance Act, 2006 comes into force, such transaction is chargeable to Securities Transaction Tax shall
be exempt from tax.
(b)
Under Section 54EC of the Act and subject to the conditions and to the extent specified therein, long term
capital gains arising on the transfer of shares of the company that are not exempt under Section 10(38) of
the Act, shall not be chargeable to tax if the whole or any part of the capital gains is invested in certain
notified bonds within a period of six months after the date of such transfer. However, if the said bonds are
transferred or converted into money within 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.
(c)
Under Section 54F of the Act, long term capital gains arising to an individual or Hindu Undivided Family
(HUF) on transfer of shares of the company, will be exempt from tax subject to other conditions specified
therein, if the sale proceeds from such shares are used for the purpose of purchase of residential house
property within a period of one year before and two years after the date on which the transfer took place or
for construction of residential house property within a period of three years after the date of transfer.
(d)
Under Section 111A of the Act, short term capital gains arising on sale of shares where the transaction of
sale is entered into on a recognized stock exchanges in India, on or after the date on which Chapter VII of
the Finance Act, 2006 comes into force shall be subject to tax at a rate of 10 percent ( plus applicable
surcharge and education cess ).
(f)
Under Section 112 and other relevant provisions of the Act, long term capital gains arising on transfer of
shares of the company not covered by Section 10(38) of the Act, shall be subject to tax at a rate of 20
percent ( plus applicable surcharge and education cess ) after indexation as provided in the second proviso
to Section 48 or at 10 percent ( plus applicable surcharge and education cess ) without indexation, at the
option of the shareholder.
However, as per the proviso to Section 112(1) of the Act, if the tax on long term capital gains resulting on
23
transfer of listed securities or units, calculated at the rate of 20 percent with indexation benefit exceeds the
tax on long term capital 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 ).
(B)
Mutual Funds
Under Section 10 (23D) of the Act, all Mutual Funds set up by Public Sector Banks or Public Financial
Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized by
the Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from
income-tax on all their income, including income from investment in the equity shares of a company.
(C)
Venture Capital Companies / Funds
Under Section 10 (23FB) of the Act, all venture capital companies / funds registered with Securities and
Exchange Board of India, subject to the conditions specified, are eligible for exemption from income-tax
on all their income, including income from sale of shares of the company.
Benefits to the Shareholders of the Company under The Wealth Tax Act, 1957.
Shares of the company held by the shareholders will not treated as an asset within the meaning of Section 2(ea) of
the Wealth Tax Act, 1957 and hence Wealth Tax will not be applicable.
Benefits to the Shareholders of the Company under The Gift Tax Act, 1958.
Gift of shares of the company made on or after October 1, 1998, would not be liable to Gift Tax provided the gift is
made to related persons. Gift of shares of the company to unrelated persons exceeding Rs. 25,000/- would however
be taxed as income in the hands of the recipient as per amendment made by the Finance Act, 2006.
Notes:
All the above benefits are as per the Current Tax Laws as amended by the Finance Act, 2006 and will be available
only to the sole / first named holder in case the shares are held by joint holders. Legislation, its judicial
interpretation and the policies of the regulatory authorities are subject to change from time to time and these may
have a bearing on the advice that I have given. Accordingly, any change or amendment in the law or relevant
regulations would necessitate a review of the above. Unless specifically requested, I have no responsibility to carry
out any review of my comments for changes in laws or regulations occurring after the date of issue of this Note.
In view of the individual nature of tax consequences, each investor is advised to consult his / her own tax advisor
with respect to specific tax consequences of his / her participation in the scheme.
24
RETAIL INDUSTRY
Retail Formats: Emerging Trends
Retailing is the world'
s largest private industry exceeding US $7 trillion and 47 of the global Fortune 500
companies and 25 of Asia'
s Top 200 companies happen to be retailers. The organized sector is generating about 18
percent shareholder returns on the global plane, thereby outperforming sectors like banking and insurance.
Nations that have enjoyed the greatest economic and social progress have been those with a strong and organized
retail sector. In most western countries the retail sector enjoys the status of a full-fledged industry and the organized
players account more than three-fourths of the total retail trade. Large retailers such as Wal-Mart of US ($256
Billion), Carrefour of France ($87 Billion), Ahold of Netherlands ($68 Billion), Metro Group of Germany ($65
Billion), Kroger of US ($53 Billion), and Tesco of UK ($50 Billion) now dominate the global retail market and
trends indicate towards a consolidation in the retail sector. The top 30 retailers currently account for about 19
percent of the global retail sales.
Potential for all Formats to Thrive: Most of the global powerhouses in the retailing sector such as Wal-Mart,
Carrefour, Tesco etc have adopted multi- format and multi-product strategies in order to customize their product
offering for distinct target segments.
Further, with the emergence of larger store formats like superstores and hypermarkets in countries like UK, France,
Germany, Spain since the 1980s and Eastern Europe more recently, traditional food retailers have been able to stock
more extensive non-food ranges. In fact, Tesco, UK'
s leading grocer, has become the number one apparel retailer in
the Czech Republic and also a major player in Hungary apart from being one of the fastest growing clothing
retailers in the UK.
Together with its rival, Wal-Mart-owned ASDA, Tesco is one of the food sector'
s most successful exponents of
clothing in Europe. To illustrate further, the various formats and categories operated by 5 of the largest retailers in
the world are highlighted below
Retailer
Formats
Product Categories
Wal-Mart Discount, Hypermarkets, Warehouse Clubs, Food and Grocery, Clothing, Furniture and
Neighborhood Stores, Convenience Stores
Furnishings, Auto Services, General Merchandise,
Electrical, Financial Services, Appliances etc
Tesco
Supermarkets, Hypermarkets, Neighborhood Food and Grocery, General Merchandise, Clothing,
stores, Convenience Stores, Internet, Home Products, Fuel, Automobiles etc.
Catalogue, Department Stores
Carrefour Hypermarkets,
Supermarkets
Royal
Ahold
Convenience
Stores, Food and Grocery, Clothing, General Merchandise
etc.
Supermarkets, Hypermarkets, Clubs, Internet Food and Grocery, General Merchandise, Home
wares
Marks & High street, Catalogue, Convenience
Spencer
Food and Grocery, Clothing, Footwear, Personal
Care, Soft Furnishings, Furniture, Home wares,
Financial Services, General Merchandise, Luggage
Light electrical etc
Retail Formats: Broad Classification
Broadly, the organized retail sector can be divided into two segments, In-Store Retailers, who operate through fixed
point of sale outlets located and designed to attract a high volume of walk-in customers, as referred to as the brickand-mortar format, and the Non-store Retailers, who reach out to the customers at their homes or offices through
direct selling, tele-marketing and e-commerce. The common formats of brick-and-mortar retailing can be
summarized as follows:
25
Format
Description
Value proposition
Specialty
Store Focus on a specific product category, Medium Greater choice to the Consumer,
sized layout in strategic location
comparison between brands possible
(Multi-Brand)
Exclusive Brand Or Exclusive Stores owned/ managed Or franchised Complete range available for a
out by a given brand or manufacturer; Can be specific brand or manufacturer with
Company Outlet
Exclusive Single-brand or Multi-brand store
certified product quality
Department
Store Large stores having a variety of products, One-stop shop catering to varied
needs,
Service
as
(Multi-Product
/ organized into different departments such as consumer
clothing, house wares, furniture, appliances, toys, differentiator
Multi- Brand)
books, etc; skewed towards apparel
Convenience store
Small self service formats located in crowded Convenient,
multiurban areas/ location
extended operating hours
Discount store
Stores offering discounts on the retail price Low prices
through selling high volumes and reaping the
economies of scale
Supermarket
Large multiple and cohesive self-service retail One-stop family shop in food and
outlets, catering to varied customer needs, located household categories
in residential high streets
functional,
Category
Killers Very Large Stores with focus on a specific Consumers get extremely wide choice
product category, located in busy marketplace in of brands in a specific product
(Multi-Brand)
Metros and large cities.
category
Hypermarket
Huge multi-divisional layout with a warehouse- Low prices, vast choice, including
like appearance, generally located in remote parts services; value drivers
of a city
Malls
A huge enclosure housing different formats of
retailers, Form ideal shopping destinations in
Metros, large cities and easily accessible urban
outskirts/ rural settings
Variety of shops available close to
each other, all under a common roof
and uniform shopping environment;
ideal hangouts
(All above source: Indian Retail Report – Images Retail and KSA Technopak)
26
The Indian Retail Story
India is the fourth largest economy in the world in Purchasing Power Parity (PPP) terms after USA, China and
Japan. It has grown steadily since economic reforms were initiated in the early 1990s. Gross Domestic Product
(GDP) has averaged a growth of around 6 percent per annum in the last 10 years, and has picked up further
momentum in the last three years, achieving between 6 and 8.4 percent growth. In 2003, India became the second
fastest growing economy in the world with a growth rate of 8.2 percent. The outlook for the future is equally
buoyant given GDP growth forecasts for the current year at 7 percent and for the next 5 years at 7-8 percent per
year.
One of the key developments during India'
s growth path has been a favorable shift towards the services sector,
which now accounts for almost 50 percent of the total GDP. Led by services such as IT, telecommunication,
healthcare and retailing, these sectors are likely to play an even more important role in the Indian economy.
With a huge and growing consuming class, India is considered to be one of the preferred destinations for
investments in the world. According to UNCTAD'
s World Investment Report 2004, Foreign Direct Investment
(FDI) inflows to India grew by 24 percent to USD 4.26 Billion in 2003 over USD 3.44 Billion in 2002, putting
India among the top 10 FDI destinations among developing economies and fourth among Asian nations.
Source: Images Retail – KSA Technopak)
India – A Vibrant Economy
•
•
•
•
•
•
•
•
•
Tops AT Kearney list of 30 emerging markets for global retailers to enter.
Among Top 10 FDI destinations.
2nd fastest economy in the world
3rd largest economy in terms of GDP in next 5 years.
4th largest economy in terms of Purchasing Power Parity (PPP) after USA, China and Japan.
Stable political climate with reforms in place.
Growing Corporate Ethics
Major tax reforms including implementation of VAT
USD 130 billion investment in infrastructure in the next 5 years.
Goldman Sachs, Investment Banker, reports:
•
•
•
India has the potential to deliver the fastest growth over the next 50 years with an average rate of more
than 5 per cent a year for the entire period.
India'
s economic growth could actually exceed that of China by 2015.
Indian economy is expected to overtake Britain in 2022 and Japan in 2032 to become the third-biggest
economy in the world after China and US.
Standard Life Investments reports: Indian stock market is expected to deliver average annual return of 10 percent
over the next 50 years
A Resplendent Market
•
•
•
•
It is a country with the largest young population in the world -- over 890 million people below 45 years of
age.
More English speaking people in India than in the whole of Europe taken together
300 million odd middle class, the “Real” consumers, is catching the attention of the world
Number of effective consumers to swell to over 600 million by 2010 – sufficient to establish India as one
of the largest consumer markets of the world
Retailing in India – Images- KSA Technopak Estimates
•
•
•
•
•
•
•
Total Consumer Spend in the Year 2004-05 – INR 18,540 billion at current prices
Retail sales (55% of private consumption expenditure) stands at INR 10,200 billion (USD 226 billion)
growing over 5% annually
Organised Retail – INR 350 billion - about 3.4% of Retail sales but growing at over 30%
Organised retail to cross INR 1000 billion mark by 2010
INR 200 billion investment in the pipeline
Top 6 cities account for 66% of total organized retailing
Overwhelming acceptance of modern retail formats
27
India Retail By 2007 – Images F&S Research
•
•
•
From 95 currently operational shopping centres with approximately 22-million square feet space, India to
have over 375 shopping centres/ Malls covering over 90 million square feet by 2007 end
50 hypermarkets, 305 large department stores, 1500 supermarkets and over 10,000 new outlets under
construction
Additional Retail space to add INR 300 billion of business to organised retail
(Source: Internet. Compiled for usage)
Huge Private Consumption Offers Attractive Opportunities In Most Categories
According to IMAGES-KSA estimates, private final consumption expenditure in India was estimated at INR
1,690,000 crore (USD 375 billion) in 2003 04. Retail sales contribute almost 55 percent of total consumption
expenditure i.e. INR 930,000 crore (USD 205 billion). Food and beverages (including tobacco) continued to
account for a significant share of nearly half of total private final consumption expenditure. Clothing and footwear
constituted 5 percent and furniture and furnishings 4 percent of overall expenditure incurred on consumption in
2003 04. The consumption of consumer durables has picked up over the last few years with 8.6 million color
television units sold last year, of which flat TVs alone contributed 30 percent. Further, mobile phone subscriptions
have touched 45 million and 1.5 million new subscribers are being added every month. In fact, the number of
mobile subscriptions has exceeded the number of fixed-line connections in the country, in line with trends
witnessed in major developed economies.
Categories
Consumption
Expenditure 2003 – 04
in Rs. crore
% of Total
718,136
79,631
203,391
49,852
142,143
258,696
57,367
178,998
43%
5%
12%
4%
8%
15%
3%
11%
Food, Beverages and Tobacco
Clothing and Footwear
Gross Rent, Fuel and Power
Furniture, Furnishings and Appliances
Medical and Health Care Services
Transport and Communications
Recreation, Education and Cultural
Miscellaneous
IMAGES KSA Technopak Estimated Figures at 2003-04 prices
The Indian Consumer
With the largest young population in the world - over 890 million people below 45 years of age! - India is indeed a
resplendent market. India has more English speaking people than in the whole of Europe taken together. Its 300
million odd middle class, the “real” consumers, is catching the attention of the world. And the number of effective
consumers is expected to swell to over 600 million by 2010 – sufficient to establish India as one of the largest
consumer markets of the world.
28
Alongside the expansion in retail activities, the Indian consumer is also evolving rapidly. While organized retailing
plays a significant role in boosting consumption expenditure, consumer lifestyles dictate what sort of offerings and
experience retailers need to come up with. This makes it necessary for retailers to understand the changing
consumer profile in some detail.
Demographic Changes: The Indian consumer is young; in fact we have one of the youngest popular of the world
as compared to the ageing population of USA, China, Japan, UK etc. Over 65 percent of the population is below 35
yrs old; 54 percent of the population is below 25 years of age. In contrast, the population in Europe and Japan is
declining, where as immigration is largely responsible for keeping a positive growth rate in US. Even China, which
is currently young, would witness rapid ageing in the next 20 yrs.
The working population in India is growing unlike the trend in most developed countries. Added to this is the fact
that Indians are getting richer with growth in incomes and purchasing power. Per capita GDP is slated to double by
2014. India is the second fastest growing economy in the world at present. Discretionary spending has witnessed a
16 percent rise for the urban upper and middle class. The number of high-income households has grown by about
20 percent yearly, between '
95-96 and '
98-99 as per NCAER date and grew by 60 percent to reach 44 m in 2003.
Consumer Spending
As per the Images-KSA Technopak 'India Retail Report': With the total Consumer Spend touching INR 20,000
billion at current prices with retail at INR 10,500 billion (growing over 5% annually), organized Retail at INR 350
billion (growing at over 30%) is expected to cross INR 1000 billion mark by 2010.
Prospects
Indian retail has come a long way in the last four decades, creating new business opportunities for Indian corporate
majors and various MNCs that have made steady inroads into the business of retailing in India. India is beginning to
make news worldwide. Indian retail extravaganzas have begun to make noises too. Indian corporates and the media
are certainly adding more fire to the building excitement. It’s just the right time to think India.
With escalating consumerism, unprecedented fashion awareness, and a youth-heavy customer base, India is the
‘Promised Land’ for the business of fashion. Global fashion brands, faced with fast saturating Western markets, are
beginning to recognise the Indian consumer mass as the world'
s most probable unexplored gold mine. The
consumer spending is ultimately pushing the economy into a growth-and-liberalisation mode. Indian fashion is
becoming bolder by the day.
Though at present the top six Indian cities account for 66 per cent of total organized retailing, overall there has been
an overwhelming acceptance of modern retail formats. Organized retailing in India will no more be restricted to the
metros and major cities. Of late, India’s rural market has also caught the eye of Indian corporate majors.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
29
Source: KSA Technopak – Consumer Outlook 2005.
30
Organized retailing constitutes just 3 percent of the Rs.930,000 crore Indian retail market. However, the scale of
organized activity is not equally spread out across all sectors. The Watches sector is the most organized of all with
almost 40 percent of the market being controlled by branded and organized players.
The next most organized segment is that of footwear (25%) followed by clothing (13.6%). As all of these three
sectors constitute core “fashion”, it is rightly observed, “fashion drives Indian retail”. Much of the credit for having
pioneered the organized retail movement in India, and in these sectors in particular goes to brands like Titan, Bata
and Raymond, besides others.
Of all the retail sectors, the last organized one is food and grocery (1%), jewellery (2%) and health and beauty (2%).
All three sectors are huge in size: Food & grocery is the largest of all sectors (worth Rs.615,000 crore); India is the
world'
s biggest market for gold and jewellery though there is hardly any retailer with a national presence in this
sector; health and beauty consciousness among Indian consumers, especially the urban youth, is on the rise and
consumers will readily accept any quality offering in this context, service as well as product. There exists huge
potential in these and all other sectors.
Book And Music Retailing
Book reading habit in India is increasingly becoming popular as recent studies indicate that the spending on books
and music has grown by a percentage point in 2004 as compared to the previous year. The Indian Book industry is
estimated at INR 3,000 crore, out of which the share of organized book retail stands at less than 7 percent, at INR
200 crore. Text and curriculum books have a contribution of 50 percent to the total sales and thus an emerging
sector. The gifting habit is also catching on fast in India and books par take a significant share of it, one reason why
it becomes all the more convenient to retail gift items at book stores.
Similar to other retailing verticals, organized book retailing in India is also a recent phenomenon. In
31
synchronization with the retail revolution in India, there have been multi-pronged efforts to change the way books
are bought in India. Credit goes to new age retailers who have been instrumental in revolutionizing the book
retailing in the country. Book store chains are mushrooming across several cities, which is an indication that reading
is alive and thriving in India. This segment is expected to grow at an annual rate of 15 percent.
The history of book retailing in India has been quite lackadaisical. The traditional bookstores have been
characterized with their dusty, dreary and browser unfriendly atmosphere. Thus it has been able to attract none but
the avid book lovers who have been the only loyal customers because of no options. To the customers'delight the
new format book retailers have changed all this. From the retailers'perspective the recipe of success is to provide
the customer with an '
experience'instead of commodity, as done earlier.
Emerging Concepts
Retailers who started exclusive book stores have added music, stationery, toys, gifts etc to increase footfalls. The
new format stores have cafes, large spaces, inviting interiors and comfortable seating, making it enjoyable for the
customer to spend long '
browsing hours'in the store. Bringing up something new constantly encourages customers
to frequent the store more and even take part in activities. Innovation in design affects space, stocks and people.
Retailers have to make key investments in this aspect. Retailers assess its use of space with the GMROF (gross
margin return on footage) or margins per square foot. Typically the margins are 25-30 per cent. For the store, a lot
depends on how books are placed, comprising the high-and low-impulse sections. The high-impulse-high-browse
segment, typically found at the back, comprises sections on management, self- improvement, cuisine, philosophy,
religion, classical literature, and more. Low-impulse- low-browse segment, towards the front, comprises bestsellers
and books that take very little time to be picked up. This reduces the "brush aspect significantly. It irritates
customers when spaces are crowded and someone constantly brushes against them which also spoils the mood."
Till now all the efforts have paid well and the players have got encouraging response from the target segment - “the
educated class across all age groups”. As a result the prominent players have shown a healthy growth rate of over
20 percent in their top line during previous financial year 2003-04.
The impressive performance of bookstore chains can also be attributed to the presence of a large base of English
speaking population in India, which ensures a huge market for books. Another factor is increase in disposable
income across all age groups that resulted in people spending more on hobbies like music and reading.
The key factor responsible was the positioning of stores as “experience centers” or destination centers instead of
mere bookstores. The two-pronged approach was to first, attract the non-book readers and encourage them to spend
some quality time inside the store and second, provide an excellent browsing experience to the book lovers through
essentials like large spaces; large collection; other merchandise like music, toys etc; good seating arrangements and
luxuries like cafes inside the bookstores, events like interaction with favorite author or personality. In addition to
this the stores have also started offering value added services like home delivery, online retailing.
Challenges in Book Retailing: roll-out in tier-II towns to drive future growth
Advantage on the price front: For organized book retailers in India, the challenge would be to tackle the second
hand market. Indian consumers have a habit of searching for second hand options. Till the time the second hand
books are available, it will be difficult for the retailers to fully realize the market potential. The obvious reason for
popularity of second hand books is the huge price differential. To tackle this, organized players have to bring down
the prices. They have an inherent advantage of volumes by which they can arm- twist suppliers and negotiate on
better discounts.
In the international markets, several retailers have successfully adopted the discounter format as well in order to
tackle the competition from second hand market. Since the Indian book retailing is currently in its growth stage, this
doesn'
t seem happening in the near future. However 10-15 years down the line, as the industry matures, the need to
differentiate from the rest of the competition will be immense. Then the industry would see many new formats
emerging. Even after more than a decade of existence, major organized chains have not yet been able to start
operations in more than ten cities.
Tough competition from e-tailing imminent: The advent of e-retailing and increasingly convenient access to
online shopping could be a challenge for the brick and mortar stores. This might not appear to be a serious problem
as of now, but in future this could reach dangerous proportions. Internationally the e-tailing of books has been
witnessing handsome growth rate with websites like Amazon.com, Barnes&noble.com, WhSmith.com earning their
substantial revenue from internet sales. The challenge for the online retailers will be to provide a substitute for the
browsing experience. To some extent, it is taken care of by articles and reviews about the books available on the
web site and elsewhere to assist customers in making choice.
Promoting private labels in accessories a must: Another challenge for retailers would be to generate footfalls in
their stores by adding other categories like music, toys and gifts to encourage non-readers to enter their stores. The
32
success mantra would be to make the stores a destination point. And, the stores should not just appeal to the Section
A class as a lifestyle store, but should be able to attract other consumer segments as well.
Another development in the international book retailing is private label merchandise being encouraged. Some
retailers have associated with publishing companies (backward integration) like WH Smith, whereas some retailers
have private-labeled merchandise like stationery, greeting cards, games etc.
Destination store is the ideal format; shop-in-shops may click: The most common format in book retailing is the
large destination Store with a retail area averaging at 20000 square feet per outlet. Thus for the retail chain to
successfully roll out in tier II cities, there is a need to work on a smaller format and there have been initiatives on
this front.
Other emerging formats are mall based and shop-in-shops. Both these formats guarantee footfalls and have lower
operating costs compared to specialty stores. The shop-in shop has seen several combinations like books + music,
books + café, books in a department store etc.
Internationally the popular formats are destination stores, discount stores and online retailing. With fierce
competition in the mature markets like the USA, discount stores like Half Price Books are fast gaining popularity.
All the major bookstore chains have commenced their web operations. The most important aspect would be to
create a balance between the two formats. The brick and mortar format can be used to create brand and thus cater to
first timers, whereas the online version can be used to service the loyal customers. Online retailing also involves a
wide range of supply chain issues. The ability to service the generated orders viably will be another important
aspect.
Music Retailing
The size of the Indian music industry, as per this Images-KSA Study, is estimated at Rs.1100 crore of which about
36 percent is consumed by the pirated market and organized music retailing constitutes about 14 percent, equivalent
to Rs.150 crore.
Film Music Dominates, Popular Music picks up:
The music industry in India has a unique structure unlike most other global markets. Till 1990, the music market
was almost completely dominated by movie and devotional music. The early 90'
s saw the advent of the television
and increased consumer exposure to non-film music channels, non-film albums and music videos.
Music Digitization on the Rise:
33
In line with the global music industry, the phenomenon of '
music digitization'is also affecting the Indian market.
With MP3 format showing a tremendous penetration in the past few years, it is all set to overtake the analog form of
music. Had the MP3 sales been legal, it would have been possible for the music companies to change their business
strategy and adopt themselves accordingly. But as it stands now, 40 percent of the Indian music is pirated (largely in
MP3 format), and it has become a Herculean task for the industry to handle it.
The growth in the MP3 format has primarily been fuelled by:
•
Increasing computer awareness of people across India
•
Computer, peripherals and CDs getting cheaper and thus penetrating deeper
•
Easy availability of MP3 songs on the net or at a neighborhood music store
•
Lack of enforcement of govt. policy for controlling music piracy
In light of the crisis, the brick and mortar organized music retail in India has to make a lot of concentrated efforts to
establish themselves. The key players have taken on the challenge and have been working hard to swim against the
flow and position themselves as destination points. They are offering a USP of experience shopping complemented
with large collection of titles, wonderful ambience and well laid out and planned interiors to make the music
shopping experience cherishable, at no extra cost.
In spite of the decline in the domestic music industry, the key players have posted impressive growth in their top
line. Primary driver of the revenue growth has been the retail expansion. With music purchase largely being on
impulse, the retail chains have put in a lot of resources for generating footfalls. In addition to the suave interiors,
promotions like celebrity endorsements, exclusive availability in the initial period, and etc act as crowd pullers for
them.
Source: India Retail Report – Images Retail & KSA Technopak
Some Challenges still need to be Overcome
Despite the enormous growth opportunities available in Indian retail, the sector continues to be fraught by a wide
variety of roadblocks that act as dampeners to the otherwise upbeat scenario. A few of them are as under
Regulatory barriers: Due to the threat to smaller domestic retailers from entry of global retailers and a ruling
coalition government, the retail sector in India remains highly regulated, thereby, holding back its full-fledged
advancement. Foreign direct investment (“FDI”) in the retail sector is not permitted though the government has
announced a draft proposal for allowing FDI to exclusive brand retailers. This issue is so critical for the sector'
s
future performance that it has been dealt with separately in another section.
Fragmented suppliers: Very few suppliers have the requisite scale and product range to supply to national retail
chains, except in industries like electronics, FMCG, cosmetics and textiles. Further, lack of adequate infrastructure
with respect to roads, electricity, cold chains and ports has further led to the impediment of a pan-India network of
suppliers. Due to these constraints, retail chains have to resort to multiple vendors for their requirements, thereby,
raising costs and prices.
Lack of skilled human capital: With new players entering the retail industry, there has been an upsurge in demand
for skilled manpower. However, this is not backed by the available talent pool as the sector has only recently
emerged from its nascent phase. Further, retailing is yet to become a preferred career option for most of India'
s
educated class that has chosen sectors like IT, BPO and financial services.
Differential taxation system: Even though the government is attempting to implement a uniform value-added tax
across states, the system is currently plagued with differential tax rates for various states leading to increased costs
and complexities in establishing an effective distribution network. Further, laxity in implementation of sales tax
legislation has lead to evasion by smaller stores giving them an edge over larger, organized formats.
Labor legislation: Stringent labor laws govern the number of hours worked and minimum wages to be paid leading
to limited flexibility of operations and employment of part-time employees. Further, multiple clearances are
required by the same company for opening new outlets adding to the costs incurred and time taken to expand
presence in the country.
Lack of 'industry'status: The retail sector does not have '
industry'status yet making it difficult for retailers to
raise finance from banks to fund their expansion plans.
Critical Success Factors
In order to accomplish success in the promising Indian
34
retailing sector, new entrants need to consider a host of
factors. For example, it is imperative to define a distinct and sustainable retail proposition which is in line with the
value-conscious Indian consumer.
Second, prospective entrants need to establish a significant presence to be able to leverage economies of scale of
operations.
Third, significant investments will have to be made in achieving supply chain excellence especially in the initial
stages of operations to facilitate an aggressive roll-out.
Next, players would have to acknowledge regional and cultural differences prevalent in India and align their
merchandise mix and retailing formats accordingly. Hence, solutions offered must be India-centric though strategic
and operational attributes like value proposition, service, experience, efficiency, hygiene etc. should be
benchmarked with global standards. Further, an effective private label strategy should be adopted and operational
gains achieved should be passed on to end-consumers in order to offer a superior price-value equation, thereby,
competing effectively with the unorganized segment.
Last, retailers will have to invest time and resources in continuous improvement of service standards and product
assortment keeping in view the speedily-evolving consumer dynamics.
Source: India Retail Report 2005 – Images Retail and KSA Technopak
35
OUR BUSINESS
Overview
music, cards, stationery, gifts, toys, multimedia and magazines. Odyssey was started in the year 1995 with a 3500
sq. ft store in the southern suburb of Chennai – Adyar. Now we occupy approximately 60,000 square feet of retail
space in six cities, viz., Chennai, Hyderabad, Coimbatore, Trichy, Salem and Varanasi.
Our Competitive Strengths
We believe that the following are our primary competitive strengths:
Strong position in the Indian retail sector
Odyssey is one of the largest book retail chains in India. We have started our expansion operations in other cities
with the same product categories. We started our expansion in the year 2002 by entering Hyderabad, Varanasi and
Trichy. We believe that we have always stood apart from our competitors in terms of service delivery by improving
the bench mark on customer service. We also believe that we have consistently provided better service than our
competitors, and have successfully withstood the competition in the markets where we have presence.
Store Design Concept
Our stores are designed to be user-friendly with an aesthetic feel to them. Every section has adequate seating area so
that our customers can take their time whether they are browsing for their favourite books or looking for toys for
their children.
Most importantly, our stores give the feeling of space - which is core to our brand promise. The gift section has
merchandise displayed in a manner it would be displayed in the home of its owners. Child friendly environment is
ensured with small details like, lower hand rails for kids on staircases and racks at a much lower level. Some of our
stores also provide for a playpen where kids can play while their parents shop at the other sections.
The book section has ample seating space. The unique part of the music section is that it has listening posts with
seating, so that our customers can take their time listening to the music they love. Two of the stores also have a
restaurant called Café Odyssey where the element of space is pervasive. The theme of this restaurant is ‘slow food’
i.e. eating at Café Odyssey is more about the entire experience than, just the food. The ambience helps our
customers relax and they can enjoy their meal while reading a book which they can order from the store or listen to
music of their choice. There are also some gift items on display which are available for purchase.
The new format stores have cafes, large spaces, inviting interiors and comfortable seating, making it enjoyable for
the customer to spend long '
browsing hours'in the store. We feel that constant innovation encourages our customers
to return to us.
Experienced and Professional Managers
36
We have a team of professionals with vast experience in analyzing the market trends and stocking the store
accordingly. The operations team, which runs the stores, has a good understanding of the customers and seeks to
provide them with the right product. They have established their credentials by attracting more walk-ins to the
stores and conversion at the stores.
Entering new markets
We started expanding since the year 2002 and we now are a 12 store chain. We plan to expand our presence to more
cities and towns in the coming years. We have finalized plans to open 17 more stores in the next 3 years. The table
below provides for the same:
Location
Chennai (Hotel Stores)
Vashi, Mumbai
Varanasi
Nagpur East
Nagpur West
Thane
Calicut
Coimbatore
Hyderabad
Cochin
Bangalore
New Delhi
Visakhapatnam
Pune
Mumbai
Aurangabad
Mysore
Size of the Store (in square feet)
140
11,400
1,555
16,238
13,771
30,000
17,981
15,000
30,000
22,000
28,000
30,000
30,000
12,516
23,750
25,000
21,000
Expected fit out by
February 2006
April 2006
May 2006
May 2006
August 2006
September 2006
November 2006
December 2006
January 2007
January 2007
February 2007
May 2007
September 2007
October 2007
January 2008
June 2008
September 2008
Strong Management Team and Motivated Work Force
Our Company is managed by a team of professional managers focusing on different aspects of the retail business
including buying and merchandising, operations, marketing, human resources, information technology and systems,
inventory control, warehousing, projects, customer relations, e-business and accounts and finance. Our management
team includes some experienced hands in the retail sector. The management of our company has vast experience in
operating retail business. For further details, please see the section titled “Our Management” on page 49 of this
Draft Red Herring Prospectus. Our Company’s human resource policy revolves around commitment to creating an
organization that nurtures talents and motivate its people. We have a very low employee turnover ratio which has
provided us continuity and stability.
Focused Retail Company
We have adopted a focused approach for our business and concentrate our efforts on the retail service business
which we believe to be our core strength. We are focused in providing our customers the best service with the right
product at the right price and also with world class ambience. We have retained our seven core categories – books,
music, toys, cards, gifts, stationery and multimedia. Our business strategy of high growth coupled with optimal
planning provides us with the ability to perform in all the phases of business cycle. We are located in the up-market
locations of the cities where we have presence and we cater to Sections A and B who have high disposable incomes.
Established Business
Our decade-old brand “Odyssey” has a significant recall amongst its target group and enjoys considerable loyalty
from our customers. Over the years, we have also built strong relationships with some of the leading suppliers/
manufacturers in each of the product categories we deal in.
Operational performance
Our Company has sought to maintain stringent control over the operating costs thereby resulting in better
profitability for our Company. Our strengths lie in key areas such as buying and merchandising, operations of our
stores, warehousing, marketing and human resources. Our information technology system assists us in achieving
higher operational efficiencies. We have systems and standard operating procedures that help our management in
driving the business.
37
Zero Defect Culture
Odyssey is committed to providing a varied portfolio of products at multiple price points that satisfy the growing
needs and expectations of customers. All levels of personnel are involved in the implementation of the Quality
Management System by adopting the Zero Defect Culture. At Odyssey, we endeavour to continually improve our
range of products and services.
Our Strategy
Our corporate vision is “to create a world-class multinational retail chain which is global in thought and local in
action.” The following are our strategies to achieve our vision:
Expand into new markets
We have been expanding our business to newer territories since the year 2002 and have added nearly 55,000 square
feet of retail space. In the next two years, we propose to enter into more markets with larger stores. We have firmed
up plans to increase our retail space from approximately 60,000 square feet to almost 4,00,000 square feet in the
next 3 years. We have also entered into letters of intent for two other proposed stores at Ludhiana and Ahmedabad.
