Sonear Industries Limited - Draft Red Herring Prospectus

C M Y K

C M Y K

DRAFT RED HERRING PROSPECTUSDated [•], 2010

Please read Section 60B of the Companies Act, 1956(The Draft Red Herring Prospectus will be updated upon filing

with the Registrar of Companies, Delhi and Haryana, Delhi)100% Book Built Issue

ISSUE SCHEDULE

BID/ ISSUE OPENS ON : [�], 2010 BID/ ISSUE CLOSES ON : [�], 2010

SONEAR INDUSTRIES LIMITED[Incorporated on May 14, 2004 under the Companies Act, 1956 as ‘Donear Decor Private Limited’ vide Certificate of Incorporation issued by the Registrar of Companies, Delhi& Haryana. The name of the Company was subsequently changed to Sonear Industries Private Limited on 12/04/2010. The Company was later converted into a public limitedcompany and the name was further changed to ‘Sonear Industries Limited’, pursuant to a shareholders resolution dated 23/04/2010 and received a Certificate of Change of Nameon 21/05/2010. The Corporate Identity Number of the Company is U20211DL2004PLC126381

Registered Office: 20, North West Avenue, Punjabi Bagh West, Club Road, New Delhi – 110 026Tel.: +91-11-45021000 -28; Fax : +91-11-45021040; Website: www.sonearply.com;

Contact Person: Ms. Sunita Agarwal, Company Secretary & Compliance Officer; E-mail: [email protected][For details regarding change in Registered office of the Company please refer to section titled “History and Other Corporate Matters” on page 86 of this Draft Red HerringProspectus]

BOOK RUNNING LEAD MANAGER TO THE ISSUE

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

R E G I S T R A R T O T H E I S S U E

BEETAL FINANCIAL AND COMPUTERSERVICES (P) LIMITEDBeetal House, 3rd Floor, 99 Madangir,Behind Local Shopping Centre,Near Dada Harsukhdas Mandir, New Delhi - 110062 Tel : +91 – 11-2996 1281; Fax: + 91 – 11- 2996 1284E-mail : [email protected] : www.beetalfinancial.comSEBI Regn No.: INR000000262

PNB INVESTMENT SERVICES LTD.2nd Floor, 10, Rakesh Deep Building,Yusuf Sarai Commercial Complex, Gulmohar Enclave,New Delhi – 110049.Tel: +91–11– 49495050Fax: +91–11– 41035057Website:www.pnbisl.com;E-mail: [email protected] Registration No.: INM 000011617

PUBLIC ISSUE OF 1,77,12,444 EQUITY SHARES OF RS. 10/- EACH (“EQUITY SHARES”) OF SONEAR INDUSTRIES LIMITED (THE “COMPANY” OR THE“ISSUER”) FOR CASH AT A PRICE OF RS. [�] PER EQUITY SHARE (INCLUDING SHARE PREMIUM OF RS. [�] PER EQUITY SHARE), AGGREGATINGTO RS. [�] CRORES (THE “ISSUE”). THE ISSUE WOULD CONSTITUTE 55% OF THE FULLY DILUTED POST ISSUE PAID UP CAPITAL OF THE COMPANY.

The Company is considering a Pre-IPO placement of upto 64,40,889 equity shares aggregating around Rs. 2600 lacs with certain investors, prior to the completion ofthe 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 a minimum issue size of 25% of the postissue capital being offered to the public.

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 BANDTHE PROMOTERS OF THE COMPANY ARE MR. JITENDRA KEJRIWAL, MRS. SAPNA KEJRIWAL, JITENDRA KEJRIWAL (HUF),

DONEAR LAMINATES PVT. LTD AND SURYA DECOLAM PVT. LTD.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 Price Band subject to the Bidding/Issue Period not exceeding ten (10) days. Any revision in the Price Band and the revised Bidding/Issue Period, if applicable, will be widely disseminated by notificationto the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”), by issuing a press release, and also by indicating the changeon the website of the Book Running Lead Manager, the Co- Book Running Lead Manager and at the terminals of the Syndicate Member. The Issue is being made through the100% Book Building Process wherein upto 50% of the Issue shall be allocated on a proportionate basis to eligible Qualified Institutional Buyers, out of which 5% of thePortion 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 proportionatebasis to all eligible Qualified Institutional Buyers, including Mutual Funds, subject to valid Bids being received at or above Issue Price. Further, not less than 15% of theIssue shall be made available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Issue shall be made available for allocationon a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price.

CO-BOOK RUNNING LEAD MANAGER TO THE ISSUE

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 face value of the Equity Shares isRs. 10/- per equity share and the Issue Price is [�] times of the face value. The Issue Price (as determined by the Company, in consultation with the Book Running Lead Managerand the Co-Book Running Lead Manager, on the basis of assessment of market demand for the Equity Shares offered by way of book building) should not be taken to beindicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the EquityShares of the Company nor regarding the price at which the Equity Shares will be traded after listing.

GENERAL RISKS

Investments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk oflosing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investorsmust rely on their own examination of the Company and the Issue including the risks involved. The Equity Shares issued in this Issue have not been recommended or approvedby the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific attention of theinvestors is invited to the statements in the section titled “Risk Factors” beginning on page. ix of this Draft Red Herring Prospectus.

ISSUER’S ABSOLUTE RESPONSIBILITY

The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus contains all information with regard tothe Company and this Issue, which is material in the context of this Issue, that the information contained in this Draft Red Herring Prospectus is true and correct in all materialaspects 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 ofwhich make this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING

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

IPO GRADING

The issue has been graded by [�] and has been assigned the [�] indicating [�] vide their letter dated [�]. For further details and rationale of grading please refer page no. 14.

Sonear Industries Limited

SECTION TABLE OF CONTENTS Page No. Definitions and Abbreviations i Presentation of Financial Information and Use of Market Data vii Forward Looking Statements and Market Data viii

I RISK FACTORS ix PART I

II INTRODUCTION Summary of the Industry & Business of the Company 1 The Issue 9 General Information 10 Capital Structure 19 Objects of the Issue 28 Basis of Issue Price 46 Statement of Tax Benefits 48

III ABOUT THE ISSUER COMPANY Industry Overview 57 Business Overview 66 Regulations and Policies 80 History and Other Corporate Matters 86 Management 88 Promoters and group companies 97 Dividend Policy 104

PART II IV FINANCIAL STATEMENTS

Report of the Peer Review Auditor, Kumar Piyush & Co., Chartered Accountants 105 Management Discussion and Analysis of Financial Conditions and Results of Operations 134

V LEGAL AND REGULATORY INFORMATION Outstanding Litigations, Material Developments and Other Disclosures 141 Government/Statutory and Business Approvals 146 Other Regulatory and Statutory Declarations 157

VI OFFERING INFORMATION Terms of the Issue 168 Issue Structure 170 Issue Procedure 174

VII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY Main Provisions of the Articles of Association of the Company. 203

VIII OTHER INFORMATION Material Contracts and Documents for Inspections 215

Declaration 217


i

DEFINITIONS AND ABBREVIATIONS

CONVENTIONAL OR GENERAL 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 Regulation/ SEBI (ICDR) Regulations

The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

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.

ISSUE RELATED TERMS

TERM DESCRIPTION Allotment/ Allotment of Equity Shares

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

Allottee A successful Bidder to whom the Equity Shares are allotted ASBA/ Applications Supported by Blocked Amount

An application for subscribing to an issue, containing an authorization to block the application money in a bank account.

ASBA Investor/ ASBA Bidders

An Investor who intends to apply through ASBA process and is applying through blocking of funds in a bank account with the SCSB

ASBA Form Bid cum Application form for ASBA Investor intending to subscribe through ASBA

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 the Red Herring Prospectus.


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TERM DESCRIPTION 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 Schedule XI of the SEBI

Regulations, 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 Allotment Note

The note or advice or intimation of allotment 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.

Co- Book Running Lead Manager (Co-BRLM)

PNB Investment Services Ltd. (PNBISL)

Cut-off The Issue Price finalised by the Company in consultation with the BRLM and Co-BRLM. Only Retail Individual Bidders who are applying for a maximum bid amount not exceeding Rs. 1,00,000/- are entitled to Bid at the Cut-off Price, for a bid amount not exceeding Rs. 1,00,000/-. QIBs and Non Institutional Bidders are not entitled to Bid at the Cut-off Price. A Bid submitted at Cut-off Price 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, Delhi & Haryana, Delhi, 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

The 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, the BRLM and the Co-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.


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TERM DESCRIPTION Issue The issue of 1,77,12,444 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 and the Co-BRLM, on the Pricing Date.

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, including sub-accounts of FIIs registered with SEBI which are foreign corporate or foreign individuals, that are not QIBs 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 not less than 15% of the Net Issue consisting of 26,56,867 Equity Shares of Rs. 10/- each aggregating Rs. [•] Lacs, available for allocation to Non Institutional Bidders.

Offer Document Draft Red Herring Prospectus/ Red Herring Prospectus/ Prospectus Pay-in-Period Means the period commencing on the Bid/Issue Opening Date and extending

until the issue closure 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 and the Co-

BRLM finalizes the Issue Price. Prospectus The Prospectus, to be filed with the Registrar of Companies, Delhi & Haryana,

Delhi 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 Portion Consists of 88,56,221 Equity Shares of Rs. 10 each aggregating Rs. [•] lacs being upto 50% of the Net 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

A mutual fund, venture capital fund and foreign venture capital investor registered with the Board; a foreign institutional investor and sub-account (other than a sub-account which is a foreign corporate or foreign individual), registered with the Board; a public financial institution as defined in section 4A of the Companies Act, 1956; a scheduled commercial bank; a multilateral and bilateral development financial institution; a state industrial development corporation; an insurance company registered with the Insurance Regulatory and Development Authority; a provident fund with minimum corpus of twenty five crore rupees; a pension fund with minimum corpus of twenty five crore rupees; National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India.

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


iv

TERM DESCRIPTION Registrar of Companies, Delhi & Haryana, Delhi before the opening of this Issue. It will become a Prospectus after filing with the Registrar of Companies, Delhi & Haryana, Delhi, after pricing and allocation.

Registrar/ Registrar to this Issue

Beetal Financial And Computer Services (P) Limited

Resident Retail Individual Investor

A Retail Individual Investor who is a person resident in India as defined in Foreign Exchange Management Act, 1999

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 61,99,356 Equity Shares of Rs. 10/- each aggregating Rs. [•] Lacs, being not less than 35% of the Net 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 Form(s).

Stock Exchanges

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

Self Certified Syndicate Bank (SCSB)

SCSB is a Banker to an Issue registered under SEBI (Bankers to an Issue) Regulations, 1994 and which offers the service of making an Application Supported by Blocked Amount and recognized as such by the Board.

Syndicate The BRLM, the Co-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 Keynote Capitals Limited and [•] 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, the Co-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. COMPANY RELATED TERMS

TERM DESCRIPTION “SDL”, “Sonear” “the Company”, “We”, “us” and “our”

Unless the context otherwise requires, refers to Sonear Industries Limited a public limited company incorporated under the provisions of Companies Act, 1956.

Articles/ Articles of Association

The Articles of Association of the Company i.e., Sonear Industries Limited.

Auditors The statutory auditors of the Company, being M/s M.C. Jain & Company 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

20, NWA, Punjabi Baugh West Club Road, New Delhi 110026


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INDUSTRY RELATED TERMS AND ABBREVIATIONS

TERM/ ABBREVIATION DESCRIPTION/FULL FORM BIS Bureau of Indian Standards BPLR Bank Prime Lending Rate BS British Standard BWR Boiling Water Resistant CBM Cubic Meter CEC Central Empowered Committee CER Certified Emissions Reductions CIF Cost, Insurance and Freight HDF High Density Fibreboard HPL High Pressure Laminates KL Kilo Litre KVA Kilo Volt Amperes MDF Medium Density Fibreboard MR Moisture Resistant PB Particle board PLB Pre Laminated Particle Board PPB Plain Particle Board

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. ASBA Application Supported by Blocked Amount AY Assessment Year BSE Bombay Stock Exchange Limited.

BG/LC Bank Guarantee/ Letter of Credit CAGR Compounded Annual Growth Rate. CDSL Central Depository Services (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.

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

of Finance, Government of India


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ABBREVIATION FULL FORM

FVCI Foreign Venture Capital Investors registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, 2000.

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.

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, Delhi & Haryana, Delhi

RoNW Return on Net Worth. USD/ $/ US$ The United States Dollar, the legal currency of the United States of America. Notwithstanding the foregoing: a. In the section titled “Financial Statements” on page 105 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 203 of this Offer Document, defined terms have the meaning given to such terms in the Articles of Association of the Company.


vii

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 year ended March 31, 2010, 2009, 2008, 2007, and 2006 prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with SEBI Regulations, as stated in the report of the statutory Auditors. Our 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 2009), 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.


viii

FORWARD-LOOKING STATEMENTS AND MARKET DATA

We have 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 us 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 we operate and in the local,

regional and national and international economies; • Changes in laws and regulations relating to the industries in which we operate; • 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;

• Our ability to meet capital expenditure requirements; • Fluctuations in operating costs; • Unanticipated variations in the duration, size and scope of the projects; • Our 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 we 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 we are involved. For a further discussion of factors that could cause our actual results to differ, see the sections titled “Risk Factors” “Business Overview” and “Management’s Discussion and Analysis” beginning on pages ix, 66 and 134 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 we nor the Book Running Lead Manager nor the Co-Book Running Lead Manager , nor any of its 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, we , the Book Running Lead Manager and the Co-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. The financial and other related implications of risks concerned, wherever quantifiable have been disclosed in the risk factors mentioned below. There are certain risk factors mentioned where the effect is not quantifiable and hence not disclosed. RISK FACTORS INTERNAL TO THE COMPANY

1. We are a party to certain legal proceedings that, if decided against us, could have an effect on our reputation, business prospects and results of operations. Classification of these legal and other proceedings instituted against our Company, Promoters/ Directors and proceedings filed by us are given as follows.

Summary of litigations/ notices pending against our Company:

Particulars No. of cases/ disputes

Approximate amount involved where quantifiable

(Rs. in lacs) Show cause notice (SCN) by Director General of Central Excise Intelligence (DGCEI) under Central Excise Act

2 93.92

Total 2 93.92 Summary of litigations/ notices pending against our Promoters:



(Rs. in lacs) Show cause notice (SCN) by Director General of Central Excise Intelligence (DGCEI) under Central Excise Act

2 871.19

Total 2 871.19 Summary of litigations/ notices pending against our group companies:

a) Against Surya Vikas Plywood Limited



(Rs. in lacs) Show Cause Notice (SCN) by Central Excise department under Central Excise Act

1 160.72

Show Cause Notice (SCN) by DGCEI under Central Excise Act

1 648.74

Total 2 809.46


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b) Against Surya Boards Limited (Rs. in lacs)

Particulars No. of cases/

disputes

Approximate amount involved

where quantifiable Show Cause Notice (SCN) by DGCEI under Central Excise Act

1 1861.88

Show Cause Notice (SCN) under Haryana General Sales Tax Act

1 40.81

Show Cause Notice (SCN) under Central Sales Act 4 2491.09 Show Cause Notice (SCN) under Haryana Value Added Tax Act

1 0.08

Show Cause Notice (SCN) under CENVAT Credit Rules 2 2.47 Total 9 4396.33

For details of litigations /notices issued against the Company/ Promoters/ Group Companies, please refer to information commencing from page 141 of this Draft Red Herring Prospectus.

2. Contingent liabilities not provided for, which if materializes may have an adverse effect on our financial condition and future financial performance.

The contingent liabilities not provided for as on March 31, 2010 are as follows:

a) Outstanding Letter of Credit as on 31.03.2010 amounting to Rs. 77,036,327/-.

b) Bank Guarantee of Rs. 6,530/- given to Sales Tax Department, Ahmedabad.

c) A Surety Bond of Rs. 4,000,000/- in favor of the Sales Tax Department for the payment of VAT and CST is given jointly with its associate concern Surya Vikas Plywood Private Limited for another associate concern Surya Boards Limited.

d) The Company has paid a sum of Rs. 100,000/- which has been shown as advance and is in appeal with CESTAT against a demand of Rs. 4,242,439/- on account of under valuation for March 2002 to June 2005 along with penalty of Rs. 4,242,439/- under Rule 25 and 26 of The Central Excise Rules2002, each and interest of like amount. The CESTAT vide its stay order No.381-382/2010-Ex Dated 14th May, 2010 has granted stay on the recovery of demand till the disposal of Appeal.

In the event, any of the above contingent liabilities materialize it may have an adverse effect on our financial condition and future financial performance.

3. Some of our group Companies have made losses in last three financial years. Some of our group companies that have incurred losses during the last three financial years are as tabulated below:

(Rs. in lacs) Sr. No Name of the Company F.Y. 2009-10 F.Y. 2008-09 F.Y. 2007-08 1 Surya Boards Limited - (46.90) - 2 Surya Vikas Plywood Limited - (118.39) - 3 Donear Laminates Private Limited (0.11) (0.09) (0.07) 4 Surya Decolam Private Limited (0.11) (0.12) (0.34)


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4. We have experienced negative Cash Flow from operating activities in the Financial Year 2005-06 to 2009-10.

We have reported a negative cash flow from operating activities for the past 5 financial years as per the restated financial statements. The same is stated below:

(Rs. in lacs) Sr. No Particulars F.Y.2009-10 F.Y.2008-09 F.Y.2007-08 F.Y.2006-07 F.Y.2005-06 1. Negative Cash Flow

from Operating Activities

(1640.41) (944.61) (747.93) (92.51) (429.15)

5. We do not currently own the premises at which our registered office and present Factory unit is located,

as the same is on lease arrangement. As a result, we may face problem of relocation in case of termination of lease and may incur higher costs. The premises at which our registered office and factory is located is not owned by us. We have lease arrangement with Mr. Jitendra Kejriwal, the promoter of our Company for the registered office premises and we pay monthly rent of Rs. 1.00 lacs for the occupation of the premises. The lease is valid for period of 3 years commencing from 06/06/2010. Further, we also have lease arrangement with Mr. Jitendra Kejriwal for the present factory unit located at 28 KM, Rohtak Milestone, Delhi Rohtak Road, Rohad Nagar Bhadurgarh, Distt. Jhajjar and we pay rent of Rs.1.00 lac per month for the occupation of the premises. The lease is valid for a period of 5 years commencing from 1/06/2010. The lease may be renewed subject to mutual consent of the lessor and us. In the event that the lessor requires us to vacate the premises, we will have to seek new premises at short notice and for a price that may be higher than what we are currently paying, which may affect our ability to conduct business or increase our operating costs.

6. We have not yet placed orders for the plant & machinery and equipment requirements for our proposed project as specified in the Objects of the Issue. Any delay in procurement of plant & machinery, equipment, etc. may delay the implementation schedule and may affect our costs, revenue and profitability. We propose to purchase plant & machinery and other fixed assets worth Rs.3267.35 Lacs which would be funded from the proceeds of this Issue. We have not yet placed orders for the plant & machinery as specified in the section ‘Objects of the Issue’. Any delay in procurement of plant & machinery, equipment, etc may delay the implementation schedule. We may also be subject to risks on price escalation of plant & machinery and other equipments that we require. Hence our project could face time and cost over-run which could have an adverse effect on the operations of our Company.

7. We propose to invest an amount of Rs.2000.00 lacs out of the proceeds of the issue for subscription to shares of our two group companies that would increase our stake to more than 51%. This would result into making them as subsidiaries of our Company. We cannot assure you that our Company would achieve the desired benefits from this investment.

We propose to invest Rs.2000.00 lacs in our group companies namely, Surya Vikas Plywood Limited and Surya Board Limited as equity of Rs 1000.00 lacs each. These companies are in related line of business activity and provide synergy to our activity. We will hold 79.30% stake in Surya Vikas Plywood Limited and 79.62% in Surya Board Limited post our investment. These companies would utilize the money towards procurement of plant and machineries and expanding the existing production facilities. In the event these companies do not achieve the desired level of profitability due to the factors within their control or the factors out of their control, it may have an impact on our financials and the expected return on investments.


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8. The brand “Donear” is not registered in our name. Our group Company M/s. Surya Boards Limited had made an application for registration of brand “Donear” under class 19 (non metallic building material), 20 (furniture and articles not otherwise classified), under Trade Marks Act. The same was objected by Donear Synthetics Pvt. Ltd. Any adverse outcome of the same may affect us. We have been using the brand “Donear” for more almost two decades for selling our products and have created a niche for ourselves under this brand in the plywood market. Our group company had made an application to Trademark authority in the year 1994 under class 19 and in the year 2000 under class 20 for registration of brand that was objected by Donear Synthetics Pvt. Ltd. in the year 2001. In the past decade, there have been no further development in this regard and we continue to use the brand for selling our products. Any adverse decision in this regard by the Trademark Authority may restrict us to use the brand. Management Proposal: The brand name “Donear” is registered under Class 24 (fabrics) by Donear Synthetics Pvt. Ltd. Our company is using the trademark since long under Class 19 and 20 of the Trademarks Act. We are defending the objections raised by Donear Synthetics Pvt. Ltd.

Recently we have launched new brand name SONEAR and we propose to use the same in future. We have changed the name of the company to SONEAR INDUSTRIES LTD. and obtained certificate of change of name from RoC New Delhi and Haryana. Our group company Surya Boards Ltd. has made and application for registration of “SONEAR” brand. We are holding license to use the same from Surya Boards Ltd. for a period of 10 years. We are also proposing to subscribe to the equity capital of Surya Boards Ltd. which will become our subsidiary after the initial public offer. In view of the same and in view of various other initiatives taken by us we do not forsee any difficulty as far as brand name is concerned.

9. There are certain trademark registration, licenses and approvals in the name of Donear Décor Pvt. Ltd. There are a few trademarks and approvals applied in the name of “Donear Décor Pvt. Ltd.” The company has changed its name to Sonear Industries Limited w.e.f. May 21, 2010. The company is required to file a separate request for each trademark application with the Registrar of Trade Marks for change in name of the applicant. The company is yet to make an application to the same.

10. The proposed project for setting up the new manufacturing unit of our Company at Yamunanagar, Haryana to manufacture particle board is partially funded from the proceeds of this Issue and balance from the term loan. Any delay / failure of the public issue or delay in disbursement of term loan shall adversely impact the implementation of the project. Our proposed project at estimated cost of Rs.2700.00 lakhs for manufacturing of particle board will be partially funded from this Issue to the extent of Rs. 1200 lacs. We have received a sanction for the term loan to the extent of Rs.1500.00 lacs from Bank of Maharashtra located at NBCC Towers, Bhikaji Cama Place, New Delhi vide its letter dated 19/08/2010. The said sanction is for a period of 6 month, post which we would be required to have a fresh sanction from the bank and the same may take time for fulfilling the requirements of pre-sanction. We shall enter in an agreement with the Bank and the same is proposed to be executed after the receipt of issue proceeds. Incase we do not comply with the bank requirements then it may lead to delay in disbursement of amount to the Company. Any delay or failure in raising the funds from this Issue may adversely affect the implementation of the project and the plans of the Company to foray into particle board market. Further, it may also limit ourselves to the present product portfolio and may also limit our growth opportunities to cater the wide spectrum of products.


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11. The land for proposed manufacturing unit at Yamuna Nagar to manufacture particle board is taken on lease from our group company namely, Surya Vikas Plywood Limited. We have entered into a agreement dated 01/04/2010 for a period of 10 years towards the said lease. In the event we are unable to renew our lease agreement, it may lead to disruption, relocation of manufacturing unit or incurring of higher rental cost and the same may have impact on our financials. We propose to set up manufacturing unit on the land leased from Surya Vikas Plywood Limited, our group company for a period of 10 years commencing from 01/04/2010 against the security deposit of Rs.10.00 lacs and a monthly rent of Rs.1.00 lacs. The unit will have facilities for manufacturing of “Particle Board” product. We have estimated a total cost of Rs.2700.00 lacs for setting up the unit and the same is completely funded by a mix of term loan and issue proceeds. In case the lease agreement is terminated or not renewed by both the parties to agreement, it may lead to disruption or relocation of factory unit to different location or complete shutdown of particle board operations. We may even require paying higher rental amount. Crystallization of any of the said events may impact our financials in short run as well as long run.

12. The implementation of the proposed project for Particle Board is at a very preliminary stage. Any delay in implementation of the same may increase the capital cost and also affect returns from the project.

The Company is planning to set up new manufacturing facilities at Yamunanagar, Haryana. The Company has estimated the cost and drawn the implementation schedule accordingly. Presently, the implementation is at a very preliminary stage. The Company has procured the land on lease basis from Surya Vikas Plywood Ltd. one of our group company. Any delay in implementation of the same will increase the capital cost and also affect the realization of returns from the expansion.

13. If we are unable to obtain required approvals and licenses in a timely manner, our business and operations may be adversely affected. Further, we also require the license from Central Empowered Committee for establishment of the proposed Particle Board unit. Our business model is largely dependent on the licenses and approvals of statutory and other regulatory authorities. We may from time to time, require certain approvals, licenses, registrations and permissions for undertaking our business for which we are required to make applications to the respective statutory body. If we fail to obtain any of these approvals or licenses, or renewals thereof, in a timely manner, or at all, our business could be adversely affected. Presently, following are the license and approvals that have expired and we have made the necessary applications for renewal of the same. The State Level Committee (appointed by Central Empowered Committee (CEC)) has already given us their approval and recommended to CEC for issuance of Forest License, for establishment and operation of Particle Board Plant. For further details please see section titled “Government/ Statutory and Business Approvals” beginning on page no 146of this Draft Red Herring Prospectus.

14. We can provide no assurance that our new product namely, “Particle Board” will be commercially successful.

We propose to set up manufacturing unit at Village Damla, Delhi Road, Yamunanagar, Haryana for manufacture of particle board. We cannot assure that our new product will be accepted by and be successful in the competitive market and whether we would be able to recover the incurred cost. Failure to sell the product or slow down in sale of our product may result into delay to achieve break even for this unit. We may also run into losses leading to shutdown of operations. This would negatively impact financials, brand of the Company and weaken our product portfolio.

Management Proposal: The management does not forecast any problem with regard to the quality of particle/ MDF Board.


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15. We had entered into certain transactions with the related parties, which were not in compliance with the

provisions of section 297 of the Companies Act, 1956. We had entered into a business transaction of purchase/sale with our group companies namely, Surya Vikas Plywood Limited and Donear Plywood Private Limited in previous financial years. We were required to comply with the provisions of section 297 of the Companies Act, 1956 and the same was not complied with. To safeguard the interest of Company, we have filed an application dated 22nd July 2010 with Company law Board, New Delhi for compounding of offences under section 621A of the Act.

16. We have entered into lease arrangement with Mr. Jitendra Kejriwal, the promoter of our company for the offices and proposed factory unit. The lease deeds entered have not been registered under the Registration Act, 1908 and the same may not be considered as evidence in the court of law at time of any dispute. We have entered into lease arrangement or Leave and License arrangement for the present properties located at Delhi and Bangalore and the proposed factory unit at Haryana. We are required to register these properties under the relevant section of Registration Act, 1908 and the same has not been complied with. In the event there is any dispute or we refer to court of law for resolve of dispute then the lease deed may not be admissible as evidence in a court of law for resolution of dispute, unless the defects of non-registration of property is rectified. However to rectify the defect we would be required to pay the necessary stamp duty and the penal charges as referred in the Registration Act 1908 and the amendments thereof.

17. We are dependent on our management team for success whose loss could seriously impair our ability to continue to manage and expand business efficiently. Our success largely depends on the continued services and performance of our management and other key employees. In the recent past our senior management has contributed to large extent for the top line growth of the Company during the recession and which in turn helped the company to maintain the profitability. We believe that any loss of service of the senior management could impair the ability to continue to manage and expand the business efficiently.

18. Our business is dependent on our manufacturing facility. Any breakdown at our manufacturing facility may have a material adverse effect on our business, financial condition and results of operations. Our manufacturing facility is subject to operating risks such as the breakdown or failure of equipment, power supply or processes, obsolescence, labour disputes, strikes, lock-outs, continued availability of services of our external contractors, earthquakes and other natural disasters. Though the Company has not faced any disruption in the manufacturing unit since inception, the occurrence of aforesaid factors or events cannot be ruled out in future that may result in material adverse effect on business and financials of the Company.

19. We may be unable to seek compensation from our suppliers for defective components or raw materials. We are required to source components and raw materials from suppliers for which advances and even prompt payments may have to be made. We cannot assure you with a reasonable certainty that the raw materials that we would procure in the future will not be defective. Further should we receive any defective raw materials, we may not be in a position to recover advance payments or claim compensation from our suppliers consequently increasing the manufacturing costs or reducing the realisation of our finished products.


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20. Depleting forest reserves may reduce the raw material availability, resulting in increase in raw material cost.

Every year large hectares of forests are utilized as firewood. There have been instances in recent past of natural calamity occurring at forest like fire resulting to huge loss of natural forest resources. Such continuous depletion of the natural forest resources may result in reduction of raw material availability and consequently increase our raw material costs and could significantly affect our operating results.

Management Proposal:

The shortage of forest wood will not effect the working of the company as the company is importing the basic raw material i.e. Gurjan Plywood, Indonesian Plywood and Malaysian Plywood,

21. We import sizeable portion of our raw material from Asian, African, European and South American nations that exposes us to the currency fluctuation risk. We import raw material like wood log and paper for manufacturing of natural and decorative plywood and decorative laminates. The imported raw material forms substantial part of the total cost of the product. While we have taken steps to reduce operating costs, we were significantly affected by currency fluctuation in F.Y. 2008-09 resulting to lower profits even though there was increase in sales of the Company.

Management Proposal:

There is no risk to the company due to fluctuations in foreign currency. The company is taking the hedging cover for the imports by booking the forward cover.

22. Our application for registration of trademarks as given herein under, are still pending for registration.

The trade marks which are yet to receive final registration, for which provisional registration has been obtained by us from the Trade Mark Registry under Trade Marks Act, 1999 are as follows:

Sr. No.

Provisional No.

Date of Application

Trade Mark Name Class in respect of which application has been made

1. 01708501 09/07/2008 KEJORRI 17 2. 01708502 09/07/2008 KEJORRI 19

23. There are restrictive covenants in the agreements with the Banks/ Institutions from whom we have

borrowed, which among other things, require the Company to obtain prior permission from them for certain acts which may limit Company’s discretion in these matters. There are restrictive covenants in the agreements with the Banks/ Institutions from whom we have borrowed, which among other things require the Company to obtain prior permission from them for change in capital structure, Change in Management, declaring dividend and undertaking of new project etc. which may limit Company’s discretion in these matters.

24. Some of our group concerns/ entities are engaged in the similar line of business. There maybe potential conflict of interest between the operations of our Company on one hand and the operations of few of the Group Companies on the other. Some of our group concerns/entities are engaged in the business of plywood and other related products. We presently have not entered into non-compete agreements or any other agreement that restricts us or our group company to enter into or venture into any business relating to wood industry. There may be potential conflict of interest between the operations of our Company on one hand and the operations of few of the Group Companies on the other.


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EXTERNAL RISK FACTORS

25. As a manufacturing company we are dependent on smooth transportation for raw material and for delivery of our finished product to our customers. Any disruption in transportation facilities may adversely affect our business. We heavily depend on sea route for transportation of imported raw materials. We rely on the road and other transportation network on need basis. We hire third party transportation services to deliver the products to our distributors and customers. Disruption of transportation services due to natural calamities, strikes, lock out or any other reason would affect the timely procurement of raw materials and delivery of our products. Any such disruptions could materially adversely affect our business, financial condition and results of operations.

26. Competition from other domestic producers / unorganized sector may adversely affect our competitive position and our profitability We face competition from other existing domestic producers and potential entrants to the industry in which we operate that may adversely affect our competitive position and our profitability. Loss of market share and competition may adversely affect our profitability. We also face competition for customers from other players in the organized and unorganized markets. We expect competition could increase with new entrants coming into this industry and existing players consolidating their positions. Some of our competitors may have access to significantly greater resources and hence the ability to compete more effectively.

27. Environmental regulation imposes additional costs and may affect the results of our operations We, like other producers, are subject to various central, state and local environmental, health and safety laws and regulations concerning issues such as damage caused by air emissions, wastewater discharges, solid and hazardous waste handling and disposal, and the investigation and remediation of contamination. These laws and regulations are increasingly becoming stringent and may in the future create substantial environmental compliance or remediation liabilities and costs. These laws can impose liability for non-compliance with health and safety regulations or clean up liability on generators of hazardous waste and other substances that are disposed of either on or off-site, regardless of fault or the legality of the disposal activities. Management Proposal While we believe that our facilities are in compliance in all material respects with applicable environmental laws and regulations, additional costs and liabilities related to compliance with these laws and regulations are an inherent part of our business.

28. A slowdown in economic growth in India could materially and adversely affect the Company’s results of operations and financial condition Our performance and the quality and growth of our 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 industry to which we belong. Any future slowdown in the Indian economy could harm our results of operations and financial condition.


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29. Changes in Indian Government policies could adversely affect economic conditions in India, and thereby adversely impact our results of operations and financial condition 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 us 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 our results of operations and financial condition in particular.

30. Global economic, political and social conditions may harm our ability 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 our ability to do business, increase its costs and negatively affect our 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 our stock price.

31. 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 our Equity Shares.

32. Any downgrade of India’s sovereign debt rating by an international rating agency could have a negative impact on our 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 our 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 our 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 our results of operations and financial condition.

33. The price of our Equity Shares may be highly volatile, or an active trading market for its equity shares may not develop. The price of our Equity Shares on the Indian Stock Exchange may fluctuate as a result of several factors including:

- Volatility in Indian and global securities market; - Our results of operations and performance; - Performance of the competitors; - Adverse media reports, if any, on Sonear or the Industry; - Changes in the estimates of our performance or recommendations by financial analysts on our

Company;


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- Significant development in India’s economic liberalization and de-regulation policies; and - Significant development in India’s Fiscal and environmental regulations. - General market conditions; and - Domestic and international economic, legal and regulatory factors unrelated to our performance.

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

Prominent Notes 1. The net worth of Sonear as per its audited restated financial statement as on March 31, 2010 is Rs.

1595.96 lacs.

2. Book value, per equity share of the Company as per its audited restated financial statement as at March 31, 2010 is Rs. 10.12.

3. The average cost of acquisition of the equity Shares of Rs. 10 each by the Promoter are as under:

Name of the Promoter Cost per share (Rs.) Mr. Jitendra Kejriwal 2.46 Mrs. Sapna Kejriwal 0.40 Jitendra Kejriwal (H.U.F) 1.08 Donear Laminates Pvt. Ltd. 0.56 Surya Decolam Pvt. Ltd. 5.11

4. Investors are advised to refer the paragraph on “Basis of Issue Price” on page 46 of this Draft Red Herring Prospectus before making an investment in the Issue.

5. Except as mentioned in the sections titled “Capital Structure” beginning on page 19 of this Draft Red Herring Prospectus, we have not issued any Equity Shares in the last twelve months.

6. For details on Related Party Transactions refer to the section titled “Related Party Transactions” on

page 123 of this Draft Red Herring Prospectus.

7. There are no financing arrangements whereby the promoter group, the directors of the Company which is a promoter of the issuer, the directors of the issuers and their relatives have financed the purchase by any other person of securities of the issuer other than in the normal course of business of the financing entity during the period of six months immediately preceding the date of filing draft offer document with the Board.

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

9. All information shall be made available by the BRLM, the Co-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 and the Co-BRLM, the Company shall be obliged to update the Offer

Document and keep the public informed about any material changes till listing and trading commences in respect of the shares issued through this issue.


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11. For interest of promoters/directors, please refer to the section titled “Promoters and group

companies” beginning on page no. 97 of this Draft Red Herring Prospectus.

12. For details of the group companies having business interests or other interests in our Company, please refer to the section titled “Promoters and group companies” beginning on page no. 97 of this Draft Red Herring Prospectus.


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PART I

SECTION II - INTRODUCTION

The information in this section is derived from DRHP report on INDIAN PLYWOOD INDUSTRY by CARE Research. It has not been independently verified by the Company, the Book Running Lead Manager or the Co-Book Running Lead Manager or their respective legal 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. For disclaimer clause of CARE please refer to page no. 57 of this DRHP.

Summary of the Industry and Business of the Company

Industry Overview

Background of Indian Economy The Indian economy is one of the largest economies in the world with a GDP at current prices in fiscal 2010 estimated at Rs. 44.64 trillion (approximately US$1 trillion). It is one of the fastest growing major economies in the world, with a real GDP growth rate (inflation-adjusted) of 5.7% in calendar year 2009 and an estimated 9.4% for calendar year 2010. The table below shows India’s economic growth in comparison to other developing countries, as well as the International Monetary Fund’s (IMF) projections for economic growth through calendar year 2011.

According to International Monetary Fund, World Economic Outlook Database, April 2010, per capita GDP at factor cost (at constant prices) in India has grown from around Rs. 13,669 in the year 1991 at the time of liberalization to an estimated Rs. 33,751 in the year 2010. This increase in per capita income has created increasing wealth and thereby higher disposable income. The construction sector in the country grew at 6.50% in FY2009-10 against 5.95% in FY2008-09. The housing market is a highly sensitive investment area worldwide and investment in the housing sector is often recognised as a barometer to measure the health of an economy. The sector, by its nature is widely linked with a very large number of manufacturing segments. There are about 250 industries, large and small, which depend on the performance of housing and construction industry. This includes larger ones that make cement and steel, medium ones that make plywood, paint, tiles, electrical and the smaller ones that make nuts and bolts. These linkage effects not only stimulate production and investments in the linked segments of manufacturing, they also push up the aggregate additional income generated in the process. In sum, growth in housing stimulates production and overall growth in the economy. In view of


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potential growth of housing and infrastructure sector, the overall demand for plywood and laminates is expected to remain buoyant in the short to medium term. Overview of Plywood Industry in India India is one of the largest users of plywood in Southeast Asia with sufficient wood of all varieties. The Indian plywood industry which is growing at a healthy rate remains a niche industry. Moreover, with the recent spurt in the housing sector, plywood and laminates are expected to gain significant role going forward. The Indian plywood industry is estimated to be approximately Rs 10,000 crore and the laminate industry accounts for almost Rs 3,000 crore (app. total Rs 13,000 crore/US$2.77 bn). The plywood industry is growing at a rapid pace of average 15-20% annually with approximately 600 units currently operating across the country. The market is highly fragmented and the small scale units account for approximately 80% of the plywood industry and roughly 50% of the laminate industry. The organised sector’s (medium-to-large scale units) 25% annual growth outperformed the overall industry growth. The small scale unit segment has advantages in terms of excise waivers and other benefits due to their Small Scale Industry (SSI) status. The SSI units generally are not fully integrated ones. The Herfindahl Index of Concentration (HIC) for the plywood industry stood at 0.117 in FY2008-09. (Source: CMIE) In India there are two main types of wood products, panel and plywood. Product categories include veneer sheets, particle board (composite wood core with plastic laminate finish), panel products (fibre board), plywood made from both hard and softwood (veneered panels and laminated woods) and medium density fibreboard (MDF). Indian particle board and plywood industry have large producers who account for 15% of the total production, producing approximately 30 mn sqm of plywood and block boards. Of the total market, particle board accounts for over 22% of the market with the rest over 78% accounted by plywood segments. Logs, the key RM for the industry, accounts for 67% of all wood and wood based products imported into India due to relatively lower import tariffs and a local preference for unprocessed wood. India imports logs mostly from Malaysia, Myanmar, Ghana and New Zealand due to a freight advantage and at relatively lower prices whereas total imports of logs have increased 72% y-o-y to US$1.14 bn in FY2009. Overview of Indian Furniture Industry The Indian furniture industry manufactures and exports quality furniture in terms of design, fashion and technology. Indian furniture has a strong reputation worldwide given its artistic component. Nonetheless, a large segment of furniture is imported from various foreign countries as well. It is estimated that the overall Indian furniture industry generates a turnover of Rs 36,000 crore annually. About 85% of the industry falls under small scale units segment and remaining 15% is under organized sector (medium-to-large scale units), made up of manufacturers and exporters catering to the different segments of the industry. Backed by a growing real estate, tourism and hospitality sectors on one hand and rising per capita income and lifestyle product consumption on the other, the Indian furniture industry is expected to grow at a Compounded Annual Growth Rate (CAGR) of 13-15% in the next five years. The concept of good living and better lifestyle is fast catching up the middle class' psyche of Indians. Interior designing is no longer confined to rich and wealthy Indians and even the middle class people do not mind paying extra in getting their homes decorated with modern and designer furniture boosting overall demand. Key Industry Characteristics Highly fragmented industry with approximately 85% falling in the small scale units segments and

remaining 15% in the medium-to-large segment. Growth of the industry directly related to economic growth and construction activity.


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Due to limited resources, timely availability of raw material at right price is crucial to maintain a steady production line.

The industry has made good in-roads in the country with extensive distribution network.

Increasing brand consciousness

High working capital intensive and aggressive pricing strategy to maintain steady cash flows.

Export- Import Statistics India is a net importer of furniture while small quantities of furniture are being exported representing not more than 0.25% of the global furniture industry. The global recession has affected India’s imports and export levels in FY2008-09. Exports of wood products are performing better and for the five year period ending FY2009 the Indian Plywood exports have grown at a CAGR of 18.7% in rupee terms. However, exports of wood and wooden products have been partially impacted due to sluggish performance of North America and Europe. Logs account for the largest portion (around 67%) of all wood and wood products imported into India due to relatively lower import tariffs and a local preference for unprocessed wood. According to industry association, Chemicals and Allied Products Export Promotion Council (CAPEXIL), imports of logs have increased by 72% y-o-y to US$1.14 bn. Imports growth over the years is steady, augmenting domestic supplies to a large extent. Besides supporting housing and industrial infrastructure, imports help forest conservation efforts in the country. India imports logs mostly from Malaysia, Myanmar, Ghana and New Zealand due to freight advantage and relatively lower prices. Export figures of plywood and veneers Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009

Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Quantity (tons) 5,481.6 13,155.4 14,009.7 16,760.1 22,470.6 29,883.6 Exports (Rs. cr) 91.7 132.9 160.9 215.3 220.2 215.7 Source: Centre for Monitoring Indian Economy (CMIE) Import of plywood and veneers ear FY2004 FY2005 FY2006 FY2007 FY2008 FY2009

Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Quantity (tons) 4,989.0 7,268.4 13,312.5 11,350.7 14,240.9 18,749.3 Imports (Rs. cr) 35.9 46.0 85.8 121.9 188.8 253.8 Source: CMIE Business Overview Our Company was incorporated on 14/05/2004 under the Companies Act, 1956 as ‘Donear Decor Private Limited’ and received its Certificate of Incorporation from the Registrar of Companies, Delhi & Haryana. The name of the Company was subsequently changed to Sonear Industries Private Limited vide certificate of incorporation dated 12/04/2010. Later the Company was converted into a public limited and received a fresh certificate of incorporation dated 21/05/2010 pursuant to the change in name. We are the flagship company of Jitendra Kejriwal group promoted by Mr. Jitendra Kejriwal and Mrs. Sapna Kejriwal. Our group has been in the arena of plywood business for over two decade catering to different type of customers under the brand name “Donear” and has recently launched our other brand as “Sonear”. Our Company has modern state of the art manufacturing unit to manufacture wood panel products and decorative surfacing products at Haryana.


4

Our manufacturing facility is strategically located at Rohad, (Dist. Jhajjar) Haryana that gives us proximity to access one of the trading hub of wooden products in India at Delhi. It is also 50 kms away from the Delhi port that helps in lower transportation and operational cost. Presently our Company has only one manufacturing unit with stock depots at Delhi, Ahmedabad and Bangalore. Our Company has a network of 34 distributors and stockist spread across 18 states of India, with around 2000 dealers providing shelf presence to our products. We believe that our brand is well acceptable amongst the architects, interior designers, contractors, builders, etc. making it one of the strong brands of the Indian Plywood industry. We also believe in building a long term relationship with our customers by providing superior quality products. Our quality product is result of the efforts made by Research and Development and Quality Assurance team at our manufacturing unit We have also received Certificate from Bureau of India Standards for Decorative Thermosetting Synthetic, Resin Bonded Single Face Laminated Sheet” vide letter dated 30/12/2008. Competitive Strength: 1. Dealer Network:

We have 34 distributors and stockiest spread over 18 states of India, with around 2000 dealers providing shelf presence to our products.

2. Experienced Management

We benefit from the leadership of our management team, which has extensive experience in the wood based panel industry. 3. Multiple Product Capability

We have developed a range of product offerings in order to address the varied and expanding requirements of our customers. Presently our core products are Decorative Plywood and Laminates. 4. Innovation and Revolution We believe that innovation and revolution is the core facet for success of our brand. With the efforts of our research and development team we introduced the “PCT Technology” i.e. Pre-Press Calibration Technology (PCT) to provide solution for inferior finish of plywood. This process involves giving individual attention to key components of the ply to make the finish products flawless. We also brought the revolution concept in plywood technology by introducing 6 ply construction in 4mm thickness compared to earlier technology of 4 ply in 4 mm thickness. This constitution is 2.5 times stronger than that of ordinary plywood and thereby increases the life of the plywood. 5. Stringent Quality Check

The Company believes in providing the best possible quality to the customers. There are quality checks in place that prevent any defective material from reaching the customer. Quality control measures are in place at every stage of manufacturing process. The Company also has a well-equipped quality control laboratory. 6. Brand Name Brand “Donear” has created a niche for itself amongst the other brands operating in this mostly unorganized and fragmented industry. Our quality and diversified product portfolio with wide price range has enabled us to tap different segment of customers over the period. Presently, all our products manufactured are sold under the umbrella of “Donear”. However, the brand “Donear” has been registered by third party and hence


5

the Company to safeguard itself has launched another brand namely, “Sonear” as a part of transformation process of re-branding ourselves from Donear to Sonear. 7. Entry Barrier

We hold factory license in segments regulated by the government which restrict and regulate the grant of new licenses for the manufacture of wood based products. Government regulations represent a large entry barrier in this industry segment in India. Pursuant to the order of the Hon’ble Supreme Court dated October 29, 2002, unlicensed saw mills, veneer and plywood industries are not permitted to operate in India. Further, opening of a new saw mill, veneer or plywood industry requires a prior permission from the Central Empowered Committee. The grant of a license is further subject to strict compliance with the prescribed regulatory norms and relaxation of any of the norms is not permitted. These complexities in obtaining new licenses make it difficult for new players to enter the market. We therefore believe that our production license gives us a competitive edge. Further, the State Level Committee (appointed by Central Empowered Committee (CEC)) has already given us their approval and recommended to CEC for issuance of Forest License, for establishment and operation of Particle Board Plant.


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SUMMARY OF FINANCIAL DATA Restated Summary of Statement of Assets and Liabilities

(Rupees in Lakh) Particulars As at March 31

2010 2009 2008 2007 2006 A. Fixed Assets Gross block 2,235.01 2,168.40 2,040.52 1,252.59 1,019.22 Less: Depreciation 353.88 256.79 163.44 92.23 51.02 Net Block 1,881.13 1,911.61 1,877.08 1,160.36 968.20 B. Current Assets, Loans and Advances Inventories 2,511.38 1,060.19 879.40 715.36 472.02 Sundry Debtors 2,796.87 2,163.56 882.22 240.98 282.01 Cash and Bank Balances 111.77 46.08 32.89 64.32 44.04 Loans and Advances 498.90 149.50 164.46 75.51 27.90 5,918.92 3,419.33 1,958.97 1,096.17 825.97 C. Liabilities and Provisions: Secured Loans 4,204.73 3,429.59 2,546.41 1,338.01 1,046.49 Unsecured Loans - - - 42.00 72.37 Current Liabilities and Provisions 1,998.06 1,124.87 612.71 449.90 288.80 Deferred Tax Liability 130.07 77.58 59.90 13.99 4.89 6,332.86 4,632.04 3,219.02 1,843.90 1,412.55 D. Share Application Money - 95.00 45.00 42.40 27.40 E. Net Worth (A+B-C-D) 1,467.19 603.90 572.03 370.23 354.22 F. Represented by Share Capital 1,449.20 320.68 320.68 299.00 299.00 Security Premium - 134.72 134.72 48.00 48.00 Reserves and Surplus 38.14 149.12 117.87 27.24 9.70 Total 1,487.34 604.52 573.27 374.24 356.70 G. Misc. Expenditure to the extent not

written off or adjusted 20.15 0.62 1.24 4.01 2.48

H. Net Worth (F-G) 1,467.19 603.90 572.03 370.23 354.22


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Restated Summary of Statement of Profits and Losses (Rupees in Lakh)

Particulars

Year Ended, March 31 2010 2009 2008 2007 2006

INCOME Sales: Of Products manufactured by the Company 5,214.92 4,359.23 2,786.21 737.28 1,105.87 Less: Excise Duty 367.51 458.86 292.88 87.22 141.23 Of Products manufactured by the Company after excise Duty

4,847.41 3,900.37 2,493.33 650.06 964.64

Of Products traded in by the Company 4,960.51 1,260.68 506.19 629.33 - Net Sales 9,807.92 5,161.05 2,999.52 1,279.39 964.64 Other Income 8.95 2.21 6.99 1.76 1.14 Increase/(Decrease in Inventories) 199.12 65.49 252.80 (21.56) 106.43 Total Income 10,015.99 5,228.75 3,259.31 1,259.59 1,072.21 EXPENDITURE Purchases 5,134.49 1,250.15 500.81 600.65 - Raw Materials and Stores and Spares Consumed 2,749.85 2,542.80 1,826.18 320.41 729.69 Manufacturing and Other Expenses 571.90 536.30 293.29 73.60 78.27 Staff Costs 106.22 87.68 28.00 7.53 22.66 Administration Expenses 100.95 68.76 32.54 36.43 30.31 VAT 232.04 177.72 109.29 27.42 39.82 Selling and Distribution Expenses 166.59 41.88 21.15 1.23 2.04 Total Expenditure 9,062.04 4,705.29 2,811.26 1,067.27 902.79 Restated Profit Before Depreciation, Interest and Tax

953.95 523.46 448.05 192.32 169.42

Depreciation 97.10 93.35 71.22 41.66 51.00 Interest and Financial Charges 427.68 371.57 223.80 120.32 102.12 Restated Net Profit before tax and Extraordinary items

429.17 58.54 153.03 30.34 16.30

Taxation Direct Tax Paid/Written Off (0.06) 1.59 - - - Current tax 73.86 5.91 15.76 3.40 1.40 Fringe Benefit Tax - 2.11 0.73 0.30 0.31 Deferred tax 52.49 17.68 45.91 9.10 4.89

Restated Net Profit before Extraordinary Items 302.82 31.25 90.63 17.54 9.70 Extraordinary items - - - - - Restated Net Profit after Extraordinary Items 302.82 31.25 90.63 17.54 9.70 Adjustments on account of Prior period Expenses

- - - - -

Restated Adjusted Profit 302.82 31.25 90.63 17.54 9.70 Restated Surplus Brought Forward From Last Year

149.12 117.87 27.24 9.70 -

Profit Available for Appropriation 451.94 149.12 117.87 27.24 9.70 Less: Utilised for Issue of Bonus Shares 413.80 - - - - Restated Surplus Carried to Balance Sheet 38.14 149.12 117.87 27.24 9.70


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Restated Summary of Statement of Cash Flow (Rupees in Lakh)

Particulars

Year Ended March 31 2010 2009 2008 2007 2006

Cash Flows from Operating Activities: Net Profit before Taxation 429.17 58.54 153.03 30.34 16.30 Adjustments for: Depreciation 97.10 93.34 71.22 41.67 51.00 Interest/ Dividend Income (4.26) (2.02) (5.22) (1.48) (1.14) Profit/Loss on Sale of Assets - - - (0.16) - Preliminary expenses Written off 0.62 0.62 0.62 0.62 0.62 Interest & Financial charges Paid 427.68 371.57 223.80 120.32 102.12 Provision for Gratuity 5.84 - - - - Exchange Gain (1.11) 0.41 - 9.52 0.65 Operating Profit before Working Capital Changes:

955.03 522.46 443.45 200.83 169.55

Change in Trade and Other Receivables (633.31) (1,281.34) (641.24) 41.03 (282.01) Change in Inventories (1,451.19) (180.78) (164.05) (243.34) (441.04) Change in Other Current Assets (285.55) 21.17 (79.48) (45.27) 41.13 Change in Current Liabilities 801.51 520.74 151.61 157.41 254.06 Income taxes paid (71.87) (24.40) (14.77) (2.34) (1.29) Prior Period Expenditure - - - - - Net Cash Flow from Operating Activities (1,640.41) (944.61) (747.93) (92.51) (429.15) Cash Flow from Investing Activities Purchase of Fixed Assets (66.61) (127.88) (785.78) (238.87) (55.93) Sale of Fixed Assets - - - 5.20 - Investments Purchased - - - - - Net Cash Flow used in Investing Activities

(66.61) (127.88) (785.78) (233.67) (55.93)

Cash Flows from Financing Activities Changes in Borrowings 775.14 883.18 1,166.41 261.14 389.61 Proceeds from Issuance of Capital 485.00 - 66.00 - 14.30 Share Application Money - 50.00 45.00 15.00 27.40 Increase in Reserves - - - - - Miscellaneous Exp incurred (20.15) - - (2.15) - Other Income/Interest Received 4.26 2.02 5.22 1.48 1.14 Interest and Financial Charge Paid (427.68) (371.57) (223.80) (120.32) (102.12) Exchange Gain 1.11 (0.41) - (9.52) (0.65) Dividend Paid - - - - - Net Cash Flow from Financing Activities 817.68 563.22 1,058.83 145.63 329.68 Net increase in cash and cash equivalents

65.70 13.19 (31.43) 20.28 14.15

Cash and Cash Equivalents(Opening Balance)

46.07 32.89 64.32 44.04 29.89

Cash and Cash Equivalents (Closing Balance)

111.77 46.08 32.89 64.32 44.04


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THE ISSUE

Public Issue aggregating to Rs. [•] lacs:

Which comprises of fresh issue of 1,77,12,444 Equity Shares of Rs. 10/- each

Of which:

QIB Portion: Upto 88,56,221 Equity Shares of Rs. 10/- each, constituting upto 50% of the Net 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]

4,42,811 Equity Shares of Rs. 10/- each

• Balance for all QIBs including Mutual Funds 84,13,410 Equity Shares of Rs. 10/- each

Non- Institutional Portion: Not less than 26,56,867 Equity Shares of Rs. 10/- each, constituting 15% of the Net Issue that will be available for allocation to Non-Institutional Bidders.

