CRP TECHNOLOGIES (INDIA) LIMITED

Transcription

1 DRAFT RED HERRING PROSPECTUS June 28, 2011 Please read Section 60B of the Companies Act, 1956 (The Draft Red Herring Prospectus will be updated and become Red Herring Prospectus upon RoC filing) 100% Book Building Issue CRP TECHNOLOGIES (INDIA) LIMITED (Our Company was originally incorporated as CRP Technologies (India) Private Limited on March 06, 2000 under the Companies Act, 1956 vide Certificate of Incorporation issued by the Deputy Registrar of Companies, Maharashtra at Mumbai. Our Company was converted into a public limited company vide a fresh Certificate of Incorporation dated June 23, 2011, issued by the Deputy Registrar of Companies, Maharashtra at Mumbai and consequently the name of our Company was changed to its present name CRP Technologies (India) Limited. The Corporate Identification Number of our Company is U72100MH2000PLC For details of changes to our Registered Office, please refer to the chapter titled History and Other Corporate Matters beginning on page 100 of the Draft Red Herring Prospectus) Registered Office: B-208/209, Classique Centre, Off Mahakali Caves Road, Andheri (East), Mumbai , Maharashtra. Telephone: ; Facsimile: Contact Person: Pallavi Sengupta, Manager Finance and Compliance Officer; ipo@crp.co.in; Website: Our Promoter: Hitesh Asrani PUBLIC ISSUE OF 60,00,000 EQUITY SHARES OF ` 10/- EACH AT A PRICE OF ` [ ] PER EQUITY SHARE (INCLUDING A PREMIUM OF ` [ ] PER EQUITY SHARE) FOR CASH AGGREGATING ` [ ] LACS (THE ISSUE ), BY CRP TECHNOLOGIES (INDIA) LIMITED (THE COMPANY OR THE ISSUER ). THE ISSUE WILL CONSTITUTE 48.00% OF THE FULLY DILUTED POST ISSUE PAID-UP CAPITAL OF OUR COMPANY. Price Band: ` [ ] to ` [ ] Per Equity Share of Face Value of ` 10 each The Price Band and the minimum bid lot size will be decided by our Company, in consultation with the Book Running Lead Manager and advertised at least two working days prior to the bid/issue opening date. The Floor Price is [ ] times of the Face Value and the Cap Price is [ ] times of the Face Value In case of revision in the Price Band, the Bidding/Issue Period shall be extended for three additional working days after such revision, subject to the Bidding/Issue Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding/Issue Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE), whose online IPO system will be available for bidding, by issuing a press release and by indicating the change on the website of the Book Running Lead Manager (BRLM) and the terminals of the member(s) of the Syndicate. This being an Issue for Equity Shares representing more than 25% of the post-issue equity share capital of the Company, Equity Shares will be offered to the public for subscription in accordance with Rule 19(2)(b)(i) of the Securities Contracts (Regulation) Rules, 1957, as amended ( SCRR ), and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended ( SEBI ICDR Regulations ). The Issue is being made under sub-regulation (2) (a)(i) and (2)(b)(i) of Regulation 26 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ( SEBI ICDR Regulations ) and through the 100% Book Building Process wherein at least 50% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers, of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only and the remaining QIB portion shall be available for allocation to the QIB Bidders including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders and not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders, subject to valid Bids being received at or above the Issue Price. All non-retail Bidders, shall participate in this Issue through the Application Supported by Blocked Amount ( ASBA ) process. Retail Bidders participating in this Issue may also utilize the ASBA process to submit their Bids. For details, please refer to the chapter titled Issue Procedure beginning on page 177 of the Draft Red Herring Prospectus. RISKS IN RELATION TO THE FIRST ISSUE This being the first issue of Equity Shares of our Company, there has been no formal market for our Equity Shares. The face value of the Equity Shares is ` 10/- and the Floor Price is [ ] times of the Face Value and the Cap Price is [ ] times of the Face Value. The price band (has been determined and justified by the BRLM and the issuer as stated under the chapter on Basis for Issue Price beginning on page 69 of the Draft Red Herring Prospectus) should not be taken to be indicative of the market price of our Equity Shares after our Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares of our Company nor regarding the price at which the Equity Shares will be traded after listing. GENERAL RISK Investments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risk involved. The Equity Shares have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does the SEBI guarantee the accuracy or adequacy of this document. Specific attention of the investors is invited to the statement of Risk Factors beginning on Page 14 of the Draft Red Herring Prospectus. ISSUER S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable enquiries, accepts responsibility for, and confirms that the Draft Red Herring Prospectus contains all information with regard to our Company and the Issue, which is material in the context of the Issue; that the information contained in the Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect; that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. IPO GRADING The Issue has been graded by [ ] and has been assigned a grade of [ ]/5 indicating [ ] fundamentals. The IPO Grading is assigned on a 5 point scale from 1 to 5 with an IPO Grade 5 indicating strong fundamentals and an IPO Grade 1 indicating poor fundamentals. For further details and grading rationale, please refer to page 42 of the Draft Red Herring Prospectus under the section General Information. LISTING ARRANGEMENT The Equity Shares issued through the Draft Red Herring Prospectus are proposed to be listed on Bombay Stock Exchange Limited (BSE) and on The National Stock Exchange of lndia Limited (NSE). In-principle approvals have been received from BSE and NSE for the listing of the Equity Shares vide their letters dated [ ] and [ ] respectively. For the purposes of this Issue, BSE shall be the Designated Stock Exchange. BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE Indbank Merchant Banking Services Limited SEBI Registration No: INM , Varma Chambers, Homji Street, Fort, Mumbai Maharashtra. Tel No: Fax No: Website: mumbai@indbankonline.com Investor Grievance Id: investors@indbankonline.com Contact Person: M. Srinivas / Kishore Iyer Sharepro Services (India) Private Limited SEBI Registration No: INR AB, Samhita Warehousing Complex, Sakinaka Telephone Exchange Lane, Off Andheri Kurla Road, Sakinaka, Andheri (East), Mumbai , Maharashtra Tel No: / 5404 Fax No: Website: crp.ipo@shareproservices.com Contact Person: Subhash Dhingreja / Satheesh H.K. ISSUE PROGRAMME Bid/Issue Opens on [ ] Bid/Issue Closes on [ ]^ ^ The Company in consultation with the BRLM, may consider closing the Bidding/Issue Period for QIBs one Working Day prior to the Bid/Issue Closing Date, subject to the Bid / Issue Period being for a minimum of three Working days