However, the costs for setting up these stores would be met through our internal accruals and not from the proceeds
of this Issue.
Increase the customer base
We are committed to increasing our customer base by constantly expanding to newer territories/markets and also
attracting new customers to existing stores. We aim to achieve this by advertising, events, promotions, tie-ups with
vendors for exclusive deals, cross promotions with non-competing brands and bringing in better and newer products
to the stores. We have also put in place a database management system which would help us in cutting down our
advertising costs as we would focus on targeting our existing customers through direct marketing initiatives. This,
we believe, would provide better results than the traditional advertising methods as today, peer-to-peer, word of
mouth advertising is the key influencer in decision making process. So our constant focus has been to reach to
potential customers in our target group who are decision makers and influencers in a family or workforce or society.
Global yet Local
Last year we introduced a new design concept that has changed the way a book store is traditionally perceived. The
stores have concepts under major categories like, art gallery, jewellery corner in gifting, perfume corners in
cosmetics, Mattel corner in toys, etc. Major brands we deal with in each category are listed below:
Books
International
• Random House
• Penguin
• Harper Collins
• Simon & Schuster
• Time Warner
• Orion
• Transworld
• Pan Macmillan
• St Martin’s Press
• John Wiley
• Thames & Hudson
• McGraw-Hill
• Hodder & Stoughton
Indian
•
Penguin India
•
Harper Collins India
•
Rupa
•
Oxford University Press
•
Jaico
•
Orient Longman
•
Navneet
•
Egmont
•
Tata McGraw-Hill
•
Prentice Hall Of India
•
Pearson India
•
Shroff
•
Sterling
38
Non-Books
Toys
• Mattel
• Funskool
• Play n Pets
• Lego
• Disney
•
•
•
•
•
•
•
•
•
Stationery
Cross
Sheaffer
Parker
Nightingale
ITC Expressions
Reynolds Write site
Faber – Castell
Staedtler
Music
• Universal
• EMI
• Virgin
• Warner
• Sony – BMG
• T-Series
• Saregama
• Times Music
• Tips
• Sony Music
Gifts
• La opala
• Solitaire
• Hidesign
• Gili
• Stone n Strings
• Paris Bijoux
• Citizen
• Casio
• Victorinox
Fragrances
• Davidoff
• Ferrari
• Burberry
• Bvlgari
• Tabac
• Azzaro
• Elizabeth Arden
• Escada
• Nina Ricci
• Kennett Cole
• J Lo
• YSL
Movies
• Warner
• Paramount
• MGM
• Universal
• Disney
• 20th Century Fox
• Dream Works
• Columbia Tristar
Multimedia
• EA
• Microsoft
• Disney
• Play station
• Vivendi Universal
• UBI Soft
• EIDOS Interactive
•
•
Britannica
Times Multimedia
The philosophy of the brand is to provide a comfortable experience to our customer through relaxed ambience. We
position our brand as a neighborhood brand. The store uses the brand colours of yellow with extensive woodwork to
provide a homely feeling. We have changed with changing consumer psychographics and demographics. The
change is reflected through our expansion which nevertheless retains our core philosophy of being one of the best in
the business by providing superior service to the customers in a relaxed ambience.
Increasing our Co-branded Card and Unwind Customer Base
We have entered into an agreement with ICICI Bank, one of the largest issuer of credit cards, for a co-branded
credit card namely, “Odyssey-ICICI Bank Co-branded Credit Card”. We launched this product in association with
Visa to enhance our brand strength and develop the market. This is the first and only co-branded credit card of a
book store chain in the country. The card offers all the benefits of an international Visa credit card, but more
importantly offers unmatched benefits to the card holder when used at any of the various retail merchant
establishments of the Company. The card member also automatically becomes a member of the Company’s loyalty
program.
A higher base of “Unwind” (our loyalty program) customers exposed to Odyssey experience would help us build
customer loyalty. We believe that understanding the individual customer through the program would help us in
making more profitable sales, as well as meeting their needs in a focused manner.
How We Run Our Business
We have our operations in six cities with 12 stores. We function out of our registered office in Chennai with
regional offices in Tamil Nadu and Andhra Pradesh with corresponding warehouses.
At the back-end, the staff and management have over the years fine-tuned the art of merchandising and selling. All
operations at Odyssey are centralized at Chennai where there is a professional team in place specializing in various
aspects of the business. There are buyers for our books, non-books and music/ multimedia categories and managers
heading various departments like Operations, HR, Finance, Systems and IT, Inventory Control, Marketing,
Customer Relations, Projects and Logistics.
Operations
The operations department is responsible for smooth functioning of our stores. Its role encompasses the functions of
all the departments as it is the key department in the organization. All other departments help the operations
39
department to achieve its targets. The down-line managers in the stores ensure planning, upkeep, optimum stocking,
proper display, appropriate and timely promotions, high standard of customer service, adequate staffing and regular
training, etc.
Buying and Merchandising
The buying and merchandising department is responsible for sourcing products that are to be retailed through the
stores. The objective of this department is to have the merchandise that our customers need or are likely to need,
when they need them, at the right price, in order to attract, delight and retain them for life and to maximize sales and
profitability.
The seven categories are handled by three sub-departments namely:
• Books
• Non-Books
• Music/Multimedia.
The Books Department handles all buying and merchandising functions related to books in the genres like fiction,
non-fiction, self improvement, business and management, computing, reference, children’s books, etc. They also
handle purchase of magazines.
The Non-Books Department handles buying of gifts, toys, stationery, cards, perfumes, jewellery, chocolates, and
such other related products.
The Music/ Multimedia Department deals with all kinds of audio/ video CDs, DVDs, cassettes, multimedia,
accessories and related products.
They find the trends in buying pattern amongst the customers through information from sales analyses, research
papers, consumer study, market visits, internet, keeping up with TV shows, etc.
Marketing
In order to achieve store sales targets, the marketing department provides front-end support function by improving
brand visibility and driving walk-ins to the store. It also plans and strategises on the positioning of the brand vis-àvis competition. Through proper use of media it ensures that the customers are reached effectively and rightly about
the brand. It helps in improving top-of-mind recall of the brand. It addresses all communications to the right
audience making the best use of available resources.
The department also provides market research data in order to understand the consumer psyche and the mood of the
nation on the macro level and about the brand / its perception at a micro level. It also provides suggestions to
improve the brand visibility.
Customer Relations
The customer relationship management is a sub-function of the Marketing Department and was constituted for
raising the bar on customer service standards. The department directly takes care of the loyalty program, co-branded
activities, database managements and corporate relationships. The key objectives of the department are to ensure
customer satisfaction and smoothen any aberration in set standards. It ensures that the customer buys into the brand
as he would when he buys a tangible product. It follows a strategy which builds the brand around merchandise, copartners and exciting activities.
Human Resources
Being a business support function, this department predominantly aims at implementing policies and procedures
towards improving work standards, establishing quality recruitment processes to facilitate right people for the right
job, creating positive work environment, providing balanced and competitive compensation and benefits,
implementing training and development activities, implementing employee motivational and recognition programs,
enhancement of quality of existing set of employees across locations, measuring employee performances, defining
career path for the employees, enabling employees to grow within and supporting all the related activities leading to
achievement of the overall objectives of the organization.
Systems and IT
The Systems and IT department handles all the hardware and software related activities of the Company. It is
involved in purchase of computers, laptops, peripherals, accessories and all other related domain work for smooth
40
functioning of all departments and inter-connectivity between offices and departments.
It also handles software part of the business where it coordinates with the software solutions company to provide
the right software for retail management. The business is driven by a dependable IT solution and the department is
committed to better IT processes and solutions.
Logistics Department
Logistics department plays a critical role in making sure that the stocks reach the respective stores on time for them
to be displayed and sold. The store sales are dependent on appropriate inventory movement which is the core
function of a warehouse. Emphasis is given to the movement of stocks to and fro from the warehouse to store and
vice versa.
Projects
Once a property is signed up to put a store / office, the project department starts to get the place ready for opening.
It coordinates with the retail store design agency to bring out the store design and layouts in line with the overall
store layout and ambience guidelines. The project department then starts the work of putting in place the
requirement of the store, procures those materials; issues work contracts and get the work done through its
contractors. Once the store is ready for fit out, then the operations department takes over to open the store.
Secretarial, Accounts and Finance
This is one of the most important departments in the Company as it provides support to the top management. It
maintains books of accounts and complies with statutory regulations like Sales tax, Income tax, and ROC
requirements. It is involved in all the banking related transactions, audit functions, commercial documentations,
preparation of profit and loss account and balance sheet. All working capital requirements, income from stores,
payments to vendors / suppliers and other related domain functions are handled by this department.
Inventory Control
The major responsibility of the Inventory Control Department is to audit daily (cycle count, stock updation, billing
audit, documentation, measure the quality of supply chain management etc.), half yearly and annual stock takes at
all locations. The final audit report helps our management get the full-fledged information on exact stock position,
various inventory losses and helps in capping the loop holes in the system and controls. It precisely streamlines the
entire process of buying department by extending accurate feedback like exact stock position at the stores and
warehouses, Information on fast moving products, slow movers and non movers. This will guide the buying team
for their future process.
E-Business
The growth of e-commerce in India has been given a fillip by factors like increased computer awareness, low cost
of computers and bandwidth, emergence of credit cards as a payment of choice, need for convenience in shopping
etc. We see e-business as the next growth model. Global outsourcing to India has not only increased standard of
living among the youth but has also placed greater demands on their time. E-commerce is well served by both these
factors and is a natural solution through its shop anytime, anywhere mantra.
We have set up an e-Business Department to implement our online strategies and selling through the internet. We
have also entered into an agreement with a website developer to design and develop our website www.odyssey.in to
facilitate internet sale of all our merchandise.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
41
Overview Of Our Store Locations
+ East Delhi
* Varanasi
+ Mumbai
+ Thane
+ Pune
+ Nagpur
+ Aurangabad
* Hyderabad
+ Vizag
+
Vijayawada
Bangalore +
Mysore+
Salem *
*
Calicut+ Coimbatore
=
* Chennai
* Trichy
Cochin+
* Existing Locations
+ Firmed Up Locations
Note:
The map hereinabove is solely for illustrative purposes and does not claim to have political or geographical
accuracy
42
Overview Of Our Store Locations
Store Location
Address
Area
( square
feet )
Adyar, Chennai
45 and 45, First Main Road, Gandhi Nagar
18232
Anna Nagar, Chennai
No. 75, AA-6, IInd Avenue, Near
Roundtana
15700
ECR, Chennai
No.40, Shivani, East Coast Road
5177
Hotel Radisson
Hotel Chola Sheraton
351
173
Hyderabad Central Mall, Hyderabad
ITC Hotel Kakatiya Sheraton
GST Road, Near Airport, Chennai
Cathedral Road, Chennai
No, 507, Arvind Towers, D B Road, R S
Puram
Kandaswarna Shopping Mall, Sarada
College Road, Fairlands
No.95, Center Point, Bharatidasan Salai,
Cantonment
Emerald House, Amrutha Hills,
6-3713, Opp TBZ
Punjagutta Cross Road, Punjagutta
Begumpet, Hyderabad
760
465
Varanasi
Luxa Road, opposite Kamacha Post Office
1700
Total
59316
Coimbatore
Salem
Trichy
Punjagutta, Hyderabad
2550
5545
2135
6528
Format
Independent
Store
Independent
Store
Independent
Store
SIS
SIS
Independent
Store
Mall Store
Independent
Store
Independent
Store
Mall Store
SIS
Independent
Store
Independent Store: Independent Stores are those stores which are not located in a mall. The marketing activities are
more for these stores as they need to attract walk-ins by their strengths.
Mall Stores: These are stores which are located in Malls and marketing activities are generally tactical and not
brand-based as the mall is expected to bring in the desired footfalls.
SIS: Shop-in-Shop stores are located either in hotels, airport lounges, and large corporate houses. The maximum
size of a shop-in-shop would not be more than 1,000 square feet.
Current Product Profile of Our Company
Products
Books
Description
We provide our customers a huge and exhaustive range on genres ranging from
popular fiction, non-fiction, computing, self-help, health, management, food and
drink, travel, art and architecture, activity and children’s books apart from
others. Even within children’s books one can find the best of fiction, fairy tales,
activity books, work books, encyclopaedia etc.
From Beatles to Balasubramanium, from Yanni to Yesudas, from Sting to
Srinivas, we provide a diverse range of music (There are exclusive combo
packs, featuring upcoming, new artists and unknown ones too).
Music/Multimedia
The best part is that the customers can take their time in going through our
relatively large collection while listening to any number they want on personal
ear-phones which will be provided on request.
We offer the latest DVDs, CDs, video games and such other multimedia
products.
Movies
We have a wide range of DVDs and VCDs right from classics to contemporary
movies, we stock the best of Hollywood and Indian cinema The customers also
have the option of placing the order for a particular title if it is not readily
available with us at that time and we would ensure that it is obtained from the
vendor.
43
Products
Toys
Description
Besides the usual board games, puzzles, activity games, soft toys, scale models,
action figures, we also stock traditional Indian games.
Stationery
We stock brands including Sheaffer, Cross, Parker, Nightingale, ITC
Expressions and Faber Castell
Gifts
Cards
We have a large collection of various items of prominent brands of jewellery
and perfumes. We also stock artwork (framed paintings and prints) by European
and Indian artists which are displayed at our Adyar, Chennai store art gallery.
There is a large collection of cards catering to all occasions including Father’s
Day, Raksha Bandhan, Christmas, Valentine’s day, Diwali and New Year.
Competition
We retail a wide range of books, gift articles, music and multimedia in our stores. This is complemented by a café
in some of our stores and personal care which helps us create a unique shopping experience. We face competition
from other retailers of similar products and services. These include stand alone stores from both organized and
unorganized sectors.
We focus on offering our customers a unique shopping experience with a combination of promotions. It is because
of this and the service and ambience that we offer, that we have been able to create a differentiation in the mind of
the customer vis-à-vis our competitors where similar products and brands are available.
Insurance
Our Company has taken public liability insurance (non-industrial risks) policy and standard fire and special perils
insurance for all its stores. Besides, it has also obtained burglary insurance, money insurance and fidelity guarantee
insurance for such stores that, in its opinion, are prone to the risks insured by such policies.
The Company has also regularly obtained additional endorsements for burglary, fire and money insurances, where
applicable, so as to cover the additional stocks and also new stores as applicable.
Certain vehicle insurances have been further obtained to cover the Company’s vehicles. Also, a marine inland
transit insurance (open) policy covering inland transit in India has been obtained by the Company.
44
REGULATIONS AND POLICIES
The Company, in its business of retail and establishing retail stores in India, is governed by various legislations as
applicable to it, its stores and the goods/products it sells or stores for sale. Under the provisions of various Central
Government and State Government statutes/ legislations, each of the stores of the Company is required to obtain
and regularly renew certain licenses/ registrations and/ or permissions required statutorily to operate the said stores.
The Company currently has 12 stores situated in various cities in India and therefore are regulated by legislations
enacted by various state governments.
Pursuant to the applicable laws in force in various states in India in which our stores are situated, each of our stores
require the following material registrations/ licenses/ consents and/ or permissions. The statutes/ legislations set out
below are only illustrative and not exhaustive.
Shops and Establishments Acts
The Company is governed by the various Shops and Establishments Acts as applicable in the states where it has
stores. These acts regulate the conditions of work and employment in shops and commercial establishments and
generally prescribe obligations in respect of inter alia registration, opening and closing hours, daily and weekly
working hours, holidays, leave, health and safety measures and wages for overtime work. The following acts are
applicable to our stores.
•
•
The Andhra Pradesh Shops and Establishments Act, 1988; and
The Uttar Pradesh Shops and Commercial Establishments Act, 1962.
Factories and Establishments (National, Festival and Other Holidays) Acts
The Company is governed by the various Factories and Establishments (National, Festival and other holidays) Acts
as applicable in the states where it has stores. These acts provide for the grant of national, festival and other
holidays to persons employed in factories and establishments in the states where they are applicable. The following
acts are applicable to our stores.
•
•
The Andhra Pradesh Factories and Establishments (National, Festival and other holidays) Act, 1974;
The Tamil Nadu Industrial Establishments (National and Festival) Holidays Act, 1958.
Other Regulations
The Company’s trademarks are required to be registered under the provisions of the Trademarks Act, 1999.
The Company’s stores are also required to obtain licenses for live musical performances and for playing music in
the stores under the provisions of the Copyright Act, 1957.
Fiscal Regulations
In accordance with the I.T. Act, any income earned by way of profits by a company incorporated in India is subject
to tax levied on it in accordance with the tax rate as declared as part of the annual Finance Act.
Further, import of any merchandise to be stocked at the Company’s stores involves the levy and payment of
customs duty in accordance with the prevalent rates prescribed in the Customs Act, 1962 and rules and notifications
issued thereunder from time to time. Accordingly, the Company is also required to obtain a license under the
provisions of the Export Import Policy 2002 – 2007. However, the Company does not carry out any activities,
which involve payment of customs duty. It procures its merchandise through domestic market alone and hence does
not need the aforesaid license. However, keeping in mind the future possibility of importing its merchandise, the
Company had nevertheless applied for an Import Export Code.
Value Added Tax
In terms of the policies enumerated in the Central Government’s proposed budget for the current fiscal year,
implementation of Value Added Tax (“VAT”) is scheduled to be completed within this fiscal year. After the
introduction of VAT, not only will the various state sales taxes be abolished, but the Central sales tax will also be
phased out. The essence of VAT is in providing set-off for the tax paid earlier, and this is given effect through the
concept of input tax credit. VAT is based on the value addition to goods, and the related VAT liability of the dealer
is calculated by deducting input tax credit for tax collected on the sales during a particular period.
45
VAT has already been implemented in the State of Andhra Pradesh and hence is applicable to the Company as far
as its stores in Andhra Pradesh are concerned.
For those states where the Company has its stores and where VAT has not been implemented, the concerned state’s
General Sales Tax Act and Central Sales Tax Act would apply.
Employment Related Regulations
The Company is governed by the provisions of the Employees’ Provident Funds Act, 1952 and the rules made
thereunder and is accordingly required to make periodic contributions to the Employees’ Provident Fund Scheme
and the Employees’ Pension Scheme as applicable. The Company is also required to make contributions under the
Employees’ State Insurance Act, 1948. For details of the Company’s registration under the Employees’ Provident
Scheme and the Employees’ State Insurance Act, please refer to the chapter “Licenses and Approvals” on page 96
of this DRHP. The Company is also governed by the various state legislations applicable in the states where it has
stores.
Foreign Investment Regulations
An industrial policy was formulated in 1991 (the “Industrial Policy 1991”) in order to implement the economic
reforms initiated by the Government of India. The GoI has since amended the Industrial Policy from time to time in
order to enable foreign direct investment in various sectors of the Indian industry in a phased manner gradually
allowing higher levels of foreign participation in Indian companies. Till recently, foreign direct investment in
Indian companies carrying on retail trading activity was completely prohibited. However, on February 10, 2006, the
GoI permitted FDI up to 51% in the retail trade of single brand products subject to prior government approval. This
is, inter alia, aimed at attracting investments in production and marketing, improving the availability of such goods
for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian
enterprises through access to global designs, technologies and management practices.
FDI up to 51% in retail trade of ‘single brand’ products is permitted with the prior approval of the government and
is subject to the following conditions:
(i)
Products to be sold should be of a ‘single brand’ only,
(ii)
Products should be sold under the same brand internationally,
(iii)
‘Single brand’ product-retailing would cover only products which are branded during manufacturing.
Application seeking permission of the Government for FDI in retail trade of ‘single brand’ products would be made
to the Secretariat for Industrial Assistance (“SIA”) in the Department of Industrial Policy and Promotion. The
application should specifically indicate the product/ product categories which are proposed to be sold under the
‘single brand’. Any addition to the product/ product categories to be sold under the ‘single brand’ would require a
fresh approval of the government.
Other Regulations
In addition to the above, the Company is required to comply with the provisions of the Companies Act, various
sales tax related legislations and other applicable statutes.
46
HISTORY AND CERTAIN CORPORATE MATTERS
Our History
Our Company was originally incorporated under the Companies Act, 1956 on March 27, 1995 as “Heritage Books
Private Limited” and in the same year floated our flagship store with the brand-name “Odyssey” in the southern
suburbs of Chennai – Adyar. Thereafter, the name of the Company was changed to “Odyssey India Private Limited”
on October 8, 2002. By virtue of Section 44 of the Companies Act, the Company became a public company and the
name of our Company was further changed to “Odyssey India Limited” on September 30, 2003. On October 7,
2002, the Company acquired the business of the firm, M/s Bytelogics and in lieu of the same issued 16,00,000
Equity Shares of Re.1 each (for consideration other than cash) to our Managing Director, T.S. Ashwin who was the
managing partner of the said partnership firm.
Our brand “Odyssey” has a considerable recall amongst its target group and enjoys loyalty from our customers. Our
company was acquired by DCHL on September 1, 2005. DCHL is the publisher of “Deccan Chronicle” which is the
fourth largest circulated broad sheet daily in India.
We started expanding our operations in to other cities and towns since 2002. We expanded into Varanasi in August
2002, followed with a store in Punjagutta, Hyderabad in November 2002 and in to Trichy, Tamilnadu with a store
in December 2002. Thereafter, we opened a store in Coimbatore in September 2003. In the year 2004, we started
our second store in ECR, Chennai. This was followed up with our second store in Hyderabad at The Hyderabad
Central Mall.
We opened our store with a new design concept at Anna Nagar, Chennai in April 2005 and thereafter relocated our
flagship store in Adyar, Chennai expanding from 6,500 square feet to 17,600 square feet.
Main Objects of the Company
Our main objects as contained in our Memorandum of Association are:
1.
To carry on the business of procuring and selling directly or through grant of licence, operate
franchise/outlets in Indian or abroad, or permission to other entities or to act as sole selling agents of
International companies for the trading, marketing and distribution of all kinds of books, magazines,
newsprint, writing and printers and publishers of books and periodicals, and also consumer
goods/products, consumer durables, electric and electronic goods, home appliances, office equipments and
other utility articles, utensils, ceramics, cutleries, batteries, cables, gift articles, stationers, glass products
such as plate glass, glass wool, packing requisites made of cardboard, strawboard, wood, glass or any other
material of all types of metal, glass or plastic containers of any other material related thereto.
2.
To act as dealers, exporters, importers, agents, traders, commission agents, stockists, manufacturers, as
representatives for foreign or local firms or companies or associations or other bodes whether incorporated
or not in or to appoint any agents, traders, commission agents, stockists, manufacturers as representatives
for the purpose of the company in, India or Abroad.
The present business of the Company is as per the main objects of our company
Amendments to our Memorandum of Association
Since our incorporation, the following changes have been made to our Memorandum of Association:
Date of Shareholder
Nature of Alteration
Approval
May 20, 2002
Alteration of Main Objects of the Company
- Split of Nominal Value of Shares from Rs.1000 to Rs.10 per share
September 2, 2002
December 9, 2002
May 30, 2003
May 28, 2004
December 15, 2004
January 30, 2006
- Increase of authorized share capital from Rs. 20,00,000 divided into 2,00,000 Equity
Shares of Rs. 10 each to Rs. 50,00,000 divided into 5,00,000 Equity Shares of Rs. 10
each.
Split of nominal value of Shares from Rs.10 to Re.1 per share
Increase of authorized share capital from Rs. 50,00,000 divided into 50,00,000 Equity Shares of Re. 1
each to Rs. 75,00,000 divided into 75,00,000 Equity Shares of Re. 1 each.
Increase of authorized share capital from Rs. 75,00,000 divided into 75,00,000 Equity Shares of Re. 1
each to Rs. 1,00,00,000 divided into 1,00,00,000 Equity Shares of Re. 1 each.
Increase of authorized share capital from Rs. 1,00,00,000 divided into 1,00,00,000 Equity Shares of Re. 1
Increase of authorized share capital from Rs. 1,25,00,000 divided into 1,25,00,000 Equity Shares of Re. 1
47
Date of Shareholder
Approval
April 3, 2006
Nature of Alteration
Consolidation of authorized capital of the Company from 1,500,00,000 Equity Shares of Re. 1 each to
1,50,00,000 shares of Rs. 10 each.
For further details, also refer to “Capital Structure - Notes to Capital Structure - Share Capital History of our
Company” on page 12 of this Draft Red Herring Prospectus.
Key Milestones
Year
1995
1998
1999
2002
2003
2004
2005
2006
Event
Company incorporated and first store opened in Chennai
Relocation of Adyar store and expansion of the size of the store
Opening of a satellite store in Hotel Radisson
Opening of a store in Varanasi
Opening of a store in Hyderabad
Opening of a store in Trichy (2,135 square feet)
Opening of a store in Coimbatore
Opening of a store in Hotel ITC Kakatiya Sheraton
Opening of a second store in Chennai, on the ECR
Nominated for the Best Retailer of Year – Leisure. (Images Retail Awards)
Launch of Odyssey – ICICI Bank Co-Branded Credit Card
Opening of a stand alone book store in Hyderabad Central Mall
Opening of a store in Salem
Opening of a third store in Chennai, in Anna Nagar
Opening of a store in Hotel Chola Sheraton, Chennai
Company acquired by Deccan Chronicle Holdings Limited
Relocation of Adyar store and expansion of the size of the store
Setting up of Regional Office in Chennai to handle TN region
48
OUR MANAGEMENT
Board of Directors
Under our Articles of Association we are required to have no less than three directors and no more than 12
directors. We currently have eight directors on our Board.
The following table sets forth details regarding our Board of Directors as at the date of this Draft Red Herring
Prospectus:
Sl.
No
Name, Designation, Father’s
Name, Address, Occupation
Nationality
Age
Date of Appointment
and Term
Other Directorships
1.
T. Venkattram Reddy
Indian
47
January 1, 2006
1.
Appointed for a period
of five years from the
date of appointment i.e.
December 31, 2011
2.
Chairman
S/o. Late Sri. T. Chandrasekhar
Reddy
Plot No. 54, H. No. 8-2-703/A-6/C
Road No. 12, Banjara Hills
Hyderabad – 500 034
Andhra Pradesh
India
3.
4.
Deccan Chronicle;
Holdings Limited;
Midram
Publication Private
Limited;
Asian Age
Holdings Limited;
and
Flyington
Freighters Limited
Business
2.
T. Vinayak Ravi Reddy
Indian
45
Executive Director
S/o. Late T. Chandrasekhar Reddy
Plot No. 54, H. No. 8-2-703/A-6/C
Andhra Pradesh
India
January 1, 2006
1.
December 31, 2011
2.
3.
January 1, 2006
1.
December 31, 2011
2.
Deccan Chronicle;
Holdings Limited;
Asian Age
Holdings Limited;
and
Flyington
Freighters Limited
Business
3.
P. K. Iyer
Indian
40
Executive Director
S/o. P. V. Parasuraman
2, LIC Colony
Dr. Radhakrishnan Nagar
Chennai – 600 041
Tamil Nadu
India
Business
49
3.
Deccan Chronicle;
Holdings Limited;
Asian Age
Holdings Limited;
and
Flyington
Freighters Limited
Sl.
No
Nationality
Age
Date of Appointment
and Term
Other Directorships
4.
T. S. Ashwin
Indian
39
January 1, 2006
1.
Managing Director
December 31, 2011
S/o. T. Suresh
19, Lakshmi Street
Kilpauk
Chennai – 600 010
Tamil Nadu
India
2.
Deccan Chronicle
Holdings Limited;
and
Flyington
Freighters Limited
Business
5.
E. Venkatram Reddy
Indian
37
Non-Executive
Independent Director
Appointed on January 1,
2006 till the next AGM
of the Company
S/o Late E. Amarender Reddy
501, Pentagon Extension
Amrutha Valley
Road No.12, Banjara Hills
Andhra Pradesh
India
1.
2.
Nagarjuna Travels
and Hotels
Limited; and
Flyington
Freighters Limited
Business
6.
P. Siddhartha
Indian
49
of the Company
Deccan Chronicle
Holdings Limited
Indian
57
of the Company
Deccan Chronicle
Holdings Limited
Non-Executive
S/o. Vaman Rao
42, Journalists Colony
Andhra Pradesh
India
Service
7.
S. Balasubramaniyan
Non-Executive
S/o KVR Shanmugham
F-3, 24, Venkatesan Street
T.Nagar
Chennai – 600 017
Tamilnadu
India
Service
50
Sl.
No
Nationality
Age
Date of Appointment
and Term
Other Directorships
8.
K. Madhavan
Indian
50
Appointed on December
29, 2003 till the next
AGM of the Company
Nil.
Non-Executive
S/o. K.K. Nair
H-37/17, TNHB Flats
3rd Street, Besant Nagar
Chennai – 600 090
Tamilnadu
India
Advocate
Brief Biographies of our Directors
T. Venkattram Reddy, aged 47 years, has vast experience in newspaper management and currently as the
Chairman of the Company, is responsible for the overall management of the Company. He was a Member of the
Parliament from the year 1993-95. During his tenure, he was a member of the “Parliamentary Standing Committee
on Finance”, “Papers Laid on the Table Committee”, “Committee on Tourism and Civil Aviation and the
“Committee on Patents and Trade Marks.” He currently holds the membership of INS, the Editors Guild of India,
the IFRA India (Member of the Executive Committee), the AP Newspaper Association (the President) and proactively participates in their activities besides also running for executive and office-bearer positions.
He is a graduate in commerce and holds a diploma in printing technology.
T. Vinayak Ravi Reddy, aged 45 years, is the Executive Director of the Company. He is in charge of the technical
and technological division of the retail operations of the company. He is a graduate in commerce and also holds a
degree in Business Management.
P.K. Iyer, aged 40 years, has considerable experience in the administration and management of companies. He has
been associated with the Company for the last three years. His current responsibilities include the overall
responsibility of various finance functions like financial management, treasury operations and taxation planning. He
has obtained a Bachelors degree in Economics and holds a Post Graduate Diploma in Business Management.
T. S. Ashwin, aged 39 years, is the Managing Director of the Company and is responsible for the day to day
management of the Company. He has considerable experience in the retail business. He is an industrialist and holds
a Bachelors degree in commerce.
E.Venkatram Reddy, 37 years, has 17 years of experience in the construction, travel and hotel industries. He is an
industrialist and graduate in Arts.
P. Siddhartha, aged 49 years, has considerable experience in the travel industry. He is an independent director on
the Board. He is an industrialist and holds a Bachelors degree in commerce.
S. Balasubramaniyan, aged 57 years has considerable experience in financial management and taxation planning.
He is a graduate in Science and a qualified Chartered Accountant.
K. Madhavan, aged 50 years is Bachelor of Arts and holds a degree in Law. He has considerable experience in
handling legal matters and is an advocate by profession.
Remuneration of our Executive Directors:
1. T. Venkattram Reddy, Chairman
T. Venkattram Reddy has been appointed as the Chairman of our Company with effect from January 1, 2006 for a
period of five years. In terms of the agreement between him and the Company dated January 6, 2006 in relation to
his employment that has been approved by the shareholders of our company in an EGM dated January 30, 2006, the
details of his remuneration are as under:
51
Salary
Perquisites
:
:
Minimum
Remuneration
:
Rs. 2,00,000 per month
Provision of car(s) with driver(s) for use on Company’s business and telephone at the
residence and cell phone (including payment for local calls and long distance official calls).
Personal long distance calls on telephone and use of car for private purposes shall be charged
to the Chairman.
Notwithstanding anything to the contrary herein contained, where in any financial year
during currency of tenure of the Appointee, the Company has no profits or its profits are
inadequate, the Company will pay to him as minimum monthly remuneration as salary and
perquisites, as stated above, however not exceeding the limits specified under Section II of
Part II of Schedule XIII of the Companies Act, and he shall not be entitled to any
commission. Further however, such minimum remuneration may be paid only in any of the
financial years during the aforesaid term of his appointment.
2. T.S. Ashwin, Managing Director
T.S. Ashwin was appointed as the Managing Director of our Company with effect from January 1, 2006 for a period
of five years. In terms of the agreement between him and the Company dated January 6, 2006 in relation to his
employment that has been approved by the shareholders of our company in an EGM dated January 30, 2006, the
details of his remuneration are as under:
Salary
Perquisites
:
:
Minimum
Remuneration
:
to the Managing Director.
3. Remuneration of T. Vinayak Ravi Reddy and P.K. Iyer, Executive Directors
T. Vinayak Ravi Reddy and P.K. Iyer have been appointed as the Executive Directors of our Company with effect
from January 1, 2006 for a period of five years. In terms of the respective agreements in relation to their
employment between them and the Company, both dated January 6, 2006, which have approved by the shareholders
of our company in an EGM dated January 30, 2006, the details of their remuneration (common to these executive
Directors) are as under:
Salary
Perquisites
:
:
Minimum
Remuneration
:
to the Executive Director.
Details of Borrowing Powers of Our Directors
The Board of Directors, vide a resolution pursuant to Section 293(1)(d) of the Companies Act passed at the EGM of
the Company held on December 5, 2003 had approved and delegated powers to the Board for borrowing upto a sum
of Rs. 2500 Lakhs apart from temporary loans obtained or to be obtained from Company’s bankers in the ordinary
course of business notwithstanding that such borrowings may be over and above the aggregate of the paid-up share
capital and free reserves of the Company. The said limit of borrowing by our Directors was further increased to Rs.
5000 Lakhs at the EGM of the Company held on April 3, 2006
Payment or benefit to directors/ officers of our Company
52
Except as stated in section titled “Our Management” on page 49 of this Draft Red Herring Prospectus, no amount or
benefit has been paid or given within the two preceding years or is intended to be paid or given to any of our officers
except the normal remuneration for services rendered as Directors, officers or employees.
