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DRAFT LETTER OF OFFER
For the Equity shareholders of the
Company Only
R
RS
SS
SO
OFFTTW
WA
AR
RE
E ((IIN
ND
DIIA
A)) LLIIM
MIITTE
ED
D
(Originally incorporated as RS Software (India) Private Limited on 2nd December 1987 with Registrar of
Companies, West Bengal and was subsequently converted into Public Limited Company w.e.f. 13th August
1990 and consequently the name of the Company was changed to RS Software (India) Limited.)
Registered Office: A-2, FMC Fortuna, 234/3A,A.J.C.Bose Road, Kolkata-700020
Tel.: +91-33-22810106/07 Fax: 91-33 -2287 6256
Web site: www.rssoftware.com • E-mail: [email protected]
Contact Person & Compliance Officer: Mr.Kunal Sen., VP-Finance & Company Secretary.
ISSUE OF 24,59,000 EQUITY SHARES OF Rs.10 EACH AT A PREMIUM OF RS. 55/- PER EQUITY
SHARE (“Issue Price of Rs.65/-“) AGGREGATING RS.1598.35 LACS TO THE EQUITY
SHAREHOLDERS ON RIGHTS BASIS IN THE RATIO OF ONE EQUITY SHARE FOR EVERY TWO
EQUITY SHARES HELD ON THE RECORD DATE i.e. [•]
The Issue Price of Rs.65/- per equity share is 6.5 times the face value.
GENERAL RISKS
Investment in Equity and Equity related securities involve a degree of risk and investors should not invest
any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are
advised to read the risk factors carefully before taking an investment decision in this offering. For taking
an investment decision, investors must rely on their own examination of the Issuer and the Issue
including the risk involved. The Equity Shares offered in the Issue have not been recommended or
approved by the Securities and Exchange Board of India (SEBI) nor does the SEBI guarantee the accuracy
or adequacy of this document. Specific attention of the investors is invited to the statement of
Risk Factors on Page No. 6 of the Draft Letter of Offer.
ISSUER’S ABSOLUTE RESPONSIBILITY
R S Software (India) Limited, having made all reasonable inquiries, accepts responsibility for, and
confirms that this Draft Letter of Offer contains all information with regard to the Company and the Issue,
which is material in the context of the Issue; that the information contained in this Letter of Offer is true
and correct in all material respects and is not misleading in any material respect; that the opinions and
intentions expressed herein are honestly held and that there are no other facts, the omission of which
makes this document as a whole or any of such information or the expression of any such opinions or
intentions misleading in any material respect.
LISTING
The existing Equity Shares of the Company are listed on Bombay Stock Exchange Limited, Mumbai
(Designated Stock Exchange) (“BSE”), The National Stock Exchange of India Limited (“NSE”), Delhi
Stock Exchange (“DSE”) Ahmedabad Stock Exchange (“ASE”), and The Calcutta Stock Exchange
Association Limited (“CSE”). The Company has received “in- principle” approvals from BSE, NSE, DSE,
CSE and the ASE for listing the Equity Shares arising from this Issue vide letters dated _____________,
respectively.
LEAD MANAGER TO THE ISSUE
REGISTRAR TO THE ISSUE
ASHIKA CAPITAL LIMITED
SEBI REGN NO:INM00010536
Trinity, 226/1,A.J.C.Bose Road
7TH Floor, Kolkata-700020
Phone No: (033) 2283-9952
Fax: (033) 2289-1555
Email:[email protected]
C.B.MANAGEMENT SERVICES (P) LTD.
SEBI REGN NO:INR000003324
P-22, Bondel Road,
Kolkata-700019
Ph:(033) 22806692 Fax:(033) 470263
Email: [email protected]
ISSUE PROGRAMME
ISSUE OPENS ON
[•]
LAST DATE FOR REQUEST FOR SPLIT
APPLICATION
[•]
ISSUE CLOSES ON
[•]
SECTION
CONTENTS
Page Nos.
I
DEFINITIONS AND ABBREVIATIONS
3
II
RISK FACTORS
6
III
INTRODUCTION
Industry Summary
15
Company Summary
15
The Issue
17
Summary of Consolidated Financial Data
18
GENERAL INFORMATION
20
Board of Directors
21
Issue Management Team
21
V
CAPITAL STRUCTURE OF THE COMPANY
24
VI
OBJECTS OF THE OFFERING
IV
VII
VIII
IX
Object of the Issue
35
Funds Requirement & Funding Plan
35
Basis of Issue Price
39
Tax Benefits
41
ABOUT THE ISSUER COMPANY
Industry Overview
49
Company Overview
54
Business of the Company
55
HISTORY OF THE COMPANY
Brief History
66
Main Objects of the Company
66
Subsidiaries of the Company
67
MANAGEMENT OF THE COMPANY
69
Board of Directors
70
Corporate Governance
71
Details of Key Managerial Personnel
73
X
PROMOTERS
76
XI
FINANCIAL INFORMATION
Auditors Report
78
Management’s Discussion and Analysis of Financial Condition and Result of
Operations
XII
XIII
108
LEGAL AND OTHER INFORMATION
Outstanding Litigations and Material developments
112
Government Approvals
114
OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority for the Issue
115
Prohibition by SEBI
115
Disclaimer Clause
115
Listing
119
Stock Market Data
122
XIV
OFFERING INFORMATION
127
XV
OTHER INFORMATION
Material Contracts and Documents for Inspections
152
Declarations
154
2
I. Definitions and Abbreviations
CONVENTIONAL/GENERAL TERMS
Act
The Companies Act, 1956 and subsequent amendments thereto
AGM
Annual General Meeting
CAGR
Compounded Annual Growth Rate
DP
EPS
Depository Participant
Earnings Per Share {EPS = Profit After Tax/No. of Equity Shares}
ESOS
ESOP
FY
GIR
FEMA
MOU
MNC(s)
NAV
Employees Stock Option Scheme
Employees Stock Option Plan
Financial Year
General Index Register
Foreign Exchange Management Act
Memorandum of Understanding
Multi National Companies
P/E Ratio
PAN
Price/Earnings Ratio
Permanent Account Number
PBDT
PBIDT
Profit Before Depreciation and Tax
Profit Before Interest Depreciation and Tax
PBT
PAT
Profit Before Tax
Profit After Tax
RONW
Security Certificate
Security (ies)
USA
UK
UTI
USD
Return on Networth
Equity Share Certificate
Equity Share(s)
United States Of America
United Kingdom
Unit Trust Of India
US Dollar
Net Assets Value {NAV= Networth/ No. of Equity Shares}
OTHER RELATED TERMS
Articles
Articles of Association of RS Software (India) Limited.
Board
Board of Directors of RS Software (India) Limited.
BSE/Designated Stock
Bombay Stock Exchange Limited.
Exchange
NSE
National Stock Exchange of India Limited
CSE
Calcutta Stock Exchange Association Limited
ASE
Ahmedabad Stock Exchange Limited
DSE
Delhi Stock Exchange Association Limited
CAF
Composite Application Form
Issuer/Company/RS/
RS Software (India) Limited
RS Software
Directors
Directors on the Board of RS Software (India) Limited
Equity Shareholders
Equity Shareholders of the Company whose name appear as:
Beneficial Owners as per the list furnished by the depositories in
respect of Equity Shares held in electronic form and
On the Register of Members of the Company in respect of the
Equity Shares held in Physical form.
Equity Shares
Equity Shares of the Company of Rs.10/- each
Lead Managers to the
Ashika Capital Limited
Issue
3
Issue/ Rights Issue
Issue Closing Date
Issue Opening Date
Issue Period
Issue Price
Letter of Offer/
LOF/LoO/ Offer
Document
Offer for 24,59,000 equity shares of Rs.10/- each for cash at
premium of Rs.55/- per share (i.e. at a price of Rs.65/- per share)
aggregating to Rs.1598.35 lacs on a rights basis to the existing
equity shareholders of the company in the ratio of 1 (one) equity
shares for every 2 (two) equity shares (i.e. 1:2) of Rs. 10/- each
held on the record date [•].
The date on which the issue closes for subscription.
The date on which the issue opens for subscription.
The period between the Issue Opening Date and Issue Closing Date
and includes both these dates.
The price at which the equity shares will be issued by the company
under this Letter of Offer.
Letter of offer dated [•], filed with the Stock Exchanges, after
receiving and incorporating the observations by SEBI on the Draft
Letter of Offer
Draft Letter of Offer
This draft letter of offer dated •, 2005 filed with SEBI for its
comments
NSE
Record Date
ROC
R&D
WIP
National Stock Exchange of India Ltd.
[•]
Registrar Of Companies
Research & Development
Work In Progress
ABBREVIATIONS
CDSL
CLB
DCA
Depository Act
DP
Depository
FCNR Account
FDI
FEMA
FI
FII(s)
ROC
IT Act
N.A.
NR
NRE Account
NRI(s)
NRO Account
NSDL
OCB’s
RBI
SEBI
SEBI (SAST)
Regulations
SEBI/DIP Guidelines
Central Depository Services (India) Limited
Company Law Board
Department of Company Affairs
The Depositories Act, 1996 as amended from time to time
Depository Participant
A Depository registered with SEBI under the SEBI (Depositories &
Participant) Regulations, 1996 as amended from time to time
Foreign Currency Non Resident Account
Foreign Direct Investment
Foreign Exchange Management Act, 1999 read with rules and
regulations there under and amendments thereto
Financial Institution
Foreign Institutional Investors registered with SEBI under
applicable laws.
Registrar Of Companies
Income tax Act, 1961
Not Applicable
Non Resident
Non Resident External Account
Non Resident Indians
Non Resident Ordinary Account
National Securities Depository Limited
Overseas Corporate Body
The Reserve Bank of India
Securities and Exchange Board of India
Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997.
Means the extant Guidelines for Disclosure and Investor Protection
issued by Securities and Exchange Board of India, constituted under
the Securities and Exchange Board of India Act, 1992 (as amended),
4
called Securities and Exchange Board of India (Disclosure and
Investor Protection) Guidelines, 2000.
COMPANY/INDUSTRY RELATED TERMS
ATM
Automatic Teller Machine
BIN
Bank Identification Number
ISO
Independent Sales Organization
MICR
Magnetic Ink Check Reader
MOTO
Mail Order Telephone Order
MSP
Member Service Provider
PIN
Personal Identification Number
POS
Point of Sale
SOA
Service-Oriented Architecture
RS
R S Software (India) Limited
IT
Information Technology
CRPS
Cumulative Redeemable Preference Shares
ODC
Off-shore Development Centre
NCD
Negotiable Certificate of Deposit
IDBI
Industrial Development Bank if India
PD
Person Day
ICD
International Code Designator
BFSI
Banking and Financial Services Industry
ITES
Information Technology Enabled Services
NASSCOM
National Association of Software and Service Companies
KPMG
Klynveld Peat Marick Goerdeler
WBEDIC
West Bengal Electronics Industry Development Corporation
EDT
Eastern Daylight Time
SCO
Santa Cruz Operations
BPO
Business Process Outsourcing
SMB
Small & Medium Business
IS
Information Security
ERP
Enterprise Resource Planning
CRM
Customer Relationship Management
CFML
ColdFusion Markup Language
COM
Component Object Model
DCOM
Distributed Component Object Model
META
A prefix meaning “Information about”
CASE
Computer Aided System Engineering
GEM
Global Execution Model
VPN
Virtual Private Network
FTP
File Transfer Protocol
IPLC
International Private Leased Circuit
TCP/IP
Transmission Control Protocol/Internet Protocol
LAN
Local Area Network
VC
Voice Conferencing/Vice Chairman
SEPG
Software Engineering Process Group
T&D
Training & Development
EBT
Earning Before Tax
ISO’s
Independent Sales Organization
ACH
Automated Clearing House
SME
Small & Medium Enterprise
5
II. RISK FACTORS
The investors should consider the following risk factors together with all other information
included in this Draft Letter of Offer carefully, in evaluating the Company and its business
before making any investment decision. Any projections, forecasts and estimates contained
herein are forward looking statements that involve risks and uncertainties. Such statements
use forward looking terminology like “may”, “believes”, “will”, “expect”, “anticipate”,
“estimate”, “plan” or other similar words. The Company’s actual results could differ from those
anticipated in these forward looking statements as a result of certain factors including those,
which are set forth in the “Risk Factors” below. Unless specified or quantified in the relevant
risk factors below, the financial or other implications of the risks described in this section
cannot be quantified.
Market data used throughout this Draft Letter of Offer 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 that the market data used in this Draft Letter of Offer is
reliable, it has not been independently verified. Similarly, internal Company reports and data,
while believed to be reliable, have not been verified by any independent source.
INTERNAL RISK FACTORS
1. The company has been impacted adversely by IT industry downturn and has suffered
large financial losses.
The period between the years 2001 to 2004 have been the worst for Indian Software Export
industry as globally the IT industry downturn happened due to the dot.com bubble burst and
which was further aggravated by the terrorist attacks in US in September 2001. Maximum
number of bankruptcies happened during this period both at individual and corporate level.
R S Software was just as impacted. In the fiscal 2005,2004,2003, the company incurred
losses of Rs.148.83 lacs, Rs.877.45 lacs and Rs.1935.55 lacs respectively. The primary
contributors to these losses were, the time taken by the company to lower its fixed costs
structure, huge increase in interest costs and conscious decision on the part of the company to
invest in strategic direction for future survival. The company also had a negative net worth of
Rs.745.89 lacs, Rs.559.63 lacs for the year 2004 and 2003 respectively.
Proposals to address the risk:
The company has shown consistent improvements in its financial performance for the past
three fiscal years and this current fiscal year is the completion of its turnaround strategy. The
significant looses were incurred due to the aggressive growth strategy followed by the
company, however the company resorted to various strategic cost cutting measures and was
able to bring down the losses from Rs.1957.68 Lacs in fiscal year 2003 to Rs. 167.35 Lacs in
fiscal year 2005, a strategy which has started to payoff handsomely since fiscal year 2005.
2. The Project has not been appraised by any Bank or Financial Institution. The funds
received from the issue will be deployed at the sole discretion of the Management
and is not subject to monitoring by any Independent agency.
Proposals to address the risk:
The Company is a professionally managed one and has estimated the funds requirement
based on the plans to be implemented. The estimates of the project costs are based on the
past experiences and expertise of the management team. The company has adopted wellaccepted corporate governance practices, and mandates that the usage of the funds be
monitored by the Board of Directors and its Audit Committee.
6
3. The expansion is funded mostly from the funds raised through the present rights
issue. Under subscription to the issue or any delay in the procedures may have an
adverse material impact on the implementation of the project and consequently on
the future performance of the Company.
Proposals to address the risk:
The Management has, in the past, implemented expansion projects and has sufficient
expertise in this area. The schedule of implementation of the project has been framed with
sufficient timelines including provisions for any delays. In the event of any under subscription
to the issue, some of the Promoters intend to subscribe to the issue beyond their entitlement.
Moreover the company has also underwritten the present rights issue to the tune of 1720000
number of Fresh Equity shares to be allotted through the issue.
4. Significant dependence on certain clients and customers
The Company derives a significant proportion of its revenue from very few clients and
customers located in USA. During the six-month period 2005, the top three clients contributed
more than 82% of the total revenue of the company. Loss of any of these major clients may
affect the business of the Company adversely.
Proposals to address the risk:
The Company has been growing consistently at an average rate of 25% for the last two years,
and the company is getting continuously repeated orders from its top clients. The company
believes that it has sufficiently strong client relationships to continue growing the business
from these clients. The Company is also constantly looking at opportunities from other clients
and countries to mitigate the risks involved in dependence on these clients and customers.
The Company has its own branch office in USA and also has its subsidiary company
Responsive Solutions Inc., in USA, and R S Software UK Limited in UK, which helps to enhance
and strengthen its relationships with the existing clients, and in obtaining new clients.
5. As approximately 96% of the revenue of the company is earned in foreign currency,
any adverse movement in foreign exchange may adversely affect its financial
performance.
Proposals to address the risk:
RS is in the business of software development and offshore development services. Major
income of the Company is from overseas projects. Therefore, the dominant parts of the
revenue are in US dollars and so are the expenses. Hence there is a natural hedge of
fluctuation in exchange rates.
6. Termination of client contracts
The customers may terminate the contracts entered into with the Company and that may have
a material impact on the operational results.
Proposals to address the risk:
The Company’s delivery teams interact with existing clients to ensure client specifications are
met and there is limited client dissatisfaction and thereby avoid any significant risk of contract
termination on these grounds. This is evident from the fact that some of the clients have been
with the company for a significant period of time. The Company has a full-fledged sales and
marketing team/offices in India, USA, UK, which engage in seeking new clients constantly to
mitigate the consequences of this risk as well as grow business.
7. Long sales cycles of the software products
The period between initial contract and the award of a contract may be subject to delays
associated with the budgeting, the approval and competitive evaluation processes that
normally accompany a significant capital expenditure decision and hence, could be long
enough to have a significant impact on the operating results of the Company.
7
Proposals to address the risk:
The Company has been learning from its engagements with its existing customers and is
implementing appropriate measures to optimize its sales cycles. More ever since the company
is operating in knowledge-based industry the cycles are normally large in this sector.
Considering that 90% of the business comes from existing clients, sales cycles are well
manageable.
8. Contingent Liabilities not provided for as on 30.09.2005
Sl.
No.
1.
2.
3.
(Rs.in lacs)
Amount
Particulars
Bank Guarantees Outstanding
20.46
Liabilities in respect of bills discounted
846.26
Income tax demands pending with Income Tax
authorities.
A. Y. 1997 – 98
218.05
A. Y. 1998 – 99
260.32
A. Y. 2001– 02
44.77
TOTAL
1389.86
Proposals to address the risk:
The matters relating to income tax demands are pending for final orders before the
appropriate Tribunal and the as per the legal opinion received by the company the merits of
the case are in favour of the company and the company is hopeful of a decision in its favour.
Note : Please refer the section “Material Developments” at page no. 113 in respect of current
status on the above due to developments taken place after 30.9.05.
9. Promises vs. Performance
The Company has not met the promises made in the initial public issue and the
performance were as under:
(Rs.in lacs)
Year Ended 31st March
PARTICULARS
Total Income
1993 - 94
1994 - 95
1995 - 96
Projected Actual Projected Actual
1005 1039
1996 - 97
Projected Actual Projected Actual
1416
1150
1955 1731
1995
2440
1415 1399
Total Cost of Production
771
793
1003
913
1415
1991
Profit before interest depreciation
234
246
413
237
540
332
540
449
Interest
60
60
54
29
43
98
34
175
Depreciation
81
88
138
94
140
103
143
112
Deferred Revenue Expenditure
13
13
13
13
13
13
13
20
PBT (Profit Before Tax)
80
84
208
100
344
118
350
142
0
0
0
0
0
0
0
0
80
84
208
100
344
118
350
142
4.45
4.66
4.78
2.29
7.91
2.72
8.04
3.27
174
185
359
207
497
235
506
274
23
27
62
82
109
43
131
43
Tax
PAT (Profit After Tax)
Earning Per Share (Rs.) (EPS)
Cash Accruals
Dividend (proposed)
Dividend (%)
15
15
20
20
25
10
30
10
Equity Capital
180
180
435
435
435
435
435
435
247
315
671
583
902
652
1117
733
25.22 27.51
25.42
22.38
30.73 25.00
35.68
26.84
Reserves
Book Value (Rs.)
Proposals to address the risk:
The period 1994 to 1997 was of early adoption of IT offshore outsourcing by the global market
place. The offering from India was more of a concept as compared today to IT offshore
outsourcing being mainstream activity. Under these situations, the company in the best case
8
met almost 125% of its projections, and in the worst case met 83% of its projections. The
largest impact however was the significant underestimation of cost of production, both in
terms of delivery costs and business development costs. There was a lot of learning in the
concept years of new market offering.
10. Security threats and inadequate protection to Company’s computer systems will
adversely affect the business.
Information and data security is highly vulnerable in area of IT business, and the risks get
compounded when you work with the data and systems of global customers in domains like
electronic cards and payment systems. Worldwide, a variety of attacks (viruses, hackers,
unauthorized access) happen on every network everyday, and irresponsible work practices by
employees who are not familiar with the company’s security procedures or those who resort to
deliberate violation of security codes and practices may leave the company’s business
interests in a state of compromise. Client contracts are never adequate to protect data
security.
Proposals to address the risk:
The Company has already secured a BS7799 certification for implementing security
procedures and guidelines for employees, and access procedures for those working on the
network of the company systems, under strict monitoring for complying with the security
obligations, including maintenance of network security, back up of data, ensuring virus-free
networks through implementation of latest signature patches, and ensuring the credentials of
its employees who work with its clients. The Company is maintaining a strong backup system
for all its operations. The efforts to adapt to global benchmarks as they evolve will be a
continuous process as part of its process architecture.
11. Global operations of the Company are exposed to complex management, foreign
currency, legal, tax and economic risks.
Proposals to address the risk:
The Company is managed by qualified professionals and also engages advisors where
necessary, in their respective fields to handle all such issues. They had not faced any difficulty
in the past to manage these issues.
12. The Information Technology industry is a rapidly evolving sector witnessing new
technological
breakthroughs,
which
may
render
the
existing
technology/infrastructure redundant.
Proposals to address the risk:
The Company has not only invested in its infrastructure and other business support systems
including state of the art communication facilities with innovative ideas and long vision to cope
up with the technological breakthroughs, but it has also convinced its largest customer to sink
in an investment in network facilities and making the facility an Offshore Development Centre
(ODC). On the technology front, the company has acquired competencies in state-of-the-art
technologies like human identification using multi-modal biometrics that is used in applications
such as management of risk and fraud, a critical area in the company’s focused domain.
13. Equity Dilution
The present issue of equity shares on Rights basis will increase the paid up capital of the
Company and this is likely to reduce the EPS.
Proposals to address the risk:
The Company is making fresh investments out of proceeds of the present issue and this
investment is expected to yield significant return. Further the Company has experienced
significant growth in its operations and earnings in current year compared to previous year.
9
14. Some shares of the company are unlisted.
Some of the shares of the company are unlisted and an application has been made to the BSE
for approval of listing of the shares on the stock exchange. For details please refer to the
notes to capital structure on page 27 of the Draft LoO.
15. 14.6% Cumulative Redeemable Preference Shares amounting to Rs. 50,000,000
issued to IDBI were due to be redeemed on May 31,2004 but have not been
redeemed by the company.
Proposals to address the risk:
The Company had filed a proposal to IDBI for restructuring. IDBI has given its in principle
approval for restructuring vide their letter dated April 20,2005 on the following terms and
conditions:
a) Roll over of Rs. 500 lacs of CRPS to be redeemed in three installments in October 2005,
November 2007 and November 2008.
b) Conversion of entire unpaid dividend of Rs. 264 lacs (accrued upto May 2005) along with
unpaid interest of Rs. 25 lacs on defaulted dividend totaling Rs. 289 lacs (subject to
reconciliation) as Non Convertible Debentures redeemable in two equal yearly installments
in November 2007 and November 2008.
c) Reduction in dividend rate from 14.6% p.a. to 12.5% p.a. on CRPS and at 12.5% on
proposed converted portion of NCD (Rs. 201 lacs)
d) Waiver of entire unpaid overdue liquidated damages of Rs. 32 lacs after Company deposits
atleast Rs. 200 lacs in FD/ICD with IDBI, against which the Company has already
deposited Rs. 40 lacs.
16. The company has erred in timely repayment of loans from banks & financial
institutions.
Allahabad Bank has served a notice upon the company to discharge Rs. 28,904,161 (including
interest) on Bill Discounting facility and Guarantees granted to the company.
Proposals to address the risk:
The company has already paid a sum of Rs. 1,09,30,763 till the end of the current half-year to
the bank as a part of the pending dues. Negotiations are on with the Bank Authorities for
extension of time to settle the dues.
17. The company may issue fresh shares, which may result in dilution of investor
shareholding in the company.
Any future equity offerings by the company, sale by significant shareholders and/or the issue
of equity shares pursuant to exercise of stock options under the various employee stock option
plans or by way of an induction of strategic investors, may lead to a dilution of investor
shareholding in the company and/or affect the market price of the equity shares.
18. Shareholders of the company in their meeting held on 23rd December 2005
approved the issue of 5,00,000 lacs share warrants to the promoters of the
Company. The share warrants on conversion into equity shares at a later date shall
result into dilution of the equity share capital and thereby affect the EPS of the
company.
19. The Company faces a competitive labour market for skilled personnel and therefore
its performance is highly dependent on the existing key personnel and the ability to
hire additional skilled employees.
10
The labour market for skilled employees with experience in software development in India is
extremely competitive, and the process of hiring employees with the necessary skills is both
time consuming and requires diversion of significant resources.
Proposals to address the risk:
The company has strategically focused on spreading out its talent hunt across a wider range
of cities that have large pools of IT population in the 3-5 years experience segment across a
diverse bandwidth of skills. The Global Sourcing Head operates out of Bangalore, which
provides the company a much larger perspective and opportunity to create a diverse talent
pipeline by networking closely with prominent sourcing consultants in South and West India
where such talents lie. The Company has adopted strong HR (Human Resource) policies and
implements regular training programs to upgrade the existing employees in new technologies
and verticals. The compensation structure is reviewed and upgraded on the lines of the
Nasscom-Hewitt Survey. It also offers stock options to its high performing employees. Last
but not the least, the company focuses strongly on internal communication and cultural
bonding and is one of the very few companies of its size that uses the corporate
communications function effectively to reach across to both its existing employees and to its
ex-employees who are the company’s brand evangelists in the talent market.