2 TABLE OF CONTENTS CONTENTS PAGE Section I Definitions and Abbreviations Company Related Terms Conventional/General Terms 2 Issue Related Terms 2 Technical / Industry Related Terms / Abbreviations 7 Conventional/General Terms / Abbreviations 8 Section II General Presentation of Financial Information and Use of Market Data 11 Forward Looking Statements 13 Section III Risk Factors 14 Section IV Introduction Summary 31 Summary of Financial Information 34 Brief Details of the Issue 37 General Information 38 Capital Structure 48 Section V Objects of the Issue Objects of the Issue 58 Basic Terms of the Issue 66 Basis for Issue Price 69 Statement of Tax Benefits 72 Section VI About Us Industry Overview 79 Our Business 85 Key Industry Regulations and Policies 99 History and Other Corporate Matters 100 Our Management 104 Our Promoter and Promoter Group 116 Currency of Presentation 124 Dividend Policy 126 Section VII Financial Information Auditors Report and Financial Information of Our Company 127 Management s Discussion and Analysis of Financial Condition and Results 145 of Operations as Reflected in the Financial Statements Section VIII Legal and other Regulatory Information Outstanding Litigations, Material Developments and Other Disclosures 153 Government and Other Statutory Approvals 156 Other Regulatory and Statutory Disclosures 159 Section IX Issue Related Information Terms of the Issue 171 Issue Structure 175 Issue Procedure 177 Restrictions on Foreign Ownership of Indian Securities 216 Section X Description of Equity Shares and Terms of the Articles of Association Main Provisions of Articles of Association 217 Section XI Other Information Material Contracts and Documents for Inspection 250 Section XII Declaration 252

3 SECTION I DEFINITIONS AND ABBREVIATIONS In the Draft Red Herring Prospectus, unless the context otherwise requires, the terms defined and abbreviations stated hereunder shall have the meanings as assigned therewith as stated in this Section. Company Related Terms Term the Company, our Company, Issuer, Issuer Company, we, us, our Articles or Articles of Association or AoA or our Articles Board, Board of Directors or our Board Director(s) Memorandum, our Memorandum or Memorandum of Association or MoA Our Group Entities Description CRP Technologies (India) Limited, a public limited company incorporated under the Companies Act, 1956, and having its registered office at B-208/209, Classique Centre, Off Mahakali Caves Road, Andheri (East), Mumbai , Maharashtra The Articles of Association of our Company, as amended from time to time The Board of Directors of our Company, duly constituted from time to time, including any committee thereof The Director(s) of our Company The Memorandum of Association of our Company, as amended from time to time Such entities as are included in the chapter titled Our Group Entities beginning on page 118 of the Draft Red Herring Prospectus Our Promoters Mr. Hitesh Asrani Registered Office The registered and corporate office of our Company, situated at B- 208/209, Classique Centre, Off Mahakali Caves Road, Andheri (East), Mumbai , Maharashtra RoC / Registrar of Companies, Mumbai Statutory Auditors Issue Related Terms The Registrar of Companies located at Everest Building, 100, Marine Drive, Mumbai , Maharashtra The statutory auditors of our Company, being M/s. Chheda Vyas & Associates, Chartered Accountants Term Issue or the Issue or this Issue you, your or yours Allocation / Allocation of Equity Shares Allot / Allotted / Allotment/ Allotment of Equity Shares Allotment Advice Allottee Application Supported by Blocked Amount/ ASBA ASBA Account ASBA Bid cum Application Description Public Issue of 60,00,000 Equity Shares of face value of ` 10 each for cash at a price of ` [ ] per Equity Share (including share premium of ` [ ] per Equity Share) aggregating to ` [ ] lacs All such references are to the Bidders to the Issue, unless the context otherwise specifies Unless the context otherwise requires, the allocation of Equity Shares pursuant to this Issue to the successful Bidders Unless the context otherwise requires, means the allotment of Equity Shares pursuant to this Issue to successful Bidders The note or advice or intimation of Allotment, sent to each successful Bidder who has been or is to be Allotted the Equity Shares after discovery of the Issue Price in accordance with the Book Building Process, including any revisions thereof A successful Bidder to whom the Equity Shares are Allotted pursuant to this Issue An application, whether physical or electronic, used by all Bidders to make a Bid authorising a SCSBs to block the Bid Amount in a specified bank account maintained with the SCSBs Account maintained with a SCSBs which will be blocked by such SCSBs to the extent of the appropriate Bid Amount of the ASBA Bidder, as specified in the ASBA Bid cum Application Form. The form, whether physical or electronic, used by an ASBA Bidder to 2

4 Term Form / ASBA Form ASBA Bidder(s) ASBA Revision Form Banker(s) to the Issue/ Escrow Collection Bank(s) Bankers to our Company Basis of Allotment / Basis of Allocation Bid Amount Bid cum Application Form Bid(s) Bid / Issue Closing Date Description submit a Bid, which contains an authorisation to block the Bid Amount in an ASBA Account and would be considered as an application for Allotment to ASBA Bidders in terms of the Red Herring Prospectus and the Prospectus Pursuant to SEBI circular number CIR/CFD/DIL/7/2010 dated July 13, 2010, ASBA Bid cum Application Forms shall be made available for download from the respective websites of the Stock Exchange(s) Any prospective investor(s) in this Issue who Bid/ apply through the ASBA process Pursuant to SEBI circular number CIR/CFD/DIL/1/2011 dated April 29, 2011, non-retail Investors i.e. QIBs and Non-Institutional Investors participating in this Issue are required to mandatorily use the ASBA facility to submit their Bids The form, whether physical or electronic, used by an ASBA Bidder to modify the quantity of Equity Shares or the Bid Amount in any of his/her ASBA Bid cum Application Form or any previous ASBA Revision Form(s) Pursuant to SEBI circular number CIR/CFD/DIL/7/2010 dated July 13, 2010, ASBA Revision Forms shall be made available for download from the respective websites of the Stock Exchange(s) The bank(s) which are clearing members and registered with SEBI as Banker to the Issue with whom the Escrow Account will be opened, in this case being [ ] Such entities which are disclosed as Bankers to our Company in the chapter titled General Information beginning on page 38 of the Draft Red Herring Prospectus The basis on which Equity Shares will be Allotted / Allocated to successful Bidders pursuant to the Issue and which is described under chapter titled Issue Procedure beginning on page 177 of the Draft Red Herring Prospectus The highest value of the optional Bids indicated in the Bid cum Application Form and payable by a Bidder on submission of a Bid in the Issue and in case of ASBA Bidders, the amount mentioned in the ASBA Bid cum Application Form The form used by a Bidder to make a Bid including the ASBA Bid cum Application Form (as applicable), which will be considered as the application for Allotment for the purposes of the Red Herring Prospectus and the Prospectus An indication to make an offer during the Bid / Issue Period by the Bidders, pursuant to submission of the Bid cum Application Form or ASBA Form as the case may be, to subscribe to the Equity Shares of our Company in this Issue at a price within the Price Band, including all revisions and modifications if any, made to such Bid(s) The date after which the members of the Syndicate and the designated branches of the SCSBs shall not accept any Bids for the Issue, which shall be a date notified in two national daily newspapers (one each in English and in Hindi) of wide circulation, and one regional (Marathi) daily newspaper of wide circulation, where the Registered Office of our Company is situated. Our Company may consider closing the Bidding by QIB Bidders one Working Day prior to the Bid / Issue Closing Date, which shall also be notified in the said advertisement in two national daily newspapers (one each in English and in Hindi) of wide circulation, and one regional (Marathi) daily newspaper of wide circulation, where the Registered Office of our Company is situated 3