Corporate Governance
The provisions of the listing agreement to be entered into with the Stock Exchanges with respect to corporate
governance will be applicable to us immediately upon the listing of our Equity Shares on the Stock Exchanges. We
intend to comply with such provisions, including with respect to the appointment of independent Directors to our
Board and the constitution of the Investor Grievances Committee. We undertake to adopt the Corporate Governance
Code in accordance with Clause 49 of the listing agreement to be entered into with the Stock Exchanges prior to
listing.
Audit Committee
The Audit Committee was constituted by the Board of Directors in its meeting held on January 30, 2006. The Audit
Committee currently comprises of S. Balasubramaniyan, Non-Executive Director (Chairman), E.Venkatram Reddy,
Non-Executive Director and P. Siddhartha, Non-Executive Director. The Company Secretary of the Company acts
as the Secretary to the Committee.
The scope and functions of the Audit Committee are:
a) Review of the quarterly, half-yearly and annual financial statements;
b) Regular review of and taking follow-up action on the reports of the internal auditors;
c) Finalising the internal audit programme for the year;
d) Planning of internal audit programme for the future;
e) Review of key accounting matters and developments; and
f) Other matters as directed by the Board.
Remuneration Committee
The Company has, pursuant to the requirement of Schedule XIII of the Companies Act, 1956 for approving
minimum remuneration to the Executive Directors, constituted the Remuneration Committee on January 30, 2006.
The Remuneration Committee, while approving minimum remuneration under Schedule XIII of the Companies Act,
takes into account the financial position of the Company, trends in industries, Director’s qualifications, experience,
past performance and past remuneration. The Committee considers the above matters and determines the minimum
remuneration, subject to the overall ceiling fixed by the Schedule XIII of the Companies Act.
The Remuneration Committee currently comprises of S. Balasubramaniyan, Non-Executive Director (Chairman), E.
Venkatram Reddy, Non-Executive Director and P. Siddhartha, Non-Executive Director.
The purposes for which the Committee has been constituted include:
a)
To determine and recommend to the Board of Directors the remuneration package of the Managing Director
and the whole-time Directors of the Company; and
b) To approve, in the event of loss or inadequate profits in any year the minimum remuneration payable to the
Managing Director and the whole-time Directors within the limits and subject to the parameters as prescribed in
Schedule XIII of the Companies Act.
Shareholders and Investor Grievance Committee
The Shareholders and Investor Grievance Committee was constituted by the Board of Directors at its meeting held
on January 30, 2006. It currently comprises of T. S. Ashwin, Managing Director, S. Balasubramaniyan, NonExecutive Director and P. Siddhartha, Non-Executive Director.
The Committee has the powers to:
a.
Looks into shareholders complaints like transfer of shares, non-receipts of balance sheet, non-receipt of
53
declared dividends, etc;
b.
Approves issue of duplicate certificates and oversees and reviews matters connected with the transfer of
securities;
c.
Oversees the performance of the registrars and transfer agents, and recommended measures for overall
improvement in the quality of investor services;
d.
Affix or authorize fixation of the common seal of the Company to the share certificates; and
e.
Take on record all disclosures made in accordance with the SEBI (Prohibition of Insider Trading) Regulations,
1992 and the Draft Code of the Company formulated under the SEBI (Prohibition of Insider Trading)
Regulations, 1992. The board has designated the Company Secretary as Compliance Officer.
IPO Committee
The IPO Committee was constituted by our Directors at their Board meeting held on January 30, 2006. This
Committee has been constituted to oversee and administer the activities to be undertaken for this Issue. The IPO
Committee consists of T.S. Ashwin, P.K. Iyer and S. Balasubramaniyan.
Shareholding of Our Directors
Our Articles of Association do not require our Directors to hold any qualification Equity Shares in our Company.
The following are the Equity Shares that are held by the following Directors in their personal capacity and on behalf
of the Promoter as per Section 187C of the Companies Act, so as to ensure compliance with the requirement of
minimum shareholding, as required under the Companies Act.
Name of Director
No. of Equity Shares
T.S. Ashwin
P.K. Iyer
T. Venkattram Reddy
T.Vinayak Ravi Reddy
1
1
1
1
Changes in Our Board of Directors during the last three years
Name
Date of Appointment
Date of Cessation
T. Venkattram Reddy
January 1, 2006
-
January 1, 2006
-
P.K. Iyer
January 1, 2006
-
T. S. Ashwin
January 1, 2006
-
E. Venkatram Reddy
January 1, 2006
-
P. Siddhartha
January 1, 2006
-
S. Balasubramaniyan
January 1, 2006
-
54
Reason
Appointed as the Chairman at
the
meeting
of
the
shareholders dated January 1,
2006
Appointed as the Executive
Director at the meeting of the
2006
Appointed as the Executive
2006
Appointed as the Managing
2006
Appointed as non-executive
independent Director at the
meeting of the shareholders
dated January 1, 2006
Name
K. Madhavan
Date of Appointment
March 18, 2003
-
Date of Cessation
T. Priya Ashwin
T. Suresh,
T. Hemalatha Suresh
July 1, 2002
January 18, 2003
January 18, 2003
January 6, 2006
January 6, 2006
January 6, 2006
Reason
Resigned
Resigned
Resigned
Key Managerial Personnel
The details of our key managerial personnel are as follows:
G. Subramanian, General Manager, aged 47 years, joined the Company on May 26, 2005 and is presently in
charge of the marketing department of the Company. He holds a Masters degree in Arts. Prior to this assignment, he
worked in K-Mart for seven years, in Vivek’s, a retail chain in Chennai for three years and in Lifestyle for four
years. He drew a salary of Rs. 1.46 lakhs from the date of his appointment till the end of the fiscal year 2005.
H. Ashwin, General Manager, aged 29 years, joined the Company on November 17, 1997 and is presently in charge
of the Operation department of the Company. He holds a Bachelors degree in Commerce. Prior to this assignment,
he worked in Connexions for one year. For the fiscal year 2004-05, he drew a salary of Rs.3.37 lakhs.
R. Madhusudan Reddy, Buyer (Books), aged 29 years joined the Company on June 1, 2002. He holds a Masters
degree in Arts. Prior to this assignment, he worked in Easylink, a website developer for one year and Crosswords
for two years. For the fiscal year 2004-05, he drew a salary of Rs. 3.25 lakhs.
Anand Menon, Buyer (Non Books and Music), aged 30 years, joined the Company on August 1, 2002. He holds a
Bachelors in Engineering. Prior to this assignment, he worked in Landmark, a retail chain for two years, Fountain
head for one year and Crossword for two years. For the fiscal year 2004-05, he drew a salary of Rs. 3.26 lakhs.
Dominic. A, Senior Manager (Projects), aged 35 years, joined the Company on January 21, 2003. He holds a
Diploma in Automobile Engineering. Prior to this assignment, he worked in Landmark, a retail chain for four years.
For the fiscal year 2004-05, he drew a salary of Rs. 2.60 lakhs.
E. Jayachandra Babu, Manager (Inventory Control), aged 31 years, joined the Company on July 25, 2005. He
holds a Masters degree in Business Administration. Prior to this assignment, he worked in Subhiksha, a retail chain
in Chennai for two years, in Lifestyle for one year and in the Chennai outlet for Caterpillar for one year. He drew a
salary of Rs. 0.47 lakhs from the date of his appointment till the end of the fiscal year 2005.
Madhusudan Kaushik, General Manager (E-business), aged 27 years, joined the Company on August 1, 2005. He
holds a Bachelors degree in Arts. Prior to this assignment, he worked in Sify for four years and in Sutherland
Technologies, Chennai for one year. He drew a salary of Rs. 0.25 lakhs from the date of his appointment till the end
of the fiscal year 2005.
Syamjee Jagdish, General Manager (Systems and IT), aged 34 years, joined the Company on August 8, 2005. He
holds a Masters degree in Computer Science and a Bachelors degree in Commerce. Prior to this assignment, he
worked in Music World for five years and in Khazana Jewellers, Chennai for four years. He drew a salary of Rs.
0.28 lakhs from the date of his appointment till the end of the fiscal year 2005.
Sreejith Janardhanan, General Manager (Finance) and Company Secretary, aged 32 years, joined the Company
on March 1, 2006. He holds a Bachelors degree in Science, Associate Chartered Accountant and Associated
Company Secretary, a Masters degree in Business Administration in Marketing. Prior to this assignment, he worked
in 3i Infotech Limited (London) for one year, as manager for Ingram Micro, Chennai for three years and in RPG
Guardian, Chennai for two years. From the date of his appointment till the date hereof, the remuneration paid to him
is Rs. 1.03 lakhs. .
Jamaluddin Khiljee, General Manager (HR and Admin), aged 30 years, joined the Company on March 1, 2006.
He holds a Masters degree in Business Administration in Human Resources. Prior to this assignment, he worked in
Radio city, Mumbai for one year and in Hotel Renaissance for three years. From the date of his appointment till the
date hereof, the remuneration paid to him is Rs. 0.60 lakhs.
Note: Except Sreejith Janardhanan and Jamaluddin Khiljee, who are in their probationary period, all the
Key Managerial Personnel listed above are the permanent employees of the Company.
55
Organizational Structure
MANAGING
DIRECTOR
General Manager Finance and Accounts
General Manager - HR and
Administration
General Manager –
Operations
Manager - Operations
Asst. Manager Operations
Manager - Accounts
Assistant Manager Accounts
Accounts Officer
Manager - Finance
Assistant Manager Finance
Finance Officer
Manager - Inventory
Control
Assistant Manager Inventory Control
Manager - Human
Resources
Manager Administration
General Manager –
Marketing
Buyer - Books
Assistant Buyer - Books
Buying Assistants
Buyer – Non-Books
Assistant Buyer - NonBooks
Buying Assistants
Buyer - Music and
Media Products
Assistant Buyer - Music
and Media Products
Buying Assistants
Manager - Marketing
Assistant Manager Marketing
Manager - Customer
Relations
Assistant Manager Customer Relations
General Manager –
Logistics
Systems Admin - H/W
and NW
Company Secretary
General Manager Systems and IT
Manager - Systems and
IT
System Admin - App.
and DB
Assistant Manager Systems and IT
Senior Manager- Projects
Manager Projects
General Manager –
eBusiness
56
Projects Officer
Interest of Promoters, Directors and Key Managerial Personnel
Except to the extent of shareholding in our Company, the Promoters do not have any other interest in our business.
All Directors may be deemed to be interested to the extent of remuneration payable to them for services rendered by
them as officers or employees of our Company, the extent of fees, if any, payable to them for attending meetings of
the Board or a Committee thereof as well as to the extent of other remuneration, reimbursement of expenses payable
to them under our Articles of Association. All our Directors may also be deemed to be interested to the extent of
Equity Shares that may be subscribed for and Allotted to them, out of the present Issue in terms of this Draft Red
Herring Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the
said Equity Shares.
Our Directors may also be regarded as interested in the equity shares, if any, held by or that may be subscribed by
and allotted to the companies, firms and trust, in which they are interested as directors, members, partners or
trustees.
Except as stated otherwise in this Draft Red Herring Prospectus, we have not entered into any contract, agreement
or arrangement since incorporation 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 or are proposed to be made to them.
We currently do not have any directors’ and officers’ insurance policy.
Changes in our Key Managerial Employees in the Last Three Years
The changes in the key managerial personnel in the last three years are as follows:
Name
Date of becoming key
managerial personnel
Date of cessation
Reason for change
G. Subramanian
May 26, 2005
-
Appointment
A. Dominic
January 21, 2003
-
Appointment
E. Jayachandra Babu
July 25, 2005
-
Appointment
Madhusudan Kaushik
August 1, 2005
-
Appointment
Syamjee Jagdish
August 8, 2005
-
Appointment
March 1, 2006
-
Appointment
Jamaluddin Khiljee
March 1, 2006
-
Appointment
Sujatha
January 1, 2003
April 30, 2003
Resigned
K. Ramachandran
July 18, 2003
March 7, 2005
Resigned
C. Rajeev
April 7, 2005
December 31, 2005
Resigned
S. Chandramouli
June 6, 2005
December 31, 2005
Resigned
Other than the above changes, there have been no changes to the Key Managerial Personnel of the Company that
are not in the normal course of employment.
Shareholding of Key Managerial Personnel in our Company
None of our Key Managerial Personnel hold any Equity Shares of the Company.
57
OUR PROMOTER
The Promoter of the Company is Deccan Chronicle Holdings Limited. DCHL is the printer and publisher of Deccan
Chronicle, an English daily newspaper, Andhra Bhoomi, a Telugu daily newspaper and Andhra Bhoomi, a Telugu
weekly and monthly magazine. It has seven editions in the state of Andhra Pradesh and launched its first out of state
edition in the state of Tamil Nadu in 2005. DCHL, as a part of diversification policy and to maintain a presence in
the retail market, acquired Odyssey India Limited in September 2005.
DCHL was initially formed as a partnership firm in 1938 by the name of “Deccan Chronicle”, which first published
the English weekly Deccan Chronicle in 1938. With a view to expanding its operations, the partnership firm
“Deccan Chronicle” was restructured to form a public limited company – “Deccan Chronicle Holdings Limited”,
and with effect from January 1, 2003 all the assets and the liabilities of the said partnership firm were transferred as
a going concern to DCHL. Subsequently, in an effort to consolidate the editions of Deccan Chronicle, DCHL, under
a business transfer agreement dated December 30, 2002 also acquired all assets and liabilities (except for land and
plant and machinery) from Deccan Chronicle Private Limited, another group company that was also involved in the
business of DCHL. The promoters of DCHL are T. Venkattram Reddy and T. Vinayak Ravi Reddy.
DCHL made its initial public offer of 80,13,100 equity shares (with a green shoe option of 11,60,058) in December
2004. The Foreign Currency Convertible Bonds of the Promoter, that were issued in October 2005, are listed on the
Singapore Exchange Securities Trading Limited.
Shareholding Pattern of DCHL as at March 31, 2006
S.No.
Particulars
1.
2.
Promoters Holding
Mutual Funds and Unit Trust of India
Banks and Financial Institutions, Insurance
Companies (Central/ State Government
Institutions / Non- Government Institutions)
Private Corporate Bodies
Indian Public
NRIs / OCBs
Any other (trusts)
Clearing Members
Total
3.
4.
5.
6.
7.
8.
3,20,51,650
79,92,225
Percentage of
Holding (%)
77.75
19.39
835
0.00
3,73,964
6,67,728
66,263
1,940
71,003
4,12,25,608
0.91
1.62
0.16
0.00
0.17
100.00
No. of Shares Held
Board of Directors of DCHL as of March 31, 2006
S.No.
1.
2.
3.
4.
5.
6.
7.
8.
T. Venkattram Reddy
P.K. Iyer
O. Thomas
T.S. Ashwin
P. Siddartha
S. Balasubramaniyan
M. Sukumar Reddy
Name
Designation
Chairman
Managing Director
Executive Director (Finance)
Director (Administration)
Non-Executive Director
Non- Executive Director
Financial Performance
The audited financial results of DCHL for the fiscal year ended March 31, 2003, March 31, 2004 and March 31,
2005 are as under:
Particulars
Sales & Other Income
Profit after tax
Equity Capital
Reserves & Surplus ( excluding Revaluation Reserve)
Earnings per Share ( Rupees )
58
(Rs. In Lakhs)
Year Ended March 31,
2003
2004
2005
2,213.60
12,237.73
17,029.17
364.56
1,750.08
3,204.69
439.32
484.33
4,122.56
6,939.77
10,310.86
22,379.30
9.23
39.77
9.26
Particulars
2003
2004
2005
186.72
242.67
64.29
Net Asset Value Per Share ( Rupees )
Other Details Relating to the Promoter
(i)
PAN - AABCD 6737D
(ii)
Bank Account Number - ICICI Bank Limited, 1, Cenotaph Road, Chennai - Account Number 000105009347
(iii) Registration Number – 40110
(iv) Address of the RoC:
Registrar of Companies, Andhra Pradesh at Hyderabad, 2nd Floor, CPWD
Building, Kendriya Sadan, Sultan Bazar, Koti, Hyderabad – 500195, Andhra
Pradesh, India
The details of PAN, bank account number, registration number of the Promoter and the address of the Registrar of
Companies where the Promoter is registered will be submitted to BSE and NSE at the time of filing the Draft Red
Herring Prospectus with them. Further, DCHL has confirmed that it has not been detained as willful defaulter by the
RBI or any other governmental authority and there are no violations of securities laws committed by them in the
past or are pending against them.
Promise v. Performance
DCHL had not made any projections in its Prospectus at the time of its initial public offering in December 2004 or
at the time of issuance of its Foreign Currency Convertible Bonds in October 2005.
Information about the Share Price of DCHL
The shares of the Promoter are listed on the NSE and the BSE. The monthly high and low of the market price of the
shares on NSE and BSE for the last six months are as follows:
High and Low of Prices of Shares on NSE
S.No.
1.
2.
3.
4.
5.
6.
Month
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
High Price (Rs.)
329.00
331.30
365.10
375.00
494.70
525.00
Low Price (Rs.)
244.00
241.00
299.10
306.00
336.05
405.55
High and Low of Prices of Shares on BSE
S.No.
1.
2.
3.
4.
5.
6.
Month
High Price (Rs.)
Low Price (Rs.)
329.80
330.00
350.00
375.00
497.00
524.00
231.05
240.00
300.00
300.00
355.70
370.00
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
Details of Public/Rights Issue in the Last Three Years
DCHL made an initial public offer of 80,13,100 of its equity shares in December 2004 with a green shoe option of
11,60,058 equity shares for cash at a price of Rs.162.00 per equity share. The initial public offer of the Promoter
was oversubscribed and the allotment of equity shares to the applicants for the initial public offer was made on
December 15, 2004. The equity shares of the Company were listed on the NSE and BSE on December 22, 2004.
In October 2005, the Promoter issued U.S.$54,022,000 worth of Foreign Currency Convertible Bond due 2010 at a
price of USD 1,000 per Foreign Currency Convertible Bond. The same were listed on the Singapore Exchange
Securities Trading Limited on October 13, 2005.
59
DCHL declared a dividend of 10% for the financial year ended March 31, 2005. No dividend, interim or otherwise,
has been declared/ paid by DCHL thereafter.
Mechanism of Redressal of Investor Grievance
DCHL has Share Transfer and Shareholders/ Investors Grievance Committee which meets as and when required, to
deal with matters relating to transfer/ transmission of shares and monitors redressal of complaints from shareholders
relating to transfers, non receipt of balance sheet, non receipt of dividend declared, etc. Typically the investor
grievances are dealt within a fortnight of receipt of the complaint from the investor. As of March 31, 2006, there are
no investor complaints that were unresolved.
Companies promoted by Promoter Group
DC Investments and Finance Private Limited
DC Investments and Finance Private Limited was incorporated on October 1, 1985 as “Annapurna Growth Funds
Limited”. It changed its name to DC Investments and Finance Private Limited on June 16, 1999. DC Investments
and Finance Private Limited was incorporated for carrying on the business of finance, investment and trading,
finance lease operations of all kinds and to undertake the business of portfolio investments and merchant bankers.
The shareholders of DC Investments and Finance Private Limited as of March 31, 2006 are:
1.
2.
3.
4.
5.
6.
7.
Sl. No.
Shareholders
T. Venkattram Reddy
T. Urmila Reddy
T. Shanthi Priyadarshini Reddy
P.K. Iyer
T. Manjula Reddy
Percentage of holding (%)
41.48
0.01
0.01
17.01
0.01
0.01
41.47
The Board of Directors of DC Investments and Finance Private Limited are T. Urmila Reddy, T. Shanthi
Priyadarshini Reddy and T. Manjula Reddy.
The audited financial highlights of DC Investments and Finance Private Limited for the last three financial years are
as under(Rs. In Lakhs)
2003
2004
2005
962.60
(196.20)
75.68
75.68
121.56
1,026.11
1,026.11
3,426.95
135.58
135.58
291.92
Particulars
Profit after tax
Equity Capital
Reserves & Surplus (excluding Revaluation Reserve)
Earnings per Share (Rupees)
Net Asset Value Per Share (Rupees)
Asian Age Holdings Limited
Asian Age Holdings Limited was incorporated on June 20, 2000. Asian Age Holdings Limited is carrying on the
business as the holding company for the companies engaged in the business of publishing magazines, journals,
newspapers or any other type of media in the field of information, mass communication and media services through
its investments and to carry on the business of investment and financial consultants. The company also publishes
the Asian Age, a newspaper that is published simultaneously from New Delhi, Mumbai, Calcutta, Bangalore and
Ahmedabad.
The shareholders of Asian Age Holdings Limited as of March 31, 2006 are:
Sl. No.
1.
2.
Shareholders
UB Holdings Limited
Percentage of holding (%)
90
10
The Board of Directors of Asian Age Holdings Limited are T. Venkattram Reddy, M.J. Akbar, P.K. Iyer and T.
60
Vinayak Ravi Reddy.
The financial highlights of Asian Age Holdings Limited for the last three financial years are as under(Rs.in Lakhs)
2003
2004
2005
1,912.61
1.596.35
2,614.39
(146.90)
75.25
127.02
7.71
7.71
7.71
(731.50)
(656.25)
(529.23)
(19.05)
97.59
164.73
-
Particulars
Profit after tax
Equity Capital
Reserves & Surplus ( excluding Revaluation Reserve)
Earnings per Share ( Rupees )
Net Asset Value Per Share ( Rupees )
61
RELATED PARTY TRANSACTIONS
As per our restated unconsolidated financial statements included in this Draft Red Herring Prospectus, the following
are the details of our related party transactions:
Sr. No.
1.
Name of the Party
Deccan Chronicle
Holdings Limited
Nature of
Relation
Holding
Company
Nature of
Service
Corporate
Security given
for Overdraft
facility taken
by Odyssey to
the extent of
Rs. 1000 lakhs
62
Year Ended
Sep 30, 2005
-
Period Ended
Jan 31, 2006
-
CURRENCY OF PRESENTATION
In this Draft Red Herring Prospectus, all references to “Rupees” and “Rs.” are to the legal currency of India.
Any percentage amounts, as set forth in “Risk Factors”, “Our Business”, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and elsewhere in this Draft Red Herring Prospectus, unless
otherwise indicated, have been calculated on the basis of the our unconsolidated financial statements prepared in
accordance with Indian GAAP.
63
DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and approved by our
shareholders, at their discretion, and will depend on a number of factors, including but not limited to our profits,
capital requirements and overall financial condition of our Company. The Board may also from time to time pay
interim dividends.
As per our restated unconsolidated financial statements included in this Draft Red Herring Prospectus, the following
are the details of our dividend declared:
STATEMENT OF DIVIDENDS DECLARED
(Rs. In Lakhs)
For the Year
Ended
31.03.01
For the Period
Ended
31.01.06
For the Year
Ended
30.09.05
For the Period
Ended
30.09.04
For the Period
Ended
30.06.03
For the Year
Ended
31.03.02
Percentage of Dividend
-
-
-
-
-
10
Amount of Dividend
-
-
-
-
-
1.81
DESCRIPTION
The amounts paid as dividends in the past would not be necessarily indicative of our dividend policy or dividend
amounts, if any, in the future.
64
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH 2001, 31st MARCH 2002, FOR THE
PERIOD ENDED 30th JUNE 2003, 30th SEPTEMBER, 2004, FOR THE YEAR ENDED 30th SEPTEMBER,
2005 AND FOR THE PERIOD ENDED 31ST JANUARY, 2006
AUDITORS REPORT
To,
The Board of Directors
Odyssey India Limited
No. 6, Dev Regency,
Gandhinagar 1st Main Road,
Adyar,
Chennai – 600 020.
Re: Initial Public offering of Odyssey India Limited
Dear Sirs,
I have examined the financial information of Odyssey India Limited, as attached to this report stamped and initialed
by me for identification and as approved by the Board of Directors, which has been prepared in accordance with
Part II of Schedule II of the Companies Act, 1956 (“the Act”) and the Securities and Exchange Board of India
(Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time (“the Guidelines”) issued by
the Securities and Exchange Board of India (“SEBI”) on January 19, 2000 in pursuance to Section 11 of the
Securities and Exchange Board of India Act, 1992 and related clarifications, and in accordance with your
instructions dated February 16, 2006 and April 6, 2006 requesting me to carry out work in connection with the
Offer Document being issued by the Company in connection with its proposed Initial Public Offering of Equity
Shares (referred to as “the Issue”).
A. FINANCIAL INFORMATION AS PER THE AUDITED FINANCIAL STATEMENTS
I have examined the attached restated Balance Sheets of the Company as at 31st March 2001, 31st March 2002, 30th
June 2003, 30th September 2004, 30th September 2005 and 31st January 2006 (Annexure II) and the attached restated
statements of Profit and Loss Account for each of these periods ended on those dates (Annexure I) and the related
financial statement schedules (Annexure IV), together referred to as ‘summary statements’. These summary
statements have been extracted from the financial statements for these periods audited by me, M/s. S.
Balasubramaniyan & Co., Chartered Accountants, Chennai and M/s. Subramaniyan & Swaminathan, Chartered
Accountants, Chennai have been adopted by the Board of Directors/members for the respective periods/year. Based
on my examination of these summary statements I confirm that:
1.
The summary statements of the Company have been restated with retrospective effect to reflect the significant
accounting policies of the Company (as disclosed in Annexure III to this report) as adopted by the Company as
at 31st January, 2006.
2.
There are no material adjustments relating to previous period, which need to be adjusted in summary statement
in the period to which they relate.
3.
There are no extra-ordinary items, which need to be disclosed separately in the summary statements.
B.
Other financial information
I have examined the following financial information relating to Odyssey India Limited proposed to be included in
the Offer Document, as approved by you and annexed to this report.
i)
ii)
iii)
Summary of accounting ratios based on the adjusted profits relating to earnings per share, net asset value and
return on net worth is enclosed as Annexure V.
Capitalization Statement of the Company is enclosed as Annexure VI.
Tax Shelter Statement of the Company is enclosed as Annexure VII.
65
iv)
v)
vi)
vii)
viii)
ix)
x)
xi)
xii)
xiii)
xiv)
Statement of Cash Flow of Odyssey India Limited is enclosed as Annexure VIII.
Statement of dividends declared by the Company as Annexure IX
Statement of secured loans outstanding as at above mentioned years enclosed as Annexure X and security of
loan outstanding as at January 31, 2006 is given in Annexure XI.
Changes in accounting policies in the concerned years is enclosed as Annexure XII.
There are no unsecured loans outstanding as at January 31, 2006 (including that from related parties) as
appearing in Annexure XIII.
There are no contingent liabilities as at January 31, 2006.
Age-wise details of sundry debtors for above mentioned period is given as per Annexure XIV.
Break up of loans and advances for above mentioned period is given as per Annexure XV.
The Company has not made any investments as at January 31, 2006.
Details of transactions with related parties is enclosed as Annexure XVI.
Statement of other income enclosed as Annexure XVII to this report.
In my opinion, the financial information of the Company, as attached to this report as mentioned in paragraphs (A)
and (B) above, read with respective significant accounting policies after making groupings and adjustments, have
been prepared in accordance with Part II of Schedules II of the Act and the Guidelines issued by SEBI.
This report is intended solely for your information and for inclusion in the Offer Document in connection with the
Issue and is not to be used, referred to or distributed for any other purpose without my prior written consent.
V. Sukumar
Chartered Accountant
Membership No. 200/19343
Chennai,
April 6, 2006
66
Annexure I
SUMMARY OF PROFIT AND LOSS ACCOUNT, AS RESTATED
(Rs. In Lakhs)
Particulars
Period Ended
Year Ended
Year Ended
Year Ended
Year Ended
Year Ended
31-Jan-06
30-Sep-05
30-Sep-04
30-Jun-03
31-Mar-02
31-Mar-01
Income
Revenue
1,033.38
1,854.87
1,320.51
950.96
545.13
507.37
Other Income
2.85
23.47
12.06
19.38
0.61
.06
Total Income
1,036.23
1,878,34
1,332.57
970.34
545.74
507.43
Employee Cost
126.64
182.68
175.94
105.74
36.47
17.89
Cost of Goods Sold
500.01
936.97
720.45
634.64
403.26
402.02
Administrative & Other Costs
227.50
426.82
315.25
175.72
82.63
65.73
Total Expenditure
854.15
1,546.47
1,211.64
916.10
522.36
485.64
Profit – EBITDA
182.08
331.87
120.93
54.24
23.38
21.79
42.03
95.33
65.53
23.86
6.82
5.75
Expenditure
Interest & Financial Charges
-
-
0.67
0.34
0.34
0.34
140.05
236.54
54.73
30.04
16.22
15.70
Depreciation
51.48
114.50
44.55
12.81
7.39
7.53
88.57
122.04
10.18
17.23
8.83
8.17
Current Tax
12.28
41.00
0.78
6.94
3.50
5.00
Proft before Depreciation and Tax
Deferred Tax
17.53
8.95
4.70
1.84
-
-
Net Profit as per audited Statement of Account (A)
Adjustment on account of changes in accounting
Policies
58.76
72.09
4.70
8.45
5.33
3.17
-
-
3.42
1.81
-
-
Total Adjustments
-
-
3.42
1.81
-
-
58.76
72.09
8.12
10.26
5.33
3.17
Adjusted Profit
67
Annexure II
SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED
(Rs. In Lakhs)
As at
As at
As at
As at
As at
As at
31-Jan-06
30-Sep-05
30-Sep-04
30-Jun-03
31-Mar-02
31-Mar-01
Gross Block
992.26
890.22
469.35
208.73
76.70
69.38
Less: Depreciation
264.07
212.60
98.09
56.37
43.56
36.16
Net Block
728.19
677.62
371.26
152.36
33.14
33.22
Fixed Assets
Net Block after adjustment for Revaluation Reserve
Capital Work In Progress
15.05
15.05
15.05
15.04
-
-
713.14
662.57
356.21
137.32
33.14
33.22
-
-
-
-
-
-
713.14
662.57
356.21
137.32
33.14
33.22
-
-
-
-
-
-
1475.00
1,278.00
660.42
357.11
109.46
92.61
27.53
40.39
144.92
29.69
7.38
11.49
Sundry Debtors
131.26
305.80
83.86
61.07
6.61
4.82
Loans and Advances
250.44
162.38
164.13
44.95
29.06
23.82
1,884.23
1,786.57
1,053.33
492.82
152.51
132.74
862.37
1,050.89
600.89
144.13
43.43
19.17
3.50
Total
Investments
Current Assets, Loans and Advances
Inventory
Cash and Bank Balances
Liabilites and Provisions
Secured Loans
Unsecured Loans
-
-
-
-
3.50
30.74
13.21
4.26
(0.44)
-
-
297.30
422.17
391.29
346.98
116.12
123.10
Total
1,190.41
1,486.27
996.44
490.67
163.05
145.77
NETWORTH
1,406.96
962.87
413.10
139.47
22.60
20.19
Share Capital
750.00
215.30
93.39
74.17
18.10
19.55
Reseverves & Surplus
974.08
1,064.69
377.51
81.01
5.51
1.98
15.05
15.05
15.05
15.04
-
-
959.03
1,049.64
362.46
65.97
5.51
1.98
Total
Less: Miscellaneous Expenditure (to the extent not
written off or adjusted)
1,709.03
1,264.94
455.85
140.14
23.61
21.53
302.07
302.07
42.75
0.67
1.01
1.34
NET WORTH
1,406.96
962.87
413.10
139.47
22.60
20.19
Current Liabilities & Provisions
Represented By
Reserves (Net of Revaluation Reserves)
68
Annexure III
SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of Accounting: The financial statements have been prepared on historical cost convention and on an
accrual basis in accordance with applicable accounting policies in India.
(b)
Fixed Assets: Expenditure which are of capital in nature are capitalized at cost, which comprises of
purchase price (net of rebates and discounts), import duties, levies and all other expenditure directly
attributable to cost of bringing the asset to its working condition for its intended use.
(c)
Deferred Revenue Expenditure: Expenses of enduring nature has been treated as deferred revenue
expenses which will be amortized.
(d)
Investments: Investments are valued at acquisition cost.
(e)
Depreciation: Depreciation on the fixed assets has been provided on Written Down Value Method from
the date the assets have been put to use, at the rates and in the manner prescribed in the Schedule XIV to
the Companies Act, 1956.
(f)
Inventory: Inventories are valued at lower of the cost or net realizable value, is consistent with that of the
previous year.
(g)
Previous years figures have been regrouped wherever necessary to conform to the classification adopted in
the current year.
(h)
Retirement Benefits: Gratuity is being accounted on payment basis.
(i)
Preliminary Expenditure: Preliminary expenditure has been amortised over a period of nine years
commencing from 1995-96.
69
Annexure IV
FINANCIAL STATEMENT SCHEDULES
A. NOTES TO ACCOUNTS
Contingent Liabilities not provided for as at January 31st 2006:
1.
a.
b.
c.
(Rs.in Lakhs)
Nil
Nil
Nil
Claims against the company not acknowledged as debts
Guarantees issued by Banks
On foreign letters of credit
2.
The Company has not provided for Gratuity to employees on accrual basis, which is not in conformity with
AS-15 issued by the ICAI and the amount has not been quantified. However, in the opinion of the Management
the amount involved is negligible and has no material impact on the Profit & Loss Account.
3.
Accounting Standard (AS) – 17, “Segment Reporting” issued by the ICAI is not applicable to the company
since it is engaged in only one segment, i.e., trading in Books, Toys Gift Articles, etc. The company’s
operations are geographically spread within India.
4. (a)
Details of Related Party Transactions as per AS-18 are as under:
Sr. No.
Name of the Party
1.
Deccan Chronicle Holdings
Limited
Nature of
Relation
Holding
Company
Nature of
Service
Corporate
Security
given for
Overdraft
facility
taken by
Odyssey to
the extent
of Rs. 1000
lakhs
(Rs. In Lakhs)
Year Ended
Period Ended
Sep 30, 2005
Jan 31, 2006
-
(b)
The details of amounts payable/ (receivable) to related parties as at 31st January, 2006 & 30th September,
2005 are as under:
(Rs. In Lakhs)
Sr. No.
