SHANKARA PIPES INDIA LIMITED · SHANKARA PIPES INDIA LIMITED iii TERM DESCRIPTION by a Retail Individual Bidder is a valid Bid at all price levels within the Price Band. Depository

SHANKARA PIPES INDIA LIMITED[Incorporated on 13/10/1995 under the Companies Act, 1956 as ‘Shankara Pipes India Private Limited’ vide Certificate of Incorporation issuedby the Registrar of Companies, Karnataka, Bengalooru. The Corporate Identity Number of the Company is U26922KA1995PLC018990.TheCompany was subsequently converted into a public limited company and the name of the Company was changed to ‘Shankara Pipes IndiaLimited’ vide a fresh certificate of Incorporation dated 28/08/2007’. ]

Registered Office: G-2, Farah Winsford, No. 133, Infantry Road, Bengalooru – 560 001Tel.: +91-080-40117777; Fax : +91-080-22861198; E-mail: [email protected]; Website: www.shankarapipe.com

Contact Person: Mr. S. Subramonia Iyer, Company Secretary & Compliance Officer

[The Registered office of the Company was shifted from 27, 2nd cross, CSI Compound Mission Road, Bengalooru – 560 027 to the present Office, w.e.f. 01/09/2006]

PUBLIC ISSUE OF 61,15,000 EQUITY SHARES OF RS. 10/- EACH FOR CASH AT A PRICE OF RS. [•] PER EQUITY SHARE (INCLUDING SHAREPREMIUM OF RS. [•] PER EQUITY SHARE) FOR CASH AGGREGATING RS. [•] LACS BY SHANKARA PIPES INDIA LIMITED (HEREINAFTERREFERRED TO AS THE “ISSUE”). THE ISSUE WILL CONSTITUTE 30.01 % OF THE POST ISSUE PAID-UP CAPITAL OF THE COMPANY.

PRICE BAND: RS. [•] TO RS. [•] PER EQUITY SHARETHE ISSUE PRICE IS [•] TIMES OF THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND [•] TIMES OF THE FACE VALUE

AT THE HIGHER END OF THE PRICE BAND

In case of revision in the Price Band, the Bidding/Issue Period will be extended for three (3) additional working days after revision of the PriceBand subject to the Bidding/Issue Period not exceeding ten (10) days. Any revision in the Price Band and the revised Bidding/Issue Period, ifapplicable, will be widely disseminated by notification to the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of IndiaLimited (“NSE”), by issuing a press release, and also by indicating the change on the website of the Book Running Lead Manager and at theterminals of the Syndicate member. The Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue shall beallocated on a proportionate basis to eligible Qualified Institutional Buyers, out of which 5% of the QIB Portion shall be available for allocationon a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basisto all eligible Qualified Institutional Buyers, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, upto15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and at least 35% of the Issue shall beavailable for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price.

RISK IN RELATION TO FIRST ISSUEThis being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The facevalue of the Equity Shares is Rs. 10/- per equity share and the Issue Price is [•] times of the face value. The Issue Price (as determined by theCompany, in consultation with the Book Running Lead Manager, on the basis of assessment of market demand for the Equity Shares offeredby way of book building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. Noassurance can be given regarding an active and/or sustained trading in the Equity Shares of the Company or regarding the price at which theEquity Shares will be traded after listing.

GENERAL RISKSInvestments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless theycan afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decisionin this Issue. For taking an investment decision, investors must rely on their own examination of the Company and the Issue including the risksinvolved. The Equity Shares issued in this Issue have not been recommended or approved by the Securities and Exchange Board of India(“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Red Herring Prospectus. Specific attention of the investors is invited to thestatements in the section titled “Risk Factors” beginning on page. x of this Red Herring Prospectus

ISSUER’S ABSOLUTE RESPONSIBILITYThe Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains allinformation with regard to the Company and this Issue, which is material in the context of this Issue, that the information contained in this RedHerring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentionsexpressed herein are honestly held and that there are no other facts, the omission of which make this Red Herring Prospectus as a whole orany of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTINGThe Equity Shares of the Company are proposed to be listed on Bombay Stock Exchange Limited (“BSE”) and the National StockExchange of India Limited (“NSE”). The Company has received in-principle approvals from these Stock Exchanges for the listing of theEquity Shares pursuant to their letters dated [•] and [•] respectively. For the purpose of the Issue, BSE is the Designated StockExchange.

IPO GRADINGThe Company has opted for IPO Grading from CRISIL Limited (CRISIL).

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

DRAFT RED HERRING PROSPECTUSPlease read Section 60B of the Companies Act, 1956

(The Draft Red Herring Prospectus will be updated upon filingwith the Registrar of Companies, Karnataka, Bengalooru)

100% Book Built Issue

ISSUE SCHEDULE

BID/ ISSUE OPENS ON [ � ] BID/ ISSUE CLOSES ON [ � ]

INTIME SPECTRUM REGISTRY LIMITEDC-13, Pannalal Silk Mills CompoundL.B.S. Marg, Bhandup (West),Mumbai - 400 078Tel : +91-22- 2596 0320 (9 Lines)Fax : +91-22- 2596 0328/29Website : www.intimespectrum.comE-Mail : [email protected] Registration. No : INR 000003761

KEYNOTE CORPORATE SERVICES LTD.4th Floor, Balmer Lawrie Building,5, J.N. Heredia Marg, Ballard Estate,Mumbai – 400001.Tel: +91–22– 30266000-3;Fax: +91–22–22694323Website: www.keynoteindia.netE-mail: [email protected] Registration No.: INM 000003606AMBI No.: AMBI/ 040

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SECTION TABLE OF CONTENTS PAGE NO.

Definitions and Abbreviations ii

Presentation of Financial Information and Use of Market Data viii

Forward Looking Statements and Market Data ix

I RISK FACTORS x

PART I

II INTRODUCTION

Summary of the Industry & Business of the Company 1

The Issue 8

General Information 9

Capital Structure 14

Objects of the Issue 21

Basis of Issue Price 33

Statement of Tax Benefits 36

III ABOUT THE ISSUER COMPANY

Industry Overview 46

Business Overview 51

Regulations and Policies 66

History and Other Corporate Matters 68

Management 72

Promoters and its Background 82

Related Party Transactions 82

Other Ventures of the Promoter 83

Dividend Policy 86

PART II

IV FINANCIAL STATEMENTS

Report of the Statutory Auditors, Rao & Venkatesulu, Chartered Accountants. 87

Management Discussion and Analysis of Financial Conditions and Results of Operations 105

V LEGAL AND REGULATORY INFORMATION

Outstanding Litigations, Material Developments and Other Disclosures 109

Government/Statutory and Business Approvals 111

Other Regulatory and Statutory Declarations 113

VI OFFERING INFORMATION

Terms of the Issue 122

Issue Structure 125

Issue Procedure 128

VII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY

Main Provisions of the Articles of Association of the Company. 148

VIII OTHER INFORMATION

Material Contracts and Documents for Inspections 157

PART III

Declaration 158

SHANKARA PIPES INDIA LIMITED

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DEFINITIONS AND ABBREVIATIONS

COMPANY/ INDUSTRY RELATED TERMS

TERM DESCRIPTION “SPIL”, “the Company” Unless the context otherwise requires, refers to Shankara Pipes India Limited

a public limited company incorporated under the Companies Act, 1956. Articles/ Articles of Association

The Articles of Association of the Company i.e., Shankara Pipes India Limited.

Auditors The statutory auditors of the Company, being M/s Rao & Venkatesulu & Co, Chartered Accountants.

Board of Directors/ Board The board of directors of the Company or a committee constituted thereof. Director(s) Director(s) of the Company unless otherwise specified. Memorandum/ Memorandum of Association

The Memorandum of Association of the Company.

Registered Office of the Company

G-2, Farah Winsford, No. 133, Infantry Road, Bengalooru – 560 001

ISSUE RELATED TERMS AND ABBREVIATIONS

TERM DESCRIPTION Allotment/ Allotment of Equity Shares

Unless the context otherwise requires, issue of Equity Shares pursuant to this Issue.

Bid An indication to make an offer, made during the Bidding Period by a prospective investor to subscribe to the Equity Shares at a price within the Price Band, including all revisions and modifications thereto.

Bid Amount The highest value of the optional Bids indicated in the Bid-cum-Application Form and payable by the Bidder on submission of the Bid for this Issue.

Bid/ Issue Closing Date The date after which the members of the Syndicate will not accept any Bids for this Issue, which shall be notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper.

Bid/ Issue Opening Date The date on which the members of the Syndicate shall start accepting Bids for this Issue, which shall be the date notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper.

Bid-cum-Application Form

The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of the Company and which will be considered as the application for allotment in terms of this Red Herring Prospectus.

Bidder Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid-cum-Application Form.

Book Building Process Book building mechanism as provided under Chapter XI of the SEBI Guidelines, in terms of which this Issue is made.

BRLM Book Running Lead Manager to this Issue, in this case being Keynote Corporate Service Limited.

CAN/ Confirmation of Allocation Note

The note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares after discovery of Issue Price in the Book Building Process.

Cap Price The upper end of the Price Band, above which the Issue Price will not be finalized and above which no Bids will be accepted.

Cut-off The Issue Price finalized by the Company in consultation with the BRLM and it shall be any price within the Price Band. A Bid submitted at the Cut-off Price


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TERM DESCRIPTION by a Retail Individual Bidder is a valid Bid at all price levels within the Price Band.

Depository A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time.

Depositories Act The Depositories Act, 1996, as amended from time to time. Depository Participant A depository participant as defined under the Depositories Act. Designated Date The date on which funds are transferred from the Escrow Account to the Public

Issue Account after the Prospectus is filed with the Registrar of Companies, Karnataka, Bengalooru, following which the Board of Directors shall allot Equity Shares to successful Bidders.

Designated Stock Exchange

In this case being the Bombay Stock Exchange Limited.

Draft Red Herring Prospectus/DRHP

This Draft Red Herring Prospectus filed with SEBI, which does not have complete particulars on the price at which the Equity Shares are offered and size of the Issue

Equity Shares Equity Shares of the Company of face value of Rs. 10 each unless otherwise specified in the context thereof.

Escrow Account Account opened with Escrow Collection Bank(s) and in whose favor the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid.

Escrow Agreement Agreement to be entered into among the Company, the Registrar to this Issue, the Escrow Collection Banks and the BRLM in relation to the collection of the Bid Amounts and dispatch of the refunds (if any) of the amounts collected, to the Bidders.

Escrow Collection Bank(s) The banks, which are registered with SEBI as Banker (s) to the Issue at which the Escrow Account for the Issue will be opened, in this case being [•].

First Bidder The Bidder whose name appears first in the Bid-cum-Application Form or Revision Form.

Floor Price The lower end of the Price Band, below which the Issue Price will not be finalized and below which no Bids will be accepted.

Indian National A citizen of India as defined under the Indian Citizenship Act, 1955, as amended, who is not an NRI.

Issue The issue of 61,15,000 Equity Shares of Rs. 10 each fully paid up at the Issue Price aggregating Rs. [•] Lacs.

Issue/ Bidding Period The period between the Bid / Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids.

Issue Price The final price at which Equity Shares will be issued and allotted in terms of the Red Herring Prospectus or the Prospectus, as determined by the Company consultation with the BRLM, on the Pricing Date.

Margin Amount The amount paid by the Bidder at the time of submission of the Bid, being 10% to 100% of the Bid Amount.

Mutual Funds Means mutual funds registered with SEBI pursuant to the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time.

Non Institutional Bidders All Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than Rs. 100,000/-.

Non Institutional Portion The portion of this Issue being upto 15% of the Issue consisting of 9,17,250 Equity Shares of Rs. 10 each aggregating Rs. [•] Lacs, available for allocation to


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TERM DESCRIPTION Non Institutional Bidders.

Offer Document Red Herring Prospectus/ Prospectus Pay-in Date Bid/Issue Closing Date or the last date specified in the CAN sent to Bidders

receiving allocation who pay less than 100% margin money at the time of bidding, as applicable.

Pay-in-Period Means: (i) with respect to Bidders whose Margin Amount is 100% of the Bid

Amount, the period commencing on the Bid/ Issue Opening Date and extending until the Bid/Issue Closing Date; and

(ii) with respect to QIBs, whose Margin Amount is 10% of the Bid

Amount, the period commencing on the Bid/Issue Opening Date and extending until the closure of the Pay-in Date.

Price Band The price band of a minimum price (“Floor Price”) of Rs. [•] and the maximum price (“Cap Price”) of Rs. [•] and includes revisions thereof.

Pricing Date The date on which the Company in consultation with the BRLM finalizes the Issue Price.

Prospectus The Prospectus, to be filed with the Registrar of Companies, Karnataka, Bengalooru containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of this Issue and certain other information.

Public Issue Account Account opened with the Banker to this Issue to receive monies from the Escrow Account for this Issue on the Designated Date.

QIB Margin Amount An amount representing at least 10% of the Bid Amount. QIB Portion Consists of 30,57,500 Equity Shares of Rs. 10 each aggregating Rs. [•] lacs being

upto 50% of the Issue, available for allocation to QIBs. 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only.

Qualified Institutional Buyers or QIBs

Public financial institution as defined in section 4A of the Companies Act, 1956, scheduled commercial banks, mutual funds, venture capital funds registered with SEBI, state industrial development corporations, insurance companies registered with the Insurance Regulatory and Development Authority (IRDA), provident funds with minimum corpus of Rs. 25 crores and pension funds with minimum corpus of Rs. 25 crores)

Red Herring Prospectus/RHP

The Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars on the price at which the Equity Shares are offered and size of this Issue. It carries the same obligations as are applicable in case of a Prospectus and will be filed with the Registrar of Companies, Karnataka, Bengalooru at least three days before the opening of this Issue. It will become a Prospectus after filing with the Registrar of Companies, Karnataka, Bengalooru, after pricing and allocation.

Registrar/ Registrar to this Issue

Intime Spectrum Registry Limited

Retail Individual Bidders Individual Bidders (including HUFs) who have Bid for an amount less than or equal to Rs. 100,000 in any of the bidding options in this Issue.

Retail Portion Consists of 21,40,250 Equity Shares of Rs. 10 each aggregating Rs. [•] Lacs, being at least 35% of the Issue, available for allocation to Retail Individual Bidder(s).

Revision Form The form used by the Bidders to modify the quantity of Equity Shares or the Bid price in any of their Bid-cum-Application Forms or any previous Revision


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TERM DESCRIPTION Form(s).

Stock Exchanges Bombay Stock Exchange Limited and the National Stock Exchange of India Limited.

Syndicate The BRLM and the Syndicate Member. Syndicate Agreement The agreement to be entered into between the Company and the members of

the Syndicate, in relation to the collection of Bids in this Issue. Syndicate Member [•] Transaction Registration Slip/ TRS

The slip or document issued by the Syndicate Member to the Bidders as proof of registration of the Bid.

Underwriters The BRLM and the Syndicate Member. Underwriting Agreement The Agreement among the Underwriters and the Company to be entered into

on or after the Pricing Date. GENERAL / CONVENTIONAL TERMS

TERM DESCRIPTION Companies Act The Companies Act, 1956, as amended from time to time. FCNR Account Foreign Currency Non Resident Account Financial Year/ Fiscal/ FY

The period of twelve months ended March 31 of that particular year.

Indian GAAP Generally Accepted Accounting Principles in India. Insurance Act Insurance Act, 1938, as amended from time to time. IT Act The Income Tax Act, 1961, as amended from time to time. IT Rules

The Income Tax Rules, 1962, as amended from time to time, except as stated otherwise.

SCRA Securities Contract (Regulation) Act, 1956, as amended from time to time. SCRR Securities Contracts (Regulation) Rules, 1957, as amended from time to time. SEBI Securities and Exchange Board of India constituted under the SEBI Act.

SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to time.

SEBI Guidelines The SEBI (Disclosure and Investor Protection) Guidelines 2000, as amended from time to time, including instructions, guidelines and clarifications issued by SEBI from time to time.

SEBI Insider Trading Regulations

The SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, including instructions and clarifications issued by SEBI from time to time.

ABBREVIATIONS

ABBREVIATION FULL FORM AGM Annual General Meeting AMBI Association of Merchant Bankers of India

AS Accounting Standards issued by the Institute of Chartered Accountants of India.

AY Assessment Year BSE Bombay Stock Exchange Limited.

BG/LC Bank Guarantee/ Letter of Credit


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ABBREVIATION FULL FORM CAGR Compounded Annual Growth Rate. CDSL Central Depository Services (India) Limited. CRISIL Credit Rating Information Services of India Limited DP Depository Participant

ECS Electronic Clearing System EGM Extra Ordinary General Meeting of the shareholders. EPS Earnings per Equity Share. ESOP Employee Stock Option Plan FCNR Account Foreign Currency Non Resident Account.

FEMA Foreign Exchange Management Act, 1999, as amended from time to time and the regulations issued thereunder.

FII

Foreign Institutional Investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time) registered with SEBI under applicable laws in India. FIIs are not permitted to participate in this Issue.

FIs Financial Institutions. FIPB Foreign Investment Promotion Board, Department of Economic Affairs,

Ministry of Finance, Government of India

FVCI Foreign Venture Capital Investors registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, 2000. FVCIs are not permitted to participate in this Issue.

GDP Gross Domestic Product GIR Number General Index Registry Number. GoI/ Government Government of India. HUF Hindu Undivided Family. INR / Rs./ Rupees Indian Rupees, the legal currency of the Republic of India. NAV Net Asset Value. NR Non Resident

NRI/Non-Resident Indian

A person resident outside India, as defined under FEMA and who is a citizen of India or a person of Indian origin, each such term as defined under the FEMA (Deposit) Regulations, 2000, as amended. NRI’s are not permitted to participate in this issue.

NSDL National Securities Depository Limited. NSE National Stock Exchange of India Limited. P/E Ratio Price/Earnings Ratio. PAN Permanent Account Number. RBI The Reserve Bank of India. RBI Act The Reserve Bank of India Act, 1934, as amended from time to time. RoC/Registrar of Companies

The Registrar of Companies, Karnataka, Bengalooru

RoNW Return on Net Worth. USD/ $/ US$ The United States Dollar, the legal currency of the United States of America.


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INDUSTRY RELATED TERMS AND ABBREVIATIONS

TERM/ ABBREVIATION

DESCRIPTION/FULL FORM

CDW Cold Drawn Welded CI Cast Iron CPVC Chlorinated Polyvinyl Chloride DI Ductile Iron ERW Electric Resistance Welded GI Galvanized Iron GRDI Global Retail Development Index HSAW Helical Saw Pipes IBEF India Brand Equity Foundation LSAW Longitudinal Saw Pipes MS Mild Steel NB Nominal Bore diameter OD Outer Diameter PVC Poly(vinyl chloride) RHS Rolled Hollow Section SAW Submerged Arc Welded SHS Square Hollow Section

Notwithstanding the foregoing: a. In the section titled “Financial Statements” on page 87 of this Offer Document, defined terms shall have

the meaning given to such terms in that section.

b. In the section titled “Main Provisions of the Articles of Association of the Company” on page 148 of this Offer Document, defined terms have the meaning given to such terms in the Articles of Association of the Company.


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PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Unless stated otherwise, the financial information used in this Red Herring Prospectus is derived from the Company’s restated financial statements as of and for the year ended March 31, 2007, 2006, 2005, 2004, 2003 and for the Six months period ended 30th September, 2007 prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with SEBI Guidelines, as stated in the report of the statutory Auditors. SPIL’s fiscal year commences on April 1 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a fiscal year (e.g., fiscal 2007), are to the fiscal year ended March 31 of a particular year.

In this Red Herring Prospectus, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding-off.

All references to ‘Rupees’ or ‘Rs.’ are to Indian Rupees, the official currency of the Republic of India. One crore is the unit in the Indian numbering system representing 10 million or 100 lac and one lac is the unit in the Indian numbering system representing 100,000; thus, for example, Rs. 10 crore equals Rs. 100 million. All references to ‘$’, ‘US$’ or ‘U.S. Dollars’ are to United States Dollars, the official currency of the United States of America. Market data used in this Red Herring Prospectus has been obtained from industry publications and internal Company reports. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although the Company believes the market data used in this Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed to be reliable, have not been verified by any independent source.


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FORWARD-LOOKING STATEMENTS AND MARKET DATA

SPIL has included statements in this Red Herring Prospectus which contain words or phrases such as “will”, “aim”, “is likely to result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward-looking statements”. All forward-looking statements are subject to risks, uncertainties and assumptions about the Company that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from the expectations include, among others: • General economic and business conditions in the markets in which the Company operates and in the

local, regional and national and international economies; • Changes in laws and regulations relating to the industries in which the Company operates; • Increased competition in these industries; • The Company’s ability to successfully implement the growth strategy and expansion plans, and to

successfully launch and implement various projects and business plans for which funds are being raised through this Issue;

• SPIL’s ability to meet its capital expenditure requirements; • Fluctuations in operating costs; • Unanticipated variations in the duration, size and scope of the projects; • SPIL’s ability to attract and retain qualified personnel; • The effect of wage pressures, seasonal hiring patterns and the time required to train and productively

utilize new employees; • Changes in political and social conditions in India or in other countries that the Company may enter,

the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

• Any adverse outcome in the legal proceedings in which the Company is involved.

For a further discussion of factors that could cause the actual results of SPIL to differ, see the sections titled “Risk Factors” “Company Overview” and “Management’s Discussion and Analysis” beginning on pages x, 105 and 51 of this Red Herring Prospectus respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither the Company nor the Book Running Lead Manager, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company and the Book Running Lead Manager will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges.


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SECTION I - RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all of the information in this Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in the Company’s Equity Shares. If any of the following risks occur, the business of the Company, financial condition and results of operations could suffer, the trading price of the Equity Shares could decline, and you may lose all or part of your investment. LITIGATIONS There are no litigations against SPIL, its promoters and/or Directors. However there are certain complaints/ cases filed by the Company. For details of cases filed by the Company please refer to page 109 of this Red Herring Prospectus. RISKS SPECIFIC TO THE PROJECT

1. The implementation of proposed project is at a preliminary stage. The fund requirements are based on management’s estimate and are not appraised by any Bank or financial institution SPIL has embarked on the proposed expansion based on success of the initial retail foray. The cost of project has been estimated by the Company based on past experience and internal evaluation by the management. The estimated costs towards rents and deposits for the lease/license arrangements for the stores & warehouses and the cost towards holding the inventory may vary based on location, size and several other factors. In the absence of any appraisal by Bank/ Financial Institution or independent agency the deployment of funds will be as per the management’s decision. Management’s proposal Presently SPIL has 16 retail outlets and 26 ware houses. In the proposed expansion SPIL desires to establish 35 new retail outlets and 8 warehouses. The cost of the said expansion is estimated at Rs. 6500 Lacs. SPIL has purchased land for establishing retail outlets at three locations. The estimate is based on the experience of present retail setup. The management is confident of completing the expansion within the stipulated time and cost.

2. SPIL will have to find locations to open and operate its proposed exclusively formatted retail outlets.

The success of any retail business lies largely in identifying the best possible location at a competitive cost. SPIL will have to book locations for its exclusive outlets on a continuous basis. It is not assured that SPIL will be able to expand and grow at the rate at which it may desire to, as it may not be able to book/find locations that it believes will be necessary for implementing its retail expansion plans. If the Company is not able to book/find the locations at the time and place that it desires, the same may have a material adverse impact on its results of operation.

3. SPIL is proposing to undertake new initiative in the nature of E-portal for which the Management do not have adequate experience and will have to depend on outside agencies. SPIL is engaged in the business of distribution of a wide range of steel tubes and pipes. Over the years SPIL has emerged as one of the largest distributor in the organized sector. However the company is proposing to undertake new initiative in the nature of E-portal for which the Management does not have adequate experience and hence, will have to depend on outside agencies.


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4. SPIL is proposing to supplement the distribution and retail initiative by establishing manufacturing facilities near Hyderabad. SPIL is yet to place orders for part of machinery and equipments required to set up the said facility. As explained in the section “Objects of the issue” part of the proceeds to be raised through the Issue is proposed to be utilized to fund the cost of the manufacturing project which the Company intends to setup. The total cost of establishing the manufacturing facilities of estimated to Rs. 330 Lacs including land and building. The Company has already spent an amount of Rs.111.07 lacs till date towards the same. Any delay in placing the orders or procurement of plant and machinery, equipments etc may delay the implementation schedule. Such delays may also lead to increase in price of these equipments, further affecting its cost, revenue and profitability.

5. The development of exclusive retail outlets into new geographic areas exposes SPIL to certain risks.

The Company has its business setup in the southern part of India. Increasing its presence in new geographical areas across India is one of the principal elements of the Company’s retail expansion strategy. The Company is in the process of expanding its network in western and eastern India. Pursuance of such a growth strategy may expose the Company to risks which may arise due to lack of familiarity with the development, ownership and management of retail business in certain regions and the customer preferences in such regions including:

• adjusting its retail methods to different geographies; • obtaining necessary governmental approvals and permits under unfamiliar regulatory regimes; and • attracting potential customers in a market in which the Company does not have significant

experience. In addition, SPIL’s plans to expand throughout India subjects it to various challenges, including those relating to the lack of understanding of culture and economic conditions of these regions and lack of brand recognition and reputation in such regions. In the event SPIL is unable to successfully manage the risks of such an expansion, it could have a material adverse effect on SPIL’s revenues, earnings and financial condition. RISK FACTORS INTERNAL TO THE COMPANY

1. SPIL’s operations are prone to the risk of non-renewal of leased properties

SPIL’s present operations are spread across 11 owned properties and 30 leased properties, further SPIL proposes to expand the operations across 24 owned properties and 19 leased properties. Some of the stores of SPIL’s are operated/ will be operated on properties on lease, which may or may not be renewed. The termination of the lease agreements, or disputes that may arise with owners of such properties may result in problems arising out of relocation of the stores, thus affecting business and profitability of the Company.

2. SPIL’s business, post expansion depends on its ability to manage the widespread operations including

inventory, manpower, supply logistic and customer service.

SPIL is in the business of distribution of Steel Pipes & tubes, mainly in the southern part of India. SPIL proposes to expand its retail presence by establishing 35 additional stores in the desired formats and 8 additional warehouses. The business of SPIL, post expansion depends on its ability to manage the widespread operations including inventory, manpower, supply logistic and customer service. Any inability of the management to control its operations may have a negative effect on the expansion plan of the Company.


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3. The success of SPIL’s business, post retail expansion shall depend on its ability to attract customers to their stores. Various factors affect the customer footfalls, including choice of location and nature of store layout. Factors such as the regional economy, weather conditions, natural disasters, social unrest as well as government regulations specific to the states in which SPIL operates may affect the customers coming to its stores.

4. SPIL’s business depends on its ability to maintain consistency in customer service and other operations. Competition for personnel, particularly for employees with retail expertise, is intense. Additionally, its ability to maintain consistency in the quality of customer service in its stores is critical to its success. This will depend on SPIL’s ability to hire the right personnel and also train the new personnel in the implementation of its processes effectively. In addition, the attrition rate of employees is high in the retail industry and in the event the Company loses its employees at a high rate or in case the Company cannot recruit fresh talent, it may adversely affect its operations.

5. The business interests of some of the group concerns may be in conflict with business interests of SPIL. The business interests of Shankara Meta Steels India Limited and Steel & Pipe Traders, a proprietary firm is engaged in a similar business of SPIL which may be in conflict with the business interests. Management’s Proposal There is no significant business activity in Shankara Meta Steel India Limited. More over its area of operation is restricted to Karnataka. Steel & Pipe Traders is a proprietary concern of promoter which is dormant and the promoter is in the process of winding-up its operations. In view of this there will not be any conflict of interest.

6. Restrictive Covenants There are restrictive covenants in the agreement for borrowings from Banks/ Institutions which among other things require the Company to obtain prior permission from Bank for change in Management, declaring dividend and undertaking of new project which may limit Company’s discretion in these matters. EXTERNAL RISK FACTORS

RELATED TO THE COMPANY’S BUSINESS AND INDUSTRY:

1. If the Indian Government imposes price controls, the prices that the Company is able to receive for its steel

products may decline

The Indian Ministry of Steel is responsible for coordinating and formulating policies for the growth and development of the Indian iron and steel industry. Prior to 1992, the Ministry of Steel controlled the price Indian primary steel producers could charge for steel. Today, the Indian steel industry is deregulated and steel prices in India are generally determined by market forces. Nonetheless, no assurance can be given that the Indian Government will not reinstitute price controls in the future. If the Indian Ministry of Steel intervenes in determining the price of steel in India, Company’s results of operations and financial condition could be adversely affected.


xiii

RISKS RELATED TO INDIA

1. A slowdown in economic growth in India could materially and adversely affect the Company’s results of operations and financial condition

The Company’s performance and the quality and growth of its business are dependent on the health of the overall Indian economy. There have been periods of slowdown in the economic growth of India during the 1990s. The Indian economy is also largely driven by the performance of the agriculture sector, which depends on the quality of rainfall during the monsoon season and is therefore difficult to predict. In the past, economic slowdowns have harmed manufacturing industries including the steel manufacturing industry. Any future slowdown in the Indian economy could harm the Company’s results of operations and financial condition.

2. Changes in Indian Government policies could adversely affect economic conditions in India, and thereby adversely impact the Company’s results of operations and financial condition

The Company and the market price and liquidity of the equity shares, may be affected by Indian Government‘s policy changes in India. For example, rising interest rates, increases in taxation or the creation of new regulations could have a detrimental effect on the Indian economy generally and the Company in particular. The Indian Government has in recent years sought to implement economic reforms, and the current Indian Government has implemented policies and undertaken initiatives that continue the economic liberalization policies pursued by previous Indian Governments. For example, the Indian Government has announced its general intention to continue India’s current economic and financial sector deregulation policies and encourage infrastructure projects. However, the roles of the Indian Government and the State Governments in the Indian economy as producers, consumers and regulators have remained significant and there can be no assurance that liberalization policies will continue in the future. Any significant change in such liberalization and deregulation policies could adversely affect business and economic conditions in India generally and the Company’s results of operations and financial condition in particular.

3. Global economic, political and social conditions may harm the ability of the Company to do business,

increase its costs and negatively affect the stock price.

External factors such as potential terrorist attacks, acts of war or geopolitical and social turmoil in many parts of the world could constrain the ability of the Company to do business, increase its costs and negatively affect the Company’s stock price. These geopolitical, social and economic conditions could result in increased volatility in India and worldwide financial markets and economy, and such volatility could constrain its ability to do business, increase its costs and negatively affect the stock price of SPIL.

4. Natural calamities could have a negative impact on the Indian economy and cause the business to suffer. India has experienced natural calamities such as earthquakes, tsunami, floods and drought in the past few years. The extent and severity of these natural disasters has an impact on the Indian economy. Any negative impact of natural disasters on the Indian economy could adversely affect the business and the market price of the Equity Shares.

5. Any downgrade of India’s sovereign debt rating by an international rating agency could have a negative

impact on the Company’s results of operations and financial condition

Any downgrade of India’s credit rating for Indian domestic and international debt by international rating agencies may adversely impact the Company’s ability to raise additional financing and the interest rates and commercial terms on which such additional financing is available. This could have an adverse effect on the Company’s ability to obtain financing to fund its growth on favorable terms or at all and, as a result, could have a material adverse effect on its results of operations and financial condition.


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6. If inflation worsens, the Company’s results of operations and financial condition may be adversely affected

An increase in inflation in India could cause a rise in the price of transportation, wages, raw materials or any other of the Company’s expenses. If this trend continues and the Company is unable to reduce its costs or pass its increased costs along to its customers, the Company’s results of operations and financial condition may be materially and adversely affected. A significant increase in the price of crude oil could adversely affect the Indian economy. India's economy could also be adversely affected by a general rise in interest rates and unfavorable weather conditions adversely affecting agriculture. Any slowdown in the Indian economy or volatility in global commodity prices could adversely affect the business of the Company and impact our performance.

RISKS RELATED TO STOCK PRICE

1. The price of SPIL’s Equity Shares may be highly volatile, or an active trading market for its equity shares

may not develop.

The price of SPIL’s Equity Shares on the Indian Stock Exchange may fluctuate as a result of several factors including:

- Volatility in Indian and global securities market; - The results of operations and performance of SPIL; - Performance of the competitors; - Adverse media reports, if any, on the Company or the Indian Steel Industry; - Changes in the estimates of the performance or recommendations by financial analysts on SPIL; - Significant development in India’s economic liberalization and de-regulation policies; and - Significant development in India’s Fiscal and environmental regulations.

There can be no assurance that an active trading market for company’s equity shares will develop or be sustained after this Issue or the price at which the Equity Shares of the Company are initially traded will correspond to the prices at which the Equity Shares of SPIL will trade in the market subsequent to this Issue.

2. The Issue price of the Equity Shares of SPIL may not be indicative of the market price of its Equity Shares after the Issue.

The market price of the Equity Shares of SPIL could be subject to significant fluctuations after the Issue, and may decline below the Issue Price. SPIL cannot assure you that you will be able to resell your Equity Shares at or above the Issue Price. Among the factors that could affect the share price of the Company are:

- Quarterly and other variations in the rate of growth of SPIL’s financial indicators, such as earnings

per share, net income and revenues; - Changes in revenue or earnings estimates or publication of research reports by analysts; - Speculation in the press or investment community; - General market conditions; and - Domestic and international economic, legal and regulatory factors unrelated to its performance.


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Notes

1. The net worth of SPIL as per its restated financial statement as at 31st march 2007 & 30th September, 2007 is Rs. 3,033.08 lacs & Rs. 3682.94 lacs respectively.

2. Book value, per equity share of the Company as per its restated financial statement as at 31st march 2007 & 30th September, 2007 is Rs. 81.78 & Rs. 67.35 respectively.

3. The average cost of acquisition of the equity Shares of Rs. 10 each by the Promoter is Rs. 3.58 per equity share.

4. Investors are advised to refer the paragraph on “Basis of Issue Price” on page 33 of this Offer Document before making an investment in the Issue.

5. Except as mentioned in the sections titled “Capital Structure” beginning on page 14 of this Offer Document, SPIL has not issued any Equity Shares in the last twelve months.

6. The Promoter of SPIL have undertaken certain transaction in the Equity Shares of the company six months prior to filing the Red Herring Prospectus with SEBI. For details of these transactions please refer page no 17 of this Red Herring Prospectus.

7. For details on Related Party Transactions refer to the section titled “Related Party Transactions” on page 102 of this Red Herring Prospectus.

8. Investors are free to contact the BRLM for any complaints, clarification or information pertaining to this Issue. For contact details of the BRLM, please refer to the cover page of this Prospectus.

9. All information shall be made available by the BRLM and the Company to the public and investors at large and no selective or additional information would be available only to a section of the investors in any manner whatsoever.

10. In addition to the BRLM, the Company shall be obliged to update the prospectus and keep the public informed about any material changes till listing and trading commences in respect of the shares issued through this issue.

11. For interest of promoters/directors, please refer to the section titled “Promoters and their Background” beginning on page no. 82 of this Red Herring Prospectus.


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PART I

SECTION II - INTRODUCTION

Summary of the Industry and Business of the Company

Industry Overview Steel Industry The world steel industry is currently going through a phase of growth and all round prosperity, fuelled primarily by the growth in consumption and production of steel in China. The major trends observed in the structure of the world steel industry are:

• Continuous shift of the industry– both in terms of production and consumption– from the West

towards the East; • Ensuring control over raw materials has become a very important component of steel business

strategy in the aftermath of tight supply conditions and inflated prices caused by China’s entry into the raw materials market;

• Consolidation taking place through mergers and acquisitions, often across boundaries, as companies acquired downstream facilities for assured markets and upstream facilities for assured raw material/feed material supplies;

• Increased volatility of steel prices globally and widening of the gap between spot and contracted prices;

• Significant increase in the market valuation of the steel companies worldwide resulting from rising prices and successful cost reduction efforts. (Source: Report of the Working Group on Steel Industry for the Eleventh Five-Year Plan (2007-2012))

India's rapid economic growth is being built on a frame of steel. Soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put India's steel industry on the world map. The Government of India anticipates a three-fold rise in steel production capacity to 120 million tonne (mt) making India the second-largest steel producer in the world by 2016. It has revised the capacity projections. (Source: www.ibef.org/industry/steel.aspx). Pipe & Tube industry

Steel pipes & tubes find use in a variety of applications at all stages of development of a country. Steel pipes and tubes are used for conveying water, steam and other liquid products besides being used for structural engineering, fabrication and general engineering. An important segment of the steel tube industry is the seamless category used in the oil sector and non-oil sectors. They consist of alloy steels and carbon steel tubes. This industry is an important segment of the Indian economy as it meets critical requirements of oil & gas sector and other hydrocarbon industry. In non-oil sector, these tubes are used in a number of important industries like boiler, ball-bearing, automobiles, chemical plants, fertilizers, petrochemicals and industrial machinery etc. Oil Sector accounts for around 60% of total requirement of seamless steel pipes. Bearings, Automobile and Boiler Sector contribute around 30% demand. The Industry is able to manufacture tubes upto 245 mm OD and is, by and large, meeting complete requirement of bearing and high-pressure boiler industries. With the expected substantial growth in the power and automobile sectors in the future, the demand pattern may change in favour of these two sectors. (Source: http://dipp.nic.in/industry)

Retail Industry

India has topped the AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market -- one of India's fastest growing industries -- is expected to grow from US$ 350 billion to US$ 427 billion by 2010.


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According to Euromonitor International, the Indian Retail market will grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost 7 per cent a year. Modern retail accounts for about 4 per cent of the total retail market in India. This share is expected to increase to about 15 -20 per cent with the entry of a number of corporates into the segment. Modern retail formats have grown by 25-30 per cent in India in the last year and could be worth US$ 175-200 billion by 2016. Business Overview of Shankara Pipes India Limited Shankara Pipes India Limited (SPIL) was incorporated in October 1995 and is engaged in the business of distribution of a wide range of steel tubes and pipes. Over the years SPIL has emerged as one of the largest distributors in the organized sector. SPIL distributes ERW, GI and Black steel tubes & pipes, seamless pipes, structural pipes, precision tubes, PVC pipes, steel structurals etc of all leading manufacturers like Tata Steel, Finolex, Jindal, Tube Investments etc. SPIL maintains high quality standards in its inventory management, procurement systems, logistics and customer service. SPIL is an ISO 9001 certified Company. SPIL is a recipient of prestigious ‘Emerging India Award’ in the category ‘Retail & Trade’ For the SME sector in the year 2005, instituted by CRISIL, ICICI Bank & CNBC TV (for other awards and recognitions please refer page no.68 of the Red Herring Prospectus). Today, SPIL:

Sells about 12,000 MT of steel tubes and allied products per month.

Has spread its operations in 8 states through 20 offices, 16 formatted retail stores and 26 warehouses.

Has over 2,50,000 sq.ft of warehousing facility.

Has over 40,000 sq.ft of retail space.

Has about 4,000 dealers & retailers.

Has a fleet of 20 trucks to supplement its delivery schedule.

In-house quality laboratory.

Has fully computerized operations and communication facility.

Is a sole distributor of the products of Tube Investments India Limited in Andhra Pradesh, Kerala and Karnataka

Is a sole distributor of the products of Tata Steel (tubes division) in the following regions:

Region Description South Karnataka and North Andhra Pradesh All products in Retail Segment Andhra Pradesh & Tamil Nadu Structural tubes


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Financials

Figures -(Rs. in lacs)

0

10000

20000

30000

40000

50000

60000

31/03/2003 31/03/2004 31/03/2005 31/03/2006 31/03/2007

Period

Sale

s

0

100

200

300

400

500

600

700

800

900

1000

PAT

Sales PAT

SPIL achieved total sales of Rs. 50221.40 lacs for fiscal 2007, Rs. 34623.76 lacs for fiscal 2006 and Rs. 26802.33 lacs for fiscal 2005, respectively. During the same period its profit after tax was Rs. 869.72 lacs, Rs. 692.19 lacs and Rs. 515.14 lacs, respectively. The Company registered a CAGR of 37% in sales & CAGR of 30% in Profit After Tax in past three years. For the six months period ended 30th September 2007, SPIL has achieved a sales of Rs. 28158.79 Lacs and a Profit After Tax of Rs. 647.36 Lacs. Some of the prestigious projects wherein the Company has supplied its products includes the following:

• Santa Cruz Airport (Mumbai) • Amrutha Institute of Medical Science

(Cochin) • Cochin Shipyard Ltd. (Cochin) • Spencers (Chennai) • Mangalore Refineries & Petro Chemicals Ltd. • International Cricket Stadium (Hyderabad) • Bangalore International Airport • Calicut Airport • Indian Institute of Management (Calicut) • Sri Sathya Sai Baba Stadium, Puttaparthi • Infosys Campus • Wipro Limited Campus • Polavaram irrigation projects • Raj Bhavan

• Ramoji Film City (Hyderabad) • SAP Labs (Bengalooru) • Volvo Limited, Bengalooru • Safal Fruit & Vegetables Auction Market

(Bengalooru), etc. • HITEX (Hyderabad) • Gachi-Bowli Stadium (Hyderabad) • Cochin Jawaharlal Nehru Stadium • Mumbai Airport • Hyderabad Airport • General Motors, Pune • Fiat , Pune • Tata Motors , Pune • P.V.Narasimha Rao Express Way (Hyderabad

City to New Airport) Competitive strengths SPIL is amongst the premier and an established distributor of a wide range of steel tubes and pipes. It is an ISO 9001 certified Company, with a legacy of over a decade of presence in steel. The Company believes that the following are its principal competitive strengths:-

1. Strong management Team: The promoter and the senior management team of the Company have significant

industry experience and has been instrumental in the consistent growth of the Company’s income and operations.


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2. Relationship with established players in industry: The Company enjoys credible relationship with steel majors like Tata Steel, Jindal, Tube Investments and other established players like Finolex for PVC tubes. The Company is well poised to benefit from this strong relationship with the industry players enabling the Company to provide better services to its customers.

3. Multiple products: The Company distributes a wide range of products such as steel pipes & tubes (Precision

ERW and CDW Tubes, Closed Structural’s: RHS & SHS, Galvanized & Black Mild Steel Pipes and Boiler, Air-Heater & Seamless Tubes), steel bars and steel rods. This allows the Company to cater to the diverse demands of its customers and to consolidate and establish its presence across regions.

4. Selling and Distribution network:

SPIL has spread its operations in 8 states through 20 offices, 16 formatted retail stores and 26 warehouses. A brief description is as follows :

Particulars State / Cities Branches Kerala, Tamil Nadu, Andhra Pradesh, Maharashtra, Karnataka, Gujarat, Orissa and

Goa Offices Ahmedabad, Bengalooru, Bellary, Bhubaneswar, Calicut, Chennai, Coimbatore (two

offices), Davangere, Ernakulam, Goa, Hosur, Hubli, Mumbai, Pune, Salem, Secunderabad (Two offices), Vishakapatnam and Vijayawada

The distribution channel of SPIL is one of the key strengths of the organization. The customers and retailers are segmented geographically on the basis of different products. SPIL has over 2,50,000 sq. ft of warehousing space across 26 locations.

5. Retail presence SPIL has forayed into the retail segment through its 16 outlets. These outlets are at a close proximity to the warehouses, hence replenishment of stocks is ensured within a shortest period of time. This helps the outlets to optimize in-store availability of merchandise and reduce transportation cost. This helps the Company in maintaining optimum inventories.

Business Strategy Shankara Pipes India Ltd is one of the leading distributors of Pipes & Tubes which has a wide range of uses and a perennial demand in a highly competitive environment. The company as part of its quality policy has committed to make available the right quality product at the right time, at the right place and provide service thereafter so as to enhance customer satisfaction. Retail expansion program SPIL presently has its 16 retail outlets at various cities like Bengalooru, Mangalore, Secunderabad, Vizag, Goa Kochi and Calicut. SPIL intends to further expand itself in the retail by leveraging the existing sales and distribution network and apply innovative retail marketing initiatives. The strategy of the Company is to initially target the metros and tier I & tier II towns all over India. These outlets will enable the Company to offer its product in an organized format. The Company has already taken steps in this direction by opening its branchs in Ahmedabad, Mumbai, Pune and other cities. Further improving the cost structure SPIL believes in providing quality products at affordable prices. The Company maintains the cost of its product by cutting its distribution cost, which is done by having its retail outlets in close proximity to its warehouses. Through its retail outlets, SPIL intends to cater to the needs of consumer directly, which will give the Company a better profit margin on the products sold. It also reduces the cost of inventory by maintaining an appropriate stock of the same.


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Strengthen its customer relationship SPIL believes in having a strong relationship with its customers so as to serve them over a long period of time. The Company aims to continue to develop its relationship with the customers not only in terms of increased turnover but also in terms of increased variety in products. SPIL aims to achieve this by adding value to its client through quality, speed and reliability of its product delivery. E-portal Service The company has created a number of retail outlets in many major cities in the country. The retailed products are related to plumbing and fabrication. In order to leverage these advantages SPIL proposes to enter the gamut of retail services. The company now plans to launch a web portal which shall have a detailed information about the products offered by the Company. The portal will offer facility to avail services of online plumbing & fabrication to households, small & medium commercial & service establishments.