Retail Portion: Not less than 61,99,356 Equity Shares of Rs. 10/- each constituting 35% of the Net Issue that will be available for allocation to Retail Individual Bidders.

Equity Shares outstanding prior to the Issue: 1,44,92,000 Equity Shares of Rs. 10/- each

Equity Shares outstanding post the Issue: 3,22,04,444 Equity Shares of Rs. 10/- each

Use of Proceeds Please refer to chapter titled “Objects of the Issue” on page 28 of this Draft Red Herring Prospectus for additional information.

The Company is considering a Pre-IPO placement of upto 64,40,889 equity shares aggregating around Rs. 2600 lacs 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 a minimum issue size of 25% of the post issue capital being offered to the public. Notes: • Under subscription, if any, in the Qualified Institutional Buyer, Non Institutional and Retail portion

would be met with spill over from any other category, at the sole discretion of the Company in consultation with the BRLM and the Co-BRLM.

• Under subscription, if any, shall be added back to the Issue and will be considered for allotment only on a proportionate basis.


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GENERAL INFORMATION INCORPORATION

Our Company was incorporated on 14/05/2004 under the Companies Act, 1956 as ‘Donear Decor Private Limited’ and received its Certificate of Incorporation from the Registrar of Companies, Delhi & Haryana. The name of the Company was changed to Sonear Industries Private Limited and received a fresh certificate of incorporation consequent upon change of name dated 12/04/2010 from Registrar of Companies, NCT of Delhi and Haryana. Later the Company was converted into a public limited and received a fresh certificate of incorporation dated 21/05/2010. The Corporate Identity Number of the Company is U20211DL2004PLC126381.

ADDRESS OF THE COMPANY

Registered & Corporate Office: 20, North West Avenue, Punjabi Bagh, New Delhi -110026

Factory Unit 28 kms, Rohtak Milestone, Delhi Rohtak Road, Rohad Nagar, Bahadurgarh, District Jhajjar – 124501, Haryana

ADDRESS OF REGISTRAR OF COMPANIES

Registrar of Companies, Delhi and Haryana 4th floor, IFCI Tower, 61, Nehru Place, New Delhi - 110019 BOARD OF DIRECTORS:

Our Board of Directors comprises of the following:

Sr. No

Name of the director Designation Status

1. Mr. Jitendra Kejriwal Managing Director Executive and Non Independent 2. Mr. Ramesh Kumar Aggarwal Director Non Executive and Non- Independent 3. Mr. Abhishek Agarwal Director Non Executive and Non- Independent 4. Mr. Mohammed Shahid Aftab Director Non Executive and Independent 5. Mr. Sheodeen Singh Yadav Director Non Executive and Independent 6. Mr. Promode Kant Director Non Executive and Independent

For further details on the Board of Directors of our Company, please refer to the section titled “Management” beginning on page 88 of this Draft Red Herring Prospectus

COMPANY SECRETARY AND COMPLIANCE OFFICER

Ms. Sunita Aggarwal Company Secretary & Compliance Officer 20, North West Avenue, Punjabi Bagh, New Delhi -110026 Tel: +91-11- 45021000/45021028; Fax : +91-11-45021040 E-mail: [email protected]


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LEGAL ADVISORS TO THE ISSUE

Vaish Associates Advocates Legal Counsel 803, Tower-A, Signature, South City –I, NH # 8, Gurgaon -122 001 Tel : +91-124-4541000, Fax : +91-124-4541010 E mail: [email protected] Contact Person: Mr. Hitendra Mehta / Mr. Akshay Saxena BANKERS TO THE COMPANY ORIENTAL BANK OF COMMERCE A-30-33, First Floor, Connaught Place New Delhi - 110001; Tel: +91- 011 – 42752408/42752405; Fax: +91- 011-43533904; Email: [email protected]; Contact Person: Mr. Chiranjiv Chawla/ Mr. Subhash Khatri

BANK OF MAHARASHTRA J8/77, Nehru Market, Rajouri Garden, New Delhi - 110027 Tel: +91- 011–25423161/65; Fax: +91- 022-25423165 Email: [email protected] Contact Person: Mr. Satish Jain

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. Girish Sharma/ Ms. Swati Sinha CO-BOOK RUNNING LEAD MANAGER TO THE ISSUE

PNB INVESTMENT SERVICES LTD. 2nd Floor, 10, Rakesh Deep Building, Yusuf Sarai Commercial Complex, Gulmohar Enclave, New Delhi – 110049. Tel: +91–11– 49495050; Fax: +91–11– 41035057 Website: www.pnbisl.com; E-mail: [email protected] Contact person: Mr. Narender Thakran


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REGISTRAR TO THE ISSUE

BEETAL FINANCIAL & COMPUTER SERVICES (P) LIMITED Beetal House, 3rd Floor, 99 Madangir, Behind Local Shopping Centre, Near Dada Harsukhdas Mandir New Delhi - 110062 Tel : +91 – 011 - 2996 1281-83 Fax: + 91 – 011- 2996 1284 E-mail: [email protected] Website: www.beetalfinancial.com SEBI Regn No.: INR000000262 Contact Person: Mr. S.P. Gupta

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. BANKERS TO THE ISSUE AND ESCROW COLLECTION BANKS

[•] SYNDICATE MEMBER

[•] SELF CERTIFIED SYNDICATE BANKS

As on date following banks are registered with SEBI for collection of ASBA forms:

1. Axis Bank Ltd 17. Andhra Bank 2. State Bank of Hyderabad 18. HSBC Ltd. 3. Corporation Bank 19. Kotak Mahindra Bank Ltd. 4. State Bank of Travencore 20. Bank of India 5. IDBI Bank Ltd. 21. CITI Bank 6. State Bank of Bikaner and Jaipur 22. IndusInd Bank 7. YES Bank Ltd. 23. Allahabad Bank 8. Punjab National Bank 24. Karur Vysya Bank Ltd. 9. Deutsche Bank 25. The Federal Bank 10. Union Bank of India 26. Indian Bank 11. HDFC Bank Ltd. 27. Central Bank of India 12. Bank of Baroda 28. Oriental Bank of Commerce 13. ICICI Bank Ltd 29. Standard Chartered Bank 14. Vijaya Bank 30. J P Morgan Chase Bank, N.A. 15. Bank of Maharashtra 31. Nutan Nagarik Sahakari Bank Ltd. 16. State Bank of India 32. UCO Bank 33. Canara Bank

For the details of list of controlling banks along with its branches for ASBA please visit the website of SEBI, BSE and NSE at www.sebi.gov.in, www.bseindia.com, www.nseindia.com respectively.


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STATUTORY AUDITORS

M.C. Jain & Co. Chartered Accountants 4701/21A, Ansari Road, Daryaganj, New Delhi - 110002 Tel: +91- 011- 23280102; Fax: +91- 011-23258841 Email: [email protected] Kumar Piyush & Co. (Peer Review Certified) Chartered Accountants C-5, Lajpat Nagar- III New Delhi 110 024 Tel: +91- 011- 29830208/ 0220; Fax: +91- 011-29847424 Email: [email protected] Firm Registration no: 005120N Peer Review no: 004545 STATEMENT OF INTER SE ALLOCATION OF RESPONSIBILITIES FOR THE ISSUE The following table sets forth the distribution of responsibility and co-ordination for various activities among Keynote Corporate Services Limited (Keynote) (Book Running Lead Manager to the Issue/BRLM) and PNB Investment Services Ltd. (PNB ISL) (Co-Book Running Lead Manager to the Issue/Co-BRLM).

Sr. No.

Activity Responsibility Co-ordinator

1. Capital Structuring with the relative components and formalities such as type of instruments, etc.

Keynote Keynote

2. Conducting a due diligence of the Company’s operations/management/business plans/legal, etc. Drafting and designing the Draft Red Herring Prospectus / Red Herring Prospectus / Prospectus. Ensuring compliance with the SEBI (ICDR) Regulations 2009 and other stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI

Keynote & PNB ISL

Keynote

3. Primary co-ordination with SEBI, RoC and Stock Exchanges up to bidding and coordinating interface with lawyers for agreements

Keynote & PNB ISL

Keynote

4. Primary co-ordination of drafting/proofing of the design of the Red Herring Prospectus, bid forms including memorandum containing salient features of the Prospectus with the printers. Primary coordination of the drafting and approving the statutory advertisement.

Keynote Keynote

5. Drafting and approving all publicity material other than statutory advertisement as mentioned in (4) above including corporate advertisement, brochure, etc.

Keynote Keynote

6. Appointing the Registrars, Appointing Bankers to the Issue, Appointing other intermediaries viz., printers and advertising agency

Keynote Keynote


14

Sr. No.

Activity Responsibility Co-ordinator

7. Marketing of the Issue, which will cover inter alia: Formulating marketing strategies, preparation of publicity budget,

Finalising media & public relations strategy, Finalising centers for holding conferences for press and brokers etc,

Finalising collection centers, Following-up on distribution of publicity and Issue material including form, prospectus and deciding on the quantum of the Issue material,

Preparing all road show presentations, Appointment of brokers to the issue, and Appointment of underwriters and entering into underwriting agreement.

Keynote Keynote

8. Coordinating institutional investor meetings, coordinating pricing decisions and institutional allocation in consultation with the Company

Keynote Keynote

9. Finalising the Prospectus and RoC filing Keynote Keynote 10. Co-ordinating post bidding activities including management

of Escrow accounts, coordinating with registrar and dispatch of refunds to Bidders, etc.

Keynote & PNB ISL

Keynote

11. Follow-up with the bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures.

Keynote PNB ISL

12. The Post-Issue activities for the Issue will involve essential follow up steps, which include finalizing basis of allotment / weeding out of multiple applications, the listing of instruments and dispatch of certificates and dematerialized delivery of shares with the various agencies connected with the work such as the Registrars to the Issue and Bankers to the Issue and the bank handling refund business. The BRLMs shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company.

Keynote & PNB ISL

PNB ISL

CREDIT RATING

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

[●] Limited has been appointed for grading of the issue. 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.


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APPRAISING AGENCY

The Project has not been appraised by any Bank or Financial Institution. BOOK BUILDING PROCESS The Book Building Process, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red Herring Prospectus within the Price Band. The Issue Price is finalised after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are:

• The Company; • The Book Running Lead Manager, in this case being Keynote Corporate Services Limited; • The Co-Book Running Lead Manager, in this case being PNB Investment Services Limited; • Syndicate Member who are intermediaries registered with SEBI or registered as brokers with

BSE/NSE and eligible to act as Underwriters. The Syndicate Member are appointed by the Book Running Lead Manager and the Co-Book Running Lead Manager;;

• Registrar to the Issue; • Escrow Collection Banks and • Self Certified Syndicate Banks

The Issue is being made through the 100% Book Building Process where upto 50% of the Net 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, not less than 15% of the Net Issue to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net 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.

For further details, see section “Terms of the Issue” on page no. 168 of this Draft Red Herring Prospectus. The Company shall comply with the SEBI Regulations and any other directions issued by SEBI for this Issue. In this regard, we have appointed the Keynote Corporate Services Limited as the Book Running Lead Manager and PNB Investment Services Limited as the Co-Book Running Lead Manager to manage the Issue.

The process of Book Building under the SEBI Regulations is subject to change from time to time and the investors are advised to make their own judgment about investment through this process prior to making a Bid or application in the Issue.

Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely for illustrative purposes and is not specific to the Issue)

Bidders can bid at any price within the price band. For instance, 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 centres’ 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.


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Bid Quantity Bid Price (Rs.) Cumulative Quantity 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%

2,700 42 6,000 100.00% 800 41 6,800 113.33%

1,200 40 8,000 133.33%

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 and the Co-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.

Steps to be taken by the Bidders for Bidding 1. Check eligibility for making a Bid (see section titled “Issue Procedure - Who Can Bid?” on page no.

175 of this Draft Red Herring Prospectus); 2. Ensure that you have a dematerialised account and the dematerialised account details are correctly

mentioned in the Bid cum Application Form; 3. Ensure that you have mentioned your PAN (see “Issue Procedure – PAN” on page no. 192 of this

Draft Red Herring Prospectus); and 4. Ensure that the Bid cum Application Form/ASBA Form is duly completed as per instructions given

in this Draft Red Herring Prospectus and in the Bid cum Application Form/ASBA Form; Withdrawal of the Issue

The Company, in consultation with the BRLM and the Co-BRLM, reserves the right not to proceed with the issue after the bidding and if so, the reason thereof shall be given as a public notice within two days of the closure of the issue. The public notice shall be issued in the same newspapers where the pre-issue advertisement had appeared. The stock exchanges where the specified securities were proposed to be listed shall also be informed promptly. If the Company withdraws the Issue after the Bid/Issue Closing Date and thereafter determines that it will proceed with an initial public offering of its Equity Shares, it shall file a fresh draft red herring prospectus with the SEBI.

Bid/Issue Programme

Bidding Period/Issue Period

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

Bids and any revision in Bids shall be accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form. On the Bid/Issue Closing Date, Bids (excluding the ASBA Bidders) shall be uploaded until (i) 4.00 p.m. in case of Bids by QIB Bidders, Non- Institutional Bidders where the Bid Amount is in excess of Rs. 100,000 and (ii) until 5.00 p.m. or such extended time as permitted by the NSE and the BSE, in case of Bids by Retail Individual Bidders bidding where the Bid Amount is up to Rs. 100,000. It is


17

clarified that Bids not uploaded in the book, would be rejected. Bids by ASBA Bidders shall be uploaded by the SCSB in the electronic system to be provided by the NSE and the BSE.

In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the physical Bid form, for a particular bidder, the details as per physical application form of that Bidder may be taken as the final data for the purpose of allotment. In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the physical or electronic Bid cum Application Form submitted through the ASBA process, for a particular ASBA Bidder, the Registrar to the Issue shall ask for rectified data from the SCSB.

Due to limitation of time available for uploading the Bids on the Bid/Issue Closing date, the bidders are advised to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no later than the times mentioned above on the Bid/Issue Closing Date. All times are Indian Standard Time. Bidders are cautioned that in the event a large number of Bids are received on the Bid/Issue Closing Date, as is typically experienced in public offerings, some Bids may not get uploaded due to lack of sufficient time. Such Bids that cannot be uploaded will not be considered for allocation under the Issue. If such Bids are not uploaded, the Issuer, BRLM, the Co-BRLM and Syndicate member will not be responsible. Bids will be accepted only on Business Days, i.e., Monday to Friday (excluding any public holidays).

The Company reserves the right to revise the Price Band during the Bid/Issue Period in accordance with the SEBI Guidelines provided that the Cap Price is less than or equal to 20% of the Floor Price. The Floor Price can be revised up or down to a maximum of 20% of the Floor Price advertised at least one day before the Bid /Issue Opening Date.

In case of revision of the Price Band, the Issue Period will be extended for three additional working days after revision of the Price Band subject to the total Bid /Issue Period not exceeding 10 working days. Any revision in the Price Band and the revised Bid/Issue, if applicable, will be widely disseminated by notification to the BSE and the NSE, by issuing a press release and also by indicating the changes on the web sites of the BRLM, the Co-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, Delhi & Haryana, Delhi 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 and the Co-BRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Member 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, Delhi & Haryana, Delhi.)

Name, address, telephone number, fax number and e-mail

of the Underwriters

Indicated Number of Equity Shares to be Underwritten

Amount Underwritten (Rs. Lacs)

[•] [•] [•] [•] [•] [•]

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


18

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, the Co-BRLM and the Syndicate Member 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 157 of this Offer Document.


19

CAPITAL STRUCTURE

The share capital of the Company as on the date of filing of this Draft 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: 3,50,00,000 Equity Shares of Rs 10. each

35,00,00,000

35,00,00,000 B. Issued, Subscribed and Paid Up Capital before this Issue: 1,44,92,000 Equity Shares of the Face Value of Rs.10 /- each

14,49,20,000

[•]

C. Present Issue in terms of this Draft Red Herring Prospectus: 1,77,12,444 Equity Shares of the Face Value of Rs.10 /- each

17,71,24,440

[•]

Of which i) QIB portion of upto 88,56,221 Equity Shares (1) ii) Non Institutional Portion not less than 26,56,867 Equity Shares (1) iii) Retail Portion of not less than 61,99,356 Equity Shares (1)

17,71,24,440 [•]

E. Issued, Subscribed and Paid-Up Capital after this Issue 3,22,04,444 Equity Shares of the Face Value of Rs. 10/- each

32,20,44,440 [•]

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, the BRLM and the Co-BRLM.

The Company is considering a Pre-IPO placement of upto 64,40,889 equity shares aggregating around Rs. 2600 lacs 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 a minimum issue size of 25% of the post issue capital being offered to the public. Details of increase in the authorized share capital, since incorporation, are as follows:

Sr.No. Details of increase in authorized share capital Date of Resolution 1 Incorporation Rs. 20.00 Lacs divided into 2,00,000 Equity

Shares of Rs. 10/- each. Memorandum of

Association 2 Increased to Rs. 400.00 Lacs divided into 40,00,000 Equity

Shares of Rs. 10/- each. 15/06/2004

3 Increased to Rs. 3500.00 Lacs divided into 3,50,00,000 Equity Shares of Rs. 10/- each.

19/03/2010


20

Notes to capital structure 1. Share capital history of the company

Equity Share capital history

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 Equity Share

Capital (no. of shares)

17/05/2004 10,000 10.00 10.00 Cash Allotment pursuant to Subscription of Memorandum

10,000

27/01/2005 28,60,000 10.00 10.00 Cash Allotment to Non-Promoters 28,70,000 12/01/2006 1,20,000 10.00 10.00 Cash Allotment to Non-Promoters 29,90,000 27/12/2007 66,800 10.00 50.00 Cash Allotment to Non-Promoters 30,56,800 24/03/2008 1,50,000 10.00 50.00 Cash Allotment to Non-Promoters 32,06,800 25/02/2010 4,50,000 10.00 10.00 Cash Allotment to Promoter Group

and Non-Promoters 36,56,800 25/03/2010 54,85,200 10.00 Nil Bonus (2:3) Allotment to Promoter and

Promoter Group 91,42,000 30/03/2010 53,50,000 10.00 10.00 Cash Allotment to Promoter and

Promoter Group 1,44,92,000 As on date of filing of this Draft Red Herring Prospectus with SEBI, the issued capital is fully paid up.

2. Promoters Holding:

History of Share Capital held by the promoters:

Name of Promoter

Date of Allotment /Transfer

Nature of the Issue

(Allotment/ Transfer)

Conside-ration

Number of Shares

Face Value(Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue

Capital

% age of Post Issue

Capital

Jitendra Kejriwal

Incorporation Allotment Cash 5,000 10.00 10.00 0.03 0.02 16/04/2005 Transfer Cash 5,000 10.00 10.00 0.03 0.02 25/05/2006 Transfer Cash 3,00,000 10.00 1.00 2.07 0.93 16/09/2009 Transfer Cash 30,000 10.00 50.00 0.21 0.09 16/09/2009 Transfer Cash 59,800 10.00 10.00 0.41 0.19 25/03/2010 Bonus (2:3) Nil 5,99,700 10.00 Nil 4.14 1.86 30/03/2010 (Transfer) Cash (5,000) 10.00 10.00 (0.03) (0.02)

Total 9,94,500 6.86 3.09

Sapna Kejriwal

25/05/2006 Transfer Cash 4,50,000 10.00 1.00 3.11 1.40 25/03/2010 Bonus Nil 6,75,000 10.00 Nil 4.66 2.10

Total 11,25,000 7.76 3.49

Jitendra Kejriwal (HUF)

25/05/2006 Transfer Cash 2,00,000 10.00 1.00 1.38 0.62 17/09/2009 Transfer Cash 7,000 10.00 10.00 0.05 0.02 19/09/2009 Transfer Cash 20,000 10.00 10.00 0.14 0.06 25/09/2009 Transfer Cash 20,000 10.00 10.00 0.14 0.06 25/03/2010 Bonus(2:3) Nil 3,70,500 10.00 Nil 2.56 1.15

Total 6,17,500 4.26 1.92 Donear Laminates Pvt. Ltd.

10/05/2005 Transfer Cash 50,000 10.00 1.00 0.34 0.16 10/05/2006 Transfer Cash 4,60,000 10.00 1.00 3.17 1.43 25/05/2006 Transfer Cash 12,00,000 10.00 1.00 8.28 3.73 14/03/2007 (Transfer) Cash (3,40,000) 10.00 1.00 (2.35) (1.06)


21

Name of Promoter


Nature of the Issue


Conside-ration

Number of Shares

Face Value(Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue

Capital

% age of Post Issue

Capital

22/03/2010 Transfer Cash 3,40,000 10.00 1.00 2.35 1.06 22/03/2010 Transfer Cash 80,000 10.00 10.00 0.55 0.25 25/03/2010 Bonus (2:3) Nil 26,85,000 10.00 Nil 18.53 8.34

Total 44,75,000 30.87 13.90

Surya Decolam Private Limited

16/09/2009 Transfer Cash 40,000 10.00 20.00 0.28 0.12 16/09/2009 Transfer Cash 53,000 10.00 10.00 0.37 0.16 17/09/2009 Transfer Cash 27,000 10.00 10.00 0.19 0.08 24/09/2009 Transfer Cash 2,00,000 10.00 1.00 1.38 0.62 25/02/2010 Allotment Cash 3,00,000 10.00 10.00 2.07 0.93 22/03/2010 Transfer Cash 1,50,000 10.00 1.00 1.04 0.47 25/03/2010 Bonus(2:3) Nil 11,55,000 10.00 Nil 7.97 3.59 30/03/2010 Allotment Cash 10,00,000 10.00 10.00 6.90 3.11

Total 29,25,000 20.18 9.08 Grand Total 1,01,37,000 69.95 31.48

3. Details of Promoters contribution eligible for lock-in for three years as on date of filing the DRHP :

Name of Promoter


Nature of the Issue


Conside-ration

Number of Shares

Face Value(Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue

Capital

% age of Post Issue

Capital

Jitendra Kejriwal

Incorporation Allotment Cash 5,000 10.00 10.00 0.03 0.02 16/04/2005 Transfer Cash 5,000 10.00 10.00 0.03 0.02 25/05/2006 Transfer Cash 3,00,000 10.00 1.00 2.07 0.93 16/09/2009 Transfer Cash 30,000 10.00 50.00 0.21 0.09 16/09/2009 Transfer Cash 59,800 10.00 10.00 0.41 0.19 25/03/2010 Bonus(2:3) Nil 5,99,700 10.00 Nil 4.14 1.86

30/03/2010 (Transfer) Cash (5,000) 10.00 10.00 (0.03) (0.02) Total 9,94,500 6.86 3.09

Sapna Kejriwal

25/05/2006 Transfer Cash 4,50,000 10.00 1.00 3.11 1.40 25/03/2010 Bonus Nil 6,75,000 10.00 Nil 4.66 2.10

Total 11,25,000 7.76 3.49 Jitendra Kejriwal (HUF)

25/05/2006 Transfer Cash 2,00,000 10.00 1.00 1.38 0.62 25/03/2010 Bonus(2:3) Nil 3,00,000 10.00 Nil 2.07 0.93

Total 5,00,000 3.45 1.55

Donear Laminates Pvt. Ltd.

10/05/2005 Transfer Cash 50,000 10.00 1.00 0.34 0.16 10/05/2006 Transfer Cash 4,60,000 10.00 1.00 3.17 1.43 25/05/2006 Transfer Cash 12,00,000 10.00 1.00 8.28 3.73 14/03/2007 (Transfer) Cash (3,40,000) 10.00 1.00 (2.35) (1.06) 25/03/2010 Bonus(2:3) Nil 20,55,000 10.00 Nil 14.18 6.38

Total 34,25,000 23.63 10.64


22

Name of Promoter


Nature of the Issue


Conside-ration

Number of Shares

Face Value(Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue

Capital

% age of Post Issue

Capital

Surya Decolam Private Limited

16/09/2009 Transfer Cash 40,000 10.00 20.00 0.28 0.12 16/09/2009 Transfer Cash 53,000 10.00 10.00 0.37 0.16 17/09/2009 Transfer Cash 27,000 10.00 10.00 0.19 0.08 24/09/2009 Transfer Cash 2,00,000 10.00 1.00 1.38 0.62

25/03/2010 Bonus(2:3) Cash 80,000 10.00 Nil 0.55 0.25 Total 4,00,000 2.76 1.24 Grand Total 64,44,500 44.47 20.01

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 from the date of allotment in the proposed public issue. Promoters’ contribution does not consist of any private placement made by solicitation of subscription from unrelated persons either directly or through any intermediary.

Shares held by the person other than the Promoters, prior to this Issue, which are subject to lock in as per Regulation 37 of SEBI (ICDR) Regulations 2009, may be transferred to any other person holding 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.

Shares held by Promoter(s) which are locked in as per the relevant provisions of Regulation 36 of the SEBI Regulations, 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. As per Regulation 39 of SEBI (ICDR) Regulations, 2009, the locked-in Equity Shares held by the Promoter(s) 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. Provided that if securities are locked in as minimum promoters’ contribution under Regulation 36 of the SEBI Regulations, the same may be pledged, only if, in addition to fulfilling the requirements of this clause, the loan has been granted by such banks or financial institutions for the purpose of financing one or more of the objects of the issue. Other than those shares that are locked in as promoter’s contribution for three years, the entire pre-issue share capital will be locked in for a period of one year from the date of allotment in this public issue.

4. Our Company has issued equity shares to following promoter / promoter group entities during

preceding one year that maybe lower than the issue price. The details of the entities are as given under :

Name of the Entity Date of Allotment

No. of Equity Shares

Issue Price (Rs.)

Consideration

Surya Decolam Private Limited 25/02/2010 3,00,000 10.00 Cash Bachchi Finance Private Ltd. 25/02/2010 1,50,000 10.00 Cash Surya Decolam Private Limited 30/03/2010 10,00,000 10.00 Cash Tulip Vinimay Private Limited 30/03/2010 43,50,000 10.00 Cash TOTAL 58,00,000


23

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

Shareholder Category

No. of Shareholders

Pre-Issue Post-Issue Shares pledged or otherwise

encumbered No. of Equity Shares

% No. of Equity Shares


%

Shareholding of Promoter and Promoter Group Indian Individuals/ Hindu Undivided Family

4 27,42,000 18.92 27,42,000 8.51 Nil Nil

Central Government/ State Government

Nil Nil Nil

Bodies Corporate 3 1,17,50,000 81.08 1,17,50,000 36.49 Nil Nil Financial Institutions/ Banks

Nil Nil Nil

Any Others (Specify) Nil Nil Nil Sub Total (A)(1) 7 1,44,92,000 100.00 1,44,92,000 45.00 Nil Nil Foreign Individuals (Non-Resident Individuals/ Foreign Individuals)

Nil Nil Nil Nil Nil Nil Bodies Corporate Nil Nil Nil Nil Nil Nil Institutions Nil Nil Nil Nil Nil Nil Any Other (Specify) Nil Nil Nil Nil Nil Nil Sub Total (A)(2) Nil Nil Nil Nil Nil Nil Total Shareholding of Promoter and Promoter Group (A) =(A)(1)+(A)(2)

7 1,44,92,000 100.00 1,44,92,000 45.00 Nil Nil

Public Shareholding Nil Nil Institutions

Nil

Mutual Funds/ UTI Nil Nil

1,77,12,444 55.00

Nil

Financial Institutions/ Banks

Nil Nil

Central Government/ State Government

Nil Nil Venture Capital Funds

Nil Nil

Insurance Companies Nil Nil Foreign Institutional Investors

Nil Nil

Foreign Venture Capital Investors

Nil Nil

Any Others (Specify) Nil Nil Sub Total (B)(1) Nil Nil Non-Institutions


24

Shareholder Category

No. of Shareholders

Pre-Issue Post-Issue Shares pledged or otherwise

encumbered No. of Equity Shares



%

Body Corporate Nil Nil Individuals: Individuals - i. Individual shareholders holding nominal share capital up to Rs. 1 Lakh

Nil Nil ii. Individual shareholders holding nominal share capital in excess of Rs. 1 Lakh

Nil Nil Any Other (Specify) Nil Nil Non-Resident Indians

Nil Nil

(OCBs) Nil Nil Hindu Undivided Family

Nil Nil

Demat – Clearing Member

Nil Nil

Sub-Total (B)(2) Nil Nil Total Public Shareholding (B)=(B)(1)+(B)(2)

Nil Nil 1,77,12,444 55.00

Nil Nil

TOTAL (A)+(B) 1,44,92,000 100.00 3,22,04,444 100.00 Nil Nil Shares held by Custodians and against which Depository Receipts have been issued

Nil Nil

GRAND TOTAL (A)+(B)+(C)

7 1,44,92,000 100.00 3,22,04,444 100.00 Nil Nil

6. There are no transactions in the Equity Shares of the Company by the Promoter & their relatives or the

directors of the Company during a period of six months preceding the date of filing of this Draft Red Herring Prospectus with SEBI except for the following

Name of

Transferor Name of

Transferee Date of

Allotment /Transfer

Conside-ration

Number of Shares

Face Value (Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue Capital

% age of Post Issue

Capital

Trimline Vyapaar Private Limited


22/03/2010 Cash 1,00,000 10 1.00 0.69 0.31


25

Name of Transferor

Name of Transferee


Conside-ration

Number of Shares

Face Value (Rs.)

Issue/ Transfer

Price (Rs.)

% age of Pre Issue Capital

% age of Post Issue

Capital

Payagpour Vyapar Pvt. Ltd.


22/03/2010 Cash 60,000 10 1.00 0.41 0.19

Cygnus Publishers Ltd.


22/03/2010 Cash 1,00,000 10 1.00 0.69 0.31

Devraj Mercantiles (P) Ltd.


22/03/2010 Cash 80,000 10 1.00 0.55 0.25

Mirabelle Tradecomm (P) Ltd.


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Sthir Lakshmi Mercantile (P) Ltd


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Punya Leather (P) Ltd.

Donear Laminates Pvt. Ltd

22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Trammel Trading (P) Ltd.


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Dhanvanti Commodities (P) Ltd.


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Abharani Vinimay (P) Ltd.


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Devraj Mercantiles (P) Ltd.


22/03/2010 Cash 10,000 10 10.00 0.07 0.03

Mr. Jitendra Kejriwal

Mr. Abhisek Agarwal

30/03/2010 Cash (5,000) 10 10.00 (0.03) (0.02)

7. Equity Shares held by the top ten shareholders:

7a. Top ten shareholders as on the date of filing this Draft Red Herring Prospectus with SEBI:

Sr. No.

Name of the Shareholder No. of Shares % to Paid up Capital (face value Rs. 10/-)

1. Donear Laminates Pvt. Ltd. 44,75,000 30.88 2 Tulip Vinimay Pvt. Ltd. 43,50,000 30.02 3 Surya Decolam Pvt. Ltd. 29,25,000 20.18 4. Mrs. Sapna Kejriwal 11,25,000 7.76 5 Mr. Jitendra Kejriwal 9,94,500 6.86 6 Jitendra Kejriwal (HUF) 6,17,500 4.26 7 Mr. Abhishek Agarwal 5,000 0.03 Total 1,44,92,000 100.00


26

7b. Top ten shareholders ten days prior to filing this Draft Red Herring Prospectus with SEBI:

Sr. No.


1. Donear Laminates Pvt. Ltd. 44,75,000 30.88 2 Tulip Vinimay Pvt. Ltd. 43,50,000 30.02 3 Surya Decolam Pvt. Ltd. 29,25,000 20.18 4. Mrs. Sapna Kejriwal 11,25,000 7.76 5 Mr. Jitendra Kejriwal 9,94,500 6.86 6 Jitendra Kejriwal (HUF) 6,17,500 4.26 7 Mr. Abhishek Agarwal 5,000 0.03 Total 1,44,92,000 100.00

7c. Top ten shareholders two years prior to filing this Draft Red Herring Prospectus with SEBI:

Sr. No.


1. Donear Laminates Pvt. Ltd. 13,70,000 42.72 2 Mrs. Sapna Kejriwal 4,50,000 14.03 3 Mr. Jitendra Kejriwal 3,10,000 9.66 4. Alpha Vinimay Pvt. Ltd. 2,00,000 6.24 5 Jitendra Kejriwal (HUF) 2,00,000 6.24 6 Trimline Vyapar Pvt. Ltd. 1,07,000 3.33 7 Cygnus Publishers Private Limited 1,00,000 3.11 8 Devraj Mercantile Private Limited 80,000 2.49

9 Payagpour Vyapar Private Limited 80,000 2.49 10. DRA Builders (P) Limited 80,000 2.49

Total 29,77,000 92.83

8. Till date Company has not introduced any Employees Stock Option Schemes/ Employees Stock Purchase Schemes.

9. There is no “buy back” or “stand by” arrangement for purchase of Equity Shares by Sonear, our Promoters, Directors, BRLM, Co-BRLM for the equity shares offered through this Draft Red Herring Prospectus.

10. The Company has not raised any bridge loan against the proceeds of the issue.

11. The company has 7 Shareholders as on the date of filing this Draft Red Herring Prospectus with SEBI.

12. An over-subscription to the extent of 10% of the offer to public can be retained for purposes of rounding

off to the nearest multiple of minimum allotment lot.

13. 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 the Draft Red Herring Prospectus with SEBI until the Equity Shares to be issued pursuant to the Issue have been listed. However we are considering the pre- IPO placement of upto 64,40,889 equity shares of Rs. 10/-each aggregating to approximately Rs. 2600 lacs 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


27

placement subject to such minimum issue size of the post issue capital being offered to the public as may be permitted.

14. We presently do not intend or propose to alter our 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, we 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 Draft Red Herring Prospectus or from the date the application moneys are refunded on account of failure.

15. Sonear has not revalued its assets since its incorporation.

16. Sonear has not made any public issue since its incorporation.

17. We undertake 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.

18. As on the date of this Draft 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 subject to any pledge.

19. 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.

20. As on date of filing this DRHP there are no equity shares held by BRLM and the Co-BRLM.


28

OBJECTS OF THE ISSUE

The Objects of the Issue is to raise resources to finance:

• Expansion of existing manufacturing facility at Rohad,(Dist. Jhajjar), Haryana • Setting up of new unit for manufacturing of “Particle Board” at Yamunanagar, Haryana • Investment in group companies • Meeting Working Capital Margin • Meet the issue expenses • List the equity shares of the company on the stock exchanges The main object clause of our Memorandum of Association and objects incidental to the attainment of the main objects enables us to undertake the existing activities and the activities for which funds are being raised by us through this Issue.

The Fund requirement is based on the current business plan. In view of the competitive and dynamic nature of the industry in which we operate, we may have to revise our business plan from time to time and consequently the fund requirement may change.

Rationale of the Objects

Our Company proposes to expand the present manufacturing facility and set up new facility at Yamunanagar, Haryana for the manufacturing of pre laminated particle board. We also propose to invest in our group companies that would result in the group companies making them subsidiaries of our Company. Besides this there would be requirement to increase our working capital margin and meet with issue expenses. The expansion plans would result in improvement of operational efficiencies leading to higher margins and will also increase market penetration and volumes.

Cost of Project and Means of Finance

Cost of Project

We intend to utilize Proceeds for financing the above mentioned objects. The details of utilization of Proceeds are as per the table set forth below:

(Rs. in Lacs) Sl. No

Particulars Amount (Rs. in lacs)

Amount (Rs. in lacs)

1. Expansion of existing manufacturing facility at Rohad, (Dist. Jhajjar) , Haryana

- Construction of Shed, Civil Work and Allied activities 360.16 - Plant and Machinery & Auxiliary Equipments 1396.26 - Miscellaneous Assets 51.82 - Contingency Expenses 90.41 1898.65 2. Setting Up New Unit for manufacture of Pre Laminated

Particle Board at Yamunanagar, Haryana

- Land and Site Development 62.00 - Construction of Factory Shed 578.00 - Plant and Machinery & Auxiliary Equipments 1672.60 - Miscellaneous Assets 146.67 - Pre – Operative Expenses 136.00 - Provision for Contingency 104.73 2700.00 3. Investment in Group Companies - Investment in Surya Vikas Plywood Limited 1000.00


29

Sl. No



- Investment in Surya Boards Limited 1000.00 2000.00 4. Margin Money for Working Capital Requirement 1300.00 5. Issue Expenses [●] 6. General Corporate Purpose [●] TOTAL [●]

Means of Finance

Particulars Amount

(Rs. In lacs) Public Issue of Equity Shares [•] Term Loan from Bank of Maharashtra for new plant at Yamunanagar, Haryana 1500.00 Internal accruals [•] Total means of finance [•]

DETAILS OF THE OBJECTS OF THE ISSUE

1.) Expansion of existing manufacturing facility at Rohad, (Dist. Jhajjar) Haryana

We propose to install additional auxiliary equipments for manufacture of Natural Decorative veneer plywood, Reconstituted Decorative veneer plywood and high pressure decorative laminates and other plant and machinery. We believe that the installation of auxiliary equipments and additional machinery shall give support to the Company to increase its capacity utilization and cater the potential demand of the market. The detailed breakup of the expenses to be incurred in the above objects is as given below :

Particulars Amount

(Rs. in lacs) - Construction of Shed, Civil Work and Allied activities 360.16 - Plant and Machinery & Auxiliary Equipments 1304.06 - Auxiliary equipments 92.20 - Miscellaneous Assets 51.82 - Contingency Expenses 90.41

Total 1898.65

The installation of auxiliary equipments and additional plant and machinery shall increase the annual capacity to manufacture Decorative Plywood from existing 35,72,160 sq. mtrs to 47,62,880 sq. mtrs and Laminates from existing 12,00,000 sheets to 24,00,000 sheets.

Construction of Shed, Civil Work and Allied activities

Our unit is categorized into two sheds namely, Shed A - for managing the manufacturing activity of veneer and laminates and Shed B - for managing the slicing activity of the raw materials. The area of Shed A is 300 sq. meters and for shed B is 1200 sq. meters. The details of the cost to be incurred for the construction of the shed is as stated below: Sr. No

Particulars Quotation provider


Quotation Date

1. Land Development and Flooring Cost of Shed A

Sharma Architects 5.34 02/06/2010


30

Sr. No

Particulars Quotation provider


Quotation Date

2. Land Development and Flooring Cost of Shed B

Sharma Architects 81.74 02/06/2010

3. Construction of Shed A Kirby Building Systems India (P) Ltd.

51.62 26/02/2010

4. Construction of Shed B Kirby Building Systems India (P) Ltd.

182.06 26/02/2010

5. Expenditure towards pipeline and electrical fittings of Shed A

-- 5.34 Estimates

6. Expenditure towards pipeline and electrical fittings of Shed B

-- 34.06 Estimates

Total 360.16

Plant and Machinery

We propose to purchase additional plant and machinery for manufacturing of decorative plywood and laminates for a total estimated cost of Rs. 1304.06 lacs that includes custom duty, transportation and installation charges. No second hand machinery is proposed to be purchased. The detailed break up is given herein under

Sr. No

Particulars Supplier Quantum (nos.)

Unit Cost (Rs. in lacs)

Total Cost (Rs. In lacs)

Quotation Date

Decorative Plywood Manufacturing Section

1. Hot Press Ambica Hydraulics Pvt. Ltd., Ahmedabad

1 34.25 34.25 03/03/2010

2. Dryer - 6 Section (For Core Drying)

L M Engineering Company, Kolkata

2 29.84 59.68 20/02/2010

3. Dryer - 4 Section (For Face Drying)


2 20.75 41.50 20/02/2010

4. Chain D.D. Saw L M Engineering Company, Kolkata

3 6.76 20.28 20/02/2010

5. Peeling Machine Guru Amar Industries, Yamunanagar

3 61.37 184.11 18/02/2010

6. Sanding Machine King Jui Wen Co. Ltd, Taiwan

2 28.45 56.90 04/03/2010

7. Lumber Composer Chen E Machinery Co. Ltd.

2 50.67 101.34 13/08/2010

8. Calibrating Machine King Jui Wen Co. Ltd, Taiwan

1 20.00 20.00 13/08/2010

9. Glue Spreader Chen E Machinery Co. Ltd.

2 4.36 8.72 13/08/2010

10. Dust Collecting Machine

Gupta Engineering Works Ltd.

2 2.00 4.00 13/08/2010

Sub – Total (A) 530.78


31

Sr. No




Quotation Date

Laminates Manufacturing Section 1. Hydraulic Press Jekson Hydraulic

Limited 1 161.16 161.16 18/02/2010

2. Loading & Unloading System of Press

Jekson Hydraulic Limited

1 40.46 40.46 18/02/2010

3. Impregnator For Kraft Paper

H.R. Industries 1 41.07 41.07 22/02/2010

4. Impregnator For Décor Paper

H.R. Industries 1 33.38 33.38 22/02/2010

5. Texture Plate - Suede Sesa (S.p.A), Italy* 153 2.57 393.49 25/02/2010 6. Texture Plate – Matt Sesa (S.p.A), Italy* 9 2.13 19.19 25/02/2010 7. Texture Plate – Gloss Sesa (S.p.A), Italy* 9 2.13 19.19 25/02/2010 8. Sanding Machine KUNDIG Widebelt

Sander 1 49.76 49.76 10/06/2010

9. Cooling Tower Varun Engineers 1 3.00 3.00 10/06/2010 10. Air Conditioning Unit

For Laminate Storage Malika Air conditioning

2 6.29 12.58 02/06/2010

Sub Total (B) 773.28 GRAND TOTAL

(A+B) 1304.06

* The costs mentioned above include handling charges.

Auxiliary Equipments The total cost of the supplementary tools and equipments required for functioning of plant and machinery is estimated at Rs. 92.20 lacs. No second hand equipment is proposed to be purchased. The detailed break up are given herein under

Sr. No


Per Unit Cost

(Rs. In lacs)


Quotation Date

1. Boiler (15Lac Kcal per Hour)

Maxotherm Engineers Pvt. Ltd., New Delhi

2 23.04 46.08 27/02/2010

2. Generator 320 KVA Sudhir Gensets Ltd. 2 17.18 34.36 23/09/2010 3. Ink Jet Printer Markem Imaje 2 2.96 5.92 08/03/2010 4. Scissor Lift Ferro Foundries Pvt.

Ltd., Mysore 2 2.56 5.12 24/02/2010

5. Pallet Truck Ferro Foundries Pvt. Ltd. , Mysore

2 0.36 0.72 24/02/2010

Total 92.20

Miscellaneous Fixed Assets The detailed break up of the amount to be utilized for purchase of miscellaneous fixed assets is hereunder:


32

Sr. No


Per Unit Cost (Rs. In lacs)


Quotation Date

1. Electrical fittings Sukhmani Associates Pvt. Ltd.

- - 2.95 15/09/2010

2. Fire Fighting Equipments

Ajax Fire Control Systems

- - 3.27 17/09/2010

3. Computer Hardware & Software

Landmark Infonet Pvt. Ltd.

5 0.61 3.06 03/07/2010

4. Furniture Kala Mandir Wooden Furniture

- - 3.00 07/07/2010

5. Vehicle - LCV & Canters

VE Commercial Vehicles

2 6.77 13.54 17/09/2010

6. Storage Tanks - formaldehyde

Gupta Engineering Works Ltd.

2 2.00 4.00 17/09/2010

7. Storage Tanks - Phenol Gupta Engineering Works Ltd.

2 2.00 4.00 17/09/2010

8. Crane Action construction Equipment (P) Ltd.

1 3.00 3.00 17/09/2010

9. Quality Check Lab Testing Equipment

AES Laboratories (P) Ltd.

-- 15.00 02/06/2010

Total 51.82

Contingency Expenses We have made provisions towards contingency expenses to the extent of 5% of the total cost to be incurred for expansion of present unit aggregating to Rs.90.41 lacs

2.) Setting Up New Unit for manufacture of Particle Board at Yamunanagar, Haryana

We propose to set up Greenfield project for manufacture of pre laminated Particle Board with an installed capacity of 55,000 cubic meter per annum at Yamunanagar, Haryana. The total project cost for setting up unit is Rs.2700.00 lacs of which Rs.1500.00 lacs is funded from term loan duly sanctioned by Bank of Maharashtra, Bhikaji Cama Place, New Delhi vide its letter dated 19/08/2010 and the balance shall be funded from the proceeds of this issue. The Particle Board product is an Agro Based Panel Product that is being promoted extensively world wide as an Environment Friendly Product. We expect to gain substantially from setting up this unit as it will be addition to our product portfolio and also help in improving our market share in the widely unorganized and fragmented interior infrastructure industry.

Particulars Amount

(Rs. in lacs) - Land and Site Development 62.00 - Construction of Factory 578.00 - Plant and Machinery & Auxiliary Equipments 1224.92 - Utilities, accessories & auxiliary equipment (for plant and machinery) 447.68 - Miscellaneous fixed assets 146.67 - Pre – Operative Expenses 136.00 - Provision for Contingency 104.73

Total Cost 2700.00


33

Land and Site Development We have taken the project site for the proposed unit on lease basis from our group Company i.e., Surya Vikas Plywood Limited for a period of 10 years with a security deposit of Rs.10.00 lacs and monthly rental of Rs.1.00 lac. The site located at Village Damla, Delhi Saharanpur Road, District Yamunanagar, Haryana is about 35 Kms away from the Arterial NH-1 Highway. We believe that, availability of plenty of underground water, power supply, easy availability of raw material, availability of semi skilled and skilled workers, proximity to national highway and national capital i.e. Delhi which is one of the major trading hub makes the project site an ideal location for setting up of factory for particle board. The total area of land available for setting up unit is 4.09 acres. We shall incur a total cost of Rs.62.00 lacs towards land and site development that includes laying of roads, development of land, construction of boundary wall and main gate and the Horticultural Work. The cost is based on the quotation dated 01/06/2010 from M/s. Ghai & Associates – Architects, New Delhi .

Construction of the Unit

We propose to construct unit with a total area of 12,250 sq. meters that includes construction of factory shed with approx is of 10,500 sq. meters, an office building with an area of 300 sq. meters and residential area for staff and workers with an area of 1,450 sq. meters. The detailed break-up for the proposed construction of building based on the quotations received from the M/s. Ghai & Associates – Architects, New Delhi is as under:

Sr. No

Particulars Construction Area (in sq. meters)

Amount (Rs. In lacs)

Quotation Date

1. Civil construction of Factory Shed for the Plant & Machineries and all Auxiliaries Equipments

10,500 366.00 01/06/2010

2. Civil Construction of Office Building 300 12.00 3. Civil Construction of Staff & Workers

Quarters 1450 85.00

4. Miscellaneous Civil Work comprising laying various Foundations / Internal Road developments / Maintenance Workshop / Lab etc.

N.A. 45.00

5. Civil Work for Fabrication in Chemical Section

N.A. 6.00 01/06/2010

6. Steel requirement for General Fabrication

About 100 tonnes of steel

64.00

Total 578.00

Plant and Machinery The total cost of the plant and machinery to be acquired (including custom duties, applicable taxes, transportation, insurance and erection charges) has been estimated at Rs. 1224.92 lacs. No second hand machinery is proposed to be purchased. The detailed break up is as under:

Sr. No



Quotation Date

1. Paper Impregnator Machinery H.R. Industries, Ahmadabad

1 set 28.00 30/08/2010


34

Sr. No



Quotation Date

2. Short Cycle Press Jekson Hydraulic Ltd

1 set 75.00 13/05/2010

3. Particle Board Manufacturing Plant containing - Chipping / Drying / Gluing / Hot Pressing / Edge Sawing / Electric Control System / Sanding Units

Sichuan Xin Min Jang Wood-Based Panel Machine Co Ltd., China

1 set 861.00 23/05/2010

Additional Cost on imported machinery from China 3.1 Customs Duty 231.24 Estimated 4 Ocean Freight, Inland Haulage &

Clearing Expense Frequent Containers Logistics, Ghaziabad

29.68 Estimated

Total Cost of Plant and Machinery 1224.92

Auxiliary Equipments

The total cost of the supplementary tools and equipments required for functioning of plant and machinery is estimated at Rs. 447.68 lacs. No second hand equipment is proposed to be purchased. The detailed break up is as under:

Sr. No


Per Unit Cost

(Rs. In lacs)


Quotation Date

1. Boiler - Model VTB-10 Maxotherm Engineers Pvt Ltd, New Delhi

1 17.00 17.00 17/05/2010

2. Boiler - Model VTB-40 Maxotherm Engineers Pvt Ltd, New Delhi

1 66.00 66.00 17/05/2010

3. Installation & Commissioning of Boilers, Chimney, Pipelines & Ducts and Thermic Fluid Oil

Maxotherm Engineers Pvt Ltd, New Delhi

N.A. N.A. 95.00 17/05/2010

4. Transformer of 3500 KVA Indian Transformers & Electricals, Jaipur

1 44.25 44.25 18/05/2010

5. Generators - 1000 KVA each

Sudhir Gensets Ltd, New Delhi

3 31.33 94.00 28/05/2010

6. Air Compressor - E37-10 Gupta Supply Agency, Rohtak

1 4.60 4.60 31/05/2010

7. Air Compressor - E18-10 Gupta Supply Agency,

1 2.75 2.75 31/05/2010


35

Sr. No


Per Unit Cost

(Rs. In lacs)


Quotation Date

Rohtak 8. Weighbridge - 80 Tons Gupta Supply

Agency, Rohtak

1 5.50 5.50 31/05/2010

9. Cooling Tower - Model no 6032

Kalyan Industries, Yamuna Nagar

1 11.00 11.00 24/05/2010

10. Air Conditioners - Model no DPA2642R1

Malika Air conditioning, New Delhi

2 6.29 12.58 02/06/2010

11. Printer - Markem Imaje 9020

Markem Imaje Ltd

2 3.00 6.00 08/05/2010

12. Resin Plant - complete with Condenser / Receivers / Columns & Storage Tanks

Arth Engineering Systems, Ahmedabad

1 48.00 48.00 22/05/2010

13. Fork Lift - Model no GX 300D

Godrej & Boyce Mfg. Co. Ltd.

2 13.00 26.00 14/05/2010

14. Scissor Lift - 3 Ton capacity

Ferro Foundries Pvt Ltd, Mysore

2 2.50 5.00 24/02/2010

15. Pallet Truck - HP 22 B Ferro Foundries Pvt Ltd, Mysore

3 0.33 1.00 22/02/2010

16. Lab Testing Equipment AES Laboratories (P) Ltd., New Delhi

1 9.00 9.00 02/06/2010

Total 447.68

Miscellaneous Assets

We have estimated total cost of Rs.146.67 lacs towards the miscellaneous assets required which include security deposit for electricity connection, electrical cables, storage racks, etc. Sr. No Particulars Quantum (nos.) Amount (Rs. In lacs) 1. Security for Electricity Connection N.A. 90.00 2. Electrical Cables N.A 10.16 3. Storage Racks N.A 9.50 4. Truck 2 19.00 5. Motor Cycles 2 0.80 6. Vehicle - Mahindra Bolero 1 7.18 7. Lights and Fans N.A 3.15 8. Air conditioner N.A 1.00 9. Fire Fighting Equipments N.A 1.40 10. Computer Hardware and Software N.A 2.48 11. Office Furniture and Others N.A 2.00 Total 146.67


36

Pre-Operative Expenses

We have estimated pre operative expense of Rs.136.00 lacs towards various expenses like rent, interest during construction etc. The details of the same are as follows:

Sr. No Particulars Amount (Rs. In lacs) 1. Establishment Expenses 6.00 2. Lease Rent 12.00 3. Tours and Travels 3.00 4. Electricity Expenses 10.00 5. Interest during construction 105.00

Total 136.00

Contingency Expenses

We have made provision of Rs.104.73 lacs towards contingency expenses being 4.25% of the cost that may arise during the setting up of unit.

