Beruflich Dokumente
Kultur Dokumente
(incorporated as a public limited Company under the Indian Companies Act with Registration No. 05-34348)
US$ 22,000,000
1% Unsecured Foreign Currency Convertible Bonds Due 2012
Convertible into Ordinary Shares of KLG Systel Limited.
ISSUE PRICE: 100 per cent.
The US$ 22,000,000 1% Unsecured Foreign Currency Convertible Bonds due 2012 (the "Bonds") will be issued
by KLG Systel Limited ("KLG" or the "Company").
The Bonds will bear interest at the rate of 1% per annum, payable semi annually in arrears on September 26 and
March 26. The first Interest Payment Date will be September 26, 2007. The Bonds are convertible at any time on
and after March 26, 2007 up to the close of business on March 16, 2012 by holders into fully paid Shares with full
voting rights with a par value of Rs.10 each of the Company (the "Shares") at an initial Conversion Price (as
defined in the "Terms and Conditions of the Bonds") of Rs. .400.00 per Share with a fixed rate of exchange on
conversion of Rs.43.70 to US $1.00. The Conversion Price is subject to adjustment in certain circumstances. The
closing price of the Shares on the Bombay Stock Exchange Limited (the "BSE") on 23 March 2007 was Rs.
297.40 per Share and on the National Stock Exchange of India Limited (the "NSE", together with the BSE the
"Indian Stock Exchanges") on 23 March 2007 was Rs. 297.20 per Share. For the terms of conversion rights, see
"Terms and Conditions of the Bonds".
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE BONDS, SEE "RISK FACTORS".
The Bonds will be represented initially by a single Global Certificate (as defined herein) in registered form,
deposited with and registered in the name of a nominee of the common depositary for Euroclear Bank S.A./N.V.
("Euroclear") and Clearstream Banking, socit anonyme ("Clearstream, Luxembourg") (together, the "Clearing
Systems") on or about March 26, 2007 (the "Issue Date") for the accounts of their respective accountholders.
The Bonds and the Shares issuable upon conversion of the Bonds have not been and will not be registered under
the US Securities Act of 1933, as amended (the "Securities Act") and, unless the Bonds and such Shares are
registered under the Securities Act or an exemption from the requirements of the Securities Act is available, may
not be offered or sold within the United States. The Bonds may not be offered or sold directly or indirectly in India
or to, or for the account or benefit of, any resident of India.
A copy of this Offering Circular will be delivered for record purposes only to the Indian Stock Exchanges, SEBI
and the Registrar of Companies.
The Bonds are of a specialist nature and should only be bought and traded by investors who are
particularly knowledgeable in investment matters. In making an investment decision, prospective investors
must rely on their own examination of the Company and the terms of the Offer, including the risks
involved. For a discussion of certain factors that should be considered in connection with an investment in
the Bonds, see the section of this Offering Circular headed "Risk Factors" on page 44.
Global Coordinator, Lead Manager & Book runner
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Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed in US dollars on
March 27, 2012 at 143.775 per cent. of their principal amount. The Bonds may be redeemed, in whole but not in
part, at any time at the option of the Company at their Accreted Principal Amount if less than 10 per cent. of the
aggregate principal amount of the Bonds originally issued is outstanding. The Bonds may also be redeemed in
whole but not in part at any time at the option of the Company at their Accreted Principal Amount in the event of
certain changes relating to taxation in India. The Company will, at the option of any holder of any Bonds, redeem
such holder's Bonds at their Accreted Principal Amount upon a Delisting (as defined in the "Terms and Conditions
of the Bonds") of the Shares or upon the occurrence of a Relevant Event (as defined in the "Terms and Conditions
of the Bonds") in respect of the Company. See "Terms and Conditions of the Bonds - Redemption, Purchase and
Cancellation".
In-principle approval has been received for the listing of the Bonds on the Singapore Exchange Securities Trading
Limited (the "SGX-ST"). Acceptance of subscription applications will be conditional upon the issue of the Bonds
and upon permission being granted to list all of the Bonds by the SGX-ST. Monies paid in respect of subscriptions
will be returned if such permission is not granted. The SGX-ST assumes no responsibility for the correctness of any
statements made, opinions expressed or reports contained herein. Admission of the Bonds to the Official List of the
SGX-ST is not to be taken as an indication of the merits of the Company or the Bonds. The Bonds will be traded on
the SGX-ST in minimum bond lot sizes of U.S.$200,000 as long as any of the Bonds remain listed on the SGX-ST.
No application has been made to list the Bonds on any stock exchange other than the SGX-ST. The Company has
undertaken to apply to have the Shares issuable upon conversion of the Bonds approved for listing on the NSE and
the BSE.
The Company accepts full responsibility for the information contained in this Offering Circular and, having made
all reasonable enquiries, confirms that this Offering Circular contains all information with respect to the Company,
the Bonds and the Shares which is material in the context of the issue and offering of the Bonds and that the
information contained in this Offering Circular, to the best of its knowledge, is in accordance with the facts in all
material respects and contains no omission of a fact or matter (i) which was or is necessary to enable investors and
their investment advisers to make an informed assessment of the assets and liabilities, financial position, profits and
losses and prospects of the Company and of an investment in the Bonds, (ii) the omission of which made or makes
any statement herein misleading in any material respect or (iii) in the context of the issue and offering of the Bonds
was or is material for disclosure herein. The statements contained in this Offering Circular relating to the Company,
the Bonds and the Shares are in every material particular true and accurate and not misleading and the opinions and
intentions expressed in this Offering Circular with regard to the Company, the Bonds and the Shares are honestly
held, have been reached after considering all relevant circumstances and information which is presently available to
the Company, and are based on reasonable assumptions. There are no other facts in relation to the Company, the
Bonds and the Shares the omission of which would, in the context of the issue and offering of the Bonds, make any
statement in this Offering Circular misleading in any material respect and all reasonable enquiries have been made
by the Company to ascertain such facts and to verify the accuracy of all such information and statements.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Company, Elara Capital
plc (the "Lead Manager"), The Bank Of New York, London Branch (the "Trustee") or the Agents (as defined in the
Terms and Conditions of the Bonds) to subscribe for or purchase, any of the Bonds, and may not be used for the
purpose of an offer to, or a solicitation by, any person in any jurisdiction in which such offer or invitation would be
unlawful. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be
restricted by law. Persons into whose possession this Offering Circular comes are required by the Company and the
Lead Manager to inform themselves about and to observe any such restrictions. For a description of certain further
restrictions on offers and sales of the Bonds and distribution of this Offering Circular, see "Subscription and Sale".
None of the Lead Manager, the Trustee, the Agents or any of their respective affiliates has separately verified the
information contained in this Offering Circular. Accordingly, no representation, warranty or undertaking, express or
implied, is made and no responsibility or liability is accepted by the Lead Manager, the Trustee or the Agents or
legal advisors as to the accuracy or completeness of the information contained in this Offering Circular or any other
information supplied in connection with the Bonds or the Shares. Each person receiving this Offering Circular
acknowledges that such person has not relied on the Lead Manager, the Trustee or the Agents or their respective
legal advisors or on any person affiliated with the Lead Manager, the Trustee or the Agents in connection with its
investigation of the accuracy of such information or its investment decision and each such person must rely on its
own examination of the Company and the merits and risks involved in investing in the Bonds. Neither the delivery
of this Offering Circular nor any sale made in connection with the offer of the Bonds shall, under any
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circumstances, create any implication that the information contained herein is correct as at any time subsequent to
the date hereof. Prospective investors should not construe anything in this Offering Circular as legal, business or tax
advice. Each prospective investor should consult its own advisors, as needed, to make its investment decision and to
determine whether it is legally able to purchase the Bonds under applicable laws or regulations.
No person is authorised to give any information or to make any representation not contained in this Offering
Circular and any information or representation not so contained must not be relied upon as having been authorised
by or on behalf of the Company, the Lead Manager, the Trustee or the Agents. The delivery of this Offering Circular
at any time does not imply that the information contained in it is correct as at any time subsequent to its date.
Information about the Company contained in publications other than this Offering Circular (such as the Companys
website) is not part of this Offering Circular and should not be relied upon in connection with the proposed placing
of the Bonds. Neither the Company nor the Lead Manager are making an offer of these securities in any country
where the offer is not permitted.
Certain monetary amounts in this Offering Circular have been subject to rounding adjustments. Accordingly, figures
shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
Market data and certain industry forecasts used throughout this Offering Circular have been obtained from market
research, publicly available information and industry publications. Industry publications generally state that the
information that they contain has been obtained from sources believed to be reliable but that the accuracy and
completeness of that information is not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified, and none of the Company, the Lead
Manager or the Trustee makes any representation as to the accuracy of that information.
Certain statements in this Offering Circular constitute "forward-looking statements". Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Company's present and future business strategies and
the environment in which the Company will operate in the future. Important factors that could cause the Company's
actual results, performance or achievements to differ materially from those in the forward-looking statements
include, inter alia, the condition of, and changes in, India's political and economic status. Additional factors that
could cause actual results, performance or achievements to differ materially include, but are not limited to, those
discussed under "Risk Factors" and "Business". These forward-looking statements speak only as at the date of this
Offering Circular. The Company expressly disclaims any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statement contained herein to reflect any changes in the Company's
expectations with regard thereto or any change in events, conditions or circumstances on which any such statements
are based.
CONVENTIONS
In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to
"Bondholders" and "holders" are to holders of the Bonds from time to time; all references to "India" are to the
Republic of India and its territories and possessions; all references to the "US" and "United States" are references to
the United States of America and its territories and possessions; all references to the "UK" and "United Kingdom"
are to the United Kingdom of Great Britain and Northern Ireland and its territories and possessions; all references to
the "Indian Government" are to the Government of India and to the "Companies Act" are to the Companies Act,
1956, as amended.; and all references to S$ are to Singapore dollars.
References in this Offering Circular to a particular "fiscal year" are to the fiscal year starting from 1 April and
ending on 31 March of each year. The Company prepares its financial statements in accordance with generally
accepted accounting principles in India ("Indian GAAP"). The Company's financial statements included in this
Offering Circular include its audited financial statements as at and for the years ended March 31, 2004, 2005 and
2006 and unaudited financial statements for the nine months ended December 31, 2006, which have all been
prepared in accordance with Indian GAAP.
The Company publishes its financial statements in Indian Rupees. All references herein to "Indian Rupees" and
"Rs." are to Indian Rupees and all references herein to "US dollars" and "US$" are to United States dollars. All
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translations from Indian Rupees to United States dollars were made (unless otherwise indicated) on the basis, of Rs.
44.11 to US$1.00. All amounts translated into United States dollars as described above are provided solely for the
convenience of the reader, and no representation is made that the Indian Rupees or United States dollar amounts
referred to herein could have been or could be converted into United States dollars or Indian Rupees, as the case
may be, at any particular rate, the above rate or at all.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is a limited liability public company incorporated under the laws of India. Majority of the Company's
directors and executive officers are residents of India and all or a substantial portion of the assets of the Company
and such persons are located in India. As a result, it may not be possible for investors to effect service of process
upon the Company or such persons in jurisdictions outside India, or to enforce against them judgments obtained in
courts outside India. India is not a party to any international treaty in relation to the recognition or enforcement of
foreign judgments
Recognition and enforcement of foreign judgments is provided for under Section 13 of the Code of Civil Procedure,
1908 as amended (the "Civil Code"). Section 13 of the Civil Code provides that a foreign judgment shall be
conclusive as to any matter directly adjudicated upon between the same parties or between parties under whom they
or any of them claim under the same title except (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where the
judgment appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal
to recognise the law of India in cases where such law is applicable; (iv) where the proceedings in which the
judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi)
where the judgment sustains a claim founded on a breach of any law in force in India. Section 44A of the Civil
Code provides that where a foreign judgment has been rendered by a superior court, as defined under Section 44A,
in any country or territory outside India which the Indian Government has by notification declared to be a
reciprocating territory for the purposes of Section 44A, it may be enforced in India by proceedings in execution as if
the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is
applicable only to a decree or judgment of a superior court under which a sum of money is payable, not being a sum
in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, and shall in no case
include an arbitration award, even if such award is enforceable as a decree or judgment.
The United Kingdom has been declared by the Indian Government to be a reciprocating territory for the purpose of
Section 44A of the Civil Code. However, the United States has not been so declared. Accordingly, a judgment of a
court in the United States may be enforced only by a suit upon judgment and not by proceedings in execution. Such
a suit must be filed in India within three years from the date of the judgment in the same manner as any other suit
filed to enforce a civil liability in India. A party seeking to enforce a foreign judgment in India is required to obtain
approval from the RBI to repatriate outside India any amount recovered.
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TABLE OF CONTENTS
Pages
DEFINITIONS & GLOSSARY...................................................................................................................... 6
GLOSSARY OF TREMS.............................................................................................................................. 11
SUMMARY OF THE TERMS OF THE OFFERING .................................................................................. 13
SUMMARY .................................................................................................................................................. 19
INDUSTRY................................................................................................................................................... 25
BUSINESS.................................................................................................................................................... 27
RISK FACTORS........................................................................................................................................... 41
SELECTED FINANCIAL INFORMATION ................................................................................................ 51
MANAGEMENTS DISCUSSION AND ANALYSIS ................................................................................ 53
MARKET PRICE INFORMATION CONCERNING THE SHARES ......................................................... 56
DIVIDENDS................................................................................................................................................. 57
EXCHANGE RATES ................................................................................................................................. 599
USE OF PROCEEDS.................................................................................................................................... 60
CAPITALISATION....................................................................................................................................... 61
DIRECTORS AND MANAGEMENT ......................................................................................................... 62
DESCRIPTION OF THE SHARES.............................................................................................................. 69
THE INDIAN SECURITIES MARKET ...................................................................................................... 82
TERMS AND CONDITIONS OF THE BONDS ......................................................................................... 90
SUMMARY OF THE TERMS OF THE GLOBAL CERTIFICATE .......................................................... 128
CLEARANCE AND SETTLEMENT OF THE BONDS............................................................................ 131
FOREIGN INVESTMENT AND EXCHANGE CONTROLS................................................................... 133
INDIAN GOVERNMENT AND OTHER APPROVALS........................................................................... 138
TAXATION................................................................................................................................................. 140
SUBSCRIPTION AND SALE.................................................................................................................... 143
GENERAL INFORMATION...................................................................................................................... 147
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND IAS/IFRS ............ 149
INDEX TO FINANCIAL STATEMENTS.................................................................................................. 153
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Accreted Principal
Amount
Agents
"AGM"
Alternative Clearing
System
Audit Committee
"Board" or "Directors" or
Board of Directors
"Bondholder"
"Bonds"
"BSE"
"Business Day"
Certificate
Change of Control
"Civil Code"
means The Code of Civil Procedure, 1908 of India (as amended from time to time);
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"Clearing Systems"
"Clearstream, Luxembourg"
Closed Period
Closing Date
"Common Depositary"
"Companies Act"
"Company" or "KLG" or
"Issuer"
"Conditions"
"Conversion Notice"
Conversion Date
Conversion Price
conversion Right
"Crore"
Definitive Certificate
Delisting
Delisting Guidelines
Delisting Put Date
"Depositories Act"
Distribution
Compliance
Period
"ECB Guidelines"
"EGM"
"Euroclear"
Extraordinary Resolution
"FCCB(s)"
"FCCB Scheme"
FDI or Foreign Direct
Investment
"FEMA"
FEM
Securities
Regulations
FEM Regulation
"FII"
"FIIA"
"FIPB"
Foreign
Institutional
Investor Regulation
"FSMA"
"Global Certificate"
"Government" or Indian
Government
"IAS"
"IFRS"
"Income Tax Act"
"India"
Indian Stock Exchange
"Indian GAAP"
Insider Trading Regulation
International
Investment
Securities
"IPO"
"Issue Date"
"ISIN"
Interest payment Date
"Lead Manager"
"Listing Agent"
Listing Agreement
"Maturity Date"
memorandum
of
Association or MOA or
Memorandum
"MOF"
"Mumbai"
"NRIs"
"NSE"
"Offering Circular" or "OC"
"Offering"
"Paying
Agency
and Conversion
Agreement" or
Agency Agreement
Portfolio Investment
"Principal
Paying
Conversion
Agent
Transfer Agent"
"Promoters"
Promoters Group
and
and
Prospectus Directive
"RBI"
Record Date
"Registrar"
"Regulation S"
Relevant Event Put Date
Remuneration Committee
ROC
"R&D"
"SCRA"
SCRR
"SEBI Act"
"SEBI"
SEBI Guidelines
SEBI (DIP) Guidelines
Security
"Securities Act"
SFA
Sensex
"SGX-ST" or "Singapore
Stock Exchange"
"Shareholders"
Shareholders and Investors
Grievance Committee
"Shares"
SICA
"Subscription"
Subscription Agreement
Subsidiary
"Takeover Code"
"Trust Deed"
"Trustee"
"UK" or "United Kingdom"
"United States" or "US"
All references to "we", "our", "us", "the Company", "the Issuer", "our Company" or " KLG" or words of similar
import in this OC are to KLG Systel Limited, unless otherwise specified in this Offering Circular or the relevant
context.
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GLOSSARY OF TREMS
Term
ABT
ANN
AT&C
AVVNL
BOLT
BPO
CAD
CAE
CAM
CLA
CLB
Co
CT
DPS
DT
ECM
ERP
FY
GAAP
GDP
GDRs
GIS
HVDS
IPR
IT
ITeS
JVVNL
KV
LED
LIBOR
LT
LTD
LuxSE
MV S/S
OCB
PAT
PBDITA
PBDT
PBT
PLM
POS
PSS
PTC
RFID
Description
Availability based tariff system
Automatic Neural Network
Aggregate Technical & Commercial
Ajmer Vidyut Vitaran Nigam Limited, Ajmer
BSE On-line Trading
Business Process Outsourcing
Computer Aided Design
Computer Aided Engineering
Computer Aided Manufacturing
Central Listing Authority
Company Law Board
Company
Current Transformer
Dynamic Publishing System
Distribution Transformer
Enterprise Content Management
Enterprise Resource Management
Financial Year
General Accepted Accounting Principles
Gross Domestic Product
Global Depository Receipts
Geographical Information System
High Voltage Distribution System
Intellectual Property Rights
Information Technology
Information Technology enabled services
Jodhpur Vidyut Vitaran Nigam Limited, Jodhpur
Kilo Volt
Laser Electronic Disply
London Interbank Offered Rate
Low Transmission
Limited
Luxembourg Stock Exchange
Mega Volt Sub station
Overseas Corporate Body
Profit After Tax
Profit Before Depreciation Interest Tax Amortisation
Profit Before Depreciation & Tax
Profit Before Tax
Product Lifecycle Management
Point of Sale software
Power System Solutions
Parametric Technology Corporation
Radio Frequency Identification Device
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SBU
SEB
SME
TIFM
T&D
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Issue
Issue Price
The Bonds will be issued at 100 per cent. of their principal amount.
Issue Date
Maturity Date
Interest Rate
means 1% per annum on the Bonds which will be payable semi annually in
arrears on each Interest Payment Date. Interest shall be paid to the
Bondholder who appears as the registered owner of the Bonds on the
records of the Registrar at the close of business on the Record Date;
The Bonds are not, and are not expected to be, rated by any rating agency.
Conversion Right
The Bondholders will have the right during the Conversion Period to
convert their Bonds into Shares at the Conversion Price. Bondholders may
convert the Bonds in whole from time to time at their sole discretion
during the period commencing on March 26, 2007 and up to the close of
business on March 16, 2012 or if such Bond shall have been called for
redemption prior to the Maturity Date, then up to the close of business on a
date no later than seven business days prior to the date fixed for
redemption thereof.
Conversion Price
The initial Conversion Price will be Rs.400.00. The Conversion Price will
be subject to adjustment for, among other things:
Standard adjustment for any dilution will be applied,
Consolidation, subdivision or reclassification
Capitalisation of profits or reserves
Cash and other distributions
Rights issues of Shares or options over Shares
Rights issues of other securities
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Conversion Procedure
Voting Rights
Negative Pledge
(i)
the Company will not and will procure that none of its
subsidiaries will create or permit to subsist any mortgage, charge,
pledge, lien or other form of encumbrance or security interest
("Security") upon the whole or any part of its undertaking, assets
or revenues, including any uncalled capital present or future, to
secure any Relevant Indebtedness (as defined below), or to secure
any guarantee or indemnity in respect of any Relevant
Indebtedness;
(ii)
(iii)
unless, at the same time or prior thereto, the Company's obligations under
the Bonds and the Trust Deed (a) are secured equally and rateably
therewith to the satisfaction of the Trustee, or (b) have the benefit of such
other security, guarantee, indemnity or other arrangement as the Trustee in
its absolute discretion shall deem to be not materially less beneficial to the
Bondholders or as shall be approved by an Extraordinary Resolution (as
defined in the Trust Deed) of the Bondholders.
See Terms and Conditions of the Bonds Negative Pledge.
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Cancellation
Redemption at Maturity
To the extent permitted by applicable law, unless the Bonds have been
previously redeemed or repurchased and cancelled or converted, each
Bondholder shall have the right, at such Bondholders option, upon the
occurrence of a Relevant Event (as defined in the Conditions), (i) to
require the Company to repurchase all such Bondholders Bonds at a price
equal to their then Accreted Principal Amount. The Company shall serve
written notice on Bondholders within seven (7) Business Days of
becoming aware of the occurrence of a Relevant Event.
To the extent permitted by applicable law, unless the Bonds have been
previously redeemed or repurchased and cancelled or converted, in the
event that the Shares cease to be listed or admitted to trading on the BSE (a
Delisting), each Bondholder shall have the right, at such Bondholders
option, to require the Company to repurchase all (but not less than all) of
such Bondholders Bonds at a price equal to their then Accreted Principal
Amount. The date for such repurchase shall be the twentieth Business Day
following the date the Company delivers written notice to the Principal
Paying and Conversion Agent of the Delisting. The Company agrees to
promptly give written notice to Bondholders of any Delisting.
RBI Approval Required for Early Under current regulations of the RBI applicable to convertible bonds, the
Redemption
Company will require the prior approval of the RBI before providing
notice for or effecting any redemption prior to the Maturity Date.
Form and Denomination of Bonds
Covenant
The Company will not take any action which would result in the
Conversion Price being reduced, pursuant to the adjustment events, below
a price which would render conversion of the Bonds into ordinary shares
of the Company, at such adjusted Conversion Price, to be in contravention
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Warrants
As at the date of this Offering Circular, the Company has offered for
subscription 1.07 million warrants of Rs. 10 each to its promoters,
associates and key employees entitling the subscriber to one Share per
warrant at a premium of Rs. 251.00 each within a period of 18 months
from the date of allotment.
The Company further proposes to allot 500,000 warrants to strategic
investors entitling the subscriber to one Share per warrant, subject to
approval of shareholders in forthcoming extraordinary general meeting.
The Shares issued upon conversion of the Bonds will in all respects rank
pari passu with the Shares in issue on the relevant Conversion Date (except
for any right excluded by mandatory provisions of applicable law) and
such Shares shall be entitled to all rights the record date or other due date
for the establishment of entitlement for which falls on or after such
Conversion Date to the same extent as all other fully-paid Shares of the
Issuer in issue as if such Shares had been in issue throughout the period to
which such rights relate. A holder of Shares issued on conversion of Bonds
shall not be entitled to any rights the record date for which precedes the
relevant Conversion Date.
Dividends
Market for the Shares, Listing and The existing Shares of the Company are listed on the BSE and the NSE.
Share Ownership Restrictions
In-principle approval from the BSE and the NSE has been obtained for the
listing of the Shares to be issued upon conversion of the Bonds (the
"Conversion Shares"). Upon conversion of the Bonds and issue of the
Conversion Shares, final approval from the BSE and NSE and any other
stock exchanges in India on which the Shares are listed from time to time
will be sought for the listing and the trading of such Shares received upon
Conversion.
There are certain restrictions applicable to investments in shares and other
securities of Indian companies, including the Shares, by persons who are
not residents of India. See "Foreign Investment and Exchange Controls".
Clearance
The Bonds will be cleared through the Clearing Systems. The Clearing
Systems each hold securities for their customers and facilitate the
clearance and settlement of securities transactions by electronic book-entry
transfer between their respective account holders.
Global Certificate
For as long as the Bonds are represented by the Global Certificate, the
Global Certificate will be held by a common depositary for the Clearing
Systems, payments of principal and premium in respect of the Bonds
represented by the Global Certificate will be made against presentation for
endorsement and, if no further payment falls to be made in respect of the
Bonds, surrender of the Global Certificate to or to the order of the Paying
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Agent for such purpose. The Bonds which are represented by the Global
Certificate will be transferable only in accordance with the rules and
procedures for the time being of the relevant Clearing System.
Indian Taxation
Selling Restrictions
There are restrictions on the offer, sale and/or transfer of the Bonds in,
among others, the European Economic Area, United Kingdom, United
States, India, Hong Kong, Japan and Singapore. For a description of the
selling restrictions on offers, sales and deliveries of the Bonds, see
"Subscription and Sale".
Listing
Approval in-principle has been received for the listing of the Bonds on the
SGX-ST.
The Bonds will be traded on the SGX-ST in a minimum board lot size of
US$200,000 for so long as the Bonds are listed on the SGX-ST.
The Company has undertaken to apply to have the Shares issuable upon
conversion of the Bonds approved for listing on the NSE and the BSE.
Trustee
The Bank of New York, acting in such capacity through its London
Branch.
Principal Paying, Conversion and The Bank of New York, acting in such capacity through its London
Transfer Agent
Branch.
Registrar
Governing Law
The Bonds will be governed by, and construed in accordance with, the
laws of England.
Use of Proceeds
The net proceeds of the issue of the Bonds (after the deduction of fees,
commissions and expenses) are expected to be approximately US$21.12m
and will be used by the Company as set out in "Use of Proceeds". The use
of the net proceeds shall be in accordance with the end-use restrictions
specified by the RBI and the Indian Government.
029029172
XS0290291722
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SUMMARY
The following summary does not purport to be complete and should be read in conjunction with the more detailed
information contained elsewhere in this Offering Circular and may not contain all the information that may be
important to investors. Before making an investment decision, investors should read the entire Offering Circular,
including the financial statements and the notes to those statements appearing elsewhere in this Offering Circular.
In particular, investors should carefully consider the risks discussed under the heading "Risk Factors".
HISTORY AND OVERVIEW OF THE COMPANY
KLG Systel Limited was initially known as KLG Consultants Private Limited and was incorporated on December
02, 1985. KLG Consultants Private Limited was converted into a public Company vide special resolution passed by
its shareholders. The fresh certificate of incorporation consequent to change of name was issued under hand of the
Assistant Registrar of Companies, NCT of Delhi & Haryana on September 29, 2004. KLG Consultants Limited
changed its name to KLG Systel Limited on September 29, 1994.
KLG Systel Limited is a listed public company. KLG has got ISO 9001-2000 certificate for its Power System
division covering Revenue Management Activities by BSI Management Systems of United Kingdom.
KLG is a Knowledge Capital Management company and is one of the prominent Life Cycle Solution providers in
the areas of concept and creation, plant design, project execution and management, operations and optimization, and
expansion/ revamp. KLG provides life cycle solutions through its five strategic business units which are as follows:
1
2
3
4
5
Utility consulting
The Power Services Sector (PSS) group has experience in the following areas of distribution network analysis and
planning studies for the utilities:
Loss Diagnostic studies: Using synergy of scientific methods for extrapolation, design calculations and field
activity, KLG is helping the power regulators in the states of Rajasthan and Himachal Pradesh in the following
areas:
These study reports are used by the regulators to independently verify the losses and ensure corrective actions,
wherever necessary.
High Voltage Distribution System (HVDS): The Indian Government is emphasising on implementing HVDS
schemes in rural areas which has become absolutely essential for utilities. KLG has taken a lead role in designing
HVDS systems, with following projects executed/under execution:
A properly designed system has the potential to save substantial costs for the utility by bringing down losses,
increasing voltage profiles and quality of supply and decreasing outages.
Load Forecasting Studies: KLG has the experience of conducting load forecasting studies for Uttar Pradesh Power
Corporation Limited and Reliance Energy Limited for future growth plans. Its study reports included load
forecasting by trending as well as neural network methods.
Industrial consulting
KLG has undertaken system studies for industrial plants inclusive of:
1. Load flow studies
2. Load shedding scheme
3. Short circuit analysis
4. Transient stability including grid synchronisation schemes
5. Motor acceleration
6. Relay coordination
7. Harmonics analysis
Projects include KRIBHCO, IOCL Mathura, Coromondel Fertilizers, Shrew Cement and Kuwait Oil Refinery, to
name but a few.
Consulting for regulatory bodies
With the increasing role of the Regulators post the Electricity Act 2003, KLG Systel has tie-up with British Power
International (BPI) and Martineau Johnson (MJ), UK to offer services in the areas of:
1.
2.
3.
4.
5.
6.
KLG has extended these services to select states in Northern India who have significantly befitted, both in terms of
revenue increase and decrease in AT&C loss. Given the benefits provided by above services to utilities, Utility
Process Management division of KLG has tremendous potential in the near future.
STRATEGY AND OBJECTIVES
KLG aims to provide complete integrated software solutions to the power sector. The Company's business strategy
is to expand its service offerings and its global capabilities. It also aims to maintain strategic focus in the Indian
Page 20
Market. KLG is working towards further developing its strategic alliances. It targets to attract, train and retain
employees.
Another important focus of KLG to strengthen and better its R&D capabilities and its brand name.
The Company's main objective is to focus on client objectives and provide customer satisfaction.
The Company also aims to:
1990
KLG entered into an agreement with M/s COADE Inc. in the field of Plant CAD and Engineering and
became an exclusive representative of COADE in India for all the engineering products of the
COADE.
COADE, Inc. is one of the world's leading engineering software companies. In the early 1980's,
COADE revolutionized pipe stress analysis with CAESAR II. COADE sets world standards for
engineering and design software solutions. KLG has since helped companies like BHEL, EIL, Jacob
H&G, IOCL and others design their plant systems.
1990
In the field of project management, KLG signed a contract with M/s PRIMAVERA Inc. And since
then it is acting as exclusive representative of the latter for all the project management solutions.
Primavera Systems, Inc. is the worlds leading project and portfolio management software Company.
It is estimated that projects totaling more than US$5 trillion in value have been managed with
Primavera products. Primavera provides industry-specific solutions to more than 75,000 customers
around the world.
In India, KLG has assisted various organizations to build world class infrastructure projects. Key
customers have been, Indian Railways, BHEL, EIL, Reliance, NTPC, NHPC and others.
1996
In the sequence of joining hands with global leaders, an agreement was signed with M/s. Operation
Technology Inc., in the field of electrical analysis solutions
Operation Technology, Inc. (OTI) specializes in the planning, design, analysis, operation, training,
and computer simulation of power systems. KLG provides software related to designing of electrical
networks in Generation, Transmission and Distribution sector. KLG has provided these solutions to
companies such as ABB, Alstom, Bechtel, BHEL, Bhaba Atomic Research Centre (BARC), Central
Power Research Institute (CPRI), Delhi Transco Limited, Damodar Valley Corporation, GE Power,
IOCL, IITs, KRIBHCO, MECON and PGCIL.
1996
The Company signed a contract with M/s Invensys (Wonderware) in the stream of manufacturing
automation and has become authorized exclusive representative for all the automation solutions
developed by the invensys in the name of Wonderware.
Wonderware is a leading supplier of industrial automation and information software, legendary for its
ease of use and for providing exceptional integration benefits. Wonderware powers intelligent plant
decisions in real time. Wonderware has approximately 325,000 software licenses in approximately
Page 21
100,000 plants worldwide, which is about 30 percent of the world's 335,000 plants with 20 or more
employees.
In India, KLG has provided manufacturing automation solution based on wonderware to companies
like Nestle, Tata Steel, Essar Steel, BPCL, Indian Oil, Maruti Suzuki, Reliance and others.
1996
The Company signed a pact with M/s Manitoba HVDS Research Centre, Canada in the stream Power
System Simulator for distribution of the latters solutions in India. The said solutions are used for
contingency studies of AC networks, Transformer Saturation effects.
1998
The Company opened its new internet division in April 1998 and successfully deployed leading edge
enabling technologies.
1998
The Company co-promoted Jaldi.com, a comprehensive e-tailing site with B2C and B2B integration,
which was used as online superstore, offering a wide repertoire of products and services to the
consumers right at their desktop. Jaldi.com was consistently rated as one of the best e-tailing software
in Asia.
1999
KLG created two B2B portals namely EPCASIA.COM and EPCPLANET.COM for providing a
powerful combination of on-line integrated project management system and information, to deal with
the complexity of the project and complete projects on time, within the budget and meeting
performance expectations.
1999
KLG was awarded the ISO 9001 Quality Management System certification by DNV certification
B.V. of the Netherlands under the accreditation of the Dutch Council of Accreditation (RvA) in
respect of design, development, supply, support and service of application software, providing
engineering and internet services using software solutions and providing training programs on
engineering based subjects using software applications. The said certification of the Company was
renewed by BSI management Systems, UK and valid to date.
2000
For providing effective enterprise solutions, KLG entered into partnership with MICROSOFT for
providing solutions in India in manufacturing, infrastructure and Oil & Gas segment.
2002
KLG is the largest reseller of the Autodesk products in India, the said reseller agreement was signed
with M/s. Autodesk Inc. to provide complete 2D and 3D design solution to the Indian market. KLG
also handles key major accounts such as BHEL and Ordinance Factory Board for Autodesk.
2004
The Company was awarded ISO 9001 Quality Management System certification by BSI Management
Systems of UK with respect to Revenue Management Services for Power utilities.
2005
In CAD/CAE segment, KLG signed agreements for distribution in India with M/s Applied flow
technology, USA in flow analysis stream, with M/s. CHAM, UK in computational fluid dynamics,
with M/s Z Corporation, USA in the field of rapid prototyping solutions.
2005
In Cable Management software, the Company entered into an agreement with M/s. Cloudis, UK for
distribution in India of the latters software applications.
2005
The Company is an Independent Software vender (ISV) Advantage partner with IBM in India for
power system solutions.
2005
During the financial year ended March 2005, the Company earned 36.07% of its revenue i.e. Rs.
131.73 Millions from major customers namely BSES, BHEL, Jaipur Vidyut Vitran Nigam Limited,
Uttar Pradesh Power Corporation Limited, IRCON, North Delhi Power Limited, Larson & Toubro
Ltd, Uttranchal Power Corporation Limited, Nestle and Jacob.
2005
In Supply chain Optimization, KLG has partnered with Oracle for providing enterprise solutions.
Further in barcode and RFID segment, the Company has executed the agreement with SATO, Japan
for acting as its authorized representative in India. To also handle the retail market in India, the
Page 22
Company has signed with Sage India Ltd. to provide a complete retail ERP in the Indian market.
These solutions are targeted to address end to end solution from POS to backend ERP.
2005-06
KLG has partnered with Microsoft, IBM, Sage Accpac, Sato and Intermec for providing solutions in
retail segment The Company offers complete Retail Solution in terms of the ePOS (Point of Sale
software) and the standard POS hardware like Barcode Scanners, Printers, Touch screens, card
reader, cash drawers and other devices.
The retail Point-of-Sale solution helps the retail segment in their Business Process Automation and
also gives Business Intelligence inputs. Easy-to-use and intuitive, it features all the needs for
managing a retail shop. It comes with integrated bar-code enabled POS billing, inventory
management, financial accounting, promotions & schemes management and customizable reporting.
2006
KLG has recently signed an agreement with SAP India in the stream of enterprise solutions for acting
as Selling ISV partner in India. As part of this relationship the Company will integrate its
infrastructure project management solution with SAP Business-one ERP and offer the integrated
solution through the SAP SME channel.
2006
KLG has entered into an agreement with Archibus, Bostan, USA for providing software solutions for
real estate, facilities and infrastructure management in the field of enterprise solution as value added
reseller in India.
ARCHIBUS/FM is widely recognized as the industry leader in facilities and infrastructure
management technology, supporting more that 3,000,000 users around the world managing over 16
billion square feet of space.
Physical assets such as real estate, buildings, equipment, materials and furniture make up a significant
percentage of an organizations total asset value. These assets are used by different business units,
departments, and individuals, and must be accurately managed in order to extend asset life cycles and
keep operating costs at a minimum. ARCHIBUS / FM Total Infrastructure and Facilities Management
(TIFM) solutions address these issues with the right combination of leading edge technologies, years
of industry experience and unparalleled, worldwide support.
2006
KLG successfully secured 33.92% of its revenue i.e. Rs. 174.05 Millions from major customers
namely Jaipur Vidyut Vitran Nigam Limited, Uttar Pradesh Power Corporation Limited, BHEL,
Uttranchal Power Corporation Limited, Tata Consultancy Services, Jodhpur Vidyut Vitran Nigam
Limited, CDOT, UHDE, Larsen & Toubro and Reliance during the financial year ending March 31,
2006.
2006
KLG has successfully raised US$7.5 Million by issue of 23,07,600 Global Depository Receipts each
representing one Share each. The GDRs of the company are listed on the Luxembourg Stock
Exchange.
2007
KLG is a strategic partner of PTC and works in close association with the customers to provide an
end to end 3D-modeling and design solution in automotive, aerospace, defense, Ship Building,
industrial equipment and Heavy engineering.
PTC provides Product Lifecycle Management (PLM) and Enterprise Content Management (ECM)
solutions to Aerospace & Defense, Airlines, Automotive, Process Manufacturing, Life sciences,
Industrial Equipment, Retail industries. PTC has delivered industry-leading software solutions to
enterprise and small business customers spanning multiple industries. Other solutions provided by
PTC are Product Development System (PDS), Dynamic Publishing System (DPS).
2007
KLG has decided to extend its supply chain application to the last mile of the Supply Chain the
retail outlet. Early last year, KLG started working on the building blocks of a complete solution from
Supply side to Demand side of a retail enterprise.
Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Page 23
Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from Esolutions which is already used by some of the leading retail chains in India such as Flemingo Duty
Free and Giordano.
CORPORATE INFORMATION
KLG's registered office is situated at Plot No. 70A, Sector- 34, EHTP, Gurgaon-122004, Haryana, (India).
The Companys website address is www.klgsystel.com. Information contained on the site is not a part of this
Offering Circular. KLG Systels shares are currently listed on the BSE and NSE and its GDRs are listed on LuxSE.
Page 24
INDUSTRY
The information presented in this section has been extracted from publicly available
documents which have not been prepared or independently verified by the Issuer, or
any of their respective affiliates or advisors.
THE INFORMATION TECHNOLOGY INDUSTRY IN INDIA
The Indian IT sector has proved to be the country's fastest growing segment in the globally challenging
economic environment. The software and services industry, a major component of India's IT sector, showed
significant momentum, higher than that of other industries in the country. India continues to be a compelling
investment destination, as leading companies either set up business here or beef up their existing
infrastructure. Outsourcing of IT requirements by leading global companies to Indian majors also picked up
pace, in line with worldwide trends.
The performance of the Indian IT sector was determined by its growth in the following areas:
Indian companies also made modest headway in segments such as packaged software support and installation,
product development and design services and embedded software solutions.
IT Enabled services (ITES)/BPO
Compared to other competing ITES nations such as Ireland, Philippines and China, India drew the bulk of the
global ITES/BPO business on account of its unmatched price, performance and quality proposition. The
ITES/BPO industry took root in most of India's leading cities. Some of the leading hubs of these services are
the National Capital Region of Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Kochi, Ahmedabad
and Pune.
Domestic IT Market
The Indian software and services sector lags behind the export segment on account of issues such as higher
piracy levels, pressure on software prices and lower level of IT spending for domestic companies. Reductions
in IT spend by key spending segments such as banking and manufacturing is said to be responsible for this
trend.
Page 25
Telecom Infrastructure
Indias telecom infrastructure has become a priority area for the country. The telecom market has recently
witnessed the following changes:
International Long Distance, National Long Distance and Basic Telephone services have been opened up
for free competition
ISPs have been granted licenses freely and are allowed to set up their own international gateways and
submarine cable landing stations.
Internet telephony has been permitted
Revenue sharing has been introduced
Telecom services have been corporatised. BSNL has been set up
Page 26
BUSINESS
Brief History and Corporate Profile
KLG was incorporated as KLG Consultants Private Limited in December 1985. KLG was converted into a public
limited Company in July, 1994 and changed its name to KLG Systel Limited in September, 1994.
KLG made a public issue in September 1995 to (a) part-finance its expansion-cum-diversification program for
setting up a centre for software development and systems integration facility at Electronic City in Gurgaon, Haryana
catering to the domestic and export markets (b) to expand the facilities in Bombay and other places, and (c) to set up
R&D department.
KLG raised GDRs of US$ 7.5 Million listed on LuxSE for strengthening organizational structure of the
Organisational Life Cycle solutions SBU, power sector SBU, implementation of pilot projects of the software
solution developed for the power sector, purchase of equipments, marketing and implementing of the software in
various parts of India meeting working capital requirements, setting up office infrastructure and expansion of its
increasing presence in power sector software solutions market and implementation of a continuous improvement
and development program for updating and customization of its software.
KLG has a strong focus on quality in sales and support processes. KLG has been awarded ISO 9001-2000
certification in respect of design, development, supply, support and service of application software and providing
engineering services using software solutions. In addition to that KLG has been awarded the ISO 9001-2000
certificate for its Power System division covering Revenue Management Activities by BSI Management Systems of
United Kingdom.
KLG has a national presence in India with 20 offices all over India and qualified resource pool to sell and support
its life cycle solutions. KLG employs over 215 engineers, domain experts, software programmers, mapping/
survey experts and has pioneered several concepts in Power Systems management, GIS and updating of Consumer
databases, Energy Audit, Revenue Management etc. It has made a paradigm shift from a normal software solutions
provider to a total solutions provider, which includes software and hardware and obtained a good response from
various industry segments.
KLG's support legacy, contemporary and futuristic technologies, applications and packages are based on its clients'
requirements. Its clients draw on KLG's expertise for ideas and plans that are dynamic and future oriented. KLG's
solutions are based on a blend of experience and winning business paradigms that are integrated into a unique and
holistic answer to its clients' demands.
The Company comprises of a core team of qualified and experienced professionals possessing expertise in a wide
spectrum of technical and commercial domains. Its aim is to give complete integrated IT solutions to its clients.
KLG has recently developed a unique solution - SG61 to manage the endemic problems of transmission and
distribution relating to technical and commercial losses and demand side management like power theft, absence of
consumption data for load management, lack of energy audit etc. The technology is a combination of hardware,
software and business processes. The development of SG61 is part of KLGs endeavour to assist distribution
utilities by introducing innovative solutions to the problem of transmission and distribution problems.
At the date of this Offering Circular the Company has the following subsidiaries:
Sl.
No.
Address
Company
1.
2.
3.
of
the
Page 27
Percentage of
Shareholding
held by KLG
Systel Limited
Wholly owned
subsidiary
Wholly owned
subsidiary
Shareholding
of KLG
Wholly owned
subsidiary
100%
100%
100%
Limited
Centric Solutions, Manufacturing Centric Solutions, Infrastructure Centric Solutions and Life Sciences Centric
Solutions.
KLG within its domain of Life Cycle Solutions aims to become a key knowledge provider in the industry specific
mainstream. Under this SBU KLG has strategic alliance with Coade, Paulin, Autodesk, Trimble, Z Corp, Parametric
Technology Corp. (PTC) etc. to provide solution in CAD/CAE/CAM/GIS areas. Uni-Graphics (UG), Stratasys, 3D
Systems, Intergraph, Bentley and other Autodesk resellers in India,from whom KLG faces competition.
Enterprise Project Management
Effective enterprise project management solutions is the fulcrum to functioning of project focussed management
organisations. Constant monitoring of projects is critical to ensure ontime within budget implementation. Effective
project management solutions provide sound business practices for effective revenue management, customer service
and maximising available resources. KLG with support of its partners provides solutions for managing resources
and tactical plans for timely completion of projects.
KLG has formed a strategic alliance with Primavera, USA and provides various Enterprise Project Management
services including consulting, software and solutions customisation, solutions deployment and user acceptance,
training and development, and support and maintenance. KLG's portfolio of Primavera solutions bring together the
disciplines of strategic planning and project management, and provide a framework for effectively managing both
the resources and the tactical plans for completing projects.