Name of the Party
Amount Outstanding as at
Amount Outstanding as at
30th September 2005
31st January 2006
NIL
1.
B.
OTHER SCHEDULES
1.
Statement of Secured Loans
Particulars
Term Loan ICICI
Overdraft/Cash Credit
ICICI
HP Loan from Banks /
Others
Total
As on 31-Jan-06
Amount
-
As on 30-Sep-05
Amount
425.57
659.92
439.75
202.45
185.57
862.37
1,050.89
Remarks
(Rs. In Lakhs)
First Charge created against all
Movable assets of the company.
Against Corporate Security by
DCHL
Against the security of respective
assets
Note: No Secured Loans have been obtained and there are no amounts outstanding from the Promoters or Promoter
Group
70
2. Statement of Unsecured Loans as on 30th September 2005 and as on 31st January 2006
Particulars
Amount
(Rs. In Lakhs)
Remarks
Nil
3. Statement of Sundry Debtors
Debts outstanding for a period exceeding six months
As on 31-Jan-06
Amount
26.25
(Rs. In Lakhs )
As on 30-Sep-05
Amount
26.45
Other Debts
Unsecured and considered good
From Promoter Group Company
From Others
Nil
105.01
Nil
279.35
131.26
305.80
As on 31-Jan-06
Amount
(Rs. In Lakhs)
As on 30-Sep-05
Amount
Particulars
Total
4.
Statement of Loans and Advances
Particulars
A. Deposits
4.65
2.58
B. Advances recoverable in cash or kind or for value to be 245.79
159.80
received
Unsecured – Considered good
Total
250.44
162.38
Note: There is no amount of Loans and Advances outstanding from the Promoters or Promoter Group
71
Annexure V
STATEMENT OF ACCOUNTING RATIOS
Key Ratios
Period
Ended
31-Jan-06
Year
Ended
30-Sep-05
Period
Ended
30-Sep-04
Period
Ended
30-Jun-03
Year
Ended
31-Mar-02
Year
Ended
31-Mar-01
Earnings per Share of Rs 10 each
4.81
6.57
0.60
2.91
2.94
1.75
Net Asset Value per Share of Rs. 10 each
115.15
87.77
52.95
47.96
12.49
11.15
Return on Net Worth (%)
4.18%
7.49%
1.14%
6.06%
23.58%
15.70%
Weighted Average Number of Equity Shares during
period (in lakhs)
12.218
10.970
7.801
2.908
1.810
1.810
Formula
1. Earnings per Share (Rs.)
Net Profit after tax and before extraordinary items
Weighted Average Number of Equity Shares outstanding during the period
2. Net Asset Value per Share (Rs.)
Net Worth
Weighted Average Number of Equity Shares outstanding during the period
3. Return on Networth (%)
Net Profit after tax and before extraordinary items
Net Worth
72
CAPITALISATION STATEMENT
Annexure VI
(Rs. In Lakhs)
Pre Issue as at
January 31, 2006
Long Term Debt
Short Term Debt
202.45
659.92
Total
862.37
As Adjusted for the
issue
Refer Note 1
Shareholders Funds
Share
Capital
Reserves after adjustment of Misc. Expenses to the extent not written off
Excluding revaluation reserve
750.00
656.96
Total Shareholders Funds
1,406.96
Long Term Debt/Equity
1 : 6.95
Notes:
The post issue capitalization cannot be determined till the completion of the book building process.
73
Annexure VII
TAX SHELTER STATEMENT
Particulars
Period
Ended
31-Jan-06
Year
Ended
30-Sep-05
Period
Ended
30-Sep-04
(Rs. In Lakhs)
Year
Ended
30-Jun-03
Year
Ended
31-Mar-02
Year
Ended
31-Mar-01
Profit before Tax
88.57
122.04
10.18
17.23
8.83
8.17
Tax at Notional Rate @ 35%
31.00
42.71
3.56
6.03
3.09
2.86
Book Depreciation
52.07
26.56
13.09
5.00
(0.72)
(0.70)
Other Adjustments
-
-
-
-
-
-
Net Adjustments
52.07
26.56
13.09
5.00
(0.72)
(0.70)
Tax Saving thereon @ 35%
18.22
9.30
4.58
1.75
(0.25)
(0.24)
Total Taxation
12.78
33.42
(1.02)
4.28
3.34
3.10
Adjustments:
Difference between Tax Depreciation and
74
Annexure VIII
STATEMENT OF CASH FLOW
Period Ended
Particulars
31-Jan-06
(Rs. In Lakhs)
Year ended
Period ended
Period ended
Year
Ended
Year
Ended
30-Sep-05
30-Sep-04
30-Jun-03
31-Mar-02
31-Mar-01
Cash Flow from Operating Activities:
Net Profit before Taxation
88.57
122.04
10.18
17.23
8.83
8.17
51.48
114.50
44.55
12.81
7.39
7.53
-
-
-
-
-
-
(17.53)
(8.95)
(4.70)
(1.84)
-
-
42.03
95.33
65.53
23.86
6.82
5.75
-
-
-
-
-
-
164.55
322.92
115.56
52.06
23.04
21.45
174.54
(221.94)
(22.79)
(54.46)
(1.79)
1.94
(197.00)
(617.58)
(303.31)
(247.65)
(16.85)
(8.76)
(88.06)
1.75
(119.18)
(15.89)
(5.24)
5.29
(124.87)
30.88
44.31
230.86
(6.98)
8.50
(12.28)
(41.00)
(0.78)
(6.94)
(3.50)
(5.00)
Dividend
-
-
-
-
(1.81)
(2.01)
Prior Period Expenses
-
-
3.42
1.81
-
(0.90)
(247.67)
(847.89)
(398.33)
(92.27)
(36.17)
(0.94)
(83.12)
(524.97)
(282.77)
(40.21)
(13.13)
20.51
Adjustments for:
Depreciation
Preliminary expenses Written off
Interest Paid
Loss on Sale of Fixed Assets
Operating Profit before Working Capital
Changes
Change in Trade and Other Receivables
Change in Inventories
Change in Loans & Advances
Change in Trade Payable
Income Taxes Paid
Net working capital changes
Net Cash Flow from Operating Activities
Purchase of Fixed Assets
(102.04)
(420.87)
(268.18)
(132.03)
(7.32)
(4.25)
Sale of Fixed Assets
-
-
7.54
-
-
-
Depn withdrawn
-
-
(2.83)
-
-
-
Investments Purchased
-
-
-
-
-
-
(102.04)
(420.87)
(263.47)
(132.03)
(7.32)
(4.25)
(188.52)
450.00
456.76
100.70
24.26
(2.44)
535.70
-
121.91
19.22
56.07
(1.45)
(3.25)
-
-
15.04
-
-
(149.37)
615.09
288.38
47.92
-
-
Net Cash Flow used in Investing Activities
Cash Flow from Financing Activities:
Proceeds from Borrowings
Proceeds from Issuance of Capital
1. Increase in Reserves
Increase in Share Premium
Increase in Deferred Tax Liability
17.53
8.95
4.70
1.84
-
-
Unsecured Loans
-
-
(2.00)
(1.50)
-
(2.45)
Miscellaneous Exp. Incurred during the year
-
(259.32)
(42.08)
0.34
0.33
0.33
Interest Received
-
-
-
-
-
-
Interest Paid
(42.03)
(95.33)
(65.53)
(23.86)
(6.82)
(5.75)
Repayment of Borrowings
-
-
-
-
-
-
Proceeds from Agencies Deposits
-
-
-
-
-
-
Dividend Paid
-
-
-
-
-
-
Net cash Flow from Financing Activities
172.31
841.30
661.45
194.55
16.32
(13.56)
Net Increase in Cash and Cash Equivalents
(12.85)
(104.54)
115.21
22.31
(4.13)
2.70
40.39
144.92
29.69
7.38
11.49
8.80
27.53
40.39
144.92
29.69
7.38
11.49
Cash and Cash Equivalents
(Opening Balance)
Cash and Cash Equivalents
(Closing Balance)
75
Annexure IX
STATEMENT OF DIVIDENDS DECLARED
(Rs.in Lakhs)
For the Period
For the
Year
For the Period
For the Period
For the
Year
Ended
Ended
Ended
Ended
Ended
Ended
31.01.06
30.09.05
30.09.04
30.06.03
31.03.02
31.03.01
Percentage of Dividend
-
-
-
-
-
10
Amount of Dividend
-
-
-
-
-
1.81
DESCRIPTION
76
For the Year
Annexure X
SECURED LOANS
(Rs.in Lakhs)
DESCRIPTION
Term Loan from ICICI
For the Period
For the Year
For the Period
For the Period
For the
Year
Ended
Ended
Ended
Ended
Ended
Ended
31.01.06
30.09.05
30.09.04
30.06.03
31.03.02
31.03.01
For the Year
-
425.57
187.50
-
3.08
3.44
Overdraft / Cash Credit with ICICI
659.92
439.75
374.33
136.79
40.35
15.73
HP Loans with ICICI
202.45
185.57
39.06
7.34
-
-
TOTAL
862.37
1,050.89
600.89
144.13
43.43
19.17
77
Annexure XI
SECURITY OF LOAN OUTSTANDING AS AT 31st JANUARY 2006
Overdraft Facility with ICICI Bank Ltd.:
The overdraft facility with ICICI Bank Ltd. availed and outstanding as at January 31, 2006 is secured by corporate security given by the holding company to the extent of Rs. 10 Crores.
HP loans with ICICI
S.No.
Type of Asset Purchased
Amount O/s as at
January 31, 2006
6.23
1.
Skoda Car
2.
Mercedes Benz Car 1
3.
Bentley
4.
Dell Computers
1.78
5.
UPS
1.83
6.
IBM POS System
1.53
7.
Scanner
1.65
8.
Dell Computers
2.06
9.
Scanner
0.86
10.
UPS
1.39
11.
Mercedes Benz
30.19
12.
Computers & Accessories
13.69
Total
20.43
120.81
Remarks
Rs. In Lakhs
Secured against hypothecation of the vehicle purchased. Rate of interest of loan taken is 7.5 %
p.a. repayable in a period of 60 months.
Secured against hypothecation of the computers purchased. Rate of interest of loan taken is 6.5
% p.a. repayable in a period of 24 months.
Secured against hypothecation of the UPS purchased. Rate of interest of loan taken is 6.5 %
Secured against hypothecation of the IBM POS System purchased. Rate of interest of loan
taken is 6.5 % p.a. repayable in a period of 24 months.
Secured against hypothecation of the Scanner purchased. Rate of interest of loan taken is 6.5 %
Secured against hypothecation of the Computer purchased. Rate of interest of loan taken is 6.5
Secured against hypothecation of the Scanner purchased. Rate of interest of loan taken is 6.5 %
Secured against hypothecation of the UPS purchased. Rate of interest of loan taken is 6.5 %
Secured against hypothecation of the Computers purchased. Rate of interest of loan taken is 6.5
202.45
78
Annexure XII
CHANGES IN ACCOUNTING POLICIES
The Accounting Policies have been consistently followed by the company and there are no changes in the
accounting policies from incorporation till date.
79
Annexure XIII
STATEMENT OF UNSECURED LOANS
Description
Unsecured Loan
For the
Period
Ended
31.01.06
For the Year
Ended
30.09.05
For the
Period
Ended
30.09.04
For the
Period
Ended
30.06.03
NIL
NIL
NIL
NIL
80
Rs. In Lakhs
For the Year
Ended
For the Year
Ended
31.03.02
31.03.01
3.50
3.50
Annexure XIV
DETAILS OF SUNDRY DEBTORS
Description
Unsecured, Considered
good outstanding for
more than six months
For the
Period
Ended
31.01.06
For the Year
Ended
30.09.05
For the
Period
Ended
30.09.04
For the
Period
Ended
30.06.03
Rs. In Lakhs
For the Year
Ended
31.03.02
For the Year
Ended
31.03.01
26.25
26.45
15.95
8.36
-
-
Other Debtors
105.01
279.35
67.91
52.71
6.61
4.82
Total
131.26
305.80
83.86
61.07
6.61
4.82
Note: There is no amount of Sundry Debtors outstanding from the Promoters or Promoter Group
S.No.
1.
LIST OF TOP TEN SUNDRY DEBTORS OUTSTANDING AS AT JANUARY 31, 2006
Rs. In Lakhs
Name of the Party
Amount
Tata Consultancy Services Ltd.,
2.82
2.
Secretariat – Library
1.40
3.
Alagu Traders
0.78
4.
Commandant – OTA, Officer’s Training Academy
0.72
5.
Sheela Rani – Anuthama
0.71
6.
Satyamoorthy
0.57
7.
Gunasekhar
0.48
8.
Coromandel Books
0.47
9.
J.D. Roche
0.46
10.
Gopalakrishnan
0.40
81
Annexure XV
DETAILS OF LOANS AND ADVANCES
Description
Govt. & Other Deposits
Advances recoverable in cash
or in kind for value to be
received
Total
For the
Period
Ended
31.01.06
For the Year
Ended
30.09.05
For the
Period
Ended
30.09.04
For the
Period
Ended
30.06.03
For the Year
Ended
31.03.02
Rs. In Lakhs
For the Year
Ended
31.03.01
4.65
2.58
59.48
18.38
14.42
1.81
245.79
250.44
159.80
162.38
104.65
164.13
26.57
44.95
14.64
29.06
22.01
23.82
Note: There is no amount of Loans and Advances outstanding from the Promoters or Promoter Group
82
Annexure XVI
DETAILS OF RELATED PARTY TRANSACTIONS
S.N
o.
1.
Name of the
Party
Nature
of
Relation
Nature of
Service
Deccan Chronicle
Holdings Limited
Holding
Company
Corporate
Security
given to
the extent
of Rs. 10
00 lakhs
for
availing
overdraft
facility by
Odyssey.
For the
Period
Ended
31.01.06
-
83
For the
Year
Ended
30.09.05
-
For the
Period
Ended
30.09.04
-
For the
Period
Ended
30.06.03
-
Rs. In Lakhs
For the
Year
Ended
31.03.02
-
For the
Year
Ended
31.03.01
-
Annexure XVII
DETAILS OF OTHER INCOME
Description
For the
Period
Ended
31.01.06
For the Year
Ended
30.09.05
For the
Period
Ended
30.09.04
For the
Period
Ended
30.06.03
For the Year
Ended
31.03.02
Rs. In Lakhs
For the Year
Ended
31.03.01
Miscellaneous Receipts
2.85
23.47
12.06
19.38
0.61
0.06
Total
2.85
23.47
12.06
19.38
0.61
0.06
84
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is based on our financial statements (as restated) for the period ended January 31, 2006,
year ended September 30, 2005 and period ended September 30, 2004, including the notes thereto and the reports
thereon, which appear on page 65 of this Draft Red Herring Prospectus.
These data have been reclassified in certain respects for purposes of presentation. Our financial year ends on
September 30 of each year, so all references to a particular financial year are to the twelve-month period ended on
September 30, of that year.
Unless otherwise indicated, all related data in the following discussion are derived from on our financial statements
(as restated) for the period ended January 31, 2006, year ended September 30, 2005 and period ended September
30, 2004. For more information, see “Forward Looking Statements” on page ix of this Draft Red Herring
Prospectus.
Background and Basis of Presentation
Our company was formed in April 1995 as Heritage Books Private Limited and floated the brand Odyssey with our
flagship store in the southern suburbs of Chennai – Adyar. In the year 2002-03 the company name was changed to
Odyssey India Private Limited. In the year 2003-04 it became a public limited company.
Our brand “Odyssey” has a strong recall amongst its target group and enjoys utmost loyalty from our customers.
Our company was acquired by Deccan Chronicle Holdings Limited last year. Deccan Chronicle is the fourth largest
circulated broad sheet daily in India and has been the undisputed leader in Hyderabad and the state of Andhra
Pradesh. The daily was launched in Chennai (Tamilnadu) last year and has already become the No.1 news paper in
Chennai.
For the purpose of analysis, we have analysed our financial data since incorporation. Due to difference in period of
the financial statements, the financial statements for the period ended January 31, 2006, year ended September 30,
2005 and period ended September 30, 2004 are not comparable.
Overview
music, cards, stationery, gifts, toys, multimedia and magazines. Odyssey was started in the year 1995 with a 3500
square feet store in the southern suburb of Chennai – Adyar. Now we occupy approximately 60,000 square feet of
retail space in six cities, viz., Chennai, Hyderabad, Coimbatore, Trichy, Salem and Varanasi.
Our competitive strengths include strong position in the Indian retail sector, store design concept, experienced,
analytical and creative team, Strong Management Team and motivated work force, focus on retail service, loyal
customer base and superior operational performance. We are a professionally managed team, system driven
organisation. We believe that our focus on Quality Management system, understanding the preferences of our
85
customers, our endeavour to continually improve our products and service and a committed work force are the key
factors that have contributed to our success and will help us scale up as we embark on strategic growth plan.
During the last year we have changed our store design concept to bring in a contemporary feel and enhance brand
visibility through the same. Last year we opened a store in Anna Nagar, northern suburb in Chennai (also highly
posh market) with the new design. The same layout and design thought would be carried forward in other stores.
We have re-located our flagship store at Adyar, Chennai expanding from 6500 square feet to 17,600 square feet in
month of October 2005 with the new design concept.
We believe that as we grow in size and scale and expand our reach further, economies of scale would be available
to us. We also continue to focus on at enhancing our operational efficiencies and human capital, which is critical in
the retail industry.
We believe that the future developments that may affect our future results of operations, financial condition and
cash flow include any letdown in forecasting changes in fashions, trends, novelty, failure of products to perform,
changes in economic conditions, any large scale shift in our large base our loyal customers, entrance of a
competitor, our ability to deliver as per our business plans, our ability to adopt changes in information technology
sector and high attrition rates at the entry level for the retail sector.
General Information
Liquidity and capital resources
Our primary liquidity needs have been to finance our working capital requirements and capital expenditures. To
fund these requirements, we have relied on cash flows from operations and short-term and long-term borrowings.
As at January 31, 2006, cash and bank balances amounted to Rs. 27.53 lakhs. We believe that our anticipated
internal accruals along with the proceeds of this Issue, will be sufficient to meet our fund requirements as described
in the “Objects of the Issue” on page 17 of this Draft Red Herring Prospectus.
Unusual or infrequent events or transactions
There have been no events, to the best of our knowledge, other than as described in this Draft Red Herring
Prospectus which may called as “unusual” or “infrequent”.
Significant economic/regulatory changes
There have been no significant changes in the law governing the retail industry in the recent past. The regulations
governing the retail industry are described in “Regulations” section of this Red Herring Prospectus.
Future relationship in costs and revenue
We are continuously working to create efficient processes resulting in cost reduction and have a better control over
our operational costs. We expect to continue this effort of improving our technology initiatives and try and realise
better margins in the future.
Total turnover of each major industry segment in which the company operates
We continue to be predominantly a book store and derive income from sale of books, gifts, toys, music and movie
cassettes & CDs, stationery etc. Please refer to the discussions in the paragraphs entitled “ Business Performance”
in this section.
New Products or business segments
We may introduce new products in our store based on changing customer preferences and our commitment to
provide latest quality products. We do not expect to launch any other business segment.
Seasonality of Business
The business of the Company is not seasonal. However there might be significant variations in our quarterly
revenues and profits because of various factors like general economic conditions, festivals etc.
Dependence on single or few suppliers / customers
The company retails a lot of foreign brands which are procured by distributors and importers. They largely belong
to the unorganised sector. Any external or internal induction affecting these distributors can hamper our business
86
and thus our operations are risk averse from supplier side. Our products our purchased by a wide variety of
customers and we do not foresee business risk arising from our customers.
Competitive conditions
We expect the competition to intensify from other retail platforms. We may also face competition from other
established players in places where we are planning to start our new stores. For further details, please refer to the
discussions of our competition in the sections titled “Risk Factors” and “Our Business” on pages x and 36,
respectively, of this Draft Red Herring Prospectus.
Known trends or uncertainties
Other than as described in this Draft Red Herring Prospectus, to our knowledge, there are no known trends or
uncertainties that have or are expected to have a material adverse impact on revenue or income of our Company
from continuing operations.
Significant developments after January 31, 2006 that may affect our future results of operations
Expected as stated as elsewhere in this Draft Red Herring Prospectus, to our knowledge no circumstances have
arisen since the date of the last financial statements as disclosed in this Draft Red Herring Prospectus which
materially and adversely affect or are likely to affect, the trading or profitability of our Company or the value of our
assets or our ability to pay material liabilities within the next twelve months.
Quantitative and Qualitative Disclosures about Market Risk
Our exposure to market risk is a function of our buying and selling activities. We are exposed to market risk from
changes in both foreign exchange rates and interest rates, though of not a significant nature.
Exchange rate risk
All our revenues are denominated in local currency and we do not have to face any exchange risk on the same. Our
employees travel overseas for business purposes, costs of which are denominated in foreign currencies. For the
period ended September 30, 2004 our expenditure in foreign currency (on payment basis) included foreign travel of
Rs. 2.18 lakhs.
Interest rate risk
Our interest rate risk results from changes in interest rates, which may affect our financial expenses. We bear
interest rate risk with respect to our indebtedness as our secured loans stood at Rs. 862.37 lakhs as at January 31,
2006. Though all our loans are currently fixed, they are subject to review by both parties at the end of every
financial year. Any rise in interest rates could have our lenders push higher rates of interest on the loans.
Effect of inflation
We set the price for our products based on various factors, including inflation. In line with changing inflations, we
alter our margins to absorb the inflationary impact. Inflation has not had a significant effect on the result of our
operations to date and we do not expect that inflation rates in India will have a significant impact on our results of
operations for the foreseeable future.
Business Performance
Income
For the period ended January 31, 2006, financial year 2005 and period ended September 30, 2004 our revenue
primarily comprises of monies received from sale of books, toys, gifts, music, movies etc. The details of sales are as
under:
Particulars
Sales ( Net of Returns and Discounts )
Other Income
Period ended
January 31, 2006
Year ended
September 30, 2005
(Rs. In Lakhs)
Period ended
September 30, 2004
1033.38
1854.87
1320.53
2.85
23.47
12.06
87
Our sales revenues are disclosed net of sales returns and discounts given to the customers. In order achieve store
sales targets the marketing department provides front-end support function by improving brand visibility and
driving walk-ins to the store. It also plans and strategies on the positioning of the brand vis-à-vis competition.
Through proper mix of media it ensures the customers are reached and communicated effectively and rightly about
the brand. It helps in improving top-of-mind recall of the brand. It addresses all communications to the right
audience making the best use of available resources.
The department also provides market research data in order to understand the consumer psyche and the mood of the
nation on the macro level and about the brand / its perception at a micro level. It also provides suggestions to
improve the brand visibility. The customer relationship management is a sub function of the marketing department
and was constituted for raising the bar on customer service standards. The department directly takes care of the
loyalty program, co branded activities, database managements and corporate relationships. The key objectives of the
department are to ensure customer satisfaction and smooth any aberration in set standards. It ensures that the
customer buys into the brand as he would when he buys a tangible product. It follows a strategy which builds the
brand around merchandise, co-partners and exciting activities. The department is aggressive into corporate
relationship building where a win-win strategy of profit sharing will dominate.
Expenditure
Cost of Goods Sold: It includes, among others, net purchase cost of goods sold and direct expenses.
Particulars
Net cost of goods sold
Direct Expenses
Period ended
January 31, 2006
Year ended
September 30, 2005
(Rs. In Lakhs )
Period ended
September 30, 2004
490.47
913.20
706.76
9.55
23.65
13.69
Net cost of goods sold represents purchase cost of goods sold net of returns and discounts. Direct expenses include
transport charges, cost of packing materials used and handling charges. The transportation of the goods is done by
road transport. The transport charges, cost of packing materials used and handling charges are added as part and
parcel of Cost of Goods Sold.
Employee Cost: It includes salary payments, wages, contributions to employee benefit, staff welfare and provident
funds, and various other benefits. Our employee base has remained stable during the period January 31, 2006.
Selling, General and Administrative Expense: Our selling, general and administrative expenses consist primarily of
taxes and insurances, business promotion expenses, travelling and conveyance expenses, repairs & maintenance
expenses, rent & electricity expenses and other miscellaneous expenses.
Taxation / Deferred Tax: income tax is accounted for in accordance with Accounting Standard 22 on “Accounting
for Taxes on Income”. Taxes comprise both current and deferred tax. Current tax is measured at the amount
expected to be paid / recovered from the taxation authorities, using the applicable tax rates and tax laws. The tax
effect of the timing differences that result between taxable income and accounting income and are capable of
reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are
measured using the substantively enacted tax rates and tax regulations. The carrying amount of deferred tax assets
at each balance sheet date is reduced to the extent that it is no longer reasonably certain that sufficient future taxable
income will be available against which deferred tax asset can be realised.
Assets
Fixed Assets: Gross fixed assets of our Company have increased by approximately Rs. 420.86 lakhs during the year
ended September 30, 2005 on account of (i) additions to machinery of Rs. 88.77 lakhs (ii) additions to furniture of
Rs. 108.98 lakhs (iii) around Rs. 183.12 incurred on acquisition of vehicles and (iv) 39.99 incurred on purchase of
computers.
Accumulated depreciation: We provide for depreciation as per the rates prescribed under Schedule XIV of the
Companies Act, 1956. The significant accounting policies adopted by our Company are disclosed on page 69 of this
Draft Red Herring Prospectus.
Miscellaneous Expenditure: The Miscellaneous Expenditure (to the extent not written off or adjusted) of Rs. 302.07
88
as at January 31, 2006 represents deferred revenue expenditure. The deferred revenue expenditure is being
amortized over a period of five years.
Liabilities
Secured Loans: The Company has taken overdraft and cash credit facility to meet its day to day its operational
expenses.
Our Growth Path
The table below sets forth information regarding our income, expenditure and profits for the indicated period.
(Rs. In Lakhs)
Period ended on
31.01.06*
30/09/05
% Increase
30.09.04*
30.06.03*
% Increase
31.03.02
31.03.01
% Increase
Income
Revenue
3100.14
1854.87
67.14%
1056.408
760.768
38.86%
545.13
507.37
7.44%
Other Income
8.55
23.47
-63.57%
9.648
15.504
-37.77%
0.61
0.06
916.67%
Total Income
3108.69
1878.34
65.50%
1066.056
776.272
37.33%
545.74
507.43
7.55%
Employee Cost
379.92
182,68
107.97%
140.752
84.592
66.39%
36.47
17.89
103.86%
Cost of Goods Sold
1500.03
936.97
60.09%
576.36
5077.1.2
13.52%
403.26
402.02
0.31%
Administrative Cost
682.5
426.82
59.90%
252.2
140.576
79.40%
82.63
65.73
25.71%
Total Expenditure
7.56%
2562.45
1546.47
65.70%
969.312
732.88
32.26%
522.36
485.64
Profit EBITDA
546.24
331.87
64.59%
96.744
43.392
122.95%
23.38
21.79
7.30%
Interest and Financial Charges
126.09
95.33
32.27%
52.424
19.088
174.64%
6.82
5.75
18.61%
0,536
0.272
97.06%
0.34
0.34
0.00%
77.62%
43.784
24.032
82.19%
16.22
15.7
3.31%
-1.86%
Profit before Depreciation and Tax
0
0
420.15
236.54
-
Depreciation
154.44
114.5
34.88%
35.64
10.248
247.78%
7.39
7.53
265.71
122.04
117.72%
81.44
13.784
83.07%
8.83
8.17
8.08%
36.84
41
-10.15%
0.624
5.552
-88.76%
3.5
5
-30.00%
Current Tax
Deffered Tax
52,.59
8.95
487.60%
3.76
1.472
155.43%
0
0
Net Profit
176.28
72.09
144.53%
3.76
6.76
-44.38%
5.33
3.17
0
0
0
0
0
0
Adjustment on account of changes in accounting policies
-
-
68.14%
-
0
0
-
2.736
1.448
88.95%
0
0
-
Total Adjustments
0
0
-
2.736
1.448
88.95%
0
0
-
176.28
72.09
6.496
8.208
-20.86%
5.33
3.17
Adjusted Profits
144.53%
* Figures for the following years have been annualised for the purpose of disclosure
Comparison of Fiscal year 2001 with Fiscal year 2002
Total Income
The total income for the period ended 31st March 2002 (Rs. 545. 74 Lakhs) increased by 7.55% to that of the
previous year ended 31st March 2001 (Rs. 507.43 lakhs).
Employee Cost
Our staff costs for the period increased by 103.86% due to revised pay packages of existing employees and new
recruitment for our expansion which began in the year 2002. Further, increasing volume and expansion plans of
business necessitated recruitment in various regional offices and stores of the company, leading to substantial
recruitment of manpower. However, in comparison to the increase in the turnover of the company this increase was
not substantial.
Administrative and other expenses
The substantial growth of our business in the fiscal year required us to expand our presence in other cities, and our
executives travelled extensively to various cities, which was the primary reason for the increase under this head by
25.71% in comparison to the previous year.
Finance Expense
During the period, our financial expenses increased 18.61%, largely due to increased borrowing to finance our
expansion requirements. With the growth in turnover our increased working capital requirement was met through
89
68.14%
increase in bank finance and through back to back credit from our suppliers.
EBITD
Earning Before Interest, Tax and Depreciation (EBITD) for the fiscal year 2002 was Rs 21.79 lakhs, which
increased by 7.30% in comparison to the previous year.
PAT
PAT for the period increased by 68.14% in 2002 to Rs 5.33 Lakhs from Rs 3.17 Lakhs in 2001.
Comparison of Fiscal year 2002 with Fiscal year 2003
Total Income:
The total income increased from Rs.545.74 Lakhs in March 2002 to Rs.776.272 Lakhs in June 2003 which is an
increase of 42.24%.
Employee Cost
recruitment of manpower.
executives travelled extensively to various cities, which was the primary reason for the increase under this head by
2 in comparison to the previous year 70.13%.
Finance Expense
During the period, our financial expenses increased , largely due to increased borrowing to finance our expansion
requirements. With the growth in turnover our increased working capital requirement was met through increase in
bank finance and through back to back credit from our suppliers It increased by a 179.88%.However the increase in
financial expense from year 2005-2006 has been comparatively lesser that is by a 32.27%.
EBITD
Earning Before Interest, Tax and Depreciation (EBITD) for the fiscal year 2003 was Rs 43.392 lakhs, which
increased by 85.56% in comparison to the previous year
PAT
PAT for the period increased by 26.82% in 2003 to Rs 6.76 Lakhs from Rs 5.33 Lakhs in 2002..
Comparison of Financial Year ended June 30, 2003 to Financial Year ended September 30, 2004 (figures have
been annualised for the purpose of comparison)
Total Income
The total income for the period ended 30th September 2004 increased by 37.33% to that of the previous year ended
30th June 2003.
Employee Cost
executives travelled extensively to various cities, costs incurred for setting up new stores which was the primary
reason for the increase under this head by 79.40% in comparison to the previous year.
90
Finance Expense
EBITD
Earning Before Interest, Tax and Depreciation (EBITD) for the year ended 30th September 2004 was Rs 96.74
lakhs, which increased by 122.95% in comparison to the previous year.
PAT
PAT for the period decreased by 48.33 % in 2004 to Rs 3.76 Lakhs from Rs 6.76 Lakhs in 2003 mainly due to
highly increase finance expenses for various funds garnered for expansion purpose.
Comparison of financial year ended September 30, 2004 to period ended September 30, 2005 (figures have been
annualised for the purpose of comparison)
Total Income:
The total income for the period ended 30th September 2005 (Rs.1854.87 Lakhs) increased by 75.58% compared to
the previous year September 2004 which was (Rs.1056.40 Lakhs)
Employee Cost:
recruitment of manpower. Though the ratio is less compared to the increase in the period between 2005-2006 which
was 107.97%.
reason for the increase under this head by 69.23 % in comparison to the previous year.
Finance Expense
expansion requirements.
EBITD
Earning Before Interest, Tax and Depreciation (EBITD) for the year ended 30th September 2005 Rs.331.87 Lakhs,
which increased by 243% in comparison to the previous year. This ratio doubled compared to the previous financial
year which is 122.95% which is a significant increase.
PAT
PAT increased from Rs.3.76 Lakhs in the 2004 to Rs. 72.09 Lakhs in the year 2005 which attributes to a increase of
1817.23% in terms of growth ratio.
Comparison of Financial year ended September 30, 2005 to period ended January 31, 2006 (figures have been
annualised for the purpose of comparison)
Total Income
The total income for the period ended 30th September 2006 increased by 67.14% to that of the previous year ended
30th September 2005.
Employee Cost
91
reason for the increase under this head by 59.90% in comparison to the previous year.
Finance Expense
EBITD
Earning Before Interest, Tax and Depreciation (EBITD) for the period ended 31st January 2006 was Rs 546. 24
lakhs (annualised basis), which increased by 64.59% in comparison to the previous year.
PAT
PAT for the period increased by 144.53 % for the period ended 31st January 2006 (on an annualised basis) to Rs
176.28 Lakhs (on an annualised basis) from Rs 72.09 Lakhs in 2005.
92
OUTSTANDING LITIGATION
Except as described below and in the notes to the financial statements in this Draft Red Herring Prospectus, there are no
contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/
financial institutions, defaults against banks/ financial institutions, defaults in dues towards instrument holders like
debenture holders, fixed deposits and arrears on cumulative preference shares issued by the Company, defaults in creation
of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences
(including past cases where penalties may or may not have been awarded and irrespective of whether they are specified
under paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956) against the Company, its Directors and its
Group Companies that would have a material adverse effect on its business, except the following:-
Contingent Liabilities
As per our restated unconsolidated financial statements included in this Draft Red Herring Prospectus on page 65,
there are there are no contingent liabilities not provided for by us.
Cases By and Against the Company
There are no cases that have been filed by or against the Company.