3.) Investment in Group Companies

We propose to invest Rs. 2000 lacs in our group companies namely Surya Vikas Plywood Ltd. And Surya Boards Ltd. These group companies will become our subsidiaries subsequent to the said investment. The rationale for investment is as follows:

• Combining the synergies of business • Optimum utilization of the installed/ licensed capacity • Provide variety of options to the consumers • Leveraging common distribution network

A. Investment in Surya Vikas Plywood Limited (SVPL)

We propose to utilize an amount of Rs.1000.00 lacs towards investment in Surya Vikas Plywood Limited which is one of our group companies. SVPL is engaged in manufacturing of affordable and low priced commercial plywood and block board. We propose to subscribe to 1,00,00,000 fresh equity shares of Rs. 10/- each at par. The present equity capital of SVPL comprises of 26,10,000 equity shares of Rs.10 each. Our proposed investment will make SVPL our subsidiary. Our holding in SVPL consequent to said investment would be 79.30% of the paid up capital of SVPL.

SVPL has authorized the investment by our company vide their resolution dated 25/09/2010. Further, SVPL has also passed a resolution to increase the authorized capital of SVPL from 32,50,000 equity shares of Rs.10/- each to 1,50,00,000 equity shares of Rs.10/- each vide their resolution dated 25/09/2010. It is in the process of complying with other requirements in this regard.

The infusion of funds is proposed to be utilized for expansion of the present factory unit of SVPL that shall help in increasing the manufacturing capacity and also cater the potential demand of affordable and lower priced plywood for the price sensitive customers. The utilization of proposed investment is detailed below:


- Construction of Shed, Civil Work and Allied activities 206.91 - Plant and Machinery and Auxiliary Equipments 536.38 - Miscellaneous Assets 59.80 - Contingency Expenses 40.15 - Margin Money 156.76

Total 1000.00


37

Construction of Shed, Civil Work and Allied activities

We have estimated a cost of Rs. 183.68 lacs towards the land and flooring cost of shed and construction of shed. We have also estimated a total cost of Rs. 23.23 lacs towards electrical fitting and pipeline fitting. The total cost for construction of shed and allied activities aggregates to Rs.206.91 lacs

Plant and Machinery & Auxiliary Equipments

We propose to utilize an amount to the extent of Rs. 536.38 lacs for purchasing of plant and machinery and auxiliary equipments as required for functioning of machineries. The detailed break up is given herein under:

Sr. No




Quotation Date

Plant and Machinery for Plywood and Block Board manufacturing



2 29.84 59.68 20/02/2010



2 20.75 41.50 20/02/2010


2 6.76 13.52 20/02/2010

4. Peeling Machine Guru Amar Industries, Yamuna Nagar

2 61.37 122.73 18/02/2010

5. Sanding Machine King Juin Wen Co. Ltd., Taiwan

2 28.45 56.90 03/04/2010

6. Chamber - 8 Chen E Machinery Co. Ltd.

1 99.18 99.18 13/08/2010


1 50.67 50.67 13/08/2010


Auxiliary Equipments 1. Boiler (15Lac Kcal per

Hour) Maxotherm Engineers Pvt. Ltd., New Delhi

2 23.04 46.08 27/02/2010

2. Generator 320 KVA Sudhir Genset Ltd. 2 17.18 34.35 23/09/2010 3. Jet Ink Printer Markem – Imaje 2 2.96 5.93 08/03/2010 4. Scissor Lift Ferro Foundries

Pvt. Ltd., Mysore 2 2.56 5.12 22/02/2010

5. Pallet Truck Ferro Foundries Pvt. Ltd., Mysore

2 0.36 0.72 22/02/2010

Total 92.20 GRAND TOTAL

(A+B) 536.38


38

Miscellaneous Fixed Assets The detailed break up of the amount to be utilized for purchase of miscellaneous fixed assets is as under: Sr. No




Quotation Date

1. Electrical fittings Sukhmani Associates Pvt. Ltd.

- - 3.05 07/09/2010



- - 3.76 20/09/2010


Landmark Infonet P Ltd.

4 0.60 2.48 05/07/2010

4. Furniture Kala Mandir - - 2.80 07/07/2010 5. Vehicle - LCV &

Canters VE Commercial Vehicals

1 6.77 6.77 17/09/2010

6. Aluminum plates for plywood manufacturing.

Maheshwari & Co. - - 16.94 16/09/2010


Gupta Engineering 2 2.00 4.00 17/09/2010

8. Storage Tanks - Phenol


9. Crane Action Construction Equipments P Ltd.

1 3.00 3.00 17/09/2010



- - 15.00 02/06/2010

Total 59.80

Contingency Expenses

We have made provisions towards contingency expenses to the extent of 5% of the total cost incurred for expansion of present unit aggregating to Rs.40.15 lacs

Margin for working capital requirement of SVPL

The levels of current Assets and current Liabilities as on 31/03/2010, 31/03/2011 and as on 31/03/2012 are as under:

(Rs. in lacs) Particulars Actual

31/03/2010 Estimates 31/03/2011

Projections 31/03/2012

Current Assets Raw Material (indigenous) 1306.50 850.00 882.33 Other consumable spares 2.10 7.00 10.00 Finished goods 76.46 245.50 325.00 Receivables (Domestic) 962.59 900.00 1250.00 Other current assets 72.48 90.00 120.00 TOTAL CURRENT ASSETS 2420.13 2092.50 2587.33 Less: Other Current Liabilities 663.00 360.37 441.50 Working capital gap 1757.13 1732.13 2145.83 Margin for working capital available 635.10 532.13 645.83 Working capital required 1122.03 1100.00 1500.00


39

The working capital requirement for 2011-12 is Rs.1500.00 lacs. The company has been sanctioned the working capital limit of Rs. 1200.00 lacs from Bank of Maharashtra, Rajouri Garden, New Delhi Branch. Out of the total investment by Sonear Industries Ltd. of Rs.1000.00 lacs, the sum of Rs. 156.76 lacs will be utilized for the working capital requirements. The deficit of Rs.143.24 lacs in working capital will be arranged from the bank at point of need. There is working capital requirement of Rs.1500.00 lacs for the year 2011-12. The holding norms for components of working capital in months level for the year 2011-12 is as under:

Particulars Months Level Raw material (indigenous) 4.00 Other consumable spares 0.88 Finished goods 1.00 Receivables (domestic) 3.00

B. Investment in Surya Boards Limited (SBL)

We propose to utilize an amount of Rs.1000.00 lacs towards investment in Surya Boards Limited which is one of our group companies. SBL is engaged in manufacturing of reconstituted plywood, plywoods and blockboards. We propose to subscribe to 10,00,000 fresh equity shares of Rs. 100/- each at par. The present equity capital of SBL comprises of 2,55,920 equity shares of Rs.100/- each. Our proposed investment will make SBL our subsidiary. Our holding in SBL consequent to said investment would be 79.62% of the paid up capital of SBL. SBL has authorized the investment by our company vide their resolution dated 25/09/2010. Further, SBL has also passed a resolution to increase the authorized capital of SBL from 3,00,000 equity shares of Rs.100/- each to 15,00,000 equity shares of Rs.100/- each vide their resolution dated 25/09/2010. SBL is in the process of complying with other requirements in this regard. The infusion of funds will be utilized for expansion of the present factory unit of SBL. The utilization of proposed investment is detailed below:


- Construction of Shed, Civil Work and Allied activities 174.43 - Plant and Machinery and Auxiliary Equipments 541.41 - Miscellaneous Assets 84.65 - Contingency Expenses 40.02 - Working capital margin 159.49

Total 1000.00

Construction of Shed, Civil Work and Allied activities We have estimated a cost of Rs. 137.09 lacs towards the land and flooring cost of shed and construction of shed. We have also estimated a total cost of Rs. 37.34 lacs towards electrical fitting and pipeline fitting. The total cost for construction of shed and allied activities aggregates to Rs.174.43 lacs


40

Plant and Machinery & Auxiliary Equipments

We propose to utilize an amount to the extent of Rs. 541.41 lacs for purchasing of plant and machinery and auxiliary equipments as required for functioning of machineries. The detailed break up is given as under:

Sr. No




Quotation Date

Plant and Machinery for Plywood and Block Board manufacturing



3 29.84 89.52 20/02/2010



3 20.75 62.25 20/02/2010


2 6.76 13.52 20/02/2010

4. Peeling Machine Guru Amar Industries, Yamuna Nagar

2 61.37 122.73 18/02/2010

5. Sanding Machine King Jiu Wen Co. Ltd., Taiwan

2 28.45 56.90 04/03/2010


2 50.67 101.34 13/08/2010


Auxiliary Equipments 1. Boiler (15Lac Kcal

per Hour) Maxotherms Engineers Pvt. Ltd., New Delhi

2 23.04 46.08 27/02/2010

2. Generator 320 KVA Sudhir Gensets Limited

2 17.18 34.35 23/09/2010

3. Jet Ink Printer Markem - imaje 3 2.96 8.88 08/03/2010 4. Hydraulic Lift Ferro Foundries

Pvt. Ltd., Mysore 2 2.56 5.12 24/02/2010

5. Pallet Truck Ferro Foundries Pvt. Ltd., Mysore

2 0.36 0.72 24/02/2010

Total 95.15 GRAND TOTAL

(A+B) 541.41

Miscellaneous Fixed Assets

The detailed break-up of the amount to be utilized for purchase of miscellaneous fixed assets is hereunder: Sr. No




Quotation Date

1. Electrical fitting Sukhmani Associates Pvt. Ltd.

- - 3.27 20/09/2010



- - 3.41 17/09/2010


Landmark Infonet P Ltd.

5 0.61 3.06 05/07/2010


41

Sr. No




Quotation Date

4. Furniture Kala Mandir - - 2.80 070/7/2010 5. Vehicle - LCV &

Canters VE Commercial Vehicals

2 6.77 13.54 17/09/2010

6. Aluminum plates for plywood manufacturing.

Maheshwari & Co. - - 34.57 16/09/2010



8. Storage Tanks - Phenol


9. Crane Action Construction Equipments P Ltd.

1 3.00 3.00 17/09/2010



- - 15.00 02/06/2010

Total 84.65 Margin for working capital requirement of SBL The levels of current Assets and current Liabilities as on 31/03/2010, 31/03/2011 and as on 31/03/2012 are as under:


31/03/2010 Estimates 31/03/2011


Current Assets Raw Material (indigenous) 1093.79 635.31 735.48 Other consumable spares 43.40 41.39 49.27 Finished goods 118.20 272.00 325.44 Receivables (Domestic) 861.36 1050.00 1250.00 Other current assets 333.39 263.85 271.14 TOTAL CURRENT ASSETS 2450.14 2262.54 2630.90 Less: Other Current Liabilities 849.43 369.80 453.42 Working capital gap 1600.71 1892.74 2177.48 Margin for working capital available 613.24 592.74 677.48 Bank Borrowings 987.47 1300.00 1500.00

The working capital requirement for 2011-12 is Rs.1500.00 lacs. The company has been sanctioned the working capital limit of Rs. 1200.00 lacs by Punjab National Bank, 74, Janpath New Delhi. Out of the total investment by Sonear Industries Ltd. of Rs.1000.00 lacs, the sum of Rs.159.41 lacs will be utilized for the working capital requirements. The deficit of Rs.140.51 lacs in working capital will be arranged from the bank at point of need.

There is working capital requirement of Rs.1500.00 lacs for the year 2011-12. The holding norms components of working capital in the months level for the year 2011-12 is as under:

Particulars Months Level Raw material (indigenous) 2.50 Other consumable spares 2.00 Finished goods 1.00 Receivables (domestic) 3.00


42

Contingency Expenses We have made provisions towards contingency expenses to the extent of 5% of the total cost incurred for expansion of present unit aggregating to Rs.40.02 lacs 4.) Margin for working capital requirement The levels of current Assets and current Liabilities as on 31/03/2010, 31/03/2011 and as on 31/03/2012 are as under:


31/03/2010 Estimates 31/03/2011


Current Assets Raw Material (imported) (indigenous)

151.21 1734.87

362.33 2551.64

533.87 3747.20

Other consumable spares 2.80 22.73 34.09 Finished goods 616.12 1685.00 2577.00 Receivables (Domestic) 2801.28 4533.13 6800.00 Other current assets 631.49 518.21 702.82 TOTAL CURRENT ASSETS 5937.77 9673.03 14394.98 Less: Other Current Liabilities 1425.80 2176.86 3304.36 Working capital gap 4511.97 7496.17 11090.62 Margin for working capital available 1468.07 2496.17 3740.62 Working capital required 3043.90 5000.00 7350.00 The working capital requirement for 2011-12 is Rs.7350.00 lacs. The company has been sanctioned the working capital limit of Rs. 5000.00 lacs by Oriental Bank of Commerce, A- Block Cannaught Place New Delhi. The sum of Rs. 1300 lacs will be utilized from the proceeds of IPO. The deficit of Rs.1050 lacs in working capital will be arranged from the bank at point of need. There is working capital requirement of Rs.7350.00 lacs for the year 2011-12. The holding norms for components of working capital in the months level for the year 2011-12 is as under:

Particulars Months Level Raw material (Imported) (indigenous)

3.00 3.00

Other consumable spares 3.00 Finished goods 1.75 Receivables (domestic) 3.75

5.) Issue Expenses The total expenses of the Issue are estimated to be approximately Rs. [●] Lacs. The Issue related expenses include, among others, Issue management fees, registrar fees, printing and distribution expenses, fees of the legal counsels, advertisement and road show expenses, stamp duty, depository charges, listing fees to the Stock exchanges etc. The break - up of the total expenses for the Issue estimated at approximately [●] % of the Issue Size is as follows:


43

Activity Expenses (Rs in Lacs)

As a % of Total Issue Expenses

As a % of total Issue Size

Listing & Annual fees & expenses of the SEBI [●] [●] [●] Lead Management fees, underwriting & selling commissions

[●] [●] [●]

Advertising & Marketing expenses [●] [●] [●] Printing & Stationery [●] [●] [●] Commission to syndicate members and SCSBs [●] [●] [●] Other (Registrar’s fees, legal fees, grading expenses etc)

[●] [●] [●]

Total estimated issue expenses [●] [●] [●] 6.) General Corporate Purposes Our Company proposes to strengthen the marketing set up and invest in brand building initiatives & distribution network. Our management has designed various marketing strategies to be implemented.

The strategy for strengthening the marketing set up is:

• To create market awareness for our company’s products in the domestic and international markets • To advertise and promote sales through sponsorships, direct marketing, exhibitions and

communicate to the construction, infrastructure and automobile industry. • To register with Government Institutions and be an approved vendor of large corporates. • We intend to set aside an amount of Rs [●] Lacs for the above mentioned activities.

Schedule of implementation

Sr. no

Activity Commencement Completion

1 Expansion of existing manufacturing facility at Rohad, Haryana: • Site development and works • Building and civil works • Installation of plant and machinery • Installation of miscellaneous fixed assets

September 2010 April 2011

August 2011 October 2011

March 2011 September 2011 December 2011

January 2012

2 Setting up of unit for manufacturing of “Particle Board” at Yamunanagar, Haryana • Site development and works • Building and civil works • Installation of plant and machinery • Installation of miscellaneous fixed assets

September 2010 April 2011

September 2011 January 2012

March 2011 September 2011

March 2012 March 2012

3 Investment in group companies January 2011 March 2011


44

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: (Rs. in lacs)

Particulars Particulars FY 2010-11 FY 2011-12 Total Expansion of existing manufacturing facility at Rohad (Dist. Jhajjar), Haryana Construction of Shed 233.68 -- -- Land Development 87.08 -- -- Pipeline Fitting & Elect. Fitting 15.00 24.40 360.16 Misc. Fixed Assets -- 51.82 51.82 Laminate Manufacturing Section -- 775.35 775.35 Decorative Plywood Mfg.Section -- 528.71 528.71 Auxillary Equipment -- 92.20 92.20 Contingency Expenses -- 90.41 90.41 Total 335.76 1562.89 1898.65

Particle Board project at Yamunanagar Site development -- 62.00 62.00 Construction of factory shed -- 578.00 578.00

Plant & Machinery -- 1,224.92 1,224.92 Misc.Fixed Assets -- 589.08 589.08 Pre-operative Expenses -- 136.00 136.00 Provision for Contingency -- 110.00 110.00 Total 2,700.00 2,700.00 Investment in Subsidiaries 2,000.00 -- 2,000.00 Margin of Working Capital -- 1,300.00 1,300.00 General Corporate Purposes [•] -- [•] Issue Expenses [•] -- [•] Grand Total [•] -- [•]

Sources & deployment of Funds As per the Certificate dated 31/08/2010 from Kumar Piyush & Co, Chartered Accountants. The Company has deployed an amount aggregating Rs. 14.65 lacs towards the cost of the project upto 31/08/2010. Details of the sources and deployment of funds as per the certificate are as follows:

(Rs. In lacs) Particulars Amount

DEPLOYMENT OF FUNDS IPO expenses 14.65 SOURCES OF FUNDS Internal Accruals 14.65


45

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. Pursuant to Clause 49 of the Listing Agreement, our Company shall on quarterly basis disclose to the Audit Committee the Applications of the proceeds of the Issue. On an annual basis, our Company shall prepare a statement of funds utilized for purposes other than stated in this Draft Red Herring Prospectus and place it before the Audit Committee. Such disclosures shall be made only until such time that all the proceeds of the Issue have been utilized in full. The statement will be certified by the Statutory Auditors of our Company. Our Company shall be required to inform the material deviations in the utilisation of the issue proceeds to the Stock Exchanges and shall also be required to simultaneously make the material deviation/ adverse comments of the Audit Committee public through advertisement in newspaper. Basic terms of the issue The Equity shares being offered are subject to the provision of the Companies Act, 1956, our Memorandum and Articles of Association, 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.


46

BASIS OF ISSUE PRICE

QUALITATIVE FACTORS

• Experienced Management and Professional Team. • Strategic Locations of Manufacturing Facilities. • Diversified customer base. • Awarded with “ISO 9001 : 2008”. 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)

Note: The EPS for Six Months period ended September 30, 2009 is Rs. 6.63. 2. Price/ Earning (P/E) Ratio

Particulars

P/E based on pre-issue weighted average EPS of Rs. 3.46 [•] P/E based on pre-issue EPS of FY 2009-10 of Rs. 2.09 [•]

3. Return on Net Worth (RONW)

Year Ended RONW (%) Weight

March 31, 2008 15.84 1 March 31, 2009 5.18 2 March 31, 2010 20.64 3 Weighted Average RONW 14.68

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

5. Net Asset Value (NAV) per share

Pre-Issue as on March 31, 2010 (Rs.) 16.74 Post Issue (Rs.) [•]

Year Ended EPS (Rs.) Weight March 31, 2008 3.01 1 March 31, 2009 0.36 2 March 31, 2010 3.46 3 Weighted Average EPS 2.35


47

6. Industry Average P/E

7. Comparison with Peer Group

Name of the Company Face Value (Per

equity shares)

Sales as on

31/03/2010 (Rs. In

Cr.)

RONW (%)

Book Value (Rs.)

EPS (Rs.)

Market price as

on 23/09/2010

P/E Multiple based on Price as

on 23/09/2010

Archidply Industries 10.00 151.30 20.50 47.40 3.59 31.10 8.66 Jollyboard Ltd. 10.00 130.90 56.60 246.20 109.80 491.50 4.47 Oriental Veneer Products Ltd. 10.00 64.91

1.02

25.64 2.04

62.55

30.66

Uniply Industries Ltd.* 10.00 98.17 0.00 15.75 (2.75) 17.35 NA Century Plyboards India Ltd. 1.00 729.98

26.70

10.20 3.64

66.10

18.16

Greenply Industries Ltd. 5.00 932.30 22.00 122.90 22.10 201.85 9.13 Source: Capital Market: August 09- August 22, 2010; Segment –Miscellaneous and *www.bseindia.com Sonear Industries Ltd. 10.00 98.07 20.64 16.74 3.46 - -

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

the Face Value.

The Issue Price of Rs. [•] has been determined by us in consultation with the BRLM and the Co-BRLM, on the basis of assessment of market 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.

Name of Company P/E Multiple based on Price as on 31/03/2010

Highest Oriental Veneer Products Ltd 30.66 Lowest Jollyboard Ltd. 4.47 Industry Average 17.57 Source: Capital Market: August 09- August 22, 2010; Segment –Miscellaneous and www.bseindia.com


48

STATEMENT OF TAX BENEFITS

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS. AS PER THE CERTIFICATE ISSUED BY STATUTORY AUDITORS OF THE

COMPANY To The Board of Directors Sonear Industries Limited 20,NWA, Punjabi Bagh West, New Delhi – 110026. We M/s M.C Jain & Co. (Chartered Accountant) are the Statutory Auditors of Sonear Industries Limited having its registered office at 20,NWA, Punjabi Bagh West, New Delhi - 110026. We hereby certify that under the current tax laws, the following tax benefits inter-alia, will be available to the Company and the members of the Company. However a member is advised to consider in his/her/its own case the tax implications of an investment in the Equity Shares, particularly in view of the fact that certain recently enacted legislation may not have direct legal precedent or may have a different interpretation on the benefits, which an investor can avail.

As per the existing provisions of the Income Tax Act 1961 and other laws as applicable for the time being in force, the following tax benefits and deductions are and will, inter-alia be available to Sonear Industries Limited and its shareholders. We believe that there are no special tax benefits available to the Company and its shareholders.

General tax benefits available: A. Benefits to the company under Act

1. Dividends exempt under section 10(34) and 10(35) of the IT Act.

Dividend (whether interim or final) received by the company from its investment in shares of another domestic company would be exempted in the hands of the company as per the provisions of section 10(34) read with section 115-O of the IT Act. In terms of section 10(35) of the IT Act, any income received from units of a Mutual Fund specified under section 10(23D) of the IT Act is exempt from tax, subject to such income not arising from the transfer of units in such Mutual Fund.

2. Computation of capital gains

Capital assets are to be categorised into short-term capital assets and long-term capital assets based on the period of holding. All capital assets except shares held in a company or any other security listed in a recognised stock exchange in India or units of Unit Trust of India (‘UTI’) or Mutual Fund units specified under section 10(23D) of the IT Act or zero coupon bonds are considered to be long-term capital assets, if they are held for a period exceeding thirty-six months. Shares held in a company or any other security listed in a recognised stock exchange in India or UTI or Mutual Fund units specified under section 10(23D) of the IT Act or zero coupon bonds are considered as long-term capital assets, if these are held for a period exceeding twelve months. As per the provisions of section 10(38) of the IT Act, long term capital gain arising to the company from transfer of a long term capital asset being an equity share in a company listed on a recognized stock


49

exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to Securities Transaction Tax (‘STT’). As per the provisions of section 112 of the IT Act, long-term capital gains other than those covered under section 10(38) of the IT Act are subject to tax at a rate of 20% (plus applicable surcharge and cess). However, proviso to section 112(1) specifies that if the long-term capital gains other than those covered under section 10(38) of the IT Act arising on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20% with indexation benefit exceeds the capital gains computed at the rate of 10% without indexation benefit, then such capital gains are chargeable to tax at the rate of 10% without indexation benefit (plus applicable surcharge and education cess). However, from Assessment Year 2007-2008, such long-term capital gains will be included while computing book profits for the purpose of payment of Minimum Alternate Tax (“MAT”) under the provisions of section 115JB of the IT Act. As per provisions of section 111A of the IT Ac t, short term capital gains arising from transfer of short term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be taxable at the rate of 15% (plus applicable surcharge and education cess), if such sale is entered into on or after October 1, 2004 and the transaction is chargeable to STT.

3. Securities Transaction Tax

In terms of STT, transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder will be chargeable to STT. As per the said provisions, any delivery based purchase and sale of equity share in a company through the recognized stock exchange is liable to securities transaction tax @ 0.125% of the value payable by both buyer and seller individually. The non-delivery based sale transactions are liable to tax @ 0.025% of the value payable by the seller.

4. Exemption of capital gains arising from income tax

As per the provisions of section 54EC of the IT Act and subject to the conditions specified therein capital gains arising to a company on transfer of a long-term capital asset other than those covered under section 10(38) of the IT Act shall not be chargeable to tax to the extent such capital gains are invested in National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) notified bonds within six months from the date of transfer. If only part of such capital gain is invested, the exemption shall be proportionately reduced. The IT Act has restricted the maximum investment in such bonds up to Rs 5 million per assessee during any financial year.

5. Where the long-term specified asset is transferred or converted into money at any time within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the long-term specified asset is transferred or converted into money.

6. In accordance with and subject to the provisions of section 32 of the Income tax Act, the Company will be allowed to claim depreciation on specified tangible and intangible assets as per the rates specified. Besides normal depreciation, the Company, in terms of section 32(1)(iia), shall be entitled to claim Additional depreciation @ 20% of actual cost on new plant and machinery for the period of one year after acquired on or after 31st March, 2005.


50

7. In accordance with and subject to the provisions of section 35D of the Income tax Act, the Company will be entitled to amortise, over a period of five years, all expenditure in connection with the proposed public issue subject to the overall limit specified in the said section.

8. 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.

9. Unabsorbed depreciation if any, for an Assessment Year (AY) can be carried forward and set off against

any source of income in subsequent AYs, as per section 32 of the Act, subject to the (2) of section 72 and sub-section (3) of section 73 of the Act.

Carry forward and Set off of Business Loss

10. Business losses if any, for any AY can be carried forward and set off against business profits for eight

subsequent AYs. 11. 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.

12. As per section 71 read with section 74, Short-term capital loss arising during a year is allowed to be set-

off against short-term as well as long-term capital gains of the said year. Balance loss, if any, should be carried forward and set-off against short-term as well as long-term capital gains for subsequent 8 years.

13. As per section 71 read with section 74, Long-term capital loss arising during a year is allowed to be set-

off only against long-term capital gains. Balance loss, if any, should be carried forward and set-off against subsequent year’s long-term capital gains for subsequent 8 years.

B. Benefits to the Resident shareholders of the company under the IT Act

1. Dividends exempt under section 10(34) of the IT Act

Dividend (whether interim or final) received by a resident shareholder from its investment in shares of a domestic company would be exempt in the hands of the resident shareholder as per the provisions of section 10(34) read with section 115-O of the IT Act.

2. Any income of minor children (Maximum two children) clubbed with the total income of the parent

under section 64(1A) of the Income Tax Act 1961, will be exempt from tax to the extent of Rs. 1500 per minor child under section 10(32) of the Income Tax Act 1961.


Capital assets are to be categorised into short-term capital assets and long-term capital assets based on the period of holding. All capital assets [except shares held in a company or any other security listed in a recognised stock exchange in India or units of UTI or Mutual Fund units specified under section 10(23D) of the IT Act and zero coupon bonds] are considered to be long-term capital assets, if they are


51

held for a period exceeding thirty-six months. Shares held in a company or any other security listed in a recognised stock exchange in India or units of UTI or Mutual Fund units specified under section 10(23D) of the IT Act and zero coupon bonds are considered as long-term capital assets, if these are held for a period exceeding twelve months. As per the provisions of section 48 of the IT Act, the amount of capital gain shall be computed by deducting from the sale consideration, the cost of acquisition and expenses incurred in connection with the transfer of a capital asset. However, in respect of long-term capital gains arising to a resident shareholder, a benefit is permitted to substitute the cost of acquisition/ improvement with the indexed cost of acquisition/ improvement. The indexed cost of acquisition/ improvement, adjusts the cost of acquisition/ improvement by a cost inflation index, as prescribed from time to time. As per the provisions of section 10(38) of the IT Act, long term capital gain arising to a resident shareholder from transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to STT. As per the provisions of section 112 of the IT Act, long-term capital gains [other than those covered under section 10(38) of the IT Act] are subject to tax at a rate of 20% (plus applicable surcharge and cess). However, proviso to section 112(1) specifies that if the long-term capital gains [other than those covered under section 10(38) of the IT Act] arising on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20% with indexation benefit exceeds the capital gains computed at the rate of 10% without indexation benefit, then such capital gains are chargeable to tax at the rate of 10% without indexation benefit (plus applicable surcharge and education cess). As per provisions of section 111A of the IT Ac t, short term capital gains arising from transfer of short term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be taxable @ 15% (plus applicable surcharge and education cess), if such sale is entered into on or after October 1, 2004 and the transaction is chargeable to STT.

4. Exemption of capital gains arising from income tax

As per the provisions of section 54EC of the IT Act and subject to the conditions specified therein capital gains arising to a resident shareholder on transfer of a long-term capital asset other than those covered under section 10(38) of the IT Act 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 such capital gain is invested, the exemption shall be proportionately reduced. However, if the resident shareholder transfers or converts the notified bonds into money (as stipulated therein) within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable in such year. The bonds specified for this section are bonds issued on or after April 1, 2006 by NHAI and REC. The IT Act has restricted the maximum investment in such bonds up to Rs 5 million per assessee during any financial year. Further, as per the provisions of section 54F of the IT Act and subject to conditions specified therein, long-term capital gains other than a capital gains arising on sale of resident house and those covered under section 10(38) of the IT Act arising to an individual or Hindu Undivided Family (‘HUF’) on transfer of shares of the company will be exempted from capital gains tax, if the net consideration from such shares are used for either purchase of residential house property within a period of one year before or two years after the date on which the transfer took place, or for construction of residential house property within a period of three years after the date of transfer.


52

However, if the resident shareholder transfers the residential house property within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable in such year.

C. Benefits to the Non-resident shareholders of the company other than Foreign Institutional Investors

and Foreign Venture Capital Investors

1. Dividends exempt under section 10(34) of the IT Act

Dividend (whether interim or final) received by a non-resident shareholder from its investment in shares of a domestic company would be exempt in the hands of the non-resident shareholder as per the provisions of section 10(34) read with section 115-O of the IT Act.

2. Any income of minor children (Maximum two children) clubbed with the total income of the parent

under Section 64(1A) of the Income Tax Act 1961 will be exempt from tax to the extent of Rs. 1,500 per minor child per year in accordance with the provisions of section 10(32) of the Income Tax Act 1961.


Capital assets are to be categorised into short-term capital assets and long-term capital assets based on the period of holding. All capital assets [except shares held in a company or any other security listed in a recognised stock exchange in India or units of UTI or Mutual Fund units specified under section 10(23D) of the IT Act and zero coupon bonds] are considered to be long-term capital assets, if they are held for a period exceeding thirty-six months. Shares held in a company or any other security listed in a recognised stock exchange in India or units of UTI or Mutual Fund units specified under section 10(23D) of the IT Act and zero coupon bonds are considered as long-term capital assets, if these are held for a period exceeding twelve months.

As per the provisions of section 48 of the IT Act, the amount of capital gain shall be computed by deducting from the sale the consideration, the cost of acquisition and expenses incurred in connection with the transfer of a capital asset. Under first proviso to section 48 of the IT Act, the taxable capital gains arising on the transfer of capital assets being shares or debentures of an Indian company need to be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer into the same foreign currency in which the shares were originally purchased. The resultant gains thereafter need to be reconverted into Indian currency. The conversion needs to be done at the prescribed rates prevailing on dates stipulated. Hence, in computing such gains, the benefit of indexation is not available to non-resident shareholders.

As per the provisions of section 10(38) of the IT Act, long term capital gain arising to a non-resident shareholder from transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to STT. As per the provisions of section 112 of the IT Act, long-term capital gains (other than those covered under section 10(38) of the IT Act) are subject to tax at a rate of 20% (plus applicable surcharge and cess). However, proviso to section 112(1) specifies that if the long-term capital gains [other than those covered second proviso to section 48 and under section 10(38) of the IT Act] arising on transfer of listed securities or units or zero coupon bond, calculated at the rate of 20% with indexation benefit exceeds the capital gains computed at the rate of 10% without indexation benefit, then such capital gains are


53

chargeable to tax at the rate of 10% without indexation benefit (plus applicable surcharge and education cess). As per provisions of section 111A of the IT Ac t, short term capital gains arising from transfer of short term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be taxable @ 15% (plus applicable surcharge and education cess), if such sale is entered into on or after October 1, 2004 and the transaction is chargeable to STT.

4. Exemption of capital gain from income-tax

As per the provisions of section 54EC of the IT Act and subject to the conditions specified therein capital gains arising to a non-resident shareholder on transfer of a long-term capital asset (other than those covered under section 10(38) of the IT Act) 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 such capital gain is invested, the exemption shall be proportionately reduced. However, if the non-resident shareholder transfers or converts the notified bonds into money (as stipulated therein) within a period of three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable in such year. The bonds specified for this section are bonds issued on or after April 1, 2006 by NHAI and REC. The IT Act has restricted the maximum investment in such bonds up to Rs 5 million per assessee during any financial year. Further, as per the provisions of section 54F of the IT Act and subject to conditions specified therein, long-term capital gains (other than a capital gains arising on sale of resident house and those covered under section 10(38) of the IT Act) arising to an individual or HUF on transfer of shares of the company will be exempted from capital gains tax, if the net consideration from such shares are used for either purchase of residential house property (subject to prior approval from Reserve Bank of India) within a period of one year before or two years after the date on which the transfer took place, or for construction of residential house property within a period of three years after the date of transfer.

5. Non resident taxation

Under section 115-I of the IT Act, the non-resident Indian shareholder has an option to be governed by the provisions of Chapter XIIA of the IT Act viz. “Special Provisions Relating to Certain Incomes of Non-Residents” which are as follows: Under section 115E of the IT Act, where shares in the company are acquired or subscribed to in convertible foreign exchange by a non-resident Indian, capital gains arising to the non-resident on transfer of shares held for a period exceeding 12 months, will [in cases not covered under section 10(38) of the IT Act], be concessionally taxed at the flat rate of 10% (plus applicable surcharge and cess) (without indexation benefit but with protection against foreign exchange fluctuation) Under provisions of section 115F of the IT Act, long-term capital gains [in cases not covered under section 10(38) of the IT Act] arising to a non-resident Indian from the transfer of shares of the company subscribed to in convertible foreign exchange will be exempt from income tax, if the net consideration is reinvested in specified assets within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption will be proportionately reduced. However the amount so exempted will be chargeable to tax subsequently, if the specified assets are transferred or converted into money within three years from the date of their acquisition.


54

6. In accordance with the provisions of Section 115G of the Income Tax Act 1961, Non Resident Indians are not obliged to file a return of income under Section 139(1) of the Income Tax Act 1961 if their only source of income is income from investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Income Tax Act 1961.

7. In accordance with the provisions of Section 115H of the Income Tax Act 1961, when a Non Resident

Indian become 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 Income Tax Act 1961 to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money.

8. As per the provisions of section 115 I of the I.T. 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 year under Section 139 of the Income Tax Act 1961, 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 Income Tax Act 1961.

9. Tax Treaty Benefits As per the provisions of Section 90(2) of the Income Tax Act 1961, the provisions of the Income Tax Act 1961 would prevail over the provisions of the tax treaty to the extent they are more beneficial to the Non-Resident.

D. Benefits to Foreign Institutional Investors (‘FII’)

1. Dividends exempt under section 10(34) of the Act

Dividend (whether interim or final) received by a FII from its investment in shares of a domestic company would be exempt in the hands of the FII as per the provisions of section 10(34) read with section 115-O of the Act.

2. Long term capital gains exempt under section 10(38) of the Act.

As per the provisions of section 10(38) of the Act, long term capital gain arising to the FII from transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to STT.

3. Capital gains

As per the provisions of section 115AD of the Act, FIIs are taxed on the capital gains income at the following rates: Rate of tax

Nature of Income (%)* Long-term capital gains 10 Short-term capital gains 30


55

* Plus applicable surcharge and cess The benefits of foreign currency fluctuation protection and indexation as provided by section 48 of the Act are not available to a FII. As per the provisions of section 10(38) of the Act, long term capital gain arising to FII from transfer of a long term capital asset being an equity share in a company listed on a recognized stock exchange in India, shall be exempt from tax, if such sale is entered into on or after October 1, 2004, and the transaction is chargeable to STT. As per provisions of section 111A of the Act, short term capital gains arising from transfer of short term capital asset, being an equity share in a company or a unit of an equity oriented mutual fund shall be taxable at the rate of 15% (plus applicable surcharge and education cess), if such sale is entered into on or after October 1, 2004and is chargeable to STT.

4. Tax Treaty Benefits

As per section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the tax treaty to the extent they are more beneficial to the FII. Thus, an FII can opt to be governed by provisions of the Act or the applicable tax treaty whichever is more beneficial.

E. Benefits to the Mutual Funds


Dividend (whether interim or final) received by a Mutual Fund from its investment in shares of a domestic company would be exempt in the hands of the Mutual Fund as per the provisions of section 10(34) read with section 115-O of the Act.

2. 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 (‘SEBI’) or regulations made there under, Mutual Funds set up by public sector banks or public financial institutions or Mutual Funds authorised by the Reserve Bank of India, would be exempt from income tax, subject to the prescribed conditions.

F. Benefits to the Venture Capital Companies / Funds


Dividend (whether interim or final) received by a Venture Capital Company (‘VCC’)/ Venture Capital Funds (‘VCF’) from its investment in shares of another domestic company would be exempt in the hands of the VCC/VCF as per the provisions of section 10(34) read with section 115-O of the Act.

2. In case of a shareholder being a Venture Capital Company/ Fund, as per the provisions of Section

10(23FB) of the Income Tax Act 1961, any income of Venture Capital Companies/ Funds registered with the SEBI, would be exempt from Income Tax, subject to the conditions specified in the said subsection.

G. Benefits under the Wealth Tax Act, 1957

Asset as defined under section 2(ea) of the Wealth-tax Act, 1957 does not include shares in companies and hence, shares are not liable to wealth tax.


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H. Benefits under the Gift Tax Act

As no Gift tax is leviable in respect of gifts made on or after October 1, 1998, but before April 1, 2006.As per amended section 56 (2) (vi) any gift received in money, the aggregate value of which exceeds Rs. 50,000/- is received without consideration, the whole of the aggregate value of such sum will be chargeable to tax. As per newly inserted section 56 (2) (vii) value of sum of money / immovable property/ movable property received without consideration or for inadequate consideration is in exceed of Rs. 50,000/- than the whole of the aggregate value of such sum will be chargeable to tax with effect from Dt: 01.10.2009. Notes 1. All the above benefits are as per the current tax laws as amended by the Finance Act, 2009 &

Finance Bill, 2010 and will be available only to the sole/ first named holder in case the shares are held by joint holders.

2. In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject to any benefits available under the double taxation avoidance agreements, if any, between India and the country in which the non-resident has fiscal domicile.

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 scheme.

4. Tax implications of an investment in the Equity Shares, particularly in view of the fact that certain recently enacted legislations may not have direct legal precedent or may have a different interpretation on the benefits which an investor can avail.

5. Our views expressed herein are based on the facts and assumptions indicated above. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. We do not assume responsibility to update the views consequent to such changes.

For M. C. Jain & Co., (Chartered Accountants) Sd/- (Manoj K. Patawari) (Partner) Membership No.: 55258 Place: New Delhi Date: 16/08/2010


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SECTION III - ABOUT THE ISSUER COMPANY

INDUSTRY OVERVIEW The information in this section is derived from DRHP report on INDIAN PLYWOOD INDUSTRY by CARE Research. It has not been independently verified by the Company, the Book Running Lead Manager or the Co-Book Running Lead Manager or their respective legal 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. The disclaimer clause of CARE Research is as follows: This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this report does not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. The opinion expressed in this report cannot be compared to the rating assigned to the company within this industry by the ratings division. The opinion expressed is also not a recommendation to buy, sell or hold an instrument. CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this product. This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form or manner without prior written permission of CARE Research.

Background of Indian Economy The Indian economy is one of the largest economies in the world with a GDP at current prices in fiscal 2010 estimated at Rs. 44.64 trillion (approximately US$1 trillion). It is one of the fastest growing major economies in the world, with a real GDP growth rate (inflation-adjusted) of 5.7% in calendar year 2009 and an estimated 9.4% for calendar year 2010. The table below shows India’s economic growth in comparison to other developing countries, as well as the International Monetary Fund’s (IMF) projections for economic growth through calendar year 2011.


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According to International Monetary Fund, World Economic Outlook Database, April 2010, per capita GDP at factor cost (at constant prices) in India has grown from around Rs. 13,669 in the year 1991 at the time of liberalization to an estimated Rs. 33,751 in the year 2010. This increase in per capita income has created increasing wealth and thereby higher disposable income. The construction sector in the country grew at 6.50% in FY2009-10 against 5.95% in FY2008-09. The housing market is a highly sensitive investment area worldwide and investment in the housing sector is often recognised as a barometer to measure the health of an economy. The sector, by its nature is widely linked with a very large number of manufacturing segments. There are about 250 industries, large and small, which depend on the performance of housing and construction industry. This includes larger ones that make cement and steel, medium ones that make plywood, paint, tiles, electrical and the smaller ones that make nuts and bolts. These linkage effects not only stimulate production and investments in the linked segments of manufacturing, they also push up the aggregate additional income generated in the process. In sum, growth in housing stimulates production and overall growth in the economy. In view of potential growth of housing and infrastructure sector, the overall demand for plywood and laminates is expected to remain buoyant in the short to medium term. Over view of Plywood industry in India India is one of the largest users of plywood in Southeast Asia with sufficient wood of all varieties. The Indian plywood industry which is growing at a healthy rate remains a niche industry. Moreover, with the recent spurt in the housing sector, plywood and laminates are expected to gain significant role going forward. The Indian plywood industry is estimated to be approximately Rs 10,000 crore and the laminate industry accounts for almost Rs 3,000 crore (app. total Rs 13,000 crore/US$2.77 bn). The plywood industry is growing at a rapid pace of average 15-20% annually with approximately 600 units currently operating across the country. The market is highly fragmented and the small scale units account for approximately 80% of the plywood industry and roughly 50% of the laminate industry. The organised sector’s (medium-to-large scale units) 25% annual growth outperformed the overall industry growth. The small scale unit segment has advantages in terms of excise waivers and other benefits due to their Small Scale Industry (SSI) status. The SSI units generally are not fully integrated ones. The Herfindahl Index of Concentration (HIC) for the plywood industry stood at 0.117 in FY2008-09. (Source: CMIE) In India, there are two main types of wood products, panel and plywood,, Product categories include veener Sheets, particle board (composite wood core with plastic laminate finish), panel products (fibre wood), plywood made from both hard and softwood (veneered panels and laminated woods) and medium density fibreboard (MDF). Indian particle board and plywood industry have large producers who account for 15% of the total production, producing approximately 30 mn sqm of plywood and block boards. Of the total market, particle board accounts for over 22% of the market with the rest over 78% accounted by plywood segments. Logs, the key RM for the industry, accounts for 67% of all wood and wood based products imported into India due to relatively lower import tariffs and a local preference for unprocessed wood. India imports logs mostly from Malaysia, Myanmar, Ghana and New Zealand due to a freight advantage and at relatively lower prices whereas total imports of logs have increased 72% y-o-y to US$1.14 bn in FY2009. Overview of Indian Furniture Industry The Indian furniture industry manufactures and exports quality furniture in terms of design, fashion and technology. Indian furniture has a strong reputation worldwide given its artistic component. Nonetheless, a large segment of furniture is imported from various foreign countries as well. It is estimated that the overall Indian furniture industry generates a turnover of Rs 36,000 crore annually.


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About 85% of the industry falls under small scale units segment and remaining 15% is under organized sector (medium-to-large scale units), made up of manufacturers and exporters catering to the different segments of the industry. Backed by a growing real estate, tourism and hospitality sectors on one hand and rising per capita income and lifestyle product consumption on the other, the Indian furniture industry is expected to grow at a Compounded Annual Growth Rate (CAGR) of 13-15% in the next five years. The concept of good living and better lifestyle is fast catching up the middle class' psyche of Indians. Interior designing is no longer confined to rich and wealthy Indians and even the middle class people do not mind paying extra in getting their homes decorated with modern and designer furniture boosting overall demand. Applications and Uses of plywood Like many developing markets, India is experiencing a rapid phase of urbanization with change in lifestyle trend. There is a growing demand for engineered wood panel products and higher infrastructure, hence industry players expect positive growth for wood products such as plywood, particleboard, MDF, oriented-strand board and laminated veneer lumber, going forward. With the surge in the housing sector in India, there is increased demand for interior wood products comprising of decorative panels, wooden floorings and readymade furniture. India remains a net importer of furniture, however small quantities of furniture are being exported representing not more than 0.25% of the total global furniture industry. Plywood alone accounts for 78% of the wood panel market in India, with the rest comprising of engineered panels such as MDF and particleboard (22%). However, for the housing interiors industry, the Indian market is still dominated by plywood and block board. The Indian furniture industry which is the primary user of plywood in India exports its products worldwide given the reputation for its design, intricacies and build quality. Plywood is extensively used in both residential and commercial units. In housing, plywood is essentially used in the kitchen (cabinets), bedroom (wardrobes and bed) and also in the living room (sofas, units etc.) In offices, plywood is used in making cubicles, computer tables, partitions, filing cabinets and more.

Source: CARE Research

Industry Classification

1. Types of wood based panel

The interior infrastructure wood sector comprises wooden panels, gypsum boards, decorative veneers, decorative laminates, particleboards and MDFs. Compared to solid timer, wood panel based products are conserves the environment since it saves considerable amount of scarce wood. Given their versatility in application and efficiency in wood raw material utilization the wood panel products have to a great extent replaced solid wood in both structural and non-structural uses.


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a. Plywood Plywood is a laminated product made up of numerous thin strips (or the veneer) of wood that are peeled from trees and laid in alternating directions and bonded with glue into strong, stable sheets. The grain of plywood not only runs in one direction, but each layer runs in the opposite direction. Hence plywood is available with odd layers which make it look like a natural piece of wood. Some of the regular varieties of plywood that are available in the market are: shuttering plywood, packaging plywood, plywood drums, flush doors, commercial & decorative plywood, block boards, marine plywood, moulded plywood furniture and chair seats, laminated picking sticks for cotton and jute textile industry, sliced decorative veneers of walnut, teak, rosewood etc. and compregnated wood veneers required for heavy chemical industry and electrified railways.

b. Particleboard

Particleboard is a reconstituted constructional panel particularly developed as a substitute for natural constructional wood and is made from low grade waste woods or from certain agricultural ligneous wastes. In that respect particleboard assumes one of the greatest importance in the wood panel products industry from the point of view of conservation of scarce forest resources in a country (Source: fippi.org). c. Medium Density Fibreboard (MDF)

Fibreboard is a board encompassing sheet materials of widely varying diversities manufactured from refined or partially refined wood fibres or other vegetable fibres. Bonding agents and other materials may be incorporated in the manufacture to increase strength, resistance to moisture, fire or decay (Source: fippi.org). 2. Pricing

The Indian plywood sector has been affected from the increasing costs of raw materials in recent times. Prices for local teak have been showing an upward trend in the past few years. According to industry sources, total sales of teak logs of 8,000-10,000 cubic metres were re-ordered in hardwood auctions with prices around Rs.50-75 per cu.ft. higher than in the previous auctions at the end of July 2010. Premium quality saw logs being priced at Rs.1,500 per cu. ft., medium quality around Rs.1,000-1,200 per cubic ft. and average quality attracted prices of Rs.800 per cu. ft. Below is the list of average plywood rates in India currently:

Plywood (ex-warehouse) Rs per sq.ft. Plywood (ex-warehouse) Rs. per sq ft. 4mm 28.0 6mm 37.0 12mm 54.0 15mm 65.0 18mm 78.0

Source: Industry and CARE Research

Locally Manufactured Plywood “Commercial Grade”

Rs. per sq ft.

Rubberwood Hardwood 4mm 10.00 17.50 6mm 14.50 25.50 12mm 18.25 28.60 15mm 22.25 30.70 18mm 28.00 41.30 5mm Flexible ply 18.50 22.50

Source: Industry and CARE Research


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Key Industry Characteristics

Highly fragmented industry with approximately 85% falling in the small scale units segments and remaining 15% in the medium-to-large segment.

Growth of the industry directly related to economic growth and construction activity.

Due to limited resources, timely availability of raw material at right price is crucial to maintain a steady production line.

The industry has made good in-roads in the country with extensive distribution network.

Increasing brand consciousness

High working capital intensive and aggressive pricing strategy to maintain steady cash flows.

Demand Drivers 1. The Indian Real Estate Sector The Indian real estate industry is one of the primary users of plywood and is growing at a healthy pace. The sector accounts for 4.5% of the gross domestic product (GDP) with urban housing accounting for 3.13%. This contribution is expected to rise to 6% in the next five years. The real estate boom is primarily driven by rising middle-class incomes, nuclear families, attractive interest rates, increasing mortgage finance penetration, growing home ownership and attitude changes in the working population. Loan disbursal to the housing sector increased from Rs 200,000 crore in 2006 to Rs 290,000 crore in 2009, at a CAGR of 11%.

The real estate market is expected to grow at a CAGR of 15-16% over 2010-2015, driven by 18-19% growth in residential/ housing segment, 55-60% growth in retail space and 20-22% growth in the commercial real estate segment.

The medium housing segment is expected to record a CAGR of around 25% and luxury housing, a CAGR of nearly 33% during 2009-2013.

The Eleventh Five Year Plan (FY2007-12) indicates a shortage of more than 25 mn housing units among the middle and low income groups.

According to IBEF, the Finance Ministry allocated US$207 mn to grant 1% (up to US$20,691) on home loans below US$41,382

Structure of Real Estate Sector:

Residential Commercial

Hospitality

Malls Multiplexes

Office

Real Estate Sector

Retail

Source: CARE Research


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2. Burgeoning middle class and growing affluence According to Central Statistics Office, the consumer purchasing power of India has increased considerably and has reduced the number of people living below the poverty line. India’s per capita income increased 5.30% y-o-y from Rs 38,695 in FY2008-09 to Rs 40,745 in FY2009-10. According to market sources, the average net worth of the Indian household is expected to grow from US$12,000 in 2007 to US$57,000 by 2017 and per capita nominal gross domestic product is likely to grow at a CAGR of 12.2% over FY2010-14 period to reach US$1,666 in FY2014. The annual household income in the top 20 Indian cities is projected to grow 10% over the next eight years. Additionally, India is urbanising at a very brisk rate, around 28% which is faster than its population growth according to Indian Urban Poverty Report 2009. Increase in income will improve affordability, driving the demand for residential units. According to McKinsey estimates, India’s middle-class is expected to account for 85% of urban household and 70% of total consumption by FY2015. The upper class will account for 7% of households and 28% of consumption. With rising middle class, discretionary spending on lifestyle and premium products is expected to increase to around 70% of most of the household expense pie by 2025. 3. Boom in organized retail sector in India The Indian retail market is the world’s fifth-largest and according to CARE Research estimates the organised retail share in India to grow from 5% in FY2008 to 6.8% in FY2011 and to 10.4% of the total retail market by FY2012. The organised retail industry is likely to add significant additional retail space in the next few years with the entry of global giants. The number of malls, multiplexes and hyper-markets are expected to increase manifold in the coming years which would directly lead to increased demand for plywood in India. 4. Growth in hospitality sector Given strong influx of business travellers and medical tourists backed by a robust economy and government initiatives has led to the re-emergence of India as a preferred tourist destination. CARE Research expects that the Indian hospitality industry to add over 40,000-45,000 rooms across the next five years. The demand for travel and tourism in India is expected to grow at CAGR of 8.2% between 2010 and 2019, making India the third fastest growing in this segment while capital investment in India’s travel and tourism sector is expected to grow 8.8% during the same period. According to IBEF, revenues from the Indian travel and tourism industry are expected to increase from US$100 bn in 2008 to US$275.5 bn in 2018. India is projected to become the fifth-fastest growing business travel destination across 2010-2019 with an estimated real growth-rate of 7.6% which will increase the demand for hotels and correspondingly boost the demand for plywood. The sector is expected to invest US$11.5 bn over two years as more than 40 international brands would establish their presence in India by 2011, strengthening the demand for plywood. Export – Import Statistics India is a net importer of furniture while small quantities of furniture are being exported representing not more than 0.25% of the global furniture industry. The global recession has affected India’s imports and export levels in FY2008-09. Exports of wood products are performing better and for the five year period ending FY2009 the Indian Plywood exports have grown at a CAGR of 18.7% in rupee terms. However, exports of wood and wooden products have been partially impacted due to sluggish performance of North America and Europe. Logs account for the largest portion (around 67%) of all wood and wood products imported into India due to relatively lower import tariffs and a local preference for unprocessed


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wood. According to industry association, Chemicals and Allied Products Export Promotion Council (CAPEXIL), imports of logs have increased by 72% y-o-y to US$1.14 bn. Imports growth over the years is steady, augmenting domestic supplies to a large extent. Besides supporting housing and industrial infrastructure, imports help forest conservation efforts in the country. India imports logs mostly from Malaysia, Myanmar, Ghana and New Zealand due to freight advantage and relatively lower prices. Export figures of plywood and veneers Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009

Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Quantity (tons) 5,481.6 13,155.4 14,009.7 16,760.1 22,470.6 29,883.6 Exports (Rs. cr) 91.7 132.9 160.9 215.3 220.2 215.7 Source: Centre for Monitoring Indian Economy (CMIE) Import of plywood and veneers ear FY2004 FY2005 FY2006 FY2007 FY2008 FY2009

Year FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Quantity (tons) 4,989.0 7,268.4 13,312.5 11,350.7 14,240.9 18,749.3 Imports (Rs. cr) 35.9 46.0 85.8 121.9 188.8 253.8 Source: CMIE Porters Five Force Model Outlook On the back of improved economic situation in India and the Government's thrust towards infrastructure and real estate development to help sustain 9% economic growth in the country, the Government of India has anticipated an investment of approximately US$492 bn according to the Eleventh Five Year Plan. In

Barriers to Entry – Medium to High

Licences are issued on very strict basis, thus making it difficult to enter the business.