KLG has received an award for Prime Club from Primavera Inc. for achieving 100%+ of target plan in the year
2005-06. Moreover the Company has successfully conducted Seminars at New Delhi and Mumbai, where the
industry leader Larson & Toubro shared the platform and applauded at the successful performance of Enterprise
project management Solutions provided by KLG. To add to the list, KLG has recently launched Academies at New
Delhi, Bangalore and Mumbai to impart Project Management courses to professionals. In Project Management
SBU, the Company faces competition from Microsoft, Artemis and Team Centre.
Automation and Manufacturing Solution
Producing the desired quality at an appropriate and competitive price to meet market needs and preferences is the
essential decision for an enterprise, and therefore, the need is to achieve an optimal combination of the above
factors.
KLG has provided IT enabled business optimisation solutions to manufacturing enterprises, which have evolved
from man machine interface and shop floor scheduling solutions to a complete framework of plant intelligence and
supply chain optimisation applications. KLGs solutions have enabled enterprises to make informed decisions about
their businesses. KLG has partnered with Invensys for exclusively representing the latters Wonderware products.
KLG has been focusing on SCADA, MES, PlMS (Plant Information Management Systems) and Plant-to-Business
Integration solutions. The main competition in this SBU is from Siemens, Rockwell, Honey well and GE.
Enterprise Business Solutions
The present age of changing consumer demand has given rise to need to factor demand side spikes in their supply
chain plans. Artificial intelligence inputs are used to analyse historical data to predict future demand. This provides
need based models for a cost effective enterprise wide supply chain optimisation solution.
KLGs solutions for supply chain optimisation provide integration with other enterprise applications. KLG also has
expertise in automating item identification and data collection for inventory and supply chain applications. In the
Enterprise Business Solutions SBU, KLG has strategic alliance with world leaders, such as Oracle, Intermac and
SATO. Under this SBU, the Company competes with IBM, Barcode India and Intellicon
KLG in Retail
KLG has been traditionally a strong player in the FMCG (also called CPG) supply chain. KLG has built number of
Supply Chain applications for leading names in India like, Nestle, Hindustan Lever Ltd., GlaxoSmithKlineBeecham
and SHV.
With the current boom in the Indian retails sector and the expected FDI approvals in the retail, KLG has decided to
extend its supply chain application to the last mile of the Supply Chain the retail outlet. Early last year, KLG
started working on the building blocks of a complete solution from Supply side to Demand side of a retail
Page 29
enterprise. Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from E-solutions which
is already used by some of the leading retail chains in India such as Flemingo Duty Free and Giordano.
Having created a world-class solution for an end-to-end retail supply chain, KLG is now all geared up to
aggressively go into the market.
Power Systems Solutions business
In the Power System Solution Business, KLG represents Operation Technology Inc., USA. HVDC Manitoba,
Canada, Cloudis, UK for solutions on Power Generation, Transmission and Distribution sectors. The Company has
world renowned products like ETAP, PSCAD, SPARD, and Electrical Designer which covers specialized area in
Power Systems. Competitive products in the segment are CYME, EDS, NEplan. We have 85% market share of the
total market in India for our products. We believe that we are far ahead with our competitors in terms of support,
training, core knowledge in software. The Company has received an award from 2005- ETAP Agent of the Year
for its outstanding sales, support and marketing of ETAP by Operation Technology, Inc.
KLGs PSS have been associated with the Indian power sector for over 10 years and provides integrated IT-based
solutions and services for the complete Life Cycle of electricity including power generation, transmission and
distribution (T&D). It is involved with the power sector from conceptualisation to design and analysis and
execution of proposed systems. KLG also provides revenue management services to several power utilities and is
presently serving more than 2 million customers in over 10 cities in India.
KLG increased its focus in this sector since 2001 and undertook providing services alongwith existing applications
of technology and software.
Propelled by its native knowledge of existing ground level position and an approach relevant to the Indian context,
KLG has consciously developed its business model in providing solutions that offer innovation and value addition
to this sector. With favourable government policies, such as APDRP, has facilitated acceptance of its services in
areas of identification and reduction of aggregate technical and commercial losses in the Transmission and
Distribution Sector. KLG has now developed a unique (patent under grant) solution titled SG61TM (SG61TM) to
manage the problems in transmission and distribution in countries like India for monitoring and control of aggregate
technical and commercial losses and demand side management.
KLG recognizes that its key strategic priorities are vested in the development of solutions for the power sector and
believes that it is well positioned to grow its presence in this business segment. The invention of SG61 offers
improvements in revenue management operations of utilities in India and in other markets.
Prime Product:
SG61
The SG61 technology is the brainchild of KLG which is an endeavour to provide a low cost Distribution
Automation System with minimum changes in the existing system and immediately enhances revenue
management for utilities.
utility a microscopic view of specific problem areas. Energy consumption on account of such factors can be
monitored closely to try to reach at the root cause of the problems.
Online tracking of consumption (or Automatic Meter Reading), billing and collection
SG61 technology integrates the three most crucial links for the utility as well as for the consumer consumption, billing and collection. Online tracking of consumption or automatic meter reading introduces
transparency into the system, with the connected load of each consumer being tracked on a minute basis. This
translates into more efficient and accurate billing processes, as units consumed for billing purpose is tracked
continuously. Further, it is possible to create infrastructure to make payment through the Internet and credit
card from anywhere and cheques and cash at selected locations. Payment related information can be fed to the
local and central server units, which make updating the account of the respective consumer.
Pre-paid metering
The meter box will be equipped with a magnetic swipe card and a smart card reader, enabling the consumer to
pay in advance, if he chooses to. A micro controller will keep tracking the energy consumption of the
consumer against the available balance. The box will be equipped with an alarm and LEDs for each meter to
indicate a low balance/zero balance.
Upon disconnection of the SG61 boxes, the action will be identified by the local server and it will stop serial
communication with the micro-controllers on the pole and start individual communication with each micro
controller.
Time of day metering
The local server unit will collect energy consumption data from each micro controller at an interval of 15
minutes. With this, it is possible to implement Time-of-Day based tariff system in which differential pricing
can be implemented for peak and slump periods of the day.
Asset management
GIS based asset coding and indexing can be carried out for all the major assets like sub-station, DTs, feeders,
cables, pole etc. Complete history about all the assets like specification, installation date, present location etc
can be collected and documented for efficient use.
Availability based tariff system (ABT)
With the facility of monitoring frequency and voltage parameters at the central server / local server unit at an
interval of 15 minutes it is possible to implement the availability based tariff system. The advantage of the ABT
is to provide better quality of power to the consumer.
Demand side management
Page 31
Connected load of the consumer can be set / changed by the micro controller. In case the consumer starts
drawing more power from the sanctioned load for more than a pre set duration an alarm is raised.
Load forecasting / trending
With available database of energy consumption in the local and central server unit, load forecasting, using time
series method and advance models like ANN, can be carried out for area wise group of MV s/s, individual MV
s/s wise and 11 kV feeders wise. Based on reports, correct demand for the coming days can be made at grid
level where ABT is already applicable and penalties for UI (un-schedule interchange) of power can be
minimized.
EDRS Energy Demand Response System
EDRS or Energy Demand Response System is a service to help View, Visualize, Measure, Optimize and
Manage the Energy Consumption in Domestic, Commercial, Industrial, Government and Semi-Government
establishments. It would not only educate the users on the fundamentals of electricity & consumer rights but
also empower them to monitor and control their power on a real time basis.
The following are the details of financial assistance granted upto December 2006:
No
1.
2.
3.
4.
-do-
Nature
Cash Credit (Stocks)
30.00
150.00
120.70
5.
6.
Vehicle Loan
5.00
5.00
Total
410.7
Contingent Liabilities:
As per the audited financial results of the Company for the year ended March 31, 2006:
1) Guarantees given by bankers amount to Rs. 76,805,876/- (Rs. 44,205,260/-) during the financial year
ending March 2006, against which the Company has shown Deposits of Rs. 8,362,186 (Nil) held by banks
as margin under the head bank balance.
2) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of
advances) amounts to Rs. 37,188,853/- ( 10,656, 560/-).
3) Other Claims against the Company, which are not acknowledged as debts, amounting to Rs. 986,392/-(Rs.
858,112/-).
Net Turnover according to SBUs
(Rs. in Millions)
SBU
Enterprise Project Management
Computational
Engineering
and
Sciences
Power Systems Solutions
Automation
and
Manufacturing
Solutions
Enterprise Business Solutions
Total
160.66
60.81
126.11
37.39
72.54
48.25
31.32
513.06
22.27
365.29
108.50
379.96
Page 32
Note: The activities carried on by the Company are of Software Services, Technical Services, Internet
Services, Consulting Services and Power System Solutions. The services provided by the Company cannot be
expressed in any generic unit and hence it is not practicable to give quantitative details of above items.
Competition
In respect of the key products sold by the Company there are no major competitors taking into consideration the
reference base and unique features in each of these products.
Recent Developments
Emerging Opportunities:
Power Sector:
Indian power industry, traditionally has been in big trouble. The aggregate transmission and distribution losses have
crossed Rs. 2,300 million (2004-05) and the rate of return for SEBs is still negative and India loses an estimated 2%
of its GDP to blackouts and SEB underperformance every year. The reforms are however happening now and one
of the key drivers for growth in this sector is the new Electricity Act 2003. The act has pushed several reforms such
as, accelerated power capacity addition, mega power projects, alternate energy solution, accelerated power
development and reform programme and rural electrification.
KLG has been involved in almost all the above areas since last 5-6 years. KLG provides solution for both
generation as well as T&D. The key customers on generation front have been companies like NTPC, NHPC, BHEL,
Siemens and Alstom, while on T&D, KLG is a key player in the Indian market.
The Company has indigenously developed Software namely VIDUSHI, which can be termed as the IT backbone
of the Revenue Management System in Power Sector. It is a cost effective, user friendly and comprehensive
software solution developed by KLG that seamlessly integrates the entire spectrum of work under Revenue
Management through dedicated modules. The VIDUSHI software integrates the prime activities i.e. GIS and
Electrical Network Mapping, Linking of consumer to Poles, Distribution Transformer & upstream network for
Energy Audits, Door-to-Door Survey etc in such a way that any data updated in one of the activities gets reflected
to the other. By doing this the user can double click any Consumer/Asset on the map and get the details specific to
that particular Consumer/Asset. This would result in regular and accurate Energy Accounting, Billing, and Revenue
Collection activities. The Company had applied for the copyright of the said software and successfully obtained the
Copyright of the said software in year 2005. Further IBM has awarded the Company Websphere Brand Badshah
Award 2005 for its stellar performance as ISV partner of IBM for Vidushi.
KLG has used worlds leading technologies to build a software solution for Power Distribution Management which
specifically meets the need of Indian utilities. KLG, though, its in house R&D, innovated and developed a unique
real time technological solution to manage the problems in transmission and distribution in developing countries for
monitoring and control of AT & C losses and demand side management and named it as SG61 Technology. SG61,
being a combination of hardware, software, and business processes, is a cost competitive and state of the art
solution which addresses not just the current problems in developing economies but will also help the distribution
companies to introduce next generation reforms including online energy audit, load management and optimization,
demand management, time-of-day billing and customer relationship management. The modules of this product are
used to manage close to 4.4 million Indian consumers and is proven in the Indian market. With the success in the
Indian market, lot of foreign companies in the region are now showing interest in the potential of the product in the
markets like Thailand, Philippines and China. To protect, the intellectual property rights in the said innovation, the
Company had applied for patent registration in 2005, registration is awaited.
KLG has formed a strategic alliance with IBM and has ported the SG-61 product on the IBM software framework to
leverage the global reach of IBM. The two companies are now jointly bidding opportunities in the power sector.
Infrastructure Centric Solution
As per the India Infrastructure Report there is a need for an increase in investment in infrastructure from 5% to 8%
of GDP by 2005-06 and doubling private spending in the infra sector to over 2% of GDP.As per the recent PWC
Page 33
report, the key sectors where the growth opportunities are immense are Airports, Ports, Power and Roads. The
investments as per the report are expected to be about USD 150 billion over the next 6 years.
KLGs business model to cater to needs of various sectors:
Airports: This is one of the fastest growing segment where new airports are expected in 6 metros and 45 non metro
airports have to be modernized. These projects will involve terminals, runways, taxiways, aerobridges and retail
spaces. This is likely to be Rs. 3,500 million expenditure.
KLG has many products to offer in airport modernization opportunity. These areas are Project Management, Design
and Engineering, Control Systems, Retail Automation and Asset Tagging.
The Company already has solution and desired experience in the Indian market to tap this opportunity. KLG has
provided solution to the key players already engaged in airport projects. These are L&T, GMR and Siemens. KLGs
technology partners such as Primavera have been involved with major international airports.
Ports: Indian ports have a long way to go. There are major capacity constraints and the ports lack in equipment and
automation to handle huge ships and cargo.
The growth in this segment is largely towards increase of capacity, construction of berths and jetties and storage
facility. Also the development of port infrastructure will drive related industries like shipping, maritime equipment,
ship building, ship repair and aquaculture.
KLG has been engaged with key players in this segment and has worked with major government and private ports,
largely in the area of Design & Engineering and Project Management. KLG has also been involved with many ship
building facilities in the country by providing them CAD and Project Management Solution.
Roads: India in the backdrop of the ambitious National Highway Development Programme would complete Rs
19,210 Millions - seven phase Golden Quadrilateral programme by 2012. Investments in the tune of Rs 6,000
Millions are required on Pradhan Mantri Gram Sadak Yojana (PMGSY) to provide road connectivity to all
unconnected inhabitants by 2007. Investments of about Rs 3,000- 4,000 Millions is likely to flow in to the road
sector from private players.
KLG has provides Design & Engineering solution, GIS frameworks and Project & Construction Management
solution to most of the key players in the Indian market. These include L&T, Punj Lloyd, DS Construction, HCC,
Gammon India Simplex Infrastructure.
Retail Automation:
The retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats
such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun
appearing in metros and second-rung cities alike introducing the Indian consumer to a shopping experience like
never before. Indias vast middle class and its almost untapped retail industry are key attractions for global retail
giants wanting to enter newer markets.
The organised retail sector is expected to grow stronger than GDP growth in the next five years driven by changing
lifestyles, strong income growth and favourable demographic patterns.
The structure of retailing is developing rapidly with shopping malls becoming increasingly common in large cities,
and development plans being projected at 150 new shopping malls by 2008. According to retail analysis reports, the
annual growth of department stores has been estimated at 24 per cent, which is faster than overall retail; and
supermarkets have taken an increased share of general food and grocery trade over the last two decades.
KLG has been traditionally a strong player in the FMCG (also called CPG) supply chain. KLG has built number of
Supply Chain applications for leading names in India like, Nestle, Hindustan Lever Ltd., GlaxoSmithKline
Beecham and SHV.
Page 34
With the current boom in the Indian retails sector and the expected FDI approvals in the retail, KLG has decided to
extend its supply chain application to the last mile of the Supply Chain the retail outlet. Early last year, KLG
started working on the building blocks of a complete solution from Supply side to Demand side of a retail
enterprise. Besides using its own Supply Chain Optimization solution, the company signed with SAP for their
Business One ERP solution along with the SAP Netweaver certified Point of Sale solution from E-solutions which
is already used by some of the leading retail chains in India such as Flemingo Duty Free and Giordano.
Having created a world-class solution for an end-to-end retail supply chain, KLG is now all geared up to
aggressively go into the market.
KLGs Business Model:
From the technology perspective as the new retail chains are set-up across the country there will be an increasing
need for automation across the retail supply chain. Traditionally the automation has been in pockets and limited to
only large chains. As the network of stores become geographically spread there will be huge complexities in terms
of managing merchandise, understanding the consumer trends, fulfilling orders, increasing customer service levels
and optimizing the inventory and finances. This will require IT enablement of complete retail supply chain. KLG
has entered this area to tap the large potential in this sector. This will also help KLG in leveraging immense
experience it gained while running asias biggest e-tailing portal jaldi.com. KLG plans to focus on areas namely
Point of Sale solution, Retail ERP, Demand Forecast and Management, Barcode/RFID based product tagging and
Theft/Pilferage Control.
Accordingly KLG has tied up with global leaders in these areas as follows:
1.
2.
3.
4.
5.
The Company has executed projects worth Rs. 825.28 million during nine months period ended December 31,2006
under various segments detailed as follows:
S no. Segments
INR Millons
1.
Computational Engineering & Sciences
251.57
2.
Enterprise Project Management
75.79
3.
Automation & Manufacturing Solutions
39.05
4.
Enterprise Business Solutions
8.69
5.
Power System Solutions
450.18
825.28
Cost of sales and services has gone up by 2.08% during the nine month period ended December 31, 2006 compared
to cost of sales and services in the year ended March 31, 2006. No major changes has taken in inventory since the
end of the financial year to which the last published annual accounts relate.
The Company had a turnover of Rs. 365.28 millions and Rs. 513.06 millions for the year ending March 31, 2005
and 2006 respectively recording an increase of 40.46% and reported a turnover of Rs.825.28 million upto the nine
months ended December 31, 2006 as against Rs.357.06 millions during the nine months ended December 2005
recording an increase of 131.13%. The Company is expected to maintain the upward trend in the financial year
ending 31 March 2007.
Insurance
The insurance taken by the Company is adequate to cover all its facilities. There has not been material change since
the certificate was issued in the amount of the policies taken by the Company. The details of the major insurance
are as follows:
Details regarding Major Insurances effected by the Company:
Page 35
Sl. No.
1
2
Amount
insured
(in Rs.)
Valid
upto
Category of Insurance
Insurance Company
Group Personal
Accident
All Employees
40,700,000
11-01-08
Analogical Computers
2,968,000
12-01-08
43,800,000
25/04/07
8,800,000
25/04/07
Burglary
15,073,896
19/04/07
51,813,750
20/04/07
4,017,750
24/01/08
7,310,088
24/01/08
855,000
24/01/08
2,823,202
24/01/08
1,855,200
24/01/08
2,335,866
24/01/08
1,452,526
24/01/08
Office Umbralla
Package Policy
Office Umbralla
Package Policy
Office Umbralla
Package Policy
10
11
12
th
13
14
7,199,330
07/03/07
15
Electronic Equipments
Insurance Poilcy
2,818,400
28/11/07
16
30000000
04/04/07
17
179504897
31/07/07
18
268187310
31/07/07
Page 36
As at March
31, 2004
8
30
116
As at March
31, 2005
8
35
128
As at March 31,
2006
8
40
134
154
171
182
Jaipur
412 ,4th Floor,
Ganpati Plaza,
MI Road, Jaipur
Tel: +91-141-4005614
Email: klg.jaipur@klgsystel.com
Jamshedpur
Flat C 1/2, Nirode Apartment
L- Road, Bistupur, Jamshedpur, Jharkhand
Tel: +91-657-2429879
Email: klg.jam@klgsystel.com
Kolkata
46/31/1 Gariahat Road
4th Floor Ballygunge New AC Market
Kolkata-700019
Tel: +91-33-24647465 /24645257/24645259
Fax:+91-33-24645258
Lucknow
3/3A Vikash Nagar, Near R L B School
Lucknow 226022
Tel: +91-522-2769784/3020910, Fax: +91-522-2328212
Email: klg.lucknow@klgsystel.com
Moradabad
C/o Jigar Colony, Electric Sub-Station,
Moradabad
Tel: +91-591-3098991, 2440791, Fax: +91-591- 2440735
Mumbai
301 Pujit Plaza, Plot.No.67, Sector 11,
Central Business District-Belapur,
Navi Mumbai 400 614
Tel: +91-22-27576789/90/91/27577327/28/29
Fax: +91-22-27576461
Email: klg.mumbai@klgsystel.com
C-19, Mezzanine Floor,
Satyam Shopping Centre,
MG Road, Ghatkopur (East)
Mumbai 400 077
New Delhi
Flat No. 6-7, 8th Floor
Narayan Manjil,
Page 37
23 Bahrakhamba Road,
Connaught Place, New Delhi
Tel: +91-11-41524492
Shimla
Khosala Appartment
3rd Floor, Under Khalini Bus Stand
Khalini, Shimla 2
Tel: +91-177-3092127
Vadodara
814, Siddharth Complex, R.C.Dutt Road,
Vadaodara 390 005
Tel: +91-265-2351867/8, Fax: +91-265-2331341
Email: klg.vadodara@klgsystel.com
Udaipur
B- Block, 1st Floor,
131 to 142, Anand Plaza,
University Road, Udaipur
Varanasi
House No 57, Chandrika Colony
Sigra, Varanasi
Tel: +91-542-3951184
Legal Proceedings
No.
Name of the Party
Amount
Due
(In Rs.)
Brief Facts
Agnice Fire
Protection Ltd.
561600 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear on the next day of appearance.
2.
Pradeep Pandey
500000 The Company has filed a suit against the ex-employee of the
Company for compensation/damages for misusing the
Companys proprietary information obtained during his
employment with the Company. The defence of the defendant
has been struck off and an application for recalling the said order
is to be argued before court.
Page 38
3.
Smartech India
320000 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear by the next day of appearance i.e. March 23,
2007.
4.
Hewlett Packard
India Pvt. Ltd.
5.
Rajlakshmi Engg.
College
280800 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The
summons has been duly issued on the defendant and defendant is
required to appear by the next day of appearance i.e. March 21,
2007.
6.
Narula College of
Engg.
213200 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The suit is
pending for clearance of objections.
7.
378000 The Company has filed a suit under Order XXXVII of the Civil
Procedure Code against the party for recovery of debts on
account of supply/services of its products/services. The suit is
pending for clearance of objections.
Cases against the Company
1.
Sanjay Sharma
121163 The party has filed the suit against the Company for supply,
installation, repair and maintenance of DG Sets, which due to
defective goods/services is disputed by the Company, hence suit.
The evidence has been filed in the court by the company and the
witness is to be cross examined by the other party on the next
date of hearing.
2.
8100 The party has filed the case against forfeiture of shares by the
shares Company on December 5, 1997, whereas the Company has
contended that the forfeiture is in due accordance with the
provisions of Companies Act. The party has already lost four
cases filed by it against the Company by way of dismissal by the
judge, on the similar grounds, as in this particular case. The
reply of the petition and reply of re-joinder filed by petitioner
have already been made and the final argument date was fixed
on 29.05.2006, the case was argued and honble Board has given
the two weeks time for submission of brief written arguments.
The Company had already filed the written arguments and the
matter has been reserved by honble Board for order with the
date awaited from the honble Board.
3.
Employee State
180216 ESI Corporation has issued a demand letter against the Company
Page 39
Insurance
Corporation
Registration Number:
The Company is incorporated in the Republic of India and registered under the Companies Act with Registration
No.05-34348.
Employee Stock Option Scheme
In accordance with the SEBI Guidelines on Employee Stock Options and the Scheme framed under these guidelines
i.e. KLG Systel Employees Stock Option Scheme 2005, The Company, on April 12, 2006 had also issued
299,500 Employee Stock Options to the employees/directors of the Company at Rs. 119.58 per option, which after
exercise will give rise to equivalent number of equity share of Rs. 10/- each at a premium of Rs.109.58 per share.
The options will vest after one year from the date of grant and the options are scheduled to vest in a period of 3
years.
In year 1999, the Company granted 70,000 options to the eligible employees of the Company, convertible into
equity shares of the Company, which were proposed to vest in three consecutive years at 20%, 30% and 50%
respectively. Out of these, 57,850 options were converted into shares by the Company upto the year 2001.
Preferential Allotment of warrants
The Company, on November 09, 2006 had allotted 400,000 equity shares of Rs.10/- each at a premium of Rs.96/per share to promoters of the company on conversion of warrants allotted to them on May 23, 2006.
Further, the company on December 05, 2006 had resolved to issue 10,70,000 further Warrants to Promoters of the
Company at Rs 261 per warrant, which after conversion, within a period of 18 months from the date of allotment,
will give rise to equity shares of Rs. 10/- each at a premium of Rs. 251 per shares. After approval of the
Shareholders by special resolution, under section 81 (1A) of the Companies Act in an EGM of the Company held
on January 05, 2007, the Board of Directors of the Company allotted the warrants to the promoters in its meeting
held on January 17, 2007. The key terms of the warrants are that upon conversion the shares underlying the
warrants will have the same rights as the equity shares issued at the time of the conversion of the equity shares. The
warrants have been issued in accordance with the SEBI (DIP) Guidelines, 2000, Chapter XIII, Guidelines for
Preferential Issues.
Further, the Company proposes to allot 1.25 million warrants to strategic investors entitling the subscriber to one
Share per warrant, subject to approval of shareholders in forthcoming extraordinary general meeting.
Page 40
RISK FACTORS
The risks described below together with the other information contained in this Offering Circular should be
carefully considered before making an investment decision. The risks described below are not the only ones
relevant to the country, the industry in which the Company operates, the Company, the GDRs or the Shares.
Additional risks, not presently known to the Company or that it currently deems immaterial may also impair
Companys business operations. The Companys business, financial condition or results of operations could be
materially adversely affected by any of these risks.
Any potential investor in, and purchaser of, the GDRs should pay particular attention to the fact that Company is
governed in India by a legal and regulatory environment which in some material respects may be different from
that which prevails in the United States and the United Kingdom and other countries. Prior to making an
investment decision, prospective investors and purchasers should carefully consider all of the information
contained in this Offering Circular (including the consolidated financial statements included in this Offering
Circular).
This Offering Circular may be construed as forward-looking statements that involve risks and uncertainties. The
Companys actual results could differ materially from those anticipated in these construed forward-looking
statements as a result of certain factors, including the considerations described below and elsewhere in this
Offering Circular.
RISKS RELATED TO THE COMPANY AND THE INDUSTRY
The revenues and expenses of the Company are difficult to predict and can vary significantly from quarter to
quarter, which could cause the share price of the Company to decline.
The revenues and profitability have grown rapidly in recent years and are likely to vary significantly in the future
from quarter to quarter. Therefore, the Company believes that period-to-period comparisons of the results of
operations are not necessarily meaningful and should not be relied upon as an indication of their future
performance. Factors, which affect the fluctuation of the revenues, include:
A significant part of its total operating expenses, particularly expenses related to personnel and facilities, are fixed
in advance of any particular quarter. As a result, unanticipated variations in the number and timing of demand for its
products projects or employee utilization rates, or the accuracy of its estimates of the resources required to complete
ongoing demand, may cause significant variations in its operating results in any particular quarter.
There are also a number of factors other than its performance that is not within the control of the Company that
could cause fluctuations in the operating results from quarter to quarter. These include general economic factors.
Any inability to manage the growth of the Company could disrupt the business and reduce its profitability
In the last couple of years the Company has undertaken major expansions by way of setting up offices in 18 cities
across the country.
The Company believes that its increasing growth shall place significant demands on its management and other
resources. It will require the Company to continue to develop and improve its operational, financial and other
internal controls, both in India and elsewhere.
In particular, continued growth increases the challenges involved in:
Page 41
recruiting, training and retaining sufficient skilled technical, marketing and management personnel;
adhering to its high quality and process execution standards;
preserving its culture, values and entrepreneurial environment;
developing and improving its internal administrative infrastructure, particularly its financial, operational,
communications and other internal systems; and
maintaining high levels of client satisfaction.
Its growth strategy also relies on the expansion of its operations to other parts of the world, particularly South East
Asia. The costs involved in entering these markets may be higher than expected and the Company may face
significant competition in these regions. The inability of the Company to manage growth in these regions may have
an adverse effect on its business, results of operations and financial condition.
The business of the Company may suffer if it fails to anticipate and develop new products and enhance existing
products in order to keep pace with rapid changes in technology and the industries on which the Company
focuses
The IT solutions / products market is characterized by rapid technological change, evolving industry standards,
changing client preferences and new product and service introductions. The future success of the Company will
depend on its ability to anticipate these advances and develop new product and service offerings to meet client
needs. The Company may not be successful in anticipating or responding to these advances in a timely basis, or, if
the Company responds, the products or technologies the Company develops may not be successful in the market
place. Further, products, services or technologies that are developed by its competitors may render its products noncompetitive or obsolete.
The Company is investing substantial cash assets in new facilities, and its profitability could be reduced if its
business does not grow proportionately
The Company may encounter cost overruns or delays in connection with new facilities that it would be setting up.
Additionally, future financing for additional facilities, whether within India or elsewhere, may not be available on
attractive terms or at all. Such expansions will significantly increase the Companys fixed costs. If the Company is
unable to grow its business and revenues proportionately, its profitability will be reduced.
The Company may be unable to recoup its investment costs to develop its software products
The development of its software products requires significant investments. Its current software products or any new
software product that it develops may not be commercially successful and the costs of developing such new
products may not be recouped. Since software product revenues typically occur in periods subsequent to the periods
in which the costs are incurred for the development of such software products, delayed revenues may cause periodic
fluctuations of its operating results.
The Company may engage in acquisitions, strategic investments, strategic partnerships or alliances or other
ventures that may or may not be successful
The Company may acquire or make strategic investments in complementary businesses, technologies, services or
products, or enter into strategic partnerships or alliances with third parties in order to enhance its business. It is
possible that it may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if it
does identify suitable candidates, it may not complete those transactions on terms commercially acceptable to it.
The inability to identify suitable acquisition targets or investments or the inability to complete such transactions
may affect its competitiveness and its growth prospects. If the Company acquires another Company, it may have
difficulty in assimilating the acquired Companys personnel, operations, technology and software. In addition, the
key personnel of the acquired Company may decide not to work for the Company. In some cases, the Company may
have difficulty in integrating the acquired products, services or technologies into its operations. These difficulties
could disrupt its ongoing business, distract its management and employees and increase its expenses. As of the date
of this Offering Circular, the Company has no proposal to enter into any material acquisition, investment,
partnership, alliance or other joint venture transaction.
The Company should be well conversant with the latest trends and changes in the IT Industry
Page 42
The business and profitability of the Company may be affected if it is unable to anticipate rapid changes in the
technology industry, innovate or diversify its product offerings in response to the market challenges.
The Company receives a portion of its revenues in US dollars or other foreign currencies and incurs a part of its
expenses in US dollars or other foreign currencies. The fluctuation of the Rupee, particularly with respect to the US
dollar could adversely impact the Companys financial statements.
Companys ability to retain its highly skilled IT professional, management team and Key personnel
The ability of the Company to execute projects and to obtain new clients depends largely on its ability to attract,
train, motivate and retain highly skilled IT professionals, particularly project managers and other mid-level
professionals. If it cannot hire and retain additional qualified personnel, its ability to expand its business will be
impaired and its revenues could decline. The Company believes that there is significant worldwide competition for
IT professionals with the skills necessary to deliver the products it offers. The Company may not be able to hire and
retain enough skilled and experienced IT professionals to replace those who leave. Additionally, the Company may
not be able to redeploy and retrain its IT professionals to keep pace with continuing changes in technology,
evolving standards and changing client preferences. The Companys inability to attract and retain IT professionals
may have a material adverse effect on its business, results of operations and financial condition. The Company is
dependent on the senior members of its management team, including the continued efforts of its Chairman &
Managing Director, its Directors and its Executives and officers. The Companys future performance will be
affected by the continued service of these persons. Competition for senior management in the Company is intense,
and it may not be able to retain such senior management personnel or attract and retain new senior management
personnel in the future. The loss of any members of it senior management or other key personnel may have a
material adverse effect on the Companys business, results of operations and financial condition.
The Company is controlled by certain Shareholders and, if they take actions that are not in the best interests of
the Holders, it may harm the value of an investment in the Bonds
As on 31 December 2006, about 26.81% of the Shares of the Company are owned directly or indirectly by the
members of the Goel family and their associates (the "Promoters' Group") or entities owned or controlled by or
acting in concert with the Promoters' Group. The Promoters' Group has the ability to exercise significant control
over most matters requiring approval by Shareholders, including the election and removal of directors and
significant corporate transactions. This control could delay, defer or prevent a change in control of the Company,
impede a merger, consolidation, takeover or other business combination involving the Company, or discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company even if that
were in the best interests of Shareholders as a whole.
The Company has plans of international expansion which is subject to risks inherent in doing business on an
international level.
Currently, the Company has operations in India. The Company intends to tap the South East Asian market for
marketing its power sector solutions. Due to reason of its limited experience with facilities outside of India, the
Company is subject to additional risks related to its international expansion strategy, including risks related to
complying with a wide variety of national and local laws, restrictions on the import and export of certain
technologies and multiple and possibly overlapping tax structures. In addition, the Company may face competition
in other countries from companies that may have more experience with operations in such countries or with
international operations generally. The Company may also face difficulties integrating new facilities in different
countries into its existing operations, as well as integrating employees that it hires in different countries into its
existing corporate culture. The Company's international expansion plans may not be successful and it may not be
able to compete effectively in other countries.
formed in October 1999, was defeated and the United Progressive Alliance, a multi-party coalition headed by the
Congress Party, formed a new government. Though the Congress Party has publicly indicated an intention to
continue India's programme of economic reform through a programme agreed to in consultation with all coalition
parties, the United Progressive Alliance consists of parties with differing agendas, which could result in political
instability, and as such the rate of economic liberalisation could change, and specific laws and policies affecting
Information Technology companies, foreign investment, currency exchange and other matters affecting investment
in the Company's securities could change as well. A significant change in India's economic liberalisation and
deregulation policies could adversely affect business and economic conditions in India generally, and the
Company's business in particular, if new restrictions on the private sector are introduced or if existing restrictions
are increased.
If regional hostilities, terrorist attacks or social unrest in India increase, the Company's business could be
adversely affected and the trading price of the Bonds could decrease.
The Asian region has from time to time experienced instances of civil unrest, terrorist attacks and hostilities among
neighbouring countries, including between India and Pakistan. Since May 1999, military confrontations between
India and Pakistan have occurred in Kashmir. Also, since early 2003, there have been military hostilities and civil
unrest in Afghanistan and Iraq. Military activity or terrorist attacks in India in the future could influence the Indian
economy by creating a greater perception that investments in Indian companies involve higher degrees of risk.
These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on
the Indian economy, the Company's business, its future financial performance and the trading price of the Bonds.
Furthermore, India has also experienced social unrest in some parts of the country. If such tensions occur in other
parts of the country, leading to overall political and economic instability, it could have an adverse effect on the
Group's business, future financial performance and the trading price of the Bonds.
Financial instability in other countries, particularly countries with emerging markets, could disrupt Indian
markets and the Company's business and cause the trading price of the bonds to decrease.
The Indian financial markets and the Indian economy are influenced by economic and market conditions in other
countries, particularly emerging market countries in Asia. Financial turmoil in Asia, Latin America, Russia and
elsewhere in the world in past years has had limited impact on the Indian economy and India was relatively
unaffected by financial and liquidity crises experienced elsewhere. Although economic conditions are different in
each country, investors' reactions to developments in one country can have adverse effects on the securities of
companies in other countries, including India. A loss of investor confidence in the financial systems of other
emerging markets may cause volatility in Indian financial markets and, indirectly, in the Indian economy in general.
Any worldwide financial instability could also have a negative impact on the Indian economy. This in turn could
negatively impact on the movement of exchange rates and interest rates in India. In short, any significant financial
disruption could have an adverse effect on the Company's business, future financial performance and the trading
price of the Bonds.
A slowdown in economic growth in India could cause the Company's business to suffer.
The Company's performance and the quality and growth of its business are necessarily dependent on the health of
the overall Indian economy. The Indian economy has grown significantly over the past few years with gross
domestic product increasing by 7.50 per cent. in the year ended 2005 compared to the previous fiscal year. Any
future slowdown in the Indian economy could harm the Company, its customers and other contractual
counterparties. The Indian economy is also largely driven by the performance of the agricultural sector, which
depends on the quality of the monsoon and is difficult to predict.
Furthermore, the Indian economy is in a state of transition. The share of the services sector of the economy is rising
while that of the industrial, manufacturing and agricultural sector is declining. It is difficult to gauge the impact of
these fundamental economic changes on the Company's business.
Trade deficits could have a negative effect on the Company's business and the trading price of the Bonds.
India's trade relationships with other countries can influence Indian economic conditions. In the year ended March
31, 2006, India experienced a trade deficit of US$39.6 billion, an increase of US$13.6 billion from the year ended
Page 45
2005. If India's trade deficits increase or become unmanageable, the Indian economy, and, therefore, the Company's
business, future financial performance and the trading price of the Bonds, could be adversely affected.
A decline in India's foreign exchange reserves may affect liquidity and interest rates in the Indian economy,
which could have an adverse impact on the Company.
India's foreign exchange reserves have increased significantly since 1991 from US$ 5.8 billion to US$ 151.6 billion
in 2006. A sharp decline in these reserves could result in reduced liquidity and higher interest rates in the Indian
economy. Reduced liquidity or an increase in interest rates in the economy following a decline in foreign exchange
reserves could adversely affect the Company's business, its future financial performance and the trading price of the
Bonds.
Any downgrading of India's debt rating by an international rating agency could have a negative impact on the
Company's business and the trading price of the Bonds.
Any adverse revisions to India's credit ratings for domestic and international debt by international rating agencies
may adversely affect the Company's ability to raise additional financing and the interest rates and other commercial
terms at which such additional financing is available. This could have an adverse effect on the Company's business
and future financial performance and the Company's ability to obtain financing to fund its growth, as well as the
debt rating and trading price of the Bonds.
Increasing employee compensation in India may erode some of the Company's competitive advantage and may
reduce the Company's profit margins.
Employee compensation in India has historically been significantly lower than employee compensation in the
United States and Western Europe for comparably skilled professionals, which has been one of the Company's
competitive strengths. However, compensation increases in India may erode some of this competitive advantage and
may negatively affect the Company's profit margins. Employee compensation in India is increasing at a faster rate
than in the United States and Western Europe, which could result in increased costs relating to scientists and
engineers, managers and other mid-level professionals. The Company may need to continue to increase the levels of
its employee compensation to attract and retain staff and manage attrition. Compensation increases may have a
material adverse effect on the Company's business, results of operation and financial condition.
The Indian securities markets are more volatile than certain other securities markets.
The Indian securities markets are more volatile than the securities markets in certain countries which are members
of the Organisation for Economic Cooperation and Development. The Indian stock exchanges have, in the past,
experienced substantial fluctuations in the prices of listed securities.
The Indian stock exchanges have experienced problems which, if such or similar problems were to continue or
recur, could affect the market price and liquidity of the securities of Indian companies, including the Shares. These
problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In
addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading
in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time
disputes have occurred between listed companies, stock exchanges and other regulatory bodies, which in some
cases may have had a negative effect on market sentiment.
Significant differences exist between Indian GAAP and International Accounting Standards
("IAS")/International Financial Reporting Standards ("IFRS"), which may be material to the financial
information prepared and presented in accordance with Indian GAAP contained in this Offering Circular.
As stated in the reports of B. Bhushan & Co., independent auditors included in this Offering Circular, the financial
statements included in this Offering Circular are prepared and presented in conformity with Indian GAAP and no
attempt has been made to reconcile any of the information given in this Offering Circular to any other principles or
to base it on any other standards. Indian GAAP differs from accounting principles and auditing standards with
which prospective investors may be familiar in other countries, such as IAS/IFRS. Significant differences exist
between Indian GAAP and IAS/IFRS, which may be material to the financial information prepared and presented in
accordance with Indian GAAP contained in this Offering Circular. B. Bhushan & Co., Auditors has made no
Page 46
attempt to quantify the effect of any of those differences. In making an investment decision, investors must rely
upon their own examination of the Company, the Terms and Conditions of the Bonds and the financial information
contained in this Offering Circular. See "Summary of Significant Differences between Indian GAAP and
IAS/IFRS".
There may be less Company information available in the Indian securities markets than securities markets in
developed countries.
There is a difference between the level of regulation and monitoring of the Indian securities markets and the
activities of investors, brokers and other participants than that of markets in other more developed economies. The
Securities and Exchange Board of India (the "SEBI") is responsible for monitoring disclosure and other regulatory
standards for the Indian securities market. The SEBI has issued regulations and guidelines on disclosure
requirements, insider trading and other matters. There may, however, be less publicly available information about
Indian companies than is regularly made available by public companies in developed countries, which could
adversely affect the market for the Shares.
Investors in the Bonds may not be able to enforce a judgment of a foreign court against KLG.
KLG is a limited liability company incorporated under the laws of India. All of KLG's directors and executive
officers named herein are residents of India and all of the assets of KLG and such persons are located in India. As a
result, it may not be possible for investors to effect service of process upon KLG or such persons outside India or to
enforce judgments obtained against such parties outside India. Moreover, it is unlikely that a court in India would
award damages on the same basis as a foreign court if an action were brought in India or that an Indian court would
enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with Indian practice.
Recognition and enforcement of foreign judgments is provided for under Section 13 of the Civil Code on a statutory
basis. Section 13 of the Civil Code provides that foreign judgments shall be conclusive regarding any matter
directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent
jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it appears on the face
of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognise
the law of India in cases to which such law is applicable; (iv) where the proceedings in which the judgment was
obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the
judgment sustains a claim founded on a breach of any law then in force in India. Under the Civil Code, a court in
India shall, upon the production of any document purporting to be a certified copy of a foreign judgment, presume
that the judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court, within
the meaning of that Section, in any country or territory outside India which the Indian Government has by
notification declared to be in a reciprocating territory, it may be enforced in India by proceedings in execution as if
the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is
applicable only to monetary decrees not being in the same nature of amounts payable in respect of taxes, other
charges of a like nature or in respect of a fine or other penalties.
The United Kingdom has been declared by the Indian Government to be a reciprocating territory for the purposes of
Section 44A but the United States has not been so declared. A judgment of a court of a country which is not a
reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution.
Such a suit has to be filed in India within three years from the date of the judgment in the same manner as any other
suit filed to enforce a civil liability in India. Repatriation outside India of any amounts received following the
enforcement of a foreign judgment is subject to the approval of the RBI. It is unlikely that a court in India would
award damages on the same basis as a foreign court if an action were to be brought in India. Furthermore, it is
unlikely that an Indian court could enforce foreign judgments if, in the opinion of that court, the damages awarded
were excessive or inconsistent with public policy. There can be no assurance that an Indian court would enforce a
foreign judgment that contravenes or violates the laws of India.
Page 47
Page 48
Fluctuations in the exchange rate between the Indian Rupee and US dollar may have a material adverse effect
on the value of the Bonds or the Shares independent of the operating results of the Company.
Investors that purchase the Bonds are required to pay for them in US dollars. Investors are subject to currency
fluctuation risk and convertibility risk since the Shares are quoted in Indian Rupees on the Indian stock exchanges
on which they are listed.
The exchange rate between the Indian Rupee and the US dollar has changed substantially in the last two decades
and may fluctuate substantially in the future. On an annual average basis, the Indian Rupee has declined against the
US dollar from 1980 to 2002. As per the noon buying rate in the City of New York for cable transfers as reported
by the Federal Reserve Bank of New York, the Indian Rupee lost approximately 8.89 per cent. of its value relative
to the US dollar in the three years ended 31 March 2003, depreciating from a rate of Rs.43.65 = US$1.00 on 31
March 2000, to a rate of Rs.47.53 = US$1.00 on 31 March 2003. The Indian Rupee has appreciated approximately
6.42 per cent. in value against the US dollar since 31 March 2003 to an exchange rate as at March 31, 2006 of
Rs.44.48 = US$1.00.
Bondholders will bear the risk of fluctuation in the price of the Shares.
The market price of the Bonds is expected to be affected by fluctuations in the market price of the Shares and it is
impossible to predict whether the price of the Shares will rise or fall. Trading prices of the Shares will be influenced
by, among other things, the financial position of and the results of operations of the Company, and political,
economic, financial and other factors. Any decline in the price of the Shares may have an adverse effect on the
market price of the Bonds.
Future issues or sales of the Shares may significantly affect the trading price of the Bonds or the Shares and
such issues or sales may not result in an adjustment to the conversion price provisions in the conditions and the
Trust Deed.
A future issue of Shares by KLG or the disposal of Shares by any of the major shareholders of KLG, or the
perception that such issues or sales may occur, may significantly affect the trading price of the Bonds or the Shares.
Other than the obtaining of consent from some of its lenders prior to altering its capital structure, there is no
restriction on KLG 's ability to issue Shares or the ability of any of its shareholders to dispose of, encumber or
pledge its Shares, and there can be no assurance that KLG will not issue Shares or that such issue will result in an
adjustment to the conversion price provisions in the Conditions and the Trust Deed.
Investors in the Bonds may be subject to Indian taxes arising out of capital gains on the sale of the Shares
following exercise of their conversion rights.
Sale of the Shares issued on conversion of the Bonds, whether to an Indian resident or to a person resident outside
India and whether in India or outside India, would be subject to tax in India. Under applicable Indian laws, a sale of
shares may be chargeable to a transaction tax and/or tax on income by way of capital gains in India. See "Taxation".