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SUMMARY OF FINANCIAL DATA STATEMENT OF ASSETS AND LIABILITIES

(Rs. in lacs) For the

Half year ended For the Financial Year Ended

PARTICULARS 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Fixed Assets Gross Block 2,086.69 1,645.06 1,240.99 803.29 661.92 499.13 Less: Depreciation 296.37 241.46 153.27 113.85 73.92 45.43 Net Block 1,790.32 1,403.60 1,087.72 689.44 588.00 453.70 Capital Works In Progress Total-A 1,790.32 1,403.60 1,087.72 689.44 588.00 453.70 Investments-B 51.10 51.10 0.60 0.60 0.55 0.44 Deferred Tax Assets-C 8.86 36.11 11.21 8.57 - - Current Assets, Loans & Advances Inventory 3,948.88 3,169.43 2,235.17 1,995.83 1,214.61 1,159.51 Sundry Debtors 8,258.54 8,288.15 5,563.29 4,240.57 2,444.53 2,148.05 Cash & Bank Balance 193.00 256.83 103.48 129.95 28.26 45.99 Loans & Advances 337.93 723.51 387.24 179.12 216.20 99.51 Total-D 12,738.35 12,437.92 8,289.18 6,545.47 3,903.60 3,453.06 Total Assets (A+B+C+D)=E 14,588.63 13,928.73 9,388.71 7,244.08 4,492.15 3,907.20 Liabilities and Provisions Secured Loan 4,707.34 4,909.56 3,388.43 1,176.55 1,105.72 1,158.61 Unsecured Loan 80.50 20.32 135.33 22.83 Deferred Tax Liabilities Current Liabilities 5,869.05 5,481.87 3,285.12 4,112.80 1,916.14 1,886.31 Provisions 329.30 504.22 395.04 336.30 198.93 88.31 Total-F 10,905.69 10,895.65 7,149.09 5,645.97 3,356.12 3,156.06 Net Worth (E+F) 3,682.94 3,033.08 2,239.62 1,598.11 1,136.03 751.14 Net Worth Represented by Share Capital 450.35 450.35 450.35 450.35 450.35 450.07 Share Application Money 2.50 Reserves & Surplus 3,230.59 2,583.23 1,790.53 1,149.76 685.97 301.65 Total 3,683.44 3,033.58 2,240.88 1,600.11 1,136.32 751.72 Less: Miscellaneous Expenditure (Not adjusted)

0.50 0.50 1.26 2.00 0.29 0.58

Net Worth 3,682.94 3,033.08 2,239.62 1,598.11 1,136.03 751.14


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STATEMENT OF PROFITS AND LOSSES

(Rs. in lacs) For the

half year ended For the Financial Year Ended

PARTICULARS 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 SALES & OTHER INCOME Sales 28158.79 50221.40 34623.76 26802.33 16498.97 11220.27 Other Income 30.80 18.59 19.77 16.35 17.52 9.17 Increase/(Decrease) in Inventory 779.45 934.26 239.34 781.22 55.10 217.77 Total 28969.04 51174.25 34882.87 27599.90 16571.59 11447.21 EXPENDITURE Purchases 26610.28 47335.02 32012.86 25430.18 14870.41 10433.30 Trading Expenses 387.37 687.64 489.62 283.97 230.18 188.20 Administrative & Other Expenses 655.71 1168.46 881.02 726.91 590.84 379.55 Total 27653.36 49191.12 33383.50 26441.06 15691.43 11001.05 Earnings Before Interest and Tax 1315.68 1983.13 1499.37 1158.84 880.16 446.16 Interest 255.54 514.66 339.84 243.38 222.72 206.19 Depreciation 56.22 91.47 44.88 42.04 29.47 18.00 Net Profit before tax and extra ordinary items 1003.92 1377.00 1114.65 873.42 627.97 221.97 Less :Provision for taxes -Current Taxes 325.41 496.82 387.55 368.01 192.00 88.00 -Deferred Taxes Adjustments 27.26 (24.90) (2.63) (9.73) 0.85 0.31 -Fringe Benefit Taxes 3.89 7.40 7.49 - - 0.76 -Income Tax for Earlier Years 0.54 30.05 - - - Net Profit before extra ordinary items 647.36 897.14 692.19 515.14 435.12 132.90 Extra ordinary items - - - - - - Net Profit after extra ordinary items 647.36 897.14 692.19 515.14 435.12 132.90 Adjustment on account of prior period expenses - 27.42 - - - - Adjustment Profit 647.36 869.72 692.19 515.14 435.12 132.90

The above should be read in conjunction with the Significant Accounting Policies given in Annexure 4 and with the Notes to Accounts given in Annexure 16 to the Auditors Report as appearing on page. 98 of this Red Herring Prospectus.


8

THE ISSUE

Public Issue aggregating to Rs. [•] lacs:

Which comprises of fresh issue of 61,15,000 Equity Shares of Rs. 10/- each aggregating Rs. [•]Lacs.

Of which:

QIB Portion(1): Upto 30,57,500 Equity Shares aggregating Rs. [•] Lacs, constituting up to 50% of the Issue

• Of which 5% is available for Allocation to Mutual Funds [the unsubscribed portion, if any, in the Mutual Fund reservation will be available to QIBs]

Upto 1,52,875 Equity Shares aggregating Rs. [•] lacs

• Balance for all QIB including Mutual Funds Upto 29,04,625 Equity Shares aggregating Rs. [•] Lacs

Non- Institutional Portion(1): Upto 9,17,250 Equity Shares aggregating Rs. [•] Lacs, constituting 15% of the Issue that will be available for allocation to Non-Institutional Bidders.

Retail Portion(1): Atleast 21,40,250 Equity Shares aggregating Rs. [•] Lacs constituting not less than 35% of the Issue that will be available for allocation to Retail Individual Bidders.

Equity Shares outstanding prior to the Issue: 1,42,63,720 Equity Shares of Rs. 10/- each

Equity Shares outstanding post the Issue: 2,03,78,720 Equity Shares of Rs. 10/- each

Use of Proceeds Please refer to chapter titled “Objects of the Issue” on page 21 of this Red Herring Prospectus for additional information.

(1)Under-subscription, if any, in any of the above categories would be allowed to be met with spillover inter-se from any other categories, at the sole discretion of the Company and BRLM.


9

GENERAL INFORMATION INCORPORATION

SPIL was incorporated on 13/10/1995 as Shankara Pipes India Private Limited, under the Companies Act, 1956, with Registration Number 08/18990. It was later converted into a public limited company on 28/08/2007 and received a fresh certificate of Incorporation from Registrar of Companies, Karnataka, Bengalooru. The Corporate Identity Number of the Company is U26922KA1995PLC018990. ADDRESS OF THE COMPANY

Registered & Corporate Office G-2, Farah Winsford, No. 133, Infantry Road, Bengalooru – 560 001 Tel: +91-080-40117777; Fax: +91-080-22861198 Email: [email protected]; Website: www.shankarapipe.com

ADDRESS OF REGISTRAR OF COMPANIES

The Registrar of Companies, E' Wing, 2nd Floor, Kendriya Sadana Koramangala, Bengalooru-560034. BOARD OF DIRECTORS:

The Board of Directors SPIL comprises of the following:

Sr. No

Name of the director Designation Status

1 Mr. Zafar Saifullah Chairman Non-Executive & Independent 2 Mr. Sukumar Srinivas Managing Director Executive & Non-Independent 3 Mr. C. Ravikumar Director Executive & Non-Independent 4 Mr. R.S.V. Shiva Prasad Director Executive & Non-Independent 5 Prof. S. Sundararajan Director Non Executive & Independent Director 6 Mr. V. Ravichandar Director Non Executive & Independent Director

For further details on the Board of Directors of SPIL, please refer to the section titled “Management” beginning on page 72 of this Red Herring Prospectus COMPANY SECRETARY AND COMPLIANCE OFFICER

Mr. S Subramonia Iyer Vice President - Corporate Affairs & Company Secretary G-2, Farah Winsford, No. 133, Infantry Road, Bengalooru – 560 001 Tel: +91-080-40117777; Fax: +91-080-22861198 E-mail: [email protected] REGISTRAR TO THE ISSUE

INTIME SPECTRUM REGISTRY LIMITED C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (West), Mumbai – 400 078 Tel : (022) 2596 0320 (9 Lines) Fax : (022) 2596 0328/29 E-Mail : [email protected] Website : www.intimespectrum.com Contact Person : Mr. Sachin Achar

Investors can contact the Compliance Officer or the Registrar in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of allocation, credit of allotted Equity Shares in the respective beneficiary account or refund orders, etc.


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BOOK RUNNING LEAD MANAGER TO THE ISSUE KEYNOTE CORPORATE SERVICES LIMITED 4th Floor, Balmer Lawrie Building 5, J. N. Heredia Marg Ballard Estate Mumbai – 400 001 Tel.: (022) 3026 6000; Fax: (022) 2269 4323 E-mail: [email protected] Website: www.keynoteindia.net Contact person: Mr. Janardhan Wagle LEGAL ADVISORS TO THE ISSUE Zenith India Lawyers A-262, IInd Floor, Defence Colony, New Delhi - 110 024, India Tel: (011) 4652 8218 Fax: (011) 4652-8219 Email: [email protected] Contact person: Ms. Rajrani Bhalla SYNDICATE MEMBER

[•] BANKERS TO THE ISSUE AND ESCROW COLLECTION BANKS

[•] STATUTORY AUDITORS Rao & Venkatesulu 53, 2nd Floor, Sri Sharada Complex, A.M Road, Journalist Colony, Bengalooru- 560 002. Tel: +91- 080-26705105 Fax: +91- 080-26706414 BANKERS TO THE COMPANY

Standard Chartered Bank 90, M.G. Road, Fort, Mumbai – 400 001 Tel: +91-022-2267 3516 / 2263 0579 Fax: +91-022-2265 5295 E-mail: [email protected] Contact Person: Mr. Karthik Natarajan

Citibank N.A. 614, 6th Floor, Carlton Towers, 1, Airport Road, Bengalooru – 560 008 Tel: +91-080-4126 5208 Fax: +91-080-5115 4940 E-mail: [email protected] Contact Person: Ms. Shruti Gupta

The Honkong and Shanghai Banking Corporation Limited No. 7, Post Bag 5267, M.G. Road, Bengalooru – 560 001 Tel: +91-080-2558 5444 Facsimile: +91-080-2558 4411 E-mail: [email protected] Contact Person: Jacob Raphael

Kotak Mahindra Bank Limited 3rd Floor, Ceebros centre, 39, Montieth Road, Egmore, Chennai – 600 008 Tel: +91-044-422 45735 Fax: +91-044-422 45799 E-mail: [email protected] Contact Person: Shankar Narayanan


11

STATEMENT OF INTER-SE ALLOCATION OF RESPONSIBILITY

Since Keynote Corporate Services Limited is the sole BRLM to this Issue, Inter-se allocation of responsibility is not applicable. CREDIT RATING

As this is an Issue of Equity Shares, there is no requirement of credit rating for this Issue. IPO GRADING

CRISIL Limited has been appointed for grading of the issue vide letter of appointment dated 13/09/2007. Grading report is awaited. TRUSTEES

As this is an Issue of Equity Shares, the appointment of trustees is not required. MONITORING AGENCY

No agency has been appointed to monitor the utilization of funds. APPRAISING AGENCY

The project is not appraised by any Bank or Financial Institution. BOOK BUILDING PROCESS

Book Building refers to the process of collection of bids from investors on the basis of the Red Herring Prospectus. The Issue Price is fixed after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are:

(1) The Company; (2) Book Running Lead Manager, in this case being Keynote Corporate Services Limited. (3) Syndicate Members who are intermediaries registered with SEBI or registered as brokers with

BSE/NSE and eligible to act as underwriters, in this case being [•]. (4) Registrar to the Issue, in this case being Intime Spectrum Registry Limited.

The Issue is being made through the 100% Book Building Process where up to 50% of the Issue to the public shall be allocated on a proportionate basis to eligible Qualified Institutional Buyers (“QIBs”). 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all other eligible QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, upto 15% of the Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not more than 35% of the Issue to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. QIBs are not allowed to withdraw their Bid after the Bid/ Issue Closing Date and are now required to pay 10% Margin Amount upon submission of their Bid. For details see the chapter titled “Terms of the Issue” on page 122 of this Offer Document.

Steps to be taken by the Bidders for bidding:

• Check whether he/ she is eligible for bidding;

• Bidder necessarily needs to have a demat account;


12

• Ensure that the Bid-cum-Application Form is duly completed as per instructions given in this Offer

Document and in the Bid-cum-Application Form; and • Ensure that the Bid-cum-Application Form is accompanied by a copy of PAN (Permanent Account

Number) card or by Form 60 or Form 61 as may be applicable together with necessary documents providing proof of address. For details please refer to the chapter titled “Issue Procedure” on page 128 of this Offer Document. Bidders are specifically requested not to submit their General Index Register number instead of the Permanent Account Number as the Bid is liable to be rejected.

Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purpose of illustration and is not specific to this Issue) Bidders can bid at any price within the price band. For instance, assuming a price band of Rs.40 to Rs.48 per share, issue size of 6,000 equity shares and receipt of nine bids from bidders, details of which are shown in the table below, the illustrative book would be as below. A graphical representation of the consolidated demand and price would be made available at the bidding centers during the bidding period. The illustrative book as shown below indicates the demand for the shares of the company at various prices and is collated from bids from various investors.

Number of equity

shares bid for Bid Price (Rs.) Cumulative equity

shares bid Subscription 500 48 500 8.33% 700 47 1,200 20.00%

1,000 46 2,200 36.67% 400 45 2,600 43.33% 500 44 3,100 51.67% 200 43 3,300 55.00%

2,800 42 6,100 101.67% 800 41 6,900 115.00%

1,200 40 8,100 135.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off i.e. Rs.42 in the above example. The issuer, in consultation with the BRLM will finalize the issue price at or below such cut-off price i.e. at or below Rs.42. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in respective category. The process of Book Building under the SEBI Guidelines is subject to change from time to time. Accordingly, investors are advised to make their own judgment about investment through this process prior to making a Bid or Application in the Issue.

Withdrawal of the Issue The Company, in consultation with the BRLM, reserves the right not to proceed with the Issue at anytime after the Issue opening date but before Allotment, without assigning any reason therefore. Bid/Issue Programme Bidding Period / Issue Period

BID / ISSUE OPENS ON [•] BID / ISSUE CLOSES ON [•]


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Bids and any revision in Bids shall be accepted only between 10 a.m. and 5 p.m. (Indian Standard Time) during the Bidding Period/Issue Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form and uploaded till such time as permitted by the BSE and NSE. The Company reserves the right to revise the Price Band during the Bidding Period/Issue Period in accordance with SEBI Guidelines. The cap on the Price Band should not be more than 20% of the floor of the Price Band. Subject to compliance with the immediately preceding sentence, the floor of the Price Band can move up or down to the extent of 20% of the floor of the Price Band disclosed in the RHP. In case of revision in the Price Band, the Bidding Period/Issue Period will be extended for three additional working days after revision of Price Band subject to the Bidding Period/Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bidding Period/Issue Period, if applicable, will be widely disseminated by notification to BSE and NSE, by issuing a press release, and also by indicating the change on the website of the BRLM and at the terminals of the Syndicate. Underwriting Agreement After the determination of the Issue Price but prior to filing of the Prospectus with Registrar of Companies, Bengalooru, Karnataka, the Company will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be issued through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfill their underwriting obligations. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and not joint, and are subject to certain conditions as specified in such agreement. The Underwriters have indicated their intention to underwrite the following number of Equity Shares:

(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with Registrar of Companies, Karnataka, Bengalooru.)

Name and Address of the Underwriters

Indicated Number of Equity Shares to be Underwritten

Amount Underwritten (Rs. million)

[•] [•] [•] [•] [•] [•]

Total [•] [•] The above-mentioned amount is an indicative underwriting and would be finalized after pricing and actual allocation. The above underwriting agreement is dated [•]. In the opinion of the Board of Directors of the Company (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI and are eligible to underwrite as per applicable guideline. Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the BRLM and the Syndicate Members shall be severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them. In the event of any default, the respective underwriter in addition to other obligations to be defined in the Underwriting Agreement, will also be required to procure/subscribe to the extent of the defaulted amount. For further details about allocation please refer to “Other Regulatory and Statutory Disclosures” on page 113 of this Offer Document.


14

CAPITAL STRUCTURE

The share capital of the Company as on the date of filing of this Red Herring Prospectus with SEBI is as set forth below:

Share Capital

Aggregate Value at Nominal Price. (Amount in Rs.)

Aggregate Value at Issue Price

(Amount in Rs.)

A. Authorized Capital: 2,50,00,000 Equity Shares of Rs 10. each

25,00,00,000

B. Issued, Subscribed and Paid Up Capital before this Issue: 1,42,63,720 Equity Shares of the Face Value of Rs.10 /- each

14,26,37,200

C. Present Issue in terms of this Red Herring Prospectus: 61,15,000 Equity Shares of the Face Value of Rs.10 /- each

6,11,50,000

[•]

- Of which i) QIB portion of up to 30,57,500 Equity Shares (1) ii) Non Institutional Portion upto 9,17,250 Equity Shares (1) iii) Retail Portion atleast 21,40,250 Equity Shares (1)

;

3,05,75,000 91,72,500

2,14,02,500

[•] [•] [•]

E. Issued, Subscribed and Paid-Up Capital after this Issue 20,378,720 Equity Shares of the Face Value of Rs. 10/- each

20,37,87,200

[•]

Securities Premium Account

Before this Issue After this Issue

Nil [•]

(1)Under-subscription, if any, in any of the above categories would be allowed to be met with spillover inter-se from any other categories, at the sole discretion of the Company and BRLM.

Note: The company is considering the private placement of certain equity shares with certain investors, prior to the completion of the issue. In such a case the issue size offered to the public would be reduced to the extent of such private placement subject to a minimum issue size of 25% of the post issue capital being offered to the public.

Details of increase in the authorized equity share capital, since incorporation, are as follows:

Sr.No. Details of increase in authorized share capital Date of Resolution

1 Incorporation Rs.50,00,000 divided into 5,00,000 Equity Shares of Rs. 10/- each

19/10/1995

2 Increased to Rs. 2,50,00,000 divided into 25,00,000 Equity Shares of Rs. 10/- each

09/03/2001

3 Increased to Rs. 5,00,00,000 divided into 50,00,000 Equity Shares of Rs. 10/- each

04/09/2001

4 Increased to Rs. 10,00,00,000 divided into 1,00,00,000 Equity Shares of Rs. 10/- each

18/03/2005

5 Increased to Rs. 25,00,00,000 divided into 2,50,00,000 Equity Shares of Rs. 10/- each

29/09/2007


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Notes to capital structure

1. Share capital history of the company

Date of Allotment

Number of Equity Shares

Face Value (Rs.)

Issue Price (Rs.)

Consideration (cash, bonus, consideration

other than cash)

Reasons for allotment (bonus, swap etc.)

Cumulative Share Capital (no. of shares)

13/10/1995 300 10 10 Cash Subscription to MOA 300 23/10/1995 49,700 10 10 Cash Further issue of shares 50,000 30/03/1998 2,00,000 10 10 Cash Further issue of shares 2,50,000 30/03/2000 2,50,000 10 10 Cash Further issue of shares 5,00,000 06/04/2001 15,00,000 10 10 Cash Further issue of shares 20,00,000 26/02/2002 25,00,000 10 10 Cash Further issue of shares 45,00,000 01/03/2003 700 10 10 Cash Further issue of shares 45,00,700 15/10/2003 2800 10 10 Cash Further issue of shares 45,03,500

06/11/2007

97,700*

10

120

Consideration other than cash

Further issue of shares to the partners of

Shankara Steel and Tubes, a partnership

firm with the Company

46,01,200

12/11/2007 96,62,520 10 Nil Nil Bonus @ 21:10 1,42,63,720 As on date of filing of this Red Herring Prospectus with SEBI, the issued capital is fully paid up. * The Company was admitted as a partner in the firm M/s. Shankara Steels & Tubes on 28/09/2007 with right

to Share 25% of the profit/Loss of the Firm. The said firm was dissolved on 31/10/2007 and upon dissolution the business of the said firm with all its Assets and Liabilities including three properties located in Bengalooru, Mangalore and Ernakulum which were reflected in the books of the said firm as at 31.10.2007 at a value of Rs.327.50 Lakhs were allotted to the Company. The Company in full and final Settlement of the amounts due to the other partners i.e. Rs.117.24 Lakhs allotted 97,700 Equity Shares of Rs.10/-each at a premium of Rs.110/- per share (45,700 Shares to Mr.Sukumar Srinivas, the promoter and 52,000 Shares to Shankara Holding Pvt Ltd, the promoter group Company).

2. Promoters Holding:

History of Share Capital held by the promoter & Promoter group:

Name of Promoter

Date of Allotment /Transfer

Allotment/ Transfer

Conside-ration

Number of Shares

Face Value (Rs.)

Issue/ Transfer Price

(Rs.)

% age of Post Issue

Promoter Mr. Sukumar Srinivas 13/10/1995

Allotment Cash 100 10 10 0.00

23/10/1995 Allotment Cash 39,750 10 10 0.20 12/02/2001 Transfer Cash 2,08,150 10 10 1.02 06/04/2001 Allotment Cash 7,50,000 10 10 3.68 26/02/2002 Allotment Cash 25,00,000 10 10 12.27 01/09/2002 Transfer Cash 9,98,000 10 10 4.90 15/10/2003 Allotment Cash 400 10 10 0.00 07/11/2005 Transfer Cash 400 10 10 0.00

06/11/2007

Allotment Other than cash 45,700* 10 120 0.22

12/11/2007 Allotment Bonus 95,39,250 10 Nil 46.81 Total 1,40,81,750 69.10


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Name of Promoter


Allotment/ Transfer

Conside-ration

Number of Shares

Face Value (Rs.)

Issue/ Transfer Price

(Rs.)

% age of Post Issue

Promoter Group M/s. Shankara Holdings Pvt. Ltd.

06/11/2007

Allotment

Other than cash

52,000* 10

120

0.28

12/11/2007 Allotment Bonus 1,09,200 10 Nil 0.54 Total 1,61,200 0.79

Grand Total 1,42,42,950 69.89 * Refer note under point no. 1 above

3. Details of Promoters contribution locked-in for three years:

Name of Promoter


Allotment/ Transfer

Conside-ration

Number of Shares

Face Value (Rs.)

Issue/ Transfer

Price (Rs.)

% age of Post Issue

Lock in Period

Mr. Sukumar Srinivas 13/10/1995

Allotment Cash 100 10 10 0.00 3 Years

23/10/1995 Allotment Cash 39,750 10 10 0.20 3 Years 12/02/2001 Transfer Cash 2,08,150 10 10 1.02 3 Years 06/04/2001 Allotment Cash 7,50,000 10 10 3.68 3 Years 26/02/2002 Allotment Cash 25,00,000 10 10 12.27 3 Years 01/09/2002 Transfer Cash 5,77,744 10 10 2.83 3 Years Total 40,75,744 20.00

Specific written consent has been obtained from the Promoters for inclusion of the Equity Shares for ensuring lock-in of three years to the extent of minimum 20% of post-Issue paid-up equity share capital as per clause 4.11.2 of SEBI Guidelines. Promoters’ contribution does not consist of any private placement made by solicitation of subscription from unrelated persons either directly or through any intermediary. The balance equity shares held by promoter & others will be locked-in for a period of 1 year from the date of allotment in the proposed public issue. Remaining Equity Shares held by Promoters & the person other than the Promoters, prior to this Issue, which are subject to lock in as per the relevant provisions of Chapter IV of SEBI Guidelines, may be transferred to any other person holding Equity Shares which are locked in, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable. Equity Shares held by Promoters which are locked in as per the relevant provisions of Chapter IV of the SEBI Guidelines, may be transferred to and amongst Promoter/Promoter group or to a new promoter or persons in control of the Company, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as applicable. The locked-in Equity Shares held by the Promoters of the Company can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan.


17

4. Transactions in the Company’s Equity Shares by the Promoter & their relatives or the directors of the Company during a period of six months preceding the date of filing of this Red Herring Prospectus with SEBI

The details of transactions in the Promoter & their relatives or the directors of the Company during a period of six months preceding the date of filing of this Red Herring Prospectus with SEBI is as follows:

Date of

Transfer Name of the Transferor

Name of the Transferee

Number of Shares

Transfer Price per

share (Rs.)

12/09/2007 Ms. Lalitha Neelakantan Mr. C. Ravikumar 4000 10/- 12/09/2007 Mr. Suresh Lal Hira Lal 100 10/- 12/09/2007 Mr. Jayesh Kothari 100 10/- 12/09/2007 Mr. Prakash Chand 100 10/- 12/09/2007 Mr. Radhakrishna S. J 100 10/- 12/09/2007 Ms. Hemalatha R.

Mr. R.S.V. Shivaprasad 100 10/-

5. The shareholding pattern of the Company before and after the Issue is as follows:

Pre-Issue Post-Issue

Shareholder’s Category No. of Shares %age No. of Shares %age a) Promoter Mr. Sukumar Srinivas 1,40,81,750 98.72 1,40,81,750 69.10 b) Immediate Relative of promoters(Spouse, Parent, Child, Brother, Sister)

NA NA NA NA

c) Company in which 10% or more of the share Capital is held by the promoter his immediate Relative firm or HUF in which the promoter Or his immediate relative is a member

NA NA NA NA

M/s. Shankara Holdings Pvt. Ltd. 1,61,200 1.13 1,61,200 0.79 d) Company in which the Company mentioned in (c)

above holds 10% or more of the share capital NA NA NA NA

e) HUF in which aggregate share of the promoter and his immediate relative is equal or more than 10% or more of the share capital.

NA NA NA NA

f) Non Promoter Holding 20,770 0.14 61,35,770 30.11 GRAND TOTAL 1,42,63,720 100.00 2,03,78,720 100.00

6. Equity Shares held by the top ten shareholders:

6a. Top ten shareholders as on the date of filing this Red Herring Prospectus with SEBI:

Sr. No.

Name of the Shareholder No. of Shares % to Paid up Capital

1 Mr. Sukumar Srinivas 1,40,81,750 98.72 2 M/s. Shankara Holdings Pvt. Ltd. 1,61,200 1.13 3 Mr. C Ravikumar 12,400 0.09 4 Mr. RSV Shiva Prasad 1,550 0.01 5 Mr. KG Kashinath 1,550 0.01 6 Mr. LR Reddy 1,550 0.01 7 Mr. V Devanathan 1,550 0.01 8 Mr. V Vasantha Mohana 1,550 0.01 9 Mr. Alex Varghese 620 0.00

Total 1,42,63,720 100.00


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6b. Top ten shareholders ten days prior to filing this Red Herring Prospectus with SEBI: Sr. No.


1 Mr. Sukumar Srinivas 1,40,81,750 98.72 2 M/s. Shankara Holdings Pvt. Ltd. 1,61,200 1.13 3 Mr. C Ravikumar 12,400 0.09 4 Mr. RSV Shiva Prasad 1,550 0.01 5 Mr. KG Kashinath 1,550 0.01 6 Mr. LR Reddy 1,550 0.01 7 Mr. V Devanathan 1,550 0.01 8 Mr. V Vasantha Mohana 1,550 0.01 9 Mr. Alex Varghese 620 0.00

Total 1,42,63,720 100.00 6c. Top ten shareholders two years prior to filing this Red Herring Prospectus with SEBI:

Sr. No.


1 Sukumar Srinivas 44,96,800 99.85 2 Lalitha Neelakantan 4000 0.09 3 T Lakshmi chand 100 0.00 4 Jayesh Kothari 100 0.00 5 Prakash chand 100 0.00 6 S J Radhakrishna 100 0.00 7 Hemalatha 100 0.00 8 Bansilal uthaman HUF 100 0.00 9 Vinod B 100 0.00

10 Neha M 100 0.00 Total 45,01,600 99.96

7. Employee Stock Option Plan Outstanding options

Remarks

58,900 Adopted for the benefit of employees eligible under the plan. The total options earmarked were 2,00,000. The plan was approved by the shareholders of the company at their meeting held on 12/11/2007

Following are the details in relation to options granted under ESOP: The Company has implemented an Employee Stock Option Plan (ESOP) in their Extra Ordinary General Meeting on 12/11/2007. As per the ESOP, the options granted would vest over a period of Five years from the date of Grant. The employees of the company who have been covered under this plan have a period of 5 years from the date of vesting to exercise the options that are vested. Sr. no Particulars a Options granted 58,900

b Pricing Formulae

At a price not less than the face value per share. All options outstanding

have been granted at Rs. 10.


19

c Options Vested 58,900

d Options Exercised Nil e Total no. of shares arising as result of exercise of Options 58,900

f Options lapsed * Nil

g Variation in terms of Options None

h Money realised by exerise of Options (in lakhs) Nil

i Total number of options in force 58,900

j Employee wise details of options granted to:

- Senior Management No: of Options C. Ravikumar 5700

R.S.V. Sivaprasad 5300

K.G. Kashinath 4400

V. Devanathan 4,300

L.R. Reddy 4,200

S. Subramonia Iyer 1,800

C. Jaiprakash 3,400

Alex Varghese 2,900

- any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year No: of Options

C. Ravikumar 5700

R.S.V. Sivaprasad 5300

K.G. Kashinath 4400

V. Devanathan 4300

L.R. Reddy 4200

V. Vasantha Mohana 3100

C. Jaiprakash 3400

- employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding warrants and conversions) of the company at the time of grant

None

k Weighted average exercise price of Options granted during the year

whose (a) Exercise price equals market price NA (b) Exercise price is greater than market price NA (c) Exercise price is less than market price 10

* Lapsed Options includes options forfeited and options cancelled/lapsed.

The Senior Management and the employees have confirmed that there would not be any sale of equity shares arising pursuant of exercise of the options granted within three months after the date of lisiting of the shares.


20

8. There is no “buy back” or “stand by” arrangement for purchase of Equity Shares by SPIL, its Promoters, Directors, BRLM for the equity shares offered through this Red Herring Prospectus.

9. SPIL has not raised any bridge loan against the proceeds of the issue. 10. SPIL has Nine Shareholders as on the date of filing this Red Herring Prospectus with SEBI. 11. An over-subscription to the extent of 10% of the net offer to public can be retained for purposes of rounding

off to the nearest multiple of minimum allotment lot. 12. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment,

and rights issue or in any other manner during the period commencing from submission of this Draft Red Herring Prospectus with SEBI until the Equity Shares to be issued pursuant to the Issue have been listed. However the company is considering the pre- IPO placement of certain equity shares with certain investors, prior to the completion of the issue. In such a case the issue size offered to the public would be reduced to the extent of such pre- IPO placement subject to such minimum issue size of the post issue capital being offered to the public as may be permitted.

13. SPIL does not presently intend or propose to alter its capital structure for a period of six months from the

Bid/Issue Opening Date, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise. However, if business needs of the Company so require, the Company may alter the capital structure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities whether in India or abroad during the period of six months from the date of listing of the Equity Shares issued under this Red Herring Prospectus or from the date the application moneys are refunded on account of failure.

14. SPIL has not revalued its assets since its incorporation. 15. SPIL has not made any public issue since its incorporation. 16. SPIL undertakes that at any given time, there shall be only one denomination for the Equity Shares of the

Company and that it shall comply with such disclosure and accounting norms as specified by SEBI from time to time.

17. As on the date of this Red Herring Prospectus, there are no outstanding warrants, options or rights to convert

debentures, loans or other financial instruments into the Equity Shares. The shares locked in by the Promoter are not pledged to any party.

18. No payment, direct or indirect, in the nature of discount, commission allowance or otherwise shall be made

either by the issuer company or the promoters in any public issue to the persons who receive firm allotment in the public issue.


21

OBJECTS OF THE ISSUE The Objects of the Issue is to raise resources to finance:

− Setting up of formatted Retail Stores and warehouses

− Setting up of manufacturing facilities at Andhra Pradesh

− Implementation of Enterprise Resource Planning

− Establishing an e-portal Service for providing IT enabled plumbing and fabrication services

− The expenses towards Brand Building & promotion

− Working Capital requirement and

− To list the equity shares of the Company on the stock exchanges.

The main object clause of the Memorandum of Association and objects incidental to the attainment of the main objects enables it to undertake the existing activities and the activities for which funds are being raised by the Company through this Issue. The net proceeds of the Issue after deducting the expenses for the Issue are estimated at Rs. [•] Lacs. The Fund requirement is based on the current business plan. In view of the competitive and dynamic nature of the industry in which the Company operates, the Company may have to revise its business plan from time to time and consequently the fund requirement may also change.

Cost of Project and Means of Finance SPIL intends to utilize Proceeds for financing the above mentioned objects. The details of utilization of Proceeds are as per the table set forth below: Cost of Project

Particulars Amount

(Rs. In lacs) Setting up of formatted Retail Stores & Warehouses at various locations

6,500.00

Setting up manufacturing facilities in Andhra Pradesh 330.00 Implementation of Enterprise Resource Planning 350.00 E-portal Service- IT enabled plumbing and fabrication service

255.27

Brand Building & promotion 500.00 Working Capital requirement [•] Preliminary & preoperative expenses including Issue expenses

[•]

Total cost of project [•] Means of Finance

Particulars Amount

(Rs. In lacs) Proceeds from the proposed issue [•] Internal Accruals [•] Total means of finance [•]


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Details of the Objects

Details of the objects of the issue are as follows: 1. Setting up of formatted Retail Stores & Warehouses

Retail Stores

SPIL proposes to strengthen its presence in the retail segment by adding retail outlets for sale of all type of pipes, steel, welding equipment, paints, hardware and accessories. SPIL proposes to offer to the consumer/ house builder a reliable & convenient one stop steel & allied solution shopping experience. The shops will stock branded and non-branded products and over a period of time, the Company will establish its own brand across various product categories. Specially designed ‘Steel Structure‘ concept shops will be opened across different strategic locations in India. The business will run on a hub and spoke model where the retail outlets will be supported by logistic infrastructure in the form of warehousing facilities. The Company uses a judicious mix of owned and leased premises for establishing the retail outlets. SPIL uses specific formats for the retail outlets based on market potential. The formats used are:

− Super store: Approximate area of 10,000 sq. ft. − Regular store: Approximate area of 3,000 - 5,000 sq. ft. − Express store: Approximate area of 1,000 – 1,500 sq. ft.

The following products are made available in these outlets:

Description Product Pipes Mild Steel & Stainless Steel, PVC, CPVC, Galvanised Pipes, Seamless etc. Steel Structural, re-rollables such as angles, channels, flats, rods, plates, sheets, wire mesh,

binding wires, chequered sheets etc. Welding products Welding rods, Co2 /mig wire, welding machines, goggles, gloves etc. Paints Rust preventive paint and metallic paints. Hardware & accessories

Fastners, ornamental grills & fabrication items, fittings, glue ,etc

SPIL sources the products from the current established sources and other local suppliers. The customers include individuals, Fabricators, Plumbers and Contractors. Setting up the retail stores would benefit SPIL in the following manner:

• Direct Connection to the end customer. • Diversification into allied products. • Rapid increase in Sales volumes combined with increase in profit margins. • Significant presence in region of operation. • Enhance brand equity of SPIL.

To ascertain the concept/need for a steel & tubes retail format, M/s. Vertebrand Consulting ( P ) Ltd. , a Bengalooru based marketing & brand consultant was appointed to conduct a detailed study and market survey on the concept and its validation. On the basis of the survey SPIL has decided to proceed with the project of opening/expanding formatted retail stores.


23

SPIL has already established 16 stores and additional 2 stores would be functional by March 2008. The details of the existing stores are as under:

Sr. no

Location Area (in sq ft)

Format Ownership

Bengalooru* 1. H B R Layout, outer ring road 3610 Regular Leased

2. Yeshwanthpura

2400 Regular Leased

3. Kanakapura Road

4500 Regular Leased

4. Hoody, White field 2860 Regular Leased

Calicut 5. Cherooty Road 1078 Express Leased

Goa 6. Margao 1130 Express Leased

Hubli 7. New Cotton Market 6156 Regular Owned

Hyderabad 8. Hill Street, Ranigunj,

Secunderabad 1260 Express Owned

9. Balanagar, Hyderabad

6662 Regular Leased

10. Sikh village, Secunderabad

2000 Regular Leased

Kochi 11. T.D. Road, Ernakulam 1000 Express Leased 12. Aluva 3000 Regular Leased

Mangalore 13. Azizuddin Road, Bunder 2365 Regular Owned

Mumbai 14. Mira-Bhayandar road 1590 Express Leased

Vizag 15. Suryabagh 990 Express Leased 16. N-H-05, Gajuwaka 1139 Express Leased

Total 41740 * Two more stores are being established in Bengalooru in the Regular format.

The Company proposes to expand its retail presence by establishing 35 additional stores in the desired formats. The proposed locations identified by the Company are as follows:

City Owned Leased Format Ahmedabad - 1 Regular Bengalooru 3 2 Regular Bellary - 1 Express Belgaum - 1 Regular Bhubneshwar 1 - Regular Calicut 1 - Super Chennai 2 - Regular & Super Cochin 1 - Regular Coimbatore 1 1 Super & Regular Davangere - 1 Express Goa 1 - Super


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City Owned Leased Format Hyderabad 2 2 Regular Hubli - 1 Regular Kakinada - 1 Express Madurai - 1 Regular Mangalore 1 - Super Mumbai - 3 Express Mysore - 1 Regular Pune 1 - Regular Salem - 1 Super Trichur - 1 Regular Trichy - 1 Regular Vijaywada 1 - Regular Vizag 1 - Super Total 16 19

Warehouses The retail outlets are supported by logistic infrastructure in the form of warehousing facilities. Presently SPIL has 26 number of warehouses at strategic locations, details of which are as follows:

Sr. no


Ownership

Ahmedabad 1. Sanad 1000 Leased 2. Sarkehj 21560 Leased

Bengalooru 3. Veerasandra, Electronic city 55000 Owned 4. Siddiah road, Lalbagh 9900 Leased 5. K S Garden 2200 Leased 6. 6th cross, Siddiah road, Lalbagh 2158 Owned

Bellary 7. Bangalore road, Bellary 660 Leased

Bhiwandi 8. Kesarwani compound & Gupta,

Purna village, 7000 Leased

Bhubaneshwar 9. Mancheshwar 2448 Leased

Calicut 10. Beach Road 3500 Leased

Cochin 11. Palarivattom 6140 Owned 12. Alwaye 17500 Leased

Coimbatore 13. Trichy Road 28784 Owned

Chennai 14. Ambattur 11200 Owned

Davangere 15. Off. Bangalore Pune highway 2080 Leased

Goa 16. Margao 1600 Leased

Hosur 17. SIDCO Industrial Estate 20800 Leased

Hubli


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Sr. no


Ownership

18. New cotton market 6000 Leased Hyderabad 19. Sikh village 8032 Leased

Mangalore 20. Bunder 7700 Leased

Mumbai 21. Sakinaka 3340 Leased

Pune 22. Tathwade 4960 Leased 23. Tathwade 5445 Owned

Salem 24. New Trichy Road 9163 Owned

Vijaywada 25. Bhavanipuram 9000 Leased

Vizag 26. Stadium Road 3000 Leased

Total 250170

The Company proposes to establish 8 additional warehouses. All the new warehouses will be owned by the Company. The proposed locations identified by the Company & its statistics are as follows:

City Number Area (in sq. ft)

Status

Ahmedabad 1 44500 To be identified Bengalooru 1 44500 Land acquired and document

registered Chennai 1 44500 To be identified Cochin 1 44500 To be identified Hyderabad 1 44500 To be identified Mumbai 1 60000 Agreement executed Salem 1 23990 Land identified Vizag 1 20000 To be identified Total 8 326490

The estimated cost of setting up the warehouses and retail outlets is Rs. 6500 lacs as projected by the Company details of which are as under:

(Rs. in lacs) Particulars Owned Leased Warehouse Land & Building 2800 - Retail Stores Deposit/ Advance rent - 500 Cost of acquisition (Land & Building) 3000 - Furniture and fixtures 120 80 Total 5920 580

STATUS Warehouses The Company has already acquired land for setting up warehouses at Bengalooru (44500 sq.ft) and has entered into ‘Agreement for sale’ for warehouses at Mumbai (60000 sq. ft) and identified a location at Salem (23990 sq. ft). The total amount spent on as on date is Rs. 204.98 lacs.


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Retail The Company has already acquired land for setting up retail stores at Mangalore (21681 sq.ft.), Chennai (14211 sq. ft.) & Calicut (9522 sq.ft) and entered into an agreement for sale at Bengalooru (6198 sq.ft.). The Company has entered into an agreement for sale to acquire an office space of 1780 sq. ft in Mumbai to coordinate retail activities in Maharashtra. The total amount spent on as on date is Rs. 304.01 lacs.

2. Setting up of manufacturing facilities at Andhra Pradesh

The Company would require about 7500 MT per month of Steel Pipes for the retail business. The company proposes to have in house production facility for 1500 MT. This manufacturing facility shall help the Company to have its own ‘Private Label’ which would ensure products with quality products, timely supply, extending the reach of the brand, both on service and products which will improve the profitability of the Company. To start with SPIL proposes to produce steel pipes used in the fabrication sector. The company plans to set-up the said manufacturing facilities near Hyderabad for producing Pipes and Tubes. SPIL intends to produce around 1500 MTs per month from this plant under the company’s brand. Advantages of setting up of the manufacturing facilities near Hyderabad:

Hyderabad is located in the South–Central part of India and is well positioned to facilitate supplies to Eastern and South Maharashtra (Nagpur, Latur/ Solapur region), Chattisgarh & Orissa besides Andhra Pradesh, where the company has substantial presence. The estimated cost for setting up the said manufacturing facility is as follows:

Particulars Amount

(Rs. in lacs) Land & Building 135.00 Plant & Machinery -Tube Mill 43.79 -150 KW Welder 20.44 -DC Motor & DC Drive 6.15 -Gear Box 8.53 -Compressor 4.41 -Cooling Tower 0.82 -Electricals 16.65 -Tooling 36.00 -Machine shop 2.00 -Gantry Crane 13.31 -3 MT EOT Crane 5.00 -Pumps & internal Pipe line 5.00 -Finishing Equipment 3.90 -Quality Control 5.00 -Erection & Commissioning Charges 5.00 -Design & Consultation 10.00 -Contingencies 9.00 Total 330.00


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Land A sum of Rs. 44.00 lacs has been allocated towards land and land development. The total area of land purchased for the proposed project is 32,340 sq.ft. The details of which are as given below:

Survey number of the land Name and address of the seller & Occupation

Survey no. 487, Bachupally village, Quthubullapur Mandal, R R district, Andhra Pradesh

Yarla Gadda Sreedhar 107, Jayabheri Silicon County, Madhapur Road, Kothaguda, Hyderabad Occupation: Business

The nature of the title or interest in the above mentioned properties - Absolute ownership. The land acquired by the company is free from all encumbrances and has a clear title. Building The Company proposes to construct 18800 sq.ft of new factory building for the proposed project. The factory building would be inclusive of storage area of 5000 sq. ft, Administrative Building of 2250 sq. ft etc. For the civil construction, the company has received quotation from M/s Ratnakar Constructions vide their Proforma dated 12/08/2007. Details of which are as under

Sr. No

Particulars Amount (Rs. in lacs)

1 RCC work in excavation , foundation and plinth 14.17 2 RCC and reinforcement steel for column and flooring 25.27 3 Reinforcement with binding wire 0.48 4 Stone work and masonry 5.38 5 Structural steel 6.30 6 Roofing sheet 14.40 7 Foundation bolts 0.50 8 Service Roads 9.94 9 Administrative Building 14.05

10 Miscellaneous 0.51 Total 91.00

As on date SPIL has already incurred an expenditure of Rs. 96.24 lacs towards Land and building acquired near Hyderabad bearing survey no. 487, Bachupally village, Quthubullapur Mandal, R R district.

Plant & Machinery The Company has placed purchase orders and received pro forma invoices/quotations for purchase of plant and machinery from various vendors. The total landed cost of the plant and machinery (including custom duties, transportation and erection charges) has been estimated at Rs. 195 Lacs. The estimates are based on purchase orders placed by the Company and the proforma invoices/quotations received by the Company. No second hand equipment or equipments has been purchased or is proposed to be purchased from the Net Proceeds. The Company has received quotations from some of the supplier which are as follows:

Sr. no

Description Supplier Amount (Rs. lacs)

Purchase order

1. Tube Mill Cost Tube Technologies – Bangalore 43.79 20/09/2007 2. Toolings Tube Technologies – Bangalore 36.00 20/09/2007 3. 150 KW RF Welder Strayfield – Bangalore 20.44 15/10/2007 4. 100 KW DC Motor Integrated Electric Co. Pvt. Ltd., -

Bangalore 3.26 15/10/2007

5. DC Drive GEMCO Controls Ltd – Ahmedabad 2.89 15/10/2007


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Sr. no

Description Supplier Amount (Rs. lacs)

Purchase order

6. Worm Reduction Gear Box

Elecon Engg. Co. Ltd., - Ahmedabad 8.53 15/10/2007

7. 1O t Gantry Crane Varun Fabs – Hyderabad 13.23 28/11/2007 8. 500 KVA Transformer &

Substation Surya Electricals – Hyderabad 5.85 06/09/2007

(Quotation) 9. Cooling Towers Perfect Cooling Towers – Bangalore 0.82 To be finalized 10. Air Compressor Tube Technologies – Bangalore 4.41 15/10/2007 11. External Electricals Surya Electricals – Hyderabad 3.15 06/09/2007

(Quotation) 12. Electricals for Machinery

& Internal Panels Ganesh Electricals & Consultancy & Frontline Kontrols – Banglore

4.50 To be finalized

13. 3 MT EOT Crane Varun Fab – Hyderabad 5.00 To be finalized 14. Electrical Stabilizers To be identified 3.15 To be finalized 15. End facing To be identified 3.90 To be finalized 16. Pumps & internal pipe

lines To be identified 4.07 To be finalized

17. Machine shop To be identified 2.00 To be finalized 18. Quality equipment To be identified 5.00 To be finalized 19. Erection &

commissioning Tube Technologies – Bangalore 5.00 20/09/2007

20. Design & Consultation Tube Technologies – Bangalore 10.00 20/09/2007 21. Miscellaneous &

Contingencies 10.00

Total 195.00 Out of the above requirement, advances of Rs. 14.83 Lacs has already been paid till date.