5 Term Bid / Issue Opening Date Bid / Issue Period Bidder Book Building Process / Book Building Method BRLM / Book Running Lead Manager Business Day Cap Price Compliance Officer Controlling Branches Cut-off Price Demographic Details Depositories Designated Branch Designated Date Designated Stock Exchange Draft Red Herring Prospectus or DRHP Eligible NRIs Equity Shares Description The date on which the members of the Syndicate and the SCSBs shall start accepting Bids for the Issue, which shall be a date notified in two national daily newspapers (one each in English and in Hindi) of wide circulation and one regional (Marathi) daily newspaper of wide circulation, where the Registered Office of our Company is situated The period between the Bid / Issue Opening Date and the Bid / Issue Closing Date, both days inclusive, during which prospective Bidders and the ASBA Bidders can submit their Bids, including any revisions thereof Any prospective investor who makes a Bid pursuant to the terms of the Red Herring Prospectus and the Bid cum Application Form including an ASBA Bidder who Bids through an ASBA Bid cum Application Form The book building route as provided under Schedule XI of the SEBI ICDR Regulations, in terms of which this Issue is being made Book Running Lead Manager to the Issue, in this case being Indbank Merchant Banking Services Limited Any day on which commercial banks in Mumbai are open for business The higher end of the Price Band above which the Issue Price will not be finalised and above which no Bids will be accepted The Manager Finance of our Company, being Ms. Pallavi Sengupta Such branches of the SCSBs which coordinate under this Issue by the ASBA Bidders with the BRLM, the Registrar to the Issue and the Stock Exchanges, a list of which is available at Any price within the Price Band finalised by our Company in consultation with the Book Running Lead Manager. Only Retail Individual Bidders are entitled to Bid at the Cut-off Price, for a Bid Amount not exceeding ` 2 lacs. No other category of Bidders are entitled to Bid at the Cut-off Price The demographic details of the Bidders such as their address, PAN, occupation and bank account details. Depositories registered with the SEBI under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, as amended from time to time, being NSDL and CDSL Such branches of the SCSBs which shall collect the ASBA Bid cum Application Form used by ASBA Bidders, a list of which is available at The date on which funds are transferred from the Escrow Account to the Public Issue Account or the Refund Account, as appropriate, or the amount blocked by the SCSBs is transferred from the ASBA Account specified by the ASBA Bidder to the Public Issue Account, as the case may be, after the Prospectus is filed with the RoC, following which the Board of Directors shall Allot Equity Shares to successful Bidders Bombay Stock Exchange Limited The Draft Red Herring Prospectus dated June 28, 2011, issued in accordance with Section 60B of the Companies Act and SEBI ICDR Regulations, filed with SEBI and which does not contain complete particulars of the price at which the Equity Shares would be issued and the size of the Issue NRIs from jurisdictions outside India where it is not unlawful to make an issue or invitation under the Issue and in relation to whom the Red Herring Prospectus constitutes an invitation to subscribe to the Equity Shares offered herein Equity shares of our Company of face value of ` 10 each, fully paid up, unless otherwise specified in the context thereof 4

6 Term Escrow Account(s) Escrow Agreement First / Sole Bidder Floor Price Issue Agreement Issue Price Issue Proceeds Listing Agreement Mutual Fund Portion Mutual Funds Net Proceeds NIF Non-Institutional Bidders Non-Institutional Portion NR / Non-Resident NRI(s) / Non Resident Indian OCB(s) / Overseas Corporate Body Pay-in-Period / Pay-in Period Description Account opened with the Escrow Collection Bank(s) for the Issue and in whose favour the Bidder (excluding ASBA Bidders) will issue cheques or drafts in respect of the Bid Amount when submitting a Bid Agreement to be entered into by our Company, the Registrar to the Issue, the BRLM, the Syndicate Members and the Escrow Collection Bank(s) for collection of the Bid Amounts and where applicable, refunds of the amounts collected from the Bidders (excluding ASBA Bidders) on the terms and conditions thereof The Bidder whose name appears first in the Bid cum Application Form or Revision Form or the ASBA Bid cum Application Form or ASBA Revision Form The lower end of the Price Band, at or above which the Issue Price will be finalised and below which no Bids will be accepted The agreement dated June 27, 2011 entered into by our Company and the BRLM, pursuant to which certain arrangements are agreed to, in relation to the Issue The final price at which the Equity Shares will be issued and allotted in terms of the Red Herring Prospectus. The Issue Price will be decided by our Company in consultation with the BRLM on the Pricing Date Proceeds from the Issue that will be available to our Company, being ` [ ] lacs Equity listing agreements to be entered into by our Company with the Stock Exchange(s) 5% of the QIB Portion or 1,50,000 Equity Shares available for allocation to Mutual Funds, out of the QIB Portion A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time The Issue Proceeds less the Issue related expenses. For further information about use of the Issue Proceeds and the Issue related expenses, please refer to the chapter titled Objects of the Issue beginning on page 58 of the Draft Red Herring Prospectus National Investment Fund set up by resolution F. No. 2/3/2005-DD-II dated November 23, 2005 of Government of India published in the Gazette of India As defined in the SEBI ICDR Regulations and includes all Bidders including sub-accounts of FIIs registered with SEBI, which are foreign corporates or foreign individuals, that are not QIBs or Retail Individual Bidders and who have Bid for Equity Shares for a cumulative amount more than ` 2 lacs (but not including NRIs other than eligible NRIs) The portion of the Issue being not less than 15% of the Issue, consisting of 9,00,000 Equity Shares, available for Allocation to Non Institutional Bidders on a proportionate basis, subject to receipt of valid Bids at or above the Issue Price A person resident outside India, as defined under FEMA including eligible NRIs and FIIs A person resident outside India, as defined under FEMA and who is a citizen of India or is a person of Indian origin (as defined under the Foreign Exchange Management (Deposit) Regulations, 2000, as amended) A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs, including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under the Foreign Exchange Management (Deposit) Regulations, OCBs are not allowed to invest in this Issue. The period commencing on the Bid / Issue Opening Date and continuing till the Bid / Issue Closing Date 5