Investors are advised to consult their own tax advisers and to consider carefully the potential tax consequences of an
investment in the Bonds or Shares under the laws of India or any other applicable jurisdiction.
The ability to sell Shares to a resident of India may be subject to certain pricing restrictions.
A person resident outside India (including a Non-Resident Indian) is generally permitted to transfer by way of sale
the shares held by him to any other person resident in India without the prior approval of the RBI or the Foreign
Investment Promotion Board (the "FIPB"). However, the price at which the transfer takes place must comply with
the pricing guidelines prescribed by the RBI in its Circular dated October 4, 2004. The guidelines stipulate that
where the shares of an Indian company are traded on a stock exchange:
(i)
the sale may be at the prevailing market price on the stock exchange if the sale is effected through a
merchant banker registered with the SEBI or through a stock broker registered with the stock exchange; or
(ii)
if the transfer is other than that referred to above, the price shall be arrived at by taking the average
quotations (average of daily high and low) for one week preceding the date of application with a 5 per cent.
variation.
Page 49
Bondholders will have no rights as shareholders until they acquire the Shares upon conversion of the Bonds.
Unless and until the Bondholders acquire the Shares upon conversion of the Bonds, the Bondholders will have no
rights with respect to the Shares, including any voting rights or rights to receive any regular dividends or other
distributions with respect to the Shares. Bondholders who acquire the Shares upon the exercise of a Conversion
Right will be entitled to exercise the rights of holders of the Shares only as to actions for which the applicable
record date occurs after the Conversion Date.
There are limitations on the ability of Bondholders to exercise conversion rights.
The Bonds are convertible into Shares at the option of the Bondholders pursuant to the terms of the Bonds.
Bondholders will be able to exercise their conversion right only within the Conversion Period specified in the
Bonds and will not be able to exercise their conversion right during the Closed Periods (as defined in the "Terms
and Conditions of the Bonds"). In addition, conversion rights may not be exercised during certain other limited
periods. See"Terms and Conditions of the Bonds". As such, a Bondholder's ability to exercise conversion rights will
be restricted during these periods.
There may be a delay from when a holder decides to convert Bonds into Shares until the time the resulting
Shares are approved to be listed and traded on the Indian Stock Exchanges and, therefore, the risk that the
Share price may fluctuate during that period.
There will be a time gap of at least 40 days from the date on which a Bondholder advises the paying and conversion
agent of the intention to convert the Bonds into Shares and the date of allotment of the Shares to the Bondholder,
being a date after the Indian Stock Exchanges have granted their final approval for the Shares to be listed and
traded. Within this gap, the price of the Shares may fluctuate and this may have an adverse effect on the price that
the Bondholder anticipates to receive for the transfer of Shares. Furthermore, any trade in the Shares by the
Bondholder will have to be done on a spot delivery basis and the trade will have to be settled within the next
settlement cycle.
Page 50
SOURCES OF FUNDS
Equity share capital
Reserves and surplus
Secured loans
Deferred tax liabilities
Total Liabilities
APPLICATION
OF
FUNDS
Gross Block
Less: depreciation
Net Block
Capital work in progress
Investments
Gross current assets
Less: Current liabilities and
provisions
Net current assets
Miscellaneous expenditure
Total assets
Net worth
US $ Rate (Rs.)
493.24
166.47
326.77
43.90
3.92
346.69
130.24
11.05
3.73
7.32
0.98
0.09
7.77
2.92
397.13
128.95
268.18
9.37
4.11
282.67
107.26
9.07
2.94
6.12
0.21
0.09
6.46
2.45
285.84
96.69
189.15
0.00
5.40
314.39
82.99
6.48
2.19
4.29
0
0.12
7.12
1.88
216.45
5.55
596.59
479.38
4.85
0.12
13.37
10.75
44.62
175.41
7.03
464.10
420.45
4.01
0.16
10.60
9.60
43.79
231.40
14.72
440.67
393.93
5.24
0.33
9.98
8.93
44.12
Page 51
US $
Year
ended
March 31, 2005
Rs.
US $
513.06
10.66
523.72
295.99
11.51
0.24
11.74
6.63
365.28
15.11
380.39
220.26
8.34
0.35
8.69
5.03
107.41
2.41
86.57
1.98
76.56
1.73
120.32
2.54
1.48
2.70
0.06
0.03
73.56
0.06
1.88
1.68
0
0.04
66.55
0.08
2.01
1.51
0
0.05
116.30
39.12
77.18
(19.19)
(5.53)
2.61
0.88
1.73
(0.43)
(0.12)
71.62
32.85
38.77
(6.65)
(6.97)
1.64
0.75
0.89
(0.15)
(0.16)
(0.40)
(0.01)
0.24
0.01
(0.07)
52.06
1.17
25.39
0.59
24.94
0.57
Equity capital
Reserves (excluding
revaluation reserves)
No. of shares
Profit per share
US $ Rate (Rs.)
81.31
403.62
1.82
9.05
38.94
388.55
0.89
8.87
38.94
369.71
0.88
8.38
8.07
0.15
44.62
3.84
6.62
3.84
0.15
43.79
3.84
6.50
3.84
0.15
44.12
8.07
6.66
Year
ended
March 31, 2004
Rs.
US$
379.93
8.61
8.76
0.20
388.69
8.81
245.58
5.57
64.46
1.46
27.33
0.62
37.13
0.84
(3.55) (0.08)
(8.57) (0.19)
Other than the investments made and reflected in the Financial Statements in this OC, the Company is not planning
any further investments in the near future.
Earning per Share (EPS) Statement for the last 4 financial years
Year
2005 06
2004 05
2003 04
2002 03
Page 52
The following discussion and analysis of our financial condition is based on our financial statements as of and for
the year ended 31 March 2006. This discussion contains forward-looking statements and reflects our current views
of our Company with respect to future events and financial performance. Actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain factors such as those set forth under
"Risk Factors" and elsewhere in this Offering Circular. This discussion should be read together with our Indian
GAAP financial statements and related notes included elsewhere in this Offering Circular. We have prepared our
financial statements in accordance with Indian GAAP and in Rupees. Indian GAAP differs in some respects from
US GAAP. See "Summary of Certain Significant Differences between Indian GAAP and US GAAP".
The overall trend in the Indian Information Technology Industry remains the same, directionally, in the fiscal 2005,
as compared to fiscal 2004. The industry has been charting sustaining growth and has achieved critical mass. Indian
IT companies and service providers are achieving leadership positions in the Global IT Industry. The Government
and the skilled and dedicated manpower have made this enviable achievement possible due to sustained support
available in India. The IT industry has been a witness to changing customer demands and customer profile. Service
providers who are able to anticipate these changes have managed to survive the recent IT Industry meltdown. KLG
is one of the few who have adapted and survived.
According to a statement issued by NASSCOM, "the Indian IT Companies do not want to merely match worldwide
standards in security. They want to set the very highest standards." The Company is striving to achieve that.
INDUSTRY STRUCTURE AND DEVELOPMENT
In recent years, technology has become increasingly important to the success of organisations worldwide and has
transformed businesses, driven productivity gains, enhanced operational efficiencies and created new business
models. In this context, organizations have increased their spending on IT services, which enable them to realize
greater value from their technology infrastructure and achieve productivity gains. The Company has organized its
operations in a structure focused on developing products using cutting edge technologies developed by its R&D
team.
PERFORMANCE OVERVIEW
The Directors are pleased to inform you that in spite of the overall recessionary trend and the meltdown in the
Information Technology Sector, the Company has achieved good growth in its turnover and net profit. Due to
continued efforts and stress on reduction of operating costs and improving efficiencies, the Company has achieved a
total revenue of Rs. 523.72 Million during the year 2005 - 2006 as against Rs. 380.39 Million in the previous year,
with net profit increasing from Rs. 25.39 to Rs. 52.04 Million.
(Rupees in Million)
Particulars
2005-06
2004 05
2003 04
Turnover Sales and other incomes
523.72
380.39
388.69
Operating profits (PBDIT)
120.32
73.56
66.55
Less: Depreciation & interest
41.66
32.90
27.41
Profit before tax (PBT)
77.18
38.78
37.12
Provision for tax Current Year
(19.19)
(6.65)
(3.55)
Provision for tax Deferred tax
(5.53)
(6.97)
(8.57)
Prior period adjustments
(0.40)
0.24
(0.07)
Profit after tax (PAT)
52.06
25.39
24.94
Balance of profit from previous year
3.02
4.19
19.68
Amount available for appropriation
55.08
29.58
44.62
Proposed Dividend
12.11
5.76
5.76
Dividend tax
1.70
0.81
0.74
Transfer to general reserve
35.00
20.00
33.94
Balance carried over to Balance Sheet
6.27
3.01
4.18
Page 53
SWOT ANALYSIS
Strength
A pioneer of the Indian IT Solutions Industry. The Company has developed a software solution for the
power sector which is a unique solution that integrates the various components of the problem of
transmission and distribution losses and tackles them simultaneously to have an immediate and long term
effect. The solution is a cost competitive and state of the art solution, has potential for global
commercialization and is backed by a professional and dedicated management team.
Promoters with deep sector knowledge, entrepreneurial drive and vision.
The Company has developed hard to imitate technologies, giving it a head start.
Comprehensive range of product and service offerings.
Proven ability to execute mission critical projects.
Enduring client relationships with repeat assignments.
Strategic focus on the global automobile security markets.
Proven R&D capabilities churning out unique customized solutions.
Strong management team and recognition as a preferred employer.
Weakness
Opportunities
Threats
The Growth Rate of the Company could be impacted in case of a slowdown in the IT Industry.
New entrants with their cutthroat pricing in the highly competitive market may affect the Companys
profitability in the short term.
The Companys strength is its senior management team and the skilled IT professionals. Threat of
poaching is a reality.
Risk Management
The Company has always been technology driven with cutting edge technologies developed by the
Company, which are hard to duplicate.
The Company is in an expansion mode and is on the verge of achieving critical mass.
The Company is planning to raise funds in the international capital markets by issue of Foreign Currency
Convertible Bonds..
Develop capabilities to continuously develop new products to broaden customer base and drive growth by
creation of new markets.
Concerted efforts to cut the cost of raising funds, energy, materials and utilities and to achieve international
norms of efficiency.
Page 54
Develop capabilities to absorb higher input costs by increasing share of high value added products in its
product portfolio.
Enhance customer satisfaction by providing products and services that meet and exceeds their expectation
through continual improvements.
Outlook
The outlook is distinctly positive especially with Indias booming economy and development of new
markets for Companys products.
Tie up with state electricity boards to provide Companys developed software solutions developed by the
Company.
The current fund raising programme will help the Company in leveraging its technological strength by
effectively launching its unique products in developing and developed markets.
Companys focus on brand building will enhance Companys presence in critical markets and add value to
the Companys fundamentals.
Overall growth achieved by the Company due to various factors will enhance value for all the stakeholders
and associates of the Company.
Page 55
December-03
January-04
February-04
March-04
April-04
May-04
June-04
July-04
August-04
September-04
October-04
November-04
December-04
January-05
February-05
March-05
April-05
May-05
June- 05
July- 05
August-05
September-05
October-05
November-05
December-05
January-06
February-06
March-06
April-06
May-06
June-06
July-06
August-06
September-06
October-06
November-06
December-06
January-07
[Source: www.nseindia.com]
60.5
57.25
38.9
33.8
38
47
37.4
41.25
43.5
46.9
73.4
117.85
114.65
102
104.9
109
97.5
98.75
108.80
176.50
206.80
241.90
192.90
187.95
217.80
267.90
154.80
127.00
127.95
139.35
138.45
140
198
223.15
314.35
319
357.65
395
36
37.1
30.25
26.35
28.25
24.25
31.25
30.5
35.1
39.9
41.35
54.2
85
67.05
82.5
73.1
76.75
74.6
85.00
92.00
158.55
171.10
127.00
136.40
168.50
127.00
119.20
91.10
97.00
102.15
91
105
122.05
169.10
209.90
240.40
255
301.20
1,503,017
406,412
176,979
154,681
148,491
311,442
155,413
224,587
269,235
626,440
3,321,811
5,032,381
2,753,018
774,574
1,772,717
2,336,444
602,524
1,367,858
2,647,011
6,770,266
6,808,844
5,106,381
1,067,235
806,823
1,236,304
2,199,333
1,611,558
808,606
971,163
1,610,202
781,398
878,251
2,171,122
1,436,918
2,513,623
1,820,215
3,008,300
3,056,519
Page 56
DIVIDENDS
Under the Companies Act, unless the Board recommends the payment of a dividend, the Shareholders at a general
meeting have no power to declare any dividend. The Shareholders at a general meeting may declare a lower, but not
higher, dividend than that recommended by the Board. Dividends are generally declared as a percentage of the par
value of the Companys Shares. The dividend recommended by the Board and approved by the Shareholders at a
general meeting is distributed and paid to Shareholders in proportion to the paid-up value of their Shares as on the
record date for which such dividend is payable. In addition, as is permitted by the articles of association, the Board
may declare and pay interim dividends. Under the Companies Act, dividends can only be paid in cash to
Shareholders listed on the register of Shareholders on the date, which is specified as the "record date" or "book
closure date". No Shareholder is entitled to a dividend while any lien in respect of unpaid calls on any of his Shares
is outstanding. Dividend declared and paid by the Company for the last 5 years is tabulated as follows:
Year ended March
31
2006
2005
2004
2003
2002
December 31, 2000
Dividend
per
share (in Rs.)
1.50
1.50
1.50
1.25
1.75
1.50
A company must pay "dividend distribution tax" of 17% (inclusive of a surcharge on dividend distribution tax and
education cess on dividend distribution tax and surcharge) on the total amount distributed as dividends. A company
is not permitted to declare any dividend, which is not recommended by the directors. The directors may pay an
interim dividend. No dividend may be paid except out of the profits of the company pursuant to Section 205 of the
Companies Act.
The Company may not declare any dividend that is not recommended by the Board of Directors. The Board of
Directors may declare and pay an interim dividend. No dividend may be paid except out of the profits of the
Company or pursuant to Section 205 of the Companies Act. See "Description of the Shares- Dividends".
The form, frequency and amount of future dividends on the Shares will depend upon the Companys earnings, cash
flow, financial conditions and other factors and shall be at the discretion of the Board.
For the Financial Year ended 31 March 2006, the Company declared a dividend of Rs. 1.50 per share (15%) on
8,075,300 equity shares of Rs.10 each, aggregating to Rs. 12.11 Million excluding dividend tax of Rs. 1.69 Million.
Future Dividends
There is no assurance that any future dividends will be declared or paid or that the amount thereof will not be
decreased. Holders of the Bonds will not be entitled to receive dividends paid on Shares until the Bonds are
converted into shares.
Page 57
Date of Meeting
January 27, 1995
No. of Shares
4,000,000
6,000,000
August 5, 2002
10,000,000
20,000,000
Description
Date
1.
Equity Share
Capital
as on December 31,
1995
Equity shares
forfeited
December 5, 1997
Equity
Equity
No of shares
3363100
10
(183,300)
10
14,000
10
600,000
10
Equity
September 2, 2000
17,100
10
Equity
26,750
10
Equity
200,000
10
Equity
February 3, 2006
4,037,650
10
Equity
23,07,600
10
10
Equity
400,000
10
Rs. 200,000,000
Rs. 109,662,000
Rs. 109,662,000
Rs. 107,829,000
Rs.
559,200
Rs. 108,388,200
Page 58
EXCHANGE RATES
The following table sets out, for the periods indicated, certain information reported by the Federal Reserve Bank of
New York concerning exchange rates between Indian Rupees and US dollars since 2004 based on the noon buying
rate in New York City on the last business day of each month during the period for cable transfers in Indian Rupees.
The column entitled "Average" in the table below is the average of the daily noon buying rate on the last business
day of each month during the year and the average of the daily noon buying rate on each business day during the
quarter or the month.
Indian Rupees per US$1.00
Average
High
Low Period End
Mid Rate
2004
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2006
January
February
March
April
May
June
July
August
September
October
November
December
January 2007
Source: Federal Reserve Bank of New York
Page 59
45.22
44.85
46.15
44.82
45.68
46.21
46.45
45.87
43.40
43.40
45.66
43.27
43.40
45.99
45.91
43.27
43.59
43.53
43.61
45.32
43.82
43.72
44.00
46.26
43.28
43.21
43.05
44.00
43.62
43.51
43.94
44.95
44.20
44.23
43.34
44.82
45.20
45.89
46.37
46.45
46.01
44.38
44.86
44.11
44.21
44.92
44.54
44.58
45.09
46.20
46.25
46.83
46.61
46.38
45.97
45.26
44.48
44.49
43.89
44.10
44.09
44.39
44.77
45.50
45.84
46.32
45.74
44.90
44.46
44.70
44.07
43.96
44.21
44.48
44.86
45.05
45.83
46.49
46.44
46.06
45.35
44.59
44.11
44.07
USE OF PROCEEDS
The Company expects to raise US22Million from this Offering. The net proceeds from this Offering, after
deduction of fees and expenses of issue of FCCBs is expected to be approximately US$21.12 Million which the
Company intends to use for new projects in Power System Solutions and expansion of existing activities.
Page 60
CAPITALISATION
The following table sets forth the Companys non-consolidated capitalisation and total debt, as adjusted to give
effect to the issuance of the Bonds. This table should be read in conjunction with the Companys audited nonconsolidated financial statements, the related notes and the other financial information contained elsewhere in this
Offering Circular.
Particulars
Secured Loans
Unsecured Loans
Total Debt (A)
200.00
4.53
200.00
4.53
108.39
886.11
994.50
2.46
20.09
22.55
108.39
886.11
994.50
2.46
20.09
22.55
1172.27
26.58
2142.69
48.58
There has been no material change in the capitalisation of the Company since 31 December 2006.
Page 61
Page 122
Number
of
shares held
Options
to
subscribe for New
Shares
1,100
12500 (ESOP)
365,025*
365,025*
12500 (ESOP)
12500 (ESOP)
1,952,603
515,980
2,594,895
787,000
940,172
655,538
400000 (Warrants
convertible
into
equity shares
300000 (Warrants
convertible
into
equity shares
-
112100
No.
Name
Residential Address
(1)
Mr.
S.B.
Budhiraja
Mr. R.C. Mody
Mr.
G.K.
Pandey
Mr. K.L. Goel
(2)
(3)
(4)
(5)
Mr.
Goel
Kumud
(6)
Mrs.
Goel
Upasana
(7)
Mr. B. D. Gupta
(8)
(9)
Mr.
Prabir
Sengupta
Phase
I,
Page 63
100000 (Warrants
convertible
into
equity shares
-
(10)
Mr.
Arora
Mukesh
C-2618,
Gurgaon
Sushant
Lok-I,
2,695,004
30000 (ESOP)
*Further in accordance with the approval of the Shareholders in the AGM of the Company held on August 12,
2005, the Non-Executive Directors were paid the commission for the financial year ending 31.03.2005 i.e. Sh.
S.B. Budhiraja, Rs. 125,776/- Sh. R.C. Mody, Rs. 136,259/- and Sh. G.K. Pandey 125,776/- aggregating to Rs.
387,811/- during the period under reporting.
No other remuneration or benefits in kind were granted, during the last completed financial year for any reason
whatsoever, and charged to overheads or the profit appropriation account, to members of the administrative,
management and supervisory bodies.
Biography of the Directors
Mr. S.B. Budhiraja, Director
Mr. S. B. Budhiraja, aged 75 years is an Independent Management consultant. Mr. S.B. Budhiraja is an
Independent Management Consultant and a Past President of the Institute of Management Consultants of India,
the national apex body of management consultants. He was the Executive Director of Management
Development Institute (MDI), Gurgaon from 1990-93, one of the top ranking management schools.
A gold medallist in Mechanical Engineering from the University of Roorkee, Mr. Budhiraja joined BurmahShell, where he worked for 14 years. He also trained with Shell, UK Mr. Budhiraja has held several significant
posts, and was the youngest ever Managing Director of Indian Oil Corporation from 1974-78. He has also been
the Managing Director of IBP, Balmer Lawrie, and Indian Oxygen, during his career. He was Overseas Director,
Al Futtaim Group U.A.E. from 1978-82.
Mr. Budhiraja was invited in 1982-83 as a Fellow, Centre for International Affairs, Harvard University. He is a
Fellow of the All India Management Association, and the Institute of Management Consultants of India. He was
President, Indian Chamber of Commerce, Calcutta in 1989-90 and Chairman CII Eastern Region in 1980-89.
Mr. R.C. Mody, Director
Mr. R. C. Mody aged 80 years is a post graduate in Economics and an Associate of Indian Institute of Bankers.
He retired as Chief General Manager in-charge of Industrial Export Credit Department of Reserve Bank of India
at the National level. He had been officially deputed to RBIs counterpart bodies in some of the European
countries like United Kingdom, Germany and Sweden.
Page 64
Page 66
Composition
KLGs Shareholders' and Investors' Grievance Committee of the Board comprises:
(1) Mr. G.K. Pandey, Chairman
(2) Mr. K.L. Goel
The following terms of reference have been specified for the committee:
To look into the Shareholders' and investors' complaints on matters relating to transfer of shares, nonreceipt of annual report and non-receipt of dividend. In addition, the committee also looks into matters
which can facilitate better investor services and relations.
(b)
any person named as promoter in any offer document of the target Company or any shareholding
pattern filed by the target Company with the stock exchanges pursuant to the Listing Agreement,
whichever is later;
and includes any person belonging to the promoter group as mentioned in Explanation I:
Provided that a director or officer of the target Company or any other person shall not be a promoter, if
he is acting as such merely in his professional capacity.
Explanation I: For the purpose of this clause, 'promoter group' shall include:
(a)
(b)
(ii)
any Company in which the promoter holds 10% or more of the equity capital or
which holds 10% or more of the equity capital of the promoter;
(iii)
the spouse of that person, or any parent, brother, sister or child of that person or of
his spouse;
(ii)
any Company in which 10% or more of the share capital is held by the promoter or
an immediate relative of the promoter or a firm or HUF in which the promoter or any
one or more of his immediate relative is a member;
Page 67
(iii)
any Company in which a Company specified in (i) above, holds 10% or more, of the
share capital; and
(iv)
any HUF or firm in which the aggregate share of the promoter and his immediate
relatives is equal to or more than 10% of the total.
Explanation II: Financial Institutions, Scheduled Banks, Foreign Institutional Investors (FIIs) and
Mutual Funds shall not be deemed to be a promoter or promoter group merely by virtue of their
shareholding.
Provided that the Financial Institutions, Scheduled Banks and Foreign
Institutional Investors (FIIs) shall be treated as promoters or promoter group for the subsidiaries or
companies promoted by them or mutual funds sponsored by them.
Page 68
per cent. of paid-up capital and free reserves and the amount so drawn is first to be used to set off the losses
incurred in the financial year before any dividends in respect of preference or shares is declared; and (iii) the
balance of reserves after withdrawals must not be below 15 per cent. of paid-up share capital.
Capitalisation of Reserves and Issue of Bonus Shares
The Company's Articles of Association permit a resolution of the shareholders in a general meeting to resolve in
certain circumstances, upon the recommendation of the Board of Directors, that certain amounts standing to the
credit of any reserves or the profit and loss account or otherwise available for distribution can be capitalised and
distributed by way of bonus shares. Bonus issues must be issued pro rata to the amount of capital paid-up on
existing shareholdings. Such amounts may also be utilised on behalf of the Company's shareholders to pay in
full, either at par or premium, any unissued shares and/or to pay any amounts for the time being unpaid on any
shares held by the members.
Any issue of bonus shares will be subject to the guidelines issued by the SEBI. The relevant SEBI Guidelines
prescribe that no company shall, pending conversion of convertible securities, issue any shares by way of bonus
unless a similar benefit is extended to the holders of such convertible securities, through reservation of shares in
proportion to such convertible part of the convertible securities falling due for conversion within a period of 12
months from the date of the bonus issue. Furthermore, bonus shares cannot be issued if a company has defaulted
in the payment of interest or principal in respect of fixed deposits, interest on existing debentures/bonds or
principal on redemption of such debentures/bonds, or if partly paid-up shares are not fully paid up. The
declaration of bonus shares in lieu of a dividend cannot be made. The bonus issue shall be made out of free
reserves accumulated from genuine profits or share premium collected in cash only. The reserves created by the
revaluation of fixed assets cannot be capitalised. Furthermore, the company should have sufficient reason to
believe that it has not defaulted in respect of the payment of statutory dues of its employees, such as
contributions to the provident fund, gratuities and/or bonuses.
The issuance of bonus shares must be implemented within six months from the date of approval by the Board of
Directors.
Recent amendments also permit the Company to issue bonus shares to its non-resident shareholders, subject to
the satisfaction of certain conditions.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act and with the approval of shareholders in a general meeting, the
Company may increase its share capital by issuing new Shares. The new Shares shall be offered to existing
shareholders listed on the members' register on the record date in proportion to the amount paid-up on those
Shares at that date. The offer shall be made by notice specifying the number of Shares offered and the date
(being not less than 15 days from the date of the offer) after which the offer, if not accepted, will be deemed to
have been declined. After such date, the Board of Directors may dispose of the Shares offered in respect of
which no acceptance has been received in such manner as the Board of Directors may consider to be most
beneficial to the Company. The offer is deemed to include a right exercisable by the person concerned to
renounce the Shares offered to him/her in favour of any other person provided that the person in whose favour
such shares have been renounced is approved by the Board of Directors in their absolute discretion.
Furthermore, under the provisions of the Companies Act, new Shares may be offered to any persons, whether or
not those persons include existing shareholders, if a special resolution to that effect is passed by the shareholders
of the Company in a general meeting. The issuance of the Shares upon conversion of the Bonds has been duly
approved by a special resolution of the shareholders and such shareholders are deemed to have waived their preemptive rights with respect to such Shares.
From time to time, the Company may, by ordinary resolution, alter its Memorandum of Association, such that it
may subdivide the Shares into a larger number of shares than is fixed by its Memorandum of Association
provided that the same proportionate liability shall continue on the Shares so reduced or increased as existed on
the original Shares before such subdivision or consolidation, and the Company may also cancel Shares which, at
the date of passing of the resolution, have not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of Shares cancelled.
Page 70
The Company's issued share capital may be, inter alia, increased by the exercise of warrants attached to any
securities of the Company, or individually issued, entitling the holder to subscribe for the Shares, or upon the
conversion of convertible debentures issued. The issue of any convertible debentures or the taking of any
convertible loans, other than from the Indian Government and financial institutions, will require the approval of
a special resolution of shareholders.
The Company's Articles of Association also provide that it may, by special resolution from time to time,
increase its capital by the creation of new Shares, consolidate or sub divide its share capital, convert all or any of
its fully paid-up Shares into stock and reconvert that stock into fully paid-up Shares and cancel Shares. The
Company may also from time to time by special resolution reduce its capital.
The Company's Articles of Association also provide that if at any time its share capital is divided into different
classes of shares, the rights attached to any one class (unless otherwise provided by the terms of issue of the
shares of that class) may be varied with the consent in writing of the holders of three-fourths 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.
Preference Shares
Preference share capital is that part of the paid-up capital of the company which fulfils the following
requirements:
(i)
it carries or will carry a preferential right to be paid a fixed amount or an amount calculated at a fixed
rate; and
(ii)
it carries or will carry on a winding-up of the company a preferential right to be repaid the amount of
the capital paid up or deemed to have been paid up.
Preference shares do not confer any further rights to participate in a company's profits or assets. Holders of
preference shares are not entitled to vote at a general meeting except:
(i)
in relation to resolutions placed before the company that directly affect the rights attached to the
holder's preference shares; and/or
(ii)
(iii)
in the case of cumulative preference shares, in respect of an aggregate period of not less than two years
preceding the date of commencement of the meeting; and
(iv)
in the case of non-cumulative preference shares, either in respect of a period of not less than two years
ending with the expiry of the financial year immediately preceding the commencement of the meeting
or in respect of an aggregate period of not less than three years comprised in the six years ending with
the expiry of the financial year immediately preceding the commencement of the meeting.
Under the Companies Act, the Company may issue redeemable preference shares, but (i) no such shares shall be
redeemed except out of the profits which would otherwise be available for dividends or out of the proceeds of a
fresh issue of shares made for the purposes of the redemption; (ii) no such shares shall be redeemed unless they
are fully paid; (iii) the premium, if any, payable on redemption shall have been provided for out of profits or out
of the securities premium account before the shares are redeemed; (iv) where any such shares are redeemed
otherwise than out of the proceeds of a fresh issue, there shall be transferred to the Company's capital
redemption reserve account a sum equal to the nominal amount of the shares redeemed out of profits which
would otherwise have been available for dividends; and (v) the provisions of the Companies Act relating to the
reduction of the share capital of a company shall apply as if the capital redemption reserve account were paid-up
share capital of the Company. Preference shares must be redeemable before the expiry of a period of 20 years
from the date of their issue.
Page 71
legal entity may appoint an authorised representative who can vote in all respects as if a member both by a show
of hands and by a poll.
The Companies Act allows for a company to issue shares with differential rights as to dividends, voting or
otherwise, subject to certain conditions. In this regard, the laws require that, for a company to issue shares with
differential voting rights: (i) the company must have had distributable profits (in accordance with the
requirements of the Companies Act) for the three financial years preceding the year in which it was decided to
issue such shares; (ii) the company must not have defaulted in filing annual accounts and annual returns for the
three financial years immediately preceding the financial year in which the company proposes to issue such
shares; (iii) the articles of association of the company must allow for the issuance of shares with differential
voting rights; and (iv) the conditions as set forth in the Companies (Issue of Share Capital with Differential
Voting Rights) Rules, 2001 must be complied with.
Convertible Securities and Warrants
The Company, in accordance with the provisions of applicable law, may from time to time issue debt
instruments that are partly and fully convertible into Shares and warrants to purchase Shares.
Register of Shareholders and Record Dates
The Company maintains a register of shareholders at its registered office at Plot No. 70 A, Sector- 34, EHTP,
Gurgaon-122004, Haryana, (India). The register and index of beneficial owners maintained by a depositary
under the Depositories Act, 1996 (the "Depositories Act") is deemed to be an index of members and register and
index of debenture holders. The Company recognises as shareholders only those persons who appear on its
register of shareholders and it cannot recognise any person holding any Share or part of it upon any trust,
express, implied or constructive, except as permitted by law.
In the case of Shares held in physical form, the Company registers transfers of Shares on the register of
shareholders upon lodgement of the duly stamped share transfer form executed by or on behalf of the transferor
and by or on behalf of the transferee and duly completed in all respects, accompanied by a share certificate or, if
there is no certificate, the letter of allotment in respect of Shares transferred. In respect of the transfer of Shares
held in the depositary form, the transfer of Shares is effected by the depository entering the name of the
purchaser in its books as the beneficial owner of the Shares. In turn, the Company enters the name of the
depositary in its records as the registered owner of the Shares. The beneficial owner is entitled to all the rights
and benefits, as well as the liabilities, attached to the Shares that are held by the depositary. Transfer of
beneficial ownership through a depositary is exempt from any stamp duty but each depositary participant may
be subject to certain charges.
Under the Companies Act, the Company is also required to maintain a register of debenture holders if it issues
debentures.
Annual Reports and Financial Results
The annual report must be laid before the annual general meeting. This report contains the audited financial
statements, the auditors' report and the directors' report, a corporate governance section, management's
discussion and analysis and certain financial information. Generally such reports are also available for
inspection at the registered office/corporate office of a company during normal working hours for 21 days prior
to the annual general meeting.
Under the Companies Act, the Company must file its annual report with the RoC within 30 days from the date
of the relevant annual general meeting. Under its listing agreements, copies of the annual report, and all
periodical and special reports which are issued by the Company are required to be sent to the stock exchanges
on which the Shares are listed. The Company must also publish its financial results in at least one English
language daily newspaper circulating in the whole or substantially the whole of India and also in a newspaper
published in the language of the region where the Company's registered office is situated.
The Company files certain information online, including its annual report, interim financial statements, report on
corporate governance, shareholding pattern statement, statement of any action taken against the company by any
Page 73
regulatory agency and such other statements, information or reports as may be specified by the SEBI from time
to time or in accordance with the requirements of its listing agreements.
Transfer of Shares
Following the introduction of the Depositories Act and the repeal of Section 22A of the Securities Contracts
(Regulation) Act, 1956 of India (SCRA) the shares of a public company became freely transferable, subject
only to the provisions of Section 111A of the Companies Act. Since the Company is a public company, the
provisions of Section 111A of the Companies Act will apply to it. In accordance with the provisions of Section
111A(2) of the Companies Act, the Board of Directors may refuse to register a transfer of Shares within two
months from the date on which the instrument of transfer or intimation of transfer, as the case may be, is
delivered to the Company, if it has sufficient cause to do so. If the Board of Directors refuses to register a
transfer of Shares, the shareholder wishing to transfer his, her or its Shares may file an appeal with the Indian
Company Law Board (the "CLB") and the CLB can direct the Company to register such transfer.
Pursuant to Section 111A(3) of the Companies Act, if a transfer of shares contravenes any of the provisions of
the Securities and Exchange Board of India Act, 1992 (the "SEBI Act") or the regulations issued thereunder, the
Sick Industrial Companies (Special Provisions) Act, 1985, as amended (the "SICA") or any other laws in India,
the CLB may, on an application made by the Company, a depositary, a participant, an investor or the SEBI,
within two months from the date of transfer of any shares or debentures held by a depositary or from the date on
which the instrument of transfer or the intimation of the transmission was delivered to the Company, as the case
may be, direct the rectification of the register of records after such inquiry as it thinks fit. The CLB may, at its
discretion, issue an interim order suspending the voting rights attached to the relevant shares before making or
completing its investigation into the alleged contravention. Furthermore, the provisions of Section 111A of the
Companies Act do not restrict the right of a holder of shares or debentures to transfer such shares or debentures
and any person acquiring such shares or debentures shall be entitled to voting rights, unless the voting rights
have been suspended by the CLB. By the Companies (Second Amendment) Act, 2002, the CLB will be replaced
by the National Company Law Tribunal. Furthermore, the SICA is sought to be repealed by the Sick Industrial
Companies (Special Provisions) Repeal Act, 2003, although this is not yet in force.
Shares held through depositaries are transferred in the form of book-entries or in electronic form in accordance
with the regulations laid down by the SEBI. These regulations provide for the functioning of the depositories
and the participants, and set out the manner in which the records are to be kept and maintained, and the
safeguards to be followed. Transfers of beneficial ownership of shares held through a depositary are exempt
from stamp duty. The Company has entered into an agreement for such depositary services with the National
Securities Depository Limited and the Central Depository Services (India) Limited.
The SEBI requires that, for trading and settlement purposes, the Shares are to be in book-entry form for all
investors, except for transactions that are not made on a stock exchange and transactions that are not required to
be reported to the stock exchange. The requirement to hold Shares in book-entry form will apply to Bondholders
when they acquire Shares upon conversion.
Pursuant to its listing agreements, in the event that the Company has not effected the transfer of Shares within
one month or where the Company has failed to communicate to the transferee any valid objection to the transfer
within the stipulated time period of one month, it is required to compensate the aggrieved party for the loss of
opportunity caused by the delay.
Acquisition by the Company of its Own Shares
The Company is prohibited from acquiring its own Shares unless the consequent reduction of capital is effected
by an approval of at least 75 per cent. of its shareholders voting on the matter in accordance with the Companies
Act and is also sanctioned by the High Court of competent jurisdiction (namely, the High Court of the state in
which the Company's registered office is situated). Subject to certain conditions, the Company is prohibited
from giving 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.
Page 74
However, pursuant to certain amendments to the Companies Act, a company is empowered to purchase its own
shares or other specified securities out of its free reserves, the securities premium account or the proceeds of any
shares or other specified securities (other than the kind of shares or other specified securities proposed to be
bought back), subject to certain conditions, including:
(i)
(ii)
a special resolution should have been passed in a general meeting authorising the buyback;
(iii)
the buyback is for less than 25 per cent. of the total paid-up capital and free reserves, provided that the
buyback of shares in any financial year shall not exceed 25 per cent. of the total paid-up share capital
in that year;
(iv)
the debt (including all amounts of unsecured and secured debt) owed by the company is not more than
twice the capital and free reserves after such buyback; and
(v)
the buyback is in accordance with the Securities and Exchange Board of India (Buyback of Securities)
Regulation, 1998.
The condition mentioned in (ii) above would not be applicable if the buyback is for less than 10 per cent. of the
total paid-up equity capital and free reserves of the company and provided that such buyback has been
authorised by the board of directors of the company. Furthermore, a company after buying back its securities, is
not permitted to buy back any securities for a period of one year from the buyback or to issue new securities for
six months from the buyback date except by way of bonus issue, conversion of warrants, preference shares or
debentures into shares. The aforesaid restriction relating to the one-year period does not apply to a buyback
authorised by a special resolution of the shareholders in general meeting. Each buyback has to be completed
within a period of one year from the date of passing of the special resolution or the resolution of the board of
directors, as the case may be.
Following a buyback of securities, the company is required to extinguish and physically destroy the securities
bought back within seven days of the last date of completion of the buyback.
A company is also prohibited from purchasing its own shares or specified securities through any subsidiary
company, including its own subsidiary companies or through any investment company (other than a purchase of
shares in accordance with a scheme for the purchase of shares by trustees of, or for shares to be held by or for
the benefit of employees of, the company) or if the company is defaulting on the repayment of deposit or
interest, redemption of debentures or preference shares or payment of dividend to a shareholder or repayment of
any term loan or interest payable thereon to any financial institution or bank, or in the event of non-compliance
with certain other provisions of the Companies Act.
The buyback of securities can be from existing security holders on a proportionate basis or from the open
market or from odd lots or by purchasing securities issued to the employees of the company pursuant to a
scheme of stock option or sweat equity.
Disclosure of Ownership Interest
Section 187C of the Companies Act requires (i) beneficial owners of shares of Indian companies who are not
holders on record to declare to the company details on the holder of record; and (ii) the holder on record to
declare to the company details of the beneficial owner. Any person who fails to make the required declaration
within 30 days from the date beneficial interest in the shares is acquired may be liable for a fine of up to
Rs.1,000 for each day the declaration is not made. Any charge, promissory note or other collateral agreement
created, executed or entered into with respect to any share by the registered owner thereof, or any hypothecation
by the registered owner of any share pursuant to which a declaration is required to be made under Section 187C
of the Companies Act, shall not be enforceable by the beneficial owner or any person claiming through the
beneficial owner if such declaration has not been made. Failure to comply with Section 187C of the Companies
Act will, inter alia, not affect the obligation of the Company to register a transfer of Shares or to pay any
dividends to the registered holder of any Shares pursuant to which such declaration has not been made.
Page 75
Liquidation Rights
Subject to the provisions of the Companies Act (including the rights of employees, the requirement to pay
statutory dues and the rights of creditors as contained in Sections 529A and 530 thereof) and the rights of the
holders of any other shares entitled by their terms of issue to preferential repayment over the Shares, in the event
of the Company's winding-up, the holders of the Shares are entitled to be repaid the amounts of capital paid-up
or credited as paid-up on such Shares or in case of a shortfall, proportionately.
Recent Developments
A draft concept paper has been prepared by a committee appointed by the Department of Company Affairs,
which has recommended substantial changes to the provisions of the Companies Act. In the event the proposed
changes are accepted, it could substantially alter the provisions of the Companies Act described in this section.
Page 76
Distribution of Shareholding
Shareholding Pattern
The table below sets forth the Shareholding pattern of KLG as on December 31, 2006.
Category
PROMOTERS HOLDINGS
PROMOTERS
Indian Promoters
Foreign Promoters
Persons acting in Concerts
Sub Total (A)
NON PROMOTERS HOLDING
Institutional Investors
Mutual Funds and UTI
Banks, Financial Institution, Insurance
Companies (Central/State Govt.
Institutions/Non Govt. Institutions)
Foreign Institutional Investors (FIIs)
Sub Total (B)
OTHERS
Private Corporate Bodies :
Indian Public
NRIs/OCBs
Shares held by custodians and against
which Depository Receipts have been
issued
Any other
Sub Total (c )
Grand Total (A+B+C)
No. of Shares
% of Shareholding
2,890,856
2,890,856
26.81
26.81
84000
963955
1047955
0.78
8.94
9.72
2434241
3610812
222351
22.56
33.49
2.06
284750
291935
2.64
2.72
6844089
63.47
10,782,900
100.00
As on December 31, 2006 the promoters of the Company holds 26.81% shares out of the total share capital of
the Company. There are no persons or any other entity that exercises or could exercise control over the
Company.
Promoters Shareholding
Name of the Promoter
Promoters shareholding
Ritu Goel
Upasana Goel
K. L. Goel
Pushap Lata Goel
Kumud Goel
KLG Computers Pvt.Ltd.
Total
112100
655538
515980
207522
787000
612716
2890856
Shareholding
(%)
1.04
6.08
4.79
1.92
7.30
5.68
26.81
Category
Indian Promoters
Banks, Financial
Institution, Insurance
Companies (Central/State
Govt. Institutions/Non
Govt. Institutions)
Foreign Institutional
Investors (FIIs)
Private Corporate Bodies :
Indian Public
NRIs/OCBs
Shares held by custodians
and against which
Depository Receipts have
been issued
Any other
TOTAL
Pre-Issue*
No. of Shares
per cent holding
2890856
26.81
84000
0.78
963955
2434241
3610812
222351
8.94
22.56
33.49
2.06
4106812
2434241
3610812
222351
29.49
17.48
25.93
1.60
284750
291935
10782900
2.64
2.72
100
284750
291935
13925757
2.04
2.10
100
It has been assumed that Bonds will be subscribed by FIIs and all bonds will be converted into shares. Further, it
has been assumed that there will be no further issue or change in shareholding pattern till conversion. The
conversion price is taken as Rs.350/- per shares i.e SEBI floor price and US$1=Rs.44/-.
As at December 31, 2006, the following persons or entities fall under the category of "public" and hold more
than 1% of the share capital of the Company.
Name
Page 78
Shareholding
(%)
400462
569942
322158
3.710
5.290
2.990
251000
284750
125000
287469
160886
415700
2817367
2.330
2.640
1.160
2.670
1.490
3.860
26.140
To supply and to provide, maintain and operate services, facilities conveniences, bureaus and the like of
the benefits of any person, Company, corporate body, firm trusts, association, society or organization
whatsoever and generally to act as consultants and as a service organization whatsoever and generally to
act as consultants and as a service organization or for providing general, administrative, secretarial,
advisory, commercial, financial, engineering, technical, computer, accountancy, quality control, legal and
other services to persons, companies, corporate bodies, firms, trusts, association or organization
whatsoever.
2.
To carry on the business of Information Technology, developing of engineering, plant design and other
softwares and providing e-commerce services as software developers, consultant, advisors and
counselors, particularly relating but not limited to, web site designing, web site launching, internet,
intranet, enterprise resource planning and other related services.
3.
To carry on the business of Energy Service Companies, Utility (Power, Water, Gas) franchisee, license to
trade, purchase, distribute, manage revenues, customers of Utilities, to carry on operation, maintenance
management, inspection, repair and maintenance of all hardware, software systems in Utilities, to finance,
fund, provide on Build Own and Operate, Build Own and Transfer system for Utilities, to design,
construct, erect equipment for Utilities as contractor, system integrator and service provider and to carry
on all such activities that may be directly or indirectly be incidental or ancillary to the above said
business.
4.
To carry on the business of research and development, prototyping, testing, production of hardware,
software, embedded system for usage in transmission and distribution network of Utilities comprising
Power, Gas and Water. The areas shall include Supervisory Control and Data Acquisition System,
Metering systems, Automation and Control System, Protection System, Distribution Management
Systems, Load Forecasting and Power Trading System and to carry on all such activities that may be
directly or indirectly be incidental or ancillary to the above said business.
5.
To advice, handle, look after and deal with legal matter, taxation matters, industrial dispute matters,
matter arising out of customers, excise and other taxes, duties or cess imposed by Central or State
Government of Municipal Bodies or other authorities and to render services as is usually rendered by
lawyers and Chartered Accountants and other professional people.
6.
To provide or produce the provisions by others of every and all kinds of office and other services, wants
or requirements of such nature that may be required by any persons, firm, trust, organization or Company
in or in connection with any business occupation, professional people profession or vocation or activity
carried on by them.
7.