3. Implementation of Enterprise Resource Planning (ERP)

SPIL proposes to embark on IT initiatives to support the growth plans. Being one of the largest distributors of Steel pipes and tubes in the Country SPIL has spread its operations in various parts of the Country. Today SPIL has 26 warehouses, 16 retail stores, 20 offices and a number of customers. The business involves large logistic management including manufacturing, inventory, debtors, creditors, tracking customer requirements, deliveries, etc. The company today has developed in house capabilities to manage the information systems through well defined internal controls. There is a need to ramp up the managing capabilities looking at the growing demands of the business and proposed expansion program. With this view SPIL proposes to implement ERP systems to enhance reporting and data navigation capabilities and strengthening internal control systems. The Company has already initiated steps for implementation. The estimated cost for the said initiative is Rs. 350 lacs. The Company has identified Visnova Solutions Pvt. Ltd. a business partner of SAP for providing complete ERP solution and is in the process of finalizing the same.

4. E-portal Service- IT enabled plumbing and fabrication service SPIL made modest beginning in 1995 with distribution of steel tubes and pipes. Over the years the Company has emerged as one of the leading distributors. After establishing the distribution setup the Company has forayed into retailing of steel tubes, pipes and allied products. Today the Company has retail outlets at 16 locations and is proposing to open another 37 out lets by 2008-09. These retail outlets would, apart from steel tubes and pipes also store products related to plumbing and fabrication. SPIL proposes to strengthen its retail reach through a proposed launch of E-portal services which would facilitate IT enabled plumbing & fabrication services. The portal will offer online plumbing & fabrication services to households, small & medium commercial & service establishments.


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E-portal will facilitate customers to register and avail the services offered by the Company. The same will be made available at a predetermined fee. The registered customer can have access to the specifications/ information of the services/products of the Company which will be provided. The services/ products of the Company can be availed through the interactive e-portal route. The request can be sent by the Customer through the web site or through telephone. The products required for the portal will be sourced by the Company through the already established retail counters or from empanelled dealers/manufacturers. SPIL plans to start the service in a progressive manner in the cities like Ahmedabad, Bengalooru, Chennai, Delhi, Hyderabad, Kochi, Kolkatta, Mumbai, Pune and Vizag. The retail stores of the Company already have a database and a select panel of plumbers & fabricators. SPIL has already initiated a Plumbers Training Program (PTP). Plumbers & fabricators will be empanelled & called upon to take up services as & when required. This will be an outsourcing model. It is estimated that the requirement of Plumbers and fabricators by Financial Year 2008-09 is as follows:

Particulars Numbers Plumbers & Fabricators on rolls 200 Call centre operators on rolls 35

The Company will target the Middle/upper middle/affluent households in India and also the small and medium commercial and service establishments. The Company shall earn its revenue through the following sources: a) Annual/predetermined fee charged from the customers b) Profit earned on products sold through the portal c) Advertisement revenue generated through the portal The estimated cost of setting up of the e-portal model is as follows:

Particulars Amount (Rs. in lacs)

Cost of Development of Portal based Solution

Team structure

SQL Developer GUI / Designer Net Developer Tester Project Manager

Webspace: 100 GB X Windows NT server with SQL server database, NET 2.00

Estimated at 33 man months of effort.

54.85

HARDWARE

Desktops/ Laptops, UPS, printer, photocopier, etc

158.30

NETWORK CONNECTIVITY

48 port switch - D-link, 42U Rack, networking component, cable, patch chords, electrical materials etc

42.12

TOTAL COST 255.27


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5. Meeting the expenses towards Brand Building & promotion The Company proposes to supplement the initiatives of expanding the retail stores and e-portal services through a well planned brand building and promotion exercise. The strategy of spending for the creation and awareness of brand would involve a cost of Rs. 500 lacs which is proposed to be spent as under:

(Rs. in lacs) Sr. no Particulars

E-portal Launch

Post e-portal Launch Total

1 Media - Newspaper & Publications 150.00 50.00 200.00 - Television & Cable 25.00 25.00 50.00 - FM Radio 25.00 25.00 50.00 200.00 100.00 300.00

2 Outdoor Publicity O n g o i n g p r o g r a m m e - Hoardings 50.00 - Other visuals 25.00 75.00

3 Theatre & Multiplex 25.00 25.00 4 Exhibitions 25.00 25.00 5 Events 50.00 50.00 6 Mailers & internet publicity 25.00 25.00

Total 500.00

6. Working Capital requirement

The detailed calculation of the working capital requirement of the Company based on estimates is as given below:

Particulars Estimates as on 31/03/2009

(Rs. in Lacs) (A) Current Assets Inventories 6,900 Debtors 13,686 Other Current Assets 1,751 Total Current Assets (A) 22,337 (B) Current Liabilities & Provisions Creditors for Supplies & others 10,962 Provisions 418 Total Current Liabilities (B) 11,380 Working Capital Gap (WCL) (A) – (B) 10,957 To be financed by: Bank limits 5,200 Internal Accruals [•] Public Issue [•]

SPIL currently has following bank sanctions for its working capital limits to the extent of Rs. 5,200.00 lacs:

(Rupees in lacs) Name of the Bank Amount Citibank N.A 2000 HSBC Ltd. 1700 Kotak Mahindra Bank Ltd. 1500 Total 5200


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Basis of estimation of working capital requirement

Particulars No. of Days Inventory 30 Debtors 60 Creditors 49

7. Preliminary & preoperative expenses including Issue expenses

Pre operative expenses for the manufacturing plant are estimated at Rs. [•] lacs. The expenses include expenses towards Wages & Remuneration, interest cost, fuel charges and other charges incurred for the project. IPO Issue expense

The break-up of issue expenses is as under:

Activity Estimated Expense (Rs. in lacs)

Fees to intermediaries [•] Advertising and marketing expenses [•] Printing and Stationary & Distribution [•] Others [•] Total estimated Issue expenses [•]

Schedule of implementation The proposed schedule of implementation for the projects is detailed below:

Activity Commencement Completion

Setting up of formatted Retail Stores & Warehouses at various locations

Already commenced

September 2008

Procurement of Plant & Machinery for Setting up manufacturing facilities in Andhra Pradesh

Already Commenced

April 2008

Implementation of Enterprise Resource Planning April 2008 September 2008 E-portal Service- IT enabled plumbing and fabrication service

March 2008

April 2008

Brand Building April 2008 September 2008

Year wise break up of the proceeds to be used

The year wise break up of funds to be incurred on the project under various heads is as follows:

Particulars Amount spent during the year

2007-08

Amount to be spent during the

year 2008-09

Total

Setting up of formatted Retail Stores & Warehouses at various locations

900.00 5600.00 6500.00

Setting up manufacturing facilities in Andhra Pradesh

210.00 120.00 330.00

Implementation of Enterprise Resource Planning 50.00 300.00 350.00 E-portal Service- IT enabled plumbing and fabrication service

50.00 205.27 255.27

Brand Building & promotion - 500.00 500.00 Working Capital requirement [•] [•] [•] Preliminary & preoperative expenses including Issue expenses

650.00 [•] [•]


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Sources & deployment of Funds As per the Certificate dated 06/12/2007 from Rao & Venkatesulu, Statutory Auditors & Chartered Accountants. The Company has upto 05/12/2007, deployed an amount aggregating Rs. 632.57 lacs towards the proposed project. Details of the sources and deployment of funds as per the certificate are as follows:

(Rs. In lacs) Particulars Amount

DEPLOYMENT OF FUNDS Setting up of formatted Retail Stores & Warehouses at various locations

509.00

Setting up manufacturing facilities in Andhra Pradesh • Land & Building • Plant & Machinery

96.24 14.83

Preliminary & preoperative expenses including Issue expenses

12.50

Total 632.57 SOURCES OF FUNDS Internal Accruals 632.57 Total 632.57

Interim Use of Funds The management, in accordance with the policies set up by the Board, will have flexibility in deploying the proceeds received from the Issue. Pending utilization for the purposes described above, the Company intends to temporarily invest the funds in high quality interest or dividend bearing liquid instruments including deposits with banks for the necessary duration. Such investments would be in accordance with any investment criteria approved by the Board of Directors from time to time. Monitoring of Utilization of Funds The Management of the Company will monitor the utilization of funds raised through this public issue. Basic terms of the issue The Equity shares being offered are subject to the provision of the Companies Act, 1956, the Memorandum and Articles of Association of the Company, the terms of this offer document and other terms and conditions as may be incorporated in the Allotment advice and other documents /certificates that may be executed in respect of the issue. The Equity shares shall also be subjected to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, RBI, ROC and /or other authorities as in force on the date of issue and to the extent applicable.


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BASIS OF ISSUE PRICE

QUALITATIVE FACTORS Strong management Team The promoter and the senior management team of the Company have significant industry experience and has been instrumental in the consistent growth of the Company’s income and operations. Multiple products The Company specializes in distributing a wide range of products such as steel pipes & tubes (Precision ERW and CDW Tubes, Closed Structural’s: RHS & SHS, Galvanized & Black Mild Steel Pipes and Boiler, Air-Heater & Seamless Tubes), steel bars and steel rods. This allows the Company to cater to the diverse demands of its customers and to consolidate and establish its presence across regions. Selling and Distribution network SPIL has spread its operations in 8 states through 20 offices, 16 formatted retail stores and 26 warehouses. The distribution channel of SPIL is one of the key strengths of the organization. The customers and retailers are segmented geographically on the basis of different products. SPIL has over 2,50,000 sq. ft of warehousing space across 26 locations. Retail presence SPIL has forayed into retail segment through its 16 outlets. These outlets are at a close proximity to the warehouses, hence replenishment of stocks is ensured within a shortest period of time. This helps the outlets to optimize in-store availability of merchandise and reduce transportation cost. SPIL’s strong distribution and logistics network enables the Company to minimize the requirement of a dedicated storage space at every store and instead undertake periodical replenishment of depleted stock. This helps the Company in maintaining an optimum working capital level.

QUANTITATIVE FACTORS Information presented in this section is derived from the restated financial statements certified by the Statutory Auditors of the Company.

1. Earnings Per Share (EPS) (on Rs. 10/- per share)

• The EPS of the Company based on audited financial six months financial period ended 30th September 2007 is Rs. 14.37.

• The annualized EPS based on Six Months financial period ended 30th September 2007 is Rs. 28.74.

2. Price/ Earning (P/E) Ratio

Particulars P/E based on pre-issue weighted average EPS of Rs. 16.69 [•] P/E based on pre-issue EPS of FY 2006-07 of Rs 19.31 [•]

Year Ended EPS (Rs.) Weight March 31, 2005 11.44 1 March 31, 2006 15.37 2 March 31, 2007 19.31 3 Weighted Average EPS 16.69


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3. Return on Net Worth (RONW)

Year Ended RONW (%) Weight March 31, 2005 32.23 1 March 31, 2006 30.91 2 March 31, 2007 28.67 3 Weighted Average RONW 30.01

• The RONW of the Company based on audited financial six months financial period ended 30th

September 2007 is 17.58%. • The annualized RONW based on Six Months financial period ended 30th September 2007 is 35.16%

4. Minimum Return on Increased Net Worth required to maintain pre-issue EPS: [•]

5. Net Asset Value (NAV) per share

Pre-Issue as on September 30, 2007 (Rs.) 81.78 Post Issue (Rs.) [•]

6. Industry Average P/E

The details of sales / RONW/ Book Value/ EPS and PE of above companies is as follows:

Name of the Company Sales as on

31/03/2007 (Rs. In Cr.)

RONW (%)

Book Value (Rs.)

EPS (Rs.)

P/E Multiple based on

Price as on 14/12/2007

STEEL Jai Corp 258.30 5.5 19.60 1.00 1072.60 Tulsyan NEC 430.20 19.70 67.40 11.90 9.55

RETAIL Pantaloon Retail 3392.80 7.40 85.70 3.90 172.60 Welspun India 937.50 9.90 73.20 7.30 14.96 Source: Capital Market – Dec 03- 16, 2007, Textile Products & Steel – Medium/ Small & www.bseindia.com

7. Comparison with Peer Group

SPIL is one of the largest distributors of steel pipes & tubes in the organized sector. SPIL distributes ERW, GI and Black steel tubes & pipes, seamless pipes, structural pipes, precision tubes, PVC pipes, steel structurals etc of all leading manufacturers like Tata Steel, Finolex, Jindal, Tubes Investments etc. SPIL has also been successful in establishing retail outlets for distribution of the products and further wish to

Name of Company P/E Multiple based on

Price as on 14/12/2007 STEEL

Highest Jai Corp 1072.60 Lowest Tulsyan NEC 9.55 Industry Average 33.80 Source: Capital Market – Dec 03- 16, 2007, Steel – Medium/ Small & www.bseindia.com

RETAIL Highest Pantaloon Retail 172.60 Lowest Welspun India 14.96 Industry Average 35.10 Source: Capital Market – Dec 03- 16, 2007, Textile Products & www.bseindia.com


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enhance its retail focus through present expansion. There are no comparable companies in listed category having business model similar to SPIL. However ratios of some of the Companies engaged in “manufacturing” of steel tubes & pipes comparable in terms of turnover & ratios of some of the Companies engaged in “retail” distribution are as follows:

Name of the Company Sales

as on 31/03/2007 (Rs. In Cr.)

RONW (%)

Book Value (Rs.)

EPS (Rs.)

P/E Multiple based on

Price as on 14/12/2007

STEEL Zenith Birla 346.10 12.60 49.70 3.90 18.99 Sical Logistics 988.30 5.70 137.00 4.50 58.98 Maharashtra Seamless 1390.00 35.00 133.20 32.30 18.85 Bihar Tubes 201.20 55.20 24.30 9.80 17.90 Metalman Industries 343.70 10.30 52.50 5.0 8.36 Pennar Industries 532.10 - 8.00 3.70 9.34 Ratnamani Metals 571.20 57.80 156.20 70.50 17.02

RETAIL Koutons Retail 402.40 44.50 86.30 11.30 71.99 Vishal Retail 602.70 25.90 105.70 11.20 72.74 Shoppers Stop 889.60 9.30 84.70 7.30 68.22 Source: Capital Market – Dec 03- 16, 2007& www.bseindia.com Shankara Pipes India Limited 502.21 28.67 67.35 19.31 -

8. The face value of Equity Shares of Shankara Pipes India Limited is Rs.10 and the Issue Price is [•] time

of the Face Value.

The Issue Price of Rs. [•] has been determined on the basis of the demand from investors through the Book- Building Process and is justified based on the above factors. The face value of the Equity Shares is Rs. 10 each. The Issue Price is [•] times the face value at the lower end of the price band and [•] times the face value at the higher end of the Price Band. On the basis of the above parameters the Issue Price of Rs. [•] per share is justified.


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STATEMENT OF TAX BENEFITS To The Board of Directors, SHANKARA PIPES INDIA Ltd, G-2, “Farah Winsford” # 133,Infantry Road, Bengalooru-560 001. Sub : Statement of possible Tax Benefits available to the Company and its shareholders Dear Sirs, We hereby report that the enclosed statement states the possible tax benefits available to the Company and to the shareholders, of the Company under the Income tax Act, 1961, Wealth Tax Act, 1957, presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which are based on business imperatives the Company faces in the future, the Company may or may not choose to fulfill. The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws and the fact that the Company will not distinguish between the shares offered for subscription and the shares offered for sale by the Selling Shareholders, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: (i) Company or its shareholders will continue to obtain these benefits in future; or (ii) The conditions prescribed for availing the benefits have been / would be met with. The contents of the enclosed statement are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. Place: Bangalore Dated: 26/11/2007

For RAO & VENKATESULU

Chartered Accountants

Sd/-

K.Y. Ningoji Rao

Partner

Membership No.18278


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STATEMENT OF TAX BENEFITS AVAILABLE TO SHANKARA PIPES INDIA LIMITED. ("THE COMPANY") AND ITS SHAREHOLDERS I. BENEFITS TO THE COMPANY UNDER THE INCOME TAX ACT, 1961 ("THE ACT"):

The Company will be entitled to deduction under the sections mentioned hereunder from its total income chargeable to Income Tax. DIVIDENDS EXEMPT UNDER SECTION 10(34): Under section 10(34) of the act, the Company will be eligible for exemption of income by way of dividend from any domestic company referred to in section 115-O of the Act. INCOME FROM UNITS OF MUTUAL FUNDS EXEMPT UNDER SECTION 10(35): The company will be eligible for exemption of income received from units of mutual funds specified under section 10(23D) of the Act, income received in respect of units from the administrator of specified undertaking and income received in respect of units from the specified company in accordance with and subject to the provisions of section 10(35) of the Act. COMPUTATION OF CAPITAL GAINS: Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding Shares in a company, listed securities or units of Unit Trust of India or unit of Mutual Fund specified under section 10(23D) or a zero coupon bond will be considered as long term capital assets if they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are considered as "Long Term Capital Gains". Capital gains arising on sale of these assets held for 12 months or less are considered as "Short Term Capital Gains". Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition/ improvement and expenses incurred in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital gains, it offers a benefit by permitting substitution of cost of acquisition/improvement with the indexed cost of acquisition/improvement, which adjusts the cost of acquisition/ improvement by a cost inflation index as prescribed from time to time. As per the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(36) or 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). However, as per the proviso to section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units (whether listed or unlisted) or zero coupon bond, calculated at the rate of 20 percent with indexation benefit exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess). As per the provisions of section 111A of the Act, short-term capital gains on sale of equity shares or units of an equity oriented fund where the transaction of sale is chargeable to Securities Transaction Tax ("STT") shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education cess).

EXEMPTION OF CAPITAL GAIN FROM INCOME TAX:

1. Under section 10(36) of the Act, long term capital gains arising on eligible equity share in a company (acquired on or after the 1st day of march 2003 and before the 1st day of march 2004) sold through a recognised stock exchange in India will be exempt from tax.

2. Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT. However, such income shall be taken into account in computing the book profit tax payable under section 115JB.


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3. According to the provisions of section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately. However, if the said bonds are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money. Investments so made u/s 54EC on or after 1.4.2007 by an assessee during any financial year shall not exceed Rs.50,00,000/-.

OTHER SPECIFIED DEDUCTIONS: Subject to the fulfillment of conditions, besides General Deduction mentioned under section 37 of the Income Tax Act,1961 the company will be eligible, inter-alia, for the following specified deductions in computing its business income:- Section 35(1)(i) and (iv) of the Act, in respect of any revenue or capital expenditure incurred, other than expenditure on the acquisition of any land, on scientific research related to the business of the company. Section 35(1)(ii) and (iii) of the Act, in respect of any sum paid to a scientific research association which has as its object, the undertaking of scientific research or to any approved university, college or other institution to be used for scientific research or for research in social sciences or statistical research to the extent of a sum equal to one and one fourth times the sum so paid. Subject to compliance with certain conditions laid down in section 32 of the Act, the company will be entitled to deduction for depreciation:

Depreciation shall be allowed: (a) In respect of tangible assets (being buildings, machinery, plant or furniture) and intangible assets

(being know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature acquired on or after 1st day of April, 1998) at the rates prescribed under the Income-tax rules, 1962;

(b) In respect of any new machinery or plant which has been acquired and installed after 31st March 2005 by an assessee engaged in the business of manufacture or production of any article of thing, a further sum of 20% of the actual cost of such machinery or plant;

Under section 36(1)(i) of the Act, A deduction is available to the Company for any premium paid in respect of insurance against risk of damage, or destruction of stocks or stores, used for the purpose of business. Under section 36(1)(ib) of the Act, a deduction is available to the Company in respect of any premium paid to keep in force an insurance on the health of the employees. Under section 36(1)(ii) of the Act, Bonus or Commission paid to employees is eligible for deduction to the Company. Under section 36(1)(iv), 36(1)(v), 36(1)(va), a deduction is available to the Company for any sum contributed in Recognized Provident Fund, Approved Gratuity Fund and other staff welfare scheme and any sum received by the company from its employees in respect of amounts specified in section 2(24)(x) of the I.T.Act provided that the same is remitted to appropriated authorities with in the stipulated time. Any bonafide expenditure incurred by the Company for the purpose of promoting family planning among its employees is allowable as deduction. If however , such expenditure is of a capital nature ,


39

one- fifth of such expenditure is allowable as deduction for the previous year in which it was incurred and the balance is deductible in equal installments in the next four years u/s 36(1)(ix) of the Act. Under Section 80 G of the Act , deduction is available to the Company for any sum paid as Donation to certain fund, Charitable Institution @ 50% and 100% at the case may be , subject to Net Qualifying Amount. Under section 80 JJAA of the Act, a deduction in respect of employment of new workmen is available to the Company to the extent of 30% of additional wages paid to the new “regular workmen” employed by the Company in the previous year, subject however to the conditions specified therein. Under section 115 JAA (1A) of the Act, tax credit shall be allowed of any tax paid (MAT) under section 115 JB of the Act. Credit eligible for carry forward is the difference between MAT paid and the tax computed as per the normal provisions of the Act. Such MAT credit shall not be available for set-off beyond 7 years succeeding the year in which the MAT becomes allowable. As per the provisions of Section 90, for taxes on income paid in Foreign Countries from projects/activities undertaken thereat, the company will be entitled to the deduction from the Indian Income-tax of a sum calculated on such doubly taxed income to the extent of taxes paid in Foreign Countries.

II. BENEFITS AVAILABLE TO RESIDENT SHAREHOLDERS:

DIVIDENDS EXEMPT UNDER SECTION 10(34): Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in section 115-O of the Act is exempt from income tax in the hands of the shareholders. COMPUTATION OF CAPITAL GAINS: Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. Shares in a company, listed securities or units of UTI or unit of Mutual Fund specified under section 10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are considered as "long term capital gains". Capital gains arising on sale of these assets held for 12 months or less are considered as "short term capital gains". Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition/ improvement and expenses incurred in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital gains, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index as prescribed from time to time. As per the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). However, as per the proviso to section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation benefit exceeds the tax on long term gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess). As per the provisions of section 111A of the Act, short-term capital gains on sale of equity shares where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 10 per cent (plus applicable surcharge and education cess).


40

EXEMPTION OF CAPITAL GAIN FROM INCOME TAX: 1. Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit

of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT.

2. According to the provisions of section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately. In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the Act.

However, if the said bonds are transferred or converted into money within a period of three years

from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.

Investments so made u/s 54EC on or after 1.4.2007 by an assessee during any financial year shall

not exceed Rs.50,00,000/-. 3. According to the provisions of section 54F of the Act and subject to the conditions specified therein,

in the case of an individual or a Hindu Undivided Family ('HUF'), gains arising on transfer of a long term capital asset (not being a residential house) are not chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in a residential house. If only a part of such net consideration is invested within the prescribed period in a residential house, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer, provided the said assessee does not own more than one residential house other than the new asset on the date of transfer of the original asset so sold.

REBATE UNDER SECTION 88E: Section 88E provides that where the total income of a person includes income chargeable under the head "profits and gains of business or profession" arising from taxable securities transactions, he shall get rebate of STT paid by him in the course of his business. Such rebate is to be allowed from the amount of income tax in respect of such transactions calculated by applying average rate of income tax.

III. BENEFITS AVAILABLE TO NON-RESIDENT INDIAN SHAREHOLDERS (OTHER THAN FIIs

AND FOREIGN VENTURE CAPITAL INVESTORS):

DIVIDENDS EXEMPT UNDER SECTION 10(34): Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in section 115-O of the Act is exempt from income tax in the hands of the shareholders. COMPUTATION OF CAPITAL GAINS: Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. Shares in a company, listed securities or units of UTI or units of mutual fund specified under section 10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are considered as "long term capital gains". Capital gains arising on sale of these assets held for 12 months or less are considered as "short term capital gains".

Section 48 of the Act contains special provisions in relation to computation of capital gains on transfer of shares of an Indian company by non-residents. Computation of capital gains arising on transfer of shares in case of non-residents has to be done in the original foreign currency, which was used to


41

acquire the shares. The capital gain (i.e., sale proceeds less cost of acquisition/ improvement) computed in the original foreign currency is then converted into Indian rupees at the prevailing rate of exchange. According to the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). In case investment is made in Indian rupees, the long-term capital gain is to be computed after indexing the cost According to the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). However, as per the proviso to section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation benefit exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess). As per the provisions of section 111A of the Act, short-term capital gains on sale of equity shares where the transaction of sale is chargeable to STT shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education cess). Options available under the Act

Where shares have been subscribed to in convertible foreign exchange:-

Option of taxation under chapter XII-A of the Act: Non-resident Indians [as defined in section 115C(e) of the Act], being shareholders of an Indian company, have the option of being governed by the provisions of chapter XII-A of the Act, which inter-alia entitles them to the following benefits in respect of income from shares of an Indian company acquired, purchased or subscribed to in convertible foreign exchange:

(a) According to the provisions of section 115D read with section 115E of the Act and subject to the

conditions specified therein, long term capital gains arising on transfer of shares in an Indian company not exempt under section 10(38), will be subject to tax at the rate of 10 percent (plus applicable surcharge and education cess), without indexation benefit.

(b) According to the provisions of section 115F of the Act and subject to the conditions specified therein, gains arising on transfer of a long term capital asset being shares in an Indian company shall not be chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period of six months in any specified asset.

If part of such net consideration is invested within the prescribed period of six months in any

specified asset the exemption will be allowed on a proportionate basis. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

Further, if the specified asset in which the investment has been made is transferred within a period of three years from the date of investment, the amount of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such specified asset or savings certificates are transferred.

(1) As per the provisions of section 115G of the Act, non-resident Indians are not obliged to file a

return of income under section 139(1) of the Act, if their source of income is only investment income and / or long term capital gains defined in section 115C of the Act, provided tax has been deducted at source from such income as per the provisions of chapter XVII-B of the Act.


42

(2) Under section 115H of the Act, where the non-resident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the assessing officer, along with his return of income for that year under section 139 of the Act to the effect that the provisions of the chapter XII-A shall continue to apply to him in relation to such investment income derived from any foreign exchange asset being asset of the nature referred to in sub clause (ii), (iii), (iv) and (v) of section 115C(f) for that year and subsequent assessment years until such assets are converted into money.

(3) As per the provisions of section 115-I of the Act, a non-resident Indian may elect not to be governed

by the provisions of chapter XII-A for any assessment year by furnishing his return of income for that assessment year under section 139 of the Act, declaring therein that the provisions of chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act.


(1) Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit

of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT.

(2) According to the provisions of section 54EC of the Act and subject to the conditions specified

therein, capital gains not exempt under section 10(38) and arising on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.

Investments so made u/s 54EC on or after 1.4.2007 by an assessee during any financial year shall not exceed Rs.50,00,000/-.

In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the Act. However, if the said bonds are transferred or converted into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.

(3) According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case of an individual, gains arising on transfer of a long term capital asset (not being a residential house) are not chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in a residential house. If only a part of such net consideration is invested within the prescribed period in a residential house, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer, provided the said assessee does not own more than one residential house other than the new asset on the date of transfer of the original asset so sold.



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IV. BENEFITS AVAILABLE TO OTHER NON-RESIDENT SHAREHOLDERS (OTHER THAN FIIS AND FOREIGN VENTURE CAPITAL INVESTORS):

DIVIDENDS EXEMPT UNDER SECTION 10(34): Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in section 115-O of the Act is exempt from income tax in the hands of the shareholders.

COMPUTATION OF CAPITAL GAINS: Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. Shares in a company, listed securities or units of UTI or units of mutual fund specified under section 10(23D) of the Act or a zero coupon bond will be considered as long term capital assets if they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more than 12 months are considered as "long term capital gains". Capital gains arising on sale of these assets held for 12 months or less are considered as "short term capital gains".

Section 48 of the Act contains special provisions in relation to computation of capital gains on transfer of shares of an Indian company by non-residents. Computation of capital gains arising on transfer of shares in case of non-residents has to be done in the original foreign currency, which was used to acquire the shares. The capital gain (i.e., sale proceeds less cost of acquisition/ improvement) computed in the original foreign currency is then converted into Indian rupees at the prevailing rate of exchange. As per the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). In case investment is made in Indian rupees, the long-term capital gain is to be computed after indexing the cost. As per the provisions of section 112 of the Act, long term gains as computed above that are not exempt under section 10(38) of the Act would be subject to tax at a rate of 20 percent (plus applicable surcharge and education cess). However, as per the proviso to section 112(1), if the tax on long term capital gains resulting on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20 percent with indexation benefit exceeds the tax on long-term gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10 percent (plus applicable surcharge and education cess). As per the provisions of section 111A of the Act, short-term capital gains on sale of equity shares, where the transaction of sale is chargeable to STT, shall be subject to tax at a rate of 10 percent (plus applicable surcharge and education cess).


(1) Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a

unit of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT.

(2) According to the provisions of section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately.

Investments so made u/s 54EC on or after 1.4.2007 by an assessee during any financial year shall

not exceed Rs.50,00,000/-.


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In such a case, the cost of such long term specified asset will not qualify for deduction under section 80C of the Act. However, if the assessee transfers or converts the notified bonds into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.

(3) According to the provisions of section 54F of the Act and subject to the conditions specified therein, in the case of an individual or a HUF, gains arising on transfer of a long term capital asset (not being a residential house) are not chargeable to tax if the entire net consideration received on such transfer is invested within the prescribed period in a residential house. If only a part of such net consideration is invested within the prescribed period in a residential house, the exemption shall be allowed proportionately. For this purpose, net consideration means full value of the consideration received or accrued as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer, provided the said assessee does not own more than one residential house other than the new asset on the date of transfer of the original asset so sold.


V. BENEFITS AVAILABLE TO FOREIGN INSTITUTIONAL INVESTORS ('FIIS'):

DIVIDENDS EXEMPT UNDER SECTION 10(34): Under section 10(34) of the Act, income earned by way of dividend from domestic company referred to in section 115-O of the Act is exempt from income tax in the hands of the shareholders.

TAXABILITY OF CAPITAL GAINS: Under section 10(38) of the Act, long term capital gains arising out of sale of equity shares or a unit of equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or unit is chargeable to STT.

The income by way of short term capital gains or long term capital gains [in cases not covered under section 10(38) of the Act] realized by FIIS on sale of shares of the company would be taxed at the following rates as per section 115 AD of the Act:

(1) Short term capital gains, other than those referred to under section 111A of the Act shall be taxed

@ 30% (plus applicable surcharge & education cess). (2) Long term capital gains @ 10% (plus applicable surcharge and education cess) (without cost

indexation).

It may be noted here that the benefits of indexation and foreign currency fluctuation protection as provided by section 48 of the Act are not applicable. According to the provisions of section 54EC of the Act and subject to the conditions specified therein, long term capital gains not exempt under section 10(38) shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed proportionately. Investments so made u/s 54EC on or after 1.4.2007 by an assessee during any financial year shall not exceed Rs.50,00,000/-. However, if the assessee transfers or converts the notified bonds into money within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become


45

chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.


VI. BENEFITS AVAILABLE TO MUTUAL FUNDS:

As per the provisions of section 10(23D) of the Act, any income of mutual funds registered under the Securities And Exchange Board of India Act, 1992 or regulations made there under, mutual funds set up by public sector banks or public financial institutions or authorized by the reserve bank of India would be exempt from income tax. However, the mutual funds shall be liable to pay tax on distributed income to unit holders under section 115R of the Act.

VII. VENTURE CAPITAL COMPANIES / FUNDS:

In terms of section 10(23FB) of the Act, all venture capital companies/funds registered with securities and exchange of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including profit on sale of shares of the company.

VIII. TAX TREATY BENEFITS:

An investor has an option to be governed by the provisions of the Act or the provisions of a tax treaty that India has entered into with another country of which the investor is a tax resident, whichever is more beneficial.

IX. BENEFITS AVAILABLE UNDER THE WEALTH-TAX ACT, 1957:

Shares of the company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of Wealth Tax Act, 1957, hence no wealth tax will be payable on the market value of shares of the company held by the shareholder of the company.

Note: 1. All the above benefits are as per the current tax law as amended by the Finance Act, 2007. 2. The stated benefits will be available only to the sole / first named holder in case the shares are held

by joint holders 3. In view of the individual nature of tax consequences, each investor is advised to consult his/her own

tax advisor with respect to specific tax consequences of his/her participation in the Issue.


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SECTION III - ABOUT THE ISSUER COMPANY

INDUSTRY OVERVIEW The information in this section is derived from a combination of various official and unofficial publicly available materials and sources of information. It has not been independently verified by the Company, the Lead Manager or their respective legal or financial advisors, and no representation is made as to the accuracy of this information, which may be inconsistent with information available or compiled from other sources. Steel Industry The world steel industry is currently going through a phase of growth and all round prosperity, fuelled primarily by the growth in consumption and production of steel in China. The major trends observed in the structure of the world steel industry are:

• Continuous shift of the industry– both in terms of production and consumption– from the West

towards the East; • Ensuring control over raw materials has become a very important component of steel business

strategy in the aftermath of tight supply conditions and inflated prices caused by China’s entry into the raw materials market;

• Consolidation taking place through mergers and acquisitions, often across boundaries, as companies acquired downstream facilities for assured markets and upstream facilities for assured raw material/feed material supplies;

• Increased volatility of steel prices globally and widening of the gap between spot and contracted prices;

• Significant increase in the market valuation of the steel companies worldwide resulting from rising prices and successful cost reduction efforts. (Source: Report of the Working Group on Steel Industry for the Eleventh Five-Year Plan (2007-2012))

India's rapid economic growth is being built on a frame of steel. Soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put India's steel industry on the world map. The Government of India anticipates a three-fold rise in steel production capacity to 120 million tonne (mt) making India the second-largest steel producer in the world by 2016. It has revised the capacity projections. (Source: www.ibef.org/industry/steel.aspx). Growth in steel consumption has accelerated in recent years. During the last five years, the world steel consumption has increased by approximately 338 million tonnes from 775 million tonnes in 2001 to 1,113 million tonnes in 2006. This represents an average compounded annual growth rate of around 7.5%, as compared to a modest 1% yearly growth in the previous three decades upto 2000. World steel production has also kept pace with an increase of 8.9% during 2006 over the previous year. Domestic steel production and apparent consumption were higher by 11.1% and 11.7% respectively over the previous year. It is widely believed that the Indian economy could sustain an annual growth rate of 8-9% in the long term. This could translate into a 10% rise in annual steel demand over the next ten years. The main drivers of this growth are the expected large investments in infrastructure, large-scale construction activities and the sustained rise in demand for auto and white goods from a burgeoning middle class in the country. While the robust steel demand globally has enabled the steel prices to remain buoyant, there has been significant pressure on margins from increased raw material prices on non-integrated steel players. (Source: Tata steel Annual Report 2006-07)


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Market Scenario • After liberalization, there have been no shortages of iron and steel materials in the country. • Apparent consumption of finished (carbon) steel increased from 14.84 Million Tonnes in 1991-92 to

43.471 million tonnes (Provisional) in 2006-07. During April-June, 2007, apparent consumption of finished (carbon) steel was 10.103 million tones (Provisionally estimated)

• Steel industry that was facing a recession for some time has staged a turnaround since the beginning of 2002.

• Efforts are being made to boost demand. • China has been an important export destination for Indian steel. • The steel industry is buoyant due to strong growth in demand particularly by the demand for steel in

China. (Source: www.steel.nic.in/overview.htm dated 30/07/2007)

Production • Steel industry was delicensed and decontrolled in 1991 & 1992 respectively. • Today, India is the 7th largest crude steel producer of steel in the world. • In 2007-08 (3 months period ended 30th June 2007), production of Finished (Carbon) Steel was 12.088

million tones (Prov). • Production of Pig Iron in 2007-08 (April-June'07) was 1.165 Million Tonnes (Prov). • The share of Main Producers (i.e Steel Authority of India Limited (SAIL), Rashtriya Ispat Nigam

Limited (RINL), etc) and secondary producers in the total production of Finished (Carbon) steel was 33% and 67% respectively during the period April-June, 2007.

• Last 4 year's production of pig iron and finished (carbon) steel is given below: (in million tonnes)

Category 2003-04 2004-05 2005-06 2006-07 (Provisional)

2007-08 (April-June'07)

(Prov. estimated)

Pig Iron 3.76 3.23 4.70 4.96 1.17

Finished Carbon Steel

36.96 40.06 44.54 49.39 12.09

(Source: www.steel.nic.in/overview.htm dated 30/07/2007)

Pipe & Tube industry

Steel pipes & tubes find use in a variety of applications at all stages of development of a country. Steel pipes and tubes are used for conveying water, steam and other liquid products besides being used for structural engineering, fabrication and general engineering. An important segment of the steel tube industry is the seamless category used in the oil sector and non-oil sectors. They consist of alloy steels and carbon steel tubes. This industry is an important segment of the Indian economy as it meets critical requirements of oil & gas sector and other hydrocarbon industry. In non-oil sector, these tubes are used in a number of important industries like boiler, ball-bearing, automobiles, chemical plants, fertilizers, petrochemicals and industrial machinery etc. Oil Sector accounts for around 60% of total requirement of seamless steel pipes. Bearings, Automobile and Boiler Sector contribute around 30% demand. The Industry is able to manufacture tubes upto 245 mm OD and is, by and large, meeting complete requirement of bearing and high-pressure boiler industries. With the expected substantial growth in the power and automobile sectors in the future, the demand pattern may change in favour of these two sectors. (Source: http://dipp.nic.in/industry) There is scope for development of infrastructure in agriculture, oil & gas, power and construction. Steel pipes find use in these development activities of a country.


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The manufacturing processes used for manufacturing pipes are ERW (Electric Resistance Welded), SAW (Submerged Arc Welded) and CDW (Cold Drawn Welded) Pipes & their uses

Longitudinal

Saw Pipes (LSAW)

Spiral/Helical Saw Pipes (HSAW)

Seamless Pipes

Ductile/Cast Iron (DI/CI

Pipes)

Electric Resistance

Welded (ERW) Application Oil & Gas

Transportation Oil & Gas Transportation, Water transportation

Petroleum , Exploration, general engineering, Boilers, Automotive

Water transportation, sanitation & housing

Oil & Gas/ Water Distribution, construction, general engineering

Size 16’ to 50” diameter

18’ to 100” diameter

½” to 14” diameter

3’ to 39” diameter

½” to 22” diameter

Used under high pressure conditions

Used under low pressure conditions

Wide application in oil related and non-oil industries

Ductile is rapidly replacing Cast Iron steel pipes

Limitation on size, thickness and grade

Key differentiator Demand directly related to investments in Oil & Gas sector

Demand directly related to investments in Oil & Gas sector and water projects

Pipe Industry Hierarchy (Type of Pipe)

Developed countries have used pipelines as a conduit for oil & gas more efficiently as compared to developing countries. This is evident from the fact that at present, the ratio of oil transportation by road & rail to pipelines in India is 70:30 compared to developed countries where this is almost reversed. However, countries like India understand the importance of this mode of transport and changes are being planned in days to come. Currently, the country is having a very limited network of cross-country pipelines. Planners in the country & also the energy industry are giving top priority to strengthen the pipeline network through out the country just like the transmission network for electricity. The usage of Pipes is also on increase for other applications like structures due to its design flexibility, superior weight to strength ratio and aesthetic appeal. As India’s automobile industry is becoming next success story for the country, Mechanical pipes industry is set to witness proportionate growth due to its wide spread application in the automobiles. More and more private sector participation is expected to step up the rate of growth in pipe line laying.


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The US$ 47.7 million steel tubes industry is poised for a 30 per cent growth in the wake of a growing demand in the infrastructure and construction sector, mainly in scaffolding in buildings. The sector has grown dramatically in the recent past at a record 20 per cent, owing to several infrastructure projects lined up by the Government and the private sector. The use of steel rods and bars in railway stations, multiplexes and gas pipelines has been replaced with steel tubes, fuelling further growth potential for the steel tubes industry. The infrastructure development ahead of the Asian Games scheduled in 2010 will drive the demand for steel tubes immensely. (Source: www.ibef.org). Healthy activity in pipes and tubes, automobiles and the construction segment is expected to enhance the demand for steel products. While flat products are expected to see a double-digit growth of 11 per cent to 21 million tonnes during 2007-08, the demand for long products is expected to grow by 7.6 per cent to 19 million tonnes. Although capacity additions in both segments will pull down the domestic demand-capacity ratio, balanced global fundamentals will help producers to export their products. (Source: Report on Steel products by Crisil Research; March 2007)

Retail Industry

India has topped the AT Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market -- one of India's fastest growing industries -- is expected to grow from US$ 350 billion to US$ 427 billion by 2010. According to Euromonitor International, the Indian Retail market will grow in value terms by a total of 39.6 per cent between 2006 and 2011, averaging growth of almost 7 per cent a year. Modern retail accounts for about 4 per cent of the total retail market in India. This share is expected to increase to about 15 -20 per cent with the entry of a number of corporates into the segment. Modern retail formats have grown by 25-30 per cent in India in the last year and could be worth US$ 175-200 billion by 2016.

Retail space

Retailers in India are the most aggressive in Asia in expanding their businesses, thus creating a huge demand for real estate. Their preferred means of expansion is to increase the number of outlets in a city, and also expand to other regions, revealed the Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia. Driven by changing lifestyles, strong income growth and favourable demographic patterns, Indian retail is expanding at a rapid pace. The country may have 600 new shopping centres by 2010. Mall space, from a meagre one million square feet in 2002, is expected to touch 40 million square feet by end-2007 and an estimated 60 million square feet by end-2008. (Source: http://www.ibef.org)

Major Formats of In-Store Retailing

Format Description The Value Proposition

Branded Stores Exclusive showrooms either owned or franchised out by a manufacturer.

Complete range available for a given brand, certified product quality

Specialty Stores Focus on a specific consumer need, carry most of the brands available

Greater choice to the consumer, comparison between brands is possible

Department Stores

Large stores having a wide variety of products, organized into different departments such as clothing, house wares, furniture, appliances, toys, etc.

One stop shop catering to varied/ consumer needs.

Supermarkets Extremely large self-service retail outlets

One stop shop catering to varied consumer needs

Discount Stores Stores offering discounts on the retail price through selling high volumes and reaping economies of scale

Low Prices


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Format Description The Value Proposition

Hyper- mart

Larger than a supermarket, sometimes with a warehouse appearance, generally located in quieter parts of the city

Low prices, vast choice available including services such as cafeterias.

Convenience stores

Small self-service formats located in crowded urban areas.

Convenient location and extended operating hours.

Shopping Malls An enclosure having different formats of in-store retailers, all under one roof.

Variety of shops available to each other.

(Source:http://www.indiainbusiness.nic.in/industry-infrastructure)

Retail reform

The Government allows 100 per cent foreign direct investment (FDI) in cash and carry through the automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators. Now, the Government also proposes further liberalisation in the retail sector allowing 51 per cent FDI in consumer electronics, sports goods, stationery and building equipment. (Source: www.ibef.org)


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BUSINESS OVERVIEW OVERVIEW Shankara Pipes India Limited (SPIL) was incorporated in October 1995 and is engaged in the business of distribution of a wide range of steel tubes and pipes. Over the years SPIL has emerged as one of the largest distributor in the organized sector. SPIL distributes ERW, GI and Black steel tubes & pipes, seamless pipes, structural pipes, precision tubes, PVC pipes, steel structurals etc of all leading manufacturers like Tata Steel, Finolex, Jindal, Tubes Investments etc. SPIL maintains high quality standards in its inventory management, procurement systems, logistics and customer service. SPIL is an ISO 9001 certified Company. SPIL is a recipient of prestigious ‘Emerging India Award’ in the category ‘Retail & Trade’ For the SME sector in the year 2005, instituted by CRISIL, ICICI Bank & CNBC TV (for other awards and recognitions please refer page no.68 of the Red Herring Prospectus). Today, SPIL:

Sells about 12,000 MT of steel tubes and allied products per month.

Has spread its operations in 8 states through 19 offices, 16 formatted retail stores and 26 warehouses.

Has over 2,50,000 sq.ft of warehousing facility.

Has over 40,000 sq.ft of retail space.

Has about 4,000 dealers & retailers.

Has a fleet of 20 trucks to supplement its delivery schedule.

In-house quality laboratory.

Has fully computerized operations and communication facility.

The Company is a sole distributor of the products of Tube Investments India Limited in Andhra Pradesh, Kerala and Karnataka

The Company is a sole distributor of the products of Tata Steel (tubes division) in the following regions:

Region Description South Karnataka and North Andhra Pradesh All products in Retail Segment Andhra Pradesh & Tamil Nadu Structural tubes

SPIL operates through its key departments to channelize the process of distribution effectively which are as follows:

The Consumer Department: Has been formed by the Company to interact with the consumers directly, understand their requirements, study their applications and guide them to buy the right product. The Project Department: Keeps track of all new and upcoming projects. SPIL interacts with the project implementation team of different Companies and guides them to pick up the right product for their requirements, keeping in mind the cost effectiveness and delivery schedules. The Trade Department: Ensures timely supply of the products to the dealers and retailers.

Departments

Consumer Department

Project Department

Trade Department


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SOME OF THE PRESTIGIOUS PROJECTS WHERE SPIL SUPPLIED ITS PRODUCTS INCLUDE 1. Larsen & Tubro Limited for:

Project Service Provided Period Bangalore International Airport Supplied pipes & tubes required for

Plumbing, Structure & space frames and fire protection

2006 to 2007

Calicut Airport

Supplied pipes & tubes required for Plumbing, Structure & space frames and fire protection

2006 to 2007

Indian Institute of Management (Calicut)

Supplied pipes used for canopy 2006

Sri Sathya Sai Baba Stadium, Puttaparthi

Supplied pipes used for Gallery Structure

2. Tata Consultancy Services (through Maharashtra Seamless Ltd) for:

Project Service Provided Period

Surinseri, OMR Road (Chennai) SPIL procured orders for pipes for the construction of the campus of Tata Consultancy Services. The material was supplied directly by Maharashtra Seamless Ltd.

2006 to 2007

3. Sobha Projects & Geodesic Technologies for:

Project Service Provided Period Infosys Campus

SPIL supplied pipes used in guard rails, structure, plumbing equipments for the development of campus of Infosys located at Bengalooru, Mysore, Mangalore, Chennai , Hyderabad and Pune.