7 Term Payment through electronic transfer of funds Price Band Pricing Date Description Payment made through NECS, Direct Credit or NEFT, as applicable Price band of a minimum price (Floor Price) of ` [ ] and the maximum price (Cap Price) of ` [ ] and includes revisions thereof. The Price Band and the minimum Bid lot size for the Issue will be decided by our Company in consultation with the BRLM and advertised at least two Working Days prior to the Bid / Issue Opening Date, in two national daily newspapers (one each in English and in Hindi) of wide circulation, and one regional (Marathi) daily newspaper, of wide circulation, where the Registered Office of our Company is situated The date on which our Company in consultation with the BRLM, finalises the Issue Price Prospectus The prospectus to be filed with the RoC in accordance with Section 60 of the Companies Act, containing, inter alia, the Issue Price that is determined at the end of the Book Building process, the size of the Issue and certain other additional information Public Issue Account QIB Portion Qualified Institutional Buyers or QIBs Red Herring Prospectus / RHP Refund Account(s) Refund Bank (s) / Refund Banker(s) Refunds through electronic transfer of funds Registrar to the Issue Resident Retail Individual Bidder / Resident Retail Individual Investor Retail Individual Bidder(s) Account opened with the Bankers to the Issue by our Company to receive monies from the Escrow Account and the SCSBs from the bank accounts of the ASBA Bidders on the Designated Date The portion of the Issue being at least 50% of the Issue, consisting of at least 30,00,000 Equity Shares, available for Allocation to QIBs, subject to receipt of valid Bids at or above the Issue Price. As defined under the SEBI ICDR Regulations, including public financial institutions as specified in Section 4A of the Companies Act, scheduled commercial banks, mutual fund registered with SEBI, FII and sub-account (other than a sub-account which is a foreign corporate or foreign individual) registered with SEBI, multilateral and bilateral development financial institution, venture capital fund registered with SEBI, foreign venture capital investor registered with SEBI, state industrial development corporation, insurance company registered with Insurance Regulatory and Development Authority, provident fund with minimum corpus of ` 2,500 lacs, pension fund with minimum corpus of ` 2,500 lacs, NIF and insurance funds set up and managed by army, navy or air force of the Union of India, insurance funds set up and managed by the Department of Posts, India The Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars of the price at which the Equity Shares are offered and the size of the Issue. The Red Herring Prospectus will be filed with the RoC at least three days before the Bid/Issue Opening Date and will become the Prospectus upon filing with the RoC after the Pricing Date No-lien account maintained by the Refund Bank(s) to which the surplus money shall be transferred and from which refunds of the whole or part of the Bid Amount (excluding that of the ASBA Bidders), if any, shall be made. The bank(s) which have been appointed / designated for the purpose of refunding the amount to investors either through the electronic mode as prescribed by SEBI and / or physical mode in accordance with the procedure contained in the chapter titled Issue Procedure beginning on page 177 of the Draft Red Herring Prospectus Refunds made through ECS / NECS, Direct Credit, NEFT or the ASBA process, as applicable Registrar to this Issue, being Sharepro Services (India) Private Limited A Retail Individual Bidder who is a person resident in India (as defined in FEMA). Individual Bidders who have Bid for Equity Shares for an amount not 6

8 Retail Portion Term Revision Form SCSB Agreement Self Certified Syndicate Bank or SCSBs Stock Exchanges Sub Syndicate Member Syndicate Syndicate Agreement Syndicate Member(s) Transaction Registration Slip / TRS Underwriters Underwriting Agreement Working Day Description more than ` 2 lacs in any of the bidding options in the Issue (includes HUFs applying through their Karta and does not include NRIs other than Eligible NRIs) The portion of the Issue being not less than 35% of the Issue, consisting of 21,00,000 Equity Shares, available for Allocation to Retail Individual Bidders on a proportionate basis. The form used by the Bidders to modify the quantity of Equity Shares or the Bid Price in any of their Bid cum Application Forms or any previous Revision Form(s) The deemed agreement between the SCSBs, the BRLM, the Registrar to the Issue and our Company, in relation to the collection of Bids from the ASBA Bidders and payment of funds by the SCSBs to the Public Issue Account. Self Certified Syndicate Bank is a Banker to an Issue registered with SEBI which offers the facility of making a Applications Supported by Blocked Amount and recognised as such by SEBI, a list of which is available at BSE and NSE, referred to as collectively A SEBI registered member of BSE and / or NSE appointed by the BRLM and / or Syndicate Member to act as a Sub Syndicate Member in the Issue Jointly, the BRLM, the Syndicate Members and the Sub Syndicate Members The agreement to be entered into between the BRLM along with the Syndicate Members and our Company in relation to the collection of Bids (excluding Bids by ASBA Bidders) in this Issue An intermediary registered with the SEBI to act as a syndicate member and who is permitted to carry on the activity as an underwriter, in this case being [ ] The slip or document issued by member of the Syndicate or the SCSBs (only on demand), as the case may be, to the Bidder as proof of registration of the Bid The Book Running Lead Manager and the Syndicate Members The agreement among the Underwriters and our Company to be entered into, on or after the Pricing Date Unless the context otherwise requires: (i) Till the Bid / Issue closing date: All days other than a Saturday, Sunday or a public holiday; (ii) Post the Bid / Issue closing date: All days other than a Sunday or a public holiday And on which commercial banks in Mumbai are open for business in accordance with the SEBI circular no. CIR/CFD/DIL/3/2010 dated April 22, 2010 Technical / Industry Related Terms / Abbreviations Term BFSI BPO CAGR CV EOU ER&D FDI GOI HR IT Description Banking, Financial Services and Insurance Business Process Outsourcing Compounded Annual Growth Rate Curriculam Vitae Export Oriented Unit Engineering Research & Development Foreign Direct Investment Government of India Human Resource Information Technology 7