20. Likelihood Of Discontinuance Of Employment By Key Technical And Managerial
Personnel
Majority of the senior managerial personnel have been with the company for quite some time
now. They have been instrumental in turning the company around from slump after 9/11.
However, with the emergence of Kolkata as a significant IT destination, many well-known IT
services brands are likely to start operations in the city in future which may create
opportunities for the senior management professionals to seek change elsewhere. The loss of
any members of its senior management or other key personnel may have an impact on
business, results of operations and financial condition.
Proposals to address the risk:
The Company has a strong team of professional-managers and further they consider their
roles in the Company as significant milestone in their respective careers. Also, since most of
these managers hail from Kolkata which is where the company’s offshore operations (as well
as corporate office operations) currently lie, opting for a change always comes with a risk of
relocation to a different city which is always a challenge for senior managers. All key technical
and managerial personnel have been awarded stock options under the ESOS scheme approved
by SEBI, and this has proven to be a powerful retention tool, especially in growth years of the
company. All of them have availed the stock options awarded to them.
21. The failure to keep technical knowledge confidential could erode the competitive
advantage.
Information security in some of the key accounts is considered so critical that the customer
has traditionally chosen to work closely with a narrow bandwidth of trusted and long-term
vendors (which includes this company) despite having much larger opportunities to outsource.
This strategy largely limits the opportunity of knowledge of intellectual property being
replicated and proliferated elsewhere at a premium. As a matter of fact, the value that a
technology professional (having knowledge of the customer’s business critical applications)
commands at existing installations which use the knowledge of these applications, is expected
to be much higher than elsewhere. However, any other IT solutions provider also wanting to
make a pitch will have to build its business around such knowledge elements and the people
who carry such knowledge, so to that extent compromise of such intellectual property is a
risk.
11
Proposals to address the risk:
Employment contracts with certain of the employees who have special technical knowledge
about the products or business contains a general obligation to keep all such knowledge
confidential and such obligation extends for a period of 12 months after the termination of
employment. In addition to the confidentiality provisions, these employment agreements
typically contain non-competition clauses.
22. Loss-making subsidiaries of the Company may adversely affect its financial results.
The adverse financial performances of these subsidiaries have a negative material
effect on the Company’s business, results of operations and financial condition.
Responsive Solutions Inc and RS Software (UK) Limited, the wholly owned subsidiary
companies of RS Software (India) Limited have made losses in the past years as detailed
below;
Name of Company
Currency
Responsive Solutions Inc
RS Software (UK) Limited
Profit & loss as on
31.03.05
$(USD)
£(Pound)
(0.04) Millions
(29.00)
Profit & loss
31.03.04
(0.02) Millions
(21.00)
Proposals to address the risk:
The subsidiaries have very little business and therefore the losses incurred are going to have a
minimal impact on the operations of the company.
EXTERNAL RISK FACTORS
23. Competition
The Company operates in a highly competitive environment and this competitive pressure on
the business is likely to continue. Growing competition may force the Company to compromise
with the prices of its products/services, which may reduce the revenues and margins and/or
decrease the market share of the Company, either of which could have a materially adverse
effect on the business, financial conditions and operations of the Company.
24. Risk of Force Majeure, Political, economic and war risks
The operations of the Company are dependent upon its ability to protect network
infrastructure against damage from fire, earthquakes, floods, power loss and similar events
and to construct networks that are not vulnerable to the effects of such events. The
occurrence of a natural disaster or other unanticipated incidents at the facilities or at the sites
of the switches could cause interruptions in the services provided by us. Additionally, failure of
the other telecommunications providers to provide voice and data communications capacity
required by us as a result of natural disaster, operation disruption or for any other reason
could cause interruptions in the services provided by us. Any damage or failure that causes
interruptions in the operations could have a material adverse effect on the business, operating
results and financial condition.
The performance of the Company may be affected by a number of factors beyond its control
including political and economic developments both inside and outside India.
25. Terrorist attacks and other acts of violence or war involving India.
Terrorist attacks and other acts of violence or war may negatively affect the Indian stock
markets and also adversely affect the global financial markets. These acts may also result in a
loss of business confidence and have other consequences that could adversely affect the
business, results of operations and financial condition.
12
26. Significant change in the Government’s economic liberalization and deregulation
policies
Any significant change in the Government’s policies or any political instability in India could
adversely affect the business and economic conditions in India and could also adversely affect
the business, future financial performance and the price of Company’s Equity Shares.
27. Decline in India’s foreign exchange reserves.
At present, India’s foreign exchange reserve is the sixth largest in the world. A decline in forex
reserves could result in reduced liquidity and higher interest rates in the Indian economy.
Reduced liquidity or an increase in interest rates in the economy following a decline in foreign
exchange reserves could adversely affect business and financial performance of the Company
and the price of Equity Shares.
28. Regulatory Risks
Reduction or termination of tax incentives to the software industry, particularly the
gradual phasing out of Income Tax benefits under Section 10A and 10B of the Income Tax
Act, 1961, will increase the Company’s tax liability and reduce the profitability.
Significant changes in the regulatory laws, India’s economic liberalisation and deregulation
policies, fiscal policies adopted by the Government of India may affect the performance of
the company in the future.
The Company’s global operations subject it to various factors in the international business
such as distinct economic and business environment, migration and labour laws,
immigration laws, restriction on trade and legal agreements, multiple and possible
overlapping of tax structures, constraints in repatriation of earnings, change in tariff
structures, exchange rate fluctuations, regulatory, socio economic, political changes, to
name a few. These factors may have a material impact on the business of the Company
Notes to Risk Factors:
1. Negative Net worth of the Company as restated on 30th September 2005 is Rs. 544
Lacs. The size of the Issue is Rs.1598.35 lacs. The net asset value per share (book
value) as on 30th September 2005 for Rs. 10 face value is Rs. (10.72).
2. This Issue of 24,59,000 Equity Shares of Rs. 10/- each for cash at a premium of Rs.
55/- per Equity Share on rights basis to the existing Equity Shareholders of the
Company in the ratio of one Equity Share for every two Equity Shares held on the
Record Date i.e [•] aggregating Rs. 1598.35 lacs.
3. The company had entered into certain related party transactions for fiscals 2003, 2004
and 2005 disclosed in the section titled “Related Party Transaction” on page 85 of this
Draft Letter of Offer.
4. Before making an investment decision in respect of this Offer, you are advised to refer
to the section entitled ‘Basis of Issue Price’ on page 39 of this Draft Letter of Offer.
5. Please refer to the sub section entitled ‘Basis of Allotment’ under section ‘Terms of the
Issue’ on page 139 of this Draft Letter of Offer for details on basis of allotment.
13
6. Average cost of acquisition of Equity Shares of the Company by Promoters:
Sl. No.
1
2
Name of the Promoter
Mr. Rajnit Rai Jain
Mrs. Sarita Jain
Amount (in Rs.)
18.92
16.25
7. The Promoter, relatives and directors have not directly or indirectly transacted in the
securities of the Company during the last six months from the date of filing the
document with the ROC / stock exchanges.
8. The Lead Managers and the company are obliged to keep this Draft Letter of Offer
updated and inform the public of any material change/development.
You may contact the Lead Managers for any complaints pertaining to the Issue including
any clarification or information relating to the Issue. The Lead Managers are obliged to
provide the same to you.
14
III. INTRODUCTION
INDUSTRY SUMMARY
Information Technology is one of the fastest growing segments in the Global Economy having
potential to generate foreign exchange earnings, high quality employment and also contribute
to productivity of the economy. The investment opportunities having high yield potential in the
IT sectors, extend from the BFSI, Telecom and Manufacturing segments to Utilities like
Transportation, Healthcare and many more.
According to a February 2003 Gartner report, worldwide IT services spending is expected to
grow from $556.9 billion in 2002 to $736.7 billion by 2006 Indian IT services and software
product exports are categorized into core IT services, which include project oriented services,
IT outsourcing, support and training; R&D services and software products, which includes
product development, design and development of embedded systems and sales of
packaged/proprietary software.
The industry’s contribution to the national economic output has nearly tripled – from 1.2% in
FY 1997-98 to 3.5% in FY 2003 – 04. The break-up in terms of exports and domestic revenues
is in favour of exports, which will increase its share from 65% to 71 per cent during 2003-08.
During the current fiscal (2005-06), Indian IT & ITES exports are expected to cross $22 billion
as against $17.2 billion achieved in the last fiscal (2004- 05), projecting a growth rate of 3032%.
The role of IT has evolved from simply supporting business enterprises to enabling them to
meet their business objectives. To succeed in today’s marketplace, companies must respond
rapidly to market trends, create new business models and improve productivity.
India has been recognized as a leading destination for offshore technology services. In June
2004, the Gartner Strategic Analysis Report indicated that through 2008 India may remain a
dominant offshore service provider. A NASSCOM-KPMG report published in 2004 indicated that
the total Indian IT services and IT-enabled services export market was nearly $10 billion in
2003 and is projected to grow to $49 billion by 2009, representing a compound annual growth
rate of approximately 30%. There are several key factors contributing to this growth. These
include:
High quality delivery capabilities of Indian organizations;
Accelerated delivery through round-the-clock execution for global clients;
Significant cost savings; and
A large pool of skilled IT professionals.
COMPANY SUMMARY
RS Software (India) Limited specializes in providing leading edge solutions for the financial
services industry worldwide. Its corporate vision is to be a globally admired technology partner
of choice for the financial services industry.
RS Software was founded in the year 1987, and presently has operations in India, USA & UK.
RS has a fully equipped engineering centre in Kolkata. It caters to companies around the world
and helps enterprises realize bottom line results by providing best-in class solutions and
improving business performance throughout the changing demands of the market place.
RS enables companies tap news sources of growth by significantly lowering their technology
operations cost by providing them effective payment solutions. The technology experts at RS
have their expertise in a wide range of business specific solutions that in turns assist in
transforming organizations into industry leaders.
15
The operational business model of RS comprises of:
Offshore development and consulting services
Solution sales and support ;
Technology incubation and development.
The most valuable strengths of the Company are its strong and reliable relationships with its
clients and its ability to manage and provide quantifiable results that ensure the highest levels
of client satisfactions. Using its unique and innovative delivery model, the Company has
acquired and developed several mid-size and large clients in a range of domains all around the
globe.
16
THE ISSUE
The details of the issue are set out as below.
Equity Shares issued by the Company
24,59,000 Equity Shares of Rs.10/- each on a
“Rights” basis to the existing equity
shareholders/beneficial
owners
of
the
company.
Rights Entitlement
1(One) equity share for every 2(Two) equity
shares held on Record Date.
[•]
Equity Shares of Rs.10/- each for cash at a
premium of Rs.55/- per share (“the issue
price of Rs. 65/-”) aggregating to Rs. 1598.35
Lacs
49,18,000 Equity Shares of Rs.10/-each
Record Date
Issue Price per Equity Share
Equity Shares outstanding prior to the
issue
Equity Shares outstanding after the
issue
Terms of the issue
73,77,000 Equity Shares of Rs.10/-each
For more information see “Terms of the
Issue” beginning on page 127 of this Draft
Letter of Offer.
17
Summary of Consolidated Financial Data
Please read the following data in conjunction with the detailed Auditors’ report on page 78
under the heading ‘FINANCIAL INFORMATION’.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (As Restated)
Sl.
PARTICULARS
2001-02
2002-03
2003-04
(Rs in Lacs)
2004-05
Half year
ended 30th
Sept, 2005
A. Fixed Assets:
Gross Block
3619.78
4398.78
4799.08
5031.44
5157.31
(1217.57)
(1915.93)
(2773.12)
(3722.31)
(3980.31)
2402.21
2477.86
2025.96
1309.13
1177.00
5.00
5.00
5.00
5.00
5.00
0.00
0.00
0.00
0.00
Sundry Debtors
830.03
930.07
1515.77
1623.00
Cash & Bank Balances
172.45
67.85
47.80
70.10
133.00
Loans & Advances
334.49
191.24
210.29
222.46
261.00
Other Current Assets
597.24
386.46
109.96
141.83
180.00
0.00
0.12
0.00
0.00
0.00
1934.21
1575.74
1782.61
1950.16
2197.00
2568.13
3012.68
3591.56
3237.71
3023.00
0.00
8.07
40.86
21.00
12.00
Less: Depreciation
Net Block
Capital W-I-P
B. Investments
C. Current Assets, Loans & Advances
Unincurred Loss
Total
1414.56
D. Liabilities & Provisions:
Secured Loans
Unsecured Loans
Current liabilities & provisions
1248.11
702.40
740.46
751.19
889.00
Total
3816.24
3723.15
4372.88
4009.90
3924.00
525.18
335.45
(559.35)
(745.62)
(544.00)
1. Share Capital
1049.71
1049.07
1030.64
991.80
996.00
2. Free Reserves
1125.73
645.16
642.41
662.00
664.00
E. Net Worth
F. Represented by:
Less: Misc. Expenses not written off
Less: P&L Account
Net Worth
(1650.26)
(6.72)
0.00
0.00
0.00
0.00
525.18
(1352.06)
335.45
(2232.40)
(559.35)
(2399.42)
(745.62)
(2204.00)
(544.00)
18
CONSOLIDATED STATEMENT OF PROFIT AND LOSS (As restated)
(Rs in Lacs)
PARTICULARS
2001-02
2002-03
2003-04
Half year
ended 30th
2004-05
September,
2005
Income
Sales
Other Income
Total Income
5,902.44
6069.96
5976.42
8249.90
4694.00
56.78
10.31
3.93
4.52
4.00
5,959.22
6080.27
5980.35
8254.42
4698.00
4,261.52
3577.49
3705.95
5384.60
3163.00
399.84
250.44
289.15
182.04
69.00
655.00
Expenditure
Salary &other employee benefits
Sales & marketing expenses
Administrative & other expenses
1,484.66
1052.52
1275.20
1146.64
Miscellaneous Expenses written off
825.13
1643.54
6.72
0.00
Interest & finance charges
543.88
756.20
709.21
736.62
351.00
Depreciation & amortization
265.12
699.99
869.81
953.17
258.00
Provision for Doubtful debts
612.96
3.49
0.00
0.00
0.00
Provision for Diminution in the value of
investments
0.00
64.48
15.67
18.70
0.00
8,393.11
8048.15
6871.71
8421.77
4496.00
Profit /(Loss) before tax & extraordinary items (2,433.89) (1967.88)
(891.36)
(167.35)
202.00
6.05
0.00
0.00
Total Expenditure
Prior period items
105.25
10.20
0.00
0.00
0.00
0.00
0.00
(2,328.64) (1957.68)
(885.31)
(167.35)
202.00
Minority interest adjustment
Profit /(Loss) before tax
Provision for taxation
Profit / (Loss) after tax
0.00
0.00
0.00
6.00
(2,328.64) (1957.68)
0.00
(885.31)
(167.35)
196.00
19
IV. GENERAL INFORMATION
Dear Equity Shareholder(s),
Pursuant to the resolution passed by the shareholders of the Company at the Extra ordinary
General Meeting held on 23rd December 2005 and the subsequent approval of the Rights issue
Committee on 27th December 2005 it has been decided to make the following offer to the
Equity shareholders of the company, with a right to renounce:
ISSUE OF 24,59,000 EQUITY SHARES OF Rs. 10/- EACH FOR CASH AT A PREMIUM OF
Rs.55/- PER EQUITY SHARE.I.E AN ISSUE PRICE OF Rs.65/-PER EQUITY SHARE AND
AGGREGATING TO Rs.1598.35 LACS ON A “RIGHTS” BASIS TO THE EXISTING EQUITY
SHAREHOLDERS/BENEFICIAL OWNERS OF THE COMPANY IN THE RATIO OF 1(ONE)
EQUITY SHARE FOR EVERY 2(TWO) EQUITY SHARE HELD AS ON [••] 2005 i.e, RECORD
DATE (‘ISSUE’). THE FACE VALUE OF THE EQUITY SHARES IS Rs. 10/- PER SHARE
AND THE ISSUE PRICE IS 6.5 TIMES THE FACE VALUE OF EACH EQUITY SHARE.
GENERAL INFORMATION
Name of the Company
Registered Office
Corporate Office
Registration No.
Contact Person &
Compliance Officer
Address of Registrar of
Companies
RS SOFTWARE (INDIA) LIMITED
A-2, 234/3A,FMC Fortuna, A.J.C. Bose Road, Kolkata700020
A-2, 234/3A,FMC Fortuna A.J.C. Bose Road, Kolkata700020
Tel:033-2281-0106/07/08.Fax:033-22876256
Website: www.rssoftware.com
Email: [email protected]
43375 of 1987
Mr.Kunal Sen.
West Bengal Nizam Palace, 2nd MSO Building, 2nd floor
234/4, A.J.C.Bose Road, Kolkata-700020.
IMPORTANT
1.
2.
3.
4.
5.
6.
7.
This Issue is pursuant to the resolution passed by the shareholders of the Company at the
Extra ordinary General Meeting held on 23rd December 2005 and the subsequent approval
of the Rights Issue Committee meeting held on 27th December 2005.
This Issue is applicable to such Equity Shareholders whose names appear as beneficial
owners as per the list to be furnished by the depositories in respect of the Equity Shares
held in the electronic form and on the Register of Members of the Company at the close of
business hours on the Record Date [•].
Your attention is drawn to the section on Risk factors starting from page 6 of this Draft
Letter of Offer.
Please ensure that you have received the CAF alongwith this Draft Letter of Offer.
Please read the Draft Letter of Offer, the instructions contained herein and in the CAF
carefully before filling in the CAFs. The instructions contained in the CAF are an integral
part of this Draft Letter of Offer and must be carefully followed. An application is liable to
be rejected for any non-compliance of the terms and conditions as mentioned in the Draft
Letter of Offer or the CAF.
All enquiries in connection with this Draft Letter of Offer or CAFs should be addressed to
the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number
and the CAF numbers as mentioned in the CAFs.
The Lead Manager and the Company shall make all information available to the Equity
Shareholders and no selective or additional information would be available for a section of
20
the Equity Shareholders in any manner whatsoever including at presentations, in research
or sales reports etc. after filing of the Draft Letter of Offer with SEBI.
8. All the legal requirements as applicable till the filing of the Draft Letter of Offer with the
SEBI and the stock exchanges have been complied with.
Board of Directors
Name of the Director
Mr.K. S. Bhatnagar
Mr.Rajnit Rai Jain
Mrs.Sarita Jain
Mr.Shital Kumar Jain
Maj. Gen. (Retd.) A.
Balasubramanian
Mr. S. Khasnobis
Mr. Jonathan Kalman
Designation
Chairman
Vice-Chairman and Managing
Director
Non Executive Director
Non Executive Director
Non Executive Director
Status
Non Executive /Independent
Promoter
Non Executive Director
Non Executive Director
Nominee ICICI
Non Executive /Independent
Promoter
Non Executive/ Independent
Non Executive/ Independent
For more details regarding the Directors of the Company please refer to “Board of Directors”
on page 70 of this Draft Letter of Offer.
ISSUE MANAGEMENT TEAM
COMPANY SECRETARY CUM COMPLIANCE OFFICER
Mr. Kunal Sen.
A-2, FMC Fortuna
234/3A,A.J.C.Bose Road
Kolkata-700020.
Ph:033-22810106/07
Fax: 91-33-22876256
Email:[email protected]
Investors can contact the Compliance Officer or the Registrar to the Issue in case of
any pre- Issue or post- Issue related problems such as, credit of allotted shares in
the respective beneficiary accounts, refund orders etc.
LEAD MANAGER TO THE ISSUE
Ashika Capital Limited
SEBI Regn. No. INM 000010536
Trinity, 226/1, A.J.C. Bose Road,
7th Floor, Kolkata-700020
Ph: (033) 2283 9952
Fax: (033) 2289 1555
E-Mail: [email protected]
Contact Person: Mr.Bhavesh Saxena
21
REGISTRAR TO THE ISSUE
C.B.Management Services (P) Ltd.
SEBI Regn. No. INR 000003324
P-22, Bondel Road,
Kolkata-700019
Ph:(033) 22806692 Fax:(033) 22470263
Email: [email protected]
BANKERS TO THE COMPANY
ICICI Bank Limited
20, Sir R N Mukherjee Road
Rasoi Court
Kolkata – 700 001
Ph#033-22429120/9104
Fax#033-22429083
UTI Bank Limited
7,Shakespeare Sarani
Kolkata-700071
Ph#033-22822933/5189
Fax#033-22826463
Allahabad Bank*
International Branch
119,Park Street
Kolkata-700019
Ph#033-22290752
Fax#033-22295796
ABN AMRO Bank
ITC Center
4,Russel Street
Kolkata-700071
Ph#033-22260850
Fax#033-22823158
*The company is yet to obtain the consent letter from Allahabad Bank to act as Banker to the
Company.
LEGAL ADVISOR TO THE ISSUE
Sandersons & Morgans
Royal Insurance Buildings
5, Netaji Subhas Road
Kolkata-700001.
Phone # 033 - 22482644 – 47
Fax # 033 - 22482648
Email: [email protected]
STATUTORY AUDITORS TO THE COMPANY
Chaturvedi & Company
60, Bentinck Street
Kolkata-700069
Phone # 033 - 22373534/ 4060/5408/5409
Fax # 033 - 22253692
BANKERS TO THE ISSUE
ICICI Bank Limited
Capital Market Division
30, Mumbai Samachar Marg,
Mumbai – 400 001
Phone # 022-22655207
Fax # 022 - 22611138
22
CREDIT RATING/DEBENTURE TRUSTEE
This being an issue of Rights Equity Shares, no Credit Rating or appointment of Debenture
Trustee is required.
MINIMUM SUBSCRIPTION
i. If the Company does not receive the minimum subscription of 90% of the issue, the entire
subscription shall be refunded to the applicants within forty-two days from the date of
closure of the Issue.
ii. If there is a delay in the refund of subscription by more than 8 days after the Company
becomes liable to pay the subscription amount (i.e. forty two days after closure of the
issue), the Company shall pay interest for the delayed period at rates prescribed under
sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956.
STANDBY UNDERWRITING ARRANGEMENTS
The Company has decided to partially underwrite the issue. The following have agreed to
underwrite the issue to the tune of 1720000 number of Fresh Equity shares at commission of
2.5% percent of the issue underwritten.
(Rs. lacs)
No.
Name and Address of Underwriters
No. of Shares
Amount
Underwritten
Underwritten
1
SMIFS Capital Markets Limited
1720000
1118.00
Vaibhav (4F), 4 Lee Road,
Kolkata – 700 020
The above Underwriting Agreement is dated 27th December 2005.
In the opinion of Board of Directors of the Company (based on a certificate given by the
Underwriters), the resources of the above mentioned Underwriter are sufficient to enable them
to discharge their underwriting obligations in full. The abovementioned Underwriter is
registered with SEBI under Section 12(1) of the SEBI Act or registered as brokers with the
Stock Exchange(s). The Committee of Directors (Rights Issue Committee), at their meeting
held on 27th December, 2005, have accepted the terms and the Company has entered into the
Underwriting Agreement mentioned above.
ISSUE SCHEDULE
ISSUE OPENS ON
LAST DATE FOR RECEIVING
REQUESTS FOR SPLIT FORMS
[•]
[•]
23
ISSUE CLOSES ON
[•]
V.
CAPITAL STRUCTURE OF THE COMPANY
Share capital as on the date of filing of the Draft Letter of Offer with SEBI is set forth below.
(Rs. In lacs, except share data)
Share Capital
A
B
Nominal/Aggregate
Value (Rs)
Authorized
1,00,00,000 Equity Shares of Rs.10/- each.
25,00,000 Preference Shares of Rs.100/-each
1000.00
2500.00
TOTAL
Issued Subscribed and Paid Up Capital
3500.00
i. 49,18,000 Equity Shares of Rs.10/-each
ii. 5,00,000 14.6% Cumulative Redeemable Preference
Shares of Rs.100/-each fully paid up*
C
D
E
491.80
500.00
Now Offered in terms of this LoO
24,59,000 Equity Shares of Rs.10/-each at a premium of
Rs 55/- per share.i.e at an Issue price of Rs.65
245.90
Paid up Equity Capital after the Present Issue
73,77,000 Equity Shares of Rs.10/-each.
737.70
Share Premium
373.08
1725.53
Before the Issue
After the Issue
1. Changes in the Authorised Capital since inception are as follows:
S. No.
Particulars of Increase
Date of Meeting
1.
2.
Rs. 10 Lacs
From 10 Lacs to 150 Lacs
Incorporation
31.05.1990
3.
From 150 Lacs to 500 Lacs
25.11.1993
4.
From 500 Lacs to 800 Lacs
22.08.1995
5.
From 800 Lacs to 1500 Lacs
22.07.1998
6.