To provide, supply, maintain and operate for the benefit of any person, institution, Company or
companies services, facilities, conveniences, bureaus and the like including internal telephone, teleprinter,
telex, and communication services and facilities, medical health services, guest houses and entertainment
facilities, canteens, clubs, housing, recreation and welfare centres, organization of Purchases, sales,
marketing and other services, time and motion studies, assessment of work loads, internal audits in
offices, factories and other establishments, general services, in relation to the affairs and business for the
benefit of any person, firms, trust, organization, institution or Company or companies.
8.
To act as consultants and to give advice on all aspect of business organization and to make valuations and
surveys or to give expert advice and suggest ways and means for improving efficiency and improvement
of business management, office organisation, maintenance of accounts and records etc.
9.
To assist any person, institution, Company, organization, trust, firm, undertaking industry of any
description by statistical information, reports, bureaus and the like.
Page 79
These objects along with other objects set out in the Memorandum of Association enable the Company to
undertake its existing and proposed activities.
Page 80
Page 81
the company falls below the minimum limit specified. A company may voluntarily delist from the stock
exchange where its securities are listed provided that an exit opportunity has been given to the investors at an
exit price determined in accordance with a specified formula. The procedure for compulsory delisting also
requires the company to make an exit offer to the shareholders in accordance with the above mentioned
guidelines.
The Delisting Guidelines provide that if for any reason the securities of a company become liable to be delisted
from the relevant stock exchange, the company may, if it desires to maintain listing, follow the procedure laid
down in the Delisting Guidelines. Pursuant to the Delisting Guidelines, the company may, within six months,
issue new shares to the public or the promoters of the company may sell a portion of their shares to the public,
such that the minimum level of public shareholding is re-established.
The Delisting Guidelines also provide that if a company fails to issue new shares or the promoters fail to sell
portion of their shares to the public, so as to bring the public shareholding back to the minimum required level,
the SEBI may delist that Company (after giving notice and as per the procedure laid down in the Delisting
guidelines). The procedure essentially requires the promoter to make an offer to buy the securities from the
public at a fair value (the "fair value" being determined in accordance with the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations 1997 (the " Takeover Code")).
In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to
apply daily circuit breakers which do not allow transactions beyond certain price volatility. The index-based
market-wide circuit breaker system applies at three stages of the movement of the relevant index, at 10 per cent.,
15 per cent. and 20 per cent. These circuit breakers, when triggered, bring about a coordinated trading halt in all
equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement
of either the BSE's Sensitive Index or the NSE, whichever is breached earlier.
In addition to the index-based market-wide circuit breakers, there are currently in place varying individual scrip
wise price bands. However, no price bands are applicable on scrips on which derivative products are available or
scrips included in indices on which derivative products are available. The stock exchanges in India can also
exercise the power to suspend trading during periods of market volatility. The Company is also subject to a daily
circuit breaker imposed by the NSE and the BSE which does not allow transactions beyond a certain volatility
threshold in relation to the price of the Company's Shares. This circuit breaker operates independently of the
index-based market-wide circuit breakers generally imposed by the SEBI on Indian stock exchanges. The
percentage limit on the Company's circuit breaker is set by the NSE and the BSE based on the historical
volatility in the price and trading volume of the Company's Shares. The NSE and the BSE do not inform the
Company of the percentage limit of the circuit breaker from time to time, and may change it without the
Company's knowledge. The Company believes it is currently set at 20 per cent., such that bid and ask prices for
the Company's Shares are only permitted to be within a band of 20 per cent. above or below the Share price at
the opening of any trading day. This circuit breaker effectively limits the upward and downward movements in
the price of the Company's Shares.
Listing Agreement
KLG has entered into Listing Agreements with each of the Indian stock exchanges on which its shares are
listed. Each of the listing agreements provide that if a purchase of a listed company's shares result in the
purchaser and its affiliates holding more than 5 per cent. of the company's outstanding shares or voting rights,
the purchaser and the company must, in accordance with the provisions of the Takeover Code (see below), as
amended to date, report its holding to the company and the relevant stock exchange(s). The agreements also
provide that if an acquisition results in the purchaser and its affiliates holding shares representing more than 15
per cent. of the voting rights in the company, then the purchaser must, in accordance with the provisions of the
Takeover Code, as amended to date, before acquiring such shares, make an offer on a uniform basis to all
remaining shareholders of the company to acquire shares that have at least an additional 20 per cent. of the
voting rights of the total shares of the company at a prescribed price.
Disclosures under the Companies Act and Securities Regulations
Under the Companies Act, a public offering of securities in India must be made by means of a prospectus, which
must contain information specified in the Companies Act and be filed with the RoC having jurisdiction over the
Page 83
place where a company's registered office is situated which, in the case of KLG is currently the RoC at its office
in Hyderabad. Additionally, the SEBI has prescribed certain guidelines, which provide for the contents of the
prospectus. A company's directors and promoters may be subject to civil and criminal liability for
misrepresentation in a prospectus. The Companies Act along with certain guidelines issued by the SEBI also
sets out procedures for the acceptance of subscriptions and the allotment of securities among subscribers and
establishes maximum commission rates for the sale of securities.
Public limited companies are required under the Companies Act to prepare, file with the RoC and circulate to
their shareholders audited annual accounts, which comply with the Companies Act's disclosure requirements
and regulations governing their manner of presentation and which include for listed companies, sections
pertaining to corporate governance and the management's discussion and analysis as required under the listing
agreement. In addition, a listed company is subject to continuing disclosure requirements pursuant to the terms
of its listing agreement with the relevant stock exchange. The companies are also required to publish unaudited
financial statements (albeit subject to a limited review by the company's auditors), on a quarterly basis and are
required to inform stock exchanges immediately regarding any stock price sensitive information. The SEBI
Guidelines permit companies to price issues of securities freely except in the case of an issue of securities to
which the preferential issue guidelines apply.
Indian Stock Exchanges
There are now 23 stock exchanges in India. Most of the stock exchanges use their own governing board for selfregulation. The NSE and the BSE together hold a dominant position among the stock exchanges in terms of
number of listed companies, market capitalisation and trading activity.
BSE
The BSE is the Company's primary stock exchange in India. Established in 1875, it is the oldest stock exchange
in India. It is the first stock exchange in India to have obtained permanent recognition in 1956 from the Indian
Government under the SCRA. It has evolved over the years into its present status as the premier stock exchange
of India. Recently, pursuant to the SEBI's BSE (Corporatisation and Demutualisation) Scheme, 2005, with effect
from August 20, 2005 the BSE has been corporatised and demutualised and is now a company under the
Companies Act.
The BSE has switched over from an open outcry trading system to an online trading network in May 1995 and
has today expanded this network to over 400 cities in India. As at November 30, 2006, the BSE had 912
members, comprising 180 individual members, 710 Indian companies and 22 FIIs. Only a member of the BSE
has the right to trade in the stocks listed on the BSE. As at November 30, 2006, there were 4,786 listed
companies trading on the BSE and the estimated market capitalisation of stocks trading on the BSE was Rs. 35,
773 billion. On November 30, 2006, the average daily turnover on the BSE was Rs. 46.29 billion.
NSE
The NSE was established by financial institutions and banks to provide nationwide, online, satellite-linked,
screen-based trading facilities with market makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange
under the Securities Contracts (Regulation) Act, 1956 in April 1993 and commenced operations in the wholesale
debt market segment in June 1994. The capital market (equities) segment commenced operations in November
1994 and operations in the derivatives segment commenced in June 2000. In October 2006, the average daily
traded value of the capital market segment was Rs.69.1 billion. As at October 31, 2006, the NSE had 981
trading members and about 11,207 registered sub-brokers on the capital market segment and the wholesale debt
market segment. The NSE launched the NSE 50 Index, now known as S&P CNX NIFTY, on 22 April 1996 and
the Mid-cap Index on 1 January 1996. As at December 5, 2006, the market capitalisation of the NSE was
approximately Rs.34,836.3 billion. With a wide network in major metropolitan cities, screen-based trading, a
central monitoring system and greater transparency, the NSE has lately recorded high volumes of trading.
Page 84
Trading Hours
Trading on the NSE is conducted from Monday to Friday between 9:30 a.m. and 3:30 p.m. Trading on the BSE
is conducted from Monday to Friday between 9:55 a.m. and 3:30 p.m. The NSE and the BSE are closed on
public holidays.
Trading Procedure
Until 1995, brokers and members of the BSE received individual orders from which any cross-orders were
matched and taken off. The balance of the orders was transmitted to the trading floor for execution in an open
outcry system. The BSE has now introduced its BSE Online Trading ("BOLT") system on the exchange. The
enhanced transparency in dealings due to the implementation of BOLT has assisted considerably in
smoothening settlement cycles and improving efficiency in back office work. The BOLT was commissioned on
14 March 1995.
Classification of shares
Securities listed on the BSE are classified into "A", "B1", "B2","T", "S", "TS", "F", "G" and "Z" groups for the
guidance and benefit of investors. Securities in the equity segment of the BSE may be classified in the "A",
"B1", "B2","T", "S", "TS" or "Z" group depending on certain qualitative and quantitative parameters, such as
number of trades or value traded. The "F" group consists of fixed income securities. The "T" group consists of
shares that are settled on a trade-to-trade basis as a surveillance measure. The "S" Group consists of shares that
form part of the "BSE-Indonext" segment. The "TS" Group consists of shares in the " BSE-Indonext" segment
that are settled on a trade-to-trade basis as a surveillance measure. The "G" group consists of government
securities for retail investors. In 1999, the BSE introduced the "Z" group which contains shares issued by
companies that have failed to comply with the BSE's listing requirements, have failed to resolve investor
complaints or have not made the required arrangements with both the Central Depository Services (I) Limited
and National Securities Depository Limited in respect of dematerialisation of their securities.
The BSE also provides a facility to market participants for online trading of odd-lot securities in physical form
that are classified within the "A", "B1", "B2", "T", "S", "TS" and "Z" groups and for rights renunciations in
respect of any securities in the equity segment of the BSE.
Settlement
With effect from 31 December 2001, trading in all securities listed in the equity segment of the BSE takes place
in one market segment, known as the Compulsory Rolling Settlement Segment.
With effect from 1 April 2003, in accordance with SEBI directives, all transactions in all groups of securities in
the equity segment of the BSE and all fixed income securities listed on the BSE are required to be settled on a
T+2 basis. The settlement calendar, which indicates the dates for various settlement related activities, is drafted
by the BSE in advance and is circulated among market participants. T+2 settlement requires that a transaction is
settled on the second business day following the relevant trade date. The Shares are listed in the rolling segment
on the BSE and trades in the Shares are settled on a T+2 basis.
Commissions
The maximum commission charged by brokers for trading equities is 2.5 per cent. of the transaction value but,
in practice, commissions generally range between 0.5 per cent. and 2 per cent. The Indian Government's 2004
budget imposed a 10 per cent. service tax (plus an education cess of 3 per cent. on the service tax) on brokerage
commissions. Pursuant to the Finance Act, 2001, payments of commission to brokers exceeding Rs.2,500 are
taxable and attract withholding tax of 10 per cent. (with an additional applicable surcharge and an education
cess of 3 per cent.).
Stock market indices
The following two indices are generally used in tracking the aggregate price movements on the BSE:
Page 85
the BSE Sensitive Index (the "Sensex") consists of listed shares of 30 large market capitalisation companies.
The companies are selected on the basis of market capitalisation, liquidity and industry representation. The
Sensex was first compiled in 1986 with the fiscal year ended 31 March 1979 as its base year. This is the most
commonly used index in India; and
the BSE 100 Index (formerly the BSE National Index) consists of listed shares of 100 companies
including the 30 comprising the Sensex. The BSE 100 Index was introduced in January 1989 with the
fiscal year ended 31 March 1984 as its base year.
An acquirer who, together with persons acting in concert, holds 15% or more but less than 55% of the shares or
voting rights in a company acquires additional shares or voting rights in a company that would entitle him to
exercise more than 5% of the voting rights in any financial year, must make a public announcement to acquire a
further minimum 20% of the voting capital of the company. Such offer has to be made to all public shareholders
of the company.
An acquirer who, together with persons acting in concert, holds 55% or more but less than 75% of the shares or
voting rights in a company acquires any additional shares or voting rights, must make a public announcement to
acquire a further minimum 20% of the voting capital of the company. Such offer has to be made to all public
shareholders of the company.
However, if the acquisition of shares in pursuance to the public offer results in the public shareholding in the
company being reduced below the minimum level required under the listing agreement (which is generally 25%,
but in certain cases, it can be 10%), the acquirer must take necessary steps to ensure that the company complies
with the relevant provisions of the listing agreement to restore minimum public shareholding (which means
restoring public shareholding to not less than 25% or 10%, as the case may be).
Where an acquirer who, together with persons acting in concert, holds 55% or more but less than 75% (under
certain cases to be read as 90%, if the listing of the company's shares was obtained by making an offer of 10%
of issue size to the public, i.e. IPO of just 10%) of the shares or voting rights in a company, is desirous of
consolidating his holding, while ensuring that the public shareholding in the company does not fall below the
minimum level permitted by the listing agreement with the stock exchanges, he may do so only by making an
open offer in accordance with the Takeover Code. Such open offer would be required to be made for the lesser
of (i) 20% of the voting capital of the company; or (ii) such other lesser percentage of the voting capital of the
company as would, assuming full subscription to the public offer, enable the acquirer, together with the persons
acting in concert, to increase his holding to the maximum level possible, which is consistent with the company
meeting the requirements of minimum public shareholding laid down in the listing agreement.
In addition, regardless of whether there has been any acquisition of shares or voting rights in a company, an
acquirer cannot directly or indirectly acquire control over a company (for example, by way of acquiring the right
to appoint a majority of the directors or to control the management or the policy decisions of the company)
unless such acquirer makes a public announcement offering to acquire a further minimum of 20% of the shares
in addition to the shares or voting rights which it already owns in the company.
The public offer for the acquisition of further shares of the target company must be made by way of public
announcement which must be made within four working days of entering into an agreement for the acquisition
of, or decision to acquire directly, shares or voting rights exceeding the relevant percentages of control over the
company.
The Takeover Code sets out the contents of the required public offer as well as the minimum offer price. The
minimum offer price depends on whether the shares of the company are "frequently" or "infrequently" traded (as
defined by the Takeover Code). If the shares are frequently traded, then the minimum offer price would be the
highest of:
the negotiated price under the agreement for the acquisition of shares in the company;
the highest price paid by the acquirer or persons acting in concert with him for any acquisitions,
including through an allotment in a public, preferential or rights issue, during the 26-week period prior
to the date of public announcement; and
the average of the weekly high and low of the closing prices of the shares of the company quoted on the
stock exchange where the shares of the company are most frequently traded during the 26-week period
prior to the date of public announcement, or the average of the daily high and low of the closing prices
of the shares as quoted on the stock exchange where the shares of the company are most frequently
traded during the two weeks preceding the date of public announcement, whichever is higher.
Page 87
The Takeover Code permits conditional offers and provides specific guidelines for the gradual acquisition of
shares or voting rights. Specific obligations of the acquirer and the board of directors of the company in the
offer process have also been set out. Acquirers making a public offer are also required to deposit into an escrow
account a percentage of the total consideration which amount will be forfeited in the event the acquirer does not
fulfil its obligations. In addition, the Takeover Code introduces the "chain principle" by which indirect
acquisition by virtue of an acquisition of companies, whether listed or unlisted, whether in India or abroad, of a
company listed in India will oblige the acquirer to make a public offer to the shareholders of each such company
which is indirectly acquired. On account of any such public offer if the public shareholding of the company falls
below the minimum level prescribed under the listing agreement with the stock exchanges, the acquirer must
take necessary steps to facilitate compliance of the company with the relevant provisions of the listing
agreement, within the time period mentioned therein.
The public offer provisions of the Takeover Code do not apply, among other things, to certain specified
acquisitions, including the acquisition of shares: (i) by allotment in a public and rights issue subject to the
fulfilment of certain conditions; (ii) pursuant to an underwriting agreement; (iii) by registered stockbrokers in
the ordinary course of business on behalf of clients; (iv) in unlisted companies (unless such acquisition results in
an indirect acquisition of shares in excess of 15% in a listed company); (v) pursuant to a scheme of
reconstruction or amalgamation approved by a court in India or abroad; (vi) pursuant to an inter se transfer
between promoters or group companies, subject to certain conditions; (vii) pursuant to a scheme under Section
18 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA"). The public offer provisions of the
Takeover Code do not apply to acquisitions in the ordinary course of business by public financial institutions
either on their own account or as pledgee. However, if the pledgee is a person, other than a bank or a financial
institution, he must make disclosures to the company and the stock exchange within two days of creation of
pledge, if the pledge is of more than 5%, 10%, 14%, 54% or 74% shares or voting rights in the company. An
application may also be filed with SEBI seeking exemption from the requirements of the Takeover Code.
On a continuing basis, any person who holds more than 5 per cent. shares or voting rights in any listed company
is required to disclose to the company, the number of shares or voting rights held by him and change in
shareholding or voting rights, even if such change results in shareholding falling below 5 per cent., if there has
been change in such holdings from the last disclosure made, provided such change exceeds 2 per cent. of total
shareholding or voting rights in the company. Furthermore, if such person is a director or an officer of the
company, and such person's shareholding changes from the last disclosed shareholding by a value in excess of
Rs.0.1 million or 25,000 shares or 1.0 per cent. of the total shareholding or voting rights, whichever is lower,
disclosure of such change is required. Such disclosure is required to be made within four working days of either:
the acquisition or sale of shares or voting rights, as the case may be.
Page 88
Depositories
In August 1996, the Indian Parliament enacted the Depositories Act which provides a legal framework for the
establishment of depositaries to record ownership details and effectuate transfers in book-entry form. The SEBI
framed the Securities and Exchange Board of India (Depositories and Participants) Regulations 1996 which
provide for, inter alia, the registration of depositaries and participants, the rights and obligations of the
depositaries, participants, the issuer companies and the beneficial owners, creation of pledge of securities held in
dematerialised form, and procedure for dematerialisation of shares held in physical form.
The depositary system has significantly improved the operations of the Indian securities markets. Trading of
securities in book-entry form commenced towards the end of 1996. In January 1998, the SEBI notified scrips of
various companies for compulsory dematerialised trading by certain categories of investors such as FIIs and
other institutional investors. The SEBI has subsequently significantly increased the number of scrips in which
dematerialised trading is compulsory for all investors. The SEBI (Disclosure and Investor Protection)
Guidelines 2000 provide that no company shall make a public or rights issue or an offer for sale of securities
unless the company enters into an agreement with a depositary for dematerialisation of securities already issued
or proposed to be issued to the public or existing shareholders and the company gives an option to subscribers,
shareholders or investors to receive the security certificates or hold securities in dematerialised form with a
depositary.
The Companies Act provides that Indian companies making any initial public offerings of securities for or in
excess of Rs.100 million (US$2.3 million) should issue the securities in dematerialised form.
However, even in case of scrips notified for compulsory dematerialised trading, investors, other than
institutional investors, are permitted to trade in physical shares on transactions outside the stock exchange where
there are no requirements of reporting such transactions to the stock exchange, and on transactions on the stock
exchange involving lots of less than 500 securities.
Transfers of shares in book-entry form require both the seller and the purchaser of the shares to establish
accounts with depositary participants registered with the depositaries established under the Depositories Act.
Charges for opening an account with a depositary participant, transaction charges for each trade and custodian
charges for securities held in each account vary depending upon the practice of each depositary participant and
have to be borne by the account holder. Upon delivery, the shares shall be registered in the name of the relevant
depositary in the books of the company and this depositary shall enter the name of the investor in its records as
the beneficial owner. The transfer of beneficial ownership shall be effected through the records of the
depositary. The beneficial owner shall be entitled to all rights and benefits and subject to all liabilities in respect
of his securities held by a depositary.
Page 89
Status
The Bonds constitute direct, senior, unsubordinated, unconditional and (subject to the provisions of
Condition 4) unsecured obligations of the Company and shall at all times rank pari passu and without
any preference or priority among themselves. The payment obligations of the Company under the
Bonds shall, save for such exceptions as may be provided by mandatory provisions of applicable law
and subject to Condition 4, at all times rank at least equally with all of its other present and future
senior, unsubordinated, unconditional and unsecured obligations.
The Bonds are not and are not expected to be rated by any rating agency.
2.
2.1
Page 90
entitled to receive definitive Certificates in respect of their individual holdings of Bonds. The Bonds are
not issuable in bearer form.
The Bonds will be represented by the Global Certificate in the aggregate principal amount of the Bonds
and the Company shall procure the Registrar to make such entries in the Register (as defined below).
The Global Certificate will be issued in the name of, and deposited with, a nominee of a common
depositary for Euroclear and Clearstream, Luxembourg. The Global Certificate need not be security
printed. The Bonds evidenced by the Global Certificate shall be subject to their terms in all respects
and entitled to the same benefits under this Trust Deed as Bonds evidenced by individual definitive
Certificates.
2.2
Title
Title to the Bonds passes only by transfer and registration in the register of Bondholders as described in
Condition 3. The holder of any Bond will (except as otherwise required by law) be treated as its
absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership,
trust or any interest in it or any writing on, or the theft or loss of, the Certificate issued in respect of it)
and no person will be liable for so treating the holder. In these Terms and Conditions "Bondholder" and
(in relation to a Bond) "holder" means the person in whose name a Bond is registered.
3.
3.1
Register
The Company will cause to be kept at the specified office of the Registrar and in accordance with the
terms of the Agency Agreement a register (the Register)on which shall be entered the names and
addresses of the holders of the Bonds and the particulars of the Bonds held by them and of all transfers
of the Bonds, subject to the Registrar having received all such information. In the event that a
Bondholder becomes entitled to a definitive Certificate each Bondholder shall be entitled to receive
only one Certificate in respect of its entire holding. No notice of any trust, charge, encumbrance or
dispute, express, implied or constructive , shall be entered on the Register in respect of any Bond,
except as may be required by law or by any court or other authority of competent jurisdiction. Each
Bondholder shall be entitled to receive only one Certificate in respect of its entire holding.
3.2
Transfers
Subject to Condition 3.5 and the terms of the Agency Agreement, a Bond may be transferred or
exchanged by delivery of the Certificate issued in respect of that Bond, with the form of transfer on the
back duly completed and signed by the holder or his attorney duly authorised in writing, to the
specified office of the Registrar or any of the Transfer Agents. No transfer of title to a Bond will be
valid unless and until entered on the Register.
Transfers of interests in the Bonds evidenced by the Global Certificate will be effected in accordance
with the rules of the relevant clearing systems.
The Bonds are not transferable to US persons (as defined in the United States Securities Act 1933 (as
amended) nor to persons resident in India and the Registrar may, without incurring any liability,
whatsoever refuse to register any such person as the holder of a Bond. The Registrar is under no
obligation to enquire as to the residency or tax status of a holder or potential holder and shall not be
liable to any person in any manner whatsoever for any failure to do so.
Every instrument of transfer must be signed by the transferor and, where jointly held, by all joint
holders (or where the transferor is a corporate entity given under its common seal) and the transferor
shall be deemed to remain the owner of the Bond to be transferred until the name of the transferee is
entered in the Register in respect of that Bond.
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Every instrument of transfer must be deposited at the specified office of the Registrar, accompanied by
the Certificate for the Bond to be transferred and, if the instrument is executed by some other person on
his behalf, the authority of that person to do so.
3.3
3.3.1
Each new Certificate to be issued upon a transfer or exchange of Bonds will, within seven business
days of receipt by the Registrar or, as the case may be, any other relevant Transfer Agent of the
original Certificate and the form of transfer duly completed and signed, be made available for
collection at the specified office of the Registrar or such other relevant Transfer Agent or, if so
requested in the form of transfer, be mailed by uninsured mail (at the expense of the Company) at the
risk of the holder entitled to the Bonds but free of charge to the holder to the address specified in the
form of transfer. The form of transfer is available at the specified office of the Principal Paying and
Conversion Agent.
Except in the limited circumstances described in the Global Certificate, owners of interests in the
Bonds represented by the Global Certificate will not be entitled to receive definitive Certificates.
3.3.2
Where some but not all of the Bonds in respect of which a Certificate is issued is to be transferred,
exchanged, converted or redeemed, a new Certificate in respect of the Bonds not so transferred,
exchanged, converted or redeemed will, within seven business days of delivery of the original
Certificate to the Registrar or other relevant Agent, be made available for collection at the specified
office of the Registrar or such other relevant Agent or, if so requested in the form of transfer, be mailed
by uninsured mail at the expense of the Company and at the risk of the holder of the Bonds not so
transferred, exchanged, converted or redeemed to the address of such holder appearing on the Register.
3.3.3
For the purposes of these Conditions, "business day" shall mean a day other than a Saturday or Sunday
on which banks are open for general banking business in New York City, London, Singapore and
Mumbai and in the city in which the specified office of the relevant Agent is located and in the case of
surrender of Certificates, the place where such Certificates are surrendered.
3.4
3.5
Closed Periods
No Bondholder may require the transfer of a Bond to be registered (i) during the period of 15 calendar
days ending on (and including) the due date for any payment of principal, premium (if any) and interest
on such Bonds; (ii) during the period of 10 business days ending on (and including) the dates for
redemption or conversion pursuant to Condition 8.2 and Condition 8.3; (iii) after a Conversion Notice
(as defined in Condition 6.2) has been delivered with respect to a Bond; (iv) after a Relevant Event Put
Exercise Notice (as defined in Condition 8.4) has been deposited in respect of such a Bond; or(v) after
a Purchase Notice (as defined in Condition 8.5) has been deposited in respect of such a Bond.
3.6
Regulations
All transfers of Bonds and entries on the Register will be made subject to the detailed regulations
concerning transfer of Bonds scheduled to the Agency Agreement. The regulations may be changed by
the Company, with the prior written approval of the Trustee and the Registrar. A copy of the current
regulations will be mailed (free of charge to the Bondholder and at the expense of the Company) by the
Registrar to any Bondholder upon request.
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4.
Negative Pledge
So long as any Bond remains outstanding (as defined in the Trust Deed):
4.1
the Company will not, and will procure that none of its Subsidiaries (as defined below) will create or
permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest
("Security") upon the whole or any part of its undertaking, assets or revenues, including any uncalled
capital present or future, to secure any Relevant Indebtedness (as defined below), or to secure any
guarantee or indemnity in respect of any Relevant Indebtedness;
4.2
the Company will procure that no Subsidiary or other person creates or permits to subsist any Security
upon the whole or any part of the undertaking, assets or revenues present or future of that Subsidiary or
other person to secure any of the Companys or any Subsidiarys Relevant Indebtedness, or to secure
any guarantee of or indemnity in respect of any of Companys or any Subsidiary's Relevant
Indebtedness.
4.3
the Company will procure that no other person gives any guarantee of, or indemnity in respect of, any
of the Company's or any Subsidiary's Relevant Indebtedness,
unless, at the same time or prior thereto, the Company's obligations under the Bonds and the Trust
Deed (a) are secured equally and rateably therewith to the satisfaction of the Trustee, or (b) have the
benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute
discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by
an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.
For the purposes of these Conditions:
"Relevant Indebtedness" means any present or future indebtedness (whether being principal, premium,
interest or other amount) in the form of, or represented by, bonds, debentures, notes or other investment
securities or any borrowed money or any liability under or in respect of any acceptance or acceptance
credit which (i) are denominated in a currency other than Rupees or are by their terms payable, or
confer a right to receive payment, in any currency other than Rupees, or (ii) are denominated or
payable in Rupees and more than 25per cent. of the aggregate principal amount thereof is initially
distributed outside India.
5.
Interest
5.1
Interest Rate: The Bonds will bear interest from 26 March 2007 (the Interest Commencement Date)
at the rate of 1% per annum of the principal amount of the Bonds. Interest is payable semi-annually in
arrears on 26 September and 26 March (each an "Interest Payment Date") with the first such payment
being made on 26 September 2007, in respect of the period from and including the Interest
Commencement Date to but excluding the first Interest Payment Date. However, if any Interest
Payment Date, would otherwise fall on a date which is not a business day, it will be postponed to the
next business day unless it would then fall in to the next calendar month, in which case it would be
brought forward to the preceding business day. Such payment shall be in respect of the period
beginning on (and including) the Issue Date or any Interest Payment Date, and ending on (but
excluding) the next Interest Payment Date. Interest shall be paid to the Bondholder who is shown as the
registered holder of a particular Bond at the close of business on the record date, which is 15 calendar
days prior to the Interest Payment Date (the "Record Date").
In the event a Bondholder exercises his Conversion Right (as described in Condition 6.1), accrued
interest will be paid by the Company directly to such Bondholder at account details specified in the
Conversion Notice for the period from and including the immediately preceding Interest Payment Date
or Interest Commencement Date, as the case may be, up to but excluding the Conversion Date. The
Trustee and Agents shall not be liable or responsible in any manner whatsoever for such calculation or
payment by the Company.
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When interest is required to be calculated in respect of a period of less than a full year period, it shall
be calculated on the basis of a 360 day year consisting of 12 months of 30 days each and, in the case of
an incomplete month, the number of days elapsed on the basis of a month of 30 days.
If the Company fails to pay any sum in respect of the Bonds when the same becomes due and payable
under these Conditions, interest shall accrue on the overdue sum at the rate of 8.25 per cent. per annum
on an as converted basis on the amount of Bonds to be converted until such conversion takes place.
Such default interest shall accrue on the basis of the actual number of days elapsed and a 360-day year.
5.2
Accrual of Interest: Each Bond will cease to bear interest on the earlier of:
(a)
up to but excluding the Conversion Date; and
(b)
the due date of redemption of such Bond unless payment is improperly withheld or refused or
default is otherwise made in which case interest will continue to accrue until whichever is the
earlier of:
(i)
the date on which all amounts due in respect of such Bond have been paid; and
(ii)
five business days prior to the date on which the full amount of the moneys payable
in respect of such Bond has been received by the Principal Paying and Conversion
Agent or the Registrar, as the case may be, and notice to that effect has been given to
the Bondholders in accordance with Condition 17.
6.
Conversion
6.1
Conversion Right
6.1.1
Conversion Period:
Subject as hereinafter provided, Bondholders have the right to convert their Bonds into Shares at any
time during the Conversion Period (as defined below). The right of a Bondholder to convert any Bond
into Shares is called the "Conversion Right". Subject to and upon compliance with the provisions of
this Condition, the Conversion Right attaching to any Bond may be exercised, at the option of the
holder thereof, at any time (subject to the next paragraph) on and after 26 March 2007 up to the close
of business (at the place where the Certificate evidencing such Bond is deposited for conversion) on 16
March 2012 (or if that is not a business day, on the immediately preceding business day) (but, except
as provided in Condition 6.1.4, in no event thereafter) or if such Bond shall have been called for
redemption prior to the Maturity Date (as defined below), then up to the close of business (at the place
aforesaid) on a date no later than seven business days (at the place aforesaid) prior to the date fixed for
redemption thereof (the "Conversion Period").
Conversion Rights may not be exercised in relation to any Bond during the period (each a "Closed
Period") commencing on: (i) the date falling 21 days prior to the date of the Company's annual general
shareholders' meeting and ending on the date of that meeting, (ii) the date falling 30 days prior to an
extraordinary shareholders' meeting and ending on the date of that meeting, (iii) the date that the
Company notifies Bombay Stock Exchange Limited (the "BSE") and The National Stock Exchange of
India Limited ("NSE") of the record date for determination of the shareholders entitled to receipt of
dividends, subscription of shares due to capital increase or other benefits, and ending on the record date
for the distribution or allocation of the relevant dividends, rights and benefits or (iv) on such date and
for such period as determined by Indian law applicable from time to time that the Company is required
to close its stock transfer books. The Company will give notice of any such period to the Bondholders
and the Principal Paying and Conversion Agent at the beginning of each such period, if practical and
depending on any applicable stock exchange requirements, at least five business days prior to the
beginning of each such period.
The Company shall provide to the Trustee, the Bondholders and the Principal Paying and Conversion
Agent notice of any meeting of the Company's board of directors which is convened to consider the
declaration of any dividends, subscription of shares due to capital increase or other benefits, at the same
time notice of such meeting is announced in India.
Page 94
In addition, Conversion Rights may not be exercised (i) in respect of a Bond where the Bondholder
shall have exercised its right to require the Company to redeem such Bond pursuant to Condition 8.4 or
8.5 or (ii) except as provided in Condition 6.1.4 and Condition 10, in each case following the giving of
notice by the Trustee pursuant to Condition 10.
The number of Shares to be issued on conversion of a Bond will be determined by the Company by
dividing the principal amount of the Bond to be converted (translated into Rupees at the fixed rate of
Rs.43.70 = U.S.$1.00 (the "Fixed Exchange Rate") by the Conversion Price in effect at the Conversion
Date (both as hereinafter defined). Neither the Trustee nor the Agents shall be responsible for
determining the number of Shares to be issued on conversion of a Bond or for verifying the Companys
determination of such number of Shares and neither shall be responsible or liable to the Bondholders or
any other person for any erroneous determination by the Company or any delay or failure of the
Company in making such determination.
A Conversion Right may only be exercised in respect of one or more Bonds. If more than one Bond
held by the same holder is converted at any one time by the same holder, the number of Shares to be
issued upon such conversion will be calculated on the basis of the aggregate principal amount of the
Bonds to be converted.
Upon exercise of Conversion Rights in relation to any Bond and the fulfilment by the Company of all
its obligations in respect thereof, the relevant Bondholder shall have no further rights in respect of such
Bond and the obligations of the Company in respect thereof shall be extinguished.
6.1.2
Fractions of Shares:
Fractions of Shares will not be issued on conversion and no cash adjustments will be made in respect
thereof. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by
operation of law or otherwise occurring after the Issue Date which reduces the number of Shares
outstanding, the Company will upon conversion of Bonds pay in cash (in U.S. dollars by means of a
U.S. dollar cheque drawn on a bank in New York) a sum equal to such portion of the principal amount
of the Bond or Bonds evidenced by the Certificate deposited in connection with the exercise of
Conversion Rights, aggregated as provided in Condition 6.1.1, as corresponds to any fraction of a
Share not issued if such sum exceeds U.S.$10.00 (which sum shall be translated into U.S. dollars at the
Fixed Exchange Rate). Any such sum shall be paid not later than seven business days in Mumbai after
the relevant Conversion Date by transfer to a U.S. dollar account with a bank in New York City
specified in the relevant Conversion Notice.
6.1.3
6.1.4
relevant Conversion Date (as defined in Condition 6.2.1(ii)) notwithstanding that the full amount of the
moneys payable in respect of such Bond shall have been received by the Principal Paying and
Conversion Agent or the Trustee before such Conversion Date or that the Conversion Period may have
expired before such Conversion Date.
6.1.5
Meaning of "Shares":
As used in these Conditions, the expression "Shares" means (1) shares of the class of share capital of
the Company which, at the date of the Trust Deed, are designated as shares of the Company with full
voting rights, together with shares of any class or classes resulting from any subdivision, consolidation
or reclassification of those shares, which as between themselves have no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary liquidation or dissolution
of the Company; and (2) fully-paid and non-assessable shares of any class or classes of the share
capital of the Company authorised after the date of the Trust Deed which have no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or windingup of the Company; provided that, subject to the provisions of Condition 11, shares to be issued on
conversion of the Bonds means only "Shares" as defined in sub-clause (1) above.
6.2
Conversion Procedure
6.2.1
Conversion Notice:
(i)
To exercise the Conversion Right attaching to any Bond, the holder thereof must complete,
execute and deposit at his own expense during 9 a.m. and 3 p.m. at the specified office of the
Principal Paying and Conversion Agent on any business day during the Conversion Period
(subject as provided in this Condition 6) a notice of conversion (a "Conversion Notice") in
duplicate in the form (for the time being current) obtainable from the specified office of each
Agent, together with (a) the relevant Certificate and (b) certification by the Bondholder, in the
form obtainable from the Principal Paying and Conversion Agent that is not a US person or
located in the United States (according to the meaning of Regulation S of the Securities Act,
1933 of the United States) and any certificates and other documents, as may be required under
the laws of the Republic of India or the jurisdiction in which the specified office of such
Principal Paying and Conversion Agent shall be located. A Conversion Notice deposited
outside the hours specified above or on a day which is not a business day at the place of the
specified office of the relevant Principal Paying and Conversion Agent shall for all purposes
be deemed to have been deposited with that Principal Paying and Conversion Agent during the
hours specified above on the next business day following such business day. Any Bondholder
who deposits a Conversion Notice during a Closed Period will not be permitted to convert the
Bonds into Shares (as specified in the Conversion Notice) until the next business day after the
end of that Closed Period, which (if all other conditions to conversion have been fulfilled) will
be the Conversion Date for such Bonds notwithstanding that such date may fall outside of the
Conversion Period. A Bondholder exercising its Conversion Right for Shares will be required
to open a depository account with a depositary participant under the Depositories Act (Act
22), 1996 of India (the "1996 Depositories Act"), for the purposes of receiving the Shares.
(ii)
The conversion date in respect of a Bond (the "Conversion Date") must (subject to the
provisions of Condition 6.1.4 and as provided below) fall within the Conversion Period and
will be deemed to be the date of the surrender of the Certificate in respect of such Bond and
delivery of such Conversion Notice and, if applicable, any payment to be made or indemnity
given under these Conditions in connection with the exercise of such Conversion Right and all
conditions precedent to conversion of the Bond are fulfilled, save that if a Bondholder
deposits a Conversion Notice during a Closed Period the Conversion Date in respect of the
relevant Bond shall be the next business day at the place of the specified office of the relevant
Principal Paying and Conversion Agent after the end of that Closed Period, notwithstanding
that such date may fall outside of the Conversion Period. A Conversion Notice once delivered
shall be irrevocable and may not be withdrawn unless the Company consents to such
withdrawal. A Conversion Right may only be exercised in respect of US$10,000 of Bonds or
integral multiples thereof and only in respect of the whole of the principal amount of a Bond.
Page 96
(iii)
6.2.2
The Principal Paying and Conversion Agent and/or the Company may reject any incomplete
or incorrect Conversion Notice or any Conversion Notice that is not accompanied by any
relevant Certificates in respect thereof.
6.2.3
Delivery of Shares:
(i)
Upon exercise by a Bondholder of its Conversion Right for Shares, the Company will, on or
with effect from the relevant Conversion Date, enter the relevant Bondholder or his/their
nominee in the register of members of the Company in respect of such number of Shares to be
issued upon conversion (notwithstanding any Retroactive Adjustment (as defined below) of
the Conversion Price referred to below prior to the time it takes effect) and will, as soon as
practicable, and in any event not later than 30 days after the relevant Conversion Date, cause
the relevant securities account of the Bondholder exercising his Conversion Right for Shares
or of his/their nominee, to be credited with such number of relevant Shares to be issued upon
conversion (notwithstanding any Retroactive Adjustment of the Conversion Price referred to
below prior to the time it takes effect) and shall further cause the name of the concerned
Bondholder or its nominee to be registered accordingly, in the record of the depositors,
maintained by the depository registered under the 1996 Depositories Act with whom the
Company has entered into a depository agreement and, subject to any applicable limitations
then imposed by Indian laws and regulations, shall procure the Share Transfer Agent to, as
soon as practicable, and in any event within 14 business days in Mumbai of the Conversion
Date, despatch or cause to be despatched to the order of the person named for that purpose in
the relevant Conversion Notice at the place and in the manner specified in the relevant
Conversion Notice (uninsured and the risk of delivery at any such place being that of the
converting Bondholder), a U.S. dollar cheque drawn on a branch of a bank in New York City
in respect of any cash payable pursuant to Condition 6.1.2 required to be delivered on
conversion and such assignments and other documents (if any) as required by law to effect the
transfer thereof.
The crediting of the Shares to the relevant securities account of the converting Bondholder
will be deemed to satisfy the Company's obligation to pay the principal and premium on the
Bonds.
(ii)
If the Conversion Date in relation to any Bond shall be after the record date for any issue,
distribution, grant, offer or other event as gives rise to the adjustment of the Conversion Price
Page 97
pursuant to Condition 6.3, but before the relevant adjustment becomes effective under the
relevant Condition (a "Retroactive Adjustment"), upon the relevant adjustment becoming
effective the Company shall procure the issue to the converting Bondholder (or in accordance
with the instructions contained in the Conversion Notice (subject to applicable exchange
control or other laws or other regulations)), such additional number of Shares ("Additional
Shares") as, together with the Shares issued or to be issued on conversion of the relevant
Bond, is equal to the number of Shares which would have been required to be issued on
conversion of such Bond if the relevant adjustment to the Conversion Price had been made
and become effective as at such Conversion Date immediately after the relevant record date
and in such event and in respect of such Additional Shares references in Conditions 6.2.3(i)
and (iii) to the Conversion Date shall be deemed to refer to the date upon which the
Retroactive Adjustment becomes effective (notwithstanding that the date upon which it
becomes effective falls after the end of the Conversion Period).
(iii)
6.3
The Shares issued upon conversion of the Bonds will in all respects rank pari passu with the
Shares in issue on the relevant Conversion Date (except for any right excluded by mandatory
provisions of applicable law) and such Shares shall be entitled to all rights the record date for
which falls on or after such Conversion Date to the same extent as all other fully-paid and
non-assessable Shares of the Company in issue as if such Shares had been in issue throughout
the period to which such rights relate. A holder of Shares issued on conversion of Bonds shall
not be entitled to any rights the record date for which precedes the relevant Conversion Date.
6.3.1
6.3.2
in effect when such dividend and/or distribution is declared (or, if the Company has fixed a prior record
date for the determination of shareholders entitled to receive such dividend and/or distribution, on such
record date) shall be adjusted in accordance with the following formula:
NCP = OCP x [N] / [N + n]
where:
NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price before such adjustment.
N = the number of Shares outstanding, at the time of issuance of such dividend and/or distribution (or
at the close of business in Mumbai on such record date as the case may be).
n = the number of Shares to be distributed to the shareholders as a dividend and/or distribution.
Effective date of adjustment: An adjustment made pursuant to this Condition 6.3.2 shall become
effective immediately on the relevant event referred to in this Condition 6.3.2 becoming effective or, if
a record date is fixed therefor, immediately after such record date; provided that in the case of a
dividend in Shares which must, under applicable laws of India, be submitted for approval to a general
meeting of shareholders of the Company or be approved at a meeting of the Board of Directors of the
Company before being legally paid or made, and which is so approved after the record date fixed for
the determination of shareholders entitled to receive such dividend, such adjustment shall, immediately
upon such approval being given by such meeting, become effective retroactively to immediately after
such record date.
6.3.3
the record date for the issue of any rights or warrants which requires an adjustment of the
Conversion Price pursuant to Condition 6.3.5, 6.3.6 or 6.3.7;
(b)
the day immediately before the date of issue of any securities convertible into or exchangeable
for Shares which requires an adjustment of the Conversion Price pursuant to Condition 6.3.9;
(c)
the day immediately before the date of grant, offer or issue of any Shares which requires an
adjustment of the Conversion Price pursuant to Condition 6.3.10 or, if applicable, the record
date for determination of stock dividend entitlement as referred to in Condition 6.3.10; or
(d)
the day immediately before the date of issue of any rights, options or warrants which requires
an adjustment of the Conversion Price pursuant to Condition 6.3.11;
then (except where such dividend, bonus issue or free distribution gives rise to a retroactive
adjustment of the Conversion Price under Conditions 6.3.1 and 6.3.2) no adjustment of the
Conversion Price in respect of such dividend, bonus issue or free distribution shall be made
under Conditions 6.3.1 and 6.3.2, but in lieu thereof an adjustment shall be made under
Condition 6.3.5, 6.3.6, 6.3.7, 6.3.9, 6.3.10, 6.3.11 or 6.3.13 (as the case may require) by
including in the denominator of the fraction described therein the aggregate number of Shares
to be issued pursuant to such dividend, bonus issue or free distribution.
6.3.4
Capital Distribution:
Adjustment:
(i)
If the Company shall pay or make to its Shareholders any Capital Distribution (as defined
Page 99
below), then the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [CMP - fmv] / CMP
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
CMP = the Current Market Price (as defined in Condition 6.3.15 below) per Share on the date
on which the relevant Dividend is first publicly announced.
fmv = the portion of the Fair Market Value (as defined below), with such portion being
determined by dividing the Fair Market Value of the aggregate Capital Distribution by the
number of Shares entitled to receive the relevant Capital Distribution (or, in the case of a
purchase of Shares or any receipts or certificates representing shares by or on behalf of the
Company, by the number of Shares in issue immediately prior to such purchase), of the Capital
Distribution attributable to one Share.