Bargaining Power of Suppliers – Medium

With increasing environmental concerns and limited resources, tight demand-supply situation prevails. Overseas supply can be disrupted due to uncertainty in raw material availability.

Competitive Rivalry – Medium to High

With large number of unorganized and organized players in the market, competition remains stringent and pricing power restricted.

Bargaining Power of Buyers – Medium

Growing population and significant increase in construction activity has resulted in unrelenting demand for plywood. Also, aesthetically

Threat of Substitutes – Low to Medium

Based on high price of plywood, many consumers are moving towards plastic and alloy based products.


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the recent finance budget (FY2010-11), a total of Rs. 173,552 crore has been earmarked for infrastructure development, which accounts for over 46% of total plan allocation. The Indian real estate sector plays a significant role in the country's economy and is second only to agriculture in terms of employment generation. It contributes significantly towards GDP growth and almost 5% of the country's GDP is contributed by the housing sector, which is expected to rise to 6% in the medium term. According to the Tenth Five Year Plan, there was a shortage of 24.71 million dwelling units. Given the demand over the next 10-15 years, around 80 to 90 mn dwelling units are expected to be constructed according to industry sources. The real estate market in India is expected to grow rapidly due to improvement in affordability, better job security and availability of housing finance. Plywood and laminates products are an integral part of interior designing and furnishing industry and hence the demand for these products is directly related to the growth of infrastructure and real estate sector. With continued government focus on infrastructure and real estate sector the demand for plywood is expected to remain buoyant. Private consumption of housing units is also increasing significantly on a y-o-y basis given higher disposable income leading to better and higher standards of living resulting in increased demand for branded plywood products. With the housing sector getting a boost, interior wood products comprising of decorative panels, wooden floorings and ready-made furniture will get a lift. CARE Research expects the Rs. 13,000 crore plywood and laminate industry to grow by around 18-20% y-o-y in FY2011 given higher activity in the domestic real estate sector- new residential and commercial units as well as refurbishment demand. Risks and Key Concerns Greater environmental and climate change activism, could lead to highly restricted supply of logs

and timber thereby impacting the plywood industry. Constant increase in raw material prices and shortages could affect the demand and margins in the

plywood industry and thus dependence on high value imports. Given its relatively higher price, wood could be substituted by alternative materials such as plastics,

synthetic materials and alloy based products. Competition from both unorganized and other organized players, leading to difficulties in improving

market share which could exacerbate by cheap imports. There is increased shortage of labour and power in many states in India hindering growth.

Government policies and regulations Prior to 1970, there was no restriction on setting up a plywood mill in the country. The only criterion required by the business entity was to obtain an Industrial License which was being considered by the Ministry of Industry after consultation with Ministries including the Ministry of Environment & Forests. The Forest Ministry was being consulted for ascertaining sustainable raw material of timber for a particular project. Hence, in that era the wood-based industry was more or less in medium and large scale segment.


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From 1988 onwards, the wood-based industry was under compulsory industrial licensing regime whether a small scale unit or a large to medium-sized unit and new undertaking or substantial expansion would require Industrial Licence. In 1997, the Government of India completely de-licensed the wood-based industry and as a result more than 2,000 SSI units set up all across the country. Pursuant to the order of the Hon’ble Supreme Court, unlicensed veneer & plywood companies prohibited to operate in India. For a new company to venture in veneer or plywood industry requires a prior permission from the Central Empowered Committee, Govt. of India. The grant of a license is further subject to strict compliance with the prescribed regulatory norms and relaxation of any of the norms is not permitted. These complexities in obtaining new licenses make it difficult for the new players to enter in, thus providing competitive edge to existing established players. In the year 2007-08, the excise duty on plywood related products was reduced by half to 8% and is now raised to 10% in the recent budget (FY2010-11). VAT in Maharashtra is currently ruling at 12.5%.


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BUSINESS OVERVIEW Our Company was incorporated on 14/05/2004 under the Companies Act, 1956 as ‘Donear Decor Private Limited’ and received its Certificate of Incorporation from the Registrar of Companies, Delhi & Haryana. The name of the Company was subsequently changed to Sonear Industries Private Limited vide certificate of incorporation dated 12/04/2010. Later the Company was converted into a public limited and received a fresh certificate of incorporation dated 21/05/2010 pursuant to the change in name. We are the flagship company of Jitendra Kejriwal group promoted by Mr. Jitendra Kejriwal and Mrs. Sapna Kejriwal. Our group has been in the arena of plywood business for over two decade catering to different type of customers under the brand name “Donear” and has recently launched our other brand as “Sonear”. Our Company has modern state of the art manufacturing unit to manufacture wood panel products and decorative surfacing products at Haryana. Our manufacturing facility is strategically located at Rohad, Haryana that gives us proximity to access one of the trading hub of wooden products in India at Delhi. It is only 50 kms away from Inland Containers Depot Delhi that helps in lower transportation cost. Presently our Company has only one manufacturing unit with stock depots at Delhi, Ahmedabad and Bangalore. Our Company has a network of 34 distributors and stockist spread across 18 states of India, with around 2000 dealers providing shelf presence to our products. We believe that our brand is well acceptable amongst the architects, interior designers, contractors, builders, etc. and is one of the strong brands in the Indian Plywood industry. We also believe in building a long term relationship with our customers by providing superior quality products. Our quality product is result of the efforts made by Research and Development and Quality Assurance team at our manufacturing unit We have also received Certificate from Bureau of India Standards for Decorative Thermosetting Synthetic, Resin Bonded Single Face Laminated Sheet” vide letter dated 30/12/2008. The graphical representation of our Sales and Profit for last three financial years is hereunder:


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Competitive Strength:

1. Dealer Network:

We have 34 distributors and stockiest spread over 18 states of India, with around 2000 dealers providing shelf presence to our products. We believe that the distributors of our product are the life line of the company and hence we have been focusing on building and maintaining long term relationship with them. We organize meetings and conferences with distributors to understand the developments of markets and the product acceptability and challenges faced in the market. We also organize annual functions for our dealers and distributors to recognize their performances and achievements for the Company. It also acts as motivational tool and helps in building loyalty of distributors towards our products.

2. Experienced Management

We benefit from the leadership of our management team, which has extensive experience in the wood based panel industry. We opine that the experience, leadership quality, understanding the pulse of market and decision making skills of our senior management team have been instrumental in growth of the Company. In addition to our senior management team, we also believe that our middle management team and skilled work force comprising of operational and marketing personnel provide us the depth needed to manage our rapid growth.

3. Multiple Product Capability

We have developed a range of product offerings in order to address the varied and expanding requirements of our customers. Presently our core products are Decorative Plywood and Laminates. However our both the core products have large variety in form of price and design that allows our customers to source most of their product and also enables us to expand our business from existing customers, as well as address a larger base of potential new customers.

4. Innovation and Revolution

We believe that innovation and revolution is the core facet for success of our brand. With the efforts of our research and development team we introduced the “PCT Technology” i.e. Pre-Press Calibration Technology (PCT) to provide solution for inferior finish of plywood. This process involves giving individual attention to key components of the ply to make the finish products flawless. We also brought the revolution concept in plywood technology by introducing 6 ply construction in 4mm thickness compared to earlier technology of 4 ply in 4 mm thickness. This constitution is 2.5 times stronger than that of ordinary plywood and thereby increases the life of the plywood.

5. Stringent Quality Check

The Company believes in providing the best possible quality to the customers. There are quality checks in place that prevent any defective material from reaching the customer. Quality control measures are in place at every stage of manufacturing process. The Company also has a well-equipped quality control laboratory.

6. Brand Name

Brand “Donear” has created a niche for itself amongst the other brands operating in this mostly unorganized and fragmented industry. Our quality and diversified product portfolio with wide price range has enabled us to tap different segment of customers over the period. Presently, all our products manufactured are sold under the umbrella of “Donear”. However, the brand “Donear” has been registered by third party and hence the Company to safeguard itself has launched another brand namely, “Sonear” as a part of transformation process of re-branding ourselves from Donear to Sonear.


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7. Entry Barrier

We hold factory license in segments regulated by the government which restrict and regulate the grant of new licenses for the manufacture of wood based products. Government regulations represent a large entry barrier in this industry segment in India. Pursuant to the order of the Hon’ble Supreme Court dated October 29, 2002, unlicensed saw mills, veneer and plywood industries are not permitted to operate in India. Further, opening of a new saw mill, veneer or plywood industry requires a prior permission from the Central Empowered Committee. The grant of a license is further subject to strict compliance with the prescribed regulatory norms and relaxation of any of the norms is not permitted. These complexities in obtaining new licenses make it difficult for new players to enter the market. We therefore believe that our production license gives us a competitive edge. Further, the State Level Committee (appointed by Central Empowered Committee (CEC)) has already given us their approval and recommended to CEC for issuance of Forest License, for establishment and operation of Particle Board Plant. Business Strategy

1. Introduction of new products We plan to introduce additional products in our portfolio to make our brand a “one stop shop” for all the wood based panel requirements that would assist to consolidate our position as an integrated player in the wood based products and interior infrastructure and furnishing industry. The proposed setting up of manufacturing unit for “Particle Board” at Yamuna Nagar, Haryana is first step towards the target objective. The aim of our Research and Development team is to strive and develop new and unique products to stay ahead in the competitive industry and provide quality products.

2. Opening up of new showrooms We plan to invest substantially in opening of our own showrooms to cater the customers directly from our outlet and to improve the profit margins. These showrooms would display all variety of our products with an objective to increase its reach and provide its customers all the products under one roof.

3. Optimizing Productivity

We have not fully utilized the installed capacity in last three years. Our Company has proposed to install balancing equipments and equipments from the issue proceeds that shall assist the Company to increase the production of decorative plywood and laminates to achieve the economies of scale and utilize the maximum installed capacity. Infrastructure Facilities • Warehouse: The Company has in-house warehousing facility at factory with a total area of 40,000 sq

meters for stocking of the raw material and finished products. The Company distributes the finished products to its different depots at Delhi, Ahmedabad and Bangalore and to its distributors from the factory.

• Water: The water requirements of the factory are catered through in-house bore well facility and water supply by private company. The water requirement for manufacturing of our product is substantially low since it is a dry process. The water requirement on daily basis is around 10,000 litres which would increase to around 15,000 – 20,000 litres after the proposed expansion.


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• Electricity: The electricity requirement of the Company is catered through “Uttar Haryana Bijli Vitran Nigam”. The Company has received sanction of load 899.41 KW CD – 950 KVA on 11 KV supply pressure vide letter dated 17/10/2007. The Company has also installed four Diesel Generator Sets of 200 KVA each for uninterrupted power supply and smooth flow of manufacturing operations. For the proposed expansion we would apply for additional power load sanction from Uttar Haryana Bijili Vitran Nigam. We believe that we would obtain the sanction for additional power requirement easily.

Raw Materials Our Company procures raw material from domestic and international suppliers. The major raw material used for producing veneer is core wood or timber log which is readily available in Indian markets and also imported from the other countries. We also procure absorbent craft paper, decorative papers, chemicals and adhesive for manufacturing of our other products. Products We primarily manufacture Decorative Plywood, Reconstituted Decorative Plywood and Laminates that is used for interior infrastructure. Our customers include architect, interior designers, carpenters, retail customers, etc. We offer wide spectrum of decorative veneer procured from the forest of Europe, America, Africa, Burma and India which is turn is manufactured as Natural Decorative Veneer Plywood and Reconstituted Decorative Plywood. Decorative Plywood is classified into following categories - Natural Decorative Plywood

Our Company has about 150 different and wide Species of Natural Decorative Veneer Plywood in its range and which conform to IS:1328 standards. Our Company sources the Wood Logs and also sliced Veneer from different parts of the world and slices / cuts/ sizes them in desired sizes. They are then pressed on top of the Plywood to make the final Product. Our Company has recently introduced some new innovations in decorative plywood - texture finish veneer which have been very well acknowledged by the market.

- Reconstituted Decorative Plywood

Reconstituted decorative plywood is made from plain veneer that is passed through a dying process to give a wide spectrum of sylvan shades and patterns. They are also referred to as mirror reflection of natural decorative plywood that is available at more affordable prices. Price advantage coupled with great wooden texture & design makes this product as one of the wide selling product of our Company.

Laminates Our Company has more than 200 exciting shades in its range of Laminates and more than 20 Special texture finishes. Our Laminates conform to the IS:2046 standards and are made from the one of the finest quality imported base paper and “A Grade” Kraft Paper. They are available in standard size of 8'X4' sheets and in 1mm thickness which can be increased as per customer and projects specific requirement. Our Company has recently introduced a special limited edition range of Laminates by the name of FUSION which has been very well received by the market.


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Equipments

The details of major machineries functional at our manufacturing unit are as follows:

Sr. No Name of Machinery Quantity (nos.)

Decorative Plywood Division 1 Slicer Machine 4 2 Roller Dryers 2 3 Hot Press 4 4 Wide Belt Sander 2 5 Saw Mill 1 6 Core Jointer 1 7 Veneer Splicing Machine 1 8 Jointer 1 Laminate Division 1 Impregnator 3 2 Lamination Press 1 3 Sanding machine 1 4 Cutting Machine 1

Client

We sell our products to distributors and stockiest who in turn sell it to larger customers and end users. We participate in government tenders and also market ourselves to interior designers, architect or at times directly to large corporate to supply our products.

Quality Assurance & Research and Development: Our dedicated team for monitoring quality and the research & development team have contributed significantly for providing quality product to the customers. We focus on the quality of raw material sourced from the vendors and subsequently, on monitoring the manufacturing process to ensure that the finished product is of desired quality and as per the standard of BIS. Our Company has well equipped laboratory and testing equipments to carry out the development in improving quality and formulating new products to assure good quality. Our all products are ISI marked and the company has ISO 9001 certification . Marketing and Selling Strategy We believe that strong relationship and wide distribution network plays pivotal role in success of marketing and selling strategy of the Company. We have large presence in the north region with our own sales depots, distributors, dealers, sub dealers and retailers providing us the desired visibility alongwith fast developing network in other regions of India. Our sales and marketing team periodically reviews new products, assesses market trends and develops and builds business relations. Presently our company has classified the target customers in following areas: 1. Distributor Network: These comprise of 34 distributors spread across 18 states that in turn cater to

stockiest/sub dealers/retailers.

2. Institutional Client: These comprise of various government agencies/institutions, real estate companies, large scale contractors.

3. End user client: These comprise of architects, interior designers, furniture manufacturing companies,

carpenters, etc.


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We undertake promotional activities as a part of our brand building exercise by advertising in print media, hoardings at high traffic areas and prime locations, wall paintings, etc. We also organize events for distributors, dealers, contractors, architects to build business relationship. Our marketing network of dealers is represented below:

Properties

Leased properties

Sr. No.

Location Licensor Rent (Rs)

Deposit (Rs)

Area Period of Agreement

Factory Units 1 28 kms, Rohtak

Milestone, Delhi Rohtak Road, Rohad Nagar Bahadurgarh, Distt. Jhajjar-124501, Haryana


2,40,000/-per month

Nil 37086 sq. yds

15 Years commencing from 17/06/2004

2 Village Damla, Delhi Road, District – Yamunanagar, Haryana (Proposed New Unit)

Surya Vikas Plywood Private Limited

1,00,000/- 10,00,000/- 4.09 acres

10 years commencing from 01/04/2010


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Sr. No.


Deposit (Rs)


Registered Office 3. 20, North West Avenue,

Punjabi Baugh, Club, Road, New Delhi – 110 026


1,00,000/- per month

Nil 200 sq. yards


Stock Depots 4. Khasra No. 62/ 20, 50th

KM, Rohtak Mile Stone, Mundka, New Delhi – 110041


20,000/- per month

10,00,000/- 1220 sq yds


5. G1, Corporation No. 20/3, Ashwath Katte Road, Kasturiba Nagar, Near Old Tolgate, Mysore Road, Bangalore - 560026

Mr. Ajit Singh Dhaliwal

31,752/- (includes service tax)

2,80,000/- 1800 sq ft


2.) Leave and License

Sr. No.


Deposit (Rs)


Purpose

1. Godown No. C/3, Highway Estate, Survey No. 378/3 of Mouje Okaf-Sarkhej, Taluka City, Dist Ahmedabad

Mr. Mustufabhai Asrafali Chejara

9,476/- 21,303/- 133 Sq Yards

11 months commencing from 21/05/2010

Stock Depot 2. Godown No. C/4,

Highway Estate, Survey No. 378/3 of Mouje Okaf-Sarkhej, Taluka City, Dist Ahmedabad

Ms. Sabinaben Sauketbhai Solanki

9,476/- 21,303/- 133 Sq Yards

11 months commencing from 21/05/2010


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MANUFACTURING PROCESS OF OUR PRODUCTS 1.) Decorative Plywood

STAGE 1 STAGE 2 & 3

FINAL STAGE

LOGYARDS CORE / FACE

SAW MILL DRYER

SLICING CORE PRESS

DRYER

GLUE SPREADER CUTTING

HOT PRESS

SPLICING CUTTING

GLUE SPREADER

HOT PRESS

CUTTING

SANDER

DESPATCH

CALIBRATED


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Process Brief The manufacturing process of decorative plywood can be divided into four stages. The detail of process of each stage is described as under: Stage 1 Wooden Logs (Imported/ Indigenous) after purchased are put or collected in the water pond and the log yard. These logs are sent to saw mill for sawing and for converting logs into beam. After sawing, the beams are put into vat for boiling and then send to slicer for slicing where the beams are converted into veneers. Thereafter, veneers are removed, the dried veneers are cut into required sizes with the help of jointers/ clippers. Thereafter, the veneers are stitched together to form a sheet with the help of splicers. Stage 2 & 3 In the second and third stage, wet core veneer is sent to dryer for drying and removing moisture. After the core veneer is dried, it is sent to core press to remove the corrugation impression on the core which comes after drying so that the core veneer get plain surface. Thereafter, the core veneer is passed through Glue spreader and commercial face is pasted on the top and then sent to hot press for making base plywood. After pressing the base plywood is cut in right dimensions with the help of D.D. Saw. Final Stage In this process, the Base plywood is first calibrated ( to eliminate the unevenness on the surface ) and then passed through Glue spreader and are send to final hot press for the final product. Before hot pressing the decorative face is put on the top of the plywood and then again processed together to make the final decorative plywood. This decorative plywood is then again processed on D.D.Saw for cutting in to required sizes and then sent for sanding and finishing before going to dispatch.


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2.) Laminates

Stage 1 Phenol

Formaldehyde Stage 2

MM

Stage 3

Cut to Size

Room Temperature

Storage Impregnator/

Dryer Kraft Paper Roll

Cut to Size

Air Condition Storage

Impregnator/Dryer

Design Paper/Barrier/Tissue Roll

Assembly of Processed Kraft Paper and Design paper

Hot Press

Cutting and Trimming

Sanding

Marking Packing Stocking Dispatch

Quality Check

Quality Check


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Process Brief: Laminates are manufactured by assembling thin sheets of impregnated kraft, barrier, designs and overlay papers upon each other (outer layer has decorative colour or design) and pressing the assembly between stainless steel pressed plates in a hydraulic/hot press under high pressure and temperature. The impregnation of the papers with melamine formaldehyde and phenol formaldehyde resins is done by impregnators capable of controlling process parameters within very narrow limits. a) Impregnation: Specifically designed horizontal impregnators consisting of resin bath, squeezing

rollers followed by drying zones and cooling cylinders are used for impregnating kraft, designs and overlay/underlay papers. Process checks for controlling resin content, volatile content and flow in prepress are carried out at regular intervals. For monitoring process parameters, electronic instruments of reputed companies are used to ensure consistency. After impregnation the impregnated paper is cut into the required length and stacked for use in assembly.

b) Storage of Impregnation Material: Impregnated papers like Kraft paper is stored at room temperature but the overlay tissues and designs are stored in air conditioned chambers under controlled conditions to lower down the chemical reaction.

c) Assembly and Pressing: The overlay tissue, design paper, barrier and kraft papers are assembled as per requirement and pressed in the hot press between stainless press plates. Temperature of the sheets during pressing is measured by an electronic recorder.

d) Finishing: After pressing, the sheets are trimmed into the specified size and surfaced defects are corrected by a sanding machine. The finished laminates are subjected to various tests as per quality standards.

Capacity Utilisation Existing Installed Capacity

Year 2007-08 2008-09 2009-10

Product Installed Utilised % Installed Utilised % Installed (nos.)

Utilised %

Decorative Plywood (sq. meters)

35,72,160 20,44,292 57.23 35,72,160 18,41,979 51.56 35,72,160 15,54,015 43.50

Laminates (no. of sheets)

12,00,000 89,147 7.43 12,00,000 2,44,283 20.35 12,00,000 4,49,194 37.43

Estimated Capacity for Present Product portfolio

Year 2010-11 2011-12 2012-13


Utilised %

Decorative Plywood (sq. meters)

35,72,160 27,30,000 76.42 47,62,880 29,09,091 61.07 47,62,880 30,95,872 65.00

Laminates (no. of sheets)

12,00,000 11,42,857 95.24 21,00,000 13,71,429 65.31 24,00,000 16,32,000 68.00


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Assumption for substantial increase in Capacity utilization Decorative Plywood and Laminates: We have been under utilizing our installed capacity due to non availability of the required working capital. This restricted us to cater the potential market demand. However, in F.Y.2010-11 our working capital limits have been increased to Rs.50.00 crores and this has enabled us to increase our production to cater the demand and also widen our supply for the present financial year. We have also proposed to install balancing equipments to be funded from the proceeds of issue that would help in increasing the manufacturing capacity in the subsequent financial years for the expected increased demand of our product on account of our increasing thrust on marketing, advertising and selling and distribution channel.

Estimated Capacity for Proposed Product (in CBM)

Year 2010-11 2011-12 2012-13


Utilised %

Particle Board (Cubic Meter)

55,000 29,000 52.73 55,000 35,100 63.82 55,000 40,500 73.63

Export obligation

The company does not have any export obligations as on date.

Manpower

We shall be appointing 250 employees towards the project of the issue.

Competitors

We mainly compete with other manufacturers operating in wood industry in organized sector on the basis of availability of product, product range, product traits, quality, assortment and other factors based on price, brand image, customer service and customer convenience. Some of our competitors are Greenply Industries Ltd., Archidply Industries Ltd., Uniply Industries Ltd., etc. Company Trade Mark Registration:

Company has filed for the registration of following trademarks under the class 17 and 19 of the Trade Marks Act 1999 and obtained provisional registration. The details of the same are as follows:

Sr. No.

Provisional No.

Date of Application

Trade Mark Name Class in respect of which application has been made

1. 01708501 09/07/2008 KEJORRI 17 2. 01708502 09/07/2008 KEJORRI 19

Location Manager Executives Supervisor Others Total Registered Office 11 18 1 1 31 Factory 3 4 4 69 80 Delhi Branch 0 0 0 1 1 Ahmadabad Branch 3 1 2 0 6 Bangalore Branch 1 2 0 0 3 Total 18 25 7 71 121


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Insurance We have taken following policies for insuring our company from any mishaps.

Sr. No.

Nature of Policy/ Policy Type

Policy No.

Insurer Block covered Value insured (Rs. In lacs)

Validity

1. Standard Fire & Special Perils Policy

040700/11/10/11/00000037

United India Insurance Co. Ltd

Building, plant and machinery, furniture, fixtures, fittings, plinth & other types of miscellaneous stock lying at Jhajjar, Bangalore, Ahmedabad and Mundka.

4305.25 13/04/2011

2. Boiler & Pressure Plant Policy

040700/44/10/52/30000008


Boiler, Mode No. VTA, Serial No. 152, 153, 154 and Mode No. IFB – 30.

42.00 13/04/2011

3. Machinery Insurance Policy

040700/44/10/51/30000007


Four (4) 1200 KVA DG Set and One (1) Transformer with Oil 500 KVA.

45.00 13/04/2011

4. Electronic Equipment Insurance Policy

040700/44/10/58/30000006


Two (2) Inkjet Printer located at the Factory Premises.

5.00 13/04/2011

5. Marine Cargo Open Policy

040700/21/10/02/00000033


Plywood, Block Boards, Wood Veener, Timber Log Reco, Densified.

3000.00 13/04/2011

6. Commercial Vehicle – Package Policy

OG-10-1113-1803-00000100

Bajaj Allianz General Insurance Co. Ltd

TATA LPK – 407 HR 63 A 5690

4.18 13/03/2011

7. Private Car – Package Policy

OG-10-1113-1801-00003637


Maruti WagonR DL 2C AH 4814

2.56 09/03/2011


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Sr. No.

Nature of Policy/ Policy Type

Policy No.

Insurer Block covered Value insured (Rs. In lacs)

Validity


OG-10-1113-1811-00000241


ACE – Mobile Crane HR 635589

4.00 12/02/2011


OG-10-1003-1003-1803-00001017


TATA – 407 Ambulance HR 638872

3.13 12/07/2011


OG-10-1003-1003-1803-00001014


TATA – 407 Ambulance HR 638873

3.13 12/07/2011

11. Private Car – Package Policy

OG-10-1113-1801-00000614


Honda Civic DL 4C AH 6242

10.00 13/05/2011


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REGULATIONS AND POLICIES

The following description is a summary of the relevant regulations and policies as prescribed by the central / state governments that are applicable to our Company in India. The information detailed in this chapter has been obtained from publications available in the public domain. The regulations set out below are not exhaustive, and are only intended to provide general information to the investors and are neither designed nor intended to be a substitute for professional legal advice.

The Companies Act, 1956

The Act deals with laws relating to companies and certain other associations. It was enacted by the parliament in 1956. The Companies Act primarily regulates the formation, financing, functioning and winding up of companies. The Act prescribes regulatory mechanism regarding all relevant aspects including organizational, financial and managerial aspects of companies. Regulation of the financial and management aspects constitutes the main focus of the Act. In the functioning of the corporate sector, although freedom of companies is important, protection of the investors and shareholders, on whose funds they flourish, is equally important. The Companies Act plays the balancing role between these two competing factors, namely, management autonomy and investor protection.

Regulation of Foreign Investment in India

Foreign investment in India is primarily governed by the provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) and the rules and regulations promulgated there under. The RBI, in exercise of its powers under FEMA, has notified the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations”) which prohibit, restrict and regulate, transfer or issue of securities, to a person resident outside India. Pursuant to the FEMA Regulations, no prior consent or approval is required from the RBI for foreign direct investment under the “automatic route” within the specified sectoral caps prescribed for various industrial sectors. In respect of all industries not specified under the automatic route, and in respect of investments in excess of the specified sectoral limits under the automatic route, approval for such investment may be required from the FIPB and/or the RBI. Further, FIIs may purchase shares and convertible debentures of an Indian company under the portfolio investment scheme through registered brokers on recognized stock exchanges in India. Regulation 1 (4) of Schedule II of the FEMA Regulations provides that the total holding by each FII or SEBI approved sub-account of an FII shall not exceed 10% of the total paid-up equity capital of an Indian company or 10% of the paid-up value of each series of convertible debentures issued by an Indian company and the total holdings of all FIIs and sub accounts of FIIs added together shall not exceed 24% of the paid-up equity capital or paid-up value of each series of convertible debentures. However, this limit of 24% may be increased up to the statutory ceiling as applicable, by the Indian company concerned passing a resolution by its board of directors followed by the passing of a special resolution to the same effect by its shareholders. Environment (Protection) Act, 1986

The Environment (Protection) Act, 1986 was enacted as a general legislation to safeguard the environment from all sources of pollution by enabling coordination of the activities of the various regulatory agencies concerned, to enable creation of an authority with powers for environmental protection, regulation of discharge of environmental pollutants etc. The purpose of the Act is to act as an "umbrella" legislation designed to provide a frame work for Central government co-ordination of the activities of various central and state authorities established under previous laws, such as Water Act & Air Act. It includes water, air and land and the inter-relationships which exist among water, air and land, and human beings and other living creatures, plants, micro-organisms and property.


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Consent for operation of the plant under the Air (Prevention and Control of Pollution) Act 1981 ("Air Act")

The Air (Prevention and Control of Pollution) Act 1981 has been enacted to provide for the prevention, control and abatement of air pollution. The statute was enacted with a view to protect the environment and surroundings from any adverse effects of the pollutants that may emanate from any factory or manufacturing operation or activity. It lays down the limits with regard to emissions and pollutants that are a direct result of any operation or activity. Periodic checks on the factories are mandated in the form of yearly approvals and consents from the corresponding Pollution Control Boards in the state. Consent for operation of the plant under the Water (Prevention and Control of Pollution) Act, 1974 ("Water Act")

The Water Act was enacted in 1974 in order to provide for the prevention and control of water pollution by factories and manufacturing industries and for maintaining or restoring the wholesomeness of water. In respect to an Industrial Undertaking it applies to the (i) Occupier (the owner and management of the undertaking) (ii) Outlet (iii) Pollution and (iv) Trade effluents. The Act requires that approvals be obtained from the corresponding Pollution Control Boards in the state. Water (Prevention and Control of Pollution) Cess Act, 1977

The Water Cess Act is a legislation providing for the levy and collection of a cess on local authorities and industries based on the consumption of water by such local authorities and industries so as to enable implementation of the Water Act by the regulatory agencies concerned. Trade Marks Act, 1999

The Indian law on trademarks is enshrined in the Trade Marks Act, 1999. Under the existing legislation, a trademark is a mark used in relation to goods so as to indicate a connection in the course of trade between the goods and some person having the right as proprietor to use the mark. A ‘mark’ may consist of a word or invented word, signature, device, letter, numeral, brand, heading, label, name written in a particular style and so forth. The trademark once applied for, is advertised in the trademarks journal, oppositions, if any are invited and after satisfactory adjudications of the same, a certificate of registration is issued. The right to use the mark can be exercised either by the registered proprietor or a registered user. The present term of registration of a trademark is ten years, which may be renewed for similar periods on payment of prescribed renewal fee.

Income-tax Act, 1961

The Income Tax Act, 1961 deals with the taxation of individuals, corporates, partnership firms and others. As per the provisions of this Act the rates at which they are required to pay tax is calculated on the income declared by them or assessed by the authorities, after availing the deductions and concessions accorded under the Act. The maintenance of Books of Accounts and relevant supporting documents and registers are mandatory under the Act. Filing of returns of Income is compulsory for all assesses. Service Tax

Chapter V of the Finance Act 1994 (as amended), and Chapter V-A of the Finance Act 2003 requires that where provision of certain listed services, whole taxable services exceeds Rs. 400,000, a service tax with respect to the same must be paid. Every person who is liable to pay service tax must register himself for the same Central Sales Tax Act (CST)

The main object of this act is to formulate principles for determining (a) when a sale or purchase takes place in the course of trade or commerce (b) When a sale or purchase takes place outside a State (c) When


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a sale or purchase takes place in the course of imports into or export from India, to provide for levy, collection and distribution of taxes on sales of goods in the course of trade or commerce, to declare certain goods to be of special importance trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on sale or purchase of such goods of special importance (called as declared goods) shall be subject. CST Act imposes the tax on inter state sales and states the principles and restrictions as per the powers conferred by Constitution. Electricity Act, 2003 The Electricity Act, 2003 has been recently introduced with a view to rationalise electricity tariff, and to bring about transparent policies in the sector. The Act provides for private sector participation in generation, transmission and distribution of electricity, and provides for the corporatisation of the state electricity boards. The related Electricity Regulatory Commissions Act, 1998 has been enacted with a view to confer on these statutory Commissions the responsibility of regulating this sector. Value Added Tax (“VAT”) VAT is a system of multi-point levy on each of the purchases in the supply chain with the facility of set-off input tax on sales whereby tax is paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. VAT is based on the value addition of goods, and the related VAT liability of the dealer is calculated by deducting input tax credit for tax collected on the sales during a particular period. VAT is a consumption tax applicable to all commercial activities involving the production and distribution of goods and the provisions of services, and each state that has introduced VAT has its own VAT Act, under which, persons liable to pay VAT must register and obtain a registration number from Sales Tax Officer of the respective State. Approvals from Local Authorities Setting up of a Factory or Manufacturing/Housing unit entails the requisite Planning approvals to be obtained from the relevant Local Panchayat(s) outside the city limits and appropriate Metropolitan Development Authority with in the city limits. Consents from the state Pollution Control Board(s), the relevant state Electricity Board(s), the State Excise Authorities, Sales Tax, are required to be obtained before commencing the building of a factory or the start of manufacturing operations. Industrial (Development and Regulation) Act, 1955 The Industrial (Development and Regulation) Act, 1951 has been liberalized under the New Industrial Policy dated July 24, 1991, and all industrial undertakings are exempt from licensing except for certain industries such as distillation and brewing of alcoholic drinks, cigars and cigarettes of tobacco and manufactured tobacco substitutes, all types of electronic aerospace and defense equipment, industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose and matches and hazardous chemicals and those reserved for the small scale sector. An industrial undertaking, which is exempt from licensing, is required to file an Industrial Entrepreneurs Memorandum ("IEM") with the Secretariat for Industrial Assistance, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, and no further approvals are required. Foreign Trade (Development and Regulation) Act, 1992 This statute seeks to increase foreign trade by regulating the imports and exports to and from India. This legislation read with the Indian Foreign Trade Policy provides that no export or import can be made by a person or company without an importer exporter code number unless such person or company is


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specifically exempt. An application for an importer exporter code number has to be made to the office of the Joint Director General of Foreign Trade, Ministry of Commerce. An importer-exporter code number allotted to an applicant is valid for all its branches, divisions, units and factories. The Factories Act, 1948 The Factories Act, 1948 is a social legislation which has been enacted to regulate the occupational safety, health and welfare of workers at work places. This legislation is being enforced by the Government through officers appointed under the Act i.e. Inspectors of Factories, Deputy Chief Inspectors of Factories who work under the control of the Chief Inspector of Factories and overall control of the Labour Commissioner. The ambit of operation of this Act includes the approval of Factory Building Plans before construction/extension, investigation of complaints with regard to health, safety, welfare and working conditions of the workers employed in a factory, the maintenance of registers and the submission of yearly and half-yearly returns. Payment of Wages Act, 1936 ("Wages Act") Wages Act applies to the persons employed in the factories and to persons employed in industrial or other establishments where the monthly wages payable to such persons is less than Rs 10,000/-. The Act confers on the person(s) responsible for payment of wages certain obligations with respect to the maintenance of registers and the display in such factory/establishment, of the abstracts of this Act and Rules made there under. The Minimum Wages Act, 1948 ("Minimum Wages Act") Minimum Wages Act was enacted to provide for minimum wages in certain employments. Under this Act, the Central and the State Governments are the authorities to stipulate the scheduled employment and to fix minimum wages. The Act contains list of Agricultural and Non Agricultural employment where the prescribed minimum rate of wages is to be paid to the workers. The minimum wages are calculated and fixed based on the basic requirement of food, clothing, housing required by an average Indian adult. Employees (Provident Fund and Miscellaneous Provisions) Act, 1952 The Act is applicable to factories employing more that 20 employees and may also apply to such establishments and industrial undertakings as notified by the Government from time to time. All the establishments under the Act are required to be registered with the Provident Fund Commissioners of the State. Also, in accordance with the provisions of the Act the employers are required to contribute to the Employees' Provident Fund the prescribed percentage of the basic wages, dearness allowances and remaining allowance (if any) payable to the employees. The employee shall also be required to make the equal contribution to the fund. As per the provision of the Act, employers are to contribute 12% of the basic wages, dearness allowances and remaining allowances (if any) payable for the time being to the employees. A monthly return in Form 12 A is required to be submitted to the commissioner in addition to the maintenance of registers by the employers. Payment of Gratuity Act, 1972 A terminal lump sum benefit paid to a worker when he or she leaves employment after having worked for the employer for a prescribed minimum number of years is referred to as "gratuity". The provisions of the Act are applicable to all the factories. The Act provides that within 30 days of opening of the establishment, it has to notify the controlling authority in Form A and thereafter whenever there is any change in the name, address or change in the nature of the business of the establishment a notice in Form


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B has to be filed with the authority. The Employer is also required to display an abstract of the Act and the rules made there-under in Form U to be affixed at the or near the main entrance. Further, every employer has to obtain insurance for his liability towards gratuity payment to be made under Payment of Gratuity Act 1972, with Life Insurance Corporation or any other approved insurance fund. Payment of Bonus Act, 1965 The Payment of Bonus Act, 1965 is applicable to every establishment employing 20 or more employees. The said Act provides for payment of the minimum bonus to the employees specified under the Act. It further requires the maintenance of certain books and registers such as the register showing computation of the allocable surplus; the register showing the set on & set off of the allocable surplus and register showing the details of the amount of Bonus due to the employees. Further it also require for the submission of Annual Return in the prescribed form (FORM D) to be submitted by the employer within 30 days of payment of the bonus to the Inspector appointed under the Act. Contract Labour (Regulation and Abolition) Act, 1970 The purpose of Contract Labour (Regulation and Abolition) Act 1970, is to regulate the employment and protect the interests of the workers who are hired on the basis of individual contracts in certain establishments. In the event that any activity is outsourced, and is carried out by labourers hired on contractual basis, then compliance with the Contract Labour (Regulation and Abolition) Act, including registration will be necessary and the principal employer will be held liable in the event of default by the contractor to make requisite payments towards provident fund etc. Employment (Standing Orders) Act, 1950 The Industrial Employment (standing orders) Act requires employers in industrial establishments to formally define conditions of employment under them. It applies to every industrial establishment wherein 100 (reduced to 50 by the Central Government in respect of the establishments for which it is the Appropriate Government) or more workmen are employed. The Act calls for the submission of such conditions of work to the relevant authorities for their approval. The Equal Remuneration Act, 1976 ("Equal Remuneration Act") and Equal Remuneration Rules, 1976 The Constitution of India provides for equal pay for equal work for both men and women. To give effect to this provision, the Equal Remuneration Act, 1976 was implemented. The Act provides that no discrimination shall be shown on the basis of sex for performing similar works and that equal remuneration shall be paid to both men and women when the same work is being done. Employees State Insurance Act, 1948 All the establishments to which the Employees State Insurance (ESI) Act applies are required to be registered under the Act with the Employees State Insurance Corporation. The Act applies to those establishments where 20 or more persons are employed. The Act requires all the employees of the factories and establishments to which the Act applies to be insured in the manner provided under the Act. Further, employer and employees both are required to make contribution to the fund. The return of the contribution made is required to be filed with the ESI department. The Maternity Benefit Act, 1961 ("Maternity Act") The purpose of Maternity Act 1961 is to regulate the employment of pregnant women and to ensure that they get paid leave for a specified period during and after their pregnancy. It provides, inter-alia for


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payment of maternity benefits, medical bonus and enacts prohibition on dismissal, reduction of wages paid to pregnant women etc. Registrations under the applicable Shops & Commercial Establishments Acts of the respective States in which our Company has an established place of business/ office ("Shops Act") The Shops Act provides for the regulation of conditions of work in shops, commercial establishments, restaurants, theatres and other establishments. The Act is enforced by the Chief Inspector of Shops (CIS) and various inspectors under the supervision and control of Deputy/Assistant Labour Commissioners of the concerned District, who in turn functions under the supervision of Labour Commissioner.


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HISTORY AND OTHER CORPORATE MATTERS

Our Company was incorporated on 14/05/2004 under the Companies Act, 1956 as ‘Donear Decor Private Limited’ and received its Certificate of Incorporation from the Registrar of Companies, Delhi & Haryana. The name of the Company was changed to Sonear Industries Private Limited and received a fresh certificate of incorporation consequent upon change of name dated 12/04/2010 from Registrar of Companies, NCT of Delhi and Haryana. Later the Company was converted into a public limited and received a fresh certificate of incorporation dated 21/05/2010. The Corporate Identity Number of the Company is U20211DL2004PLC126381. The Registered Office of the Company is situated at 20, North West Avenue, Punjabi Baugh W..est, Club Road, New Delhi – 110 026.

Our Company is promoted by Mr. Jitendra Kejriwal and Mrs. Sapna Kejriwal. Presently we have modern state of the art manufacturing unit at Rohad, Haryana with research and development facility for production of natural decorative plywood, reconstituted decorative plywood and laminates.

We are one amongst the premier and an established manufacturer of a wide range of decorative plywood and laminates. Our target customers include Architect, Interior Designers, Builders and Developers, etc.

Major Events in the History of Our Company

Year Events

2004 Incorporation of Donear Décor Private Limited 2008 Introduction of 6 Ply Construction in 4mm Thickness 2008 Introduction of Mela- Film Technology 2009 Received Certificate from Bureau of India Standards for Decorative Thermosetting

Synthetic, Resin Bonded Single Face Laminated Sheet” vide letter dated 30/12/2008. 2009 The Company crossed sales turnover of Rs.50.00 crores 2010 The Company crossed sales turnover of Rs.100.00 crores 2010 The name of Company was changed to Sonear Industries Pvt. Ltd 2010 Subsequent to change of name, the Company launched another brand namely “Sonear

Ply” 2010 Launched a limited edition laminate namely, FUSION

Main Objects of the Company

The main object of the Company as stated in Memorandum of Association is to carry on the business of manufacturing, processing seasoning and trading of wood and Articles of wood such as plywood, blockboard, flush doors, panel doors, shutter doors, resins, veneers, leafs, leaps, packing planks and other paper products i.e Laminates (mica) and other allied products.

Changes in the Registered Office Address:

Date of change

Address Changed Reason for Change of Address

From To

10/04/2006 32, North West Avenue, Punjabi Baugh West, Club Road, New Delhi - 110026

20, North West Avenue, Punjabi Baugh West, Club Road, New Delhi - 110026

Expansion and requirement for additional space


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Changes in the Memorandum of Association

Date of shareholders’ approval

Type of change/ Reasons for change

15/06/2004 Increase in the Authorized Share Capital from Rs. 20.00 Lacs to Rs. 400.00 Lacs 10/04/2006 Change in registered office of the company 19/03/2010 Change in name, MoA and Articles of the company from Donear Décor

Private Ltd. to Sonear Industries Pvt. Ltd. 19/03/2010 Increase in the Authorized Share Capital from Rs. 400.00 Lacs to Rs. 3500.00

Lacs 23/04/2010 Change in name, MoA and Articles of the company from Sonear Industries

Pvt. Ltd. to Sonear Industries Ltd. 23/04/2010 Change in main object clause of the company

Subsidiaries of the Issuer Company

We have no Subsidiary Company, as on date. 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 SIL, we have not entered into any other agreement/contract. 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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MANAGEMENT Name, Age, Qualification, Residential

Address, Designation, Occupation, DIN No. Date of

Appointment / Re-appointment,

Term

Other Directorships held

Mr. Jitendra Kejriwal S/o: Mr. Mahabir Prasad Kejriwal Age: 42 Years Qualification: B.Com Residential Address: 320-C/73, West Punjabi Bagh, New Delhi – 110 026 Designation: Managing Director Occupation: Business DIN No.: 00483516

Re appointed on 05/05/2010

(five years)

• Surya Boards Limited • Surya Vikas Plywood Ltd. • Surya Decolam Pvt. Ltd. • Tulip Vinimay Pvt. Ltd.

Mr. Ramesh Kumar Aggarwal S/o: Mr. Nathu Ram Aggarwal Age: 57 Years Qualification: Chartered Accountant Residential Address: 80, Block BFH (West), Shalimar Bagh New Delhi – 110 088 Designation: Director Occupation: Professional DIN No.: 01580859

Appointed on 18/02/2010

(Retire by Rotation)

• Profin Money Markets Ltd. • Profin Capital Services Ltd. • Tulip Vinimay Pvt. Ltd.

Mr. Abhishek Agarwal S/o: Mr. Dayaram Agarwal Age: 34 Years Qualification: B.Com, M.B.A (U.K) Residential Address: Dimple Court, Flat No: 6B, 26, Shakespeare Sarani, Kolkata – 700 017 Designation: Director Occupation: Industrialist DIN No.: 00125351



• RGA Software Solutions Pvt. Ltd. • DRA Builders Pvt. Ltd. • KA Solutions Pvt. Ltd. • Piramal Projects Pvt. Ltd. • DRA Infrastructure Pvt. Ltd. • Abhishek Impex & Credit Pvt.

Ltd. • Bhasa Developers Pvt. Ltd. • Vikram Solar Pvt. Ltd. • Deepshika Investment Pvt. Ltd.

Mr. Mohammed Shahid Aftab S/o: Mr. Mohammed Shakir Age: 64 Years Qualification: M.Com, CAIIB Residential Address: Sukriti Apt, Flat No 2A, 20 Bally Gunj Circular Road, Kolkata – 700 019 Designation: Director Occupation: Professional DIN No.: 01363518



• PNB Gilts Ltd. • Gujarat Paguthan Energy

Corporation • Assets Care Enterprise

Corporation • Archidply Industries Ltd. • Magnum Ventures Ltd.


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Name, Age, Qualification, Residential Address, Designation, Occupation, DIN No.

Date of Appointment /

Re-appointment, Term

Other Directorships held

Mr. Sheodeen Singh Yadav S/o: Mr. Hukam Chand Yadav Age: 65 Years Qualification: B.A Residential Address: D-15, Rajouri Garden, New Delhi – 110 027 Designation: Director Occupation: Professional DIN No.: 03041362



Nil

Mr. Promode Kant S/o: Mr. Janardan Prasad Sharma Age: 55 Years Qualification: Phd. Forestry, PGDM- Wildlife Management Residential Address: B-108, Parsvanath Prestige Apt. Sector 93, Noida – 201 304 Uttar Pradesh Designation: Director Occupation: Industrialist DIN No.: 02414831



• Eco Sequest Private Limited

There is no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any of the above mentioned Directors were selected as a Director of our Company.

As on date of filing of the Offer Document there is no service agreement entered into by the Directors with the Company providing for benefits upon termination of employment.

Remuneration and shareholding of Directors in the Company

Particulars No. of Shares held Remuneration Mr. Jitendra Kejriwal 9,94,500 1,00,000 p.m. Mr. Rajesh Kumar Aggarwal Nil Nil Mr. Abhishek Agarwal 5000 Nil Mr. Mohammed Shahid Aftab Nil Nil Mr. Sheodeen Singh Yadav Nil Nil Mr. Promode Kant Nil Nil

BRIEF PROFILE OF THE DIRECTORS OF SIL

A brief profile of the Board Members is given below: Mr. Jitendra Kejriwal, (41 years) is the Promoter, Managing Director of the Company. Mr. Jitendra Kejriwal is a Graduate in Commerce stream from Delhi University with sharp business acumen. Mr.


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Jitendra Kejriwal belongs to merchant family dealing in plywood business since 1973. He started his career by venturing into the family business of trading concern. He was instrumental in setting up the first factory of his family business at Araria, Bihar for manufacturing of plywood and subsequently played pivotal role in setting up additional companies and growing the family business. With mutually accepted family settlement in 2001, he took over reign of Surya Boards Ltd. and later established Donear Décor Pvt. Ltd. in 2004. Presently, he manages day to day affairs of the Company and is responsible for business policies, strategic decisions and business development. Mr. Ramesh Kumar Aggarwal, (56 years) is Non-Executive and Non-Independent Director of the Company. He is a qualified Chartered Accountant with 35 years of rich experience in banking sector. As an ex-Punjab National Banker he has comprehensive knowledge of different industries making him highly capable of formulating financial policies for the Company. He joined our Company in the year 2010 and has been instrumental in his area of expertise. Mr. Abhishek Agarwal, (33 years) is Non-Executive and Non-Independent of our Company. He joined our Company 18/02/2010. He is a B.Com (Hons) and a Masters of Business Administration (M.B.A) from United Kingdom. He has varied experience in the field of IT Infrastructure, Real Estate and Cricket Franchisee. He has been associated with companies like RGA Software Systems Pvt. Ltd., Primal Projects Pvt. Ltd., DRA Infrastructure Pvt. Ltd. etc. Mr. Mohammed Shahid Aftab, (64 years) is Non Executive and Independent Director of our Company who joined the board on 06/03/2010. He is M.Com and a qualified CAIIB professional with more than 4 decades of experience in different industries. During his tenure of service he has served renowned companies like Ramsarup Industrial Corporation, PNB Gilts, Ltd. Gujarat Paguthan Energy Corporation etc. He is also engaged as a financial consultant with Delton Cables Ltd. Mr. Sheodeen Singh Yadav, (64 years) is Non Executive and Independent Director of our company. An arts graduate from Punjab University, he began his career with Delhi Police Force. He served for Delhi Police Force for more than 30 years and retired as Assistant Police Commissioner. Mr. Promode Kant (55 years), is Non Executive Independent Director of the Company. He joined on the board of our company on 18/02/2010. He holds a Doctorate Degree in Forestry from the Forest Research Institute, Dehradun on “Development of a Model for Forest Carbon Management & Trade Strategies under the Kyoto Protocol”. He had also done Higher Civil Services Foundational Course in Constitution, Law, Social Sciences and Economics from the National Academy of Administration and Post Graduate Diploma in Wildlife Management from Wildlife Institute of India, Dehradun. He served in the Indian Forest Service (IFS) for more than 31 years reaching the rank of Additional Principal Chief Conservator of Forests till his (voluntary) retirement in 2008. During his tenure with the IFS he held several posts including that of the Managing Director, Tamil Nadu Tea Plantation Corporation, Coonoor, a public sector corporation and held the post of Chief Conservator of Forests as the head of the Ministry of Environment & Forests and Adviser (E&F) to the North Eastern Council of the Ministry of Home Affairs at Shillong from 1997 to 2002. He is also the Founding Director of the Institute of Green Economy, C 312, Defence Colony, and New Delhi 110024. BORROWING POWERS OF DIRECTORS The members of Company have passed resolution at its Extra-ordinary General Meeting held on 12/06/2010 in terms of the provisions of section 293(1)(d) of the Companies Act 1956, whereby it has authorized the Board of Directors to borrow money up to Rs 200.00 crores (Rupees Two Hundred Crores) (excluding temporary loans obtained by the Company from its bankers in the ordinary course of business).


91

RELATIONSHIPS BETWEEN DIRECTORS Mr. Abhishek Agarwal is Brother in Law of Mr. Jitendra Kejriwal and Brother of Mrs. Sapna Kejriwal. Except this none of the directors are related to each other. QUALIFICATION SHARES REQUIRED TO BE HELD BY OUR DIRECTORS Our directors are not required to hold any qualification shares. INTEREST OF 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. COMPENSATION TO MANAGING DIRECTOR / WHOLE TIME DIRECTORS The Board of Directors in its meeting held on May 5, 2010 appointed Mr. Jitendra Kejriwal as the Managing Director of the Company for a period of five (5) years with effect from May 5, 2010 at a maximum remuneration of Rs.1,00,000/- (Rupees One Lakh Only) per month, subject to the approval of the members of the Company and pursuant to the provisions of section 198, 269, 309 and Schedule XIII and other applicable provisions of the Companies Act,. Subsequently, the members in their Extra-ordinary General Meeting held on June 12, 2010 approved the said appointment and remuneration, subject to such further terms and conditions as may be set out by the Board of Directors. The Company has accordingly entered into an ‘Agreement for appointment of Managing Director’ dated June 25, 2010 with Mr. Jitendra Kejriwal. The said agreement is effective May 5, 2010. Mr. Jitendra Kejriwal, Managing Director In the terms of remuneration of Mr. Jitendra Kejriwal as per the Resolution passed at the meeting of the Board of Directors held on 05/05/2010 he is entitled only for salary of Rs.1,00,000/- per month. CHANGES IN THE BOARD OF DIRECTORS DURING THE LAST THREE YEARS

Sr. No.