2006 - 2007

4. Consolidated Consortium Ltd. & Essenco for:

Project Service Provided Period Wipro Limited Campus SPIL supplied pipes used in fabrication,

Fire Protection and plumbing at Wipro campus located at Mysore.

2006 – 2007

5. Formex Space Frames for:


Cochin Jawaharlal Nehru Stadium

SPIL supplied its products used for the construction of the new stadium

2007

6. GMR Infrastructures Ltd. for:


Hyderabad Airport SPIL supplied products required for required for Plumbing, Structure & space frames and fire protection.

2007 (currently on)


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7. Raj Bhavan (Bengalooru) for:

Project Service Provided Period Raj Bhavan SPIL helped in design and supply of its

products for the construction of glass house.

2001-2002

8. Shapoorji Pallonji for:

Project Service Provided Period General Motors, Pune Supplied material for truss fabrication and

scaffolding 2007

Fiat , Pune Supplied material for truss fabrication and scaffolding

2007

Tata Motors , Pune Supplied material for truss fabrication and scaffolding

2007

9. Simplex Limited for:

Project Service Provided Period P.V.Narasimha Rao Express Way (Hyderabad City to New Airport)

Supplied pipes for scaffolding and hand railing

2007 (currently on)

10. Maytas Projects Ltd., Andhra Pradesh for:

Project Service Provided Period Polavaram irrigation projects Supplied pipes required for irrigation 2007 (currently on)

Other projects wherein the Company had supplied its products include the following:

• Santa Cruz Airport (Mumbai) • Amrutha Institute of Medical Science

(Cochin) • Cochin Shipyard Ltd. (Cochin) • Spencers (Chennai) • Mangalore Refineries & Petro Chemicals Ltd. • International Cricket Stadium (Hyderabad)

• Ramoji Film City (Hyderabad) • SAP Labs (Bengalooru) • Volvo Limited, Bengalooru • Safal Fruit & Vegetables Auction Market

(Bengalooru), etc. • HITEX (Hyderabad) • Gachi-Bowli Stadium (Hyderabad)

COMPETITIVE STRENGTHS SPIL is amongst the premier and an established distributor of a wide range of steel tubes and pipes. It is an ISO 9001 certified Company, with a legacy of over a decade of presence in steel. The Company believes that the following are its principal competitive strengths:-

1. Strong management Team: The promoter and the senior management team of the Company have significant

industry experience and has been instrumental in the consistent growth of the Company’s income and operations.

2. Relationship with established players in industry: The Company enjoys credible relationship with steel majors like Tata Steel, Jindal, Tube Investments and other established players like Finolex for PVC tubes. The Company is well poised to benefit from this strong relationship with the industry players enabling the Company to provide better services to its customers.


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3. Multiple products: The Company distributes a wide range of products such as steel pipes & tubes (Precision ERW and CDW Tubes, Closed Structural’s: RHS & SHS, Galvanized & Black Mild Steel Pipes and Boiler, Air-Heater & Seamless Tubes), steel bars and steel rods. This allows the Company to cater to the diverse demands of its customers and to consolidate and establish its presence across regions.

4. Selling and Distribution network:

SPIL has spread its operations in 8 states through 20 offices, 16 formatted retail stores and 26 warehouses. A brief description is as follows :

Particulars State / Cities Branches Kerala, Tamil Nadu, Andhra Pradesh, Maharashtra, Karnataka, Gujarat, Orissa and

Goa Offices Ahmedabad, Bengalooru, Bellary, Bhubaneswar, Calicut, Chennai, Coimbatore (two

offices), Davangere, Ernakulam, Goa, Hosur, Hubli, Mumbai, Pune, Salem, Secunderabad (Two offices), Vishakapatnam and Vijayawada

The distribution channel of SPIL is one of the key strengths of the organization. The customers and retailers are segmented geographically on the basis of different products. SPIL has over 2,50,000 sq. ft of warehousing space across 26 locations.

5. Retail presence

SPIL has forayed into the retail segment through its 16 outlets. These outlets are at a close proximity to the warehouses, hence replenishment of stocks is ensured within a shortest period of time. This helps the outlets to optimize in-store availability of merchandise and reduce transportation cost. This helps the Company in maintaining optimum inventories.

FINANCIALS

Figures -(Rs. in lacs)

0

10000

20000

30000

40000

50000

60000

31/03/2003 31/03/2004 31/03/2005 31/03/2006 31/03/2007

Period

Sale

s

0

100

200

300

400

500

600

700

800

900

1000

PAT

Sales PAT

SPIL achieved total sales of Rs. 50221.40 lacs for fiscal 2007, Rs. 34623.76 lacs for fiscal 2006 and Rs. 26802.33 lacs for fiscal 2005, respectively. During the same period its profit after tax was Rs. 869.72 lacs, Rs. 692.19 lacs and Rs. 515.14 lacs, respectively. The Company registered a CAGR of 37% in sales & CAGR of 30% in Profit After Tax in past three years. For the six months period ended 30th September 2007, SPIL has achieved a sales of Rs. 28158.79 Lacs and a Profit After Tax of Rs. 647.36 Lacs.


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PROPERTIES

Used for organized Retail Stores Sr. No.

Location Title Area (Square feet)

Date of Agreement

Date of Renewal

Bengalooru 1 225, Shivaramaiah Layout,

H B R Layout, 3rd Block Kalyananagar Post Bengalooru-560 043

Leased

3610.00 01/04/2007 31/03/2009

2 76, Industrial Suburb, Near Soap Facotry, Yeshwanthpura, Bengalooru - 560 022

Leased

2400.00 01/11/2005 31/08/2008

3 18,Doddakalasandra, Kanakapura Road, Uttarahalli Hobli Bengalooru-560 062

Leased

4500.00 01/04/2007 & 01/04/2007

31/03/2008 & 31/03/2008

4 63/1, Next to Krishna Community Hall, Ayappa Nagar, Hoody, Bangalore – 560 036

Leased

2860 20/08/2007 19/07/2008

Mangalore 5 9-16-623, Neela Building,

Azizuddin Road, Bunder, Mangalore-575 001

Owned 2365 - -

Hubli 6 C.T.S # 122/120A

Opp:Raitnara Santhe, New Cotton Market Hubli-580 029

Owned 6156 - -

Hyderabad 7 5-1-571/1 Hill Street,

Ranigunj, Secunderabad-03

Owned

1260 - -

8 26/B, I.D.A Balanagar, Hyderabad

Leased 6662 31/01/2004 30/01/2009

9 207/3, Sikh Road, Sikh Village, Hyderabad

Leased

2000 01/07/2006

30/06/2009

Vizag 10 28-9-1/1 Suryabagh,

Visakhapatnam-530 020 Leased

1000 01/04/2004 31/03/2007

(Being renewed)

11 8-1-120, Panthulugarimeda, N-H,-05 Road Old Gajuwaka-530 026

Leased

1139 15/06/2006 14/06/2008

Goa 12 No.10 and 11, Ground

Floor, Swami Narayan Apartments, Opposite Rajendra Prasad Stadium, Quepem Road, Margao, Salcete, Goa

Leased

387.50 01/09/2007 31/07/2008


56

Sr. No.


Date of Agreement

Date of Renewal

Kochi 13 40/6708,6709, P.K.M

Building, T.D. Road, Flower Juction Ernakulam, Kochi-682 035

Leased

1000 01/06/2004 30/04/2005 (Being

renewed)

14 No. 3/730a, Chornikkara, Aluva West, Ernakulam

Leased

3000 01/12/2006 30/11/2011

Calicut 15 11/435,Achama Building,

Cherooty Road, Calicut-673 032

Leased

1078 01/10/2007 30/08/2008

Mumbai 16 No. 7, Ground Floor, Shree

Traders Centre, Village of Goddev, Bhyander, Dist. Thane

Leased

1590 01/10/2007 31/08/2008

Used for Warehouse

Sr. No.


Date of Agreement

Date of Renewal

Ahmedabad 1. 277, Jamnagar Trns Vill

Navapura Tal. Sanad Ahmedabad

Leased 1000 17/11/2006 16/11/2007

2. 398, Behind, Neelkanth waybridge, Fathawadi Village, Ahmedabad.

Leased 21560 01/12/2007 29/11/2008

Bengalooru 3. Survey no. 19/4, 21/1,

Veerasandra, Attibeli Hobli, Anakel Taluk, Bengalooru

Owned 55000 - -

4. 36/27, Second Main Road, H. Siddiah Road, Second Cross, Sudham Nagar, Bengalooru - 27

Leased 9900 01/11/2006 & 01/08/2005

31/10/2011 & 31/07/2010

5. 41, 4th Cross K.S Garden Lalbagh Road, Bengalooru-560 027

Leased 2200 01/02/2007 31/01/2012

6. 6th cross, Siddiah road, Lalbagh, Bengalooru - 560 027

Owned 2158 - -

Bellary 7. 100, HAS Building,

Bangalore Road, Bellary Leased 660 01/08/2007 30/06/2008

Bhiwandi 8. No. 528 (5), C/o

Kesarwani compound & Gupta, Near Rahnal Bus stop, Purna village, Bhiwandi taluk, Thane Dist.

Leased 7000 14/04/2006 13/04/2011


57

Sr. No.


Date of Agreement

Date of Renewal

Bhubaneshwar 9. 153 I E Mancheswar

Sector- A, Zone-B Leased 2448 15/04/2007 15/04/2013

Calicut 10. 3/2500 Abdunnasir

Building North Beach Road, Puthiya Kadavu, P. O Nadakkavu, Calicut

Leased 3500 24/09/2007

23/09/2007

Cochin 11. 32/1752 B(1), Pipeline

Road, Palarivattom, Ernakulam

Owned 6140 - -

12. 3/727, Sy. 146/24, Ward no. 3, Choornikara Panchayath Alva West Village Taluk Ernakulam

Leased 17500 01/05/2006 31/12/2008

Coimbatore 13. 659, Trichy Main Road,

Singanallur Post, Coimbatore

Owned 28784 - -

Chennai 14. No. 333, Sidco Industrial

Estate, Ambattur, Chennai – 28

Owned 11200 - -

Davangere 15. # 204, Hanumanthappa

Building, Off. Bangalore Pune highway

Leased 2080 10/09/2007

01/09/2010

Goa 16. Garage 1, On the Ground

Floor, Balaji Apartments Rawanfond Salcete, Goa

Leased 1600 01/08/2007

30/06/2008

Hosur 17. N-25 SIDCO Industrial

Estate, Phase-III Under Zuzuvadi, Village Panchayat, Hosur

Leased 20800 01/04/2007

28/02/2008

Hubli 18. CTS, 122/52 Ward No. III

at New Cotton Market, Hubli

Leased 6000 01/07/2007

09/06/2008

Hyderabad 19. 207/3, Sikh Road, Sikh

Village, Hyderabad Leased

8032 01/07/2006

30/06/2009

Mangalore 20. 10-21-999, 10-21-999/1,

10-21-998, Dr. Ansari Road, Bunder, Mangalore

Leased 7700 01/01/2005, 01/03/2006 &

25/08/2006

31/12/2009, 16/01/2011 &

25/08/2011

Mumbai 21. Unit No.5-6 Bldg. No.18-

B, Exim Chember, Leased 2600 01/03/2007 28/02/2008


58

Sr. No.


Date of Agreement

Date of Renewal

(Samhita Complex) A.K.Road, Sakinaka Andheri (E), Mumbai -400 072

Pune 22. 64/1 at Tathwade, Tal.

Mulshi, Dist. Pune - 411 033

Leased 4960 15/10/2006 & 01/01/2006

14/10/2008 & 31/12/2007

23. 25/1/6, Tathavade,

Mulshi Taluka, Pune Owned 5445 - -

Salem 24. 81/1, New Trichy Road,

Dadagapatty, Salem- 636 006

Owned 9163 - -

Vijayawada 25. 139, Bhavani Puram

Iron Complex Vijayawada -520 012

Leased 9000 01/02/2007 & 01/03/2007

01/02/2009 & 25/02/2009

Vizag 26. 28-9-1/1, Stadium Road,

Vizag

Leased 3000 01/04/2004

31/03/2007

Used for Office

Sr. No.

Location Title Date of Agreement

Date of Renewal

Ahmedabad 1. No. 5 Ground Floor, Shreeji

Estate Ahmedabad Leased 26/11/2006 22/11/2008

Bengalooru 2. G-2, Farah Winsford, 133,

Infantry Road, Bengalooru - 01 Owned - -

Bellary 3. 100, HAS Building, Bangalore

Road, Bellary Leased 01/08/2007 30/06/2008

Bhubaneswar 4. 153 I E Mancheswar Sector- A,

Zone-B, Bhubaneswar Leased 15/04/2007 15/04/2013

Calicut 5. 11/435,Achama Building,

Cherooty Road, Calicut-673 032

Leased

01/10/2007 30/08/2008

Chennai 6. 1666, 6th Avenue,Second

Floor,Anna Nagar West Chennai-600 40

Leased 28/09/2007

06/09/2010

Coimbatore 7. 659, Trichy Main Road,

Singanallur Post, Coimbatore Owned - -

8. 659, Trichy Main Road, Singanallur Post, Coimbatore

Leased 28/09/2007

06/09/2010

Davangere


59

Sr. No.

Location Title Date of Agreement

Date of Renewal

9. Bangalore Pune Highway, Davangere

Leased 22/08/2007 01/09/2010

Ernakulam 10. 32/1752 B(1), Pipeline Road,

Palarivattom, Ernakulam Owned - -

Goa 11. No.10 and 11, Ground Floor,

Swami Narayan Apartments, Opposite Rajendra Prasad Stadium, Quepem Road, Margao, Salcete, Goa

Leased

01/09/2007 31/07/2008

Hosur 12. N-25 SIDCO Industrial Estate,

Phase-III Under Zuzuvadi, Village Panchayat, Hosur

Leased 01/04/2007

28/02/2008

Hubli 13. C.T.S # 122/120A

Opp:Raitnara Santhe, New Cotton Market Hubli-580 029

Owned - -

Mumbai 14. Unit No.5-6 Bldg. No.18-B,

Exim Chember, (Samhita Complex) A.K.Road, Sakinaka Andheri (E), Mumbai -400 072

Leased 01/03/2007 28/02/2008

Pune 15. 64/1 at Tathwade, Tal. Mulshi,

Dist. Pune - 411 033 Leased 15/10/2006 &

01/01/2006 14/10/2008 &

31/12/2007 Salem

16. 81/1, New Trichy Road, Dadagapatty, Salem- 636 006

Owned - -

Secunderabad 17. 1/1/40/01, Vasavi Towers,

Second Floor, SD Road, Secunderabad

Owned

18. 03, 2nd Floor Vasavi Tower, Secunderabad

Leased 27/01/2007

07/04/2012

Vishakapatnam 19. 28-9-1/1 Suryabagh,

Visakhapatnam-530 020 Leased

01/04/2004 31/03/2007

(Being renewed) Vijayawada

20. 139, Bhavani Puram Iron Complex Vijayawada -520 012

Leased 01/02/2007 & 01/03/2007

01/02/2009 & 25/02/2009

Technical and Financial Agreements SPIL has not entered into any technical and/or financial agreement.


60

BUSINESS STRATEGY

Shankara Pipes India Ltd is one of the leading distributors of Pipes & Tubes which has a wide range of uses and a perennial demand in a highly competitive environment. The company as part of its quality policy has committed to make available the right quality product at the right time, at the right place and provide service thereafter so as to enhance customer satisfaction. The Company’s growth strategy is based on:

Retail expansion program

SPIL presently has its 16 retail outlets at various cities like Bengalooru, Mangalore, Secunderabad, Vizag, Goa Kochi and Calicut. SPIL intends to further expand itself in the retail by leveraging the existing sales and distribution network and apply innovative retail marketing initiatives. The strategy of the Company is to initially target the metros and tier I & tier II towns all over India. These outlets will enable the Company to offer its product in an organized format. The Company has already taken steps in this direction by opening its branchs in Ahmedabad, Mumbai, Pune and other cities. Further improving the cost structure SPIL believes in providing quality products at affordable prices. The Company maintains the cost of its product by cutting its distribution cost, which is done by having its retail outlets in close proximity to its warehouses. Through its retail outlets, SPIL intends to cater to the needs of consumer directly, which will give the Company a better profit margin on the products sold. It also reduces the cost of inventory by maintaining an appropriate stock of the same. Strengthen its customer relationship SPIL believes in having a strong relationship with its customers so as to serve them over a long period of time. The Company aims to continue to develop its relationship with the customers not only in terms of increased turnover but also in terms of increased variety in products. SPIL aims to achieve this by adding value to its client through quality, speed and reliability of its product delivery. E-portal Service The company has created number of retail outlets in many major cities in the country. The retailed products are related to plumbing and fabrication. In order to leverage these advantages SPIL proposes to enter the gamut of retail services. The company now plans to launch a web portal which shall have a detailed information about the products offered by the Company. The portal will offer online plumbing & fabrication services to households, small & medium commercial & service establishments. PRODUCTS SPIL primarily deals in the following products:

1. Precision ERW and CDW Tubes:

Precision welded ERW tubes are manufactured by high frequency induction welding process using cold rolled steel strips. CDW tubes are an important component of the ERW tubes. If ERW tubes with close tolerances and superior physical / mechanical properties are required in non-standard sizes specific end users, they are produced by cold drawing. Applications

• Automobile Industry & its ancillaries • Bicycle and Furniture Industries • Mechanical & General Engineering Industries • Textile machinery Manufacture • Auto Body Building • Propeller shafts • Transformer.


61

Features • Close tolerance on diameter and thickness • Exceptional concentricity • Smooth surface finish • Uniformity of flow under controlled temperature and pressure • The size range from 12.70mm outer diameter to 76.10 outer diameter and thickness starting from

0.60mm to 3.25mm. 2. Closed Structurals: RHS & SHS

Closed Structural (RHS / SHS) are manufactured in high frequency induction welding mills. These products are popular not only in the domestic market but all over the world. RHS / SHS can be supplied to IS-4923 specification. Brief Advantages of using Closed Structurals (RHS / SHS)

• The excellent distribution of materials around the axis of closed structurals exhibit remarkable strength qualities and thus offer design advantages

• Due to high torsional rigidity and compressive strength closed structuals are more efficient than conventional structurals

• Their higher strength of weight ratio results up to 20 % savings in steeL • The smooth uniform profile of the sections minimize corrosion and facilitate easy, on-site

Fabrication • Closed structuals also enhance the aesthetic appeal of the structure

Applications

• Automobile Chasis • Cranes • Conveyors Granites • Trolley and Pallets Trusses • Agricultural Implement Frames • Amusement Park and Playground Equipments • Guard Rails, Staircases • Exhibition Stalls • Industrial Sheds • Material Storage Racks • Pedestrians Wall covers -Foot Bridge • Trusses, Columns and Purlins.

3. Galvanized & Black Mild Steel Pipes

MS - Tubes & Pipes are made out of Hot rolled Coils. This is of two categories. A. MS - Black Tubes. B. Galvanized Pipes. These Tubes are manufactured from Hot rolled coils and the process of welding is called Electric Resistant Welding (ERW) and these pipes are given a zinc coating by the hot dip galvanizing method as per customer requirement and BIS standards. The size ranges from 15MM NB (1/2") to 350MM NB (14"). These Tubes are produced as per IS-1239,IS-1161 & IS-3601 specification. Applications

• General Engineering • Structural Engineering • Oil Pipe Lines • Water & Gas sewage Application • Agricultural & Irrigation • Power & Electrification • Tubular Poles & Structura • Textile Mills • Construction Industry


62

• Tube wells & Bore wells • Rolls of Paper & Table Mills • Fire Protection

4. Boiler, Air-Heater & Seamless Tubes

Boiler and Air Heater tubes are manufactured by high frequency induction welding process and subjected to other finishing operations such as annealing, hydrotesting etc. Applications

• Thermal and super thermal power stations • Heavy water plants • Nuclear power plants • Heat Recovery units such as economisers in steam generation plants • Heat exchange condensers and similar heat transfer apparatus • Sugar mills • Oil refineries • Boilers • Super heaters and others

Features

• Bright Annealed tubes ensuring scale free surface • Closed Dimensional Control • 100% leak tested tubes • Better Machinability

SPIL also deals in Metal Sections, PVC Pipes and Fittings, Binding Wire, Welding Rods, GI Fittings and CPVC.

Value Added Services SPIL has a tube cutting process and cold draw bench. This helps the Company to supply cut-to-length deburred tubes and precision non-standard tubes, as per customer specifications. They also have an in house laboratory with physical, mechanical and chemical testing facilities. COMPETITION

There are many retailers in steel and allied products however they are in the unorganized sector. As of now none of them have a significant retail chain across town and cities. Recently there have been some initiatives taken by Essar Steel Limited & Tata Iron & Steel Limited to make a foray into the retail segment.

Suppliers

The Company sources its supplies from steel tube giants like: 1. Tata Iron & Steel Co. Ltd 2. Tube Investments of India Ltd. 3. Maharashtra Seamless Limited 4. Jindal Group 5. Bhushan Group

Customers

Major customers of the company based on the turnover for 2006-2007 are as under: 1. Tippers & Trailers Pvt. Ltd. 2. Decker Devices Pvt. Ltd.


63

3. Tanisha Enterprises 4. Mahavir Steel Tubes 5. Steelcom.

MARKETING STRATEGIES

1. The company has its branches in key potential areas in its current areas of operation for eg :

Hyderabad, Vizag & Vijayawada in Andhra Pradesh. This helps the Company to go closer to their customer. The marketing teams are grouped together in divisions handling specific customer groups or location specific or product specific. For e.g: a) Customer group – Trade division catering to trade customers. b) Location specific – Outstation market or city suburb market. These groupings are flexible and adapt to the specific needs of a location / region.

2. Retail marketing strategy:

The Company plans to open retail stores across metros and smaller cities which could cater to multi-brand products in steel and allied items.

SWOT ANALYSIS

Strengths Weakness

• ISO 9001 company. • Professional Management. • Large Network of Branches. • Business Relationships with known

brands / companies. • Large infrastructure in terms of storage &

logistics in place. • A good sales force. • Large number of customers. • Multi brand / multi products dealt with. • Good systems management / accounting

in place. • Value addition activities in place.

• Full range of products not in place. • Lack expertise in new products. • Ability to arrest attrition of workforce at

junior / mid levels. • Need to implement an ERP & develop

management bandwidth to cope up with proposed expansion..

Opportunities Threats • Retailing holds huge promise. Shankara

Pipes will be a pioneer in hardware & steel solutions retailing.

• Steels tubes / steel / pvc products / hardware items have application in numerous industries as well as in daily use fabrication, construction, plumbing etc. Therefore, the Company expects a perennial market.

• Infrastructure in India needs a huge investment which is happening slowly but steadily. The products supplied by the Company finds its requirement in all infrastructure projects.

• Demand for the products supplied by the Company are throughout India.

• Large manufacturer emulating the retail model.

• Retail model in this segment yet to be tested.

• Competition from large as well as small organized sector.


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INSURANCE The Company has adequate insurance of their inventory & property, details of which are as given below: Relating to inventory & property Sr.no

Policy Policy No Sum Assured (Rs. in Crores)

Description Validity upto

1 Standard Fire and Special Peril

671902/11/06/11/00001462

25.00 To insure its stock located at its 34 godowns, and

Citibank N.A. is insured party as these goods are hypothecated to them

22/02/2008

2 Burglary I.R. 671902/46/06/00000276

25.00 To insure its stock located at its 34 godowns, Citibank

N.A. is insured party as these goods hypothecated

to them

25/02/2008


671902/11/07/11/00000118

0.30 To insure building of class I construction in respect of Neela Bulding, Azizuddin Road, Bunder, Mangalore, Citibank N.A. is insured

party as these goods hypothecated to them

25/04/2008


671902/11/07/11/00000119

0.40 To insure building of class I construction in respect of

Sy no. 19/04, 21/01, Veerasandra, Attibele Hobli, Bengalooru is

insured party as these goods hypothecated to

them

25/04/2008


671902/11/07/11/00000120

0.16 To insure building of class I construction in respect of Apartment No. 104, 1st Floor, Skyline Surabhi, Sy. No. 14, Bengalooru. Citibank N.A. is insured party as these goods hypothecated to them.

25/04/2008


671902/11/07/11/00000121

0.35 To insure dwelling building of class A construction in respect of Flat No. A, 21/8, 2nd Floor, Block A, Brigade, MM Industrial Estate, K. R. Road, Bengalooru. Citibank N.A. is insured party as these goods hypothecated to them

25/04/2008


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Relating to Employees Sr.no

Policy Policy No Description Validity upto

1 Group Personal Accident Insurance Policy

671902/42/07/03/00000106

This policy covers 190 employees

09/07/2008

2 Group Mediclaim Policy

671902/34/07/00000526

This policy covers 190 employees

09/07/2008

Apart from above the Company has also taken below policies for its employees:

• Keyman Insurance Policies for its employees. • Waiver of premium Rider and Endowment Policy.


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REGULATIONS AND POLICIES FEMA Regulations Foreign investment in India is governed primarily by the provisions of the FEMA which relates to regulation primarily by the RBI and the rules, regulations and notifications thereunder, and the policy prescribed by the Department of Industrial Policy and Promotion, Government of India, the implementation of which is regulated by the FIPB. The RBI, in exercise of its power under the FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 as amended (“FEMA Regulations”) to prohibit, restrict or regulate, transfer by or issue security to a person resident outside India. As laid down by the FEMA Regulations, no prior consents and approvals are required from the RBI for FDI under the “automatic route” within the specified sectoral caps. In respect of all industries not specified under the automatic route, and in respect of investment in excess of the specified sectoral limits under the automatic route, approval may be required from the FIPB and/or the RBI. Labour and Industrial Laws SPIL is required to comply with labour and industrial laws, including Industrial Disputes Act 1947 as amended, the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 as amended, the Minimum Wages Act, 1948 as amended, the Payment of Bonus Act, 1965 as amended, Workmen Compensation Act, 1923 as amended, the Payment of Gratuity Act, 1972 as amended, the Payment of Wages Act, 1936 as amended and the Factories Act, 1948 as amended. In addition the Company is also governed by the provisions of the Employees’ Provident Funds Act, 1952 as amended and the rules made thereunder and are accordingly required to make periodic contributions to the Employees Provident Fund Scheme and the Employees’ Pension Scheme as applicable. The Company is also required to make contributions under the Employees’ State Insurance Act, 1948 as amended. Fiscal Regulations In accordance with the Income Tax Act, 1961 as amended any income earned by way of profits by a company incorporated in India is subject to tax levied on it in accordance with the tax rate as declared as part of the annual Finance Act. Contract Labour (Regulation and Abolition) Act The Company engages for each of its stores the services of various contractors for various activities including, house keeping security, maintenance, tailoring and valet services. These contractors in turn employ contract labour whose number exceeds twenty in respect of some of the stores. Accordingly, the Company is regulated by the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 as amended which requires the Company to be registered as a principal employer and prescribes certain obligations with respect to welfare and health of contract labour. Shops and Establishments legislations in various states SPIL is governed by the various Shops and Establishments legislations, as applicable, in the states where it has exclusive retail outlets. These legislations regulate the conditions of work and employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures and wages for overtime work. Trademarks Act, 1999 SPILs logo & the name “Shankara Pipes” has been registered under the Trademarks Act 1999.


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Regulations regarding foreign direct investment (“FDI”) An industrial policy was formulated in 1991 (“Industrial Policy, 1991”) in order to implement the economic reforms initiated by the Government of India. The Government of India (“GoI”) has since amended the Industrial Policy, 1991, from time to time in order to enable FDI in various sectors of the Indian industry in a phased manner, gradually allowing higher levels of FDI in Indian companies. Under the extant FDI Policy, April 2006, FDI in Indian companies carrying on business in Indian retail and trading sector is prohibited, except “Single Brand Product” retailing. Press Note No. 3 (2006 Series) which provides guidelines for FDI in retail trade of “Single Brand Products”, prescribes a 51% cap on the same, with prior Government approval. Further, Press Note No. 4 (2006 Series), which aims at rationalisation of the FDI Policy, states that the GoI has decided to allow FDI up to 51 % with prior Government approval for retail trade of “Single Brand Products”. In this regard, it is pertinent to note that the corollary changes to the foreign exchange control regulations promulgated by the Reserve Bank of India under the Foreign Investment Management Act, 1999 have not been notified. The company proposes to have in house production facility for the manufacturing of Steel Pipes & Tubes. Hence, flowing regulations shall be applicable to the Company, post expansion: Water (Prevention and Control of Pollution) Act, 1974 The Act aims at the prevention and control of water pollution as well as for restoration of water quality, through the establishment of state pollution control boards. Under the provisions of this act, any individual, industry or institution discharging industrial or domestic wastewater is required to obtain consent of the state pollution control board. The consent to operate is granted for a specific period after which the conditions stipulated at the time of granting consent are reviewed by the state pollution control board. Even before the expiry of the consent period, the state pollution control board is authorized to carry out random checks on any industry to verify if the standards prescribed are being complied with by the industry. If the standards are not being complied with, the state pollution control board is authorized to serve a notice to the concerned person. In the event of non-compliance, the concerned state pollution control board may withdraw its water supply or cause magistrates to pass injunctions to restrain such polluters. Air (Prevention and Control of Pollution) Act, 1981 The Act aims at the prevention and control of air pollution through the establishment of state pollution control boards. SPIL shall also be required to comply with the said Act under which any individual, industry or institution responsible for emitting smoke or gases by way of use as fuel or chemical reactions must apply in a prescribed form and obtain consent from the state pollution control board prior to commencing any manufacturing activity. The board is required to grant consent within four months of receipt of the application. The consent may contain conditions relating to specifications of pollution control equipment to be installed. For ensuring the continuation of manufacturing activities, a consent certification from the state pollution control board is required both under the Air (Prevention and Control of Pollution) Act, 1981 and Water (Prevention and Control of Pollution) Act, 1974 as discussed above.


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HISTORY AND OTHER CORPORATE MATTERS

Shankara Pipes India Limited was incorporated as Shankara Pipes India Private Limited on October 13, 1995, under the Companies Act, 1956, with Registration Number 08/18990. The Company was converted into a Public Limited Company on August 28, 2007 with the name “Shankara Pipes India Limited”. The Registered Office of the Company is situated G-2, Farah Winsford, No. 133, Infantry Road, Bengalooru – 560 001. Shankara Pipes India Limited is an ISO 9001 certified Company engaged in the business of distributing Steel Tubes and Pipes that are used in automobile industry, oil & gas transportation, water supply, construction & infrastructure, irrigation etc. SPIL has achieved a turn over of Rs. 50221.40 lacs & PAT of Rs. 869.72 lacs for the FY 2006-07. Major events in the History of the Company:

Year Event 1995 Incorporation of the Company 1997 Appointed as one of the distributor for Tube Investments of India Ltd. 2000 Appointed as one of the distributors of Tata Pipes at Bengalooru 2003 Received ISO Certification (BS EN ISO 9001: 2000) from National Quality Assurance

Limited for the UKAS & ANAB accreditation 2003 Opened first integrated warehousing facility of 55,000 sft at Bengalooru 2003 Achieved Rs. 100 Crores turnover for the financial year 2002 – 03 2006 The Company organized its retail network by opening its first retail store in

Bengalooru 2007 Became the largest Distributor of Steel Pipes and Tubes in India 2007 Sold over 1,00,000 tonnes of material in the financial year

Awards & Recognition

Year Event Awarding Entity 2002 Highest Sales, 2001-02 – Commendation Award Tube Product of India 2003 Best Performance Award – Closed Structurals

(Southern Region 2002-03) Tata Steel

2003 Best Performance Award 2002-2003 – STP Karnataka Tata Steel 2005 Awarded the ‘Emerging India Award’ in the category

‘Retail & Trade’ For the SME sector. CRISIL, ICICI Bank &

CNBC TV 2005 J. N. Tata Award as the Best Distributor 2004-05 Tubes Division of Tata Steel

2002-2005 Excellent Achievement (Mr. Sukumar Srinivas – Promoter)

Karnataka Pipe Dealers Association

2005-2006 Best Distributor Award Tata Steel 2006 SMERA Rating – SMERA B2 SME Rating Agency of India

Ltd. 2006 Highest Lifter Award Shri Lakshmi Metal Udyog 2007 Star Distributor Plumbing Segment Tata Steel

Main Objects of the Company: The main objects of the Company are as follows:

Object Clause number

Description

A (1) To carry on the business of manufacture, process, purchase, sell or otherwise to deal with Steel Pipes, Tubes and Pipe Fittings, Iron and Steel and allied products of all kinds and descriptions.

A (2) To carry on the business of manufacture, process, purchase, sell or otherwise to deal with PVC Rigid


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Object Clause number

Description

Pipes and Pipe Fittings, PVC Products, Moulded Plastic Products, Plastic Furniture and allied products of all kinds and descriptions.

A (3) To carry on the business of manufacture, process, purchase, sell or otherwise to deal with Sections made out of Aluminum, Steel, Stainless Steel and other Metals and allied products of all kinds and descriptions.

The main objects clause of the MoA of the Company enables SPIL to undertake its existing activities as well as the activities for which funds are being raised through this Issue. Further, it is confirmed that the activities carried out by the Company until now are in accordance with the objects clause of its MoA.

Changes in Registered Office of the Company

Address Changed Date of change

From To 01/09/2006 27, 2nd cross, CSI Compound

Mission Road, Bengalooru – 560 027 G-2 Farah Winsford, No. 133,

Infantry Road, Bengalooru – 560 001

Changes in the Memorandum of Association

Date of Shareholders

Approval Type of change/Reasons

01/09/2006 Change in the registered office of the Company 30/07/2007 Company converted into a public limited company from a private limited

company 18/03/2005 Object clause amended to include - to carry on the business of generation

of power and energy including that of hydel power, thermal power, atomic power, nuclear power, wind mill power and the like of all kinds and descriptions and to carry on the business of supply and distribution of power of all kinds and descriptions.

12/11/2007 Object clause amended to include – to carry on the business such as to undertake E-portal services related to plumbing, electrical, fabrication, electronic, carpentry and construction related activities for domestic apartments, houses, commercial complexes, other buildings of whatever categorization for the business/ social/ education, training, guest house, house/ hostel complexes, and building of all sorts of infrastructural activities, carry on the activities such as conducting training program, courses, seminars on E-portal services, in respect of the Company’s activities, issue advertisement, journals, bulletins, course materials, news letters, circulars, books, electronic devices, setup establishments for training of all related activities providing E-portal services in India or else where, to carry on the services of management consultancies in the above activities, enter into periodical contracts, to collect revenues/ incur the expenses of varied nature on all the above, to deal in all kinds of automation systems as required, to promote, organize seminar, exhibition, centers develop all sort of designs, conduct research to carry on the activities in whatsoever systems procedure so required in the field.

Subsidiaries of the Issuer Company

SPIL do not have any subsidiary


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Shareholders’ Agreement

There are no Shareholders’ Agreements existing as on date.

Other Agreements

Except the contracts/agreements entered in the ordinary course of the business carried on or intended to be carried on by SPIL, SPIL has not entered into any other agreement/contract. The Company has entered into many lease agreements for procurement of the land required for its retail outlets and warehouses.

Financial Partners There are no financial partnership agreements entered into by the Company. Strategic Partners There are no strategic partnership agreements entered into by the Company.


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ORGANISATION CHART

Board of Directors

Managing Director

Executive Director Executive Director

Finance

Regional Regional

Branch Managers

GM Logistic

Asst. Managers

Retail CEO Company Secretary

Accounts Sales Officers Warehouse-in-charge

Regional

Officers of Warehouse

Dispatch Staff

Accounts Managers

Accounts Executive

Branch Retail

Retail Outlet –In-Charge


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MANAGEMENT BOARD OF DIRECTORS

Name, Age, Designation, Son of, Address and

Occupation

Date of Appointment/ Reappointment(Term period)

Qualificat-ion

No. & Percentage of

post issue shareholding

Remuner-ation (Per

annum)

Other Directorships

Mr. Zafar Saifullah (71 years) Chairman S/o late Mr. Salahuddin 301, " Asha Deep", 9, Hailey Road, New Delhi- 110 001 Occupation: Retired from Govt of India (Former Cabinet Secretary)

29/09/2007 (Retire by rotation)

BCom., LLB, CA, (IAS Ret.)

Nil Nil

• METRAIL India (Pvt.) Ltd.

• CCL Products India Ltd.

Mr. Sukumar Srinivas (47 Years) Managing Director S/o late Mr.S.Srinivasan 490, 14th Main, III Block, Koramangala, Bengalooru- 560 034 Occupation: Business

MD from (28/08/07 to 27/06/2012)

MBA (IIM Ahmedaba),

B.Com

1,40,81,750 (69.10 %) 36,00,000/-

• Shankara Holdings Private Limited

• Shankara Meta-Steels Private Limited

Mr, C, Ravikumar (41 Years) S/o Mr. C. Chowdappa Director 13, III Main Road, Maruthi Extn., Srirampuram, Bengalooru- 560 021 Occupation: Service

Director (01/10/2007 to

30/09/2012)

B.Sc 12,400 (0.06 %) 7,44,000/-

• Shankara Meta-Steels Private Limited

Mr. R.S.V. Shiva Prasad (50 Years) S/o Mr. Gopala Rao Ramenani Director 72, Warlu Mansion, Kalyan Nagar, Hyderabad- 38 Occupation: Service

Director (01/10/2007 to

30/09/2012)

M.Sc (Zoology ),

MBA

1,550 (0.01 %) 6,96,000/- Nil

Prof. S. Sundararajan (60 years) S/o Mr. Selvaganapathy Natesaiyer Arupadi Director Quarters no. 120, Indian Institute of Management Bangalore, Bannerghatta Road, Bengalooru- 560 076 Occupation: Service (Professor)

29/09/2007 (Retire By Rotation)

BSc. LLB, FCA Nil Nil Nil

Mr. V. Ravichandar (50 Years) S/o Mr. Venkatraman Director 17, Moyenvilla Road, Langford Town, Bengalooru-560 025 Occupation: Business

29/09/2007 (Retire By Rotation)

BE, MBA (IIM – A) Nil Nil

• Feedback Business Consulting Services Pvt. Ltd.

• I-Vista Solutions Pvt. Ltd.


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BRIEF PROFILE OF THE DIRECTORS OF SPIL A brief profile of the Board Members is given below:

Mr. Zafar Saifullah is the Chairman of the Company. He has an experience of 45 years in various fields. Mr. Zafar Saifullah was the Cabinet Secretary of the Government of India from July 1993 to July 1994. He is the first officer from the Karnataka Cadre as well as the first Muslim to head the country’s bureaucracy as Cabinet Secretary. He has been at various key positions at the Centre as well as in the State of Karnataka. Some of the positions held by him have been Secretary to The Government of India – Minority Commission, Advisor to the Governor of Haryana etc. At the State level he has held important portfolios like Additional Chief Secretary & Development Commissioner, Secretary – Rural Development & Cooperation, Director of Industries & Commerce. He had been the Managing Director/ Chairman of Mysore Paper Mills Ltd, Trade Fair Authority of India, Bombay Port Trust etc. He retired from Government Service in 1994 & eschewed further appointment with the Government. He engaged himself with a wide range of issues relating to the Muslim Community in India. He made himself available for Consultation to Industry, International Relation, Agriculture, Rural Development, Credit & Finance. He was the Founder President of the India – Ukraine Friendship Association. Currently, he is the Chairman of Met Rail India Pvt Ltd. He is a keen sport enthusiast. Mr. Sukumar Srinivas, Founder and Managing Director of the Company. He has over 20 years of experience in both manufacturing & distribution of steel tubes. He did his Masters in Management Studies from IIM Ahmedabad with specialization in Finance, after graduating in commerce from Loyola College (Chennai). He started his career in Gemini Steel Tubes Ltd. in the year 1983. He joined Gemini Steel Tubes Ltd. as an executive assistant to the Managing Director. There he was associated with setting up of the tube manufacturing facility at Bengalooru which helped him to gain his practical knowledge on the working of a tube mill. He was later promoted as commercial manager where he was associated with setting up of the marketing activities of Gemini Steel Tubes Ltd. He was later appointed an Executive Director of Gemini Steel Tubes Ltd. in the year 1989 to 1991 when he disassociated himself as a Director of Gemini Steel Tubes Ltd. He started his partnership named Shankara Steel & Tubes in the year 1992. He later promoted Shankara Pipes India Limited in the year 1995. His contribution to SPIL has enabled the Company to reach at respectable position in the Steel Tube Distribution Market in India. He looks after the overall management of the Company. He was also a member of the Raw Material Committee of CEI Bengalooru Region (now known as CII) in the year 1988 till 1990. He was the President of the Karnataka Pipe Dealers Association from 2000 till 2003. Presently he is a member of the Bangalore Hardware Iron & Steel Merchants Association. Mr. C. Ravikumar, is a Science Graduate from Bangalore University. He has over 20 years of experience in the Steel Pipes Industry & is widely respected in the Steel Pipes Industry of Bengalooru. He started his career in 1986 in Gemini Steel Tubes Ltd. He joined Shankara Pipes India Ltd as a Senior Manager in 1995 and has been associated with the Company since then. He was appointed as a Director of the Company in 2001. He is currently the Vice President of the Karnataka Pipe Dealers Association. He has been actively engaged in matters related to the Pipe Manufacturer and Dealers community of Karnataka. Mr. R. S. V. Shivaprasad, is a Post Graduate in Science & an MBA from the Andhra University. He has an experience of 25 years in the field of sales. He began his career in Hyderabad with Shivmoni Steels Ltd in 1982. He joined Shankara Pipes India Ltd in 1995 as a Senior Manager and has been associated with the Company since then. He was later appointed as a Director of the Company in 2001. He is an active member of the Hyderabad Tube Association & has held positions in various capacities in the Association. Prof. S. Sundarajan, is a fellow member of the Institute of Chartered Accountants of India. He has been in practice as a Chartered Accountant for over two decades. He was nominated by SEBI on the Council of Management of Bangalore Stock Exchange and was on the Board of Bangalore Stock Exchange Financials Ltd. He is now a Fulltime Faculty Member of the Indian Institute of Management, Bangalore Since 1991. He is a Director at Sutra Centre for Strategic Design, engaged in Training, Consulting and Research. He has received Best Professor Award from the students at IIMB. His name appeared in the 2006-07 edition of the WHO’S WHO


74

of Professionals of the International WHO’S WHO Historical Society which documents biographies in history since 1928. Mr. V. Ravichandar BE, MBA (IIM-A), is in the field of consulting. He is the Chairman and Managing Director of feedback Business Consulting Services Pvt. Ltd. and Director of i-Vista Digital Solutions Pvt. Ltd. He has over 27 years of experience in consulting. Mr. V, Ravichandar was an active member of the Bangalore Agenda Task Force (BATF) where he contributed to city improvement initiatives. He along with others was instrumental in catalyzing the Jawaharlal Nehru National Urban Renewal Mission (JN-NURM) by the Central Government. BORROWING POWERS OF DIRECTORS Subject to the provisions of Sections 292 and 293 of the Act and of the Articles, the Board may, from time to time at its discretion, by a resolution passed at a meeting of the Board accept deposits from Members, (either in advance of calls or otherwise) and generally borrow or raise or secure the payment of any sum or sums of money so borrowed for the purposes of the Company, Provided, however, that where the moneys to be borrowed together with the moneys already borrowed (apart from temporary loans obtained from the Company’s bankers in the ordinary course of business), exceed the aggregate of the paid up capital of the Company and its free reserves, (not being reserves set apart for any specific purpose) the Board shall not borrow such excess moneys without the consent of the Company in General Meeting. Subject to the provisions of the Act, the payment or repayment of money borrowed as aforesaid may be secured in such manner and upon such terms and conditions in all respects as the Board may think fit and in particular by the issue of debentures, debenture-stock of the Company, charged upon all or any part of the property of the Company (both present and future), including its uncalled capital for the time being and debentures, debenture-stock and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued. RELATIONSHIP AMONG DIRECTORS There is no relationship among any of the Directors belonging to the Board of SPIL. INTEREST OF PROMOTERS, DIRECTORS All Directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration, reimbursement of expenses payable to them under the Articles of Association of the Company. The whole time directors will be interested to the extent of remuneration paid to them for services rendered by them as officers or employees of the Company. All the directors of the Company may also be deemed to be interested to the extent of equity shares, if any, already held by them or their relatives in the Company, or that may be subscribed for and allotted to them, out of the present Issue in terms of this Offer Document and also to the extent of any dividend payable to them and other distributions in respect of the said equity shares. CHANGES IN THE BOARD OF DIRECTORS DURING THE LAST THREE YEARS

Sr. No.

Name of the Director Date of Appointment

Date of Resignation

Reasons

1. Mr. V Devanathan - 30/07/2007 Resignation 2. Mr. K.G Kashinath - 30/07/2007 Resignation 3. Mr. L.R Reddy 30/07/2007 Resignation 4. Mr. Zafar Saifullah 29/09/2007 - Appointment 5. Mr. V. Ravichandar 29/09/2007 - Appointment 6. Mr. S Sundararajan 29/09/2007 - Appointment


75

CORPORATE GOVERNANCE The provisions of the Listing Agreement to be entered into with the Stock Exchange(s) with respect to Corporate Governance and the SEBI Guidelines in respect of Corporate Governance will be applicable to Shankara Pipes India Limited upon the listing of the Company’s Equity Shares on the Stock Exchange(s). The Company believes in adopting the best Corporate Governance practices, based on the under mentioned principles in order to maintain utmost level of transparency, accountability and ethics:

• Recognition of the respective roles and responsibilities of the Board and the management; • Independent verification and assured integrity of financial reporting; • Protection of shareholders’ right and redressal of Investors Complaints; and • Timely and accurate disclosure on all material matters concerning operations and performance of the

company.