Contingent Liability of Our Promoter
As of March 31, 2005, the following are the contingent liabilities:
Foreign Letters of Credit – Rs. 147.52 lakhs.
Cases Against our Promoter
Criminal Cases
1.
A criminal complaint (C.C. 1/1997) was filed by M. Malla Reddy, former Vice Chancellor, Osmania
University on May 1, 1996 in the Court of Metropolitan Magistrate at Hyderabad against our Company
claiming that through the publications of certain news-articles published in the Deccan Chronicle, grave
allegations have been made on his character. The Court has been approached to take cognizance of the
offence of defamation under Section 501 of the Indian Penal Code, 1860 and punish them accordingly. The
next hearing in the said case is scheduled to be held on April 12, 2006.
2.
A criminal complaint (CC No.518/1998) has been filed by one Dr. Y.C. Simhadri before the II
Metropolitan Magistrate, Vishakapatnam claiming that by a publication of a news item, Deccan Chronicle
has alleged that Dr Simhadri influenced Mr. Balayogi, the then Speaker to become the Vice Chancellor of
Andhra University. The complainant has prayed for a compensation of Rs. 50 lakhs. The next hearing in
the case is posted to be held on April 13, 2006.
Civil Cases
1.
Ramoji Rao along with three other persons filed a suit (O/S 119 of 1994) on March 18, 1994 in the Court
of III Additional Judge, City Civil Court, Secunderabad against the Promoter alleging defamation and
mental agony to him caused pursuant to the publication of certain articles published in the Deccan
Chronicle alleging them of indulging in certain adverse market practices that affected the capital markets
and the Hyderabad Stock Market. The Plaintiffs have prayed for a sum of Rs. 100 lakhs as compensation
and interest at the rate of 18% on the said amount and a permanent injunction restraining the Promoter
from publishing any further defamatory articles of the same nature. The next hearing in the said manner is
scheduled to be held on April 17, 2006.
Cases Against our Group Companies
DC Investments and Finance Private Limited
1.
Contingent Liabilities not provided for as of March 31, 2005: Nil
2.
Litigation against DC Investments and Finance Private Limited as of March 31, 2006: Nil
Asian Age Holdings Limited
93
1.
Contingent Liabilities not provided for as of March 31, 2005: Nil
2. Litigation against Asian Age Holdings Limited as of as of March 31, 2006: Nil
Cases Against our Directors
Except for the case mentioned below, there is no other pending litigation of any nature against any Directors of the
Company.
A suit (O.S. 1338/2003) has been filed by one Pilli Venkata Ramana Reddy on May 8, 2003 in the Court of
Principal Senior Civil Judge, Vishakapatnam against T. Vinayak Ravi Reddy, our Executive Director seeking
permanent injunction restraining our Director from raising permanent structures over certain property leased by him
to one Padala Venkata Satyanarayana Reddy who in turn sub-leased the same to our Director. The plaintiff has also
filed an application for a temporary injunction (IA 546/2003 in O/S 1338/2003) on May 7, 2003 against the
director. Our Director has filed counters to both these proceedings and the matter stands posted to April 20, 2006
for hearing.
94
MATERIAL DEVELOPMENTS
The Company consolidated the face value of its Equity Shares from Re. 1 to Rs. 10 per share after obtaining the
necessary approval from its shareholders at an Extraordinary General Meeting held on April 3, 2006.
Except as disclosed herein, in the opinion of the Board of Directors of the Company, there have not arisen, since the
date of the last financial statements disclosed in this Draft Red Herring Prospectus, any circumstances that
materially or adversely affect or are likely to affect the profitability of the Company or the value of its assets or its
ability to pay its liabilities within the next twelve months.
95
LICENSES AND APPROVALS
We have received the necessary consents, licenses, permissions and approvals from the Government and various
governmental agencies required for our present business and except as mentioned below, no further approvals are
required to continue our present business activities.
Approvals for our Business
Regulatory Approvals in relation to our Outlets and our Employees
1.
The Company currently has 12 stores in various cities in India. For these stores, pursuant to various laws in
force in the States where they are located, the following registrations/ licenses/ consents/ permissions have been
obtained which are material for their operation and therefore for the Company’s current business activities:
(a)
(b)
(c)
(d)
(e)
(f)
Registrations under the relevant Shops and Establishments Acts;
Registrations under the relevant Factories and Establishments (National, Festival and other holidays) Acts;
Licenses to play all sound recordings and to publicly perform any musical work on the store premises;
Registration under the Employees Provident Funds and Miscellaneous Provisions Act, 1952;
Registration under the Employees State Insurance Corporation Act, 1948; and
Other miscellaneous licenses.
Brief details of the above material licenses for each of our 12 stores are set out below:
(a)
Registrations under the relevant Shops and Establishments Acts
S.No
1.
2.
Hyderabad Central,
Hyderabad
3.
ITC Hotel Kakatiya
Sheraton, Hyderabad
*
(b)
Description of the
Store
Panjagutta,
Hyderabad
Relevant Act
Andhra
Pradesh Shops
and
Establishments
Act, 1988
Andhra
Pradesh Shops
and
Establishments
Act, 1988
Andhra
Pradesh Shops
and
Establishments
Act, 1988
Registration Number
Validity
L II/ Hyd 213/ 2002
From January 1, 2006 to
December 31, 2006
A1010/Hyd/32/2005
December 31, 2006
C26/43/05
December 31, 2006
We believe that we need not obtain specific registrations under the Tamil Nadu Shops and
Establishments Act, 1947. We are only required to obtain permission to run the store for 365
days and display the list of public holidays under Form III of the Tamil Nadu Industrial
Establishments (National and Festival Holidays) Act, 1958.
Illustrative list of registrations under the relevant Factories and Establishments (National, Festival and
other Holidays) Acts
S.No
1.
Description of the
Store
Adyar, Chennai
Relevant Act
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
96
Registration
Number
R. Dis 1107/05
Dated
January 18, 2006
S.No
(c)
2.
Description of the
Store
Annanagar, Chennai
3.
ECR, Chennai
4.
Hotel
Chennai
5.
Hotel
Chola
Sheraton, Chennai
6.
Coimbatore
7.
Salem
8.
Trichy
Radisson,
Relevant Act
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Tamil
Nadu
Industrial
Establishments
(National and
Festival)
Holidays Act,
1958
Registration
Number
R. Dis 271/05
Dated
May 2, 2005
R. Dis 1108/05
January 18, 2006
R. Dis 38/06
February 27, 2006
R.Dis 20/80
February 27, 2006
R.Dis 51/04
February 18, 2004
No. 524/2005
March 21, 2005
Reg No. 43/03
February 13, 2003
Licenses to play all sound recordings and to publicly perform any musical work at certain stores:
S. No
1.
Description of the Store
Adyar, Chennai
2.
Annanagar, Chennai
Nature of the license
Public
performance
of
musical works from the
Indian Performing Rights
Society Limited
Public
performance
of
Society Limited
97
License No.
GL:CHN:00112
Validity
September 1, 2005
to August 31, 2006
CS/03/SR/96 SR
No 16/m/4118
June 1, 2005 to
May 31, 2006
S. No
3.
Description of the Store
ECR, Chennai
6.
Coimbatore
7.
Salem
8.
Trichy
9.
Panjagutta, Hyderabad
Nature of the license
Public
performance
of
Society Limited
Public
performance
of
Society Limited
Public performance license
by
Phonographic
Performance Limited
by
Phonographic
Performance Limited
by
Phonographic
Performance Limited
License No.
GL:CHN:00300
Validity
September 1, 2005
to August 31, 2006
GL:COIM:00016
September 1, 2005
to August 31, 2006
CS/03/SR/96 SR
No 16/m/4349
November
26,
2004 to November
25, 2007
June 1, 2005 to
May 31, 2006
CS/03/SR/96
SR.No:
16/m/4114
CS/03/SR/96 SR
No 16/m/4116
June 1, 2005 to
May 31, 2006
2.
Registration (bearing ref no: TN/40760/Enf Regl/99 dated February 25, 1999) under the Employees
Provident Funds and Miscellaneous Provisions Act, 1952.
3.
Registration (bearing ref no: 51-75219-101 dated October 1, 1999) under the Employees State Insurance
Corporation Act, 1948.
4.
Other Miscellaneous Registrations/ licenses
•
Registration (bearing ref no: 165) for the café situated at Annanagar premises of the Company from the
Tamil Nadu Food and Beverages Department.
•
License (bearing ref no: 1155) dated September 23, 2005 has been issued by the Tamil Nadu Government
under the Tamilnadu Shops and Establishments, 1947 permitting the Company’s stores in Adyar,
Tiruvanmiyur, Annanagar, Coimbatore and Salem to operate for 365 days.
Taxation
(a)
Income Tax
1.
PAN (No: AAACO6902A) allotted to the Company;
2.
Tax Deduction Account Number (TAN) (No: CHEO03244D) allotted to the Company.
(b)
Sales Tax
We are required to register under the Central Sales Tax Act as well as the relevant state legislations in
respect of our stores. The following is an illustrative list of our sales tax registrations:
1.
Registration number 799919 dated July 22, 2004 obtained under the Central Sales Tax Act, 1956;
2.
Registration number PJT/01/1/3596/04-05 obtained under the Andhra Pradesh General Sales Tax Act,
1957;
3.
Registration number TNGST No: 0862737 (area code: 044) dated May 23, 2005 obtained under the Tamil
Nadu General Sales Tax Act, 1959 for the year 2005-06 for the stores in Chennai, Trichy, Salem and
Coimbatore.
4.
Registration No (TIN):28920133862 under the Andhra Pradesh Value Added Tax Act, 2005 dated March
27, 2005.
(c)
Service Tax
Registration No: GTA/CHENNAI-IV/189/STC dated February 24, 2005 issued by the Superintendent of
service tax under Section 69 of the Finance Act, 1994.
98
Intellectual Property
We have made a multiple clause application (Application No. 1305971 dated August 31, 2004) for registration of
our trade mark ‘Odyssey’ under the Trade Marks Act, 1999 which is pending with the trade mark registry, Chennai
for publication in the Trade Mark Journal. The application has been made for the following categories:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Hand tools and instruments;
Scientific, natural, surveying and electrical apparatus and instruments;
Precious metals, alloys and goods in precious metals;
Paper and paper articles, cardboard and cardboard articles, printed matter, newspapers and periodical books;
Leather and imitations of leather;
Furniture, mirrors, picture frames;
Small domestic utensils and containers;
Clothing including boots, shoes and slippers; and
Games and playthings, gymnastic and sporting articles.
Miscellaneous
(a)
Certificate of Importer-Exporter Code (“IEC”) from the GOI, Ministry of Commerce issued on June 6,
2002 (IEC No: 0402006801) to Odyssey India Private Limited. However, this certificate had expired as the
Company failed to file for amendment within 60 days of date of change of its name to Odyssey India
Limited. The Company had reapplied for the IEC Code for Odyssey India Limited and an amended
certificate dated February 27, 2006 has been issued with the changed name of the Company.
Approvals Material To Our Current Business Activities For Which Approvals Have Not Yet Been Renewed
(a)
The Company had applied to the Government of Andhra Pradesh under the Andhra Pradesh Shops and
Establishments Act, 1988 requesting it for license to keep its stores open for 365 days. The Department for
Labour Employment Training and Factories issued a Government order (G.O Rt. No. 1994) dated October
26, 2004 granting exemption to the Company for a period of one year to run its stores for 365 days. The
Company is in the process of applying for a renewal for the said license.
(b)
The registration (Reg. No. 10/1197 dated September 19, 2003) under the Uttar Pradesh Shops and
Commercial Establishments Act, 1962 for the Company’s store at Varanasi has expired and the Company
is in the process of applying for a renewal for the said registration.
99
OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Present Issue
Our Board of Directors authorised a fresh issue of up to 26,25,000 Equity Shares of Rs. 10 each pursuant to a
resolution passed at its meeting held on March 31, 2006. Our shareholders subsequently authorised the fresh issue
of up to 26,25,000 Equity Shares of Rs. 10 each, by a resolution passed unanimously at the EGM of our Company
held on April 3, 2006.
Prohibition by SEBI
Neither we, nor our Directors or the Promoter or the Promoter Group Companies, or companies with which our
Directors are associated with as directors or Promoters, have been prohibited from accessing or operating in the
capital markets under any order or direction passed by SEBI.
Eligibility for the Issue
Our Company is eligible to undertake this Issue as per Clause 2.2.2 of SEBI Guidelines, which are explained
hereunder:
“2.2.2 An unlisted company not complying with any of the conditions specified in Clause 2.2.1 may make an
initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with
equity shares at a later date, only if it meets both the conditions (a) and (b) given below:
(a) (i)
OR
The issue is made through the book-building process, with at least 50% of the net offer to public being
allotted to the Qualified Institutional Buyers (QIBs), failing which the full subscription monies shall be
refunded.
(a) (ii) The “project” has at least 15% participation by Financial Institutions/ Scheduled Commercial Banks, of
which at least 10% comes from the appraiser(s). In addition to this, at least 10% of the issue size shall be
allotted to QIBs, failing which the full subscription monies shall be refunded
AND
(b) (i)
The minimum post-issue face value capital of the company shall be Rs. 10 crores.
OR
(b) (ii) There shall be a compulsory market-making for at least 2 years from the date of listing of the shares ,
subject to the following:
(a)
Market makers undertake to offer buy and sell quotes for a minimum depth of 300 shares;
(b)
Market makers undertake to ensure that the bid -ask spread (difference between quotations for
sale and purchase) for their quotes shall not at any time exceed 10%:
(c)
The inventory of the market makers on each of such stock exchanges, as on the date of allotment
of securities, shall be at least 5% of the proposed issue of the company.”
We are an unlisted company not complying with Clause 2.2.1 of the SEBI Guidelines and therefore, are required to
meet the conditions stipulated by Clause 2.2.2 (a) and Clause 2.2.2 (b) of the SEBI Guidelines.
We are complying with Clause 2.2.2 (a) (i) and at least 50% of the Issue size would be allotted to QIBs, failing
which the subscription monies will be refunded;
We are complying with Clause 2.2.2 (b)(i) and the minimum post Issue face value capital of the Company shall
be Rs. 10 crores.
Hence, we are eligible for the Issue under Clause 2.2.2 of the SEBI Guidelines.
Further, in accordance with Clause 2.2.2A, we shall ensure that the number of prospective allottees to whom Equity
Shares will be Allotted will not be less than 1,000 in number.
100
Disclaimer Clause
AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO
SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED
HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED
THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY
RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE
PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF
THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT RED HERRING
PROSPECTUS. THE BOOK RUNNING LEAD MANAGER, KARVY INVESTOR SERVICES LIMITED
HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS
ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURES AND
INVESTOR PROTECTION) GUIDELINES, 2000 AS FOR THE TIME BEING IN FORCE. THIS
REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR
MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY
UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE
CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE
DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGER IS EXPECTED TO
EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS
RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK
RUNNING LEAD MANAGER, KARVY INVESTOR SERVICES LIMITED, HAS FURNISHED TO SEBI,
A DUE DILIGENCE CERTIFICATE DATED APRIL 10, 2006 IN ACCORDANCE WITH THE SEBI
(MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:
1.
“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO
LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH
COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE
FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID
ISSUE.
2.
ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY,
ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT
VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE,
PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE
DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY
THE COMPANY.
3.
WE CONFIRM THAT:
THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY
WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;
ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY
OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED
WITH;
THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR
AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION
AS TO THE INVESTMENT IN THE PROPOSED ISSUE;
BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT RED
HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH
REGISTRATIONS ARE VALID; AND
WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE
UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.”
4.
WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED
FOR INCLUSION OF ITS SECURITIES AS PART OF PROMOTER’S CONTRIBUTION
SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE
PROMOTER’S
CONTRIBUTION
SUBJECT
TO
LOCK-IN,
WILL
NOT
BE
DISPOSED/SOLD/TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING
FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH THE SEBI
TILL THE DATE OF COMMENCEMENT OF LOCKIN PERIOD AS STATED IN THE DRAFT
RED HERRING PROSPECTUS.
ALL LEGAL REQUIREMENTS PERTAINING TO THE ISSUE WILL BE COMPLIED WITH
AT THE TIME OF FILING OF THE RED HERRING PROSPECTUS WITH THE DESIGNATED
101
STOCK EXCHANGES IN ACCORDANCE WITH APPLICABLE LAW, AS ALSO ANY
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, GOI AND ANY OTHER
COMPETENT AUTHORITY. ALL LEGAL REQUIREMENTS PERTAINING TO THE ISSUE
WILL BE COMPLIED WITH AT THE TIME OF REGISTRATION OF THE PROSPECTUS
WITH THE REGISTRAR OF COMPANIES, CHENNAI AT TAMIL NADU IN ACCORDANCE
WITH APPLICABLE LAW, AS ALSO ANY GUIDELINES, INSTRUCTIONS, ETC., ISSUED BY
SEBI, GOI AND ANY OTHER COMPETENT AUTHORITY.
THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER,
ABSOLVE THE COMPANY FROM ANY LIABILITIES IN THE NATURE OF LIABILITIES
UNDER SECTION 63 AND SECTION 68 OF THE COMPANIES ACT OR FROM THE
REQUIREMENT OF OBTAINING SUCH STATUTORY AND OTHER CLEARANCES AS MAY
BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES
THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD
MANAGER, ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED HERRING
PROSPECTUS.
Caution:
Our Company, our Directors and the BRLMs accept no responsibility for statements made otherwise than in this
Draft Red Herring Prospectus or in any advertisements or any other material issued by or at instance of the above
mentioned entities and anyone placing reliance on any other source of information, including our website
www.odyssey.in, would be doing so at his or her own risk.
The BRLMs accept no responsibility, save to the limited extent as provided in the memorandum of understanding
entered into among the BRLMs and us dated April 8, 2006 and the Underwriting Agreement to be entered into
among the Underwriters and us.
All information shall be made available by us and the BRLMs to the public and investors at large and no selective
or additional information would be available for a section of the investors in any manner whatsoever including at
road show presentations, in research or sales reports or at Bidding centres.
We shall not be liable to the Bidders for any failure in downloading the Bids due to faults in any software/hardware
system or otherwise.
Jurisdiction
This Issue is being made in India to Persons resident in India (including Indian nationals resident in India), who are
majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and
authorised to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial
banks, regional rural banks, co-operative banks (subject to RBI permission), or trusts under the applicable trust law
and who are authorised under their constitution to hold and invest in shares, permitted insurance companies and
pension funds. This Draft Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to
subscribe to or purchase Equity Shares offered hereby in any other jurisdiction to any Person to whom it is unlawful
to make an offer or invitation in such jurisdiction. Any Person into whose possession this Draft Red Herring
Prospectus comes is required to inform himself or herself about and to observe, any such restrictions. Any dispute
arising out of this Issue will be subject to the jurisdiction of appropriate court(s) in Chennai, India only.
No action has been or will be taken to permit a public offering in any jurisdiction where action would be required
for that purpose, except that this Draft Red Herring Prospectus has been filed with SEBI for observations and SEBI
has given its observations. Accordingly, the Equity Shares, represented thereby may not be offered or sold, directly
or indirectly, and this Draft Red Herring Prospectus may not be distributed, in any jurisdiction, except in
accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Draft Red
Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has
been no change in our affairs from the date hereof or that the information contained herein is correct as of any time
subsequent to this date.
Disclaimer Clause of the BSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to BSE. BSE has given vide its letter
dated [•], permission to the Company to use BSE’s name in this Draft Red Herring Prospectus as one of the stock
exchanges on which our further securities are proposed to be listed. BSE has scrutinised this Draft Red Herring
Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to us. BSE
does not in any manner:
102
1.
2.
3.
Warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red
Herring Prospectus; or
Warrant that this Company’s securities will be listed or will continue to be listed on BSE; or
Take any responsibility for the financial or other soundness of this Company, its promoters, its
management or any scheme or project of this Company;
and it should not for any reason be deemed or construed to mean that this Draft Red Herring Prospectus has been
cleared or approved by BSE. Every Person who desires to apply for or otherwise acquires any securities of this
Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim
against BSE whatsoever by reason of any loss which may be suffered by such Person consequent to or in
connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or
for any other reason whatsoever.
Disclaimer Clause of the NSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to NSE. NSE has given in its letter
dated [•] permission to us to use NSE’s name in this Draft Red Herring Prospectus as one of the stock exchanges on
which our further securities are proposed to be listed, subject to the Company fulfilling the various criteria for
listing including the one related to paid up capital and market capitalization (i.e., the paid up capital shall not be less
than Rs. 1000 lakhs and the market capitalization shall not be less than Rs. 2500 lakhs at the time of listing). The
NSE has scrutinised this Draft Red Herring Prospectus for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to us. It is to be distinctly understood that the aforesaid permission given by NSE
should not in any way be deemed or construed to mean that this Draft Red Herring Prospectus has been cleared or
approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of
the contents of this Draft Red Herring Prospectus; nor does it warrant that our securities will be listed or will
continue to be listed on the NSE; nor does it take any responsibility for the financial or other soundness of this
Company, its promoters, its management or any scheme or project of this Company.
Every Person who desires to apply for or otherwise acquires any of our securities may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against NSE whatsoever by reason of
any loss which may be suffered by such Person consequent to or in connection with such subscription/acquisition
whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.
Filing
A copy of this Draft Red Herring Prospectus has been filed with SEBI at Corporation Finance Department, Ground
Floor, Mittal Court, “A” Wing, Nariman Point, Mumbai 400 021. A copy of the Red Herring Prospectus, along with
the documents required to be filed under Section 60B of the Companies Act, would be delivered for registration to
the RoC and a copy of the Prospectus to be filed under Section 60 of the Companies Act would be delivered for
registration with RoC.
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the
Companies Act, which is reproduced below:
“Any person who:
(a)
makes in a fictitious name, an application to a company for acquiring or subscription, 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”
Listing
Initial listing applications have been made to the BSE & NSE for permission to list the Equity Shares and for an
official quotation of the equity shares of the Company.
In case, the permission for listing of the equity shares is not granted by the Stock Exchanges, the Company shall
forthwith repay, without interest, all moneys received from the applicants in pursuance of this Draft Red Herring
Prospectus. If such money is not repaid within 8 days after the day from which the Issuer becomes liable to repay it,
then the Company and every director of the Company who is an officer in default shall, on and from expiry of 8
days, be jointly and severally liable to repay that money with interest as prescribed under Section 73 of the
Companies Act, 1956.
103
The Company with the assistance of the BRLMs shall ensure that all steps for the completion of the necessary
formalities for listing and commencement of trading at the Stock Exchanges mentioned above are taken within 7
working days of finalisation of basis of allotment for the Issue.
Consents
Consents in writing of the (a) Directors, the Company Secretary and Compliance Officer, the Auditors, Legal
Advisors to the Issue, Bankers to the Company and Bankers to the Issue; and (b) the Book Running Lead Managers
to the Issue, the Syndicate Members, the Escrow Collection Bankers and the Registrar to the Issue, to act in their
respective capacities, have been obtained and shall be filed along with a copy of the Red Herring Prospectus with
the Registrar of Companies, Tamil Nadu located at Chennai, as required under Sections 60 and 60B of the
Companies Act and such consents have not been withdrawn up to the time of delivery of this Draft Red Herring
Prospectus for registration with the Registrar of Companies, Tamil Nadu located at Chennai.
M/s. V. Sukumar, Chartered Accountant, being our Auditors have given their written consent to the inclusion of
their report in the form and context in which it appears in this Draft Red Herring Prospectus and such consent and
report has not been withdrawn up to the time of delivery of this Draft Red Herring Prospectus for registration with
the Registrar of Companies, Tamil Nadu located at Chennai.
Expert Opinion
Except as stated elsewhere in this Draft Red Herring Prospectus, we have not obtained any expert opinions.
Expenses of the Issue
The total expenses of the Issue are estimated to be approximately Rs. [•]. The expenses of this Issue include, among
others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees,
statutory advertisement expenses and listing fees. All expenses with respect to the Issue would be borne by our
Company.
The estimated Issue expenses are as under:
(Rs. in lakhs)
Expenses
Activity
Lead management, underwriting and selling commission
Advertising and Marketing expenses
Printing and stationery
Others (Registrars fee, legal fee, listing fee, etc.)
Total estimated Issue expenses
[•]
[•]
[•]
[•]
[•]
Fees payable to the BRLMs
The total fees payable to the Book Running Lead Managers will be as per the letters of appointment issued by the
Company to the BRLMs and the memorandum of understanding dated April 8, 2006 with the BRLMs and the
Company, a copy of which is available for inspection at our registered office.
Fees payable to the Registrar to the Issue
The fees payable to the Registrar to the Issue will be as per the memorandum of understanding dated April 8, 2006
between us and the Registrar, a copy of which is available for inspection at our registered office. Adequate funds
will be provided to the Registrar to the Issue to enable them to send refund orders or allotment advice by registered
post.
Bidding Period / Issue Period
BID / ISSUE OPENS ON
BID / ISSUE CLOSES ON
[ ]
[ ]
Bids and any revision in Bids shall be accepted only between [ ] a.m. and [ ] p.m. (Indian Standard Time) during
the Bidding Period/Issue Period as mentioned above at the bidding centres mentioned on the Bid cum Application
Form except that on the Bid Closing Date, the Bids shall be accepted only between 10 a.m. and 1 p.m. (Indian
Standard Time) and uploaded till such time as permitted by the BSE.
104
We reserve the right to revise the Price Band during the Bidding Period/Issue Period in accordance with SEBI
Guidelines. The cap on the Price Band should not exceed the floor of the Price Band by more than 20% of the floor
of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can
move up or down to the extent of 20% of the floor of the Price Band disclosed in the Red Herring Prospectus.
In case of revision in the Price Band, the Bidding Period/Issue Period will be extended for three additional
days after revision of Price Band subject to the Bidding Period/Issue Period not exceeding 10 days. Any
revision in the Price Band and the revised Bidding Period/Issue Period, if applicable, will be widely
disseminated by notification to BSE and NSE by issuing a press release, and also by indicating the change on
the websites of the BRLMs and at the terminals of the Syndicate.
Designated Date and Allotment of Equity Shares
(i). We will ensure that the Allotment of Equity Shares is done within 15 days of the Bid Closing Date/Issue
Closing Date. After the funds are transferred from the Escrow Accounts to the Issue Account on the Designated
Date, we would ensure the credit to the successful Bidders’ depository account as well as the refund to
unsuccessful Bidders within two working days of the date of Allotment.
(ii). As per SEBI Guidelines, Equity Shares will be issued and allotment shall be made only in the
dematerialised form to the allottees. Allottees will have the option to re-materialise the Equity Shares, if they
so desire, in the manner stated in the Depositories Act.
(iii). Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated
to them pursuant to this Issue.
Mode of making refunds
The Company shall make refunds to applicants using the following modes:
a)
In case of applicants residing in Ahmedabad, Bangalore, Bhubaneshwar, Kolkata, Chandigarh, Chennai,
Gauhati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvanthapuram any of
the centres specified by SEBI, the refunds shall be credited to the bank accounts of the applicants through
electronic transfer of funds by using electronic clearance service (ECS) Direct Credit, Real Time Gross
Settlement or National Electronic Funds Transfer (NEFT), as is for the time being permitted by the
Reserve Bank of India;
b)
In case of other applicants – by dispatch of refund orders by registered post, where the value is Rs.1,500
or more or under certificate of posting in other cases, (subject however to postal rules); and
c)
In case of any category of applicants specified by SEBI – crediting of refunds to the applicants in any
other electronic manner permissible under the banking laws for the time being in force which is permitted
by SEBI from time to time.
Letters of Allotment or Refund Orders
We shall give credit to the beneficiary account with Depository Participants within two working days from the date
of the finalisation of Allotment. We shall ensure despatch of refund orders, other than ECS credits, if any, of value
up to Rs. 1,500 by “Under Certificate of Posting”, and shall dispatch refund orders above Rs. 1,500, if any, by
registered post or speed post only at the sole or First Bidder’s sole risk within 15 days of the Bid Closing Date/Issue
Closing Date, and adequate funds for the purpose shall be made available to the Registrar by us
In accordance with the requirements of the Stock Exchanges and SEBI Guidelines, we undertake that:
•
Allotment shall be made only in dematerialised form within 15 days from the Issue Closing Date;
•
Despatch of refund orders, except ECS credits, shall be done within 15 days from the Issue Closing Date;
and
•
Save and except refunds effected through the electronic mode i.e ECS, direct credit or RTGS, refunds will
be made by cheques, pay orders or demand drafts drawn on the Refund Bank and payable at par at places
where Bids are received. The bank charges, if any, for encashing such cheques, pay orders or demand
drafts at other centres will be payable by the Bidders.
We shall pay interest at 15.00% per annum (for any delay beyond the 15 day time period as mentioned
105
above), if allotment is not made, refund orders are not dispatched and/or demat credits are not made to
investors within the 15 day time prescribed above as per the guidelines issued by the Government of India,
Ministry of Finance pursuant to their letter No.F/8/S/79 dated July 31, 1983, as amended by their letter
No.F/14/SE/85 dated September 27, 1985, addressed to the Stock Exchanges and as further modified by
SEBI'
s clarification XXI dated October 27, 1997, with respect to the SEBI DIP Guidelines.
Where refunds are effected through electronic transfer of funds, a suitable communication shall be sent to
the applicant within 15 days of closure of the Issue giving details of the bank where refunds shall be
credited along with the amount and expected date of electronic credit of the refund.
No further issue of Equity Shares shall be made till the Equity Shares offered through this Prospectus are
listed or until the Bid moneys are refunded on account of non-listing, under-subscription, etc.
We will provide adequate funds required for despatch of refund orders or allotment advice to the Registrar to the
Issue.
Refunds, in the manner aforesaid, will be made by cheques, pay orders or demand drafts drawn on the Escrow
Collection Bank and payable at par at places where Bids are received. The bank charges, if any, for encashing such
cheques, pay orders or demand drafts at other centres will be payable by the Bidders
Underwriting commission, brokerage and selling commission on previous issues
Since this is the initial public offer of our Company, no sum has been paid or has been payable as commission or
brokerage for subscribing to or procuring or agreeing to procure subscription for any of our Equity Shares since our
inception.
Previous Rights and Public Issues
Our Company has not made any previous rights and public issues.
Previous Issues of Shares Otherwise than for Cash
Our Company has not made any previous issues of shares otherwise than for cash except as stated in the section
entitled “Capital Structure-Notes to Capital Structure” on page 12 of this Draft Red Herring Prospectus.
Companies under the Same Management
Please see the section entitled “Our Promoter” on page 58 of this Draft Red Herring Prospectus.
Promise vs. Performance
This is the first public issue of our Company.
Outstanding Debentures or Bond Issues
Our Company has no outstanding debentures or bond issues.
Stock Market Data for our Equity Shares
This being an initial public issue of our Company, the Equity Shares of our Company are not listed on any stock
exchange.
Mechanism for Redressal of Investor Grievances
The agreement between the Registrar to the Issue and us will provide for retention of records with the Registrar to
the Issue for a period as specified under the SEBI (Registrars to an Issue and Share Transfer Agents) Regulations,
1993 to enable the investors to approach the Registrar to the Issue for redressal of their grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as name,
address of the applicant, number of Equity Shares applied for, amount paid on application and the bank branch or
collection centre where the application was submitted.
We estimate that the average time required by us or the Registrar to the Issue for the redressal of routine investor
grievances will be 7 business days from the date of receipt of the complaint. In case of non-routine complaints and
complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as
106
possible.
We have also appointed Sreejith Janardhan as the Compliance Officer for this Issue.
Change in Auditors
The auditors of our Company are appointed (and reappointed) in accordance with provisions of the Companies Act
and their remuneration, rights and duties are regulated by Sections 224 to 233 of the Companies Act.
There have been no changes of the auditors in the last three years except as detailed below:
Name of Auditor
S. Balasubramanyan & Co.
V. Sukumar
Date of Appointment
October 28, 2002
July 29, 2005
Date of Resignation
July 29, 2005
-
Reasons for Change
Resignation
Appointed
Capitalisation of Reserves or Profits During the Last Five Years
The Company has not capitalized its reserves or profits during the last five years, except as stated in the section
titled “Capital Structure” starting on page 12 of this Draft Red Herring Prospectus.
Revaluation of Assets during the Last Five Years
During the financial year ended June 30, 2003, the Company revalued certain land purchased by it at Rs.15.04
lakhs.
Purchase of Property
Except as stated in the section titled “Objects of the Issue” and elsewhere in this Draft Red Herring Prospectus,
there is no property which we have 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 Draft Red Herring Prospectus, 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 Draft Red Herring Prospectus.
Servicing Behavior
There has been no default in payment of statutory dues or of interest or principal in respect of our borrowings or
deposits. Please see the section entitled “Financial Statements – Notes to Accounts” on page 70 of this Draft Red
Herring Prospectus for details of borrowings in our Company.
Payment or benefit to officers of our Company
Except for statutory benefits available upon termination of their employment in our Company or superannuation, no
officer of our Company is entitled to any benefit upon termination of his employment in our Company or
superannuation.
107
TERMS OF THE ISSUE
The Equity Shares being issued are subject to the provisions of the Companies Act, our Memorandum and Articles,
the terms of this Draft Red Herring Prospectus, Bid cum Application Form, the Revision Form, the CAN and other
terms and conditions as may be incorporated in the CAN, allotment advice and any other documents/ certificates
that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws, guidelines,
notifications and regulations relating to the issue of capital and listing of securities issued from time to time by
SEBI, Government of India, Stock Exchanges, Registrar of Companies and/or other authorities, as in force on the
date of the Issue and to the extent applicable.