9 Term Description ITES Information Technology Enables Services I. T. Act The Income Tax Act, 1961, as amended from time to time I. T. Rules The Income Tax Rules, 1962, as amended from time to time KPO Knowledge Process Outsourcing MNC Multi National Company NASSCOM The National Association of Software and Services Companies NSR National Skills Registry R&D Research & Development RPO Recruitment Process Outsourcing SLA Service Level Agreement SME Small and Medium Enterprises Sq.ft. Square feet sq.mtrs. Square meters Conventional/General Terms / Abbreviations Abbreviation/Acronym A/c AGM AS AY BSE CDSL CENVAT CIN Companies Act CRR Depositories Act DIN DIPP DP EBIDTA ECB ECS EGM EPS ESIC FCNR Account FDI FEMA FEMA Regulations FII FII Regulations Financial Year / Fiscal / Fiscal Year / FY FIPB FVCI FVCI Regulations Description Account Annual General Meeting. Accounting Standards issued by the Institute of Chartered Accountants of India Assessment Year; the period of twelve months commencing from the 1 st day of April every year Bombay Stock Exchange Limited Central Depository Services (India) Limited. Central Value Added Tax Corporate Identity Number The Companies Act, 1956, as amended from time to time Cash Reserve Ratio The Depositories Act, 1996, as amended from time to time Director s identification number Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India. A Depository Participant as defined under the Depositories Act Earnings before Interest, Depreciation, Tax, Amortisation and extraordinary items External Commercial Borrowings Electronic Clearing System Extraordinary General Meeting Earnings per Share Employee State Insurance Corporation Foreign Currency Non Resident Account Foreign Direct Investment The Foreign Exchange Management Act, 1999, together with rules and regulations framed thereunder, as amended Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended Foreign Institutional Investor, as defined under the FII Regulations and registered with the SEBI under applicable laws in India Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, as amended Period of twelve months ended March 31 of that particular year, unless specifically stated otherwise Foreign Investment Promotion Board Foreign venture capital investor as defined in and registered under the FVCI Regulations. Securities and Exchange Board of India (Foreign Venture Capital 8

10 Abbreviation/Acronym GIR Number GoI/ Government HUF IFRS Indian GAAP IPO ISO Key Managerial Personnel / KMP Ltd. Merchant Banker MICR MOU N.A. NAV NBFC NECS NEFT NIFTY NSDL NSE NSEL NTA p.a. P/E Ratio PAN PAT PBT R & D RBI RBI Act RoNW Rs./ ` / INR/Rupees RTGS SCRA SCRR SEBI SEBI Act SEBI ICDR Regulations / ICDR Regulations / SEBI ICDR / ICDR Description Investors) Regulations, 2000, as amended. General Index Registry Number Government of India Hindu Undivided Family International Financial Reporting Standards. Generally Accepted Accounting Principles in India. Initial Public Offer International Organisation for Standardization The officers vested with executive powers and the officers at the level immediately below the Board of Directors of the Issuer Company and other persons whom the Issuer has declared as a Key Managerial Personnel and as mentioned in the chapter titled Our Management beginning on page 104 of the Draft Red Herring Prospectus Limited Merchant banker as defined under the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 as amended from time to time Magnetic Ink Character Recognition Memorandum of Understanding Not Applicable Net Asset Value being paid-up equity share capital plus free reserves (excluding reserves created out of revaluation, preference share capital and share application money) less deferred expenditure not written off (including miscellaneous expenses not written off) and debit balance of profit and loss account, divided by number of issued Equity Shares outstanding at the end of the Fiscal. Non-Banking Finance Company National Electronic Clearing System National Electronic Fund Transfer National Stock Exchange Sensitive Index National Securities Depository Limited National Stock Exchange of India Limited National Spot Exchange Limited Net Tangible Assets Per annum Price/Earnings Ratio Permanent Account Number Profit After Tax Profit Before Tax Research and Development Reserve Bank of India The Reserve Bank of India Act, 1934, as amended from time to time. Return on Net Worth Indian Rupees, the legal currency of the Republic of India Real Time Gross Settlement Securities Contracts (Regulation) Act, 1956, as amended from time to time Securities Contracts (Regulation) Rules, 1957, as amended from time to time The Securities and Exchange Board of India constituted under the SEBI Act, 1992 Securities and Exchange Board of India Act, 1992, read with rules and regulations thereunder and amendments thereto and as amended from time to time SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time, including instructions and clarifications issued by SEBI from time to time. 9

11 Abbreviation/Acronym SEBI Insider Trading Regulations SEBI Rules and Regulations SEBI Takeover Regulations/ Takeover Code Sec. Securities Act SICA Sub-account TDS U.S. or US or U. S. A. UIN UoI VCF Regulations VCFs Description SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, including instructions and clarifications issued by SEBI from time to time. SEBI ICDR Regulations, SEBI (Underwriters) Regulations, 1993, as amended, the SEBI (Merchant Bankers) Regulations, 1992, as amended, and any and all other relevant rules, regulations, guidelines, which SEBI may issue from time to time, including instructions and clarifications issued by it from time to time. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended from time to time. Section The U.S. Securities Act of 1933, as amended. Sick Industrial Companies (Special Provisions) Act, 1985, as amended from time to time Sub-accounts registered with SEBI under the Securities and Exchange Board of India (Foreign Institutional Investor) Regulations, 1995, as amended. Tax Deducted at Source The United States of America Unique Identification Number issued in terms of SEBI (Central Database of Market Participants) Regulations, 2003, as amended from time to time. Union of India Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, as amended from time to time Venture Capital Funds as defined in and registered with SEBI under the VCF Regulations Notwithstanding the foregoing: 1. In the section titled Main Provisions of the Articles of Association beginning on page 217 of the Draft Red Herring Prospectus, defined terms shall have the meaning given to such terms in that section; 2. In the chapters titled Summary of Business and Our Business beginning on pages 33 and 85 respectively, of the Draft Red Herring Prospectus, defined terms shall have the meaning given to such terms in that section; 3. In the section titled Risk Factors beginning on page 14 of the Draft Red Herring Prospectus, defined terms shall have the meaning given to such terms in that section; 4. In the chapter titled Statement of Tax Benefits beginning on page 72 of the Draft Red Herring Prospectus, defined terms shall have the meaning given to such terms in that section; In the chapter titled Management s Discussion and Analysis of Financial Conditions and Results of Operation beginning on page 145 of the Draft Red Herring Prospectus, defined terms shall have the meaning given to such terms in that section. 10