The Board of Directors of Shankara Pipes India Limited consists of the following Independent Directors:

Name of the Director Designation Status Mr.Zafar Saifullah Chairman Non Executive & Independent Director Mr.S. Sundararajan Member Non Executive & Independent Director Mr. V. Ravichandar Member Non Executive & Independent Director

50% of the Board of Directors of Shankara Pipes India Limited is constituted by Independent Directors. In Compliance with Clause 49 of the Listing Agreement of the Stock Exchange(s), the Company has formed Audit Committee, Remuneration Committee and Shareholders Grievances/ Share Transfer Committee, the details whereof are as under:

Audit Committee: The Company has constituted an Audit Committee pursuant to provisions of the Companies Act, 1956. The Audit Committee was constituted by the Board of Directors at their meeting held on 31st October 2007. The Audit Committee of the Board consists of three Independent Directors as members.

The Audit Committee has the following powers:

1. Overseeing the Company’s financial reporting process and ensuring correct, adequate and credible

disclosure of financial information. 2. Recommending appointment and removal of internal as also external auditors and fixing of their fees 3. Reviewing with management the annual financial statements before submission to the Board with

special emphasis on accounting policies and practices, compliance with accounting standards and other legal requirements concerning financial statements

4. Reviewing the adequacy of the Audit and Compliance function, including their policies, procedures, techniques and other regulatory requirements and

5. Any other term of reference assigned by the Board from time to time.

The details of the members of the Audit Committee are:

Name of the Director Designation Status Mr. S Sundararajan Chairman Independent Director Mr. Zafar Saifullah Member Independent Director Mr. V Ravichandar Member Independent Director

Mr. S Subramonia Iyer, Vice President-Corporate Affairs & Company Secretary will be the Secretary of the committee.


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Remuneration Committee: The Remuneration Committee of the Company was approved and reconstituted by a meeting of the Board of Directors at their meeting held on 31st October 2007. The Committee comprises of three Independent Directors as members.

The Remuneration Committee consists of the following members:

Name of the Director Designation Status Mr. Zafar Saifullah Chairman Independent Director Mr. S Sundararajan Member Independent Director Mr. V Ravichandar Member Independent Director

The terms of reference to the said committee are as follows:

1. To review market practices and to decide/make recommendations to the Board on remuneration packages applicable to the Managing Director, the Executive Directors and the Senior Executives of the Company.

2. During the course of its review, the Committee may also decide on the commission and/or other incentives payable, taking into account the individual’s performance as well as that of the Company.

3. The Remuneration Committee thus assesses the overall compensation structure and policies of the Company with an objective to attract, retain and motivate employees, consider grant of stock options to employees etc.

4. Review compensation levels of the Company’s employees vis-a-vis other Companies in the same field and industry in general.

Shareholders Grievances/ Share Transfer Committee: The Shareholders Grievances/ Share Transfer Committee of the Board consists three members all of them are Independent Directors. The committee was constituted by the board of Directors at their meeting held on 31st October 2007. The Shareholders Grievances/ Share Transfer Committee consists of following members:

Name of the Director Designation Status Mr. Zafar Saifullah Chairman Independent Director Mr. S Sundararajan Member Independent Director Mr. V Ravichandar Member Independent Director

Mr. S Subramonia Iyer, Vice President-Corporate Affairs & Company Secretary will be Compliance Officer of the committee, who will be responsible for monitoring the share transfer process and report to the company’s board in each meeting.

The terms of reference of the Committee:

1. The committee shall oversee share transfers and monitor redressal of shareholders,

depositors and investors’ complaints. 2. The committee shall also review the processes and service standards adopted by the in-

house share department/ Registrar and, Share Transfer Agent, the complaints received by the Company.


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COMPENSATION TO MANAGING DIRECTOR The remuneration of Mr. Sukumar Srinivas, Managing Director, has been approved in the Extra Ordinary General Meeting held on 30th July 2007. The details are as given below:

1. Salary: Rs.3,00,000/- (Rupees Three lakhs only) per month.

2. Perquisites: In addition to the aforesaid salary, the Managing Director shall be entitled to the following perquisites :

a) Fully furnished residential accommodation, where no accommodation is provided by the company, suitable house rent allowance in lieu thereof may be paid. The expenses on furnishings, gas, electricity, water and other utilities shall be borne by the company.

b) Reimbursement of all medical expenses incurred for self and family as per service rules of the company.

c) Leave travel assistance for self and family as per service rules of the company

d) Fees of clubs, which will include admission and life membership fees limited to two clubs.

e) Education allowance for the education of his children as per the rules of the service rules of the company.

f) Personal accident insurance, premium whereof as per the limit under the income tax rules.

g) A car with driver for official purpose.

h) Telephone and fax facilities at residence for official purpose.

i) Contribution to provident fund as per the provident fund Act & Rules, superannuation fund or annuity fund as applicable to the extent these either singly or put together are not taxable under the Income Tax Act 1961.

j) Gratuity at the rate as per the payment of Gratuity Act and rules prevailing from time to time.

k) Leave at the rate of one month for every year of service. Leave not availed of may be enchased.

Note: ‘Family’ for the above purpose means wife, dependent children and dependent parents of the Managing Director.

3. Commission : Payment of remuneration to the Managing Director will be decided by the Board of Directors either by way of salary of by way of commission based on the net profits as per the article 141 of Articles of the Association of the company, in each year subject to the condition that the aggregate remuneration of the Managing Director shall not exceed five per cent of the net profits of the company, in accordance with Section 198, 309 and Schedule XIII of the Companies Act 1956 as amended from time to time.

Further, notwithstanding anything contained hereinabove, where, in any financial year, during the currency of the tenure of the Managing Director, the company has no profits or its profits are inadequate, the company shall pay the Managing Director minimum remuneration by way of salary, perquisites, dearness allowance and any other allowances subject to the ceiling of Rs.36,00,000/- per annum or Rs. 3,00,000/- per month calculated in the scale laid down in s II of Pt II of Schedule XIII to the Companies Act 1956 as applicable to the company at the relevant time depending upon the effective capital of the company

Compensation to Directors The Directors, who are non-executive directors, are entitled only for the sitting fees for the Board / Committee meeting attended by them.


78

UTILITIES Power

SPIL’s retail outlets, warehouses and offices require supply of electricity, which is supplied by the regional electricity supplying Company. Water The requirement of water is nominal and is supplied by the local water supply authorities MANPOWER Break-up of the present manpower in the Company

Sr. no

Name of the Department Number of Employees

1. Sales Department 220 2. Logistics Department 28 3. Accounts Department 69 4. Administration Department 21 5. Finance Department 07 6. Purchase Department 2

Total 347 The Company proposes to add the following staff after expansion and shall take the necessary steps for recruitment of additional manpower shortly:

Sr. no

Name of the Department Number of Employees

1. Sales Department 70 2. Logistics Department 105 3. Accounts Department 40 4. Administration Department 7 5. Finance Department 2 6. Purchase Department 10

Total 234 Recruitment Strategy

Recruitment at SPIL is done in a phased manner, as and when the need arises. The vacancies at junior level positions like data entry operators, sales officers, labour to take care of attrition and also middle & senior positions are filled on a need based policy. Shankara Pipes hires its people through Recruitment Agencies, Newspaper Advertisements and Referrals. Training programme & retention strategy Training

1. Accounts & Systems Post orientation programe which lasts for a day, the company provides training to the new recruits for one week, in which the employees are replenished with concept of accounting. It then follows by a weeks orientation on systems & package usage.

After these two weeks of in house training, the recruits are then put on the job and are closely monitored by their superiors/ colleagues. The recruits (now employees) are rotated in the various


79

functions of the job for another three months and are subsequently given a permanent position which is based on their departmental performance and interest.

2. Sales

Sales department regularly interacts with the Customers, hence they are expected to know their customers and their requirement. They should also have a fair idea of the products in which the Company deals, including the use and its technical specifications. Fresh inductees are put through a Company orientation programme. Later the recruits are taken to the main warehouse for a week, in which they are given an idea of the products in which the Company deals. They are also briefed in the specifications and technical details of the products. This programme helps them to market a right product to a right client. The warehouse experience also gives them an idea of documentation and various procedures related to sales. The recruits then report to the sales office where they are acquainted to a senior sales executive who introduce them to the customers of SPIL. The training process continues for a period of about thirty days. Once the concerned manager is confident about the ability of the new employees, he/she is allowed independent sales calls, which is again closely monitored by their superiors/ colleagues.

3. Logistics

The recruits are taken through a one day company orientation programme. They are then given a technical literature and a brief workshop with regard to the different products available with SPIL. The Company also arranges for their visit to the various warehouses and stocking points in the city. They are then given a practical training on documentation – implications of VAT & excise duty. The recruits are then put on the job and are closely monitored by their superiors/ colleagues for about a month and if the Company finds them competent enough, they are assigned with their regular duty.

Retention The Company accepts the fact that retention is one of the biggest challenge faced by any industry. SPIL endeavors the following, in order to retain their employees:

a Reasonable compensation package. b Good working environment. c Long term benefits like insurance, children’s education etc for older employees. d Annual increments commensurate to performance and cost of living. e Job rotation, in order to see the best fit for an employee.

The Company claims that these policies have been fairly effective and that the company has a fairly low attrition rate at senior levels and of their key personnel.


80

KEY MANAGERIAL PERSONNEL

The Key Managerial Personnel of SPIL other than the Directors are as follows:

Name, Designation & Address

Age (Years)

Qualificati-on

Present responsibilities

and Years of experience in the Company

Date of appointment

Previous Employment

and Total Experience

Remunerati-on

Per annum

No. of shares held

Mr. S. Subramonia Iyer Company Secretary, Compliance Officer & Vice President-Corporate Affairs # 5, Type IV, Block III, Nimhans Quarters, Bannerghatta Circle Campus, Dharmaram College Post, Bengalooru – 560 029

56 Bachelor of Commerce,

Fellow Company Secretary,

Membership in All India

Management Association

Company Secretary (1 Month)

01/11/2007 Practicing Company secretary

(34 Years)

Rs. 5.33 Lacs Nil

C. Jaiprakash General Manager # 908 , Ashirwada , 1st ‘A’ Main 4th Cross, Bsk 3 Rd Stage 3 Rd Block , 3 Rd Phase Bengalooru – 560 085

45 Bachelor of Arts

Logistics and inventory control in

Bengalooru (12 Year and 2

months)

13/10/1995 Shankara Steels &

Tubes (Asst. manager – Logistics)

(23 years)

Rs. 4.48 lacs Nil

Mr. Alex Varghese Manager Finance # 106 , Richie Villa Meg layout, B’narayanpura Bengalooru – 560 016

35 Bachelor of Commerce

Handling Day to Day

financial activity of the

Company (12 Year and 2

months)

13/10/1995 Shankara Steels & Tubes

(Accounts in-charge)

Rs. 3.80 lacs 620

Mr. L. R. Reddy Regional Director (Andhra Pradesh) # S6, Ragu Enclave Lalitha Nagar Visakhpatnam – 530 016


In-charge of Marketing and Administration

in Andhra Pradesh

(12 Year and 2 months)

13/10/1995 Shankara Agencies (Branch

Manager)

Rs. 5.56 lacs 1550

Mr. K. G. Kashinath Regional Director (Kerala) # 48 / 410 D3 ‘ Sree Anugraha ‘ Tagore Lane Extn, Perandoor Road, Elamakkra Cochin – 682 026


In-charge of Marketing and Administration

in Kerala (12 Year and 2

months)

13/10/1995 Shankara Steels & Tubes

(Branch manager)

Rs. 5.77 lacs 1550


81

Name, Designation & Address

Age (Years)

Qualificati-on

Present responsibilities

and Years of experience in the Company

Date of appointment

Previous Employment

and Total Experience

Remunerati-on

Per annum

No. of shares held

Mr. V. Devanathan Regional Director (Tamil Nadu) # 5e / 44, Main Street Behind Balamani Theatre, Balaji Nagar Main Road, Ammapet Salem – 636 003


Marketing and Administration in Tamil Nadu (12 Year and 2

months)

13/10/1995 Shankara Steels & Tubes (Regional Manager)

Rs. 5.65 lacs 1550

The above persons are on the rolls of the company as permanent employees RELATIONSHIP WITH DIRECTORS / PROMOTERS OF THE COMPANY None of the key managerial personnel are related to the promoters, directors of SPIL and other key managerial personnels. CHANGES IN THE KEY MANAGERIAL PERSONNEL OF THE COMPANY DURING LAST THREE YEARS

Name Date of Appointment Date of Resignation Mr. S. Subramonia Iyer 01/11/2007 - Mr. Murali Srinivas - 30/10/2007

EMPLOYEE STOCK OPTION SCHEMES For details on Employees Stock Option Scheme please refer to page 18 of this Red Herring Prospectus. INTEREST OF KEY MANAGERIAL PERSONNEL No amount or benefit has been paid or given within the two preceding years or intended to be given to any of the directors or key managerial personnel except the normal remuneration for services rendered as directors, officers or employees.


82

PROMOTERS AND THEIR BACKGROUND a. Details of Promoter

Sukumar Srinivas is the founder & Managing Director of the Company. He has over 20 years of experience in both manufacturing & distribution of steel tubes. He did his Masters in Management Studies from IIM Ahmedabad with specialization in Finance, after graduating in commerce from Loyola College (Chennai). He started his career by joining Gemini Steel Tubes Ltd. in the year 1983. He joined Gemini Steel Tubes Ltd. as an executive assistant to the Managing Director of Gemini Steel Tubes Ltd. He was associated with setting up of the tube manufacturing facility at Bengalooru which helped him to gain practical knowledge on the working of a tube mill. He was later promoted as commercial manager where he was associated with setting up of the marketing activities of Gemini Steel Tubes Ltd. He was later appointed an Executive Director of Gemini Steel Tubes Ltd. in the year 1989 to 1991 when he disassociated himself as a Director of Gemini Steel Tubes Ltd. He started his partnership named Shankara Steel & Tubes in the year 1992. He later promoted Shankara Pipes India Limited in the year 1995. His contribution to SPIL has enabled the Company to reach at respectable position in the Steel Tube Distribution Market in India. He looks after the overall management of the Company. He was a member of the Raw Material Committee of CEI Bengalooru Region (now known as CII) in the year 1988 till 1990. He was also the President of the Karnataka Pipe Dealers Association from 2000 till 2003. Presently he is a member of the Bangalore Hardware Iron & Steel Merchants Association.

Educational Qualification B.Com, MBA (IIM Ahmedabad) PAN AGDPS5408F Passport No. G4171055

SPIL confirms that the Permanent Account Number, Bank Account Numbers, Passport Number of the Promoter being individual has been submitted to the Stock Exchanges at the time of filing of the Offer Document. Further, the Promoters have not been detained as a willful defaulter by the Reserve Bank of India or any other Government authority and there are no violations of securities laws committed by the Promoters in the past or any such proceedings are pending against the Promoters.

Common Pursuits

Except as disclosed in this Red Herring Prospectus under the section titled “Other ventures of the Promoter”, the Promoters do not have an interest in any venture that is involved in any activities similar to those conducted by the Company or any member of the Promoter Group. The Promoter has not been restrained or prohibited by SEBI or any other regulatory authority from accessing the capital markets for any reason. None of the companies promoted by the Promoters of SPIL have been struck off from the records of the Register of Companies. RELATED PARTY TRANSACTIONS For Related party Transactions, please refer page no. 102 of this Offer Document


83

OTHER VENTURES OF THE PROMOTER

1. Shankara Meta-Steel India Private Limited

Corporate Information:

The company was incorporated on December 13, 2004 with Registrar of Companies Karnataka, Bengalooru. Registration No. of the company is 08-35227. (CIN NO. U27104KA2004PTCO35227). The company was set up with the object to carry on the business of distribution of structural steel products like mild steel flats, angles, rounds etc. Shankara Meta-Steel India Private Limited is having its registered office at G2 Farah Winsford, 133 Infantry Road, Bangalooru – 560001. The company is promoted by Mr. Sukumar Srinivas.

Board of Directors of the company is as under • Mr. Sukumar Srinivas • Mr. C. Ravikumar • Mr. Alex Varghese

Shareholding Pattern As on 30th September 2007:

Name of the Shareholder No. of Equity Shares (Face value of Rs. 10/-

per equity share)

% of total Equity holding

Mr. Sukumar Srinivas 9800 98.00 Mr. Ravikumar 100 1.00 Mr. Alex Varghese 100 1.00 10000 100.00

Financial Performance: (In Lacs.)

Financial Year Ended 31st March Particulars 2007 2006 2005

Equity Share Capital 1.00 1.00 1.00 Reserves & Surplus 16.06 10.96 0.65 Sales 524.00 859.58 72.69 Profit After Tax 5.11 10.31 0.65 EPS (Rs.) 51.06 103.08 6.48 Book Value Per Share (Rs.) 165.42 111.75 6.07

Shankara Meta-Steel India Private Limited has not made any capital issue during last three years. Shankara Meta-Steel India Private Limited is not a Sick Industrial Company within the meaning of the SICA.

2. Shankara Holdings Private Limited

Corporate Information:

The company was incorporated on June 2, 2000 with Registrar of Companies Karnataka, Bengalooru. Registration No. of the company is 08-27182. (CIN NO. U65993KA2000PTC027182). The company was set up with the object to invest in various partnership firms and companies. Shankara Holdings Private Limited is having its registered office at G2 Farah Winsford, 133 Infantry Road, Bangalooru – 560001. The company is promoted by Mr. Sukumar Srinivas.

Board of Directors of the company is as under

• Mr. Sukumar Srinivas • Mr. L.S. Vinayaka


84

Shareholding Pattern As on 30th September 2007:

Sr. No.

Name of the Shareholder No. of Equity Shares (Face value of Rs.

10/-per equity share)

% of total Equity

holding 1. Mr. Sukumar Srinivas 30300 99.67 2. Mr. L.S. Vinayaka 100 0.33 Total 30400 100.00

Financial Performance: (In Lacs.)


Equity Share Capital 3.04 3.04 3.04 Share Application Money 0.25 0.25 0.25 Profit and Loss Account 15.00 13.93 12.27 Sales --- -- -- Other Income 1.26 1.75 0.77 Profit After Tax 1.07 1.66 0.50 EPS (Rs.) 3.51 5.47 1.64 Book Value Per Share (Rs.) 59.34 56.65 51.18

Shankara Holdings Private Limited has not made any capital issue during last three years. Shankara Holdings Private Limited is not a Sick Industrial Company within the meaning of the SICA.

3. Shankara Cargo Movers

Shankara Cargo Movers is a partnership firm formed on13/09/2001. The office of the firm is situated at G-2, Farah Winsford, 133, Infantry Road, Banglore-560 001. Shankara Cargo Movers, is in the business of Cargo carriers, transportation agents and fleet owners.

Profit sharing ratio of the partners is given as follows:

In the case of Name of the Partner Profit Loss

Mr. Sukumar Srinivas 60% 90% M/s Shankara Holdings Private Limited

5% 5%

Mr. V. Vasanth Mohan 5% 5% Master Dhananjay M. Srinivas 30% NIL

Financial Performance: (Rs. In Lacs)


Sales (including Commission) 81.11 55.42 32.40 Net Profit 21.99 15.62 4.10 Partners Capital Account:

• Mr. Sukumar Srinivas (27.10) (19.91) (14.75) • M/s Shankara Holdings Private

Limited (2.23) 1.35 0.80

• Mr. V. Vasanth Mohan 2.10 1.24 0.70 • Master Dhananjay M. Srinivas 11.22 6.15 3.05


85


Partners Current Account • Mr. Sukumar Srinivas - - - • M/s Shankara Holdings Private

Limited - - -

• Mr. V. Vasanth Mohan - - - • Master Dhananjay M. Srinivas - - -

Status Partnership Firm PAN AADFS9041E

Other Details:

Whether the Firm has made a loss in the immediately preceding year and if so, the profit or loss No figures for the immediately preceding three years

No

There are no defaults in meeting any statutory/bank/institutional dues. No proceedings have been initiated for economic offences against the Firm.

4. Steel and Pipe Traders

Steel and Pipe Traders is a proprietorship firm formed on 29/04/1992. The office of the firm is situated at G-2, Farah Winsford, 133, Infantry Road, Banglore-560 001. Steel and Pipe Traders, is in the distribution of PVC Pipes. Mr. Sukumar Srinivas is the proprietor of Steel and pipe traders

Financial Performance:

(Rs. In Lacs) Financial Year Ended 31st March Particulars

2007 2006 2005 Other Income Rent Received 0.84 0.84 0.94 Net Profit 0.66 0.67 0.68 Proprietors Capital Account - Sukumar Srinivas 1.50 1.50 1.50 Proprietors Current Account - Sukumar Srinivas 14.13 (1.49) (2.16)

Other Details:

Public or rights Issue in the preceding three years Not Applicable Whether the Firm has made a loss in the immediately preceding year and if so, the profit or loss No figures for the immediately preceding three years

No

There are no defaults in meeting any statutory/bank/institutional dues. No proceedings have been initiated for economic offences against the Firm.

Litigation

There are no litigations against the group companies/ firms/ SPIL. For details relating to legal proceedings initiated by SPIL, please refer to the section titled “Outstanding Litigation and Material Developments” beginning on page 109.


86

Company/firm from which the promoters have disassociated themselves during preceding three years The Promoters of SPIL have not dissociated themselves from any company in the last three years. Related party transactions For details of the related party transactions, see the section titled “Financial Statements—Related Party Transactions” on page 102. DIVIDEND POLICY

The Board of Directors of the company may, at its discretion, recommend dividend to be paid to the members of the company. The factors that may be considered by the Board before making any recommendations for the dividend includes but not limited to profits/earnings during the financial year, liquidity of the company, need for reserving resources for future growth, applicable taxes including tax on dividend, as well as exemptions under tax laws available to various categories of investors from time to time etc. Dividend will be declared and approved at the Annual General Meeting of the shareholders based on the recommendation by the Board. The Board may also from time to time pay to the members interim dividend if it considers justified by the profits generated by the company. The Company has declared dividend for the last four years and the details of the same are as under:

Financial Year Dividend paid including

Interim Dividend 2006-2007 15% 2005-2006 10% 2004-2005 10% 2003-2004 10%


87

PART III

SECTION IV - FINANCIAL STATEMENTS

AUDITORS’ REPORT

To, The Board of Directors, SHANKARA PIPES INDIA Ltd, G-2, “Farah Winsford” # 133,Infantry Road, Bengalooru-560 001. Dear Sirs,

We have examined the Restated Financial Information of SHANKARA PIPES INDIA LIMITED (the Company) annexed to this report for the purpose of inclusion in the Red Herring Prospectus (‘the RHP’).. The said Restated Financial Information has been prepared in accordance with the requirements of paragraph B (1) of Part-II of Schedule II to the Companies Act, 1956 (‘the Act’), the Securities and Exchange Board of India (“SEBI”)-Disclosure AND investor Protection Guidelines,2000 (‘the Guidelines’), as amended vide notification No.SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25,2005 issued by the Securities and Exchange Board of India in pursuance of Section 11 of the Securities and Exchange Board of India Act,1992 and related clarification and in accordance with the terms of reference received from the Company requesting us to carry out work in connection with the offer document being issued by the Company in connection with its Proposed Initial Public Offer (‘IPO’) of the equity shares. The Restated Financial Information has been prepared by the Company and approved by the Board of Directors.

A. Financial Information as per Audited Financial Statement:

We have examined the attached “ Restated Summary Statement of Assets and Liabilites’ of the Company as at 30th September, 2007, 31st March, 2007, 31st March, 2006, 31st March, 2005, 31st March, 2004 and 31st March, 2003 (Annexure 1) and the attached ‘Restated Statement of Profit and Loss (Annexure 2) and the attached ‘Restated Statement of Cash Flows’ (Annexure 3) for the half year period ended on 30.09.2007 and years ended on 31st March, 2007,2006,2005,2004 and 2003 together referred to as ‘Restated Summary Statement’. These Summary Statements have been extracted from the annual financial statements of the year ended on 31st March, 2007,2006,2005,2004 and 2003 audited by us for those years, and have been adopted by the Board of Directors/Members for those respective years and the Financial Statements for the Six-Month Period ended on 30th September 2007 have been adopted by the Board of Directors and examined by us based on our examination of these summary statements, we state that:

i) The ‘Restated Summary Statements’ have to be read in conjunction with the Significant Accounting Policies given in Annexure 4 and with the Notes to Accounts and Qualifications to Accounts given in Annexure 16 to this report

ii) The ‘Restated Summary Statements’ of the Company have been restated with retrospective effect to reflect the significant accounting policies being adopted by the Company as on 30th September 2007.

iii) The restated profits have been arrived at after charging all expenses including depreciation and after making such adjustment and regroupings as in our opinion are appropriate in the year/period to which they are related.

B. Other Financial Information:

We have examined the following information in respect of the Six Months period ended on 30th September 2007 and the years ended 31st March, 2007,2006,2005,2004 and 2003 of the Company, proposed to be included in the DRHP/RHP, as approved by the Board of Directors and annexed to this report:


88

i) Restated Schedule of Investments –Shankara Pipes India Ltd. Annexure-5 ii) Restated Schedule of Rates of Dividend- Shankara Pipes India Ltd. Annexure-6 iii) Accounting Ratios-Shankara Pipes India Ltd- Annexure-7 iv) Capitalization Statement-Shankara Pipes India Ltd- Annexure-8 v) Statement of Taxation-Shankara Pipes India Ltd- Annexure-9 vi) Restated Schedule of other Income-Shankara Pipes India Ltd- Annexure-10 vii) Schedule of Loans-Shankara Pipes India Ltd- Annexure-11 viii) Unsecured Loans-Shankara Pipes India Ltd- Annexure-12 ix) Schedule of Sundry Debtors-Shankara Pipes India Ltd- Annexure-13 x) Contingent Liabilities-Shankara Pipes India Ltd- Annexure-14 xi) Schedule of Sundry Creditors-Shankara Pipes India Ltd- Annexure-15 xii) Statement of Changes in the Significant Accounting Policies -Shankara Pipes India Ltd-Annexure-17 xiii) Statement of Related Party Transactions-Shankara Pipes India Ltd-Annexure-18

In our opinion, the ‘Financial Information as per Audited Financial Statements’ and ‘Other Financial Information’ mentioned above for the Six months period ended 30th September 2007 and for the year ended 31st March, 2007,2006,2005,2004 and 2003 have been prepared in accordance with Part II of schedule II of the Act and the Guidelines.

This report should not in any way be construed as a re-drafting of any of the previous audit report given by us nor should this be construed as a new opinion on any of the financial statements referred to herein.

This report is intended solely for your information and for inclusion in the Red Herring Prospectus in connection with the proposed IPO of the Company and not to be used, referred to or distributed for any other purpose without our prior written consent.

Place: Bangalore

Date: 18th November 2007

For RAO & VENKATESULU

Chartered Accountants

Sd/-

K.Y. Ningoji Rao

Partner

Membership No.18278


89

Annexure "1" RESTATED STATEMENT OF ASSETS AND LIABILITIES-SHANKARA PIPES INDIA LTD

(Rs. in lacs)

As on For the Financial Year Ended PARTICULARS 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Fixed Assets Gross Block 2,086.69 1,645.06 1,240.99 803.29 661.92 499.13 Less: Depreciation 296.37 241.46 153.27 113.85 73.92 45.43 Net Block 1,790.32 1,403.60 1,087.72 689.44 588.00 453.70 Capital Works In Progress Total-A 1,790.32 1,403.60 1,087.72 689.44 588.00 453.70 Investments-B 51.10 51.10 0.60 0.60 0.55 0.44 Deferred Tax Assets-C 8.86 36.11 11.21 8.57 - - Current Assets, Loans & Advances Inventory 3,948.88 3,169.43 2,235.17 1,995.83 1,214.61 1,159.51 Sundry Debtors 8,258.54 8,288.15 5,563.29 4,240.57 2,444.53 2,148.05 Cash & Bank Balance 193.00 256.83 103.48 129.95 28.26 45.99 Loans & Advances 337.93 723.51 387.24 179.12 216.20 99.51 Total-D 12,738.35 12,437.92 8,289.18 6,545.47 3,903.60 3,453.06 Total Assets (A+B+C+D)=E 14,588.63 13,928.73 9,388.71 7,244.08 4,492.15 3,907.20 Liabilities and Provisions Secured Loan 4,707.34 4,909.56 3,388.43 1,176.55 1,105.72 1,158.61 Unsecured Loan 80.50 20.32 135.33 22.83 Deferred Tax Liabilities Current Liabilities 5,869.05 5,481.87 3,285.12 4,112.80 1,916.14 1,886.31 Provisions 329.30 504.22 395.04 336.30 198.93 88.31 Total-F 10,905.69 10,895.65 7,149.09 5,645.97 3,356.12 3,156.06 Net Worth (E-F) 3,682.94 3,033.08 2,239.62 1,598.11 1,136.03 751.14 Net Worth Represented by Share Capital 450.35 450.35 450.35 450.35 450.35 450.07 Share Application Money 2.50 - - - - - Reserves & Surplus 3,230.59 2,583.23 1,790.53 1,149.76 685.97 301.65 Total 3,683.44 3,033.58 2,240.88 1,600.11 1,136.32 751.72 Less: Miscellaneous Expenditure (Not adjusted) 0.50 0.50 1.26 2.00 0.29 0.58 Net Worth 3,682.94 3,033.08 2,239.62 1,598.11 1,136.03 751.14


90

Annexure "2" RESTATED STATEMENT OF PROFIT AND LOSSES-SHANKARA PIPES INDIA LTD

(Rs. in lacs)

As on For the Financial Year Ended PARTICULARS 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

SALES & OTHER INCOME Sales 28158.79 50221.40 34623.76 26802.33 16498.97 11220.27 Other Income 30.80 18.59 19.77 16.35 17.52 9.17 Increase/(Decrease) in Inventory 779.45 934.26 239.34 781.22 55.10 217.77 Total 28969.04 51174.25 34882.87 27599.90 16571.59 11447.21 EXPENDITURE Purchases 26610.28 47335.02 32012.86 25430.18 14870.41 10433.30 Trading Expenses 387.37 687.64 489.62 283.97 230.18 188.20 Administrative & Other Expenses 655.71 1168.46 881.02 726.91 590.84 379.55 Total 27653.36 49191.12 33383.50 26441.06 15691.43 11001.05 Earnings Before Interest and Tax 1315.68 1983.13 1499.37 1158.84 880.16 446.16 Interest 255.54 514.66 339.84 243.38 222.72 206.19 Depreciation 56.22 91.47 44.88 42.04 29.47 18.00 Net Profit before tax and extra ordinary items 1003.92 1377.00 1114.65 873.42 627.97 221.97 Less :Provision for taxes -Current Taxes 325.41 496.82 387.55 368.01 192.00 88.00 -Deferred Taxes Adjustments 27.26 (24.90) (2.63) (9.73) 0.85 0.31 -Fringe Benefit Taxes 3.89 7.40 7.49 0.76 -Income Tax for Earlier Years 0.54 30.05 Net Profit before extra ordinary items 647.36 897.14 692.19 515.14 435.12 132.90 Extra ordinary items Net Profit after extra ordinary items 647.36 897.14 692.19 515.14 435.12 132.90 Adjustment on account of prior period expenses 27.42 Adjustment Profit 647.36 869.72 692.19 515.14 435.12 132.90


91

Annexure "3" RESTATED STATEMENT OF CASH FLOW -SHANKARA PIPES INDIA LTD

(Rs. in lacs) For the Financial Year Ended

PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Cash Flow From Operating Activities Net Profit Before Tax & Extraordinary items 1,003.92

1,376.99

1,114.65 873.44 627.97 221.97

Adjustments For : Depreciation 56.22 91.47 44.89 42.04 29.47 18.00 Miscellaneous Expenditure Written off - 0.75 0.75 0.79 0.29 0.29 Assets Written Off 0.14 - - - - - Provision for Gratuity - 3.53 - - - - Profit/Loss on Sale of Assets - 0.98 1.00 0.31 0.33 -

Interest, Dividends Etc 0.00

(0.41) (0.27)

(3.09)

(1.59)

(3.91) Interest Paid 255.54 514.66 339.84 243.38 222.72 206.19 Operating Profit Before Working Capital Changes: 1,315.82

1,987.97

1,500.86

1,156.87 879.19 442.54

Trade & Other Receivables 138.17

(3,039.12) (1,395.84)

(1,741.97)

(330.05)

(188.89)

Inventories (779.45)

(934.26) (239.35)

(781.22)

(55.10)

(217.77)

Trade Payables 387.19

2,165.81 (827.68)

2,196.66 29.83 195.43 Cash Generated From Operations 1,061.73 180.40 (962.01) 830.34 523.87 231.31

Intertest Paid (255.54)

(514.66) (339.84)

(243.38)

(222.72)

(206.19)

Direct Taxes Paid (277.22)

(417.58) (501.35)

(252.22)

(161.00)

(89.07) Cash flow before extra ordinary items Sales Assets 528.97

(751.84) (1,803.20) 334.74 140.15

(63.95)

Net Prior Period Expenses Net Cash Flow From Operating Activities 528.97

(751.84) (1,803.20) 334.74 140.15

(63.95)

Cash Flow from Investing Activities

Purchase of Fixed Assets (443.20)

(410.31) (446.75)

(147.05)

(164.92)

(123.09)

Purchase of Investments 50.00

(50.50) -

(0.06)

(0.10) - Sale of Investments/ Fixed Assets 0.12 1.98 2.58 3.26 0.82 0.16

Miscellaneous Expenditure - - -

(2.51) 1.59 3.91 Interest Received - 0.41 0.27 3.09 - - Dividend Received - - - - - - Net Cash used in investing activities (393.08)

(458.42)

(443.90)

(143.27)

(162.61)

(119.02)

Cash Flow from Financing Activities


92

For the Financial Year Ended PARTICULARS

As on 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Proceeds from issue of Capital - - - - 0.28 0.07 Share Application Money 2.50 - - - - -

Dividend & Dividend Tax Paid -

(77.03) (51.42)

(55.72)

(45.04) - Proceeds from Long Term Borrowings (27.78) 250.00 -

(7.12)

(6.33) 2.97

Lease Finance Liabilities (22.74) 151.30 145.85 21.26 4.27 -

Work in Capital Loan (151.70)

1,119.84 2,066.03 56.69

(50.83) 181.38 Deffered tax liability - - - - - 0.31

Unsecured Loans -

(80.50) 60.17

(115.01) 112.50 20.32 Net Cash Used in Financing Activities (199.72)

1,363.61

2,220.63

(99.90) 14.85 205.05

Net Increase/Decrease in Cash & Cash Equivalents (63.83) 153.35

(26.47) 91.57

(7.61) 22.08

Opening Balance of Cash & Cash Equivalents 256.83 103.48 129.95 38.38 45.99 23.91 Closing Balance of Cash & Cash Equivalents 193.00 256.83 103.48 129.95 38.38 45.99

1. The Cash flow Statementhas been prepared under indirect method as set out in Accounting Statndard-3 on

Cash Flow Statement issue by the lnstitute of Chartered Accounts of India. 2. Negative figures have been shown in brackets Annexure “4”

SIGNIFICANT ACCOUNTING POLICIES:

A. REVENUE RECOGNITION:

1. Sales revenues are accounted on delivery of goods on accrual basis. 2. Sales revenues, if any, in respect of goods sold on approval are accounted on receipt of approval from

the purchaser. 3. All other incomes, to the extent they are ascertained, are accounted on accrual basis. 4. Incomes which, though accrued, can not be quantified are accounted in the year in which the same are

quantified or received which ever is earlier.

B. EXPENDITURE RECOGNITION:

1. All expenditure relating to the purchase of goods are accounted on receipt of goods on accrual basis. 2. All purchases made on approval basis are accounted on grant of approval. 3. All expenditure to the extent they are ascertained are accounted on accrual basis. 4. The liability in respect of any expenditure which are not easily ascertainable are accounted in the year

in which they are ascertained and determined or in the year in which such liabilities are either ascertained or actually paid which ever is earlier.

5. Liability in respect of gratuity and earned leave payable to employees is accounted o the basis of estimated liability.


93

C. DEPRECIATION ON FIXED ASSETS:

Depreciation on fixed assets is provided at the rates prescribed under the Income Tax Rules, 1962.

D. VALUATION OF INVENTORY:

a. Closing Stock of Inventories are valued at cost or net realizable value which ever is lower. b. All items of Stocks which are considered to be damaged, unmarketable or unserviceable and have

become otherwise obsolete are valued at the estimated net realizable value.

E. INVESTMENTS:

All Investments in shares and securities are valued at Cost.

F. TAXES ON INCOME:

a. Deferred Tax Liability is recognized as per AS 22 issued by the ICAI; b. Deferred Tax Asset is recognized as per AS 22 issued by the ICAI; and c. Current Liability towards Taxes on Income is recognized as per the estimates made as per the

provisions of the Income Tax.

G. AMORTISATION OF INTAGIBLE ASSETS:

a. All Intangible Assets other than goodwill acquired at costs are amortized as per AS 26 issued by the ICAI; and

b. All Intangible Assets, being the Goodwill acquired at cost which are, in the opinion of the

management have future cash flow and are not impaired in any manner’ are not amortized and are recognized as an asset at cost.

Annexure "5" RESTATED SCHEDULE OF INVESTMENTS-SHANKARA PIPES INDIA LTD

(Rs. in lacs) As At

PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Non Trade: Unquoted {at Cost} National Saving Certificate 1.10 1.10 0.60 0.60 0.55 0.44 Indira Vikas Patra - - - - - - Shares in Companies: [Hyderabad Castings Ltd 100,000 Equity Shares of Rs.10/-each]

- 50.00 - - - -

Investments in Partnership Firm as partner 50.00 - - - - - Total 51.10 51.10 0.60 0.60 0.55 0.44


94

Annexure "6" RESTATED SCHEDULE OF RATES OF DIVIDEND-SHANKARA PIPES INDIA LTD The detail of dividends declared by the Company is as under:


PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Number of Equity Shares 4,503,500 4,503,500 4,503,500 4,503,500 4,503,500 4,500,700 Face Value Per Share 10 10 10 10 10 10 Equity Share Capital 450.35 450.35 450.35 450.35 450.35 450.07 Final Dividend - 15% 10% 10% 10% - Amount Of Dividend - 67.55 45.04 45.04 45.04 - Dividend Tax - 9.47 6.39 6.31 5.77 -

Annexure "7" ACCOUNTING RATIOS - SHANKARA PIPES INDIA LIMITED


As on 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Adjusted Profit To Income From Operation (%) 3.47% 2.69% 3.20% 3.16% 3.79% 1.94% Earning Per Share (Rs) 14.37 19.31 15.37 11.44 9.67 2.95 Net Asset Value Per Sgare (Rs) 81.78 67.35 49.73 35.49 25.23 16.69 Return On Net Worth (%) 17.58% 28.67% 30.91% 32.23% 38.30% 17.69% Number of Equity Shares 4,503,500 4,503,500 4,503,500 4,503,500 4,503,500 4,500,700 Weighted Number of Equity Shares

4,503,500

4,503,500

4,503,500

4,503,500

4,501,989

4,500,700

Net Worth (Excluding Revaluation Reserve) Rs. In Lakhs

3,682.94

3,033.08

2,239.62

1,598.11

1,136.03

751.14

Notes: 1. The ratios have been computed as below:

Adjusted Profit/(Loss)after tax but before extraordianary items Earnings per Shares (Rs) = ------------------------------------------------------------------------------------------ Weighted average number of Equity Shares outstanding during the year

Net Worth excluding revaluation reserve

Net Asset Value Per Share (Rs.) = ------------------------------------------------------------------------------------------------- Weighted average number of Equity Shares outstanding during the year Adjusted Profit/(Loss)after tax but before extraordianary items Return on Net Worth (%) = ----------------------------------------------------------------------------------------------- Weighted average number of Equity Shares outstanding during the year


95

2. Profit and Loss as restated has been considered for the purpose of computing the above ratios 3. The Company has issued 2800 equity shares issue on 15/10/2003. Accordingly Weighted Average number of

equity shares for the year 2003-04 has been calculated as follows:

Particulars No of Days

hold Factor

Weighted Average

No of Shares

45,00,700 Equity Shares 365 4500700 2800 Equity Shares 168 1289 Weighted Average No. of Shares 4501989

Annexure "8"

CAPITALISATION STATEMENT - SHANKARA PIPES INDIA LIMITED

Particulars

Pre-Issue As At 30/9/2007

Post Issue

TOTAL DEBTS: Long Term Debts Short Term Debts: - Cash Credit Loan 1707.41 Bills Discounting Loan 2456.23 Term Loans 543.70 4707.34 Total Debts A 4707.34 - Shareholders Fund: Share Capital 450.35 - Share Application Money 2.50 - Reserves & Surplus 3230.59 - Total Shareholders Fund B 3683.44 - Long Term Debt/Equity Ratio Total Debts/Equity Ratio 1.28 -

Note - Rs. in lacs Annexure "9" STATEMENT OF TAXATION-SHANKARA PIPES INDIA LTD


PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Profit After tax as restated (A) 647.36 869.72 692.19 515.14 435.12 132.90 Add: Provision for Tax 325.41 497.36 417.60 368.01 192.00 88.00 Add: Deferred Tax 27.26 (24.90) (2.63) (9.73) 0.85 0.31 Add: Provision for FBT 3.89 7.40 7.49 0.00 0.00 0.76 Net Profit Before Tax 1003.92 1349.58 1114.65 873.42 627.97 221.97 Tax Rate 33.99% 33.66% 33.66% 36.59% 35.88% 36.75% Tax as per actual rate on profits 341.23 454.27 375.19 319.58 225.32 81.57 Adjustments Permanent Differences Dividend (exemtp from tax) - - - - - - Indexation difference in Long Term - - - - - - Capital Gain/Loss - - - - - - Investment Write-off - - - - - -


96


As on 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Deduction under section 80 IB of the Income Tax Act,("the Act")

-

-

-

-

-

-

Disallowance for donations 6.63 4.69 3.57 3.55 2.24 0.54 Other Disallowances 31.89 0.25 Loss/(Profit)on sale of Fixed Assets 0.14 0.98 1.00 0.31 0.34 Other Adjustments (0.48) (0.62) (0.23) (0.35) (0.91) (0.71) Prior Period Expenses/Extraordinay items - Expenses for proposed public issue - B/F Losses set off - Total Permanent Difference (B) 6.29 36.94 4.59 3.51 1.67 (0.17) Timing Difference Difference between tax depreciation and book depreciation

0.87

1.98

0.03

(1.09)

0.57

(1.88)

Deduction under section 43B of the Income tax Act -

-

- - -

-

Other Disallowances (53.70) 42.33 9.27 24.17 Difference in amortisation of preliminary Expenses U/s 35D Total Timing Difference -C (52.83) 44.31 9.30 23.08 0.57 (1.88) Total Adjustments D=(B+C) (46.54) 81.25 13.89 26.59 2.24 (2.05) Tax Expense/(Saving)thereon D*Rate (15.82) 27.35 4.68 9.73 0.80 (0.75) Net Tax Incidence 325.41 481.62 379.87 329.31 226.12 80.82 Tax Under Mat 113.74 151.42 125.06 114.15 48.28 17.48 Tax payable for the year Maximum of Mat or Tax 325.41 481.62 379.87 329.31 226.12 80.82 Interest U/s 234B & 234C (As per Income Tax Return) 15.20 7.60 15.08 1.30 6.08 Total Tax Payable 325.41 496.82 387.47 344.39 227.42 86.90

Annexure "10" RESTATED SCHEDULE OF OTHER INCOME-SHANKARA PIPES INDIA LTD


PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 OTHER INCOME Interest on Fixed Deposit with Banks Interest on Others 0.41 0.27 3.08 1.58 3.90 Rent Receipt 1.98 2.49 0.86 1.25 3.72 2.85 Misc Incomes 28.82 15.63 18.57 11.97 12.22 2.40 Profit on Sale of Fixed Assets 0.001 0.06 0.07 0.05 0.01 Total 30.80 18.59 19.77 16.35 17.52 9.16 Net Profit before tax as restated 1003.92 1349.58 1114.65 873.43 627.97 221.97 Percentage of Other Income 3.07% 1.38% 1.77% 1.87% 2.79% 4.13%


97

Annexure "11" SCHEDULE OF LOANS - SHANKARA PIPES INDIA LTD

PARTICULARS As on

30/09/2007 As on

31/03/2007 SECURED LOANS (I) From Banks: Cash Credit Loan: Bank Citibank N.A 1707.41 1837.64 Bills Discounting Loan: HSBC Bank 1083.87 1282.68 ICICI Bank 0.00 1195.01 Standared Chartered Bank 1372.36 2456.23 0.00 2477.69

(Secured by hypothecation of stock-in-trade, book debts and

other assets of the company on pari passu basis)

Term Loan Citibank N.A 222.22 250.00 (Secured by property) Total From Banks 4385.86 4565.33 (ii) From Others Term Loan on Vehicles Kotak Mahindra Primus Ltd 104.29 97.33

(Secured by hypothecation of cars & trucks)

Term loan on property Kotak Mahindra Primus Ltd 217.19 246.90

(Secured by hypothecation of property)

Total From Others 321.48 344.23 Total 4707.34 4909.56

Note: Amounts Rs. in lacs Annexure "12" UNSECURED LOANS - SHANKARA PIPES INDIA LIMITED

(Rs. in lacs) Particulars As At 30.9.2007 As At 31.3.2007 Rate Of Interest Repayment Unsecured Loans: From: Corporate Bodies Nil Nil Not Applicable Not Applicable Promoters & Directors Nil Nil Not Applicable Not Applicable Shareholders Nil Nil Not Applicable Not Applicable Public Nil Nil Not Applicable Not Applicable Total Debts/Equity Ratio Nil Nil Not Applicable Not Applicable


98

Annexure "13” SCHEDULE OF SUNDRY DEBTORS-SHANKARA PIPES INDIA LTD


As on 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Debts outstanding for a period exceeding six months Unsecured considered good 196.76 267.41 266.88 82.55 81.89 62.56 Total 196.76 267.41 266.88 82.55 81.89 62.56 Other Debts Unsecured considered good 8,061.78 8,020.74 5,296.41 4,158.02 2,362.64 2,085.49 Total 8,061.78 8,020.74 5,296.41 4,158.02 2,362.64 2,085.49 Grand Total 8,258.54 8,288.15 5,563.29 4,240.57 2,444.53 2,148.05

Note: Amounts Rs. in lacs Annexure "14" CONTINGENT LIABILITIES-SHAKARA PIPES INDIA LTD


PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Estimated amount of contracts remaining Nil Nil Nil Nil Nil Nil to be executed on capital account Claims against the company not Nil Nil Nil Nil Nil Nil acknowledged as debts Counter Guarantees given to bank Nil Nil Nil Nil Nil Nil Corporate Guarantee Nil Nil Nil Nil Nil Nil Total Nil Nil Nil Nil Nil Nil

Annexure "15" SCHEDULE OF SUNDRY CREDITORS-SHANKARA PIPES INDIA LTD


PARTICULARS As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003 Other Creditors 5552.94 5207.22 3180.32 4004.12 1829.60 1853.76 Creditors outstanding for a period exceeding six months 19.42 0.00 0.00 0.00 0.00 0.00 Total 5572.36 5207.22 3180.32 4004.12 1829.60 1853.76


99

STATEMENT OF NOTES TO ACCOUNTS AND QUALIFICATION TO ACCOUNTS – SHANKARA PIPES INDIA LIMITED Annexure 16 A. NOTES TO ACCOUNTS:

Year Ended On Notes to accounts 31st MARCH,

2003 1. The paidup Equity Share Capital includes 1,500,000 Equity Shares of Rs.10/- each fully

paidup allotted at par to the other partners of the dissolved firm M/s Shankara Agencies, the business of which with all its assets and liabilities were allotted to the company in terms of the Deed of Dissolution of Partnership dated 30th day of March, 2001.