Name of the Director Date of Change Reasons

1. Mr. Ramesh Kumar Aggarwal 18/02/2010 Appointment 2. Mr. Abhishek Agarwal 18/02/2010 Appointment 3. Mr. Mohammed Shahid Aftab 06/03/2010 Appointment 4. Mr. Sheodeen Singh Yadav 09/03/2010 Appointment 5. Mr. Dhirendra Pandey 27/05/2010 Resignation 6. Mr. Promode Kant 27/05/2010 Appointment


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Management Organisation Structure

Head (Human Resource)

Assistant General Manager

(Accounts)

General Manager (Export - Import)

General Manager (Marketing – North Zone)

General Manager– Accounts (Factory)

Company Secretary

Executive Director

Front Office In-charge

Board of Directors

Chief General Manager

(Marketing)

Executive Assistant

Managing Director

Manager (Brand Equity)


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Compliance with Corporate Governance Requirements: The provisions of the Listing Agreement to be entered into with the Stock Exchange(s) will be applicable to our Company immediately upon the listing of our Equity Shares with the Stock Exchanges. Our Company has complied with the corporate governance code in accordance with Clause 49 to the extent applicable. Our Company undertakes to take all necessary steps to continue to comply with all the requirements of Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges. In terms of the Clause 49 of the Listing Agreement, our Company has already constituted the following committees.

Audit Committee

The Audit Committee was constituted at the Board meeting held on 01/05/2010. The Audit Committee comprises of the following members

Name of Director Status in

Committee Nature of Directorship

Mr. Mohammed Shahid Aftab Chairman Independent Mr. Ramesh Kumar Aggarwal Member Non Executive and Non Independent Mr. Sheodeen Singh Yadav Member Independent

The role of the Committee has been defined to include the following activities: (a) Overseeing the Company’s financial reporting process and the disclosure of its financial information

to ensure that the financial statements are correct, sufficient and credible. (b) Recommending to the Board, the appointment, re-appointment and if required, the replacement or

removal of the statutory auditor and fixation of audit fee. (c) Approval of payment to statutory auditors for any other services rendered by the statutory auditors. (d) Reviewing with the management the annual financial statements before submission to the Board for

approval, with particular reference to: - Matters required to be included in the Director’s Responsibility Statement to be included in the

Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956. - Changes, if any, in accounting policies and practices and reasons for the same. - Major accounting entries involving estimates based on the exercise of judgment by management. - Significant adjustments made in the financial statements arising out of audit findings. - Compliance with listing and other legal requirements relating to financial statements. - Disclosure of any related party transactions. - Qualifications in the draft audit report.

(e) Reviewing, with the management, the statement of uses/ application of funds raised through an

issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document/ prospectus/ notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter.

(f) Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal control systems.

(g) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

(h) Discussion with internal auditors any significant findings and follow up there on.


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(i) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board.

(j) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

(k) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividends) and creditors.

(l) To review the functioning of the Whistle Blower mechanism, in case the same is existing. (m) Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

Remuneration Committee The Remuneration Committee was constituted on 01/05/2010 and comprises the following directors of the Board.

Name of Director Status in Committee

Nature of Directorship

Mr. Mohammed Shahid Aftab Chairman Independent Mr. Ramesh Kumar Aggarwal Member Non Executive and Non Independent Mr. Sheodeen Singh Yadav Member Independent

The terms of reference of the Remuneration Committee are as follows: (a) The Remuneration Committee recommends to the board the compensation terms of the executive

directors. (b) Framing and implementing on behalf of the Board and on behalf of the shareholders, a credible and

transparent policy on remuneration of executive directors including ESOP, Pension Rights and any compensation payment.

(c) Considering approving and recommending to the Board the changes in designation and increase in salary of the executive directors.

(d) Ensuring the remuneration policy is good enough to attract, retain and motivate directors. (e) Bringing about objectivity in deeming the remuneration package while striking a balance between

the interest of our Company and the shareholders. Shareholders’/ Investor Grievances Committee

The Shareholders and Investors Grievances Committee was constituted at the Board meeting held on 01/05/2010. The Committee consists of the following Directors.

Name of Director Status in Committee Nature of Directorship Mr. Mohammed Shahid Aftab Chairman Independent Mr. Ramesh Kumar Aggarwal Member Non Executive and Non Independent Mr. Sheodeen Singh Yadav Member Independent

The scope and function of this committee is to consider and review shareholders’/ investors’ grievances and complaints and ensure that all shareholders’/ investors’ grievances and correspondence are attended to expeditiously and satisfactorily unless constrained by incomplete documentation and/ or legal impediments.


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KEY MANAGERIAL PERSONNEL

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

Sr. No

Name, Designation, Age, Qualification,

Functions and areas of

experience

Remuneration Per annum (Rs. in lacs)

Date of Appointment

Previous Company and

Total Experience 1. Mr. A.N. Iyengar

Head of Department Age: 57 years Qualification: B.Sc & PG Diploma in Human Resource

Human Resource

3,30,000/- 11/02/2008

Diamond Dynamics (India) Ltd.

(35years)

2. Mr. Ajay Gupta Asst. General Manager Age: 35 years Qualification: M.Com, & Chartered Accountant

Corporate Finance and

Accounts

5,10,000/- 11/12/2009

Avatar Steel Ltd

(10 years)

3. Mr. Vinod Agarwal General Manager Age: 41 years Qualification: B. Tech in Chemical (Plastics) & PG Diploma in Finance Management

Production 3,00,000/- 01/08/2007 Century Plyboard (I) Limited

(20 years)

4. Ms. Sunita Agarwal Company Secretary & Compliance Officer Age: 26 years Qualification: M.Com & Company Secretary

Responsible for Secretarial activities

3,30,000/- 01/03/2010 Surya Boards Limited

(1 Year)

5. Mr. Mohit Gupta General Manager – Exports Age: 33 years Qualification: B.Tech

Exports 4,80,000/- 01/10/2008 Own Business

(8 years)

There is no specific tenure of any of our key managerial personnel.

NUMBER OF SHARES HELD BY THE KEY MANAGERIAL PERSONNEL

None of the Key Managerial Personnel are holding any equity share in the Company.

CHANGES IN THE KEY MANAGERIAL PERSONNEL OF THE COMPANY DURING LAST THREE YEARS

Name Date of Change Reason

Mr. A.N. Iyengar 11/02/2008 Appointment Mr. Ajay Gupta 11/12/2009 Appointment Mrs. Sunita Agarwal 01/03/2010 Appointment


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BONUS OR PROFIT SHARING PLAN FOR THE KEY MANAGERIAL PERSONNEL

Currently, we do not have a performance-linked bonus or a profit sharing scheme for key managerial personnel. The key managerial personnel do not have any interest in the Company other than to the extent of the remuneration of benefits to which they are entitled as per their terms of appointment, reimbursement of expenses incurred by them during the ordinary course of business and to the extent of Equity Shares held by them, if any in our Company.

RELATIONSHIP AMONGST THE KEY MANAGERIAL PERSONNEL

None of the Key Managerial Personnel are related to each other.

ARRANGEMENTS AND UNDERSTANDING WITH MAJOR SHAREHOLDERS

None of our key managerial personnel have been appointed pursuant to any arrangement or understanding with our major shareholders, customers, suppliers or others.

LOANS TO KEY MANAGERIAL PERSONNEL

The Company has not given any loan to its Key Managerial Personnel.

EMPLOYEE STOCK OPTION SCHEMES

Till date Company has not introduced any Employees Stock Option Schemes/ Employees Stock Purchase Schemes.

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.

PAYMENT OR BENEFIT (NON-SALARY RELATED) TO OFFICERS OF THE COMPANY

Except as stated in this Offer Document, no amount or benefit has been paid or given or is intended to be paid or given during the preceding two years to any of its officers except for the normal remuneration paid to Directors, officers or employees since the incorporation of the Company.


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OUR PROMOTERS AND GROUP COMPANIES

Details of Promoter being individuals Our Promoters 1. Mr. Jitendra Kejriwal

Mr. Jitendra Kejriwal, (41 years) is the Promoter, Managing Director of the Company. Mr. Jitendra Kejriwal is a Graduate in Commerce stream from Delhi University with sharp business acumen. Mr. Jitendra Kejriwal belongs to merchant family dealing in plywood business since 1973. He started his career by venturing into the family business of trading in plywood. He was instrumental in setting up the first factory of his family business at Araria, Bihar for manufacturing of plywood and subsequently played pivotal role in growing the family business. With mutually accepted family settlement in 2001, he took over reign of Surya Boards Ltd. and later established Donear Décor Pvt. Ltd. in 2004. Presently, he manages day to day affairs of the Company and is responsible for business policies, strategic decisions, and business development.

Identification Details Voter ID Number AAHPK7715M Driving License Number DL-1019910000715(P)

2. Mrs. Sapna Kejriwal

Mrs. Sapna Kejriwal, (37 years) is wife of Mr. Jitendra Kejriwal and Promoter of the Company. She holds a Bachelor’s Degree in the arts stream from University of Kolkata. She has been associated with family business and has experience of more than a decade in the management of plywood and block board business. Presently, she is Marketing Director of one of our group companies and also performs voluntary function of marketing, advertising and public relation of entire Sonear Group. Identification Details

Voter ID Number JBJ1198993 Permanent Account No. AAXPK7008D

Details of Promoter Being Company

1. Donear Laminates Private Limited (DLPL)

Identification Particulars Details Permanent Account No. AACCD2638J Corporate Identity Number U22219DL2004PTC130881

DLPL was incorporated as “Donear Laminates Pvt. Ltd.” on 01/12/2004 with Registrar of Companies, N.C. T. of Delhi & Haryana. The registered office is situated at 20, North West Avenue, Punjabi Baugh, New Delhi -110 026. The Company was incorporated with the main object to act as laminators of all kind of goods. The Company has not commenced its commercial production till date. Mr. Jitendra Kejriwal is the promoter of the Company.


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Board of Directors Ms. Sapna Kejriwal and Mr. Ghanshyam Sharma

The Shareholding pattern of DLPL as on September 15, 2010 is as follows:

Sr. No

Category No. of shares held of Rs. 10/- each

% of total share capital

1 Mr. Jitendra Kejriwal 65,000 29.54 2 Ms. Sapna Kejriwal 55,000 25.01 3 M/s Donear Plywood Pvt. Ltd. 1,00,000 45.45

Grand Total 2,20,000 100.00

Brief Financials (Rs. in Lacs)

Particulars 2009-2010 2008-2009 2007-2008

Equity Share Capital 22.00 22.00 22.00 Reserves & Surplus 134.00 134.00 134.00 Total Income N.A. NA NA Profit After Tax (0.11) (0.09) (0.07) Earnings Per Share (Rs.) (Face Value Rs. 10/-) NA NA NA Net Asset Value (NAV) 70.28 70.33 70.37

DLPL has not made any capital issue during last three years. DLPL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.

2. Surya Decolam Private Limited (SDPL) SDPL was incorporated as “Surya Decolam Pvt. Ltd.” on 26/09/2006 with Registrar of Companies, N.C. T. of Delhi & Haryana. The CIN Number of SDPL is U20219DL2006PTC154349. The registered office is situated at 20, North West Avenue, Punjabi Baugh, New Delhi -110 026. The company is engaged in manufacturing and distribution of decorative plywood, particle board and MDF board, laminates, sun mica, laminated board and ply, timber, veneers glue and other allied wood products. Mr. Jitendra Kejriwal is the promoter of the Company.

Board of Directors Mr. Jitendra Kejriwal and Mrs. Sapna Kejriwal The Shareholding pattern of SDPL as on September 15, 2010 is as follows:

Sr. No



1 Mr. Jitendra Kejriwal 5,000 2.48 2 Mrs. Sapna Kejriwal 5,000 2.48 3 M/s Donear Laminates Pvt. Ltd. 1,92,000 95.06

Grand Total 2,02,000 100.00 Financials

(Rs. in Lacs) Particulars 2009-10 2008-09 2007-08 Equity Share Capital (Face Value Rs.10/- each) 20.20 1.00 1.00 Reserves & Surplus 76.80 0.00 0.00 Total Income Nil Nil Nil Profit After Tax (0.11) (0.12) (0.34) Earnings Per Share (Rs.) NA NA NA Net Asset Value (NAV) 48.01 10.00 10.00


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Note: Till the period March 31, 2009 the Company’s production has not started and the Company has incurred pre- operative expenditure. SDPL has not made any capital issue during last three years. SDPL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995. 3. Jitendra Kejriwal (HUF)

Identification Particulars Details Permanent Account No. AADHJ2001F An HUF with Jitendra Kejriwal as a Karta is engaged in the business of Commodity Trading. It has its office at 20 C/73, Punjabi Bagh West, Delhi-110026. Financials (Rs. in Lacs)

Particulars 2009-10 2008-09 2007-08 Capital 41.07 38.86 37.22 Sales / Income 1.73 1.64 1.53 Net Profit 1.73 1.64 1.53

We confirm, that the Permanent Account Number (PAN), Bank Account Number and Passport Number of the individual promoters and the PAN and Bank Account Number of Promoter Company and HUF have been submitted to the Stock Exchanges at the time of filing of the Draft Red Herring Prospectus.

Our Promoter Group Companies and Entities

The companies that are part of the Promoter Group and Group Companies are as follows:

Sr. No Name

1. Surya Boards Limited 2. Surya Vikas Plywood Ltd. 3. Donear Plywood Private Limited 4. Surya Decolam Private Limited 5. Tulip Vinimay Private Limited

The details of our Promoter Group companies and entities are as provided below:

4. Surya Boards Limited (SBL) SBL was originally incorporated as “Surya Boards Pvt. Ltd.” on 28/02/1994 with Registrar of Companies, N.C.T. of Delhi & Haryana. The Company was later converted into a public limited company and the name of the company was changed to “Surya Boards Ltd.” with effect from 05/08/1999. The Registration Number of the company is 55-57612 of 1993-94 and the CIN Number is U74899DL1994PLC057612. The registered office is situated at 20, North West Avenue, Punjabi Baugh, New Delhi -110 026. The company is engaged in manufacturing and trading of plywood, block board, flush doors, panel doors, shutter doors resins, veneers, leafs, leaps, packing planks and other allied products. Mr. Jitendra Kejriwal is the promoter of the Company.

Board of Directors Mr. Jitendra Kejriwal, Mr. Dhirendra Pandey and Mr. Naresh Goel


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The Shareholding pattern of SBL as on September 15, 2010 is as follows:

Sr. No



1 M/s Donear Laminates Pvt. Ltd. 1,19,100 46.54 2 Mr. Jitendra Kejriwal 72,520 28.33 3 Mrs. Sapna Kejriwal 35,000 13.68 4 Jitendra Kejriwal HUF 29,000 11.33 5 Mr. Dhirendra Pandey 100 0.04 6 Mr. Naresh Goel 100 0.04 7 Mr. Ghanshyam Sharma 100 0.04 Grand Total 2,55,920 100.00

Brief Financials (Rs. in Lacs)

Particulars 2009-10 2008-2009 2007-2008 Equity Share Capital @ Rs.100/- each 255.92 255.92 255.92 Reserves & Surplus 24.45 (0.03) 46.87 Total Income 3315.17 2,775.20 2449.78 Profit After Tax 24.48 (46.90) 11.24 Earnings Per Share (Rs.) 9.57 NA 4.39 Net Asset Value (NAV) 109.55 99.93 118.19

SBL has not made any capital issue during last three years. SBL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995

5. Surya Vikas Plywood Limited (SVPL) SVPL was originally incorporated as “Surya Vikas Plywood Pvt. Ltd.” on 05/09/2002 with Registrar of Companies, N.C.T. of Delhi & Haryana. The Company was later converted into a public limited company and the name of the company was changed to “Surya Vikas Plywood Ltd.” with effect from 04/08/2010. The CIN Number of SVPL is U20211DL2002PLC116835. The registered office is situated at 20, North West Avenue, Punjabi Baugh, New Delhi -110 026. The company is engaged in manufacturing of plywood, hardboard, wood blocks for flooring and other purposes, boxes, windows, doors wood pulp, tool handles, paneling, woodwork, furniture and articles of all description wholly or partly made from wood. Mr. Jitendra Kejriwal is the promoter of the Company.

Board of Directors Mr. Jitendra Kejriwal, Mr. Dhirendra Pandey and Mr. Ghanshyam Sharma The Shareholding pattern of SVPL as on September 15, 2010 is as follows:

Sr. No.



1 M/s Donear Laminates Pvt. Ltd. 12,50,000 47.90 2 Mr. Jitendra Kejriwal 5,55,000 21.26 3 M/s Donear Plywood Pvt. Ltd. 5,50,000 21.07 4 Ms. Sapna Kejriwal 1,40,000 5.36 5 M/s Surya Boards Ltd. 1,05,000 4.03 6 Jitendra Kejriwal (HUF) 10,000 0.38 Grand Total 26,10,000 100.00


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Brief Financials (Rs. In Lacs)

Particulars Financial Year Ended 31st March 2009-2010 2008-2009 2007-2008

Equity Share Capital @ of Rs.10/- each 261.00 261.00 261.00 Reserves & Surplus 115.82 19.13 137.53 Total Income 4378.68 2983.35 1839.58 Profit After Tax 96.68 (118.39) 101.61 Earnings Per Share (Rs.) 3.70 NA 3.89 Net Asset Value (NAV) 14.43 10.73 15.26

SVPL has not made any capital issue during last three years. SVPL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.

6. Donear Plywood Private Limited (DPPL) Donear Plywood Pvt. Ltd. was incorporated on 13/08/2001 with Registrar of Companies, N.C. T. of Delhi & Haryana. The CIN Number of DPPL is U02001DL2001PTC112014. The registered office is situated at 2975/3, Chuna Mandi, Paharganj, New Delhi - 110055. The company is engaged in business of dealing in all kinds of decorative plywood particle board, MDF Board, etc. Mr. Jitendra Kejriwal is the promoter of the Company.

Board of Directors Mrs. Sapna Kejriwal, Mr. Vinod Tiwary and Mr. Dinesh Mittal The Shareholding pattern of SDPL as on September 15, 2010 is as follows:

Sr. No



1 M/s Donear Laminates Pvt. Ltd. 1,14,750 45.04 2 Mr. Jitendra Kejriwal 1,09,000 42.79 3 M/s. Surya Decolam Pvt. Ltd. 20,000 7.85 4 Ms. Sapna Kejriwal 11,000 4.32

Grand Total 2,54,750 100.00 Brief Financials

(Rs. in Lacs) Particulars 2008-09 2007-2008 2006-2007 Equity Share Capital of Face Value Rs.10/- each 25.47 23.47 23.47 Reserves & Surplus 57.55 33.09 28.57 Total Income 1822.42 1785.58 1391.98 Profit After Tax 6.46 4.52 3.67 Earnings Per Share (Rs.) 2.54 1.92 1.56 Net Asset Value (NAV) 32.58 24.07 22.14

DPPL has not made any capital issue during last three years. DPPL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995.

7. Tulip Vinimay Private Limited (TVPL) Tulip Vinimay Pvt. Ltd. was incorporated on 20/02/2007 with Registrar of Companies, West Bengal. The CIN of TVPL is U51109WB2007PTC113558. The registered office is situated at 26, Shakespeare Sareni, 8th Floor, Flat-4, Kolkata-700017. The company is engaged in the business as buyers, sellers, traders, merchants,


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indentors, brokers, agents, commission agents, packers, stockists, broker and sub-brokers, distributors, advisors distributors, advisors of all kinds of industrial tools, equipments and machineries etc. Mr. Jitendra Kejriwal is the promoter of the company.

Board of Directors Mr. Jitendra Kejriwal and Mr. Ramesh Kumar Aggarwal The Shareholding pattern of TVPL as on September 15, 2010 is as follows:

Sr. No



1 Donear Laminates Private Limited 1,18,600 46.11 2 Surya Decolam Private Limited 95,400 37.09 3 Donear Plywood Pvt. Ltd. 43,000 16.72 4 Surya Vikas Plywood Limited 200 0.08

Grand Total 2,57,200 100.00 Brief Financials

(Rs. in Lacs) Particulars 2008-2009 2007-2008 2006-2007 Equity Share Capital of Face Value Rs.10/- each 25.72 25.72 25.72 Reserves & Surplus 593.29 593.29 593.28 Total Income 0.23 0.23 0.26 Profit After Tax* Nil Nil Nil Earnings Per Share (Rs.) Nil Nil Nil Net Asset Value (NAV) (Rs.) 240.62 240.57 240.52

*The profits for F.Y. 2008-09, 2007-08, 2006-07 are negligible and hence mentioned as Nil. TVPL has not made any capital issue during last three years. TVPL is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1995. Common Pursuits

All of our group concerns/entities are also engaged in the business of plywood. We have not entered into any agreement or arrangement that shall restrict any of the group entities to venture in the similar line of business model. However we shall adopt necessary procedures and practices as permitted by law to address any conflict situation as and when they may arise. For further details on the business of all such companies please refer to our section “Promoters and Group Companies” beginning on page no. 97. For further details on the related party transactions to the extent of which company is involved, please refer “Related Party Transactions” on page 123 of this Draft Red Herring Prospectus.

Defunct Promoter Group Companies

There are no defunct Promoter Group companies.

Interest of Promoters

All the Promoters who are on the Board of Company may be deemed to be interested to the extent of the sitting fees and other remuneration for the services rendered and the reimbursement of expenses, if any, payable to them under the articles. The Promoters may also be deemed to be interested to the extent of the shares, if any, held by them or by the relatives or by firms or companies of which any of them is a partner and


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a director/member respectively. For further details please refer Related Party Transaction appearing on page no 123 of this Draft Red Herring Prospectus. Mr. Jitendra Kejriwal, is also interested to the extent of rent received for the properties leased to the Sonear Industries Limited. During the F.Y. 2009-10 the Company paid rent of Rs.2.40 lacs to Mr. Jitendra Kejriwal. For details of the leased properties please refer the title “Property” beginning on page no.71. Except as mentioned above the promoters do not have any interest in the business of the company. Payment or benefit to Promoters of the Issuer Company

Other than the salary and remuneration of the Promoter Directors, dividend, if any declared by the Company on shares held by them and the lease rent payable to them as stated earlier there are no payment or benefit to promoters of the Company.

Company/firm from which the promoters have disassociated themselves during preceding three years

Our promoters have not disassociated themselves with any company during preceding three years

Related Party Transactions as per Financial Statements

The details of related party transactions please refer to page no. 123 of this Draft Red Herring Prospectus.

CURRENCY OF PRESENTATION

In this DRHP, all references to “Rupees” “Rs.” are to the legal currency of India and all references to “U.S. Dollars”, and “US$” are to the legal currency of the United States.

Any percentage amounts, as set forth in “Risk Factors”, “Business”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” etc. in the DRHP, unless otherwise indicated, have been calculated on the basis of our financial statements prepared in accordance with Restated Financial Statements prepared as per Indian GAAP.

For the convenience of the Shareholders, as far as possible the reporting unit has been maintained as Rupees in Lacs (Rupees in Hundred Thousands).


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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. Till date the company has not paid any dividends.


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PART III

SECTION IV: FINANCIAL STATEMENTS

AUDITORS’ REPORT The Board of Directors Sonear Industries Limited 20, NWA, Punjabi Bagh New Delhi – 110 026 1. We have examined the attached financial information of Sonear Industries Limited (formerly known as

Donear Décor Private Limited) as approved by the Board of Directors of the Company prepared in terms of the requirements of Paragraph B, Part II of Schedule II of the Companies Act, 1956 (the Act) and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (SEBI Regulation) and terms of our engagement agreed with you in accordance with your letter dated 10/08/2010 in connection with the proposed Equity offering. The preparation and presentation of these financial information is the responsibility of the Company’s management.

2. We have, in terms of Securities and Exchange Board of India (ICDR) Regulations, 2009 reaudited the Balance Sheet of SONEAR INDUSTRIES LIMITED as at March 31, 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, which has been audited by Messrs. M C Jain & Co., Chartered Accountants. In our opinion and to the best of our information and according to the explanation given to us, and also as per the reliance placed on the reports submitted by the Statutory Auditors, Messrs. M C Jain & Co., the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principle generally accepted in India.

3. We have examined the attached ‘Summary Statement of Assets and Liabilities’ as restated of the

Company as at March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 (Annexure I) and the attached ‘Statement of Profit and Loss’ as restated (Annexure II) and the attached ‘Statement of Cash Flows’ as restated (Annexure III) for the financial years ended on March 31, 2010, 2009, 2008, 2007 and 2006 together referred to as ‘Restated Summary Statement’. These Summary Statements have been extracted from the financial statements for the period ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006.Audit for the financial year ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 was conducted by the statutory auditors, Messrs. M C Jain & Co., Chartered Accountants. The financial information included for the financial year ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 are based on reports submitted by them and have been relied upon by us while expressing our opinion and reporting on various restated financial information and annexure thereof expressly stated in the following paragraphs.

4. Based on the above, we report that in our opinion and according to the information and explanations

given to us, we have found the same to be correct and the same have been accordingly used in the standalone financial information.

5. Based on the above and also as per the reliance placed on the reports submitted by the previous auditors,

Messrs. M C Jain & Co., Chartered Accountants for the respective periods and year we state that:


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i) The ‘Restated Summary Statements’ have to be read in conjunction with the notes given in

Annexure IV and with the Notes to Accounts 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 March 31, 2010.

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. Please Refer to note no. 14 of notes on accounts.

iv) There are no extra ordinary items that need to be disclosed separately in the Restated Summary

Statements.

v) There are no qualifications in the auditors’ report on the non-consolidated financial statements that require adjustments to the Restated Summary Statements. (If there are qualifications a separate annexure for the same shall be attached)

Other Financial Information: We have also examined the following other financial information set out in annexure prepared by the management and approved by the Board of Directors relating to the Company for the period ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006. Audit for the financial year ended March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 was conducted by the statutory auditors Messrs. M C Jain & Co. , Chartered Accountants and the corresponding information have been included based upon the reports submitted by them and relied upon by us. a) Annexure IV - Significant Accounting Policies and Notes on restated financial statements. b) Annexure V- Schedule of Secured Loans c) Annexure VI - Schedule of Unsecured Loans d) Annexure VII - Schedule of Sundry Debtors e) Annexure VIII - Schedule of Loans and Advances f) Annexure IX - Schedule of Other Income g) Annexure X - Statement of Tax Shelter h) Annexure XI - Key Accounting Ratios i) Annexure XII - Statement of Capitalization j) Annexure XIII – Statement of Related Party Transaction k) Annexure XIV - Statement of Contingent Liabilities.

The company has not made any investments in the current and previous years. Further, no dividend was paid in the current and previous years.

6. In our opinion, the ‘Financial Information as per Audited Financial Statements’ and ‘Other Financial

Information’ mentioned above read with Significant Accounting Policies and Notes to Accounts appearing in Annexure IV and the audit report for the year ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 and have been prepared in accordance with Part II of schedule II of the Act, and the SEBI Regulations.

7. This report should, in any way, neither be construed as a re-issuance nor re-dating of any of the previous audit reports by us nor should this be construed as a new opinion on any of the Financial Statements referred to herein.


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This report is intended solely for your information and for inclusion in the Offer Document in connection with the proposed IPO of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

Yours truly, For Kumar Piyush & Co. Chartered Accountants Sd/- Virendra Kumar Goel Partner Membership Number: 83705 Firm registration No.: 005120N Peer Review No.: 004545 Date: August 31, 2010 Place: New Delhi


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Annexure I

Restated Summary of Statement of Assets and Liabilities


2010 2009 2008 2007 2006 A. Fixed Assets Gross block 2,235.01 2,168.40 2,040.52 1,252.59 1,019.22 Less: Depreciation 353.88 256.79 163.44 92.23 51.02 Net Block 1,881.13 1,911.61 1,877.08 1,160.36 968.20 B. Current Assets, Loans and Advances Inventories 2,511.38 1,060.19 879.40 715.36 472.02 Sundry Debtors 2,796.87 2,163.56 882.22 240.98 282.01 Cash and Bank Balances 111.77 46.08 32.89 64.32 44.04 Loans and Advances 498.90 149.50 164.46 75.51 27.90 5,918.92 3,419.33 1,958.97 1,096.17 825.97 C. Liabilities and Provisions: Secured Loans 4,204.73 3,429.59 2,546.41 1,338.01 1,046.49 Unsecured Loans - - - 42.00 72.37 Current Liabilities and Provisions 1,998.06 1,124.87 612.71 449.90 288.80 Deferred Tax Liability 130.07 77.58 59.90 13.99 4.89 6,332.86 4,632.04 3,219.02 1,843.90 1,412.55 D. Share Application Money - 95.00 45.00 42.40 27.40 E. Net Worth (A+B-C-D) 1,467.19 603.90 572.03 370.23 354.22 F. Represented by Share Capital 1,449.20 320.68 320.68 299.00 299.00 Security Premium - 134.72 134.72 48.00 48.00 Reserves and Surplus 38.14 149.12 117.87 27.24 9.70 Total 1,487.34 604.52 573.27 374.24 356.70 G. Misc. Expenditure to the extent not written

off or adjusted 20.15 0.62 1.24 4.01 2.48

H. Net Worth (F-G) 1,467.19 603.90 572.03 370.23 354.22


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Annexure II

Restated Summary of Statement of Profits and Losses (Rupees in Lakh)

Particulars

Year Ended, March 31 2010 2009 2008 2007 2006

INCOME Sales: Of Products manufactured by the Company 5,214.92 4,359.23 2,786.21 737.28 1,105.87 Less: Excise Duty 367.51 458.86 292.88 87.22 141.23 Of Products manufactured by the Company after excise Duty

4,847.41 3,900.37 2,493.33 650.06 964.64

Of Products traded in by the Company 4,960.51 1,260.68 506.19 629.33 - Net Sales 9,807.92 5,161.05 2,999.52 1,279.39 964.64 Other Income 8.95 2.21 6.99 1.76 1.14 Increase/(Decrease in Inventories) 199.12 65.49 252.80 (21.56) 106.43 Total Income 10,015.99 5,228.75 3,259.31 1,259.59 1,072.21 EXPENDITURE Purchases 5,134.49 1,250.15 500.81 600.65 - Raw Materials and Stores and Spares Consumed 2,749.85 2,542.80 1,826.18 320.41 729.69 Manufacturing and Other Expenses 571.90 536.30 293.29 73.60 78.27 Staff Costs 106.22 87.68 28.00 7.53 22.66 Administration Expenses 100.95 68.76 32.54 36.43 30.31 VAT 232.04 177.72 109.29 27.42 39.82 Selling and Distribution Expenses 166.59 41.88 21.15 1.23 2.04 Total Expenditure 9,062.04 4,705.29 2,811.26 1,067.27 902.79 Restated Profit Before Depreciation, Interest and Tax

953.95 523.46 448.05 192.32 169.42


429.17 58.54 153.03 30.34 16.30

Taxation Direct Tax Paid/Written Off (0.06) 1.59 - - - Current tax 73.86 5.91 15.76 3.40 1.40 Fringe Benefit Tax - 2.11 0.73 0.30 0.31 Deferred tax 52.49 17.68 45.91 9.10 4.89

Restated Net Profit before Extraordinary Items 302.82 31.25 90.63 17.54 9.70 Extraordinary items - - - - - Restated Net Profit after Extraordinary Items 302.82 31.25 90.63 17.54 9.70 Adjustments on account of Prior period Expenses

- - - - -

Restated Adjusted Profit 302.82 31.25 90.63 17.54 9.70 Restated Surplus Brought Forward From Last Year

149.12 117.87 27.24 9.70 -

Profit Available for Appropriation 451.94 149.12 117.87 27.24 9.70 Less: Utilised for Issue of Bonus Shares 413.80 - - - - Restated Surplus Carried to Balance Sheet 38.14 149.12 117.87 27.24 9.70


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Annexure III

Restated Summary of Statement of Cash Flow (Rupees in Lakh)

Particulars

Year Ended March 31 2010 2009 2008 2007 2006

Cash Flows from Operating Activities: Net Profit before Taxation 429.17 58.54 153.03 30.34 16.30 Adjustments for: Depreciation 97.10 93.34 71.22 41.67 51.00 Interest/ Dividend Income (4.26) (2.02) (5.22) (1.48) (1.14) Profit/Loss on Sale of Assets - - - (0.16) - Preliminary expenses Written off 0.62 0.62 0.62 0.62 0.62 Interest & Financial charges Paid 427.68 371.57 223.80 120.32 102.12 Provision for Gratuity 5.84 - - - - Exchange Gain (1.11) 0.41 - 9.52 0.65 Operating Profit before Working Capital Changes:

955.03 522.46 443.45 200.83 169.55

Change in Trade and Other Receivables (633.31) (1,281.34) (641.24) 41.03 (282.01) Change in Inventories (1,451.19) (180.78) (164.05) (243.34) (441.04) Change in Other Current Assets (285.55) 21.17 (79.48) (45.27) 41.13 Change in Current Liabilities 801.51 520.74 151.61 157.41 254.06 Income taxes paid (71.87) (24.40) (14.77) (2.34) (1.29) Prior Period Expenditure - - - - - Net Cash Flow from Operating Activities (1,640.41) (944.61) (747.93) (92.51) (429.15) Cash Flow from Investing Activities Purchase of Fixed Assets (66.61) (127.88) (785.78) (238.87) (55.93) Sale of Fixed Assets - - - 5.20 - Investments Purchased - - - - - Net Cash Flow used in Investing Activities (66.61) (127.88) (785.78) (233.67) (55.93)

Cash Flows from Financing Activities Changes in Borrowings 775.14 883.18 1,166.41 261.14 389.61 Proceeds from Issuance of Capital 485.00 - 66.00 - 14.30 Share Application Money - 50.00 45.00 15.00 27.40 Increase in Reserves - - - - - Miscellaneous Exp incurred (20.15) - - (2.15) - Other Income/Interest Received 4.26 2.02 5.22 1.48 1.14 Interest and Financial Charge Paid (427.68) (371.57) (223.80) (120.32) (102.12) Exchange Gain 1.11 (0.41) - (9.52) (0.65) Dividend Paid - - - - - Net Cash Flow from Financing Activities 817.68 563.22 1,058.83 145.63 329.68 Net increase in cash and cash equivalents 65.70 13.19 (31.43) 20.28 14.15 Cash and Cash Equivalents(Opening Balance)

46.07 32.89 64.32 44.04 29.89

Cash and Cash Equivalents (Closing Balance)

111.77 46.08 32.89 64.32 44.04


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ANNEXURE-IV A. SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting The Financial statement have been prepared under the historical cost conventions in accordance with the generally accepted accounting principal and the provisions of the Companies Act, 1956 as adopted consistently by the company. The company follows accrual system of accounting and recognizes income and expenditure accrual basis unless otherwise stated.

2. Fixed Assets: Fixed Assets are stated at cost less accumulated depreciation. Cost comprises of the purchase price and other attribute expenses.

3. Depreciation on Fixed Assets: Depreciation on all fixed assets is provided on Straight Line Method basis. Depreciation on Fixed Assets has been charged at rates and in the manner prescribed in schedule –XIV of the Companies Act, 1956.

4. Inventories: Closing inventories have been valued at Cost or Net Realisable Value, whichever is lower.

5. Revenue Recognition:

Sale of goods is recognized at the point of dispatch to customers and is stated net of sales return and inclusive of Excise Duty and Sales Tax. Inter divisional transfer of goods are at market value. All other income is accounted on accrual basis.

6. Preliminary Expenses:

Preliminary Expenses are being amortized proportionately over a period of five years.

7. Employees Retirement Benefits:

Employee benefits are provided in the books as per AS-15 (revised) in the following manner:

a) Provident fund and pension contribution-as a percentage of salary/wages is a defined contribution scheme.

b) Gratuity is a defined benefit obligation. The liability is provided for on the basis of actuarial valuation made at the end of each financial year. The actuarial valuation is made on “Projected Unit Credit Actuarial Method”.

8. Foreign Transactions:

a) The transaction in foreign currencies remaining outstanding at the end of the year are transacted at the exchange rate prevailing on the date of Balance Sheet or at the rate of exchange fixed under contractual arrangement.

b) Exchange gain/loss on transactions relating to liabilities incurred to acquire fixed assets is treated as an adjustment to the loss of fixed asset.

c) Exchange gains and losses on transaction other than those relating to fixed asset are adjusted in the Profit & Loss Account.

9. Taxes on Income:

a) Current Tax is determined as the amount of tax payable in respect of taxable income for the period.


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b) Deferred Tax is recognized subject to consideration of prudence on timing difference between taxable income and account income that originate in one period and is capable of reversal in one or more subsequent period.

10. Investments:

Investments are stated at cost and where there is permanent diminution in the value of investments, a provision is made wherever applicable.

11. Contingencies:

Loss arising from claims, litigation, assessment, fines, penalties after sales warranty, right to compensate etc. are provided for when it is probable that liability may be incurred and the amount can be reasonably estimated.

B. NOTES ON ACCOUNTS

1. Name of the Company

The name of the company was changed from Donear Decor Private Limited to Sonear Industries Private Limited vide Special Resolution dated March 19, 2010 and approved by the Registrar of Companies vide his certificate dated April 12, 2010. Thereafter, the company was converted from Private Limited Company to Limited Company vide Special Resolution passed on April 23, 2010 and approved by the Registrar of Companies vide his certificate dated May 21, 2010.

2. Previous year figures have been re-grouped/re-arranged wherever required to make them comparable with current year.

3. Retirement Benefits

During the year ended March 31, 2010, provision of gratuity has been made for a sum of Rs. 583,648/- as per the actuarial valuation.

4. Sundry Debtors, Loans and Advances and Sundry Creditors

a) In the opinion of the Board of Director’s, the Current Assets, Loans and Advances are approximately of the value stated if realised in the ordinary course of business. The provisions for all known liabilities are adequate and not in excess of the amount reasonably required.

b) Balance of Sundry Creditors, Sundry Debtors and Advances are subject to confirmation and reconciliation.

c) Balances of Dealers Security received are subject to confirmation.

5. Fixed Deposit with Punjab National Bank and Oriental Bank of Commerce has been deposited as margin money against Letter of Credit and Bank Guarantee.


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6. Provision for Deferred Tax: (Rupees in Lakh)

Particulars 2009-2010 (Rupees)

2008-2009 (Rupees)

Opening Balance (Liability) 77.58 59.90

Add:

Deferred Tax Liabilities 52.49 17.68

Closing Balance 130.07 77.58

7. Earning Per Share (EPS) (Rupees in Lakh)

Sl. No. Particulars 31.03.2010 31.03.2009

a) Net Profit after Tax as per Profit and Loss A/c 302.88 31.25

b) Excess Provision fortax of earlier years 0.06 0.00

c) Net Profit attributable to Equity Shareholders 302.82 31.25

d) Weighted Average No. of Equity Shares 8764466 8764466

e) Basic Earning Per Shares 3.46 0.36

f) Diluted Earning Per Shares 3.46 0.36

g) Face Value Per Equity Shares 10/- 10/-

8. Payment to Auditors

31.03.2010 31.03.2009

(Rs) (Rs)

As Audit Fees 100,000.00 15,000.00

As Tax Audit Fees 25,000.00 5,000.00

As Service Tax and Cess 12,875.00 2,472.00

Total 137,875.00 22,472.00

9. Managing Director Remuneration

During the previous years, no remuneration was paid to Managing Director.

10. Lease Rent of Rs. 240,000/- (Previous year Rs. 240,000/-) was paid to managing director.

11. During the year, the authorised share capital of the company has been increased from Rs. 4.00 Crore to Rs. 35.00 Crore, expenses on increasing in Authorised Capital is shown as Deferred Revenue Expenditure.

12. The Company has deposited Custom Duty of Rs. 700,000/- (including Fine and penalty) under protest as per the order of Joint Commissioner of Customs (Import) on account of under valuation of goods imported during the Financial Year 2009-10. The Company has filed an appeal with the Commissioner of Customs (Appeals) against the said order.


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13. Additional information pursuant to provision of paragraph 3 and 4 of part II ofSchedule VI of the Companies Act 1956.

Break of expenditure of employee’s who are in receipt or were entitled to receive a remuneration amounting to Rs. 2,400,000/- or more per year or Rs. 200,000/- or more per month where employed for part or the year.

NIL

(previous year NIL)

14. Effects of Re-statements (Rupees in Lakh)

Particulars 2009-10 2008-09 2007-08 2006-07 2005-06

Balances carried to balance sheet as per the as per restated financial statement (A)

38.14 149.12 117.87 27.24 9.70

Balances carried to balance sheet as per the audited financial statement (B)

146.76 212.92 163.59 27.05 0.43

Increase/(Decrease) (A-B) (108.62) (63.80) (45.72) 0.19 9.27

15. Contingent Liabilities

e) Outstanding Letter of Credit as on 31.03.2010 amounting to Rs. 77,036,327/-.

f) Bank Guarantee of Rs. 6,530/- given to Sales Tax Department, Ahmedabad.

g) A Surety Bond of Rs. 4,000,000/- in favor of the Sales Tax Department for the payment of VAT and CST is given jointly with its associate concern Surya Vikas Plywood Private Limited for another associate concern Surya Boards Limited.

h) The Company has paid a sum of Rs. 100,000/- which has been shown as advance and is in appeal with CESTAT against a demand of Rs. 4,242,439/- on account of under valuation for March 2002 to June 2005 along with penalty of Rs. 4,242,439/- under Rule 25 and 26 of The Central Excise Rules2002, each and interest of like amount. The CESTAT vide its stay order No.381-382/2010-Ex Dated 14th May, 2010 has granted stay on the recovery of demand till the disposal of Appeal.

16. Related Parties Disclosures

As per Accounting Standard–18 ‘Related Party Disclosures’, notified in the Companies (Accounting Standards) Rules 2006, the disclosures of transactions with the related parties as defined in AS-18 are given below:

i) Lists of Related parties where control exists and related parties with whom transactions have taken place and relationships:

S. No. Name of The Related Party Relationship 1

Mr. Jitendra Kejriwal Key Management Personnel

2 Surya Vikas Plywood Private Limited Enterprises owned or Significantly influenced by key management personnel or their relatives


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S. No. Name of The Related Party Relationship 3 Donear Laminates Private Limited Enterprises owned or Significantly influenced

by key management personnel or their relatives 4 Surya Boards Limited Enterprises owned or Significantly influenced

by key management personnel or their relatives 5 Donear Plywood Private Limited Enterprises owned or Significantly influenced

by key management personnel or their relatives 6 Surya Decolam Private Limited Enterprises owned or significantly influenced

by key management personnel or their relatives

ii) Transactions during the year with Related Parties (Excluding reimbursements):

Name of Related Party/ For the Year 2009-10 Nature of Transaction Amount (Rs.) Mr. Jitendra Kejriwal Advance for Expenses Opening Balance (Dr.) 1,90,336.00 Amount Given 9,75,280.00 Amount Received 11,65,616.00 Closing Balance Nil Lease Rent paid 2,64,720.00 Less: TDS 30,540.00 Surya Boards Limited Advance for Purchase of Raw – Materials Opening Balance 0.00 Amount Given 30,00,000.00 Closing Balance (Dr.) 30,00,000.00 Sundry Debtors Opening Balance (Dr.) 1,05,50,160.00 Transaction (50,48,491.00) Sale of Goods 5,40,39,615.00 Purchase of Goods (95,82,687.00) Closing Balance (Dr.) 4,99,58,597.00

Surya Vikas Plywood Private Limited Advance for Purchase of Raw - Materials Opening Balance 0.00 Amount Given 80,00,000.00 Closing Balance 80,00,000.00 Sundry Debtors Opening Balance 65,46,135.00 Transaction 40,00,000.00 Sale of Goods 90,01,944.00


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17. Capacity, Production and Turnover of Plywood/Laminate

(i) Capacity and Production:

Particulars Licensed Capacity Installed Capacity Production As at

31.03.2010 As at

31.03.2009 As at

31.03.2010 As at

31.03.2009 As at

31.03.2010 As at

31.03.2009 Plywood (Sq. Mtrs.) N.A. N.A. 3,572,160 3,572,160 15,54,014.95 18,41,978.99 Laminate (Sheets) N.A. N.A. 1,200,000 1,200,000 4,49,194.00 2,44,283.00

(ii) Details of Turnover (Amount in Rupees)

Particulars As at 31.03.2010 (Rs) As at 31.03.2009 (Rs) Turnover 1,017,543,107.90 561,990,855.77 18. Capital Commitment

Current Year Previous Year For Capital Goods Nil Nil

19. Foreign Exchange Earning And Outgo

I. Imports (CIF Value) 31.03.2010 31.03.2009

a) Capital Goods Rs. 3,519,967.00 Rs. 2,909,230.00

b) Raw Material Rs. 102,092,660.00 Rs. 61,402,849.00

c) Consumable Stores Rs. 110,418.00 NIL

II. Expenditure in Foreign Exchange

a) Travel NIL Rs. 109,139.00

III. Earnings in Foreign Exchange

a) FOB Value of Exports NIL Rs. 200,541.06

b) Others NIL NIL

Purchase of Goods (55,03,087.00) Closing Balance 1,40,44,992.00 Donear Plywood Private Limited Sundry Debtors Opening Balance 10,93,84,654.60 Sale of Goods 10,91,63,675.40 Amount Received (13,01,00,594.00) Closing Balance 8,84,47,736.00 Surya Decolam Private Limited Advance for Purchases Opening Balance 0.00 Amount Given 9,54,000.00 Amount Received 9,54,000.00 Closing Balance 0.00


117

20. Dues to Micro and Small enterprises There were no Micro and Small enterprises to whom amounts are outstanding for more than 45 days, as at March 31, 2010 (Previous Year Rs. Nil). As at March 31, 2010, no supplier has intimated the company about its status as Micro and Small enterprises or its registration with the appropriate authority under The Micro, Small and Medium Enterprises Development Act, 2006.


118

ANNEXURE V

SCHEDULE OF SECURED LOANS AS ON MARCH 31, 2010 (Rupees in Lakh)

Sl.No.

Name of the Lender

Principal Outstanding

as on March 31, 2010

(Rupees)

Rate of Interest

Repayment

Schedule

Details of Security (if applicable)

1. Term Loans from Banks:

a) Oriental Bank of Commerce

614.38 PLR- Minus 1%

Qtrly Rs.35.00 Lakh

Hypothecation of entire fixed assets of the company (including mortgage of factory land and building), plant and machinery and other fixed assets.

b) Oriental Bank of Commerce

211.07 PLR Minus 1%

Qtrly Rs.30.00 Lakh

Hypothecation of all existing and future fixed assets of the company

Total 825.45 2. Cash Credit Facilities: a) Oriental Bank of

Commerce 3022.71 PLR

Minus 0.50%

- Hypothecation of inventory, book debts and all other chargeable current assets of the company.

b)

The Royal Bank of Scotland (erstwhile ABN AMRO Bank Limited)

238.92 LIBOR+ 1.10%

On due date

Against Hypothecation of Letter of Credit

c) Indian Overseas Bank

73.29 LIBOR+ 1.65%

On due date


d) State Bank of India

37.28 LIBOR+ 2.00%

On due date


Total 3372.20 3. Hire Purchase Loans:

a) ICICI Bank Ltd. 1.25 13.99% EMI of

Rs. 11,148/-

Car Wagon R

b) Sundram Finance Ltd.

1.41 12.80% EMI of Rs. 14,900/-

Tata 407

c) TATA Capital Ltd.

4.43 10.34% EMI of Rs. 33,597/-

Car Honda Civic

Total 7.09 Grand Total 4204.74


119

ANNEXURE VI SCHEDULE OF UNSECURED LOANS

(Rupees in Lakh) Particulars Year Ended March 31

2010 2009 2008 2007 2006 Fixed Deposits: From Directors Nil Nil Nil Nil Nil From Others Nil Nil Nil 42.00 72.37 Sales Tax Loan under Sales Tax incentive scheme

Nil Nil Nil Nil Nil

Total Nil Nil Nil 42.00 72.37

ANNEXURE VII

SCHEDULE OF SUNDRY DEBTORS

(Rupees in Lakh)

Particulars Year Ended March 31 2010 2009 2008 2007 2006

(Unsecured, considered doubtful): - Outstanding for a period less than six months Nil Nil Nil Nil Nil - Outstanding for a period Exceeding six months

Nil Nil Nil Nil Nil

(Unsecured, considered good): - Outstanding for a period less than six months 2692.84 2123.55 833.88 178.13 270.45 - Outstanding for a period Exceeding six months

104.03 40.00 48.34 62.84 11.56

2796.87 2163.55 882.22 240.97 282.01

Note: The sundry debtors include the following amount receivable from promoter(s)/promoter group and directors of the company:


Promoter Group Companies: Surya Boards Limited 499.59 105.50 - 43.62 - Surya Vikas Plywood Private Limited 140.45 85.46 - 8.34 - Donear Plywood Private Limited 88.45 1093.85 279.29 94.81 -

ANNEXURE-VIII

SCHEDULE OF LOANS AND ADVANCES (Rupees in Lakh)

Particulars Year Ended March 31

2010 2009 2008 2007 2006 Loan and Advances 498.90 149.50 164.46 75.51 27.90


120

Note: The loans and advances include the following amount receivable from promoter(s)/promoter group and directors of the company:

Particulars Year Ended March 31

2010 2009 2008 2007 2006 Key Managerial Person: Jitendra Kejriwal - 1.90 - 2.52 0.36 Promoter Group Companies: Surya Boards Limited 30.00 - - - - Surya Vikas Plywood Private Limited 80.00 - - - - Donear Laminates Private Limited - - 6.83 6.83 -

ANNEXURE- IX

SCHEDULE OF OTHER INCOME (Rupees in Lakh)

Particulars Year Ended March 31, 2010 2009 2008 2007 2006

Other Income 8.54 2.21 6.99 1.76 1.14 Net Profit before tax as restated 429.17 58.94 153.03 30.34 16.30 Percentage 1.99% 3.75% 4.57% 5.80% 7.00% Source of Income • Rebates and Discounts 1.33 - 0.12 - - • Interest 4.26 2.02 5.22 1.48 1.14 • Receipt on sale of DEPB - - 1.63 - - • Exchange Difference 1.52 - - - - • Miscellaneous Income 1.43 0.19 0.02 ..28 - Total 8.54 2.21 6.99 1.76 1.14


121

Annexure X Restated Summary of Statement of Tax Shelter

(Rupees in Lakh) Sl

No. Particulars Year Ended March 31,

2010 2009 2008 2007 2006 30.00% 30.00% 30.00% 30.00% 30.00% 1 Tax at Notional Rate 129.00 18.00 46.00 9.00 5.00 Adjustments:

a) Export Profits - - - - - b) Difference between Tax

Depreciation and Book (71.57) (67.20) (110.79) (105.13) (78.88) Depreciation, Gratuity

c) Other Adjustments - - - - - {d=( Net Adjustments (71.57) (67.20) (110.79) (105.13) (78.88)

d) Tax Saving Thereon (21.47) (20.16) (33.24) (31.54) (23.66)

1+/ Total Taxation 107.53 (2.16) 12.76 (22.54) (18.66) e) Taxation on extra-ordinary Items - - - - - Tax on Profits before extra-

ordinary items 107.53 (2.16) 12.76 (22.54) (18.66)

Annexure XI

KEY ACCOUNTING RATIOS

Particulars

Year Ended March 31, 2010 2009 2008 2007 2006

Fully Diluted Earnings per share (Rs.) (weighted)

3.46 0.36 3.01 0.59 0.33

Pre Bonus Issue Earnings per share (Rs.) (Weighted)

9.23 0.97 3.01 0.59 0.33

Fully Diluted Earnings per share (Rs.) 2.09 0.97 2.83 0.59 0.32 Pre Bonus Issue Earnings per share (Rs.) 3.36 0.97 2.83 0.59 0.32 Net Asset value per share (Rs.) 16.74 6.89 19.00 12.38 12.23 Return on Net Worth (%) 20.64 5.18 15.84 4.74 2.74 Weighted average number of equity shares in the period (in Nos.)( Post Bonus issue)

8,764,466 8,017,466 3,010,674 2,990,000 2,895,973

Weighted average number of equity shares in the period (in Nos.) (Pre Bonus Issue)

3,279,266 3,206,800 3,010,674 2,990,000 2,895,973

Number of equity shares in the period (in Nos.) (Post Bonus Issue)

14,492,000 3,206,800 3,206,800 2,990,000 2,990,000

Number of equity shares in the period (in Nos.) (Pre Bonus Issue)

9,006,800 3,206,800 3,206,800 2,990,000 2,990,000

Formula: 1. Weighted Earnings per share(Rs.) = Net profit attributable to equity shareholders (Diluted/Non Diluted) Weighted average number of equity shares outstanding during the period


122

2. Earning Per Share (Rs.) = Net profit attributable to equity shareholders (Diluted/Non Diluted) Number of equity shares outstanding during the period 3. Net Asset Value per share (Rs.) = Net Worth excluding revaluation reserve at the end of the period/year Weighted average number of equity shares outstanding during the period 4. Return on Net Worth (%) = Net profit attributable to equity shareholders Net Worth excluding revaluation reserve at the end of the period/year

Note: The Key Accounting Ratios are calculated in accordance with A S – 20 issued by The ICAI.