From 1500 Lacs to 3500 Lacs
24.07.2001
24
2. Build up of the Equity Share Capital
Date of
Allotment
No. Of
Equity
Shares
Cumulative
Share
Capital
(Rs)
Face
Value
(Rs)
Issue
Price
(Rs)
Consideratio
n (Cash,
Bonus,
Consideratio
n other than
cash)
Reasons for allotment
03.12.1987
to
29.06.1988
31.03.1990
13.08.1990
19.11.1990
07.03.1991
10.01.1994
04.05.1994
13.10.1998
49000
490000
10
10
Cash
Various Allotments
10000
930000
110000
100000
599500
2550500
353900
590000
9890000
10990000
11990000
17985000
43490000
47029000
10
10
10
10
10
10
10
10
10
10
10
20
20
20
Cash
Cash
Cash
Cash
Cash
Cash
Cash
20.01.1999
55000
47579000
10
20
Cash
12.04.1999
70000
48279000
10
20
Cash
19.07.1999
83600
49115000
10
20
Cash
21.12.2000
2600
49141000
10
20
Cash
22.04.2002
400
49145000
10
20
Cash
27.05.2002
300
49148000
10
20
Cash
17.07.2003
700
49155000
10
71
Cash
27.08.2004
200
49157000
10
10
Cash
27.08.2004
2300
49180000
10
71
Cash
Allotment to promoter
Further Allotment
Further Allotment
Allotment
Rights Issue
Public Issue
Conversion of Warrants
(Issued on 10/01/1994)
Conversion of Warrants
(Issued on 10/01/1994)
Conversion of Warrants
(Issued on 10/01/1994)
Conversion of Warrants
(Issued on 10/01/1994)
Exercise
of
option
granted
under
ESOS
(Issued on 19/09/1997)
Exercise
of
option
granted
under
ESOS
(Issued on 19/09/1997)
Exercise
of
option
granted
under
ESOS
(Issued on 19/09/1997)
Exercise
of
option
granted
under
ESOS
(Issued in 19/09/1997)
Exercise
of
option
granted
under
ESOS
(Issued in 19/09/1997)
Exercise
of
option
granted
under
ESOS
(Issued in 19/09/1997)
TOTAL
4918000
3. Build up of the Preference Share Capital.
Particulars
14.6% Cummulative Redeemable Preference Shares of Rs.100/-each fully
paid up were allotted to IDBI on 08.05.2001.
25
(Rs.in lacs)
Amount
500.00
4. Shareholding Pattern (As on November 30, 2005)
Sl.
Category
A.
1.
PROMOTERS HOLDING
Promoters
Indian Promoters
Rajnit Rai Jain
Sarita Jain
2.
B.
3.
a.
b.
No. of Shares Held
Foreign Promoter
Persons acting in Concert
Sub-Total
NON-PROMOTERS HOLDING
Institutional Investors
Mutual Funds and UTI
Percentage of
Shareholding
1149150
97000
23.37
1.97
Nil
Nil
1246150
Nil
Nil
25.34
12800
0.26
3300
0.07
1800
17900
0.03
0.36
680557
13.85
4.
a.
Banks, Financial Institutions, Insurance
Companies, State Government
Foreign Institutional Investors
Sub-Total
Others
Private Corporate Bodies
b.
Indian Public
2884856
58.66
c.
d.
NRIs/OCBs
Any other
Sub- Total
GRAND TOTAL
53891
34646
3653950
4918000
1.09
0.70
74.30
100.00
c.
26
5. Details of Shareholding before and after the Offer
Pre Issue
Sl.
Category
A.
1.
PROMOTERS HOLDING
Promoters
Indian Promoters
Rajnit Rai Jain
Sarita Jain
2.
B.
3.
a.
b.
Foreign Promoter
Persons acting in Concert
Sub-Total
NON-PROMOTERS
HOLDING
Institutional Investors
Mutual Funds and UTI
Post Issue
No. of
Shares Held
Percentage
of
Shareholding
No. of
Shares
Held
Percentage
of
Shareholding
1149150
97000
23.37
1.97
1723725
145500
23.37
1.97
Nil
Nil
1246150
Nil
Nil
25.34
Nil
Nil
1869225
Nil
Nil
25.34
12800
0.26
19200
0.26
3300
0.07
4950
0.07
1800
0.03
2700
0.03
17900
0.36
26850
0.36
680557
13.85
1020835
13.85
4.
a.
Banks,
Financial
Institutions,
Insurance
Companies,
State
Government
Foreign Institutional
Investors
Sub-Total
Others
Private Corporate Bodies
b.
Indian Public
2884856
58.66
4327284
58.66
c.
d.
NRIs/OCBs
Any other
Sub- Total
GRAND TOTAL
53891
34646
3653950
4918000
1.09
0.70
74.30
100.00
80836
51969
5480924
7377000
1.09
0.70
74.30
100.00
c.
Notes on Capital Structure:
1. The shareholding pattern after the present Right Issue indicated above is on the
assumption that all the shareholders in respective categories will subscribe to their full
entitlement. However, this may change on the subscription and allotment of equity shares
under each category.
2. As this is a Rights Issue, the Issuer is exempt from the requirements of Promoter’s
contribution as specified in Clause 4.10.1(c) of the Securities and Exchange Board of India
(Disclosure and Investors Protection) Guidelines 2000; As a consequence none of the
equity shares are locked in.
27
3.
Details of Promoter Shareholding as on 30.11.05
Name
No. of shares
held pre issue
Mr. Rajnit Rai
Jain
Mrs. Sarita Jain
TOTAL
%
of
Issue
Capital
pre
No. of Shares
held post issue
%
of
Capital
Post
1149150
23.37
1723725
23.37
97000
1.97
145500
1.97
1246150
25.34
1869225
25.34
4. Top Ten Shareholders of the Company
As on the date of filing of the draft LoO with SEBI (i.e as on 09.01.2006)
Sl.
No
1
2
3
4
5
6
7
8
9
10
Name Of The Shareholders
Rajnit Rai Jain
Mitesh N Mehta
Ashok Popatlal Shah
Sarita Jain
L R Ferro Alloys Pvt. Ltd
Mahendra Kumar Saraogi
Bina Sheth
Ajay Sheth
Nagarjun Textiles (India) Pvt. Ltd
SMS Holdings Pvt. Ltd
No. of Shares
% To Capital
1149150
120000
112954
97000
84000
78554
60002
60001
50000
50000
23.37
2.44
2.30
1.97
1.71
1.60
1.22
1.22
1.02
1.02
5. As on ten days prior to filing the draft LoO with SEBI (i.e as on 30.12.2005)
Sl.
No
1
2
3
4
5
6
7
8
9
10
Name Of The Shareholders
Rajnit Rai Jain
Ashok Popatlal Shah
Mitesh N Mehta
Sarita Jain
L R Ferro Alloys Pvt. Ltd
Mahendra Kumar Saraogi
Nagarjun Textiles (India) Pvt. Ltd
SMS Holdings Pvt. Ltd
Mili Consultants Investments Pvt. Ltd
Angel Broking Limited
28
No. of Shares
% To Capital
1149150
112954
100000
97000
84000
78554
50000
50000
39510
31359
23.37
2.30
2.03
1.97
1.71
1.60
1.02
1.02
0.80
0.64
6. As on two years prior to the date of filing the Draft LoO with SEBI (i.e as on
09.01.2004)
Sl.
No
1
2
3
4
5
6
7
8
9
10
Name Of The Shareholders
Rajnit Rai Jain
Sarita Jain
West Bengal Electronics Industry Dev. Corpn
S L Sachdev
Anil Kumar Parakh
Mithun Securities Pvt. Limited
Indus Portfolio Pvt. Ltd
Girish Kumar Sharda
Poonam Chand
Shri Parasram Holdings Pvt. Ltd
No. of Shares
% To Capital
1149150
97000
50210
30000
21269
19800
12672
12650
11800
11420
23.38
1.97
1.02
0.61
0.43
0.40
0.26
0.26
0.24
0.23
There are no buyback, standby or similar arrangement for purchase of securities offered
through this Draft LoO by the Promoters, Directors and the Lead Manager except the
underwriting agreement made by the company.
As on the date, there are no partly paid up shares.
7. Subscription by the Promoters
Of the total equity capital of Rs. 491.80 lacs the promoters hold 25.34%. In the present
Rights Issue, the Promoters will be entitled to equity shares. The Promoters have
confirmed their intention to subscribe to their Rights entitlement in full and also retain the
option of subscribing to additional shares beyond their entitlement. The promoters will
comply with the provisions of SEBI (Substantial Acquisition of shares and takeover)
Regulations, 1997 in regard to the acquisition of such additional shares. Acquisition of
additional securities by one or more Promoters shall be exempt from making an open offer
in terms of proviso to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares
and Takeover) Regulations, 1997. Further, this acquisition will not result in change of
control of the Management of the Company.
8. Some of the Promoters intend to subscribe to additional shares beyond their entitlement if
the issue is under-subscribed. The acquisition of additional securities by the Promoters in
such an event shall be exempt from making an open offer in terms of proviso to
Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover)
Regulations, 1997. Further, this acquisition will not result in change of control of the
Management of the Company. The promoter group undertakes that in case the
subscription by the promoter group to the unsubscribed portion results in the public
shareholding falling below the “permissible minimum level” on the basis of which the
shares of the Company continue to be listed, then the promoter group shall make an offer
for sale of their holdings so that the public shareholding is raised to the “permissible
minimum level” within a period of three months from the date of allotment of the
proposed issue in the manner specified as per sub-clause 17.1 and 17.2 of SEBI (Delisting
of Securities) Guidelines, 2003 or as per any amendment thereto.
9. If the Company does not receive the minimum subscription of 90% of the Issue, the entire
subscription shall be refunded to the applicants within 42 days from the date of closure of
the Issue. If there is a delay in the refund of subscription by more than 8 days after the
Company becomes liable to repay the subscription amount, the Company will pay interest
for the delayed period at prescribed rates in sub-sections (2) and (2A) of Section 73 of the
Companies Act, 1956.
10. The Promoters and the Directors have not purchased or sold, financed, directly or
indirectly, any Ordinary Shares of the Company during a period of six months preceding
29
the date on which the Draft letter of offer is filed with SEBI except as mentioned in the
clause 18 below.
11. The Equity Shares offered through this Issue shall be made fully paid-up or may be
forfeited within twelve months from the date of allotment
12. The Company undertakes that there shall be no further issue of capital whether by way of
issue of bonus shares, preferential allotment, Rights Issue or public issue or in any other
manner, during the period commencing from the submission of the LoO to SEBI for Rights
Issue till the securities referred in the LoO have been listed or application moneys
refunded on account of failure of the Issue.
13. There are no bridge loans or any other financial arrangements made for incurring
expenditure on the project, which will be repaid out of the proceeds of the current issue.
14. The number of equity shareholders/beneficial owners of the Company as on 23rd
December 2005 was 11,227.
15. The Company has no proposal, intention, negotiations, consideration to alter the capital
structure by way of split/consolidation of the denomination of the shares, or issue of
shares on a preferential basis or issue of bonus or rights or further public issue of shares
or any other securities, within a period of 6 months from the date of opening of the
present issue.
16. The Company undertakes that at any given time, there shall be only one denomination for
the shares of the Company and the Company shall comply with such disclosure and
accounting norms specified by SEBI from time to time.
17. The Company has not issued any Equity Shares out of revaluation reserves in the past.
18. The company by a resolution passed at the extraordinary meeting of shareholders has
received the consent to allot 5,00,000 equity share warrants on a preferential basis to the
Mr.Rajnit Rai Jain who is a part of the promoters/promoter group(s) of nominal value of
Rs.10/- each at a price of Rs.87/- which includes a premium of Rs.77/-per share
calculated in accordance with SEBI preferential allotment guidelines on 23rd December,
2005 which are convertible into equity shares of equal numbers before the expiry of 18
months from the date of the issue of share warrants. M/s Chaturvedi & Company Auditor
of the company vide their certificate have confirmed that the Company has complied with
all the preferential allotment guidelines issued by SEBI.
19. Other than those mentioned in the paragraph 18 above no shares/securities convertible
into equity shares at a later date shares have been allotted on firm basis or through
private placement in the last two years nor has the company bought back its equity shares
in the last six months.
20. The Company has not revalued any of its assets since inception.
30
21. The Company confirms that all the existing shares of the Company except the shares
mentioned below are listed on the BSE and NSE and trading permission has been obtained
for all of them.
Details of Un- listed shares with the Stock Exchanges
Sl.
Distinctive nos.
No. of
Reason for not listed with the SEs.
no.
shares
1
4349001- 4911500
562500
Preferential Allotment to Mr. Rajnit Rai
Jain, the main Promoter of the
Company, which was included in the
Prospectus in 1994 Public Issue and at
that time no Guidelines were issued by
SEBI for Preferential Allotment of shares.
2
4911501 - 4918000
Total Shares :
6500
Allotted
under
ESOS,
which
was
approved in the year 1994, i.e. before
the Guidelines on ESOS issued by SEBI.
569000
22. The following shares of the company are pledged with ICICI Bank.
Sl.
no.
1
2
3
Name of the pledgee
Mr. Rajnit Rai Jain
Mrs. Sarita Jain
Mrs. V. V. Jain
Total
No. of shares
pledged
1122950
96400
1500
1220850
1220850 number of equity shares are pledged with ICICI Bank Ltd. and the said shares
are not locked-in shares. The term loan from ICICI is secured by a first mortgage and
charge on the immovable and movable properties of the company, subject to prior charges
created on current assets, including book debts, in favour of working capital bankers in
addition to pledge of 1220850 equity shares of the Company held by Shri Rajnit Rai Jain
and Smt. Sarita Jain and joint and several, unconditional and irrevocable personal
guarantee of Shri R.R. Jain and Smt. Sarita Jain.
31
23. DETAILS OF THE EMPLOYEE STOCK OPTION SCHEME’s
RS has instituted three employee stock option schemes, being the ESOS 2000, ESOS 2004 &
ESOS 2005. The shareholders of the company has approved ESOS 2000 & ESOS 2004 at the
EGM & AGM held on May 6, 2000 & August 27, 2004 respectively. Each of the ESOS 2000 &
2004 is compliant with the provisions of the SEBI (Employee Stock Option Plan and Employee
Stock Purchase Plan) Guidelines, 1999 as amended. ESOS 2000 & ESOS 2004 are
administered by the Compensation Committee. As on the date of filing of this Draft Letter of
Offer, there were 32300 options outstanding against ESOS 2004 and no Equity shares have
been allotted under ESOS 2004.
The details of the options granted and outstanding under ESOS 2000 & ESOS 2004, as of the
date of this Draft letter of Offer have been detailed in the table below:
Particulars
Options Granted
Exercise Price per option
share
Option Vested
ESOS 2000
1, 63,900
Rs. 206.00
/
Options Exercised
Total number of Equity shares
arising as a result of exercise of
options
Options Lapsed
Variation in terms of Options
Money realized by exercise
price
Total number of options in
force
Person-wise details of options
granted to:
(i) Key Management employees
(ii) Any
other
person
who
received a grant in any one
year of options amounting to
5% or more of options
granted during that year.
ESOS 2004
1,65,000
Rs. 15.35
25% of the total
options granted, would
become vested after
each year.
None
N.A.
25% of the total options granted,
would become vested after each
year.
N.A.
N.A.
N.A.
Nil
Nil
Rs. 495805.00
Nil
335000
Refer to Table given
below.
Nil
Refer to Table given below.
54
32,300
Name
a.
b.
c.
d.
e.
f.
(iii) Identified Employees who
are granted options, during any
one year equal to or exceeding
1% of the issued capital
(excluding
outstanding
warrants and conversions) of
the Company at the time of
grant.
Diluted
Earning
Per
Nil
Share
32
Options
Granted
Aniruddha De
Choudhury
Rakesh Srivastava
Aniruddha Rai
Choudhury
Bibek Das
Rajil Vohra
Kunal Sen
Nil
9000
10000
9000
10000
10000
9000
(EPS) pursuant to issue of
shares on exercise of options
(for
the
unconsolidated
financial statement of the
Company.
Vesting Schedule
Lock-in
Rs. 26.35 (calculated
as at Mar 31’ 2001)
Rs. (2.93)(calculated as at Mar 31’
2005)
There were a minimum
vesting period of one
year and a staggered
vesting over four years
from the date of grant.
25% of the options
granted
to
an
employee
were
become vested after
each year.
1 year between grant
and vesting of options
There will be a minimum vesting
period of one year and a staggered
vesting over four years from the
date of grant. 25% of the options
granted to an employee will
become vested after each year
1 year between grant and vesting
of options
Details regarding Options granted to Directors and Key Management Employees:
RS has not granted any options to the Directors under ESOS 2000 & ESOS 2004.
The Company has granted the following options to certain Key Management Employees:
Sl.
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Name
ESOS 2000
Options granted
3000
5000
3000
3000
3000
3000
3000
3000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Aniruddha De Choudhury
Akhil Pandey
Partha Chatterjee
Anantadeb Bandopadhyay
Sanjay Mondal
Sudipta Bhattacharjeere
Kunal Sen
Suman Sasmal
Aniruddha Rai Choudhury
Kalarab Roy
Sabyasachi Chatterjee
Rakesh Srivastava
Bibek Das
Rajil Vohra
Sanjib Mukherjee
Prasun Maharatna
Pradyp Kanabar
ESOS 2004
Options granted
9000
Nil
Nil
Nil
Nil
Nil
9000
Nil
9000
7000
7000
10000
10000
10000
5000
5000
7000
As on the date of this Draft letter of offer, no employee holds Equity Shares arising from
exercise of their options under ESOS 2000. Further, 6500 options have vested for certain key
management personnel under ESOS 2000, but have not yet been exercised.
As on the date of this Draft letter of offer, no employees hold Equity Shares arising from
exercise of their options under ESOS 2004. Further, 22000 options have vested for certain key
management personnel under ESOS 2004, and they have been exercised.
33
ESOS 2005
Particulars of the ESOS allotted in 2005 as per the policy approved by the Members of the
Company in Annual General Meeting dated 19th July 2005 is given below:
a. Option granted: 176600
b. The pricing: Rs. 71 per warrant.
c. Option vested: 25% will be vested on completion of a year
d. Options exercised: Yet to exercised
e. The total number of shares arising as a result of exercise of option: 176600
f. Options lapsed: yet to be allotted
g. Variation of terms of option: NA
h. Money realized by exercise of option: NA
i. Total number of options in force: NA
Employee wise details of options granted to Key managerial personnel:
Sl Name
No.
Options Granted
1
Mr. Bibek Das
10000
2
Mr. Rakesh Srivastava
9000
3
Mr. Kunal Sen
9000
4
Mr. Aniruddh Rai Choudhury
9000
5
Mr. Aniruddh De Choudhury
8100
6
Mr. Pradyp Kanabar
7000
7
Mr. Sabyasachi Chatterjee
7000
8
Mr. Debasis Bandyopadhyay
7000
9
Mr. Prasun Maharatna
5000
10
Mr. Sanjib Mukherjee
5000
34
VI. OBJECTS OF THE OFFERING
OBJECTS OF THE ISSUE
The present issue of equity shares is being made primarily to:
To
To
To
To
make repayment of the high cost debts.
part finance the working capital requirements of the company.
meet the expenses for upgradation of infrastructure.
meet the expenses of the present issue.
The main objects clause and objects incidental or ancillary to the main objects clause of the
Memorandum of Association of the company enables us to undertake the existing activities
and the activities for which the funds are being raised through this issue.
FUNDS REQUIREMENT AND FUNDING PLAN
Total Fund Requirements
The total estimated funds requirements for the purposes listed below is Rs. [•] lakhs as per
details given below:
(Rs. In lacs)
Sl Activity
Amount Required
1. Repayment of High Cost Borrowings
200.00
2. Working Capital Requirements
700.00
3. Upgradation of Infrastructure
700.00
[•]
4. Issue Expenses
[•]
TOTAL
Means Of Finance
The Company proposes to meet the above fund requirements through the following:
(Rs. In lacs)
Sl Source
AMOUNT
1
Proceeds from the Present Issue
Equity Shares of Rs.10 each at Rs 65/per share.
Share Capital
245.90
Share Premium
1352.45
Total Proceeds through Issue
1598.35
[•]
2
Internal Accruals
[•]
Total
1) Repayment of High Cost Borrowings
The company plans to utilize a part of the proceeds of the Issue to repay the Overdraft of
Rs.200.00 Lacs out of a total Overdraft limit, which stands as on date to Rs.800.00 lacs. from
ICICI Bank, bearing an high interest rate of 15.5%.
2) Working Capital Requirements
The proceeds of this Issue will also be used to meet the working capital requirements of the
parent company in India and that of the two Subsidiaries, which arise primarily from expenses
relating to payments to sundry creditors, employees, general and administration expenses and
selling expenses. The Company expects its working capital requirements to significantly
increase due to an increase in the volume of the business and a reduction in the current
liabilities.
35
In addition to the proceeds of this Issue, the company plans to infuse long-term funds to meet
the working capital margin requirements. In the table shown below the working capital
required for 2007-08 is Rs.2294 lac. The balance requirement after deducting the proceeds of
Rs.700.00 lacs from Rights Issue would be funded by own cash generation.
(Rs. Lacs)
Half year
For the year
ended
2006-07
2007-08
PARTICULARS
30th Sept
2005
Annual Revenue
4,656
11,801
15,341
3,110
7,453
9,054
717
2,106
3,151
3,827
9,559
12,204
Operating Margin
829
2,242
3,137
As a % of revenue
18%
19%
20%
Interest & Depreciation
609
1,217
1,457
Net Profit
220
1,025
1,679
5%
9%
11%
776
983
1,278
-Employment Cost (Incl S & M)
518
621
754
- Other Expenses
120
176
263
- Total
638
797
1,017
1,552
1,967
2,557
120
176
263
1,432
1,791
2,294
Annual Operating Expenses:
-Employment Cost (Incl S & M)
- Other Expenses
- Total Operating Expenses
As a % of revenue
Computation of Average Working Capital
Requirement
Average Monthly Revenue
Average Monthly Operating Expenses:
Current Assets
Receivables @ 2 months sales (60 days)
Current Liabilities
- Other Expenses @ 30 days
Net Working Capital Requirement
(Current Assets - Current Liabilities)
The aforesaid estimates of working capital have not been assessed by any bank or financial
institution and have only been estimated by us.
3) Upgradation of Infrastructure
RS aims to provide a robust technology platform for its clients, including local and internal
organizations and professionals, to foster technology innovation and growth in its business.
The company to cater to these needs proposes to incur expenses of Rs.700.00 lacs, which
would be utilized for investments into capital assets consisting of PC’s, Servers, printers as
well as investments in infrastructure to meet the revenue growth.
36
4) Issue Expenses
The issue expenses are estimated at Rs. [•] lakhs comprising of fees and expenses payable to
the Lead Managers to the Issue, Bankers to the Issue, Registrar to the Issue, printing and
stationery expenses, advertising expense, marketing expenses and all other expenses for
listing the Equity Shares on the Stock Exchanges.
Appraisal of funding needs
The above assessments of funding needs and utilsation schedules are based on the estimates
and have not been subject to any assessment by any Bank or Financial Institution.
Monitoring of funds utilization
In terms of SEBI DIP Guidelines Clause 8.17 there is no need for a separate monitoring
agency. The Audit Committee of the Board will monitor utilisation of the proceeds and in turn
report to the Board periodically on the same.
Interim Use of Proceeds
Pending any use as described above, proceeds of the Issue shall be used by the Company for
reduction of cash credit limits and invest the funds high quality, interest/dividend bearing
short term/long term liquid instruments including deposits with banks for the necessary
duration. The Company may also deploy the proceeds of this issue in temporarily reducing its
exposure to working capital borrowings from banks and financial institutions. Such
investments would be in accordance with the directives of the Board of Directors No part of
the issue proceeds will be paid by us as consideration to promoter, directors, key management
personnel, associate or group companies except in the course of normal business, such as
deposit/lease rentals/conducting fees for premised owned by any of the companies promoted
by the promoters as per terms of the commercial contractual arrangements from which they
may operate any of the proposed stores or for expanding the existing stores of the Company.
37
TERMS OF THE PRESENT ISSUE
The Equity Shares now being offered are subject to the terms of this Draft Letter of Offer, the
CAF, the Memorandum and Articles of the Company, approvals under the Foreign Direct
Investment Scheme of Government of India, FEMA, if applicable, Guidelines issued by SEBI,
the Act, the guidelines, notifications and regulations for the issue of capital and for the listing
of securities issued by the Government and/or other statutory authorities and bodies from
time to time and such terms and conditions as may be incorporated in the Letter of
Allotment/Share Certificate or any deed or document executed by the Company regarding the
Rights Issue. The principal terms and conditions of the Offer are as follows:
i. Present Issue: The present Issue of 24,59,000 Equity Shares of Rs. 10/- each for cash at a
premium of Rs. 55/- per share are being offered on Rights basis in the ratio of One Equity
Share for every two Equity Share held in terms of the Draft Letter of Offer.
ii. Face Value: Each Equity Share shall have a face value of Rs.10/-.
iii. Offer Price: Rs. 65/- per Share.
Authority for the Issue
Pursuant to Section 81(1A) of the Companies Act, 1956, the present Rights issue of Equity
Shares has been authorised by the Equity shareholders vide Special Resolution passed at the
Extra Ordinary General Meeting of the Company held on 23rd December 2005. The Committee
of Board has authorized the Rights Issue at its meeting held on 27th December 2005.
Approvals for the Offer
The Offer is being made in terms of Guidelines issued by the Securities and Exchange Board of
India and in accordance with the Companies Act, 1956 and Listing Agreement entered into
with the Stock Exchanges.
Basis of Offer
The Right Issue of 24,59,000 Equity Shares of Rs. 10/- each for cash at a premium of Rs.55/per share.i.e at a offer price of Rs.65/- per share are being offered on a Rights basis in the
ratio of One Equity Share for every two Equity Share held to those Equity Shareholders
whose names appear on the Register of Members of the Company and the names of the
beneficial Equity Owners as provided by the Depositories at the close of business hours on [•]
being the Record Date fixed by the Board of the Company in consultation with the BSE
(Designated Stock Exchange).
