DISINVESTMEMT POLICY IN INDIA

Vedant Bhutra

Submitted To: -

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 Index

Definition

Evolution

Disinvestment Policy of India

Facts and figures till 2004-05

Current Strategies

1) Valuation of PSUs

2) Valuation Techniques

3) Challenges in valuation

4) Right valuation approach

5) Problems associated with disinvestment policy

6) Conclusion

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 Definitions of Disinvestments:

• Capital investment shrinkage caused by a firm's failure to

maintain or replace capital assets being used up or by the
firm's sale of capital goods such as equipment.

• Disinvestment is a process of transferring property from

public ownership. (By Wordnet Dictionary)

• Disinvestment refers to the use of a concerted economic

boycott, with specific emphasis on liquidating stock, to
pressure a government towards policy or regime change.

• The term also refers to the reduction of investment in firms,

industries or countries for reasons of political or social
policy.

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 Evolution of Disinvestments Policy

Disinvestment was a term first used in the 1980s, most commonly

in the United States, to refer to the use of a concerted economic
boycott designed to pressure the government of South Africa into
abolishing its policy of apartheid, which was still in force at that
time. In India since 1991 the term is applied to the privatization of
State-held assets; the Minister for Disinvestment is a Cabinet-level
post. The Department of Disinvestment was formed on the10th
December 1999, with a view to establishing a systematic policy.

DISINVESTMENT POLICY OF THE

GOVERNMENT OF INDIA
The whole policy of disinvestments has undergone a sea change.
Initially, it was one of offering a part of the equity to various
private sector players both domestic and foreign. Now it is one of
outright sale of majority shares to be so called strategic partners,
with a clear commitment to ultimately off-load the rest of the
shares after a time lag. And with such a strategy, the anxiety of the
present Govt to bridge the fiscal deficit is creating a situation of
distress sale of PSUs to private hands. Therefore, it is no longer
disinvestments policy, but clear-cut policy conclusive
privatization.

The whole privatization process has become an instrument of

transferring public property to private hands for a song much to the
detriment of the national interest and the industrial economy of the
country in particular. And with the whole process, corruption is
woven intrinsically. The very concept of privatization of public
sector units and more so the blue chip ones, in itself is a bankrupt

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corrupt policy perception, treachery with the nation and fraud on
the people of the country.

INTERIM BUDGET 1991-92

(Chandrasekhar Government)
" It has been decided that Government would disinvest up to 20 per
cent of its equity in selected public sector undertakings, in
favour of mutual funds and financial or investment
institutions in the public sector. The disinvestment, which
would broad base the equity, improve management and
enhance the availability of resources for these enterprises, is
also expected to yield Rs. 2,500 crore to the exchequer
in1991-92. The modalities and details of implementing this
decision, which are being worked out, would be announced
separately."The policy, as enunciated by the Government,
under the Prime Minister Shri Chandrashekhar was to divest
up to 20% of the Government equity in selected PSEs in
favour of public sector institutional investors. The objective
of the policy was stated to be to broad-base equity, improve
management, and enhance availability of resources for these
PSEs and yield resources for the exchequer.

Industrial Policy Statement of 24th July, 1991

“In the case of selected enterprises, part of Government holdings in

the equity share capital of these enterprises will be disinvested in
order to provide further market discipline to the performance of
public enterprises ".

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 Budget speech: 1991-92

"In order to raise resources, encourage wider public participation

and promote greater accountability, up to 20 per cent of
Government equity in selected public sector undertakings would be
offered to mutual funds and investment institutions in the public
sector, as also to workers in these firms"

Report of the Committee on the Disinvestment of

Shares in PSEs (Rangarajan Committee): April 1993
The Rangarajan Committee recommendations emphasised the need
for substantial disinvestment. It stated that the percentage of
equity to be divested could be up to 49% for industries
explicitly reserved for the public sector. It recommended that
in exceptional cases, such as the enterprises, which had a
dominant market share or where separate identity had to be
maintained for strategic reasons, the target public ownership
level could be kept at 26%, that is, disinvestment could take
place to the extent of 74%. In all other cases, it recommended
100% divestment of Government stake. Holding of 51% or
more equity by the Government was recommended only for 6
Schedule industries, namely:

I) Coal and Lignite

ii) Mineral Oils

iii) Arms, ammunition and defence equipment

iv) Atomic energy

v) Radioactive minerals, &

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 vi) Railway transport

However, the Government did not take any decision on the

recommendations of the Rangarajan Committee.

Budget Speech by Finance Minister Shri P.

Chidambaram (1996-97) on 22nd July, 1996

“Government has approved the proposal to establish a

Disinvestment Commission. Any decision to disinvest will
be taken and implemented in a transparent manner.
Revenues generated from such disinvestment will be utilised
for allocations for education and health and for creating a
fund to strengthen Public Sector Enterprises. The interim
budget for 1996-97 took credit for Rs. 5000 crore through
disinvestment. I propose to take credit for the same amount.”

Disinvestment Commission Recommendations:

(Feb.1997- Oct. 1999)
Pursuant to the above policy of the United Front Government, a
Disinvestment Commission was set up in 1996. By August 1999, it
made recommendations on 58 PSEs. The recommendations
indicated a shift from public offerings to strategic / trade sales,
with transfer of management.

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 Budget Speech by Finance Minister Shri P.
Chidambaram (1997-98) on 28th February, 1997
“The Commission has observed “The essence of a long-term
disinvestment strategy should be not only to enhance
budgetary receipts, but also minimise budgetary support
towards unprofitable units while ensuring their long-term
viability and sustainable levels of employment in them.”
Government agrees with this view and I would appeal to
Hon’ble Members to take a positive view of disinvestment.”

Budget Speech by Shri Yashwant Sinha (1998 -99) on

(1st June, 1998)
"Government has also decided that in the generality of cases, the
Government shareholding in public sector enterprises will be
brought down to 26per cent. In cases of public sector enterprises
involving strategic considerations, government will continue to
retain majority holding. The interest of workers shall be protected
in all cases".

Budget Speech by Shri Yashwant Sinha (1999-2000)

on 27th February, 1999
"Government's strategy towards public sector enterprises will
continue to encompass a judicious mix of strengthening
strategic units, privatising non-strategic ones through gradual
disinvestment or strategic sale and devising viable
rehabilitation strategies for weak units".

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 Strategic & Non-strategic Classification
On 16th March 1999, the Government classified the Public Sector
Enterprises into strategic and non-strategic areas for the purpose of
disinvestment. It was decided that the Strategic Public Sector
Enterprises would be those in the areas of:

 Arms and ammunitions and the allied items of defence

equipment defence aircrafts and warships;
 Atomic energy (except in the areas related to the
generation of nuclear power and applications of radiation
and radio-isotopes to agriculture, medicine and non-
strategic industries);
 Railway transport.

All other Public Sector Enterprises were to be considered non-

strategic. For the non-strategic Public Sector Enterprises, it was
decided that the reduction of Government stake to 26% would not
be automatic and the manner and pace of doing so would be
worked out on a case-to-case basis. A decision in regard to the
percentage of disinvestment i.e., Government stake going down to
less than 51% or to 26%, would be taken on the following
considerations:

 Whether the industrial sector requires the presence of the

public sector as a countervailing force to prevent
concentration of power in private hands.
 Whether the industrial sector requires a proper regulatory
mechanism to protect the consumer interests before Public
Sector Enterprises are privatised.

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 Excerpts from the Address by the President Shri K.
R. Narayanan to the Joint Session of Parliament
(February, 2001).
"The public sector has played a vital role in the development of our
economy. However, the nature of this role cannot remain frozen to
what it was conceived fifty years ago - a time when the
technological landscape and the national and international
economic environment were so very different. The private sector in
India has come of age, contributing substantially to our nation-
building process. Therefore, both the public sector and private
sector need to be viewed as mutually complementary parts of the
national sector. The private sector must assume greater public
responsibilities just as the public sector needs to focus more on
achieving results in a highly competitive market. While some
public enterprises are making profits, quite a few have
accumulated huge losses. With public finances under intense
pressure, Governments are just not able to sustain them much
longer. Accordingly, the Centre as well as several State
Government is compelled to embark on a programme of
disinvestment.

The Government’s approach to PSUs has a three-fold objective:

revival of potentially viable enterprises; closing down of those
PSUs that cannot be revived; and bringing down Government
equity in non-strategic PSUs to 26 percent or lower. Interests of
workers will be fully protected through attractive VRS and other
measures. This programme has already achieved some initial
successes. The Government has decided to disinvest a substantial
part of its equity in enterprises such as Indian Airlines, Air India,
ITDC, IPCL, VSNL, CMC, BALCO, Hindustan Zinc, and Maruti
Udyog.Where necessary, strategic partners would be selected
through a transparent process".

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 Budget Speech: 2000 – 2001 by Shri Yashwant Sinha
on 29th February, 2000.
“Disinvestment/Privatization/Public Sector Restructuring –
Government’s policy towards the public sector is clear and
unambiguous. Its main elements are: -

• Restructure and revive potentially viable PSUs;

• Close down PSUs which cannot be revived;
• Bring down Government equity in all non-strategic PSUs
• To 26% or lower, if necessary;
• Fully protect the interests of workers.

Government have recently established a new Department for

Disinvestment to establish a systematic policy approach to
disinvestment and privatization and to give a fresh impetus to this
programme, which will emphasize increasingly on strategic sales
of identified PSUs. Government equity in all non-strategic PSUs
will be reduced to 26% or less and the interests of the workers will
be fully protected. The entire receipt from disinvestment and
privatization will be used for meeting expenditure in social sectors,
restructuring of PSUs and retiring public debt.”

Budget Speech: 2001 – 2002 by Shri Yashwant Sinha

on 28th February, 2001.
“Our public sector has expanded in almost every area of economic
activity. In many ways, it has served the nation well; capability has
been developed all round and a strong industrial base built up.
These enterprises must now be strengthened to compete and
prosper in the new environment. Last year I had defined
government’s policy in this regard clearly. Given the advanced
stage of the process of disinvestment in many of these companies, I
am emboldened to take credit for a receipt of Rs 12000 crore from

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disinvestment during the next year. An amount of Rs 7000 crore
out of this will be used for providing restructuring assistance to
PSUs, safety net to workers and reduction of debt burden. A sum
of Mrs. 5000 crore will be used to provide additional budgetary
support for the Plan primarily in the social and infrastructure
sectors. This additional allocation for the plan will be contingent
upon realisation of the anticipated receipts. In consultation with
Planning Commission I shall come up with sectoral allocation
proposals during the course of the year."Additional budgetary
support for the Plan, primarily in the social and infrastructure
sectors (contingent upon realisation of the anticipated receipt.)
2.14 Excerpts from the Address by the President Shri K. R.
Narayanan to the Joint Session of Parliament (February, 2002)
“The Public sector has played a laudable role in enabling our
country to achieve the national objective of self-reliance. However,
the significantly changed economic environment that now prevails
both in India and globally makes it imperative for both the public
sector and the private sector to become competitive. Learning from
our experience, especially over the last decade, it is evident that
disinvestment in public sector enterprises is no longer a matter of
choice, but an imperative. The prolonged fiscal haemorrhage from
the majority of these enterprises cannot be sustained any longer.
The disinvestment policy and the transparent procedures adopted
for disinvestment have now been widely accepted and the shift in
emphasis from disinvestment of minority shares to strategic sale
has yielded excellent results. The Government has taken two major
initiatives to improve the safety net for the workers of PSUs. The
first enhanced VRS benefits in those PSUs where wage revision
had not taken place in 1992 or 1997. The second increased training
opportunities for self-employment for workers retiring under
VRS.”

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 Excerpts from the Budget Speech for 2002-03 of the
Finance Minister Shri Yashwant Sinha on 28th
February, 2002.

“With the streamlined procedure for disinvestment and

privatisation, I am happy to report that the Government has
now completed strategic sales in 7 public sector companies
and some hotels properties of the Hotel Corporation of India
(HCI) and the India Tourism Development Corporation
(ITDC). The change in approach from the disinvestment of
small lots of shares to strategic sales of blocks of shares to
strategic investors has improved the price earning ratios
obtained. We expect to complete the disinvestment in
another 6 companies and the remaining hotels in HCI and
ITDC this year. Disinvestment receipts for the present year
are estimated at Rs. 5,000 crore excluding the special
dividend from VSNL of Rs. 1,887 crore. Encouraged by
these results, I am once again taking credit for a receipt of
Rs. 12,000 crore from disinvestment next year.” 2.16 Suo–
Moto Statement of Shri Arun Shourie, Minister of
Disinvestment, made in both Houses of Parliament on 9th
December, 2002. The main objective of disinvestment is to
put national resources and assets to optimal use and in
particular to unleash the productive potential inherent in our
public sector enterprises. The policy of disinvestment
specifically aims at:
• Modernization and Up gradation of Public Sector
Enterprises;
• Creation of new assets;
• Generating of employment; and
• Retiring of public debt.

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Government would continue to ensure that disinvestment does not
result in alienation of national assets, which, through the process of
disinvestment, remain where they are. It will also ensure that
disinvestment does not result in private monopolies.

In order to provide complete visibility to the Government’s

continued commitment of utilization of disinvestment proceeds for
social and infrastructure sectors, the Government would set up a
Disinvestment Proceeds Fund. This Fund will be used for
financing fresh employment opportunities and investment, and for
retirement of public debt. For the disinvestment of natural asset
companies, the Ministry of Finance and the Ministry of
Disinvestment will work out guidelines. The Ministry of Finance
will also prepare for consideration of the Cabinet Committee on
Disinvestment a paper on the feasibility and modalities of setting
up an Asset Management Company to hold manage and dispose
the residual holding of the Government in the companies in which
Government equity has been disinvested to a strategic partner.
2.17 Excerpts from the Budget Speech for 2003-04 of the Finance
Minister Shri Jaswant Singh on 28thFebruary, 2003. I am
confident that the pace of disinvestment will accelerate in the
coming year. I wish to also state that details about the already
announced Disinvestment Fund and Asset Management Company,
to hold residual shares post disinvestment, shall be finalized early
in 2003-04.disinvestment is not merely for mobilizing revenues for
the Government, it is mainly for unlocking the productive potential
of these undertakings, and for reorienting the Government, away
from business and towards the business of governance.”

The following table indicates the actual disinvestments from 1991-

92 till date, the methodologies adopted for such disinvestments and
the extent of disinvestment in different CPSUs:

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 Disinvestment from 1991-92 to 2004-05, the methodologies adopted
No. of
transacti Target Actual
ons in receipt receipts
Year Methodology
which (Rs. in (Rs. in
equity Crore) Crore)
sold
Minority shares sold in Dec 1991 and Feb
1992 by auction method in bundles of
1991-92 47 2500 3037.74
"very good", "good" and "average"
companies
Shares sold separately for each company
1992-93 29 2500 1912.42
by auction method.
Equity of 6 companies sold by open
1993-94 - 3500 0.00
auction but proceeds received in 94-95.
Sale through auction method, in which
NRIs and other persons legally permitted
1994-95 17 4000 4843.10
to buy, hold or sell equity, allowed to
participate.
1995-96 5 7000 168.48 Equities of 4 companies auctioned
1996-97 1 5000 379.67 GDR (VSNL) in international market.
1997-98 1 4800 910.00 GDR (MTNL) in international market.
GDR (VSNL) / Domestic offerings with the
participation of FIIs (CONCOR, GAIL). Cross
1998-99 5 5000 5371.11
purchase by 3 Oil sector companies i.e.
GAIL, ONGC & IOC
GDR—GAIL, VSNL-domestic issue, BALCO
1999-00 5 10000 1860.14 restructuring, MFIL’s strategic sale and
others
Strategic sale of BALCO, LJMC; Takeover -
2000-01 5 10000 1871.26
KRL (CRL), CPCL (MRL), BRPL
Strategic sale of CMC – 51%, HTL –74%,
VSNL – 25%, IBP – 33.58%, PPL-- 74%, and
2001-02 # 8 12,000 5632.25 sale of hotel properties of ITDC & HCI;
receipt from surplus cash reserves from
STC and MMTC

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 Strategic sale: HZL (26%), IPCL (25%),
HCI, ITDC, Maruti: control premium from
2002-03 # 8 12,000 3347.98 renunciation of rights issue, Put Option -
MFIL (26%), Shares to employees in HZL,
CMC and VSNL.
Jessop & Co. Ltd.(72% Strategic Sale), HZL
(18.92% Call Option), through Public Offer-
2003-04 2 14,500 15547.41 Maruti (27.5%), ICI Ltd. (9.2%), IBP (26%),
IPCL (28.945%), CMC (26.25%), DCI (20%),
GAIL (10.%) and ONGC (9.96%)
NTPC (5.25% Offer for Sale), IPCL (5% to
2004-05 3 4,000 2764.87
Employees) and ONGC (0.01%)
By sale of shares to Public Sector Financial
2005-06 1567.60 Institutions & Public Sector Banks on
'Differential Pricing Method'
Total 96800 49214.03

# Figures (inclusive of control premium,

dividend/dividend tax, restructuring and transfer of
surplus cash reserves prior to disinvestments)

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 Realization through strategic sale during 1999-2000
to 2004-05

Sr. Name Percentage Realisation Profit/Loss

No of Rs. in crore Making during
Government the year of
Equity sold disinvestment

1 a. Modern Food Industries (India) Ltd. 74 105.45 Loss Making

(MFIL)

1 b. (MFIL) Phase II 25.995 44.07

2. Bharat Aluminium Co. Ltd. 51 826.92 ^ Profit Making

3a. CMC Ltd. 51 152 Profit Making

3b CMC Ltd. @ 6.07

4 HTL 74 55 Profit Making

5. Lagan Jute Machinery Corporation 74 2.53 Loss Making

ITDC-19 HOTELS

6. Hotel Agra Ashok 89.97 3.61 Loss Making

7 Hotel Bodhgaya Ashok 89.97 1.81 Loss Making

8. Hotel Hassan Ashok 89.97 2.27 Loss Making

9. TBABR Mamallapuram 89.97 6.13 Loss Making

10. Hotel Madurai Ashok 89.97 4.97 Loss Making

11. Hotel Ashok Bangalore * 89.97 39.41 Loss Making

12. Qutab Hotel, New Delhi 89.97 34.46 Loss Making

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13. Lodhi Hotel, New Delhi 89.97 71.93 Loss Making

14. LVPH, Udaipur 89.97 6.77 Loss Making

15. Hotel Manali Ashok 89.97 3.65 Loss Making

16. KABR, Kovalam 89.97 40.39 Loss Making

17. Hotel Aurangabad Ashok 89.97 16.50 Loss Making

18. Hotel Airport Ashok, Kolkata 89.97 19.39 Loss Making

19. Hotel Khajuraho Ashok 89.97 2.19 Loss Making

20. Hotel Variants Ashok 89.97 8.38 Loss Making

21. Hotel Kanishka, New Delhi 89.97 92.37 Loss Making

22. Hotel Indraprastha, New Delhi 89.97 43.39 Loss Making

23. Chandigarh Hotel project 89.97 17.27 Loss Making

24. Hotel Ranjit, New Delhi 89.97 29.28 Loss Making

25. HCI - Centaur Hotel Juhu Beach, 100 153 Loss Making
Mumbai

26. HCI-Indo Hokke Hotels Ltd.(Centaur 100 6.51 Profit Making

Rajgir)

27. HCI - Centaur Hotel Airport, Mumbai 100 83 Loss Making

28. IBP Co Ltd 33.58 1153.68 Profit Making

29. Videsh Sanchar Nigam Ltd. 25 3689^ Profit Making

30. Paradeep Phosphates Ltd. 74 151.70 Loss Making

31 Hindustan Zinc Ltd. 26 445 Profit Making

(a)

31 Hindustan Zinc Ltd. @ 6.19

(b)

31 Hindustan Zinc Ltd. @@ 18.92 323.88

(c)

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32 Maruti Udyog Ltd. 4.2 1000 Profit Making

33. Indian Petrochemicals Corporation 26 1490.84 Profit Making

Ltd.