ANNEXURE-XII

STATEMENT OF CAPITALISATION (Rupees in Lakh)

PARTICULARS

Pre-Issue as at Post Issue* March 31, 2010

Borrowings : Short-term Debt** 3372.20 - Long-term Debt 832.53 - Total Debt 4204.73 - Shareholders' funds: Share Capital 1449.20 - Reserves 17.99 - Total Shareholders' Funds 1467.19 -

Total Capitalization 5671.92 - Long-term Debt/Equity ratio 0.57 - Total Debt/Equity ratio 2.86 -

* Share Capital and reserves and total shareholders' Funds would be calculated on conclusion of the Book Building process ** Short-term Debts are debts maturing within the next one year from the date of above statement.


123

ANNEXURE-XIII

STATEMENT OF RELATED PARTY TRANSACTION

A. Related Parties and their relationship Promoters/ directors and their relatives Mr. Jitendra Kejriwal Group Companies Surya Boards Ltd. Donear Plywood Pvt. Ltd. Surya Vikas Plywood Pvt. Ltd. Donear Laminates Pvt. Ltd. Surya Decolam Private Limited Key Managerial Personnel and their relatives Mr. Jitendra Kejriwal

B. Details of Related Party Transactions Sr. No.

Name Nature of Transaction

Relationship Year Ended March 31 2010 2009 2008 2007 2006

1. Mr. Jitendra Kejriwal

Advance Given

Key Management Personnel

9.75 1.90 2.27 4.85 -

Advance Given

11.66 - 4.89 2.70 -

Balance at year end

- 1.90 (Dr.)

0.10 (Cr.)

2.52 (Dr.)

0.37

Rent Given 2.65 2.70 2.50 2.40 2.40 2. Surya

Boards Ltd.

Sales Enterprises owned or significantly influenced by key management personnel or their relatives

540.40 381.95 251.71 201.31 123.59 Purchases 95.83 129.75 19.79 239.10 155.33 Balance at year end

469.59 (Dr.)

105.50 (Dr.)

6.85 (Cr.)

45.93 (Cr.)

59.09 (Cr.)

Loan Received - - - - 42.00 Loan Repaid - - 42.00 - - Balance at year end

- - - 42.00 (Cr.)

42.00 (Cr.)

3. Donear Plywood Pvt. Ltd.


1091.64 1204.30 825.73 291.58 185.14 Purchases - - - - - Balance at year end

884.48 (Dr.)

1,093.85 (Dr.)

270.60 (Dr.)

94.81 (Dr.)

49.39 (Dr.)

4. Surya Vikas Plywood Pvt. Ltd.


90.02 107.30 24.17 8.48 0.31 Purchases 55.03 106.45 13.18 122.30 22.90 Balance at year end

300.45 (Dr.)

85.46 (Dr.)

9.06 (Cr.)

67.49 (Cr.)

7.59 (Cr.)

5. Donear Laminates Pvt. Ltd.

Loan Received Enterprises owned or significantly influenced by key management personnel or their relatives

- 6.83 10.00 89.87 Loan Repaid - - - 47.20 59.50 Balance at year end

- - 6.83 (Dr.)

6.83 (Dr.)

30.37 (Cr.)


124

Sr. No.

Name Nature of Transaction

Relationship Year Ended March 31 2010 2009 2008 2007 2006

6. Surya Decolam Private Limited

Loan Received Enterprises owned or significantly influenced by key management personnel or their relatives

9.54 - - - -

Loan Repaid 9.54 - - - - Balance at

year end - - - - -

ANNEXURE-XIV

SCHEDULE OF CONTINGENT LIABILITIES (Rupees in Lakh)


Letter of Credit (Outstanding) 7.70 --- --- --- --- Bank Guarantee 0.06 --- --- --- --- Excise 42.42 42.42 42.42 42.42 Nil Surety Bond at Sales Tax* 40.00 Nil Nil Nil Nil

*A Surety Bond of Rs.4,000,000/- in favor of the Sales tax Department for the payment of VAT and CST is given jointly with its associate concern Surya Vikas Plywood Private Limited for another associate concern Surya Boards Limited.

For Kumar Piyush & Co. Chartered Accountants Sd/- Virendra Kumar Goel Partner Membership No.: 83705 Firm Registration No.:005120N Peer Review No.: 004545 Date: 31.08.2010 Place: New Delhi


125

Financial Information As Required Under Schedule VIII, Part-A, Financial Statements (IX), 5 (a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 The Board of Directors Sonear Industries Limited 20, North West Avenue Punjabi Bagh Delhi-110 026 Dear Sirs We have examined the audited financial statements of Surya Vikas Plywood Limited (Formerly known as Surya Vikas Plywood Private Limited) for the financial years ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006. The report has been prepared as required under SCHEDULE-VIII, Part-A, Financial Statements (IX) 5(a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 issued by the Securities and Exchange Board of India ('SEBI') which is proposed to be incorporated in the Offer Document of SONEAR INDUSTRIES LIMITED ('The Company') in connection with its proposed public issue of equity shares. Audit of the financial statements for the year ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 has been conducted by Company's Statutory Auditor, Messrs. Jitender R. Deo & Co. Further, financial statement for the year ended March 31, 2010 have been reaudited by us as required under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. This report, in so far as it relates to the amounts included for the financial years ended March 31, 2010 March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 is based on the audited financial statements of the Company which were audited by the Statutory Auditor, Messrs. Jitender R. Deo & Co. and whose Auditors report has been relied upon by us for the said periods. SCHEDULE-VIII, PART A, Financial Statements (IX) 5(a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 inter-alia,, requires that if the proceeds or any part of the proceeds of the issue of shares are to be applied for the acquisition of shares in any other body corporate ('the subsidiary') and by reason of that acquisition, the body corporate will become a subsidiary of the issuer company then, a report made by accountants upon the profits and losses and assets and liabilities of the subsidiary for the preceding five years indicating how the profits or losses of the subsidiary would have concerned the members of the issuer company and what allowance would have fallen to be made and in relation to the assets and liabilities so dealt with for holders of other shares, if the issuer company had at all material times held the shares to be acquired. We understand that a part of the proceeds of the proposed public issue of the Company is proposed to be utilized for investment in equity shares of Surya Vikas Plywood Limited (Formerly known as Surya Vikas Plywood Private Limited) thereby acquiring 51% stake of the post investment total paid up equity capital of the company. Based on our examination of the financial statements provided to us, of the Company, Surya Vikas Plywood Limited (Formerly known as Surya Vikas Plywood Private Limited), we certify that the enclosed Financial Statements, as required under SCHEDULE VIII', PART A, Financial Statements (IX) 5 (a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, have been drawn up following the Accounting Standards issued by the Institute of Chartered Accountants of India and the


126

Financial Statements for the years ended on March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 have been presented in Annexure-A1 and Annexure-A2 of this report. Yours truly, For Kumar Piyush & Co. Chartered Accountants Sd/- Virendra Kumar Goel Partner Membership Number: 083705 Firm registration No.: 005120N Peer Review No.: 004545 Place: New Delhi, Date: August 31, 2010


127


(Rupees in Lakh) Particulars As at March 31,

2010 2009 2008 2007 2006 A. Fixed Assets Gross block 798.35 773.55 763.68 756.97 705.84 Less Depreciation 179.51 147.91 117.96 88.89 61.08 Net Block 618.84 625.64 645.72 668.08 644.76 B. Investments - - 0.11 0.27 - C. Current Assets, Loans and Advances Inventories 1,385.07 1,092.27 568.88 290.09 302.17 Sundry Debtors 962.59 404.43 487.83 182.95 322.51 Cash and Bank Balances 23.91 63.39 52.92 27.71 (24.10) Loans and Advances 48.56 43.58 26.72 22.89 21.32 Deferred Tax Assets - - - - - 2,420.13 1,603.67 1,136.35 523.64 621.90 D. Liabilities and Provisions: Secured Loans 1,178.09 1,153.87 833.09 544.08 584.22 Unsecured Loans 448.00 295.00 109.30 155.00 80.78 Current Liabilities and Provisions 952.59 420.55 438.89 193.90 337.17 Deferred Tax Liabilities 83.62 79.91 2.58 2.58 2.58 2,662.30 1,949.33 1,383.86 895.56 1,004.75 E. Share Application Money - - - 20.00 - F. Net Worth (A+B+C-D-E) 376.67 279.98 398.33 276.44 261.91 G. Represented by Share Capital 261.00 261.00 261.00 257.00 257.00 Share Premium 60.00 60.00 60.00 44.00 44.00 Reserves 55.82 (40.86) 77.53 (24.08) (38.12) Total 376.82 280.14 398.53 276.92 262.88 H. Misc. Expenditure to the extent not written off or adjusted 0.15 0.16 0.20 0.49 0.97 I. Net Worth (G-H) 376.67 279.98 398.33 276.44 261.91


128

Restated Summary of Statement of Profits and Losses

(Rupees in Lakh)

Particulars

Year Ended March 31, 2010 2009 2008 2007 2006

Income Sales: Of Products manufactured by the Company 1,899.45 2,029.72 1,532.51 322.35 744.62 Less: Excise Duty 41.52 128.47 114.25 42.34 100.36 Of Products manufactured by the Company after excise Duty

1,857.93 1,901.25 1,418.26 280.01 644.26

Of Products traded in by the Company 2,574.91 784.48 203.21 499.48 45.15 Net Sales 4,432.84 2,685.73 1,621.47 779.49 689.41 Other Income 0.02 106.03 0.01 0.16 0.17 Increase/(Decrease in Inventories) (95.70) 63.12 81.00 7.10 (13.96) Total Income 4,337.16 2,854.88 1,702.48 786.75 675.62

Expenditure Purchases (Trade) 2,080.26 758.44 177.37 439.94 44.27 Raw Materials Consumed 1,554.15 1,588.98 1,035.79 176.65 461.70 Other Manufacturing Expenses 210.80 228.81 176.88 8.28 38.38 Staff Costs 44.18 42.52 11.72 8.27 11.07 Administration Expenses 47.57 65.59 26.69 11.94 10.71 VAT 121.12 62.41 46.67 20.61 26.92 Selling and Distribution Expenses - 0.01 0.35 0.06 0.14 Total Expenditure 4,058.08 2,746.76 1,475.47 665.75 593.19 Restated Profit Before Depreciation, Interest and Tax 279.08 108.12 227.01 121.00 82.43 Depreciation 31.60 29.95 29.07 27.81 23.90 Interest and Financial Charges 125.69 117.96 82.00 78.91 52.97 Restated Net Profit before tax and Extraordinary items 121.79 (39.79) 115.94 14.28 5.56 Taxation:

Current tax 21.32 0.36 11.40 - 0.41 Fringe Benefit Tax 0.08 0.92 0.20 0.24 - Deferred tax 3.71 77.32 - - -

Restated Net Profit before Extraordinary Items 96.68 (118.39) 104.34 14.04 5.15

Extraordinary items - - 2.74 - - Restated Net Profit after Extraordinary Items 96.68 (118.39) 101.60 14.04 5.15 Adjustments on account of Prior period Expenses - - - - - Restated Adjusted Profit 96.68 (118.39) 101.60 14.04 5.15 Restated Balance Brought Forward From Last Year (40.86) 77.53 (24.08) (38.12) (43.27)

Profit Available for Appropriation 55.82 (40.86) 77.53 (24.08) (38.12) Restated Surplus Carried to Balance Sheet 55.82 (40.86) 77.53 (24.08) (38.12)


129

Financial Information As Required Under Schedule VIII, Part-A, Financial Statements (IX), 5 (a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 The Board of Directors Sonear Industries Limited 20, North West Avenue Punjabi Bagh Delhi-110 026 Dear Sirs We have examined the audited financial statements of Surya Boards Limited for the financial years ended March 31, 2010, March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006. The report has been prepared as required under SCHEDULE-VIII, Part-A, Financial Statements (IX) 5(a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 issued by the Securities and Exchange Board of India ('SEBI') which is proposed to be incorporated in the Offer Document of SONEAR INDUSTRIES LIMITED ('The Company') in connection with its proposed public issue of equity shares. Audit of the financial statements for the year ended March 31, 2010, March 31, 2009, March 31, 2008 March 31, 2007 and March 31, 2006 has been conducted by Company's Statutory Auditor, Messrs. M. C. Jain & Co. Further, financial statement for the year ended March 31, 2010 have been reaudited by us as required under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. This report, in so far as it relates to the amounts included for the financial years ended March 31, 2010 March 31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 is based on the audited financial statements of the Company which were audited by the Statutory Auditor, Messrs. M. C. Jain & Co. and whose Auditors report has been relied upon by us for the said periods.

SCHEDULE-VIII, PART A, Financial Statements (IX) 5(a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 inter-alia,, requires that if the proceeds or any part of the proceeds of the issue of shares are to be applied for the acquisition of shares in any other body corporate ('the subsidiary') and by reason of that acquisition, the body corporate will become a subsidiary of the issuer company then, a report made by accountants upon the profits and losses and assets and liabilities of the subsidiary for the preceding five years indicating how the profits or losses of the subsidiary would have concerned the members of the issuer company and what allowance would have fallen to be made and in relation to the assets and liabilities so dealt with for holders of other shares, if the issuer company had at all material times held the shares to be acquired. We understand that a part of the proceeds of the proposed public issue of the Company is proposed to be utilized for investment in equity shares of Surya Boards Limited thereby acquiring 51% stake of the post investment total paid up equity capital of the company. Based on our examination of the financial statements provided to us, of the Company, Surya Boards Limited, we certify that the enclosed Financial Statements, as required under SCHEDULE VIII', PART A, Financial Statements (IX) 5 (a) and 5(b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, have been drawn up following the Accounting Standards issued by the Institute of Chartered Accountants of India and the Financial Statements for the years ended on March 31, 2010, March


130

31, 2009, March 31, 2008, March 31, 2007 and March 31, 2006 have been presented in Annexure-A1 and Annexure-A2 of this report. Yours truly For Kumar Piyush & Co. Chartered Accountants Sd/- Virendra Kumar Goel Partner Membership Number: 083705 Firm registration No.: 005120N Peer Review No.: 004545 Place: New Delhi, Date: August 31, 2010


131



2010 2009 2008 2007 2006 A. Fixed Assets Gross block 310.03 299.27 266.96 216.69 210.84 Less Depreciation 188.01 166.43 142.57 124.65 115.15 Net Block 122.02 132.84 124.39 92.04 95.69 B. Investments 10.75 10.75 10.75 10.75 0.25 C. Current Assets, Loans and

Advances

Inventories 1,255.39 689.45 406.75 309.80 381.92 Sundry Debtors 861.36 568.69 614.09 647.79 240.50 Cash and Bank Balances 29.87 19.94 24.36 25.10 38.99 Loans and Advances 298.12 87.99 210.75 192.97 87.60 Deferred Tax Assets 12.82 5.40 5.40 5.40 5.40 2,457.56 1,371.47 1,261.35 1,181.06 754.41 D. Liabilities and Provisions: Secured Loans 991.12 871.74 883.63 618.03 384.57 Unsecured Loans - 83.75 88.25 97.00 9.97 Current Liabilities and

Provisions 1,311.42 303.84 122.13 277.74 164.97

2,302.54 1,259.33 1,094.01 992.77 559.51 E. Share Application Money - - - - 1.70 F. Net Worth (A+B+C-D-E) 287.79 255.73 302.48 291.08 289.14 G. Represented by Share Capital 255.92 255.92 255.92 255.92 255.92 Reserves 31.87 (0.03) 46.87 35.63 33.84 Total 287.79 255.89 302.79 291.55 289.76 H. Misc. Expenditure to the extent

not written off or adjusted

-

0.16

0.31

0.47

0.62 I. Net Worth (G-H) 287.79 255.73 302.48 291.08 289.14


132

Restated Summary of Statement of Profits and Losses

(Rupees in Lakh) Particulars

Year Ended March 31, 2010 2009 2008 2007 2006

Income Sales: Of Products manufactured by the Company

2,015.82

1,865.21

1,846.08

1,710.32

944.64

Less: Excise Duty 115.73 118.10 134.76 209.02 125.59 Of Products manufactured by the Company after excise Duty

1,900.09

1,747.11

1,711.32

1,501.30

819.05

Of Products traded in by the Company 1,174.57 712.52 503.50 63.78 53.25 Net Sales 3,074.66 2,459.63 2,214.82 1,565.08 872.30 Other Income 6.57 1.90 6.52 2.14 2.67 Increase/(Decrease in Inventories) (77.37) 101.90 42.64 (17.24) (68.05) Total Income 3,003.86 2,563.43 2,263.98 1,549.98 806.92 Expenditure Purchases (Trade) 1,181.18 706.05 500.02 62.52 53.74 Raw Materials Consumed 1,034.62 1,106.61 1,093.73 1,078.70 484.92 Other Manufacturing Expenses 272.05 306.50 267.82 158.89 89.52 Staff Costs 104.08 68.88 32.08 19.85 34.90 Administration Expenses 98.92 69.22 57.69 48.03 33.28 VAT 57.69 54.13 72.59 60.12 32.66 Selling and Distribution Expenses 101.04 150.45 114.63 42.16 18.39 Total Expenditure 2,849.58 2,461.84 2,138.56 1,470.27 747.41 Restated Profit Before Depreciation, Interest and Tax

154.28

101.59

125.42

79.71

59.51


28.93

(44.36)

19.27

5.90

5.87

Taxation: Direct Tax Paid/Written Off - - - - - Current tax 4.45 - 6.17 3.21 2.10 Fringe Benefit Tax - 2.54 1.86 0.90 1.20 Deferred tax (7.42) - - - 0.44

Restated Net Profit before Extraordinary Items

31.90

(46.90)

11.24

1.79

2.13

Extraordinary items - - - - - Restated Net Profit after Extraordinary Items

31.90

(46.90)

11.24

1.79

2.13

Adjustments on account of Prior period Expenses

-

-

-

-

2.72

Restated Adjusted Profit 31.90 (46.90) 11.24 1.79 (0.59) Restated Balance Brought Forward From Last Year

(0.03)

46.87

35.63

33.84

34.43

Profit Available for Appropriation 31.87 (0.03) 46.87 35.63 33.84 Restated Surplus Carried to Balance Sheet

31.87

(0.03)

46.87

35.63

33.84


133

CHANGES IN ACCOUNTING POLICIES IN THE LAST THREE YEARS

There are no changes in accounting policies of the Company in the last three years.


134

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 our Business:

Sonear Industries Limited has grown up considerably during last few years in spite of the recessionary trends in the economy during last year. The Company has taken various steps to become more competitive, and to gain market share by catering to newer customers from hotel Industries and various other industries. The company will increase its capacity of manufacturing of Decorative Plywood and Laminates by installation of balancing equipments in the factory. The company is now geared up to exploit the opportunity which is generated by Government of India by giving more focus and resources to expand hotels & infrastructure projects. We will continue to explore new markets domestically and intend to cater international markets more strongly.

b. Capacity Expansion The company is having the installed capacity for manufacturing of laminates and decorative plywood of 12.00 Lacs Sheets and 35,72,160 Sq. Mtrs. respectively to be increased to 24.00 Lacs Sheets for laminates and 4762880 Sq. Mtrs. for decorative plywood.

c. Significant Development Subsequent to Last Financial Period The Directors confirm that there have been no events or circumstances since the date of the last financial statements as disclosed in the DRHP which materially or adversely affect or is likely to affect the manufacturing or profitability of our company, or the value of our assets, or our ability to pay liabilities within next twelve months.

d. Corporate Social Responsibility

We at Sonear Industries Limited are fully committed to our social responsibilities. We believe that company can grow only when the community at large grows. Community welfare activities are regularly taken at the company’s plant location these activities include medical camps, cultural and sports events. Company also sponsors various events which contribute to the welfare of community at large, like maintaining water fountain, donating notebooks and other educational items to students, build a library, yoga centre and Pigeon house.

e. Environment Efforts

Preserving environment is prime concern of the company. Company is committed to securing green and friendly ecosystem in and around its manufacturing units. Company has already installed super efficient Effluent Treatment Plant at the factory. The company’s environment efforts are directed towards constant improvement of environment through a combination of process innovation, pollution prevention and control activities, Energy conservation, Resource conservation.

f. Industry structure and development

Global industry is witnessing rapid changes due to advances in communication technologies and the nations are trying hard to position themselves to take advantages of this emerging opportunity. We have established our position in Indian market and consolidation process is on. The northern market is experiencing moderate


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increase in demand. In spite of the global meltdown and upheaval, the company performance during the year under review is satisfactory.

g. Internal Control Systems and Their Adequacy

The company has in place effective system for internal control ensuring accurate, reliable and speedy compilation of financial information, safeguarding the assets and interest of the company and ensuring compliance with law and regulations. The company has proper and adequate system of internal control to ensure that all assets are safeguarded and protected against any loss from unauthorized use or disposition and that transaction are authorized, recorded and reported correctly.

h. Human Resource Development / Industrial Relation

The company values and understand the need for continuous growth and development of its people in order to have greater productivity and provide job satisfaction and also equip them to meet growing organizational challenges. We have an excellent relation at the factory and its branches. Our company has genuine concern and top priority for safety and welfare of its employees.

i. Promoters experience & their Shareholding

Our promoters have been involved in the Plywood Veneer business for over two decades. Our promoters & promoters group currently holds entire 100% of our equity Capital.

j. 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;

As a company operating in India, we are affected by the general economic conditions in the country. The Indian economy has grown steadily over the past several years. This improved performance was propelled by the growth in industrial activity and robust services sector. The overall economic growth will therefore impact the results of its operations. The growth prospects of the business of the Company and its ability to implement the strategies will be influenced by macroeconomic growth.

• Our ability to successfully implement its strategy and its growth and expansion plans;

Our growth plans are considerable and would put significant demands on our management team and other resources. Any delay in implementation of its strategy and its growth and expansion plans could impact the Company’s roll out schedules and cause cost and time over runs.

• Factors affecting industrial activity;

In the year 2007-08, the excise duty on plywood related products was reduced by half to 8% and is now raised to 10% in the recent budget (FY2010-11). VAT in Maharashtra is currently ruling at 12.5%.

Any such changes in the factors such as industrial policies, tariffs, excise duties etc which may affect the activities of the woodbased industry etc. may affect our results of operation.

• Increasing competition in the industry;

We face competition from countries i.e. Pakistan, Indonesia, Malaysia, China and Russia etc. in the overseas market and Green Plywood, Century Plywood, Duro Plywood and Marino in the domestic market.


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• Cyclical or seasonal fluctuations in the operating results;

Cyclical or seasonal fluctuations in the operating results of the Company may affect the enduring financial performance at large.

• Changes in laws and regulations that apply to the industry;

Pursuant to the order of the Hon’ble Supreme Court, unlicensed veneer & plywood companies prohibited to operate in India. For a new company to venture in veneer or plywood industry requires a prior permission from the Central Empowered Committee, Govt. of India. The grant of a license is further subject to strict compliance with the prescribed regulatory norms and relaxation of any of the norms is not permitted. These complexities in obtaining new licenses make it difficult for the new players to enter in, thus providing competitive edge to existing established players.

There are some laws and regulations applicable to the industry in which we operate, which we have to comply/ follow. In case of a failure to comply with these laws and regulations or to obtain or renew the necessary permits and approvals our business may be affected.

• Changes in fiscal, economic or political conditions in India;

External factors such as potential terrorist attacks, acts of war or geopolitical and social turmoil in many parts of the world could constrain our ability to do business, increase the costs and negatively affect our financial performance.

• Changes in the foreign exchange control regulations, interest rates and tax laws in India.

Any change in the foreign exchange control regulation, mainly interest rates and tax laws pertaining to India affects the liquidity of cash in the market which in turn affects the purchasing power of the economy.

k. Outlook

The company is committed to put continuous efforts for providing superior quality products with research and innovation using best practices, adopting aggressive sales and marketing strategies, investment in people development and expansion of manufacturing capacity. The company is confident of continuous good performance of growth by using better technologies and consistent efforts. Fundamental growth drivers of the Indian economy continue to exist. The overall scenario for economy is showing recovery trends and we believe it will help our industry to grow at a faster rate, and we at Sonear Industries Limited remains optimistic about our future.

The per capita consumption of Plywood is increasing in India due to the higher growth rate and there are tremendous growth opportunities in India.

l. Overview of Our Results of Operations

The following discussion of the financial condition and results of operations for the financial year ending March 31, 2010, 2009, 2008 & 2007 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,

2010 March 31,

2009 March 31,

2008 March 31,

2007 Net Sales 9,807.92 5,161.05 2,999.52 1,279.39 Total Income 10,015.99 5,228.75 3,259.31 1,259.59 Total expenses 9,062.04 4,705.29 2,811.26 1,067,.27 Total Expenses as a % of Net Sales 92.40% 91.17% 93.72% 83.42%


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Particulars March, 31, 2010

March 31, 2009

March 31, 2008

March 31, 2007

Gross Block 2,235.01 2,168.40 2,040.52 1,252.59 Depreciation 97.10 93.35 71.22 41.66 Depreciation as % of Net Sales 0.99% 1.81% 2.37% 3.26% Secured Loans 4,204.73 3,429.59 2,546.41 1,338.01 Finance Cost 427.68 371.57 223.80 120.32 Finance Cost as % of Net Sales 4.36% 7.20% 7.46% 9.40% Deferred Tax Liabilities 52.49 17.68 45.91 9.10 Profit / (loss) before Tax 429.17 58.54 153.03 30.34 Profit / (loss) before Tax as % of Net Sales 4.38% 1.13% 5.10% 2.37% Profit / (loss) after tax and extra ordinary items

302.82 31.25 90.63 17.54

Profit / (loss) after tax as % of Net Sales 3.09% 0.60% 3.02% 1.37%

Note: Figures have been regrouped wherever necessary to make the data comparable n. Comparison of Recent Financial Years with Previous Financial Years

Financial performance of F.Y.2009-10 Vs F.Y. 2008-09

Net Sales: The company has achieved a net sales of Rs.9807.92 Lacs for year 2009-10 as compared to Rs.5161.05 Lacs for the year 2008-09. The Sales of the company during the year 2009-10 has increased by 89.93% over the previous year. The net Sales of the company have improved due to over all efficiency of the company. Total Expenditure: Total expenses for the year 2009-2010 was Rs.9062.04 Lacs as against Rs.4705. 29 Lacs for the previous year. There has been an increase of over 92% in the total expenditure of the company. This can be attributed to the increase in the purchase of goods for the increased trading activity carried on by the company. The increase in other expenses is in line with the increase in the total turnover of the company except for the increase in selling and distribution expenses which has increased from Rs.41.88 lacs in 2008-09 to Rs.166.59 Lacs in 2009-10. This increase in selling and distribution expenses was due to increase in Advertisement Expenses during the current year. Interest and financial charges : The interest and financial charges in the company has increased from Rs.371.57 Lacs in 2008-09 to Rs.427.68 Lacs in 2009-10. The increase of 15% is due to increase in working capital facilities availed by the company. Profit After Tax : Profit After Tax for the year 2009-10 was Rs.302.82 Lacs as compared to Rs. 31.25 Lacs in the year 2008-09. As a percentage of net sales, the profit after tax has increased to 3.09% as compared to 0.60% in the previous year. The profitability of the company has increased during the current year and the company has paid the Advance Income Tax of Rs.70.00 Lacs during the current year Secured Loans: The outstanding balance of the secured loans have increased from Rs.3429.59 Lacs in 2008-09 to Rs.4204.73 in the financial year ended 2009-10. The increase was mainly on account of additional working facilities availed from the Banks by the Company to ensure smooth operations. Inventories: The level of inventory as on 31/03/2010 was Rs.2511.38 Lacs as compared to Rs.1060.19 Lacs as on 31/03/2009. The increase in the level of inventory is due to the increase in level of operations.


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Loans and advances : The balance in the loans and advances for the year 2009-10 has increased by over 233.44% as compared to the year 2008-09. This was mainly due to advances for income tax to the extent of Rs.70.00 Lacs, advances to group companies of Rs.110.00 Lacs for procurement of raw material and other advances amounting to Rs.210 Lacs for purchase of raw material etc. Financial performance of F.Y.2008-09 Vs F.Y. 2007-08 Net Sales: The Company has achieved net sales of Rs.5161.05 Lacs for the year 2008-09 as compared to Rs.2999.52 Lacs for the year 2007-08. The Sales of the company has increased by Rs.72% during the year 2008-09 as compared to the last year. The net Sales of the company has improved due to over all efficiency of the company. Total Expenditure: Total expenses for the year 2008-09 was Rs.4705.29 Lacs as against Rs.2811.26 Lacs for the year 2007-08. The increase in the expenditure is due to the increased Sales 2008-09 as compared to 2007-08. There is corresponding increase in expenditure as compared to Sales. Interest and financial charges : The interest and financial charges in the company has increased from Rs.223.80 Lacs in 2007-08 to Rs.371.57 Lacs in 2008-09. This increase of 66% is due to increase in working capital facilities availed by the company. Depreciation: There has been increase in the depreciation provided by the company from Rs.71.22 Lacs in 2008-09 to Rs.93.35 Lacs in 2009-10 due to addition of fixed assets during the year to the tune of Rs.127.87 Lacs. Profit After Tax : Profit After Tax for the year 2008-09 was Rs.31.25 Lacs as compared to Rs.90.63 Lacs in the year 2007-08 showing a decrease of over 65.52%. The profitability of the company during the year 2008-09 has come down due to the reason that the prices of the inputs have increased whereas the Sale prices of the finished products have not increased to the desired extent. There was a global recession during the year 2008-09. Secured Loans: The outstanding balance of the secured loans have increased from Rs.2546.41 Lacs in 2007-08 to Rs.3429.59 Lacs in the financial year ended 2008-09. The increase was mainly on account of additional working facilities availed from the Banks by the Company to ensure smooth operations. Inventories: There has been a increase of 20% in the level of inventory as on 31/03/2009 as compared to the previous year. This increase in the level of inventory is due to the increase level of operations Financial performance of F.Y.2007-08 Vs F.Y. 2006-07 Net Sales: The company has achieved a net sales of Rs.2999.52 Lacs for year 2007-08 as compared to Rs.1279.39 Lacs for the year 2006-07. The Sales of the company has increased by Rs.134.45% during the year 2007-08 as compared to the last year. The net Sales of the company has improved due to over all efficiency of the company. Total Expenditure: Total expenses for the year 2007-08 was Rs.2811.26 Lacs as against Rs.1067.27 Lacs for the year 2006-07. The increase in the expenditure is due to the increased Sales 2007-08 as compared to 2006-07. This can be attributed to the increase in the turnover of the company with a corresponding increase in the other expenditure.


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Interest and financial charges : The interest and financial charges in the company has increased from Rs.120.32 Lacs in 2006-07 to Rs.223.80 Lacs in 2007-08. This increase of over 86% isdue to increase in working capital facilities availed by the company. Profit After Tax : Profit After Tax for the year 2007-08 was Rs.90.63 Lacs as compared to Rs.17.54 Lacs in the year 2006-07. As a percentage of net sales, the profit after tax has been increased to 3.02% as compared to 1.37% in the previous year. The profitability of the company has increased during the current year. The company has paid the Advance Income Tax of Rs.11.75 Lacs during the current year. Secured Loans: The outstanding balance of the secured loans have increased from Rs.1338.01 Lacs in 2006-07 to Rs.2546.41 Lacs in the financial year ended 2007-08. The increase was mainly on account of additional working facilities availed from the Banks by the Company to ensure smooth operations. Inventories: The level of inventory as on 31/03/2008 was Rs.879.40 Lacs as compared to Rs.715.36 Lacs as on 31/03/2007. This increase in the level of inventory is due to the increase level of operations. Loans and Advances: The balance in the loans and advances for the year 2007-08 has increased by over 118% as compared to the year 2006-07. This was mainly due to increase in Excise Duty and Educational Cess to the extent of Rs.100.75 Lacs, Advance Income Tax to the extent of Rs.11.75 Lacs and advance to suppliers to the extent of Rs.28.12 Lacs.

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.

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.


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6. Total turnover of each major industry segment in which the Company operated The Indian plywood industry is estimated to be approximately Rs 10,000 crore and the laminate industry accounts for almost Rs 3,000 crore (app. total Rs 13,000 crore/US$2.77 bn). The plywood industry is growing at a rapid pace of average 15-20% annually with approximately 600 units currently operating across the country. It is estimated that the overall Indian furniture industry generates a turnover of Rs 36,000 crore annually. About 85% of the industry falls under small scale units segment and remaining 15% is under organized sector (medium-to-large scale units), made up of manufacturers and exporters catering to the different segments of the industry. Backed by a growing real estate, tourism and hospitality sectors on one hand and rising per capita income and lifestyle product consumption on the other, the Indian furniture industry is expected to grow at a Compounded Annual Growth Rate (CAGR) of 13-15% in the next five years.

7. Status of any publicly announced new product

We have not publicly announced any new products.

8. The extent to which the business is Seasonal

Our business is not seasonal and no major cyclical trends are observed in this industry. 9. Competitive conditions

We face competition from both unorganized and other organized players, leading to difficulties in improving market share which could exacerbate by cheap imports. Few of the companies from whom we face competition include companies like Century Plyboards Ltd. Archidply Industries Ltd., Uniply Industries Ltd., Greenply Industries Ltd. and Sarda Plywood Industries Ltd. in the domestic market.

10. Cautionary Statement Statements in this report on Management Discussion and Analysis describing the company’s objective,

expectations or predictions may be forward looking statements within the meaning of applicable security law and regulations. These statements are based on certain assumption and expectation of future events. Actual results could however differ materially from those expressed or implied.


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SECTION V - LEGAL AND REGULATORY INFORMATION

OUTSTANDING LITIGATION, MATERIAL DEVELOPMENTS AND OTHER DISCLOSURES Except as detailed below, there are no outstanding or pending litigations, disputes, bargains and demands, investigations, Central / State Government claims or inquiries, proceedings or disputed tax liabilities, over-dues to banks/financial institutions, defaults against banks/ financial institutions, proceedings initiated for economic/civil/ criminal/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) against the Company, Promoters, Directors or Group Companies or their promoters or directors. Other than as detailed below, there are no defaults of non-payment of statutory dues against the Company including under the excise, customs, sales tax, income tax and service tax, and no disciplinary action has been taken by SEBI or any stock exchanges against the Company.

I. Litigations/ notices pending against our Company: Show Cause Notice F.No.DZU/INV/CE/D/132/09/2342 dated May 10, 2010 was issued by the Director General of Central Excise Intelligence, New Delhi (“DGCEI”). Under the said Show Cause Notice it was alleged that the Company was actively involved in suppression of assessable value of their manufactured goods and involved in clandestine removal of their finished goods in collusion with purchasers and evaded huge amount of Central Excise Duty during the financial year 2005-06 & 2006-07 (up to November 9, 2006). Based on detailed enquiry, the DGCEI issued a show cause notice to the Company, calling the Company to show cause as to why-

a) Central excise duty amounting to Rs.51,50,589/- should not be imposed on the Company under section 11A of the Central Excise Act, 1944 (the “Excise Act”).

b) Interest should not be charged to the Company under section 11AB of the Excise Act. c) Penalty should not be imposed on the Company under section 11AC of the Excise Act.

During the course of the same proceedings, show cause was also issued to Mr. Jitendra Kejriwal, Promoter and Director of the Company, as to why penalty under Rule 26 of the Central Excise Rules should not be imposed against him. Status: The Company is yet to file a reply to the said show cause notice.

II. Litigations/ notices pending against our Promoters: Mr. Jitendra Kejriwal our promoter and Managing Director has also been made party to the above notice mentioned. The details and status of the same are as mentioned at I above. III. Litigations/ notices pending against our group companies:

A. Against Surya Vikas Plywood Ltd.

1. Show Cause Notices were issued to the Company, Surya Boards Limited and Surya Vikas Plywood

Limited by the DGCEI alleging under-valuation of goods manufactured and cleared by them during the period March 2002 to June 2005. It was alleged that only a part of the actual consideration was disclosed by the parties thereby evading excise duty. The Company, Surya Boards Limited and Surya Vikas Plywood Limited were asked to show cause as to why:


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a) Central excise duty amounting to Rs.42,42,439/-, Rs.6,20,62,878/- and Rs.2,16,14,572/- should not be imposed on the Company, Surya Boards Limited and Surya Vikas Plywood Limited, respectively, under section 11A of the Excise Act.

b) Interest should not be charged to the Company under section 11AB of the Excise Act. c) Penalty should not be imposed on the Company under section 11AC of the Excise Act.

During the course of the same proceedings, show cause was issued to Mr. Jitendra Kejriwal, Director and Promoter of the Company, as to why penalty under Rule 26 of the Central Excise Rules should not be imposed against him. The Company, Surya Boards Limited and Surya Vikas Plywood Limited have paid Rs.1,50,000/-, Rs.9,00,000/- and Rs.4,50,000/-, respectively, against the said show cause notices under protest and contested the said show cause notices. Subsequently, the Commissioner of Central Excise, Rohtak passed three orders dated July 25, 2008 directing the Company to pay a duty of Rs.42,42,439/- and penalty of Rs.84,84,878/-. Further, Surya Boards Limited was directed to pay a duty of Rs.6,20,62,878/- and a penalty of Rs.12,41,25,756/-. Surya Vikas Plywood Limited was directed to pay a duty of Rs.2,16,14,572/- and a penalty of Rs.4,32,29,144/- (after deducting the amount already paid by them) and Mr. Jitender Kejriwal was directed to pay a penalty of Rs.8,79,19,889/-. The Company, Surya Boards Limited, Surya Vikas Plywood Limited and Mr. Jitender Kejriwal (along with other appellants) filed a stay application before October 31, 2008 for waiver of the deposit which was disposed of by the Tribunal vide its Order dated August 13, 2009. The said Order allowed the applicants request for waiver of pre-deposit of the amount of interest , however the prayer as regards the duty payable was turned down. Status: Aggrieved by the order, the Company, Surya Boards Limited, Surya Vikas Plywood Limited and Mr. Jitender Kejriwal (along with other appellants) filed an application with the Delhi High Court to permit them to file an application before the Tribunal for re-consideration of the matter. The High Court allowed the said application and permitted the parties to file such application with the Tribunal. The parties subsequently filed the said application with the Tribunal and the Tribunal vide its order dated May 18, 2010 recalled its earlier order dated August 13, 2009 and allowed the stay application by waiving the requirement of pre-deposit of the amount, till disposal of the appeals. 2. Show Cause Notice was issued against Surya Vikas Plywood Limited (SVPL) alleging that SVPL had

contravened the provisions of Rules 4,6,8,10,11 and 12 of the Central Excise Rules, 2002 for manufacture and clandestine removal of finished goods with intent to evade payment of Central Excise duty. SVPL was asked to show cause as to why-

a) Central excise duty amounting to Rs.1,60,71,863/- should not be imposed under section 11A of

the Excise Act. b) Interest should not be charged to the company under section 11AB of the Excise Act. c) Penalty should not be imposed on the company under section 11AC of the Excise Act.

SVPL submitted its reply to the said show cause notice vide letter dated February 10, 2010 denying the aforesaid allegations. Status: On receiving the reply, the Central Excise Commissionerate, Panchkula confirmed the demand of central excise duty amounting to Rs.1,60,71,863/- under Section 11A of the Excise Act, and ordered SVPL to pay the same along with interest under Section 11AB of the Excise Act. Further, a penalty of Rs. 1,60,71,863 under section 11 AC of the Excise Act.


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The company has filed an appeal with CESTAT New Delhi against the aforesaid order of the Central Excise Commissionerate, Panchkula on July 26, 2010. The case has been fixed for herring on November 12, 2010.

B. Against Surya Boards Ltd.

1. Surya Boards Ltd. is also a party to notices/ litigation mentioned at A(1) above. The details and status

are as mentioned above. 2. Surya Boards Ltd. is also a party to notices/ litigation mentioned at A(2) above. The details and status

are as mentioned above 3. Appeals were filed by Surya Boards Limited (SBL) under the Haryana General Sales Tax Act (HGST

Act) and Central Sales Tax Act (CST Act) against the re-assessment orders dated August 21, 2008 passed by E.T.O. cum Assessing Authority, Bahadurgarh for the assessment year 2002-03 whereby additional demands of Rs.40,81,471/- under HGST Act and Rs.4,60,80,288/- under the CST Act were raised. The aforesaid demands were made on the ground that SBL had suppressed its actual turnover and therefore was liable to pay additional tax for such concealed turnover. On appeal, the Joint Excise and Tax Commissioner (A), Rohtak vide order dated August 12, 2009 observed that the ETO cum Assessing Authority did not conduct an independent enquiry for framing re-assessment and placed reliance on information supplied by the Central Excise Authorities. It was further observed that the ETO cum Assessing Authority did not give any findings on the submissions made by SBL and therefore, its order may be termed as being, non speaking. Status: The Joint Excise and Tax Commissioner held that SBL deserved another opportunity of being heard and remanded the case back to the Assessing Authority with the direction to afford a reasonable opportunity of being heard to SBL and then decide the case afresh in accordance with the provisions of law.

4. Appeals were filed by Surya Boards Limited (SBL) under the Haryana General Sales Tax Act (HGST

Act) and Central Sales Tax Act (CST Act) against the re-assessment orders dated August 21, 2008 passed by E.T.O. cum Assessing Authority, Bahadurgarh for the assessment year 2002-03 whereby additional demands of Rs.40,81,471/- under HGST Act and Rs.4,60,80,288/- under the CST Act were raised. The aforesaid demands were made on the ground that SBL had suppressed its actual turnover and therefore was liable to pay additional tax for such concealed turnover. On appeal, the Joint Excise and Tax Commissioner (A), Rohtak vide order dated August 12, 2009 observed that the ETO cum Assessing Authority did not conduct an independent enquiry for framing re-assessment and placed reliance on information supplied by the Central Excise Authorities. It was further observed that the ETO cum Assessing Authority did not give any findings on the submissions made by SBL and therefore, its order may be termed as being, non speaking. Status: The Joint Excise and Tax Commissioner held that SBL deserved another opportunity of being heard and remanded the case back to the Assessing Authority with the direction to afford a reasonable opportunity of being heard to SBL and then decide the case afresh in accordance with the provisions of law.

5. Appeal was filed by Surya Boards Limited (SBL) under the Central Sales Tax Act against the re-

assessment order dated March 14, 2008 passed by E.T.O. cum Assessing Authority, Bahadurgarh for the assessment year 2003-04 whereby additional demand of Rs.5,91,90,286/- was raised. The aforesaid demands were made on the ground that SBL had suppressed its actual turnover and therefore was liable to pay additional tax for such concealed turnover. On appeal, the Joint Excise and Tax Commissioner (A), Rohtak vide its order dated February 13, 2009 observed that the ETO cum Assessing Authority did not conduct an independent enquiry for framing re-assessment and placed reliance on information supplied by the Central Excise Authorities.


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Status: The Joint Excise and Tax Commissioner held that SBL deserved another opportunity of being heard and remanded the case back to the Assessing Authority with the direction to afford a reasonable opportunity of being heard to SBL and then decide the case afresh in accordance with the provisions of law.

6. Appeals were filed by Surya Boards Limited (SBL) under the Haryana Value Added Tax Act and

Central Sales Tax Act against the orders dated March 14, 2008 passed by E.T.O. cum Assessing Authority, Bahadurgarh for the assessment year 2004-05 and raised additional demands of Rs.7,871/- and Rs.6,98,00,968/- respectively. The aforesaid demands were made on the ground that SBL had suppressed its actual turnover and therefore was liable to pay additional tax for such concealed turnover. On appeal, the Joint Excise and Tax Commissioner (A), Rohtak vide order dated July 4, 2008 observed that the ETO cum Assessing Authority did not conduct an independent enquiry for framing re-assessment and placed reliance on information supplied by the Central Excise Authorities. Status: The Joint Excise and Tax Commissioner held that SBL deserved another opportunity of being heard and remanded the case back to the Assessing Authority with the direction to afford a reasonable opportunity of being heard to SBL and then decide the case afresh in accordance with the provisions of law.

7. Appeal was filed by Surya Boards Limited (SBL) under the Central Sales Tax Act against the

assessment order dated March 30, 2009 passed by E.T.O. cum Assessing Authority, Bahadurgarh for the assessment year 2005-06 whereby additional demand of Rs.7,40,39,297/- was raised. The aforesaid demands were made on the ground that SBL had suppressed its actual turnover and therefore was liable to pay additional tax for such concealed turnover. On appeal, the Joint Excise and Tax Commissioner (A), Rohtak vide order dated September 18, 2009 observed that the ETO cum Assessing Authority did not conduct an independent enquiry for framing re-assessment and placed reliance on information supplied by the Central Excise Authorities. Status: The Joint Excise and Tax Commissioner held that SBL deserved another opportunity of being heard and remanded the case back to the Assessing Authority with the direction to afford a reasonable opportunity of being heard to SBL and then decide the case afresh in accordance with the provisions of law.

8. Show Cause Notice was issued against Surya Boards Limited (SBL) on April 30, 2010 alleging that

SBL had taken cenvat credit under invalid documents which were in favour of its head office at Delhi and the same was not registered with the department as ‘Input Service Distributor’ to distribute or transfer cenvat credit of input service (advertisement). In this background, SBL was asked to show cause as to why-

a) Credit of service tax amounting to Rs. 1,01,158 should not be demanded and recovered from

SBL under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11 A of the Central Excise Act, 1944 and the provisions of Section 73(1) of the Finance Act, 1994 by invoking extended period of five years.

b) Interest should not be charged to SBL under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Rules, 1944 and the provisions of Section 75 of the Finance Act, 1944.

c) Penalty should not be imposed on SBL for wrong availment of cenvat credit under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Excise Act, 1944 and the provisions of Section 78 of the Finance Act, 1944.

Status: SBL submitted its reply to the said show cause notice vide letter dated September 6, 2010 denying the aforesaid allegations.


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9. Show Cause Notice was issued against Surya Boards Limited (SBL) on May 18, 2010 alleging that SBL

had taken cenvat credit under invalid documents which were in favour of its head office at Delhi and the same was not registered with the department as ‘Input Service Distributor’ to distribute or transfer cenvat credit of input service (rental services). In this background, SBL was asked to show cause as to why-

a) Credit of service tax amounting to Rs. 1,46,260 should not be demanded and recovered from

SBL under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11 A of the Central Excise Act, 1944 and the provisions of Section 73(1) of the Finance Act, 1994 by invoking extended period of five years.

b) Interest should not be charged to SBL under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Rules, 1944 and the provisions of Section 75 of the Finance Act, 1944.

c) Penalty should not be imposed on SBL for wrong availment of cenvat credit under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Excise Act, 1944 and the provisions of Section 78 of the Finance Act, 1944.

Status: SBL submitted its reply to the said show cause notice vide letter dated September 6, 2010 denying the aforesaid allegations.


146

GOVERNMENT/STATUTORY AND BUSINESS APPROVALS

On the basis of the indicative list of approvals below, we are permitted to carry on business activities and no further major approvals from any Government authorities or regulatory authority or any other entity are required by us to undertake the Issue or continue these business activities. It must be understood that, in granting these licenses, Government of India and/ or Reserve Bank of India does not take any responsibility for Company’s financial soundness or for the correctness of any of the statements made or opinion expressed in this behalf. We require various approvals to carry on its business in India. It has received the following Government approvals/licenses/permissions:

Sl. No Act under which

the license/approval is issued

Details of the Applicable Statute and

Section

Issuing Authority

Details of the license / approval

A. Approvals from the Central Government 1 The Companies Act,

1956 Registrar of

Companies Certificate of Incorporation No. U20211DL2004PLC126381 Dated: 21/05/2010

Income Tax Act, 1961 – Section 139 A

The Company is required to complete the assessments for the respective financial years and duly file the returns with the Income Tax Authorities.

Chief Commissioner of Income-Tax

Permanent Account Number (PAN): AABCD9865C

Income Tax Act, 1961 - Section 203

The Company is required to obtain Tax Deduction Account Number (TAN) and pay the tax deducted at source to the Central Government within the prescribed time

Income Tax Officer

DELD07826A

Central Excise Act, 1944

The company being a manufacturing company is enjoined to get itself registered according to the provisions of Rule 9 of the Central Excise Rules, 2002 under Central Excise Act, 1944

Central Excise Officer

AABCD9865CXM001


147

Central Sales Tax Registrations:

S. No.

Description Reference/ License No.

Issue Date/ Date of

Liability

Period of Validity

Purpose

1. Certificate of Registration is issued in the name of Sonear Industries Limited at Khasra No. 62/20, 50 K.M. Rohtak Milestone, Mundka, New Delhi – 41 as Dealer under section 7(1) /Section 7(2) of the Central Sales Tax Act, 1956 – By Notified Authority.

TIN 07880314074

July 3, 2006 Valid till cancelled

Permitted to resale of Plywood, Block Board, Flush Doors, Veneers, Timber Logs, Laminates, etc.

2. Certificate of Registration is issued in the name of Sonear Industries Limited at No. 20/3, Aswathkatte Road, Kasturba Nagar, Mysore Road, Bangalore - 560026 as Dealer under Central Sales Tax Act, 1956 – By Assistant Commercial Tax Officer, Bangalore.

TIN 29280809614

July 30, 2008 Valid till cancelled

Permitted to purchase Plywood, Block Board, Veneers, Laminate and packing materials at concessional rate of tax under Section 8 (1) of Central Sales Tax Act, 1956.

3. Certificate of Registration issued Sonear Industries Limited at 378/C/3/4, New Highway Estate, Sanand Road, Sarkhej, Ahmedabad, Gujarat – 382210 as Dealer under section 7(1) /Section 7(2) of the Central Sales Tax Act, 1956 – By Assistant Commercial of Commercial Tax, Ahmedabad.

TIN 24574502570

_ Valid till cancelled

Permitted to resale of Articles of Plywood and Deco Sheets Plywood.

Registration under local Value Added Tax (VAT) Acts:

The Company is registered with the state authorities under the following Acts and authorities:

a) Registration No. 07880314074 w.e.f., July 3, 2006 under the seal and signature of VAT Authority under the Delhi Value Added Tax Act, 2004; and

b) Registration No. 24074502570 w.e.f., May 30, 2008 under the seal and signature of the Assistant Commercial Tax Officer under the Gujarat Value Added Tax Act, 2003.

Tax Identification Number (TIN) – The Company has also obtained TIN 29280809614 w.e.f., July 1, 2008 from the office of the Assistant Commercial Tax Officer under the Karnataka Value Added Tax Act, 2003 and TIN 06781704301 w.e.f. June 17, 2004 from the office of Assessing Authority under the Haryana Value Added Tax Act, 2003.


148

Finance Act, 1994 (Service Tax) The company has been granted Certificate of Registration under Section 69 of the Finance Act, 1994 from the Office of the Assistant Commissioner, Central Excise Division, Department of Revenue, Ministry of Finance on April 04, 2005. The details of registration are as follows: The company has taken registration under section 65 (105) (zzp) of the Act i.e. “ Goods Transport Agency Services” with registration number as AABCD9865CSD001. Certificate of Importer – Exporter Code (IEC)

Name of the Certificate

holder

Address Importer-Exporter Code

Issue Date and Place

Period of Validity

Issuing Authority


20, NWA, Punjabi Bagh Extension, Club Road, New Delhi – 110026

0504037820 August 30, 2004 and issued at New Delhi

Valid Until Cancelled

Foreign Trade Development Officer

Indian Boilers Act, 1923 (“Boilers Act”)


holder

Type and location of the boiler

Registration no. Issue Date Issuing Authority

Donear Décor Private Limited

Horizontal and 28 K.M. Rohtak Milestone, Delhi Rohtak Road, Rohad, Jhajhar, Haryana – 124515

HA – 1264 May 06, 2009

Haryana Board Inspection Department

The aforesaid license is in the name of Company Donear Décor Pvt. Ltd. The company has accordingly moved an application for change in name from “ Donear Décor Pvt. Ltd.” to “ Sonear industries Ltd” on May 22, 2010 Certificate Marks License by Bureau of India Standards (“BIS”)


holder

License no CM/L and

location of the factory

License and IS no.

Issue Date Period of Validity

Product


9703079 and 28 K.M. Rohtak Milestone, Delhi Rohtak Road, Rohad, Jhajhar, Haryana – 124515

CM/L – 9703079 and IS 2046 : 1995

December 26, 2009

1 year i.e. up to December 31, 2010

Decorative thermosetting Synthetic, Resin Bonded Single face Laminated sheet.