(ii)
If the Company shall pay or make to its Shareholders any Extraordinary Cash Dividend then,
in such case, the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [CMP - C] /CMP
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
CMP = the Current Market Price (as defined in Condition 6.3.15 below) per Share on the date
on which the relevant Dividend is first publicly announced.
C = the Extraordinary Cash Dividend attributable to one Share.
or the issue of Shares by way of capitalisation of profits or reserves, or any like or similar event or any
adjustment to the Conversion Price.
For the purposes of this Condition 6.3.4, an Extraordinary Cash Dividend shall be any cash Dividend
where the total amount of:
(a)
such cash Dividend, which shall exclude all taxes, including but not limited to,(i) withholding
tax and (ii) any corporate tax and dividend distribution tax attributable to that Dividend (the
Relevant Dividend); and
(b)
all other cash Dividends paid or declared on the Shares, in the period beginning on the day
immediately after the prior anniversary of the relevant date of determination (other than any
dividend or portion thereof previously deemed to be an excess cash dividend or a Distribution
in respect of which an adjustment was made to the Conversion Price) (the "previous
dividends"), except that where the date of announcement or payment for dividends for two
different fiscal years has occurred in such period, such dividends relating to the earlier fiscal
year will be disregarded for the purpose of determining the previous dividends,
exceeds an amount equal to 25.00 per cent., 27.50 per cent., 30.25 per cent., 33.30 per cent.,
36.60 per cent. and 40.25 per cent. of the par value of the Shares, on a per Share basis, that the
Company may pay or declare on the Shares in each of the financial years ended 31 March
2007, 31 March 2008, 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012,
respectively.
Such adjustment shall become effective on the record date for the determination of
Shareholders entitled to receive such Dividend in cash.
"Relevant Period" means the period beginning on the first Trading Day after the record date
for the first cash Dividend aggregated in the total current Dividend, and ending on the Trading
Day immediately preceding the date of first public announcement for the Relevant Dividend.
However, if there were no cash Dividends publicly announced during the 365 consecutive day
period prior to the date of first public announcement for the Relevant Dividend or if there is no
other Dividend aggregated in the total current dividend, the Relevant Period will be the entire
such period of 365 consecutive calendar days.
"Dividend" means any dividend or distribution of cash or other property or assets or evidences
of the Company's indebtedness, whenever paid or made and however described provided that:
(a)
where a Cash Dividend is announced which is to be, or may at the election of a shareholder or
shareholders be, satisfied by the issue or delivery of Shares or other property or assets, or
where a capitalisation of profits or reserves is announced which is to be, or may at the election
of a shareholder or shareholders be, satisfied by the payment of a Dividend, then for the
purposes of this definition the Dividend in question shall be treated as a Dividend of (i) such
cash Dividend or (ii) the Fair Market Value (on the date of announcement of such Dividend or
date of capitalisation (as the case may be) or, if later, the date on which the number of Shares
(or amount of property or assets, as the case may be) which may be issued or delivered is
determined) of such Shares or other property or assets if such Fair Market Value is greater
than the Fair Market Value of such cash Dividend;
(b)
any tender or exchange offer falling within Condition 6.3.12 and any issue or distribution of
Shares falling within Condition 6.3.2 shall be disregarded; and
(c)
a purchase or redemption of ordinary share capital by or on behalf of the Company shall not
constitute a Dividend unless, in the case of purchases of Shares by or on behalf of the
Company, the Volume Weighted Average Price per Share (before expenses) on any one day in
respect of such purchases exceeds the Current Market Price per Share by more than 5 per cent.
either (1) on that day (or if such day is not a Trading Day, the immediately preceding Trading
Day), or (2) where an announcement (excluding for the avoidance of doubt for these purposes,
Page 101
any general authority for such purchases or redemptions approved by a general meeting of
shareholders of the Company or any notice convening such a meeting of shareholders) has
been made of the intention to purchase Shares at some future date at a specified price, on the
Trading Day immediately preceding the date of such announcement, in which case such
purchase shall be deemed to constitute a Dividend (but not a cash Dividend) to the extent that
the aggregate price paid (before expenses) in respect of such Shares purchased by or on behalf
of the Company exceeds the product of (i) the Current Market Price per Share determined as
aforesaid and (ii) the number of Shares so purchased.
"Fair Market Value" means, with respect to any property on any date, the fair market value of
that property as determined in good faith by an Independent Financial Institution provided,
that (i) the Fair Market Value of a cash Dividend paid or to be paid shall be the amount of such
cash Dividend; (ii) the Fair Market Value of any other cash amount shall be equal to such cash
amount; and in the case of (i) translated into Rupees (if declared or paid in a currency other
than Rupees) at the rate of exchange used to determine the amount payable to shareholders
who were paid or are to be paid or are entitled to be paid the cash Dividend in Rupees; and in
any other case, converted into Rupees (if expressed in a currency other than Rupees) at such
rate of exchange as may be determined in good faith by an Independent Financial Institution to
be the spot rate ruling at the close of business on that date (or if no such rate is available on
that date the equivalent rate on the immediately preceding date on which such a rate is
available).
"Volume Weighted Average Price" means, in respect of a Share on any Trading Day, the order
book volume-weighted average price of a Share appearing on or derived from Bloomberg (or
any successor service) page WWTC IN or such other source as shall be determined to be
appropriate by an Independent Financial Institution on such Trading Day, provided that on any
such Trading Day where such price is not available or cannot otherwise be determined as
provided above, the Volume Weighted Average Price of a Share in respect of such Trading Day
shall be the Volume Weighted Average Price, determined as provided above, on the
immediately preceding Trading Day on which the same can be so determined.
"Cash Dividend" means (i) any Dividend which is to be paid in cash and (ii) any Dividend
determined to be a cash Dividend pursuant to paragraph (a) of the definition "Dividend", and
for the avoidance of doubt, a Dividend falling within paragraph (c) of the definition
"Dividend" shall be treated as not being a cash Dividend.
6.3.5
(b)
at a consideration per Share receivable by the Company which is fixed after the record date
mentioned below and is less than the Current Market Price per Share on the date the Company
fixes the said consideration, then the Conversion Price in effect (in a case within (a) above) on
the record date for the determination of shareholders entitled to receive such rights or (in a
case within (b) above) on the date the Company fixes the said consideration shall be adjusted
in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
Page 102
(b)
at a consideration per Share receivable by the Company which is fixed after the record date
mentioned above and is less than the higher of the Conversion Price in effect and the Current
Market Price per Share on the date the Company fixes the said consideration, then the
Conversion Price in effect (in a case within (a) above) on the record date for the determination
of shareholders entitled to receive such warrants or (in a case within (b) above) on the date the
Company fixes the said consideration shall be adjusted in accordance with the following
formula:
NCP = OCP x [N + v] / [N + n]
where:
Page 103
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of
business in India (in a case within (a) above) on such record date or (in a case within (b)
above) on the date the Company fixes the said consideration.
n = the number of Shares to be issued upon exercise of such warrants at the said consideration
which, where no applications by shareholders entitled to such warrants are required, shall be
based on the number of warrants issued. Where applications by shareholders entitled to such
warrants are required, the number of such Shares shall be calculated based upon (aa) the
number of warrants which underwriters have agreed to underwrite as referred to below or, as
the case may be, (bb) the number of warrants for which applications are received from
shareholders as referred to below save to the extent already adjusted for under (aa).
v = the number of Shares which the aggregate consideration receivable by the Company
(determined as provided in Condition 6.3.16) would purchase at such Conversion Price in
effect or, as the case may be, Current Market Price per Share specified in (a) or, as the case
may be, (b) above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective (i)
where no applications for such warrants are required from shareholders entitled to the same, upon their
issue and (ii) where applications by shareholders entitled to the same are required as aforesaid,
immediately after the latest date for the submission of such applications or (if later) immediately after
the Company fixes the said consideration but in all cases retroactively to immediately after the record
date mentioned above.
Warrants not subscribed for by Shareholders: If, in connection with a grant, issue or offer to the holders
of Shares of warrants entitling them to subscribe for or purchase Shares in the circumstances described
in (a) and (b) of this Condition 6.3.6, any warrants which are not subscribed for or purchased by the
shareholders entitled thereto are underwritten by others prior to the latest date for the submission of
applications for such warrants, an adjustment shall be made to the Conversion Price in accordance with
the above provisions which shall become effective immediately after the date the underwriters agree to
underwrite the same or (if later) immediately after the Company fixes the said consideration but
retroactively to immediately after the record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Shares of warrants entitling them to
subscribe for or purchase Shares, any warrants which are not subscribed for or purchased by the
underwriters who have agreed to underwrite as referred to above or by the shareholders entitled thereto
(or persons to whom shareholders have transferred the right to purchase such warrants) who have
submitted applications for such warrants as referred to above are offered to and/or subscribed by others,
no further adjustment shall be made to the Conversion Price by reason of such offer and/or
subscription.
6.3.7
(b)
case within (b) above) on the date the Company fixes the said consideration shall be adjusted
in accordance with the following formula:
NCP = OCP x [N + v] / [N + n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of
business in India (in a case within (a) above) on such record date or (in a case within (b)
above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights or warrants and
conversion or exchange of such convertible or exchangeable securities at the said
consideration being, in the case of rights, (aa) the number of Shares initially to be issued upon
conversion or exchange of the number of such convertible or exchangeable securities which
the underwriters have agreed to underwrite as referred to below or, as the case may be, (bb)
the number of Shares initially to be issued upon conversion or exchange of the number of such
convertible or exchangeable securities for which applications are received from shareholders
as referred to below save to the extent already adjusted for under (aa) and which, in the case of
warrants, where no applications by shareholders entitled to such warrants are required, shall
be based on the number of warrants issued. Where applications by shareholders entitled to
such warrants are required, the number of such Shares shall be calculated based upon (x) the
number of warrants which underwriters have agreed to underwrite as referred to below or, as
the case may be, (y) the number of warrants for which applications are received from
shareholders as referred to below save to the extent already adjusted for under (x).
v = the number of Shares which the aggregate consideration receivable by the Company
(determined as provided in Condition 6.3.16) would purchase at such Conversion Price in
effect or, as the case may be Current Market Price per Share specified in (a) or, as the case
may be, (b) above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective (a)
where no applications for such warrants are required from shareholders entitled to the same, upon their
issue and (b) where applications by shareholders entitled to the warrants are required as aforesaid and
in the case of convertible or exchangeable securities by shareholders entitled to the same pursuant to
such rights, immediately after the latest date for the submission of such applications or (if later)
immediately after the Company fixes the said consideration; but in all cases retroactively to
immediately after the record date mentioned above.
Rights or warrants not taken up by Shareholders: If, in connection with a grant, issue or offer to the
holders of Shares of rights or warrants entitling them to subscribe for or purchase securities convertible
into or exchangeable for Shares in the circumstances described in this Condition 6.3.7, any convertible
or exchangeable securities or warrants which are not subscribed for or purchased by the shareholders
entitled thereto are underwritten by others prior to the latest date for the submission of applications for
such convertible or exchangeable securities or warrants, an adjustment shall be made to the Conversion
Price in accordance with the above provisions which shall become effective immediately after the date
the underwriters agree to underwrite the same or (if later) immediately after the Company fixes the said
consideration but retroactively to immediately after the record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Shares or rights or warrants entitling them
to subscribe for or purchase securities convertible into or exchangeable for Shares, any convertible or
exchangeable securities or warrants which are not subscribed for or purchased by the underwriters who
have agreed to underwrite as referred to above or by the shareholders entitled thereto (or persons to
whom shareholders have transferred such rights or the right to purchase such warrants) who have
submitted applications for such convertible or exchangeable securities or warrants as referred to above
are offered to and/or subscribed by others, no further adjustment shall be made to the Conversion Price
Page 105
6.3.9
6.3.11
Page 107
NCP and OCP have the meanings ascribed thereto in Condition 6.3.2.
N = the number of Shares outstanding (having regard to Condition 6.3.17) at the close of business in
India on the day immediately prior to the date of such issue.
n = the number of Shares to be issued on exercise of such rights or warrants and (if applicable)
conversion or exchange of such convertible or exchangeable securities at the said consideration.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as
provided in Condition 6.3.16) would purchase at such Current Market Price per Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in India
corresponding to the calendar day at the place of issue on which such rights or warrants are issued.
6.3.12
6.3.13
have an effect on the position of the Bondholders as a class compared with the position of the holders
of all the securities (and options and rights relating thereto) of the Company, taken as a class which is
analogous to any of the events referred to in Conditions 6.3.1 to 6.3.12, then, in any such case, the
Company shall promptly notify the Trustee in writing thereof and the Company shall consult with an
Independent Financial Institution as to what adjustment, if any, should be made to the Conversion Price
to preserve the value of the Conversion Right of Bondholders and will make any such adjustment. All
costs, charges, liabilities and expenses incurred in connection with the appointment, retention,
consultation and remuneration of any Independent Financial Institution appointed under the Conditions
shall be borne by the Company.
6.3.14
6.3.15
Certain definitions:
For the purposes of these Conditions:
the "Closing Price" of the Shares for each Trading Day shall be the last reported transaction price of the
Shares on the BSE for such day or, if no transaction takes place on such day, the average of the closing
bid and offered prices of Shares for such day as furnished by a leading independent securities firm
licensed to trade on the BSE selected and appointed from time to time by the Company at its own cost.
"Current Market Price" per Share on any date means the average of the daily Closing Prices (as defined
below) of the relevant Shares for the five consecutive Trading Days (as defined below) ending on and
including the Trading Day immediately preceding such date. If the Company has more than one class
of share capital comprising Shares, then the relevant Current Market Price for Shares shall be the price
for that class of Shares the issue of which (or of rights or warrants in respect of, or securities
convertible into or exchangeable for, that class of Shares) gives rise to the adjustment in question.
If during the said five Trading Days or any period thereafter up to but excluding the date as of which
the adjustment of the Conversion Price in question shall be effected, any event (other than the event
which requires the adjustment in question) shall occur which gives rise to a separate adjustment to the
Conversion Price under the provisions of these Conditions, then the Current Market Price as
determined above shall be adjusted in such manner and to such extent as an Independent Financial
Institution shall in its absolute discretion deem appropriate and fair to compensate for the effect thereof.
"Trading Day" means a day when the BSE is open for business, but does not include a day when (a) no
such last transaction price or closing bid and offered prices is/are reported and (b) (if the Shares are not
listed or admitted to trading on such exchange) no such closing bid and offered prices are furnished as
aforesaid.
If the Shares are no longer listed but are still listed on the NSE, references in the above definitions to
the BSE shall be deemed to be the NSE, and if the Shares are no longer listed on the BSE or the NSE
Page 109
and have been listed on an Alternative Stock Exchange as required by Condition 6.4.1, references in the
above definitions to the BSE will be taken as references to the Alternative Stock Exchange.
6.3.16
in the case of the issue of Shares for cash, the consideration shall be the amount of such cash;
(b)
in the case of the issue of Shares for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as determined by an
Independent Financial Institution or, if pursuant to applicable law of India, such determination
is to be made by application to a court of competent jurisdiction, as determined by such court
or an appraiser appointed by such court, irrespective of the accounting treatment thereof;
(c)
in the case of the issue (whether initially or upon the exercise of rights or warrants) of
securities convertible into or exchangeable for Shares, the aggregate consideration receivable
by the Company shall be deemed to be the consideration received by the Company for such
securities and (if applicable) rights or warrants plus the additional consideration (if any) to be
received by the Company upon (and assuming) the conversion or exchange of such securities
at the initial conversion or exchange price or rate and (if applicable) the exercise of such rights
or warrants at the initial subscription or purchase price (the consideration in each case to be
determined in the same manner as provided in this Condition 6.3.16) and the consideration per
Share receivable by the Company shall be such aggregate consideration divided by the
number of Shares to be issued upon (and assuming) such conversion or exchange at the initial
conversion or exchange price or rate and (if applicable) the exercise of such rights or warrants
at the initial subscription or purchase price;
(d)
in the case of the issue of rights or warrants to subscribe for or purchase Shares, the aggregate
consideration receivable by the Company shall be deemed to be the consideration received by
the Company for any such rights or warrants plus the additional consideration to be received
by the Company upon (and assuming) the exercise of such rights or warrants at the initial
subscription or purchase price (the consideration in each case to be determined in the same
manner as provided in this Condition 6.3.16) and the consideration per Share receivable by the
Company shall be such aggregate consideration divided by the number of Shares to be issued
upon (and assuming) the exercise of such rights or warrants at the initial subscription or
purchase price;
(e)
if any of the consideration referred to in any of the preceding paragraphs of this Condition
6.3.16 is receivable in a currency other than Rupees, such consideration shall (in any case
where there is a fixed rate of exchange between the Rupees and the relevant currency for the
purposes of the issue of the Shares, the conversion or exchange of such securities or the
exercise of such rights or warrants) be translated into Rupees for the purposes of this
Condition 6.3.16 at such fixed rate of exchange and shall (in all other cases) be translated into
Rupees at the mean of the exchange rate quotations (being quotations for the cross rate
through U.S. dollars if no direct rate is quoted) by a leading bank in India for buying and
selling spot units of the relevant currency by telegraphic transfer against Rupees on the date as
of which the said consideration is required to be calculated as aforesaid;
(f)
in the case of the issue of Shares (including, without limitation, to employees under any
employee bonus or profit sharing arrangements) credited as fully paid out of retained earnings
or capitalisation of reserves at their par value, the aggregate consideration receivable by the
Company shall be deemed to be zero (and accordingly the number of Shares which such
aggregate consideration receivable by the Company could purchase at the relevant Current
Market Price per Share shall also be deemed to be zero); and
Page 110
(g)
6.3.17
in making any such determination, no deduction shall be made for any commissions or any
expenses paid or incurred by the Company.
Cumulative adjustments:
If, at the time of computing an adjustment (the "later adjustment") of the Conversion Price pursuant to
any of Conditions 6.3.2, 6.3.5, 6.3.6, 6.3.9, 6.3.10 and 6.3.11 above, the Conversion Price already
incorporates an adjustment made (or taken or to be taken into account pursuant to the proviso to
Condition 6.3.18) to reflect an issue of Shares or of securities convertible into or exchangeable for
Shares or of rights or warrants to subscribe for or purchase Shares or securities, to the extent that the
number of such Shares or securities taken into account for the purposes of calculating such adjustment
exceeds the number of such Shares in issue at the time relevant for ascertaining the number of
outstanding Shares for the purposes of computing the later adjustment, such excess Shares shall be
deemed to be outstanding for the purposes of making such computation.
6.3.18
Minor adjustments:
No adjustment of the Conversion Price shall be required if the adjustment would be less than 1 per
cent. of the then current Conversion Price; provided that any adjustment which by reason of this
Condition 6.3.18 is not required to be made shall be carried forward and taken into account (as if such
adjustment had been made at the time when it would have been made but for the provisions of this
Condition 6.3.18) in any subsequent adjustment. All calculations under this Condition 6.3 shall be
made to the nearest Re.1.00 with Re.0.5 being rounded up to the next Re.1.00. Except as otherwise set
out in Condition 6.3.19, the Conversion Price may be reduced at any time by the Company.
6.3.19
6.3.20
(a)
the Conversion Price shall not be reduced below the par value of the Shares (Rs.10 at the date
hereof) as a result of any adjustment made hereunder unless under applicable law then in
effect Bonds may be converted at such reduced Conversion Price into legally issued, fullypaid and non-assessable Shares; and
(b)
it will not take any corporate or other action which might result in the Conversion Price being
reduced pursuant to Conditions 6.3.1 to 6.3.14 below the level permitted by (i) applicable
Indian laws and regulations from time to time (if any) or (ii) applicable Indian regulatory
authorities.
Reference to "fixed":
Any references herein to the date on which a consideration is "fixed" shall, where the consideration is
originally expressed by reference to a formula which cannot be expressed as an actual cash amount
until a later date, be construed as a reference to the first day on which such actual cash amount can be
ascertained.
6.3.21
Downward adjustment:
No adjustment involving an increase in the Conversion Price will be made, except in the case of a
consolidation of the Shares, as referred to in Condition 6.3.1.
6.3.22
Warrants
(a)
(b)
No adjustment shall be made to the Conversion Price in respect of the issue of Shares
pursuant to the exercise of 1070000 warrants outstanding on the Issue Date entitling the
holders thereof to subscribe for 1070000 Shares.
No adjustment shall be made to the Conversion Price in respect of the allotment of
Page 111
warrants to strategic investors to be made after the issue date subject to approval of
shareholders of the Company in general meeting up to 500,000 warrants and issue of
Shares pursuant to conversion of aforesaid warrants.
6.3.23
6.3.24
6.3.25
Approval of Trustee:
The Company shall send the Trustee a certificate setting out particulars relating to adjustment of the
Conversion Price. The Company shall also cause a notice containing the same information to be sent to
Bondholders, in accordance with Condition 17 (with a copy to the Trustee).
6.3.26
6.3.27
Expert Certificate
If any Bondholder shall have any doubts as to the appropriate adjustment to the Conversion Price, the
Company shall at its expense and at the request of the Trustee, acting on the instructions of the
Bondholders holding at least 25 percent of the aggregate outstanding principal amount of the bonds,
and as soon as practicable, provide the Trustee with a certificate signed by a Director or Authorised
Officer of the Company setting out the method by which the adjustment is calculated and a certificate
Page 112
of an Independent Financial Institution certifying the appropriate adjustment to the Conversion Price
and such a certificate shall be conclusive and binding on all concerned.
6.3.28
6.3.29
6.4
Undertakings
6.4.1
The Company has undertaken in the Trust Deed, inter alia, that so long as any Bond remains
outstanding, save with the approval of an Extraordinary Resolution of the Bondholders or with the
approval of the Trustee where, in the opinion of the Trustee, it is not materially prejudicial to the
interests of Bondholders to give such approval:
(i)
it will use its best endeavours (a) to obtain and maintain a listing of the Bonds on Singapore
Exchange Securities Trading Limited (the SGX-ST), (b) to maintain a listing for all the
issued Shares on the BSE and the NSE together with the BSE, the "Indian Stock Exchanges"),
(c) to obtain and maintain a listing for all the Shares issued on the exercise of the Conversion
Rights attaching to the Bonds on the Indian Stock Exchanges, and (d) if the Company is
unable to obtain or maintain such listings, to obtain and maintain a listing for all the Bonds or
the Shares issued on the exercise of the Conversion Rights, as the case may be on such other
stock exchange (in the case of the Shares, an "Alternative Stock Exchange") as the Company
may from time to time (with the prior written consent of the Trustee) determine and will
forthwith give notice to the Bondholders and the Trustee in accordance with Condition 17
below of the listing or delisting of the Shares or the Bonds (as a class) by any of such stock
exchanges;
(ii)
it will pay the expenses of the issue of, and all expenses of obtaining listing for, Shares arising
Page 113
6.5
(iii)
it will not make any reduction of its ordinary share capital or any uncalled liability in respect
thereof or of any share premium account or capital redemption reserve fund (except, in each
case, as permitted by law); and
(iv)
it will not take any corporate or other action pursuant to Conditions 6.3.1 to 6.3.14 that would
cause the Conversion Price to be adjusted to a price which would render conversion of the
Bonds into Shares at such adjusted Conversion Price to be in contravention of applicable law
or subject to approval from the Reserve Bank of India ("RBI"), the Ministry of Finance,
Government of India and/or any other governmental/regulatory authority in India. The
Company also covenants that prior to taking any action which would cause an adjustment to
the Conversion Price, the Company shall provide the Trustee with an opinion of a legal
counsel in India of international repute, approved by the Trustee, stating that the Conversion
Price as proposed to be adjusted pursuant to such action, is in conformity with applicable law
and that the conversion of the Bonds to the Shares at such adjusted Conversion Price would
not require approval of the RBI, the Ministry of Finance, India and/or any other
governmental/regulatory authority in India (the "Price Adjustment Opinion").
In the Trust Deed, the Company has undertaken with the Trustee that so long as any Bonds remain
outstanding:
(i)
(ii)
6.6
it will reserve, free from any other pre-emptive or other similar rights, out of its authorised but
unissued ordinary share capital the full number of Shares liable to be issued on conversion of
the Bonds without breaching any foreign ownership restrictions in India applicable to the
Shares and will ensure that all such Shares will be duly and validly issued as fully-paid; and
it will not make any offer, issue or distribute or take any action the effect of which would be to
reduce the Conversion Price below the par value of the Shares of the Company, provided
always that the Company shall not be prohibited from purchasing its Shares to the extent
permitted by law.
The Company has also given certain other undertakings in the Trust Deed for the protection of the
Conversion Rights.
The Shares issued upon conversion of the Bonds are expected to be listed on the NSE and the BSE and
will be tradable on such stock exchange once listed thereon, which is expected to occur within 40 days
after the relevant Conversion Date. The Company will make due application in respect of such listing
within five days following the relevant Conversion Date. If there is any delay in obtaining the approval
of the NSE and the BSE to list such Shares, they shall not be tradeable on the BSE and the NSE until
the listing occurs.
6.7
7.
Payments
7.1
of the relevant Certificate at the specified office of an the relevant Agent. If an amount which is due on
the Bonds is not paid in full, the Registrar will annotate the Register with a record of the amount (if
any) in fact paid.
7.2
Registered Accounts
For the purposes of this Condition, a Bondholder's registered account means the U.S. dollar account
maintained by or on behalf of it with a bank in New York, details of which appear on the Register at the
close of business on the second business day before the due date for payment, and a Bondholder's
registered address means its address appearing on the Register at that time.
7.3
Applicable Laws
All payments to be made to Bondholders by or on behalf of the Company shall be made in all cases
subject to any applicable laws and regulations in New York City and, where appropriate, the place of
the specified office of the relevant Agent to whom a Certificate is surrendered, but without prejudice to
the provisions of Condition 9. No commissions or expenses shall be charged by the Company or any
Agent to the Bondholders in respect of such payments.
7.4
Payment Initiation
Where payment is to be made by transfer to a registered account, payment instructions (for value on the
due date or, if that is not a business day, for value on the first following day which is a business day)
will be initiated and, where payment is to be made by cheque, the cheque will be mailed (at the risk
and, if mailed at the request of the holder otherwise than by ordinary mail, expense of the holder) on
the due date for payment (or, if it is not a business day, the immediately following business day) or, in
the case of a payment of principal, if later, on the business day on which the relevant Certificate is
surrendered at the specified office of an Agent.
7.5
Delay in Payment
Bondholders will not be entitled to any interest or other payment for any delay after the due date in
receiving the amount due if the due date is not a business day, if the Bondholder is late in surrendering
its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after
the due date for payment.
8.
8.1
Maturity
Unless previously redeemed, converted or purchased and cancelled as provided herein, the Company
will redeem each Bond at 143.775 per cent. of its principal amount on 27 March 2012 (the Maturity
Date). The Company may not redeem the Bonds at its option prior to that date except as provided in
Condition 8.2 and Condition 8.3 below (but without prejudice to Condition 10).
8.2
8.2.1
At any time the Company may, having given not less than 30 nor more than 60 days' notice to the
Bondholders (which notice shall be irrevocable) redeem all, and not some only, of the Bonds at their
Accreted Principal Amount plus any accrued and unpaid interest on the date fixed for redemption ("Tax
Redemption Date"), if
(i)
the Company satisfies the Trustee immediately prior to the giving of such notice that the
Company has or will become obliged to pay additional amounts as referred to in Condition 9
as a result of any change in, or amendment to, the laws or regulations of India or any political
subdivision or any authority thereof or therein having power to tax, or any change in the
general application or official interpretation of such laws or regulations, which change or
Page 115
amendment becomes effective on or after 26 March 2007 (the Issue Date); and
(ii) such obligation cannot be avoided by the Company taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obliged to pay such additional amounts were a
payment in respect of the Bonds then due. Prior to the publication of any notice of redemption
pursuant to this paragraph, the Company shall deliver to the Trustee (a) a certificate signed by
two directors of the Company stating that the obligation referred to in (i) above cannot be
avoided by the Company (taking reasonable measures available to it) and (b) an opinion of
independent legal or tax advisors of recognised international standing to the effect that such
change or amendment has occurred (irrespective of whether such amendment or change is then
effective) and the Trustee shall be entitled to accept such certificate and opinion as sufficient
evidence thereof in which event it shall be conclusive and binding on the Bondholders.
8.2.2
8.2.3
Upon the expiry of any such notice, the Company will be bound to redeem the Bonds at their
Accreted Principal Amount plus any accrued and unpaid interest on the Tax Redemption Date.
If the Company gives a notice of redemption pursuant to this Condition 8.3, each Bondholder will have
the right to elect that his Bond(s) shall not be redeemed and that the provisions of Condition 9 shall not
apply in respect of any payment to be made in respect of such Bond(s) which falls due after the
relevant Tax Redemption Date whereupon no additional amounts shall be payable in respect thereof
pursuant to Condition 9 and payment of all amounts shall be made subject to the deduction or
withholding of the taxation required to be withheld or deducted by the government of India or any
authority thereof or therein having power to tax. For the avoidance of doubt, any additional amounts
which had been payable in respect of the Bonds as a result of the laws or regulations of the government
of India or any authority thereof or therein having power to tax prior to the Issue Date will continue to
be payable to such Bondholders. To exercise such right, the holder of the relevant Bond must complete,
sign and deposit at the specified office of any Principal Paying and Conversion Agent a duly completed
and signed notice of election (the "Bondholder's Tax Election Notice"), in the form for the time being
current, obtainable from the specified office of any Principal Paying and Conversion Agent together
with the Certificate evidencing the Bonds on or before the day falling 10 days prior to the Tax
Redemption Date.
Under prevailing RBI regulations the Company is required (and at the time of redemption may
continue to be required) to obtain the prior approval of the RBI before providing notice for or effecting
such a redemption prior to the Maturity Date, such approval may or may not be forthcoming.
8.3
8.3.1
Following the occurrence of a Relevant Event (as defined below) and to the extent permitted by
applicable law, the holder of each Bond will have the right at such holder's option to require the
Company to redeem in whole but not in part such holder's Bonds on the Relevant Event Put Date at
their Accreted Principal Amount plus any accrued and unpaid interest. To exercise such right, the
holder of the relevant Bond must complete, sign and deposit at the specified office of any Principal
Paying and Conversion Agent a duly completed and signed notice of redemption, in the form for the
time being current, obtainable from the specified office of any Principal Paying and Conversion Agent
("Relevant Event Put Exercise Notice") together with the Certificate evidencing the Bonds to be
redeemed by not later than 30 days following a Relevant Event, or, if later, 30 days following the date
upon which notice thereof is given to Bondholders by the Company in accordance with Condition 17.
The "Relevant Event Put Date" shall be the fourteenth calendar day after the expiry of such period of
30 days as referred to above. If such date is not a business day then the next following business day
shall be treated as the Relevant Event Put Date.
8.3.2
A Relevant Event Put Exercise Notice, once delivered, shall be irrevocable and the Company shall
redeem the Bonds which form the subject of the Relevant Event Put Exercise Notices delivered as
aforesaid on the Relevant Event Put Date.
8.3.3
Neither the Trustee nor the Agents shall be responsible or liable for monitoring whether a Relevant
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Event has occurred or is continuing and shall be entitled to assume that no such event has occurred
until the Trustee has received notice in writing to the contrary from the Company and shall not be liable
or responsible to the Bondholders or any person for any failure to monitor so.
8.3.4
No later than seven days after becoming aware of a Relevant Event, the Company shall procure that
notice regarding the Relevant Event shall be delivered to the Trustee and the Bondholders (in
accordance with Condition 17) stating: (i) the Relevant Event Put Date; (ii) the date of such Relevant
Event and, briefly, the events causing such Relevant Event; (iii) the date by which the Relevant Event
Put Exercise Notice (as defined above) must be given; (iv) the redemption amount and the method by
which such amount will be paid; (v) the names and addresses of all Principal Paying and Conversion
Agents; (vi) briefly, the Conversion Right and the then current Conversion Price; (vii) the procedures
that Bondholders must follow and the requirements that Bondholders must satisfy in order to exercise
the Relevant Event Put Right or Conversion Right; and (viii) that a Relevant Event Put Exercise
Notice, once validly given, may not be withdrawn.
8.3.5
a "person" includes any individual, company, corporation, firm, partnership, joint venture,
undertaking, association, organisation, trust, state or agency of a state (in each case whether or
not being a separate legal entity) but does not include the Company's Board of Directors or
any other governing board and does not include the Company's wholly-owned direct or
indirect subsidiaries;
(ii)
"Relevant Event" occurs when there has been a Change of Control in the Company;
(iii)
when any Person or Persons acting together acquires Control of the Company if such
Person or Persons does not or do not have, and would not be deemed to have, Control
of the Company on the Issue Date;
(b)
(c)
one or more other Persons acquires the legal or beneficial ownership of more than
50 per cent. of the issued share capital of the Company.
The term "Control" means the acquisition or control of more than 50 per cent of the voting
rights of the issued share capital of the Company or the right to appoint and / or remove all or
the majority of the members of the Companys Board of Directors or other governing body,
whether obtained directly or indirectly, and whether obtained by ownership of share capital,
the possession of voting rights, contract or otherwise;
(iv)
Accreted Principal Amount of each Bond will on the Issue Date equal US$10,000 and will
thereafter accrete at the rate of 8.25 per cent per annum from the Issue Date, compounded
semi-annually, calculated on the basis of the number of days elapsed and a 360-day year
(Accreted Principal Amount) and shall at any time, be calculated in accordance with the
formula set forth below. In the event that the Bonds are redeemed prior to the expiry of one
year from the Issue Date, the Company shall calculate the Accreted Principal Amount, as the
case may be, (on the basis of the number of days elapsed and a 360-day year) and notify the
Trustee and the Bondholders in accordance with Condition 17 (with a copy to the Trustee and
the Principal Paying and Conversion Agent).
Accreted Principal Amount = Previous Redemption Amount x [(1+R/2)d/p]- AI
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Previous Redemption Amount = Accreted Principal Amount for each U.S.$10,000 principal
amount on the Semi-Annual Date immediately preceding the date fixed for redemption as set
out below.
r = 8.25 per cent. expressed as a fraction.
d = number of days from and including the immediately preceding Semi-Annual Date (or if
the Bonds are to be redeemed on March 27, 2012, from and including the Closing Date) to,
but excluding, the date fixed for redemption, calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month, the number
of days elapsed.
p = 180.
AI = accrued and unpaid interest on the principal amount of Bonds from and including the
immediately preceding Semi-Annual Date to but excluding the date fixed for redemption.
The Trustee and the Agents shall not be responsible or liable with respect to any calculations
in relation to the Accreted Principal Amount of the accuracy or inaccuracy thereof. Upon
determination of the Accreted Principal Amount, the Company shall promptly notify the
Bondholders (with a copy to the Trustee and the Principal Paying and Conversion Agent).
8.4
8.4.1
In the event the Shares cease to be listed or admitted to trading on any of the Indian Exchanges (a
"Delisting"), each Bondholder shall have the right (the "Delisting Put Right"), at such Bondholder's
option, to require the Company to redeem all (but not less than all) of such Bondholder's Bonds on the
twentieth business day after notice has been given to Bondholders regarding the Delisting referred to
under Condition 8.4.2 below or, if such notice is not given, the twentieth business day after the
Delisting (the "Delisting Put Date") at their Accreted Principal Amount plus any accrued and unpaid
interest (the "Delisting Put Price").
8.4.2
Promptly after becoming aware of a Delisting, the Company shall procure that notice regarding the
Delisting Put Right shall be given to the Trustee and the Bondholders (in accordance with Condition
17) stating:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
8.4.3
To exercise its rights to require the Company to purchase its Bonds, the Bondholder must deliver a
written irrevocable notice of the exercise of such right (a "Purchase Notice") together with the
Certificate evidencing the Bonds to be redeemed, in the then current form obtainable from the specified
office of any Agent during business hours, to any Principal Paying and Conversion Agent on any
business day prior to the close of business at the location of such Principal Paying and Conversion
Agent on such day and which day is not less than 10 business days prior to the Delisting Put Date.
8.4.4
A Purchase Notice, once delivered, shall be irrevocable and the Company shall redeem the Bonds
which form the subject of the Delisting Notices delivered as aforesaid on the Delisting Put Date.
8.4.5
Neither Trustee nor the Agents shall be responsible or liable for monitoring whether a Delisting has
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occurred or is continuing and shall be entitled to assume that no such event has occurred until the
Trustee has received notice in writing to the contrary from the Company and shall not be liable or
responsible to the Bondholders or any person for any failure to monitor so.
RBI regulations at the time of redemption may require the Company to obtain the prior approval of the
RBI before providing notice for or effecting such a redemption prior to the Maturity Date, such
approval may or may not be forthcoming.
8.5
8.6
8.7
Purchases
The Company or any of its Subsidiaries may, if permitted under the laws of India, at any time and from
time to time purchase Bonds at any price in the open market or otherwise (including without limitation
by private treaty).
The Company is required to submit to the Registrar for cancellation any Bonds so purchased. If
purchases are made by tender, the tender must be available to all Bondholders alike.
8.8
Cancellation
All Bonds which are redeemed or converted or purchased by the Company or any of its Subsidiaries
will forthwith be cancelled. Certificates in respect of all Bonds cancelled will be forwarded to or to the
order of the Registrar and such Bonds may not be reissued or resold.
8.9
Redemption Notices
All notices to Bondholders given by or on behalf of the Company pursuant to this Condition will be
given in accordance with Condition 17, and specify the Conversion Price as at the date of the relevant
notice, the closing price of the Shares (as quoted on the BSE) as at the latest practicable date prior to
the publication of the notice, the date for redemption, the manner in which redemption will be effected
and the aggregate principal amount of the Bonds outstanding as at the latest practicable date prior to the
publication of the notice.
No notice of redemption or conversion given under Condition 8.2 or Condition 8.3 shall be effective if
it specifies a date for redemption or conversion which falls during a Closed Period or within 15 days
following the last day of a Closed Period.
8.10
Multiple Notices
If more than one notice of redemption (which shall include any notice given by the Company pursuant
to Condition 8.2 or 8.3 and any Relevant Event Put Exercise Notice or Delisting Put Notice given by a
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Bondholder pursuant to this Condition 8, the first of such notices to be given shall prevail.
9.
Taxation
9.1
All payments of principal, interest and premium (if any) in respect of the Bonds by the Company will
be made free from any restriction or condition and without deduction or withholding for or on account
of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed
or levied by or on behalf of India or any authority thereof or therein having power to tax, unless
deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by
law.
9.2
In the event that any such withholding or deduction in respect of principal or premium or interest is
required, the Company will pay such additional amounts by way of principal, premium or interest as
will result in the receipt by the Bondholders of the amounts which would otherwise have been
receivable in the absence of such withholding or deduction, except that no such additional amount shall
be payable in respect of any Bond:
9.2.1
to a holder (or to a third party on behalf of a holder) who is subject to such taxes, duties, assessments or
governmental charges in respect of such Bond by reason of his having some connection with India
otherwise than merely by holding the Bond or by the receipt of amounts in respect of the Bond; or
9.2.2
(in the case of a payment of principal or premium) if the Certificate in respect of such Bond is
surrendered more than 30 days after the Relevant Date except to the extent that the holder would have
been entitled to such additional amount on surrendering the relevant Certificate for payment on the last
day of such period of 30 days; or
9.2.3
9.2.4
presented for payment by or on behalf of a holder who would have been able to avoid such withholding
or deduction by presenting the relevant Bond to another Principal Paying and Conversion in a Member
State of the European Union.
9.3
For the purposes hereof, "Relevant Date" means the date on which such payment first becomes due
except that if the full amount payable has not been received by the Trustee or the Principal Paying and
Conversion Agent on or prior to such due date, the date on which, the full amount having been so
received, notice to that effect shall have been given to the Bondholders and cheques despatched or
payment made.
9.4
References in these Conditions to payments (including of principal, premium and interest in respect of
the Bonds) shall be deemed also to refer to any additional amounts which may be payable under this
Condition or any undertaking or covenant given in addition thereto or in substitution therefore pursuant
to the Trust Deed.
10.
Events of Default
10.1
The Trustee at its discretion may (but shall not be obliged to), and if so requested in writing by the
holders of not less than 25 per cent. in principal amount of the Bonds then outstanding or if so directed
by an Extraordinary Resolution shall (subject to being indemnified and/or secured by the Bondholders
to its satisfaction), give notice to the Company that the Bonds are, and they shall accordingly thereby
become, immediately due and repayable at their Accreted Principal Amount plus any accrued and
unpaid interest (subject as provided below and without prejudice to the right of Bondholders to exercise
the Conversion Right in respect of their Bonds in accordance with Condition 6) if any of the following
events (each an "Event of Default") has occurred and is continuing:
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10.1.1
a default is made in the payment of any sum due in respect of the Bonds and such default continues for
a period of 15 business days;
10.1.2
failure by the Company to deliver the Shares as and when such Shares are required to be delivered
following conversion of a Bond;
10.1.3
the Company does not perform or comply with one or more of its other obligations in the Bonds or the
Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy,
is not in the opinion of the Trustee remedied within 30 days after written notice of such default shall
have been given to the Company by the Trustee (acting at the written direction of Bondholders holding
not less than 25 per cent. of the principal amount of the Bonds then outstanding).
10.1.4
the Company or any Subsidiary is (or is, or could be, deemed by law or a court to be) insolvent or
bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend, payment of all or a
material part of (or of a particular type of) its debts, proposes or makes any agreement for the deferral,
rescheduling or other readjustment of all of (or all of a particular type of) its debts (or of any part which
it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an
arrangement or composition with or for the benefit of the relevant creditors in respect of any of such
debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a
particular type of) the debts of the Company or any of its Subsidiaries;
10.1.5
(i) any other present or future indebtedness of the Company or any of its Subsidiaries for or in respect
of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior
to its stated maturity by reason of any actual or potential default, event of default or the like
(howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be,
within any applicable grace period, or (iii) the Company or any of its Subsidiaries fails to pay when due
any amount payable by it under any present or future guarantee for, or indemnity in respect of, any
moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness,
guarantees and indemnities in respect of which one or more of the events mentioned above in this
Condition 10.1.5 have occurred equals or exceeds U.S.$1 million or its equivalent (as reasonably
determined on the basis of the middle spot rate for the relevant currency against the U.S. dollar as
quoted by an independent bank of international repute on the day on which such indebtedness becomes
due and payable or is not paid or any such amount becomes due and payable or is not paid under any
such guarantee or indemnity);
10.1.6
a distress, attachment, execution or other legal process is levied, enforced or sued out on or against a
material part of the property, assets or revenues of the Company or any of its Subsidiaries and is not
discharged or stayed within 45 days;
10.1.7
an order is made or an effective resolution passed for the winding-up or dissolution, judicial
management or administration of the Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations
or the company or any of its subsidiaries disposes of the whole or a substantial part of its assets
(including but not limited to the issuance of equity interests by any of the companys subsidiaries or the
sale of equity interests in any of the companys subsidiaries), except for the purpose of and followed by
a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an
Extraordinary Resolution of the Bondholders or (ii) in the case of the voluntary winding up or
dissolution of a Subsidiary, whereby the undertaking and surplus assets of the Subsidiary are
transferred to or otherwise vested in the Company or another of its Subsidiaries;
10.1.8
10.1.9
it is or will become unlawful for the Company to perform or comply with any one or more of its
obligations under any of the Bonds or the Trust Deed;
10.1.10 any step is taken by any person with a view to the seizure, compulsory acquisition, expropriation or
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nationalisation of all or a material part of the assets of the Company or any of its Subsidiaries; or
10.1.11 any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the
events referred to in any of the foregoing paragraphs.
"Subsidiary" or "subsidiary" means (i) any company or other business entity of which that person
owns or controls (either directly or through one or more other Subsidiaries) more than 50 per cent. of
the issued share capital or other ownership interest having ordinary voting power to elect directors,
managers or trustees of such company or other business entity or (ii) any Consolidated Subsidiary
whose gross revenues (consolidated in the case of a Subsidiary which itself has Subsidiaries) or whose
total assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) represent in each
case (or, in the case of a Subsidiary acquired after the end of the financial period to which the then
latest audited consolidated accounts of the Company and its Subsidiaries relate, are equal to) not less
than 5 per cent. of the consolidated gross revenues of the Company, or, as the case may be,
consolidated total assets, of the Company and its Subsidiaries taken as a whole, all as calculated
respectively by reference to the then latest audited accounts (consolidated or, as the case may be,
unconsolidated) of such Subsidiary and the then latest audited consolidated accounts of the Company
and its Subsidiaries, provided that in the case of a Subsidiary of the Company acquired after the end of
the financial period to which the then latest audited consolidated accounts of the Company and its
Subsidiaries relate, the reference to the then latest audited consolidated accounts of the Company and
its Subsidiaries for the purposes of the calculation above shall, until consolidated accounts for the
financial period in which the acquisition is made have been prepared and audited as aforesaid, be
deemed to be a reference to such first-mentioned accounts as if such Subsidiary had been shown in
such accounts by reference to its then latest relevant audited accounts, adjusted as deemed appropriate
by the Company; "Consolidated Subsidiary" means any company or other business entity which at
any time has its accounts consolidated with those of that person or which, under Indian law, regulations
or generally accepted accounting principles from time to time, which should have its accounts
consolidated with those of that person.