34. State Trading Corporation of India 40 ^^^

35 MMTC Ltd. 60 ^^^

36 Jessop & Co Ltd 72 18.18 Loss Making

Grand Total 10257.19

The Fund-Bank design in Operation

The Indian ruling polity, of course, cannot claim any originality in
their disastrous designs on the country’s economy and her people.
Each and every move is meticulously designed under the
prescription of the World Bank and the IMF and at the behest of
the imperialist powers and the MNCs. The World Bank
publication, called ‘Research Report’ and titled “Bureaucrats in
Business” has already detailed out each and every step, the Indian
rulers have been taking since 1991to dismantle the public sector
network in the country including the various modalities of
privatization. The publication also had written down with every
detail the game plan to create downward pressure on wages of the
public sector employees, drastically curtail workers’ rights, stop
industry-wise wage settlement and to make the PSUs an unholy
destination by suitable policy engineering from Govt level.

It is amusing to note that the current model of outright

privatization through ‘strategic disinvestments’ aggressively
pursued by the Government has been copied from the World Bank
prescription. The `Research Report’ of the World Bank has
prescribed that: “If potential buyers cannot otherwise raise the
funds, the enterprise can be sold in trenches (passing management

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control immediately to private, allowing them time to raise the
funds to buy out rest of the share gradually). With freedom to hire
and fire, which is an important factor in successful management
contracts.” The message of the World Bank’s guideline is loud and
clear: tune your privatization strategy to the advantage of the
potential buyers, the foreign and Indian Corporate, without
bothering for the immense financial loss and harm to economic
sovereignty caused to the country.

Thus it is clear that the offensive against the public sector is not
guided by financial or managerial prudence but because of the
ideological position taken by IMF/WB/WTO with rich countries
led by United States pushing from behind, that there should be no
public sector any where in the world. Private oligarchies want
complete command over the entire world economy and they
wouldn’t tolerate even a token presence of PSU on their way. The
BJP-led government is more than obliging to meet their dictates.

The Policy to Wipe out Public Sector

Under the on going drive of privatization, the Government has

mainly targeted most of the blue chip profit making PSUs which
were decorated with the classification of ‘Ratnas’. Further, the
most strategic sectors have been engulfed under the drive for
privatization. Notable among them are oil & petroleum, power,
telecom, rail, road and air transport, ports & docks, airports and of
course the financial sector. The game plan is to completely erase
the public sector network from the industrial map of the country.

The creation of a separate Disinvestments Ministry under the

exclusive charge of one Cabinet Minister clearly demonstrates the
present Government’s point of priority to completely destroy the
public sector. This fact was reflected in the budget speech (2000-
01) of the Union Finance Minister pronouncing that, “Government
have recently established a new Department for Disinvestments to

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establish a systematic policy approach to disinvestments and
privatization and to give fresh impetus to this programmed, which
will emphasize increasingly on strategic sales of identified PSUs.”
As noted above, when the Government is desperately taking
steps to wipe out public sector from the country, the mention in
the agenda note that the Government strategy is, “strengthening
strategic units, privatizing non-strategic ones” is nothing but
travesty of truth.
The Government has refused to recognize the strategic
importance oft he PSEs in energy, telecommunication and
defense production sectors including the airports in protecting
the economic sovereignty and even security of the country’s
independence. They have identified these CPSUs as non-
strategic and selling them off chaotically. And after that talking
about strategic and non-strategic sectors is nothing but extreme
hypocrisy and self-deception.
Similarly it is nothing but a stupid argument that “price realized
through the sale of minority stakes, was low as compared to
price realized through strategic disinvestments …” It is but
natural that conclusive privatization is bound to fetch higher
yields than off-loading of minority shares. The price differential
is bound to be there between simple share holding and acquiring
the ownership including whole sole control of the enterprise and
its management which in turn open up host of private
commercial interest to the buyer. On the other hand, the
dangerous fall out of conclusive privatization is also colossal.
Realizing higher price by so-called ‘strategic sale of PSUs is
short sighted and suicidal for the country. Therefore, there is no
rationale behind the suicidal steps of strategic sale of CPSUs,
particularly the blue chips ones.
The claim of the Government that “The concerns of the various
stakeholders are taken care of through the Shareholders’
Agreement (SHA), Share Purchase Agreement (SPA) and

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 Parent Guarantee Agreement (PGA)” is not correct. Except
extending due and undue benefits to the private buyers, the
strategic sale cause immense harm to all – the nation, the people
and of course the workmen.
The SHA is supposed to protect the interest of the employees
and act against asset stripping. Let us examine some concrete
examples:

Asset Stripping
The Tata Teleservices Limited (TTSL) acquired 25 per cent
stake of Videsh Sanchar Nigam Limited (VSNL) from the
Government at a price of Rs.1,439.00 crore. The Company further
acquired another 20 per cent stake of VSNL through open offer at
a cost of Rs.1,151.00 crore. Now with 45 per cent stake. The TTSL
has been handed over the total management control of the telecom
giant. VSNL is a classic example of pre and post privatization asset
stripping.

Manual on Disinvestments & Strategic Sale Agreement

On the basis of the experience of disinvestments in the last decade
in more faithful tune with the World Bank guidelines, the Union
Ministry of Disinvestments has brought out a “Manual on
Privatization”. By the said manual, the process of loot on national
wealth through fast track privatization as prescribed by the World
Bank has been sought to be systematized and legitimized with
deceptive posture of transparency. While dealing at length various
methods of valuation of the PSUs under sale, the manual
recommends a particular method—‘the discounted cash flow
method’ (DCF), which ensure price-fixing for the PSUs under sale
at a low level, without any consideration of its huge asset base and
replacement cost, solely to the advantage of the prospective
buyers.

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The said Manual published by the Disinvestments Ministry has
squarely discarded the Asset valuation method, which could
capture the real value of the huge national assets created by the
public sector industries over a long period. While recommending
the Discounted Cash Flow method (DCF), the Manual went a step
ahead to advise that the prospective cash flow to the company
under sale must also capture for discount the future (after sale)
presumable cost for modernization, capital-replacement, market
etc. that may be incurred by the new owner, which would lead to
assessment of the ‘cash flow’ at a lower level and facilitate low
pricing to facilitate the prospective customer. Thus, it is crystal
clear that the Government of the day is more concerned to protect
the interest the private capitalist at the cost of the national asset. It
is not without reason the Comptroller & Auditor General (CAG)
has found “intrinsic fault” in the valuation method recommended
by the Govt’s Disinvestments Manual and commented,” As per
international valuation standards, depreciated replacement cost
(i.e., Asset Valuation method) would have been the most
appropriate method.”

The love and affection of the Government of the day at the centre
for the private business is further exposed in yet another document
published by the Ministry of Disinvestments –‘Understanding The
Strategic Sale Agreement’ As if the under valuation and other
undue concessions granted while transferring the national assets to
the private buyer for a song are not enough, provision has been
made to pay cash ‘reward’ in the name of ‘Post Closing
Adjustment’. An unique scope has been created by the
Government by providing for the buyer to grab money from the
seller (PSUs) – “During the data room visits and the due diligence
exercise by the Strategic Partner, the Strategic Partner gets the
picture of the assets and liabilities of the company as on a certain
date … The deal may actually close at a much later date … In the
intervening period the company has been functioning and the
asset/liability position has undergone a change “ The perception of

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the Government, in this matter, has got expression in the statement
of the Disinvestments Minister Arun Shourie to the Financial
Express on 07.03.02 : “This means that the government could
actually end up paying private bidders to rid itself of loss-making
PSUs.” Now a concrete example is the sale of Paradip Phosphates
Ltd. (PPL). PPL has been conclusively privatized and purchased
by the sole bidder Zuari-Maroc combine at a cost of Rs.151.7 crore
against the reserve price of Rs.176 crore. Taking advantage of the
‘post closing adjustment’ clause, Zuari-Haroe has claimed an
amount of Rs.190 crore from the Government. Thus, the net
outcome of the privatization deal is the private business combine
got a PSU plus a cash gift of Rs.39.00 crore. In the deal of Modern
Foods, the Hindustan Lever also got some money under the same
consideration. So also was the case of ITDC hotels deal where an
amount of Rs.27.5 crore is being returned to the buyers.

Current Targets: The Cash-rich PSUs

The motivated, unfounded blame of inefficiency attributed to the
so-called ‘sick’ and ‘uneconomic’ PSUs are also nothing but a ploy
to justify the closure of such PSUs. Had that not been so, then why
the most efficient and consistently profit making oil PSUs are
being privatized by robbing them of their investible surplus. It is
evident that whether loss making or profit making, good or bad
record of performance, the onslaught of Fund-Bank dictated policy
of closure, and privatisation of public sector shall spare none. It
has been aptly said that, “What is Shourie’s argument? PSUs are
loss making, therefore profit-making PSUs should be the first to be
sold. (TOI, 13.8.02)The Government has been repeatedly projecting
the performance records of the comparatively weak PSUs to justify
the privatisation policy. However, the interesting fact is that the
recent past cases of privatisation and the ones lined up for the
forthcoming period, are all consistently profit making cash-rich
public sector companies. Indian Petrochemicals Corporation Ltd

24
(IPCL) has been handed over to the Reliance Industries Ltd., (RIL)
own by the Ambanies. While RIL has acquired the controlling
share of IPCL at price of Rs.1,491.00 crore, at the time of
privatisation the IPCL had an amount of Rs.2,946.13 crore as
reserve and surplus. The Sterile Group has acquired the equity and
management control of Hindustan Zinc Limited (HZL) at a price of
Rs.445.00 crore and the PSU has a reserve fund of Rs.737.00 crore
and estimated asset base of around Rs.10,000.00 crore.

In fact the CPSUs which are under current prioritized initiative of

the Government for privatisation are from among the top ten profit
making public sector companies with huge investible surplus and
belong to very important sectors of the economy namely: Oil,
Power and Telecommunication. The two cash rich profit making
Oil PSUs which are in the advanced stage of privatisation are Bharat
Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum
Corporation Ltd (HPCL). These two CPSUs together have earned
a profit of Rs.1,908.13 crore in the year 2000-01.

Valuation of Public Sector Units for the purpose of

Disinvestment

The process of disinvestment in India began in 1992, under the

aegis of new economic liberalization policy put forward by then
Finance Minister, Dr. Manmohan Singh. Disinvestment was
supposed to be the tool in the hands of government to improve the
functioning and profitability of public sector enterprises and also
raise funds to mitigate its fiscal deficits. However, over the past
decade, this exercise has been plagued by criticisms and
controversies and has not achieved desired results for the
government because of political bickering.

25
The enunciated Government of India’s policy on disinvestment
as per Economic Survey 2001 was:

 Bring down Government equity in all non-strategic PSUs to

26% or lower, if necessary.
 Restructure and revive potentially viable PSUs.

 Close down PSUs which cannot be revived,

 Fully protect interests of workers.

There have been several criticisms of the disinvestment process.

One is that valuations processes were unsound and that the
government gave away its stakes too cheaply; two, disinvestment
has been merely a revenue-raising affair for the government, with
little thought being given to the requirements of the firms
concerned; thirdly, it is contended that the government’s reluctance
to disinvest more than 51% and relinquish control over PSUs has
meant that the government has been unable to attract suitably
priced bids, as bidders do not believe the firms’ performance
would improve significantly with small government stakes being
offloaded. An important and perhaps most critical issue in the
process of disinvestments or privatization of PSUs is valuation. Be
it disinvestments of 1991-92 or that of BALCO in 2001, valuation
has always been at the core of controversy. This is so because there
are several methods of valuation and different methods yield
widely varying results. The criticality of the issue of valuation in
disinvestment or privatization can be easily gauged from the fact

26
that the value of BALCO as put by different people differed as
widely as from Rs.1100 crore to Rs.5000 crore.

Valuation Techniques

The guidelines on valuation in the PSUs, are prescribed in Chapter

18 of the manual titled "DISINVESTMENT: POLICY &
PROCEDURES", published by the Ministry of Disinvestment in
2001. The disinvestment Commission has prescribed four
approaches to valuation of PSUs.

These are:

The Discounted Cash Flow method

The Balance Sheet method

Transaction Multiple method

The Net Asset Value method

While the first three are business valuation methodologies

generally used for valuation of a going concern, the last
methodology would be relevant only for valuation of assets in case
of liquidation of a company.
Let us discuss about each one of them:

The Discounted Cash Flow method: The Discounted Cash Flow

(DCF) methodology expresses the present value of a business as a
function of its future cash earnings capacity. This methodology
works on the premise that the value of a business is measured in

27
terms of future cash flow streams, discounted to the present time at
an appropriate discount rate.

The Balance Sheet method: The Balance sheet or the Net Asset
Value (NAV) methodology values a business on the basis of the
value of its underlying assets. This is relevant where the value of
the business is fairly represented by its underlying assets. The
NAV method is normally used to determine the minimum price a
seller would be willing to accept and, thus serves to establish the
floor for the value of the business.

Transaction Multiple method: This method takes into account

the value paid for similar transactions in the industry and
benchmarks it against certain parameters, like earnings or sales.
Two such parameters are: Earnings Before Interest, Taxes,
Depreciation & Amortizations (EBITDA) , & Sales.

Although the Transaction Multiples method captures most value

elements of a business, it does not properly reflect the cash flows
generated by a business, or take into account the time value of
money. However, it is considered as a useful rule of thumb, in
valuing businesses by various valuation experts. Accordingly, one
may have to review a series of comparable transactions to
determine a range of appropriate capitalization factors to value a
company as per this methodology.

The Net Asset Value method: The asset valuation methodology

essentially estimates the cost of replicating the tangible assets of
the business. The replacement cost takes into account the market
value of various assets or the expenditure required to create the
infrastructure exactly similar to that of a company being valued.
Since the replacement methodology assumes the value of business
as if we were setting a new business, this methodology may not be
relevant in a going concern. Instead it will be more realistic if asset
valuation is done on the basis of the new book value of the assets.
The asset valuation is a good indicator of the entry barrier that

28
exists in a business. Alternatively, this methodology can also
assume the amount which can be realized by liquidating the
business by selling off all the tangible assets of a company and
paying off the liabilities.

Challenges in valuation of Indian PSUs

• Companies listed on stock exchange can be assessed fairly on the

basis of market price of shares. However, most of the PSUs are
either not listed on stock exchange or command extremely limited
trade float.

• Valuation of PSU is different from establishing the price for

which it can be sold. Government can only realize what the buyer
is willing to pay for the PSU.

• Valuation is a subjective figure arrived at by the bidder by

leveraging his strengths with the potential of the company.

• The profitability of the PSUs as reflected through the profit and

loss account does not adequately reflect the earning potential of
PSUs because the PSUs have generally been run in unprofessional
manner.

• Public Sector undertakings own not only huge business assets but
also highly valuable non-business assets like real estate, residential
complex and utilities like power plant etc.

• Valuing companies in India becomes even more difficult, as there

is no databank of transactions carried out in the past. In the US, the
valuation report of any acquisition has to be filed with Securities
and Exchange Commission (SEC).

29
 The Right Valuation Approach

All of the above methods have their own merits and demerits. No
method will suffice in any particular case. The valuation methods
are benchmark figures and in no way can predict the exact price at
which an entity can be sold.
The buyer will be willing to pay the price depending on the
synergy value that will result from improvements made when the
companies are combined. This value will accrue to the acquirer’s
shareholders rather than to the target’s shareholders. The more the
synergy value a particular acquisition can generate, the higher the
maximum price an acquirer will be interested in paying. Price a
buyer would be willing to pay could be a function of Synergies
expected from proposed integration of Target Company

In case of Modern Foods depending on the valuation method, the

company’s value oscillated between Rs 28 crore and Rs 78 crore.
Hindustan Lever, however, offered Rs 125.45 crore. HLL quoted
the price depending on the value they thought they would derive
from the company.