149

The Factories Act, 1948 (“ Factories Act”)

Name of the owner

Location of the factory

Licence and serial no.

Period of validity

Maximum Horse power and the no. of

workers

Issuing Authority


28 K.M. Rohtak Milestone, Delhi Rohtak Road, Rohad, Jhajhar, Haryana – 124515

RTK/D -63/ 8089 and 1399

For the year 2009 (Expired) The Company has made an application for renewal on November 1, 2009.

Up to 600 H.P. and 100 workers

Chief Inspector of Factories, Haryana, Chandigarh

Approval of Extension of electricity load (“load”) Name of the license holder and occupier

Location of the factory

Memo no. Date of the approval

Extension Approving authority


28 K.M. Rohtak Milestone, Delhi Rohtak Road, Rohad, Jhajhar, Haryana – 124515

2 / C – 391 May 22, 2007 From 473.818 KW to 899.411 KW with C.D. from 500KVA to 950 KVA.

S.E. ‘OP’ Circle Rohtak

License to operate wood based industry

Name of the license holder

Location License no.

Issue date

Valid upto

Issuing authority


28 K.M. Rohtak Milestone, Delhi Rohtak Road, Rohad, Jhajhar, Haryana – 124515.

3/10/DCF Jhajjar

May 27, 2007 March 31, 2017

Divisional Forest Officer, Jhajjar

Consent for emission of air under the Air (Prevention and Control of Pollution) Act, 1981 (“Act”)

Name of the

consent holder

Location Consent no. Issue date

Issuing authority



HSPCB/BDR//Air Consent/09/4320

September 16, 2009

Regional Officer, Bahadurgarh Region

• The aforesaid license is in the name of Company Donear Décor Private Limited. The Company has moved an application for change in the name of the Company from “Donear Décor Private Limited” to “Sonear Industries Limited” to the Regional Officer on May 22, 2010.


150

Consent for discharge of effluent under the Water (Prevention and Control of Pollution) Act, 1974, (“Act”)

Name of the consent holder

Location Consent no. Issue date Issuing authority



HSPCB/BDR//Water Consent/09/4322

September 16, 2009

Regional Officer, Bahadurgarh Region

Application for setting up of MDF/ Particle Board Unit at Village Damla, Delhi Road, District – Yamuna Nagar, Haryana

The company will take all the necessary approvals before starting of the commercial production.

Intellectual property:

Registered Trademarks The Company does not own any registered trademark however, the Company, vide licensing agreement dated September 17, 2010 entered into with Surya Boards Limited obtained the right to use the following registered trademarks owned by Surya Boards Limited:

Sr. No.

Name of Trademark

Registration No.

Class Specification of Services in respect of which used

Date of Registration

Validity Up to

Date of First Use (User Claimed)

1. Luminous Rays (Device)

1156477 19 Plywood, board, plywood block board, flush doors

09.12.2002 08.12.2012 25.02.1994

Trademark Image

2. Silva 1155797 19 Plywood,

board, plywood block board, flush doors

05.12.2002 04.12.2012 01.01.2002

3. Beyond Wood Just Too Good

1155798 19 Plywood, board, plywood block board, flush doors, included in class 19

05.12.2002 04.12.2012 01.02.1994

4. Melafilm*

(Device)

1439341 19 Decorative veneers, plywood, block board, flush doors, particle

28.03.2006 27.03.2006 01.03.2006


151

Sr. No.

Name of Trademark

Registration No.



Validity Up to


board, MDF, laminates, floorings etc, included in class 19

Trademark

Image

5. Enviro

(Device)

1455388 19 Decorative veneers, plywood, block board, flush doors, particle board, MDF, laminates, floorings etc, included in class 19

19.05.2006 18.05.2016 01.04.2006

Trademark

Image

6. Keruing

(Device)


19.05.2006 18.05.2016 01.04.2006

Trademark

Image

7. Jitendra

Kejriwal

Group with

logo


19.05.2006 18.05.2016 01.04.2006


152

Sr. No.

Name of Trademark

Registration No.



Validity Up to


Trademark Image

The Company has applied for certificate of Trade Mark under section 23(2) of the Trade Marks Act, Rule 62 (1) of the Trade Marks Rules, 2002 of the below mentioned trademarks with Trademarks Registry:

Sr. No.

Trademark Application No.

Class Brief specificatio

n of Goods/Ser

vices

Date of application

Status Date of First Use

(User Claimed)

Applicant

1. Kejorri (Device)

1708501 17 Mica included in Class 17

09.07.2008 Pending* Examination Report issued by TM Registry vide letter dated 24.06.2009

01.04.2008 Donear Décor Pvt. Ltd.

Trademark Image

2. Kejorri

(Device) 1708502 19 Decorative

veneers, plywood, block board, flush doors, particle board, MDF, laminates, floorings etc included in class 19.

09.07.2008 Pending* Examination Report issued by TM Registry vide letter dated 24.06.2009

01.04.2008 Donear Décor Pvt. Ltd.

Trademark Image


153

Sr. No. Trademark Applicat

ion No. Class Brief

specification of Goods/Services

Date of applicat

ion


(User Claimed)

Applicant

1. KJ (Device) 1827151 17 Mica 09.06.2009

Advertised before acceptance

01.10.2008

Surya Boards Limited

Trademark

Image

2. KJ (Device) 1827149 19 Plywood, ply

board, block boards, flush doors, particle boards, mdf, decorative veneers, laminates and flooring

09.06.2009

Objected by TM Registry vide letter dated 07.07.2010

01.10.2008


Trademark

Image

3. KJ (Device) 1827150 35 Advertising,

professional business consultancy, business information, business management assistance, business management and organizational consultancy, demonstration of goods, exhibitions, public relations,

09.06.2009


01.10.2008



154

Sr. No. Trademark Application No.

Class Brief specification of Goods/Services

Date of applicat

ion


(User Claimed)

Applicant

publicity, sale promotion for others, shop window dressing, information relating to shopping centre & retail industry.

Trademark

Image

4. Donear# 820567 19 Plywood,

plywood block board and plywood flush doors included in class 19

23.09.1998

Opposed*

01.02.1994

Surya Boards Pvt. Limited

5. Donear 1155796 20 Furniture, mirrors, picture frames, articles (not included in other classes) of wood, cork, reeds, cane, wicker, horn, bone, ivory, whalebone, shell

05.12.2002

Opposed^

01.10.2000


6. Sonear 1847263 17 Mica 04.08.2009


01.10.2008


7. Sonear 1847261 19 Plywood, block boards, flush doors, particle boards, MDF,

04.08.2009

Objected by TM Regist

01.10.2008



155



Date of applicat

ion


(User Claimed)

Applicant

decorative veneers, laminates and floorings

ry vide letter dated 02.08.2010

8. Sonear 1847262 35 Retail trade and business

04.08.2009


01.10.2008


9. Solinear 1823095 17 Mica 28.05.2009


01.10.2008


10. Solinear (Device)

1827147 19 Plywood, block boards, flush doors, particle boards, MDF, decorative veneers, laminates and floorings

09.06.2009


01.10.2008


Trademark

Image

11. Solinear (Device)

1827148 35 Advertising, business appraisals, professional business consultancy, business information, business management assistance, business management and

09.06.2009


01.10.2008



156



Date of applicat

ion


(User Claimed)

Applicant

organizational consultancy, demonstration of goods, exhibitions, public relations, publicity, sale promotion for others, shop window dressing, information relating to shopping centre & retail industry

Trademark

Image

Domain name and website The Company has one registered Domain name www.sonearply.com, which gives detailed information regarding the various products of the Company. During the due diligence, it has been observed that the WHOIS look up of the domain indicates that the domain name of the Company is registered in the name and style of www.sonearply.com and the same is valid till July 12, 2019.


157

OTHER REGULATORY AND STATUTORY DISCLOSURES

A) AUTHORITY FOR THE PRESENT ISSUE

Our Board has, pursuant to resolution passed at its meeting held on 05/05/2010, authorised the Issue subject to the approval by the shareholders of the Company under Section 81(1A) of the Companies Act. The shareholders of our Company have authorised the Issue by a special resolution passed pursuant to Section 81(1A) of the Companies Act, at an Extra Ordinary General Meeting held on 12/06/2010.

B) PROHIBITION BY SEBI, RBI or government authorities

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.

None of the Directors of the Company are associated with any entities which are engaged in securities market related business and are registered with SEBI.

C) Eligibility for the Issue

The Company is eligible for the Issue as per regulation 26(1) of the (Issue of Capital and Disclosure Requirements), as explained under: • Sonear Industries Limited has a net tangible assets of at least Rs. 3 crores in each of the preceding three

full years (of 12 months each), of which not more than 50% is held in monetary assets; • Sonear Industries Limited has a pre-Issue net worth of at least Rs. 1 crore in each of the three preceding

full years (of 12 months each); • Sonear Industries Limited has a track record of distributable profits as per Section 205 of Companies

Act , 1956, 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, 2010;

• We have changed the name of the company from Donear Décor Pvt. Ltd. to Sonear Industries Limited w.e.f. 21/05/2010 however there has been no change in the business activity.

The distributable profits as per Section 205 of the Companies Act and net worth for the last five years as per the restated financial statements are as under:

(In Rs. lacs) Particulars For the Financial Year Ended March 31

2010 2009 2008 2007 2006 Distributable Profits(1) 38.14 149.12 117.87 27.24 9.70 Net Worth (2) 1467.19 603.90 572.03 370.23 354.22 Net Tangible Assets (3) 1597.26 776.48 676.93 426.62 386.51 Monetary Assets(4) 111.77 46.08 32.89 64.32 44.04 Monetary Assets as a % of Net Tangible Assets 7.00 5.93 4.86 15.08 11.39


158

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. (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. The Company satisfies all the eligibility criterias, laid down in regulation 26(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulation. 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 Sonear Industries Limited 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.

Sonear Industries Limited 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 (SEBI)

"IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (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. THE BOOK RUNNING LEAD MANAGER, KEYNOTE CORPORATE SERVICES LIMITED AND CO BOOK RUNNING LEAD MANAGER, PNB INVESTMENT SERVICES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 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 THE OFFER DOCUMENT, THE BOOK RUNNING LEAD MANAGER AND THE CO-BOOK RUNNING LEAD MANAGER ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGER AND THE CO-BOOK RUNNING LEAD MANAGER , HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 27/09/2010 IN ACCORDANCE WITH SEBI (MERCHANT BANKERS) REGULATION, 1992, WHICH READS AS FOLLOWS:


159

(1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID ISSUE;

(2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT:

(A) THE DRAFT RED HERRING PROSPECTUS FILED WITH THE BOARD IS IN

CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

(B) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE REGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

(C) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE

DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID.

(4) WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.

(5) WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR

INCLUSION OF THEIR SPECIFIED SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED TO FORM PART OF PROMOTERS’ 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 THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS.

(6) WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF

INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE IN THE DRAFT RED HERRING PROSPECTUS.

(7) WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND

(D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS


160

HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. – NOT APPLICABLE

(8) WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS

ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.

(9) WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT

THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 73 OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE PROSPECTUS. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION.

(10) WE CERTIFY THAT SINCE THE PROPOSED ISSUE SIZE IS MORE THAN RS.10 CRORES, THE

PROVISION RELATING TO OPTION TO THE INVESTORS TO GET THE SHARES IN PHYSICAL MODE IS NOT APPLICABLE IN TERMS OF SECTION 68B OF THE COMPANIES ACT, 1956.

(11) WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES

AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE INVESTOR TO MAKE A WELL INFORMED DECISION.

(12) WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT

RED HERRING PROSPECTUS/ DRAFT PROSPECTUS/ DRAFT LETTER OF OFFER: (A) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE SHALL BE

ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE ISSUER AND (B) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH

DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME.

(13) WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO

ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE MAKING THE ISSUE.

(14) WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE ,ETC.


161

(15) WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH THE

APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING PROSPECTUS WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF ANY.

THE FILING OF THE OFFER DOCUMENT DOES NOT, HOWEVER, ABSOLVE THE ISSUER 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 ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MERCHANT BANKER ANY IRREGULARITIES OR LAPSES IN OFFER DOCUMENT."

The promoter / director of Sonear Industries Limited, Mr. Jitendra Kejriwal, Mr. Ramesh Kumar Aggarwal, mr. Abhishek Agarwal, Mr. Mohammed Shahid Aftab, Mr. Sheodeen Singh Yadav and Mr. Pramode Kant 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 Draft 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 suppressed/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 ,THE BRLM AND THE CO-BRLM

The Company, the Directors, the BRLM and the Co-BRLM accept no responsibility for statements made otherwise than in this RHP or in the advertisements or any other material issued by or at instance of the above mentioned entities and anyone depending on any other source of information, including our website, www.sonearply.com, would be doing so at his or her own risk.

The BRLM accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding entered into among the BRLM and us dated 24/09/2010 and the Underwriting Agreement to be entered into among the Underwriters and us. The Co-BRLM accept no responsibility, save to the limited extent as provided in the Memorandum of Understanding entered into among the Co-BRLM and us dated 28/09/2010 and the Underwriting Agreement to be entered into among the Underwriters and us.

All information shall be made available by us , BRLM and the Co-BRLM to the public and investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road show presentations, in research or sales reports or at bidding centres etc.

Neither we nor the Syndicate is liable to the Bidders for any failure in downloading the Bids due to faults in any software/hardware system or otherwise.

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


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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 DRHP 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 DRHP 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 Delhi & Haryana, Haryana 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 DRHP has been filed with SEBI for observations. Accordingly, the Equity Shares, represented thereby may not be offered or sold, directly or indirectly, and this Draft Red Herring Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date. G) DISCLAIMER CLAUSE OF THE STOCK EXCHANGES Disclaimer Clause of Bombay Stock Exchange Limited (BSE):

“Bombay Stock Exchange Limited (“the Exchange”) has given vide its letter dated [●] permission to the Company to use the Exchange’s name in this Offer Document as one of the stock exchanges on which this Company’s securities are proposed to be listed. The Exchange has scrutinized this Offer Document 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 Offer

Document; 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;

and it should not for any reason be deemed or construed that this Offer Document 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 Offer Document has been submitted to National Stock Exchange of India Limited (hereinafter referred to as NSE). NSE has given vide its letter ref.: [●] dated [●] permission to the Issuer to use the Exchange’s name in this Offer Document as one of the stock exchanges on which this Issuer’s securities are proposed to be listed. The Exchange has scrutinised this draft offer document 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 Offer Document 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 offer document; nor does it warrant that this Issuer’s securities will be listed or will continue to be listed on


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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.

Disclaimer Clause of [●] IPO Grading Agency

[●]

H) FILING

A copy of this DRHP has been filed with SEBI at Mumbai.

A copy of the Red Herring 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 the ROC, Delhi & Haryana, Delhi. 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 RHP. 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 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."


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K) CONSENTS

Consents in writing of the Directors, the Company Secretary and Compliance Officer, the Auditors, the Legal Advisor, Bankers to the Company, BRLM, Co-BRLM and the Registrar to the Issue to act in their respective capacities, have been obtained and will be filed along with a copy of the RHP 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 the Prospectus for registration with the ROC.

Kumar Piyush & Co., 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 RHP 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 RHP. L) EXPERT OPINION OBTAINED, IF ANY

Except as stated in “Statement of Tax Benefits”, the Company has not obtained any expert opinion.

M) EXPENSES OF THE ISSUE

The Management estimates an expense or Rs. [●] Lacs towards issue expense. The expenses of this Issue include, among others, underwriting and management fees, selling commission, printing and distribution expenses, legal fees, statutory advertisement expenses and listing fees. The estimated Issue expenses are as follows:

(Rs. in Lacs) Sr. No.

Nature of Expenses Amount* % to the Total

Expenses

% to the Issue

1. Lead Management Fee, Underwriting Commissions and Selling Commissions

[●] [●] [●]

2. Advertising and Marketing Expenses [●] [●] [●] 3. Printing and Stationery [●] [●] [●] 4. Others (Registrar’s Fee, Legal Fee, etc.) [●] [●] [●] Total [●] [●] [●]

* Will be incorporated after finalisation of Issue Price

N) DETAILS OF FEE PAYABLE

Book Running Lead Manager to the Issue

The total fees payable to the Book Running 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. Co-Book Running Lead Manager to the Issue

The total fees payable to the Co-Book Running Lead Manager will be as per the Memorandum of Understanding signed with the Co-Lead Manager, a copy of which is available for inspection at the Registered Office of the Company. The Co-Lead Manager will be reimbursed for all relevant out-of-pocket expenses such as cost of travel, stationery, postage and communication expenses.


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Fees Payable to the 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 04/05/2010.

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, the Co-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. 17 of this RHP.

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 ten years preceding the date of this RHP. Q) PREVIOUS ISSUE OF SHARES OTHERWISE THAN FOR CASH

We have issued 54,85,200 equity shares of Rs. 10 each as bonus in the ratio of 2 equity shares for every 3 equity shares on 25/03/2010 by capitalizing free reserves, other than this we have not issued any equity shares for consideration otherwise than for cash.

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 since inception of the Company. S) CAPITAL ISSUE DURING THE LAST THREE YEARS

Sonear Industries Limited and its group companies have not made any capital issue during the last three years. T) PROMISE VIS-A-VIS PERFORMANCE This is a first issue of the Company and none of its group companies 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 RHP. V) STOCK MARKET DATA

This being an initial public offering of the Company, the Equity Shares are not listed on any stock exchange.


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W) INVESTOR GRIEVANCES AND REDRESSAL SYSTEM

The company has appointed the registrar to the issue, to handle the investor grievances in co-ordination with 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, Beetal Financial Services (P) Limited, 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/Demat Credit

Within 7 days of receipt of complaint subject to production of satisfactory evidence

3. Any other complaint in relation to Public Issue

Within 7 days of receipt of complaint with all relevant details

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/ dematerialisation/ rematerialisation 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.

We have appointed Ms. Sunita Agarwal, Company Secretary as the Compliance Officer and he may be contacted in case of any pre-issue or post-issue problems. He can be contacted at the following address:

Ms. Sunita Agarwal Company Secretary & Compliance Officer Sonear Industries Limited 20, North West Avenue, Punjabi Baugh West, Club road, New Delhi 110 026 Tel.: +91-011 – 450211000/45021028 Fax : +91-011- 45021040 E-mail: [email protected]

X) CHANGES IN AUDITORS

We have not made any changes in statutory auditors during last three years.


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Y) CAPITALIZATION OF RESERVES OR PROFITS DURING LAST 5 YEARS

Our company has issued 54,85,200 Equity Shares in the ratio of 2 equity shares for every 3 equity share held (2:3), on 25/03/2010 by capitalizing reserves or profits.

Z) REVALUATION OF ASSETS DURING THE LAST 5 YEARS

The company has not revalued its assets during the last 5 years.


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SECTION VI - OFFERING INFORMATION

A) TERMS OF THE ISSUE The Equity Shares being offered are subject to the provisions of the Companies Act, our Memorandum and Articles of Association, the terms of this 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 Reserve Bank of India, 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 Companies Act, our Memorandum and Articles of Association 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 We shall pay dividend to our 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. RIGHTS OF THE EQUITY SHAREHOLDERS Subject to applicable laws, the equity shareholders shall have the following rights:

Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll either in person or by proxy; Right to receive 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

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 Regulations, the trading in the Equity Shares of the Company shall only be in dematerialized form for all investors. Since trading of our Equity Shares will be in dematerialized mode, the tradable lot is one equity share. Allotment of Equity Shares through this Issue will be done only in electronic form in multiples of one Equity Share subject to a minimum Allotment of [●] Equity Shares.


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NOMINATION FACILITY TO 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 our Board, elect either:

To register himself or herself as the holder of the Equity Shares; or To make such transfer of the Equity Shares, as the deceased holder could have made.

Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the Equity Shares, and if the notice is not complied with, within a period of 90 days, our 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 form, there is no need to make a separate nomination with us. Nominations registered with the respective depository participant of the applicant would prevail. If the investors require changing the nomination, they are requested to inform their respective depository participant. MINIMUM SUBSCRIPTION If we 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, we shall forthwith refund the entire subscription amount received. If there is a delay beyond 8 days after we become liable to pay the amount, we shall pay interest as per Section 73 of the Companies Act. ARRANGEMENTS FOR DISPOSAL OF ODD LOTS The Company has not made any arrangements for the disposal of odd lots. RESTRICTIONS ON TRANSFER OF SHARES There are no restrictions on transfers and transmission of shares/ debentures and on their consolidation/ splitting.


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B. ISSUE STRUCTURE

Public Issue of 1,77,12,444 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 will constitute 55 % of the Post Issue paid-up capital of the Company. The Issue is being made through the 100% Book Building Process:

Particulars QIBs Non-Institutional Bidders

Retail Individual Bidders

Number of Equity Shares*

Upto 88,56,221 Equity Shares will be allotted to QIBs.

Not less than 26,56,867 Equity Shares shall be available for allocation.

Not less than 61,99,356 Equity Shares shall be available for allocation.

Percentage of Issue Size available for allocation

Upto 50% of the 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.

Not less than 15% of the Issue or Issue less the allocation to QIBs and Retail Portion*

Not less than 35% of the Issue or Issue less the allocation to QIBs and Non-Institutional Portion.*

Basis of allocation if respective category is oversubscribed

Proportionate (a) 4,42,811 Equity Shares shall be available for allocation on a proportionate basis to Mutual Funds; and (b) 84,13,410 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 1,00,000 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


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exceed Rs.100,000.

Mode of Allotment Compulsorily in dematerialized form.

Compulsorily in dematerialized form.

Compulsorily in dematerialized form.

Trading Lot One Equity Share One Equity Share One Equity Share Who can Apply ** Public financial

institutions specified in Section 4A of the Companies Act, FIIs (and their subaccounts registered with SEBI, other than a sub-account which is a foreign corporate or foreign individual), scheduled commercial banks, mutual funds registered with SEBI, multilateral and bilateral development financial institutions, FVCIs registered with SEBI (subject to receipt of appropriate approvals by the FVCI from the appropriate regulatory authority), venture capital funds registered with the SEBI, state industrial development corporations, insurance companies registered with the Insurance Regulatory and Development Authority, provident funds (subject to applicable law) with a minimum corpus of Rs. 250 million, pension funds with a minimum corpus of Rs. 250 million, the National Investment Fund set up by resolution F. No. 2/3/2005-DD-II dated November 23, 2005 of GoI published in the Gazette of India and insurance funds set up and managed by the

Resident Indian individuals, HUFs (in the name of Karta), companies, corporate bodies, Eligible NRIs, scientific institutions societies and trusts, and any FII sub-account registered with SEBI, which is a foreign corporate or foreign individual

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.


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Army, Navy or Air Force of the Union of India

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 Full Bid Amount 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 any of the above 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, the Co-BRLM and subject to applicable provisions of the SEBI Regulations.

** 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 4,42,811 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.

Withdrawal of this Issue

The Company, in consultation with the BRLM and the Co-BRLM, reserves the right not to proceed with the issue after the bidding and if so, the reason thereof shall be given as a public notice within two days of the closure of the issue. The public notice shall be issued in the same newspapers where the pre-issue advertisement had appeared. The stock exchanges where the specified securities were proposed to be listed shall also be informed promptly. If the Company withdraws the Issue after the Bid/Issue Closing Date and thereafter determines that it will proceed with an initial public offering of its Equity Shares, it shall file a fresh draft red herring prospectus with the SEBI.

Bidding/Issue Programme

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

Bids and any revision in Bids will be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard Time) during the Bidding Period as mentioned above at the Bidding centers mentioned in the Bid cum Application Form except that on the Bid Closing Date, Bids excluding ASBA Bids shall be accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) and uploaded until (i) 4.00 p.m. in case of Bids by QIB Bidders and Non-Institutional Bidders; and (ii) 5.00 p.m. which may be extended up to such time as permitted by the Stock Exchanges in case of Bids by Retail Individual Bidders where the Bid Amount is up to Rs. 1,00,000. Due to limitation of time available for uploading the Bids on the Bid Closing Date, the Bidders are advised to submit their Bids one Working Day prior to the Bid Closing Date and, in any case, no later than 1.00 p.m. (Indian Standard Time) on the Bid Closing Date. Bidders are cautioned that in the event a large number of Bids are received on the Bid Closing Date, as is typically experienced in IPOs,


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which may lead to some Bids not being uploaded due to lack of sufficient time to upload, such Bids that cannot be uploaded will not be considered for allocation in the Issue. If such Bids are not uploaded, the Company and the Syndicate shall not be responsible. Bids will be accepted only between Monday and Friday (excluding any public holiday). On the Bid Closing Date, extension of time will be granted by the Stock Exchanges only for uploading the Bids received by Retail Individual Bidders, after taking into account the total number of Bids received up to the closure of timings for acceptance of Bid-cum Application Forms and ASBA Forms as stated herein and reported by the BRLM, Co-BRLM to the Stock Exchanges within half an hour of such closure. Our Company reserve the right to revise the Price Band during the Bidding Period in accordance with ICDR Regulations. The Cap Price shall be less than or equal to 120% of the Floor Price. Subject to compliance with the immediately preceding sentence, the Floor Price can move up or down to the extent of 20% of the floor price originally disclosed in the RHP and the Cap Price will be revised accordingly. In case of revision in the Price Band, the 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 the BSE and the NSE, by issuing a press release, and also by indicating the change on the web sites of the Book Runners at the terminals of the Syndicate.


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C) ISSUE PROCEDURE

This section applies to all Bidders. Please note that all Bidders can participate in the Issue through the ASBA process. ASBA Bidders should note that the ASBA process involves application procedures that are different from the procedure applicable to Bidders other than the ASBA Bidders. Bidders applying through the ASBA process should carefully read the provisions applicable to such applications before making their application through the ASBA process. Please note that all the Bidders are required to make payment of the full Bid Amount along with the Bid cum Application Form. BOOK BUILDING PROCEDURE The Issue is being made through the 100% Book Building Process wherein upto 50% of the Issue will be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds, subject to valid Bids being received from them at or above the Issue Price. Further, not less than 15% of the Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. Bidders are required to submit their Bids through the members of the Syndicate. ASBA investors intending to subscribe to the issue shall submit a complete ASBA form to the designated branch of the SCSB. We, in consultation with the BRLM and the Co-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 the cases of Non-Institutional Bidders and Retail Individual Bidders, the Company will have a right to reject the Bids only on technical grounds. Investors should note that Allotment of Equity Shares to all successful Bidders will be only in the dematerialised form. The Bid cum Application Forms which do not have the details of the Bidders’ depository accounts shall be treated as incomplete and rejected. Bidders will not have the option of being Allotted Equity Shares in physical form. The Equity Shares on Allotment shall be traded only on the dematerialised segment of the Stock Exchanges. BID CUM APPLICATION FORM Bidders (other than ASBA 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. 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. ASBA Bidders shall submit an ASBA Bid cum Application Form to the SCSB authorising blocking of funds that are available in the bank account specified in the ASBA Bid cum Application Form only. ASBA Bid cum application forms will be available for download and printing, from websites of the Stock Exchanges which provide electronic interface for ASBA facility i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Upon filing of the Prospectus with the RoC, the Bid-cum-Application Form shall be considered as the Application Form. Upon completing and submitting the Bid-cum-Application Form to a member of the Syndicate or the SCSB, the Bidder or the ASBA Bidder is deemed to have authorized our Company to make the necessary changes in the Red Herring Prospectus 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 or the ASBA Bidder. The prescribed colour of the Bid cum Application Form for various categories is as follows:


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Category Colour of Bid cum Application Form

Resident Indians, Eligible NRIs applying on a non-repatriation basis [●] Eligible NRIs and FIIs applying on a repatriation basis [●] ASBA Form [●]

ASBA Bidders shall submit an ASBA Bid cum Application Form either in physical or electronic form to the SCSB authorizing blocking the funds that are available in the bank account specified in the ASBA Bid cum Application Form used by ASBA Bidders. The Bidders shall have the option to make a maximum of three Bids in the ASBA Bid-cum-Application Form and such options shall not be considered as multiple Bids. Upon the allocation of Equity Shares, dispatch of the CAN and filing of the Prospectus with the RoC, the ASBA Bid cum Application Form shall be considered as the Application Form. Upon completing and submitting the ASBA Bid cum Application Form for ASBA Bidders to the SCSB, the ASBA Bidder is deemed to have authorised our Company to make the necessary changes in the Red Herring Prospectus and the ASBA Bidcum- Application Form as would be required for filing the Prospectus with the RoC and as would be required by RoC after such filing, without prior or subsequent notice of such changes to the ASBA Bidder. Who can Bid? • Persons eligible to invest under all applicable laws, rules, regulations and guidelines;

• Indian nationals resident in India who are not minors in single or joint names (not more than three);

• Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs would be considered at par with those from individuals;

• Companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest in the equity shares;

• Mutual Funds registered with SEBI;

• Eligible NRIs on a repatriation basis or on a non-repatriation basis, subject to applicable laws. NRIs other than Eligible NRIs are not eligible to participate in this issue;

• Indian Financial Institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI and the SEBI Regulations and regulations, as applicable);

• FIIs and sub-accounts registered with SEBI, other than a sub-account which is a foreign corporate or a foreign individual;

• Sub-accounts of FIIs registered with SEBI, which are foreign corporate or foreign individuals, only under the Non Institutional Bidders Category.

• FIIs registered with SEBI;

• Venture Capital Funds registered with SEBI;

• Foreign Venture Capital Investors registered with SEBI,

• Multilateral and Bilateral development financial institutions

• State Industrial Development Corporations;


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• 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;

• Scientific and/or industrial research organizations authorized to invest in equity shares;

• Insurance Companies registered with Insurance Regulatory and Development Authority, India;

• Provident Funds with minimum corpus of Rs. 250 million and who are authorized under their constitution to hold and invest in equity shares;

• 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

• National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of Government of India published in the Gazette of India; and

As per the existing regulations, OCBs cannot participate in this Issue. Participation by associates of BRLM, Co-BRLM and Syndicate Member The BRLM, the Co-BRLM and Syndicate Member shall not be allowed to subscribe to this Issue in any manner except towards fulfilling their underwriting obligations. However, associates and affiliates of the BRLM, the Co-BRLM and Syndicate Member may subscribe for Equity Shares in the Issue, either in the QIB Portion and Non-Institutional Portion where the allotment is on a proportionate basis. Bids by Mutual Funds An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Funds Portion. In the event that the demand is greater than 4,42,811 Equity Shares, allocation shall be made to Mutual Funds proportionately, to the extent of the Mutual Fund Portion. The remaining demand by Mutual Funds shall, as part of the aggregate demand by QIBs, be available for allocation proportionately out of the remainder of the QIB Portion, after excluding the allocation in the Mutual Funds Portion. In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. As per the current regulations, the following restrictions are applicable for investments by mutual funds: No mutual fund scheme shall invest more than 10% of its net asset value in the equity shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any company’s paid-up capital carrying voting rights. The above information is given for the benefit of the Bidders. Our Company and the BRLM & Co-BRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may happen after the date of this Draft Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares bid for do not exceed the applicable limits under laws or regulations.


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Bids by Eligible NRIs Bid cum Application Forms have been made available for Eligible NRIs at the registered office of the Company and with members of the Syndicate and the Registrar to the Issue. Eligible NRI applicants should note that only such Bids as are accompanied by payment in free foreign exchange shall be considered for Allotment. The Eligible NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall use the Bid cum Application Form meant for Resident Indians. Bids by FIIs As per the current regulations, the following restrictions are applicable for investments by FIIs: The issue of Equity Shares to a single FII should not exceed 10% of our post-Issue paid- up capital. In respect of an FII investing in the Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our total issued capital of the Company or 5% of the total issued capital, in case such sub-account is a foreign corporate or an individual. Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of Regulation 15A(1) of the Securities Exchange Board of India (Foreign Institutional Investors) Regulations 1995, as amended, an FII or its sub-account may issue, deal or hold, offshore derivative instruments such as Participatory Notes, equity-linked notes or any other similar instruments against underlying securities listed or proposed to be listed in any stock exchange in India only in favour of those entities which are regulated by any relevant regulatory authorities in the countries of their incorporation or establishment subject to compliance of “know your client” requirements. An FII or sub-account shall also ensure that no further downstream issue or transfer of any instrument referred to hereinabove is made to any person other than a regulated entity. Bids by Sebi Registered Venture Capital Funds And Foreign Venture Capital Investors As per the current regulations, the following restrictions are applicable for Sebi registered venture capital funds and foreign venture capital investors: The SEBI (Venture Capital) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulations, 2000 prescribe investment restrictions on venture capital funds and foreign venture capital investors registered with SEBI. Accordingly, the holding by any individual venture capital fund registered with SEBI in one company should not exceed 25% of the corpus of the venture capital fund; a Foreign Venture Capital Investor can invest its entire funds committed for investments into India in one company. Further, Venture Capital Funds and Foreign Venture Capital Investors can invest only up to 33.33% of the funds available for investment by way of subscription to an initial public offer. The above information is given for the benefit of the Bidders. The Company and the Book Runners 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. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares Bid for do not exceed the applicable limits under laws or regulations.


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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. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by applicable laws. Under the existing SEBI Regulations, 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.

Information for the Bidders:

(a) Our Company in consultation with the BRLM and Co- BRLM shall declare the Bid/Issue Opening Date

and Bid/Issue Closing Date in the Red Herring Prospectus to be registered with the RoC and also publish the same in two (2) national newspaper one(1) each in English and Hindi newspaper and one regional newspaper with wide circulation

(b) Bidding by QIBs will close one Working Day prior to the Bid Closing Date, provided that Bidding shall be kept open for a minimum of three Working Days for all categories of Bidders.

(c) Our Company will file the Red Herring Prospectus with the RoC at least three (3) days before the Bid/Issue Opening Date.

(d) The members of the Syndicate will circulate copies of the Bid-cum-Application Form to potential investors, and at the request of the potential investor’s, copies of the Red Herring Prospectus.

(e) Any Bidders (who is eligible to invest in the Equity Shares) who would like to obtain the Red Herring Prospectus and/ or the Bid cum Application Form can obtain the same from the Registered Office or from any member of the Syndicate or the SCSBs.

(f) Eligible investors who are interested in subscribing for the Equity Shares should approach the BRLM, Co-BRLM or Syndicate Member or their authorized agent(s) to register their Bids. Bidders who wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their Bids.


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(g) ASBA Bidders shall correctly mention the bank account number in the ASBA Bid cum Application Form and ensure that funds equal to the Bid Amount are available in the bank account maintained with the SCSB before submitting the ASBA Bid cum Application Form to the respective Designated Branch.

(h) If the ASBA Account holder is different from the ASBA Bidder, the ASBA Bid cum Application Form should be signed by the account holder as provided in the ASBA Bid cum Application Form.

(i) The Bids should be submitted on the prescribed Bid-cum-Application Form only. Bid-cum-Application Forms (other than the ASBA Bid cum Application Forms) should bear the stamp of the member of the Syndicate. Bid-cum-Application Forms which do not bear the stamp of a member of the Syndicate will be rejected. Bids by ASBA Bidders shall be accepted by the Designated Branches of the SCSBs in accordance with the SEBI (ICDR) Regulations and any circulars issued by SEBI in this regard. Bidders applying through the ASBA process also have an option to submit the ASBA Bid cum Application Form in electronic form.

The applicants may note that in case the DP ID and Client ID and PAN mentioned in the Bid cum Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate do not match with the DP ID and Client ID and PAN available in the Settlement Depository database, the application is liable to be rejected.

Method and Process of Bidding (a) Our Company in consultation with the BRLM and Co-BRLM will decide the Price Band and the

minimum Bid lot size for the Issue. The Syndicate and the SCSBs shall accept Bids from the Bidders during the Bid/Issue Period.

(b) The Bid/Issue Period shall be for a minimum of three Working Days and shall not exceed 10 Working Days. The Bid/ Issue Period may be extended, if required, by an additional three Working Days, subject to the total Bid/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/ Issue Period, if applicable, will be published in two national newspapers (one each in English and Hindi) and one regional newspaper with wide circulation and also by indicating the change on the websites of the BRLM, Co-BRLM and at the terminals of the Syndicate.

(c) During the Bid/Issue Period, Bidders, other than QIBs, who are interested in subscribing for the Equity Shares should approach the Syndicate or their authorised agents to register their Bids. The Syndicate shall accept Bids from all Bidders and have the right to vet the Bids during the Bid/ Issue Period in accordance with the terms of the Red Herring Prospectus. Bidders who wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their Bids.

(d) 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 entitled ― “Bids at Different Price Levels” below) 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 Amount, will become automatically invalid.

(e) The Bidder cannot Bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been submitted to any member of the Syndicate or the SCSBs. Submission of a second Bid cum Application Form to either the same or to another member of the Syndicate or SCBS 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 entitled ― “Build up of the Book and Revision of Bids”.


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(f) The Syndicate/the SCSBs will enter each Bid option into the electronic bidding system as a separate Bid and generate a Transaction Registration Slip, (‘TRS’), for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.

(g) Along with the Bid cum Application Form, all Bidders (other than ASBA Bidders) will make payment in the manner described in ― “Escrow Mechanism - Terms of payment and payment into the Escrow Accounts” on page 190.

(h) Upon receipt of the ASBA Bid cum Application Form, submitted whether in physical or electronic mode, the Designated Branch of the SCSB shall verify if sufficient funds equal to the Bid Amount are available in the ASBA Account, as mentioned in the ASBA Bid cum Application Form, prior to uploading such Bids with the Stock Exchanges.

(i) If sufficient funds are not available in the ASBA Account, the Designated Branch of the SCSB shall reject such Bids and shall not upload such Bids with the Stock Exchanges.

(j) If sufficient funds are available in the ASBA Account, the SCSB shall block an amount equivalent to the Bid Amount mentioned in the ASBA Bid cum Application Form and will enter each Bid option into the electronic bidding system as a separate Bid and generate a TRS for each price and demand option. The TRS shall be furnished to the ASBA Bidder on request.

(k) The Bid Amount shall remain blocked in the aforesaid ASBA Account until finalisation of the Basis of Allotment and consequent transfer of the Bid Amount against the Allotted Equity Shares to the Public Issue Account, or until withdrawal/failure of the Issue or until withdrawal/rejection of the ASBA Bid cum Application Form, as the case may be. Once the Basis of Allotment is finalized, the Registrar to the Issue shall send an appropriate request to the Controlling Branch of the SCSB for unblocking the relevant ASBA Accounts and for transferring the amount allocable to the successful Bidders to the Public Issue Account. In case of withdrawal/failure of the Issue, the blocked amount shall be unblocked on receipt of such information from the Registrar to the Issue.

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 and Non-Institutional Bidders 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


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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. Revision option is also available to ASBA investor. For details, please refer section “ASBA Process” in this Red Herring Prospectus.

7. 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.

8. 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 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.

9. 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.

10. 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.

11. 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.

12. 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.

Electronic Registration of Bids (a) The Syndicate and the SCSBs will register the Bids using the on-line facilities of the Stock Exchanges.

(b) The Syndicate and the SCSBs will undertake modification of selected fields in the Bid details already uploaded within one Working Day from the Bid/Issue Closing Date.

(c) There will be at least one on-line connectivity facility in each city, where a stock exchange is located in India and where Bids are being accepted. The BRLM Co-BRLM, our Company and the Registrar are not responsible for any acts, mistakes or errors or omission and commissions in relation to, (i) the Bids accepted by the Syndicate Members and the SCSBs, (ii) the Bids uploaded by the Syndicate Members and the SCSBs, (iii) the Bids accepted but not uploaded by the Syndicate Members and the SCSBs or (iv) with respect to ASBA Bids, Bids accepted and uploaded without blocking funds in the ASBA Accounts.


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However, the Syndicate and/or the SCSBs shall be responsible for any error in the Bid details uploaded by them. It shall be presumed that for Bids uploaded by the SCSBs, the Bid Amount has been blocked in the relevant ASBA Account.

(d) The Stock Exchanges will offer an electronic facility for registering Bids for the Issue. This facility will be available with the Syndicate and their authorised agents and the SCSBs during the Bid/ Issue Period. The Syndicate Members and the Designated Branches of the SCSBs 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 Syndicate and the Designated Branches of the SCSBs shall upload the Bids till such time as may be permitted by the Stock Exchanges. This information will be available with the BRLM, Co-BRLM on a regular basis.

(e) Based on the aggregate demand and price for Bids registered on the electronic facilities of the Stock Exchanges, a graphical representation of consolidated demand and price as available on the websites of the Stock Exchanges would be made available at the Bidding centres during the Bid/Issue Period.

(f) At the time of registering each Bid other than ASBA Bids, the Syndicate shall enter the following details of the Bidders in the on-line system:

• Name of the Bidder: Bidders should ensure that the name given in the Bid cum Application Form is exactly the same as the name in which the Depositary Account is held. In case the Bid cum Application Form is submitted in joint names, Bidders should ensure 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.

• Investor Category – Individual, Corporate, QIBs, Eligible NRI, FVCI, FII & sub-account registered with SEBI (other than a sub-account which is a foreign corporate or foreign individual) or Mutual Fund, etc.

• Numbers of Equity Shares Bid for.

• Bid Amount.

• Bid cum Application Form number.

• DP ID and client identification number of the beneficiary account of the Bidder.

• PAN.

With respect to ASBA Bids, at the time of registering each Bid, the Designated Branches of the SCSBs shall enter the following information pertaining to the Bidder into the online system:

• Name of the Bidder(s);

• Application Number;

• PAN (of First Bidder, in case of more than one Bidder);

• Investor Category and Sub-Category:

Retail Non- Institutional QIB (No sub category) • Individual

• corporate • other

• Mutual Funds • Financial Institutions • Insurance companies • Foreign Institutional • Investors other than • corporate and individual • sub-accounts


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• Employee/shareholder (if reservation);

• DP ID and client identification number;

• Beneficiary account number of Equity Shares Bid for;

• Quantity;

• Bid Amount and

• Bank account number;

(g) 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 Syndicate or the Designated Branches of the SCSBs. The registration of the Bid by the member of the Syndicate or the Designated Branches of the SCSBs does not guarantee that the Equity Shares shall be allocated/Allotted either by the Syndicate or our Company.

(h) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

(i) In case of QIB Bidders, only the BRLM, Co-BRLM and their Affiliate Syndicate Members have the right to accept the Bid or reject it. However, such rejection shall 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 will be rejected on technical grounds listed on page 193. The Members of the Syndicate may also reject Bids if all the information required is not provided and the Bid cum Application Form is incomplete in any respect. The SCSBs shall have no right to reject Bids, except on technical grounds.

(j) The permission given by the Stock Exchanges 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 our Company and/or the BRLM, Co-BRLM are cleared or approved by the Stock Exchanges; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, the Promoter, the management or any scheme or project of our Company; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Red Herring Prospectus; nor does it warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges.

(k) Only Bids that are uploaded on the online IPO system of the Stock Exchanges shall be considered for allocation/ Allotment. Members of the Syndicate will be given up to one day after the Bid/Issue Closing Date to verify the information uploaded in the online IPO system during the Bid/Issue Period after which the date will be sent to the Registrar for reconciliation and Allotment of Equity Shares. In case of any discrepancy of data between the BSE or the NSE and the Members of the Syndicate or the Designated Branches of the SCSBs, the decision of our Company, in consultation with the BRLM, Co-BRLM and the Registrar, based on the physical records of Bid Cum Application Forms shall be final and binding on all concerned. If the Syndicate Members finds any discrepancy in the DP name, DP Id and the Client Id, the Syndicate Members will correct the same and send the data to the Registrar for reconciliation and Allotment of Equity Shares.

Build up of the book and revision of Bids: (a) Bids received from various Bidders through the Syndicate and the SCSBs shall be electronically

uploaded to the Stock Exchanges‘ mainframe on a regular basis.

(b) The Book gets built up at various price levels. This information will be available with the BRLM and Co-BRLM on a regular basis at the end of the Bid/Issue Period.


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(c) During the Bid/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.

(d) Revisions can be made in both the desired number of Equity Shares and the Bid Amount by using the Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form. For example, if a Bidder has Bid for three options in the Bid cum Application Form and such Bidder is changing only one of the options in the Revision Form, he must still fill the details of the other two options that are not being revised, in the Revision Form. The Syndicate and the Designated Branches of the SCSBs will not accept incomplete or inaccurate Revision Forms.

(e) The Bidder can make this revision any number of times during the Bid/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 or the SCSB through whom such Bidder had placed the original Bid. Bidders are advised to retain copies of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies thereof.

(f) 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) shall make additional payment based on the cap of the revised Price Band (such that the total amount i.e., original Bid Amount plus additional payment does not exceed Rs. 100,000 if the Bidder wants to continue to Bid at Cut-off Price), with the Syndicate to whom the original Bid was submitted. In case the total amount (i.e., original Bid Amount plus additional payment) exceeds Rs. 100,000, 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 cap of the Price Band prior to revision, the number of Equity Shares Bid for shall be adjusted downwards for the purpose of allocation, such that no additional payment would be required from the Bidder and the Bidder is deemed to have approved such revised Bid at Cut-off Price.

(g) 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.

(h) Our Company, in consultation with the BRLM and Co-BRLM, shall decide the minimum number of Equity Shares for each Bid to ensure that the minimum application value is within the range of Rs. 5,000 to Rs. 7,000.

(i) 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. With respect to the ASBA Bids, if revision of the Bids results in an incremental amount, the relevant SCSB shall block the additional Bid Amount. In case of Bids, other than ASBA Bids, the Syndicate shall collect the payment in the form of cheque or demand draft 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. In such cases, the Syndicate will revise the earlier Bids details with the revised Bid and provide the cheque or demand draft number of the new payment instrument in the electronic book. The Registrar will reconcile the Bid data and consider the revised Bid data for preparing the Basis of Allotment.

(j) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and may get a revised TRS from the Syndicate or the SCSB, as applicable. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised the previous Bid.

Price Discovery and Allocation

1. After the Bid/Issue Closing Date, the BRLM and the Co-BRLM shall analyze the demand generated at various price levels and discuss pricing strategy with the Company.


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2. Our Company in consultation with the BRLM and Co-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 less than 15% and 35% of the Issue respectively, and, would be on proportionate basis, in the manner specified in the SEBI Regulations 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 any category would be met with spill over from any other category at the sole discretion of the Company in consultation with the BRLM and the Co-BRLM. However, if the aggregate demand by Mutual Fund is less than 4,42,811 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 QIB Portion has been met, under subscription, if any, would be allowed to be met with spill-over from any other category or combination of categories at the discretion of our Company, in consultation with the BRLM and Co-BRLM and the Designated Stock Exchange.

5. Under-subscription, if any, in any category, would be met with spill over from other categories at our sole discretion in consultation with the BRLM and Co-BRLM.

6. Allocation to Non-Residents, including Eligible NRI’s, FIIs and FVCIs registered with SEBI, applying on repatriation basis will be subject to applicable law, rules, regulations, guidelines and approvals.

7. The BRLM and Co-BRLM, in consultation with us, shall notify the members of the Syndicate of the Issue Price and allocations to their respective Bidders, where the full Bid Amount has not been collected from the Bidders.

8. Our Company reserves the right to cancel the Issue any time after the Bid/Issue Opening Date without assigning any reasons whatsoever. In terms of the SEBI Regulations, QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date.

9. The allotment details shall be put on the website of the Registrar to the Issue.

Signing of the Underwriting Agreement and the RoC Filing

(a) Our Company, the BRLM, Co-BRLM and the Syndicate Members shall enter into an Underwriting Agreement on or immediately after the finalisation of the Issue Price.

(b) After signing the Underwriting Agreement, our Company will update and file the updated Red Herring Prospectus with the RoC in accordance with the applicable law, which then would be termed as the ‘Prospectus‘. The Prospectus will contain details of the Issue Price, Issue size, underwriting arrangements and will be complete in all material respects.

Pre-Issue Advertisement

Subject to Section 66 of the Companies Act, our Company shall, after registering the Red Herring Prospectus with the RoC, publish a pre-Issue advertisement, in the form prescribed by the SEBI Regulations, in one English language national daily newspaper, one Hindi language national daily newspaper and one Marathi language daily newspaper, each with wide circulation.

Advertisement regarding Issue Price and Prospectus

Our Company will issue a statutory advertisement after the filing of the Prospectus with the RoC. This advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the Issue Price. Any material updates between the date of the Red Herring Prospectus and the date of Prospectus will be included in such statutory advertisement.


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Issuance of Confirmation of Allotment Note (“CAN”)

(a) Upon approval of the Basis of Allotment by the Designated Stock Exchange, the Registrar shall send to the Syndicate a list of the Bidders who have been Allotted 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 Allotment for the Retail and Non-Institutional Bidders. However, Bidders should note that our Company shall ensure that (i) the Allotment of the Equity Shares and (ii) the instructions by the Company for the demat credit of the Equity Shares, to all Bidders in this Issue shall be done on the same date.

(b) The Registrar will then dispatch a CAN to the Bidders who have been Allotted 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.

(c) The Issuance of CAN shall be deemed a valid, binding and irrevocable contract for the Allotment of Equity Shares to such Bidder.

Designated Date and Allotment of Equity Shares

(a) Our Company will ensure that (i) the Allotment of Equity Shares; and (ii) credit to the successful

Bidder‘s depositary account will be completed within 12 Working Days of the Bid/Issue Closing Date.

(b) In accordance with the SEBI Regulations, Equity Shares will be issued and Allotment shall be made only in the dematerialised form to the Allottees.

(c) Allottees will have the option to re-materialise the Equity Shares so Allotted as per the provisions of the Companies Act and 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.

GENERAL INSTRUCTIONS

Do’s:

a) Check if you are eligible to apply;

b) Ensure that you have Bid within the Price Band;

c) Read all the instructions carefully and complete the Bid cum Application Form;

d) Ensure that the details about the Depository Participant and the beneficiary account are correct as Allotment of Equity Shares will be in the dematerialised form only;

e) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate or with respect to ASBA Bidders, ensure that your Bid is submitted at a Designated Branch of the SCSB where the ASBA Bidder or the person whose bank account will be utilised by the Bidder for bidding has a bank account;

f) With respect to ASBA Bids ensure that the ASBA Bid cum Application Form is signed by the account holder in case the applicant is not the account holder. Ensure that you have mentioned the correct bank account number in the ASBA Bid cum Application Form;

g) Ensure that you request for and receive a TRS for all your Bid options;

h) Ensure that you have funds equal to the Bid Amount in your bank account maintained with the SCSB before submitting the ASBA Bid cum Application Form to the respective Designated Branch of the SCSB;

i) Ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate and funds equivalent to the Bid Amount are blocked in case of any Bids submitted though the SCSBs.


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j) Instruct your respective banks to not release the funds blocked in the bank account under the ASBA process;

k) Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed and obtain a revised TRS;

l) Except for Bids submitted on behalf of the Central Government or the State Government and officials appointed by a court, all Bidders should mention their PAN allotted under the IT Act;

m) Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all respects;

n) 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 Amount to less than the Floor Price or higher than the Cap Price;

c) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the Syndicate or the SCSBs, as applicable;

d) Do not pay the Bid Amount in cash, by money order or by postal order or by stock invest;

e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the Syndicate or the SCSBs only;

f) Do not Bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders, for Bid Amount in excess of Rs. 100,000);

g) Do not Bid for a Bid Amount exceeding Rs. 100,000 (for Bids by Retail Individual Bidders);

h) 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;

i) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground; and

j) Do not submit the Bids without the full Bid Amount.

Instructions for Completing the Bid cum Application Form Bids must be:

a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable.

b) 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. Bidders should note that the Syndicate and / or the SCSBs, as appropriate, will not be liable for errors in data entry due to incomplete or illegible Bid cum Application Forms or Revision Forms.

c) Information provided by the Bidders will be uploaded in the online IPO system by the Syndicate and the SCSBs, as the case may be, and the electronic data will be used to make allocation/ Allotment. The Bidders should ensure that the details are correct and legible.


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d) For Retail Individual Bidders, the Bid must be for a minimum of [•] Equity Shares and in multiples of [•] thereafter subject to a maximum Bid Amount of Rs. 100,000.

e) For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity Shares that the Bid Amount exceeds or equal to 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 Equity Shares that can be held by them under the applicable laws or regulations.

f) In single name or in joint names (not more than three, and in the same order as their Depository Participant details).

g) Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.

Bidder’s PAN, Depository Account and Bank Account Details

Bidders should note that on the basis of PAN of the Bidders, DP ID and beneficiary account number provided by them in the Bid cum Application Form, the Registrar will obtain from the Depository the demographic details including address, Bidders bank account details, MICR code and occupation (hereinafter referred to as “Demographic Details”). These bank account details would be used for giving refunds (including through physical refund warrants, direct credit, NECS, NEFT and RTGS) or unblocking of ASBA Account. 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 or unblocking of ASBA Account at the Bidders sole risk and neither the BRLM, Co-BRLM or the Registrar or the Escrow Collection Banks or the SCSBs nor our Company 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 DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY PARTICIPANT�S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. INVESTORS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM.