38
BASIS OF ISSUE PRICE
Qualitative factors
Domain specific service offerings.
Ability to successfully offer latest technology solutions in the field of payment
solutions.
India based operations model.
Reliable relationships with customers.
Extensively experienced management team.
The Promoters of company are professionals with industry, domain and technical
experience.
Quantitative factors
Earning per Share (EPS) weighted on face value of Rs.10 as per AS-20.
Year
EPS
2002-03
(39.38)
2003-04
(17.85)
2004-05
(3.01)
As on 30th Sept 2005.
4.35
Weighted Average
(14.01)
Wts
1
2
3
-
P/E Ratio in relation to Offer Price
Offer Price (Rs)
PE Multiple Based on EPS as on 30th
Sept, 2005
Industry PE
Computer Software
Highest
Lowest
Industry composite average
Return on Net Worth (RONW)
Year
2002-03
2003-04
2004-05
As on 30th Sept 2005
Weighted Average RONW
65.00
14.94
177.1
2.00
23.00
RONW (%)
(577.50)
*
*
*
*
Minimum Return on Total Net Worth after Issue needed to maintain
EPS at Rs 4.35.
*Not Relevant since net worth are negative for all the periods.
39
Wts
113.00%
Book Value (Rs.)
(31.19)
(26.76)
3.83
Rs.65/-
Book Value (pre issue) (As on 31/03/2005)
Book Value (pre issue) (As on 30/09/2005)
Book Value (post issue)
Issue Price
Comparison with other Companies
Name
of
the
Company
I Flex Solutions
Mascon Global
Financial Technologies
India Limited
Equity
(in crs)
38.01
176.51
8.80
Sales
(in crs)
902.9
205.6
30.2
PAT
(in crs)
196.0
25.4
9.5
Source: Capital Market issue dated Dec 5-18,2005.
40
EPS
(Rs.)
25.1
1.4
2.1
BV (Rs.)
P/E Ratio
148.1
16.1
31.5
41.2
16.7
177.1
TAX BENEFIT STATEMENT
TAX BENEFITS FOR THE COMPANY AND ITS SHAREHOLDERS
Auditors Certificate
We hereby report that the enclosed Annexure state the possible tax benefits available to R.S.
Software (India) Ltd. (the company”) and its shareholders under the current direct tax laws as
amended by Finance Bill 2005. Several of these benefits are dependent on the company or the
shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence the ability
of the company and its shareholders to derive the tax benefits is dependent upon such
conditions, which based on business imperatives company may or may not choose to fulfill.
The benefits discussed below are not exhaustive.
This statement is only indented to provide general information to the investors and is neither
designed nor intended to be a substitute for the professional tax advice. In view of the
individual nature of the tax consequence and the changing tax laws, each investor is advised
to consult his or her own tax consultant with respect to the specific tax implications arising out
of their participation in the issue.
We do not express any opinion or provide any assurance as to the whether:
The company or its shareholder will continue to obtain in the future or
The conditions prescribed for availing the benefits have been / would be met with.
The contents of this annexure are based on information, explanations and representations
obtained from the company and on basis of our understanding of the business activities and
operations of the company and the interpretation of current tax laws as amended by the
Finance Bill 2005.
For Chaturvedi & Co.
Chartered Accountants
Nilima Joshi, FCA
Partner
Membership No: 52122
December 19, 2005
41
ANNEXURE - STATEMENT OF POSSIBLE BENEFITS AVAILABLE TO THE COMPANY AND
ITS SHAREHOLDERS
A. Benefits available to the Company under the Income Tax Act, 1961 (‘Act’)
1. Deduction under Section 10B of the Act:
Under the provisions of Section 10B of the Act, a company which is a 100 % export oriented
unit engaged in the business of export of articles or things or computer software and which
satisfies the prescribed conditions is eligible to claim a benefit with respect to profits derived
by its undertaking/s from the export of articles or things or computer software for a period of
ten consecutive assessment years, beginning with the assessment year relevant to the
previous year in which the undertaking/s begin to manufacture or produce such articles or
things or computer software. The eligible deduction would be 90% of the profit and gains
derived by an undertaking from the export of such articles or things or computer software.
Profits on domestic turnover would get taxed. The benefit is available subject to fulfillment of
conditions prescribed by the Section and no benefit under this Section shall be allowed to any
assessee with respect to any such undertaking for the assessment year beginning on the 1st
day of April 2010 and subsequent years.
2. Exemption in respect of Unit’s income and dividend
As per the provisions of Section 10(33), any income arising from the transfer of a capital
asset, being a unit of the Unit scheme, 1964 referred to in Schedule I to the Unit Trust of
India (Transfer of undertaking and Repeal) Act 2002 and where the transfer of such asset
takes place on or after the 1st day of April 2002 is exempt from tax in the hands of the
Company. Dividends (whether interim or final) declared, distributed or paid by a domestic
company for any assessment year commencing on or after 1 April, 2003 are exempt in the
hands of the Company, in its capacity as shareholder, as per the provisions of Section 10(34)
of the Act, if the same is subject to dividend distribution tax under section 115O of the Act.
3. Expenditure on Scientific Research
In accordance with and subject to the provisions of Section 35(2AB), the Company would be
entitled to deduction in respect of expenditure incurred on Scientific Research (not being
expenditure in the nature of cost of any land or building) related to the business, to the extent
of one and one half times of the expenditure so incurred.
4. Exemption of Capital Gains from Income tax
In accordance with the provisions of section 10(38), the long term capital gains arising on the
transfer of securities in a transaction entered into in a recognized stock exchange in India and
such transaction is chargeable to Securities Transactions Tax under Chapter VII of the Finance
(No ) Act, 2004, shall be exempt from income-tax.
The long-term Capital Gains accruing to the company otherwise than as mentioned in 4 above,
shall be chargeable to tax in accordance with and subject to the provisions of section 112 of
the Income-tax Act as follows:
-
If long term capital gain is computed with indexation @ 20% (plus applicable
surcharge and education cess)
In the case of certain listed shares, securities and units, in a transaction not
entered into in a recognized stock exchange, if long term capital Gain is computed
without indexation @10% (plus applicable surcharge and education cess)
The short-term capital Gains accruing to the company, from the transfer of a short-term
capital asset, being securities, in a transaction entered into in a recognized stock exchange in
42
India, and such transaction is chargeable to Securities Transaction Tax under chapter VII of
the Finance (No. 2) Act, 2004 shall be chargeable to tax at the rate of 10% (plus applicable
surcharge and education cess) as per the provisions of section 111A.
The Company is eligible to claim exemption in respect of tax on long term capital Gains under
section 54EC and 54ED if the amount of capital gains is invested in certain specified bonds /
securities subject to the fulfilment of the conditions specified in those sections.
B. Benefits available to the Members of the Company
I. Resident Members
1. Income of a minor exempt up to certain limit
Under Section 10(32) of the Act, any income of minor children clubbed in the total income of
the parent under Section 64(1A) of the Act will be exempt from tax to the extent of Rs. 1,500
per minor child.
2. Dividends exempt under Section 10(34)
Dividends (whether interim or final) declared, distributed or paid by the Company for any
assessment year commencing on or after 1 April, 2003 are exempt in the hands of
shareholders as per the provisions of Section 10(34) of the Act, if the same is subject to
dividend distribution tax under section 115O of the Act.
3. Computation of capital gains
Under section 111A of the Act, Capital gains arising to a shareholder from transfer of short
term Capital assets, being equity shares (held for not more then 12 months) will be subject to
tax at the rate of 10% (plus applicable surcharge and education cess) provided such
transaction is chargeable to securities Transaction tax.
Under section 112 of the Act and other relevant provisions of the Act, long term capital gains
[not covered under section 10(38) of the Act] arising to a shareholder on transfer of shares in
the Company, if shares are held for a period exceeding 12 months shall be taxed at a rate of
20% (plus applicable surcharge and education cess) after indexation as provided in the second
proviso to section 48 or at 10% (plus applicable surcharge and education cess) without
indexation, at the option of the shareholders.
4. Exemption of long-term capital gains from income tax
As per the provisions of Section 10(38) of the Act, long term capital gain arising from transfer
of a long term capital asset being an equity share in a company or unit of an equity oriented
fund (i.e capital asset held for the period of twelve months or more) is exempt from incometax in cases where securities transaction tax has been paid as per Chapter VII of the Finance
(No.2) Act, 2004.
• As per the provisions of Section 54EC of the Act and subject to the conditions specified
therein, capital gains arising to the shareholder on transfer of a long term capital asset shall
not be chargeable to tax to the extent such capital gains are invested in certain notified bonds
within six months from the date of transfer. However, if the shareholder transfers or converts
the notified bonds into money 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 bonds are transferred or converted into money.
• As per the provisions of Section 54ED of the Act and subject to the conditions specified
therein, capital gains arising from transfer of long term capital assets, being listed securities or
units of a mutual fund specified under section 10(23D) of the Act or the UTI shall not be
43
chargeable to tax to the extent such gains are invested in acquiring equity shares forming part
of an “eligible issue of capital” within six months from the date of transfer of the said long
term capital assets. Eligible issue of capital has been defined as an issue of equity shares,
which satisfies the following conditions;
i.
the issue is made by a public company formed and registered in India; and
ii.
the shares forming part of the issue are offered for subscription to the public.
• Under section 54F of the Act, long-term capital gains (in cases not covered under section
10(38) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of
shares of the company will be exempt from capital gain tax subject to certain conditions, if the
net consideration from such shares are used for purchase of residential house property within
a period of one year before and 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.
II. Benefits available to Non-Resident Indians / Members other than FIIs and
Foreign Venture Capital Investors.
1. Income of a minor exempt up to certain limit
Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income
of the parent under Section 64(1A) of the IT Act will be exempt from tax to the extent of Rs.
1,500 per minor child.
2. Dividends exempt under Section 10(34)
Dividends (whether interim or final) declared, distributed or paid by the Company for any
assessment year commencing on or after 1 April, 2003 are exempt in the hands of
shareholders as per the provisions of Section 10(34) of the Act, if the same is subject to
dividend distribution tax under section 115O of the Act.
3. Computation of capital gains
Capital assets may be categorized into short term capital assets and long term capital assets
based on the period of holding. Under section 48 of the Act, if the investments in shares are
sold after being held for not less than twelve months, the gains (in cases not covered under
section 10(38) of the Act), if any, will be treated as long-term capital gains and the gains shall
be calculated by deducting from the gross consideration, the indexed cost of acquisition.
Under the first proviso to section 48 of the Act, in case of a non – resident, in computing the
capital gains arising from transfer of shares of the company acquired in convertible Foreign
exchange (as per exchange control regulations) protection is provided from fluctuations in the
value of rupee in terms of foreign currency in which the original investment was made. Cost
indexation benefits will not be available in such a case.
As per section 111A of the Act, short term capital gain arising from transfer of an equity
shares in a company listed on a
recognized stock exchange or a unit of an equity oriented fund would be taxable at 10 percent
(plus applicable surcharge), in cases where securities transaction tax has been paid as per
Chapter VII of the Finance (No.2) Act, 2004.
4. Capital gains tax - Options available under the Act (On Income from Investments
and Long-term Capital Gains.)
(A) Where shares have been subscribed in convertible foreign exchange - Option available
under Chapter XII-A of the Act, the non-resident Indian shareholder has an option to be
44
governed by the provisions of Chapter XIIA of the Income Tax Act, 1961 viz. “Special
Provisions Relating to Certain Incomes of Non-Residents” which are as follows: • As per the provisions of Section 115D read with Section 115E of the Act and subject to the
conditions specified therein, long term capital gains arising on transfer of an Indian company’s
shares, will be subject to tax at the rate of 10 percent (plus applicable surcharge and
educational cess on Income-tax), without indexation benefit but with protection against
foreign exchange fluctuation under the first proviso to section 48 of the Act.
• Under provisions of section 115F of the Act, long-term capital gains (in cases not covered
under section 10(38) of the Act) arising to a non-resident Indian from the transfer of shares of
the company subscribed to in convertible Foreign Exchange shall 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 shall be
proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if
the specified assets are transferred or converted into money within three years from the date
of their acquisition.
• As per the provisions of Section 115G of the Act, Non-Resident Indians are not obliged to file
a return of income under Section 139(1) of the Act, if their only source of income is income
from investments or long term capital gains or both, provided tax has been deducted at source
from such income as per the provisions of Chapter XVII-B of the Act.
• Under Section 115H of the Act, where the Non-Resident Indian becomes assessable as a
resident in India, he may furnish a declaration in writing to the Assessing Officer, along with
his return of income for that year under Section 139 of the Act to the effect that the provisions
of the Chapter XII-A shall continue to apply to him in relation to such investment income
derived from the specified assets for that year and subsequent assessment years until such
assets are converted into money.
• As per the provisions of Section 115I of the Act, a Non-Resident Indian may elect not to be
governed by the provisions of Chapter XII-A for any assessment year by furnishing his return
of income for that assessment year under Section 139 of the Act, declaring therein that the
provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his
total income for that assessment year will be computed in accordance with the other
provisions of the Act.
5. Exemption of long-term capital gains from income tax
• As per the provisions of Section 10(38) of the Act, long term capital gain arising from
transfer of an equity share in a company or unit of an equity oriented fund is exempt from
income-tax in cases where securities transaction tax has been paid as per Chapter VII of the
Finance (No.2) Act, 2004.
• As per the provisions of Section 54EC of the Act and subject to the conditions specified
therein, capital gains arising to the Company on transfer of a long term capital asset shall not
be chargeable to tax to the extent such capital gains are invested in certain notified bonds
within six months from the date of transfer. However, if the Company transfers or converts
the notified bonds into money 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 bonds are transferred or converted into money.
• As per the provisions of Section 54ED of the Act and subject to the conditions specified
therein, capital gains arising from transfer of long term assets, being listed securities or units
of a mutual fund specified under section 10(23D) of the Act or the UTI shall not be chargeable
to tax to the extent such gains are invested in acquiring equity shares forming part of an
“eligible issue of capital” within six months from the date of transfer of the said long term
45
capital assets. Eligible issue of capital has been defined as an issue of equity shares which
satisfies the following conditions –
i.
the issue is made by a public company formed and registered in India; and
ii.
the shares forming part of the issue are offered for subscription to the public.
• Under section 54F of the Act, long-term capital gains (in cases not covered under section
10(38) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of
shares of the company will be exempt from capital gain tax subject to certain conditions, if the
net consideration from such shares are used for purchase of residential house property within
a period of one year before and 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.
Under section 112 of the Act and other relevant provisions of the Act, long term capital gains
(not covered under section 10(38) of the Act ] arising on transfer of shares in the Company, if
shares are held for a period exceeding 12 months shall be taxed at a rate of 20% (plus
applicable surcharge and education cess) after indexation as provided in the second proviso
to section 48 ( indexation not available if investments made in foreign currency as per the first
proviso to section 48 (indexation not available if investments made in foreign currency as per
the first proviso to section 48 stated above) or at 10% (plus applicable surcharge and
education cess) without indexation at the option of the assess.
6. Provisions of the Act vis-à-vis provisions of the tax treaty
As per Section 90(2) of the Act, the provisions of the Act would prevail over the provisions of
the relevant tax treaty to the extent they are more beneficial to the non-resident.
III. Benefits available to Foreign Institutional Investors (“FIIs”)
1. Taxability of capital gains
• By virtue of section 10(34) of the Act, income earned by way of dividend income from
another domestic company referred to in section 115O of the Act, are exempt from tax in the
hands of the Institutional investor.
. The income realized by FIIs on sale of shares in the company by way of short-term capital
gains referred to in section 111A (plus applicable surcharge and education cess on incometax) as per section 115AD of the Act.
. The income by way of short term capital gains (not referred to in section 111A) or long term
capital gains [ not covered under section 10(38) of the Act ] realized by FIIs on sale of shares
in the company would be taxed at the following rates as per section 115AD of the Act.
-
Short term Capital gains – 30% (plus applicable surcharge and education cess on
income-tax)
Long term Capital gains - 10 % (without cost indexation plus applicable surcharge
and education cess on income-tax)
Shares held in a company would be considered as a long term capital asset provided
they are held for a period exceeding 12 months)
2. Provisions of the Act vis-avis provisions of tax treaty
• 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 non-resident.
46
3. Exemption of capital gain from income tax
• As per the provisions of Section 10(38) of the Act, long term capital gain arising from
transfer of an equity share in a company or unit of an equity oriented fund is exempt from
income-tax in cases where securities transaction tax has been paid as per Chapter VII of the
Finance (No.2) Act, 2004.
• As per the provisions of Section 54EC of the Act and subject to the conditions specified
therein, capital gains arising to
the Company on transfer of a long term capital asset shall not be chargeable to tax to the
extent such capital gains are invested in certain notified bonds within six months from the
date of transfer. However, if the Company transfers or converts the notified bonds into money
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 bonds are transferred or converted into money.
• As per the provisions of section 54ED of the Act and subject to the conditions specified
therein, capital gains arising from transfer of long term assets, being listed securities or units
of a mutual fund specified under section 10(23D) of the Act or of the UTI shall not be
chargeable to tax to the extent such gains are invested in acquiring equity shares forming part
of an “eligible issue of share capital” within six months from the date of transfer of the said
long term capital assets. Eligible issue of share capital has been defined as an issue of equity
shares which satisfies the following conditions –
i.
ii.
the issue is made by a public company formed and registered in India; and
the shares forming part of the issue are offered for subscription to the public.
IV. Benefits available to Venture Capital Companies / Funds
In terms of section 10 (23FB) of the Act and subject to the conditions specified there in, all
Venture Capital Undertakings referred to in Securities and Exchange Board of India (Venture
Capital Fund ) Regulations, 1996 made under the Securities and Exchange Board of India Act,
1992 and notified as such in the official Gazette and Venture Capital Companies, are eligible
for exemption from income-tax on all their income, including income from dividend.
V. Benefits to Mutual Fund
As per the provisions of section 10(23D) of the Act, any income of Mutual Funds registered
under the Securities and Exchange Board of India Act 1992, or regulations made thereunder,
Mutual funds set up by Public sector Banks or Public Financial Institution and Mutuals
authorized by the Reserve Bank of India would be exempt from Income-tax.
VI. Benefits available to the Members of the Company under Wealth Tax Act, 1957
Shares of the Company held by the shareholder will not be treated as an asset within the
meaning of Section 2(ea) of Wealth Tax Act, 1957 and hence in this respect, Wealth Tax Act
will not be applicable.
VII. Benefits to shareholders of the Company under the Gift Tax Act, 1958.
Gift of shares of the Company made on or after 1st October, 1998 is not liable for any gift tax,
and hence, gift of shares of the company would not be liable for any gift tax.
47
Notes:
• All the above benefits are as per the current tax law as amended by the Finance Act, 2005
• The stated benefits will be available only to the sole / first named holder in case the shares
are held by joint holders.
• 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. • 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 consequence of his / her
participation in the scheme.
For Chaturvedi & Co.
Chartered Accountants
Nilima Joshi, FCA
Partner
Membership No: 52122
December 19, 2005
48
VII. ABOUT THE ISSUER COMPANY
INDUSTRY OVERVIEW
THE INDIAN SOFTWARE INDUSTRY
The information presented in this section relating to the Indian software industry has been
extracted from publicly available information, unless otherwise specified. These data have not
been prepared or independently verified by the company or the Lead Managers or any of their
respective affiliates or advisors.
India as a country has been able to successfully position itself in the software market. While
the forecast spend in the global IT-ITES industry remains moderate, the India Industry is
expected to continue on its significantly higher-than-average growth trajectory. The Global IT
Industry consists of IT Services and Products. As before, service exports will be the key
drivers of this growth, suitably complemented by a booming economy and a growing domestic
market. The market share of India in the software-enabled services has been on a good ramp
up. While its share in the IT Enabled Software Products is 0.2%, its share in Services market
is much higher at 1.5%.
As per NASSCOM-McKinsey analysis, the product and technology services opportunity is
poised for rapid growth and could reach US$8-11 billion by 2008. In the product arena, the
emergence of interoperate ability standards and customer resistance to “bundled functionality”
will open a new window for smart “component type” product development and integration for
Indian companies.
INDIA’S SHARE IN GLOBAL IT BUSINESS
India has been recognised as a leading destination for Offshore Technology services. The
Gartner Strategic Analysis Report suggests that India is going to remain a dominant offshore
service provider in the coming future. The NASSCOM-KPMG report published in 2004
indicates that the total Indian IT services and IT-enabled services export market was nearly
USD 10 billion in 2003 and is projected to grow to USD 49 billion buy 2009, clocking a CAGR
of about 30%.
The important factors that contribute to this growth are:
High quality delivery capabilities of Indian organizations;
Accelerated delivery through round-the-clock execution for global clients;
Considerable cost savings; and
A large pool of skilled IT professionals
49
SIZE OF THE INDIAN IT SERVICES MARKET:
Total Revenues
US$ bn
CAGR (2001 – 2005)
Rs bn
Overseas Revenues
Growth
24.9%
US$ bn
Rs bn
Domestic Revenues
Growth
26.2%
US$ bn
Rs bn Growth
21.7%
FY2005E
16.5
741.3
26.5
12.2
548.1
30.1
4.3
193.2
17.2
FY2004
12.8
586.0
22.3
9.2
421.2
22.6
3.6
164.8
21.7
FY2003
9.9
479.0
15.8
7.1
343.5
16.6
2.8
135.5
14.0
FY2002
8.7
413.5
8.8
6.2
294.7
3.4
2.5
118.8
25.1
CAGR (1997 – 2001)
43.9%
61.5%
44.3%
FY2001
8.3
380.0
55.7
6.2
285.0
66.2
2.1
95.0
31.0
FY2000
5.6
244.0
53.6
3.9
171.5
56.8
1.7
72.5
46.5
FY1999
3.8
158.9
58.3
2.6
109.4
67.5
1.2
49.5
41.0
FY1998
2.5
100.4
59.1
1.7
65.3
67.4
0.9
35.1
45.6
FY1997
1.8
63.1
50.6
1.1
39.0
54.8
0.7
24.1
44.3
CAGR (1992 – 1996)
53.7%
55.6%
51.1%
FY1992
1.3
41.9
60.8
0.8
25.2
64.2
0.5
16.7
56.1
FY1993
0.8
26.1
51.9
0.5
15.4
50.5
0.3
10.7
54.0
FY1994
0.5
17.2
47.2
0.3
10.2
51.1
0.2
7.0
41.8
FY1995
0.4
11.7
55.3
0.2
6.8
57.0
0.2
4.9
53.1
FY1996
0.3
7.5
57.9
0.2
4.3
72.0
0.1
3.2
42.2
CAGR (1988 – 1992)
43.9%
57.4%
32.1%
Source: NASSCOM
IT Enabled Services as a Sector of Economy
The IT Enabled services are the largest and fastest growing segment of the economy world over. A
traditionally agrarian economy like India is also no exception to this. Professional services constitute a large
chunk of this. The key aspect of professional services is its ability to convert the skills and knowledge of its
employees into value added ‘deliverables’. These deliverables vary depending on the nature of the business.
IT Service organizations delivering ‘software code’, EDC’s (engineering design center) delivering ‘drawings’,
translation companies delivering ‘ translated documents’; can be examples of these deliverables.
Globalization, Deregulation and Technological innovation fundamentally changed the way the ServicesCentric Organizations (SCO’s) around the globe function and compete. Phenonema such as ‘Outsourcing’
have created ‘paradigm shift’. To develop the ability to compete and succeed in such competitive
environment, SCO need tools that enable them to make better decisions, avoid costly mistakes due to lack
of information, and give their customers, partners and employees a better insight into organizational
performance.
Key Trends Forecast for global IT-ITES over 2005-08
Growth, which has remained a hallmark of India’s IT-ITES sector, will continue to hold sway as
both the IT services and ITES-BPO industries continue to record momentum and achieve
higher revenue targets. The IT-ITES industry, which grew almost five-fold during the 2000-05
phase, logging in a CAGR of around 28 per cent during the period, is all set to maintain this
pace and stay on the growth path during 2005-06. The sector’s performance over the past six
50
months seems to suggest that it will conform to the growth forecasts, keeping in tune with the
analyst’s expectations during the remainder of the financial year.
While revenue growth is one aspect, the IT-ITES industry is also gaining maturity. The IT
services segment has already gone a considerable distance up the value chain, with key
players notching up long-term engagements and repeat business from reputed global
customers. Exposure to global competition has enabled these firms to greatly improve their
productivity and utilisation and deliver a sustainable value proposition to users. The
organisations have expanded their services portfolio to include more high-value offerings and
skill sets in areas such as packaged software implementation, systems integration, R&D
engineering, remote network management and in limited cases, top-of-the-spectrum
consultancy services.
The industry has seen moderate growth in IT spending as consumer spending softens and SMB
and enterprise spending witnesses marginal growth.
The relatively slower growth in the mature markets of US, Western Europe and Japan, have
led to the emergence of geographies such as Central and Eastern Europe, China and India to
drive demand in the services sector.
Global IT-ITES Services spend forecast by Segment 2005-2008
2005
2006
2007
(USD Billion)
2008
497.80
422.60
386.60
197.30
1518.10
554.80
449.70
409.90
226.40
1640.80
614.90
467.60
434.80
242.60
1759.80
682.50
510.40
460.90
259.00
1912.00
Particulars
ITES-BPO
IT Services
Hardware Products
Software Products
TOTAL
Source: NASSCOM
Key Service Lines
Indian IT Services and software product exports are categorized into:
IT Services, which include IT outsourcing, project oriented services, support and training;
R&D services and software products, which includes product development, design and
development of embedded systems.