10.1.12 if the Company breaches any of the covenants as defined in Condition 6.4, Neither the Trustee nor the
Agents shall be responsible or liable for monitoring whether an Event of Default has occurred or is
continuing and shall be entitled to assume that no such event has occurred until the Trustee has
received notice in writing to the contrary from the Company and shall not be liable or responsible to the
Bondholders or any person for any failure to monitor so.
10.2
Notwithstanding receipt of any payment after the acceleration of the Bonds, a Bondholder may exercise
its Conversion Right by depositing a Conversion Notice with a Principal Paying and Conversion Agent
during the period from and including the date of a default notice with respect to an event specified in
Condition 10.1.2 (at which time the Company will notify the Bondholders of the number of Shares per
Bond to be delivered upon conversion, assuming all the then outstanding Bonds are converted) to and
including the 30th business day after such payment.
If any converting Bondholder deposits a Conversion Notice pursuant to this Condition 10 in the
business day prior to, or during, a Closed Period, the Bondholder's Conversion Right shall continue
until the business day following the last day of the Closed Period, which shall be deemed the
Conversion Date, for the purposes of such Bondholder's exercise of its Conversion Right pursuant to
this Condition 10.
If the Conversion Right attached to any Bond is exercised pursuant to this Condition 10, the Company
will deliver Shares (which number will be disclosed to such Bondholder as soon as practicable after the
Conversion Notice is given) in accordance with these Conditions, except that the Company shall have
10 business days before it is required to register the converting Bondholder (or its designee) in its
register of members as the owner of the number of Shares to be delivered pursuant to this Condition
and an additional five business days from such registration date to make payment in accordance with
the following paragraph.
If the Conversion Right attached to any Bond is exercised pursuant to this Condition 10, the Company
shall, at the request of the converting Bondholder, pay to such Bondholder an amount in United States
dollars (converted from Rupees at the Fixed Exchange Rate) (the "Default Cure Amount"), equal to the
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product of (x) (i) the number of Shares that are required to be delivered by the Company to satisfy the
Conversion Right in relation to such converting Bondholder minus (ii) the number of Shares that are
actually delivered by the Company pursuant to such Bondholders' Conversion Notice and (y) the
Closing Price of the Shares on the Conversion Date; provided that if such Bondholder has received any
payment under the Bonds pursuant to this Condition 10, the amount of such payment shall be deducted
from the Default Cure Amount.
The "Share Price" means the Closing Price of the Shares on the Conversion Date.
11.
Prior thereto the Company shall have notified the Trustee and the Bondholders of such event
in accordance with condition 17
(ii)
the corporation formed by such Merger or the person that acquired such properties and assets
shall expressly assume, by a supplemental trust deed, all obligations of the Company under the
Trust Deed, the Agency Agreement and the Bonds and the performance of every covenant and
agreement applicable to it contained therein and to ensure that the holder of each Bond then
outstanding will have the right (during the period when such Bond shall be convertible) to
convert such Bond into the class and amount of shares, cash and other securities and property
receivable upon such consolidation, amalgamation, merger, sale or transfer by a holder of the
number of Shares which would have become liable to be issued upon conversion of such Bond
immediately prior to such consolidation, amalgamation, merger, sale or transfer;
(iii)
immediately after giving effect to any such Merger, no Event of Default shall have occurred or
be continuing or would result therefrom;
(iv)
the corporation formed by such Merger, or the person that acquired such properties and assets,
shall expressly agree, among other things, to indemnify each holder of a Bond against any tax,
assessment or governmental charge payable by withholding or deduction thereafter imposed
on such holder solely as a consequence of such Merger with respect to the payment of
principal and premium on the Bonds; and
(v)
immediately after giving effect to such transaction on a pro forma basis, the Company or any
Person becoming the successor obligor of the Notes shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately prior to such
transaction.
"Consolidated Net Worth" means total shareholders' equity for the Company on a consolidated
basis (as determined from the relevant financial statements of the Company) but deducting:
(a)
any debit balance on the consolidated profit and loss account of the Company;
(b)
(to the extent included) any amount shown in respect of goodwill (including goodwill
arising only on consolidation) or other intangible assets of the Company on a
consolidated basis; and
(c)
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"No Subsidiary of the Company will consolidate with or merge into any other Person or permit any other Person
to consolidate with or merge into it, except that a Subsidiary may consolidate with or merge into (i) the
Company (and for the avoidance of doubt the Company remains the obligor of the Bonds) or (ii) another
Subsidiary of the Company which is a Wholly Owned Subsidiary of the Company.
A "Wholly Owned Subsidiary" is any company or other business entity of which that person owns or controls
(either directly or through one or more other Subsidiaries) 100 per cent. of the issued share capital or other
ownership interest having ordinary voting power to elect directors, managers or trustees of such company or
other business entity."
The Trustee shall be entitled to require from the Company such opinions, consents, documents and other
matters at the expense of the Company in connection with the foregoing as it may consider appropriate and may
rely on such opinions, consents and documents without liability to any person. The above provisions of this
Condition 11 will apply in the same way to any subsequent consolidations, amalgamations, mergers, sales or
transfers.
12.
Prescription
Claims in respect of amounts due in respect of the Bonds will become prescribed unless made within
10 years (in the case of principal and premium) and five years (in the case of interest) from the relevant
date for payment. Neither the Trustee nor the Agents shall be responsible or liable for any amounts so
prescribed.
13.
Enforcement
At any time after the Bonds have become due and repayable, the Trustee may, at its discretion and
without further notice, take such proceedings against the Company as it may think fit to enforce
repayment of the Bonds and to enforce the provisions of the Trust Deed, but it will not be bound to take
any such proceedings unless (i) it shall have been so requested in writing by the holders of not less than
25 per cent. in principal amount of the Bonds then outstanding or shall have been so directed by an
Extraordinary Resolution of the Bondholders and (ii) it shall have been indemnified and/or secured to
its satisfaction. No Bondholder will be entitled to proceed directly against the Company unless the
Trustee, having become bound to do so, fails to do so within a period of 60 days from the date of the
relevant written request on Extraordinary Resolution and such failure shall be continuing and no
direction inconsistent with such written request or Extraordinary Resolution has been given to the
Trustee during such 60 day period by the holders of a majority in principal amount of the outstanding
Bonds.
14.
14.1
Meetings
The Trust Deed contains provisions for convening meetings of Bondholders to consider any matter
affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the
Bonds or the provisions of the Trust Deed. The quorum at any such meeting for passing an
Extraordinary Resolution will be two or more persons holding or representing in the aggregate over 50
per cent. in principal amount of the Bonds for the time being outstanding or, at any adjourned such
meeting, two or more persons being or representing Bondholders whatever the principal amount of the
Bonds so held or represented unless the business of such meeting includes consideration of proposals,
inter alia, (i) to modify the due date for any payment in respect of the Bonds, (ii) to reduce or cancel the
amount of principal or premium or default interest payable in respect of the Bonds (including the
Accreted Principal Amount or method of calculation thereof), (iii) to change the currency of payment
of the Bonds, (iv) to modify or cancel the Conversion Rights or the put options specified in Condition 8
or (v) to modify the provisions concerning the quorum required at any meeting of the Bondholders or
Page 124
the majority required to pass an Extraordinary Resolution, in which case the necessary quorum for
passing an Extraordinary Resolution will be two or more persons holding or representing not less than
75 per cent., or at any adjourned such meeting not less than 25 per cent., in principal amount of the
Bonds for the time being outstanding. An Extraordinary Resolution passed at any meeting of
Bondholders will be binding on all Bondholders, whether or not they are present at the meeting. The
Trust Deed provides that a written resolution signed by or on behalf of the holders of not less than 90
per cent. of the aggregate principal amount of Bonds outstanding shall be as valid and effective as a
duly passed Extraordinary Resolution.
14.2
14.3
Substitution
The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the
Trust Deed and such other conditions as the Trustee may (in its absolute discretion) require, but without
the consent of the Bondholders, to the substitution of any other company in place of the Company, or of
any previous substituted company, as principal debtor under the Trust Deed and the Bonds. In such
event, the Company shall give notice to Bondholders in accordance with Condition 17.
14.4
Interests of Bondholders
In connection with the exercise of its functions (including but not limited to those in relation to any
proposed modification, authorisation, waiver or substitution) the Trustee shall have regard to the
interests of the Bondholders as a class and shall not have regard to the consequences of such exercise
for individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholder be
entitled to claim, from the Company or the Trustee, any indemnification or payment in respect of any
tax consequences of any such exercise upon individual Bondholders except to the extent provided for
in Condition 9 and/or any undertakings given in addition thereto or in substitution therefore pursuant to
the Trust Deed.
14.5
Certificates/Reports
Any certificate or report of any expert or other person called for by or provided to the Trustee (whether
or not addressed to the Trustee) in accordance with or for the purposes of these Conditions or the Trust
Deed may be relied upon by the Trustee as sufficient evidence of the facts therein (and shall, in absence
of manifest error, in the Trustee's opinion, be conclusive and binding on all parties) notwithstanding
that such certificate or report and/or engagement letter or other document entered into by the Trustee
and/or the Company in connection therewith contains a monetary or other limit on the liability of the
relevant expert or person in respect thereof.
15.
Replacement of Certificates
If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified
office of the Registrar or any Agent upon payment by the claimant of such costs as may be incurred in
connection therewith and on such terms as to evidence and indemnity as the Company and such Agent
may reasonably require. Mutilated or defaced Certificates must be surrendered before replacements
will be issued.
16.
Further Issues
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The Company may from time to time without the consent of the Bondholders create and issue further
securities either having the same terms and conditions as the Bonds in all respects and so that such
further issue shall be consolidated and form a single series with the Bonds outstanding securities of any
series (including the Bonds) or upon such terms as the Company may determine at the time of their
issue. Such further Bonds may, with the consent of the Trustee, be constituted by a deed supplemental
to the Trust Deed. References in these Conditions to the Bonds include (unless the context requires
otherwise) any other securities issued pursuant to this Condition and forming a single series with the
Bonds. Any further securities forming a single series with the outstanding securities of any series
(including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other
securities may (with the written consent of the Trustee), be constituted by a deed supplemental to the
Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and
the holders of securities of other series where the Trustee so decides.
17.
Notices
All notices to Bondholders shall be validly given if mailed to them at their respective addresses in the
register of Bondholders maintained by the Registrar or published in a leading newspaper having
general circulation in Asia and, so long as the Bonds are listed on the SGX-ST and the rules of that
Exchange so require notices will also be published via SGXNET of the SGX-ST. Such notices shall be
deemed to have been given on the later of the date of such publications. Any such notice shall be
deemed to have been given on the later of the date of such publication and the seventh day after being
so mailed, as the case may be.
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on
behalf of Euroclear or Clearstream or the Alternative Clearing System (as defined in the form of the
Global Certificate), notices to Bondholders shall be given by delivery of the relevant notice to
Euroclear or Clearstream or the Alternative Clearing System, for communication by it to entitled
accountholders in substitution for notification as required by these Conditions.
18.
Agents
The names of the initial Agents and the Registrar and their specified offices are set out below. The
Company reserves the right, subject to the prior written approval of the Trustee, at any time to vary or
terminate the appointment of any Agent or the Registrar and to appoint additional or other Agents or a
replacement Registrar. The Company will at all times maintain (i) a Principal Paying and Conversion
Agent, (ii) a Registrar outside the United Kingdom, (iii) an Agent having a specified office in
Singapore (or any city required by the rules and regulations of an Alternative Stock Exchange) where
the Bonds may be presented or surrendered for payment or redemption, so long as the Bonds are listed
on theSGX-ST (or, as the case may be, Alternative Stock Exchange) and the rules of that exchange so
require and (iv) a Principal Paying and Conversion Agent with a specified office in a European Union
member state that will not be obliged to withhold or deduct tax pursuant to any law implementing the
Savings Directive (2003/48/EC) or any other Directive implementing the conclusions of the ECOFIN
Council meeting of 26-27 November 2000. Notice of any such termination or appointment, of any
changes in the specified offices of any Agent or the Registrar and of any change in the identity of the
Registrar or the Principal Paying and Conversion Agent will be given promptly by the Company to the
Bondholders in accordance with Condition 17 and in any event not less than 45 days' notice will be
given.
Subject to the terms of the Agency Agreement, in acting hereunder and in connection with the Bonds,
the Agents shall act solely as agents of the Company and will not thereby assume any obligations
towards, or relationships of agency or trust for, any of the Bondholders.
So long as the Bonds are listed on the SGX-ST and the rules of that exchange so require, in the event
that the Global Certificate is exchanged for definitive Certificates, the Company shall appoint and
maintain a paying agent in Singapore, where the Bonds may be presented or surrendered for payment
or redemption. In addition, in the event that the Global Certificate is exchanged for definitive
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Certificates, announcement of such exchange shall be made through the SGX-ST and such
announcement will include all material information with respect to the delivery of the definitive
Certificates, including details of the Singapore agent.
19.
Indemnification
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from
responsibility, including provisions relieving it from taking proceedings to enforce repayment unless
indemnified and/or secured to its satisfaction. The Trustee is entitled to enter into business transactions
with the Company without accounting for any profit.
The Trustee may rely without liability to Bondholders on any certificate prepared by the directors or
Authorised Officers of the Company and accompanied by a certificate or report prepared by the
Auditors of the Company or an internationally recognised firm of accountants pursuant to these
Conditions and/or the Trust Deed, whether or not addressed to the Trustee and whether or not the
Auditors of the Company or the internationally recognised firm of accountants liability in respect
thereof is limited by a monetary cap or otherwise limited or excluded and shall be obliged to do so
where the certificate or report is delivered pursuant to the obligation of the Company to procure such
delivery under these Conditions; any certificate or report shall be conclusive and binding on the
Company, the Trustee and the Bondholders.
20.
21.
Governing Law
These Conditions are governed by, and shall be construed in accordance with, the laws of England.
22.
Jurisdiction
The courts of England and Wales are to have jurisdiction to settle any disputes which may arise out of
or in connection these Conditions or the Bonds and accordingly any legal action or proceedings arising
out of or in connection with these Conditions or the Bonds ("Proceedings") may be brought in such
courts. The Company irrevocably submits to the jurisdiction of such courts and waives any objections
to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been
brought in an inconvenient forum. This submission is for the benefit of the Trustee and each of the
Bondholders and shall not limit the right of any of them to take Proceedings in any other court of
competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the
taking of Proceedings in any other jurisdiction (whether concurrently or not).
23.
Service of Process
The Company irrevocably appoints Ashley King Ltd., of 148 Field End Road, Pinner, HA5 1RJ as its
authorised agent for service of process in England. Subject to applicable law, such service shall be
deemed to be completed on delivery to such process agent (whether or not it is forwarded to and
received by the Company). The Company will procure that, so long as any of the Bonds is outstanding,
there shall be in force an appointment of such a person with an office in England with authority to
accept service as aforesaid on behalf of the Company and, failing such appointing within 15 days after
demand by or on behalf of the Trustee, the Trustee shall be entitled by notice to the Company to
appoint such person at the cost of the Company. Nothing herein shall affect the right to serve process
in any other manner permitted by law.
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The Bonds will initially be represented by a Global Certificate in registered form. The Global Certificate was
delivered to, and registered in the name of a common nominee for, and held by the Common Depositary for,
Euroclear and Clearstream, Luxembourg on the Issue Date. Except in the limited circumstances described in the
Global Certificate, owners of interests in the Bonds represented by the Global Certificate will not be entitled to
receive definitive Certificates in respect of their individual holdings of the Bonds. The Global Certificate
contains provisions, which apply to the Bonds while they are in global form, some of which modify the effect of
the terms and conditions (the "Conditions") of the Bonds set out in this Offering Circular. The following is a
summary of certain of those provisions. Unless otherwise defined herein, terms defined in the Conditions shall
have the same meaning herein.
Meetings
The holder of the Global Certificate will be treated as being two persons for the purposes of any quorum
requirements of a meeting of Bondholders and, at any such meeting, as having one vote in respect of each
US$10,000 in principal amount of Bonds in respect of which the Global Certificate is issued. The Trustee may
allow any accountholder (or the representative of any such person) of a clearing system entitled to Bonds in
respect of which the Global Certificate is issued to attend and speak (but not to vote) at a meeting of
Bondholders, on confirmation of entitlement and proof of his identity.
Conversion
Subject to the requirements of Euroclear and Clearstream, Luxembourg (or any alternative clearing system
approved in writing by the Trustee), the Conversion Right attaching to Bonds in respect of which the Global
Certificate is issued may be exercised by the presentation of one or more Conversion Notices (which may be by
facsimile while the Bonds are represented by the Global Certificate) duly completed by or on behalf of a holder
of a book-entry interest in such Bond. Deposit of the Global Certificate with the Conversion Agent together with
the relevant Conversion Notice shall not be required. The provisions of Condition 6 of the Bonds will otherwise
apply.
Trustee's Powers
In considering the interests of Bondholders, the Trustee may, to the extent it considers it appropriate to do so in
the circumstances, (a) have regard to such information as may have been made available to it by or on behalf of
the relevant clearing system or its operator as to the identity of its accountholders (either individually or by
category) with entitlements in respect of Bonds and (b) consider such interests on the basis that such
accountholders were the Bondholders in respect of which the Global Certificate is issued.
Enforcement
For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a
certificate of the holder of the Bonds in respect of which the Global Certificate is issued shall be as the
beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interests in the
Bonds set out in the certificate of the holder as if they were themselves the holders of Bonds in such principal
amounts.
Cancellation
Cancellation of any Bonds required by the Conditions to be cancelled following its redemption, conversion or
re-purchase will be effected by reduction in the principal amount of the Bonds in the Register.
Payments
Payments of principal, interest and premium (if any) in respect of Bonds represented by the Global Certificate
will be made without presentation or, if no further payment is to be made in respect of the Bonds, against
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presentation and surrender of the Global Certificate to or to the order of the Principal Paying Agent or such
other Paying and Conversion Agent as shall have been notified to the Bondholders for such purpose.
Transfers
Transfers of interests in the Bonds with respect to which this Global Certificate is issued shall be made in
accordance with the Agency Agreement.
Transfers of interests in the Bonds with respect to which this Global Certificate is issued shall be effected
through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance
with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect
participants.
Accountholders
For so long as any of the Bonds are represented by the Global Certificate and such Global Certificate is held on
behalf of Euroclear and/or Clearstream, Luxembourg, each person who is for the time being shown in the
records of Euroclear and Clearstream, Luxembourg as the holder of a particular principal amount of such Bonds
(each an "Accountholder") (in which regard any certificate or other document issued by Euroclear and
Clearstream, Luxembourg as to the principal amount of such Bonds standing to the account of any person shall
be conclusive and binding for all purposes) shall be treated as the holder of such principal amount of such Bonds
for all purposes (including for the purposes of any quorum requirements of, or in the right to demand a poll at,
meetings of the Bondholders) other than with respect to the payment of principal and premium on such Bonds,
the right to which shall be vested, as against the Company and the Trustee, solely in the holder of the Global
Certificate in accordance with and subject to its terms and the terms of the Trust Deed. Each Accountholder
must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment
made to the holder of the Global Certificate.
Notices
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of
Euroclear or Clearstream, Luxembourg, or any alternative clearing system notices required to be given to
Bondholders may be given to the relevant clearing system for communication by it to entitled accountholders in
substitution for notification, as required by the Conditions.
Definitive Certificates
Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title
to the Bonds registered in their names and to receive individual certificates in definitive form ("Definitive
Certificates") if either:
(i)
(ii)
the Common Depositary or any successor to the Common Depositary notifies the Company in writing
that it is at any time unwilling or unable to continue to act as a depositary and a successor depositary is
not appointed by the Company within 90 days of the date of such notice, or
Euroclear or Clearstream, Luxembourg or a successor clearing system is closed for business for a
continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an
intention permanently to cease business or does in fact do so.
In such circumstances, the Company will make arrangements for the exchange of interests in the Global
Certificate in whole but not in part for Definitive Certificates and cause such Definitive Certificates to be
executed and delivered to the Registrar in sufficient quantities and authenticated by the Registrar for delivery to
the holders of the Bonds. Each person exchanging interests in the Global Certificate for one or more of these
Definitive Certificates will be required to provide to the Trustee, through the relevant clearing system, written
instructions and other information required by the Company and the Registrar to complete, execute and deliver
the relevant certificates. Any Definitive Certificates delivered in exchange for the Global Certificate or
beneficial interests therein will be registered in the names requested, and issued in any denominations approved,
by the relevant clearing system.
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In the case of Definitive Certificates issued in exchange for any Global Certificate, such Definitive Certificates
will bear, and be subject to, such legends, as the Company requires in order to ensure compliance with any
applicable law. The holder of such restricted Definitive Certificates may transfer the Bonds represented by such
Definitive Certificates, subject to compliance with the provisions of such legend. Upon the transfer, exchange or
replacement of Definitive Certificates bearing the legend, or upon specific request for removal of the legend on
a Definitive Certificate, the Company will deliver only Definitive Certificates that bear such legend, or will
refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither
the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions
of the Securities Act.
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(iii)
(iv)
(v)
(vi)
A person residing outside India (other than a citizen of Pakistan and Bangladesh) or any entity incorporated
outside India (other than an entity incorporated in Pakistan or Bangladesh) has general permission to purchase
shares or convertible debentures or preference shares of an Indian company, subject to certain terms and
conditions.
Currently, subject to certain exceptions, FDI and investment by Non-Resident Indians in Indian companies do
not require the prior approval of the FIPB or the RBI. The Government of India has indicated that in all cases
where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary
agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is
obtained, no approval of the RBI is required, although a declaration in the prescribed form, detailing the foreign
investment, must be filed with the RBI once the foreign investment is made in the Indian company. The
foregoing description applies only to an issuance of shares by, and not to a transfer of shares of, Indian
companies.
The Government of India has set up the Foreign Investment Implementation Authority (the "FIIA") in the
Department of Industrial Policy and Promotion. The FIIA has been mandated to (i) translate foreign direct
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investment approvals into implementation, (ii) provide a pro-active one stop after care service to foreign
investors by helping them obtain necessary approvals, (iii) deal with operational problems, and (iv) meet with
various Government of India agencies to find solutions to foreign investment problems, and maximise
opportunities through a partnership approach.
Under the current regulations, 100% FDI is permitted for investments in IT industries.
Pricing
The SEBI is the regulatory body that regulates the business of Indian securities markets and has framed SEBI
(Disclosure and Investor Protection) Guidelines, 2000, as amended (the "SEBI Guidelines") to be complied
with by Indian companies who intend to issue and list their securities in the Indian stock markets. The SEBI
Guidelines are applicable to all public issues by listed and unlisted companies, all offers for sale, bonus issues
and rights issues by listed companies whose share capital is listed, except in the case of rights issues where the
aggregate value of securities offered does not exceed Rs.5 million.
The Ministry of Finance through an amendment to the Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depository Receipt Mechanism) Scheme, 1993 announced on 31 August 2005 that it had
prescribed the eligibility criteria for Indian issuers desirous of raising funds under the said Scheme. Consequent
thereto, an Indian Company which is not eligible to raise funds from the Indian capital market including a
company which has been restrained from accessing the securities market by the SEBI will not be eligible to
issue FCCBs or Global Depositary Receipts ("GDRs") under the aforesaid Scheme. OCBs that are not eligible
to invest in India through the portfolio route and entities that are prohibited to buy, sell or deal in securities by
SEBI will not be eligible to subscribe to the FCCBs or the GDRs under the aforesaid Scheme. The pricing at
which the FCCBs or the GDRs may be made has also been set out by the Ministry of Finance through the
amendment.
The pricing of the FCCBs or the GDRs shall not be less than the higher of the following two averages: (a)
average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange
during the six months prior to the relevant date, and (b) the average of the weekly high and low of the closing
prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date.
Relevant date for the above purpose is defined as the date thirty days prior to the date on which the meeting of
the general body of the shareholders is held, in terms of Section 81(1A) of the Companies Act to consider the
proposed issue.
Every Indian company issuing shares or convertible debentures in accordance with the Regulations must submit
a report to the RBI within 30 days of receipt of the consideration and another report within 30 days from the
date of issue of the shares to the non-resident purchaser.
The above description applies only to a new issue of securities by an Indian company.
Investment by Foreign Institutional Investors
In September 1992, the Government of India issued guidelines which enable foreign institutional investors
("FIIs"), including institutions such as pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional portfolio managers, to make portfolio investments in all securities of
listed and unlisted companies in India. Investments by registered FIIs or Non-Resident Indians made through a
stock exchange are known as portfolio investments ("Portfolio Investments"). Foreign investors wishing to
invest and trade in Indian securities in India under these guidelines are required to register with the SEBI and
obtain a general permission from the RBI under the FEMA. However, since the SEBI provides a single window
clearance, a single application must be made to the SEBI. Foreign investors are not necessarily required to
register with the SEBI as FIIs and may invest in securities of Indian companies pursuant to the FDI route
discussed above.
FIIs that are registered with the SEBI must comply with the provisions of the Securities and Exchange Board of
India (Foreign Institutional Investors) Regulations 1995 (the "Foreign Institutional Investor Regulations"). A
registered FII may, subject to the ownership restrictions discussed below, freely buy and sell securities issued by
any Indian company, realise capital gains on investments made through the initial amount invested in India,
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subscribe to or renounce rights offerings for shares, appoint a domestic custodian for custody of investments
made and repatriate the capital, capital gains, dividends, income received by way of interest and any
compensation received towards sale or renunciation of rights offerings for shares. An Fll may not hold more
than 10% of the total issued capital of a company in its own name; a corporate/individual sub-account of the FII
may not hold more than 5% of the total issued capital of a company, and a broad-based sub-account may not
hold more than 10% of the total issued capital of a company. The total holding of all Flls in a company is
subject to a cap of 24% of the total issued capital of a company, which can be increased to the relevant statutory
cap/ceiling in respect of the company with the passing of a special resolution of the shareholders of the company
in a general meeting.
Registered FIIs are generally subject to tax under Section 115AD of the Indian Income Tax Act. The Bonds and
the Shares are subject to tax under Section 115AC. There is uncertainty under Indian law as to the tax regime
applicable to the FIIs that hold and trade in foreign currency denominated bonds or global depositary receipts. A
Bondholder need not be an FII in order to exercise its Conversion Rights.
Portfolio Investment by Non-Resident Indians
A variety of methods for investing in shares of Indian companies are available to Non-Resident Indians. These
methods allow Non-Resident Indians to make Portfolio Investments in shares and other securities of Indian
companies on a basis not generally available to other foreign investors. In addition to Portfolio Investments in
Indian companies, Non-Resident Indians may also make foreign direct investments in Indian companies
pursuant to the FDI route discussed above.
Until recently, the sale of shares of an Indian company from a non-resident to a resident required RBI approval,
unless the sale was made on a stock exchange at the market price. The Government has granted general
permission to persons residing outside India to transfer shares and convertible debentures held by them to an
Indian resident, subject to compliance with certain terms and conditions and reporting requirements. A resident
who wishes to purchase shares from a non-resident must, pursuant to the relevant notice requirements, file a
declaration with an authorised dealer in the prescribed Form FC-TRS, together with the relevant documents and
file an acknowledgment thereof with the Indian company to effect transfer of the shares to his name. However,
in such cases, the person to whom the shares are being transferred is required to obtain the prior permission of
the Central Government of India to acquire the shares if he has an existing or previous venture or tie-up in India
through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment
by whatever name called in the same field or allied field other than in the information technology field to that in
which the Indian company whose shares are being transferred is engaged. Further, a non-resident may transfer
any security held by him to a person resident in India by way of gift.
Transfer of shares and convertible debentures of an Indian company by a person resident outside India
Subject to what is stated below, a person resident outside India may transfer the shares or convertible debentures
held by him in Indian companies in accordance with the Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India) Regulations 2000. A non-resident or a NRI may transfer, by way
of sale, the shares or convertible debentures held by him to any other non-resident or a NRI, respectively,
without the prior approval of the RBI. Approval of the FIPB will however be required in cases where the person
to whom the shares are being transferred has an existing or previous venture or tie-up in India through
investment in shares or debentures or a technical collaboration or a trade mark agreement or other investment,
howsoever called in the same or an allied field (other than in the information technology field and certain
relaxations in the mining sector) to that in which the Indian company whose shares are being transferred is
engaged. Further, a non-resident may transfer shares or convertible debentures held by him to a person resident
in India by way of gift or may sell the same on a recognised stock exchange in India through a registered broker.
Pursuant to recent liberalisation, non-residents (other than erstwhile overseas corporate bodies, foreign
nationals, NRIs and FIIs) are permitted to purchase shares or convertible debentures of an Indian company
(subject to applicable sectoral caps), other than an Indian company engaged in the financial services sector, from
a resident of India without the prior approval of the RBI, subject to compliance with prescribed conditions,
pricing guidelines, submission of required documents and reporting and obtaining a certificate from the
applicable authorised dealer. Similarly, a non-resident (i.e. incorporated non-resident entity, erstwhile overseas
corporate bodies, foreign nationals, NRIs and FIIs) may sell shares or convertible debentures of an Indian
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company (subject to applicable sectoral caps), other than an Indian company engaged in the financial services
sector, to a resident of India without the prior approval of the RBI, subject to compliance with prescribed pricing
guidelines, submission of required documents and reporting and obtaining a certificate from the applicable
authorised dealer. Further to this, in its recent Circular No. 16 dated 14 October 2004, the RBI has granted
general permission for the transfer of shares by way of sale by a person resident outside India to a person
resident in India, subject to compliance with certain terms, conditions and reporting requirements.
Issue of Foreign Currency Convertible Bonds ("FCCBs")
The MOF, through the Depositary Receipt Scheme and the ECB Guidelines, has allowed Indian corporates to
issue FCCBs. The notification relating to FCCBs has been amended from time to time by the MOF, and certain
relaxations in the guidelines have also been notified by the RBI. The FEM Regulations provide that an Indian
company may issue FCCBs to a person resident outside India subject to the approval of the RBI in certain cases.
Any Indian company issuing such bonds must comply with certain reporting requirements prescribed by the
RBI. The FEM Securities Regulations provide the following:
An Indian corporate can raise funds up to US$500 million under the "automatic route" without the approval of
the RBI, and above any amount of US$500 million with the approval of the RBI. These limits are also available
to FCCBs under the ECB Guidelines, and Indian Companies may issue FCCBs subject to the following
conditions:
(i)
FCCBs up to US$20 million or equivalent must have a minimum average maturity of three years;
(ii)
FCCBs above US$20 million and up to US$500 million or equivalent must have minimum average
maturity of five years;
(iii)
FCCBs up to US$20 million may have a call/put option provided the minimum average maturity of
three years is complied before exercising the call/put option;
(iv)
the issue of FCCBs shall be subject to the foreign direct investment sectoral caps prescribed by the
MOF;
(v)
public issues of FCCBs must be made through reputable lead managers;
(vi)
FCCBs must be availed of from Recognised Lenders (as defined in the ECB Guidelines dated 1 August
2005);
(vii)
prepayment of FCCBs up to US$200 million is permitted without prior approval subject to compliance
with the minimum average maturity period, as applicable;
(viii)
the "all-in cost" ceiling for FCCBs having a minimum average maturity period of three to five years
should not exceed six month LIBOR plus 2 per cent, and in the case of FCCBs having a minimum
average maturity period of more than five years, should not exceed six month LIBOR plus 3.5 per cent;
(ix)
FCCB proceeds must be used for investments in areas such as import of capital goods, new projects,
modernisation/expansion of existing production units and real estate investments (such as industrial
sector, including small and medium enterprises ("SME") and infrastructure sector, but other than
permitted development of integrated townships) in India. Infrastructure sector is defined as (i) power,
(ii) telecommunications, (iii) railways, (iv) road including bridges, (v) ports, (vi) industrial parks and
(vii) urban infrastructure (water supply, sanitation and sewage projects). Utilisation of the FCCB
proceeds is also permitted in the first stage acquisition of shares in the divestment process and also in
the mandatory second stage offer to the public under the Government of India's divestment programme
of PSU shares, or for overseas direct investment in joint ventures/wholly-owned subsidiaries,
expansion of existing joint ventures or wholly-owned subsidiary operations and overseas mergers and
acquisitions. For any use of proceeds, other than as set out above, the prior permission of the RBI
would be required;
(x)
FCCB proceeds are not permitted to be used for working capital purposes, general corporate purposes
or for the repayment of existing Rupee loans;
(xi)
FCCB proceeds may not be used for on-lending and investment in capital markets or acquiring a
company (or a part thereof) in India and real estate (other than permitted development of integrated
townships);
(xii)
proceeds from the issue of the FCCBs after deduction of the amounts equal to commissions, fees and
expenses of the arranger (provided that such amounts do not exceed the prescribed ceiling) must be
parked overseas until actual requirement in India;
(xiii)
issue-related expenses shall not exceed 4 per cent of issue size for public issues and 2 per cent for
private placements.
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On 31 January 2004, the RBI issued a revised policy with effect from 1 February 2004 for External Commercial
Borrowings, which is also applicable to FCCBs (the "Borrowing Policy"), permitting Indian corporations to
raise funds up to US$500 million under the automatic approval route. Borrowings in excess of US$500 million
require the approval of the RBI. In terms of the Borrowing Policy, FCCBs up to US$20 million must have a
minimum average maturity period of three years and FCCBs above US$20 million and up to US$500 million
must have a minimum average maturity of five years. Further, the "all-in cost" ceiling for FCCBs having a
minimum average maturity period of three to five years should not exceed 200 basis points over six month
LIBOR and in the case of FCCBs having a minimum average maturity period of more than five years should not
exceed 350 basis points over six month LIBOR. The RBI has yet to amend the Overseas Direct Investment
Regulations to give effect to the Borrowing Policy. Further, on 1 April 2004, the RBI issued a circular stating,
inter alia, the following:
(i)
end use of FCCBs for working capital, general corporate purpose and repayment of existing rupee
loans is not permitted;
(ii)
the maximum amount of FCCBs that may be raised by an eligible borrower under the automatic route
is US$500 million or its equivalent during a financial year; and
(iii)
the primary responsibility to ensure that FCCBs raised/utilised are in conformity with the RBI
instructions is that of the concerned borrower and any contravention of the FCCB guidelines will be
viewed seriously and may invite penal action.
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the average of the weekly high and low of the closing prices of the related shares quoted on the stock
exchange during the six months preceding the relevant date; and
(ii)
the average of the weekly high and low of the closing prices of the related shares quoted on a stock
exchange during the two weeks preceding the relevant date.
The "relevant date" in this regard has been defined to mean the date 30 days prior to the date on which
the meeting of the general body of shareholders is held, in terms of section 81(IA) of the Companies
Act to consider the proposed issue of FCCBs.
Regulatory Filings
The Company is required to make the following filings in connection with issuance of the Bonds and at the time
of conversion of Bonds into Shares:
(i)
filing with the RBI (through an authorised dealer in foreign exchange) Form No. 83;
(ii)
filing of information with the RBI subsequent to the issuance of the Bonds, which would include: total
amount of the Bonds issued, names of the investors resident outside India and number of the Bonds
issued to each of them, and the amount repatriated to India through normal banking channels duly
supported by Foreign Inward Remittance Certificates;
(iii)
filing of return of allotment with the ROC of NCT of Delhi & Haryana at its office in New Delhi at the
time of conversion of Bonds into Shares;
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(iv)
filing of information with the RBI on conversion of Bonds into the Shares in the prescribed Form FCGPR;
(v)
monthly filing with the RBI (through an authorised dealer in foreign exchange) in the prescribed Form
No. ECB-2; and
(vi)
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TAXATION
The following is a summary of the principal Indian tax consequences for non-resident investors of the Bonds
who acquire the Bonds pursuant to this Offering Circular. The summary details the tax consequences for nonresident investors only in relation to the Bonds and the Shares issuable upon conversion of the Bonds. The
summary only addresses the tax consequences for non-resident investors who hold the Bonds or the Shares
issued on conversion of Bonds as capital assets and does not address the tax consequences which may be
relevant to other classes of non-resident investors, including dealers. The summary proceeds on the basis that
the investor continues to remain a non-resident when the income by way of dividends and capital gains is
earned. The summary is based on Indian tax laws as in force as at the date of this Offering Circular and is
subject to change. This summary is not intended to constitute a complete analysis of all the tax consequences for
a non-resident investor under Indian law in relation to the acquisition, ownership and disposal of the Bonds or
Shares issuable upon conversion of the Bonds. Potential investors should therefore consult their own tax
advisers on the tax consequences of such acquisition, ownership and disposal of the Bonds or the Shares under
Indian law including specifically, the tax treaty between India and their country of residence and the law of the
jurisdiction of their residence.
The following discussion describes the material Indian income tax, stamp duty and estate duty consequences of
the purchase, ownership and disposal of the Bonds and the Shares issuable upon conversion of the Bonds. The
Income Tax Act is the law relating to taxation of income in India. The Income Tax Act provides for the taxation
of persons resident in India on their global income and persons not resident in India on income received,
accruing or arising in India or deemed to have been received, accrued or arisen in India. This summary is based
on the provisions of Section 115AC of the Income Tax Act and other applicable provisions of the Income Tax
Act and the FCCB Scheme promulgated by the Indian Government (together referred to as the "Tax Regime").
Taxation of Income from Bonds
The Tax Regime provides that payment of interest on the Bonds paid to the non-resident Bondholders will be
subject to withholding tax at the rate of 10 per cent. plus surcharge at the applicable rate. The Income Tax Act
requires that such tax be withheld at source. Under the FCCB Scheme, the transfer of Bonds outside India by a
non-resident holder to another non-resident shall not give rise to any capital gains tax in India. However, Section
115AC of the Income Tax Act provides that income by way of long-term capital gains arising from the transfer
of Bonds outside India by the non-resident holder to another non-resident is subject to tax at the rate of 10 per
cent. In the circumstances, if at all, that capital gains arising from a transfer of Bonds are taxable under the
Income Tax Act, the same shall be subject to tax as long-term capital gains at the rate of 10 per cent. plus
surcharge at the applicable rate if such Bonds have been held by the non-resident holder for more than 12
months. In the event that such Bonds have been held by the non-resident holder for less than 12 months, the
capital gains shall be subject to tax as short-term capital gains at the normal income tax rates applicable to nonresidents under the provisions of the Income Tax Act.
It is unclear whether capital gains derived from the sale by a non-resident investor of rights in respect of Bonds
will be subject to tax liability in India. This will depend on the view taken by Indian tax authorities on the
position with respect to the situs of the rights being offered in respect of the Bonds. The premium payable by the
Company to a non-resident Bondholder upon redemption of the Bonds will be taxed as long-term capital gains
at the concessional rate of 10 per cent. plus surcharge at the applicable rate if the Bonds have been held by the
non-resident holder for more than three years. In the event that the Bonds have been held by the non-resident
holder for less than three years, the capital gains due to payment of premium on redemption of the Bonds shall
be subject to tax as short-term capital gains at the normal income tax rates applicable to non-residents under the
provisions of the Income Tax Act. Withholding tax on capital gains due to payment of premium on redemption
of the Bonds is required to be deducted under Section 195 of the Income Tax Act at the prescribed rates.
Taxation of Shares Issued upon Conversion of Bonds
The conversion of Bonds into Shares, will not give rise to any capital gains liable to income tax in India.
However, the issue of Shares by the Company upon conversion of Bonds will be chargeable to stamp duty as
described below under "Stamp Duty".
Page 140
Taxation of Dividends
Dividends paid to a non-resident holder of Shares issued upon conversion of Bonds are not presently liable to
tax. However, the Company is liable to pay a "dividend distribution tax" currently at the rate of approximately
12.5 per cent. Additionally, there is a surcharge at 10 per cent. levied on the dividend distribution tax and a 3 per
cent. education cess levied on the sum of the dividend distribution tax and the surcharge. Hence, the effective
rate of dividend distribution tax is 14.03 per cent. The Company assumes the responsibility for the payment of
such tax.
Taxation on Sale of the Shares
Sale of the Shares by any holder thereof may occasion certain incidence of tax in India, as is discussed below.
Under applicable law, a transaction of sale of Shares may be chargeable to a transaction tax and/or tax on
income by way of capital gains. Capital gains accruing to a non-resident investor on the sale of the Shares,
whether to an Indian resident or to a person resident outside India and whether in India or outside India, may be
subject to Indian capital gains tax in certain instances as described below.
Sale of the Shares on a Recognised Stock Exchange
In accordance with applicable Indian tax laws, any income arising from a sale of the shares of an Indian
company through a recognised stock exchange in India is subject to securities transaction tax. Such tax is
payable by a person irrespective of its residential status and is to be collected by the recognised stock exchange
in India on which the sale of the shares is effected.
Capital gains (calculated in the manner set forth in the following paragraph) realised in respect of Shares held by
the non-resident investor for more than 12 months will be treated as long-term capital gains and will not be
subject to tax in the event such transaction is chargeable to securities transaction tax. Capital gains (calculated in
the manner set forth in the following paragraph) realised in respect of Shares held by the non-resident investor
for 12 months or less will be treated as short-term capital gains and will be subject to tax at the rate of 10 per
cent. plus surcharge at the rate of 2.5 per cent., in the event such transaction is chargeable to securities
transaction tax. Withholding tax on capital gains on sale of the Shares is required to be deducted under Section
195 of the Income Tax Act at the prescribed rates.
For the purpose of computing capital gains tax on the sale of the Shares, the cost of acquisition of the Shares
issued upon conversion of the Bonds would be the market price of the Shares on the BSE or the NSE on the date
of conversion. For the purpose of computing capital gains on sale of Shares, the sale consideration received or
accruing on such sale shall be reduced by the cost of acquisition of such Shares and any expenditure incurred
wholly and exclusively in connection with such sale. However, there is no corresponding provision in the
Income Tax Act as to the cost of acquisition of the Shares being the price prevailing on the date of conversion as
explained above.
Sale of the Shares otherwise than on a Recognised Stock Exchange
Capital gains (calculated in the manner set forth above) realised in respect of Shares held by the non-resident
investor for more than 12 months will be treated as long-term capital gains and will be subject to tax at the rate
of 10 per cent. plus surcharge at the rate of 2.5 per cent. Capital gains (calculated in the manner set forth above)
realised in respect of Shares held by the non-resident investor for 12 months or less will be treated as short-term
capital gains and will be subject to tax at the normal income tax rates applicable to non-residents under the
provisions of the Income Tax Act. Withholding tax on capital gains on sale of the Shares is required to be
deducted under Section 195 of the Income Tax Act at the prescribed rates.
Capital Losses
The losses arising from a transfer of a capital asset in India can only be set off against capital gains and not
against any other income in accordance with the Income Tax Act. A long-term capital loss may be set off only
against a long-term capital gain. To the extent that the losses are not absorbed in the year of transfer, they may
be carried forward for a period of eight assessment years immediately succeeding the assessment year for which
the loss was first computed and may be set off against the capital gains assessable for such subsequent
Page 141
assessment years. In order to get the benefit of set-off of the capital losses in this manner, the non-resident
investor would be required to file appropriate and timely tax returns in India and undergo the usual assessment
procedures. If the investors are covered by the securities transaction tax regime, the loss arising from the transfer
of a long-term capital asset may not be available for set-off against capital gains.
Tax Treaties
The above mentioned tax rates and the consequent taxation shall be subject to any benefits available to a nonresident investor under the provisions of any agreement for the avoidance of double taxation entered into by the
Indian Government with the country of residence of such non-resident investor.
Stamp Duty
Upon issuance of the Shares upon conversion of the Bonds, stamp duty as applicable would need to be paid
regardless of whether such Shares are issued in physical or dematerialised form. If the Shares are issued in
physical form, the transfer of the Shares would be subject to stamp duty at the rate of 0.25 per cent. (as presently
in force) of the value of the ordinary shares on the transfer date and such stamp duty customarily is borne by the
transferee. However, if the Shares are issued in dematerialised form, no stamp duty is payable on the transfer of
the Shares in dematerialised form.