12 SECTION II GENERAL PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA Certain Conventions Unless otherwise specified or the context otherwise requires, all references to India in the Draft Red Herring Prospectus are to the Republic of India, together with its territories and possessions, all references to the US, the USA, the United States or the U.S. are to the United States of America, together with its territories and possessions. Financial Data Unless stated otherwise, the financial data in the Draft Red Herring Prospectus is derived from our audited financial statements for the Fiscals 2007, 2008, 2009, 2010 and 2011 prepared in accordance with Indian GAAP, the Companies Act and restated in accordance with the SEBI ICDR Regulations and the Indian GAAP which are included in the Draft Red Herring Prospectus, and set out in the section titled Financial Information beginning on page 127 of the Draft Red Herring Prospectus. Our Fiscal commences on April 1 and ends on March 31 of the following year, so all references to a particular Fiscal are to the twelve-month period ended March 31 of that year. In the Draft Red Herring Prospectus, discrepancies in any table, graphs or charts between the total and the sums of the amounts listed are due to rounding-off. There are significant differences between Indian GAAP, IFRS and U.S. GAAP. Our Company has not attempted to explain those differences or quantify their impact on the financial data included herein, and the investors should consult their own advisors regarding such differences and their impact on the financial data. Accordingly, the degree to which the restated financial statements included in the Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader's level of familiarity with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in the Draft Red Herring Prospectus should accordingly be limited. Any percentage amounts, as set forth in the sections / chapters titled Risk Factors, Our Business and Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 14, 85 and 145 respectively, of the Draft Red Herring Prospectus and elsewhere in the Draft Red Herring Prospectus, unless otherwise indicated, have been calculated on the basis of our restated financial statements prepared in accordance with Indian GAAP, the Companies Act and restated in accordance with the SEBI ICDR Regulations and the Indian GAAP. Currency and units of presentation In the Draft Red Herring Prospectus, unless the context otherwise requires, all references to; Rupees or ` or Rs. are to Indian rupees, the official currency of the Republic of India. US Dollars or US$ or USD or $ are to United States Dollars, the official currency of the United States of America. All references to the word Lakh or Lac, means One hundred thousand and the word Million means Ten Lacs and the word Crore means Ten Million and the word Billion means One thousand Million. Industry and Market Data Unless stated otherwise, industry data used throughout the Draft Red Herring Prospectus has been obtained from industry publications and publicly available government documents. 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. Similarly while information contained in the publicly available government documents that is relied upon for the purposes of the Draft Red Herring Prospectus is 11

13 believed to be complete and reliable, there can be no assurance of the same. Accordingly, no investment decisions should be made based on such information. The extent to which the market and industry data used in the Draft Red Herring Prospectus is meaningful depends on the reader s familiarity with and understanding of the methodologies used in compiling such data. Further, the extent to which the industry and market data presented in the Draft Red Herring Prospectus is meaningful depends on the reader's familiarity with and understanding of the methodologies used in compiling such data. 12

14 FORWARD LOOKING STATEMENTS All statements contained in the Draft Red Herring Prospectus that are not statements of historical fact constitute forward-looking statements. All statements regarding our expected financial condition and results of operations, business, plans and prospects are forward-looking statements. These forwardlooking statements include statements as to our business strategy, our revenue and profitability, planned projects and other matters discussed in the Draft Red Herring Prospectus regarding matters that are not historical facts. These forward looking statements and any other projections contained in the Draft Red Herring Prospectus (whether made by us or any third party) are predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. These forward-looking statements generally can be identified by words or phrases such as aim, anticipate, believe, expect, estimate, intend, objective, plan, project, may, might, will, will continue, will pursue or other words or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward-looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results and property valuations to differ materially from those contemplated by the relevant statement. Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, regulatory changes pertaining to the industries in India in which we have our businesses and our ability to respond to them, our ability to successfully implement our strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in India and which have an impact on our business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in our industry. Important factors that could cause actual results to differ materially from our expectations include, among others: 1. Implementation risks involved in our projects; 2. Significant changes in the exchange rates; 3. Increase in freight, interest rates, etc.; 4. Competition from existing players; 5. Working capital arrangements; 6. Growth of unorganized sector and threat from national/regional players; 7. Changes in laws and regulations relating to the industry in which we operate; 8. Changes in political and social conditions in India, the monetary and interest rate policies in India and / or other countries, inflation, deflation, anticipated turbulence in interest rates, equity prices or other rates or prices; 9. Our ability to successfully implement our strategy, growth and expansion plans; 10. The outcome of legal or regulatory proceedings that we are or might become involved in; 11. Contingent liabilities, environmental problems and uninsured losses; 12. Changes in government policies and regulatory actions that apply to or affect our business; 13. Developments affecting the Indian economy; 14. Ability to retain appropriate personnel; 15. Uncertainty in global financial markets; and 16. Occurrence of natural disasters or calamities affecting the areas in which our Company has its operations. For further discussion of factors that could cause our actual results to differ from our expectations, please refer sections / chapter titled Risk Factors, Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 14, 85 and 145 respectively, of the Draft Red Herring Prospectus. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. 13

15 SECTION III RISK FACTORS An investment in the Equity Shares involves a high degree of risk. You should carefully consider all the information in the Draft Red Herring Prospectus, including the risks and uncertainties summarized below, before making an investment in our Equity Shares. The risks described below are relevant to the industry our Company is engaged in, our Company and our Equity Shares. To obtain a complete understanding of our Company, you should read this section in conjunction with the chapters titled Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 85 and 145 respectively, of the Draft Red Herring Prospectus as well as the other financial and statistical information contained in the Draft Red Herring Prospectus. Prior to making an investment decision, prospective investors should carefully consider all of the information contained in the section titled Financial Information beginning on page 127 of the Draft Red Herring Prospectus. Unless stated otherwise, the financial data in this section is as per our restated financial statements prepared in accordance with Indian GAAP and SEBI (ICDR) Regulations. If any one or more of the following risks as well as other risks and uncertainties discussed in the Draft Red Herring Prospectus were to occur, our business, financial condition and results of our operation could suffer material adverse effects, and could cause the trading price of our Equity Shares and the value of investment in the Equity Shares to materially decline which could result in the loss of all or part of investment. Prospective investors should pay particular attention to the fact that our Company is incorporated under the laws of India, and is therefore subject to a legal and regulatory environment that may differ in certain respects from that of other countries. The Draft Red Herring Prospectus also contains forward looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the considerations described below and elsewhere in the Draft Red Herring Prospectus. These risks are not the only ones that our Company face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify financial or other implication of any risks mentioned herein. Materiality The Risk factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality. 1. Some events may not be material individually but may be material when considered collectively. 2. Some events may have an impact which is qualitative though not quantitative. 3. Some events may not be material at present but may have a material impact in the future. Project related and internal risks 1. Our Company and certain of our Group Entities are involved in certain legal proceedings. Any adverse decision in such proceedings may render us / them liable to liabilities / penalties and may adversely affect our / their business and results of operations. Our Company and certain of our Group Entities are involved in certain legal proceedings and claims in relation to certain civil and tax matters. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. Any adverse decision may render us / them liable to liabilities / penalties and may adversely affect our / their business and results of operations. A classification of these legal and other proceedings are given in the following table: Entity involved in the litigation Civil cases Tax cases Criminal Cases Financial implication (` lacs)* Our Company 14