The value is a function of the individual’s perception of the risk,

the nature of financial resources available to the purchaser,
opportunity, and other similar factors. Therefore, the government
in order to realize better proceeds from disinvestment should
consider following issues in future:

It is important to understand that price is not value; in fact, the

30
difference between price and value is the raison d’etre of
investment valuation, independent of market pricing.
B. The final value to be paid by acquirer will depend on the
controlling premium he is willing to pay. Most foreign companies
are not comfortable with less than 51 percent holding. But the
government isn’t offering 51 percent in most strategic sales.

The government should have clear future policy when going in for
big-ticket disinvestments like Air India. For instance, main assets
of Air India are the bilateral rights. Will these bilateral rights vest
with Air India – if yes, Air India’s valuation will be higher.
However, no country in the world has committed all its bilateral to
one airline. These uncertainties with regard to future of the sector
will prevent bidders to quote higher prices for Air India.

There is no reason why the government should continue to hold a

part of the equity in PSEs that are operating in non-core sectors.
This strategy leads to sub-optimal realization of revenue and
significant loss to the government.

In the cases of disinvestment involving transfer of control of

management affairs to the private investor, higher weightage has to
be given to the value of assets both tangible and intangible and
relatively lower value can be assigned to fair market price. While
disinvesting minority shares, more weightage will have to be given
to market price. In such case asset valuation approach needs to be
given lesser weightage.

Nonetheless, what is important is that, not merely should the value

derived be unquestionable on the basis of well-established equity
valuation principles, but also the processes and methodologies (and
the underlying assumptions) adopted for deriving such value be
reasonable. Transparency in valuations is a must so as to avoid
controversies.

31
 Problems associated with Disinvestments

A number of problems and issues have bedeviled the disinvestment

process. The number of bidders for equity has been small not only
in the case of financially weak PSUs, but also in that of better-
performing PSUs. Besides, the government has often compelled
financial institutions, UTI and other mutual funds to purchase the
equity, which was being unloaded through disinvestment. These
organizations have not been very enthusiastic in listing and trading
of shares purchased by them, as it would reduce their control over
PSUs. Instances of insider trading of shares by them have also
come to light. All this has led to low valuation or under pricing of
equity.
Further, in many cases, disinvestment has not really changed
the ownership of PSUs, as the government has retained a majority
stake in them. There has been some apprehension that
disinvestment of PSUs might result in the? Crowding out? Of
private corporate (through lowered subscription to their shares)
from the primary capital market.

Contrary to the publicity of the Government, privatisation of

CPSUs almost invariably involves reduction of workmen. Such
reduction takes place both immediately before and after
privatisation, as we have seen in the case of ‘asset stripping’ in the
VSNL. To cite an example of pre-privatisation reduction of
workmen, let take the case of Bharat Petroleum Corporation Ltd
(BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). These

32
two PSEs have drawn plan to reduce the number of workmen by
around 4,000. In fact ever, since the Government has launched the
privatisation onslaught, the management of CPSUs, under orders
from the Government has been reducing the workmen. The
Labour Ministry note itself has mentioned, “During last ten years,
the workforce in the Public Sector Undertakings has reduced from
2.3 million to 1.7 million”. In BALCO, most widely noticed case
of privatisation, several hundred workmen has been retrenched
after privatisation. In IPCL 400 hundred workmen are being
dislodged and further “Reliance has identified 2,000 excess staff at
the Vadoda plant alone.”

So far as the question of wage revision is concerned, the

experience of the CPSU workers in privatized companies is very
bad. The drum beating by the Ministry of Disinvestments citing the
example of wage revision of the BALCO workers is rather a case
of deprivation. It is a case of mourning and not rejoicing. The
wage revision was deliberately kept pending by the Government
keeping in mind the impending privatisation. Further,
the”guaranteed benefit of 20% of basic pay” is one of the lowest in
a profit making company like BALCO. During its entire period in
the public sector, BALCO workers never got such a paltry wage
rise. In fact, in many CPSUs the workers got guaranteed benefit of
more than 80% of basic pay. The ex-gratia payment of Rs.5,000
referred in the note of the Ministry is in lieu of the unpaid wages of
the workers on an average amounting to Rs.15,000 per worker and
hence not gratis from the management. The experience with
Modern Foods, ITDC Hotels, Maruti, VSNL are more or less
same. The Hindustan Lever Ltd (HLL) management has declared
that the acquired Modern Food employee shall continue to get less
pay than the HLL employees. An Executive of the company has
been quoted, ”we will not pay a Modern Foods employee the same
salary. If, however, we recruit a new employee and post him at
Modern Foods, he will get the same compensation as his
Hindustan Lever counterparts,”

33
As is generally the case in the private sector, rampant violation of
labour laws and blatant refusal to trade rights is seriously
confronted by the workers in the post privatisation era.

Conclusion
Disinvestment plays an important role in revenue generation. Good
disinvestment receipts can help the government reduce fiscal
deficit not only by way of equity sale in PSUs but also for the
subsequent cap in government transfers to bleeding PSUs. But has
the government been successful in this context. Trends in the past
few years have displayed wide and abysmal differences in
disinvestment targets and actual receipts.
Year Targeted Receipts Actual Receipts
1999-2000 10,000 1829
2000-2001 10,000 1870
2001-2002 12,000 5632

Political hurdles in disinvestment, intervention of stakeholders and

interest groups as well as poor state of PSUs have all contributed to
this performance. Efficient Market Structure is also one of the
important goals in the disinvestment/privatisation process. The
government would seek to establish a competitive market which
would result in driving down consumer prices (telecom sector
privatisation in India) or it would try to maximize revenue by
divesting in a pseudo monopoly environment and using regulation
to control rent seeking behaviour (Reliance acquisition of IPCL)
but it cannot try to maximize both revenue and market structure.
The following case will explain the contradiction in the two
objectives. Solutions are not simple, especially where stakeholders
are many and come from all sections of the society; workers,
employees, management, equity holders and consumers. Further
this essay looks only at a single variable i.e. market structure and

34
its relationship with disinvestment receipts. Several other variables
play more important roles in the scheme of disinvestment. The
government should study international best practices, customize
them to the Indian landscape and arrive at the right direction of the
liberalization process.

Dated this _______

AGREEMENT
AMONGST
SELLING SHAREHOLDER
AND
COMPANY
AND
REGISTRAR 1

35
THIS AGREEMENT (the “Agreement”) is made at New Delhi on this ______ by and
amongst: SELLING SHAREHOLDER(hereinafter referred to as the “Selling
Shareholder”), of the FIRST PART; AND COMPANY, a company registered under the
Companies Act, 1956 (the “Companies Act”) and having its registered office, (the
“Company”), which expression shall, unless it be repugnant to the context or meaning
thereof, be deemed to mean and include its successors and permitted assigns, of the
SECOND PART; AND REGISTRAR, a company within the meaning of the Companies
Act and having its registered office (the “Registrar”), which expression shall, unless it be
repugnant to the context or meaning thereof, be deemed to mean and include its successors
and permitted assigns), of the THIRD PART. The Selling Shareholder, the Company and the
Registrar are hereinafter individually referred to as a “Party” and collectively as “Parties”.
WHEREAS: 2

36
1. The Selling Shareholder and the Company are taking steps for an initial public offering
(hereinafter referred to as the “Offer”) of up to ………… equity shares of face value of
Rs.__ of the Company (the “Equity Shares”) in accordance with the requirements of the
Companies Act, 1956 (the “Act”) the Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time (the
“SEBI Regulations”) and other Applicable Laws (i) within India, to Indian institutional,
non-institutional and retail investors that are not “U.S. persons”, as defined in, and in reliance
on, Regulation S (“Regulation S”) under the U.S. Securities Act of 1933, as amended (the
“U.S. Securities Act”), (ii) within the United States, to “qualified institutional buyers”
(“QIBs”) as defined in Rule 144A (“Rule 144A”) under the U.S. Securities Act that are also
“qualified purchasers” as defined in the U.S. Investment Company Act of 1940, as amended,
and related rules and regulations and in reliance upon transactions exempt from, or not
subject to, the registration requirements of the U.S. Securities Act and (iii) outside the United
States and India, to institutional investors that are not “U.S. persons”, as defined in, and in
reliance on Regulation S under the U.S. Securities Act, at such prices as may be determined
or discovered in accordance with the processes provided under the SEBI Regulations or any
regulation, circular or guideline issued by the Securities and Exchange Board of India (the
“SEBI”) and as agreed to by the Selling Shareholder and the Company, in consultation with
the BRLMs.

2. The Offer comprises an offer for sale of …………. Equity Shares by the Selling
Shareholder (the “Offer for Sale”), including a reservation for Eligible Employees (as
defined in the Draft Red Herring Prospectus to be filed with the SEBI, and such portion will
herein after referred to as, the “Employee Reservation Portion”). The Offer less the
Employee Reservation Portion shall constitute the net Offer to the public (the “Net Offer”).

3. The Selling Shareholder has appointed REGISTRAR as the Registrar to the Offer wide its
mandate letter dated ______, as per the terms and conditions detailed in this Agreement (the
activities pertaining to it acting as the registrar to the Offer are hereinafter referred to as the
“Assignment") and the Registrar has accepted the Assignment.

4. REGISTRAR is registered with the SEBI as Registrar to Issue and has a subsisting
Registration No. _______, valid from _______ to _______.

5. In terms of Regulation 5 (7) of the SEBI Regulations, the Registrar is required to enter into
a valid agreement with the Selling Shareholder and the Company inter alia to define the
allocation of duties and responsibilities among the Parties, pursuant to which the Parties are
entering into this Agreement.

6. All capitalized terms used in this Agreement shall, unless specifically defined herein or
required by the context in which they are referred to, have the meanings assigned to them in
the Draft Red Herring Prospectus or Red Herring Prospectus or the Prospectus to be filed
with the SEBI and the
3

37
Registrar of Companies, National Capital Territory of Delhi and Haryana, at New Delhi.

NOW THEREFORE, the Parties do hereby agree as follows:

1. The Selling Shareholder and the Company hereby appoints the Registrar as Registrar to the
Offer and the Registrar accepts such appointment.

2. The Registrar hereby undertakes to perform and fulfill such functions, duties and
obligations and to provide such other functions, duties, obligations and services as are
mentioned herein and undertakes that it shall be the Registrar‟s sole and absolute
responsibility to ensure that such duties are performed, subject to other entities/intermediaries
involved in the Offer adhering to their time deadlines and standards agreed upon.

3. The Registrar declares and undertakes that:

a) It has obtained certificate of registration from SEBI and that the certificate is valid from
_____ to _____. It shall also ensure that the certificate of registration shall remain in force by
taking suitable steps including prompt steps for renewal.

b) It has not violated any of the conditions subject to which registration has been granted and
that no disciplinary or other proceedings have been commenced by SEBI and that it is not
debarred or suspended from carrying on its activities as a registrar by SEBI. In case any
prohibiting orders are passed restricting it from carrying out the Assignment, it agrees to
promptly inform the Company and the Selling Shareholder of the same and cooperate to
establish alternate arrangements.

c) It shall perform the Assignment with highest standards of integrity and fairness and shall
abide by the code of conduct as specified in Schedule III of the RTA Regulations and shall
act in an ethical manner in all its dealings pursuant to the Agreement with the Selling
Shareholder, the Company, and the Bidders. The Registrar will not take up any activities
which are likely to be in conflict with the interests of the Selling Shareholder, the Company
and investors or contrary to/ in violation of the directions issued by SEBI.

d) It shall carry out the Assignment and complete all the formalities within the specified time
limits as per the applicable law, including without limitation, the SEBI Regulations and rules,
regulations and bye-laws of the Stock Exchanges.

e) It has the required infrastructure, facilities, personnel, capacity, capability and the net
worth to honour its obligations and liabilities under this Agreement.
4

38
f) It shall ensure that adequate resources including qualified manpower are dedicated in the
performance of the services indicated herein and that due care and caution shall be taken and
endeavor to ensure that there are no errors in the services to be performed by the Registrar.

g) It is a „fit and proper person‟ as per the criteria specified in Schedule II of the Securities
and Exchange Board of India (Intermediaries) Regulations, 2008, as amended.

h) It shall co-operate and comply with any instructions the BRLMs may provide in respect of
the Offer.

i) It is not subject to any litigation in, or injunction or order of any court or regulatory
authority that seeks to prevent it from entering into this Agreement or performing the
Assignment in any manner or acting as the registrar in relation to any public offering by a
company.

j) The entry into this Agreement does not violate, or constitute a breach of, any law,
regulation, court or tribunal order or any agreement, deed or undertaking entered into by the
Registrar.

k) In the event the Registrar is unable to continue to act as a Registrar, at any point of time,
due to any direction of any statutory or regulatory authority it shall immediately inform the
Company and the Selling Shareholder and take steps, in consultation with and as per the
direction of the Company and the Selling Shareholder, for a smooth transition of the Equity
Shares data held by the Registrar at no cost to the Company and the Selling Shareholder for
such transition to another Registrar as may be appointed by the Company.

l) It shall keep the Company and the Selling Shareholder fully informed about the progress
with regard to any legal action initiated against it and/or any of its group entity by any
regulator from time to time.

4. The Selling Shareholder and the Company hereby declares that they have complied with
and agree to comply with all statutory formalities under the Act, the SEBI Regulations, and
all other applicable laws, rules, regulations and guidelines, to enable them to make the Offer.
The Selling Shareholder and the Company also agrees that it will co-ordinate with the
Registrar and that they will not give any instructions which are in violation of any applicable
legislation, and any rules, regulations and guidelines.
5. The Parties agree to their respective functions, duties and obligations pertaining to the
Assignment in respect of each activity mentioned in Schedule II hereunder, which is
indicative and not exhaustive and conforms to the model agreement contemplated under the
SEBI Regulations. The Parties may include further activities agreed upon but all the activities
pertaining to the Assignment shall be listed and agreed upon between the parties. Further, the
Registrar
5

39
agrees to undertake all the obligations and responsibilities specified for the Registrar herein,
as well as in the underwriting agreement, escrow agreement, syndicate agreement, self
certified syndicate bank agreement, if any, the Draft Red Herring Prospectus and the
Prospectus (collectively, the “Offer Documents”) provided that the Registrar is either a party
to such agreements or is in receipt of any communication detailing such obligations and
responsibilities. The Registrar hereby consents to the inclusion of its name as the Registrar to
the Offer in all such documents as are required for the Offer.

6. Without prejudice to the above, the Registrar‟s functions and responsibilities in connection
with the Offer will include, without limitation, the following:

(A) Collecting:

1) the Bid cum Application Forms from various centers of the Escrow Collection Banks,

2) the electronic Bid data (including the Application Supported by Blocked Amount
(“ASBA”) Bid data) from the Stock Exchanges, and 3) the aggregate data in relation to the
total number of ASBAs uploaded by the Self Certified Syndicate Banks (the “SCSBs”) and
the total number of Equity Shares and the total amount blocked against the uploaded ASBAs,
from each SCSB, in each case, in accordance with the instructions of the Selling Shareholder
and the Company and reporting any disruptions/delay in the flow of applications from
bankers to the Selling Shareholder, the Company and the BRLMs;
(B) Processing all applications in relation to the Offer

(i) Reconciling the compiled data collected from the Stock Exchanges in terms of Clause
6(A) (2) with the data collected from the SCSBs in terms of 6(A)(3); (ii) Matching the DP
ID, Client ID and PAN specified in the reconciled data with the depository‟s database; (iii)
Informing the SCSBs about errors, if any, in the Bid details, along with advice to send the
rectified data within a specified date; iv) Rejecting the Bids (including ASBAs) in respect of
which the DP ID, Client ID and PAN specified in the reconciled data does not match with
these details in the depository‟s database and which has not been rectified by the SCSB
within the specified date; 6

40
(v) Entering accurate data based on application/depository details and weeding out multiple
applications, including ASBAs; (vi) Keeping accurately, at all times, the electronic records
relating to ASBAs received from all SCSBs, including: (a) ASBAs taken from the online
public Offer system of the Stock Exchanges and ASBAs furnished by SCSBs; (b) Particulars
relating to the allocation and Allotment of Equity Shares against valid ASBAs; (c) Particulars
relating to the requisite money to be transferred to the Public Offer Account, in accordance
with the terms of this Agreement, the Draft Red Herring Prospectus, Red Herring Prospectus,
the Prospectus, the SEBI Regulations and the Companies Act; and (d) Particulars relating to
rejected/withdrawn/unsuccessful ASBAs; (vii) Delete details of the Bids submitted by the
ASBA Bidders which have been withdrawn after the Bid/Offer Closing Date;
(C) Keeping a proper record of applications and monies received from Bidders and paid to
the Selling Shareholder/ Escrow collection Account/ Bankers to the Offer;

(D) Providing correct data in time to enable the Selling Shareholder and the Company to
determine and finalize the basis of allocation and allotment and the Selling Shareholder and
the Company in coordination with the designated stock exchange for timely approval of the
basis of allotment, including in relation to ASBA applicants;

(E) Post communication of the basis of allotment by the Selling Shareholder and the
Company, preparation of list of allottees entitled to allocation of Equity Shares;

(F) Ensuring that correct credit to respective demat accounts (for all applicants including
ASBA applicants) is made in time , as specified in the Offer Documents and applicable rules,
regulations and guidelines issued by SEBI;

(G) Ensuring that allotment made is correct and timely uploading of the correct file in the
depository system is made;
7

41
(H) Coordinating with the concerned depository and ensure that the number of Equity Shares
allocated to each category of bidders is correct in all respects;

(I) Dispatch of letters of allotment/ Confirmation of Allocation Note (“CAN”)/ refund orders,
credit of shares to the allottees‟ demat accounts within the time frame indicated in the Offer
Documents subject to certain cases kept in abeyance in consultation with the Selling
Shareholder/Company / BRLMs. It is clarified that for the purposes of this Agreement, any
reference to dispatch of refund orders shall include refunds made by way of modes permitted
by the Reserve Bank of India and as provided in the SEBI Regulation;

(J) Issuing duplicate refund orders (after obtaining suitable indemnity bond)/CAN;

(K) Revalidating refund orders;

(L) Carrying out due procedures in relation to processing of multiple applications as provided
in the Offer Documents;

(M) Complying with the effective procedure for monitoring the activities of intermediaries,
which will be established in consultation with the Selling Shareholder/Company, and the
BRLMs;

(N) Collecting and keeping a record of multiple Bids submitted by ASBA Bidders
(determined on the basis of common PAN) and rejected ;

(O) Obtaining the electronic bid data (including ASBA bid data) from the Stock Exchange(s)
and reconciling the same with the following data received from the SCSBs that is, (i) Total
number of ASBAs uploaded by the SCSB; and (ii) Total number of shares and total amount
blocked against the uploaded ASBAs (“Reconciled Data”);

(P) Ensuring that proper grievance handling mechanism is in place at its office during the
Offer period and after closing of the Offer, as per applicable regulations;

(Q) Rejecting multiple ASBAs determined as such, based on common PAN;

(R) Once the basis of allotment is approved by the Designated Stock Exchange, providing the
following details to the Controlling Branch of each SCSB, along with instructions to unblock
the relevant bank accounts and transfer the requisite money to the Selling Shareholder‟s
account, as the case may be, within the timelines specified in the ASBA process:
8

42
i. Number of Equity Shares to be allotted against each valid ASBA.