31st MARCH, 2004

1. The paidup Equity Share Capital includes 1,500,000 Equity Shares of Rs.10/- each fully paidup allotted at par to the other partners of the dissolved firm M/s Shankara Agencies, the business of which with all its assets and liabilities were allotted to the company in terms of the Deed of Dissolution of Partnership dated 30th day of March, 2001.

2. The purchases and Sales includes the value of goods received and sold on Consignment amounting to Rs.6,837,866.13 (P.Y.Rs.6,586,602.00)

3. The Significant Accounting Policies of the Company have been modified during the year by inclusion of Accounting Policies with regard to the Taxes On Income and Intangible Assets. The same have been modified in order to disclose the company’s accounting policies in respect of the matters covered under AS 22 and 26. The same has no effect on the profits of the company for the year.

4. That in accordance with the Company’s Accounting Policies regarding Accounting of Intangible Assets, the Goodwill of Rs.15.00 Millions acquired at cost on 30th day of March, 2001 on take over of the business of erstwhile firm M/s Shankara Agencies up on its dissolution has not been amortized owing to the fact that, in the opinion of the management, it has adequate cash flow in future and that there is no impairment to the same.

31st MARCH, 2005

1. The paidup Equity Share Capital includes 1,500,000 Equity Shares of Rs.10/- each fully paidup allotted at par to the other partners of the dissolved firm M/s Shankara Agencies, the business of which with all its assets and liabilities were allotted to the company in terms of the Deed of Dissolution of Partnership dated 30th day of March, 2001.

2. The purchases and Sales includes the value of goods received and sold on Consignment. The value of Closing Stock includes Rs.1,764,526 (P.Y.Rs.Nil) being the value of Consignment Stock. The details of Consignment Sales transactions which are reckoned in the accounts are as under: In Rs

Particulars Current Year Previous Year Consignment Purchases 97,809,487.90 6,837,866.13 Consignment Sales 96,044,961.60 6,837,866.13 Consignment Stock: Opening Nil Nil Consignment Stock: Closing 1,764,526 Nil Consignment Commission 935,664.00 683,786.00


31st MARCH, 2006

1. The paidup Equity Share Capital includes 1,500,000 Equity Shares of Rs.10/- each fully paidup allotted at par to the other partners of the dissolved firm M/s Shankara Agencies, the business of which with all its assets and liabilities were allotted to the company in terms of the Deed of Dissolution of Partnership dated 30th day of March,


100

Year Ended On Notes to accounts 2001.

2. The Purchases and Sales includes the value of goods received and sold on Consignment. The value of Closing Stock includes Rs.4,085,731 (P.Y.Rs.1,764,526) being the value of Consignment Stock. The details of Consignment Sales transactions which are reckoned in the accounts are as under: In Rs

Particulars Current Year Previous Year Consignment Purchases 215,041,980.70 97,809,487.90 Consignment Sales 212,720,775.70 96,044,961.60 Consignment Stock: Opening 1,746,526.00 Nil Consignment Stock: Closing 4,085,731.00 1,764,526 Consignment Commission 2,127,208.00 935,664.00


31st MARCH, 2007

1. The paid-up Equity Share Capital includes 1,500,000 Equity Shares of Rs.10/- each fully paid-up allotted at par to the other partners of the dissolved firm M/s Shankara Agencies, the business of which with all its assets and liabilities were allotted to the company in terms of the Deed of Dissolution of Partnership dated 30th day of March, 2001.

2. The Purchases and Sales includes the value of goods received and sold on Consignment. The value of Closing Stock includes Rs.11,122,881 (P.Y.Rs.4,085,731) being the value of Consignment Stock. The details of Consignment Sales transactions which are reckoned in the accounts are as under: In Rs:

Particulars Current Year Previous Year Consignment Purchases 441,144,816.60 215,041,980.70 Consignment Sales 434,107,666.60 212,720,775.70 Consignment Stock: Opening 4,085,731.00 1,764,526.00 Consignment Stock: Closing 11,122,881.00 4,085,731.00 Consignment Commission 4,323,458 2,127,208.00


B. QUALIFICATION ON ACCOUNTS:

Year Ended On Qualification to Accounts 31st MARCH,

2003 1. The Balance Sheet and the Profit and Loss Account dealt with by this report comply

with Accounting Standards referred to in section 211(3C) of the Companies Act, 1956 except however to AS 15.

2. Subject to the significant accounting policies contained in Note 8 (B) (5) of Schedule “O” to the Balance Sheet with regard to accounting of companies liability in respect of gratuity and earned leave to its employees in our opinion and to the best of our information and according to the explanations given to us, the accounts give the information required by the Companies Act, 1956 in the manner so required and accounts give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs in the case of Balance Sheet as at 31st March, 2003 and of the profit in the case of Profit and Loss Account for the year ended on that date.


101

Year Ended On Qualification to Accounts 31st MARCH,

2004 1. The Balance Sheet and the Profit and Loss Account dealt with by this report comply

with Accounting Standards referred to in section 211(3C) of the Companies Act, 1956 except however to AS 15 and AS 26.

2. Subject to the significant accounting policies contained in Note 15 (B) (5) of Schedule “O” to the Balance Sheet with regard to accounting of companies liability in respect of gratuity and earned leave to its employees and to the significant accounting policies contained in Note 15 (G) (b) of Schedule “O” to the Balance Sheet read together with Note No.7 of the said Schedule with regard to the accounting of goodwill acquired at cost and non-amortization thereof in our opinion and to the best of our information and according to the explanations given to us, the accounts give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs in the case of Balance Sheet as at 31st March, 2004 and of the profit in the case of Profit and Loss Account for the year ended on that date.

3. The company has internal audit system. However the same requires to be strengthened having regard to the size of the company and the nature of its business.

4. All undisputed statutory dues have been paid except the Dividend Tax Liability of Rs.5,77,011 which is outstanding for more than six months.

31st MARCH, 2005

1. The Balance Sheet and the Profit and Loss Account dealt with by this report comply with Accounting Standards referred to in section 211(3C) of the Companies Act, 1956 except however to AS 15 and AS 26.

2. Subject to the significant accounting policies contained in Note 15 (B) (5) of Schedule “P” to the Balance Sheet with regard to accounting of companies liability in respect of gratuity and earned leave to its employees and to the significant accounting policies contained in Note 15 (G) (b) of Schedule “P” to the Balance Sheet read together with Note No.6 of the said Schedule with regard to the accounting of goodwill acquired at cost and non-amortization thereof in our opinion and to the best of our information and according to the explanations given to us, the accounts give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs in the case of Balance Sheet as at 31st March, 2005 and of the profit in the case of Profit and Loss Account for the year ended on that date.

31st MARCH, 2006


2. Subject to the significant accounting policies contained in Note 15 (B) (5) of Schedule “P” to the Balance Sheet with regard to accounting of companies liability in respect of gratuity and earned leave to its employees and to the significant accounting policies contained in Note 15 (G) (b) of Schedule “P” to the Balance Sheet read together with Note No.6 of the said Schedule with regard to the accounting of goodwill acquired at cost and non-amortization thereof in our opinion and to the best of our information and according to the explanations given to us, the accounts give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs in the case of Balance Sheet as at 31st March, 2006 and of the profit in the case of Profit and Loss Account for the year ended on that date.

31st MARCH, 2007


2. Subject to the significant accounting policies contained in Note 15 (G) (b) of Schedule “Q” to the Balance Sheet read together with Note No.6 of the said Schedule with regard to the accounting of goodwill acquired at cost and non-amortization thereof and to para 2(e) of our report, in our opinion and to the best of our information and according to the explanations given to us, the accounts give a true and fair view, in conformity with the accounting principles generally accepted in India, of the state of affairs in the case of Balance Sheet as at 31st March, 2007 and of the profit in the case of Profit and Loss Account for the year ended on that date.


102

STATEMENT OF CHANGES IN THE SIGNIFICANT ACCOUNTING POLICIES – SHANKARA PIPES INDIA LIMITED ANNEXURE: - 17 CHANGES IN THE SIGNIFICANT ACCOUNTING POLICIES IN THE LAST FIVE YEARS: A. Accounting Policy in respect of liability in respect gratuity and earned leave payable to the employees:

The liability in respect gratuity and earned leave payable to the employees was being accounted in the year in which they were paid as per the Significant Accounting Policies that was being followed until the year ended on 31st March, 2006.

The said accounting policy was changed during the year ended on 31st March, 2007. According to the changed accounting policy the liability in respect gratuity and earned leave payable to the employees is being accounted on the basis of estimated liability.

B. Accounting of Taxes On Income:

The following Accounting Policy in respect accounting of taxes on income was introduced in the year ended on 31st March, 2004:

a. Deferred Tax Liability is recognized as per AS 22 issued by the ICAI; b. Deferred Tax Asset is recognized as per AS 22 issued by the ICAI; and c. Current Liability towards Taxes On Income is recognized as per the estimates made as per the

provisions of the Income Tax. C. Amortization of Intangible Assets:

The following Accounting Policy in respect accounting of Intangible Assets was introduced in the year ended on 31st March, 2004:

a. All Intangible Assets other than goodwill acquired at costs are amortized as per AS 26 issued by the

ICAI; and b. All Intangible Assets, being the Goodwill acquired at cost which are, in the opinion of the

management have future cash flow and are not impaired in any manner’ are not amortized and are recognized as an asset at cost.

Annexure "18" RELATED PARTY TRANSACTIONS DISCLOSURES-SHANKARA PIPES INDIA LTD

For the Financial Year Ended NAME OF

RELATED PARTY

Nature of Transaction

As on 30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Associated Companies & Firms: 1.Shankara Meta-Steels India Pvt Ltd

Purchase of Goods 113.96 280.26 0.00 0.00 0.00 0.00

Sale of Goods 112.83 73.37 0.00 0.00 0.00 0.00

2.Shankara Steels & Tubes

Advance Paid 16.35 86.92 0.00 118.00 0.00 0.00


103

For the Financial Year Ended NAME OF RELATED

PARTY Nature of

Transaction As on

30/09/2007 31/03/2007 31/03/2006 31/03/2005 31/03/2004 31/03/2003

Advance Received 0.00 67.37 0.00 135.00 0.00 0.00

Rent paid 12.60 25.20 25.20 25.00 21.00 17.40

Interest

Paid 0.00 0.00 0.00 10.00 0.00 0.00

Invested as

Partner 50.00 0.00 0.00 0.00 0.00 0.00 3.Shankara Cargo Movers

Freight paid 20.04 54.16 0.00 0.00 0.00 0.00

Hire Charges Received 0.00 8.40 6.91 6.24 0.00 0.00

Key Managerial Personnel: 1.Mr. Sukumar Srinivas: Prop: Steel & Pipe Trader Rent paid 0.42 0.84 0.84 0.84 0.78 0.78

Loan

Repaid 0.00 0.00 15.32 0.00 0.00 0.00

Interest

Paid 0.00 0.00 2.02 4.43 0.70 0.00

Loan

Borrowed 0.00 0.00 0.00 15.32 33.00 0.00 NOTE: Amounts in Rs. Lakhs

Event after 30th September 2007:-

The Company was admitted as a partner in the firm M/s. Shankara Steels & Tubes on 28.09.2007 with right to Share 25% of the profit/Loss of the Firm. The said firm was dissolved on 31.10.2007 and up on dissolution the business of the said firm with all its Assets and Liabilities including three properties located in Bengalooru, Mangalore and Ernakulum which were reflected in the books of the said firm as at 31.10.2007 at a value of Rs.327.50 Lakhs were allotted to the Company. The Company in full and final Settlement of the amounts due to the other partners i.e. Rs.117.24 Lakhs allotted 97,700 Equity Shares of Rs.10/-each at a premium of Rs.110/- per share (45,700 Shares to Mr.Sukumar Srinivas and 52,000 Shares to Shankara Holding Pvt Ltd).


104

PRINCIPAL TERMS OF TERM LOAN & CREDIT FACILITY Sr.no

Name of lender

Facility Date of Sanction/ renewal

Letter

Sanctioned amount (Rs. in Crores)

Rate of Interest

Repayment schedule

Security

1 Citibank N.A.

Cash Credit Facility

22/08/2007 22.36 (Cash Credit limit of Rs. 20

Crores and Term Loan of Rs. 2.36 Crores)

- Cash Credit: Revolving

basis Term Loan: 32

months

Movable property (book debts and stock in trade) and immovable property by way of

deposit of title deeds in respect of property, situated at S.D. Road, Secunderabad, Andhra

Pradesh; Kathriguppe Grama, Bangalore South Talluk; K.R. Road Bangalore; Siddaiah Road,

Bangalore; Azizuddin Road, Mangalore; Anekal Talluk, Bangalore; Edapally Ernakulam; Dasanpura Village, Bangalore North and Bachupally Village, R. R. District, Andhra

Pradesh. 2 HSBC Ltd. Purchase

Bill Discounting

28/11/2006 17.00 (Outstanding balance as on

31/03/2007 - Rs. 12.83 Crores)

- Maximum period of 90

Days

Pari passu on Stock and receivables with CitiBank & HSBC

48 monthly installments

Term Loan on Property

22/12/2006 & 02/01/2006

1.38 &

1.50 (Outstanding balance as on

31/03/2007 - Rs.2.47 Crores)

11% & 9.75%

60 monthly Installments

Unit No. 133/2, Farah Winsform, Infantry Road,

Corporation Division No. 71, Bangalore, Karnataka (Ground & Third Floor) by way of

simple mortgage

3

Kotak Mahindra

Bank Limited Purchase Bill

Discounting

09/08/2007

15.00 (including Rs. 5 Crores as

cash credit carrying interest @ 11.25%)

- 90 days from the invoice

date

Paripassu charges on current assets to be shared with CitiBank & HSBC

4 Standard Chartered

Bank Limited

Channel Finance

29/06/2007 15.00

- 60 days from the invoice

date

-


105

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis of Financial Condition and Results of Operations as Reflected in the Financial Statements

a. Overview of the Business of SFPL / Business Outlook:

SPIL is amongst the premier and an established distributor of a wide range of steel tubes and pipes. It’s an ISO 9001 Company, with a legacy of over a decade of presence in steel. The Company distributes a wide range of products viz; steel pipes & tubes (Precision ERW and CDW Tubes, Closed Structural’s: RHS & SHS, Galvanized & Black Mild Steel Pipes and Boiler, Air-Heater & Seamless Tubes), steel bars and steel rods. This allows the Company to cater to the diverse demands of their customers and to consolidate and establish its presence across diverse regions.

SPIL intends to further expand itself in the retail by leveraging its existing sales and distribution network and apply innovative retail marketing initiatives.

SPIL presently has its 16 retail outlets at various cities like Bengalooru, Mangalore, Secunderabad, Vizag, Goa Kochi and Calicut. SPIL intends to further expand itself in the retail by leveraging the existing sales and distribution network and apply innovative retail marketing initiatives. The strategy of the Company is to initially target the metros and big towns all over India. These outlets will enable the Company to offer its product and enable them to frequently renew its inventory. The Company propose to start its own dedicated supermarket that shall cater to the demand of steel in the retail market. The Company has already taken steps in this direction by opening its branch in Ahmedabad, Mumbai, Pune and other cities.

b. Significant Development Subsequent to Last Financial Period

The Company was admitted as a partner in the firm M/s. Shankara Steels & Tubes on 28.09.2007 with right to Share 25% of the profit/Loss of the Firm. The said firm was dissolved on 31.10.2007 and up on dissolution the business of the said firm with all its Assets and Liabilities including three properties located in Bengalooru, Mangalore and Ernakulum which were reflected in the books of the said firm as at 31.10.2007 at a value of Rs.327.50 Lakhs were allotted to the Company. The Company in full and final Settlement of the amounts due to the other partners i.e. Rs.117.24 Lakhs allotted 97,700 Equity Shares of Rs.10/-each at a premium of Rs.110/- per share (45,700 Shares to Mr.Sukumar Srinivas and 52,000 Shares to Shankara Holding Pvt Ltd).

c. Factors that may affect Results of Operations

Except as otherwise stated in this Offer Document, the Risk Factors given in this Offer Document and the following important factors could cause actual results to differ materially from the expectations include, among others:

• General economic and business conditions; • Company’s ability to successfully implement its strategy and its growth and expansion plans; • Factors affecting industrial activity; • Increasing competition in the industry; • Increases in raw materials prices; • Cyclical or seasonal fluctuations in the operating results; • Amount that the Company is able to realize from the clients; • Changes in laws and regulations that apply to the industry; • Changes in fiscal, economic or political conditions in India; • Social or civil unrest or hostilities with neighboring countries or acts of international terrorism; • Changes in the foreign exchange control regulations, interest rates and tax laws in India.


106

d. Discussion on Results of Operations

Analysis of Financial Performance of Shankara Pipes India Limited The following discussion of the financial condition and results of operations for the financial year ending March 31, 2007, 2006, 2005 respectively including the notes thereto and the reports thereon which appear in this Offer Document. The Audited Financial Statements are prepared in accordance with the Indian Accounting Standards

(Rs. In Lacs Particulars March 31,

2007 March 31,

2006 March 31,

2005 March 31,

2004 Sales 50221.40 34623.76 26802.33 16498.97 Other Income 18.59 19.77 16.35 17.52 Gross Income 50239.99 34643.53 26818.68 16516.49 Depreciation 91.47 44.88 42.04 29.47 Depreciation as % of Sales 0.18 0.13 0.16 0.18 Finance Cost 514.66 339.84 243.38 222.72 Finance Cost as % of Net Sales 1.02 0.98 0.91 1.35 Profit / (loss) before Tax 1377.00 1114.65 873.42 627.97 Profit / (loss) before Tax as % of Net Sales 2.74 3.22 3.26 3.81 Provision for Taxation 479.86 422.46 358.28 192.85 Profit / (loss) after tax and extra ordinary items 897.14 692.19 515.14 435.12 Note: Figures have been regrouped wherever necessary to make the data comparable

e. Comparison of Recent Financial Years / Periods with Previous Financial Years / Periods

Financial performance for FY 2006-07 vs. FY 2005-06

Sales: The sales of the Company increased from Rs. 34623.76 lacs in the Financial Year 2005-06 to Rs. 50221.40 lacs in the Financial Year 2006-07. The increase of Rs. 15596.46 (i.e a growth of 45%) in the sales was on account of:

• Boom in construction and real estate. • Substantial impetus for infrastructure projects like airports, roads and irrigation. • Company expanded operations to new territories like Gujarat and Goa.

Depreciation: The company charges depreciation on Written Down Value method. It has increased by 103.81% in Fiscal 31/03/2007 over Fiscal 31/03/2006. The company had moved into its own corporate office measuring about 7,000 sq. ft in August 2006. The Company incurred substantial cost in interiors and office automation. Depreciation on these items contributed to 29% of the depreciation for the year. This also represents 50% increase compared to the previous year’s depreciation. Further the Company had acquired office space during the end of the previous financial year under comparison. This accounts for another 25 % of the depreciation provided for. Finance cost: The Company has increased its working capital limits during the Financial Year 2006-07. As a result the cost of finance increased to Rs.514.66 lacs as compared to Rs. 339.84 lacs in the previous period ended 31/03/2006. Working capital increased by 45% during the financial year 2006-07. Interest rates were also increased during the year. Both these factors contribute to the increase in the finance cost.


107

Profit: During the Fiscal 31/03/2007, SPIL reported a profit before tax of Rs.1377 lacs. The increase in profit for the period is 23.54 % as compared to the previous period ended 31/03/2006, because of higher sales revenue. Financial performance for the FY 2005-06 vs. Financial Year 2004-05

Sales: The sales of the Company increased by 29.18 % in the Financial year 2005-06, as compared previous year. This is due to increased housing activity and creation of new departments by the Company. Finance cost: The finance cost for the period under comparison increased by 39.63%. The increase in the cost was on account of an increase in the working capital limits. Profit: The Profit Before Tax for the Financial Year 2005-06 increased by Rs. 241.23 lacs as compared to the Financial Year 2004-05. The increase in the PBT was on account of sales revenue. Financial performance for the FY 2004-05 vs. FY 2003-04

Revenue: The Company achieved a turnover of Rs. 26802.33 lacs during the year 2004-05, an increase of 62.45% compared to the previous year. This was due to opening of new branches by the Company, the Company was awarded exclusive distribution rights in certain territories and products by Tata Steel (tubes division). Depreciation: The Company bought vehicles amounting to Rs. 53.82 lacs in the Financial Year 2004-05 most of these vehicles were trucks which were needed to improve the logistical capability of the Company. Hence there was an increase of Rs. 12.57 lacs compared to the previous year under comparison. Profit: During the Financial year the Company earned a PBT of Rs. 873.42 lacs for the Financial Year 2004-05 as compared to Rs. 627.97 for the previous year under comparison. This increase of 39.08% was on account of increase in sales revenue. An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Unusual or infrequent events or transactions

There have been no events, other than as described in this Offer Document, which may be called

“unusual” or “infrequent”.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations

Any slowdown in the growth of Indian economy or future volatility in global commodity prices, could

affect the business, including the future financial performance, shareholders’ funds and ability to implement strategy and the price of the Equity Shares.


108

3. Known trends or Uncertainties that have had or are expected to have a material adverse impact on

sales, revenue or income from continuing operations

There are no known trends or uncertainties that may have material adverse impact on the income, costs and profits of the company from continuing operations.

4. Future changes in relationship between costs and revenues, in case of events such as future increase

in labour or material costs or prices that will cause a material change are known

Increase in the cost of the products in which the Company deals, will affect the profitability of the company. Further, the company is not able to pass on the increase in prices of the product to the customers in full. This can be offset through cost reduction.

5. The extent to which material increases in net sales or revenue are due to increased sales volume,

introduction of new products or services or increased sales prices

The increase / decrease in turnover is only on account of increase in sales prices and volume.

6. Total turnover of each major industry segment in which the Company operated

The Company is in the business of distribution of steel pipes and tubes. However, there are no published data available to the Company for total turnover of the Industry.

7. Status of any publicly announced new product

The Company has not publicly announced any new products. However the Company may deal in any new product, depending on the demand in future.

8. The extent to which the business is Seasonal

No major cyclical trends are observed in this industry neither are their any government controls or regulatory framework impinging on the industry.

9. Dependence on single or few suppliers / customers

The company’s turnover is not dependent on single or few customers. Shankara Pipes India Limited has a wide breadth of customers in all major market segments.

10. Competitive conditions

For details of competitive conditions please refer to Section titled, “Business Overview” on page no. 51 of this Offer Document.


109

SECTION V - LEGAL AND REGULATORY INFORMATION OUTSTANDING LITIGATION, MATERIAL DEVELOPMENTS AND OTHER DISCLOSURES

a. Contingent liabilities not provided for

Nil

b. Outstanding Litigations involving Shankara Pipes India Limited: There are no:

• Pending litigations against the company.

• Outstanding litigations, defaults etc pertaining to matter likely to affect operations and finances of the company including prosecution under the Companies Act 1956 (1 of 1956).

• Such cases of pending litigations, defaults etc in respect of Companies/firms/ventures with which the promoters were associated in the past but are no longer associated, and their names continue to be associated with particular litigation.

• Disciplinary action/ investigation has been taken by Securities and Exchange Board of India(SEBI)/ Stock Exchanges against the Company, its directors , promoters and their other business ventures (irrespective of the fact whether or not they fall under the purview of section 370(1B) of the Companies Act 1956.

• Cases against the Company or its Promoters of economic offences in which penalties were imposed on promoters.

• Pending litigation, disputes, defaults, non-payment of statutory dues, proceedings initiated for offences (including past cases and irrespective of whether specified in paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956) against the promoters and there business ventures.

• Pending litigations, defaults, non payment of Statutory dues, proceedings initiated for economic offences/civil offences, any disciplinary action taken by the Board /Stock Exchanges against the Company/Promoters and their business ventures/Directors other than those mentioned in this Prospectus and that no litigations have arisen and the Company and its Directors take full responsibility of the information mentioned in the Prospectus.

In the opinion of the Company there have been no material developments after the date of latest balance sheet, which would have an impact on the performance and the prospects of the Company other than what has been set out in this Offer Document.

c. Outstanding Litigations involving Promoters/ Directors of Company There are no outstanding litigations, disputes, non-payment of statutory dues, overdues to banks / financial institutions, defaults against banks / financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares issued, defaults in creation of full security as per terms of issue, other liabilities, proceedings initiated for economic / civil / any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part I of Schedule XIII of the Companies Act, 1956) against the promoters and director of the Company.

d. Outstanding Litigations involving Promoters and Group Companies: There are no outstanding litigation, disputes, non-payment of statutory dues, overdues to banks / financial institutions, defaults against banks / financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares issued, defaults in creation of full security as per terms of issue, other liabilities, proceedings initiated for economic / civil / any other offences (including past cases where penalties may or may not have been


110

awarded and irrespective of whether they are specified under paragraph (i) of Part I of Schedule XIII of the Companies Act, 1956) against the promoter group companies.

e. Cases/Suits filed by SPIL The details of cases filed by the Company are as follows

Sr. No

Parties Court Case Number Current status Amount involved (Rs. In lacs)

Cheque Dishonor 1. OSHO Agencies XII Additional

Chief Metropolitan

Magistrate

Criminal Case No. 22902/05

Non Balable Warrant & Plea,

Party not traceable

1.09

2. S.K. Traders XII Additional Chief

Metropolitan Magistrate

Criminal Case No.31173/06

Cross examination of

petitioner withness

1.12

3. Vybhav Traders XIV Additional Chief



Party not available in the

old address, fresh address of the

party to be collected

6.50

4. Shankar Rao, Ganapathi Steels

XIV Additional Chief


Private Complaint Report No.

7209/07

SPIL has to give the statement

about the case to the Lawyers

0.50

5. K.K. Steels, Pune - - Notice sent on 18/07/2007

1.14

6. Reliance Fire & Safety Ltd.

XIV Additional Chief



7813/07 &


Summons to be served at

Hyderabad

10.81

Recovery suit 7. Yadav Krishna Additional City

Civil & Session Judge,

Bengalooru

Original Suit No. 16645/04

Evidence to be lead

1.79

8. Shankar Manjunatha

Traders

Additional City Civil & Session

Judge, Bengalooru


7209/07

Party not available in the

old address, fresh address of the

party to be collected

0.34

9. Prabhu Engineering

- - Notice sent on 13/07/2007,

originals returned with an advice to file case

at Pune

0.20


111

GOVERNMENT/STATUTORY AND BUSINESS APPROVALS

On the basis of the indicative list of approvals below, the Company is permitted to carry on business activities and no further approvals from any Government authorities/RBI are required by the Company to undertake the business of the Company. It must be distinctly understood that, in granting these licenses, the Government of India and/or RBI does not take any responsibility for Company’s financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf. The Company has obtained necessary approvals and registrations from various authorities in relation to its business activities; which include:

i) Permanent Account Number (AACCS9670B) and Tax Deduction Account Number

(BLRS04318G) under the Income Tax Act, 1961;

ii) Service Tax Registration (Reg. No.: AACCS9670BST001) from Ministry of Finance, Office of the Superintendent Service Tax Range, Bengalooru;

iii) Certificate of Registration under the Central Sales Tax Act, 1956 (Reg. No.: 00264726 dated 06/12/1995) and Value Added Tax, 2005 (Reg. No.: 29150071079) from Commissioner of Sales tax, Karnataka;

iv) Certificate of Registration (Kar/nspn./53-17702-101 dated 06/04/2001) with Employees’ State Insurance Corporation under Employees’ State Insurance Act., 1948 from Employees’ State Insurance Commission, Bengalooru Karnataka;

v) Certificate of Registration (No.: KM/BN/EMF-CIR-I/BD/III/727/2000-01 with code no. 25045 dated March 8, 2001) under Employees Provident Fund & Miscellaneous Provisions Act, 1952 from Regional Provident Commissioner, Bengalooru, Karnataka for the purposes of deposit of provident fund with the P.F. Commissioner, Bengalooru with effect from April 1, 1999 onwards;

vi) Registered with the Department of Labour, Bengalooru with registration number ALCB-4/CLA/P1:03/2007-08 dated April 9, 2007

vii) Registered with Government of Karnataka under the Act with registration number 1703467-0 dated October 8, 1997, with effect from March 1, 1996.

viii) Registration of Trade Mark;

(a) Owned by the Company

The Company is registered proprietor of a trademark namely “Shankara Pipes” with logo registered in class 6 (unwrought and partly wrought common metal and their alloys, rolled steel tubes, black and galvanished tubes casing pipes, boilers and steamless tubes, CBD tubes, transformers cooling tubes and precision steel tubes for rail coach industry, nails, screws included in class 6) under the Trade Marks Act, 1999, vide registration number 962881 dated October 10, 2000, issued by the Trade Marks Registry, Government of India under the Trade Marks Act, 1999.

(b) Trade Mark Application pending for registration

The Company has applied for registration of another trade mark namely “Shankara Loha Steel Solutions” in class 6 (Steel Pipes and Tubes Aloy Steel Products, Metal Building Materials, Hardware items, fasteners included in class 6) under the Trade Marks Act, 1999, vide application number 1568762 dated June 14, 2007 filed in the Office of Trade Marks Registry, Chennai, Tamil Nadu, India.

ix) Certificate of compliance with ISO 9001 standards by TUV India Certification body;

x) Any other license


112

Apart from the above, SPIL has received following, Licenses and Approval for its proposed project of setting up its tube mill:

i) The Company has received an approval no. GP/BAL/2007 dated 09/05/2007 from Gram

Panchayat, Bachupally village for construction of Factory shed for its proposed Tube Mill. ii) The Company has received a No Objection Certificate dated 04/08/2007 from Gram

Panchayat, Bachupally village for setting up tube mill and power supply. iii) The Company has received a provisional certificate dated 10/10/2007 from Director of

Industries, Andhra Pradesh for setting up of Manufacturing plant. iv) The Company has received an approval no. 05472/07 dated 16/10/2007 from single

window cell for Hi Tension Power. v) Excise registration number AACS9670BXM001 dated 19/10/2007 for exemption of capital

goods. vi) The Company has received Huda certificate (certify the land pertains to the industrial

purpose) as an Industrial Zone dated 09/10/2007 from Hyderabad Urban Development Authority.


113

OTHER REGULATORY AND STATUTORY DECLARATIONS

A) AUTHORITY FOR THE PRESENT ISSUE

The Board of Directors have, pursuant to a resolution passed at its meeting held on 03/09/2007, authorized the Issue, subject to the approval of the shareholders of the Company under Section 81 (1A) of the Companies Act. The shareholders of Shankara Pipes India Limited have authorized the Issue by a special resolution adopted pursuant to Section 81 (1A) of the Companies Act, passed at the Annual General Meeting held on 29/09/2007.

B) PROHIBITION BY SEBI

The Company, its Promoters, its Directors or any of the Company’s associates or group companies and companies with which the Directors of the Company are associated as Directors or Promoters, or Directors or Promoters in control of, of the promoting Company, are currently not prohibited from accessing or operating in the capital market under any order or direction passed by SEBI. The Promoters, their relatives (as per Act), the Company, group companies, associate companies are not detained as willful defaulters by RBI / Government authorities.

C) Eligibility for the Issue

SPIL is eligible for the Issue as per Clause 2.2.1 of the SEBI Guidelines as explained under:

• SPIL has a net tangible assets of at least Rs. 30 million in each of the preceding three full years (of 12

months each), of which not more than 50% is held in monetary assets; • SPIL has a pre-Issue net worth of not less than Rs. 10 million in each of the three preceding full years; • SPIL has a track record of distributable profits as per Section 205 of Companies Act for at least three out

of the immediately preceding five years; • The proposed Issue size would not exceed five times the pre-Issue net worth as per the audited

accounts for the year ended March 31, 2007; • The Company has not changed its name during the last one year.

the distributable profits as per Section 205 of the Companies Act and net worth for the last five years as per the restated unconsolidated financial statements are as under:

(In Rs. lacs) For the Financial Year Ended March 31 Particulars

2007 2006 2005 2004 2003 Distributable Profits(1) 869.72 692.19 515.14 435.12 132.90 Net Worth (2) 3,033.08 2,239.62 1,598.11 1,136.03 751.14 Net Tangible Assets (3) 13778.73 9238.71 7094.08 4342.15 3757.20 Monetary Assets(4) 257.93 104.08 130.55 28.81 46.43 Monetary Assets as a % of Net Tangible Assets 1.87% 1.13% 1.84% 0.66% 1.24%

Note: (1) Distributable profits have been defined in terms of section 205 of the Companies Act. (2) Net worth has been defined as the aggregate of equity share capital and reserves, excluding miscellaneous

expenditures, if any.


114

(3) Net tangible assets means the sum of all net assets of the Company excluding intangible assets as defined in Accounting Standard 26 issued by Institute of Chartered Accountants of India.

(4) Monetary assets comprise of cash and bank balances, public deposit account with the Government.

SPIL satisfies all the eligibility criterias, laid down in clause 2.2.1 of SEBI (DIP) Guidelines. However, the Company is doing a “voluntary book-building issue” wherein the Company proposes to allot upto 50% of the Issue to QIBs and under-subscription, if any, in the QIB portion will be added back to the Issue to public. The promoters, the company, directors of SPIL are not detained as willful defaulters by the RBI/ GOI authorities and there are no violations of securities laws committed by them in the past or pending against them other than those disclosed in this Offer Document. No penalty has been imposed by SEBI and other regulatory bodies against the company, its directors, its promoters and companies promoted their directors. SPIL undertakes that the number of allottees in the Issue shall be at least 1,000. Otherwise, the entire application money shall be refunded forthwith. In case of delay, if any, in refund, the Company shall pay interest on the application money at the rate of 15% per annum for the period of delay.

D) DISCLAIMER CLAUSE OF SEBI

AS REQUIRED, A COPY OF THIS RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). “IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE OFFER DOCUMENT. LEAD MERCHANT BANKER, KEYNOTE CORPORATE SERVICES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN OFFER DOCUMENT, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER KEYNOTE CORPORATE SERVICES LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 15/12/2007 IN ACCORDANCE WITH SEBI (MERCHANT BANKERS) REGULATIONS 1992 WHICH READS AS FOLLOWS :

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO

LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE OFFER DOCUMENT PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY,

IT’S DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.


115

WE CONFIRM THAT:

(a) THE DRAFT RHP FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE PUBLIC ISSUE;

(b) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID PUBLIC ISSUE, AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANOTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

(c) THE DISCLOSURES MADE IN THE DRHP ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED PUBLIC ISSUE.

(d) BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRHP ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID.

(e) WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH OF THE UNDERWRITES TO FULFIL THEIR UNDERWRITING COMMITMENTS.

(f) WE CERTIFY THAT WRITTEN CONSENT FROM THE SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS A PART OF PROMOTER’S CONTRIBUTION SBJECT TO LOCK-IN, AND THE SECURITIES PROPOSED TO FORM PART OF PROMOTER’S CONTRIBUTION SUBJECT TO LOCK-IN SHALL NOT BE DISPOSED/SOLD/TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH THE BOARD TILL THEDATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS. THE FILING OF THE DRHP DOES NOT, HOWEVER ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956, OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED PUBLIC ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE LEAD MANAGER FOR ANY IRREGULARITIES OR LAPSES IN THE OFFER DOCUMENT. THE PROMOTER / DIRECTOR OF SHANKARA PIPES INDIA LIMITED, MR. ZAFAR SAIFULLAH, MR. SUKUMAR SRINIVAS, MR. C. RAVIKUMAR, MR. R.S.V. SHIVA PRASAD, PROF. S. SUNDARARAJAN AND MR. V. RAVICHANDAR SUNDARARAJAN AND CONFIRM THAT NO INFORMATION/MATERIAL LIKELY TO HAVE A BEARING ON THE DECISION OF INVESTORS IN RESPECT OF THE SHARES OFFERED IN TERMS OF THIS RED HERRING PROSPECTUS HAS BEEN SUPPRESSED WITHHELD AND / OR INCORPORATED IN THE MANNER THAT WOULD AMOUNT TO MIS-STATEMENT/MISREPRESENTATION AND IN THE EVENT OF ITS TRANSPIRING AT ANY POINT IN TIME TILL ALLOTMENT/REFUND, AS THE CASE MAY BE, THAT ANY INFORMATION/MATERIAL HAS BEEN UPPRESSED/WITHHELD AND/ OR AMOUNTS TO A MIS- STATEMENT/MISREPRESENTATION, THE PROMOTERS/DIRECTORS UNDERTAKE TO REFUND THE ENTIRE APPLICATION MONIES TO ALL SUBSCRIBERS WITHIN 7 DAYS THEREAFTER WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 63 OF THE COMPANIES ACT.

E) DISCLAIMER STATEMENT FROM THE COMPANY AND THE LEAD MANAGER

The Company, its Directors and the Lead Manager accept no responsibility for statements made otherwise than in this Red Herring Prospectus or in the advertisements or any other material issued by or at instance of the above mentioned entities and anyone placing reliance on any other source of information, including our website, www.shankarapipe.com, would be doing so at his or her own risk. The Book Running Lead Manager accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding entered into among the Book Running Lead Manager and the Company dated 29/11/2007.


116

All information shall be made available by BRLM and the Company to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in research or sales reports or at bidding centers etc. We shall not be liable to the Bidders for any failure in downloading the Bids due to faults in any software/hardware system or otherwise. The Issuer Company accepts no responsibility for statements made otherwise than in this Prospectus or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his/her own risk. The BRLM and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of the Prospectus with SEBI. The BRLM and the Company shall update the Prospectus and keep the public informed of any material changes till the listing and trading commences.

F) DISCLAIMER WITH RESPECT TO JURISDICTION

This Issue is being made in India to persons resident in India {including Indian nationals resident in India who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in shares, Indian Mutual Funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), or trusts under the applicable trust law and who are authorised under their constitution to hold and invest in shares, permitted insurance companies and pension funds}. This Draft Prospectus does not, however, constitute an invitation to subscribe to Equity Shares offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Prospectus comes is required to inform him or herself about and to observe, any such restrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of appropriate court(s) in Bengalooru only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Draft Prospectus has been filed with SEBI for observations. Accordingly, the Equity Shares, represented thereby may not be offered or sold, directly or indirectly, and this Red Herring Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Draft Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

G) DISCLAIMER CLAUSE OF THE STOCK EXCHANGE

Disclaimer Clause of Bombay Stock Exchange Limited (BSE):

“Bombay Stock Exchange Limited (“Designated Stock Exchange”) has given vide its letter dated [●], 2007 permission to the Company to use the Exchange’s name in this Prospectus as one of the stock exchanges on which this Company’s securities are proposed to be listed. The Exchange has scrutinized this Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The Exchange does not in any manner:

i. Warrant, certify or endorse the correctness or completeness of any of the contents of this Prospectus; or

ii. Warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or

iii. Take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this Company;


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and it should not for any reason be deemed or construed that this Prospectus has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever”.

Disclaimer Clause of the NSE

As required, a copy of this Red Herring Prospectus has been submitted to National Stock Exchange of India Limited. NSE has given vide its letter Ref. No. [●] dated [●] permission to the Issuer to use the Exchange’s name in this Red Herring Prospectus as one of the stock exchanges on which this Issuer’s securities are proposed to be listed subject to the Issuer fulfilling the various criteria for listing including the one related to paid up capital and market capitalization (i.e. the paid up capital shall not be less than Rs. 10 crores and market capitalization shall not be less than Rs. 25 crores at the time of listing). The Exchange has scrutinized this Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Issuer. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Red Herring Prospectus has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus, nor does it warrant that this Issuer’s securities will be listed or will continue to be listed on the Exchange; nor does it take any responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.

H) FILING

i. The Offer Document has been filed with SEBI at Mumbai and also with the Bombay Stock Exchanges

Limited at Mumbai and the National Stock Exchange of India Limited at Mumbai. ii. A copy of the documents referred to as Material Contacts / Documents in this Offer Document has

been kept open for inspection at the Registered Office of the Company. iii. Copy of this Offer Document along with the relevant material documents shall be filed with Stock

Exchanges. All the legal requirements applicable till the filing of the Offer Document with Stock Exchanges have been complied with.

iv. A copy of the Prospectus, along with the documents required to be filed under Section 60B of the Companies Act, will be delivered for registration to the ROC and a copy of the Prospectus required to be filed under Section 60 of the Companies Act would be delivered for registration with ROC situated at Bengalooru, Karnataka.

I) LISTING

Applications will be made to NSE and BSE for permission to deal in and for an official quotation of the Equity Shares of the Company. BSE shall be the Designated Stock Exchange with which the basis of allocation will be finalised. If the permission to deal in and for an official quotation of the Equity Shares is not granted by any of the Stock Exchanges mentioned above, the Company shall forthwith repay, without interest, all monies received from the applicants in pursuance of this DRHP. If such money is not repaid within eight days after the Company becomes liable to repay it from the date of refusal or within 70 days from the date of Bid/Issue Closing Date, whichever is earlier, then the Company, and every Director of the Company who is


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an officer in default shall, on and from expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act. The Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at both the Stock Exchanges mentioned above are taken within seven working days of finalisation of the basis of Allotment for the Issue.

J) IMPERSONATION

ATTENTION OF THE APPLICANTS IS SPECIFICALLY DRAWN TO THE PROVISIONS OF SUB-SECTION (1) OF SECTION 68 A OF THE COMPANIES ACT, WHICH IS REPRODUCED BELOW: "ANY PERSON WHO:

(A) MAKES IN A FICTITIOUS NAME, AN APPLICATION TO A COMPANY FOR ACQUIRING OR SUBSCRIBING FOR, ANY SHARES THEREIN,

OR

(B) OTHERWISE INDUCES A COMPANY TO ALLOT, OR REGISTER ANY TRANSFER OF SHARES, THEREIN TO HIM, OR ANY OTHER PERSON IN A FICTITIOUS NAME,

SHALL BE PUNISHABLE WITH IMPRISONMENT FOR A TERM WHICH MAY EXTEND TO FIVE YEARS."

K) CONSENTS

Consents in writing of the Directors, the Company Secretary and Compliance Officer, the Auditors, the Domestic Legal Advisor, Bankers to the Company, Lead Manager and the Registrar to the Issue to act in their respective capacities, have been obtained and filed along with a copy of the Prospectus with the ROC as required under Sections 60 and 60B of the Companies Act and such consents have not been withdrawn up to the time of delivery of this Prospectus for registration with the ROC. Rao & Venkatesulu, Chartered Accountants, Auditors of the Company have also given their consent to the inclusion of their report as appearing hereinafter in the form and context in which appears in this Red Herring Prospectus and also of the tax benefits accruing to the Company and to the members of the Company and such consent and report have not been withdrawn up to the time of signing this Offer Document. Except as stated in the sections titled, “Statement of Tax Benefits“ and “Financial Statements” beginning on pages 36 and 87 respectively, of this Offer Document, SPIL have not obtained any expert opinions.

L) EXPERT OPINION OBTAINED, IF ANY

The Company has not obtained any expert opinion.