Sales of packaged/proprietary software.
Project Oriented Services
Indian exports of project-oriented services grew from USD 3.2 billion in FY 2002-03 to USD
3.9 billion in FY 2003-04 – a growth of 19.2 % over the previous year. In contrast, the
worldwide market for project-oriented services grew by a mere 4.8% over a comparable
period. While India continues to lead in traditional segments, vendors are now also gaining
ground in newer services such as system integration and network infrastructure management.
Custom Application Development and Maintenance
Custom application development and maintenance continues to dominate Indian IT service
exports, accounting for 51% of the total IT service exports from India in FY 2003-04. The
segment revenue grew from USD 3.0 billion in FY 2002-03 to USD 3.5 billion in FY 2003-04
While custom application development and maintenance comprises only 5% of global IT
services market, it has a high offshorable component (nearly 85% of the work can be off
shored) – making it a key service lines for Indian vendors. Leading MNCs have rated
application development and deployment as high priority areas in it initiatives for 2004 & 2005
giving Indian companies the opportunities to leverage their skilled manpower, domain and
51
technical expertise, to capitalize on the opportunity. Consequently. Indian exports of these
services is likely to witness steady growth over the next few years.
IT Outsourcing
Globally, outsourcing is the largest IT services macro market. Worldwide spending on
outsourcing services grossed USD 144.6 billion in FY 2004 and is expected to surpass USD
198.3 billion by 2008, representing a 5-year CAGR of 8.3%. Key trends in the global IT
outsourcing market include:
Integration of more automated technologies, including web services, that support the shift
towards using modular and more standardized components to provide business and
application processes.
The emergence of on demand/utility computing or the application service provider model
as a substitute for traditional IT procurement and delivery, and for traditional outsourcing.
Increased utilization of offshore service delivery.
Indian IT services revenue from the export of IT outsourcing services registered a growth of
27% in the previous fiscal, from USD 1.9 billion in FY 2002-03 to USD 2.5 billion in FY 200304. The segment accounted for 36% of the total Indian IT service exports in FY 2003-04. With
global demand for every segment of IT outsourcing forecast to grow at above average growth
rates, this segment presents significant potential for Indian vendors who can leverage their
offshore expertise and relatively lower cost structures to tap into this segment.
Application outsourcing continues to be the key service line for Indian exports of IT
outsourcing services, accounting for over 88% of the outsourcing segment revenue earned in
FY 2003-04.
IT Consulting
Changing economic and business conditions, rapid technological innovation, proliferation of the
Internet and increasing globalization are creating an increasingly competitive market
environment that is driving corporations to transform the manner in which they operate.
Managing customer expectations is becoming increasingly difficult with customers demanding
improved products and services with accelerated delivery times and at lower prices.
To adequately address these needs, corporations are focusing on their core competencies and
are using outsourcing service providers to help improve productivity, develop new products,
conduct research and development activities, reduce business risk, and manage operations
more effectively.
Indian export revenues from IT consulting services grew by 50% to reach USD 12 million at
the end of FY 2003-04. Although IT consulting has traditionally remained immune to offshore
outsourcing, Indian vendors are now moving up the value chain and aggressively pursuing this
high margin segment. IT consulting may be a natural progression for software service
companies considering that the entry barriers are not very high compared to software
products space. The billing rates in consulting are also higher, upwards of USD 100 an hour,
while in services, its upwards of USD 20 an hour. However, IT consulting is typically not driven
by cost consideration and its successful execution requires in-depth local knowledge and
domain expertise – which offshore vendors often lack. Recognizing the need to fill this gap,
Indian companies are actively engaged in building capabilities to tap this segment.
Offshore outsourcing, which began with Information Technology, has expanded over the years
to Business Process Outsourcing as well. Reducing telecommunication costs and the success of
pioneers like GE are driving growth in offshore outsourcing.
IT departments of many companies are placing great emphasis on lowering costs and
improving performance by accessing the latest technology expertise and accelerating the
delivery of new systems and solutions. To accomplish these objectives, many IT departments
52
have shifted all or a portion of their IT development, integration and maintenance
requirements to IT outsourcing vendors that provide high quality, timely and cost-effective
solutions and services. This outsourcing enables companies to eliminate or reduce the large inhouse IT staff otherwise required to evaluate, implement and manage IT initiatives, thereby
reducing their present and future investment requirements.
Increasing trend towards leveraging offshore delivery capabilities to attain high quality IT
solutions and services at a lower cost, companies are turning to providers with a global
delivery model that combines onsite client teams with offshore delivery centres. IT vendors
with offshore delivery capabilities that are able to offer products and services at a lower total
cost of ownership are increasingly being preferred by clients globally, for the quality of their
services, their responsiveness to clients and their on-time delivery capabilities.
According to the Strategic Review of 2004 by NASSCOM, IT spending in the global market, after
a decline in 2002 and being flat in 2003, is expected to clock an annual growth rate of 5.4%.
The service-wise growth prospects of IT Industry till 2007 are as depicted in the following table:
Type of Service
2002
2003
2004
2005
2006
2007
Outsourcing
2002-03
Growth
(%)
2002-07
CAGR (%)
Application Management
12237
13210
14267
15535
17002
18624
7.9
8.8
IS Outsourcing
67357
71119
75506
80560
85979
91376
5.6
6.3
Network and Desktop
Outsourcing
23311
24348
25569
27109
28851
30519
4.4
5.5
Application Service Providers
2328
2957
3780
4803
5929
7179
27
25.3
System Infrastructure Service
Providers
11537
13312
15572
18495
22071
26348
15.4
18
116770
124945
7
8.3
Sub Total
134695 146502
159772 174047
Support and Training
Hardware deploy and support
Software deploy and support
45156
44897
44943
46791
45097
49389
46444
52954
48231
57704
49876
62754
-0.5
4.2
2
6.9
IT Education and Training
18833
18524
18652
19135
20249
21479
-1.6
2.7
108887
110258
1.3
4.3
Sub Total
113138 118533
126184 134109
Project-oriented Services
IS Consulting
20825
20249
20466
21111
22082
23067
-2.8
2.1
Systems Integration
64494
62414
63908
66711
70670
74847
-3.2
3
Network
Consulting and
Integration
20291
21296
22510
24097
26154
28353
5
6.9
18818
18421
18577
19016
19701
20389
-2.1
1.6
124427
122380
125461 130935
138607 146656
-1.6
3.3
350084
357582
373294 395969
424562 454812
2.1
5.4
Custom Application
Sub Total
Total
Source: NASSCOM
53
COMPANY OVERVIEW
RS Software (India) Ltd is amongst the pioneers in IT industry in the eastern region of
India, where it started its operations in 1991. It had the foresight to start offshore-based
software services from the Salt Lake Electronic Complex at Kolkata, and has consistently
contributed to make Kolkata as one of the most attractive destinations on India’s IT map
today. The company has quite a few ‘early mover’ achievements to its credit. To start with,
complete diligence was done on software engineering processes from IEEE and leading
companies like Price Waterhouse during the inception year itself, as RS began its pursuit of
adopting the best management practices. The company’s vision since inception has been to be
quality software service providing company in India as well in International markets.
The company demonstrated its entrepreneurial leadership by investing in IBM 390 architecture
system in 1991,when industry leaders in India were slow to look at this opportunity. This gave
visibility, positioning and branding to the company in its early years, facilitating fortune 500
clientele wins like IBM, Visa International and Lexmark, all of whom continue to be clients
even today. On the supply side, the company was able to leverage significant help from IBM to
build its quality process architecture, and this has enabled recruitment of high quality talent
both laterally and from leading universities like IITs and IIMs. The company was quick to build
its position within the industry association NASSCOM, and till date continues to contribute in
many ways to the growth of the industry. R S Software has demonstrated stable execution for
14 years thru its operational excellencies, and its management team has had the tenacity to
face the most turbulent 4 years of IT industry. The company’s sales engine is now robust to
deliver revenues of $18MM annually, and is quickly strengthening itself to continually provide
growth rates higher than the industry averages.
RS Software continues to have a clear goal to maximize returns for all its stakeholders. RS has
enjoyed the confidence of venture capital and financial institutions who have strategically
invested into the company and has been rewarded well. RS was one of the first companies in
India to achieve the ISO 9001 assessment, which has now been upgraded to ISO 9001:2000.
Subsequently the company has been successfully assessed and accredited CMM Level 4 and PCMM Level 3.
RS has been able to attract Board members of high repute and with unique success
credentials. They have over the years helped the company put in place a respectable
corporate governance model.
Year 2001 and 2002 brought several disparaging causes like the Dot Com bubble burst, which
affected the IT industry worldwide. The unprecedented turmoil in the IT industry worldwide
resulted in recession globally and particularly in the US which reported the highest number of
bankruptcies in 2001 and multi-million job losses happened in the US and Europe.
Investments in offshore IT infrastructure were held back by Corporate America and at one
stage it was reported that over US$ 600 billion worth of IT investments were lying unutilized.
RS was also impacted by this turn of events but moved quickly to turn the situation around.
The company drove into strategic cost management initiatives to help quickly turn to cash
profitability with decent operating margins and continued to maintain confidence of its
investors. Focused account management strategy facilitated maintenance of revenue base.
This foundation helped RS to withstand the 9/11 attacks when America reportedly resulted in
a loss of around 1.5 million jobs, and NASDAQ went down by over 60% in just one year alone.
RS yet again moved quickly to build a sustainable Business Model by adopting McKinsey
recommended strategy of becoming domain focused as distinct from low cost commodity
offerings, According to the 2005 NASSCOM-McKinsey survey report of the Indian IT industry
(also corroborated by several other independent market researches) the growth in the SME IT
companies will mainly be driven by:
Higher value offerings to its customers thru focused service offerings
Product innovation and services around products which delivers specific capability
Participation in client’s business growth thru domain offerings
54
With increasing focus on building Payment Systems domain competency, the company had
steadily invested into building a robust Sales Engine to address higher growth targets. This
strategy is paying off well, as after three flat years of growth, RS has increased its revenues
by 60% in the last two fiscal years
Even as relationship of the company matures with its large clients into a more long term and
steadily increasing revenue stream, in the coming four-five years, a large part of its revenues
will come from high value added offerings in the areas of its domain focus. As the company
continues to build more reusable knowledge components, it will shorten the time to market by
acquiring core technology/platform that drives a large part of the electronic payments value
chain. To service the business, the workforce is expected to double in the next two years. To
support this ramp-up, a very robust sourcing process architecture is being implemented, which
will facilitate recruiting from multiple IT locations that offer high quality mid tier talent pool,
and which can enhance the company’s skills profile to a higher value-driven offering.
BUSINESS STRATEGY
RS Software is aiming to be a boutique software company in payment solution space that can
provide a combination of domain knowledge, and price performance, while being passionate to
maximize customers’ competitiveness.
The fulfillment of the vision will be through the adoption following strategies:
To leverage the size and operational flexibility to fill the gap in the payment systems
IT solutions market and occupy a leadership position in the next three to five years
To build on the foundation of 13 years’ experience of the company in Payment
Systems and the software outsourcing business and move up the value chain – from
programming services to an end-to-end solutions partner capable of delivering
customized and /or shrink-wrapped products, Business Engineering as well as
specialized IT services
Acquire IP ownership through own research and development efforts as well as thru
strategic alliances and a potentially inorganic growth model
To enhance its existing competencies in payment systems thru knowledge acquisition
and management, to deliver higher quality solutions that reduces customers’ total cost
of ownership and time-to-market, thereby maximizing their competitiveness
The company has demonstrated success in achieving both growth strategy during the first ten
years of its existence, and then turn-around strategy between 2001 and 2004. R S Software is
now poised for consistent progress in implementing the high value added domain focused
strategy, bringing disproportionate incremental returns to all its stakeholders.
BUSINESS OF THE COMPANY
RS Software has a proven track record on projects development, maintenance, testing and
conversion work in IBM mainframe technologies and Client Server applications for some the
major global players. The company's technical expertise and depth cover a wide range that
include MVS, UNIX, LINUX, OS/400, Windows, Windows NT, Novell NetWare, CICS, DB2,
Oracle, SQL Server, Java, HTML, CFML, Cobol, C, C++, VC++, VB, Pearl, Sybase, ASP,
Assembler, JD Edwards, ACCESS, ADABAS and Natural. The Web services offered by RS
Software covers Website Development, Integration of Legacy System, Integration of third
party products and services, Internet-based application development, Website and database
administration. The tools used by the company in web technology include a varied range of
products from Allaire Coldfusion, Allaire Spectra, Oracle dot Com Suite, EJB J2EE, Microsoft
Transaction Server, Visual Café, COM, DCOM, JavaScript and VBScript.
55
RS Software’s core competencies in terms of technical services are listed below:
Services
The Company classifies the type of business it does with its clients into three key categories:
a) IT Consulting: IT Strategy, Architecture, Requirement analysis and design
b) Applications Management - Software development, Maintenance, Testing
c) Professional Services
RS has 42 customer engagements today, out of which in 83% of cases the company manages
the applications. In another 5% of the cases, it is carrying out IT consulting work and in 12%
of the cases, the company is executing professional services.
IT Consulting
Identify the customer’s pain points, and opportunities for improving productivity &/or
margins and offering price-performing (competitive) solutions to the customer’s customers
Work out the overall IT strategy and the architecture for implementing the strategy, and
propose solutions. This also includes risk analysis & mitigation, and offshorability.
Delve deep into the customer’s business space, understand the applications, and design
the specs for the Applications Management efforts.
Applications Management
Development
RS has built the capability to be the vendor of choice by offering Development practices that
involve:
Requirements analysis and transfer of domain knowledge
Development and testing
Implementation and support
Proven project management capabilities
Availability of diverse technical skill sets with cross platform exposure
Preparation of development life cycle documentation Metrics and Causal Analysis of
Development Issues
Maintenance
Maintenance Services are long-term engagements capitalizing on RS Software’s expertise to
deliver the following:
24 x 7 support
Help Desk Support
Pre-emptive, long term resolution of production problems
Production Implementation
Change Request Management
Defect Repair
Service Request Processing
Enhancements/Modifications
Application Documentation
Maintenance Documentation
56
Root Cause Analysis
Testing
RS Software’s has established a testing process through usage of automated testing tool which
has helped customers reduce cost of long term maintenance due to improved quality. The
Company possesses professionals having exclusive experience in testing only.
RS Testing Services focus on comprehensive testing support of new development and
enhancements including:
Integration, System, Regression, Cross System and Performance Testing
Maintenance of test beds, test cases, test scripts providing increased reuse and
repeatability
Definition of the metrics to measure process capabilities
Professional Services
•
Sourcing and supplying the skills required (to the client); ensuring fast turnaround time
and proper skills match to fulfill the requirement
Distribution of Revenues (04-05)
Technology Platform
Web
15%
Systems Netw orking
Softw are
2%
Others
6%
0.3%
Legacy Systems
Client/Server
Web
Client/Server
1%
Legacy
Systems
76%
Systems Software
Networking
Others
Project Type
Netw ork
Support
2%
Others
15%
Development
29%
Conversion
10%
Testing
8%
Development
Maintenance
Testing
Conversion
Maintenance
36%
Network Support
Others
57
Global Execution Model (GEM)
RS Software was established with a clear focus of providing outsourcing services to its global
clientele from an offshore delivery standpoint. Over the years, it has not only perfected its
delivery process but has also
evolved
a
global
delivery
capability while benchmarking its
services
against
international
standards and best management
practices.
A
global
delivery
Offsite
Onsite
capability has now matured with
GEM
the increasing demands to service
a variety of client needs. The
company has in place a GLOBAL
EXECUTION
MODEL
(GEM)
providing services in onsite,
offsite
and
onsiteoffshore
modes in different countries that
have
language
and
cultural
Onsite
variations, supporting businessOffshore
critical applications and meeting
stringent service levels.
Onsite
Projects, which involve iterations and mandate high interactions with users, are usually
serviced with consulting staff at client locations.
The consultants work at client premises and under the direct supervision of client managers.
The client retains complete project control and maintenance. This model is best suited for
short-term requirements of specialized personnel. The client does not have to directly recruit
people and inflate its payroll.
Offsite
Projects, which need quick ramp up of a team and require quick deployment under close
supervision of client manager, an Offsite Delivery process is usually opted for. This is often
taken as a pilot experience before initiating an offshore project.
In this model, RS Software provides services from its own location in the client’s country using
the existing infrastructure. Here, though the price metric is equivalent to the onsite mode
mentioned above, there is significant savings for the client in terms of the client’s
infrastructure usage. In addition the client considerably saves on management resources
required in the previous option.
These rules are not hard-coded and a mixed approach is possible.
Onsite
Offshore
Projects which are big, long duration and well defined, are usual candidates for offshore
outsourcing. In this model, the project team is split into two, one stationed at the client
location and the other based at offshore, in the computer centers in India.
The onsite team carries out the task of client communication, analysis, review, installation and
user acceptance testing. The offshore team is responsible for design, development, and
testing. The final delivery to the client is always through the onsite team.
A part of the onsite team after analysis and review stage returns and works with the offshore
team imparting the necessary training to the offshore team and ensuring a smooth transition
and knowledge transfer.
The network communication plays a very important role over here, which may be through
dedicated links, VPN, FTP etc. In this approach, although the teams are physically apart but
58
both work in union. When a client decides to go offshore - it usually leverages the time
difference parameter with the India delivery center enabling a longer virtual workday and also
the price performance of a low-cost economy.
59
Infrastructure
The Company has a separate Facilities Management Group for smooth operation of hardware,
software and network at multiple development centers in India. This includes resource
allocation, installation, fine-tuning, troubleshooting and maintenance.
Currently RS Software, at its Kolkata setup uses Active Directory infrastructure for all types of
services like File, Print, Web, and Internet etc. Couples of other servers are used as DNS, Mail
server, Web server, database and authentication servers. Some of these servers are in the
public domain and some of them are in local domain for security reasons. A time-tested
firewall policy is keeping RS reasonably secure from any data security threats from public and
private domain.
Kolkata office is having IPLC (International private leased circuits) links to USA to cater better
and speedy service to their valued customers. A separate 512 KBPS leased Internet link is
used for Internet service for every employee of the organization. High-speed optical fiber is
used to connect several development centers that are in close proximity. Layer 3 Switch
based architecture and structured cabling has given a new dimension to LAN in terms of
network performance and data reliability.
Some of the key features of the company’s infrastructure are as follows:
Network Topology
The current network infrastructure has several VLANs, L2 and L3, for various projects. LAN
segments use STAR topology with Ethernet 10/100BASE-T) based technology.
Network Protocols
TCP/IP is the base Network protocol of RS.
Network Operating Systems
RS uses Novell NetWare versions 4.10 and 4.11, Windows 2003, AIX, and Linux for all the
production servers of the company. Windows 2K Professional and Windows XP as desktop OS.
Network Security Administration
Time tested Checkpoint Firewall, Intruder Detection System and Content Inspection are
implemented for better security infrastructure apart from various security features of
Operating Systems for system and network administration.
Other Links
•
For a particular client, a Global leader in the Credit card sector, the company has a
2MBPS IPLC ATM link from Kolkata to US, out of which 1 MBPS is being used as data
and the rest 1 MBPS is used for Voice Communication.
•
1.5 Mbps IPLC link from Calcutta to Milpitas Office in USA.
•
Voice over IP (VoIP) 1.5 Mbps IPLC between US and Kolkata office for the daily
requirements of the company.
•
128 Kbps IP-VPN link between USA and Kolkata for secure communication between RS
and other clients.
•
512 KBPS Internet Leased Line for incoming mails and Web Browsing
60
ISDN
The Company has 4 BRI ISDN connections at different locations that are used as backup for
leased lines.
Video Conferencing
RS possesses a state-of-the-art VC facility at RS between the US office and Kolkata Office of
the company.
At United States
The Company has one T1 Internet leased line from AT&T.
UPS system
Power cut is a rare phenomenon in the Electronic complex where the development centers are
located but still RS has an online UPS system that works for more than 1 hour in case of any
power cut. Beside that it possesses generators which starts within few min just after the
power cut.
Information Security
The Company is following BS7799 standard for information security. Under this umbrella, it
possesses Encryption, Intrusion Prevention system, Business Impact analysis, Business
Continuity plan etc.
Disaster recovery plan
Currently RS Software uses LTO2 for daily data backup. A strong and well-defined
backup/disaster recovery policy is in place. It keeps 2 sets of backup media for critical data
and distributes among 2 different places. Also, have RAID 5 in place. The Company has
recently implemented Network Area Storage for advanced backup system.
Telecom facility
RS uses EPABX system, fax, and tele-conferencing facility. The telephone network is fairly
reliable with undisturbed service round the clock.
SOME OF THE CRITICAL SUPPORT SERVICES
Quality & Benchmarking
From the very inception, Quality has been a major focus area of RS Software – with a
conscious effort to create a higher degree of awareness about Quality Management System in
the organisation.
RS benchmarks its Quality Management System with internationally accepted Quality Models
like ISO 9001:2000, SEI-CMM & P-CMM. The Information Security practices are certified under
BS7799.
A Process driven architecture is maintained within the organization. Each business discipline is
defined as an appropriate process and is headed by a process owner. Quality is an umbrella
process that permeates all business disciplines. Each process owner is empowered with
accountability to implement his/her process and is encouraged to disseminate the same
culture. Internal audits and reviews of all projects & support processes are conducted at
regular intervals.
The Quality & Benchmarking (Q&B) Group at RS comprises of the Software Quality Assurance
(SQA) and the Software Engineering Process Group (SEPG)
61
The SQA is the custodian of all company process assets and facilitates achievement of
customer satisfaction through effective process implementation. It also ensures that processes
are interlocked, owned by users and continuously improved.
The SEPG is the focal point for process definition and improvement. Composed of line
practitioners, who have varied skills, the group is at the center of the collaborative effort of
everyone in the organization who is involved with software engineering process improvement.
This group conceptualizes and designs tools to measure and increase the overall process
capability of the organization.
In RS, every project has a Quality Assurance Representative (QA Rep) who is an expert in
technology as well as a specialist in software engineering.
The Q&B Group tracks the adequacy of the various software development activities through
periodic audits and reviews conducted by experienced professionals.
Training & Development
Training and Development function (T&D) at RS enables project professionals to gain
appropriate knowledge and skills required to perform current assignments and develop
competencies for future assignments. The T&D function provides a learning environment and
facilitates execution of training programs, both in-house and with the help of appropriate
external organizations. T&D also maintains a library that has technical as well as non-technical
journals, magazines, reference materials etc.
Recruitment & Allocation
RS does not have a defined process for allocating required person power resources for
projects. Resource Organisation Consulting Services (ROCS) is responsible for fulfilling all
these manpower requirements. The professionals on joining RS would go through the normal
RS induction process of 5 days whereby they are inducted into the organization. RS values
systems, Quality procedures, processes and practices to name a few. Thereafter they are
allocated to the Projects and are given project specific induction training.
Human Resource
The HR policies at RS have been framed and implemented keeping in mind that it wishes to
motivate and retain the best performers in the company. HR believes satisfied employees are
vital for customer-delight. Therefore, HR aims for maximum employee satisfaction through
continuous and planned performance management, open communication, transparent policies
and ethical work-practices. HR also promotes and encourages sense of belonging, teamwork,
efficiency and result-orientation among employees through suitable compensation, rewards
and recognition.
MARKET OPPORTUNITY FOR PAYMENT SOLUTIONS
In countries like USA, cards have the major share of payments and they are expected to grow
from $2.1 trillion in 2003 to $3.6 in 2008, a CAGR of about 11%. The cards have about 35%
market share today, which will grow to about 49% by 2008. (Nilson, December 2004)
Among the cards segment, while credit and debit (in all its forms) still has the largest market
share (about 96%) today, it is likely to reduce to about 94% by 2008 – the share going to
prepaids which have the highest growth rates (about 20% as predicted by Nilson) among all
payment instruments. The Pelorus group predicts a much higher growth, about 30%, in this
segment.
The Payments Solutions industry has the following major players:
Card issuers and Issuing Processors
Card acquirers, Acquiring Processors and ISOs
62
Card associations and Network providers
Gateways and speciality processors
ACH Operators and networks
Product vendors
Card Issuers: The major opportunity in this space is for services for the large issuers and a
product-based solution for mid-size and smaller issuers.
As per estimates that the total volume of services in the US in the issuing segment is about
$550 million, which is being met thru internal resources (employing about 5500 FTEs). With
an (estimated) outsourcing potential of 30%, the total possible outsourcing business is about
$165 million. The presence of a large number of providers in this segment makes it difficult to
take a leadership position immediately. The Company expects to take a partial share of about
5% of the services segment by 2010 giving us about $8 million of revenue. The estimated
products revenue from US and overseas would be around $31 million.
Card Acquirers: The major opportunities in this space in US is for services for the top ten
acquirers and products-based solutions for the next 30 or 40 acquirers and large ISOs.
The company estimates the total volume of services in the top ten acquirers in US is about
$550 million annually, being currently met thru internal FTEs (about 5500). Considering a total
outsourcing potential of 30%, the potential outsourcing would be about $165 million.
Assuming R S is able to take a leadership position, since there are only a handful of providers
in this segment, the projected business of the company will be $32 million (with a 20%
market share) by 2010.
The mid-size and smaller acquirers have a dominant need for products and product-based
solutions. The total investment potential in this segment in IT is about $68 million. The
company expects to take a leading market share of about 20% the revenue from this offering
to be about $14 million.