43
ii. Amount to be transferred from the relevant bank account to the Selling Shareholder‟s
account, for each valid ASBA.

44
iii. The date by which the funds referred herein above, shall be transferred to the Selling
Shareholder‟s account.

45
iv. Details of rejected ASBAs, if any, along with reasons for rejection and details of
withdrawn/ unsuccessful ASBAs, if any, to enable SCSBs to unblock the respective bank
accounts;

(S) Deleting the Bids withdrawn by ASBA investors from the bid file, where withdrawal
request is submitted to the Registrar after the Bid/Offer Closing Date;

(T) Settling investor complaints and grievance in a timely manner in accordance with any
applicable legislation and any rules, regulations and guidelines issued by SEBI, and provide
requisite reports to the Selling Shareholder and the Company; and

(U) Assisting the Selling Shareholder/Company in providing necessary report/information

and complying with the formalities of the designated stock exchange.

(V) Delivery of communication to the Company and the Selling Shareholder at the earliest in
the event of discrepancy between Bids registered in the online IPO system of the Stock
Exchanges and physical Bid cum Application Forms;

(W) Providing all the relevant statements/reports in a timely manner for listing and trading as
required under applicable regulations issued by the SEBI, in consultation with the Company,
the Selling Shareholder and the BRLMs;

7. In connection with the Offer, the Registrar shall maintain, without limitation, the following
records:

(a) all the applications received from investors in respect of the Offer;

(b) records relating to ASBAs received from all SCSBs including ASBAs taken from the
online public issue system of the Stock Exchanges and ASBAs furnished by SCSBs;

(c) all the applications of investors rejected and reasons thereof and details of the
rejected/withdrawn or unsuccessful ASBA Forms;

(d) basis of allocation of Equity Shares to the investors as finalized by the Selling
Shareholder and the Company in consultation with the Designated Stock Exchange, along
with relevant annexures and details;
9

46
(e) terms and conditions of offer of the Equity Shares;

(f) ASBAs taken from the electronic bidding system of the Stock Exchange(s) and ASBAs
furnished by SCSBs in respect of the Offer;

(g) particulars relating to allocation and Allotment of Equity Shares against valid ASBAs;

(h) particulars relating to the requisite money to be transferred to the Offerer‟s account
against valid ASBAs;

(i) Details of rejected/ withdrawn/ unsuccessful ASBAs, if any;

(j) details of allotment of Equity Shares;

(k) list of names of successful bidders and unsuccessful bidders of the Equity Shares,
including successful ASBA Bidders and unsuccessful ASBA Bidders;

(l) particulars relating to the allocation/allotment of the Equity Shares for the Offer;

(m) particulars relating to the monies to be transferred to the public offer account and the
refunds to be returned to the bidders;

(n) refund orders dispatched to investors in respect of application monies received from them
in response to the Offer revalidation and Offer of duplicate refund order;

(o) reconciliation between funds deposited in the Escrow Bank and total of amounts stated in
bid cum application forms received in the Offer;

(p) details of files in case of refunds to be sent by electronic mode such as Electronic
Clearing Service/ RTGS etc.; and

(q) such other records as may be specified by SEBI, the Selling Shareholder , the Company
and/or the BRLMs for carrying on the activities as Registrar to an Offer.

Subject to the provisions of any other law, the Registrar shall preserve all aforesaid records
and documents for a minimum period of three years. The Registrar shall provide the Selling
Shareholder, the Company or any of their assigns any report that is required by them using
the information specified above in a timely manner.
8. The Registrar and its officers, employees and agents shall not, either during the term of, or
after the termination of, their appointment hereunder, divulge to any third party any
confidential information about the Selling Shareholder and
10

47
the Company, or the Offer which comes to its knowledge in its capacity as the Registrar to
the Offer.

9. The Registrar shall provide in a timely manner all accurate information to be provided by
it under this Agreement, to ensure proper allotment and transfer of the Equity Shares,
dispatch of instructions to SCSBs to unblock the bank accounts of the respective ASBA
Bidders pursuant to approval of basis of allotment by the Designated Stock Exchange and
dispatch of refund orders without delay, including providing the escrow collection banks with
the details of the monies and any surplus amount to be refunded to the bidders. The Registrar
shall be responsible for the correctness and validity of the information relating to any refunds
required to be made that has been provided by the Registrar to the Refund Bankers, including
any of their correspondent banks.

10. The Registrar shall ensure that:

a. the enquiries/ complaints from applicants/ investors, including ASBA Bidders, are dealt
with adequately and in a timely manner in accordance with applicable rules, regulations and
guidelines;

b. the Registrar has a proper system to track, address and redress investor complaints;

c. adequate steps are taken for proper allocation and allotment of Equity Shares and refund of
application monies without delay and as per law;

d. uniform procedure is followed for the processing ASBA Forms and non ASBA Forms; and

e. the information furnished to the SCSBs in discharging its responsibility under the ASBA
process is correct and valid.

The Registrar shall be responsible for the correctness and validity of the information
furnished by it to the SCSBs and shall be liable for omissions and commissions in
discharging its responsibilities under this Agreement.
11. The Registrar shall undertake that it shall not generally and particularly in respect of any
dealings in the Equity Shares be party to:

(a) creation of false market;

(b) price rigging or manipulation;

(c) passing of unpublished price sensitive information to any third party including without
limitation brokers, members of the stock exchanges and other intermediaries in the securities
market or take any other action which is not in the interest of the investors; and
11

48
(d) neither it nor any of its directors, partners or managers having the management of the
whole or substantially the whole of the affairs of their business shall either on their respective
accounts or through their associates or family members, relatives or friends indulge in any
insider trading.

12. Immediately on receiving the instructions from the Selling Shareholder and/or the
Company , as the case may be, the Registrar shall dispatch all the refund orders within the
period specified in the Offer Documents. The required pre-printed stationery of CAN / refund
orders, letters of allocation and allocation advice shall be arranged by the Selling Shareholder
at least three days in advance to the Registrar. If the Selling Shareholder , as the case may be,
is liable to pay interest due to delay in refunding the amount, where such a delay is
attributable solely to the Registrar‟s failure to refund the amount or to provide instructions to
the SCSBs to unblock the bank accounts of the respective ASBA Bidders within the period
stated in the Offer Documents on receiving the instruction to do so from the Selling
Shareholder, the Registrar shall be liable to indemnify the Selling Shareholder for the cost
incurred by the Selling Shareholder in paying the interest as per the applicable law.

13. In case of refunds through electronic means like NECS, Direct Credit or RTGS, NEFT
etc, the Registrar shall be solely responsible to pick up the relevant details from the bid cum
application form or depository(ies) and provide the Refund Bank(s) with the requisite details
and files.

14. In case of Employee Reservation, Equity Shares within the Employee Reservation
Portion shall be allotted to persons identified in the list provided by the Authorised
Representative of the Company certifying that such persons are bona fide employees of the
Company who are Eligible Employees as defined in the Offer Documents, as per the
procedure specified in the Offer Documents.

15. The Registrar will not hand over any Bid cum Application Forms or other documents/
records relating to the Offer to any other person (except to the BRLMs and the relevant stock
exchanges, subject to the Registrar having provided prior notice of such disclosure to the
Selling Shareholder and the Company) until the completion of the dispatch of allotment
letters, refund orders, credit of shares etc. Provided that the Registrar may hand over any Bid
cum Application Form or ASBA Form or other documents/ records relating to the Offer to
the BRLMs, to the SCSBs and the Stock Exchanges with prior notice of such disclosure to
the Selling Shareholder and the Company. The Registrar undertakes not to disclose or cause
to be disclosed any such information to any other person without the written consent of the
Selling Shareholder and the Company, as the case may be. The Selling Shareholder and the
Company agrees that it will have access to the applications/ documents relating to the Offer
at the office of the Registrar only (as indicated at Clause 16 below).
12

49
16. The Registrar will handle the Offer related work from its office/s at C-13, Pannalal Silk
Millls Compound, L.B.S. Marg, Bhandup (West), Mumbai - 400078 which has been declared
to SEBI and approved by it for carrying on its activities. The address of its above said office
shall be printed in all relevant stationery pertaining to the said Offer.

17. The Registrar will extend all help to the public representative deputed by the designated
Stock Exchange. In the case of over-subscription, allotment will be done in the presence of a
Stock Exchange representative and the Registrar will extend all facilities to complete the
allotment process smoothly and speedily. The Selling Shareholder and the Company shall
also extend all necessary assistance to the Registrar in such matters.

18. The Selling Shareholder and/or the Company may take a special contingency insurance
policy to cover risk arising out of fraud, forgery, errors of commission/ omission etc, if so
required

19. The Registrar shall act as a nodal agency for redressing complaints of ASBA and non-
ASBA investors, including providing guidance to ASBA investors regarding approaching the
SCSB concerned.

20. The Registrar acknowledges that the ASBA process has been newly introduced and
effective functioning of the same has not been established. The Registrar shall extend all
necessary support to the Selling Shareholder and the Company, the BRLMs and the SCSBs
as may be required for the smooth and speedy functioning of the ASBA process.

21. The post Offer stationery including letters of allocation, allocation advice, refund orders,
envelopes etc. shall be kept ready and handed over to the Registrar by the Selling
Shareholder within seven days from the date of closure of Offer and the Selling Shareholder
shall be responsible for any delay on this account.

22. The Registrar will finalize various post Offer monitoring reports such as 3 day report and
final issue monitoring report, along with relevant documents/ certificates, in consultation
with the post issue lead manger and the Selling Shareholder and the Company, to be
submitted to SEBI within the stipulated time.

23. The Registrar will provide all the relevant statements/reports for trading within timelines
mentioned in the Offer Documents, in consultation with the Selling Shareholders, Company
and the BRLMs.

24. The Registrar will also carry-out the following activities:

1. Ensure to establish electronic connectivity for the Company‟s equity shares with NSDL &
CDSL, by entering into tripartite agreement between the Company, Depository and the
Registrar.
13

50
2. Ensure that the equity shares offered for sale are transferred to ESCROW account a day
prior to the Offer opening date..

3. Initiate Corporate Action to allot shares to the applicants by transfer from the escrow
account, after the approval of allotment of shares.

4. Move the funds from the escrow collection amount to Company‟s Public Offer Account,
for eventual credit to the Sellers.

25. The Selling Shareholder shall ensure that requisite funds are made available to the
Registrar for postage, mailing charges for dispatching of allotment letters etc. On allotment,
the Registrar will submit an estimate of the work done and the funds required for postage.
The Registrar should maintain a proper account of the amount spent by it on behalf of the
Selling Shareholder.

26. The Selling Shareholder and the Company agrees that formats of all reports, statements,
share certificates and other documents shall be in conformity with the standard designs
approved by the Stock Exchanges, SEBI as applicable.

27. The Selling Shareholder agrees that the fees, expenses and charges payable to the
Registrar for handling the Assignment shall be paid by the Selling Shareholder as per the
terms and conditions specified in Schedule I.

28. In the event of complete collapse or dislocation of business in the financial markets of the
country due to war, insurrection or any other serious sustained, political or industrial
disturbance or in any event caused by force majeure as may be agreed to between the Parties,
any of the Parties may terminate this Agreement with mutual consent before the opening of
the Offer. However, prior to exercising the option to terminate, the Parties shall need to
mutually decide on the future course of action and if they fail to arrive at a mutually
agreeable course of action within 15 working days from the date on which the event of force
majeure occurs, then any of the Parties shall be entitled to terminate this Agreement by
giving 15 working days notice to the other Parties of its intention to so terminate this
Agreement. The Registrar shall continue to be responsible for the services detailed herein till
termination of the Agreement.

29. The Selling Shareholder and the Company shall be entitled to terminate this Agreement
in the event the Registrar‟s „Certificate of Registration‟ with the SEBI is suspended/
cancelled or the SEBI debars the Registrar from carrying on its activities.

30. In the event the Selling Shareholder and the Company, in consultation with the BRLMs,
decide not to proceed with the Offer, the Agreement shall immediately stand terminated
without the Registrar having recourse to compensation from the Selling Shareholder and/or
the Company Further, the Company and the Selling Shareholder may terminate this
Agreement with or
14

51
without cause, upon giving seven days notice to the Registrar of its intention to so terminate
the Agreement.

31. If ever this Agreement is terminated, then it shall be the duty of the Registrar to extend all
such support as may be required by the Selling Shareholder and the Company or their newly
appointed Registrar to the Offer towards taking over duties and responsibilities as the
Registrar to the Offer.

32. The Registrar shall redress complaints of the investors (including ASBA Bidders) within
15 days of receipt of the complaint during the currency of this Agreement and continue to do
so during the period it is required to maintain records under the RTA Regulations and the
Selling Shareholder and the Company shall extend necessary co-operation to the Registrar for
its complying with such regulation. The Registrar shall provide a status report of investor
complaints on a fortnightly basis to the Selling Shareholder/the Company. Similar status
reports should also be provided to the Selling Shareholder and the Company as and when
required.

33. The Registrar‟s responsibility under this Agreement will be restricted to the duties of the
Registrar as agreed to herein and the Registrar will not be in any way construed to be an
agent of the Selling Shareholder and the Company in any other business of the Selling
Shareholder and the Company in any manner whatsoever.

34. In an event of default of any of the duties and responsibilities of the Registrar herein or
any error in the services rendered by the Registrar, the Registrar shall ensure that the
Registrar will take all measures at its own cost to rectify such defaults and the Registrar shall
be directly responsible for any liability arising out of such error or failure to deliver the
services contemplated in this Agreement. The Registrar undertakes that in the event that there
is any order or any injunction issued by any court or authority, against the Registrar, then
they shall within 3 working days upon being instructed by the Selling Shareholder and the
Company transfer all the documents in their possession including shares, to any other
registrar/depositary as instructed by the Selling Shareholder and the Company.

35. The Registrar shall act with due diligence, care and skill. The Registrar shall indemnify
and hold harmless the Selling Shareholder and the Company its affiliates, advisors, its
successors and each of their respective directors, officers, employees and agents (collectively
“Indemnified Party”) from and against all suits, claims, actions and demands which may be
made or commenced by the bidders for the Equity Shares (including ASBA Bidders), any
holder of the Equity Shares or third party against the Selling Shareholder and the Indemnified
Party as a consequence of any act or omission of, or any failure, deficiency or error on the
part of the Registrar or any of its officers, employees or agents in performing or fulfilling any
of its functions, duties, obligations and services under this Agreement. The Registrar shall
further indemnify and refund all costs incurred by the Selling Shareholder and the
15

52
Company, its affiliates and each of their respective directors, officers, employees and agents,
in addressing investor complaints which otherwise would have been addressed by the
Registrar in the performance of the services contemplated under this Agreement and in
responding to queries relating to such services from SEBI and/ or the stock exchanges and/or
any other statutory or regulatory authority or a court of law. However, the Registrar shall not
be liable for any indirect or consequential loss caused to the Selling Shareholder and the
Company due to error or omission committed by them in good faith.

36. The Registrar may have to provide certain information regarding the applicants
(including ASBA Bidders) as may be required under any legislation or regulation to certain
statutory and regulatory authorities including, without limitation, income tax authorities, and
the Parties acknowledge that providing such information strictly for such purpose shall not be
in violation of the terms of this Agreement.