Wealth Tax, Gift Tax and Inheritance Tax
At present there are no taxes on wealth, gifts and inheritances which apply to the Bonds, or the Shares issuable
upon conversion of the Bonds.
Service Tax
Brokerage or commission fees paid to stockbrokers in connection with the sale or purchase of Shares are now
subject to an Indian service tax at a rate of 12.24 per cent. A stockbroker is responsible for collection of such
service tax at the prescribed rate and for paying the same to the relevant authority.
Tax Credit
A non-resident investor would be entitled to tax credit with respect to any withholding tax paid by the Company
or any other person for its account in accordance with the laws of the applicable jurisdiction.
Education Cess
In all the above cases, the amount of income tax and surcharge and service tax as stated above would be
increased by an education cess of 3 per cent.
Taxation on buyback of Shares
If Shares held by a non-resident investor are purchased by the Company, the non-resident investor will be liable
to pay income tax in respect of the capital gains arising on such buyback under the provisions of Indian tax laws.
The provisions of any double taxation treaty entered into by the Indian Government with the country of
residence of the non-resident investor will be applicable to the extent they are more beneficial to the nonresident investor.
Page 142
to legal entities which are authorised or regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose is solely to invest in securities;
(b)
to any legal entity which has two or more of (1) an average of at least 250 employees during the last
financial year; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of
more than 50,000,000, as shown in its last annual or consolidated accounts; or
(c)
in any other circumstances which do not require the publication by the Company of a prospectus
pursuant to Article 3 of the Prospectus Directive.
Page 143
For the purposes of this provision, the expression an "offer of Bonds to the public" in relation to any Bonds in
any Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the offer and the Bonds to be offered so as to enable an investor to decide to purchase or
subscribe the Bonds, as the same may be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive
2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
United Kingdom
The Lead Manager has represented and agreed that:
(1)
it has only communicated or caused to be communicated and will only communicate or cause to be
communicated any invitation or inducement to engage in investment activity (within the meaning of
section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection
with the issue or sale of any Bonds in circumstances in which section 21(1) of the FSMA does not
apply to the Company; and
(2)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.
United States
The Bonds and the Shares to be issued upon conversion of the Bonds have not been and will not be registered
under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States.
The Bonds are being offered and sold outside the United States in reliance on Regulation S under the Securities
Act.
India
The Lead Manager has represented and agreed that this Offering Circular will not be registered as a prospectus
with the RoC and that the Bonds will not be offered or sold in India, nor has it circulated or distributed nor will
it circulate or distribute this Offering Circular or any other offering document or material relating to the Bonds,
directly or indirectly, to the public or any members of the public in India.
Hong Kong
The Lead Manager has represented and agreed that (i) it has not offered or sold and will not offer or sell in Hong
Kong, by means of any document, any Bonds other than (a) to "professional investors" as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in
other circumstances which do not result in the document being a "prospectus" as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that
Ordinance; and (ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have
in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or
document relating to the Bonds, which is directed at, or the contents of which are likely to be accessed or read
by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than
with respect to Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to
"professional investors" as defined in the Securities and Futures Ordinance and any rules made under that
Ordinance.
Japan
The Lead Manager has represented and agreed that the Bonds have not been and will not be registered under the
Securities and Exchange Law of Japan (the "Securities and Exchange Law"). Accordingly, the Lead Manager
has represented, warranted and agreed that it has not, directly or indirectly, offered or sold and will not, directly
or indirectly, offer or sell any Bonds in Japan or to, or for the benefit of, any resident of Japan (which term as
used herein means any person resident in Japan, including any corporation or other entity organised under the
laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of,
Page 144
any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in
compliance with, the Securities and Exchange Law and other relevant laws and regulations of Japan.
Singapore
The Lead Manager has acknowledged that this Offering Circular has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, the Lead Manager has represented, warranted and agreed that it
has not offered or sold any Bonds or caused such Bonds to be made the subject of an invitation for subscription
or purchase and will not offer or sell such Bonds or cause such Bonds to be made the subject of an invitation for
subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Offering
Circular or any other document or material in connection with the offer or sale, or invitation for subscription or
purchase, of such Bonds, whether directly or indirectly, to persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a
relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with
the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
The Bonds may not be sold within the period of 6 months from the date of the initial acquisition by the owner to
any person other than to (a) an institutional investor; (b) a relevant person as defined in section 275 (2); or (c)
any person pursuant to an offer referred to in section 275 (1A) of the SFA.
Note:
Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole
business of which is to hold investments and the entire share capital of which is owned by one or more
individuals, each of whom is an accredited investor; or
(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary (which shall include a unitholder of a business trust and a participant of a collective
investment scheme) of the trust is an individual who is an accredited investor,
the shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights
and interest (howsoever described) in that trust shall not be transferred within six months after that
corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the
SFA except:
(1)
to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person
defined in Section 275(2) of the SFA, or to any person pursuant to Section 275(1A), and in accordance
with the conditions specified in Section 275 of the SFA;
(2)
(3)
Notice to Investors
Except in certain limited circumstances, interests in the Bonds may only be held through interests in the Global
Certificate. Such interests in the Global Certificate will be shown on, and transfers thereof will be effected only
through, records maintained by Euroclear and Clearstream, Luxembourg and their respective direct and indirect
participants.
Each purchaser of the Bonds, by accepting delivery of such Bonds, will be deemed to have acknowledged and
represented to and agreed as follows (terms used herein that are defined in Regulation S are used as defined
therein):
Page 145
(1)
(2)
(3)
(4)
(5)
(6)
The Bonds and the Shares issuable upon conversion of the Bonds have not been and are not expected to
be registered under the Securities Act or with any securities regulatory authority of any state of the
United States and are subject to significant restrictions on transfer.
Each owner purchasing prior to the expiration of 40 days after the later of the commencement of the
offering of the Bonds and the last related Issue Date (the "Distribution Compliance Period") is
purchasing the Bonds in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of
Regulation S.
The Bonds and the Shares issuable upon conversion of the Bonds may not be sold, pledged or
transferred to, or for the account or benefit of, any U.S. person during the Distribution Compliance
Period.
The purchaser is not located in India, is not a resident of India and is not purchasing for, or for the
account or benefit of any US person during the Distribution Compliance Period.
Such owner will not offer, sell, pledge or otherwise transfer any interest in the Bonds or the Shares
issuable upon conversion of the Bonds except as permitted by the applicable legend set forth in
paragraph (5) below.
The Bonds will bear legends to the following effect, unless the Company determines otherwise in
compliance with applicable law, and that it will observe the restrictions contained therein:
THE BONDS ("BONDS") EVIDENCED HEREBY AND THE SHARES OF KLG SYSTEL LIMITED
ISSUABLE UPON CONVERSION OF THE BONDS HAVE NOT BEEN AND ARE NOT EXPECTED TO
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND PRIOR TO THE EXPIRATION OF 40 DAYS AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING OF THE BONDS AND THE LAST RELATED ISSUE DATE
(THE "DISTRIBUTION COMPLIANCE PERIOD"), SUCH BONDS AND SHARES MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANY U.S. PERSON.
EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE BONDS EVIDENCED
HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING AND
FOLLOWING RESTRICTIONS.
UPON THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD, THIS LEGEND (BUT NOT
THE LEGEND SET OUT IN THE IMMEDIATELY FOLLOWING PARAGRAPH) SHOULD BE
REMOVED AND THE BONDS EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON
CONVERSION OF THE BONDS SHALL NO LONGER BE SUBJECT TO THE RESTRICTIONS
PROVIDED IN THIS LEGEND, PROVIDED THAT AT SUCH TIME AND THEREAFTER THE OFFER OR
SALE OF THE BONDS EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION OF
THE BONDS WOULD NOT BE RESTRICTED UNDER ANY APPLICABLE SECURITIES LAWS OF THE
UNITED STATES OR OF THE STATES OR TERRITORIES OF THE UNITED STATES.
EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE BONDS EVIDENCED
HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES THAT (I) IT IS NOT LOCATED IN
INDIA, (II) IT IS NOT A RESIDENT OF INDIA AND (III) IT IS NOT PURCHASING FOR, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY SUCH PERSON THE BONDS EVIDENCED HEREBY OR THE
SHARES OF KLG SYSTEL LIMITED ISSUABLE UPON CONVERSION OF THE BONDS AND UNLESS,
IN ANY SUCH CASE, THE COMPANY DETERMINES OTHERWISE, IN COMPLIANCE WITH
APPLICABLE LAW, THE BONDS EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED TO ANY PERSON LOCATED IN INDIA, TO ANY RESIDENT OF
INDIA OR TO, OR FOR THE ACCOUNT OF, ANY SUCH PERSON.
(7)
(8)
The Company has the absolute right at its discretion to reject all or part of any application for the
Bonds and return the subscription monies accordingly without interest.
Such owner is entitled to subscribe for the Bonds under the laws of all jurisdictions, which apply to it
and it has fully observed such laws and has obtained all necessary consents and completed all necessary
formalities.
Page 146
GENERAL INFORMATION
(1)
The Company is incorporated in India under registration number 05-34348. The Company's registered
office is Plot No. 70A, Sector- 34, EHTP, Gurgaon-122004, Haryana, (India).
(2)
The issue of the Bonds and the Shares issuable on conversion of the Bonds was authorised by an
extraordinary general meeting of the shareholders of the Company held on February 10, 2007. The terms
of the offering and the issue of the Bonds were approved by resolution of the Board of Directors passed
on January 8, 2007.
(3)
The Company has undertaken to apply to have the Shares issue on conversion of the Bonds approved for
listing on the NSE and the BSE, and approval in-principle has been received for the listing of the Bonds
on the SGX-ST. So long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require,
the Company shall appoint and maintain a paying agent in Singapore, where the Bonds may be presented
or surrendered for payment or redemption, in the event that the Global Certificate is exchanged for
Certificates in definitive form. In addition, in the event that the Global Certificate is exchanged for
Certificates in definitive form, announcement of such exchange shall be made by or on behalf of the
Company through the SGX-ST and such announcement will include all material information with respect
to the delivery of the Certificates in definitive form, including details of the paying agent in Singapore.
(4)
Copies of the Memorandum and Articles of Association of the Company and copies of the Trust Deed
and the Agency Agreement will be available for inspection during usual business hours on any weekday
(except Saturdays and public holidays) at the Company's registered office and at the specified office of
the Principal Agent.
(5)
Copies in English of the Company's audited annual financial statements for the years ended March 31,
2004, 2005 and 2006 and the unaudited nine months ended December 31, 2005 and 2006 statements,
prepared in accordance with Indian GAAP, may be obtained during usual business hours at the office of
the Principal Agent subject to provision of such financial statements by the Company to the Principal
Agent.
(6)
The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg with a
Common Code of 029029172. The International Securities Identification Number for the Bonds is
XS0290291722.
(7)
The Company has obtained all consents, approvals and authorisations in India required in connection
with the issue of the Bonds.
(8)
There has been no significant change in the financial or trading position of the Company since December
31, 2006 and no material adverse change in the financial position or prospects of the Company since
December 31, 2006.
(9)
The Company is not involved in any litigation or arbitration proceedings or any regulatory investigations
relating to claims or amounts which are material in the context of the issue of the Bonds or to the
Company's results of operations.
(10)
The financial statements of the Company as at and for the years ended March 31, 2004, 2005 and 2006
have been audited by B. Bhushan & Co., Chartered Accountants as stated in its reports appearing herein
and therein.
(11)
Subject to the relevant provisions of the Civil Code, submission by the Company to the jurisdiction of the
English courts, and the appointment of an agent for service of process, are valid and binding under Indian
law. The choice of English law as the governing law, under the laws of India, is a valid choice of law and
should be honoured by the courts of India, subject to proof thereof and considerations of public policy.
(12)
The Trustee is entitled under the Trust Deed to rely without liability to the Bondholders on any certificate
Page 147
prepared by the directors or Authorised Officers (as defined in the Trust Deed) of the Company and
accompanied by a certificate or report prepared by the auditors of the Company or an internationally
recognised firm of accountants, whether or not addressed to the Trustee, and whether or not the same are
subject to any limitation on the liability of that internationally recognised firm of accountants and
whether by reference to a monetary cap or otherwise limited or excluded.
(13)
The Conditions do not provide Bondholders with any participating rights in the event of a takeover offer
for the Shares.
(14)
There has been no material adverse change in the financial position or prospects of the Company since
December 31, 2006.
(15)
Application Approval in-principle has been received for the listing of Bonds on the SGX-ST. Application
will be made to list the Shares issued on conversion of the Bonds on the BSE and the NSE. There is no
assurance that such listings will be granted or maintained.
(16)
Copies of the following documents will be available for inspection and collection during usual business
hours on any weekday (Saturdays, Sundays and public holidays excepted) at the specified office of the
Principal Paying and Conversion Agent in London and the specified office of the Principal Paying and
Conversion Agent free of charge for so long as any of the Bonds shall remain outstanding and for so long
as the Bonds remain listed on the Singapore Stock Exchange:
(i)
this Offering Circular and any Supplementary Offering Circular required to be so produced;
(ii)
the Trust Deed;
(iii)
the Paying and Conversion Agency Agreement;
(iv)
the most recent published annual audited accounts of the Company for the year ended 31 March
2006 and the annual audited accounts published thereafter; and
(v)
the quarterly audited results of the Company for the nine months ended December 2006 and
thereafter.
(17)
The annual audited accounts of the Company for the year ended 31 March 2006 will be available for
inspection and collection during usual business hours on any weekday (Saturdays, Sundays and public
holidays excepted) at the specified office of the Principal Paying and Conversion Agent in London and
the specified office of the Principal Paying and Conversion Agent free of charge for so long as any of the
Bonds shall remain outstanding and for so long as the Bonds remain listed on the Singapore Stock
Exchange.
(18)
Information contained on the Company's website www.klgsystel.com is not, and should not be, construed
as part of this Offering Circular.
Page 148
INDIAN GAAP
IAS/IFRS
Investments are classified as Investments are classified as
long-term or current, based on trading, held-to-maturity or
management's intention at the available for sale.
time of purchase.
Long-term
investments
are Investments acquired principally
carried at cost less provision for for the purpose of generating
diminution in value, which is profits from short-term price
other than temporary.
fluctuations or dealers margin are
classified as trading.
Current investments are carried Held-to-maturity investments are
at the lower of cost or fair value. investments with fixed or
determinable payments and fixed
maturity, together with the
entity's intent and ability to hold
until maturity.
Available for sale investments
are those that do not qualify as
either trading or held-to-maturity
investments.
Changes in fair value of trading
investments are recognised as
profits or losses in the income
statement.
Held to maturity investments are
carried at amortised cost.
Changes in fair value of
available for sale securities are
recognised in the statement of
equity.
Transactions in foreign currency All gains or losses arising out of
are converted at the exchange foreign exchange differences are
rate prevailing on the date of the recognised in the profit and loss
transaction. Foreign currency account.
Page 149
Discounting
Onerous contracts
Retirement benefits
Compensation absences
Termination benefits
Business combinations
Dividends
Borrowing costs
Issuance and
borrowings
redemption
costs
Depreciation
is
generally The depreciation of property,
provided on a straight-line basis plant and equipment is allocated
at rates prescribed in Schedule on a systematic basis over its
XIV of the Companies Act. useful life.
These are minimum rates and
companies are permitted to
charge depreciation at a higher
rate.
Borrowing
costs
directly Borrowing costs are recognised
attributable to the acquisition, as an expense in the period in
construction or production of a which they are incurred and
qualifying asset are capitalised as calculated using an effective
a part of the cost of that asset. interest rate method. Borrowing
Other borrowing costs are costs include amortisation of
recognised as an expense in the transaction costs incurred in the
period in which they are initial
arrangement
of
incurred. Costs incurred include borrowings.
Alternatively
interest and other fees paid in borrowing costs attributable to
connection with the arrangement the purchase, construction or
of borrowings.
production of an asset may be
capitalised.
of Debt
issuance
costs
and Debt
issuance
costs
are
prepayment premiums may be amortised using the effective
(a) amortised and charged as an interest rate method over the
expense or (b) charged as an period of the debt. Prepayment
expense or (c) charged to a premiums are recognised in the
Securities Premium Account.
profit and loss account in the
period of prepayment.
Deferred tax assets and liabilities Deferred income taxes are
arising as a consequence of recognised for the future tax
timing
differences
between effects of temporary differences
accounting and taxable income between the accounting and tax
are measured using the tax rates base of assets and liabilities at
and laws that have been enacted tax rates and laws enacted or
or substantively enacted at the substantively enacted at the
balance sheet date.
balance sheet date.
Deferred tax assets relating to Deferred
tax
assets
are
unabsorbed tax depreciation or recognised for carry forward tax
carry forward tax losses are losses and unused tax credits to
recognised only to the extent that the extent that it is probable that
there
is
virtual
certainty future taxable profits will be
supported
by
convincing available against which the carry
evidence that sufficient future forward losses and unused tax
taxable income will be available credits can be utilised.
against which such deferred tax
assets can be realised.
All other deferred tax assets are
recognised and carried forward
only to the extent that there is a
"reasonable
certainty"
that
sufficient future taxable income
will be available against which
such deferred tax assets can be
realised.
Page 152
153
Page Nos.
154
157
160
161
162
163
180
200
in the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2005;
in the case of the Profit and Loss Account, of the profit earned by the Company
for the year ended on that date; and
in the case of the Cash Flow Statement, of the cash flows for the year ended on
that date.
EC-13, Inderpuri,
New Delhi 110012
Kamal Ahluwalia
Partner
Membership no. 93812
154
i)
a)
b) The fixed assets were physically verified by the management at reasonable intervals
during the year and no material discrepancies were noticed on such verification as
compared to book records.
ii)
c)
The Company has not disposed off any substantial part of its fixed assets during the year.
a)
The inventory has been physically verified by the management at reasonable intervals
during the year.
b) In our opinion, the procedures for physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the Company and the
nature of its business.
c)
iii)
The Company has neither granted nor taken any loans, secured or unsecured, to/from
companies, firms or other parties covered in the register maintained under section 301 of the
Companies Act.
iv)
In our opinion and according to the information and explanations given to us, there are
adequate internal control systems commensurate with the size of the Company and the nature
of its business with regard to purchase of inventory, fixed assets and with regard to the sale of
goods and services. Further, on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us, we have neither
come across nor have been informed of any continuing failure to correct major weaknesses in
the aforesaid internal control systems.
v)
a)
In our opinion and according to the information and explanations given to us, there are no
transactions that are required to be entered into the register in pursuance of section 301 of
the Companies Act.
b) In our opinion and according to the information and explanations given to us, there are no
transactions made in pursuance of contracts or arrangements entered into the register in
pursuance of section 301 of the Companies Act.
vi)
In our opinion and according to the information and explanations given to us, the Company
has not accepted any deposits from the public within the meaning of sections 58A, 58AA or
any other relevant provisions of the Companies Act and the rules framed thereunder.
vii)
In our opinion, the Company has an internal audit system commensurate with its size and
nature of its business.
viii)
According to the information and explanations given to us, the Central Government has not
prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209
of the Companies Act in respect of activities carried out by the Company. Accordingly, clause
4(viii) of the Order is not applicable
ix)
a)
According to the information and explanations given to us and the records of the
Company examined by us, in our opinion, the Company is regular in depositing the
undisputed statutory dues including provident fund, investor education protection fund,
employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty,
excise duty, cess and other statutory dues as applicable with the appropriate authorities.
155
b) According to the information and explanations given to us, there are no dues of income
tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not
been deposited with the appropriate authorities on account of any dispute.
x)
The Company has no accumulated losses as at the end of the financial year and it has not
incurred any cash losses in the financial year ended covered by our audit and in the
immediately preceding financial year.
xi)
In our opinion and according to information and explanation given to us, the Company has not
defaulted in repayment of dues to a financial institution or bank or debenture holders.
xii)
The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
xiii)
The provisions of any special statute applicable to chit fund/ nidhi/mutual benefit fund/
societies are not applicable to the Company.
xiv)
The Company is not dealing or trading in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.
xv)
According to information and explanation given to us, the Company has not given any
guarantees for loans taken by others from banks or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the Company.
xvi)
xvii)
According to the information and explanations given to us and on the basis of an overall
examination of the Balance Sheet of the Company, there no funds raised on a short term basis
which have been used for long term investment.
xviii)
The Company has not made any preferential allotment of shares to parties and companies
covered in the register maintained under section 301 of the Companies Act. Accordingly,
provisions of clause 4(xviii) of the Order are not applicable to the Company.
xix)
The Company has not issued any debenture during the year. Accordingly, the provisions of
clause 4(xix) of the Order are not applicable to the Company.
xx)
The Company has not raised any money by way of public issue during the year. Accordingly,
the provisions of clause 4(xx) of the Order are not applicable to the Company.
xxi)
Based upon the audit procedures performed and according to the information and explanations
to us, no fraud on or by the Company has been noticed or reported during the course of our
audit, that causes the financial statements to be materially misstated.
EC-13, Inderpuri
New Delhi.
New Delhi
May 31, 2005
Kamal Ahluwalia
Partner
Membership no. 93812
156
in the case of the Balance Sheet, of the state of affairs of the Company as at
March 31, 2006;
in the case of the Profit and Loss Account, of the profit earned by the Company
for the year ended on that date; and
in the case of the Cash Flow Statement, of the cash flows for the year ended on
that date.
EC-13, Inderpuri,
New Delhi 110012
Kamal Ahluwalia
Partner
Membership no. 093812
157
i)
a)
b) The fixed assets were physically verified by the management at reasonable intervals
during the year and no material discrepancies were noticed on such verification as
compared to book records.
ii)
iii)
iv).
v)
c)
a)
The Company has not disposed off any substantial part of its fixed assets during the year.
The inventory has been physically verified by the management at reasonable intervals
during the year.
b)
In our opinion, the procedures for physical verification of inventory followed by the
management are reasonable and adequate in relation to the size of the Company and the
nature of its business.
c)
The Company has neither granted nor taken any loans, secured or unsecured, to/from
companies, firms or other parties covered in the register maintained under section 301 of the
Companies Act. Accordingly, the provisions of clause of 4(iii) of the Order are not applicable
to the Company.
In our opinion and according to the information and explanations given to us, there are
adequate internal control systems commensurate with the size of the Company and the nature
of its business with regard to purchase of inventory, fixed assets and with regard to the sale of
goods and services. Further, on the basis of our examination of the books and records of the
Company, and according to the information and explanations given to us, we have neither
come across nor have been informed of any continuing failure to correct major weaknesses in
the aforesaid internal control systems.
a)
In our opinion and according to the information and explanations given to us, there are no
transactions that are required to be entered into the register in pursuance of section 301 of
the Companies Act.
b) In our opinion and according to the information and explanations given to us, there are no
transactions made in pursuance of contracts or arrangements entered into the register in
pursuance of section 301 of the Companies Act.
vi)
In our opinion and according to the information and explanations given to us, the Company
has not accepted any deposits from the public within the meaning of sections 58A, 58AA or
any other relevant provisions of the Companies Act and the rules framed thereunder.
vii)
In our opinion, the Company has an internal audit system commensurate with its size and
nature of its business.
viii)
According to the information and explanations given to us, the Central Government has not
prescribed the maintenance of cost records under clause (d) of sub-section (1) of section 209
of the Companies Act in respect of activities carried out by the Company. Accordingly, clause
4(viii) of the Order is not applicable
ix) a)
According to the information and explanations given to us and the records of the Company
examined by us, in our opinion, the Company is regular in depositing the undisputed statutory
dues including provident fund, investor education protection fund, employees state insurance,
income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other
statutory dues as applicable with the appropriate authorities.
158
b) According to the information and explanations given to us, there are no dues of income tax,
sales tax, wealth tax, service tax, custom duty, excise duty and cess which have not been
deposited with the appropriate authorities on account of any dispute.
x).
The Company has no accumulated losses as at the end of the financial year and it has not
incurred any cash losses in the financial year ended covered by our audit and in the
immediately preceding financial year.
xi).
In our opinion and according to information and explanation given to us, the Company has not
defaulted in repayment of dues to a financial institution or bank or debenture holders.
xii).
The Company has not granted any loans and advances on the basis of security by way of
pledge of shares, debentures and other securities.
xiii).
The provisions of any special statute applicable to chit fund/ nidhi/mutual benefit
fund/societies are not applicable to the Company.
xiv).
The Company is not dealing or trading in shares, securities, debentures and other investments.
Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.
xv).
According to information and explanation given to us, the Company has not given any
guarantees for loans taken by others from bank or financial institutions. Accordingly, the
provisions of clause 4(xv) of the Order are not applicable to the Company.
xvi).
In our opinion and according to the information and explanations given to us, the term loans
have been applied for the purpose for which they were raised.
xvii).
According to the information and explanations given to us and on the basis of an overall
examination of the Balance Sheet of the Company, there no funds raised on a short term basis
which have been used for long term investment.
xviii).
The Company has not made any preferential allotment of shares to parties and companies
covered in the register maintained under section 301 of the Companies Act. Accordingly,
provisions of clause 4(xviii) of the Order are not applicable to the Company.
xix).
The Company has not issued any debenture during the year. Accordingly, the provisions of
clause 4(xix) of the Order are not applicable to the Company.
xx).
The Company has not raised any money by way of public issue during the year. Accordingly,
the provisions of clause 4(xx) of the Order are not applicable to the Company.
xxi).
Based upon the audit procedures performed and according to the information and explanations
to us, no fraud on or by the Company has been noticed or reported during the course of our
audit, that causes the financial statements to be materially misstated.
EC-13, Inderpuri,
New Delhi 110012.
Kamal Ahluwalia
Partner
Membership no. 093812
159
in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Limited and its subsidiary as at March 31, 2004; and
(ii)
in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date.
(iii)
In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.
EC-13, Inderpuri,
New Delhi.
Kamal Ahluwalia
Partner
Membership no. 093812
160
We have examined the attached Consolidated Balance Sheet of KLG Systel Limited and its subsidiaries
as at March 31, 2005, and also the Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement for the year ended on that date annexed thereto.
These financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with generally accepted auditing standards in India. These standards require that we plan
and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in
all material aspects, in accordance with an identified financial reporting framework and are free of
material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the overall financial
statements. We believe that our audit provides a reasonable basis for our opinion.
The financial statements of wholly owned subsidiaries i.e. KLG Environment and Safety Sciences Ltd.,
KLG Software Technology Pvt. Ltd. and KLG Software Technology and Infrastructure Pvt. Ltd., with
total assets of Rs. 8,996,050 (Rs. 6,638,245) as at March 31, 2005 and total revenues of Rs. 14,177,179
(Rs. 5,502,062) for the year ended on that date. The audit of KLG Software Technology Pvt. Ltd. and
KLG Software Technology and Infrastructure Pvt. Ltd., have not been conducted by us. In case of First
Power Utilities Distribution Ltd. which has ceased to be subsidiary of the Company with effect from
December 23, 2004, the results of operations have been included in the consolidated statement of Profit
and Loss upto the date of cessation. The reports of the other auditors of the wholly owned subsidiary
companies have been furnished to us and our opinion, in so far it relates to the amounts included in
respect of those wholly owned subsidiaries, is based solely on the report of such auditors.
We report the consolidated financial statements have been prepared by the Company in accordance
with the requirements of Accounting Standard-21 Consolidated Financial Statements issued by the
Institute of Chartered Accountants of India and on the basis of the individual financial statements of
KLG Systel Limited and its wholly owned subsidiaries included in the aforesaid consolidation.
On the basis of the information and explanations given to us and on consideration of the separate audit
reports on individual audited financial statements of KLG Systel Ltd., audited financial statements of
the wholly owned subsidiaries i.e., KLG Environment and Safety Sciences Ltd., KLG Software
Technology Pvt. Ltd. and KLG Software Technology and Infrastructure Pvt. Ltd., and the results of
operations of First Power Utilities Distribution Ltd. for the period from April 1, 2004 to December 23,
2004 and on consolidation of the same, we are of the opinion that the said consolidated financial
statements give a true and fair view in conformity with the accounting principles generally accepted in
India:
(i)
in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Ltd. and its subsidiaries as at March 31, 2005;
(ii)
in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date; and
(iii)
In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.
EC-13, Inderpuri,
New Delhi.
Kamal Ahluwalia
Partner
Membership no. 93812
161
We have examined the attached Consolidated Balance Sheet of KLG Systel Limited and its subsidiaries
as at March 31, 2006, and also the Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement for the year ended on that date annexed thereto. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in India. These
standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are prepared, in all material aspects, in accordance with an identified financial
reporting framework and are free of material misstatements. An audit includes, examining on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by the management,
as well as evaluating the overall financial statements. We believe that our audit provides a reasonable
basis for our opinion.
The financial statements of wholly owned subsidiaries i.e. KLG Environment And Safety Sciences
Limited, KLG Software Technology Private Limited and KLG Software Technology and Infrastructure
Private Limited, has total assets of Rs. 8,802,269 (Rs. 8,996,050) as at March 31, 2006 and total
revenues of Rs. 5,175,472 (Rs. 14,177,179) for the year ended on that date. The audit of KLG Software
Technology Private Limited and KLG Software Technology and Infrastructure Private Limited have
not been conducted by us. The reports of other auditors of the wholly owned subsidiary companies
have been furnished to us and our opinion, in so far it relates to the amounts included in respect of
those wholly owned subsidiaries, is based solely on the report of such auditors.
We report the consolidated financial statements have been prepared by the Company in accordance
with the requirements of Accounting Standard-21 Consolidated Financial Statements issued by the
Institute of Chartered Accountants of India and on the basis of the individual financial statements of
KLG Systel Limited and its wholly owned subsidiaries included in the aforesaid consolidation.
On the basis of the information and explanations given to us and on consideration of the separate audit
reports on individual audited financial statements of KLG Systel Limited, audited financial statements
of the wholly owned subsidiaries i.e., KLG Environment and Safety Sciences Limited, KLG Software
Technology Private Limited and KLG Software Technology and Infrastructure Private Limited, and on
consolidation of the same, we are of the opinion that the said consolidated financial statements give a
true and fair view in conformity with the accounting principles generally accepted in India:
(i)
(ii)
(iii)
in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of
KLG Systel Limited and its subsidiaries as at March 31, 2005;
in the case of the Consolidated Profit and Loss Account, of the consolidated results
of operations of KLG Systel Limited and its subsidiaries for the year ended on that
date; and
In the case of the Consolidated Cash Flow Statement, of the consolidated cash flows
of the Company and its subsidiaries for the year on that date.
EC-13, Inderpuri,
New Delhi.
Kamal Ahluwalia
Partner
Membership no. 93812
162
As at March
31, 2006
Rs.
As at March
31, 2005
Rs.
As at March
31, 2004
Rs.
Share capital
81,312,200
38,935,700
38,935,700
404,438,016
391,467,246
372,840,595
Secured
74,237,267
4,710,089
7,101,889
Unsecured
1,400
37,744,706
31,995,448
597,733,588
467,108,483
418,878,184
496,652,948
398,618,498
288,764,890
Less: Depreciation
166,961,519
129,133,245
96,842,043
Net block
329,691,429
269,485,253
191,922,847
43,902,877
11,801,566
SOURCES OF FUNDS
Shareholders funds
APPLICATION OF FUNDS
Fixed assets
Gross block
Investments
Current assets, loans and advances
1,000
1,391,000
4,239,602
Inventories
29,870,120
14,543,362
8,223,820
Debtors
254,680,117
187,632,200
206,995,421
10
27,613,706
25,250,414
47,877,110
11
38,200,696
59,265,681
57,274,994
350,364,639
286,691,657
320,371,345
131,820,305
109,327,927
86,949,085
218,544,334
177,363,730
233,422,260
12
Deffered Tax
13
(25,173,322)
Miscellaneous expenditure
(to the extent not written off or adjusted)
14
5,593,948
7,066,934
14,466,798
597,733,588
467,108,483
418,878,184
163
Schedules
516,054,775
372,928,694
383,232,621
10,670,016
15,242,126
8,857,874
526,724,791
388,170,819
392,090,495
INCOME
Sales and services
15
Others
EXPENDITURE
Cost of sales and services
16
295,987,102
213,885,154
243,585,086
17
40,262,496
40,727,608
26,541,880
Consultancy fees
6,095,191
7,895,388
7,389,532
14,940,955
10,120,958
8,853,081
Communication
18
4,421,140
4,845,779
3,654,586
Administrative
19
28,425,666
22,283,474
17,388,921
10,375,426
6,099,994
5,077,167
3,115,109
1,880,247
2,240,381
4,253,893
4,575,454
7,983,528
79,594
640,950
407,876,977
312,393,651
323,355,112
118,847,815
75,777,168
68,735,383
Interest
2,553,261
56,076
Depreciation
39,444,575
33,301,714
27,481,593
1,480,148
1,877,042
2,009,333
75,369,831
40,542,336
39,244,458
(18,043,748)
(7,075,818)
(3,625,311)
- Deferred tax
(5,749,256)
(6,998,805)
(8,495,989)
- Wealth tax
(80,962)
(28,138)
(28,755)
(1,129,955)
164
(406,848)
126,390
(68,436)
49,959,062
26,565,966
27,025,967
3,213,209
4,715,888
20,022,843
(341,024)
53,172,271
31,281,854
46,707,786
1,200,000
12,112,950
5,756,475
6,956,476
1,698,842
964,170
891,298
35,000,000
20,148,000
34,144,124
4,360,479
3,213,209
4,715,888
53,172,271
31,281,854
46,707,786
APPROPRIATIONS
165
As at March
31, 2005
Rs.
As at March
31, 2004
Rs.
200,000,000
100,000,000
100,000,000
82,586,000
40,209,500
40,209,500
80,753,000
38,376,500
38,376,500
559,200
559,200
559,200
81,312,200
38,935,700
38,935,700
Capital reserve
1,100,800
1,100,800
1,100,800
266,596,075
289,772,575
289,772,575
451,332
451,332
451,332
(18,670)
(18,670)
95,000,000
75,000,000
41,055,876
1,948,000
1,800,000
1,600,000
35,000,000
20,148,000
34,144,124
4,360,479
3,213,209
4,715,888
404,438,016
391,467,246
372,840,595
41,233,312
- Term loan
ICICI Bank Ltd.
25,401,963
- Vehicle loan
5,105,410
- Equipment loan
1,029,719
1,466,863
4,710,089
each
Issued and subscribed
8,258,600 (4,020,950) equity shares of Rs. 10 (Rs. 10)
each
Paid up
8,075,300 (3,837,650) equity shares of Rs. 10 (Rs. 10)
2.
- Subsidiaries
3.
SECURED LOANS
From State Bank of India
166
7,101,889
4.
74,237,267
4,710,089
1,400
4,799,812
5,442,918
42,544,518
37,438,366
37,744,706
31,995,448
UNSECURED LOAN
From director
5.
7,101,889
167
6. FIXED ASSETS
GROSS BLOCK
Cost as at
Additions
April 1, 2005
Deletions
Cost as at
March
31,2006
Upto March
NET BLO
CK
As at March
As at March
As at March
written back
31, 2006
31, 2006
31, 2005
31, 2004
Rs.
Rs.
Rs.
Rs.
Rs.
59,217,775
53,560,885
1,207,944
D E P R E C I AT I O N
Upto March
For the
Depreciation
31, 2005
Year
Rs.
Rs.
Rs.
during the
year
Rs.
during the
year
Rs.
Land
53,560,885
5,656,890
59,217,775
Buildings
49,192,168
45,765
49,237,933
8,927,883
1,558,844
10,486,727
38,751,206
40,264,285
41,822,982
Computers
134,154,979
42,898,375
177,053,354
76,394,533
21,979,239
98,373,772
78,679,582
57,760,446
62,732,061
26,322,650
10,833,587
37,156,237
3,513,733
3,740,429
7,254,162
29,902,075
22,808,917
3,453,945
Furniture
24,175,028
8,009,162
32,184,190
5,347,702
1,660,239
7,007,941
25,176,249
18,827,326
14,549,234
Office equipments
12,925,247
1,822,284
14,722,031
2,293,459
654,277
339
2,947,397
11,774,634
10,631,788
10,264,940
Air conditioners
8,314,745
1,634,887
9,949,632
2,099,029
414,200
2,513,229
7,436,403
6,215,716
5,763,064
Vehicles
8,369,858
6,927,757
12,031,387
3,338,356
956,492
2,693,376
9,338,011
5,031,502
5,332,938
Patent - Technology
45,864,144
21,117,977
66,982,121
11,769,620
4,873,958
16,643,578
50,338,543
34,094,524
22,931,996
Brands
35,738,794
2,379,494
38,118,288
15,448,930
3,592,407
19,041,337
19,076,951
20,289,864
23,863,743
Total
398,618,498
101,326,178
3,291,729
496,652,948
129,133,245
39,430,085
1,601,811
166,961,519
329,691,429
269,485,253
191,922,847
288,764,890
113,613,576
3,759,968
398,618,498
96,842,043
33,064,805
773,603
129,133,245
269,485,253
191,922,847
193,558,528
262,918,978
25,845,912
288,764,890
69,360,450
27,481,593
96,842,043
191,922,847
193,558,528
195,104,713
25,500
3,266,228
Rs.
168
1,601,472
7.
a)
b)
95,000
95,000
95,000
500
500
500
(Vadodra) Association
500
500
500
(a)
1,000
191,000
96,000
546,983
530,685
3,065,934
8.
9.
10.
1,200,000
(a+b)
1,000
1,391,000
810,307
640,194
29,059,813
13,903,168
Finished Inventories
8,223,820
29,870,120
14,543,362
8,223,820
six months
Others debts
(Unsecured and considered good)
12,239,149
37,646,538
21,348,490
20,729,174
Others debts
217,033,579
166,283,710
174,027,098
254,680,117
187,632,200
206,995,421
4,239,602
INVENTORIES
DEBTORS
Secured and considered good
Debts outstanding for a period exceeding
169
13,276,985
22,055,499
29,378,072
- in current account
5,733,779
2,836,362
12,567,400
- in deposit account
Balance with non scheduled banks
8,602,942
358,554
5,636,111
11.
12.
195,780
99,748
27,613,706
25,250,415
47,877,110
5,379,000
6,634,000
6,679,000
16,147,118
5,937,622
Advance to staff
3,318,576
4,095,191
6,675,462
Capital advances
4,883,944
95,128
Security deposits
11,573,058
10,077,015
9,690,505
5,985,190
3,497,677
11,838,777
Advances to vendors
4,718,000
12,893,730
Others
7,226,872
5,920,950
11,474,556
38,200,696
59,265,681
57,274,994
71,904,548
27,403,630
51,598,953
2,049,597
40,613,866
Other liabilities
37,022,035
17,133,615
18,339,307
Unpaid dividend
999,469
949,782
708,772
Provisions
12,112,950
5,756,475
6,956,476
3,890,312
13,635,834
6,707,243
Gratuity
2,181,507
1,564,659
1,325,102
Leave encashment
1,578,925
2,179,924
1,194,334
Others
80,962
90,143
118,898
131,820,305
109,327,928
86,949,085
170
13
14
DEFERRED TAX
5,185,777
(30,359,099)
(25,173,322)
396,894
926,079
396,894
529,185
396,894
Structuring cost
7,030,624
13,321,327
14,801,475
1,480,148
6,290,703
1,480,148
5,550,476
7,030,624
13,321,328
Preliminary expenses
30,800
30,800
32,681
469
30,800
30,800
32,212
12,672
5,510
716,364
5,593,948
7,066,934
14,466,798
Sales
341,645,999
255,277,597
345,218,071
147,687,306
103,747,929
38,014,550
28,896,470
13,903,168
518,229,775
372,928,694
383,232,621
Opening stock
640,194
8,223,820
8,928,969
234,796,335
169,484,568
221,436,237
235,436,529
177,708,388
230,365,206
810,307
640,194
8,223,820
(A)
234,626,222
177,068,194
222,141,386
MISCELLANEOUS EXPENDITURE
(to the extent not written off or adjusted)
Preoperative expenses
15.
16.
171
17.
18.
19
Cost of services
(B)
61,360,880
36,816,960
21,443,700
(A+B)
295,987,102
213,885,154
243,585,086
Salary
33,524,392
33,658,255
21,860,105
3,216,073
2,831,628
2,443,554
Gratuity
994,840
513,426
952,176
Leave encashment
793,503
1,444,463
485,866
Others
1,733,688
2,279,836
800,179
40,262,496
40,727,608
26,541,880
3,234,669
4,015,394
2,823,788
Courier
985,674
682,023
624,787
Postage
200,797
148,362
206,011
4,421,140
4,845,779
3,654,586
4,845,205
3,776,684
2,516,893
5,020,374
4,703,420
4,106,735
1,704,124
1,962,323
1,903,990
1,664,200
1,624,004
1,818,773
Bank charges
3,481,715
2,406,263
1,388,918
Temporary partition
Repair and maintenance
558,304
- Machinery
179,577
239,151
314,127
- Computers
172,853
227,405
92,227
- Building
445,535
301,189
232,549
- Office
699,120
735,307
- Others
107,504
110,050
223,221
Insurance
654,432
371,653
580,981
Auditors' remuneration
386,730
254,408
177,299
Membership fees
290,828
167,180
159,951
Management expenses
8,215,165
5,404,437
3,873,257
28,425,666
22,283,474
17,388,921
COMMUNICATION
ADMINISTRATIVE
172
20.
ACCOUNTING POLICIES
a)
CONVENTIONS
The consolidated financial statements have been prepared under the historical cost convention in accordance with
the Indian generally accepted Accounting principles and mandatory According Standards issued by the Institute of
Chartered Accountants of India and the provisions of the Companies Act.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in accordance with Accounting Standard 21 (AS-21)Consolidated Financial Statements issued by the institute of Chartered Accountants of India, to the extent
possible in the same format as that adopted by the parent Company for its financial statements by regrouping
recasting, recasting or rearranging figures wherever considered necessary.
The consolidation of the financial statements of the parent Company and its subsidiaries is done to the extent
possible on line by line basis by adding together like items of assets, liabilities, income and expenses. All inter
Company balances and transactions are eliminated in the process of consolidation.
RECOGNITION OF REVENUE / EXPENDITURE
Income and expenditure are accounted for on accrual basis.
Income of KLG Environment and safety Sciences Ltd. Subsidiary of parent Company is considered to accrue at the
time attaining the defined stage of an assignment i.e. defined in clients contract and terms of payment.
Expenditure incurred on research and development, technology seminar, training and business development is
inclusive of direct expenses and allocable overheads.
Dividend income is accounted in the year of receipt.
FIXED ASSETS
Goodwill arising from consolidation represents the excess of cost to parent Company of its investment in
subsidiary Company over the parent Companys portion of equity at the date on which investment in subsidiary
Company is made.
Fixed assets, including assets acquired for research and development, are capitalized at cost inclusive of direct
expenditure incurred to put the asset into use.
Fixed assets under construction, advances paid towards acquisition of fixed assets and cost of assets not put to use
before the period/year end, are disclosed as capital work in progress.
Expenditure incurred on acquiring Technology and Brands, considered to have benefit of enduring nature, is
capitalised.
DEPRECIATION
Depreciation is charged according to the straight line method at rates as specified in Scheduled in Schedule XIV of
the Companies Act Depreciation on the acquisition / purchase of assets during the year has been provided on Prorata basis according to the period each asset was put to use during the year.
Technology developed is amortised equally in 10 years from the date of capitalization.
INVESTMENTS
Investments in subsidiaries are stated at cost and provision is made to recognize any decline, other than temporary,
in the value of such investments.
Investments in units are valued at cost or marked to Market value, whichever is lower.
INVENTORY
Work in process is valued at cost
Finished goods are valued at lower of cost or net realizable value cost being determined on the First in and first
out method
EMPLOYEES BENEFITS
Leave encashment, incentive, performance base allowance; medical and other reimbursements are accounted on
accrual basis.
Periodical contribution to provident fund is charged to revenue and provision for gratuity is based on actual
valuation.
TAXES ON INCOME
Current tax provision is measured by the amount of tax expected to be paid on the taxable profits after considering
tax allowances and exemptions and using applicable tax rates and laws.
173
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences
between the financial statements, carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss carry forwards. Deferred tax assets and liabilities are measured on the timing differences
applying the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.