16 Entity involved in the litigation Civil cases Tax cases Criminal Cases Financial implication (` lacs)* Litigations against our Not quantifiable Company Our Group Company Mediline Pharmaceuticals (India) Private Limited Litigations filed against our Group Entities Litigations/ Notices against our Directors *The table above does not include those penalties, interests and costs, if any, which may be imposed or which may have been pleaded but not quantified in the course of legal proceedings, or which the Court / Tribunal otherwise has the discretion to impose. The imposition and amount of such penalties / interests / costs are at the discretion of the court / tribunal where the case is pending. Such liability, if any, would crystallize only on the order of the tribunal where the case(s) is / are pending. For further details regarding these legal proceedings, please refer to the chapter titled Outstanding Litigations and Material Developments beginning on page 153 of the Draft Red Herring Prospectus. 2. Our Company had negative cash flows in recent fiscals, details of which are given below. Sustained negative cash flow could adversely impact our business, financial condition and results of operations. (` in lacs) Cash flow from March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011 Operating activities (3.47) (211.58) (189.28) Investing activities (90.35) (66.26) (49.83) (197.73) (303.23) Financing activities (18.08) Cash flow of a company is a key indicator to show the extent of cash generated from operations to meet its capital expenditure, pay dividends, repay loans and make new investments without raising finance from external resources. If we are not able to generate sufficient cash flows, it may adversely affect our business and financial operations. For further details please refer to the section titled Financial Information and chapter titled Management s Discussion and Analysis of Financial Condition and Results of Operations as reflected in the Financial Statements beginning on pages 127 and 145 respectively, of the Draft Red Herring Prospectus. 3. Our Promoters and Directors have indirect interest in certain of our Group Entities, which are engaged in businesses, which have main object clauses similar to our Company, which may create a conflict of interest. Further we do not enjoy contractual protection by way of a non compete or other agreement or arrangement with such Group Entities. Our Promoters and Directors are promoters / directors of our Group Companies namely, CRP Associates Private Limited and Axis Resources Private Limited which are engage in the business, inter alia, of providing process and internal audit services for corporates and providing training and related services to corporates respectively. As these entities do not have any non compete agreements in place amongst themselves, there is a conflict of interest between our Company and the said Group Entities. For further details please refer to the chapters titled Our Promoters and Promoter Group beginning on page 116 respectively of the Red Herring Prospectus. 4. Our Company does not have long-term agreements with majority of our customers and is subject to uncertainties in demand. There is no assurance that these customers will continue to avail our services or that they will not scale down their orders. This could impact financial performance of our Company. 15

17 Our Company has been dealing with some of our customers for several years, we do not have any long term agreements with majority of our customers. As a result, our customers can terminate their relationships with us due to a change in preference or any other reason upon relatively short notice, which could materially and adversely impact our business. Consequently, our revenue may be subject to variability because of fluctuations in demand for our services. Our Company's customers have no obligation to avail our services and may either cancel, reduce or delay availing our services. The agreements entered by our Company with its customers are dependent on factors such as the customer satisfaction with the level of service that our Company provides, pricing amongst others. Although, we have a strong emphasis on quality, timely delivery of our services and personal interaction by the top management with the customers, any change in the pattern of customers can adversely affect the business of our Company. 5. Our failure to accurately forecast and manage demand for our services could harm our business. We monitor the levels of business activity based on our own projections of future demand. Because of the length of time necessary to execute contracts we must make necessary arrangements before the execution period of the contract commences. An inaccurate forecast of execution period can result in excess deployment of our Company s resources, which may increase costs, negatively impact cash flow, erode margins substantially and ultimately adversely affect our financial performance. The possibility of converse cannot be also ruled out, where our Company s resources are not available in time to execute large contracts which may adversely affect our financial performance. Any of the aforesaid circumstances could have a material adverse effect on our business, results of operations and financial condition. 6. Quality concerns and negative publicity if any, would adversely affect the value of our brand, and our sales Our business is dependent on the trust our clients have in the quality of our services as well as on our ability to protect critical data pertaining to our clients. Any negative publicity regarding our Company, brand, or services, including those arising from a drop in quality of our service levels from our employees/vendors, or any other unforeseen events could adversely affect our reputation our brand value, our operations and our results from operations. 7. We operate in an industry where there are a few organised players, and the bottom of the pyramid largely consists of localised unorganised players. We face significant competition from our competitors. Our inability to compete effectively, market our services relative to our competitors may lead to lower market share, and adversely affect our operations and profitability. Our Company is part of a highly competitive market structure and faces competition; however it is not possible to compute the present market share of our Company since authentic market data about the same is not available from any reliable source / report. We face competition primarily from the unorganized market and MNCs. In the event of price competition from our competitors, we may be required to reduce the price of our services while maintaining quality standards and our Company may not always be able to do so. Some of our competitors may have greater financial resources, generate higher revenues, and therefore, be able to better respond to market changes and shifts in client spending patterns and changes in sentiments and tastes. They also may be in a better position than us to sustain losses in revenue due to pricing pressures. Accordingly, we cannot be certain that we will be able to compete effectively with these competitors or that we will not lose clients to these competitors. If we are not able to compete effectively, our business, results of operations and financial condition could be adversely affected. 8. Vendor charges, Verification fees and communication costs constitute a significant percentage of our Company s total expenses. Particularly, any increase in the same would materially adversely affect our Company s business 16

18 Vendor charges, Verification fees and communication costs constituted 40.76%, 39.06% and 44.52% of the total operation income for Financial Years 2009, 2010 and 2011 respectively. Our inability to negotiate these costs and manage them may adversely impact out profitability. The agreements which we enter into may or may not carry cost escalation clauses. Unless we pass on the impact of the same to our clients, it would have a material adverse effect on our Company s business and financial performance. 9. Delays or defaults in client payments could result in a reduction of our profits. We regularly commit resources to projects prior to receiving advances or other payments from clients in amounts sufficient to cover expenditures on projects as they are incurred. We may be subject to working capital shortages due to delays or defaults in client payments. If clients default in their payments on a project to which we have devoted significant resources or if a project in which we have invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on our business, financial condition and results of operations and could cause the price of our Equity Shares to decline. 10. We are a manpower intensive industry and hence may face disruptions and other planned and unplanned outages that would interfere with our operations. Our Company s activities are manpower intensive. As on May 31, 2011, we have 419 personnel working for us, with significant plans to ramp up the headcount. Strikes and other employee action may have an adverse impact on our operations, though we have not experienced any such disruption in the past. We cannot guarantee that we will not experience any strike, work stoppage or other adverse actions from our employees in the future. For further details, please refer to the paragraph titled Manpower under chapter titled Our Business beginning on page 85 of the Draft Red Herring Prospectus. 11. Our business is dependent on our key customers and the loss of any significant customer could adversely affect our financial results. For the financial year ended March 31, 2011, our five largest customers accounted for approximately 45.26% of our net sales. The loss of a significant client or clients would have a material adverse effect on our financial results. We cannot assure you that we can maintain the historical levels of business from these customers or that we will be able to replace these customers in case we lose any of them. 12. Our business and profitability will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in client preferences and the industry on which we focus. Our business is characterized by constant service level innovation due to evolving industry standards in the Insurance/Retail/BFSI industry to which we cater. Adaptability is one of the key attributes for success in our industry. To compete successfully in the industry, we must be able to identify and respond to changing requirements, as well as operate within substantial delivery constraints. Changes in service levels may impact our operating results and our margins. We cannot assure you that our services will always gain acceptance from our clients and meet customer expectations. Failure to identify and respond to changes in client preferences could, among other things, limit our ability to differentiate our services, adversely affect client acceptance of our services, and lower sales and gross margins. Further, services, that are offered by our competitors may render our offerings non-competitive or force us to reduce prices, thereby adversely affecting our margins. Any of these factors could have a material adverse effect on our business and results of operations. 13. We could become liable to claims by customers, suffer adverse publicity and incur substantial costs as a result of defects in our services, which in turn could adversely affect our results of operations. 17