37. Any notice, communication or documents to be given to the Parties may be given by
personal delivery, registered/ speed post, telex or by fax. The notice, communication or
document shall be deemed to have been served upon the Party to whom it is given if given by
personal delivery when so delivered, if given by post on expiration of three working days
after the notice etc. shall have been delivered to the post office for onward dispatch, and if
given by fax or telex upon transmission thereof. Provided that any notice etc. given by telex
or fax, shall be confirmed in writing. All notices to the Parties shall be addressed as under:

If to the Company: COMPANY Address Telphone: Fax: Kind Attn: Name, Designation If
to the Selling Shareholder: SELLING SHAREHOLDER Telephone: Fax: Kind Attn:
Name, Designation If to the Registrar: REGISTRAR Address 16

53
Telephone: Fax : Kind Attn : Name, Designation Any change in the above shall be intimated
by the Party concerned to the other Party and such change shall be effective 5 business days
thereafter or such later date as may be specified by the Party whose address/ contact details
are changed.
38. The Parties agree that non-compliance of any of the covenants contained herein by any
Party shall be reported to the SEBI within seven days by the other Party(ies).

39. In the event of a breach by any Party, the defaulting Party shall have the right to cure
such breach within a period of ten days of receipt of written notice of such breach by the non-
defaulting Party. In the event that (i) such breach is not cured by the defaulting Party within
the aforesaid period, or (ii) any dispute or difference arises between the Parties hereto as
regards the validity and the interpretation of this Agreement and which is not settled within
fifteen (15) days through negotiations, then any Party may refer the dispute for resolution to
an arbitration tribunal consisting of three arbitrators (one to be appointed by the Selling
Shareholder/ the Company, one by the Registrar and the two arbitrators so appointed will
appoint the third arbitrator). All proceedings in any such arbitration shall be conducted under
the Arbitration and Conciliation Act, 1996 and shall be conducted in English. The Arbitration
shall take place in New Delhi, India. The Parties shall share the costs of such arbitration
equally unless otherwise awarded or fixed by the arbitration tribunal. The arbitral award shall
state the reasons on which it is based.

40. Subject to Clause 39, courts at New Delhi shall have exclusive jurisdiction.

41. This Agreement shall be governed by and construed in accordance with the laws of India,
without reference to its conflict of laws rules.

42. Unless terminated earlier in accordance with its terms, this Agreement will expire and
stand terminated upon the expiry of one year from the date of closing of the Offer, provided
that Clauses 33, 38, 39 and 40 and this Clause 41 shall survive the termination of this
Agreement. On expiry or termination of this Agreement, all documents and other information
and data which are in the possession or custody of the Registrar shall be handed over to the
Selling Shareholder/ the Company.

43. Neither Party shall be entitled to assign any of its rights, duties or obligations hereunder
without the prior written consent of the other.

44. If any provision/s of this Agreement is held to be prohibited by or invalid under

applicable law or becomes inoperative as a result of change in
17

54
circumstances, such provision/s shall be ineffective only to the extent of such prohibition or
invalidity or inoperativeness, without invalidating the remaining provisions of this
Agreement.

Offer agreement

OFFER AGREEMENT DATED _____ AMONGST SELLING SHAREHOLDER AND

COMPANY AND BRLM

55
TABLE OF CONTENTS
A. DEFINITIONS ................................................................................................................................... 2
B. INTERPRETATION ............................................................................................................................ 4
1. BOOK BUILDING ............................................................................................................................... 4
2. PAYMENT ......................................................................................................................................... 5
3. TERMS AND TERMINATION ........................................................................................................... 5
4. SCOPE OF SERVICE........................................................................................................................ 6
5. OFFER TERMS ................................................................................................................................. 9
6. SUPPLYING OF INFORMATION AND DOCUMENTS ................................................................ 11
7. INDEPENDENT VERIFICATION BY BRLMS ............................................................................... 14
8. APPOINTMENT OF INTERMEDIARIES ....................................................................................... 14
9. PUBLICITY FOR THE OFFER ....................................................................................................... 14
10. POST OFFER WORK ................................................................................................................... 15
11. DUTIES OF THE BRLMS ............................................................................................................ 15
12. CONFIDENTIALITY ................................................................................................................... 17
13. CONSEQUENCES OF BREACH ................................................................................................. 18
14. INDEMNITY ............................................................................................................................... 19
15. ARBITRATION ............................................................................................................................ 21
16. NOTICES..................................................................................................................................... 21
17. GOVERNING LAW ...................................................................................................................... 22
18. WAIVER OF SOVEREIGN IMMUNITY .................................................................................... 22
19. SEVERABILITY ........................................................................................................................... 22
20. MISCELLANEOUS ...................................................................................................................... 22
ANNEXURE A .......................................................................................................................................... 25
ANNEXURE B .......................................................................................................................................... 26
STATEMENT OF RESPONSIBILITY AMONG THE MANAGERS ......................................................
26 1

56
OFFER AGREEMENT This OFFER AGREEMENT ("Agreement") is entered into on _____
at ____, amongst: SELLING SHAREHOLDER _________ (hereinafter referred to as the
"Selling Shareholder"), of the FIRST PART; AND COMPANY, a company registered under
the Companies Act, 1956, as amended ("Companies Act") and having its registered office at
______(hereinafter referred to as "____" or the "Company") which expression shall, unless it be
repugnant to the context or meaning thereof, be deemed to mean and include its successors and
permitted assigns, of the SECOND PART; AND BRLM, a company incorporated under the
Companies Act and having its registered office at whose registered office is situated at ______
(hereinafter referred to as "__"), which expression shall, unless it be repugnant to the context or
meaning thereof, be deemed to mean and include its successors and permitted assigns, of the
THIRD PART; _____, _____, _____ are hereinafter collectively referred to as the "Book
Running Lead Managers" or "BRLMs". The Selling Shareholder, the Company and the
BRLMs are hereinafter collectively referred to as the "Parties" and individually as "Party".
WHEREAS
1. The Selling Shareholder and the Company are taking steps for a initial public offering
(hereinafter referred to as the "Offer") of up to _______ equity shares of Rs.__ each of the
Company (the "Equity Shares") by an offer for sale by the Selling Shareholder, in accordance
with the requirements of the Companies Act as amended, the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the "SEBI
Regulations") and other Applicable Laws (i) within India, to Indian institutional, non-
institutional and retail 2

57
investors that are not "U.S. persons", as defined in, and in reliance on, Regulation S ("Regulation
S") under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), (ii) within the
United States, to "qualified institutional buyers" as defined in Rule 144A under the U.S.
Securities Act ("Rule 144A") and related rules and regulations and in reliance upon transactions
exempt from, or not subject to, the registration requirements of the U.S. Securities Act and (iii)
outside the United States and India, to institutional investors that are not "U.S. persons", as
defined in, and in reliance on Regulation S under the U.S. Securities Act, at such prices as may be
determined or discovered in accordance with the processes provided under the SEBI Regulations
or any regulation, circular or guideline issued by the Securities and Exchange Board of India (the
"SEBI") and as agreed to by the Selling Shareholder and the Company, in consultation with the
BRLMs. 2. The SELLING SHAREHOLDER through its letter dated _______ bearing reference
no. conveyed the approval granted to the Offer. 3. The Offer comprises an offer for sale of
______ Equity Shares by the Selling Shareholder, including a reservation for Eligible Employees
(as defined in the Draft Red Herring Prospectus and such portion, the "Employee Reservation
Portion"). The Offer less the Employee Reservation Portion shall constitute the Net Offer to the
public. 4. The Selling Shareholder has appointed the BRLMs to manage the Offer subject to the
execution of customary underwriting agreements between the Parties on the terms and conditions,
which will be stated therein, as the BRLMs to the Offer and the BRLMs have accepted this
engagement in terms of the engagement letter dated ____ issued to them by the Selling
Shareholder (the "Engagement Letter") as set out in Annexure A and subject to the Selling
Shareholder and the Company entering into this Agreement with the BRLMs. 4. Further, as
prescribed under the SEBI Regulations, the Parties are entering into this Agreement for the
purpose of these presents. NOW, THEREFORE, the Selling Shareholder, the Company and the
BRLMs do hereby agree as follows:
A. DEFINITIONS
In this Agreement the following terms, unless the context otherwise requires, shall have the
following meanings: "Affiliates" with respect to any Party means any person that (a) directly or
indirectly through one or more intermediaries, Control or is Controlled by or is under common
control with such Party; or (b) has a "significant influence" over or is under "significant
influence" of such Party, either directly or indirectly through one or more intermediaries, where
(i) "significant influence" over a person is the power to participate in the management, financial
or operating policy decisions of that person but is less than control over those policies; and (ii)
shareholders beneficially holding, directly or indirectly through one or more intermediaries, a
10% interest in the voting power of any person or Party, are presumed to have a significant
influence over that person or Party; or (c) any other person that is a holding company, joint
venture or subsidiary of such Party, provided that, for purposes of this Agreement, the terms
"holding company" and "subsidiary" shall have the meanings set forth in Section 4 of the
Companies Act. For the purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" or "under common control with") shall have the same meaning
as assigned to it under Regulation 2(1)(i) of the SEBI Regulations. "Agreement" shall have the
meaning ascribed to such term in the preamble hereto. "Allot" or "Allotment" or "Allotted" shall
mean the transfer of Equity Shares to successful Bidders pursuant to the Offer; "Applicable
Laws" has the meaning attributed to such term in Clause 1.3. 3

58
"Bid" shall mean an indication by a Bidder to make an offer to purchase the Equity Shares in
terms of the Red Herring Prospectus; "Bidder" shall mean a prospective investor who makes a Bid
pursuant to the terms of the Red Herring Prospectus; "Bid cum Application Form" means the form in
terms of which the Bidder shall make a Bid and which will be considered as the Application for
Equity Shares pursuant to the terms of the Red Herring Prospectus and the Prospectus including
the ASBA Bid cum Application as may be applicable; "Book Running Lead Managers" or
"BRLMs" has the meaning attributed to such term in the Preamble. "Book Building" has the
meaning attributed to such term in Clause 1.1. "Company" or "____" has the meaning attributed
to such term in the Preamble. "Companies Act" has the same meaning as attributed to it in the
Preamble. "Cure Period" has the meaning attributed to such term in Clause 14.8. "Designated
Stock Exchange" means [•] "Directors" shall mean the directors of the Company; "Draft Red
Herring Prospectus", "Red Herring Prospectus" and "Prospectus" refer to the offering
documents used or to be used in connection with the Offer, as filed or to be filed with the
Securities and Exchange Board of India issued in accordance with the provisions of Section 60B
of the Companies Act and the SEBI Regulations, the stock exchanges and the Registrar of
Companies, as applicable, together with the preliminary or final international supplement/wrap to
such offering documents, as may be applicable and, any amendments, supplements, notices,
corrections or corrigenda to such offering documents and any international supplement/wrap.
"Engagement Letter" has the meaning attributed to such term in the Recitals. "Equity Shares"
has the meaning attributed to such term in the Recitals. "Group Companies" shall mean the
companies or other entities identified as such in the Draft Red Herring Prospectus; "Indemnified
Party(ies)" has the meaning attributed to such term in Clause 14.1. "Intermediary(ies)" has the
meaning attributed to such term in Clause 4.1 (e). "____" has the meaning attributed to such term
in the Preamble. "____" has the meaning attributed to such term in the Preamble. "Offer Price"
refers to the final price at which Allotment will be made, as determined by the Company and the
Selling Shareholder in consultation with the Book Running Lead Managers; "Offer" has the
meaning attributed to such term in the Recitals. "Party" or "Parties" has the meaning attributed
to such term in the Preamble. "Prospectus" shall mean the prospectus of the Company to be filed
with the RoC relating to the Offer post the Pricing Date pursuant to Section 60 B of the
Companies Act, containing, inter alia, the Offer Price that is determined at the end of the Book
Building Process on the Pricing Date, including any corrigendum thereof; . 4

59
"Price Band" shall mean the price band between the Floor Price of Rs. [•] per Equity Share and
the Cap Price of Rs. [•] per Equity Share, including all revisions thereof "Regulation S" has the
meaning attributed to such term in the Recitals. "RoC" or "Registrar of Companies" shall mean
the Registrar of Companies, "Regulations S Distribution Compliance Period" means a period
(a) that begins on the later of (i) the date on which the Equity Shares are first offered to persons
other than distributors in reliance upon Regulation S; and (ii) the date of closing of the Offer and
(b) that ends on the date that is one year after the date determined in accordance with clause (a) of
this definition; "Rule 144A" has the meaning attributed to such term in the Recitals. "SEBI
Regulations" has the meaning attributed to such term in the Recitals. "SEBI" has the meaning
attributed to such term in the Recitals. "Selling Shareholder" has the meaning attributed to such
term in the Preamble. "US Exchange Act" has the meaning attributed to such term in Clause
5.1.2. "U.S. Securities Act" has the meaning attributed to such term in the Recitals.
B. INTERPRETATION
In this Agreement, unless the context otherwise requires: (a) capitalized terms used in this
Agreement that are not specifically defined herein shall have the meaning assigned to them in the
Draft Red Herring Prospectus, Red Herring Prospectus and the Prospectus, as the context
requires. In the event of any inconsistencies or discrepancies, the definitions as prescribed in the
Draft Red Herring Prospectus, Red Herring Prospectus and the Prospectus shall prevail; (b)
words denoting the singular number shall include the plural and vice versa; (c) heading and bold
typeface are only for convenience and shall be ignored for the purposes of interpretation; (d)
references to the word "include" or "including" shall be construed without limitation; (e)
references to this Agreement or to any other agreement, deed or instrument shall be construed as
a reference to this Agreement or to such agreement, deed, or instrument as the same may from
time to time be amended, varied, supplemented or novated; (f) any reference to any Party to this
Agreement or any other agreement or deed or instrument shall include its successors or permitted
assigns; (g) any reference to a statute or statutory provision shall be construed as a reference to
such provisions as from time to time amended, consolidated, modified, extended, re-enacted or
replaced; (h) any reference to a Clause or paragraph or Annexure is, unless indicated to the
contrary, a reference to a clause or paragraph of this Agreement; and (i) time is the essence in the
performance of the Parties' respective obligations. If any time period specified herein is extended,
such extended time shall also be of the essence.
1. BOOK BUILDING 5

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1.1 The Offer would be managed by the BRLMs through processes prescribed under the SEBI
Regulations ("Book Building"), in accordance with the inter se allocation of responsibilities, as
annexed to this Agreement as Annexure B. 1.2 The Selling Shareholder and the Company shall
be responsible for deciding the Price Band and the Offer Price, in consultation with the BRLMs.
Notwithstanding the above, the Selling Shareholder agrees that the Price Band and the Offer
Price, including any changes to them necessitated by the market conditions from time to time,
shall be approved by it in writing to the BRLMs.
1.3 All allocations made pursuant to the Offer shall be in accordance with the SEBI Regulations
and other laws, statutes, regulations applicable to the Offer (hereinafter referred to as the
"Applicable Laws") and shall be undertaken by the Selling Shareholder and the Company in
consultation with the BRLMs and the Designated Stock Exchange.
1.4 Subject to Clause 5.6 of this Agreement, the Parties agree that entering into this Agreement or
the Engagement Letter by the Company/ Selling Shareholder with BRLMs shall not create any
obligation, whether express or implied, on the BRLMs, Selling Shareholder and the Company to
enter into any underwriting agreement with the Company in connection with the Offer, or to
purchase, underwrite or place any securities or to provide any financing to the Company or its
Affiliates.
2. PAYMENT
2.1 For the services to be rendered by the BRLMs, the BRLMs shall be paid fees as per the
Engagement Letter. 2.2 All payments to be made by the Selling Shareholder to the BRLMs in
relation to the Offer, shall be made in Indian Rupees to each of the BRLMs at such address in
India as may be intimated by each of the BRLMs individually in writing. All payments are
subject to deductions on account of any taxes, charges, duties or levies applicable in connection
to performance of services hereunder.
3. TERMS AND TERMINATION
3.1 The respective BRLMs' engagement (collectively, the "Engagement") shall have commenced
as of the date specified in the Engagement Letter and shall continue until the completion of all
formalities in respect of the Offer and the completion of applicable compliances prescribed by the
SEBI and the Stock Exchanges regarding the Offer, unless terminated earlier pursuant to this
Agreement. 3.2 The Selling Shareholder, the Company and the BRLMs may terminate this
Agreement with written mutual consent. 3.3 Notwithstanding anything stated in Clause 3.2
above, on the occurrence of the following force majeure conditions, the Parties shall meet to
mutually decide on the future course of action and in the event they fail to arrive at a mutually
agreeable course of action within a period of fifteen (15) days from the date on which the force
majeure event occurred, then any of the Parties, shall be entitled to terminate this Agreement after
the expiry of the said period of fifteen (15) days, by giving a written notice thereof to the other
Parties:
(i) a complete break down or dislocation of business in the major financial markets affecting any
or all of the cities of New Delhi, Mumbai, Kolkata or Chennai as a result of which the success of
the Offer is likely to be prejudicially affected;

(ii) declaration of war or occurrence of insurrection, civil commotion or any other serious or
sustained financial, political or industrial emergency or disturbance affecting the financial
markets in any or all of the cities of New Delhi, Mumbai, Kolkata, Chennai as a result of which
the success of the Offer is likely to be prejudicially affected;
6

61
(iii) any material adverse change in the international financial or political conditions as a result of
which trading generally on the Stock Exchanges or either of the Stock Exchanges is suspended
for a continuous period of more than 5 business days or future trading on the Stock Exchanges is
likely to be materially limited or restricted as a result of which the success of the Offer is likely to
be prejudicially affected; or

(iv) any other event as may be agreed to, in writing, between the Parties.