These Demographic Details would be used for all correspondence with the Bidders including mailing of the CANs/Allotment Advice and printing of Bank particulars on the refund orders. The Demographic Details given by Bidders in the Bid cum Application Form would 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


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any such delay shall be at the Bidders sole risk and neither the Bank, the Registrar, Escrow Collection Bank(s) nor the BRLM, Co-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, Bidders may note that refunds may get delayed if Bank particulars obtained from the Depository Participant are incorrect.

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. Our Company in their absolute discretion, reserve the right to permit the holder of the power of attorney to request the Registrar that for the purpose of printing particulars on the refund order and mailing of the refund order/CANs/allocation advice/ refunds through electronic transfer of funds, the Demographic Details given on the Bid cum Application Form should be used (and not those obtained from the Depository of the Bidder). In such cases, the Registrar shall use Demographic Details as given in the Bid cum Application Form instead of those obtained from the depositories. 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. Our Company will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.

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, we reserve 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 pursuant to a Power of Attorney by FIIs, 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 their SEBI registration certificate must be lodged along with the Bid cum Application Form. In case of Bids made by Mutual Funds, venture capital funds registered with SEBI and FVCIs, 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, we reserve 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, we reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore.


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We, in our 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 we and the BRLM and Co-BRLM may deem fit. PAYMENT INSTRUCTIONS

Escrow Mechanism for Bidders other than ASBA Bidders Our Company and the Syndicate shall open Escrow Account(s) with one or more Escrow Collection Bank(s) in whose favour the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders would be deposited in the Escrow Account. The Escrow Collection Banks will act in terms of the Red Herring Prospectus and the Escrow Agreement. The Escrow Collection Banks for and on behalf of the Bidders shall maintain the monies in the Escrow Account until the Designated Date. 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 Banks shall transfer the funds represented by allocation of Equity Shares (other than ASBA funds with the SCSBs) from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue Account with the Bankers to the Issue. The balance amount after transfer to the Public Issue Account shall be transferred to the Refund Account. Payments of refund to the Bidders shall also be made from the Refund Account as per the terms of the Escrow Agreement and the Red Herring Prospectus. The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between our Company, the Syndicate, the Escrow Collection Banks and the Registrar to facilitate collections from the Bidders. Payment mechanism for ASBA Bidders The ASBA Bidders shall specify the bank account number in the ASBA Bid cum Application Form and the SCSB shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Bid cum Application Form. The SCSB shall keep the Bid Amount in the relevant bank account blocked until withdrawal/ rejection of the ASBA Bid or receipt of instructions from the Registrar to unblock the Bid Amount. In the event of withdrawal or rejection of the ASBA Bid cum Application Form or for unsuccessful ASBA Bid cum Application Forms, the Registrar shall give instructions to the SCSB to unblock the application money in the relevant bank account within one day of receipt of such instruction. The Bid Amount shall remain blocked in the ASBA Account until finalisation of the Basis of Allotment in the Issue and consequent transfer of the Bid Amount to the Public Issue Account, or until withdrawal/ failure of the Issue or until rejection of the ASBA Bid, as the case may be.

Payment into Escrow Account for Bidders other than ASBA Bidders Each Bidder shall draw a cheque or demand draft or remit the funds electronically through the RTGS mechanism for the amount payable on the Bid and/or on allocation/Allotment as per the following terms:

1. All Bidders would be required to pay the full Bid Amount at the time of the submission of the Bid cum Application Form.

2. The Bidders shall, with the submission of the Bid cum Application Form, draw a payment instrument

for the Bid Amount in favour of the Escrow Account and submit the same to the Syndicate. If the


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payment is not made favouring the Escrow Account along with the Bid cum Application Form, the Bid of the Bidder shall be rejected.

3. The payment instruments for payment into the Escrow Account should be drawn in favour of:

(a) In case of Resident QIB Bidders: [•] (b) In case of Non-Resident QIB Bidders: [•] (c) In case of Resident Retail and Non-Institutional Bidders: [•] (d) In case of Non-Resident Retail and Non-Institutional Bidders: [•]

4. In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian

Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident Bidder bidding on a repatriation basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE Account or FCNR Account.

5. In case of Bids by NRIs applying on non-repatriation basis, the payments must be made through Indian

Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance or out of a Non-Resident Ordinary (NRO) Account of a Non-Resident Bidder bidding on a non-repatriation basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting an NRE or FCNR or NRO Account.

6. In case of Bids by FIIs, the payment should be made out of funds held in a Special Rupee Account along

with documentary evidence in support of the remittance. Payment by drafts should be accompanied by a bank certificate confirming that the draft has been issued by debiting the Special Rupee Account.

7. The monies deposited in the Escrow Account will be held for the benefit of the Bidders (other than

ASBA Bidders) till the Designated Date. 8. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account

as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to the Issue. 9. On the Designated Date and no later than ten (10) Working Days from the Bid/Issue Closing Date, the

Escrow Collection Bank shall also refund all amounts payable to unsuccessful Bidders (other than ASBA Bidders) and also the excess amount paid on bidding, if any, after adjusting for allocation/Allotment to such Bidders.

10. Payments should be made by cheque, or a 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/ stock invest/money orders/postal orders will not be accepted.


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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 Syndicate at the time of submission of the Bid. With respect to the ASBA Bidders, the ASBA Bid cum Application Form or the ASBA Revision Form shall be submitted to the Designated Branches of the SCSBs. No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or Revision Form. However, the collection centre 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). Two or more Bids will be deemed to be multiple Bids if the sole or first Bidder is one and the same. Our Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all categories. In this regard, the procedures to be followed by the Registrar to the Issue to detect multiple applications are given below: 1. All Bids will be checked for common PAN and will be accumulated and taken to a separate process file

which will serve as a multiple master document. 2. In this master, a check will be carried out for the same PAN numbers. In cases where the PAN numbers

are different, the same will be deleted from this master. 3. The applications will be electronically matched for Depository Participant’s Identity (DP ID) (Client ID)

numbers. If applications bear the same numbers, these will be treated as multiple applications. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Funds 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. Our Company, in consultation with the BRLM and Co-BRLM reserves the right to reject, in their absolute discretion, all or any multiple Bids in any or all categories

Permanent Account Number or PAN Pursuant to the circular MRD/DoP/Circ-05/2007 dated April 27, 2007, SEBI has mandated Permanent Account Number (PAN) to be the sole identification number for all participants transacting in the securities market, irrespective of the amount of the transaction with effect from July 2, 2007. Each of the Bidders, should


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mention his/her PAN allotted under the IT Act. Applications without this information 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. Unique Identification Number (“UIN”) With effect from July 1, 2005, SEBI had decided to suspend all fresh registrations for obtaining UIN and the requirement to contain/quote UIN under the SEBI MAPIN Regulations/Circulars vide its circular MAPIN/Cir-13/2005. However, in a recent press release dated December 30, 2005, SEBI has approved certain policy decisions and has now decided to resume registrations for obtaining UIN’s in a phased manner. The press release states that the cut off limit for obtaining UIN has been raised from the existing limit of trade order value of Rs. 100,000 to Rs. 500,000 or more. The limit will be reduced progressively. For trade order value of less than Rs. 500,000, an option will be available to investors to obtain either the PAN or UIN. These changes are, however, not effective as of the date of the Red Herring Prospectus and SEBI has stated in the press release that the changes will be implemented only after necessary amendments are made to the SEBI MAPIN Regulations. Therefore, MAPIN is not required to be quoted with the Bids. Our Right to Reject Bids In case of QIB Bidders, our Company in consultation with the BRLM and CO-BRLM may reject Bids provided that the reasons for rejecting the same shall be provided to such Bidders in writing. In case of Non-Institutional Bidders and Retail Individual Bidders, our Company has a right to reject Bids based on technical grounds. Consequent refunds shall be made by RTGS/NEFT/NES/Direct Credit/cheque or pay order or draft and will be sent to the Bidder‘s address at the Bidder‘s risk. With respect to ASBA Bids, the Designated Branches of the SCSBs shall have the right to reject ASBA Bids if at the time of blocking the Bid Amount in the Bidder‘s bank account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not available in the Bidder‘s bank account maintained with the SCSB. Subsequent to the acceptance of the ASBA Bid by the SCSB, our Company would have a right to reject the ASBA Bids only on technical grounds.

GROUNDS FOR TECHNICAL REJECTIONS

Bidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:

• Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for.

With respect to ASBA Bids, the amounts mentioned in the ASBA Bid cum Application Form does not tally with the amount payable for the value of the Equity Shares Bid for;

• Bank account details (for refund) not given; • Age of first Bidder not given; • 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; • Bid by persons not competent to contract under the Indian Contract Act, 1872 including minors,

insane persons; • PAN not mentioned in the Bid cum Application Form; • GIR number furnished instead of PAN; • Bids for lower number of Equity Shares than specified for that category of investors; • Bids at a price less than the Floor Price; • Bids at a price more than the Cap Price; • Bids at Cut-off Price by Non-Institutional and QIB Bidders; • Bids for number of Equity Shares which are not in multiples of [•];


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• Category not ticked; • Multiple Bids as defined in the Red Herring Prospectus; • In case of Bids under power of attorney or by limited companies, corporate, trust etc., relevant

documents are not submitted; • Bids accompanied by Stock invest/money order/postal order/cash; • Signature of sole and/or joint Bidders missing; • Bid cum Application Forms does not have the stamp of the BRLM, Co-BRLM or Syndicate Members

or the SCSB; • Bid cum Application Forms does not have Bidder‘s depository account details; • Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid

cum Application Forms, Bid/Issue Opening Date advertisement and the Red Herring Prospectus and as per the instructions in the Red Herring Prospectus and the Bid cum Application Forms;

• In case no corresponding record is available with the Depositories that matches three parameters namely,names of the Bidders (including the order of names of joint holders), the Depositary Participant‘s identity (DP ID) and the beneficiary‘s account number;

• With respect to ASBA Bids, inadequate funds in the bank account to block the Bid Amount specified in the ASBA Bid cum Application Form at the time of blocking such Bid Amount in the bank account;

• Bids for amounts greater than the maximum permissible amounts prescribed by the regulations; • Bids where clear funds are not available in Escrow Accounts as per final certificate from the Escrow

Collection Banks; • Bids by QIBs not submitted through the BRLM and the Co-BRLM or in case of ASBA Bids for QIBs

not intimated to the BRLM and the Co-BRLM; • Bids by OCBs; • Bids by persons in the United States excluding qualified institutional buyers as defined in Rule 144A

of the Securities Act or other than in reliance of Regulation S under the Securities Act; • Bids by any person outside India if not in compliance with applicable foreign and Indian Laws; • Bids not uploaded on the terminals of the Stock Exchanges; and Bids by persons prohibited from

buying, selling or dealing in the shares directly or indirectly by SEBI or any other regulatory authority.

IN CASE THE DP ID, CLIENT ID AND PAN MENTIONED IN THE BID CUM APPLICATION FORM AND ENTERED INTO THE ELECTRONIC BIDDING SYSTEM OF THE STOCK EXCHANGES OR THE SYNDICATE/THE SCSBs DO NOT MATCH WITH THE DP ID, CLIENT ID AND PAN AVAILABLE IN THE RECORDS WITH THE DEPOSITARIES.

Equity Shares in Dematerialized Form with NSDL or CDSL

As per the provisions of Section 60B of the Companies Act, 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 the fungible and be represented by the statement issued through the electronic mode). In this context, two agreements have been signed among the Company, the respective Depositories and the Registrar to the Issue:

a) Agreement dated 03/09/2010 with NSDL, the Company and the Registrar to the Issue; b) Agreement dated [•]with CDSL, the Company and the Registrar to the Issue.

The ISIN number allotted to the Company is INE455L01015.

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.


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a) A bidder applying for Equity Shares must have at least one beneficiary account with either of the

Depository Participant of either NSDL or CDSL prior to making the Bid. b) 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. c) Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account

(with the Depository Participant) of the Bidder. d) Names in the Bid-cum-Application Form or Revision Form should be identical to those appearing in the

account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details in the Depository.

e) 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.

f) 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.

g) Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL or CDSL. All the Stock Exchanges where our Equity Shares are proposed to be listed have electronic connectivity with NSDL and CDSL.

h) 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 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 or the Designated Branch of the SCSBs where the Bid was submitted and cheque or draft number and issuing bank thereof or with respect to ASBA Bids, bank account number in which the amount equivalent to the Bid Amount was blocked. Bidders 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 Allotment, credit of Allotted shares in the respective beneficiary accounts, refund orders etc. In case of ASBA Bids submitted to the Designated Branches of the SCSBs, the Bidders can contact the Designated Branches of the SCSBs. PAYMENT OF REFUND

Bidders other than ASBA Bidders must note that on the basis of the names of the Bidders, Depository Participant‘s name, DP ID, 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 the nine digit Magnetic Ink Character Recognition (“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 our Company, the Registrar, Escrow Collection Bank(s), Bankers to the Issue, the BRLM and Co-BRLM 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 for Bidders other than ASBA Bidders The payment of refund, if any, for Bidders other than ASBA Bidders would be done through various modes in the following order of preference:


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1. NECS – Payment of refund would be done through NECS for applicants having an account at any of the

68 centres notified by SEBI, where clearing houses for ECS are managed by the RBI. This mode of payment of refunds would be subject to availability of complete bank account details including the nine-digit MICR code as appearing on a cheque leaf from the Depository. The payment of refund through NECS is mandatory for applicants having a bank account at any of the sixty eight (68) centres notified by SEBI, except where the applicant is otherwise disclosed as eligible to receive refunds through direct credit or RTGS.

2. Direct Credit - Applicants having bank accounts with the Refund Banker, shall be eligible to receive

funds through direct credit. Charges, if any, levied by the Refund Banker for the same would be borne by the Company.

3. RTGS - Applicants having a bank account at any of the above-mentioned 68 centers and whose refund

amount exceeds Rs. Ten Lacs, 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 banks for the same would be borne by the Company. Charges, if any, levied by the applicants’ bank receiving the credit would be borne by the applicant.

4. NEFT - Payment of refund shall be undertaken through NEFT wherever the applicants’ bank has been

assigned the IFSC, which can be linked to a MICR, if any, available to that particular bank branch. IFSC will be obtained from the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with MICR numbers. Wherever 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 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 hence use of NEFT is subject to operational feasibility, cost and process efficiency. In the event that NEFT is not operationally feasible, the payment of refunds would be made through any one of the other modes as discussed in the sections.

5. Refund Orders - 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 up to Rs. 1,500 and through Speed Post/ Registered Post for refund orders of Rs. 1,500 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.

Please note that only applicants having a bank account at any of the centres where clearing houses for NECS are managed by the RBI are eligible to receive refunds through the modes detailed in 1, 2, 3 & 4 hereinabove. For all the other applicants, including applicants who have not updated their bank particulars along with the nine digit MICR code, the refund orders would be dispatched “Under Certificate of Posting” for refund orders of value upto Rs. 1,500 and through Speed Post / Registered Post for refund orders of Rs. 1,500 and above.

Mode of making refunds for ASBA Bidders In case of ASBA Bidders, the Registrar shall instruct the relevant SCSB to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within ten (10) working days of the Bid/Issue Closing Date.


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DISPOSAL OF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF DELAY With respect to Bidders other than ASBA Bidders, our 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 after the Allotment of Equity Shares. In case of Bidders who receive refunds through NECS, NEFT, direct credit or RTGS, the refund instructions will be given to the clearing system within Nine (9) Working Days from the Bid Closing Date. A suitable communication shall be sent to the Bidders receiving refunds through this mode within ten (10) Working Days of the Bid Closing Date, giving details of the bank where refunds shall be credited along with amount and expected date of electronic credit of refund. Our 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 twelve (12) Working Days of the Bid Closing Date. In accordance with the Companies Act, the requirements of the Stock Exchanges and the ICDR Regulations, our Company further undertakes that:

• Allotment of Equity Shares shall be made only in dematerialised form, including the credit of Allotted

Equity Shares to the beneficiary accounts of the Depository Participants, within nine Working Days of the Bid Closing Date;

• With respect to Bidders other than ASBA Bidders, dispatch of refund orders or in a case where the refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing system within ten (10) Working Days of the Bid Closing Date would be ensured. With respect to the ASBA Bidders’ instructions for unblocking of the ASBA Bidder’s bank account shall be made within ten days from the Bid Closing Date; and

• Our Company shall pay interest at 15% p.a. for any delay beyond the 15 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 eight days from the day the Company becomes liable to repay (i.e. 15 Days after the Bid Closing Date or the date of refusal by the Stock Exchange(s), whichever is earlier). If such money is not repaid within eight days from the day the Company becomes liable to repay it, the Company and every officer in default shall, on and from expiry of eight days, be liable to repay the money with interest at the rate of 15% as prescribed under Section 73 of the Companies Act.

Interest in case of delay in dispatch of Allotment Letters or Refund Orders/instruction to SCSB by the Registrar to the Issue Allotment of Equity Shares in the Issue, including the credit of Allotted Equity Shares to the beneficiary accounts of the Depository Participants, shall be made not later than ten Working Days of the Bid Closing Date. Our Company further agrees that it shall pay interest at the rate of 15% p.a. if the allotment letters or refund orders have not been dispatched to the Bidders or if, in a case where the refund or portion thereof is made in electronic manner, the refund instructions have not been given in the disclosed manner within eight days from the day the Company becomes liable to repay (i.e. 15 Days after the Bid Closing Date or the date of refusal by the Stock Exchange(s), whichever is earlier). If such money is not repaid within eight days from the day the Company becomes liable to repay it, the Company and every officer in default shall, on


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and from expiry of eight days, be liable to repay the money with interest as prescribed under Section 73 of the Companies Act. Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by our Company as a Refund Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.

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 person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”

(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.”

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 61,99,356 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 61,99,356 Equity Shares at or above the Issue Price, the Allotment shall be made on a proportionate basis up to a minimum of [•] 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 26,56,867 Equity Shares at or above the Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent of their demand.


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In case the aggregate demand in this category is greater than 26,56,867 Equity Shares at or above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of [•]Equity Shares. For the method of proportionate basis of allotment, refer below.

C. For QIBs

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 88,56,221 Equity Shares.

Under-subscription, if any, in any category would be met with spill-over from other categories at our sole discretion, in consultation with the BRLM and the CO-BRLM.

Procedure and Time of Schedule for Allotment and Demat Credit of Equity The Issue will be conducted through a "100% book building process" pursuant to which the members of the Syndicate or SCSBs will accept bids for the Equity Shares during the Bidding/Issue Period. Following the expiration of the Bidding/Issue Period, our Company, in consultation with the BRLM and the Co-BRLM, will determine the Issue Price, and, in consultation with the BRLM and the Co-BRLM, the basis of allocation and entitlement to Allotment based on the bids received and subject to confirmation by the BSE. The SEBI (ICDR) Regulations require our Company to complete the Allotment to successful Bidders within ten (10) working days of the expiration of the Bidding / Issue period. The equity shares will be then be credited and Allotted to the investors’ Demat Accounts maintained with the relevant depository participant. Upon approval by the Stock Exchanges, the Equity Shares will be listed and trading will commence.


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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, Co-BRLM and the Registrar to the Issue shall be responsible for ensuring that basis of allotment is finalized in a fair and proper manner in accordance with the allotment procedure specified Schedule XV of SEBI (ICDR) Regulations 2009. 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:

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.

Letters of Allotment or Refund Orders or instructions to the SCSBs

Bidders residing at the centres where clearing houses are managed by the RBI will get refunds through NECS only, except where the Bidder is otherwise disclosed as eligible to get refunds through direct credit and RTGS. Our Company shall ensure dispatch of refund orders, if any, of value up to Rs. 1,500, under certificate of posting, and shall dispatch refund orders above Rs. 1,500, if any, by registered or speed post at the sole or first Bidder’s sole risk within 10 Working Days of the Bid Closing Date. Applicants to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary post, intimating them of the mode of credit of refund within 10 Working Days of the Bid Closing Date. In case of ASBA Bidders, the Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids within eight Working Days of the


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Bid Closing Date, which shall be completed within one Working Day after the receipt of such instruction from the Registrar to the Issue. Signing of Underwriting Agreement and Filing with the Designated Stock Exchange

(a) We, the BRLM, Co-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, we 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.

Filing of the Prospectus with the Registrar of Companies

We will file a copy of the Prospectus with the Registrar of Companies in terms of Section 56, Section 60 and Section 60B of the Companies Act.

UNDERTAKINGS BY THE COMPANY

We undertake that: • The complaints received in respect of the captioned Public Issue shall be attended to by the Company

expeditiously and satisfactorily • All steps for completion of the necessary formalities for listing and commencement of trading at all

stock exchanges where the securities are to be listed are taken within twelve working days from the closure of the issue

• The funds required for making refund to unsuccessful applicants as per the modes disclosed shall be made available to the registrar to the captioned Public Issue.

• Where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the applicant within 10 days of closure of the issue, giving details of the bank where refund shall be credited along with amount and expected date of electronic credit of refund.

• The promoters’ contribution in full, wherever required, shall be brought in advance before the Issue opens for public subscription and the balance, if any, shall be brought in pro-rata basis before the calls are made on public.

• The certificates of the shares/ refund orders to the Non-Resident Indians shall be dispatched within the specified time.

• No further issue of securities shall be made till the shares offered through the prospectus are listed or till the application moneys are refunded on account of non-listing, undersubscription, etc

• That at any given time there shall be only one denomination for the shares of the company, • That the company shall comply with such disclosure and accounting norms specified by the Board

(SEBI) from time to time and • That the adequate arrangements shall be made to collect all Applications Supported by Blocked

Amount (ASBA) and to consider them similar to non-ASBA applications while finalizing the basis of allotment.

UTILISATION OF ISSUE PROCEEDS

Our Board of Directors certify that: (a) all monies received out of the issue to the public shall be transferred to a separate bank account other

than the bank account referred to in sub-section (3) of Section 73 of the Companies Act, 1956.


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(b) details of all monies utilised out of the issue referred to in sub-item (a) shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such monies had been utilised, and

(c) details of all unutilised monies out of the issue, if any, referred to in sub-item (a) shall be disclosed

under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised monies have been invested.

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.

RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES Foreign investment in Indian securities is regulated through the Industrial Policy of the Government of India notified through press notes and press releases issued from time to time and FEMA and circulars and notifications issued there under. While the policy of the Government prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy of the Government, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures and reporting requirements for making such investment. Subscription by NRIs/ FIIs It is to be distinctly understood that there is no reservation for Non-Residents, NRIs and FIIs and all Non- Resident, NRI and FII applicants will be treated on the same basis as other categories for the purpose of allotment. As per the RBI regulations, OCBs cannot participate in this Issue. The Equity Shares have not been and will not be registered under the Securities Act or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold (i) in the United States to “qualified institutional buyers”, as defined in Rule 144A of the Securities Act, and (ii) outside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act and the applicable laws of the jurisdiction where those offers and sales occur. As per the current regulations, the following restrictions are applicable for investments by FIIs: No single FII can hold more than 10% of the post-Issue paid-up capital of our Company. In respect of an FII investing in our Equity Shares on behalf of its sub-accounts, the investment on behalf of each subaccount shall not exceed 10% of our total issued capital or 5% of total issued capital of our Company incase such sub account is a foreign corporate or an individual. The aggregate FII holding should not exceed 24% of the total issued capital of our company. The above information is given for the benefit of the Bidders. The Company and the BRLM, Co-BRLM are not liable for any amendments or modification or changes in applicable laws or regulations, which may happen after the date of this Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity Shares bid for do not exceed the applicable limits under laws or regulations.


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SECTION VII - MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION

CAPITAL, INCREASE AND REDUCTION IN CAPITAL

4) The Authorised Share Capital of the Company is as provided in Clause V of the Memorandum of Association of the Company as amended from time to time.

5) The Company in General Meeting may, from time to time, increase the capital by the creation of new

shares. Such increase to be of such aggregate amount and to be divided into shares of such respective amounts as the resolution shall prescribe. Subject to the provisions of the Act, any shares of the original or increased capital shall be issued upon such terms and conditions, and with such rights and privileges annexed thereto, as the General Meeting resolving upon the creation thereof shall direct, and if direction be given, the directors shall determine accordingly and in particular, such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the company, and with a right of voting at General Meetings of the Company in conformity with provisions of the Act. Whenever the capital of the Company has been increased under the provisions of this Article, the Directors shall comply with the relevant provisions of the Act.

6) Except so far as otherwise provided by the conditions of issue or by these Articles, any capital raised

by the creation of new shares shall be considered as part of the existing capital, and shall be subject to the provisions herein contained, with reference to the payment of calls and installments, forfeiture, lien, surrender, transfer and transmission, voting and otherwise.

7) The Company may (subject to the applicable provisions of the Act) from time to time by Special

Resolution, reduce its capital and any Capital Redemption Reserve Account or Securities / Share Premium Account in any manner for the time being authorised by law; and in particular, capital may be paid off on the basis that it may be called up again or otherwise. This Article is not to derogate the company from any power which it would have, if it was omitted.

8) Subject to the applicable provisions of the Act, the company in General Meeting may from time to

time, sub-divide or consolidate its shares, or any of them and the resolution whereby any share is sub-divided, may determine that, as between the holders of the shares resulting from such sub-division, one or more of such shares shall have same preference or special advantage as regards dividend, capital or otherwise over or as compared with the other or others. Subject as aforesaid, the Company in General Meeting may also cancel shares which have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled.

9) Whenever the capital, by reason of the issue of Preference Shares or otherwise, is divided into

different classes of shares, all or any of the rights and privileges attached to each class may, subject to the applicable provisions of the Act, be modified, commuted, affected or abrogated, or dealt with by agreement between the Company and any person purporting to contract on behalf of that class, provided such agreement is ratified in writing by holders of at least three-fourths in nominal value of the issued shares of the class or is confirmed by a special Resolution passed at separate General Meeting of the holders of shares of that class.

10) Notwithstanding anything contained in Section 79 or other applicable provisions of the Act, a

Company may make issue of sweat equity shares or of a class of shares/other securities already issued if the applicable provisions of the Companies Act, 1956 or any other statutory modification(s) for the time being in force in this regard be fulfilled.


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SHARES AND CERTIFICATES 11) The Company shall cause to be kept a Register and Index of Members in accordance with the

applicable provisions of the Act. The Company shall be entitled to keep in any state or country outside India a Branch Register of Members resident in that state or country.

12) The shares in the capital shall be numbered progressively according to their several denominations,

and except in the manner herein before mentioned, no share shall be sub-divided. Every forfeited or surrendered share shall continue to bear the number by which the same was originally distinguished.

FURTHER ISSUE OF SHARES

13) Where at any time after the 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 made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the Company by allotment of further shares, whether out of unissued Share Capital or out of increased Share Capital, then such further Shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the Company, in proportion, as nearly as circumstances admit to the capital paid-up on these shares at that date. Such offer shall be made by a notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined. The amount to be paid-up on application and allotment on the shares so offered shall be equal in all respect for all the share-holders. After the expiry of the time specified in the notice aforesaid or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board may dispose of them in such manner as they think most beneficial to the Company.

14) Notwithstanding anything contained in the immediately preceding clause, the Company may: a) by a Special Resolution; or b) where no such Special Resolution is passed, if the votes cast (whether on a show of hands or

on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that General Meeting (including the casting vote, if any, of the Chairman) by Members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by Members so entitled and voting and the Central Government is satisfied, on an application made by the Board in this behalf, that the proposal is most beneficial to the Company, offer further shares to any person and such person need not be at the date of such offer, a holder of equity shares.

c) Notwithstanding anything contained in the above para, but subject, however to the applicable

provisions of the Act, the Company may increase its subscribed capital on exercise of an option attached to the debentures issued or loans raised by the company to convert such debentures or loans into shares, or to subscribe for shares in the Company.

DISPOSAL OF SHARES

15) Subject to the provisions of these Articles and of the Act, the shares (including any shares forming

part of any increased capital of the Company) shall be under the control of the Directors, who may issue and allot or otherwise dispose off the same to such persons in such proportion, on such terms and conditions and at such times as the Directors think fit and subject to the sanction by the Company in General Meeting with full power, to give any person the option to call for or be allotted shares of any class of the Company ( subject to applicable provisions of the Act) at a premium or at a discount and such option being exercisable for such time and for such consideration as the Directors may think fit. The Board shall cause to be filed the prescribed return as to such allotment(s).


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16) In addition to and without derogating from the powers for that purpose conferred on the Board under

the foregoing provisions, the Company in General Meeting may, subject to the applicable provisions of the Act, determine that any shares (whether forming part of the original capital or of any increased capital of the Company) shall be offered to such persons (whether Members or not) in such proportion and on such terms and conditions and either at a premium or at par or at a discount, such option being exercisable at such times and for such consideration as may be directed by such General Meeting or the Company in General Meeting may make any other provisions whatsoever for the issue, allotment or disposal of any shares.

17) Any application signed by or on behalf of an applicant for shares in the Company, followed by an

allotment of any shares therein, shall be an acceptance of shares within the meaning of these articles, and every person who thus or otherwise accepts any shares and whose name is on the Register of Members shall, for the purposes of these Articles, be a Member.

18) The money (if any) which the Board shall, on the allotment of any shares being made by them, require

or direct to be paid by way of deposit, call or otherwise, in respect of any shares allotted by them, shall immediately on the insertion of the name of the allottee in the Register of Members as the name of the holder of such shares, become a debt due to and recoverable by the Company from the allottee thereof, and shall be paid by him accordingly.

19) Every Member, or his heirs, executors or administrators, shall pay to the Company the portion of the

capital represented by his share or shares, which may, for the time being, remain unpaid thereon, in such amounts, at such time or times, and in such manner as the Board shall, from time to time, in accordance with the Company's regulation require or fix for the payment thereof.

DIRECTORS MAY REFUSE TO REGISTER TRANSFER

33. Subject to the provisions of Section 111A, these Articles and other applicable provisions of the Act or

any other law for the time being in force, the Board may refuse whether in pursuance of any power of the company under these Articles or otherwise to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a Member in 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 Company, send notice of the refused to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. Provided that the registration of a transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person or persons indebted to the Company on any account whatsoever except where the Company has a lien on shares. Transfer of shares/debentures in whatever lot shall not be refused.

That fully paid shares shall be free from all lien and that in the case of partly paid shares the Issuer's

lien shall be restricted to moneys called or payable at a fixed time in respect of such shares.

INSTRUMENT OF TRANSFER 34. That a common form of transfer shall be used;The instrument of transfer shall be in writing and all

provisions of Section 108 the Companies Act, 1956 and statutory modification thereof for the time being shall be duly complied with in respect of all transfer of shares and registration thereof.


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NO FEE ON TRANSFER OR TRANSMISSION 35. No fee shall be charged for registration of transfer, transmission, probate,Succession certificate and

Letters of administration, Certificate of Death Or Marriage, Power of Attorney or similar other document.

BUY BACK OF SHARES

40. (a) The Company shall have a power subject to and in accordance with all other applicable provisions of

the Companies Act, 1956, to acquire/purchase any of its fully paid shares on such terms and conditions and upto such limits as may be prescribed by the law from time to time and may be determined by the Board from time to time and may make payment out of free Reserves and Surplus and/or Securities Premium Account and/or proceeds of any shares or other specified securities or such other funds as may be prescribed by the law in respect of such acquisition/purchase.

UNPAID OR UNCLAIMED DIVIDEND

41. Where the Company has declared a dividend but which has not been paid or claimed within 30 days

from the date of declaration, transfer the total amount of dividend which remains unpaid or unclaimed within the said period of 30 days, to a special account to be opened by the company in that behalf in any scheduled bank to be called "____________Unpaid Dividend Account."

The company shall transfer any money transferred to the unpaid dividend Account of a company that

remains unpaid or unclaimed for a period of Seven years from the date of such transfer, to the Fund known as Investor Education and Protection Fund established under section 205C of the Act.

That there shall be no forfeiture of unclaimed dividends before the claim becomes barred by law;

FORFEITURE OF SHARES 45. If any Member fails to pay any call or installment of a call on or before the day appointed for the

payment of the same or any such extension thereof as aforesaid, the Board may at any time thereafter, during such time as the call or installment remains unpaid, give notice to him requiring him 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.

The notice shall name a day (not being less than fourteen days from the date of the notice) and a place

or places on and at which such call or installment and such interest thereon at such rate as the Directors shall determine from the day on which such call or installment ought to have been paid and express as aforesaid are to be paid. The notice shall also state that, in the event of the non-payment on or before the time and at the place appointed, the shares in respect of which the call was made or installment is payable, will be liable to be forfeited.

If the requirements of any such notice as aforesaid shall not be complied with, every or any share in

respect of which such notice has been given, at any time thereafter, but before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared or any other moneys paid before the forfeiture.

When any share shall have been so forfeited, notice of the forfeiture shall be given to the Member in

whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date


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thereof, shall forthwith be made in the Register of Members, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make any such entry as aforesaid.

Any share so forfeited shall be deemed to be the property of the Company and may be sold, reallotted

or otherwise disposed off, either to the original holder thereof or to any other person, upon such terms and in such manner as the Board think fit.

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, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture until payment, at such as the Board may determine and the Board may enforce the payment thereof, if it thinks fit.

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.

A declaration in writing that the declarant 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 therein stated as against all persons claiming to be entitled to the share.

Upon any sale after forfeiture or for enforcing a lien in purported exercise of the powers herein before

given, the Board may appoint some person to execute an instrument of transfer of the shares sold and cause the purchaser's name to be entered in the Register of Members in respect of the shares 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 has been entered in the Register of Members 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 be in damages only and against the Company exclusively.

Upon any sale, re-allotment or other disposal under the provisions of the preceding Articles, the

certificate or certificates originally issued in respect of the relative shares shall (unless the same shall on demand by the Company have 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 duplicate certificate or certificates in respect of the said shares to the persons or persons entitled thereto.

The Board may at any time before any share so forfeited shall have been so sold, re-allotted or

otherwise disposed off, annul the forfeiture thereof upon such conditions, as it thinks fit.

TRANSFER AND TRANSMISSION OF SHARES 46. The Company shall keep a "Register of Transfers" and therein shall be fairly and distinctly entered

particulars of every transfer or transmission of any share. That a common form of transfer shall be used. The instrument of transfer shall be in writing and all the provisions of section 108 of the Act and of

any statutory modification thereof for the time being shall be duly complied with in respect of all transfers of shares and registration thereof.

The instrument 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


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shall be accompanied by such evidence as the Board may require to prove the title of 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 shall have been entered in the Register of Members in respect thereof. Before the registration of a transfer, the certificate or certificates of the shares must be delivered to the Company.

The Board shall have power on giving 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 the Register of holders of any other security, at such time or times and for such period or periods, as may be prescribed by the Act or any statutory authority.

Subject to the applicable statutory provisions of the Act, the Board of Directors may refuse whether in

pursuance of any power of the Company under the Articles or otherwise to register the transfer of, or the transmission by operation of law or the right to any shares or interest of a member in, or any security 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 the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

Provided that registration of a transfer shall not be refused on the ground that the transferor being

either alone or jointly with any person or persons is indebted to the Company on any account whatsoever, except the outstanding allotment/call money/any interest on the same.

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 the Act.

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 persons recognized by the Company having any title to or interest in such shares, but nothing herein contained shall be taken to release the estate of a deceased joint-holder from any liability on shares held by him jointly with any other person.

The executors or administrators or holders of a succession certificate or the legal representative of a

deceased member (not being one of two or more joint-holders) shall be the only persons registered 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 a 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 appropriate Court; 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 and under the circumstances described elsewhere in this Article, register the name of any person who claims to be absolutely entitled to the share standing in the name of a deceased member, as a member.

No share shall in any circumstances be subscribed for by or transfer to, any insolvent or person of

unsound mind.


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Subject to the provisions of these presents, any person becoming entitled to shares in consequence of death, lunacy, bankruptcy, or insolvency of any Member, or by any lawful means other than by a transfer in accordance with these Articles may, with the consent of the Board (which it shall not be under any obligation to give) upon producing such evidence that he sustains the character in respect of which he proposes to act under the Article, or such title, as the Board thinks sufficient, either be registered himself as the holders of the shares or elect to have some person nominated by him as approved by the Board registered as such holder; provided, nevertheless, that if such person shall elect to have his nominee registered, he shall testify the election by executing in favour of his nominee as instrument of transfer in accordance with the provisions herein contained, and until he does so, he shall not be freed from any liability in respect of the shares.

The Board shall have the same right to refuse to register a person entitled by transmission to any

shares or his nominees as if he were the transferee named in the case of a transfer of shares presented for registration.

Every Holder of Shares in or holder of other security of a Company may at any time, nominate, in the

prescribed manner, a person to whom all the rights in the shares or such other security of the Company shall vest in the event of his death. Where the shares in, or debenture of, a Company shall vest in the event of death of all the joint holders.

Notwithstanding anything contained in any other law for the time being in force or in any disposition,

whether testamentary or otherwise, in respect of such shares in, or other security of the Company, where a nomination made in the prescribed manner purports to confer such rights on the nominee, upon death of the share holder or joint share holder as the case may be, he shall be vested with same rights as the original share holder or as a joint holder, which the original shareholder held vis-à-vis other joint holders, if any, and the Company shall not be required to recognize other persons.

A person entitled to a share by transmission shall, subject to the right of the Directors to retain such

dividend or money as herein provided, be entitled to receive, and may give a discharge for any dividend or money as herein provided, be entitled to receive, and may give a discharge for any dividend or other moneys payable in respect of such share.

47) No fee shall be charged for the registration of a transfer or transmission of any share. 48) The Company shall incur no liability or responsibility whatsoever in consequence of its registering or

giving effect to any transfer of shares made or purporting to be made by any apparent legal owner thereof (as shown or appearing in the Register of Members) to the prejudice of persons having or claiming any equitable right, title of interest to or in the said shares, notwithstanding the Company may have had notice of such equitable right, title or interest or notice prohibiting registration of such transfer and may have entered such notice, or referred thereto, in any book of the Company; and the Company shall not be bound or required to regard or attend or give effect to any notice which may be given to it of any equitable right, title or interest, or be under any liability whatsoever for refusing or neglecting so to do, though it may have been entered or referred to in some books of the Company, but the Company shall nevertheless be at liberty to regard and attend to any such notice and give effect thereof, if the Board shall so think fit.

Dematerialization / Rematerialization of Securities

49) Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialize

its securities and to offer securities in the dematerialized form pursuant to the Depositories Act.


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Notwithstanding anything contained in this Article, where securities are dealt with in a Depository, the Company shall intimate the Details of allotment of securities to Depository immediately on allotment of such Securities.

Options for investors Every person subscribing to securities offered by the company shall have the option to receive

security certificated or to hold the securities with a depository, such a person who is the beneficial owner of the securities can opt out of depository, if permitted by law, in respect of any security in the manner provided by the Depository Act, and the company shall, in the manner and within the time prescribed, issue to the beneficial owner the required certificate of securities.

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 information, the depository shall enter in the records, the name of the allottee as the beneficial owner of the securities.

Securities in Depositories to be in fungible form All securities held by a Depository shall be dematerialized and shall be in fungible form. No

Certificate shall be issued for the securities held by the depository. Nothing contained in Section 153, 153A, 153B, 187B, 187C and 372A of the Companies Act, 1956 shall apply to a depository in respect of the securities held by it on behalf of the beneficial owners.

Transfer of Securities Nothing contained in Section 108 of the Companies Act, 1956 or these Articles shall apply to a transfer

of securities effected by a transferor and transferee, both of whom are entered as beneficial owners in the records of a depository.

Allotment of Securities dealt within a Depository Notwithstanding anything contained in the Act, or these Articles, where a depository deals within or

the securities, the Company shall intimate the details of allotment of relevant securities to the depository immediately on allotment of such securities.

Distinctive Nos. of Securities held in a Depository Notwithstanding in the Act, or these Articles regarding the necessity of having distinctive numbers

for securities issued by the company shall not apply to securities held with a depository. Register and Index of beneficial owners The Register and index of beneficial owners maintained by a Depository under the Depositories Act

shall be deemed to be the Register and Index of members and other security holders for the purpose of these Articles.

Right of Depositories and beneficial owners (a) Notwithstanding anything contained in the Provisions of the Companies Act, 1956 and these

Articles, a depository shall be deemed to be the registered owner for the purpose of effecting transfer of ownership of security on behalf of the beneficial owner.

(b) Save as otherwise provided in (a) above, 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.

(c) 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 owners of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of their securities, which are held by the depository.


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THE SEAL

163) The Board shall provide a Common Seal for the purposes of the Company, and shall have power from

time to time to destroy the same and substitute a new seal in lieu thereof, and the Board shall provide for the safe custody of the Seal for the time being, and the Seal shall never be used except by the authority of the Board or a Committee of the Board previously given.

164) The Company shall also be at liberty to have an official seal in accordance with Section 50 or other

provisions of the Act, for use in any territory, district, district or place outside India. 165) Every Deed or other instrument, to which the Seal of the Company is required to be affixed shall be

affixed pursuant to the authority of a resolution of the Board of Directors or any of its duly constituted committee and unless such deed or instrument is executed by a duly constituted attorney, shall be signed by two Directors or one Director and Secretary or some other person appointed by the Board for the purpose; provided that in respect of the Share certificate the seal shall be affixed in accordance with the applicable provisions of the Act and the Rules framed there under.

DIVIDENDS

166) The profits of the Company, subject to any special rights relating thereto created or authorised to be

created by these Articles, and subject to the provisions of the Act and of these Articles, shall be divisible among the members in proportion to the amount of capital paid-up or credited as paid-up on the shares held by them respectively.

167) The Company in General Meeting may declare dividends to be paid to Members according to their

respective rights, but no dividends shall exceed the amount recommended by the Board, but the Company in General Meeting may declare a smaller dividend.

168) No dividend shall be declared or paid otherwise than out of profits of the Financial year arrived at

after providing for the depreciation in accordance with the provisions of the Act or out of the profits of the Company for any previous financial year or years arrived at after providing for depreciation in accordance with these provisions and remaining undistributed or out of both.

Provided that: a. If the Company has not provided for depreciation for any previous financial year or years it

shall, before declaring or paying a dividend for any financial year, provide for such depreciation out of the profits of the financial year, or out of the profits of any other previous year or years.

b. If the Company has incurred any loss in any previous financial year or years, the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years, whichever is less, shall be set off against the profits of the Company for the year for which the dividend is proposed to be declared or paid or against the profits of the Company for any previous financial year or yeas arrived at in both cases after providing for depreciation in accordance with the provisions of sub-section (2) of Section 205 of the Act or against both.

c. Notwithstanding anything contained herein, no dividend shall be declared or paid by the Company for any financial year out of profits of the Company for that year arrived at after providing for depreciation in accordance with the provisions of Section 205 of the Act, except after the transfer to the reserves of the Company of such percentage of its profits for that year, not exceeding ten percent , as may be prescribed. Provided that nothing in this sub-clause shall be deemed to prohibit the voluntary transfer by the Company of a higher percentage of its profits to the reserves in accordance with the prescribed rules in this behalf.


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d. Where, owing to inadequacy or absence of profits in any year, the Company proposes to declare dividend out of the accumulated profits earned by the Company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with prescribed rules in this behalf, and, where any such declaration is not in accordance with the prescribed rules, such declaration shall not be made except with the previous approval of the appropriate authority.

169) Subject to the provisions of the Act, the Board may, from time to time, pay to the Members such

interim dividend as in their judgement the position of the Company justifies. 170) Where capital is paid in advance of calls, such capital may carry interest but shall not in respect

thereof confer a right to dividend or participate in profits. 171) All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid

on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any share is issued on terms providing that it shall rank for dividend as from a particular date, such share shall rank for dividend accordingly.

172) Subject to the provisions of the Act, the Board may retain the dividends payable upon shares in

respect of which any person is under any provisions of these presents is entitled to transfer, until such person shall become a Member in respect of such shares or shall duly transfer the same.

173) Any one of several persons who are registered as the joint holders of any share may give effectual

receipt for all dividends or bonus and payments on account of dividends or bonus or other moneys in respect of such shares.

174) No Member shall be entitled to receive payment of any interest or dividend in respect of his share or

shares, while any money may be due owing from him to the Company in respect of such share or otherwise, howsoever, either alone or jointly with any other person or persons and the Board may deduct from the interest or dividend payable to any Member all sums of moneys so due from him to the Company.

175) A transfer of shares shall not pass the right to any dividend declared thereon before the registration of

the transfer. 176) Where any 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: a. transfer the dividend in relation to such shares to the Special Account referred to in Section

205A of the Act unless the Company is authorised 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 rights shares under clause (a) of sub-section (1) of Section 81 and any issue of fully paid-up bonus shares in pursuance of sub-section (3) of Section 205 of the Act.

177) Unless otherwise directed, any dividend may be paid by cheque or warrant or by a payslip or receipt

having the force of the cheque or warrant sent through the post to the registered address of the Member or person entitled or in case of joint-holders to that one of them first named in the Register of members in respect of joint-holding. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. The Company shall not be liable or responsible for any cheque or warrant or payslip or receipt lost in transmission, or for any dividend lost to the Member or person


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entitled thereto by the forged endorsement of any cheque or warrant or the forged signature of any payslip or receipt or the fraudulent recovery of the dividend by any other means.

178) Subject to the provisions of the Act, no unpaid dividend shall bear interest as against the Company. 179) Where a dividend has been declared by the Company but has not been paid or claimed within forty-

two (42) days from the date of declaration to any shareholder entitled to the payment of the dividend, the Company shall deal with the same in the manner as directed by the Act.

180) In the above para, the expression "dividend which remains unpaid" shall mean any dividend the

warrant in respect whereof has not been encashed or which has otherwise not been paid or claimed. 181) Any General Meeting declaring a dividend may, on the recommendation of the Directors make a call

on the Members of such amount as the meeting fixes, but so that the call on each Member shall not exceed the dividend payable to him and so that the call be made payable at the same time as the dividend, and the dividend may, if so arranged between the Company and the member, to set off against the calls.

CAPITALISATION 182) The Company in general meeting may resolve that any moneys, investments or other assets forming

part of the undivided profits of the Company standing to the credit of the Reserve Fund, or any Capital Redemption Reserve Account, or in the hands of the Company and available for dividend (or representing premium received on the issue of shares and standing to the credit of the Share Premium Account) or other reserves or funds permissible for this purpose be capitalised and distributed amongst such of the shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportions on the footing 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 or debentures or debenture-stock of the Company which shall be distributed accordingly or in or towards payment 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 Reserve Account may, for the purpose 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.

183) A General Meeting may resolve that any surplus moneys arising from the realising 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 amongst the members on the footing that they receive the same as capital.

184) For the purpose of giving effect to any relevant resolution under the above Articles the Board may

settle any difficulty which may arise 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 Member upon the footing of the value so fixed or that fraction of less value than Rs. 10/- 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 the provisions of the Act, and the Board may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalised fund, and such appointment shall be effective.


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WINDING UP 201) The liquidator on any winding-up (whether voluntary, under supervision or compulsory) may, with

the sanction of a Special Resolution, but subject to the rights attached to any preference share capital, divide among the contributories in specie any part of the assets of the Company and may, with the like sanction, vest any part of the assets of the Company in trustees upon such trusts for the benefit of the contributories, as the liquidator, with like sanction shall think fit.

INDEMNITY AND RESPONSIBILITY

202) Every officer or agent for the time being of the Company shall be indemnified out of the assets of the

Company against all liability incurred by him in defending any proceedings, whether civil or criminal, in which judgement is given in his favour or in which he is acquitted or discharged or in connection with any application under section 633 or other applicable provisions of the Act in which relief is granted to him by the Court or other Appropriate Authority.

SECRECY CLAUSE

204) a. Every Director, Manager, Auditor, Treasurer, Trustee, Member of a Committee, Officer, Servant,

Agent, Accountant or other person employed in the business of the Company shall, if so required by the Directors, before entering upon his duties, sign a declaration pledging himself to observe strict secrecy respecting all transactions and affairs of the Company with the customer and the state of the accounts with individuals and in matters relating thereto, and shall be such declaration pledge himself not to reveal any of the matters which may come to his knowledge in the discharge of his duties except when required so to do by the Directors or by law or by the persons to whom such matters relate and except so far as may be necessary in order to comply with any of the provisions as these presents contained.

b. No Member shall be entitled to visit or inspect any works of the Company without the permission of

the Directors or to require discovery of or any information respecting any details of the Company's trading, or any matter which is or may be in the nature of a trade secret, mystery of trade, secret process or any other matter which may relate to the conduct of the business of the Company and which in the opinion of the Directors, it would be inexpedient in the interest of the Company to disclose.


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SECTION VIII - OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

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 DRHP), 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 DRHP 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 this DRHP until the date of closure of the subscription List.

Material contracts

1. Memorandum of Understanding dated 24/09/2010 entered into between the Company and Keynote Corporate Services Limited, Book Running Lead Manager to the Issue.

2. Memorandum of Understanding dated 28/09/2010 entered into between the Company and PNB Investment Services Limited, Co-Book Running Lead Manager to the Issue.

3. Memorandum of Understanding dated 04/05/2010 entered into between the Company and Beetal Financial & Computer Services (P) Ltd., Registrar to the Issue.

4. Copy of Tripartite agreement dated 03/09/2010 entered into between the Company, NSDL and Registrar to the Issue.

5. Copy of Tripartite agreement dated [•] entered into between the Company, CDSL and Registrar to the Issue.

6. Escrow Agreement dated [•], between the Company, the BRLM, the Co-BRLM the Escrow Collection Banks and the Registrar to the Issue.

7. Syndicate Agreement dated [•] between the Company, BRLM, the Co-BRLM and Syndicate Members.

8. Underwriting Agreement dated [•] between the Company, BRLM, Co-BRLM and Syndicate Members.

Material Documents

1. Memorandum of Association and Articles of Association of the Company, as amended from time to time.

2. Resolution passed by the shareholders’ of the company in terms of Section 81, 81 (1)(A) of the Companies Act, 1956 in the Extra Ordinary General Meeting held on 12/06/2010 in relation to this Issue.

3. Copy of the Agreement dated 25/06/2010 entered into between the company and the Managing Director of the company,

4. Audited Balance sheets and Profit and Loss Accounts of the Company for the financial years ending on March 31, 2010, 2009, 2008, 2007 and 2006.

5. Consents of Auditors, Bankers to the Company, Bankers to the Issue, BRLM, Co-BRLM Registrar to the Issue, Directors of our Company, Company Secretary & Compliance Officer Legal Advisor to the Issue as referred to, in their respective capacities.

6. Legal Due Diligence Report dated 20/09/2010 by Vaish and Associates, Advocates, Legal Advisor to the Issue.

7. Copy of certificate dated 31/08/2010 issued by M/s Kumar Piyush & Co, Chartered Accountants (Peer Review Auditor) in terms of Part II Schedule II of the Companies Act 1956 including capitalisation statement, taxation statement and accounting ratio.


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8. Copy of certificate dated 16/08/2010 issued by M.C. Jain & Co., Chartered Accountant and Statutory Auditors of the Company regarding tax benefits accruing to the company and its shareholders.

9. Copy of certificate dated 31/08/2010 received Kumar Piyush & Co., Chartered Accountants regarding sources and deployment of funds.

10. Undertakings by the Company.

11. Copy of In-principle approval received from BSE vide their letter no. [•] dated [•] for listing of the securities offered through this Offer Document at BSE.

12. Copy of In-principle approval received from NSE vide their letter no. [•] dated [•] for listing of the securities offered through this Offer Document at NSE.

13. SEBI Observation Letter No. [•] dated [•] issued by the Securities and Exchange Board of India and reply to the observation by Keynote Corporate Services Limited (Book Running Lead Manager) and PNB Investment Services Limited (Co-Book Running Lead Manager)vide their letter no. [•] dated [•].

Any of the contracts or documents mentioned in the DRHP may be amended or modified at any time if so required in the interest of our Company or if required by the other parties, without reference to the shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.


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PART III

DECLARATION

All the relevant provisions of the Companies Act, 1956, and the guidelines issued by the Government of India or the regulations issued by Securities and Exchange Board of India, established under Section 3 of the Securities and Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement made in this Draft Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules made thereunder or regulations issued, as the case may be. We further certify that all statements in this Draft Red Herring Prospectus are true and correct.

Signed by all Directors

Sd/-

Sd/-

Jitendra Kejriwal Managing Director

Ramesh Kumar Aggarwal Director

Sd/-

Sd/-

Sheodeen Singh Yadav Director

Abhishek Agarwal Director

Sd/-

Sd/-

Promode Kant Director

M.S. Aftab Director

Signed by the Company Secretary and Compliance Officer

Sd/-

Date: 28/09/2010 Place: Mumbai

Date post:	30-Dec-2015
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