Authority for the Issue
The Issue has been authorized by a special resolution adopted pursuant to Section 81(1A) of the Companies Act, at
the extraordinary general meeting of the shareholders of our Company held on April 3, 2006. The Board of
Directors has pursuant to a resolution dated March 31, 2006 authorized a committee of its Directors referred to as
the IPO Committee to take decisions on behalf of the Board in relation to the Issue. The IPO Committee was
formed pursuant to its resolution dated January 30, 2006
Ranking of Equity Shares
The Equity Shares being issued shall be subject to the provisions of the Companies Act, our Memorandum and
Articles of Association and shall rank pari-passu with the existing Equity Shares of our Company, including in
respect of the rights to receive dividends and other corporate benefits, if any, declared by our Company after the
date of allotment. See “Main Provisions of the Articles of Association of Our Company” on page 130 of this Draft
Red Herring Prospectus for the description of our Articles of Association.
Face Value and Issue Price
The Equity Shares with a face value of Rs. 10 each are being issued at a total price of Rs. [•] per Equity Share. At
any given point of time there shall be only one denomination for the Equity Shares.
Rights of the Equity Shareholder
Subject to applicable laws, the equity shareholders shall have the following rights:
Right to receive dividend, if declared;
Right 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 the Company’s Memorandum and Articles.
For a detailed description of the main provisions of our Articles relating to voting rights, dividend, forfeiture and
lien and/or consolidation/splitting, please refer to the section entitled “Main Provisions of Articles of Association of
the Company” on page 130 in this Draft Red Herring Prospectus.
Market Lot and Trading Lot
In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialised form. As
per existing SEBI Guidelines, the trading of our Equity Shares shall only be in dematerialised form. Since trading of
our Equity Shares is in dematerialised form, the tradable lot is one Equity Share. Allotment in this Issue will be only
in electronic form in multiples of one Equity Share subject to a minimum allotment of [•] Equity Shares.
Jurisdiction
Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Chennai, India.
Nomination Facility to Investor
108
In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders, may
nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death of all
the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee, entitled to
the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the
Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the
registered holder of the equity share(s). Where the nominee is a minor, the holder(s) may make a nomination to
appoint, in the prescribed manner, any person to become entitled to equity share(s) in the event of his or her death
during the minority. A nomination shall stand rescinded upon a sale of equity share(s) by the person nominating. A
buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on
the prescribed form available on request at the Registered Office of our Company or to the Registrar and Transfer
Agents of our Company.
In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the
provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required
by the Board, elect either:
to register himself or herself as the holder of the Equity Shares; or
to make such transfer of the Equity Shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or
herself or to transfer the Equity Shares, and if the notice is not complied with within a period of ninety days, the
Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the Equity
Shares, until the requirements of the notice have been complied with.
Since the allotment of Equity Shares in the Issue will be made only in dematerialised form, there is no need to make
a separate nomination with us. Nominations registered with respective depository participant of the applicant would
prevail. If the investors require to change the nomination, they are requested to inform their respective depository
participant.
Application by Non Residents/NRIs/FIIs
The Issue is not being made to any other jurisdictions other than India. Consequently, only resident Indians
are allowed to participate in the Issue. Non-Residents/NRIs/ FIIs/ Foreign Venture Capital Funds registered
with SEBI, multilateral and bilateral development financial institutions and companies in which there is
majority ownership and control by persons resident outside India are not permitted to participate in the
Issue.
Minimum subscription
If our Company does not receive the minimum subscription of 90% of the Issue, including devolvement of
underwriters within 60 days from the Bid/Issue Closing Date, our Company shall forthwith refund the entire
subscription amount received. If there is a delay beyond 8 days after our Company becomes liable to pay the
amount, our Company shall pay interest prescribed under Section 73 of the Companies Act.
Arrangements for disposal of odd lots
Since the market lot for our Equity Shares will be one, no arrangements for disposal of odd lots are required.
Application in this Issue
Equity Shares being issued through this Draft Red Herring Prospectus can be applied for in the dematerialized form
only.
Withdrawal of the Issue
Our Company, in consultation with the BRLMs, reserves the right not to proceed with the Issue at anytime
including after the Bid Closing Date, without assigning any reason thereof.
109
ISSUE STRUCTURE
The present Issue of 26,25,000 Equity Shares of Rs. 10 each by the Company for cash at a price of Rs. [ ] per
Equity Share aggregating Rs. [ ] and is being made through the 100% Book Building process.
QIBs
Non-Institutional Bidders
Retail Individual Bidders
Number of Equity
Shares*
Percentage of Issue
Size available for
allocation*
Basis of Allocation
(subject
to
compliance
with
sectoral caps)
13,12,500 Equity Shares
At least 50% of Issue
Minimum
of
3,93,750
Equity Shares
Minimum 15% of Issue
Minimum
of
9,18,750
Equity Shares
Minimum 35% of Issue
Proportionate
Proportionate
Proportionate
Minimum Bid
Such number of Equity
Shares that the Bid Amount
is equal to or exceeds Rs.
1,00,000 and in multiples of
[•] Equity Shares thereafter.
Shares that the Bid Amount
exceeds Rs. 1,00,000 and in
multiples of [•] Equity
Shares thereafter.
[•] Equity Shares and in
multiples of [•] Equity
Share thereafter.
Maximum Bid
Shares not exceeding the
Issue, subject to applicable
limits.
Shares not exceeding the
Issue, subject to applicable
limits.
Shares whereby the Bid
Amount does not exceed Rs.
1,00,000.
Mode of Allotment
Compulsorily
dematerialised form.
Compulsorily
Compulsorily
Trading Lot
One Equity Share
One Equity Share
One Equity Share
Who can Apply
Public financial institutions,
as specified in Section 4A of
the
Companies
Act,
scheduled
commercial
banks, mutual funds, foreign
institutional
investors
registered
with
SEBI,
multilateral and bilateral
development
financial
institutions,
and
State
Industrial
Development
Corporations,
permitted
insurance
companies
registered with the Insurance
Regulatory
and
Development
Authority,
provident
funds
with
minimum corpus of Rs.
2,500 lakhs and pension
funds with minimum corpus
of Rs. 2,500 lakhs in
accordance with applicable
law.
Resident Indian individuals,
HUF (in the name of Karta),
companies,
corporate
bodies, scientific institutions
societies, trusts
Individuals
(including
HUFs) applying for Equity
Shares such that the Bid
Amount does not exceed Rs.
1,00,000 in value.
Terms of Payment
QIB Margin Amount shall
be payable at the time of
submission of Bid cum
Application Form to the
BRLMs.
Margin Amount shall be
payable at the time of
Syndicate Members.
Margin Amount shall be
payable at the time of
Syndicate Members.
Margin Amount
10% of the Bid Amount
Full Bid Amount on bidding
Full Bid Amount on bidding
in
110
in
in
* Subject to valid Bids being received at or above the Issue Price. Under-subscription, if any, would be allowed to
be met with spillover from any other portions, except the QIB Portion, at the discretion of the Company in
consultation with the BRLMs.
Bids by QIBs shall be submitted only to the BRLMs or the Syndicate Members duly appointed by them in this
regard.
111
ISSUE PROCEDURE
Book Building Procedure
The Issue is being made through the 100% Book Building Process wherein at least 50% of the Issue shall be
available for allocation on a proportionate basis to QIB Bidders. Further not less than 35% of the Issue to the public
shall be available for allocation on a proportionate basis to the Retail Individual Bidders and not less than 15% of
the Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders, subject
to valid Bids being received at or above the Issue Price.
Bidders are required to submit their Bids through the Syndicate. However, the Bids by QIB shall be submitted only
to the BRLMs or Syndicate Members duly appointed by them in this regard. In case of QIB Bidders, the Company
in consultation with the BRLMs may reject Bids at the time of acceptance of the Bid cum Application Form
provided that the reasons for rejecting the same shall be provided to such Bidder in writing. In case of Bids under
the Non-Institutional Portion and Bids under the Retail Portion, Bids would not be rejected except on the technical
grounds listed in this Draft Red Herring Prospectus.
Investors should note that Allotment to all successful Bidders will only be in the dematerialised form.
Bidders will not have the option of getting Allotment in physical form. The Equity Shares, on Allotment,
shall be traded only in the dematerialised segment of the Stock Exchanges.
Application by Non Residents/NRIs/FIIs
The Issue is not being made to any other jurisdictions other than India. Consequently, only resident Indians
are allowed to participate in the Issue. Non-Residents/NRIs/ FIIs/ Foreign Venture Capital Funds registered
with SEBI, multilateral and bilateral development financial institutions and companies in which there is
majority ownership and control by persons resident outside India are not permitted to participate in the
Issue.
Bid cum Application Form
Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for
the purpose of making a Bid in terms of this Draft Red Herring Prospectus. The Bidder shall have the option to
make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as
multiple Bids. Upon the allocation of Equity Shares, dispatch of the CAN, and filing of the Prospectus with the
RoC, the Bid cum Application Form shall be considered as the application form. Upon completing and submitting
the Bid cum Application Form to a member of the Syndicate, the Bidder is deemed to have authorised us to make
the necessary changes in this Draft Red Herring Prospectus and the Bid cum Application Form as would be required
for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or
subsequent notice of such changes to the Bidder.
The prescribed colour of the Bid cum Application Form for various categories is as follows:
Category
Colour of Bid cum Application Form
Indian public including resident QIBs, Non Institutional
Bidders, Retail Individual Bidders
White
Who can Bid?
•
Indian nationals resident in India who are majors, in single or joint names (not more than three);
•
Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that
the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of
Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the
Karta”. Bids by HUFs would be considered at par with those from individuals;
•
Companies, corporate bodies and societies registered under the applicable laws in India and authorised to
invest in the Equity Shares;
•
Mutual Funds registered with SEBI;
•
Indian Financial Institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI
112
permission, as applicable);
•
Domestic Venture Capital Funds registered with SEBI;
•
State Industrial Development Corporations;
•
Trusts registered under the Societies Registration Act, 1860, as amended, or under any other law relating to
Trusts and who are authorised under their constitution to hold and invest in equity shares;
•
Scientific and/or Industrial Research Organisations authorised to invest in equity shares;
•
Insurance Companies registered with Insurance Regulatory and Development Authority;
•
Provident Funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their constitution
to hold and invest in equity shares;
•
Pension Funds with minimum corpus of Rs. 2,500 lakhs and who are authorised under their constitution to
hold and invest in equity shares; and
•
Multilateral and Bilateral Development Financial Institutions.
Note:
The BRLMs and Syndicate Members shall not be entitled to subscribe to this Issue in any manner except
towards fulfilling their underwriting obligation.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable law.
Application by Mutual Funds
As per the current regulations, the following restrictions are applicable for investments by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity related
instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or
sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any
company’s paid-up share capital carrying voting rights. These limits would have to be adhered to by the mutual
funds for investment in the Equity Shares.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with
SEBI and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids
provided that the Bids clearly indicate the scheme concerned for which the Bid has been made.
Applications by Domestic Venture Capital Funds
As per the current regulations, the following restrictions are applicable for SEBI registered domestic Venture
Capital Funds:
The SEBI (Venture Capital) Regulations, 1996 prescribe investment restrictions on venture capital funds and
foreign venture capital investors registered with SEBI. Accordingly, the holding by any individual venture capital
fund or foreign venture capital investor registered with SEBI should not exceed the limits under these regulations.
Maximum and Minimum Bid Size
(a)
For Retail Individual Bidders: The Bid must be for a minimum of [•] Equity Shares and in multiples of
[•] Equity Share thereafter, so as to ensure that the Bid Amount payable by the Bidder does not exceed Rs.
1,00,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount
does not exceed Rs. 1,00,000. In case the Bid Amount is over Rs. 1,00,000 due to revision of the Bid or
revision of the Price Band or on exercise of cut-off option, the Bid would be considered for allocation
under the Non Institutional Bidders portion. The cut-off option is an option given only to the Retail
Individual Bidders indicating their agreement to Bid and purchase at the final Issue Price as determined at
the end of the Book Building Process.
(b)
For Non-Institutional Bidders and QIB Bidders: In case of a Non-Institutional Bidder, the Bid must be
for a minimum of such number of Equity Shares such that the Bid Amount exceeds Rs. 1,00,000 and in
multiples of [•] Equity Shares thereafter. In case of a QIB Bidder, the Bid must be for a minimum of such
number of Equity Shares such that the Bid Amount is equal to or exceeds Rs. 1,00,000 and in multiples of
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[•] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue to the public. However, the
maximum Bid by a QIB Bidder should not exceed the investment limits prescribed for them by applicable
laws. Under existing SEBI Guidelines, a QIB Bidder cannot withdraw its Bid after the Bid Closing
Date/Issue Closing Date and is required to pay the QIB Margin upon submission of the Bid cum
Application Form.
In case of revision in Bids, the Non Institutional Bidders, who are individuals, have to ensure that the Bid
Amount is greater than Rs. 1,00,000 for being considered for allocation in the Non Institutional Portion. In
case the Bid Amount reduces to Rs. 1,00,000 or less due to a revision in Bids or revision of the Price Band,
Bids by Non Institutional Bidders who are eligible for allocation in the Retail Portion would be considered
for allocation under the Retail Portion. Non Institutional Bidders and QIB Bidders are not allowed to Bid
at ‘cut-off’.
Information for the Bidders
(a)
The Company will file the Red Herring Prospectus with the RoC at least three days before the Bid
Opening Date/ Issue Opening Date.
(b)
The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum
Application Form to potential investors.
(c)
Investors other than QIBs, who are interested in subscribing for our Company’s Equity Shares should
approach any of the BRLMs or Syndicate Members or their authorized agent(s) to register their Bid. QIBs
interested in subscribing to our Company’s Equity Shares should only approach any of the BRLMs to
register their Bid.
(d)
Any investor (who is eligible to invest in our Equity Shares according to the terms of this Draft Red
Herring Prospectus and applicable law) who would like to obtain the Red Herring Prospectus and/or the
Bid cum Application Form can obtain the same from our registered office or from any of the members of
the Syndicate.
(e)
The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application
Forms should bear the stamp of the members of the Syndicate. Bid cum Application Forms which do not
bear the stamp of the members of the Syndicate will be rejected.
Method and Process of Bidding
(a)
The Company and the BRLMs shall declare the Bid Opening Date/Issue Opening Date, Bid Closing
Date/Issue Closing Date and Price Band at the time of filing the Red Herring Prospectus with the RoC and
also publish the same in [ ], an English language newspaper with wide circulation, [ ], a Hindi language
newspaper with wide circulation and [ ], a Tamil language newspaper with wide circulation. The BRLMs
and Syndicate Members shall accept Bids from the Bidders during the Issue Period in accordance with the
terms of the Syndicate Agreement. QIBs should submit their BID to BRLMs or Syndicate Members duly
appointed by them in this regard.
(b)
Investors other than QIBs, who are interested in subscribing for the Equity Shares should approach any of
the members of the Syndicate or their authorized agent(s) to register their Bid. QIBs shall register their
Bids only through a BRLM/or a Syndicate Member duly appointed by it in this regard.
(c)
The Bidding Period shall be a minimum of three working days and not exceed seven working days. In case
the Price Band is revised, the revised Price Band and Bidding Period will be published in [ ], an English
language newspaper with wide circulation, [ ], a Hindi language newspaper with wide circulation and [ ],
a Tamil language newspaper and the Bidding Period may be extended, if required, by an additional three
days, subject to the total Bidding Period not exceeding ten working days.
(d)
Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for
details see the section titled “Issue Procedure-Bids at Different Price Levels” on page 115 of this Draft Red
Herring Prospectus) within the Price Band and specify the demand (i.e. the number of Equity Shares Bid
for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application
Form will be treated as optional demands from the Bidder and will not be cumulated. After determination
of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price
will be considered for allocation and the rest of the Bid(s), irrespective of the Bid Price, will become
automatically invalid.
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(e)
The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application Form
have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form
to either the same or to another member of the Syndicate may be treated as multiple Bids and is liable to be
rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to
the allocation or Allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through
the Revision Form, the procedure for which is detailed under the section titled “Issue Procedure-Build up
of the Book and Revision of Bids” on page 117 of this Draft Red Herring Prospectus.
(f)
The Syndicate Members will enter each Bid option into the electronic bidding system as a separate Bid and
generate a Transaction Registration Slip, (“TRS”), for each price and demand option and give the same to
the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.
(g)
During the Bidding Period, Bidders may approach the members of the Syndicate to submit their Bid. Every
member of the Syndicate shall accept Bids from all clients / investors who place orders through them and
shall have the right to vet the Bids. In case of Bids by QIB, the same shall be submitted only through the
BRLMs or Syndicate Members duly appointed by them in this regard.
(h)
Along with the Bid cum Application Form, all Bidders will make payment in the manner described under
the section titled “Issue Procedure-Terms of Payment and Payment into the Escrow Accounts” on page 116
of this Draft Red Herring Prospectus.
Bids at Different Price Levels
1.
In accordance with SEBI Guidelines, the Company reserves the right to revise the Price Band during the
Bidding Period. The cap on the Price Band should not exceed the floor of the Price Band by more than
20%. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can
move up or down to the extent of 20% of the floor of the Price Band disclosed in the Red Herring
Prospectus.
2.
In case of revision in the Price Band, the Issue Period will be extended for three additional days after
revision of Price Band subject to a maximum of 10 working days. Any revision in the Price Band and the
revised Bidding Period/Issue Period, if applicable, will be widely disseminated by notification to NSE and
BSE, by issuing a public notice in [•], an English language newspaper with wide circulation, [•], a Hindi
language newspaper with wide circulation and [•], a Tamil newspaper with wide circulation, and also by
indicating the change on the websites of the BRLMs and at the bidding terminals of the members of the
Syndicate.
3.
The Company in consultation with the BRLMs can finalise the Issue Price within the Price Band in
accordance with this clause, without the prior approval of, or intimation, to the Bidders.
4.
Bidders can bid at any price within the Price Band. Bidders have to bid for the desired number of Equity
Shares at a specific price. Retail Individual Bidders applying for a maximum Bid in any of the bidding
options not exceeding Rs. 1,00,000 may bid at Cut-off Price. However, bidding at Cut-off Price is
prohibited for QIB Bidders and Non-Institutional Bidders and such Bids from QIB Bidders and Non
Institutional Bidders shall be rejected.
5.
Retail Individual Bidders who bid at the Cut-off Price agree that they shall purchase the Equity Shares at
any price within the Price Band. Retail Individual Bidders bidding at Cut-off Price shall deposit the Bid
Amount based on the Cap Price in the respective Escrow Accounts. In the event the Bid Amount is higher
than the subscription amount payable by the Retail Individual Bidders who Bid at Cut-off Price (i.e. the
total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail Individual
Bidders, who Bid at Cut off Price, shall receive the refund of the excess amounts from the respective
Escrow Accounts/refund account(s).
6.
In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had
bid at Cut-off Price could either (i) revise their Bid or (ii) make additional payment based on the cap of the
revised Price Band (such that the total amount i.e. original Bid Amount plus additional payment does not
exceed Rs. 1,00,000 if the Bidder wants to continue to bid at Cut-off Price), with the Syndicate Member to
whom the original Bid was submitted. In case the total amount (i.e. original Bid Amount plus additional
payment) exceeds Rs. 1,00,000, the Bid will be considered for allocation under the Non-Institutional
Portion in terms of this Draft Red Herring Prospectus. If, however, the Bidder does not either revise the
Bid or make additional payment and the Issue Price is higher than the cap of the Price Band prior to the
revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of Allotment,
such that the no additional payment would be required from the Bidder and the Bidder is deemed to have
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approved such revised Bid at Cut-off Price.
7.
In the event of any revision in the Price Band, whether upwards or downwards, the minimum application
size shall remain [•] Equity Shares irrespective of whether the Bid Amount payable on such minimum
application is not in the range of Rs. 5,000 to Rs. 7,000.
Escrow Mechanism
We shall open Escrow Accounts with one or more Escrow Collection Bank in whose favour the Bidders shall make
out the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts
received for the full Bid Amount from Bidders in a certain category would be deposited in the respective Escrow
Account. The Escrow Collection Bank will act in terms of this Draft Red Herring Prospectus and the Escrow
Agreement. The monies in the Escrow Accounts shall be maintained by the Escrow Collection Bank for and on
behalf of the Bidders. The Escrow Collection Bank shall not exercise any lien whatsoever over the monies
deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow
Collection Bank shall transfer the monies from the Escrow Accounts to the Issue Account as per the terms of the
Escrow Agreement. Payments of refund to the Bidders shall also be made from the Escrow Accounts/refund
account(s) as per the terms of the Escrow Agreement and this Draft Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an
arrangement between us, the members of the Syndicate, the Escrow Collection Bank and the Registrar to the Issue
to facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Accounts
Each Bidder shall provide the applicable Margin Amount, with the submission of the Bid cum Application Form
either by drawing a cheque or demand draft for such Margin Amount of his/her Bid in favour of the Escrow
Account of the Escrow Collection Bank(s) (for details see the section titled “Issue Procedure-Payment Instructions”
on page 122 of this Draft Red Herring Prospectus) and submit the same to the member of the Syndicate to whom
the Bid is being submitted. The Bidder may also provide the applicable Margin Amount by way of an electronic
transfer of funds through RTGS mechanism. Each QIB shall provide their QIB Margin Amount only to the BRLMs.
Bid cum Application Forms accompanied by cash shall not be accepted. The Margin Amount based on the Bid
Amount has to be paid at the time of submission of the Bid cum Application Form.
The members of the Syndicate shall deposit the cheque or demand draft with the Escrow Collection Bank(s), which
will hold the monies for the benefit of the Bidders till the Designated Date. On the Designated Date, the Escrow
Collection Bank(s) shall transfer the funds equivalent to the size of the Issue from the Escrow Accounts, as per the
terms of the Escrow Agreement, into the Issue Account with the Banker(s) to the Issue. The balance amount after
transfer to the Issue Account shall be held for the benefit of the Bidders who are entitled to refunds on the
Designated Date, and not later than 15 days from the Bid Closing Date/Issue Closing Date, the Escrow Collection
Bank(s) shall refund all monies to unsuccessful Bidders and also the excess amount paid on bidding, if any, after
adjustment for Allotment to the Bidders.
Each category of Bidders, i.e. QIB Bidders, Non-Institutional Bidders and Retail Individual Bidders, would be
required to pay their applicable Margin Amount at the time of the submission of the Bid cum Application Form.
The Margin Amount payable by each category of Bidders is mentioned in the section titled “Issue Structure” on
page 110 of this Draft Red Herring Prospectus. Where the Margin Amount applicable to the Bidder is less than
100% of the Bid Amount, any difference between the amount payable by the Bidder for Equity Shares allocated at
the Issue Price and the Margin Amount paid at the time of Bidding, shall be payable by the Bidder not later than the
Pay-in-Date. QIB Bidders will be required to deposit a margin of 10% at the time of submitting of their Bids.
If the payment is not made favouring the appropriate Escrow Account within the time and in the manner stipulated
above, the Bid of the Bidder is liable to be rejected. However, if the members of the Syndicate do not waive such
payment, the full amount of payment has to be made at the time of submission of the bid form.
Where the Bidder has been allocated lesser number of Equity Shares than he or she had Bid for, the excess amount
paid on bidding, if any, after adjustment for allocation, will be refunded to such Bidder within 15 days from the Bid
Closing Date/Issue Closing Date, failing which we shall pay interest at 15% per annum for any delay beyond the
periods as mentioned above.
Electronic Registration of Bids
(a)
The Syndicate Members will register the Bids using the on-line facilities of NSE and BSE. There will be at
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least one on-line connectivity in each city, where a stock exchange is located in India and where Bids are
being accepted.
(b)
NSE and BSE will offer a screen-based facility for registering Bids for the Issue. This facility will be
available on the terminals of the Syndicate Members and their authorised agents during the Bidding
Period/Issue Period. Syndicate Members can also set up facilities for off-line electronic registration of Bids
subject to the condition that they will subsequently download the off-line data file into the on-line facilities
for book building on a regular basis. On the Bid Closing Date/ Issue Closing Date, the Syndicate Members
shall upload the Bids till such time as may be permitted by the NSE and BSE.
(c)
The aggregate demand and price for Bids registered on the electronic facilities of NSE and BSE will be
downloaded on a regular basis, consolidated and displayed on-line at all bidding centers. A graphical
representation of the consolidated demand and price would be made available at the bidding centers and
the websites of the NSE and BSE during the Bidding Period/Issue Period.
(d)
At the time of registering each Bid, the members of the Syndicate shall enter the following details of the
investor in the on-line system:
•
Name of the investor;
•
Investor Category –Individual, Corporate or mutual fund, etc.;
•
Numbers of Equity Shares Bid for;
•
Bid price;
•
Bid cum Application Form number;
•
Whether payment is made upon submission of Bid cum Application Form;
•
Margin Amount; and
•
Depository Participant identification no. and client identification no. of the demat account of the
Bidder.
(e)
A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding
options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The
registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be
allocated either by the members of the Syndicate or the Company.
(f)
Such TRS will be non-negotiable and by itself will not create any obligation of any kind.
(g)
In case of QIB Bidders, the BRLMs also have the right to accept the Bid or reject it. However, such
rejection should be made at the time of receiving the Bid and only after assigning a reason for such
rejection. Additionally, Bids would be liable to be rejected on the technical grounds listed in this Draft Red
Herring Prospectus.
(h)
It is to be distinctly understood that the permission given by NSE and BSE to use their network and
software of the Online IPO system should not in any way be deemed or construed to mean that the
compliance with various statutory and other requirements by the Company or the BRLMs are cleared or
approved by NSE and BSE; nor does it in any manner warrant, certify or endorse the correctness or
completeness of any of the compliance with the statutory and other requirements nor does it take any
responsibility for the financial or other soundness of our Company, our management or any scheme or
project of our Company.
(i)
It is also to be distinctly understood that the approval given by BSE should not in any way be deemed or
construed that this Draft Red Herring Prospectus has been cleared or approved by the BSE; nor does it in
any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Draft
Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be
listed on BSE.
Build Up of the Book and Revision of Bids
(a)
Bids registered by various Bidders through the Syndicate Members shall be electronically transmitted to
the NSE or BSE mainframe on a regular basis.
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(b)
The book gets built up at various price levels. This information will be available with the BRLMs on a
regular basis.
(c)
During the Bidding Period, any Bidder who has registered his or her interest in the Equity Shares at a
particular price level is free to revise his or her Bid within the Price Band using the printed Revision Form,
which is a part of the Bid cum Application Form.
(d)
Revisions can be made in both the desired number of Equity Shares and the Bid price by using the
Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also
mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For
example, if a Bidder has Bid for three options in the Bid cum Application Form and he is changing only
one of the options in the Revision Form, he must still fill the details of the other two options that are not
being changed, in the Revision Form unchanged. Incomplete or inaccurate Revision Forms will not be
accepted by the members of the Syndicate.
(e)
The Bidder can make this revision any number of times during the Bidding Period. However, for any
revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate
through whom he or she had placed the original Bid. Bidders are advised to retain copies of the blank
Revision Form and the revised Bid must be made only in such Revision Form or copies thereof.
(f)
Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the
incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if
any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in
accordance with the terms of this Draft Red Herring Prospectus. In case of QIB Bidders, the BRLMs shall
collect additional payment, if any, in the form of cheque or demand draft for the incremental amount in the
QIB Margin Amount, if any, to be paid on account of the upward revision of the Bid at the time of one or
more revisions by the QIB Bidders.
(g)
When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from
the members of the Syndicate. It is the responsibility of the Bidder to request for and obtain the
revised TRS, which will act as proof of his or her having revised the previous Bid.
(h)
Only Bids that are uploaded to the online IPO system of NSE/BSE shall be considered for
allocation/Allotment. In the event of a discrepancy in data between the Bids registered on the online IPO
system and the physical Bid cum Application Form, the decision of the Company in consultation with the
BRLMs based on the physical Bid cum Application Form shall be final and binding on all concerned.
Notice to QIBs: Allotment Reconciliation
After the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar on the basis of Bids uploaded
on the BSE/NSE system. Based on the electronic book, QIBs may be sent a CAN, indicating the number of Equity
Shares that may be allocated to them. This CAN is subject to the basis of final Allotment, which will be approved
by the Designated Stock Exchange and reflected in the reconciled book prepared by the Registrar. Subject to SEBI
Guidelines, certain Bid applications may be rejected due to technical reasons, non-receipt of funds, cancellation of
cheques, cheque bouncing, incorrect details, etc., and these rejected applications will be reflected in the
reconciliation and basis of Allotment as approved by the Designated Stock Exchange. As a result, a revised CAN
may be sent to QIBs, and the allocation of Equity Shares in such revised CAN may be different from that specified
in the earlier CAN. QIBs should note that they may be required to pay additional amounts, if any, by the Pay-in
Date specified in the revised CAN, for any increased allocation of Equity Shares. The CAN will constitute the
valid, binding and irrevocable contract (subject only to the issue of a revised CAN) for the QIB to pay the entire
Issue Price for all the Equity Shares allocated to such QIB. The revised CAN, if issued, will supersede in entirety
the earlier CAN.
Price Discovery and Allocation
(a)
After the Bid Closing Date/Issue Closing Date, the BRLMs will analyse the demand generated on the basis
of electronic registration of Bids, at various price levels and discuss pricing strategy with us.
(b)
Our Company, in consultation with the BRLMs, shall finalise the Issue Price and the number of Equity
Shares to be allotted in each investor category.
(c)
QIB Bidders will be required to deposit a margin of 10% at the time of submitting of their Bids.
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(d)
The allocation to all Bidders would be on proportionate basis, in the manner specified in the SEBI
Guidelines. The basis for Allotment would be finalized by the Company in consultation with the
Designated Stock Exchange.
(e)
Under subscription in any category would be allowed to be met with spill over from any of the other
categories, except the QIB Portion, at the discretion of the Company and the BRLMs.
(g)
The BRLMs in consultation with the Company shall notify the members of the Syndicate of the Issue Price
and allocations to their respective Bidders, where the full Bid Amount has not been collected from the
Bidders.
(h)
The Company reserves the right to cancel the Issue any time after the Bid Opening Date/Issue Opening
Date but before Allotment without assigning any reasons whatsoever.
(i)
In terms of SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bid after the Bid Closing
Date/Issue Closing Date.
(j)
The allotment details shall be put on the website of the Registrar to the Issue.
Signing of Underwriting Agreement and Filing with the RoC
(a)
The Company, the BRLMs and the Syndicate Members shall enter into an Underwriting Agreement on
finalisation of the Issue Price and allocation(s) to the Bidders.
(b)
After signing the Underwriting Agreement, we would update and file the updated Red Herring Prospectus
with the RoC, which then would be termed ‘Prospectus’. The Prospectus would have details of the Issue
Price, Issue size, underwriting arrangements and would be complete in all material respects.
Advertisement regarding Issue Price and Prospectus
A statutory advertisement will be issued by the Company after the filing of the Prospectus with the RoC. This
advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the
Issue Price. Any material updates between the date of Red Herring Prospectus and the date of Prospectus will be
included in such statutory advertisement.
Issuance of CAN
(a)
Upon approval of the Basis of Allotment by the Designated Stock Exchange, the BRLMs or the Registrar
to the Issue shall send to the members of the Syndicate a list of their Bidders who have been allocated
Equity Shares in the Issue. Investors should note that the Company shall ensure that the demat credit of
Equity Shares pursuant to Allotment shall be made on the same date to all investors in this Issue.
(b)
The BRLMs or members of the Syndicate would then send the CAN to their Bidders who have been
allocated Equity Shares in the Issue. The dispatch of CAN shall be deemed a valid, binding and irrevocable
contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to such Bidder.
(c)
Bidders who have been allocated Equity Shares and who have already paid the Margin Amount for the said
Equity Shares into the Escrow Account at the time of bidding shall directly receive the CAN from the
Registrar to the Issue subject, however, to realisation of their cheque or demand draft paid into the Escrow
Accounts. The dispatch of a CAN shall be a deemed a valid, binding and irrevocable contract for the
Bidder.
Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be
Allotted to them pursuant to this Issue.
GENERAL INSTRUCTIONS
Do’s:
•
Check if you are eligible to apply;
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•
Read all the instructions carefully and complete the Resident Bid cum Application Form (White in colour);
•
Ensure that the details about Depository Participant and Beneficiary Account are correct as Allotment of
Equity Shares will be in the dematerialized form only;
•
Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of
the Syndicate;
•
Ensure that you have been given a TRS for all your Bid options;
•
Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and
obtain a revised TRS;
•
Ensure that the bid is within the Price Band;
•
Ensure that you mention your Permanent Account Number (PAN) allotted under the I.T. Act where the
maximum Bid for Equity Shares by a Bidder is for a total value of Rs. 50,000 or more and attach a copy of
the PAN Card and also submit a photocopy of the PAN card(s) or a communication from the Income Tax
authority indicating Allotment of PAN along with the application for the purpose of verification of the
number, with the Bid cum Application Form. In case you do not have a PAN, ensure that you provide a
declaration in Form 60 or Form 61 prescribed under the I.T. Act along with the application;
•
Ensure that the Demographic Details (as defined hereinbelow) are updated, true and correct in all respects;
and
•
QIBs shall submit their Bids only to the BRLMs or Syndicate Members duly appointed by them in this
regard.
Don’ts:
•
Do not Bid for lower than the minimum Bid size;
•
Do not Bid/ revise Bid price to less than the lower end of the price band or higher than the higher end of
the Price Band;
•
Do not Bid on another Bid cum Application Form after you have submitted a Bid to the members of the
Syndicate;
•
Do not pay the Bid Amount in cash;
•
Do not provide your GIR number instead of your PAN;
•
Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate
only;
•
Do not Bid at Cut-off Price (applicable to QIB Bidders and Non-Institutional Bidders where the Bid
Amount exceeds Rs. 1,00,000);
•
Do not fill up the Bid cum Application Form such that the Equity Shares Bid for exceeds the Issue size
and/or investment limit or maximum number of Equity Shares that can be held under the applicable laws
or regulations or maximum amount permissible under the applicable regulations;
•
Do not submit Bid accompanied with Stockinvest; and
•
Do not submit the Bid without the applicable Margin Amount.