Payment Networks: VISA is the dominant player in this space and RS has a strategic
partnership with VISA – which is a primarily services engagement and is expected to continue
in future. There are three more credit card networks of significance in US and about 20 more
EFT and ATM networks. The company expects them to also have services needs.
HOW RS STANDS OUT IN THE MIDST OF COMPETITION
RS Software believes that the following are its strengths that differentiate them from its peer
group companies:
The robust Process Architecture of the Company.
Large Payment applications are still hosted on mainframes and there is a huge demand for
transition of these applications from Mainframes to newer technologies. RS Software
started as a mainframe shop and over the years the company has graduated with the
industry technology cycle. Therefore on one hand the company has recognition as a
mainframe specialist & on the other hand it has excellent skills in the newer technologies.
Proof of the pudding is in the pie. There has been a decade long standing association
Inovant. The delivery capabilities coupled with strong process architecture, which has been
leveraged by them for the last decades have given enough confidence with the world
largest Payment Network provider to jointly promote an ODC.
The share holding pattern of RS promotes its establishment as a non-volatile body, which
is not easy for acquisition unlike the risks of running organizations with Venture funding.
Advantage Bengal: As the company passes through a dynamic change in the Perceptions
of Bengal, the company is in a best position to attract the talent. Bengal has a much lesser
attrition rate than compared to other locations.
63
Organizations are today looking for framework architectures rather than fully blown up
Products which they can customize as per their own requirements and stringent security
features built in which are proprietary to them. RS is well positioned in that sphere to
provide readily customizable frameworks.
Most CIO relationships are managed at the senior most level of the organization showing
utmost commitment of the Senior Management. Everyone in top Management pitches in
for relationship building.
As offshore outsourcing is more strategic to clients than opportunistic, The Company is
focused towards penetrating large accounts who would grow their business with us on a
long term. Deeper relationships with fewer partners have led to long-term stable business
integrating multiple competencies; Fixed-fee, Single-bid, No RFP situation & CEO and
Executive team sponsorship.
The focus on technologies like Biometrics & embedded in payments industry is the next
focus of the Industry. With its deep expertise in the area of embedded development,
components and tools in the biometric space, The company are well positioned to address
the ever growing demands of Biometric based secured applications in the payments
industry.
Itss association with one of the worlds largest retail industry has taken the right kind of
growth curve where the company anticipates growth in terms of revenue as well as in
terms of domain leveraging making the necessary impetus to be one of the leaders in the
retail payment segment.
The size of the organization is to the advantage of the company to have the right kind of
ramp ups during project & customer demands.
ESOS, recognitions and long service awards are also means of retaining the best talents,
which have been a practice with RS software for long.
The company earns around 85% of its revenue from top 5 clients of the company located all
around the globe.
Region wise details of export made by the company during the period AprilSeptember 2005.
Item/Product
Export Direct /
through
Intermediary
Software Development
Direct
Countries
Currency
Amount in
Foreign
Currency
Amount in
INR (Rs.
Lacs)
USA
USD
$7,384,217
3749.24
Software Development
Direct
UK
GBP
£408,713
649.09
Software Development
Direct
France
GBP
£34,928
27.72
Software Development
Direct
UAE
USD
$39,000
16.96
Software Development
Direct
Japan
YEN
JPY 3,252,257
12.90
TOTAL
4455.89
Marketing Infrastructure
The sales activities are lead by a dedicated and experienced sales team having both an onsite
and domestic presence. The sales team is supported by the MD, the VP (Corp) and a host of
business support managers who have the necessary techno-sales skills to interact with CIOs of
client organizations. Back-end marketing support is provided by a dedicated corporate
communications team at offshore, and business managers who have the necessary project
and account management bandwidth. The company regularly participates in international
trade shows for showcasing its offerings, and interacts with leading consultants and subject
matter experts in the payments business. The company’s website is regularly updated to
reflect the company’s vision and outlook in the payment systems domain, where its strategic
focus lies. Since a large volume of revenues come from existing business, account
management is taken up seriously and is complemented through regular interlocks between
64
sales and execution. Feeds on market research data and industry outlook are provided by a
dedicated market research team based at offshore which also works closely with the corporate
communications group to create a steady flow of tools and collateral for use by the sales
team.
Key Industry- Regulations and Policies
No specific Industry Regulation or Policy is in effect.
SWOT analysis of RS.
Strength
Long term engagements with some of the leading companies (including the world’s brand
name players in the Payment Systems, Retail and Embedded space
Long association with leading accounts has resulted in acquiring of core competencies
particularly in Payment Solutions (capabilities showcased at international trade meetings,
resulting in building new clients.
Strategy for focused penetration in the payment systems market is well supported by the
Mckinsey Nasscom report recommendations.
Robust and continually improving sales engine; healthy short-term order book & long term
pipeline.
Well-tested and mature process architecture that powers the company’s unique global
execution model.
Small paid up equity capital that will reward disproportionately, with projected increases in
profitability.
Weaknesses
Early stages of single domain strategy implementation.
Talent attraction and retention for SMEs is a larger challenge as compared to tier 1
companies.
Opportunities
Technology adoption in payments space is creating huge growth in electronic payment
transactions, which in turn builds significant growth prospects for companies like R S
Software.
Existing relationships with world leaders in payment space, vindicated by repeat business
for several years, create large opportunities for account penetration.
So far, the geography focus has been US specific. Large yet untapped opportunities exist
in the payments space in the European and Asia Pacific markets.
Financially, the company is turning around fast, creating opportunities for making
investments to achieve growth higher than industry average
Threats
Continuing talent shortage.
High talent attrition/turnover in the market
Inadequate management talent to meet high growth targets.
65
VIII. HISTORY OF THE COMPANY
BRIEF HISTORY
The company was originally incorporated as R. S. Software (India) Private Limited on 2nd
December 1987. The Company was converted from Private Limited to Public Limited
Company u/s 43A of the Companies Act 1956 with effect from 13th August, 1990 and fresh
Certificate of incorporation was obtained consequent upon the change on 13th August, 1990.
Major Achievements of the company
YEAR
ACHIEVEMENTS
1990
Incorporated in Kolkata, India.
1991
Installation of IBM Mainframe 390
Received the first US Client Contract
1994
Company went into a Public Issue of 2550500 Equity Shares of Rs.10/each at a premium of Rs.10/- per share
Listing on major Indian Stock Exchanges
A wholly Owned Subsidiary of the company was set up in USA.
Beginning of offshore-onsite relationship.
Awarded ISO 9001 certification by KPMG
2000
Assessed at SEI CMM Level 4 by KPMG
Assessed at PCMM Level 3 by Q-Labs and KPMG
A wholly Owned Subsidiary of the company was set up in UK.
2003
Awarded ISO 9001:2000 certification by KPMG
2004
The company decided on making Payment Systems chosen as a strategic
business direction
ODC with the largest customer of RS.
Awarded BS7799 certified by KPMG
2005
Main objects of the company.
1. To carry on the business of manufacturing, developing and trading in Software and
providing technomanagerial consultancy of any kind for the manufacture and/or
development of Software; to provide computer Engineers, system analysts for
development of Software at Customers’ location both in the domestic and export markets;
to undertake assignments for development of Software at the Company’s location and to
sell both in India and abroad; procuring and installation of hardware, whatsoever, from
indegenous market or from abroad for Customers.
2. To carry on research and developments work for industrial, agricultural and minerals,
productivity and methods of production, matters and problems relating to accountancy,
business management, distribution, marketing and selling and to collect, analyse, examine
prepare, formulate, publish, distribute and circulate data, statistics, reports and
information relating to any type of business, trade, industry, sports, education, society,
cinema or real estates and to promote or propose such methods, procedures and
measures as may be considered desirable or beneficial for all or any of the object of the
company and for extending, developing and/or improving any type of business, trade,
estate, industry, commerce, organization, methods, techniques, technical know- how,
66
patents, trade makers and, procedures to consider and evaluate problems relating to
administration, management, manufacture, production, storage, distribution, finance,
marketing, and sale and/or relating to the rendering of any service.
3. To acquire by purchase, lease, exchange, hire or otherwise develop or operate land,
buildings and hereditaments of any tenure or description including agricultural land,
mines, quarries, tea or coffee gardens, farms, gardens, orchards, groves, plantations and
any estate or interest therein, and any rightoveror connected with land and buildings so
situated and develop or to turn the same to account as may seem expedient and in
particular by preparing building sites and by constructing, re-constructing, altering,
improving, decorating, furnishing and maintaining hotels, rooms, flats, houses,
restaurants, markets, shops, workshops, mills factories, warehouses, cold storages,
wharves, godowns, offices, hotels, gardens, swimming pools, play-grounds, buildings,
works and conveniences of all kinds and by leasing, hiring or disposing of the same.
AMENDMENT IN MEMORANDUM OF THE COMPANY
SL No.
1
2
3
3
4
5
6
Amendment to the Memorandum of Association
Increase in the Authorised Capital from 10 Lacs to 150 Lacs
Conversion from Private Limited to Public Limited Company u/s
43A of the Companies Act 1956
Change of situation of Registered Office of the Company
Increase in the Authorised Capital from 150 Lacs to 500 Lacs
Increase in the Authorised Capital from 500 Lacs to 800 Lacs
Increase in the Authorised Capital from 800 Lacs to 1500 Lacs
Increase in the Authorised Capital from 1500 Lacs to 3500 Lacs
Date
of
Amendment
31.05.1990
13.08.1990
13.11.1991
25.11.1993
22.08.1995
22.07.1998
24.07.2001
SUBSIDIARIES OF THE COMPANY
Responsive Solutions Inc.
Responsive Solutions Inc was incorporated on 9th June 1994 as a wholly owned subsidiary of
RS Software (India) Limited under the Laws of the State of California. The registered office of
the company is located at 1900 McCarthy Boulevard, Suit 103, Milpitas, CA 95035, California.
Responsive Solutions Inc is engaged in development of software.
Board of Directors:
The directors on the Board of Responsive Solutions Inc. as on 30th Sept 2005 are:
Mr.Rajnit Rai Jain.
Mrs.Sarita Jain.
PARTICULARS
Sales and other income
Profit/Loss after tax
Equity capital
Reserve and Surplus
Profit/Loss per equity share
Book Value per equity share
Six months ended Sept.30,
2005
42.05
(18.13)
218.10
(0.04)
0.09
67
(In Rs. Lacs)
Year ended March 31,2005
88.94
(18.51)
218.10
(0.04)
0.13
RS Software UK Limited
RS Software UK Limited was incorporated on 18th July 2000 as a wholly owned subsidiary of
RS Software (India) Limited. The registered office of the company is located at Suite 510, 78
Cannon Street, London EC4N 6NQ. RS Software UK Limited is engaged in Development of
Computer software.
Board of Directors:
The directors on the Board of R. S. Software Uk Ltd. as on 30th Sept 2005 are:
Mr.Rajnit Rai Jain.
Mr.Kunal Sen.
PARTICULARS
Sales and other income
Profit/Loss after tax
Equity capital
Reserve and Surplus
Profit/Loss per equity share
Book Value per equity share
Six months ended Sept.30,
2005
(0.0194)
0.0008
0.24
(0.0194)
0.24
(In Rs. Lacs)
Year ended March 31,2005
Shareholders Agreements
The Company has not entered into shareholders Agreement as on date.
Financial Partners
The company has no financial partners.
68
(0.0173)
0.0008
0.27
(0.0173)
0.27
IX. MANAGEMENT OF THE COMPANY
The details of the Board of Directors of the company are as follows:
Name,
Address
and
Designation
Mr. K. S. Bhatnagar
Chairman & Non Executive
Director
S/o Late Mr. G.S. Bhatnagar
31, Chitra Vihar, Trans – Yamuna,
Delhi – 110092
Occupation
Retired
Mr. Rajnit Rai Jain
Managing Director
S/o Late Jagdish Rai Jain
2B, Sarat Bose Road
Kolkata – 700 020
Occupation
Industrialist
Maj. Gen. A. Balasubramanian
Non Executive Director
S/o Late Mr. K. Arunachalam
1, Oliver Road, Chennai - 600 004
Occupation
Retired
Mr. Shital Kumar Jain
Non Executive Director
S/o Mr. Daulat Ram Jain
5/10, Second Floor,
Shantiniketan,
New Delhi – 110 021
Occupation
Retired
Mr. S. Khasnobis
Nominee Director
S/o
Late
Nitish
Chandra
Khasnobis
A-11,Perigrene Appartments
400
Veer
Savarkar
Marg,
Prabhadevi
Mumbai – 400 025
Occupation
Service
Mr. Jonathan Kalman
Non Executive Director
S/o Jerome
1200River Road, Suit 1302,
Conshohocken, PA 19428
Local Address:
C/o R.S. Software (India) Ltd.
A2, 234/3A, A.J.C. Bose Road,
Kolkata – 700 020
Occupation
Businessman
Date
of
appointment
24/12/1990
02/12/1987
Age
(years)
80
years
Other Directorship
•
•
Clutch Auto Limited
Sahara
(I)
Corpn. Limited
Finance
49 years
NIL
24/12/1990
78 years
•
Pace Automation Limited
19/02/2001
66 years
•
•
Centurion Bank Limited
26/04/2005
Clutch Auto Limited
51 years
NIL
21/10/2005
69
44 years
NIL
Mrs.Sarita Jain
Non Executive Director
W/o Rajnit Rai Jain
2B,Sarat Bose Road,
Kolkata-700020
Occupation
Industrialist
20/01/1988
38years
NIL
There are no outstanding litigations, disputes and defaults etc. pending against the directors
of the company.
BOARD OF DIRECTORS
Mr. K. S. Bhatnagar is a former Secretary, Govt. of India, Department of Company Affairs &
Chairman, Company Law Board. He has been on the Board of many noteworthy companies
and has acted as the Chairman in many of them. He is the current Chairman of the Company.
Mr. Bhatnagar is M.A. (Eco.), M.Com. LLB and qualified the distinguished program in
Marketing Management with Harvard Business School (USA) and is a Fellow of Company
Secretaries of India.
Mr. R. R. Jain is a qualified B.S. and MBA with specialization in Marketing and Information
Systems. He started his professional career in Software Consultancy in Los Angeles, USA and
worked for several years as an independent consultant in the early days of computerisation. In
December 1987 he decided to become an entrepreneur and incorporated R S Software India
Pvt. Ltd. a distinguished software export company from India, and in 1999 he was appointed
as chairman of Nasscom.
Maj. Gen. A. Balasubramanian (Retd.) is a member of Institute of Electronics and Radio
Engineers – UK. He has worked with Attachment Marcony Works UK in the field of advanced
electronics, Institute of Armament, Ministry of Defence in the field of guided missiles and was
also attached with IBM, USA. He joined RSSIL as a director on 24/12/1990 and his
contribution to the technical and various other aspects of the functioning of your Company has
been very considerable.
Mr. Shital Kumar Jain is an MBA from Indian University, USA and has earlier done MA, BA
(Hons.) (Economics) from Punjab University and has worked in Citibank for almost 32 years.
He has spent several years overseas in Senior Management positions in Hong Kong, Taiwan,
Phillipines, Thailand and Canada. He is also currently a Director in Centurion Bank Ltd.
Mr. S. Khasnobis is the President and Chief Operating Officer of Asset Reconstruction
Company (India) Limited (ARCIL) and is in charge of the day-to day operations of the
Company. He is on deputation from ICICI bank and is designated as General Manager at ICICI
bank. He is a Mechanical Engineer, with wide experience in the Banking sector and has been
with ICICI Bank Limited (erstwhile ICICI) for the last 22 years. He has long experience in
Corporate Credit, Relationship, Project Finance, Structured & Corporate Finance and
Technology Funding.
Mr. Jonathan Kalman, is the Founder Chairman of a Company named Katalyst based in US.
He has done B.S. Engineering in Applied and Engineering Physics from Cornell University, US
and MBA from Kellog School, North Western University, USA. He has significant experience in
the Payment Systems Industry and amongst his various strength is the knowledge of the US
Capital Market and his significant network of contacts. He began his career at IBM where he
held Sales, Technology and Management positions. He is an advisor to both Public and Private
Companies in US, Europe, Latin America, Israel and Canada on the issue of growth,
technology and investments.
Mrs. Sarita Jain is M.A. in English Literature and Diploma in Mass Communication, has been
a Director with the Company since its inception.
70
BORROWING POWERS
The Board may, from time to time and at its discretion, subject to the provisions of
Sections 58-A, 292, 293 and 370 of Act and the Regulations made there under and
directions issued by Reserve Bank of India raise or borrow, either from the Directors or
from elsewhere and secure the payment of any sum or sums of money for the purpose of
the Company.
The Board may raise or secure the repayment or payment of such sum or sums in such
manner and upon such terms and conditions in all respects as it thinks fit, and, in
particular by the Issue of bonds, perpetual or redeemable, debentures or debenture-stock,
or any mortgage, or other security on the undertaking of the whole or any part of the
property of the Company (both present and future) including its uncalled capital for the
time being.
Any debentures, debenture-stock, bonds or other securities may be issued at a discount,
premium or otherwise and with any special rights, as to redemption, surrender, drawing,
allotment of shares, appointment of Director and otherwise, Debentures, debenture-stock,
bonds and other securities may be made assignable free from any equities between the
Company and the person to whom the same may be issued. Provided that debentures with
the right to allotment of or conversion into shares shall not be issued except in conformity
with the provisions of Section 81(3) of the Act.
Save as provided in Section 108 of the Act, no transfer of debentures shall be registered
unless a proper instrument of transfer duly stamped and executed by the transferor and
transferor has been delivered to the Company together with the certificate or certificates
of the debentures
Terms of Appointment & Compensation of Managing Director / Executive Director
Name of Directors
Contract/Appointment
Letter/Resolution
Details
Remuneration
of
Mr. R. R. Jain
Originally appointed on
01/10/1987
and
reappointed for a period
of
three
years
w.e.f
01.10.2005.
Total consolidated salary
of Rs 1,50,000.00 p.m.
Term
Managing
Director
5 years
CORPORATE GOVERNANCE
SEBI, through circular number SEBI/ CFD/ DIL/ CG/ 1/ 2005/ 29 dated March 29, 2005
revised the date for ensuring compliance with Clause 49 of the listing agreement as per
circular no. SEBI/ CFD/ DIL/ CG/ 1/2004/ 12/ 10 dated October 29, 2004 from April 1, 2005 to
December 31, 2005. The Company undertakes to take all steps as may be necessary to
comply with the further requirements for corporate governance, within the time frame allowed
by SEBI.
The Board of Directors of the Company consists of a promoter Director who is the Vice
Chairman & Managing Director, one Non-Executive Nominee Director representing ICICI who
is also an Independent Director and 5 Non Executive Directors, of which 4 are independent.
The Chairman is a former Secretary, Government of India, Department of company Affairs &
Chairman of Company Law Board, who is among the 5 Non-Executive Directors.
The Audit Committee functions as a bridge between the administration of the Company and its
Board in all financial and accounting matters including budget. It also interacts between the
Board, Statutory Auditors and Internal Auditors. The Committee oversees the Company’s
financial reporting process and ensure that the financial accounting rules and the information
on the subject furnished to the Board or to any other governmental authorities is correct,
appropriate and the image of the Company is projected appropriately before its stakeholders.
71
The basic objective of the Audit Committee are to maximize the utilization of Company’s
financial resources, to promote it’s plans and objectives while fulfilling its obligations towards
public accountability. It also ensures that the Financial reporting, internal control and
monitoring mechanism is transparent, adequate and fair. In its review and appraisals, the
Audit committee interacts both with the Statutory Auditors and the top Management on any
matter regarding changes in accounting policies, procedures and practices and presentation of
the Audit Reports to the Board and the Shareholders. It also ensures that there is due
compliance of the accounting philosophy and accounting norms as laid by the Institutes of
Chartered Accountant, Company Secretary, Dept of Company Affairs and / or SEBI. The Audit
Committee also reviews the Company’s financial and risk management policies, complaints of
substantial defaults in matter of payments to the creditors, debenture holders and the
shareholders.
The composition of Audit Committee is as follows
Designation
Chairman
Name
Mr. K. S. Bhatnagar
(Non Executive /
Independent Director having financial &
accounting knowledge)
Mr. S. K. Jain (Non Executive/ Independent
Director)
Mr. S. Khasnobis (Nominee Director of ICICI,
Non Executive / Independent Director)
Members
The Company Secretary of the Company, Mr. Kunal Sen, attends its meetings and assists the
meeting and he may also be co-opted as a member incase of need.
Shareholders Committee
Meetings of such Committee are held on monthly basis and the Shareholder’s complaints and
grievances are reviewed in detail by the committee and prompt and effective directions given
to the Registrar for proper disposal.
The Share Transfer -cum-Investors Grievance Committee consists of:
Designation
Chairman
Members
Name
Mr. K. S. Bhatnagar
Mr. R. R. Jain
The Company Secretary of the Company, Mr. Kunal Sen, attends its meetings and assists the
meeting and he may also be co-opted as a member incase of need.
Compensation / Remuneration Committee
This Committee recommends and review the Compensation packages of the individuals and
grant of ESOPs to eligible candidates. The Compensation Policy is directed towards rewarding
performance based on review of achievements on a periodical basis and has the overall
approval from the Board of Directors.
The Compensation / Remuneration Committee of the Company Comprises the Vice Chairman
& Managing Director, Mr. R. R. Jain and 2 Independent Non Executive Directors.
Designation
Chairman
Member
Member
Name
Maj. Gen. A Balasubramanian (Retd.) (Independent Non-Executive
Director)
Mr. R. R. Jain (Vice Chairman & Managing Director)
Mr. S. K. Jain (Independent Non executive Director)
72
INTEREST OF PROMOTERS/DIRECTORS
All the Directors may be deemed to be interested to the extent of reimbursement of expenses,
if any, payable to them under the articles. The Directors 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 a Director/ Member respectively and the shares if any,
out of the present Offer that may be subscribed for and allotted to them or their relatives or
any Company in which they are Directors / members of firms in which they are partners.
CHANGES IN DIRECTORS DURING LAST THREE YEARS:
Name of Director
Date of Appointment
Dr. P. K. Basu
Mr. S. Khasnobis
Mr. Jonathan Kalman
Date of
Cessation
29/01/2005
-
26/04/2005
21/10/2005
Reason
Resignation
N.A
N.A
DETAILS OF KEY MANAGERIAL PERSONNEL
S.
NAME
No.
1 Aniruddha Rai Chaudhuri
Age Designation Qualification
(Yrs.)
34
GM-Q&B
2 Anirudha De Choudhury
44
3 Bibek Shankar Das
42
GM-Corporate
Planning &
Development
VP-Corporate
4 Debasis Bandopadhyay
46
AVP-Projects
5 Kunal Sen
49
6 Prasun Maharatna
37
VP-Finance & LLB, FCA, ACS,
Company
MBA-Cambridge
Secretary
Manager HRM
M.Tech
7 Rakesh Srivastava
42
8 Sabyasachi Chatterjee
40
9 Sanjib Kumar Mukherjee
39
General
Manager
(Sales) USA
DGM & Chief
Technology
Officer
DGM-HRM
10 Vivek Chettur
43
Global
Sourcing Head
11 Debasis Gupta
35
DGM Finance
Previous
Employment
B.Com,
Globsyn Tecnologies
PGCACS, CQA
M.Sc
Globsyn Tecnologies
M.Tech
BE
BE, MBA
B.Tech
BSW, PGDPM
BE
Exp. (in
Months)
113
246
Tata Consultancy
Services
CTS
224
Pashupati Seohung
Limited
260
Jain Group of
Industries
Object Edge
Inc.,USA
138
M.N.Dastur &
Company Ltd.
196
Vedika Software
189
IIHT Ltd.
240
AICWAI,
Reliance Telecom
MBA(Finance) Limited
288
260
60
All the abovementioned key managerial personnel are permanent employees of the Company.
The remuneration of each of the key personnel is as per the statement pursuant to Section
217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules,
1975.
73
ORGANISATION CHART
Shareholding of the Key Managerial Personnel.
Name of Key Managerial Personnel
Mr.Kunal Sen
No. of Shares held
500
Except as stated in “Related Party Disclosures” on page 85 of this Draft Letter of Offer, and to
the extent of shareholding in the Company, the Promoters and promoter group of the
Company do not have any other interest in the business.
The key managerial personnel of the Company do not have any interest in the Company other
than to the extent of the remuneration or benefits to which they are entitled to as per their
terms of appointment and reimbursement of expenses incurred by them during the ordinary
course of business and to the extent of the Equity Shares held by them in the Company, if
any, and options granted to them under the ESOS.
Details of loans taken by key managerial personnel of RS
Except as stated otherwise in this Draft Letter of Offer, The company have not entered into
any contract, agreement or arrangement during the preceding two years from the date of this
Draft Letter of Offer in which the Directors are interested directly or indirectly and no
payments have been made to them in respect of these contracts, agreements or
arrangements or are proposed to be made to them. The Directors and the key managerial
personnel have not taken any loan from the Company.
74
Changes in the Key managerial employees during the last three years
Name
Designation
Sabyasachi Chatterjee
DGM & Chief
Technology Officer
Asst.Vice President
Business Support
DGM - Sales (UK)
Manager Sales
(UK)
Manager (HRM)
General Manager
Sales (UK)
Head-Global
Sourcing
Assistant Vice
President
(Projects)
General Manager
Sales (US)
Debasis Bandyopadhyay
Rakesh Srivastava
Pradyp Kanabar
Prasun Maharatna
Rajil Vohra
Vivek Chettur
Kalarab Ray
Rajil Vohra
Date of
Joining/Leaving
May 28th 2003
Reasons
December 10th 2003
Appointment
May 28th 2003
Invitee
Appointment
Appointment
May 28th 2003
May 28th 2003
Appointment
Appointment
July 19th 2005
Appointment
April 29th 2005
Resignation
December 2nd, 2005
Resignation
75
Appointment
X.