3.4 Notwithstanding anything stated in Clause 3.3 above, the BRLMs, in their individual
capacities, may terminate this Agreement if, at any time prior to the Offer Opening Date as
notified in the Red Herring Prospectus, any of the representations, statements or undertakings
made by the Selling Shareholder and/or the Company in the Draft Red Herring Prospectus, Red
Herring Prospectus, Prospectus, Bid-cum-Application Form, , advertisements, public
announcements or in this Agreement are found to be incorrect, inaccurate, untrue or misleading
either affirmatively or by omission. 3.5 Upon termination of this Agreement in accordance with
this Clause 3, the Parties to this Agreement shall (except for any liability arising before or in
relation to such termination and except as otherwise provided herein) be released and discharged
from their respective obligations under or pursuant to this Agreement, provided that this Clause
3.5 and Clauses 11.3, 12, 14, 15, 16, 17 and 19 shall survive such termination. 3.6 The
termination of this Agreement shall not affect any fees which may have been accrued to any of
the BRLMs till the date of such termination, in accordance with the Engagement Letter. 3.7 In
case the Offer is withdrawn or abandoned for any reason other than a default in the duties of the
BRLMs, this Agreement shall be terminated. 3.8 In case of any inconsistency or dispute between
the terms relating to fees in this Agreement and the Engagement Letter, the terms of the
respective Engagement Letter shall prevail.
4. SCOPE OF SERVICE
4.1 Without limiting the scope of services as described herein and as set forth in the Engagement
Letter, and subject to the 'inter-se allocation of responsibility' (as per Annexure B), the BRLMs
shall, among other things, provide the following services in relation to the Offer:
(i) Assisting the Company and the Selling Shareholder in structuring of the Offer, undertaking
liaison for the listing process (i.e. to ensure completion of the Offer process) at the Stock
Exchanges, as may be required under the prevailing framework of guidelines issued by SEBI and
the Stock Exchanges;

(ii) Assisting the Company in applying for and securing all necessary regulatory approvals from
various regulatory agencies such as SEBI, the Stock Exchanges and RBI and any other
government agencies together with other advisors and legal counsels;

(iii) Undertaking due diligence activities to enable preparation of appropriate due diligence
certificates and to assist the Selling Shareholders and the Company in preparing the Draft Red
Herring Prospectus, Red Herring Prospectus and Prospectus for filing with SEBI, RoC or the
Stock Exchanges;

(iv) Along with the Syndicate Members (as defined in the Red Herring Prospectus to be filed with
the RoC), develop the equity story for the Offer, articulate the key marketing themes and
positioning of the Company;

(v) Assisting the Selling Shareholder and the Company in the appointment of Registrars to the
Offer, Bankers to the Offer, and the refund bankers (the "Intermediaries");
7

62
(vi) Undertake pre-marketing and marketing activities, collate feedback from investors, analyze
such feedback and suggest an appropriate valuation range/Floor Price;

(vii) Conducting the Book Building as per SEBI Regulations;

(viii) Assisting the Company in obtaining the required connectivity, etc. from the Stock
Exchanges in various cities for registration of electronics bids, as applicable, from the bidders;

(ix) Assisting the Selling Shareholder and the Company in the dealing with the SEBI and Stock
Exchanges in relation to the Offer;

(x) Performing and/or undertaking all, acts, deeds and things necessary or incidental for the Offer
as per the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, as
amended and the SEBI Regulations and all Applicable Laws, including co-ordination with
Intermediaries;

(xi) Advising the Selling Shareholder and the Company on the compliance of various regulatory
norms, rules, SEBI Regulations and/ guidelines, etc and assisting in securing consents, approvals
and exemptions as may be necessary;

(xii) Drafting and designing of advertisements or other publicity material including newspaper
advertisements, brochure and memoranda containing salient feature of the Offer documents;

(xiii) Advising the Company on timing of the Offer with due regard to the strengths, weakness of
the Offer and prevalent market forces;

(xiv) Preparation of various draft agreements in consultation with legal counsels to the Offer;

(xv) Formulating an action plan for complying with various formalities relating to the Offer;

(xvi) Make arrangements for the selection of :

(a) Ad-Media;
(b) Centers for holding conferences with press, Brokers, Investors, etc.;
(c) Collection Centers;
(d) Distribution of publicity and issue material including Bid cum Application Forms, Prospectus,
abridged prospectus and brochure and deciding on the quantum of issue material. The number of
Bid cum Application Forms should not be less than one crore for all categories taken together;
(xvii) Prepare and maintain the book of demand;

(xviii) Follow-up with the bankers to the Offer and Self Certified Syndicate Banks to get quick
estimates of collection and advising the Selling Shareholder about the closure of the Offer, based
on the correct figures;

(xix) After the Book Building, file the Prospectus along with the Offer Price and Offer size with
the RoC;

(xx) The post offering activities such as essential follow-up, which must include finalization of
the basis of allotment, weeding out of multiple applications as per SEBI Regulations, and

63
guidelines, dispatch of certificates and refunds, with the various agencies such as Registrars to the
Offer, Bankers to the Offer and the bank(s) handling refund business and any such related
activities;
8

64
(xxi) To carry out the above assignment the BRLMs will depute their deal teams committed in
their respective presentations and ensure that the strength of the deal teams will be maintained for
the timely completion of the above assignment;

(xxii) Any other services to be rendered as per terms of request for proposal and clarification
thereto by the SELLING SHAREHOLDER and the Engagement Letter and further deliberation in
connection with the Offer;

(xxiii) The above-mentioned scope of services is illustrative and not exhaustive and BRLMs are
required to perform all such other incidental obligations or acts as may be required to successfully
launch and conclude the Offer; and

(xxiv) Rendering such other assistance as may be required in connection with the Offer.

Subject to the Clause 11.3 hereof, it is expressly understood and agreed that the Selling
Shareholder and/or the Company shall be entitled to proceed against the BRLMs for breach or
non-performance of all activities relating to the Offer including those enumerated above. 4.2 The
obligations of the BRLMs in relation to the Offer shall be conditional, inter alia, upon the
following:
(i) the Company providing authentic, correct, valid information, reports, statements, declarations,
undertakings, clarifications, documents, certifications for incorporation in the Draft Red Herring
Prospectus, Red Herring Prospectus and the Prospectus;

(ii) the completion of due diligence to the satisfaction of the BRLMs as is customary in issues of
the kind contemplated herein to enable the BRLMs in their sole discretion to file the due
diligence certificate with SEBI;

(iii) execution of certifications (including from the statutory auditor of the Company) and
auditor's comfort letter, undertakings, consents, customary agreements, including, without
limitation, the underwriting agreement between the Company, Selling Shareholders and the
BRLMs and/or the syndicate members to the Offer, where necessary, and such agreements will
include, without limitation, provisions such as representations and warranties, conditions as to
closing of the Offer, force majeure, indemnification and contribution, lock-in, term and
termination provisions, satisfactory in form and substance to the BRLMs;

(iv) completion of all regulatory requirements (including receipt of all necessary approvals and
authorisations) and compliance with all laws, regulations and guidelines applicable to the Offer
and disclosure in the DRHP, RHP and the Prospectus, including any amendments, supplements,
notices, corrections or corrigenda to such offering documents and any international supplement/
wrap, all to the satisfaction of the BRLMs;

(v) the receipt of necessary and any applicable consents and approvals by the Company;

(vi) the absence of any material adverse change in the condition, current or proposed business
(including any proposed restructuring), results, operations or prospects, of the Company which
may have any material adverse impact on the Company;

(vii) any change in the type of securities proposed to be offered in the Offer being made only with
the prior written consent of the BRLMs;

65
(viii) existence of market conditions being, satisfactory for launch of the Offer;

(ix) terms and conditions of the Offer having being finalised, including without limitation, the
Price Band, Offer Price and size of the Offer, by the Company and the Selling Shareholder, in
consultation with and to the satisfaction of the BRLMs;
9

66
(x) the BRLMs having approved of any changes to the terms and conditions of the Offer from
those set forth in the Draft Red Herring Prospectus, the Red Herring Prospectus or the
Prospectus;

(xi) the benefit of a clear market to the BRLMs prior to the Offer, and in connection therewith,
the absence of any debt or equity offering of any type, other than the Offer, undertaken, or being
undertaken, by the Company, which may affect the benefit of such clear market to the BRLMs;
and

(xii) the Company and the Selling Shareholder not having breached any term of this Agreement
and the Engagement Letter.

5. OFFER TERMS
5.1 The Offer is being made by the Selling Shareholder and the Company pursuant to the
approval granted by the SELLING SHAREHOLDER through its letter dated ______.
Accordingly, the Selling Shareholder and the Company, in consultation with the BRLMs, shall
decide the terms of the Offer. 5.2 The Selling Shareholder and the Company shall not, without the
approval of the BRLMs, file the Draft Red Herring Prospectus, Red Herring Prospectus,
Prospectus including any amendments or supplement thereto, preliminary or final international
wrap and/or any documentation with relation to the Offer, with SEBI/ Stock Exchanges, RoC or
any other authorities whatsoever, as the case may be. 5.3 The Selling Shareholder and the
Company shall jointly determine the Offer Opening Date and Offer Closing Dates, in
consultation with the BRLMs. 5.4 The Selling Shareholder and the Company hereby declare that
they have complied with at all times and agree to comply with all the statutory formalities under
all corporate, fiscal, economic legislation and any other statutes as are applicable to the Selling
Shareholder, the Company and the Offer, including the Companies Act and the SEBI Regulations
and other relevant statutes, circulars or communications issued by SEBI, to enable the Selling
Shareholder and the Company to make the Offer (and similar agreements, rules and regulations in
force in other countries where the Offer is to be launched or marketed) and that consent of lenders
and any third party having any pre-emptive rights in respect of the Equity Shares has been
obtained, to the extent applicable and that the Company has complied with and agrees to comply
with the terms and conditions of such approvals, as applicable. 5.5 The Company shall obtain the
requisite approval from the Reserve Bank of India for the Offer. 5.6 Notwithstanding the
provisions of Clause 1.4 of this Agreement, the Selling Shareholder and the Company shall enter
into an underwriting agreement with the BRLMs, which would include customary provisions
including representations and warranties, conditions as to closing of the Offer, force majeure
provisions, and provisions as to the indemnification of the BRLMs. Any agreement or
commitment between the parties with respect to underwriting or purchasing the Equity Shares
shall be set forth in such an underwriting agreement, in a form and substance as may be mutually
agreed upon by the Selling Shareholder, the Company and the BRLMs. 5.7 The Selling
Shareholder and the Company shall take such steps as are necessary to ensure the completion of
allotment and dispatch of the CAN, including a revised CAN, if any, refund orders to the non-
ASBA bidders, and in any case, not later than the applicable time limit under Applicable Laws
and regulation. In the event of failure to do so, the Selling Shareholder shall pay interest to the
non-ASBA bidders as provided under the Companies Act or any other applicable regulations. 5.8
The Equity Shares proposed to be transferred and sold in the Offer will be free and clear of any
pre-emptive rights, liens, charges or any other encumbrances, present or future. 10

67
5.9 The Company and the Selling Shareholder represent, warrant and undertake: (i) that there
shall be no further issue of capital whether by way of issue of bonus shares, preferential
allotment, rights issue or in any other manner during the period between the date of filing the Red
Herring Prospectus with the RoC till the listing of the Equity Shares in the Offer or refund of
application moneys on non-listing or failure of the Offer. (ii) that the Company, its Directors and
companies in which the Company's Directors are directors have not been prohibited from
accessing or operating in the capital markets or restrained from buying, selling or dealing in
securities under any order or direction passed by the SEBI. (iii) the Company its Directors and
companies in which our Directors are directors have not been declared as willful defaulter by RBI
or any other government authority and there have been no violation of securities laws committed
by them in the past or no such proceeding are pending against the Company or them. (iv) except
as disclosed in the Draft Red Herring Prospectus and except as will be disclosed in the Red
Herring Prospectus and the Prospectus, the Company possesses all the necessary permits,
licenses, approvals, consents and other authorisations (collectively, "Governmental Licenses")
issued by and has made all necessary declarations and filings with, the appropriate central, state,
local or foreign regulatory agencies or bodies for the business carried out by the Company and in
relation to its projects as of the date hereof as described in the Draft Red Herring Prospectus and
as will be described in the Red Herring Prospectus and the Prospectus and that all such
Governmental Licenses are valid and in full force and effect and no notice of proceedings has
been received relating to the revocation or modification of any such Governmental Licenses.
Further, in the case of Governmental Licenses which are required in relation to the business and
in relation to the projects and have not yet been obtained, the Company represents that it has
made the necessary applications for obtaining such Governmental Licenses and no such
application has been rejected by any concerned authority. Furthermore, the material terms and
conditions of all such Governmental Licenses have been duly complied with. (v) Except as
disclosed in the Draft Red Herring Prospectus and except as will be disclosed in the Red Herring
Prospectus and the Prospectus, the Company is not in default under or in violation of any of any
indenture, loan or credit agreement or any other agreement or instrument to which the Company
is a party or by which the Company is bound or to which the Company's properties or assets are
subject. Further, except as disclosed in the Draft Red Herring Prospectus, there has been no
notice or communication, written or otherwise, issued by any third party to the Company with
respect to any default or violation of or sought acceleration of repayment with respect to any
indenture, loan or credit agreement, or any other agreement or instrument to which the Company
is a party or by which the Company is bound or to which the Company's properties or assets are
subject. (vi) to inform the BRLMs about material developments in respect of the Offer, including
in respect of the operations or business of the Company and its Board of Directors that may have
any effect on the Offer for the period up to and including the closing of the Offer 5.10 The
Company and the Selling Shareholder undertake to sign and cause each of the Company's
Directors to sign the Draft Red Herring Prospectus to be filed with SEBI and Red Herring
Prospectus and Prospectus to be filed with the SEBI, the Stock Exchanges and the Registrar of
Companies, as applicable. Such signatures will be construed to mean that the Company and the
Selling Shareholder agrees that:
(i) each of the Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus gives a fair,
true and accurate description of the Company, its business and assets and contains all information
with regard to the Company, the Selling Shareholder and the Offer, which is material in the
context of the Offer, which information is true and correct in all material 11

68
aspects and is not misleading in any material respect and all opinions and intentions expressed in
each of the Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus are honestly
held;
(ii) the Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus, as of each of their
respective dates, and the Prospectus will not as if the Closing Date of the Offering, do not contain
any untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading; and

(iii) the affixing of signature shall also mean that no relevant material information has been
omitted from the Draft Red Herring Prospectus, Red Herring Prospectus and Prospectus.

5.11 The Company agrees that it will not, without the prior written consent of the BRLMs, during
the period starting from the date hereof and ending 180 days after the date of the Prospectus, (i)
issue, offer, lend, pledge, encumber, sell, contract to sell or issue, sell any option or contract to
purchase, purchase any option or contract to sell or issue, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any Equity Shares or any
securities convertible into or exercisable or exchangeable for Equity Shares; (ii) enter into any
swap or other agreement that transfers, in whole or in part, any of the economic consequences of
ownership of shares of the Company or any securities convertible into or exercisable as or
exchangeable for the Equity Shares; or (iii) publicly announce any intention to enter into any
transaction described in (i) or (ii) above; whether any such transaction described in (i) or (ii)
above is to be settled by delivery of Equity Shares or such other securities, in cash or otherwise or
(iv) engage in any publicity activities prohibited under the SEBI Regulations or any general
solicitation of directed selling efforts as such terms are defined in Regulation S or any other
jurisdiction in which the Equity Shares are being offered, during the period in which it is
prohibited under such laws.
5.12 The Selling Shareholder undertakes to appoint and bear the expenses for an IPO grading
agency in compliance with SEBI Regulation. 5.13 The Equity Shares satisfy the eligibility
requirements of Rule 144A (d)(3) under the US Securities Act. As of the closing date of the Offer
and the date of transfer of the Equity Shares, the Equity Shares will not be (i) of the same class as
securities listed on a national securities exchange in the United States that is registered under
Section 6 of the Securities Exchange Act of 1943, as amended (the "U.S. Exchange Act"), (ii)
quoted in any "automated inter dealer quotation system" (as such term is used in the U.S.
Exchange Act) in the United States, or (ii) convertible or exchangeable at an effective conversion
premium (calculated as specified in paragraph (a)(6) of Rule 144A) of less than ten percent for
securities so listed or quoted.
6. SUPPLYING OF INFORMATION AND DOCUMENTS
6.1 The Selling Shareholder and/or the Company, as the case may be, undertake and declare that
they shall disclose, to the BRLMs, all information and documents including pending or
threatened litigation, complaints or investigation in relation to the Company, its director or in
relation to the Equity Shares until the closing of the Offer, and furnish all relevant documents,
papers, information relating to the said litigation etc., to verify and incorporate the information
and statements in the Draft Red Herring Prospectus, the Red Herring Prospectus or the
Prospectus.
6.2 The Selling Shareholder and/or the Company, as the case may be, undertake to furnish and
cause the Directors of the Company to furnish such relevant information, documents and
particulars for the purpose of the Offer as may be required by the BRLMs to enable them to cause
filing of such reports, in time, as may be required by SEBI and/or other regulatory bodies and to
enable the BRLMs to file the due diligence certificates with SEBI. The Selling Shareholder

69
and/or the Company further undertake to also inform the investors in the manner advised by the
BRLMs, on an immediate basis. 12

70
6.3 The Selling Shareholder and/or the Company, as the case may be, shall extend all necessary
facilities to the BRLMs to interact on any matter relevant to the Offer with the Board of
Directors, key managerial personnel, solicitors/legal advisors, auditors, consultants, advisors to
the Offer, financial institutions, banks or any other organizations, and also with the any other
intermediaries, including the Registrar to the Offer who may be associated with the Offer in any
capacity whatsoever. The Company shall instruct all intermediaries, including the registrar to the
Offer, the escrow collection banks, the credit rating agencies, printers, bankers, brokers and
syndicate members, to follow the instructions of the BRLMs. 6.4 The Selling Shareholder and the
Company undertake to provide the BRLMs with all information and documents to enable the
BRLMs to assist the Selling Shareholder and the Company in preparing the Draft Red Herring
Prospectus, Red Herring Prospectus and the Prospectus in compliance with
(i) legal requirements in relation to the Offer;

(ii) the guidelines, instructions or other rules and regulations issued by SEBI, the Stock
Exchanges, the Government of India, the Registrar of Companies and any other regulatory or
supervisory authority; and

(iii) customary disclosure norms to enable the investors to make a well informed decision as to
investment in the Offer.