Instructions for Completing the Bid Cum Application Form
Bidders can obtain Bid cum Application Forms and/or Revision Forms from the members of the Syndicate.
Bids and Revisions of Bids
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Bids and revisions of Bids must be:
•
Made only in the prescribed Bid cum Application Form or Revision Form (white colour).
•
Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained
herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms
or Revision Forms are liable to be rejected.
•
The Bids from the Retail Individual Bidders must be for a minimum of [•] Equity Shares and in multiples
of [•] thereafter subject to a maximum Bid Amount of Rs. 1,00,000.
•
For Non-Institutional Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid
Amount exceeds Rs. 1,00,000 and in multiples of [•] Equity Shares thereafter. For QIB Bidders, Bid
Amount must be a minimum of such number of Equity Shares that the Bid Amount exceeds Rs. 1,00,000
and in multiples of [ ] Equity Shares thereafter. Bids cannot be made for more than the Issue size. Bidders
are advised to ensure that a single Bid from them should not exceed the investment limits or maximum
number of Equity Shares that can be held by them under the applicable laws or regulations.
•
In single name or in joint names (not more than three, and in the same order as their Depository Participant
details).
•
Thumb impressions and signatures other than in the languages specified in the Eighth Schedule of the
Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate
under official seal.
Bidder’s Bank Details
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum Application
Form, the Registrar to the Issue will obtain from the Depository the Bidders bank account details. These bank
account details would be printed on the refund order, if any, to be sent to Bidders. Hence, Bidders 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 Bidders at the Bidders sole risk and neither the
BRLMs nor the Company shall have any responsibility and undertake any liability for the same.
Bidder’s Depository Account Details
It is mandatory for all the Bidders to get their Equity Shares in dematerialised form. All Bidders should mention
their Depository Participant’s name, Depository Participant Identification Number and Beneficiary Account
Number in the Bid Cum Application Form. Investors must ensure that the name given in the Bid Cum Application
Form is exactly the same as the name in which the Depository Account is held. In case the Bid Cum Application
Form is submitted in joint names, it should be ensured that the Depository Account is also held in the same joint
names and are in the same sequence in which they appear in the Bid Cum Application Form.
Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository
Participant- Identification number and Beneficiary Account Number provided by them in the Bid cum Application
Form, the Registrar to the Issue will obtain from the Depository demographic details of the Bidders such as address,
bank account details for printing on refund orders and occupation (“Demographic Details”). Hence, Bidders should
carefully fill in their Depository Account details in the Bid cum Application Form.
These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund
orders/ CANs/Allocation Advice and printing of bank particulars on the refund order and the Demographic Details
given by Bidders in the Bid cum Application Form would not be used for these purposes by the Registrar. Hence,
Bidders are advised to update their Demographic Details as provided to their Depository Participants and ensure
that they are true and correct.
By signing the Bid cum Application Form, Bidder would have deemed to authorise the Depositories to provide,
upon request, to the Registrar to the Issue, the required Demographic Details as available on its records.
Refund Orders/Allocation Advice/CANs would be mailed at the address of the Bidder as per the Demographic
Details received from the Depositories. Bidders may note that delivery of refund orders/allocation advice/CANs
may get delayed if the same once sent to the address obtained from the Depositories are returned undelivered. In
such an event, the address and other details given by the Bidder in the Bid cum Application Form would be used
121
only to ensure dispatch of refund orders. Please note that any such delay shall be at the Bidders sole risk and neither
the Company nor the BRLMs shall be liable to compensate the Bidder for any losses caused to the Bidder due to
any such delay or liable to pay any interest for such delay.
In case no corresponding record is available with the Depositories that matches three parameters, namely, names of
the Bidders (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the
beneficiary’s identity, then such Bids are liable to be rejected.
Bids under Power of Attorney
In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered
societies, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along
with a certified copy of the memorandum and articles of association and/or bye laws must be lodged along with the
Bid cum Application Form. Failing this, we reserve the right to accept or reject any Bid in whole or in part, in either
case, without assigning any reason.
In case of Bids made by insurance companies registered with the IRDA, a certified copy of certificate of registration
issued by the IRDA must be lodged along with the Bid cum Application Form. Failing this, we reserve the right to
accept or reject any Bid in whole or in part, in either case, without assigning any reason.
In case of Bids made by provident funds with minimum corpus of Rs. 2,500 lakhs (subject to applicable law) and
pension funds with minimum corpus of Rs. 2,500 lakhs, a certified copy of certificate from a chartered accountant
certifying the corpus of the provident fund/ pension fund must be lodged along with the Bid cum Application Form.
Failing this, we reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any
reason.
We, in our absolute discretion, reserve the right to relax the above condition of simultaneous lodging of the power
of attorney along with the Bid cum Application Form, subject to such terms and conditions that we and the BRLMs
may deem fit.
We, in our absolute discretion, reserve the right to permit the holder of the power of attorney to request the
Registrar that for the purpose of printing particulars on the refund order and mailing of the refund
order/CANs/allocation advice, the Demographic Details given on the Bid cum Application Form should be used
(and not those obtained from the Depository of the Bidder). In such cases, the Registrar shall use Demographic
Details as given in the Bid cum Application Form instead of those obtained from the depositories.
Payment Instructions
We shall open Escrow Accounts with the Escrow Collection Bank for the collection of the Bid Amounts payable
upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Issue.
Each Bidder shall either draw a cheque or demand draft or remit the funds electronically through the RTGS
mechanism for the amount payable on the Bid and/or on allocation as per the following terms:
(a)
Payment into Escrow Account
•
The Bidders for whom the applicable Margin Amount is equal to 100% or 10% as the case may
be, shall, with the submission of the Bid cum Application Form draw a payment instrument for
the Margin Amount in favour of the Escrow Account and submit the same to the members of the
Syndicate.
•
QIB Bidders will be required to deposit a margin of 10% at the time of submitting of their Bids.
•
In case the above Margin Amount paid by the Bidders during the Bidding Period is less than the
Issue Price multiplied by the Equity Shares allocated to the Bidder, the balance amount shall be
paid by the Bidders into the Escrow Account within the period specified in the CAN which shall
be subject to a minimum period of two days from the date of communication of the allocation list
to the members of the Syndicate by the BRLMs.
•
The payment instruments for payment into the Escrow Account should be drawn in favour of:
ο
In case of QIB Bidders : [ ]
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ο
In case of Retail and Non Institutional Bidders : [ ]
•
Where a Bidder has been allocated a lesser number of Equity Shares than the Bidder has Bid for,
the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable
on the Equity Shares allocated, will be refunded to the Bidder from the Escrow Accounts.
•
The monies deposited in the Escrow Account will be held for the benefit of the Bidders till the
Designated Date.
•
On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds from the Escrow
Account as per the terms of the Escrow Agreement into the Issue Account with the Banker to the
Issue.
•
On the Designated Date and no later than 15 days from the Bid Closing Date/Issue Closing Date,
the Escrow Collection Bank(s) shall also refund all amounts payable to unsuccessful Bidders and
also the excess amount paid on Bidding after adjusting for allocation to the Bidders
•
Payments should be made by cheque, or demand draft drawn on any bank (including a Cooperative bank), which is situated at, and is a member of or sub-member of the bankers’ clearing
house located at the centre where the Bid cum Application Form is submitted. Outstation
cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted
and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/
money orders/postal orders will not be accepted.
Submission of Bid cum Application Form
All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or
drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid. Each member of the
Syndicate may, at its sole discretion, waive the requirement of payment at the time of submission of the Bid cum
Application Form and Revision Form; provided however that the QIB Bidders shall pay the QIB Margin Amount
only to the BRLMs or Syndicate Members duly authorized by them in this regard who would deposit the same in
the Escrow Account.
No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or
Revision Form. However, the collection center of the members of the Syndicate will acknowledge the receipt of the
Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip.
This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the
Bidder.
Other Instructions
Joint Bids in the case of Individuals
Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be
made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All
communications will be addressed to the First Bidder and will be dispatched to his or her address.
Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two
or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same.
We reserve the right to reject, in our absolute discretion, all or any multiple Bids in any or all portion.
PAN
Where Bid(s) is/are for Rs. 50,000 or more, the Bidder or in the case of a Bid in joint names, each of the Bidders,
should mention his/her Permanent Account Number (PAN) allotted under the I.T. Act. The copy of the PAN card or
PAN allotment letter is required to be submitted with the application form. Applications without this information
and documents will be considered incomplete and are liable to be rejected. It is to be specifically noted that Bidders
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should not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground. In case the
Sole/First Bidder and Joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention “Not
Applicable” and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet
been allotted each of the Bidder(s) should mention “Applied for” in the Bid each of the Joint Bidder(s), as the case
may be, would be required to submit Form 60 (Form of declaration to be filed by a person who does not have a
permanent account number and who enters into any transaction specified in rule 114B), or, Form 61 (form of
declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable
to income tax in respect of transactions specified in rule 114B), as may be applicable, duly filled along with a copy
of any one of the following documents in support of the address: (a) Ration Card (b) Passport (c) Driving License
(d) Identity Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential
address (f) Any document or communication issued by any authority of the Central Government, State Government
or local bodies showing residential address (g) Any other documentary evidence in support of address given in the
declaration. It may be noted that Form 60 and Form 61 have been amended vide a notification issued on December
1, 2004 by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes. All Bidders are
requested to furnish, where applicable, the revised Form 60 or 61, as the case may be.
Right to Reject Bids
In case of QIB Bidders, the Company, in consultation with the BRLMs may reject Bids at the time of acceptance of
the bid provided that the reasons for rejecting the same shall be provided to such Bidder in writing. In case of QIB
Bidders, Non-Institutional Bidders and Retail Individual Bidders who Bid, we have a right to reject Bids on
technical grounds. Consequent refunds shall be made by cheque or pay order or draft and will be sent to the
Bidder’s address at the Bidder’s risk.
Grounds for Technical Rejections
Bidders are advised to note that Bids are liable to be rejected on among others on the following technical grounds:
•
Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for;
•
Age of First Bidder not given;
•
In case of partnership firms, shares may be registered in the names of the individual partners and no firm
as such, shall be entitled to apply;
•
Bids by Persons not competent to contract under the Indian Contract Act, 1872, including minors, insane
Persons;
•
PAN photocopy/ PAN Communication/ Form 60 declaration along with documentary evidence in support
of address given in the declaration, not given if Bid is for Rs. 50,000 or more;
•
Submission of the GIR number instead of the PAN;
•
Bids for lower number of Equity Shares than specified for that category of investors;
•
Bids at a price less than lower end of the Price Band;
•
Bids at a price more than the higher end of the Price Band;
•
Bids at Cut-off Price by Non-Institutional Bidders and QIB Bidders applying for greater than 1,00,000
Equity Shares;
•
Bids for number of Equity Shares, which are not in multiples of [•];
•
Category not ticked;
•
Multiple Bids as defined in this Draft Red Herring Prospectus;
•
In case of Bid under power of attorney or by limited companies, corporate, trust etc. relevant documents
are not submitted;
•
Bids accompanied by money order/postal order/cash
•
Signature of sole and /or joint Bidders missing;
124
•
Bid cum Application Forms does not have the stamp of the BRLMs or the Syndicate Members;
•
Bid cum Application Forms does not have Bidder’s depository account details;
•
Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid cum
Application Forms, Bid Opening Date/Issue Opening Date advertisement and this Draft Red Herring
Prospectus and as per the instructions in this Draft Red Herring Prospectus and the Bid cum Application
Forms;
•
In case no corresponding record is available with the Depositories that matches three parameters namely,
names of the Bidders (including the order of names of joint holders), the Depositary Participant’s identity
(DP ID) and the beneficiary’s identity;
•
Bids for amounts greater than the maximum permissible amounts prescribed by the regulations. See the
details regarding the same in the section titled “Issue Procedure–Bids at Different Price Levels” on page
115 of this Draft Red Herring Prospectus;
•
Bids without the applicable Margin Amount; and
•
Bids by QIBs are not made to the BRLMs or Syndicate Members duly appointed by them in this regard.
Basis of Allotment
A.
For Retail Individual Bidders
•
Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to
determine the total demand under this portion. The Allotment to all the successful Retail Individual
Bidders will be made at the Issue Price.
•
The Issue size less Allotment to Non-Institutional Bidders and QIB Bidders shall be available for
Allotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to or greater than
the Issue Price.
•
If the aggregate demand in this portion is less than or equal to 9,18,750 Equity Shares at or above the Issue
Price, full Allotment shall be made to the Retail Individual Bidders to the extent of their demand.
•
If the aggregate demand in this category is greater than 9,18,750 Equity Shares at or above the Issue Price,
the allocation shall be made on a proportionate basis up to a minimum of [•] Equity Shares and in
multiples of one (1) Equity Share thereafter. For the method of proportionate basis of allocation, refer
below.
B.
For Non-Institutional Bidders
•
Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to
determine the total demand under this portion. The Allotment to all successful Non-Institutional Bidders
will be made at the Issue Price.
•
The Issue size less allocation to QIB Bidders and Retail Individual Bidders shall be available for allocation
to Non-Institutional Bidders who have bid in the Issue at a price that is equal to or greater than the Issue
Price.
•
If the aggregate demand in this category is less than or equal to 3,93,750 Equity Shares at or above the
Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent of their demand.
•
In case the aggregate demand in this category is greater than 3,93,750 Equity Shares at or above the Issue
Price, allocation shall be made on a proportionate basis up to a minimum of [•] Equity Shares and in
multiples of 1 Equity Shares thereafter. For the method of proportionate basis of allocation refer below.
C.
For QIB Bidders
•
Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine the
total demand under this portion. The allocation to all the QIB Bidders will be made at the Issue Price.
•
The Issue size less allocation to Non-Institutional Bidders and Retail Individual Bidders shall be available
for allocation to QIB Bidders who have bid in the Issue at a price that is equal to or greater than the Issue
125
Price.
•
Allotment shall be undertaken in the following manner:
(a)
(b)
•
In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be
determined as follows:
(i)
In the event that Bids from Mutual Fund exceeds 5% of the QIB
Portion, allocation to Mutual Funds shall be done on a proportionate
basis for up to 5% of the QIB Portion.
(ii)
In the event that the aggregate demand from Mutual Funds is less than
5% of the QIB Portion, then all Mutual Funds shall get full allotment
to the extent of valid bids received above the Issue Price.
(iii)
Equity Shares remaining unsubscribed, if any, not allocated to Mutual
Funds shall be available to all QIB Bidders as set out in (b) below;
In the second instance allocation to all QIBs shall be determined as follows:
(i).
The number of Equity Shares available for this category shall be the QIB
Portion less allocation only to Mutual Funds as calculated in (a) above.
(ii).
The subscription level for this category shall be determined based on the overall
subscription in the QIB Portion less allocation only to Mutual Funds as
calculated in (a) above.
(iii).
Based on the above, the level of the subscription shall be determined and
proportionate allocation to all QIBs including Mutual Funds in this category
shall be made.
The aggregate allocation to QIB Bidders shall be 13,12,500 Equity Shares.
Method of proportionate basis of allocation in the QIB, Retail and Non-Institutional Portions
Bidders will be categorized according to the number of Equity Shares applied for by them.
(a)
The total number of Equity Shares to be allotted to each portion as a whole shall be arrived at on a
proportionate basis, being the total number of Equity Shares applied for in that portion (number of Bidders
in the portion multiplied by the number of Equity Shares applied for) multiplied by the inverse of the oversubscription ratio.
(b)
Number of Equity Shares to be allotted to the successful Bidders will be arrived at on a proportionate
basis, being the total number of Equity Shares applied for by each Bidder in that portion multiplied by the
inverse of the over-subscription ratio.
(c)
If the proportionate Allotment to a Bidder is a number that is more than [•] but is not a multiple of one
(which is the market lot), the decimal would be rounded off to the higher whole number if that decimal is
0.5 or higher. If that number is lower than 0.5, it would be rounded off to the lower whole number.
Allotment to all Bidders in such categories would be arrived at after such rounding off.
(d)
In all Bids where the proportionate Allotment is less than [•] Equity Shares per Bidder, the Allotment shall
be made as follows:
(e)
•
Each successful Bidder shall be Allotted a minimum of [•] Equity Shares; and
•
The successful Bidders out of the total Bidders for a portion shall be determined by draw of lots
in a manner such that the total number of Equity Shares Allotted in that portion is equal to the
number of Equity Shares calculated in accordance with (b) above; and
•
Each successful Bidder shall be Allotted a minimum of [•] Equity Shares.
If the Equity Shares allocated on a proportionate basis to any portion are more than the Equity Shares
allotted to the Bidders in that portion, the remaining Equity Shares available for Allotment shall be first
adjusted against any other portion, where the Equity Shares are not sufficient for proportionate Allotment
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to the successful Bidders in that portion. The balance Equity Shares, if any, remaining after such
adjustment will be added to the portion comprising Bidders applying for minimum number of Equity
Shares.
Equity Shares in Dematerialised Form with NSDL or CDSL
The Allotment of Equity Shares in this Issue shall be only in a de-materialised form, (i.e. not in the form of physical
certificates but be fungible and be represented by the statement issued through the electronic mode).
In this context, two agreements have been signed among the Company, the respective Depositories and the
Registrar to the Issue:
•
a tripartite agreement dated [
] with NSDL, us and the Registrar; and
•
a tripartite agreement dated [
] with CDSL, us and the Registrar.
All Bidders can seek Allotment only in dematerialised mode. Bids from any Bidder without relevant details of his
or her depository account are liable to be rejected.
•
A Bidder applying for Equity Shares must have at least one beneficiary account with either of the
Depository Participants of either NSDL or CDSL prior to making the Bid.
•
The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository
Participant’s identification number) appearing in the Bid cum Application Form or Revision Form.
•
Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account
(with the Depository Participant) of the Bidder.
•
Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the
account details in the Depository. In case of joint holders, the names should necessarily be in the same
sequence as they appear in the account details in the Depository.
•
If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the
Bid cum Application Form or Revision Form, it is liable to be rejected.
•
The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum
Application Form vis-à-vis those with his or her Depository Participant.
•
It may be noted that Equity Shares in electronic form can be traded only on the stock exchanges having
electronic connectivity with NSDL and CDSL. Only the NSE and the BSE have electronic connectivity
with CDSL and NSDL.
•
The trading of the Equity Shares of the Company would be in dematerialised form only for all investors in
the demat segment of the respective Stock Exchanges.
Communications
All future communications in connection with Bids made in this Issue should be addressed to the Registrar to the
Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, details of Depository
Participant, number of Equity Shares applied for, date of Bid form, name and address of the member of the
Syndicate where the Bid was submitted and cheque or draft number and issuing bank thereof.
Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the
Companies Act, which is reproduced below:
“Any person who:
(c)
makes in a fictitious name, an application to a company for acquiring or subscription, for, any
shares therein, or
(d)
otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other
127
person in a fictitious name, shall be punishable with imprisonment for a term which may extend to
five years”
Undertakings by the Company
We undertake as follows:
•
that the complaints received in respect of this Issue shall be attended to by us expeditiously and
satisfactorily;
•
that all steps will be taken for the completion of the necessary formalities for listing and commencement of
trading at all the Stock Exchanges where the Equity Shares are proposed to be listed within seven working
days of finalisation of the Allotment;
•
that the funds required for dispatch of refund orders or Allotment advice by registered post or speed post
shall be made available to the Registrar to the Issue by us;
•
that the refund orders or Allotment advice to the successful Bidders shall be dispatched within specified
time;
•
that funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed under the
heading “Other Regulatory and Statutory Disclosures - Mode of Making Refunds” on page 105 of the
Draft Red Herring Prospectus shall be made available to the Registrar to the Issue by the Registrar to the
Issue by the Issuer; and
•
that no further issue of Equity Shares shall be made till the Equity Shares offered through the Red Herring
Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription etc.
Utilisation of Issue Proceeds
The Company shall not have any recourse to the Issue proceeds until the approval for trading the Equity Shares is
received from the Stock Exchanges. For further details, please refer to the section entitled “Objects of the Issue” on
Disposal of Applications and Applications Money and Interest in Case of Delay in Despatch of Allotment
Letters/Refund Orders
We shall ensure dispatch of Allotment advice, refund orders and give benefit to the beneficiary account with
Depository Participants and submit the documents pertaining to the Allotment to the Stock Exchanges within two
working days of date of finalisation Allotment of Equity Shares. We shall dispatch refund orders, if any, of value up
to Rs. 1,500, “Under Certificate of Posting”, and shall dispatch refund orders above Rs. 1,500, if any, by registered
post or speed post only at the sole or First Bidder’s sole risk and adequate funds for the purpose shall be made
available to the Registrar by us.
We shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and
commencement of trading at the Stock Exchanges where the Equity Shares are proposed to be listed are taken
within seven working days of Allotment.
In accordance with the requirements of the Stock Exchanges and SEBI Guidelines, we further undertake that:
•
Allotment shall be made only in dematerialised form within 15 days of the Bid Closing Date/Issue Closing
Date;
•
dispatch refund orders within 15 days of the Bid Closing Date/Issue Closing Date would be ensured; and
•
we shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above),
if Allotment is not made and refund orders are not dispatched and/or demat credits are not made to
investors within the 15 day time prescribed above as per the guidelines issued by the Government of India,
Ministry of Finance pursuant to their letter No. F/8/S/79 dated July 31, 1983, as amended by their letter
No. F/14/SE/85 dated September 27, 1985, addressed to the Stock Exchanges, and as further modified by
SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.
Refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Bank(s) and
payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or
128
demand drafts at other centers will be payable by the Bidders
129
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the Government of India
and FEMA. While the Industrial Policy, 1991 prescribes the limits and the conditions subject to which foreign
investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which
such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign investment is
freely permitted in all sectors of the Indian economy up to any extent and without any prior approvals, but the
foreign investor is required to follow certain prescribed procedures for making such investment.
Till recently, foreign direct investment in Indian companies carrying on retail trading activity was completely
prohibited. However, on February 10, 2006, the GoI permitted FDI in the retail trade of single brand products.
Accordingly, the Issue is not being made to any other jurisdictions other than India. Consequently, only
resident Indians are allowed to participate in the Issue.
Non-Residents/NRIs/ FIIs/ Foreign Venture Capital Funds registered with SEBI, multilateral and bilateral
development financial institutions are not permitted to participate in the Issue.
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MAIN PROVISIONS OF ARTICLES OF ASSOCIATION
Capitalised terms used in this Section have the meaning that has been given to such term in the Articles of
Association of our Company.
Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main provisions of the Articles of
Association of our Company are as follows:
4.
a.
The Authorised Share Capital of the Company shall be as per clause V of Memorandum of Association of the
company.
b.
The Equity Shares shall rank for dividend and return of capital pari passu among themselves, but in proportion
to the amount paid up thereon.
c.
Subject to the provisions of Section 87(1) of the Act every holder of the Equity Share in the Capital of the
Company shall have the right to vote on every resolution placed before the Company.
d.
i)
Where it is proposed to increase the subscribed capital of the company by allotment of further shares,
whether out of unissued share capital, or out of increase share capital, then such further shares shall be
offered to the persons who at the date of the offer, are holders of the equity shares of the company, in
proportion, as nearly as circumstances admit, to the capital paid up on these shares at that date. Such
offer shall be made by a notice specifying the number of shares offered and limiting a time, as may be
decided, but not less than 15 days from the date of the offer within which, the offer, if not accepted,
will be deeded to have been declined. After the expiry of the time specified in the notice aforesaid, or
on receipt of earlier intimation from the person to whom such notice is given that he declines to accept
the shares offered, the Board may dispose of them in such manner at it things most beneficial to the
Company.
ii)
Notwithstanding anything contained above, the persons concerned shall have a right exercisable by
them to renounce the shares offered to them or any of them in favour of any other person within the
above mentioned time limit and the notice referred in this Article shall contain a statement of this right,
but this right shall not be exercised for the second time in favour of any other person.
iii)
Notwithstanding anything contained in the preceding sub-clause, the company may
iv)
a)
by a special resolution, or
b)
Where no such special resolution is passed, if votes cast (whether on a show of hands or on a poll,
as the case may be) in favour of the proposal contained in the resolution moved in that General
Meeting (including the casting vote, if any of the Chairman) by members who, being entitled so
to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast
against the proposals by members so entitled and voting and the Central Government is satisfied,
on an application made by the Board in this behalf that the proposal is most beneficial to the
company, offer the further shares to any persons (whether or not those persons include those who,
at the date of the offer, are holders of the equity shares of the Company) in any manner
whatsoever.
Notwithstanding anything contained in sub-clause (a) above, but subject however to section 81(3) of
the Act, the Company may increase its subscribed capital on exercise of an option attached to the
debentures issued or loans raised by the Company to convert such debentures or loans into shares, or
to subscribe for shares in the Company.
e.
The company shall by a special resolution passed by the shareholders provide for offering shares to the
employees of the company, promoter companies, group companies and affiliates and shall make necessary
reservations for this purpose in the proposed offer of Securities on Rights basis subject to the regulations made
by SEBI in this regard from time to time.
f.
The Company may by ordinary resolution:i.
Consolidate and divide all or any of its share capital into shares of larger amount than its existing shares.
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ii. Subdivide its existing shares or any them into shares of smaller amount than is fixed by the memorandum,
subject, nevertheless to the provisions of clause (d) of sub section (1) section 94;
iii.
Cancel any shares, which, at the date of passing of the resolution, have not been taken or agreed to be
taken by any person.
5.
(a)
Subject to the provisions of these Articles and of the Act, the shares including any shares forming part of
any increased capital of the Company shall be under the control of Directors who may allot or otherwise
dispose of the same to such persons in such proportion, on such terms and conditions, and at such times as
the Directors think fit and subject to the sanction of the Company in General Meeting with full power, to
call for or be allotted shares of any class of the Company either at a premium or at par or at a discount and
such option being exercisable at such time and for such consideration as the Directors think fit. The Board
shall cause to be filed the returns as to allotment provided for in the Act.
(b)
Power also to company in General Meeting to issue shares
In addition to and without derogating from the powers for that purpose conferred on the Board in
accordance with these Articles, the Company in General Meeting may, subject to the provisions of the Act,
determine that any shares (whether forming part of the original capital or of any increased capital of the
Company) shall be offered to such persons (whether members or not) in such proportion and on such terms
and conditions and either (subject to compliance with the provisions of the Act) at a premium or at par or
at a discount, as such General Meeting shall determine and with full power to call for or to allot shares of
any class of the Company either (subject to compliance with the provisions of the Act) at a premium or at
par or at a discount, such option being exercisable at such time and for such consideration as may be
directed by such General Meeting or the Company in General Meeting may make any other provision
whatsoever for the issue, allotment or disposal of any shares.”
(c)
Sweat Equity
(1)
Notwithstanding anything contained in Section-79 of the Act, the company may issue sweat equity shares
of a class of shares already issued subject to the conditions that (a) the issue of the sweat equity shares is authorised by a special resolution passed by the company in the
General Meeting;
(b) the resolution shall specify the number of shares, current market price, consideration, if any and the
class or classes of Directors or employees to whom such equity shares are to be issued ;
(c) not less than one year has, at the date of issue, elapsed since the date on which the company was
entitled to commence business ;
(d) the sweat equity shares of the company shall be subject to the provisions of any regulations made by
SEBI and the Stock Exchanges in this behalf.
For the purpose of this clause, “Sweat Equity Shares” means equity shares issued by the company to
employees or directors at a discount or for consideration other than cash for providing know-how or
making available rights in the nature of intellectual property rights or value addition by whatever name
called.
(2)
6.
a.
b.
All the limitations restrictions and provisions relating to equity shares shall be applicable to sweat equity
shares issued by the company.
Even person whose name is entered as a member in the Register shall be entitled to receive share
certificate/s without payment.
Except as ordered by a Court of competent jurisdiction, or as by law required, the company shall not be
bound to recognise an equitable, contingent, future or partial interest in any share, or (except only as is by
these Articles otherwise expressly provided) any right in respect of a share other than an absolute right
thereto in accordance with these Articles, in the person from time to time registered as the holder thereof,
or whose name appears as the beneficial owner of shares in the records of a Depository, but the board shall
be at liberty at their sole discretion to register any share in the joint names of any two or more persons or
the survivor or survivors of them.
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c.
The company shall not give whether directly or indirectly, and whether by means of a loan, guarantee, the
provision of security or otherwise, any financial assistance for the purpose of, or in connection with a
purchase or subscription made or to be made by any person of, or for any shares in the company or in its
holding company:
Provided that nothing in this article shall be taken to prohibit –
7.
a.
(i)
the provision by the company, in accordance with any scheme for the time being in force, of
money for the purchase of, or subscription for, fully paid shares in the company or its holding
company, being a purchase or subscription by trustees of, or for shares to be held by, or for the
benefit of employees of the company, including any director holding a salaried office or
employment in the company ; or
(ii)
the making by the company of loans, within the limit laid down under the Act, or any other
regulations that may be in force, at the time of making such loan, to persons (other than directors
or managers) bonafide in the employment of the company with a view to enabling those persons
to purchase or subscribe for fully paid shares in the company or its holding company to be held by
themselves by way of beneficial ownership.
Every member shall be entitled, without payment, to one or more certificates in marketable lots, for all the
shares of each class or denomination registered in his name, or if the Directors so approve (upon paying
such fee as the Directors may from time to time determine) to several certificates, each for one or more of
such shares and the Company shall complete and have ready for delivery such certificates within three
months from the date of allotment, unless the conditions of issue thereof otherwise provide, or within one
month of the receipt of application of registration of transfer, transmission, sub-division, consolidation or
renewal of any ot its shares as the case may be. Every certificate of shares shall be under the seal of the
company and shall specify the number and distinctive numbers of shares in respect of which it is issued
and amount paid-up thereon and shall be in such form as the directors may prescribe or approve, provided
that in respect of a share or shares held jointly by several persons, the company shall not be borne to issue
nore than one certificate and delivery of a certificate of shares to one of several joint holders shall be
sufficient delivery to all such holders.
The Board of Directors are authorized to split/sub-divide/consolidate share certificates in accordance with
the rules prescribed thereof, and all the rules in this regard shall mutatis mutandis apply to such shares
certificates.
b.
No Fee should be charged for transfer of shares or for effecting transmission or for registering any letters
of probate, letters of administration and similar other documents.
c.
No fee shall be charged for issue of new share/debenture certificates in replacement of those which are
old, decrepit, wornout or where the cages on the reverse for recording transfers have been fully utilised.
d.
“Notwithstanding anything contained in this article, when the shares are dealt with in a depository, no
certificate shall be issued and the company shall intimate the details of allotment of shares to the
depository immediately on allotment of such shares.
e.
“In respect of shares held in a Depository, the investor shall have the option to request the Company to
issue share certificate in physical form at any time, subject to the provisions of Depositories Act".
8.
Every share certificate shall be under the seal of the Company and shall specify the shares to which it
relates and the amount paid up thereon.
9.
a.
The rights attached to any class of shares (unless otherwise provided by the terms of the issue and class)
may, subject to the provision of Section 106 and 107 of the Act be varied with the consent in writing of the
holders of three-fourth of the issued shares of that class or with the sanction of a special resolution passed
at a separate meeting of the holders of the shares of that class.
b.
To every such separate general meeting the provisions of these Articles relating to general meetings shall
mutatis mutandis apply. The necessary quorum shall be five persons at least holding or representing by
proxy one-third of the issued shares of that class.
10.
Subject to the provisions of Section 76 of the Act, the Company by a special resolution may at any time
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pay a commission to any person for subscribing or agreeing to subscribe (whether absolutely or
conditionally) for any shares in, debentures, or debenture stock of the Company or for procuring, or
agreeing to procure, subscriptions (whether absolute or conditional) for shares in or for debentures or
debenture stock of the Company but so that, if the commission in respect of any such shares, debentures, or
debenture stock shall be paid or payable out of the Capital the statutory conditions and requirements shall
be observed and complied with and the amount or rate or commission shall not exceed five percent of the
issue price of the shares and two and a half percent of the issue price of debenture or debenture stock in
each case subscribed or to be subscribed. And the extent stated above the commission may be paid or
satisfied by issue and allotment of fully paid up shares, debentures or debenture stock of the Company.
13.
Except so far as otherwise provided by the conditions of issue or by these present, any capital raised by the
creation of new shares shall be considered part of the original and shall be subject to the provisions herein
contained with reference to the payment of calls, installments, transfer, transmissions, forfeiture, lien,
surrender, voting and otherwise.
14.
The Company may from time to time by special resolution, subject to confirmation by the court and
subject to the provisions of Section 100 to 104 of the Act, reduce its share capital in any way and in
particular without prejudice to the generality of the foregoing by
a.
b.
extinguishing or reducing the liability on any of its share in respect of shares capital not paid up; or
either with or without extinguishing or reducing liability on any of its shares, cancel any paid up share
capital which is lost or unrepresented by available assets; or
either with or without extinguishing or reducing liability on any of its shares, pay off any paid up share
capital which is in excess of the wants of the company.
c.
15.
Subjects to the provisions of Section 91 of the Act, the Board of Directors may from time to time make
such calls as they think fit upon the members in respect of all moneys un paid on the shares held by them
respectively and not by the conditions of allotment thereof made payable at fixed time and the member
shall pay the amount of every call so made on him to the persons and at the time and place appointed by
the Board of Directors.
18.
If the sum payable in respect of any call or installment be not paid on or before the day appointed for
payment thereof the holder for the time being of the share in respect of which the call shall have been
made or the installment shall be due, shall pay interest for the same at the rate of 12 percent per annum
from the day appointed for the payment thereof to the time of actual payment or at such lower rate as the
Directors may determine. The Board of Directors shall able be at liberty to waive payment of that interest
wholly or in part.
22.