PROMOTERS
The present promoters of the company are Mr. Rajnit Rai Jain and his wife Mrs. Sarita Jain.
Rajnit Rai Jain, Vice-Chairman and Managing Director
A Science graduate and MBA from California, USA, Mr. Jain's outstanding
profile and innovative approach undoubtedly make him an exemplary
figure in the software industry. He has contributed significantly in building
the company’s services business in the payment, logistics and supply
chain domain in the US and European geographies. He is a member of
the past Chairman council in NASSCOM. In 1999, Ernst & Young
acknowledged his entrepreneurial success by conferring on him the top
20 'Outstanding Entrepreneur of the Year Award'. He is looking after the
entire functions of the company.
Sarita Jain, Director
Mrs. Sarita Jain has been Director, RS Software, since the company's
inception. She holds a Masters degree in English Literature and a Diploma
in Mass Communication. She is looking after the US subsidiary operations
in USA.
DETAILS OF PROMOTERS
Voter ID
Driving License No.
PAN No.
Bank Account Details
Passport Details
Residential Address
Mr. Rajnit Rai Jain
None
None
ACLPJI483B
Centurion Bank Limited
Kolkata Main Branch
Savings:0010354533001
B3059505
2B, Sarat Bose Road, Kolkata
Mrs. Sarita Jain
None
None
None
Allahabad Bank
International Branch, Kolkata
Savings: G-1196
B2953800
– 700 020
The company confirms that the PAN, Bank Account numbers and Passport Numbers have been
submitted to the Stock Exchanges on which the securities are proposed to be listed.
In August 1990, West Bengal Electronics Industry Development Corporation (WBEDIC)
participated in the Equity Share Capital of the Company along with Technology Development &
Information Company of India Limited (TDICI) and Risk Capital & Technology Finance
Corporation Limited (RCTC). TDICI is a venture capital firm promoted by ICICI & UTI and
RCTC is a venture capital firm promoted by IFCI & Credit Capital Finance Corporation Limited.
WBEIDC is a development financial institution of the West Bengal Government for promoting
the growth of computer and electronics industry in West Bengal.
As per the records of the company, WBEIDC is presently holding only 1100 number of shares
in the company. Therefore at the Board Meeting of RS held on the 28th of November 2005, the
Board passed a resolution approving that since the shareholding of WBEIDC in the company is
very negligible & the fact that they do not have any representation on the Board of the
Company, the inclusion of the name of WBEIDC as a part of the promoter group in the Draft
Draft Letter of Offer and other disclosures made by the company from time to time shall not
be indicating true and correct position and hence forth WBEIDC is not shown as a promoter of
the company in this Draft LoO.
76
Payment of benefit to promoters of RS Software (India) Limited
All the Promoters of the Company shall be deemed to be interested to the extent of shares
held by them and/or their and relatives which may be allotted to them out of the present issue
and are deemed to be interested to the extent of remuneration and perquisites being drawn
by them from the Company
Related Party Transactions
Related party Disclosures are given as notes to accounts in Auditors Report on page 85 of this
Draft Letter of Offer.
Currency of presentation
In this Draft LoO all references to ‘Rupees’ and ‘Rs.’ are to legal currency of India. US Dollar
amounts have been translated into Rupees for various periods and presented solely to comply
with requirements of the Clause 6.8.4 of the SEBI Guidelines. Investors are requested not to
rely on such translated amounts.
Dividend policy
The declaration and payment of dividends will be recommended by the Board of Directors and
shareholders, in their discretion, and will depend on a number of factors, including but not
limited to the earnings, capital requirements and overall financial condition.
77
XI.
FINANCIAL INFORMATION
AUDITORS REPORT
The Board of Directors
RS Software India Limited
Kolkata-700020.
Dear Sirs,
1. We have examined the financial information of RS Software Limited (the Company) as set
out in Annexures A to G attached to this report stamped and initialed by us for identification
and as approved by the authorized Directors pursuant to the resolution of the Board of
Directors of the Company, which has been prepared in accordance with Paragraph B (1) – Part
II of Schedule II of the Companies Act, 1956 of India (‘the Act’) and the amendments thereof
and the Securities and Exchange Board of India (Disclosure and Investor Protection)
Guidelines 2000 issued by the Securities and Exchange Board of India (SEBI) on 19 January,
2000 in pursuance to Section 11 of the Securities and Exchange Board of India Act, 1992 and
the related amendments from time to time thereto, to the extent applicable and in accordance
with your assignment dt. 8th December, 2005, setting out inter alia the scope of work relating
to the Draft letter of offer being issued by the Company in connection with its proposed right
issue (hereinafter refer to as “The Right Issue”).
UNCONSOLIDATED FINANCIAL INFORMATION
2. We have examined the attached restated Statement of Profits and Losses and the restated
Cash Flow Statement of the Company for each of the years ended 31 March, 2005, 2004,
2003, 2002, 2001 and 6 months period ended on 30th September, 2005 (Annexures A and C
respectively) and the restated Statement of Assets and Liabilities of the Company as at those
dates (Annexure B) together referred to as “ Summary Statements” together with the
Significant Accounting Policies and Notes to the Financial Statements set out in Annexure D.
3. These Summary Statements have been extracted from the audited financial statements of
the Company for the respective periods audited by us.
4. In accordance with the aforesaid SEBI Guidelines, also attached are:
(i) Statement of accounting ratios based on the adjusted profits relating to earnings per share,
net asset value and return on net worth - Annexure E
(ii) Statement of Dividend – Annexure F
(iii) Statement of Tax Shelters – Annexure G
(iv) Capitalization statement – Annexure H
(v) Principal terms of Loans and assets charged as security – Annexure I
CONSOLIDATED FINANCIAL INFORMATION
5. We have examined the attached summarized restated Consolidated Balance Sheet
Statement of the Company and its
Subsidiaries, collectively referred to as ‘the Group’ as set out in Annexure K as at 31 March 2005, 2004, 2003, 2002 and as at September 30, 2005 and the related Consolidated Profit
and Loss for years ended 31 March - 2005, 2004, 2003, 2002 and 6-month period ended 30th
September, 2005 (Annexure – J) and the Consolidated Cash Flow Statements for years ended
31 March, - 2005, 2004, 2003 and 6 -month period ended 30th September 2005 (Annexure L)
collectively referred to as the ‘Consolidated Summary Statements’ together with the
Significant Accounting Policies and Notes to the Consolidated Summary Statements set out in
(Annexure M) respectively, stamped and initialed by us for the purpose of identification.
78
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these summarized restated consolidated financial
statements based on our audit.
6. The Consolidated Summary statements, as set out in Paragraph 5 above, have been
prepared from the restated Financial Statement of the Company and its Subsidiaries, including
the notes on accounts viz. Responsive Solutions INC., USA (Annexure N) and RS Software, UK
(Annexure O). The financial statements of all the Subsidiaries have been audited by their
respective auditors for the half year ended 30th Sept 2005 and for the years 31st March
2005,2004,2003,2002. Our opinion is based solely on the reports of the respective auditors for
the half year ended 30th Sept, 2005 and for the year ended 31st March, 2005, 2004, 2003. and
2002.
7. Based on our examination of the aforesaid Summary Statements, we confirm that:
a) there are no restatements which are required to be made in the Summary Statements with
retrospective effect to reflect the significant accounting policies (Annexure D and M) as
adopted by the Company, other than restatements referred to in note 4 of Annexure – A and
note 2 of Annexure J.
b) there are no materials adjustments relating to previous year, which need to be adjusted in
Summary Statement in the period to which they relate, other than prior period items.
8. We conducted our audit in accordance with generally accepted auditing standards in India.
These standards require that we plan and perform the audit to obtain reasonable assurance
whether the financial statements are prepared in all material respects, in accordance with and
identified financial reporting framework and are free of material misstatement. An audit
includes, examining on a test basis, evidence supporting the amounts and disclosure in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a reasonable basis for our
opinion.
9. The Consolidated Financial Statements have been prepared by the Company’s management
in accordance with the requirements of the relevant Accounting Standards (AS) issued by the
Institute of Chartered Accountants of India, being AS 21 – “Consolidated Financial
Statements”.
10. In our opinion, the financial information of the Company, as attached to this report, after
making groupings/ adjustments have been prepared in line Paragraph B (1) – Part II of
schedule II of the Act and the SEBI Guidelines.
11. This report is intended solely for your information and inclusion in the Draft Letter of Offer
in connection with the proposed Rights Issue of the Company and is not to be used, referred
to or distributed for any other purpose without our prior written consent.
For Chaturvedi & Co.
Chartered Accountants
Nilima Joshi, FCA
Partner
Membership Number: 52122
Place: Kolkata
Date: December 19, 2005
79
Annexure-A
STATEMENT OF PROFITS AND LOSSES (AS RESTATED)
(Rs.in lacs)
2000-01
2001-02
2002-03
2003-04
2004-05
Half
Year
ended
30th
Sept
2005
10144.67
4.24
10148.91
5895.56
27.96
5923.52
6029.01
10.31
6039.32
5936.07
3.92
5939.99
8160.96
4.49
8165.45
4652.00
4.00
4656.00
3.03
0.00
0.00
0.00
0.00
0.00
613.91
398.71
250.44
289.15
182.04
69.00
5283.48
4217.49
3533.97
3665.23
5284.35
3110.00
2154.50
594.40
1473.85
543.88
1125.93
738.48
1284.38
709.21
1159.01
736.62
648.00
351.00
204.20
1090.25
2268.28
859.85
933.57
258.00
0.00
612.96
3.49
0.00
0.00
0.00
Year ended 31st March
PARTICULARS
Income
Sales
Other Income
Total Income
Expenditure
Purchases
Selling & Marketing
Expenses
Salary & Other Employee
Benefits
Administrative & Other
Expenses
Interest & Finance Charges
Depreciation &
Amortization
Provision for Doubtful
Debts
Provision for dimunition in
the value of investments
0.00
0.00
64.48
15.67
18.69
0.00
Total Expenditure
8853.52
8337.14
7985.07
6823.49
8314.28
4436.00
Profit/(Loss) before Tax &
Other Extraordinary Items
1295.39
(2413.62)
(1945.75)
(883.50)
(148.83)
220.00
120.52
105.25
10.20
6.05
0.00
0.00
1174.87
(2308.37)
(877.45)
(148.83)
220.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6.00
1174.87
(2308.37)
(1935.55)
(877.45)
(148.83)
214.00
Prior Period Adjustments
Profit/(Loss) before Tax
Provision for Taxation
Provision for Fringe
Benefit-tax
Profit/(Loss) after Tax
(1935.55)
Notes to accounts:
Treatment of various items adjusted in restated accounts
1. Prior period items: This represents adjustments in respect of items being material charges
or credits which arise in a particular period as a result of errors or omission in the
preparation of financial statements of one or more prior periods and/ or material
adjustments. These have been adjusted in the year to which they pertain.
2. Depreciation & amortisations include depreciation charges and miscellaneous expenses
written off.
80
3. Details of Miscellaneous expenditure charged to profit & loss account.
(Rs. In Lacs)
Nature of Miscellaneous
Expenses
Share issue expenses
Deferred marketing expenses
Total
2000-01
2001-02
6.72
0.00
6.72
6.72
818.41
825.13
2002-03
2003-04
6.72
1636.82
1643.54
6.72
0.00
6.72
2004-05
0.00
0.00
0.00
4. Change in accounting policy: Accounting Standard - 15 " Accounting for Retirement
Benefits in the Financial statement of employers" ---- In the accounting year 2001-02 the
company for the first time made a provision for leave liability based on actuarial valuation
as required by AS-15. No adjustment had been done to the profits of earlier years as the
effect had not been ascertained.
Annexure-B
STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED)
Sl PARTICULARS
For the Year Ended
2000-01
A.
B.
C.
D.
E.
F.
Fixed Assets:
Gross Block
Less: Depreciation
Net Block
Capital W-I-P
Investments
Current Assets, Loans &
Advances
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Other Current Assets
Total
Liabilities & Provisions:
Secured Loans
Unsecured Loans
Current liabilities &
provisions
Total
Net Worth
Represented by:
1. Share Capital
2. Net Reserves
Less: Misc. Expenses not
written off
Less: P&L Account
Net Worth
2001-02
2002-03
(Rs. In Lacs)
2003-04
2004-05
Half Year
ended
30th Sept
2005
2208.39
967.38
1241.01
5.00
163.300
3605.04
1217.57
2387.47
5.00
163.300
4379.26
1908.65
2470.61
5.00
98.82
4792.38
2772.11
2020.27
5.00
83.15
5025.77
3721.40
1304.37
5.00
64.45
5152.40
3979.40
1173.00
5.00
64.00
3439.91
454.99
2705.88
40.91
6641.69
814.68
171.58
243.57
596.04
1825.87
917.13
42.1
106.22
385.27
1450.72
1397.73
45.41
132.97
108.87
1684.98
1538.26
67.49
143.7
140.74
1890.19
1558.00
129.00
181.00
179.00
2047.00
2714.98
0.00
2568.13
0.75
3012.68
0.00
3591.56
21.00
3237.71
21.00
3023.00
12.00
654.01
3368.99
4682.01
1247.78
3816.66
565.73
677.27
3689.95
335.16
740.46
4353.02
(559.63)
751.19
4009.9
(745.89)
781.00
3816.00
(527.00)
1049.99
3652.19
1049.71
1166.28
1049.07
506.25
1030.64
506.68
991.8
508.08
996.00
508.00
20.17
0.00
4682.01
1650.26
0.00
565.73
6.72
1213.44
335.16
0.00
2096.95
(559.63)
0.00
2245.77
(745.89)
0.00
2031.00
(527.00)
81
Annexure-C
Cash Flow Statement as Restated
PARTICULARS
A.
(Rs. In Lacs)
2000-01
2001-02
2002-03
(2308.37)
(1935.56)
2003-04
2004-05
Half
Year
ended
30th
Sept 05
Cash Flow from Operating Activities:
Net Profit before Tax
Prior period adjustments made in
restated accounts
1174.86
(877.46)
(148.82)
220.14
120.52
(105.25)
(10.20)
(6.05)
0.00
0.00
1295.38
(2413.62)
(1945.76)
(883.51)
(148.82)
220.14
Depreciation
197.48
265.12
692.71
868.79
952.26
258.36
Interest Paid
594.39
543.88
756.20
709.21
736.62
350.23
Bad debt & Provision for Doubtful debts
0.00
664.13
3.49
0.00
0.00
0.00
Sundry Balance written off
Provision for Diminution in the value of
Investments
0.00
1.48
0.00
0.00
0.00
0.00
0.00
0.00
64.48
15.67
18.70
0.00
Liabilities no longer required written back
0.00
0.00
0.00
(2.89)
0.00
0.00
Adjustments for :
Profit on sale of assets
0.00
(8.03)
0.00
(0.35)
(1.96)
0.00
(3.66)
(1.47)
(2.73)
(0.67)
(2.36)
(0.57)
6.72
825.13
1643.54
6.72
0.00
0.00
2090.31
(123.38)
1211.92
712.97
1554.44
828.16
(2466.86)
1411.33
235.81
(230.95)
(183.14)
(94.85)
406.94
512.49
(392.77)
41.44
10.74
24.77
Interest (Received)
Miscellaneous Expenditure written off
Operating Profit before Working Capital
changes
Adjustments for :
Trade and other Receivables
Trade Payables
Cash generated from operations
Interest Paid
B.
30.39
1800.44
1054.97
523.47
1382.03
758.08
(524.19)
(543.88)
(756.20)
(709.21)
(736.62)
(350.24)
Cash Flow before Extraordinary Items
(493.80)
1256.56
298.77
(185.75)
645.41
407.84
Net Cash from Operating Activities
(493.80)
1256.56
298.77
(185.75)
645.41
407.84
(603.42)
(1396.65)
(775.82)
(418.48)
(236.37)
(126.45)
0.00
0.00
0.00
0.00
0.00
0.00
Profit on sale of assets
0.00
8.03
0.00
0.35
1.96
0.00
Interest received
3.49
1.33
2.73
0.67
2.36
0.57
(599.93)
(1387.28)
(773.09)
(417.46)
(232.04)
(125.87)
Cash Flow from Investing Activities
Purchase of Fixed Assets (net)
Investment in Wholly Owned Subsidiary
Net Cash from Investing Activities
C.
Cash Flow from Financing Activities:
Proceeds from Share Application
Proceeds from Long term Borrowings
Proceeds from Short term Borrowings
500.00
(0.28)
0.00
(18.00)
(37.44)
3.73
1000.00
(148.34)
363.85
578.86
34.76
35.54
121.42
0.75
(0.75)
21.00
0.00
0.00
Repayment of Loan
(168.77)
0.00
0.00
0.00
(388.60)
(259.07)
Dividend
(155.33)
(4.12)
0.00
0.00
0.00
0.00
Tax on Dividend
Net Cash from Financing Activities
Net Increase /Decrease in Cash and
Cash Equivalents (A+B+C)
(35.39)
(0.93)
0.00
0.00
0.00
0.00
1261.93
(152.93)
363.10
581.88
391.28
(219.81)
62.17
168.20
(283.65)
(111.22)
(21.33)
22.09
Opening Cash and Cash Equivalents
293.41
461.61
177.95
66.74
45.41
67.50
Closing Cash and Cash Equivalents
461.61
177.95
66.74
45.41
67.50
129.67
82
Annexure - D
NOTES ON ACCOUNTS
1.
Significant Accounting Policies
a) Convention
The financial statements have been prepared under the historical cost convention in
accordance with the applicable Accounting Standards in India and the provisions of the
Indian Companies Act, 1956.
b) Basis of Accounting
The Company follows accrual basis of accounting.
c) Revenue Recognition
Revenue is realised on time-and-material basis and billed to clients as per the terms of
specific contracts. Revenue from software development on time and material basis is
recognised based on software developed and billed to clients as per the terms of
specific contracts. Revenue from sale of special import licenses is recognised when
the licenses are actually sold. The income from software development is inclusive of
value added tax.
d) Work- in progress
Since this is a service industry, value of work in progress cannot be and is not
ascertained.
e) Fixed Assets
Fixed Assets are capitalised at cost inclusive of installation charges, interest & other
financial charges on borrowings and other expenses for acquisition of such fixed assets
till they are made operational.
f) Depreciation
Depreciation on fixed assets is provided using the straight line method at the rates
prescribed under the Schedule XIV of the Indian Companies Act, 1956. However,
Plant & Machinery is being depreciated @ 33.33%. Assets costing less than Rs.5000/are depreciated in full in the year of purchase. Depreciation on additions due to
realignment of rupee value of foreign currency loan or fixed assets has been charged
proportionately on the productive life of the assets. Significant purchased application
software that is an integral part of the computer system expected to provide lasting
benefits is capitalised and amoritised in three years.
g) Investments
Current Investments are valued at lower of cost or market value. Long term
Investments are valued at cost. Provision for diminution is made to recognize the
decline, other than temporary, in the value of investments, such reduction being
determined and made for each investment individually. Changes in carrying amount of
investments are charged or credited to the Profit and Loss Account.
h) Miscellaneous Expenditure
Share Issue Expenses are being written off in ten equal annual installments. Deferred
Marketing expenses are being written off in a period of eighteen months.
i) Foreign Currency Translation
Foreign Currency transactions are recorded at exchange rate prevailing on the dates of
respective transactions. Exchange difference arising on settlement is included in Profit
& Loss Account. Revenue items of the Foreign Branch are converted in equivalent
Indian Rupees at the buying rate prevailing at the end of the month. Monetary items
are translated using the closing rate. Non monetary items other than inventories and
83
fixed assets should be translated using the exchange rate at the date of the
transaction. Fixed assets should be translated using the exchange rate at the date of
the transaction. The effect of exchange rate fluctuation in respect of payment of
liability relating to fixed assets is adjusted with the historical cost of the respective
assets. Investment in subsidiary Company is being valued at carrying cost adjusted by
any non temporary decline in their value according to the requirements of statute.
j) Spares and Consumables
Computer spares, accessories and stationery are charged to revenue in the year they
are purchased.
k) Income Tax
The Company computes income tax liability under the “Tax Payable” method after
taking credit for allowances and exemptions under section 10B of the Income Tax Act,
1961 for the Export Oriented Unit with the assumption that realisation from debtors in
convertible foreign exchange shall be within a period of six months from the end of the
previous year or any extended period by competent authority.
Deferred Tax is accounted for by computing the tax effect of timing differences, which
arise during the year and reverse in subsequent periods.
l) Contingent liabilities
Contingent liabilities have been disclosed by way of notes to accounts.
m) Employee Benefits
Contribution of Employers share to Employees’ Provident Fund and ESI are worked on
accrual basis and charged to Profit & Loss Account. The Company also provides for
gratuity and leave encashment based on actuarial valuation made by an independent
actuary.
2.
Details of Contingent Liabilities
(Rs. In Lacs)
Sl.
No.
1.
Particulars
As on
31-03-01
As on
31-03-02
As on
31-03-03
As on
31-03-04
As on
31-03-05
As on
30-09-05
Bank Guarantees
23.63
33.00
20.12
20.46
20.46
20.46
Outstanding
2.
Liabilities in respect
1556.25
1133.97
696.69
559.00
571.57
846.26
of bills discounted
3.
Income tax
demands pending
with Income Tax
authorities
A. Y. 1997 – 98
*
2.38
2.38
244.25
218.05
A. Y. 1998 – 99
260.32
260.32
A. Y. 2000 – 01
*
1.19
1.19
1.19
1.19
A. Y. 2001– 02
44.77
44.77
44.77
4.
Estimated amounts
31.86
20.82
20.82
of contracts
remaining to be
executed on Capital
accounts not
provided for
5.
Advances paid on
5.55
2.08
2.08
above items
Upto
6.
Arrear dividend on
Upto
Upto
14.6% cumulative
31-0331-0331-03redeemable
2002
2003
2004
preference share
Rs. 65.60
Rs.138.60
Rs.211.60
* Note: Contingent liabilities for Income Tax demands pending with Income – tax Authorities for the
financial year 2000 – 01 not available.
84
3.
For the financial year 2004-2005, debit in Interest and Finance Charges Account
includes Interest to Banks and Financial Institutions Rs. 71,437,154 , Interest on
delayed payment of TDS of earlier years Rs. 1,920,900 and to Others Rs 5,043
and Bank charges Rs 298,886. Other Income includes Profit on sale of assets Rs.
196,152, Interest received – Rs. 236,151 and Miscellaneous Receipts Rs. 16,869.
4.
For the financial year 2003-2004, debit in Interest and Finance Charges Account
includes Interest to Banks and Financial Institutions Rs. 68,630,101 and to Others Rs
1,164,276 and Bank charges Rs 1,126,884. Other Income includes liabilities no longer
required written back - Rs 289,411, Profit on sale of assets Rs. 35,000 and Interest
received – Rs. 67,418.
5.
For the financial year 2002-2003, debit in Interest account includes Interest to Banks
and Financial Institutions Rs. 72,559,229 and to others Rs. 1,288,785. Other Income
includes liabilities no longer required written back Rs. 623,600 and Interest received
Rs 2, 73,143.
6.
For the financial year 2001-2002, debit in Interest account includes factoring fees Rs
1,406,921, Interest to Banks and Financial Institutions Rs. 51,752,827 and to others
Rs. 1,228,415. Other Income includes liabilities no longer required written back Rs.
1,845,631, Profit on sale of assets Rs. 8,03,197 and Interest received Rs 1,47,301 and
tax deducted at source on interest income Rs 13,870.
7.
Stock Option
The Shareholders of the Company in the Extra Ordinary General Meeting held on May
6, 2000 approved 5,00,000 options under Employees Stock Option Scheme which
were to be granted to the Employees over a period of 3 years starting from fiscal year
2000 – 2001. 124 employees were allotted in total 1, 63900 options @ Rs. 206/- per
option. None of the Option Grantees had exercised the options at the said price. The
Shareholders of the Company approved renewal of Employees Stock Option Scheme
earlier on May 6, 2005 and granted 5,00,000 options for a period of 3 years starting
1st April 2004 as per SEBI Guidelines. Eligible employees were allotted 165000 options
@ Rs. 15.35 per option. 24,280 No. of options have been exercised till date and the
money received towards the exercise of options have been included in the share
capital and share premium accounts respectively. The Company has applied to the
Stock Exchanges for the In – Principle Approval as per Clause 24A of the Listing
Agreement for allotting equity shares to the employees who have exercised their
options.
8.
Related Party Disclosures:
a) Enterprises where control exists:
Wholly Owned Subsidiaries:
i) Responsive Solutions Inc
ii) RS Software UK Limited
Percentage of holding
100%
100%
Country of
Incorporation
United States of America
United Kingdom
b) Key Management Personnel:
Mr. K S Bhatnagar
Mr. R R Jain
-
Chairman
Vice Chairman and Managing Director
85
c)
Maj Gen A Bal Subramanian
Mr. S K Jain
Maj. Gen. K. C. Mehra
Mr. Debasis Pal
Dr. P K Basu
-
Mr. S. Khasnobis
Mrs. S Jain
-
Director
Director
Director (till 30.10.2002)
Nominee Director – ICICI (till 27.08.2002)
Nominee Director – ICICI (w. e. f 27.08.2002,
Resigned w.e.f. 29.01.2005)
Nominee Director –ICICI ( w. e .f 26.04.2005)
Director
Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on September, 30, 2005:
(Rs . in Lacs)
Sl.