M) EXPENSES OF THE ISSUE

The expenses for this Issue include issue management fees, printing and distribution expenses, legal fees, advertisement expenses, depository charges and listing fees to the Stock Exchanges, among others. The expenses of the Issue payable by the Company inclusive of fees payable to the Lead Manager, other intermediaries to the Issue, stamp duty, printing, publication, advertising and distribution expenses, bank charges, fees payable to the Registrar to the Issue, listing fees, brokerage and other miscellaneous expenses are estimated to be approximately [●] % of the total proceeds of this Issue. The total expenses for this Issue are estimated not to exceed Rs. [●] Lacs. A broad breakup of the same is as under:


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Rs. In Lacs Sr. No. Nature of Expenses Amount

% to the Total Expenses

% to the Issue

1. Lead Management-Issue Management fees, Advisory Fee [●] [●] [●] 2. Legal Counsel charges, Registrars Printers, Postage,

Dispatch expenses, Advertisement & publicity expenses [●] [●] [●]

3. Listing Expenses & Others Expenses [●] [●] [●] Total [●] [●] [●]

N) DETAILS OF FEE PAYABLE

Lead Manager to the Issue The total fees payable to the Lead Manager will be as per the Memorandum of Understanding signed with the Lead Manager, a copy of which is available for inspection at the Registered Office of the Company. The Lead Manager will be reimbursed for all relevant out-of-pocket expenses such as cost of travel, stationery, postage and communication expenses. Registrar to the Issue The fees payable by the Company to the Registrar to the Issue for processing of application, data entry, printing of CAN/ refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as per the Memorandum of Understanding signed with the Company dated 28/10/2007. The Registrar to the Issue will be reimbursed for all out-of-pocket expenses including cost of stationery, postage, stamp duty and communication expenses. Adequate funds will be provided by the Company to the Registrar to the Issue to enable them to send refund orders or Allotment advice by registered post/ speed post/ under certificate of posting.

O) UNDERWRITING COMMISSION, BROKERAGE AND SELLING COMMISSION

The underwriting commission and the selling commission for the Issue are as set out in the Syndicate Agreement amongst the company, the BRLM and the Syndicate Member. The underwriting commission shall be paid as set out in the Syndicate Agreement based on the Issue price and the amount underwritten in the manner mentioned on page no 13 of the DRHP.

P) PREVIOUS PUBLIC OR RIGHTS ISSUE

The Company has not made any public or rights issue of shares either in India or abroad in the five years preceding the date of this Offer Document.

Q) PREVIOUS ISSUE OF SHARES OTHERWISE THAN FOR CASH

The Company has issued 97,700 equity shares of Rs. 10 each at a price of Rs. 120 per share on 06/11/2007 for consideration other than cash i.e; issued in full and final settlement of the erstwhile partnership firm Shankara Steel & Tubes upon dissolution. The company has issued 96,62520 equity shares of Rs. 10 each as bonus in the ratio of 21 shares for every 10 shares on 12/11/2007 by capitalizing free reserves.


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R) COMMISSION AND BROKERAGE ON PREVIOUS ISSUES

Since this is the initial public offer of the Company, no sum has been paid or has been payable as commission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares of the Company since its inception.

S) PREVIOUS ISSUE OF CAPITAL DURING LAST THREE YEARS

Shankara Pipes India Limited has issued 97,700 equity shares of Rs. 10/- each on 06/11/2007 & 96,62,520 equity shares Rs. 10/- each as on 12/11/2007. Besides this, SPIL has not made any previous issue of capital during last 3 years.

T) PROMISE VERSUS PERFORMANCE

None of the group companies of the Company are listed on any stock exchanges in India.

U) OUTSTANDING DEBENTURES OR BONDS AND REDEEMABLE PREFERENCE SHARES AND

OTHER INSTRUMENTS

There are no outstanding debentures or bonds or redeemable preference shares and other instruments issued by the company as on the date of this Red Herring Prospectus.

V) STOCK MARKET DATA

This being an initial public offering of SPIL, the Equity Shares are not listed on any stock exchange.

W) INVESTOR GRIEVANCES AND REDRESSAL SYSTEM

The company has appointed the registrar to the issue, to handle the investor grievances in co-ordination with Mr. S. Subramonia Iyer .the Compliance Officer of the Company. All grievances relating to the present issue may be addressed to the Registrar with a copy to the Compliance Officer, giving full details such as name, address of the applicant, number of equity shares applied for, amount paid on application and bank and branch. The company would monitor the work of the registrar to ensure that the investor grievances are settled expeditiously and satisfactorily.

The Registrar to the issue, namely, Intime Spectrum Registry Ltd. will handle investor’s grievances pertaining to the issue. A fortnightly status report of the complaints received and redressed by them would be forwarded to the company. The company would also be co-ordinating with the registrar to the issue in attending to the grievances to the investor. The company assures that the Board of Directors in respect of the complaints, if any, to be received shall adhere to the following schedules:

Sr. No.

Nature of complaint Time Table

1. Non-receipt of refund Within 7 days of receipt of complaint subject to production of satisfactory evidence

2. Non Receipt of Share Certificate Within 7 days of receipt of complaint subject to production of satisfactory evidence

3. Transfer of Shares Within 30 days 4. Change of Address Notification Within 7 days of receipt of information 5. Any other complaint in relation to Public Issue Within 7 days of receipt of complaint

with all relevant details


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Redressals of investors’ grievance are given top priority by the Company. The Committee oversees redressal of complaints of shareholders/investors and other important investor related matters. The Company has adequate arrangements for redressal of investor complaints as follows: Share transfer/ dematerialization/ dematerialization are handled by well equipped professionally managed Registrar and Transfer Agent, appointed by the Company in terms of SEBI’s direction for appointment of Common Agency for physical as well as demat shares. The Registrars are constantly monitored and supported by qualified and experienced personnel of the Company.

X) CHANGES IN AUDITORS

There has been no change in the Auditors over the last three years.

Y) CAPITALIZATION OF RESERVES OR PROFITS DURING LAST 5 YEARS

The company has issued 96,62,520 Equity Shares in the ratio of 21 equity shares for every 10 equity shares held (21:10), on 11/12/2007 by capitalizing reserves or profits.

Z) REVALUATION OF ASSETS DURING THE LAST 5 YEARS

The company has not revalued the assets during the last 5 years.


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OFFERING INFORMATION

A. TERMS OF THE ISSUE The Equity Shares being offered are subject to the provisions of the Companies Act, the Memorandum and Articles of Association of the Company, the terms of the Red Herring Prospectus, the Prospectus, the Bid cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the Allotment advices and other documents/certificates that may be executed in respect of the Issue. The Equity Shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, Government of India, the Stock Exchanges, the RBI, ROC and/ or other authorities, as in force on the date of the Issue and to the extent applicable. RANKING OF EQUITY SHARES The Equity Shares being offered shall be subject to the provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the existing Equity Shares including rights in respect of dividend. The Allottees will be entitled to dividend or any other corporate benefits, if any, declared by the Company after the date of allotment. MODE OF PAYMENT OF DIVIDEND The Company shall pay dividend to its shareholders as per the provisions of the Companies Act, 1956. FACE VALUE AND ISSUE PRICE The face value of the Equity Shares is Rs. 10/- each and the Floor Price is Rs. [●] and the Cap Price is Rs. [●] per Equity Share. At any given point of time there shall be only one denomination for the Equity Shares subject to the applicable laws. COMPLIANCE WITH SEBI GUIDELINES The Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time. RIGHTS OF THE EQUITY SHAREHOLDERS Subject to applicable laws, regulations, rules and guidelines and the Memorandum and Articles of Association, the equity shareholders shall have the following rights:

Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a show of hands in person or a poll either in person or by proxy; Right to receive annual reports and notices to members; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation; Right of free transferability; and Such other rights, as may be available to a shareholder of a listed public company under the Companies

Act, 1956 and the Memorandum and Articles of Association of the Company.

MARKET LOT AND TRADING LOT In terms of Section 68B of the Companies Act, 1956, the Equity Shares of the Company shall be allotted only in dematerialized form. In terms of existing SEBI Guidelines, the trading in the Equity Shares of the Company shall only be in dematerialized form for all investors. Since trading of the Equity Shares of the Company will be in dematerialized mode, the tradable lot is one equity share.


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Allocation and allotment of Equity Shares through this Issue will be done only in electronic form in multiples of [●] Equity Share to the successful Bidders subject to a minimum Allotment of [●] Equity Shares. For details of allocation and allotment, see “Issue Procedure” on page 128. NOMINATION FACILITY TO THE INVESTOR In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidder(s), may nominate any one person in whom, in the event of death of the sole Bidder or in case of joint Bidders, death of all the Bidders, as the case may be, the Equity Shares Allotted, if any, shall vest. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity Share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale/transfer/alienation of Equity Share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. A fresh nomination can be made only on the prescribed form available on request at the registered office of the Company or at the registrar and transfer agent of the Company. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board of the Company, elect either:

To register himself or herself as the holder of the Equity Shares; or To make such transfer of the Equity Shares, as the deceased holder could have made.

Further, the Board of the Company may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with, within a period of 90 days, the Board may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice have been complied with. Since the allotment of Equity Shares in the Issue will be made only in dematerialized mode, there is no need to make a separate nomination with the Company. Nominations registered with the respective depository participant of the applicant would prevail. If the investors require to change the nomination, they are requested to inform their respective depository participant.

APPLICATION BY NRIS, FIIS REGISTERED WITH SEBI AND FVCIS REGISTERED WITH SEBI The Equity Shares are being offered in this Issue to the Indian public only. Non-residents such as foreign institutional investors, non resident Indian, foreign venture capital funds, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per RBI regulations, OCBs cannot participate in the Issue. MINIMUM SUBSCRIPTION If the Company do not receive the minimum subscription of 90% of the Issue to the extent of the amount including devolvement of the members of the Syndicate, if any, within 60 days from the Bid/ Issue Closing Date, the Company shall forthwith refund the entire subscription amount received. If there is a delay beyond eight days after the Company becomes liable to pay the amount, the Company shall pay interest as per Section 73 of the Companies Act. JURISDICTION Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Bengalooru, India.


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ARRANGEMENTS FOR DISPOSAL OF ODD LOTS

The equity shares of the Company will be listed/traded in compulsory demat mode. The market lot of the share will be 1 (One). The Company has not made any arrangements for the disposal of odd lot shares arising out of the issue. ALLOTMENT RECONCILIATION AND REVISED CANS After the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar on the basis of Bids uploaded on the BSE/NSE system. Based on the electronic book, QIBs may be sent a CAN, indicating the number of Equity Shares that may be allocated to them. This CAN is subject to the basis of final Allotment, which will be approved by the Designated Stock Exchange and reflected in the reconciled book prepared by the Registrar. Subject to SEBI Guidelines, certain Bid applications may be rejected due to technical reasons, non- receipt of funds, cancellation of cheques, cheque bouncing, incorrect details, etc., and these rejected applications will be reflected in the reconciliation and basis of Allotment as approved by the Designated Stock Exchange. As a result, a revised CAN may be sent to QIBs, and the allocation of Equity Shares in such revised CAN may be different from that specified in the earlier CAN. QIBs should note that they may be required to pay additional amounts, if any, by the Pay-in Date specified in the revised CAN, for any increased allocation of Equity Shares. The CAN will constitute the valid, binding and irrevocable contract (subject only to the issue of a revised CAN) for the QIB to pay the entire Issue Price for all the Equity Shares allocated to such QIB. The revised CAN, if issued, will supersede in entirety the earlier CAN. APPLICATION IN ISSUE Equity Shares being issued through this Red Herring Prospectus can be applied for in the Dematerialized form only. WITHDRAWAL OF THE ISSUE The Company, in consultation with the BRLM, reserves the right not to proceed with the Issue at anytime after the Bid/Issue Opening Date but before Allotment, without assigning any reason therefore.


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B. ISSUE STRUCTURE Public Issue of 61,15,000 Equity Shares of face value Rs.10/- each for cash by the company issued at a price of Rs.[●] per Equity Share, aggregating Rs. [●] Lacs (hereinafter referred to as the “Issue”). The Issue would constitute 30.01% of the post issue paid-up capital of the Company. The Issue is being made through the 100% Book Building Process:

QIBs Non-Institutional Bidders

Retail Individual Bidders

Number of Equity Shares*

Up to 30,57,500 Equity Shares will be allotted to QIBs.

Upto 9,17,250 Equity Shares shall be available for allocation.

At least 21,40,250 Equity Shares shall be available for allocation.

Percentage of Issue Size available for allocation

Up to 50% of the Net Issue (of which 5% shall be reserved for Mutual Funds) Mutual Funds participating in the 5% reservation in the QIB Portion will also be eligible for allocation in the remaining QIB Portion. The unsubscribed portion, if any, in the Mutual Fund reservation will be available to QIBs.

Upto 15% of the Net Issue or Net Issue less allocation to QIBs and Retail Portion*

At least 35% of the Net Issue or Net Issue less allocation to QIBs and Non-Institutional Portion.*

Basis of allocation if respective category is oversubscribed

Proportionate(a) 1,52,875 Equity Shares shall be available for allocation on a proportionate basis to Mutual Funds; and (b) 29,04,625 Equity Shares shall be allotted on a proportionate basis to all QIBs, including Mutual Funds receiving allocation as per (a) above.

Proportionate Proportionate

Minimum Bid Such number of Equity Shares that the Bid Amount exceeds Rs.100,000 and in multiples of [●] Equity Shares thereafter.

Such number of Equity Shares that the Bid Amount exceeds Rs 100,000 and in multiples of [●] Equity Shares thereafter.

[●] Equity Shares and in multiples of [●] Equity Share thereafter.

Maximum Bid Not exceeding the size of the Issue subject to regulations as applicable to the Bidder

Not exceeding the size of the Issue subject to regulations as applicable to the Bidder

Such number of Equity Shares per Retail Individual Bidder so as to ensure that the Bid Amount does not exceed Rs.100,000.

Mode of Allotment Compulsorily in dematerialized form.

Compulsorily in dematerialized form.

Compulsorily in dematerialized form.


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QIBs Non-Institutional Bidders

Retail Individual Bidders

Trading Lot One Equity Share One Equity Share One Equity Share Who can Apply ** Public financial

institutions, as specified in Section 4A of the Companies Act: scheduled commercial banks, mutual funds, State Industrial Development Corporations, permitted insurance companies registered with the Insurance Regulatory and Development Authority, provident funds with minimum corpus of Rs. 2500 Lacs and pension funds with minimum corpus of Rs. 2500 Lacs in accordance with applicable law.

Resident Indian individuals, HUFs (in the name of karta), companies, corporate bodies, societies and trusts.

Individuals (including HUFs in the name of karta) applying for Equity Shares such that the Bid Amount per Retail Individual Bidder does not exceed Rs.100,000 in value.

Terms of Payment Margin Amount applicable to QIB Bidders at the time of submission of Bid-cum-Application Form to the Member of Syndicate.

Margin Amount applicable to Non-institutional Bidder at the time of submission of Bid-cum-Application Form to the Member of Syndicate.

Margin Amount applicable to Retail Individual Bidder at the time of submission of Bid - cum - Application Form to the Member of Syndicate.

Margin Amount At least 10% of the Bid Amount in respect of bids placed by QIB Bidder on Bidding.

Full Bid Amount on Bidding.

Full Bid Amount on Bidding.

* Subject to valid Bids being received at or above the Issue Price, under-subscription, if any, in the Non-Institutional and Retail Individual categories would be allowed to be met with spillover inter-se from any of the other categories, at the sole discretion of the Company, the BRLM and subject to applicable provisions of the SEBI Guidelines.

** In case the Bid-cum-Application Form is submitted in joint names, the investors should ensure that the demat account is also held in the same joint names and in the same sequence in which they appear in the Bid-cum-Application Form. If the aggregate demand by Mutual Funds is less than 1,52,875 Equity Shares, the balance Equity Shares available for allocation in the Mutual Fund reservation will first be added to the QIB Portion and be allocated proportionately to the QIB Bidders in proportion to their Bids.

Who can Bid?

1. Persons eligible to invest under all applicable laws, rules, regulations and guidelines;

2. Indian nationals resident in India who are majors, or in the names of their minor children as natural/ legal guardians in single or joint names (not more than three);


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3. Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals;

4. Companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest in the equity shares;

5. Mutual Funds registered with SEBI;

6. Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI regulations and the SEBI Guidelines and regulations, as applicable);

7. Venture Capital Funds registered with SEBI;

8. State Industrial Development Corporations;

9. Trusts/ societies registered under the Societies Registration Act, 1860, as amended, or under any other law relating to trusts/ societies and who are authorized under their constitution to hold and invest in equity shares;

10. Scientific and/or industrial research organizations authorized under their constitution to invest in equity shares; and

11. Insurance companies registered with the Insurance Regulatory and Development Authority;

12. Provident Funds with minimum corpus of Rs. 250 million and who are authorized under their constitution to hold and invest in equity shares; AND

13. Pension Funds with a minimum corpus of Rs. 250 million and who are authorized under their constitution to hold and invest in equity shares; and

The Equity Shares are being offered in this Issue to the Indian public only. Non-residents such as foreign institutional investors, non resident Indian, foreign venture capital funds, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per the existing regulations, OCBs cannot participate in this Issue.


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C. ISSUE PROCEDURE BOOK BUILDING PROCEDURE The Issue is being made through the 100% Book Building Process where upto 50% of the Issue to the public shall be allocated on a proportionate basis to eligible Qualified Institutional Buyers (“QIBs”). 5% of the QIB Portion shall be available for allocation on a proportionate basis to Mutual Funds only and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, at least 15% of the Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and at least 35% of the Issue to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price Bidders are required to submit their Bids through the members of the Syndicate. The Company, in consultation with the BRLM reserve the right to reject any QIB Bid procured by any or all members of the Syndicate provided the rejection is at the time of receipt of such Bids and the reason for rejection of the Bid is communicated to the Bidder at the time of rejection of the Bid. In case of Non-Institutional Bidders and Retail Individual Bidders the Company would have a right to reject the Bids only on technical grounds. Investors should note that Equity Shares will be allotted to successful Bidders only in the dematerialized form. Bidders will not have the option of getting allotment of the Equity Shares in physical form. The Equity Shares on allotment shall be traded only in the authorized segment of the Stock Exchanges. Bid cum Application Form Bidders shall only use the specified Bid cum Application Form, bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of this Red Herring Prospectus. The Bidders shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple Bids. Upon the filing of the Prospectus with the ROC, allotment of Equity Shares, and dispatch of the CAN, the Bid cum Application Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to a member of the Syndicate, the Bidder is deemed to have authorized the Company to make the necessary changes in the Red Herring Prospectus and the Bid cum Application Form as would be required for filing the Prospectus with the ROC and as would be required by the ROC after such filing, without prior or subsequent notice of such changes to the Bidder. The prescribed colour of the Bid cum Application Form for various categories is as follows:

Category Colour of Bid cum

Application Form Resident Indians applying on a non-repatriation basis White

Participation by associates of BRLM and Syndicate Members The BRLM and Syndicate Members shall not be entitled to subscribe to this Issue in any manner except towards fulfilling their underwriting obligations. However, associates and affiliates of the BRLM and Syndicate Members may subscribe for Equity Shares in the Issue, including in the QIB Portion and Non-Institutional Portion where the allotment is on a proportionate basis. The information below is given for the benefit of the Bidders. The Company and the BRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Red Herring Prospectus. The Bidders are advised to make their independent investigations and ensure that the number of Equity Shares Bid for or that can be owned by them do not exceed the applicable limits under laws or regulations. Bids by Mutual Funds No mutual fund scheme shall invest more than 10% of its net asset value in the Equity Shares or equity


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related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No Mutual Fund under its scheme should own more than 10% of any company’s paid-up capital carrying voting rights. Further, Bidders may bid as per the limits prescribed above. Bids by SEBI registered Venture Capital Funds and Foreign Venture Capital Investors The SEBI (Venture Capital Funds) Regulations, 1996 prescribe investment restrictions on venture capital funds reistered with SEBI. Accordingly, the holding by any individual venture capital investor registered with SEBI, should not exceed 25% of one company’s paid up capital. The aggregate venture capital funds registered with SEBI could, however go up to 100% of the Company’s paid up equity capital. Maximum and Minimum Bid Size

(a) For Retail Individual Bidders: The Bid must be for a minimum of [●] Equity Shares and in multiples of

[●] Equity Shares thereafter, so as to ensure that the Bid Price payable by the Bidder does not exceed Rs.100,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Price does not exceed Rs. 100,000. In case the Bid Price is over Rs. 100,000 due to revision of the Bid or revision of the Price Band or on exercise of Cut-off option, the Bid would be considered for allocation under the Non-Institutional Bidders portion. The Cut-off option is an option given only to the Retail Individual Bidders indicating their agreement to Bid and purchase at the final Issue Price as determined at the end of the Book Building Process.

(b) For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such

number of Equity Shares such that the Bid Amount exceeds Rs.100,000 and in multiples of [●] Equity Shares thereafter. A Bid cannot be submitted for more than the Issue size. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. Under the existing SEBI Guidelines, a QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date and is required to pay QIB Margin Amount upon submission of the Bid.

In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the Bid

Amount is greater than Rs. 100,000 for being considered for allocation in the Non-Institutional Portion. In case the Bid Amount reduces to Rs. 100,000 or less due to a revision in Bids or revision of the Price Band, Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Portion would be considered for allotment under the Retail Portion. Non-Institutional Bidders and QIBs are not allowed to Bid at ‘Cut-Off’.

Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified in this Red Herring Prospectus.

Refund amounts following a permitted withdrawal of a Bid shall be paid in the manner described in “Mode of making refunds” below.

Information for the Bidders: 1. The Company will file the Red Herring Prospectus with the Designated Stock Exchange least 3 (three)

days before the Bid/Issue Opening Date.

2. The Company and the BRLM shall declare the Bid/ Issue Opening Date, Bid/ Issue Closing Date and Price Band at the time of filing the Red Herring Prospectus with the Designated Stock Exchange and also publish the same in three widely circulated newspapers (one each in English, Hindi and Marathi). This advertisement, shall be in the format prescribed in Schedule XX-A of the SEBI Guidelines.

3. The members of the Syndicate will circulate the Bid cum Application Form to potential investors and at the request of potential investors, copies of the Red Herring Prospectus.


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4. Any investor (who is eligible to invest in the Equity Shares of the Company) who would like to obtain the Red Herring Prospectus and/ or the Bid cum Application Form can obtain the same from the Head Office or from any of the members of the Syndicate and should approach any of the BRLM or Syndicate Members or their authorized agent(s) to register their bids.

5. The Members of the Syndicate shall accept Bids from the Bidders during the Issue Period in accordance with the terms of the Syndicate Agreement.

6. The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms should bear the stamp of the members of the Syndicate. Bid cum Application Forms, which do not bear the stamp of the members of the Syndicate, will be rejected.

7. The Biding/ Issue Period shall be for a minimum of 3 (three) working days and not exceeding 7 (seven) working days. In case the Price Band is revised, the revised Price Band and the Bidding/ Issue Period will be published in two weekly circulated national newspapers (one each in English and Hindi) and one Marathi newspaper and the Bidding/ Issue Period may be extended, if required, by an additional 3 (three) days, subject to the total Bidding/ Issue Period not exceeding 10 (ten) working days.

8. The Price Band has been fixed at Rs.[●] to Rs.[●] per Equity Share of Rs. 10 each, Rs. [●] being the lower end of the Price Band and Rs. [●] being the higher end of the Price Band. The Bidders can bid at any price with in the Price Band, in multiples of [●].

9. The Company in consultation with the BRLM, reserve the right to revise the Price Band, during the Bidding/ Issue Period, in accordance with SEBI Guidelines. The higher end of the Price Band should not be more than 20% of the lower end of the Price Band. Subject to compliance with the immediately preceding sentence, the lower end of the Price Band can move up or down to the extent of 20% of the lower end of the Price Band disclosed in the Red Herring Prospectus.

10. In case of revision in the Price Band, the Bidding/ Issue Period will be extended for 3 (three) additional working days after revision of Price Band subject to a maximum of 10 (ten) working days. Any revision in the Price Band and the revised Bidding/ Issue Period, if applicable, will be widely disseminated by notification to BSE and NSE, by issuing a public notice in three widely circulated newspapers (one each in English and Hindi) and one Marathi newspaper with wide circulation, and also by indicating the change on the websites of the BRLM and at the terminals of the Syndicate Members.

11. The Company in consultation with the BRLM, can finalize the Issue Price within the Price Band without the prior approval of, or intimation, to the Bidders.

Method and Process of Bidding 1. Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices

(for details refer to the paragraph titled “Bids at Different Price Levels and Revision of Bids” on page 131 of this Red Herring Prospectus within the Price Band and specify the demand (i.e., the number of Equity Shares Bid for) in each option. The price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Issue Price, the maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered for allocation/ Allotment and the rest of the Bid(s), irrespective of the Bid Price, will become automatically invalid.

2. The Bidder cannot Bid on another Bid cum Application Form after Bid(s) on one Bid cum Application Form have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to either the same or to another member of the Syndicate will be treated as multiple Bids and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue. However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed under the paragraph titled “Bids at Different Price Levels and Revision of Bids” on 131 of this Red Herring Prospectus.


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3. The members of the Syndicate will enter each Bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip (“TRS”) for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.

4. During the Bidding/Issue Period, Bidders may approach the members of the Syndicate to submit their Bid. Every member of the Syndicate shall accept Bids from all clients/investors who place orders through them and shall have the right to vet the Bids, subject to the terms of the Syndicate Agreement and this Red Herring Prospectus.

5. Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the paragraph titled “Terms of Payment and Payment into the Escrow Accounts” on page 137 of this Red Herring Prospectus.

Bids at Different Price Levels and Revision of Bids 1. The Bidder can bid at any price within the Price Band. The Bidder has to bid for the desired number

of Equity Shares at a specific price. Retail Individual Bidders applying for a maximum Bid in any of the bidding options not exceeding Rs. 100,000 may bid at Cut-Off Price. However, bidding at Cut-Off Price is prohibited for QIB; Non-Institutional Bidders bidding in excess of Rs. 100,000 and such bids shall be rejected.

2. Retail Individual Bidders who bid at the Cut-Off Price agree that they shall purchase the Equity Shares at any price within the Price Band. Retail Individual Bidders bidding at Cut-Off Price shall deposit the Bid Price based on the higher end of the Price Band in the Escrow Account. In the event the Bid Price is higher than the subscription amount payable by the Retail Individual Bidders who Bid at Cut off Price (i.e., the total number of Equity Shares allocated in the Issue multiplied by the Issue Price), the Retail Individual Bidders who Bid at Cut off Price, shall receive the refund of the excess amounts from the Escrow Account.

3. In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who had Bid at Cut-off Price could either (i) revise their Bid or (ii) make additional payment based on the higher end of the Revised Price Band (such that the total amount i.e., original Bid Price plus additional payment does not exceed Rs. 100,000 for Retail Individual Bidders, if the Bidder wants to continue to Bid at Cut-off Price), with the members of the Syndicate to whom the original Bid was submitted. In case the total amount (i.e., original Bid Price plus additional payment) exceeds Rs. 100,000 for Retail Individual Bidders the Bid will be considered for allocation under the Non- Institutional Portion in terms of this Red Herring Prospectus. If, however, the Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the higher end of the Price Band prior to revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of Allotment, such that no additional payment would be required from the Bidder and such Bidder is deemed to have approved such revised Bid at Cut-off Price.

4. In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders who have Bid at Cut-off Price could either revise their Bid or the excess amount paid at the time of bidding would be refunded from the Escrow Account.

5. In the event of any revision in the Price Band, whether upwards or downwards, the minimum application size shall remain [●] Equity Shares irrespective of whether the Bid Price payable on such minimum application is not in the range of Rs. 5,000 to Rs. 7,000.

6. During the Bidding/ Issue Period, any bidder who has registered his or her interest in the Equity Shares at a particular price level is free to revise his or her Bid within the Price Band using the printed Revision Form, which is a part of the Bid cum Application Form.

7. Revisions can be made in both the desired number of Equity Shares and the Bid price by using the Revision Form. The Bidder must also mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum Application Form and he is changing only one of the options in the Revision Form, he must


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complete all the details of the other two options that are not being revised, in the Revision Form. The members of the Syndicate will not accept incomplete or inaccurate Revision Forms.

8. The Bidder can make this revision any number of times during the Bidding/ Issue Period. However, for any revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate through whom he or she had place the original Bid.

9. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof.

10. Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this Red Herring Prospectus. In case of the QIB Bidders, the members of the Syndicate shall collect the payment in the form of cheque or demand draft or electronic transfer of funds through RTGS for the incremental amount in the QIB Margin Amount, if any, to be paid on account of the upward revision of the Bid at the time of one or more revisions by the QIB Bidders.

11. When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and get a revised TRS from the members of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of revision of the original bid.

Instructions for Completing the Bid cum Application Form Bidders can obtain Bid cum Application Forms and/or Revision Forms from the members of the Syndicate. Bids and revisions of Bids must be: 1. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white colour

for Resident Indians).

2. Completed in full, in BLOCK LETTERS in English and in accordance with the instructions contained herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected.

3. For Retail Individual Bidders, the Bid must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter subject to a maximum Bid Amount of Rs. 100,000.

4. For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares such that the Bid Amount exceeds Rs. 100,000 and in multiples of [●] Equity Shares thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of shares that can be held by them under the applicable laws and regulations.

5. Bids for a Bid Price of more than Rs. 100,000 would be considered under Non-Institutional Portion for the purpose of allocation.

6. In single name or in joint names (not more than three, and in the same order as their Depository Participant details).

7. Thumb impressions and signatures other than in the languages specified in the Eighth Schedule in the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.

Electronic Registration of Bids 1. The Members of the Syndicate will register the Bids using the on-line facilities of the BSE and the

NSE. There will be at least one on-line connectivity in each city, where a stock exchange is located in India and where Bids are being accepted.


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2. The BSE and the NSE will offer a screen-based facility for registering Bids for the Issue. This facility will be available on the terminals of the Members of the Syndicate and their authorized agents during the Bidding/Issue Period. The members of the Syndicate can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently upload the off-line data file into the on-line facilities for book building on a regular basis. On the Bid/Issue Closing Date, the Members of the Syndicate shall upload the Bids until such time as may be permitted by the Stock Exchanges.

3. The aggregate demand and price for Bids registered on the electronic facilities of the BSE and the NSE will be uploaded on a regular basis, consolidated and displayed on-line at all bidding centres and the website of BSE and NSE. A graphical representation of consolidated demand and price would be made available at the bidding centres during the Bidding/ Issue Period.

4. At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the on-line system:

• Name of the investor • Investor category – Individual, Corporate, Mutual Fund, QIBs, etc; • Numbers of Equity Shares bid for; • Bid price; • Bid cum Application Form number; • Whether Margin Amount has been paid upon submission of Bid cum Application Form • Depository Participant identification number and client identification number of the

beneficiary account of the Bidder. 5. A system generated TRS will be given to the Bidder as a proof of the registration of each of the

bidding options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of the Syndicate does not guarantee that the Equity Shares shall be allocated/ Allotted either by the members of the Syndicate or the Company.

6. Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

7. In case of QIB bidders, members of the syndicate also have the right to accept the bid or reject it. However, such rejection should be made at the time of receiving the bid and only after assigning a reason for such rejection in writing. In case of Non-Institutional Bidders, Retail Individual Bidders, Bids would not be rejected except on the technical grounds listed on page 139 of this Red Herring Prospectus.

8. It is to be distinctly understood that the permission given by the BSE and the NSE to use their network and software of the Online IPO system should not in any way be deemed or construed to mean that the compliance with various statutory and other requirements by the Company and/or the BRLM are cleared or approved by BSE and NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of the Company, its Promoter, management or any scheme or project of the Company.

9. It is also to be distinctly understood that the approval given by the BSE and the NSE to use their network and software of the online IPO system should not in any way be deemed or construed that this Red Herring Prospectus has been cleared or approved by the BSE and NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it warrant that the Equity Shares of the Company will be listed or will continue to be listed on the BSE and NSE.

10. Only bids that are uploaded on the online IPO system of the NSE and BSE shall be considered for allocation/ Allotment. In case of discrepancy of data between the BSE or the NSE and the members of the Syndicate, the decision of the BRLM based on the physical records of the Bid cum Application Forms shall be final and binding on all concerned.


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OPTION TO SUBSCRIBE In terms of section 68B of the Companies Act, 1956, the equity shares in this offer shall be allotted only in dematerialised form (i.e. not in the form of physical certificates but the fungible and be represented by the statement issued through electronic mode). Investors shall have an option to hold the shares post allotment in physical or demat form.

Availability of RHP and Bid cum Application Forms

The memorandum Form 2A containing the salient features of the RHP together with the Application Forms and copies of the RHP may be obtained from the Registered Office of the Company, the BRLM to the Issue and Syndicate members as mentioned on the application form.

GENERAL INSTRUCTIONS Do’s:

a) Check if you are eligible to apply having regard to applicable laws, rules, regulations, guidelines and

approvals and the terms of the Red Herring Prospectus;

b) Read all the instructions carefully and complete the applicable Bid cum Application Form;

c) Ensure that the details about Depository Participant and beneficiary account are correct as Allotment of Equity Shares will be in the dematerialized form only;

d) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate;

e) Ensure that you Bid within the Price Band and that you have been given a TRS for all your Bid options;

f) Submit Revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised TRS;

g) Each Bidder should mention his/ her Permanent Account Number (PAN) allotted under the IT Act. SEBI has issued a circular no. MRD/DoP/Cir-05/2007 dated April 27, 2007 requiring that with effect from July 2, 2007, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of transaction. In case the PAN has not been allotted, mention “Applied for” or “Not Applicable” in the appropriate places and submit Form 60 or Form 61 as the case may be together with permissible documents as proof of address.

h) Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects; and

i) Ensure that the name(s) given in the Bid cum Application Form is exactly the same as the name(s) in which the beneficiary account is held with the Depository Participant. In case the Bid cum Application Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names and such names are in the same sequence in which they appear in the Bid cum Application Form.

Don’ts: a) Do not Bid for lower than the minimum Bid size;

b) Do not Bid/revise Bid Price to less than the lower end of the Price Band or higher than the higher end of the Price Band;

c) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the members of the Syndicate;

d) Do not pay the Bid amount in cash, by money order or by postal order or by stockinvest;


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e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate only;

f) Do not Bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders);

g) Do not bid at Bid Amount exceeding Rs. 100,000 in case of a Bid by a Retail Individual Bidder;

h) Do not submit the Bid without the QIB Margin Amount, in case of a Bid by a QIB;

i) Do not fill up the Bid cum Application Form such that the Equity Shares Bid for exceeds the Issue size and/or investment limit or maximum number of Equity Shares that can be held under the applicable laws or regulations or maximum amount permissible under the applicable regulations; and

j) Do not submit the GIR number in stead of the PAN as the Bid is liable to be rejected on this ground.

Bidder’s Depository Account and Bank Account Details Bidders should note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar to the Issue will obtain from the Depository the demographic details including address, Bidders bank account details, MICR code and occupation (hereinafter referred to as “Demographic Details”). Since the Issue is being made entirely in the dematerialized form, the Bank Account details used for giving refunds to the Bidders to whom an electronic refund is being made will also be taken from the data provided by such Bidder to the Depository Participant. Hence, Bidders are advised to immediately update their Bank Account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays in despatch/ credit of refunds to Bidders at the Bidders sole risk and neither the BRLM or the Registrar or the Escrow Collection Banks nor the Bank shall have any responsibility and undertake any liability for the same. Hence, Bidders should carefully fill in their Depository Account details in the Bid cum Application Form. IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN DEMATERIALIZED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM. These Demographic Details would be used for all correspondence with the Bidders including mailing of the refund orders/ECS credit for refunds/Direct credit of refund/CANs/Allotment Advice/ NEFT or RTGS for refunds and printing of Bank particulars on the refund orders. The Demographic Details given by Bidders in the Bid cum Application Form will not be used for any other purpose by the Registrar to the Issue. By signing the Bid cum Application Form, the Bidder would have deemed to have authorized the Depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records. In case of Bidders not receiving refunds through electronic transfer of funds, delivery of refund orders/ allocation advice/ CANs may get delayed if the same, once sent to the address obtained from the Depositories, are returned undelivered. In such an event, the address and other details given by the Bidder in the Bid cum Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay shall be at the Bidders sole risk and neither the Bank, the Registrar, Escrow Collection Bank(s) nor the BRLM shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such delay or pay any interest for such delay. In case of Bidders receiving refunds through electronic modes as detailed on page 137 of this Red Herring Prospectus, Bidders may note that refunds may get delayed if Bank particulars obtained from the Depository Participant are incorrect.


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In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Bidders (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s identity, then such Bids are liable to be rejected. Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only at the prevailing exchange rate and net of bank charges and/or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. the Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency. The Equity Shares are being offered in this Issue to the Indian public only. Non-residents such as foreign institutional investors, non resident Indian, foreign venture capital funds, multilateral and bilateral development financial institutions are not permitted to participate in the Issue. As per RBI regulations, OCBs cannot participate in the Issue. Bids under Power of Attorney In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, a certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum and articles of association and/or bye laws must be along with the Bid cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In case of Bids made by Mutual Funds, venture capital funds registered with SEBI, a certified copy of their SEBI registration certificate must be lodged along with the Bid cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In case of the Bids made by insurance companies registered with the Insurance Regulatory and Development Authority, a certified copy of certificate of registration issued by Insurance Regulatory and Development Authority must be lodged along with the Bid cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In case of the Bids made by provident funds with minimum corpus of Rs. 250 million (subject to applicable law) and pension funds with minimum corpus of Rs. 250 million, a certified copy of certificate from a chartered accountant certifying the corpus of the provident fund/pension fund must be lodged along with the Bid cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. The Company in its absolute discretion, reserve the right to permit the holder of the power of attorney to request the Registrar that for the purpose of printing particulars on the refund order and mailing of the refund order/ CAN/ allocation advice/ refunds through electronic transfer of funds, the Demographic Details on the Bid cum Application Form should be used (and not those obtained from the Depository of the Bidder). In such cases, the Registrar shall use Demographic Details as given in the Bid cum Application Form instead of those obtained from the depositories. SPIL, in its absolute discretion, reserve the right to relax the above condition of simultaneous submission of the power of attorney along with the Bid cum Application Form, subject to such terms and conditions that the Company and the BRLM may deem fit.


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PAYMENT INSTRUCTIONS Escrow Mechanism The Company shall open Escrow Accounts with the Escrow Collection Banks for the collection of the Bid Amounts payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allotment in the Issue. The Escrow Collection Banks will act in terms of this Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Bank(s) for and on behalf of the Bidders shall maintain the monies in the Escrow Account. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Bank(s) shall transfer the funds equivalent to the size of the Issue from the Escrow Account, as per the terms of the Escrow Agreement, into the Issue Account shall be held for the benefit of the Bidders who are entitled to refunds. Payments of refund to the Bidders shall also be made from the Refund Account as per the terms of the Escrow Agreement and this Red Herring Prospectus. The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between the Company, the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Issue to facilitate collections from the Bidders. Terms of Payment and Payment into the Escrow Accounts Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/ or on allocation/ Allotment as per the following terms.

1. Each category of Bidders i.e., QIB Bidders, Non-Institutional Bidders, Retail Individual Bidders shall

provide the applicable Margin Amount, and with the submission of the Bid cum Application Form draw a cheque or demand draft for the maximum amount of his/ her Bid in favour of the Escrow Account of the Escrow Collection Bank(s) (for details refer to the paragraph titled “Terms of Payment and Payment into the Escrow Account” on page 137 of this Red Herring Prospectus) and submit the same to the member of the Syndicate to whom the Bid is being submitted. Bid cum Application Forms accompanied by cash shall not be accepted. The Margin Amount payable by each category of Bidders is mentioned under the section titled “Issue Structure” on page 125 of this Red Herring Prospectus. The maximum Bid Price has to be paid at the time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder.

2. Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Price, any difference

between the amount payable by the Bidder for Equity Shares allocated/ allotted at the Issue Price and the Margin Amount paid at the time of Bidding, shall be payable by the Bidder no later than the Pay-in –Date, which shall be a minimum period of 2 (two) days from the date of communication of the allocation list to the members of the Syndicate by the BRLM. If the payment is not made favoring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled.

3. The payment instruments for payment into the Escrow Account should be drawn in favour of: (a) In case of Resident QIB Bidders: “Escrow Account - SPIL IPO– QIB – R” (b) In case of Resident Retail and Non-Institutional Bidders: “Escrow Account - SPIL IPO - R” 4. Where a Bidder has been allocated/ Allotted a lesser number of Equity Shares than the Bidder has Bid

for, the excess amount, if any, paid on bidding, after adjustment towards the balance amount payable on the Equity Shares allocated/Alloted will be refunded to the Bidder from the Refund Account.

5. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Accounts

as per the terms of the Escrow Agreement into the Issue Account with the Bankers to the Issue. No later than 15 days from the Bid/Issue Closing Date, the Escrow Collection Banks shall refund all


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amounts payable to unsuccessful Bidders and also the excess amount paid on Bidding, if any, after adjusting for allocation/ Allotment to the Bidders.

6. Payments should be made by cheque, or demand draft drawn on any bank (including a co-

operative bank), which is situated at, and is a member of or sub-member of the bankers’ clearing house located at the centre where the Bid cum Application Form is submitted. Outstation cheques/bank drafts drawn on banks not participating in the clearing process will not be accepted and applications accompanied by such cheques or bank drafts are liable to be rejected. Cash/ money orders/postal orders will not be accepted.

Submission of Bid cum Application Form All Bid/cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid. Separate receipts shall not be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre of the members of the Syndicate will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder. OTHER INSTRUCTIONS Joint Bids in the case of Individuals Bids may be made in single or joint names (not more than three). In the case of joint Bids, all refund payments will be made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form. All communication will be addressed to the First Bidder and will be dispatched to his or her address as per the Demographic Details received from the Depository. Multiple Bids A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same. In this regard, the procedures which would be followed by the Registrar to the Issue to detect multiple applications are given below:

1. All applications with the same name and age will be accumulated and taken to a separate process file as

probable multiple master documents. 2. In this master, a check will be carried out for the same PAN/GIR numbers. In cases where the

PAN/GIR numbers are different, the same will be deleted from this master. 3. The Registrar will obtain, from the depositories, details of the applicant’s address based on the DP ID and

Beneficiary Account Number provided in the Bid cum Application Form and create an address master. 4. The addresses of all these applications in the multiple master will be strung from the address master. This

involves putting the addresses in a single line after deleting non-alpha and non-numeric characters i.e. commas, full stops, hash etc. Sometimes, the name, the first line of address and pin code will be converted into a string for each application received and a photo match will be carried out amongst all the applications processed. A print-out of the addresses will be taken to check for common names. The applications with same name and same address will be treated as multiple applications.

5. The applications will be scanned for similar DP ID and Beneficiary Account Numbers. In case applications

bear the same DP ID and Beneficiary Account Numbers, these will be treated as multiple applications.


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6. Subsequent to the aforesaid procedures, a print out of the multiple master will be taken and the applications physically verified to tally signatures as also father’s/husband’s names. On completion of this, applications will finally be identified as multiple applications.

In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual funds registered with SEBI and such Bids in respect of more than one scheme of the mutual funds will not be treated as multiple Bids provided that the Bids clearly indicate the scheme for which the Bid has been made. The Company, in consultation with the BRLM, reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all categories. Permanent Account Number or PAN The Bidders, or in the case of a Bid in joint names, each of the Bidders, should mention his/her Permanent Account Number (PAN) allotted under the I.T. Act. SEBI has issued a circular no. MRD/DoP/Cir-05/2007 DATED April 27, 2007 requiring that with effect from July 2, 2007, the PAN would be the sole identification number for participants transacting in the securities market, irrespective of the amount of transaction. In case the PAN has not been allotted, mention “Applied for” or “Not Applicable” in the appropriate places and submit Form 60 or Form 61 as the case may be together with permissible documents as proof of address. Applications without this information and documents will be considered incomplete and are liable to be rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN, as the Bid is liable to be rejected on this ground. In case the sole/First Bidder and joint Bidder(s) is/are not required to obtain PAN, each of the Bidder(s) shall mention “Not Applicable” and in the event that the sole Bidder and/or the joint Bidder(s) have applied for PAN which has not yet been allotted each of the Bidder(s) should mention “Applied for” in the Bid cum Application Form. Further, where the Bidder(s) has mentioned “Applied for” or “Not Applicable”, the Sole/First Bidder and each of the Joint Bidder(s), as the case may be, would be required to submit Form 60 (form of declaration to be filed by a person who does not have a permanent account number and who enters into any transaction specified in Rule 114B of the Income Tax Rules, 1962), or, Form 61 (form of declaration to be filed by a person who has agricultural income and is not in receipt of any other income chargeable to income-tax in respect of transactions specified in Rule 114B of the Income Tax Rules, 1962), as may be applicable, duly filled along with a copy of any one of the following documents in support of the address: (a) Ration Card (b) Passport (c) Driving License (d) Identity Card issued by any institution (e) Copy of the electricity bill or telephone bill showing residential address (f) Any document or communication issued by any authority of the Central Government, State Government or local bodies showing residential address and (g) Any other documentary evidence in support of address given in the declaration. It may be noted that Form 60 and Form 61 have been amended vide a notification issued on December 1, 2004 by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes. All Bidders are requested to furnish, where applicable, the revised Form 60 or Form 61 as the case may be. GROUNDS FOR TECHNICAL REJECTIONS In case of QIB Bidders, the Company in consultation with the BRLM may reject Bids provided that the reasons for rejecting the same shall be provided to such Bidder in writing. In case of Non-Institutional Bidders and Retail Individual Bidders who Bid, the Company has a right to reject Bids based on technical grounds. Consequent refunds shall be made as described in this Red Herring Prospectus and will be sent to the Bidders’ address at the Bidders’ risk. Bidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:

1. Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for; 2. Bank account details (for refund) are not given; 3. Age of First Bidder not given; 4. In case of partnership firms, Equity Shares may be registered in the names of the individual partners

and no firm as such shall be entitled to apply;


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5. Bids by persons not competent to contract under the Indian Contract Act, 1872 including minors and insane persons;

6. PAN photocopy/ PAN communication/ Form 60 or Form 61 declaration along with documentary evidence in support of address given in the declaration not given;

7. GIR number furnished instead of PAN; 8. Bids for lower number of Equity Shares than specified for that category of investors; 9. Bids at a price less than lower end of the Price Band; 10. Bids at a price more than the higher end of the Price Band; 11. Bids at Cut-off Price by Non-Institutional and QIB Bidders whose Bid Amount exceeds

Rs.100,000; 12. Bids for number of Equity Shares, which are not in multiples of [●]; 13. Category not ticked; 14. Multiple Bids as defined in this Red Herring Prospectus; 15. In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant

documents are not submitted; 16. Bids accompanied by Stockinvest/ money order/postal order/cash; 17. Signature of sole and/or joint Bidders missing; 18. Bid cum Application Form does not have the stamp of the BRLM or the Syndicate Members; 19. Bid cum Application Form does not have the Bidder’s depository account details; 20. Bid cum Application Form is not delivered by the Bidder within the time prescribed as per the Bid cum

Application Forms, Bid/ Issue Opening Date advertisement and the Red Herring Prospectus and as per the instructions in this Red Herring Prospectus and the Bid cum Application Forms;

21. In case no corresponding record is available with the Depositories that matches three parameters namely, names of the Bidders (including the order of names of joint holders), the Depository Participant’s identity (DP ID) and the beneficiary’s account number;

22. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations; 23. Bids by QIBs not submitted through members of the Syndicate; 24. Bids by OCBs; 25. Bids by persons outside India if not in compliance with applicable foreign and Indian laws or by any

persons who are not eligible to acquire Equity Shares of the Company, in terms of all applicable laws, rules, regulations, guidelines and approvals.