6.5 The Selling Shareholder and or the Company, as the case may be, will inform the BRLMs
about material developments in respect of the Offer, including in respect of the operations or
business of the Company, its Board of Directors, that may have any effect on the Offer for the
period up to and including the closing of the Offer. 6.6 The Selling Shareholder and the Company
declare that any information made available to the BRLMs or any statement made in the Draft
Red Herring Prospectus, Red Herring Prospectus and the Prospectus is or will be complete,
accurate and updated in all material respects as of their respective dates and as required under
SEBI Regulations and all Applicable Laws will be true, adequate and correct and that under no
circumstances would they give any information or statement which is likely to mislead the
BRLMs, the concerned regulatory authorities and/or investors. The Company further declares that
no information, material or otherwise, shall be left undisclosed by it which will have an impact on
the judgment of the concerned regulatory authorities and/or investment decision of investors. The
Draft Red Herring Prospectus, the Red Herring Prospectus and the Prospectus at the respective
dates thereof, do not contain any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Prospectus at the closing
date of the Offer (and any amendment or supplement thereto, at the date hereof) will not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they were made, not
misleading. Since the respective dates as of which information is given in the preliminary
offering circular and the final offering circular, there has not been any material adverse change, or
any development involving a prospective material adverse change, in or affecting the condition,
financial or otherwise, earnings, business or operations of the Company, except as set forth in the
Draft Red Herring Prospectus, the Red Herring Prospectus and the Prospectus. 6.7 The Company
undertakes to furnish complete audited annual report(s), other relevant documents, papers, etc. to
enable the BRLMs to corroborate the information and statements given in the Draft Red Herring
Prospectus, Red Herring Prospectus and Prospectus. 6.8 The Selling Shareholder and the
Company shall furnish such relevant information and particulars regarding the Offer as may be
required by the BRLMs to enable them to cause filing of post-Offer reports as may be required by
SEBI.

71
6.9 The BRLMs shall have the right to call for any reports, documents, papers, information etc.
necessary from the Selling Shareholder or the Company to enable them to certify that the
statements 13

72
made in the Draft Red Herring Prospectus, Red Herring Prospectus/ and Prospectus are true,
correct, accurate and not misleading. 6.10 The Selling Shareholder and the Company shall keep
the BRLMs informed, if they encounter any difficulties due to dislocation of communication
system or any other material adverse circumstances which are likely to prevent or which have
prevented either the Selling Shareholder or the Company from complying with its obligations,
whether statutory or contractual, in respect of any matter pertaining to the Offer, including
matters pertaining to allotment and dispatch of refund orders/share certificates/ demat credits for
the Equity Shares. The Selling Shareholder and the Company shall update the information
provided to the BRLMs and duly communicate to the BRLMs in case of any material change
subsequent to the filing of the Red Herring Prospectus with the RoC, up to the closing of the
Offer. 6.11 The Selling Shareholder and the Company authorize the BRLMs to issue and
circulate the Red Herring Prospectus and Prospectus to the prospective investors after filing the
same with SEBI, provided that such issuance and circulation is in accordance with Applicable
Laws of each relevant jurisdiction. 6.12 The Selling Shareholder and/or the Company
acknowledge and agree that all information, documents, statements, required for the purpose
related to the Offer would be signed/ authenticated by their authorized signatories or by an
attorney authorized by a valid power of attorney without independent verification by the BRLMs.
In the event any Party requests any of the other Parties to deliver documents or information
relating to the Offer via electronic transmissions or delivery of such documents or any
information is required by law or regulation to be made via electronic transmissions, the Party
requesting for such documents or information, acknowledges and agrees that the privacy and/or
integrity of electronic transmissions cannot be guaranteed. To the extent that any documents or
information relating to the Offer are transmitted electronically, the Party(ies) that may so request
electronic transmission shall be deemed to have hereby released the other Party(ies) from any loss
or liability that may be incurred in connection with the electronic transmission of any such
documents or information, including any unauthorized interception, alteration or fraudulent
generation or transmission of electronic transmission by any third parties, provided that such
other Party(ies) have exercised due caution in accessing such information from the Internet and
have accessed the said information through a secure medium. 6.13 The Selling
Shareholder/Company, as the case may be, shall be responsible for the authenticity, correctness,
validity and reasonableness of the information, reports, statements, declarations, undertakings,
clarifications, documents, certifications provided or authenticated by (including, in respect of the
Company, its Board of Directors, officers and employees) and other information provided by
them, respectively, for incorporation in the Draft Red Herring Prospectus, Red Herring
Prospectus and the Prospectus. In relation to certain information in the Draft Red Herring
Prospectus, Red Herring Prospectus and the Prospectus, which have been obtained from the
public domain, the Selling Shareholder and or the Company, as the case may be, confirms that
such information has been and shall be procured from reliable third parties. The BRLMs and their
Affiliates shall not be liable in any manner for the foregoing except to the extent of the
information provided by such BRLM in writing expressly for inclusion in the Draft Red Herring
Prospectus, the Red Herring Prospectus and the Prospectus, which consists of only the BRLM's
the name, address, contact details and SEBI registration numbers. . 6.14 The Company accepts
full responsibility for consequences, if any, of making a false statement, providing misleading
information or withholding or concealing material facts which have a bearing on the Offer except
in relation to information provided by the BRLMs as stated in Clause 6.13. The BRLMs shall
have the right to withhold submission of the Draft Red Herring Prospectus, Red Herring
Prospectus and/or the Prospectus to the SEBI, the Stock Exchanges and the Registrar of
Companies, as applicable, in case any of the information requested for is not made available by
the Company.

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6.15 So long as any of the Equity Shares are "restricted securities" within the meaning of Rule
144 (a)(3) under the U.S Securities Act, the Company will, unless they become subject to and
comply with the 14

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Section 13 or 15 (d) of the U.S. Exchange Act, provide to each holder of such restricted securities
and to each prospective purchaser (as designated by such holder) of such restricted securities,
upon request of such holder or prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the U.S. Securities Act. This covenant is intended to be for the benefit of
the holders, and the prospective purchasers designated by such holders, from time to time of such
restricted securities.
7. INDEPENDENT VERIFICATION BY BRLMs
The Company will, if so required, extend such facilities as may be called for by the BRLMs to
enable their representatives to visit the plant site, the offices of the Company or such other
place(s) to conduct due diligence, including review of relevant documents, to ascertain for
themselves, the true state of affairs of the Company, including the progress made in respect of the
project implementation, status and other facts relevant to the Offer. If, in the opinion of the
BRLMs, the verification of any of the aforesaid matters require hiring of service of technical,
legal or other experts, in the specialized field, the Company will permit access to such
independent agency hired by BRLMs to all relevant and material facts on record of the Company.
8. APPOINTMENT OF INTERMEDIARIES
8.1 The Selling Shareholder and the Company shall in consultation with the BRLMs appoint the
Intermediaries or other persons in connection with the Offer. 8.2 Whenever required, the
Company and the Selling Shareholder shall, in consultation with the BRLMs, enter into a
memorandum of understanding or agreement, as the case may be, with the concerned
Intermediary associated with the Offer, clearly setting forth their mutual rights, responsibilities
and obligation. A certified true copy of such memorandum of understanding or agreement, as the
case may be, shall be furnished to the BRLMs. The Parties agree that any Intermediary who is so
appointed shall have to be necessarily registered with SEBI under the applicable SEBI
guidelines/regulations. The Parties acknowledge that any such intermediary, being an
independent entity shall be fully and solely responsible for the performance of its duties and
obligations. 8.3 The Company and the Selling Shareholder agree that the BRLMs shall not be
directly or indirectly be held responsible for any action/ inaction for any Intermediary including
any processes adopted by the Intermediary for discharging its professional duties for the Offer,
such intermediary, being an independent entity, shall be fully and solely responsible for the
performance of its duties and obligations. However, the BRLMs shall co-ordinate the activities of
all the Intermediaries in order that they perform their respective functions in accordance with
their respective terms of engagement. In case the work of the intermediaries appointed by the
BRLM's is not found satisfactory, the BRLM's would be required to substitute the intermediary to
the satisfaction of the Government.
9. PUBLICITY FOR THE OFFER
9.1 The Selling Shareholder and the Company shall obtain prior approval of the BRLMs in
respect of all Offer advertisements, publicity material or any other media communications in
connection with the Offer or for the term of this Agreement and shall make available to them
copies of all Offer related material. The Selling Shareholder and the Company, in consultation
with the BRLMs shall ensure that all advertisements prepared and released by the advertising
agency or otherwise in connection with the Offer conform to the regulations/ guidelines, etc.
issued by SEBI and instruction given by it from time to time and with all Applicable Laws in
India and abroad. The Selling Shareholder and the Company shall not make any statement, or
release any material or other information which is not contained in the Draft Red Herring
Prospectus/Red Herring Prospectus and/or Prospectus, in any advertisements or at any press,
conferences, road show meetings or brokers or investors conferences without the prior approval
of the BRLMs. The Selling Shareholder and the Company shall follow restrictions in respect of
all advertisements, publicity material or other media communications including any corporate and
product advertisement as prescribed under the SEBI Regulations and as may be prescribed by the
legal counsels for the Offer. 15

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9.2 Subject to applicable regulations and laws regarding publicity restrictions issued by SEBI or
the restrictions in any other jurisdiction in which the Company proposes to circulate the Draft
Red Herring Prospectus, Red Herring Prospectus and/or the Prospectus, the BRLMs may, at their
own expense place advertisements in newspapers and other external publications describing their
involvement in the Offer and the services rendered by them, and may use the Company's name
and logo in this regard, with the prior consent of the Company, which shall not be unreasonably
withheld. The BRLMs agree that such advertisements shall be issued only after the closure of the
Offer. 9.3 The Selling Shareholder and the Company agree that they will not, without the prior
written consent of the BRLMs, during Regulation S Distribution Compliance Period indulge in
any publicity activities prohibited under the SEBI Regulations or Regulation S. 9.4 The Selling
Shareholder and the Company agree that they will not, without the prior written consent of the
BRLMs, the Regulation S Distribution Compliance Period as notified by the BRLMs engage in
any "directed selling efforts" as defined in Regulation S or "general solicitation" or "general
advertising" as defined Regulation D under the U.S. Securities Act or otherwise distribute any
"written communication" as defined in Rule 405 under the U.S. Securities Act relating to the
Company or the Offer in the United States. 9.5 The Selling Shareholder and the Company agree
that they will not indulge in any publicity activities prohibited by any other jurisdiction in which
the Equity Shares under the Offer are being offered, during the period in which it is prohibited
under each such law.
10. POST OFFER WORK
10.1 The Selling Shareholder and/or the Company shall take such steps as are necessary to ensure
the completion of transfer, and dispatch of letters of intimation/ demat credits and refund orders
to the applicants, including non-resident Indians, soon after the basis of allotment has been
approved by the Designated Stock Exchange and in any case not later than the statutory time
limit, if any, save and except on account of reasons beyond its control, and in the event of failure
to do so, the Selling Shareholder shall pay interest to the applicants as provided in the Prospectus.
10.2 The Company has set up a Shareholders'/Investors' Grievance Committee to satisfy all Offer
related grievances to the satisfaction of the BRLMs. The Selling Shareholder has duly authorized
the Compliance Officer and Company Secretary of the Company and the Registrar to the Offer to
satisfy all investor grievances in relation to the Offer. 10.3 From the date of this Agreement until
the commencement of trading of the Equity Shares, the Selling Shareholder or the Company shall
not resort to any legal proceedings in respect of any matter having a bearing on the Offer, except
in consultation with and after receipt of the advice of the BRLMs. The Company shall keep the
BRLMs immediately informed in writing of all the developments pertaining to such legal
proceedings in relation to the Offer.
10.4 The Selling Shareholder shall not access the money raised in the Offer till completion of
transfer formalities and receipt of listing and trading approval from the Stock Exchanges. The
Selling Shareholder and the Company further agree that they shall refund the money raised in the
Offer together with any interest to the non-ASBA bidders if required to do so for any reason such
as, failing to get requisite permissions or under any direction or order of the SEBI or any other
governmental or statutory authority. The Selling Shareholder agrees that it shall pay requisite
interest if so required under the Applicable Laws or direction or order of the SEBI, Stock
Exchanges or the RoC.
11. DUTIES OF THE BRLMS
11.1 The BRLMs hereby undertake to observe the code of conduct as stipulated in the SEBI
(Merchant Bankers) Regulations, 1992, including any subsequent amendments and the SEBI
Regulations 16

76
issued by SEBI from time to time. The BRLMs further undertake to exercise due diligence and
care in the preparation of the Draft Red Herring Prospectus/ Red Herring Prospectus and/or the
Prospectus and manage the process diligently. 11.2 The services rendered by the BRLMs shall be
performed in a professional manner with due diligence, on a best efforts basis and in an advisory
capacity. The BRLMs shall not be held responsible for any acts of commission or omission of the
Selling Shareholder, the Company or directors, agents, employees or authorized persons of the
Selling Shareholder or the Company. 11.3. Each of the BRLMs is providing services pursuant to
this Agreement on a several basis and independent of other BRLMs or other
underwriter/syndicate members or any other intermediary in connection with the Offer.
Accordingly, the Selling Shareholder and the Company acknowledge and agree that each BRLM
will be responsible to the Selling Shareholder and the Company only for its own acts and
omissions but not for acts and omissions of the other BRLMs, underwriters or Syndicate
Members or any other intermediaries. For the avoidance of doubt, unless expressly otherwise
provided, all rights and obligations of the BRLMs are on a several basis. Each of the BRLMs
shall act under this Agreement as an independent contractor with duties of each of the BRLMs
arising out of its engagement pursuant to this Agreement owed solely to the Company and not in
any other capacity, including as a fiduciary.
11.4 The duties and responsibilities of the BRLMs under this Agreement shall not include general
financial or strategic advice, and shall be limited to those expressly set out in this Agreement, and
in particular, shall not include providing services as receiving bankers or registrars. No tax, legal,
regulatory or accounting advice is being given by the BRLMs. The Selling Shareholder and the
Company agree that the BRLMs may provide services hereunder through one or more of their
Affiliates, as each deems appropriate. Each of the BRLMs shall be responsible for the activities
carried out by their respective Affiliates in relation to this Offer. The Selling Shareholder and the
Company understand and agree that the BRLMs and/or their group companies and/or their
Affiliates may be engaged in securities trading, securities brokerage, financing, banking and
investment activities, as well as providing investment banking and financial advisory services. In
the ordinary course of its trading, brokerage and financing activities, the BRLMs or their group
companies or Affiliates may at any time hold long or short positions and may trade or otherwise
effect transaction for its own account or account of customers in debt or equity securities or
senior loans of any company that may be involved in the Offer, subject to compliance with
provisions under Applicable Law, including the SEBI Regulations. Any of the BRLMS, their
directors, officers and employees may also at any time invest on a principal basis or manage
funds that invest on a principal basis, in debt or equity securities of any company that may be
involved in the Offer, subject to compliance with provisions under Applicable Law, including the
SEBI Regulations. The Selling Shareholder/Company hereby acknowledge and agree that, by
reason of law or duties of confidentiality owed to other persons, or the rules of any regulatory
authority, the group companies or Affiliates of the BRLMs may be prohibited from disclosing
information to the Company, in particular information as to the BRLMs' or their Affiliates'
possible interests as described in this Section 11.4. In addition, while the BRLMs shall, pursuant
to this Agreement, act on behalf of and in the best interest of the Selling Shareholder and the
Company as their clients, the BRLMs and their group companies or Affiliates can represent other
entities whose interests conflict with or are adverse to those of the Selling Shareholder and the
Company. The BRLMs shall not be obligated to disclose to the Selling Shareholder/Company
any information in connection with any such representation by their respective group companies
or Affiliates.
11.5 The Selling Shareholder and Company acknowledge and agree that (i) any purchase and sale
of the Equity Shares pursuant to an underwriting agreement and the determination of the Offer
Price, shall be an arms' length commercial transaction between the Selling Shareholder and the
Company, on the one hand, and the BRLMs, on the other hand; (ii) in connection with the Offer,
and the process leading to such transaction, the BRLMs shall act solely as a principal and not as

77
the agents or fiduciaries of the Company or its stockholders, creditors, employees or any other
party, or the Selling Shareholder; and irrespective of whether the BRLMs have advised or are
currently advising the Company on other matters; (iii) the BRLMs do not have any obligation to
the Selling shareholder and Company with respect to the Offer except the obligations expressly
set forth herein; 17

78
and (iv) the BRLMs and their respective Affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of the Selling Shareholder and the
Company. 11.6 The Company and the Selling Shareholder acknowledges that the provision of
services by the BRLMs herein is subject to the requirements of any laws and regulations
applicable to the BRLMs and their Affiliates. The BRLMs and their Affiliates are authorized by
the Company to do all such acts necessary to comply with any applicable laws and regulations in
the course of their services required to be provided under this Agreement or under the
Engagement Letter. The BRLMs may comply with all instructions, both oral and written, which
they reasonably believe has been issued by or on behalf of the Company. However, the BRLMs
may request the Company to issue written instructions to confirm any oral instruction given by
the Company, if they so deem necessary and the Company shall issue such written instruction as
expeditiously as possible.
12. CONFIDENTIALITY
12.1 The BRLMs severally agree to keep all information furnished by the Selling Shareholder
and/or the Company, or their advisors, representatives or counsels, in connection with the Offer,
whether furnished before or after the date hereof and regardless of the manner in which it is or
was furnished will be treated by the BRLMs, their advisors, representatives and counsel as
Confidential Information. Upon closing of the Offer, and at the request by the Selling
Shareholder and/or the Company, the BRLMs will promptly return or cause to be returned all
such Confidential Information to the Selling Shareholder and/or the Company, except to the
extent required to be retained under any requirement of any applicable law, rule or any regulation.
The BRLMs undertake that any such Confidential Information retained shall be used only for the
purpose of making disclosures, if any required by any law, rule of regulation. 12.2 The
confidentiality obligation under this Clause will not apply;
(i) To any information which, prior to its disclosure in connection with this Offer, was already in
the possession of the BRLMs or its advisors, representatives or counsel when they were not
acting as BRLMs or their advisors, representatives or counsel for purpose of the Offer or to the
extent such information is or becomes publicly available otherwise than by disclosure by the
BRLMs in violation of this Agreement;

(ii) To any information which is required to be disclosed, or is disclosed, in connection with the
Offer, including also the Draft Red Prospectus or Red Herring Prospectus or the Prospectus;

(iii) Disclosed on behalf of the Company and the Selling Shareholder to purchasers or prospective
purchasers of the Equity Shares in connection with the Offer, in accordance with the applicable
laws;

(iv) Upon the request or demand of any regulatory authority or any stock exchange having
jurisdiction over any of the BRLMs or any of their respective Affiliates;

(v) To any information, which is or comes into the public domain without any default on the part
of the BRLMs or their advisors, representatives or counsel or comes into the possession of the
BRLMs or their advisors, representatives or counsel other than in breach of any confidentiality
obligation owed to the Selling Shareholder and the Company of which they are aware;

(vi) To any disclosure pursuant to any law or order of any court or pursuant to any direction,
request or requirement (whether or not having the force of law) of any central bank or any
governmental, regulatory or supervisory authority; to the extent practicable and permitted by
Applicable Laws, rule or regulation, the BRLMs, shall notify the Selling Shareholder and the
Company in respect thereof;

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(vii) To the extent that any of the BRLMs or their advisors, representatives or counsel need to
disclose any information with respect to any proceeding for the protection or enforcement of
18

80
any of its right arising out of this Agreement or the Offer the BRLMs shall notify the Selling
Shareholder and the Company in respect thereof provided giving such notice does not prejudice
or diminish the BRLMs or its advisors, representatives or counsel's rights in any such proceeding;
or

(viii) To any information made public with the prior consent of the Selling Shareholder and/or the
Company.