Changes in deferred tax assets and liabilities between one Balance Sheet date and the next are recognised in the
Profit and Loss Account in the year of change. The effect on deferred tax assets and liabilities of a change in tax
rates is recognised in the Profit and Loss Account in the year of change. Deferred tax assets are recognized only if
there is reasonable certainty that they will be realized by way of future taxable income. Deferred tax assets related
to unabsorbed depreciation and carry forward losses are recognised only to the extent that there is virtual certainty
of realisation. Deferred tax assets are reviewed for appropriateness of their carrying amounts at each Balance Sheet
date.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net profit after tax for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per
share is computed using the weighted average number of equity shares outstanding during the year end, except
where the results would be anti-dilutive.
FOREIGN CURRENCY TRANSLATIONS
Revenue and expenditure items, current assets, current liabilities, if any, appearing/outstanding at the year end, are
converted into equivalent Indian Rupees at the exchange rate prevailing at the year end except in cases where
actual amount has been ascertained by the time of finalisation of accounts. Investments are stated at equivalent
Indian Rupees at the exchange rate prevailing at the time of remittance.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are accounted at the exchanged rate prevailing on the date of the transaction.
Monetary items denominated in foreign currencies at the exchange rate on the date of Balance Sheet. The
exchange differences arising on such except those relating to acquisition of fixed assets are recognized as income
or expense in the profit and Loss Account.
MISCELLANEOUS EXPENDITURE
Public issue expenses are amortised over a period of ten years.
Structuring cost is amortised over a period of ten years.
21
a)
b)
c)
ii.
Iii
iv.
NOTES TO ACCOUNTS
As at March 31,
2006
Rs.
i) Contingent liabilities
Guarantees given by bankers
Deposits of Rs. 8,428,186 (Nil) held by Banks as
margin shown under the head bank balance
Estimated amount of contracts to be executed on
capital account and not provided for (net of
advances)
Claims against the Company not acknowledged as
debts
Paid up share capital includes:
34,800, (34, 800) shares allotted as fully paid up for
consideration other than cash
4,609,730 (572,080) shares allotted as fully paid up
by way of bonus shares
57,850, (57,850) shares allotted as fully paid up
under Employees Stock Plan
Unexpired installments of assets purchased on hire
purchase basis
Payment of director:
Parent Company
-Remuneration to Mr. Kumud Goel, Managing
Director
174
76,971,876
As at
March 31,
2005
Rs.
As at
March 31,
2004
Rs.
44,205,260
26,347,557
10,656,560
1,182,976
856,112
348,000
348,000
5,720,800
5,720,800
578,500
578,500
37,188,853
986,392
348,000
46,097,300
578,500
6,907,319
2,594,895
1,750,184
1,498,668
vi) a)
Payment to auditors:
Audit fees including services tax
Other services including service tax
1,952,603
1,600,291
940,172
262,500
18,500
1,169,839
383,555
92,339
475,894
1,790,633
16,500
377,655
220,000
214,839
254,408
29,724
284,132
226,929
24,780
251,709
The consolidated financial statements includes the accounts of the Company and the subsidiaries (as listed
below). Subsidiary undertaking are those companies in which the parent Company has an interest of more
than 50% of the voting power. Subsidiary are consolidated from the date on which effective control is
acquired and are excluded from the date of cessation.
S.No.
1.
2.
3.
Country of
incorporation
India
India
India
% of holding
100
100
100
b)
The consolidated financial statements for the current year are not comparable with that of previous year
on account of inclusion of acquired subsidiaries and exclusion of subsidiary in the previous year.
c)
The consolidated financial statements are prepared using uniform accounting policies for the transactions
and other events in similar circumstances.
vii)
Secured Loans
From State Bank of India
Working capital facilities of Rs. 41.23 Millions in the form of cash credit secured against hypothecation of
Company's entire current assets including receivables both present and future, and also collaterally secured by, (a)
extension of first charge over the entire fixed assets, present and proposed, of the Company including equitable
mortgage over land and building at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot nos. 68,
69, 70A and passage in Plot no. 70 situated at Sector-34, Gurgaon, Haryana, and proposed building to be
constructed, (b) personal guarantees of Shri K.L.Goel, Whole Time Director of the Company and Shri Kumud
Goel, Managing Director of the Company, and (c) keyman insurance policy of Shri Kumud Goel, Managing
Director of the Company.
Term loan of Rs. 25.40 Millions under 'Rent Plus Scheme' secured against clean assignment of receivables/rentals
with power of attorney duly recorded with the lessee and also collaterally secured by, (a) extension of charge on
land and building rented at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, (b) extension of charge over
the entire fixed assets of the Company, both present and future, including equitable mortgage over land and
building at Plot no. 24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot no. 68, 69, 70A and passage in Plot
no. 70 situated at Sector-34, Gurgaon, Haryana, and (c) extension of charge on current assets of the Company.
From ICICI Bank Ltd.
Equipment loan of Rs. 1.03 Millions secured against hypothecation of equipments namely desktops, printers,
servers, projectors, UPS, and other allied products, and also collaterally secured by way of personal guarantee of
Mr. K.L.Goel, Whole Time Director of the Company.
Equipment loan repayable within 1 (one) year is Rs. 584,640/- (Nil).
Vehicle loans of Rs. 5.105 Millions are secured against hypothecation of vehicles. Vehicle loan repayable within 1
(one) year is Rs. 2,200,092/- (Nil).
The Company availed Sales tax deferment for a period of 7 years effective from August 29, 1997, subject to a
ceiling of Rs. 84,380,625 and yearly renewal of its entitlement certificate, under Rule 28A of the Haryana General
Sales tax Act, 1973. The Company availed benefit of sales tax deferment of Rs. 9,134,418 (Rs. 9,134,418), which
has since been converted into interest free loan by District Industries Centre, (Gurgaon, Haryana) and is secured
against bank guarantees issued by bankers of the Company. The Company is required to make payment of the
deferred amount, during the period September, 2003 to August, 2006.
The Company discontinued availing the above deferment with effect from August 1, 2001 and commenced
availing the benefit of retaining 50% of sales tax collections in full settlement of future obligations as provided
175
under the provisions of Rule 28C of Haryana General Sales Tax Act, 1973. The period of benefit of retaining 50%
sales tax collections expired on August 28, 2004.
Structuring cost relate to costs incurred in connection with structuring of business transactions and strategic
investments and are stated net of recovery.
Inventory represents cost of acquisition of software licenses lying unutilised for customised development/ internal
usage.
In the opinion of the management, the current assets, loans and advances, if realised in the ordinary course of
business, would realise a sum equal to that stated in the Balance Sheet.
Unpaid dividend does not include any amount, due and outstanding, to be credited to Investor Education and
Protection Fund.
Other liabilities includes Rs. 3,825,900 (Rs. 3,825,900) received as deposits from tenants.
As per the information provided by the Company, there are no small scale industrial undertakings as defined under
section 3(J) of the Industries (Development & Regulation) Act, 1951 to whom the Company owes any sum.
The segment report prepared in accordance with accounting standard 17 'Segment Reporting' issued by the
Institute of Chartered Accountants of India.
Xvi
a.
b.
c.
d.
xvii)
S.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13
Nature of transactions
Related party
Amount
K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
Mini Arora
Ritu Goel
Upasana Arora
Mukesh Arora
Mini Arora
Pushap Telecommunication
Pvt. Ltd.
Aditi Telecom Pvt. Ltd.
Mukesh Arora
Mini Arora
K.L. Goel
Kumud Goel
1,952,603
2,594,895
940,172
2,695,004
346,872
114,000
480,000
178,500
178,500
300,000
176
300,000
1,557,500
308,000
6,720,000
6,720,000
5,760,000
B.
S.No.
1.
Accounted head
Loan & advances
Related Party
Mukesh Arora
Mini Arora
Amount
2,202,500
3,176,500
xviii
Segment reporting
Segment wise revenue, results and capital employed for the period ended March 31, 2006
Rs.
In 000
For the year
ended
March 31, 2006
Rs.
1
Segment revenue
a)
b)
2.
3.
xix
xx)
177
Year ended
March 31,
2005
Year ended
March 31,
2004
Rs.
Rs.
Rs.
75,369,831
40,542,336
39,244,459
Depreciation
39,444,575
33,301,714
27,481,593
396,894
1,480,148
6,290,703
Interest paid
2,553,261
56,076
(1,129,955)
Interest receipts
(1,072,485)
(854,230)
Dividend receipts
(2,416,718)
(53,521)
(21,603)
(3,434,015)
(5,749,256)
(6,998,805)
(8,495,989)
(18,670)
1,766,405
(236,907)
(7,162)
710,854
Share premium
1,412
Unrealised loss
(14,489)
(406,848)
126,390
1,087,917
714,210
111,502,016
73,360,061
(45,982,932)
14,940,777
Inventories
(15,326,758)
(6,319,542)
705,149
16,269,711
31,546,982
40,147,240
(ii)
(45,039,979)
40,168,217
(61,272,132)
(iii=i+ii)
66,462,037
113,528,278
(4,258,720)
(13,243,933)
(8,166,013)
(1,722,397)
(i)
2,009,333
78,984
(1,109,586)
-
1,600,000
451,329
(341,024)
(748,576)
345,340
(68,436)
-
57,013,412
(102,124,521)
178
(1,356,825)
(6,720,645)
(7,847,774)
(5,411,687)
46,497,460
96,157,666
(11,392,804)
(101,326,178)
(113,613,576)
(25,845,912)
(32,101,311)
(9,369,809)
Investments
1,390,000
2,848,602
602,000
505,747
53,521
21,603
3,434,015
Interest receipts
1,072,485
854,230
1,109,586
Dividend receipts
2,416,718
(130,309,483)
(116,336,485)
2,000,000
17,200,000
69,527,178
(2,391,800)
Security Deposits
1,400
Interest paid
(2,553,261)
(56,076)
Dividend paid
Net cash flow operating activities
(A)
(B)
47,300,181
-
25,997,870
(2,032,529)
3,825,900
(78,984)
(C)
86,175,316
(2,447,876)
1,714,387
(A+B+C)
2,363,293
(22,626,695)
16,319,453
25,250,414
47,877,110
31,557,657
27,613,706
25,250,414
47,877,110
179
As at March
31, 2006
Rs.
As at March 31,
2005
Rs.
1
2
81,312,200
403,600,359
38,935,700
388,547,005
3
4
74,237,267
37,424,925
596,574,750
4,710,089
31,896,358
464,089,152
493,243,767
166,476,377
326,767,390
43,902,877
397,131,965
128,953,473
268,178,492
11,048,105
Investments
3,918,524
4,108,524
7
8
9
10
29,659,840
253,212,523
26,934,819
36,877,598
346,684,780
14,496,425
184,922,132
23,901,692
44,603,788
267,924,036
11
130,249,297
216,435,483
94,200,630
173,723,406
Miscellaneous expenditure
(to the extent not written off or adjusted)
12
5,550,476
7,030,625
596,574,750
464,089,152
SOURCES OF FUNDS
Shareholders funds
Share capital
Reserves and surplus
Loans funds
Secured
Deferred tax liabilities
APPLICATION OF FUNDS
Fixed assets
Gross block
Less: Depreciation
Net block
Capital work in progress
ACCOUNTING POLICIES
18
NOTES TO ACCOUNTS
19
Kumud Goel
Managing Director
K. L. Goel
Director
Kamal Ahluwalia
Partner
Membership no. 093812
New Delhi
April 22, 2006
S.P. Bathla
Company Secretary
180
R.C. Mody
Director
INCOME
Sales and services
Others
EXPENDITURE
Cost of sales and services
Employees remuneration and benefits
Consultancy fees
Travelling and conveyance
Communication
Administrative
Research and development
Training and seminars
Business and human resource development
Schedule
As at March
31, 2006
Rs.
As at March 31,
2005
Rs.
13
513,061,119
10,663,200
523,724,319
365,283,867
15,109,774
380,393,640
14
15
295,987,102
36,927,387
5,707,991
14,644,420
4,360,193
28,076,837
10,375,426
3,115,109
4,218,802
403,413,266
120,311,054
220,263,716
31,764,831
7,453,424
8,823,067
4,707,665
21,260,260
6,099,994
1,880,247
4,575,454
306,828,659
73,564,981
2,543,838
39,124,712
1,480,148
56,076
32,850,780
1,877,042
77,162,356
38,781,083
(18,013,270)
(5,528,566)
(80,962)
(1,098,792)
(399,120)
(6,619,477)
(6,971,451)
(28,138)
52,041,646
3,018,970
55,060,616
25,396,840
4,185,950
29,582,790
12,112,950
1,698,842
35,000,000
6,248,824
55,060,616
5,756,475
807,345
20,000,000
3,018,970
29,582,790
6.66
3.31
16
17
234,823
18
19
Kumud Goel
Managing Director
K. L. Goel
Director
Kamal Ahluwalia
Partner
Membership no. 093812
S.P. Bathla
Company Secretary
New Delhi
April 22, 2006
181
R.C. Mody
Director
1.
As at March
31, 2006
Rs.
As at March 31,
2005
Rs.
200,000,000
100,000,000
82,586,000
40,209,500
80,753,000
38,376,500
SHARE CAPITAL
Authorised
20,000,000 (10,000,000) equity shares of
Rs.10 (Rs.10) each
Issued and subscribed
8,258,600 (4,020,950) equity shares of
Rs.10 (Rs.10) each
Paid up
8,075,300 (3,837,650) equity shares of
Rs.10 (Rs.10) each fully paid up
Add : Forfeited shares
2.
559,200
559,200
81,312,200
38,935,700
Capital reserve
1,100,800
1,100,800
266,250,735
289,427,235
General reserve
Opening balance
95,000,000
75,000,000
35,000,000
20,000,000
6,248,824
3,018,970
403,600,359
388,547,005
41,233,312
--
- Term loan
25,401,963
--
- Vehicle loan
5,105,410
--
- Equipment loan
1,029,719
--
1,466,863
4,710,089
74,237,267
4,710,089
year
Profit and Loss Account
3.
SECURED LOANS
From State Bank of India
4.
4,799,812
5,394,414
42,224,737
37,290,772
37,424,925
31,896,358
182
5.
FIXED ASSETS
PARTICULA
RS
GROSS BLOCK
DEPRECIATION
Upto March
31, 2006
NETBLOCK
As at March
31, 2006
As at March
31, 2005
Rs.
Rs.
Rs.
--
Depreciatio
n
written
back
Rs.
--
--
59,217,775
53,560,885
1,558,844
--
10,486,727
38,751,205
40,264,285
76,345,335
21,846,446
--
98,191,781
78,617,724
57,629,619
3,504,269
3,733,354
--
7,237,623
29,771,044
22,720,813
Cost as at
April 1,
2005
Rs.
Additions
during the
year
Rs.
Deletions
during the
year
Rs.
Cost as at
March
31,2006
Rs.
Upto March
31,2005
For the
year
Rs.
Rs.
Land
53,560,885
5,656,890
--
59,217,775
--
Buildings
49,192,167
45,765
--
49,237,932
8,927,883
Computers
133,974,953
42,834,552
--
176,809,505
Plant and
machinery
Furniture
26,225,080
10,783,587
--
37,008,667
23,436,698
6,277,950
--
29,714,648
5,319,315
1,557,598
--
6,876,913
22,837,735
18,117,384
Office
equipments
Air
conditioners
Vehicles
12,789,168
1,785,919
25,500
14,549,587
2,281,142
645,176
339
2,925,979
11,623,608
10,508,027
8,159,433
1,593,637
--
9,753,070
2,085,945
405,358
--
2,491,303
7,261,767
6,073,488
8,190,645
6,927,757
3,266,228
11,852,174
3,271,036
911,571
1,601,472
2,581,135
9,271,039
4,919,609
Patent
Technology
Brands
45,864,144
21,117,977
--
66,982,121
11,769,620
4,873,958
--
16,643,578
50,338,543
34,094,527
35,738,794
2,379,494
--
38,118,288
15,448,930
3,592,407
--
19,041,337
19,076,951
20,289,864
Total
397,131,967
99,403,528
3,291,728
493,243,767
128,953,475
39,124,712
1,601,811
166,476,377
326,767,390
268,178,492
Previous Year
285,860,185
113,081,748
1,809,968
397,131,965
96,692,701
32,850,780
590,008
128,953,473
268,178,492
189,167,484
183
6.
As at March
31, 2006
Rs.
As at March 31,
2005
Rs.
3,717,524
3,717,524
100,000
100,000
100,000
100,000
3,917,524
3,917,524
--
95,000
--
95,000
500
500
500
500
(b)
1,000
191,000
(a+b)
3,918,524
4,108,524
763,370
28,896,470
29,659,840
593,257
13,903,168
14,496,425
37,106,373
21,152,112
216,106,150
253,212,523
163,770,020
184,922,132
13,276,136
20,875,977
5,221,741
8,436,942
26,934,819
2,667,162
358,554
23,901,692
INVESTMENTS
a)
Investments in subsidiary
companies at cost (long term, non-trade
and unquoted)
12,000 (12,000) equity shares
of Rs.100 (Rs.100) each of KLG
Environment and Safety Sciences Ltd.
10,000 (10,000) equity shares
of Rs.10 (Rs.10) each of KLG Software
Technology and Infrastructure Pvt. Ltd.
10,000 (10,000) equity shares
of Rs.10(Rs.10) each of KLG Software
Technology Pvt. Ltd.
(a)
b)
Investment in others
(Non-trade and unquoted)
(9,500) equity shares of
(Rs.10) each of First Power
Utilities Distribution Ltd.
(9,500) equity shares of
(Rs.10) each of Universal Power
Distribution Ltd.
5 (5) shares of Rs.100 (Rs.100) each
of Apex Hotel & Enterprises P. Ltd.
5 (5) shares of Rs.100 (Rs.100) each
of Siddhartha (Vadodra) Association
*
Investments are pursuant to
purchase of office flats.
7.
8.
9.
INVENTORIES
Software licenses held of development
Value of work in process
DEBTORS
(Unsecured and considered good)
Debts outstanding for a period
exceeding six months
other debts
184
10.
5,379,000
--
1,849,775
Advance to staff
3,318,576
4,095,191
Security deposits
11,270,721
9,749,005
5,985,190
3,497,677
Advances to vendors
4,718,000
12,893,730
Others
11.
6,634,000
6,206,111
5,884,410
36,877,598
44,603,788
71,904,548
27,403,630
2,049,597
40,613,866
Other liabilities
35,508,372
15,774,702
Unpaid dividend
999,469
949,782
12,112,950
5,756,475
3,859,834
--
Provisions
shares
tax)
Gratuity
2,154,640
1,553,008
Leave encashment
1,578,925
2,059,024
Others
12.
80,962
90,143
130,249,297
94,200,630
MISCELLANEOUS EXPENDITURE
(to the extent not written off or adjusted)
Public issue expenses
--
396,894
--
396,894
--
--
Structuring Cost
7,030,624
13,321,327
1,480,148
6,290,703
(A)
(B)
5,550,476
7,030,624
(A+B)
5,550,476
7,030,624
185
13.
14.
341,645,999
142,518,650
28,896,470
513,061,119
255,277,597
96,103,102
13,903,168
365,283,867
593,257
234,796,335
235,389,592
8,176,883
169,463,130
177,640,013
(A)
763,370
234,626,222
593,257
177,046,756
(B)
61,360,880
43,216,960
(A+B)
295,987,102
220,263,716
30,229,912
3,197,583
989,266
776,938
1,733,688
36,927,387
25,347,753
2,433,923
513,426
1,444,463
2,025,266
31,764,831
3,173,722
985,674
200,797
4,360,193
3,877,280
682,023
148,362
4,707,665
4,845,205
4,960,974
1,704,124
1,664,200
3,481,715
558,304
3,462,718
4,689,169
1,841,003
1,624,004
2,395,543
--
179,577
159,645
445,535
591,120
107,504
654,432
386,730
275,278
8,062,494
28,076,837
239,151
183,637
301,189
735,307
110,040
365,675
214,890
144,730
4,953,204
21,260,260
Cost of services
15.
16.
17.
COMMUNICATION
Telephone and fax
Courier
Postage
ADMINISTRATIVE
Consumables of stationery
Rent, rates and taxes
Vehicle running and maintenance
Power and fuel
Bank charges
Temporary partition
Repair and maintenance
Machinery
Computers
Building
Office
Others
Insurance
Auditor's remuneration
Membership fees
Management expenses
18.
ACCOUNTING POLICIES
a)
CONVENTIONS
The financial statements are prepared under the historical cost convention, in accordance with the Indian
Generally Accepted Accounting Principles and mandatory accounting standards issued by the Institute of
Chartered Accountants of India and the provisions of Companies Act.
186
b)
RECOGNITION OF REVENUE/EXPENDITURE
Income and expenditure are accounted for on accrual basis.
Expenditure incurred on research and development, technology seminar, training and business development is
inclusive of direct expenses and allocable overheads.
Dividend income is accounted in the year of receipt.
c)
FIXED ASSETS
Fixed assets, including assets acquired for research and development, are capitalised at cost inclusive of direct
expenditure incurred to put the asset into use.
Fixed assets under construction, advances paid towards acquisition of fixed assets and cost of asses not put to
use before the period/year end, are disclosed as 'capital work-in-progress'.
Expenditure incurred on acquiring Technology and Brands, considered to have benefit of enduring nature, is
capitalized.
d)
DEPRECIATION
Depreciation is charged according to the straight line method at rates as specified in Schedule XIV of the
Companies Act. Depreciation on the acquisition/purchase of assets during the year has been provided on prorata basis according to the period each asset was put to use during year.
Technology and Brand costs are amortised equally in 10 years from the date of capitalisation.
e)
INVESTMENTS
Investments in subsidiaries are stated at cost and provision in made to recognize any decline, other than
temporary, in the value of such investments.
f)
INVENTORY
Work-in-process is valued at cost.
Finished goods are valued at lower of cost or net realisbale value; cost being determined on the 'First in and
first out' method.
g)
EMPLOYEE BENEFITS
Leave encashment, incentive, performance base allowance, leave travel allowance, medical and other
reimbursements are accounted on accrual basis.
Periodical contribution to provident fund is charged to revenue for gratuity is based on actuarial valuation.
h)
TAXES ON INCOME
Current tax provision is measured by the amount of tax expected to be paid on the taxable profits after
considering tax allowance and exemptions and using applicable tax rates and laws.
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing
differences between the financial statements, carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured on the
timing differences applying the tax rates and tax laws that have been enacted or substantively enacted by the
Balance sheet date. Changes in deferred tax assets and liabilities between one balance sheet date and the next
are recognized in the profit and Loss Account in the year of change. The effect on deferred tax assets and
liabilities of a change in tax rates in recognised in the Profit and Loss Account in the year of change. Deferred
tax assets are recognised only if there is reasonable certainty that they will be realized by way of future taxable
income. Deferred tax assets related to unabsorbed depreciation and carry forward losses are recognised only to
the extent that there is virtual certainty of realisation. Deferred tax assets are reviewed for appropriateness of
their carrying amounts at each Balance Sheet date.
i)
187
Basic earnings per share is computed by dividing the net profit after tax for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings
per share is computed using the weighted average number of equity shares outstanding during the year end,
except where the results would be anti-dilutive.
j)
k)
l)
MISCELLANEOUS EXPENDITURE
Public issue expenses are amortised over a period of ten years.
Structuring cost, net of recovery is amortised over a period of ten years.
19.
NOTES TO ACCOUNTS
(i)
Contingent liabilities
Guarantees given by bankers
Deposits of Rs.8,362,186 (Nil) held by
Banks as margin shown under the head
bank balance.
(ii)
As at March
31,2006
Rs.
As at March
31,2005
Rs.
76,805,876
44,205,260
37,188,853
10,656,560
986,392
858,112
348,000
348,000
46,097,300
5,720,800
578,500
578,500
6,907,319
--
2,594,895
1,750,184
1,952,603
1,600,291
940,172
--
1,169,839
--
(iv)
Payment to directors :
Remuneration to Mr. Kumud Goel,
Managing Director
Remuneration to Mr. K.L. Goel, whole
time director
Remuneration to Ms. Upasana Goel,
whole time director
Commission paid to non executive and
independent directors
*
An amount of Rs.387,811/-
188
(v)
Payment to auditors:
Audit fees including service tax
Other services including service tax
189
262,500
18,500
782,028
--
77,162,356
--
(47,500)
--
1,087,917
--
78,202,773
--
361,515
80,379
441,894
214,890
29,724
244,614
(vi)
Secured Loan
From State Bank of India
(A)
Working capital facilities of Rs.41.23 Millions in the form of cash credit secured against
hypothecation of Company's entire current assets including receivables both present and future, and also
collaterally secured by, (a) extension of first charge over the entire fixed assets, present and proposed, of the
Company including equitable mortgage over land and building at Plot No.24, Sector-18, Electronic City,
Gurgaon, Haryana, and Plot Nos. 68, 69, 70A and passage in Plot No.70 situated at Sector-34, EHTP, Gurgaon,
Haryana, and proposed building to be constructed, (b) personal guarantees of Shri K.L. Goel, Whole Time
Director of the Company and Shri Kumud Goel, Managing Director of the Company, and (c) keyman insurance
policy of Shri Kumud Goel, Managing Director of the Company.
(B)
Term loan of Rs.25.40 Millions under 'Rent Plus Scheme' secured against clean assignment of
receivable/rentals with power of attorney duly recorded with the lessee and also collaterally secured by, (a)
extension of charge on land and building rented at Plot No.24, Sector-18, Electronic City, Gurgaon, Haryana,
(b) extension of charge over the entire fixed assets of the Company, both present and future, including equitable
mortgage over land and building at Plot no.24, Sector-18, Electronic City, Gurgaon, Haryana, and Plot No.68,
69, 70A and passage in Plot No. 70 situated at Sector-34, EHTP, Gurgaon, Haryana, and (c) extension of
charge on current assets of the Company.
Term loan repayable within 1 (one) year is Rs.8,551,344/- (Nil).
From ICICI Bank Ltd.
(C)
Equipment loan of Rs.1.03 Millions secured against hypothecation of equipments namely desktops,
printers, servers, projectors, UPS, and other allied products, and also collaterally secured by way of personal
guarantee of Mr. K.L. Goel, Whole Time Director of the Company.
Equipment loan repayable within 1 (one) year is Rs.584,640/- (Nil).
(D)
(vii)
The Company availed Sales tax of deferment for a period of 7 years effective from August 29, 1997, subject to
a ceiling of Rs. 84,380,625/- and yearly renewal of its entitlement certificate, under Rule 28A of the Haryana
General Sales Tax Act, 1973. The Company availed benefit of sales tax deferment of Rs.9,134,418
(Rs.9,134,418), which has since been converted into interest free loan by District Industries Centre, Gurgaon,
Haryana, and is secured against bank guarantees issued by bankers of the Company. The Company is required
to make payment of the deferred amount, during the period September, 2003 to August, 2006.
The Company discontinued availing the above deferment with effect from August 1, 2001 and commenced
availing the benefit of retaining 50% of Sales Tax collections in full settlement of future obligations as provided
under the provisions of Rule 28C of Haryana General Sales Tax Act, 1973. The period of benefit of retaining
50% Sale Tax collections expired on August 28, 2004.
(viii)
Structuring cost relate to costs incurred in connection with structuring of business transactions and strategic
investments and are stated net of recovery.
(ix)
The Company alloted 200,000 (Nil) equity shares to its promoters on November 25, 2005 arising out of
conversion of 200,000 (Nil) warrants at a price of Rs.96.00 per warrant, which was converted into equity share
of face value of Rs.10 including premium of Rs.86.00 per share, which were issued on August 25, 2005, in
compliance with all the requirements under Securities Exchange Board of India (Disclosure and Investor
Protection) Guidelines, 2000. The proceeds of issue had been utilised to part finance the projects in power
sector in acquiring capital assets and for meeting part of working capital requirements of projects in power
sector.
(x)
During the year, the Company issued 4,037,650 equity shares of Rs.10 each as fully paid up bonus shares on
February 3, 2006, in the proportion of 1:1, i.e., one fully paid up equity share for each equity share held on the
record date i.e., January 30, 2006. The aforesaid bonus shares were issued out of capitalisation of Share
Premium Account.
(xi)
The Company had got the approval of shareholders in its EGM held on March 16, 2006, for raising of funds to
the tune of US $ 10 millions by issue of American Depository Receipt/Global Depository Receipt/ Foreign
Currency Convertible Bonds or any financial instrument from Indian/Overseas market.
(xii)
The Company, at its meeting of Compensation Committee held on April 12, 2006, issued 299,500 employee
stock options @ Rs.119.58 per option to the employees/directors of the Company, which after exercise will
give rise to equivalent number of equity shares of Rs.10.00 each at a premium of Rs.109.58 per share.
190
The Company resolved to issue 400,000 warrants @ Rs.106.00 per warrant to the promoters of the Company,
which after conversion will give rise to equivalent number of equity shares of Rs.10.00 each at a premium of
Rs.96.00 per share, subject to the approval of the shareholders of the Company at the proposed EGM
Scheduled to be held on May 11, 2006.
(xiii)
In the opinion of the management, the current assets, loans and advances, if realised in the ordinary course of
business, would realise a sum equal to that stated in the Balance Sheet.
(xiv)
Inventory represents cost of acquisition of software licenses lying unutilised for customized
development/internal usage.
(xv)
(xvi)
As per Accounting Standard 21 on "Consolidated Financial Statements" issued by the Institute of Chartered
Accountants of India, the Company has presented consolidated financial statements separately in this annual
report.
(xvii)
Unpaid dividend does not include any amount, due and outstanding, to be credited to Investor Education and
Protection Fund.
(xviii
)
As per the information provided by the Company, there are no small scale industrial undertakings as defined
under section 3(J) of the Industries (Development & Regulation) Act, 1951, to whom the Company owes any
sum.
(xix)
Prior year adjustments comprise; (i) Rs.3,04,915 (Rs.58,947) charged/ (credited) to Profit and Loss Account
being short provision made on account of income tax for the assessment years 2001-02, (ii) 293,606
(Rs.175,876) being the amount of excess depreciation charged in previous year, now written back, and (iii)
Rs.387,811 (Nil) being amount of commission payable to non executive and independent directors for the
financial year 2004-05.
(xx)
The Company is primarily engaged in the customised development of computer software. The production and
sales of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative
details as required under paragraph 3, 4C and 4D of Part 2 of Schedule VI to the Companies Act.
(xxi)
Previous years figures have been regrouped/rearranged wherever necessary to confirm to those of the current
year.
(xxii)
(xxiv
)
In accordance with the provisions of the Accounting Standard-22 on "Accounting for Taxes on Income" issued
by the Institute of Chartered Accountants of India, the Company has recognised deferred tax assets of
Rs.4,799,812 (Rs. 5,394,414) and deferred tax liabilities of Rs.42,224,737 (Rs.37,290,772) as at March 31,
2006. Major components of deferred tax are as follows:
As at April 1,
2005
Rs.
(A)
As at March
31, 2006
Rs.
(B)
3,838,141
3,543,094
(295,047)
1,556,272
5,394,413
1,256,718
4,799,812
(299,554)
(594,601)
7,640,157
10,943,620
3,303,463
29,650,615
37,290,772
31,281,116
42,224,737
1,630,501
4,933,965
31,896,359
37,424,925
5,528,566
(i)
The deferred tax liability amounting to Rs.5,528,566 (Rs.6,971,451) for the year has been adjusted from Profit
and Loss Account.
(xxv)
191
EPS is calculated by dividing the profit attributable to the equity shareholders by the average number of equity
shares outstanding during the year. Numbers used for calculating basic and diluted earnings per equity share
are as stated below:
(a)
Net profit available for equity
shareholders (in Rs.)
(b)
Weighted average number of
shares outstanding
(c)
Nominal value of per equity
share (in Rs.)
(d)
Earning per share (a)/(b)
(Basic and Diluted)
*
Adjusted EPS consequent to
1:1 bonus issue
(xxvi
)
As at March
31, 2006
Rs.
As at March
31, 2005
Rs.
52,041,646
25,396,840
7,815,300
7,675,300
10
10
6.66
3.31
Additional information pursuant to provisions of Para 3 and 4 of Schedule VI of the Companies Act 1956:
For the year
ended March
31, 2006
Rs.
7,446,231
146,976,580
99,248,309
312,068
481,870
Travelling Others
543,025
910,845
Internet charges
566,359
527,099
Membership
--
58,000
Subscription
180,144
--
Seminar
--
45,950
b)
Service charges
1,495,189
787,659
a)
192
a.
Particulars
Opening Balance
Sale/Adjustment
Closing balance
Shares
Amount
Rs.
Shares
Amount
Rs.
Shares
Amount
Rs.
Shares
Amount
Rs.
12,000
3,717,524
10,000
100,000
----
----
----
----
12,000
10.000
10,000
3,717,524
100,000
100,000
10,000
100,000
3,917,524
--
--
--
--
-----
9,500
9,500
---
95,000
95,000
---
A
b.
Purchases
9,500
9,500
5
5
B
95,000
95,000
500
500
191,000
C=A+B
--
--
4,108,524
193
Valuatio
n
At cost
At cost
At cost
3,917,524
--5
5
--500
500
190,000
1,000
190,000
3,918,524
At cost
At cost
At cost
At cost
xxvii
i)
Pursuant to Accounting Standard (AS18) "Related Party Disclosure" issued by Institute of Chartered
Accountants of India following parties are to be treated as related parties alongwith their relationships:
S.No.
Related Party
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
P.L. Goel
Ritu Goel
Mini Arora
KLG Environment and Safety Sciences Ltd.
KLG Software Technology and Infrastructure Pvt. Ltd.
KLG Software Technology Pvt. Ltd.
KLG Computers Pvt. Ltd.
12.
13.
S.No.
Nature of transactions
Related party
Amount Rs.
1.
2.
3.
4.
5.
6.
7.
1,952,603
2,594,895
940,172
2,695,004
346,872
114,000
2,175,000
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
K.L. Goel
Kumud Goel
Upasana Goel
Mukesh Arora
Mini Arora
Ritu Goel
KLG Environment and Safety
Sciences Ltd.
Upasana Goel
Mukesh Arora
Mini Arora
Pushap Telecommunication
Pvt. Ltd.
Aditi Telecom Pvt. Limited
Mukesh Arora
Mini Arora
K.L. Goel
Kumud Goel
KLG Computers Pvt. Ltd.
B.
S.no.
Account head
Related party
Amount Rs.
1.
Investments
3,717,524
100,000
194
480,000
178,500
178,500
300,000
300,000
1,557,500
308,000
6,720,000
6,720,000
5,760,000
2.
100,000
Mukesh Arora
Mini Arora
2,202,500
3,176,500
The segment report prepared in accordance with the accounting standard 17 on 'Segment Reporting' issued by the
Institute of Chartered Accountants of India.
Segment wise revenue, results and capital employed for the year ended March 31, 2006
(Rs. in '000)
S.no.
Particulars
1.
Segment revenue
a)
b)
2.
420,927
305,628
92,134
59,656
Total
513,061
365,284
--
--
513,061
365,284
Segment results
Profit/(loss) before tax and interest from each segment)
a)
147,855
91,342
b)
23,740
10,467
Total
171,595
101,809
Interest
2,544
56
91,889
62,972
77,162
38,781
Less:
c)
d)
Unallocable income
Profit before tax
3.
Capital employed
Assets and liabilities have not been segregated to any of the reportable segments, as fixed assets are used
interchangeably between segments and it is not practicable to provide meaningful segment disclosure relating
to total assets and liabilities.
195
(xxx)
Additional information under part IV of the Schedule VI of the Companies Act, as certified by the
Management.
I.
REGISTRATION DETAILS
2005-06
2004-05
34348
34348
05
March 31, 2006
05
March 31, 2005
As at March
31, 2006
Rs. in '000
As at March
31,2005
Rs. in '000
--40,337
2,000
-----
596,575
596,575
464,089
464,089
SOURCES OF FUNDS
Paid up capital
Reserves and surplus
Secured loans
Deferred tax liabilities (net)
81,312
403,600
74,237
37,425
38,936
388,547
4,710
31,896
APPLICATION OF FUNDS
Net fixed assets
Capital work in progress
Investments
Net current assets
Miscellaneous expenditure
326,767
43,903
3,919
216,435
5,550
268,178
11,048
4,109
173,723
7,031
PERFORMANCE OF COMPANY
Total turnover
Total expenditure
Profit before tax
Profit after tax
523,724
446,562
77,162
52,042
380,394
341,613
38,781
25,397
6.66
15.00%
3.31
15.00%
85249002
85249002
Computer software and hardware
Registration no.
Status code
Balance Sheet date
II.
III.
IV.
V.
196
Kumud Goel
Managing Director
K.L. Goel
Director
R.C. Mody
Director
S.P. Bathla
Company Secretary
New Delhi,
April 22, 2006
197
Year ended
March 31,
2006
Rs.
Year ended
March 31,
2005
Rs.
77,162,356
38,781,083
39,124,712
1,480,148
32,850,780
1,877,042
--
4,810,555
2,543,838
(1,098,792)
1,073,280
-(47,500)
(5,528,566)
(399,120)
1,087,917
56,076
-(864,312)
(2,400,000)
(37,252)
(6,971,451)
234,823
714,213
115,398,273
69,051,557
(60,564,202)
17,025,153
(15,163,415)
29,146,763
(46,580,854)
(6,319,542)
32,357,764
43,063,375
(A)
68,817,419
(12,911,734)
(6,563,820)
49,341,866
112,114,932
(7,809,716)
(6,494,023)
97,811,193
(B)
(99,403,528)
(32,854,772)
190,000
602,000
47,500
(1,073,280)
-(132,492,080)
(113,081,748)
(9,369,809)
1,282,668
505,747
37,252
864,312
2,400,000
(117,361,578)
2,000,000
17,200,000
---
(C)
69,527,178
(2,543,838)
86,183,340
-(56,076)
(2,447,876)
(A+B+C)
3,033,127
(21,998,261)
23,901,692
45,899,953
(i)
(ii)
Cash used in operations
Direct taxes paid (net)
Dividend paid
Net cash flow operating activities
CASH FLOW FROM INVESTING
ACTIVITIES
Purchase of fixed assets
Capital work in progress
Sale of investments
Sale of fixed assets
Profit on sale on investment
Interest receipts
Dividend receipts
Net cash used in investing activities
CASH FLOW FROM FINANCE
ACTIVITIES
Issuance of equity share capital
Share premium received on issuance
of equity share capital
Increase in secured loans
Interest paid
Net cash used in financing activities
NET INCREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents Opening
balance
(iii=i+ii)
198
26,934,819
23,901,692
balance
Note: Figures in brackets indicate cash outflow
Certified that the above statement is in accordance with the requirement prescribed by SEBI.
For and on behalf of the Board
Kumud Goel
Managing Director
K.L. Goel
Director
Kamal Ahluwalia
Partner
S.P. Bathla
Company Secretary
New Delhi
April 22, 2006
199
R.C. Mody
Director
S no.
Particular
Quarter
Quarter
ended
31.12.2006
ended
31.12.2005
Nine
months
period
ended
31.12.2006
Nine months
Year
period ended
31.12.2005
Ended
31.03.2006
Audited
Net Sales/Income
from operation
4,098.63
1,227.37
8,252.85
3,570.64
5,130.61
2
3
Other income
Total expenditure
70.61
24.61
136.72
80.46
106.63
a.
1.90
1.02
5.00
0.28
(1.70)
b.
(Increase)/decrease
in stock in trade
Cost of
sales/operations
2,532.45
633.73
4,928.29
2,031.72
2,961.57
c.
Staff cost
174.46
103.27
452.81
271.28
369.27
d.
Administrative
211.93
65.77
371.68
185.48
280.77
e.
Other expenditure
147.79
106.57
356.25
275.88
439.02
Interest
20.27
4.16
52.65
8.81
25.44
Cash profit
1,080.45
337.46
2,222.90
877.65
1,162.87
Depreciation
148.55
112.09
402.74
314.53
391.25
931.90
225.37
1,820.16
563.12
771.62
186.47
70.45
355.14
163.05
191.93
34.85
14.63
73.25
11.78
55.29
3.99
710.58
140.29
1,391.77
388.29
520.41
1078.29
403.76
1078.29
403.76
807.53
9
10
11
12
13
14
4036.00
15.00%
200
15
7.98
Basic EPS
*Adjusted consequent to 1:1 bonus
issue
16
Diluted EPS
17
18
1.74
15.64
4.81
6.66
7.98
15.64
10.08
Cash EPS
*Adjusted consequent to 1:1 bonus
issue
Aggregate of nonpromoters
shareholding
3.35
21.11
8.90
12.56
7,892,044
2,727,222
7,892,044
2,727,222
5,454,444
73.19
67.54
73.19
67.54
67.54
- Number of shares
- Percentage of
shareholding
Segment reporting
Segment wise revenue and results for the quarter ended December 31, 2006
S
no.
Particular
Quarter
Quarter
ended
31.12.2006
ended
31.12.2005
Nine
months
period
ended
31.12.2006
Nine months
Year
period ended
31.12.2005
Ended
31.03.2006
Audited
Segment Revenue
Life Cycle Solutions
a)
1,439.11
1,017.31
4,286.27
2,828.46
3,995.59
2,659.52
210.06
3,966.58
742.18
1,135.02
8,252.85
3,570.64
5,130.61
1,227.37
-
3,570.64
4,098.63
1,227.37
2. Segment Results
(Profit)+/Loss(-) before tax and interest
from each segment)*
Life Cycle Solutions
497.97
a)
Power System Solutions
867.66
b)
Total
1,365.63
Less:
Interest
1)
20.27
Other un-allocable
expenditure net off
413.46
2)
unallocable income
Total Profit Before Tax
8,252.85
5,130.61
380.38
1,300.48
892.46
1,160.10
97.50
1,527.12
321.26
555.85
477.88
2,827.60
1,213.72
4.16
52.65
8.81
248.35
201
225.37
25.44
954.79
641.79
931.90
1,715.95
1820.16
563.12
918.89
771.62
Notes :
1) The above results have been reviewed by audit committee and taken on record by the Board of Directors
of the Company at its meeting held on January 8,2007 at Gurgaon.
2) Statutory Auditor's of the Company have carried out the limited review of the financial results for the
quarter ended December 31,2006.
3) Net deferred tax liability as at the end of the quarter is Rs 447.50 lacs. Company has accounted for net
deferred tax liability of Rs. 374.24 lacs till March 31,2006.
4) The Company had allotted 4,00,000 equity shares on November 09,2006 to its promoters arising out of
conversion of 4,00,000 warrants. The aforesaid warrants were issued on May 23,2006.
5) The Company had received Rs. 42.40 lacs during quarter ended June 30,2006 and Rs. 381.60 lacs during
the quarter from promoters as payment against issue of warrants, which were converted into equity shares
(see note 4 above).The proceeds of issue have been utilised to finance the projects in power sector in
acquiring capital assets and for meeting working capital requirements of projects in power sector .
6) The Company resolved to issue 1,070,000 warrants @ Rs. 261.00 per warrant to the promoters of the
Company, which after conversion will give rise to equivalant number of equity shares of Rs. 10.00 each
at a premium of Rs. 251.00 per share. Abovesaid resolution has been approved by shareholders of the
Company at its Extra-Ordinary General Meeting held on January 5, 2007.
7) The Company received Rs. 3,363.64 lacs during quarter ended September 30,2006 from issue of GDR's.
The proceeds of issue to the extent of Rs. 863.64 lacs had been utilised for creation / development of
infrastructure facilities for Research and Development centre and meeting working capital requirements
and Rs. 2,500.00 lacs had been kept invested in units of mutual funds till final utilisation.
8) The Company have rearranged its segments during the quarter ended September 30, 2006 so as to give
better understanding of the business of the Company; accordingly segment report for the quarter and
previous period figure's have been regrouped.
9) Fixed assets and liabilities have not been segregated to any of the reportable segments, as fixed assets are
used interchangeably between segments and currently not practicable to provide meaningful segment
disclosures relating to total assets and liabilities.
10) There were no investor complaints pending as on 1.10.2006. 6 complaints were received during the
quarter, out of which two were for non receipt of 700 bonus shares, four were for non receipt of dividend
of Rs. 128,400/-. All the complaints have been resolved except one which was for non receipt of dividend
warrants amounting to Rs. 2,400/11) Figures have been regrouped /rearranged wherever considered necessary.
Date: 08.01.2007
Place: Gurgaon
http://www.klgsystel.com
E-mail address : investor@klgsystel.com
202
The Company
KLG Systel Limited
Plot No. 70A, Sector- 34,
EHTP, Gurgaon-122004,
Haryana, (India)
REGISTRAR
Campbell Hooper
35, Old Queen Street
Londan SWIH 9J D
United Kingdom
Rajani Associates,
F-4, Panchsheel, 53, C Road
Churchgate, Mumbai 400020
India
203