Price Discovery and Allocation

1. After the Bid/Issue Closing Date, the BRLM shall analyze the demand generated at various price levels

and discuss pricing strategy with the Company.

2. The Company in consultation with the BRLM, shall finalize the Issue Price, the number of Equity Shares to be allotted in each investor category.

3. The allocation to QIBs will be upto 50% of the Issue and the availability for allocation to Non-Institutional and Retail Individual Bidders will not be less than 15% and 35% of the Issue respectively, and, would be on proportionate basis, in the manner specified in the SEBI Guidelines and this Red Herring Prospectus, in consultation with Designated Stock Exchange, subject to valid Bids being received at or above the Issue Price.

4. Under-subscription, if any, in the Non-Institutional category and the Retail Individual category would be met with spill over from any other category at the sole discretion of the Company in consultation with the BRLM. However, if the aggregate demand by Mutual Fund is less than 1,52,875 Equity Shares, the balance Equity Shares available for allocation in the Mutual Fund Portion will first be added to the QIB Portion and be Allotted proportionately to the QIB Bidders. In the event that the aggregate demand in the


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QIB Portion has been met with spill-over from any other category or combination of categories at the discretion of the Company, in consultation with BRLM and the Designated Stock Exchange.

Signing of Underwriting Agreement and Filing with the Designated Stock Exchange

(a) The Company, the BRLM and the Syndicate Members shall enter into an Underwriting Agreement on finalization of the Issue Price and allocation/ Allotment to the Bidders.

(b) After signing the Underwriting Agreement, the Company would update and file the updated Red Herring Prospectus with the Designated Stock Exchange, which then would be termed ‘Prospectus’. The Prospectus would have details of the Issue Price, Issue size, underwriting arrangements and would be complete in all material respects.

(c) A statutory advertisement will be issued by the Company after the filing of the Red Herring Prospectus with the ROC. This advertisement in addition to the information that has to be set out in the statutory advertisement shall indicate the Price Band along with a table showing the number of Equity Shares and the amount payable by an investor. Any material updates between the date of Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.

Issuance of Confirmation of Allotment note (“CAN”)

(a) Upon approval of the basis of Allotment by the Designated Stock Exchange, the BRLM or the Registrar to the Issue shall send to the members of the Syndicate a list of their Bidders who have been allocated Equity Shares in the Issue. The approval of the basis of Allotment by the Designated Stock Exchange for QIB Bidders may be done simultaneously with or prior to the approval of the basis of allocation for Retail Bidders and Non-Institutional Bidders. However, the investor should note that the Company shall ensure that the demat credit of the Equity Shares to all investors in this Issue shall be done on the same date.

(b) The BRLM or the members of the Syndicate would then dispatch the CAN to their Bidders who have

been allocated Equity Shares in the Issue. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares allocated to such Bidder. Those Bidders who have not paid the entire Bid Amount into the Escrow Account at the time of bidding shall pay in full the amount payable into the Escrow Account by the Pay-in Date specified in the CAN.

(c) Bidders who have been allocated Equity Shares and who have already paid the Bid Amount into the

Escrow Account at the time of bidding shall directly receive the CAN from the Registrar to the Issue subject, however, to realization of their cheque or demand draft paid into the Escrow Account. The dispatch of a CAN shall be deemed as a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all Allotted to such Bidder.

(d) The Issuance of CAN is subject to “Notice to QIBs: Allotment Reconciliation and Revised CANs” as set

forth herein.

Notice to QIBs: Allotment Reconciliation and Revised CANs

After the Bid/Issue Closing Date, an electronic book will be prepared by the Registrar on the basis of Bids uploaded on the BSE/NSE system. This shall be followed by a physical book prepared by the Registrar on the basis of Bid-cum-Application Forms received. Based on the electronic book or the physical book, as the case may be, QIBs may be sent a CAN, indicating the number of Equity Shares that may be allocated to them. This CAN is subject to the basis of final allotment, which will be approved by the Designated Stock Exchange and reflected in the reconciled book prepared by the Registrar. Subject to SEBI Guidelines, certain Bid cum Applications Forms may be rejected due to technical reasons, non-receipt of funds, cancellation of cheques, cheque bouncing, incorrect details, etc., and these rejected applications will be reflected in the reconciliation and basis of Allotment as approved by the Designated Stock Exchange. As a result, a revised CAN may be sent to QIBs and the allocation of Equity Shares in such revised CAN may be different from that specified in the earlier CAN. QIBs should note that they may be required to pay additional amounts, if any, by


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the Pay-in Date specified in the revised CAN, for any increased allotment of Equity Shares. The CAN will constitute the valid, binding and irrevocable contract (subject only to the issue of a revised CAN) for the QIB to pay the entire Issue Price for all the Equity Shares allocated to such QIB. Any revised CAN, if issued, will supersede in entirety the earlier CAN.

Designated Date and Allotment of Equity Shares

(a) The Company will ensure that the Allotment of Equity Shares is done within 15 days of the Bid/Issue

Closing Date. After the funds are transferred from the Escrow Accounts to the Issue Account on the Designated Date, the Company would ensure the credit to the successful Bidders depository account. Allotment of the Equity Shares to the successful Bidders shall be within 15 days from the Bid/ Issue Closing Date.

(b) In accordance with the SEBI Guidelines, Equity Shares will be issued and Allotment shall be made only in the dematerialized form to the Allottees. Allottees will have the option to re-materialize the Equity Shares, if they so desire, as per the provisions of the Depositories Act.

Investors are advised to instruct their Depository Participant to accept the Equity Shares that may be allocated/ Allotted to them pursuant to this Issue.

BASIS OF ALLOTMENT

A. For Retail Individual Bidders

Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped together to

determine the total demand under this category. The Allotment to all the successful Retail Individual Bidders will be made at the Issue Price.

The Issue size less Allotment to Non-Institutional and QIB Bidders shall be available for Allotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.

If the aggregate demand in this category is less than or equal to 21,40,250 Equity Shares at or above the Issue Price, full Allotment shall be made to the Retail Individual Bidders to the extent of their valid Bids.

If the aggregate demand in this category is greater than 21,40,250 Equity Shares at or above the Issue Price, the Allotment shall be made on a proportionate basis up to a minimum of 21,40,250 Equity Shares. For the method of proportionate basis of Allotment, refer below.

B. For Non-Institutional Bidders Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped together to

determine the total demand under this category. The Allotment to all successful Non-Institutional Bidders will be made at the Issue Price.

The Issue size less Allotment to QIBs and Retail Portion shall be available for Allotment to Non-Institutional Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.

If the aggregate demand in this category is less than or equal to 9,17,250 Equity Shares at or above the Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent of their demand.

In case the aggregate demand in this category is greater than 9,17,250 Equity Shares at or above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of 9,17,250 Equity Shares. For the method of proportionate basis of allotment, refer below.


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C. For QIB Bidders Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to determine

the total demand under this portion. The Allotment to all the QIB Bidders will be made at the Issue Price.

The QIB Portion shall be available for Allotment to QIB Bidders who have bid in the Issue at a price that is equal to or greater than the Issue Price.

Allotment shall be undertaken in the following manner:

(a) In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion shall be determined as follows:

(i) In the event that Mutual Fund Bids exceeds 5% of the QIB Portion, allocation to Mutual Funds shall be done on a proportionate basis for up to 5% of the QIB Portion.

(ii) In the event that the aggregate demand from Mutual Funds is less than 5% of the QIB Portion, then all Mutual Funds shall get full Allotment to the extent of valid bids received above the Issue Price.

(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds shall be available to all QIB Bidders as set out in (b) below;

(b) In the second instance Allotment to all QIBs shall be determined as follows:

(i) In the event that the oversubscription in the QIB Portion, all QIB Bidders who have

submitted Bids above the Issue Price shall be Allotted Equity Shares on a proportionate basis for upto 95% of the QIB Portion.

(ii) Mutual Funds, who have received allocation as per (a) above, for less than the number of Equity Shares Bid for by them, are eligible to receive Equity Shares on a proportionate basis along with other QIB Bidders.

(iii) Under-subscription below 5% of the QIB Portion, if any, from Mutual Funds, would be included for allocation to the remaining QIB Bidders on a proportionate basis.

The aggregate Allotment to QIB Bidders shall be upto 30,57,500 Equity Shares.

Method of Proportionate Basis of Allotment in the Issue

In the event the Issue is over-subscribed, the basis of Allotment shall be finalized by the Company in consultation with the Designated Stock Exchange. The Executive Director (or any other senior official nominated by them) of the Designated Stock Exchange along with the BRLM and the Registrar to the Issue shall be responsible for ensuring that basis of allotment is finalised in a fair and proper manner.

The Allotment shall be made in marketable lots, on a proportionate basis as explained below:

(a) Bidders will be categorized according to the number of Equity Shares applied for by them.

(b) The total number of Equity Shares to be Allotted to each category as a whole shall be arrived at on a proportionate basis, which is the total number of Equity Shares applied for in that category (number of Bidders in the category multiplied by the number of Equity Shares applied for) multiplied by the inverse of the over-subscription ratio.

(c) Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by the inverse of the over-subscription ratio.

(d) In all Bids where the proportionate Allotment is less than [●] Equity Shares per Bidder, the Allotment shall be made as follows:


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The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of Equity Shares Allotted in that portion is equal to the number of Equity Shares calculated in accordance with (b) above; and

Each successful Bidder shall be Allotted a minimum of [●] Equity Shares.

(e) If the proportionate Allotment to a Bidder is a number that is more than [●] but is not a multiple of one (which is the market lot), the decimal would be rounded off to the higher whole number if that decimal is 0.5 or higher. If that number is lower than 0.5, it would be rounded off to the lower whole number. Allotment to all Bidders in such categories would be arrived at after such rounding off.

(f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares Allotted to the Bidders in that category, the remaining Equity Shares available for Allotment shall be first adjusted against any other category, where the Allotted shares are not sufficient for proportionate Allotment to the successful Bidders in that category. The balance Equity Shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of Equity Shares.

PAYMENT OF REFUND

Bidders must note that on the basis of name of the Bidders, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Bid cum Application Form, the Registrar will obtain from the Depositories, the Bidders’ bank account details including nine digit MICR code as appearing on a cheque leaf. Hence, Bidders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays in despatch of refund order or refunds through electronic transfer of funds, as applicable, and any such delay shall be at the Bidders’ sole risk and neither the Bank, the Registrar, Escrow Collection Bank(s), Bankers to the Issue nor the BRLMs shall be liable to compensate the Bidders for any losses caused to the Bidder due to any such delay or liable to pay any interest for such delay.

Mode of making refunds

The payment of refund, if any, would be done through various modes in the following order of preference:

I ECS - Payment of refund would be done through ECS for applicants having an account at any of the

following fifteen centres: Ahmedabad, Bengalooru, Bhuvaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram. This mode of payment or refunds would be subject to availability of complete Bank Account Details including the MICR code as appearing on a cheque leaf, from the Depositories. The payment of refunds through ECS is mandatory for applicants having a bank account at any of the above mentioned fifiteen centres, except where the applicant, being eligible, opts to receive refund through NEFT, direct credit or RTGS.

II Direct Credit – Applicants having bank accounts with the Refund Banker(s), as mentioned in the bid cum

Application Form, shall be eligible to receive refunds through direct credit. Charges, if any, levied by the Refund Bank(s) for the same would be borne by the Bank.

III RTGS – Applicants having a bank account at any of the above mentioned fifteen centres and whose refund

amount exceeds Rs. 1 million, have the option to receive refund through RTGS. Such eligible applicants who indicate their preference to receive refund through RTGS are required to provide the IFSC code in the Bid-cum-application Form. In the event the same is not provided, refund shall be made through ECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by the Bank. Charges, if any, levied by the applicant’s bank receiving the credit would be borne by the applicant.

IV NEFT (National Electronic Fund Transfer) – Payment of refund shall be undertaken through NEFT

wherever the applicants’ bank has been assigned the Indian Financial System Code (IFSC), which can be


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linked to a MICR, if any, available to that particular bank branch. IFSC Code will be obtained from the website of RBI as on date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Whenever the applicants have registered their nine digit MICR number and their bank account number while opening and operating the demat account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment of refund will be made to the applicants through this method. The process flow in respect of refunds by way of NEFT is at an evolving stage and hence use of NEFT is subject to operational feasibility, cost and process efficiency.

Please note that only applicants having a bank account at any of the 15 centres where clearing houses for ECS are managed by the RBI are eligible to receive refunds through the modes detailed hereinabove. For all other applicants, including those who have not updated their bank particulars with the MICR code, the refund orders will be dispatched “Under Certificate of Posting” for value upto Rs. 1,500 and through Speed Post/Registered Post for refund orders of Rs. 1500 and above. Such refunds will be made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders. Interest on refund of excess Bid Amount The Company shall pay interest at the rate of 15% per annum on the excess Bid Amount received if refund orders are not dispatched within 15 working days from the Bid/Issue Closing Date. DISPOSAL OF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF DELAY

The Company shall ensure dispatch of Allotment advice, refund orders (except for Bidders who receive refunds through electronic transfer of funds) and give benefit to the beneficiary account with Depository Participants and submit the documents pertaining to the Allotment to the Stock Exchanges within 15 working days of the Bid/ Issue Closing Date. In case of applicants who receive refunds through ECS, direct credit or RTGS, the refund instructions will be given to the clearing system within 15 days from the Bid/ Issue Closing Date. A suitable communication shall be sent to the bidders receiving refunds through this mode within 15 days of Bid/ Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund. The Company will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Issue. The Company shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed are taken within seven working days of Allotment. In accordance with the requirements of the Stock Exchanges and the SEBI Guidelines, the Company further undertakes that:

Allotment of Equity Shares shall be made only in Dematerialized form within 15 (fifteen) working days of

the Bid/Issue Closing Date;

Dispatch of refund orders or in case where the refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing system within 15 (fifteen) working days of the Bid/Issue Closing Date would be ensured; and

That the Bank shall apply in advance for the listing of Equity Shares;

The Bank shall pay interest at 15% (fifteen) per annum for any delay beyond the 15 (fifteen) day time period as mentioned above, if Allotment is not made and refund orders are not dispatched or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the clearing system in the disclosed manner and/ or demat credits are not made to investors within the 15 (fifteen) days time prescribed above as per the guidelines issued by the Government of India, Ministry of Finance pursuant to their letter No. F/8/S/79 dated July 31, 1983, as amended by their


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letter no. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further modified by SEBI’s Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.

UNDERTAKINGS BY THE COMPANY

The Company undertakes the following:

That the complaints received in respect of this Issue shall be attended to by us expeditiously;

That all steps will be taken for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed within seven working days of finalization of the basis of Allotment;

That funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available to the Registrar to the Issue by the Issuer;

That where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 15 working days of the Bid/ Issue Closing Date, as the case may be, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund;

That no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner shall be made until the Equity Shares offered through this Red Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-subscription etc.

The Company shall not have recourse to the Issue proceeds until the approval for trading of the Equity Shares from all the Stock Exchanges where listing is sought has been received.

Utilization of Issue proceeds The Company shall not have any recourse to the Issue proceeds until the approval for trading the Equity Shares is received from the Stock Exchanges. Restrictions on Foreign Ownership of Indian Securities An industrial policy was formulated in 1991 (“Industrial Policy, 1991”) in order to implement the economic reforms initiated by the GoI. The GoI has since amended the Industrial Policy, 1991, from time to time in order to enable FDI in various sectors of the Indian industry in a phased manner, gradually allowing higher levels of FDI in Indian companies. Under the extant FDI Policy, April 2006, FDI in Indian companies carrying on business in Indian retail and trading sector is prohibited, except “Single Brand Product” retailing. Press Note No. 3 (2006 Series) which provides guidelines for FDI in retail trade of “Single Brand Products”, prescribes a 51% cap on the same, with prior Government approval. Further, Press Note No. 4 (2006 Series), which aims at rationalisation of the FDI Policy, states that the GoI has decided to allow FDI up to 51% with prior Government approval for retail trade of “Single Brand Products”. In this regard, it is pertinent to note that the corollary changes to the foreign exchange control regulations promulgated by the Reserve Bank of India under the Foreign Investment Management Act, 1999 have not been notified. Further, a non-zero ceiling of 24% has been imposed on by FIIs, for investment in a company engaged in retail trading and listed/ proposing to get listed on a recognised stock exchange in India. Withdrawal of the Issue The Company in consultation with the BRLM reserves the right not to proceed with the Issue at anytime including after the Bid/ Issue Opening Date, without assigning any reason thereof. In terms of the SEBI Guidelines, QIB Bidders shall not be allowed to withdraw their Bids after the Bid/ Issue Closing Date.


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EQUITY SHARES IN DEMATERIALIZED FORM WITH NSDL OR CDSL The Allotment of Equity Shares in this Issue shall be only in a Dematerialized form, (i.e., not in the form of physical certificates but fungible statements issued in electronic mode). In this context, two tripartite agreements have been signed among the Comapny, the respective Depositories and the Registrar to the Issue:

(a) An agreement dated [●] between NSDL, SPIL and Registrar to the Issue; (b) An agreement dated [●] between CDSL, SPIL and Registrar to the Issue. All Bidders can seek allotment only in DEMATERIALIZED mode. Bids from any Bidder without relevant details of his or her depository account are liable to be rejected.

1. A Bidder applying for Equity Shares must have at least one beneficiary account with the

Depository Participants of either NSDL or CDSL prior to making the Bid.

2. The Bidder must necessarily fill in the details (including the Beneficiary Account Number and Depository Participant’s identification number) appearing in the Bid cum Application Form or Revision Form.

3. Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder.

4. Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details with the Depository.

5. If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in the Bid cum Application Form or Revision Form, it is liable to be rejected.

6. The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum Application Form vis-à-vis those with his or her Depository Participant.

7. Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL and CDSL. All the Stock Exchanges where the Equity Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.

8. The trading of the Equity Shares of the Company would be in DEMATERIALIZED form only for all investors in the demat segment of the respective Stock Exchanges.

Communications

All future communications in connection with Bids made in this Issue should be addressed to the Registrar to the Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, Bidders Depository Account Details, number of Equity Shares applied for, date of Bid Form, name and address of the member of the Syndicate where the Bid was submitted and cheque or draft number and issuing bank thereof. Investors can contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or post-Issue related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary accounts, refunds, etc.


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SECTION VII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY

Article no. Particulars SHARE CAPITAL FURTHER ISSUE OF SHARES:

19. Any or all further issue of shares made at any time after expiry of two years from the formation of the

Company or at any time after the expiry of one year from the allotment of shares in the company shall be in accordance with and subject to the provisions of sections 81 of the Companies Act,1956.

20. Subject to the approval of the Central Government and to the applicable provisions of the Act,

nothing in these regulations shall apply to the increase of the subscribed capital of the company caused by the exercise of option attached to the Debentures issued or loans raised by the company with an option to convert in to Equity Shares. POWER TO ISSUE STOCK OPTIONS:

21. The company may, subject to the provisions of the Act and subject to the approval of the Securities Exchange Board of India and such other authorities as may be required, issue and allot Stock Options to the Directors and Employees of the Company to subscribe for and to get allotment of Shares and Stocks in the Company and Convertible Debentures, Convertible Debenture Stocks and Convertible Bonds of the Company subject to such terms and conditions as the Board of Directors of the Company may deem it necessary and conducive to the Company. RIGHT OF MEMBERS TO SHARE CERTIFICATE:

27. Every member shall be entitled to one or more certificates in marketable lots, for the shares held by him without payment.

28. The Share Certificates shall be kept ready for delivery and be issued in accordance with the relevant provisions and within the time specified under the Act.

29. The Share certificates shall be issued only in pursuance of resolution passedby the Board and shall be issued under the seal of the Company with in the time specified under section 113 of the Act.

30. Particulars of every Share Certificate issued shall be entered in the Register ofMembers. 31. Where the shares are allotted jointly to two or more persons, they collectively shall be treated as a

single member and the Certificate of any shares so allotted or held by them may be delivered to anyone of such joint owners on behalf of all of them.

32. The share certificates may, subject to the provisions of the Act, be either in physical form or in electronic form. DISCRETION TO REFUSE SUB-DIVISION OR CONSOLIDATION OF SHARE CERTIFICATES:

36. Subject to the provisions of the Act, the Board may in its absolute discretion, refuse applications for the sub-division or consolidation of Share Certificates, debentures, debenture stock or bond certificate into lots less than the marketable lot. UNDERWRITING COMMISSION AND BROKERAGE:

37. Subject to the provisions of Section 76 of the Act the Company may at any time pay a commission any person subscribing or agreeing to subscribe for any shares in or debentures of the Company or procuring, or agreeing to procure subscriptions for any shares in or debentures of the Company. However the commission so payable shall not exceed the limits specified in the Act.

38. The Company may, subject to the provisions of the Act, pay a reasonable sum for brokerage.


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Article no. Particulars

PAYMENT OF INTEREST OUT OF CAPITAL

39. The Company may pay interest on the share capital subject to the conditions and restrictions as provided by Section 208 of the Act. POWER TO MAKE CALLS, NOTICE OF CALLS AND REVOCATION OF CALLS

40. The Board may, from time to time, subject to the terms on which any shares are issued and subject to the conditions of allotment, make such call or calls as it thinks fit upon the Members in respect of all moneys unpaid on the shares held and the Members shall pay the amount of every call so made in such manner, on such dates and at such places appointed by the Board. A call may be made payable by installments.

41. At least fourteen days notice in writing of any call shall be given by the Company for payment of such calls.

42. A call may be revoked or postponed at the discretion of the Board. COMPANY’S LIEN ON SHARES:

50. The Company shall have a first and paramount lien uponall the shares/debentures (other than fully paid-up shares/debentures) in respect of all calls due thereon and any other money due to the company by the holder of such shares/debentures. Such lien shall extend to all dividends, bonus and interest payable thereon. SALE BY ENFORCING LIEN:

51. For the purpose of enforcing such lien, the Board may sell the shares and for that purpose it issue a duplicate certificate in respect of such shares and may authorize one of their member to execute a transfer thereof on behalf of and in the name of such member. Such sale shall not be made until a notice of the intention to sell, in writing, is served on such Member or his representatives and the default has continued even thereafter. FORFEITURE OF SHARES:

53. In the event any Member fails to pay any call on or before the day appointed for the payment of the same or before the expiry of time extended the Board may, at any time thereafter, give notice to him requiring to pay the same together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment.

54. The notice shall specify a day (not being less than fourteen days from the date of the notice) and a place of places on and at which such call and such interest thereof for the period of delay at such rate not exceeding 18 per annum as the Directors shall determine are to be paid. The notice shall also state that, in the event of non-payment on or before the appointed date, the shares in respect of which the call is in arrears will be liable to be forfeited.

55. In case the requirements of such notice are not compiled with, every such share may be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared or any other moneys payable in respect of the forfeited share and not actually paid before the forfeiture.

56. When any share is forfeited notice of forfeiture shall be given to the Member and the same be recorded in the Register of Members forthwith. No forfeiture shall be invalidated by any omission or neglect to give such notice or to make any such entry as aforesaid.


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FORFEITED SHARES TO BE PROPERTY OF THE COMPANY AND SOLD ETC:

57. Any share so forfeited shall be deemed to be the property of the Company, and may be sold, re-allotted or the otherwise disposed of, either to the original holder or to any other person, upon such terms and in such manner as the Board shall think fit. MEMBERS LIABILITY TO PAY CALLS IN ARREARS AND INTEREST AFTER FORFEITURE:

58. Any Member whose shares have been forfeited shall, notwithstanding the forfeiture, be liable to pay and shall forthwith pay to the Company on demand all calls, installments, interest and expenses due or in respect of such shares at the time of the forfeiture, together with interest thereon from time to time of the forfeiture until payment, at such rate not exceeding 18 percent per annum as the Board may determine and the Board may enforce the payment thereof. EFFECT OF FORFEITURE:

59. The forfeiture of a share shall involve extinction, at the time of the forfeiture, of all interest in and all claims and demands against the Company, in respect of the share and all other rights incidental to the share, except only such of those rights as by these Articles are expressly saved and shall be subject to the provisions of the Companies Act, 1956. OTHER REGULATIONS RELATING TO FORFEITURE:

60. A declaration in writing that the person declaring is a Director or Secretary of the Company and that a share in the Company has been duly forfeited in accordance with these Articles on a date stated in the declaration shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to those shares.

61. Upon any sale after forfeiture or for enforcing a lien, the Board may appoint some persons to execute an instrument of transfer of the shares sold and cause the purchasers’ name to be entered in the Register of Members in respect of the shares so sold, and the Purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money and after his name is entered in the Register in respect of such shares, the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

62. Upon any sale, re-allotment or otherwise disposal under these regulations, the certificate or certificates originally issued in respect of the relative shares shall (unless the same shall on demand by the Company been previously surrendered to it by the defaulting Member) stand cancelled and become null and void and of no effect, and the Directors shall be entitled to issue a new Certificate or Certificates in respect of the said shares to the person or persons entitled thereto.

63. The Board may at any time before any shares so forfeited is sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit. TRANSFER AND TRANSMISSION OF SHARES:

64. The Company shall keep a “Register of Transfers”, and distinctly enter therein particulars of every transfer or transmission of share.

65. The instrument of transfer shall be in writing and all the provisions of Section 108 of the Companies Act, 1956, and any statutory modifications thereof for the time being shall be duly complied with in respect of all transfers of shares and registration thereof.


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66. The Instruments of Transfer duly stamped and executed by the Transferor and the Transferee shall be

delivered to the Company in accordance with the provisions of the Act. The instrument of Transfer shall be accompanied by such evidence as the board may require to prove the title of the Transferor and his right to transfer the shares and every registered instrument of Transfer shall remain in the custody of the Company until destroyed by order of the Board. The Transferor shall be deemed to be the holder of such shares until the name of the Transferee is entered in the Register of Members. Before the registration of transfer the Certificate or Certificates of the Shares must be delivered to the Company. CLOSURE OF TRANSFER OF BOOKS AND REGISTER OF MEMBERS:

67. The Board of Directors shall have power on giving not less than 42 days notice (or such longer or shorter notice as prescribed from time to time by the Stock Exchange where the shares/debentures of the Company are listed) to the Stock Exchange and not less than seven days previous notice by advertisement in some newspaper circulating in the district in which the registered office of the Company is situate to close the Transfer Books, the Register of Members or Register of Debenture holders at such time or times and for such period or periods, not exceeding 30 days at a time and not exceeding in the aggregate forty five days in each year. DIRECTORS POWERS TO REFUSE REGISTRATION OF TRANSFERS:

68. Subject to the provisions of Section 111 of the Act and Section 22A of the Securities Contracts (Regulation) Act, 1956 the Board may refuse to register any transfer of, or transmission by operation of law, of the right to any shares or interest of member in the shares or debentures of, the Company. Provided further that in the event of refusal to register any such transfer of or transmission of the shares the right to any share or interest of a member in the shares, or debentures of the Company, the Company shall, within one month from the date on which the instrument of transfer, or the intimation of such transmission as the case may be, was delivered to the Company, send notice of such refusal to the Transferee and the transferor or the person giving intimation of such transmission, as the case may be, giving reason for such refusal. NOTICE OF APPLICATION TO BE GIVEN:

69. Where, in the case of partly paid shares, an application for registration is made by the Transferor, the Company shall give notice of the application to the Transferee in accordance with the provisions of Section 110 of the Act. DEATH OF ANY OF THE JOINT HOLDERS OF SHARES:

70. In the case of the death of any one or more of the persons named in the Register of Members as the joint holders of any share, the survivor or survivors shall be the only person recognized by the Company as having any title to or interest in such share, but nothing herein contained shall be taken to release the estate of deceased joint-holder from any liability on shares held by him jointly with any other person.


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TITLE TO SHARES OF DECEASED MEMBER:

71. The executors, administrators or holders of a Succession Certificate or the legal representatives of a deceased Member (not being one of two or more joint-holders) shall be the only person recognized by the Company as having any title to the shares registered in the name of such Member, and the Company shall not be bound to recognize such executors or administrators or holders of Succession Certificate or the legal representatives unless such executors or administrators or legal representatives shall have first obtained probate or letters of administration or succession Certificate , as the case may be, from a duly constituted Court in the Union of India. Provided that in any case where the Board in its absolute discretion thinks fit, the Board may dispense with production of Probate or letters of Administration or Succession Certificate, upon such terms as to indemnity or otherwise as the Board in its absolute discretion may think necessary. OTHER REGULATIONS RELATING TO TRANSFERS:

72. Share shall not, in any circumstances, be transferred to any minor, insolvent or person of unsound mind. 73. Subject to the regulation herein contained any persons becoming entitled to shares in consequence

or the death, lunacy, bankruptcy or insolvency or any Member, or by any lawful means other than by a transfer may with the consent of the Board upon producing such evidence as the Board thinks sufficient, either be registered as the holders of the shares or elect to have some person nominated by him and approved by the Board registered as such holder. If such person elects to have his nominee registered, he shall testify the election by executing in favour of his nominee an instrument of transfer in accordance with the provisions here in contained, and until he does so, he shall not be free from any liability in respect of the shares.

74. A person entitled to a share by transmission shall, subject to the right of the Directors to retain such dividends or moneys as hereinafter provided, be entitled to receive, and may give a discharge for, any dividends or other moneys payable in respect of the shares.

75. No fee shall be payable to the Company in respect of transfer or transmission of shares, and for registration of Probates, Succession certificates and Letters of administration, certificate of Date of Marriage, Power of Attorney or similar other document and for sub-division and consolidation of shares or for replacement of old, decrepit, worn out share certificates.

76. The Company shall incur no liability or responsibility whatever in consequence of its registering or giving effect to any transfer of shares made by an apparent legal owner thereof to the prejudice of persons having or claiming any equitable right, title or interest to or in the said shares. DEMATERIALISATION OF SECURITIES:

77. For the purpose dematerialization of securities: a. ‘Beneficial Owner’ means a person or persons whose name is recorded as such with a depository; b. ‘SEBI’ means the Securities & Exchange Board of India’ c. ‘Depository’ means a company formed an registered under the Companies Act, 1956 and which has

been granted a certificate of registration to act as a depository under the Securities & Exchange Board of India Act, 1992; and

d. ‘Security’ means such security as may be specified by SEBI from time to time. ‘Depositories Act, 1996’ shall include any statutory modification or reenactment thereof.

78. Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize its securities and to offer securities in a dematerialized form pursuant to the Depositories Act, 1996.

79. Every person subscribing to securities offered by the Company shall have the option to receive security certificates or to hold the securities with a depository. Such a person who is the beneficial owner of the securities can at any time output of a depository, if permitted by the law, in respect, of any security in manner provided by the Depositories Act, and the Company shall, in the manner and within the time prescribed, issue to the beneficial owner the required Certificate of Security.


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80. If a person opts to hold his security with a depository, the Company shall intimate such

depository the details of allotment of the security and on receipt of the information, the depository shall enter in its record the name of the allottee as the beneficial owner of the security.

81. All securities held by a depository shall be dematerialized and be in fungible form. Nothing contained in Sections 153,153A,153B,187B,187C and 372A of the Act shall apply to a depository in respect of the securities held by it on behalf of the beneficial owners.

82. Notwithstanding anything to the contrary contained in the Act or these Articles, a depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of the beneficial owner.

83. The depository as the registered owner of the securities shall not have any voting rights or any other rights in respect of the securities held by it.

84. Every person holding securities of the Company and whose name is entered as the beneficial owner in the records of the depository shall be deemed to be member of the Company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a depository.

85. Notwithstanding anything in the Act or these Articles to the contrary, where securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.

86. Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of securities effected by a transferor and transferee both of who are entered as beneficial owners in the records of a depository.

87. In the case of transfer or transmission of shares or other marketable securities where the Company has not issued any certificates and where such shares or securities are being held in any electronic or fungible form in a Depository, the provisions of the Depositories Act, 1996 shall apply.

88. Notwithstanding anything in the Act or these Articles, where securities dealt with a depository, the Company shall intimate the details thereof to the depository immediately on allotment of such securities.

89. Nothing contained in the Act or these Articles regarding the necessity of having distinctive numbers for securities issued by the Company shall apply to securities held with a depository.

90. The Register and Index of beneficial owners maintained by a Depository under the Depositories Act, 1996 shall be deemed to be the Register and Index of Members and Security holders for the purposes of these Articles. BORROWING POWERS:

92. Subject to the provisions of Sections 292 and 293 of the Act and of these Articles, the Board may, from time to time at its discretion, by a resolution passed at a meeting of the Board accept deposits from Members, (either in advance of calls or otherwise) and generally borrow or raise or secure the payment of any sum or sums of money so borrowed for the purposes of the Company, Provided, however, that where the moneys to be borrowed together with the moneys already borrowed (apart from temporary loans obtained from the Company’s bankers in the ordinary course of business), exceed the aggregate of the paid up capital of the Company and its free reserves, (not being reserves set apart for any specific purpose) the Board shall not borrow such excess moneys without the consent of the Company in General Meeting.

93. Subject to the provisions of the Act, the payment or repayment of money borrowed as aforesaid may be secured in such manner and upon such terms and conditions in all respects as the Board may think fit and in particular by the issue of debentures, debenture-stock of the Company, charged upon all or any part of the property of the Company (both present and future), including its uncalled capital for the time being and debentures, debenture-stock and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued.


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MEETINGS OF MEMBERS:

97. The Company shall in each year hold a General Meeting as its Annual General Meeting in addition to any other meetings in that year.

98. All General Meeting other than Annual General Meetings shall be called Extraordinary General Meetings.

99. All the General Meetings of the company shall be held in accordance with the provisions of sections 166 and other relevant provisions of the Act.

100. The Board shall cause to be prepared the Annual List of Members, Summary of the Share Capital, Balance Sheet and Profit and loss Accounts and forward the same to the Registrar in accordance with Section 159,161 and 220 of the Act.

QUALIFICATION OF DIRECTORS:

140. Directors shall not be required to hold any share qualification. REMUNERATION OF DIRECTORS:

141. Subject to the provisions of sections 198, 268, 269, 309, 314 of and Schedule XIII to the Act, the Chairman, Managing Director or any or all the other Directors may be paid such remuneration, either by way of monthly salary with perquisites or by way of commission as a percentage of profits of the company or partly by salary and partly by commission, as the Board may determine from time to time.

142. Subject to section 310 and other provisions of the Act, every Director shall be entitled to a sitting fee of such amount, as may be determined by the Board of Directors from time to time, for every meeting of the Board or Committee of Directors attended by him.

143. Board may remunerate and pay such remuneration to any Director or Directors for any extra services or special exertions or efforts, rendered, done or suffered by them.

144. The Board may permit reimbursement of all such expenses as may be incurred by any Director(s) for travelling, boarding, lodging and any other expenses incidental for attending to and returning from any meeting of the Board or Committee of Directors.

POWERS OF DIRECTORS:

191. The management and control of the business of the Company shall be vested in the Directors who may exercise all such powers of the Company and do all such acts and things as are not, by the Act, or by any other Act or by the Memorandum or by the Articles of the Company required to be exercised by the Company in General Meeting or as may be prescribed by the Company in General Meeting. However regulations made by the Company in General Meeting shall not invalidate any prior act of the Board which would have been valid if that regulation had not been made, provided that the Board shall not except with the consent of the Company in General Meeting:

(a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the Company where the Company owns more than one undertaking of the whole, or substantially the whole, of any such undertaking;

(b) remit, or give time for the repayment of, any debt due by a Director; (c) invest otherwise than in trust securities the amount of compensation received by the Company in

respect of the compulsory acquisition of any such undertakings as is referred to in clause (a), or of any premises or properties used for any such undertakings and without which it cannot be carried on or can be carried on only with difficult or only with difficulty or only after a considerable time;


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(d) borrow moneys where the money to be borrowed together with the moneys already borrowed by

the Company (apart from temporary loans obtained from the Company’s bankers in the ordinary course of business), will exceed the aggregate of the paid up capital of the Company and its free reserves that is to say, reserves not set apart for any specific purpose, provided further that the powers specified in Section 292 of the Act shall subject to these Articles be exercised only at meetings of the Board, unless the same be delegated to the extent therein stated; or

(e) contribute to charitable and other funds not directly relating to the business of the Company or the welfare of its employees, any amounts the aggregate of which will, in any financial year, exceed fifty thousand rupees or five per cent of its average net profits as determined in accordance with the provisions of Sections 349 and 350 of the Act during the three financial year immediately preceding, whichever is greater; THE COMMON SEAL- CUSTODY AND USE:

194. The Board shall provide a Common Seal of the Company and shall have power from time to time to destroy the same and to substitute a new seal in lieu thereof.

195. The Board shall provide for the safe custody of the Common Seal and the Common Seal shall never be used except by the authority of the Board or a Committee of the Board under the powers previously given.

196. The Company shall also be at liberty to have an official seal in accordance with Section 50 of the Act, for use in any territory, district or place outside India.

197. Every Deed or other instrument, to which the seal of the Company is required to be affixed shall, unless the same is executed by a duly constituted attorney be signed by two Directors and Secretary or such other person appointed by the Board for the purposes. Provided that in respect of the Share Certificate the Seal shall be affixed in accordance with these Articles.

NO INTEREST ON DIVIDEND:

204. Subject to the provisions of the Act no unpaid dividend shall bear interest as against the Company. PAYMENT OF DIVIDEND WHEN REGISTRATION OF TRANSFER IS PENDING:

206. Where an instrument of transfer of shares has been delivered to the Company for registration and the transfer of such shares has not been registered by the Company, it shall, notwithstanding any thing contained in these Articles:

(a) transfer the dividend in relation to such shares to the special account, unless the Company is authorized by the registered holder of such shares in writing to pay such dividend to the transferee specified in such instrument of transfer ; and

(b) keep in abeyance in relation to such shares any offer of right such shares and any issue of fully paid bonus shares in pursuance to these regulations. CAPITALISATION:

207. The Company in General Meeting may resolve that any moneys, Investments or other assets forming part of the undivided profits of the Company or standing to the credit of the General Reserve, Reserve, of any Reserve Fund, or any other Fund of the Company, the Capital Redemption Reserve Account, or in the hands of the Company and available for dividend, or representing premium received on the issue one shares and standing to the credit of the Share Premium Account be capitalised and distributed amongst such of the shareholders as would be entitled to receive the same if distributed by way of dividend in accordance with the respective rights & interests and in proportion to the amount of capital paid up on shares held by them respectively on the basis that they become entitled thereto as capital and that all or any part of such capitalised fund be applied on behalf of such shareholders in paying up in full either at par or at such premium as the resolution may provide, any unissued shares of the Company or debentures of the Company or debenture- stock of the Company


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which shall be distributed accordingly, or in or towards payment of the whole or part of the uncalled liability on any issued shares or debentures or debenture-stock and that such distribution or payment shall be accepted by such shareholders in full satisfaction of their interest in the said capitalised sum provided that a Share Premium Account and a Capital Redemption Account may, for the purposes of this Article, only be applied in the paying of any unissued shares to be issued to members of the Company as fully paid bonus shares.

208. A General Meeting may resolve that any surplus moneys arising from the realisation of any capital assets of the Company, or any investments representing the same or any other undistributed profits of the Company not subject to charge for income tax be distributed among the members on the footing that they receive the same as capital.

209. For the purpose of giving effect to any resolution under the Articles 207 and 208 the Board decide on any issue in regard to the distribution as it thinks expedient and in particular

may issue fractional certificates and may fix the value for distribution of any specific assets and may determine that such cash payments shall be made to any members upon the footing of the value so fixed or that fraction of less value than Rs. 1/- may be disregarded in order to adjust the rights of all parties and may vest any such cash or specific assets in trustees upon such trusts for the person entitled to the dividend or capitalised fund as may seem expedient to the Board. Where required, a proper contract shall be delivered to the Registrar for registration in accordance with Section 75 of the Companies Act, 1956, and the Board may appoint any person to sign such contract on behalf of the person entitled to the dividend or capitalised funds and such appointment shall be effective. WINDING UP OF THE COMPANY:

230. The Liquidator may, up on winding-up of the company, whether voluntary or statutory, with the sanction of special resolution of the company or with any other sanction required by the Act, divide among the members or contributories, in specie or kind, the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not. INDEMNITY AND RESPONSIBILITY:

231. Subject to the provisions of Section 210 of the Act, the Managing Director, every Director of the Company or Manager, Secretary and other Officers or employees of the Company shall be indemnified by the Company against all costs, losses and expenses (including traveling expenses) which any Director, Managing Director, Officer or employee of the Company may incur or become liable to by reason of any contract entered into or an act or deed done by him as such Director, Managing Director, Officer or employee or in any way in the discharge of his duties.

232. Subject as aforesaid the Managing Director, every Director, Manager, Secretary or other officer of the Company shall be indemnified against any or all liability incurred by him in defending any proceedings against the Company whether civil or criminal in which judgment is given in his favour or in which he is acquitted or in connection with any application under Section 633 of the Act, in which relief is given to him by the Court.

233. Subject to the provisions of Section 210 of the Act, a Director or Officer of the Company shall not be liable for the act, receipts, neglects or defaults of any other Director or Officer or for joining in a receipt or other act for conformity or for any loss or expenses happening to the Company through insufficiency or deficiency of title to any property acquired by order of the Board for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or any loss or damage arising from the bankruptcy, insolvency or tortuous act of any person, Company or Corporation with whom any moneys, securities or effects may be entrusted or deposited or for any other loss occasioned by any error of judgment or oversight on his part or for any other loss or damage or misfortune whatsoever which may happen in the execution of duties of his office or in relation thereto unless the same happens through his own dishonesty.


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SECTION VIII – OTHER INFORMATION The following contracts and agreements referred to (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or contracts entered into more than two years before this Offer Document), which are or may be deemed material to be material have been entered into by or on behalf of the Company. Copies of these contracts together with copies of documents referred under Material Documents below all of which have been attached to the copy of this Offer Document and have been delivered to the Stock Exchanges and may be inspected at the Registered Office of the Company between 9:30 am to 5:30 pm on any working day from the date of the RHP until the date of closure of the subscription List. Material contracts

1. Memorandum of Understanding dated 29/11/2007 entered into between the Company and Keynote Corporate Services Limited, BRLM.

2. Memorandum of Understanding dated 28/11/2007 entered into between the Company and Registrar to the Issue.

3. Escrow Agreement dated [•], between the Company, the BRLM, the Escrow Banks and the Registrar to the Issue.

4. Syndicate Agreement dated [•] between the Company, BRLM and Syndicate Members.

5. Underwriting Agreement dated [•] between the Company, BRLM and Syndicate Members.

6. Copy of Tripartite agreement dated [•] entered into between the Company, CDSL and Registrar to the Issue.

7. Copy of Tripartite agreement dated [•] entered into between the Company, NSDL and Registrar to the Issue.

Material Documents

1. Memorandum of Association and Articles of Association of the Company, as amended from time to time.

2. Balance Sheets of the Company for the financial years ending on March 31, 2007, 2006, 2005, 2004, and 2003.

3. Resolutions passed under section 81 (1A) of the Companies Act 1956 by the members of the Company at their meeting held on 29/09/2007.

4. Consents from Directors, Auditors, Bankers to the Company, Bankers to the Issue, Compliance Officer of the Company, Lead Manager to the Issue, Legal Advisor to the Issue and the Registrar to the Issue.

5. Copy of certificate dated 18/11/2007 issued by Auditors, Rao & Venkatesulu, Chartered Accountant and Statutory Auditors of the Company in terms of Part II Schedule II of the Companies Act 1956 including capitalisation statement, taxation statement and accounting ratio for the Year ended 31st March 2003, 2004, 2005, 2006 & 2007 and for the six months period ended 30th September 2007.

6. Copy of letter dated 26/11/2007 received from Rao & Venkatesulu, Chartered Accountants and Statutory Auditors of the Company advising the company on the tax benefits available to the company and its shareholders.

7. Copy of certificate dated 06/12/2007 received from Rao & Venkatesulu, Chartered Accountant and Statutory Auditors of the Company regarding sources and deployment of funds.

8. Undertakings by the Company.

9. Due Diligence report dated 15/12/2007 from Legal Advisors to the issue, Zenith India Lawyers;

10. In-principle approval dated [•] and [•] from BSE and NSE for listing of the securities offered through this Prospectus.

11. SEBI Observation Letter No. [•] dated [•] issued by the Securities and Exchange Board of India.


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PART III

DECLARATION We, the Directors of Shankara Pipes India Limited, hereby declare that, all the relevant provisions of the Companies Act, 1956, and the guidelines issued by the Government of India or the guidelines issued by the Securities and Exchange Board of India, as the case may be, have been complied with and no statement made in this Offer Document is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules made there under or guidelines issued, as the case may be. We further certify that all the disclosures and statements made in this Offer Document are true and correct.

Date: 15/12/2007