19 Many of our contracts involve providing services that are critical to the operations of our customers' business. Any failure or defect in our services rendered could result in a claim against us for substantial damages, regardless of our responsibility for such a failure or defect. Although we attempt to limit our contractual liability for all damages, including consequential damages, in rendering our services, we cannot be assured that the limitations on liability we provide for in our service contracts will be enforceable in all cases, or that they will otherwise be sufficient to protect us from liability for damages. However, we cannot be assured that such coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. Further, in certain instances we may also give performance bank guarantees to our clients, in case business needs demand it, and in case we are not able to perform as desired, the clients may invoke the bank guarantees to claim damages. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of a large deductible or co-insurance requirement, could adversely affect our financial condition and results of operations. 14. If we are unable to successfully protect our computer systems from security risks, our business could suffer particularly since our Company s operations involve transmission of data through Internet, which involves security risks. Many of our services operate on web technologies. Our client contracts require us to comply with certain security obligations, including maintenance of network security, back-up of data, ensuring our network is virus-free and ensuring the credentials of those employees who work with our clients. We cannot assure you that we will be able to comply with all these obligations and not incur any liability. Further, while we have implemented industry-standard security measures, our network may still be vulnerable to unauthorized access, computer viruses and other disruptive problems. A party that is able to circumvent security measures could misappropriate proprietary information and cause interruptions in our operations. We may be required to expend significant capital or other resources to protect against the threat of security breaches or to alleviate problems caused by such breaches. There can be no assurance that any measures implemented will not be circumvented in the future. 15. Some of the Group Companies promoted by our Promoters have incurred losses in the last three years. Sustained financial losses by our Group Companies may not be perceived positively by external parties such as customers, bankers, suppliers etc, which may affect our credibility and business operations. The following Group Companies promoted by the Promoters has incurred losses in one or more of the last three years: (` Lacs) Name of the Company FY 2009 FY 2010 FY 2011 CRP Associates Private Limited (0.15) (0.15) Rudra Properties Private Limited (0.13) (0.13) (0.13) 16. Our Company have in the past entered into related party transactions with our Promoters and Promoter Group Entities and may continue to do so in the future. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations. Our Company has entered into related party transactions with our Promoters and Promoter Group Entities in the past. While our Company believes that all such transactions have been conducted on an arm s length basis and are accounted as per Accounting Standard 18, however there can be no assurance that we could not have achieved more favourable terms had such transactions not been entered into with related parties. Furthermore, it is likely that we may enter into related party transactions in the future. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations. 18

20 For further details please refer to the section titled Financial Information beginning on page 127 of the Draft Red Herring Prospectus. 17. Our Company has made application for registration of trademark, which is under process of registration. We are unable to assure that the future viability or value of any of our intellectual property or that the steps taken by us to protect the proprietary rights of our Company will be adequate. We have made application for registration of trademark, and the registration for the said trademark in our name is important to retain our brand equity. If our application for registration is not accepted or if the oppositions filed against our trademark application if any, are successful, we may lose the statutory protection available to us under the Trade Marks Act, 1999 for such trademark. Further, we cannot assure that our pending application would be granted registration or will not be challenged or if granted registration, will not be invalidated or circumvented or will offer us any meaningful protection. Further, the laws of some countries in which we may market our products may not protect our intellectual property rights adequately. We are unable to assure that the future viability or value of any of our intellectual property or that the steps taken by us to protect the proprietary rights of our Company will be adequate. For further details please refer to the chapter titled Government and Other Approvals beginning on page 156 of the Draft Red Herring Prospectus 18. Our success depends largely upon the services of our Promoters, Executive Directors and other Key Managerial Personnel and our ability to attract and retain them. Demand for Key Managerial Personnel in the industry is intense and our inability to attract and retain Key Managerial Personnel may affect the operations of our Company. Our Chairman and Managing Director, Mr. Hitesh Asrani and our Executive Directors and Key Managerial Persons have over the years built relations with suppliers, clients and other persons who are connected with us. Further, most of the Key Managerial Personnel of our Company have been known to us for many years. Our success is substantially dependent on the expertise and services of our Directors and our Key Managerial Personnel. They provide expertise which enables us to make well informed decisions in relation to our business and our future prospects. Our future performance will depend upon the continued services of these persons. Demand for Key Managerial Personnel in the industry is intense. We cannot assure you that we will be able to retain any or all, or that our succession planning will help to replace, the key members of our management. The loss of the services of such key members of our management team and the failure of any succession plans to replace such key members could have an adverse effect on our business and the results of our operations. 19. Our agreements with various banks/financial institutions for financial arrangements contain restrictive covenants for certain activities and if we are unable to get their approval, it might restrict our scope of activities and impede our growth plans. We have entered into agreements for short term and long term borrowings with certain banks/financial institutions. These agreements include restrictive covenants which mandate certain restrictions in terms of our business operations such as to obtain either the prior written consent of such financial institutions or require us to give prior written intimation to such lenders, prior to, amongst other circumstances, creating further encumbrances on our assets, disposing of assets outside the ordinary course of business, paying dividends to our shareholders, undertaking guarantee obligations, alteration of our capital structure, raising of additional equity or debt capital, incurrence of indebtedness, undertaking any merger, amalgamation, restructuring or changes in management. Our ability to execute business plans, including our ability to obtain additional financing on terms and conditions acceptable to us, could be negatively impacted as a result of these restrictions and limitations. In the event that we breach a restrictive covenant, our lenders could deem us to be in default and seek early repayment of loans. An event of default would also affect our ability to raise new funds or renew maturing borrowings as needed to conduct our operations and pursue our growth initiatives. Although we have received consent from our lender for this Issue, we cannot assure you that we will be able to receive such consents in future. 19