The Company shall have a first and paramount lien upon all the shares other than fully paid up shares
registered in the name of each member whether solely or jointly with others and upon the proceeds of sale
thereof for all moneys whether presently payable or not called or payable at a fixed time in respect of such
shares and no equitable interest in any share shall be created except upon the footing and condition that
this Article will have full effect, and such lien shall extend to all dividends and bonuses from time to time
declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall
operate as a waiver of the company'
s lien if any, on such shares. The directors may at any time declare any
share wholly or in part to be exempt from the provisions of this clause.
26.
If a member fails to pay any call or installment of a call on the day appointed for the payment thereof, the
Board may, at any time thereafter, during such time as any part of such a call or installment remains
unpaid, serve a notice on him requiring payment of so much of the call or installments as is unpaid
together with any interest which may have accrued.
34.
a.
Subject to the provisions of the Act or of any other law in that regard, the Board may accept in the name of
and for the benefit of the Company and upon such terms and conditions as may be agreed, the surrender of
any shares liable to forfeiture, and in so far as the law permits, of any other shares.
b.
Buy back of shares and other specified securities
(1)
Notwithstanding anything contained in the Act, but subject to the provisions of sub-section (2) of section
77A and section 77B, the company may purchase its own shares or other specified securities (hereinafter
referred to us ‘buy back’) out of –
(i)
its free reserves; or
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(ii)
the securities premium account; or
(iii)
the proceeds of any shares or other specified securities
Provided that no buy back of any kind of shares or other specified securities shall be made out of the
proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
(2)
The company shall not purchase its own shares or other specified securities under sub-clause (1) of this
article unless a)
a special resolution has been passed in general meeting of the company authorising the buy back;
b) the buy back is less than twenty five per cent of the total paid-up capital and free reserves of the
company
Provided that the buy back of equity shares in any financial year shall not exceed twenty-five percent,
of its total paid-up equity capital in that financial year.
c)
the ratio of the debt owed by the company is not more than twice the capital and its free reserves after
such buy back or at such ratio as may be fixed by the central government from time to time in this
regard;
Explanation:- For the purpose of this article, the expression “debt” includes all amounts of unsecured
and secured debts.
a)
all the shares or other specified securities for buy back shall be fully paid-up;
b) the buy back of shares or other specified securities shall be made in accordance with the
guidelines issued by SEBI in this behalf.
40.
The Board may, at their absolute discretion and without assigning any reason, decline to register.
i.
ii.
the transfer of any share whether fully paid or not to a person of whom they do not approve;
any transfer or transmission of shares on which the company has a lien.
PROVIDED that registration of any transfer shall not be refused on the ground of the transferor being
either alone or jointly with any other person indebted to the company on any account whatsoever except a
lien on the shares.
41.
a.
The company shall keep a book to be called the Register of Members and therein shall be entered the
particulars of every transfer or transmission of any shares and all other particulars of shares required
by the Act to be entered in such Register.
b.
“Nothing contained in this article shall apply to transfer of shares effected by the transferor and the
transferee both of whom are entered as beneficial owners in the records of a depository.”
c.
Nomination of Shares/Debentures
i)
Notwithstanding anything contained in these Articles, a shareholder or debentureholder of the
company may at any time nominate in the form and manner prescribed by the company in
accordance with the rules if any framed by the central government under Section 109A of the Act,
a person to whom his shares in, or debentures, of the company shall vest in the event of his death.
ii)
Where the shares in, or debentures of the company are held by more than one person jointly, the
joint holders may together nominate, in the prescribes manner, a person to whom all the rights in
the shares or debentures of the company shall vest in the event of death of all the joint holders.
iii)
Notwithstanding anything contained in any other law for the time being in force or in any
disposition, whether testamentary or otherwise, in respect of such shares in or debentures of the
company, where a nomination made in the prescribed manner purports to confer on any person
the right to vest the shares in or debentures of the company, the nominee shall on the death of the
shareholder or the debentureholder of the company, or as the case may be, on the death of the
joint holders become entitled to all rights on the shares or debentures of the company or, as the
case may be, all the joint holders in relation to such shares in or debenture of the company to the
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exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed
manner.
iv)
Where the nominee is a minor, it shall be lawful for the holder of the shares, or the holder of
debentures to make the nomination to appoint in the prescribed manner any person to become
entitled to shares in or debentures of the company, in the event of his death, during the minority.
d.
Transmission of Shares/Debentures
i)
Notwithstanding anything contained in these Articles, any person who becomes a nominee by virtue of the
provisions of the preceding Article, upon the production of such evidence as may be required by the board
and subject as hereinafter provided elect, either a)
To be registered himself as holder of the share or debenture, as the case may be, or
b) To make such transfer of the share or debenture, as the case may be, as the deceased shareholder or
debentureholder, as the case may be could have made.
ii)
If the person being the nominee, so becoming entitled elects to be registered as a shareholder or debenture
holder, himself as the case may be, he shall deliver or send to the company a notice in writing signed by
him stating that he so elects and such notice shall be accompanied with the death certificate of the
deceased shareholder or debentureholder, as the case may be.
iii)
All the limitations, restrictions and provisions of the act or these Articles, relating to the right to transfer
and the registration of transfers of shares or debentures shall be applicable to any such notice or transfer as
aforesaid as if the death of the member and not occurred and the notice or transfer were a transfer signed
by that shareholder or debentureholder, as the case may be.
iv)
A person being a nominee, becoming entitled to a share or debenture by reason of the death of the holder
shall be entitled to the same dividends and other advantages to which he would be entitled if he were the
registered holder of the share or debenture except that he shall not, before being registered a member in
respect of his share or debenture, be entitled in respect of it to exercise any right conferred by membership
in relation to meetings of the company. Provided that board may at any time, give notice requiring any
such person to elect either to be registered himself or to transfer the share or debenture, and if the notice is
not complied with within ninety days, the board may thereafter withhold payment of all dividends, bonuses
or other moneys payable in respect of the share or debenture, until the requirements of the notice have been
complied with.
53.
The Board may call an Extra-Ordinary General Meeting either on its own motion or on the requisition of
the members in accordance with Section 169 of the Act.
54.
Five members personally present shall be a quorum for a general meeting and no business shall be
transacted at any general meeting unless the requisite quorum is present at the commencement of the
business.
If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if
called upon the requisition of members, shall be dissolved and in any other case, it shall stand adjourned to
the same day in next week at the same time and place and if at the adjourned meeting a quorum is not
present within half an hour from the time appointed for the meeting the members present shall constitute a
quorum.
55.
The Chairman of the Board of Directors shall preside over every General Meeting of the company and if
he is not present within 15 minutes from the time appointed for holding the meeting, or if he is unwilling to
acts as Chairman, the Joint Chairman of the Board, if any, shall preside over at every General Meeting of
the Company.
56.
If there is no such Chairman or Joint Chairman or if at any General Meeting either the Chairman or Joint
Chairman is not present within 15 minutes from the time appointed for holding the meeting or if they are
unwilling to act as Chairman, the members present shall chose a Director present, to be the Chairman of
the Meeting and if no director is present or all the Directors are unwilling to take the chair, the members
present shall choose one among them to be the Chairman.
57.
The Chairman may, if so directed by the meeting, adjourn that meeting from time to time but no business
shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place. When meeting is adjourned for 30 days or more, notice of the
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adjourned meeting shall be given as in the case of original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.
58.
At General Meetings a resolution put to the vote of the meeting shall be decided on a show of hands,
unless a poll is (before or on the declaration of the result of the show of hands) demanded in accordance
with the provisions of section 179 of the Act. Unless a poll is so demanded a declaration by the Chairman
that a resolution has, on a show of hands, been carried unanimously or by a particular majority or lost and
an entry to that effect in the book of the proceedings of the meeting shall be conclusive evidence of that
fact without proof of the number of proportion of the votes recorded in favour of or against that resolution.
59.
In the case of an equality of votes, the Chairman shall, both on a show of hands and on a poll, have a
casting vote in addition to the votes to which he may be entitled as a member.
60.
If a poll is duly demanded in accordance with the provisions of Section 179, it shall be taken in such
manner as the Chairman, may direct subject to the provisions of Section 184 and Section 185 of the Act,
and the results of the poll shall be deemed to be decision of the meeting on the resolution on which the poll
was taken.
61.
Any act or resolution which, under the provisions of these Article or of the Act is permitted or required to
be done or passed by the company in General Meetings, shall be sufficiently so done or passed if effected
by an ordinary resolution as defined in Section 189(1) of the Act, unless either the Act or these Articles
specifically require such act to be done or resolution to be passed by the Special Resolution as defined in
Section 189(2) of the Act.
62.
Until otherwise determined by the Company in General Meeting, the number of directors shall not be less
than three and not more than twelve, including an Ex-Officio or nominated directors.
64.
One third of such of the directors for the time being, as are liable to retire by rotation, other than
permanent, ex-officio and nominated directors. The Directors to retire every year shall be those who have
been longest, in office since their last appointment but as between persons who become since directors on
the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot by
a meeting of the Board.
65.
Regulation 66 of Table `A'shall not apply to this Company and a director need not hold any shares to
qualify himself to be a director of this Company.
67.
The Board shall have power at any time, and from time to time, to appoint a person as an Additional
Director, provided the number of the directors and Additional Directors together shall not at any time
exceed the maximum strength fixed for the Board by the articles. Such person shall hold office only up to
the date of the next annual general meeting of the company but shall be eligible for appointment by the
company as a director at that meeting subject to the provisions of the Act.
68.
The Board of Directors may appoint any individual to be an alternate Director to act for a Director
(hereinafter referred to as the `Original Director'
) during his absence for a period of not less than three
months from the State in which the meetings of the Board are ordinarily held. An alternate Director so
appointed shall not hold office as such for a period longer than that permissible to the Original Director
and shall vacate office if and when the Original Director returns to the State in which meetings of the
Board are ordinarily held. If the term of office of the Original Director is determined before he so returns
to the State aforesaid, the provisions contained in the Act or these Articles for the automatic reappointment
of retiring directors in default of another appointment shall apply to the Original Director but not to the
alternate Director.
78.
At every annual general meeting one third of such of the directors for the time being as are liable to retire
by rotation or if their number is not three or a multiple of three, then the number nearest to one-third shall
retire from office. The Directors to retire in such cases shall be those who have been longest in office since
their last appointment but as between persons who became directors on the same day those to retire shall
(unless they otherwise agree among themselves) be determined by lot.
79.
A retiring Director shall be eligible for re-appointment.
80.
The Company at the annual general meeting at which a Director retires in the manner aforesaid may fill the
vacated office by appointment of another individual thereto if he or some member intending to propose
him has, not less than fourteen days before the meeting, left at the Office a notice in writing under his hand
137
signifying his candidature for the office of director or the intention of such member to propose such person
as a candidate for that office, as the case may be, along with a deposit of five hundred rupees which shall
be returned to such person, or as the case may be, to such member, if the person succeeds in getting elected
as a director and he has signed and filled with the Registrar his consent in writing to act as such director
within thirty days of his appointment. The company shall notify the members in accordance with the
provisions of Section 257 of the Act.
81.
The appointment of Directors shall be voted upon individually.
82.
If, at any annual general meeting at which an appointment of directors ought to take place, the place of any
retiring directors is not filled up, and the meeting has not expressly resolved not to fill the vacancy, the
meeting shall stand adjourned till the same day in the next week at the same time and place and if that day
is a public holiday, till the next succeeding day which is not a public holiday at the same time and place,
and if at the adjourned meeting also, the place of the retiring Director is not filled up and that meeting also
has not expressly resolved not to fill the vacancy, the retiring Director shall, if willing, and is not otherwise
disqualified be deemed to have been reappointed unless the resolution for such reappointment has been put
to the vote and lost either at the adjourned meeting or at the previous meeting.
83.
The Company may, from time to time, in general meeting, increase or reduce the number of directors,
subject to approval by the Central Government in the case of an increase over the limit prescribed by the
Articles.
89.
The Directors may meet together as a Board for the despatch of business from time to time and shall so
meet at least once in every three months, and at least four such meetings shall be held in every year. The
directors may adjourn and otherwise regulate their meetings and proceedings as they think fit. The
Managing Director or the Secretary may at any time and at the request of the Director convene a meeting
of the Board.
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a.
Notwithstanding anything to the contrary contained in these Articles, so long as any moneys remain unpaid
by the Company to the Industrial Development Bank at India (IDBI), the Industrial Credit and Investment
Corporation of India Ltd., (ICICI), Industrial Finance Corporation of India (IFCI), Tamil Nadu Industrial
Investment Corporation Ltd., (TIIC), Small Industries Industrial Promotion Corporation of Tamil Nadu
Ltd., (SIPCOT) and Life Insurance Corporation of India (LIC) or to any other Financing Company or
Body out of any loans granted by them to the Company or so long IDBI, IFCI, ICICI, TIIC, SIPCOT, LIC
and Unit Trust of India (UTI) or any other Finance Company or Body is hereinafter in this Articles
referred to as "the corporation" continue to hold debentures in the Company as a result of underwriting or
by direct subscription or private placement, or so long as the corporation holds shares in the Company as a
result or underwriting or direct subscription or so long as any liability of the Company arising out of any
guarantee furnished by the Corporation on behalf of the Company remains outstanding, the Corporation
shall have a right to appoint from time to time any person or persons as a Director or Directors wholetime
or non-wholetime (which Director or Directors is/are hereinafter referred to as `Nominee or Directors/s'
)
on the Board of the Company and to remove from such office any person or persons so appointed and to
appoint any person or persons in his or their places.
b.
The Board of Directors of the Company shall have no power to remove from office the Nominee
Director/s. At the option of the Corporation such Nominee Director/s shall not be required to hold any
share qualification in the Company. Also at the option of the corporation such Nominee Director/s shall
not be liable to retire by rotation. Subject as aforesaid, the Nominee Director/s shall be entitled to the same
rights and privileges and be subject to the same obligations as any other Director of the Company.
c.
The Nominee Director/s so appointed shall hold the said office only so long as any moneys remain owing
by the Company to the Corporation or so long as the Corporation holds debentures in the Company as a
result of direct subscription or private placement or so long as the Corporation holds shares in the
Company as a result of underwriting or direct subscription or the liability of the company arising out of
any guarantee is outstanding and the Nominee Director/s so appointed in exercises of the said power shall
ipso-facto vacate such office immediately the moneys owing by the Company to the Corporation, is paid or
on the Corporation ceasing to hold debentures/shares in the Company or on the satisfaction of the liability
of the Company arising out of any guarantee furnished by the Corporation.
d.
The Nominee Director/s appointed under this article shall be entitled to receive all notices of and attend all
General Meeting, Board Meetings and of the Meetings of the Committee of which the Nominee Director/s
is/are member/s as also the minutes of such meetings. The Corporation shall also be entitled to receive all
such notices and minutes. The Company shall pay to the Nominee Director/s sitting fees and expenses
which the other Director/s of the Company are entitled but if any other fees, commission, moneys or
remuneration in relation to such Nominee Director/s shall accrue to the Corporation and same shall
138
accordingly be paid by the Company directly to the Corporation. Any expenses that may be incurred by the
Corporation or by such Nominee Director/s in connection with their appointment Directorship, shall also
be or reimbursed by the Company to the Corporation or as the case may be to such Nominee Director/s.
e.
Provided that if any such Nominee Director/s is an officer of the Corporation the sitting fees in relation to
such Nominee Director/s shall also accrue to the Corporation and these shall accordingly be paid by the
Company directly to the Corporation.
f.
Provided further that if such Nominee Director/s is an Officer of the Reserve Bank of India, the sitting fees
in relation to such Nominee Director/s shall also accrue to IDBI and the same shall accordingly be paid by
the Company directly to IDBI.
g.
Provided also that in the event of the Nominee Director/s being appointed as wholetime Director/s such
Nominee Director/s shall exercises such powers and duties as may be approved by the Lendors and have
such as rights as are usually exercised or available to a wholetime Director, in the management of the
affairs of the Borrower. Such Nominee Director/s shall be entitled to receive such remuneration, fees,
commission, and moneys as may be approved by the Lendors.
107.
The Directors may subject to the provisions of Sections, 291 to 297 of the Act and these Articles from time
to time entrust to and confer upon a Managing Director for the time being such of the powers exercisable
under these presents by the Directors as they may think fit and may confer such powers for such time and
to be exercised for such objects and purposes, and upon such terms and conditions and with such
restriction as they think expedient; and they may confer such powers either collaterally with or to the
exclusion of and in substitution for all or any of the powers of the Directors in that behalf; and may from
time to time revoke, withdraw, alter or vary any of such powers.
108.
Subject to the provisions of the Act, the management and business affairs of the company shall be vested
in the directors and the directors may exercise all such powers and do all such acts and things as the
Company is, by the Memorandum of Association or otherwise, authorised to exercise and to or by the
Statue or otherwise directed or required to be exercised or done by the company in General Meeting, but
subject, nevertheless, to the provisions of the Act and any other Act and of the Memorandum of
Association and these Articles from time to time made by the Company in General Meeting provided that
no such regulation shall invalidate any prior act of the directors which would have been valid if such
regulation had not been made.
109.
Without prejudice to the general powers conferred by Article and the other powers conferred by these
presents and so as not in any way to limit any or all of these powers it is hereby expressly declared that,
subject as aforesaid, the directors shall have powers:
i.
to pay the costs, charges and expenses preliminary and incidental to the promotion, formation, establishment
and registration of the company;
ii. to pay and charge to the capital account of the company the interest lawfully payable thereon under the
provisions of Section 76 and 208 of the Act;
iii. subject to the provisions of the Act and these Articles to purchase or otherwise acquire any lands, buildings,
machinery, premises, assets, rights, credits royalties, boundaries and goodwill of any person, firm or Company
carrying on the business, which this company is authorised to carry on, at or for such price or consideration on
such terms and conditions as they think fit, and, on any such purchases or acquisition, to accept such title as the
Board may believe or may be advised to be reasonably satisfactory;
iv. subject to the provisions of the Act, to purchases, or take on lease for any term or terms of years, or otherwise
acquire any mills or factories or any land or lands, with or without buildings and out houses thereon, situate in
any part of India, at such price or rent and subject to such terms and conditions as the Directors may think fit;
and in any such purchase, lease or other acquisition to accept such title as the Directors may believe or may be
advised to be reasonably satisfactory.
v.
to erect, contract, enlarge, improve, alter, maintain, pull down, rebuild or reconstruct any buildings, factories,
offices, workshops or other structures, necessary or convenient for the purposes of the company and to acquire
lands for the purposes of the company.
vi. to let, mortgage, charge, sell or otherwise dispose of subject to the provisions of Section 293 of the Act, any
property of the Company, either absolutely of conditionally, and in such manner and upon such terms and
conditions in all respects as they think fit and to accept payment or satisfaction for the same in cash or
otherwise as they may think fit.
139
vii. Subject to Section 292 of Act, to open accounts with any bank or bankers or with any company, firm or
individual and to pay money into and draw money from such account from time to time as the Directors may
think fit.
viii. to secure the fulfillment of any contracts or engagements entered into by the Company by mortgage or charge
of all or any of the properties of the company and in such other manner as they may think fit.
ix. to appoint any person or persons (whether incorporated or not), to accept and hold in trust for the Company any
Property belonging to the Company or in which it is interested or for any other purposes and to execute and do
all such deeds and things as may be requisite in relation and to provide for the remuneration of such trustee or
trustees.
x.
to institute, conduct, defend, compound or abandon any legal proceedings by or against the Company or its
Officers or otherwise concerning the affairs of the Company and also subject to the provisions of Section 293
of the Act to compound and allow time for payment or satisfaction of any debts due, or of any claims or
demands by or against the Company.
xi. to refer, subject to the provisions of Section 293 of the Act any claims or demands by or against the Company
to arbitration and observe and perform the awards;
xii. to make and give receipts, releases and other discharges for money payable to the Company and for the claims
and demands of the Company subject to the provisions of Section 293 of the Act;
xiii. to determine from time to time, as to who shall be entitled to sign bills, notes, receipts, acceptances,
endorsements, cheques, dividend warrants, releases, contracts and documentation on the Company'
s behalf.
xiv. to execute in the name and on behalf of the Company in favour of any Director or other person who may incur
or about to incur any personal liability for the benefit of the Company, such mortgages of the Company'
s
property (present and future) as they think fit and any such mortgage may contain a power of sale and such
other powers, covenants and provisions as shall be agreed upon;
xv. subject to such sanction as may be necessary under the Act, or the Articles, to give to any Director, Officer, or
other person employed by the Company, and interest in any particular business or transaction either by way of
commission on the gross expenditure thereon or otherwise of a share in the general profits of the Company, and
such interest, commission or share of profits shall be treated as part of the working expenses of the Company.
xvi. to subscribe, or contribute otherwise to assist or to guarantee money to charitable, benevolent, religious,
scientific, national, public or any other useful institutions, object, or purposes for any exhibitions.
xvii.to establish and maintain or procure the establishment and maintenance of any contributory or non-contributory
pensions or superannuation funds for the benefit of and give or procure the giving of donations, gratuities,
pensions, allowances or emoluments, to any persons who are or were at any time in the employment or services
of the Company, or of any Company which is a subsidiary of the Company or is allied to or associated with the
Company or with any such subsidiary Company or who are or were at any time Directors or Officers of the
Company or of any such other company as aforesaid, and the wives, widows, families and dependents of any
such persons and, also to establish and subsidise and subscribe to any institutions, associations, clubs or funds
calculated to be fore the benefit of or to or any such other company as aforesaid and do any of the matters
aforesaid, either alone or in conjunction with any such other company as aforesaid.
xviii.to appoint and, at their discretion to remove or suspend Managers, Secretaries, Officers, Clerks, Agents and
servants for permanent, temporary or special service as they may from time to time think fit, and to determine
their powers and duties, and fix their salaries or emoluments and require security in such instances and to such
amounts as they think fit, and from time to time to provide for the management and transactions of the affairs
of the company in any special locality in India in such manner as they think fit. The provisions contained in the
Article following shall be without prejudice to the general powers conferred by this clause;
xix. at any time and from time to time by power of attorney to appoint any person or persons to be the Attorney of
the Company for such purposes and with such powers, authorities and discretion’s (not exceeding those vested
in or exercisable by the Directors under these presents) and for such period and subject to such conditions as
the Directors may from time to time think fit and any such appointment (if the Directors think fit) be made in
favour of any Company or the members, directors, nominees, or managers of any company or firm or otherwise
in favour of any fluctuating body or person whether nominated, directly or indirectly by the Directors and any
such power of attorney may contain any such powers for the protection or convenience of persons dealing with
such Attorneys as the Directors may think fit; and may contain powers enabling any such delegates or Attorney
140
as aforesaid to sub-delegate all or any of the powers, authorities and discretion’s for the time being vested in
them;
110.
The Directors may from time to time at their discretion exercise all the powers of the Company to borrow
money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof and to
issue debenture, debenture-stock, and other securities whether outright or as security for any debts, liability
or obligation of the Company. The Company may give the lender power to nominate Director/Directors in
the Board at their discretion.
115.
The Company in general meeting may declare dividends, but that dividend shall not exceed the amount
recommended by the directors. No dividends shall be declared or paid except out of profits of the
Company after providing for depreciation in accordance with Section 205 of the Companies Act 1956
subject however to the provisions of the Act as amended and in force from time to time.
116.
Subject to the provisions of Section 205 and Section 205 (2A) of the Act, the Directors may, before
recommending any dividend set aside out of the profits of the Company such sums as they thing proper as
a reserve which shall at the discretion of the Directors be applicable for repayment of debentures, meeting
contingencies or for equalising dividends, or for any other purpose to which the profits of the Company
may be properly applied and pending such application may, at the like discretion either be employed in the
business of the Company, or be invested in such investment (other than shares of the Company) as the
directors may from time to time think fit.
117.
Subject to the rights of persons (if any) entitled to shares with special rights as to dividends, all dividends
shall be paid according to the amount paid-up on the shares. No amount paid on a share in advance of calls
shall be treated for the purpose of this Article as paid up on the share.
118.
a.
b.
Subject to the provisions of the Act the company shall pay to the members such interim dividends as
appear to the directors to be justified by the profits of the company.
Unpaid or Unclaimed Dividend, - Where the company has declared a dividend but which has not been
paid or the dividend warrant in respect thereof has not been posted within 42 days from the date of
declaration to any shareholder entitled to the payment of the dividend, the Company shall within 7 days
from the date of expiry of the said period of 42 days, open a special account in that behalf in any scheduled
bank called “Unpaid Dividend of Odyssey India Limited and transfer to the said account, the total amount
of dividend which remains unpaid or in relation to which no dividend warrant has been posted.
Any money transferred to the unpaid dividend account of the company which remains unpaid or unclaimed
for a period of three years from the date of such transfer, shall be transferred by the company to the general
revenue account of the Central Government. A claim to any money so transferred to the general revenue
account may be preferred to the Central Government by the shareholders to whom the money is due.
No unclaimed or unpaid dividend shall be forfeited by the Board.
119.
The Company in general meeting may at any time and from time to time pass a Resolution that any sum
not required for the payment or provision of any fixed preferential dividend, if any and for the time being
standing to the credit of any reserve or reserve account of the Company including any sum carried to
reserve as result of a sale or revaluation of the assets of the Company or any part thereof, or any premia
received on the Issue of any shares or debentures of the Company, or being undivided net profits in the
hands of the Company, be capitalised and that such sum be appropriated as capital to and amongst the
shareholders in the shares and proportions to which they would have been entitled thereto if the same has
been distributed by way of dividend and in such manner as the Resolution may direct and such Resolution
with such resolution shall be effective and the directors shall in accordance with such Resolution apply
such sum in paying up in full any unissued shares in the capital of the Company on behalf of the
shareholders aforesaid, and appropriate such shares to, and distribute the same credited as fully paid up
amongst such shareholders in the proportions aforesaid in satisfaction of their shares and interests in the
said capitalised sum, or shall apply such sum or any part thereof on behalf of the share holders aforesaid in
paying up the whole or part of any uncalled balance which shall for the time being be unpaid in respect
shareholders or otherwise deal with such sum as directed by such Resolution, and when any difficulty
arises in regard to the distribution, they may settle the same as they think expedient and in particular may
issue fractional certificates, and may fix the value for distribution of such specific assets or any part thereof
and may determine that cash payment shall be made to any member upon the footing of the value so fixed
in order to adjust the rights of all parties and may vest any specific assets in trustees upon trust for such of
the persons entitled to the dividend as may seem expedient to the directors. Where required the directors
141
may appoint any person to sign any contract thereby required on behalf of the persons entitled to the
dividend and such appointment shall be effective.
124.
The directors shall cause to be kept proper books of accounts with respect to:-
a.
all sums of money received and expended by the Company and the matters in respect of which the receipt
and expenditure take place.
b.
all sales and purchases by the Company.
c.
the assets and liabilities of the Company.
125.
The books of accounts shall be kept at the Office or at such other place as the Board shall decide and shall
always be open to the inspection of the Board during business hours.
126.
The Board shall, from time to time, determine whether and to what extent and at what time and places and
under what conditions or regulations the accounts and books of the Company or any of them shall be open
to the inspection of members not being Directors and no member (not being a Director) shall have any
right of inspecting any account or book or document of the Company except as conferred by law or
authorised by the Board or by the Company in general meeting.
131.
Subject to the provisions of Section 201 of the Act, every Director, Manager, Auditor, Secretary and other
Officer or servant of the Company shall be indemnified by the Company and it shall be the duty of the
Directors, out of the funds of the Company to pay all costs, losses, expenses which any such officer or
servant may incur or become liable to by reason of any contract entered into or act or thing done by him as
such Officer or servant or in any way in the discharge of his duties, and the amount for which such
indemnity is provided shall immediately attach as a lien on the property of the Company, and have priority
as between the members over all other claims.
132.
Every Director, Manager, Auditor, Treasurer, Trustee, Member or Committee, Officer, Servant, Agent,
Accountant or other persons employed in the business of the Company shall, if so required by the
Directors, before entering upon his duties, sign a declaration pledging himself to observe a strict secrecy
respecting all transactions and affairs of the Company, with the customers and the state of accounts with
individuals and in mattes which may come to his knowledge in the discharge of his duties except when
required to do so by the Board or by law or the person to whom such matters relate, except so far as may
be necessary in order to comply with any of the provisions of these presents.
133.
The Company shall have among its objectives the promotion and growth of the national economy through
increased productivity, effective utilisation of material and manpower resources and continued application
of modern, scientific and managerial technique in keeping with the national aspirations, and the Company
shall be mindful of its social and moral responsibilities to the consumers, employees, shareholders, society
and local community.
134.
Whenever in the Companies Act, it has been provided that the Company shall have any right, privileges or
authority or at the Company could carry out any transaction only if the company is so authorised by its
articles, then and in that case this Regulation hereby authorises and empowers the Company to have such
right, privilege or authority and to carry such transaction, as have been permitted by the Act, without there
being any specific regulation in that behalf herein provided.
142
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION
The following contracts (not being contracts entered into in the ordinary course of business carried on by our
Company or entered into more than two years before the date of this Draft Red Herring Prospectus) which are or
may be deemed material have been entered or to be entered into by our Company. These contracts, copies of which
have been attached to the copy of this Draft Red Herring Prospectus, delivered to the RoC for registration and also
the documents for inspection referred to hereunder, may be inspected at the registered office of our Company
between 10.00 am to 4.00 pm on working days from the date of this Draft Red Herring Prospectus until the Bid
Closing Date/Issue Closing Date.
Material Contracts
1.
Letters of appointment dated January 30, 2006 and February 28, 2006 to Karvy Investor Services Limited
and SREI Capital Markets Services Limited respectively from our Company appointing them as the
BRLMs respectively.
2.
Letter of appointment dated January 30, 2006 for the Registrar to the Issue.
3.
Memorandum of Understanding amongst our Company and the BRLMs dated April 8, 2006.
4.
Memorandum of Understanding executed by our Company and the Registrar to the Issue dated dated April
8, 2006.
5.
Escrow Agreement dated [ ] between the Company, the BRLMs, Escrow Collection Bank and the
Registrar to the Issue.
6.
Syndicate Agreement dated [ ] between the Company, the BRLMs and the Syndicate Members.
7.
Underwriting Agreement dated [ ] between the Company, the BRLMs and the Syndicate Members.
Material Documents
1.
Our Memorandum and Articles of Association, as amended from time to time
2.
Our Certificate of Incorporation dated March 27, 1995
3.
Shareholders’ resolution dated April 3, 2006 in relation to this Issue and other related matters.
4.
Resolution of the Board of Directors dated March 31, 2006 in relation to this Issue.
5.
Resolution of the Board of Directors dated January 30, 2006 inter alia resolving to constitute the IPO
Committee and to do all other acts in relation to this Issue.
6.
Employment contracts between our Company and our Chairman, Our Managing Director and our Executive
Directors.
7.
Reports of the Auditors dated April 6, 2006 prepared as per Indian GAAP.
8.
Copies of annual reports of our Company for the last five financial years.
9.
Copies of annual reports of our Promoter for the last three financial years.
10. Consents of the Auditors for inclusion of their report on accounts in the form and context in which they appear
in this Red Herring Prospectus.
11. Powers of Attorney executed by the Directors of our Company in favour of Person(s) for signing and making
necessary changes to this Draft Red Herring Prospectus and other related documents.
12. Consents of the BRLMs, the Auditor, Legal Advisors to the Issue, the Syndicate Members, Registrar to the
Issue, Escrow Collection Bank, Banker to the Issue, the Monitoring Agency, Directors, Company Secretary and
Compliance Officer, as referred to, in their respective capacities.
13. In-principle listing application dated [ ] and approval dated [ ] from the BSE.
143
14. In-principle listing application dated [ ] and approval dated [ ] from the NSE.
15. Tripartite Agreement between NSDL, our Company and the Registrar to the Issue dated [.].
16. Tripartite Agreement between CDSL, our Company and the Registrar to the Issue dated [.].
17. Due diligence certificate dated April 10, 2006 to SEBI from KISL.
18. Tax benefit report dated April 6, 2006 provided by the Auditors.
19. SEBI Observation letter number [.] dated [.].
20. Copies of Forms along with relevant resolutions regarding increase in the authorized share capital of the
Company.
21. Copy of Board Resolution dated April 8, 2006 approving this Draft Red Herring Prospectus.
22. Copies of various government approvals approved by our Company.
23. Auditor’s certificate dated April 6, 2006 regarding the sources and deployment of funds, as on January 31,
2006.
24. Relevant extracts with regard to the information contained in the section on Industry.
25. Copies of all real estate agreements/documents in relation to our premises.
26. Copies of the letters of intent in relation to the premises proposed to be leased in Ludhiana and Ahmedabad.
27. Website design and development agreement dated January 31, 2006 between the Company and Foundation of
Occupational Development (Food).
28. Agreement dated April 19, 2004 with ICICI Bank in relation to our Co-Branded Credit Card.
Any of the contracts or documents mentioned in this Draft Red Herring Prospectus may be amended or modified at
any time if so required in the interest of the Company or if required by the other parties, without reference to the
shareholders subject to compliance of the applicable laws.
144
DECLARATION
We, the Directors of the Company, hereby declare that all the relevant provisions of Companies Act, 1956 and the
guidelines issued by the Government of India or the guidelines issued by Securities and Exchange Board of India,
established under Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been
complied with and no statement made in this Draft Red Herring Prospectus is contrary to the provisions of the
Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules made thereunder or guidelines
issued, as the case may be. All legal requirements applicable till the filing of the Draft Red Herring Prospectus with
the Securities and Exchange Board of India have been complied with. We further certify that all statements and
disclosures in this Draft Red Herring Prospectus are true and fair.
SIGNED BY THE DIRECTORS OF THE COMPANY
T. Venkattram Reddy
P. K. Iyer
T. S. Ashwin
E. Venkatram Reddy
P. Siddhartha
S. Balasubramaniyan
K. Madhavan
Date:
Place:
145

drhp- refiling final 070406 1800 cln

Transcription

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