Provided that the term "Confidential Information" shall not include any information that is
stated in the Draft Red Herring Prospectus or Red Herring Prospectus or the Prospectus, which
may have been filed with relevant regulatory authorities (excluding any informal filings or filings
where the documents are treated in a confidential manner), or in the opinion of such BRLM is
necessary to make the statements therein not misleading. 12.3 The BRLMs shall be entitled to
retain all information and to use the information, any defences available to them under Applicable
Laws in connection with such underwriting, including without limitation, any due diligence
defences. 12.4 Any advice or opinions provided by the BRLMs under or pursuant to this Offer
shall not be disclosed or referred to publicly or to any third party except in accordance with the
prior written consent from the BRLMs and except where such information is required by law or
in connection with disputes between the Parties or if required by a court of law or any other
regulatory authority, provided that the Selling Shareholder and/or the Company shall, to the
extent possible, provide the BRLMs with prior notice of such requirement. The Selling
Shareholder and the Company agrees that no public announcement or communication relating to
the subject matter of this Agreement shall be issued or dispatched without the prior consent of the
BRLMs, which shall not be unreasonably withheld, and except to the extent that such public
announcement or communication may be required under applicable law. The Selling Shareholder
and the Company agrees that any BRLM may place advertisements in financial and other
newspapers and journals at the BRLM's expense describing the BRLM's involvement in any
transaction resulting from this Engagement and its services rendered after the closing of the
Offer. 12.5 The BRLMs shall not use any of the Confidential Information, for any purpose other
than for the purpose of the Offer and shall be fully responsible for any breach of the
confidentiality undertaking hereunder. Each of the BRLMs acknowledges and agrees that this
Clause 12 shall survive the termination of this Agreement for a period of one year from the date
of termination of the Agreement or closing of the Offer. 12A. EXCLUSIVITY Subject to Clause
11.5 above, the BRLMs shall be the exclusive advisors to the Company and the Selling
Shareholder in respect to the Offer. The Company and the Selling Shareholder shall not, during
the term of the Agreement appoint any advisor in relation to the Offer without the prior written
consent of the BRLMs. Nothing contained herein shall be interpreted to prevent the Company
from retaining legal counsels or other advisors or parties as may be required for taxation,
accounts, legal, employee matters, due diligence and other matters in connection with the Offer.
13. CONSEQUENCES OF BREACH
In the event of breach of any of the material terms of the Agreement, the non-defaulting Parties
shall have the absolute right to take such action, as they may deem fit including but not limited to
withdrawing from the Offer. Subject to Applicable Laws, in the event of a breach by any Party,
the defaulting Party shall have the right to cure any such breach within a period of ten (10) days
of the breach. The defaulting Party shall, immediately upon occurrence of a breach or the
knowledge of a breach, give notice in writing to all Parties. In the event that the breach is not
cured within the aforesaid period, the non-defaulting Parties shall not be liable or responsible for
the consequences if any, resulting from such termination and withdrawal. 19

81
The BRLMs will not be liable to refund any amounts paid as fees, commissions, reimbursements
or expenses specified under the Engagement Letter if any breach of this Agreement occurs as a
result of any act or omission of the Company and or the Selling Shareholder only as determined
by way of a binding judgment/order, after exhausting any appellate / revisional / writ remedies
available to the parties. If it is determined by way of a binding judgment/order, after exhausting
any appellate / revisional / writ remedies available to the parties, that the breach is caused due to
gross negligence, willful misconduct or fraud of any of the BRLMs, the Company shall not be
liable to pay any fees, if applicable, to such defaulting BRLM.
14. INDEMNITY
14.1 The Selling Shareholder and the Company shall indemnify and keep indemnified and hold
harmless each of the BRLMs for its own account and their respective Affiliates and all the
respective directors, officers, employees, agents and controlling persons(each, an "Indemnified
Party(ies)") at all times from and against any and all losses, liabilities, costs, claims, charges,
actions, suits, proceedings, damages, expenses or demands of whatever nature made, suffered or
incurred including without limitation, any legal or other fees and expenses actually incurred in
connection with investigating, disputing, preparing or defending any action or claim, to which
such Indemnified Party may become subject under any applicable laws including the law of any
applicable foreign jurisdiction or otherwise consequent upon or arising directly or indirectly out
of or in connection with or in relation to this Agreement, Engagement Letter, Offer, or the
BLRM's role contemplated under this Agreement or the Engagement Letter, including without
limitation (i) any breach or alleged breach by the Company and or the Selling Shareholder of its
obligations, representations or warranties under this Agreement, the Engagement Letter,(ii)
breach of any obligations of the Company and or the Selling Shareholder under the Draft Red
Herring Prospectus and the Prospectus or the Bid cum Application Form and any amendment or
supplement to any of the foregoing (iii) arising out of or based on the Draft Red Herring
Prospectus or the Prospectus being, or being alleged to be, not true, fair or adequate to enable the
investors to make a well informed decision as to the investment in the proposed Offer; (iv)
including any misrepresentation or alleged misrepresentation of a material fact contained in the
Draft Red Herring Prospectus/ Red Herring Prospectus and Prospectus, the Bid cum Application
Form, ASBA, including the preliminary and final international wrap the Bid cum Application
Form and any amendment or supplement thereto, or any other offering materials, including,
without limitation, any road show materials or in information or documents, furnished or made
available by the Company to an Indemnified Party and any amendment or supplement thereto, or
omission or alleged omission therefrom of a material fact necessary in order to make the
statements therein in light of the circumstances under which they were made not misleading, or
(v) any acts or omissions which violates or allegedly violates applicable laws and regulations in
relation to the Offer, by the Company or which are determined by a court or arbitral tribunal of
competent jurisdiction to have resulted from any bad faith, dishonesty, illegal or fraudulent acts
or the willful default or gross negligence on the part of the Selling Shareholder or the Company.
Such indemnity will extend to include all reasonable costs, changes and expenses which such
Indemnified Party may pay or incur in investigating, disputing or defending any such loss,
liability, cost, claim, charge, demand or action or other proceedings. 14.2 Each Party giving an
indemnity hereinabove is liable to indemnify solely for the information provided respectively by
such Party.
14.3 Each of the BRLMs agrees that after receiving a notice of an action, suit, proceeding or
claim against any Indemnified Party or receipt of a notice of the commencement of any
investigation which is based, directly or indirectly, upon any matter in respect of which
indemnification may be sought from the Selling Shareholder and the Company, the BRLMs will
notify the Selling Shareholder and the Company in writing of the particulars thereof and will
provide copies of all relevant documentation of the Selling Shareholder and the Company, unless
the Selling Shareholder and/or the Company assume the defense thereof, will keep the Selling

82
Shareholder and the Company informed of the progress thereof, and will discuss all significant
actions proposed. The omission to notify the Selling Shareholder and/or the Company shall not
relieve the Selling Shareholder and/or the Company of any liability which the Selling Shareholder
and/or the Company may have to any Indemnified Party, except only to the extent that any such
delay in or failure to give notice, as herein 20

83
required, prejudices the defence of such action, suit or proceeding under this indemnity, had the
BRLMs or any other the Indemnified Party(ies) not so delayed in or failed to give the notice
required hereunder. 14.4 The Selling Shareholder and the Company shall be entitled, at their own
expense, to participate in and, to the extent it may wish to do so, assume the defence of such
action, suit, proceeding, claim or investigation, provided that such defence is conducted by
experienced and competent counsel. Upon the Selling Shareholder and the Company notifying
the BRLMs in writing of its election to assume the defence and retaining counsel, the Selling
Shareholder and the Company shall not be liable to the BRLMs or any other Indemnified Party
for any legal expenses subsequently incurred by them in connection with such defence. If such
defence is assumed by the Selling Shareholder and/or the Company, the Selling Shareholder
and/or the Company, throughout the course thereof, will provide copies of all relevant
documentation to the BRLMs, will keep the BRLMs advised of the progress thereof, and will
discuss with the BRLMs all significant actions proposed. 14.5 No Indemnified Party shall admit
any liability or settle any action, writ proceeding, claim or investigation without the prior written
consent of the Selling Shareholder and the Company, which shall not be unreasonably withheld.
The Selling Shareholder and the Company will not be liable for any settlement of any action, suit,
proceeding, claim or investigation that any Indemnified Party makes without the written consent
of the Selling Shareholder and the Company. 14.6 The right of the Selling Shareholder and/or the
Company to assume the defence on behalf of the Indemnified Party set out above shall be subject
to the following conditions:
(i) No admission of liability or compromise whatsoever in connection with the claim or action
may take place without the BRLMs' prior written consent, which shall not be unreasonably
withheld.

(ii) Notwithstanding the foregoing, the Indemnified Party shall have the right to employ its or
their own counsel in any such case and also to undertake any action in connection with the
investigation of, preparation of or defence of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not
such a claim, action or proceeding is initiated or brought by or on behalf of the Selling
Shareholder and/or the Company, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (a) the employment of such counsel shall have been
authorized in writing by the Selling Shareholder and the Company in connection with the defence
of such action, and (b) the Selling Shareholder and the Company have not employed counsel to
take charge of the defence of such action within a reasonable time after notice of commencement
of the action.

14.7 Notwithstanding anything contained hereinabove, in the event any of the BRLMs have acted
in bad faith or have been grossly negligent or have committed any willful misconduct, illegal or
fraudulent act, in performing the services under this Agreement, the Selling Shareholder and the
Company shall give notice of 30 days (the "Cure Period") to the concerned BRLMs, as the case
may be, to remedy or cure such default. 14.8 In the event of a failure by the concerned BRLMs to
remedy or cure such default or offer suitable justification to the Selling Shareholder and the
Company that they have not acted in bad faith or gross negligence or willful misconduct, illegal
or fraudulent acts in performing the services under this Agreement within the Cure Period, as
determined by a court or arbitral tribunal of competent jurisdiction, the concerned BRLMs shall
be severally responsible to the Selling Shareholder and the Company for any loss, claim, damage
or liability incurred by the Selling Shareholder and the Company, caused due to such acts of bad
faith or gross negligence or willful misconduct, illegal or fraudulent acts on the part of the
BRLMs, as the case may be, in performing the services under this Agreement. 14.9 This Clause
14 would survive the termination of expiry of this Agreement, subject to Applicable Laws. 21

84
14.10 The remedies provided for in this Clause 14 are not exclusive and shall not limit any rights
or remedies that may otherwise be available to any Indemnified Party at law or in equity. 14.11
The indemnity provisions contained in this Clause 14 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on
behalf of the BRLMs, or any party controlling the BRLMs, or by or on behalf of the Company, its
officers or Directors or any party controlling the Company, and (iii) acceptance of and payment
for any of the Equity Shares.
15. ARBITRATION
15.1 If any dispute, difference or claim arises between the Parties hereto in connection with this
Agreement or the validity, performance, interpretation, implementation or alleged breach of the
terms of this Agreement or anything done or omitted to be done pursuant to this Agreement, the
Parties shall attempt in the first instance to resolve the same through negotiation. If the dispute is
not resolved through negotiation within 15 days after commencement of discussion then any
Party may refer the dispute for resolution to an arbitration tribunal consisting of three arbitrators,
one to be appointed jointly by the Selling Shareholder and the Company, the other to be jointly
appointed by the BRLMs and the third to be jointly appointed by the two arbitrators appointed
under this Agreement in accordance with the Rules of Arbitration of the Indian Council of
Arbitration to be conducted in accordance with the fast track arbitration procedures as set forth in
such rules. All proceedings in any such arbitration shall be conducted under the Arbitration and
Conciliation Act, 1996, as amended, and shall be conducted in English. The arbitration shall take
place in Delhi, India and shall be governed by the laws of India. The Parties shall share the costs
of such arbitration equally unless otherwise awarded or fixed by the arbitral tribunal. The arbitral
tribunal shall provide a speaking and reasoned award shall state the reasons on which it is based.
15.2 Notwithstanding the power of the arbitrators to grant interim relief, the disputing parties
shall have the power to seek appropriate interim relief from the courts of New Delhi. The
arbitration award shall be in English and shall state the reasons on which it is based and shall be
final and binding on the disputing parties and the disputing parties agree to be bound thereby and
to act accordingly. The arbitrators may award to a disputing party that substantially prevails on
the merits, its costs and expenses (including fees of its counsel). Without prejudice to the
indemnification provisions in the Engagement Letter and this Agreement, the Parties shall bear
their respective costs incurred in the arbitration unless otherwise awarded or fixed by the
arbitration tribunal. 15.3 Any reference made to the arbitration tribunal under this Agreement
shall not affect the performance of terms, other than the terms related to the matter under
arbitration, by the Parties under this Agreement and the Engagement Letter. The disputing parties
shall co-operate in good faith to expedite, to the maximum extent practicable, the conduct of any
arbitral proceedings commenced pursuant to this Agreement.
16. NOTICES
All notices required or permitted to be given hereunder shall be in writing and shall be valid and
sufficient if dispatched by registered airmail, postage prepared, or by telex, cable or facsimile as
follows: If to the Selling Shareholder SELLING SHAREHOLDER Address : Attn : Tel.:
Fax.: If to the Company 22

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COMPANY Address : Attn : Tel.: Fax.: If to BRLM Address : Attn : Tel.: Fax.: Any Party
hereto may change its address by a notice given to the other Parties hereto in the manner set forth
above. Any notice sent to any Party shall also be marked to all the remaining Parties to this
Agreement as well.
17. GOVERNING LAW
This Agreement shall be governed by and performed in accordance with the laws of India.
18. WAIVER OF SOVEREIGN IMMUNITY
The execution, delivery and performance by the Selling Shareholder of this Agreement and any
other related agreements to which it is a party constitutes commercial acts done and performed
for commercial purposes and do not constitute sovereign acts and the Selling Shareholder, save
and except the present or future assets and properties concerning the military of the Government
of India, the constitutional authorities and their offices, any diplomatic or consular office, or
national heritage, waives any and all rights of immunity that it or any of its assets may have or
may acquire in future against the institutions of any legal or arbitral proceedings and the
enforcement of any judgment, settlement or arbitral award.
19. SEVERABILITY
If any provision of this Agreement is held to be prohibited by or invalid under Applicable Law or
becomes inoperative as a result of change in circumstances, such provision shall be ineffective
only to the extent of such prohibition or invalidity or inoperativeness, without invalidating the
remaining provisions of this Agreement.
20. MISCELLANEOUS
20.1 No modification, alteration or amendment of this Agreement or any of its terms or
provisions shall be valid or legally binding on the Parties unless made in writing duly executed by
or on behalf of all the Parties hereto. 20.2 The terms and conditions of this Agreement are not
assignable by any Party hereto without the prior written consent of all the other Parties hereto.
20.3 All representations, warranties, obligations provided by, and rights of the given by each of
the BRLMs in this Agreement have been provided severally. 20.4 This Agreement may be
executed in separate counterparts, each of which when so executed and delivered shall be deemed
to be an original, but all such counterparts shall constitute one and the same instrument.
20.5 These terms and conditions will be binding on and enforceable for the benefit of the Parties
hereto, their successors, and permitted assigns of this Agreement. Subject to Section 3.8, the
terms and conditions hereof shall supersede and replace any and all prior contracts,
understandings or 23

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arrangements, whether oral or written, heretofore made between any of the Parties hereto and
relating to the subject matter hereof, and as of the date hereof constitute the entire understanding
of the Parties with respect to the Offer. 24

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