Particulars
1
Advances given
2.
Sales
2.
Remuneration to Key Personnel:
Directors
Managing Director
Balance as on September,30,
2005:
Advances given
Debtors
Maximum balance outstanding
during the year
Advance given
Debtors
3
4
Wholly Owned
Subsidiaries
22.51
Key Management
Personnel
37.75
1.20
9.82
22.67
-
22.67
84.55
d) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March 31, 2005:
Wholly Owned
Subsidiaries
45.19
1
Advances given
2.
Sales
2.
Remuneration to Key Personnel:
Directors
Managing Director
Balance as on March 31,2005:
Advances given
Debtors
Maximum balance outstanding
during the year
Advance given
Debtors
3
4
(Rs. in Lacs)
Key Management
Personnel
59.82
2.35
20.94
59.46
36.47
59.46
d) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March, 31, 2004:
Rs . in Lakhs
Wholly Owned
Key Management
Subsidiaries
Personnel
86
1
Advances given
2.
Sales
2.
Remuneration to Key Personnel:
Directors
Managing Director
Balance as on March 31,2004:
Advances given
Debtors
11.61
-
Maximum balance outstanding
during the year
Advance given
Debtors
22.42
-
3
4
20.81
1.85
21.00
f) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March, 31, 2003:
Wholly Owned
Subsidiaries
13.30
1
Advances given
2.
Sales
2.
Remuneration to Key Personnel:
Directors
Managing Director
Balance as on March 31,2003:
Advances given
Debtors
3
4
Rs . in Lakhs
Key Management
Personnel
1.47
16.64
-
Maximum balance outstanding
during the year
Advance given
Debtors
13.30
-
g) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March, 31, 2002:
Wholly Owned
Subsidiaries
1
Advances given
2.
Sales
3.
Remuneration to Key
Personnel:
Directors
Managing Director
Balance as on March
31,2002:
Advances given
Debtors
Dues to
4
5
6
Key Management
Personnel
-
2.38
1.55
15.66
1.28
Maximum balance
outstanding during the
year
Advance given
Debtors
13.30
-
87
Rs . in Lakhs
Associates
7
9.
Provision for Bad and
Doubtful debts
-
549.73
14.6% Cumulative Redeemable Preference Shares (CRPS) amounting to Rs.
50,000,000 issued to IDBI were due to be redeemed on May 31,2004 but have not
been redeemed. The Company had filed a proposal to IDBI for restructuring. IDBI in
principle are agreeable for restructuring vide their letter dated April 20,2005 on the
following terms and conditions:
a)
Roll over of Rs. 500 lacs of CRPS to be redeemed in three installments in October
2005, November 2007 and November 2008,
b) Conversion of entire unpaid dividend of Rs. 264 lacs (accrued upto May 2005)
along with unpaid interest of Rs. 25 lacs on defaulted dividend totaling Rs. 289
lacs (subject to reconciliation) as Non Convertible Debentures redeemable in two
equal yearly installments in November 2007 and November 2008,
c) Reduction in dividend rate from 14.6% p.a. to 12.5% p.a. on CRPS and at 12.5%
on proposed converted portion of NCD (Rs. 201 lacs)
d) Waiver of entire unpaid overdue liquidated damages of Rs. 32 lacs after Company
deposits atleast Rs. 200 lacs in FD/ICD with IDBI, against which the Company has
already deposited Rs. 40 lacs,
The above terms are subject to acceptance of the above terms by the Company hence
effect of the above has not been provided by the Company in its Accounts. Due to
losses incurred by the Company no amount has been transferred to Preference Shares
Redemption Reserve.
10.
Salary and Other employee benefits include
a) Contribution to Employees’ Provident Fund Rs 43,97,617 and Subcontracting
Charges Rs. 6,73,93954.
b) The salary for the Managing Directors Remuneration include:
Salaries
Other benefits
Contribution to Provident Fund
Period ending 30th Sept,2005
(Rs.)
9,00,000
17,593
72,000
11.
During the financial year 2001-2002, out of the payment of Rs 40 million made to
ICICI Bank towards principal and interest, the company had adjusted Rs 36, 642,277
towards principal and Rs 16,00,000 as interest. During the financial year 2002-2003,
ICICI Bank had adjusted Rs. 9,682,913 out of the above amount towards principal and
Rs 30,317,087 towards interest. Accordingly, during the financial year 2002-2003, the
Company had made adjustments due to which the principal loan had increased by Rs.
36,659,488 and interest by Rs. 8,099,786 on principal adjusted in financial year 20012002.
12.
Subsequent to the letter dated January 03,2003 issued on the Company by Allahabad
Bank under Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 calling upon to discharge Rs. 28,904,161 (including
interest) on Bill Discounting facility and Guarantees, the Bank has been paid a sum of
Rs. 1,09,30,763 till the end of the half year. The Company is negotiating with the
Bank Authorities for extension of time to settle the dues.
13.
As per available information with the company, there were no dues to small-scale
industrial undertakings.
88
14.
Additional Information pursuant to provisions of the Para 3 and 4 of Part II Schedule
VI for the Companies Act, 1956:The Company is engaged in the business of development & maintenance of computer
software and other related services. The production and sale of such software services
are not capable of being expressed in generic terms.
(Amount in
Rs.)
2000-01
2001-02
2002-03
2003-04
2004-05
Half
year
ended
30.09.2005
Imports on
CIF basis:
Capital
27093018 144300000
71891700
8281674
14536691
Nil
Goods
Expenditure
553978873
77634577 676396682 365211584 496306408 288054680
in Foreign
Currency
Earning in 1005116090 578725316 560110308 550052116 782924646 445592947
Foreign
Currency
15.
The unabsorbed depreciation and losses under the tax laws resulting in timing
differences, which warrant the recognition of deferred tax assets, have not been so
recognized due to considerations of prudence.
89
16. Segment Revenue (net sale/ income from each segment)
(Rs.in lacs)
2001-02 2002-03 2003-04 2004-05 Half year ended
30th
Segment Revenue
September,2005
(net sale/ income from each segment)
PARTICULARS
a. SEGMENT - A (USA)
4770.72 4222.31
b. SEGMENT - B (ROW)
4403.2 6606.55
1152.8 1817.01 1536.78
TOTAL
894
5923.52
6039.32
5939.98
8165.45
4656
0
0
0
0
0
5923.52 6039.92 5939.98 8165.45
4656
Less: Inter Segment Revenue
Net Sales/Income from Operations
3762
1558.9
Segment Result Profit/ (Loss) before
tax and interest from each segment
a. SEGMENT - A (USA)
685.03 1122.92
b. SEGMENT - B (ROW)
622.97
879.96
468.39
643.41
372
1308
2002.88
1323.76
2556.66
1364
543.88
738.48
709.21
736.62
351
265.12
692.71
868.79
952.26
258
64.48
15.67
18.7
6.72
TOTAL
Less: I) Interest & Finance Charges
II) Depreciation
III) Provision for dimunition in the
value of investments
IV) Share issue expenses w/off
6.72
6.72
818.41
1636.82
1474.52
805.95
612.96
3.49
V) Deferred marketing expenses w/off
VI) Selling, General & Administrative
Expenses
VII) Provision for Doubtful Debts
Total Profit/(Loss) before Tax
-2413.61 -1945.77
855.37 1913.25
606.86
992
997.89
535
-883.49 -148.81
220
Capital Employed
Total Assets
5245.27
5149.87
4758.59
4539
Total Liabilities
5245.27
5149.87
4758.59
4539
17. Details of Secured Loan
(Rs. In Lacs)
Particulars
1. ICICI Ltd
(Term Loan)
2. ICICI Ltd
(Corporate Loan)
3. Bank O/D with
ICICI Bank
4. Advance against
bills purchased by
Banks
5. ABN Amro
Bank(Car Loan)
6. Interest accrued
and due
TOTAL
2000 - 01
2001 - 02
2002 - 03
2003 - 05
2004 - 05
Half Year
ended3009-05
783.97
674.49
824.95
824.95
701.20
618.71
1500.00
1549.61
1765.75
1765.75
1500.89
1324.31
0.0
0.00
0.00
780.89
750.94
810.87
422.24
337.45
158.03
126.41
91.64
78.83
8.77
5.84
1.85
0.59
0.00
0.00
0.00
2714.98
0.00
2567.39
262.12
3012.7
92.97
3591.56
193.04
3237.71
190.18
3022.9
90
18.DETAILS OF INVESTMENTS
PARTICULARS
2000-01
2001-02
2002-03
(Rs.In Lacs)
Half year
2004-05
ended
30.09.05
2003-04
Unquoted:
In wholly owned subsidiary:
Responsive Solution Inc.
R S Software (UK) Ltd
16,330,000 16,330,000 16,330,000 16,330,000 16,330,000
67.00
67.00
67.00
67.00
67.00
16,330,000
67.00
16,330,067 16,330,067 16,330,067 16,330,067 16,330,067
16,330,067
Less: Prov ford dimunition
in value of Investments
Total
9885038
9885038
16,330,067 16,330,067 9,882,356 8,314,911 6,445,029
0
0
6447711
8015156
6,445,029
19.Details of Loans and Advances
PARTICULARS
*Loans
Advances to Staff
Other Advances
Deposits
*Loans to
Responsive
Solution Inc
(For the year 2001-01)
2000 - 01
0.00
65.49
101.57
76.50
243.56
2002 - 03
2003 - 04
0.00
9.74
7.67
88.81
106.22
0.00
14.88
6.60
111.49
132.97
0.00
18.83
0.00
124.88
0.00
26.08
23.04
131.73
143.71
180.85
2422.69
Loans to
R S Software (UK) Ltd
TOTAL
2001 - 02
2422.81
34.65
139.07
109.35
2705.88
(Rs.In Lacs)
2004-05
Half year
ended
30.09.05
0.12
2422.81
20.Details of Reserve and Surplus
Rs.in Lacs
Particulars
Capital Reserve
Securities Premium
General Reserve
Pref. Share R.R
Profit & Loss A/c.
Total
2000-01
2001-02
2002-03
2003-04
2004-05
30-09-05
0.00
0.00
0.00
0.00
0.00
0.00
371.25
371.25
371.25
371.68
373.08
373.08
1805.62
660.03
0.00
0.00
0.00
0.00
135.00
135.00
135.00
135.00
135.00
135.00
1340.32
0.00
0.00
0.00
0.00
0.00
3652.19
1166.28
506.25
506.68
508.08
508.08
91
21.Statement Showing Age wise analysis of Sundry Debtors
PARTICULARS
Over 6 months
Other debts
Total
2000-01
2001-02
1283.68
2002-03
1188.46
( Rs.in lacs)
2004-05
30-09-05
2003-04
568.19
649.40
615.08
601.86
2156.23
239.18
352.43
748.32
923.18
956.14
3439.91
1427.64
920.62
1397.72
1538.26
1558.00
3439.91
814.68
917.13
1397.72
1538.26
1558.00
Considered
Good
Doubtful
Total
0.00
612.96
3.49
0.00
0.00
0.00
3439.91
1427.64
920.62
1397.72
1538.26
1558.00
Less: Provision
Total
0.00
612.96
3.49
0.00
0.00
0.00
3439.91
814.68
917.13
1397.72
1538.26
1558.00
22. The previous tears figures have been recast /restated, wherever necessary to the current
years’ classification.
23. Financial figures have been rounded off to the nearest rupee.
Annexure -E
Key Accounting Ratios
PARTICULARS
2000 - 01
EPS:
Basic
Diluted
Return on Net
Worth (%)
Net Asset Value
Per Share
Basic
Diluted
Profit after Tax (Rs
in lacs)
Denominator for:
EPS( Basic)
EPS(Diluted)
Note: - Profit after tax has
2001 - 02
2002 - 03
2003 - 04
2004 - 05
(17.85)
(17.85)
(3.01)
(3.01)
*
*
30-09-05
23.81
23.81
(48.44)
(48.43)
(39.38)
(39.38)
25.09
(408.03)
(577.50)
94.16
94.14
(1.12)
(1.12)
(7.29)
(7.29)
(26.61)
(26.61)
(31.19)
(31.19)
(26.76)
(26.76)
1174.87
(2308.37)
(1935.55)
(877.45)
(148.83)
214.00
4912150
4914100
4914775
4915325
4917167
4912931
4914881
4914865
4915457
4917167
been restated to include effects of prior period adjustments
4918000
4918000
*Not Relevant since net worth are negative.
1) Profit after tax has been restated to include effects of prior period adjustments.
2) While calculating the Net Asset Value per share, dividend on 16% cumulative redeemable
preference shares issued on 14th August 1997 and which were redeemable on September
2000 and redeemed during the Financial Year 2004-05 have not been taken into consideration
(other than dividend of Rs. 412274/- which was paid on 16.10.2001 and corporate dividend
Tax of Rs. 93174), as no dividend other than Rs. 412274/- was paid by the Company till the
date of redemption and subsequent thereto.
3) Unpaid dividend on 16% Cumulative Redeemable Preference amounting to Rs. 264 Lakhs
alongwith unpaid interest of Rs. 25Lakhs will be converted into Non Convertible Debentures
carrying an interest rate of 12.5 % as agreed with IDBI. Hence unpaid dividend has been
92
4.35
4.35
*
taken into consideration while calculating Net Asset value per share for the FY 2001-02,200203,2003-04,2004-05 and for the half year ended 30th Sept 2005.
4) Out of 5,00,000 options under Employee Stock Option Scheme granted for a period of three
years starting from 1st April 2004, eligible employees were alloted 1,65,000 options and
24,800 Nos of options have been exercised till 30th Sept 2005. However, as the Company's
application to Stock Exchange for In Principle approval as per clause 24(A) of Listing
Agreement for alloting Equity Shares to the employees who have exercised their options is
pending, effect of the same is not being taken into consideration in calculating the Diluted and
Net EPS & Diluted and Net Asset Value per share.
Annexure-F
Dividend Statement
Year ended 31st March
Half year ended 30th
September,2005
PARTICULARS
2000-01
Equity Shares
2001-02
2002-03
2003-04
2004-05
4914100
4914100
4914800
4915500
4918000
4918000
Rate of Dividend (%)
0.00
0.00
0.00
0.00
0.00
0.00
Dividend Amount
0.00
0.00
0.00
0.00
0.00
0.00
Preference Dividend
•
55,000, 16% Cumulative Redeemable Preference Shares of Rs.100 each fully paid were
due for redemption in September, 2000 have been redeemed during the financial year
2004-05. No dividend has been paid in the interim period except Rs. 412274/- paid on
16/10/2001.
•
5,00,000, 14.6% Cumulative Redeemable Preference Shares of Rs. 100 each fully paid
were issued in the year 2000-2001 and were due for redemption on May, 2004. No
dividend has been paid on these shares since they were issued.
Annexure-G
Statement of Tax Shelter
( Rs.in lacs)
Particulars
2000-01 2001-02 2002-03 2003-04 2004-05
Profit before Tax as per Books
1174.87 (2308.37) (1935.55) (877.45) (148.83)
Prior Period Adjustments
(120.52)
Net of adjustments
1295.39 (2413.62) (1945.75) (883.50) (148.83)
Tax Rate (%)
38.50
Notional Tax liability
498.73
105.25
35.70
-
10.20
36.75
-
6.05
35.88
-
0.00
36.59
-
Adjustments :
Difference between Tax depreciation book dep
- Exemption u/s 10B
(89.66) (406.09) (284.36)
417.58
(1255.68)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Other adjustments
Net Adjustments
94.17
(1345.34) (406.09) (284.36)
Tax Saving thereon :
Prov. For Taxation as per books
93
94.17
417.58
498.73
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Annexure-H
Capitalisation Statement as 30th September 2005
(In Rs.lacs)
PARTICULARS
PRE-ISSUE
POST-ISSUE
Debt
Secured Debt
3023.00
Unsecured Debt
3023.00
12.00
12.00
3035.00
3035.00
Share Capital
996.00
1242.00
Reserves
508.00
1860.00
Total Debt
Shareholders Funds
Less: Misc.Expenses not written off
0.00
0.00
2031.00
2031.00
(527.00)
1071.00
(5.75)
2.83
Profit & Loss Account
Total Shareholders Funds
Debt/ Equity
Share Capital and Share Premium account includes money received towards exercise of Employees
Stock Option Scheme against which shares have not been allotted, pending In-Principal Approval of
Stock Exchange.
Annexure-I
Principal Terms of Loans and Assets charged as Security.
Name of
Lender
ICICI Bank
Allahabad
Bank
ABN AMRO
BANK N.V
ICICI Bank
Facility
Term Loan 1
Term Loan 2
Corporate Loan 1
Corporate Loan 2
Advance against
bills purchased
Car Loan
Bank O/D
Sanctioned
Amount
500.00
400.00
600.00
1000.00
Balance
445.19
88.1
530.61
879.12
Rate of
Interest
15.5%
15.5%
15.5%
15.5%
1000.00
403.94
Variable
12.16
Nil
800.00
810.87
14.97%&
17.68%
15.5%
(Rs.in lacs)
Repayment
Security
Schedule
Secured
by
first
Quarterly
mortgage and charge on
-do all
the
company's
immovable properties at
- do Salt
lake
City
and
- do movable property, both
-
present and future, book
debts and by personal
guarantee and equity
shares of the company
held by two directors.
Secured against bills
receivable
Every month
Charge on Maruti-800
and Maruti Esteem.
Interest
to
be
repaid
every
month
Secured by first charge
on all the current assets,
second mortgage and
charge
on
all
the
company's fixed assets
ranking pari passu with
other bankers, exclusive
charge on the corporate
office of the company
and personal guarantee
of two directors.
Note: Bank of America originally sanctioned Car loan. The loan was transferred to
ABN Amro Bank during the financial year 1999-2000.
94
Annexure-J
CONSOLIDATED STATEMENT OF PROFITS AND LOSSES (AS RESTATED)
(Rs.in lacs)
PARTICULARS
2001-02
2002-03
2003-04
200405
Half year
ended 30th
September,
2005
Income
Sales
5,902.44
Other Income
Total Income
6069.96
5976.42 8249.90
3.93
4694.00
56.78
10.31
4.52
4.00
5,959.22
6080.27
5980.35 8254.42
4698.00
4,261.52
3577.49
3705.95 5384.60
3163.00
Expenditure
Salary &other employee benefits
Sales & marketing expenses
399.84
250.44
1,484.66
1052.52
Miscellaneous Expenses written off
825.13
1643.54
6.72
0.00
Interest & finance charges
543.88
738.48
709.21
736.62
351.00
Depreciation & amortization
265.12
699.99
869.81
953.17
258.00
Provision for Doubtful debts
612.96
3.49
0.00
0.00
0.00
0.00
64.48
15.67
18.70
0.00
8,393.11
8048.15
6871.71 8421.77
4496.00
(2,433.89) (1967.88)
(891.36) (167.35)
202.00
Administrative & other expenses
Provision for Diminution in the value of
investments
Total Expenditure
Profit /(Loss) before tax & extraordinary items
Prior period items
Minority interest adjustment
Profit /(Loss) before tax
69.00
655.00
10.20
6.05
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(885.31) (167.35)
202.00
0.00
0.00
(2,328.64) (1957.68)
Profit / (Loss) after tax
289.15
105.25
(2,328.64) (1957.68)
Provision for taxation
182.04
1275.20 1146.64
0.00
0.00
6.00
(885.31) (167.35)
196.00
Treatment of various items adjusted in restated accounts:
•
Prior period items: This represents adjustments in respect of items being material charges
or credits which arise in a particular period as a result of errors or omission in the
preparation of financial statements of one or more prior periods and/ or material
adjustments. These have been adjusted in the year to which they pertain.
•
Change in accounting policy: Accounting Standard - 15 " Accounting for Retirement
Benefits in the Financial statement of employers" ---- In the accounting year 2001-02 the
company for the first time made a provision for leave liability based on actuarial valuation
as required by AS-15. No adjustment had been done to the profits of earlier years as the
effect had not been ascertained.
95
Annexure-K
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED)
(Rs. in Lacs)
Sl. PARTICULARS
2001-02
2002-03
2003-04
2004-05
Half year
ended 30th
Sept, 2005
A. Fixed Assets:
Gross Block
Less: Depreciation
3619.78
4393.78
4799.08
5031.44
5157.31
(1217.57) (1915.93)
(2773.12)
(3722.31)
(3980.31)
2402.21
2477.85
2025.96
1309.13
1177.00
5.00
5.00
5.00
5.00
5.00
0.00
0.00
0.00
0.00
Sundry Debtors
830.03
930.07
1515.77
1623.00
Cash & Bank Balances
172.45
67.85
47.80
70.10
133.00
Loans & Advances
334.49
191.24
210.29
222.46
261.00
Other Current Assets
597.24
386.46
109.96
141.83
180.00
0.00
0.12
0.00
0.00
0.00
1934.21
1575.74
1782.61
1950.16
2197.00
2568.13
3012.68
3591.56
3237.71
3023.00
0.00
8.07
40.86
21.00
12.00
Net Block
Capital W-I-P
B. Investments
C. Current Assets, Loans & Advances
Unincurred Loss
Total
1414.56
D. Liabilities & Provisions:
Secured Loans
Unsecured Loans
Current liabilities & provisions
1248.11
702.40
740.46
751.19
889.00
Total
3816.24
3723.15
4372.88
4009.90
3924.00
525.18
335.45
(559.35)
(745.62)
(544.00)
1. Share Capital
1049.71
1049.07
1030.64
991.80
996.00
2. Net Reserves
1125.73
645.16
642.41
662.00
664.00
E. Net Worth
F. Represented by:
Less: Misc. Expenses not written off
(1650.26)
(6.72)
0.00
0.00
0.00
0.00
(1352.06)
(2232.40)
(2399.42)
(2204.00)
525.18
335.45
(559.35)
(745.62)
(544.00)
Less: P&L Account
Net Worth
96
ANNEXURE-L
Consolidated Cash Flow Statement as Restated
Sl.No PARTICULARS
A.
2002-03
2003-04
2004-05
Half year ended
30th
September,2005
Cash Flow from Operating Activities:
Net Profit before Tax
(1957.88)
(885.31)
(167.35)
202.00
(10.20)
(6.05)
0.00
0.00
Depreciation
699.99
869.81
953.17
258.00
Interest Paid
756.19
709.21
736.62
350.00
Foreign exchange fluctuation in RSI Bank Balance
0.00
(0.01)
0.05
0.00
Bad debt & Provision for Doubtful debts
3.49
Prior period adjustments made in restated accounts
Adjustments for:
Sundry Balance written off
Provision for Diminution in the value of Investments
Profit on sale of assets
Interest (Received)
0.00
0.00
(2.89)
64.48
15.67
18.70
0.00
(0.35)
(1.96)
(2.73)
(0.67)
(2.36)
0.57
Miscellaneous Expenditure written off
1643.54
6.72
Operating Profit before Working Capital changes
1197.08
706.13
1536.87
811.57
237.50
(235.01)
(203.31)
(123.00)
Adjustments for :
Trade and other Receivables
B.
Trade Payables
(392.22)
41.16
68.54
25.00
Cash generated from operations
1042.36
512.29
1403.86
712.00
Interest Paid
(756.19)
(709.21)
(736.61)
(350.00)
Cash Flow before Extraordinary Items
286.17
(196.93)
667.24
361.57
Net Cash from Operating Activities
286.17
(196.93)
667.24
361.57
(775.82)
(418.48)
(236.37)
149.00
0.35
1.96
Cash Flow from Investing Activities:
Purchase of Fixed Assets (net)
Investment in Wholly Owned Subsidiary
0.00
Advance given to Company
4.75
Profit on sale of assets
0.00
Interest received
Net Cash from Investing Activities
2.74
0.67
(17.49)
0.57
(768.33)
(417.46)
(251.89)
149.00
(0.64)
(18.00)
(37.43)
28.00
364.50
578.88
34.76
36.00
7.32
33.46
(388.60)
(259.00)
Cash Flow from Financing Activities:
C.
Proceeds from Share Application
Proceeds from Long term Borrowings
Proceeds from Short term Borrowings
Repayment of Loan
Dividend
Tax on Dividend
Net Cash from Financing Activities
Net Increase /Decrease in Cash and Cash Equivalents
(A+B+C)
Opening Cash and Cash Equivalents
Closing Cash and Cash Equivalents
97
371.18
594.34
(391.28)
(195.00)
(110.98)
(20.05)
24.06
17.00
178.83
67.85
47.80
70.10
67.85
47.80
70.10
87.10
CONSOLIDATED NOTES ON ACCOUNTS
Annexure-M
1. Significant Accounting Policies
a. Convention
The financial statements have been prepared under the historical cost convention in
accordance with the applicable Accounting Standards in India and the provisions of the
Indian Companies Act, 1956.
b. Basis of Accounting
The Company follows accrual basis of accounting.
c.
Work- in progress
Since this is a service industry, value of work in progress cannot be and is not ascertained.
d. Revenue Recognition
Revenue is realized on time-and-material basis and billed to clients as per the terms of
specific contracts.
Revenue from software development on time and material basis is
recognised based on software developed and billed to clients as per the terms of specific
contracts. Revenue from sale of special import licenses is recognised when the licenses
are actually sold. The income from software development is inclusive of value added tax.
e. Fixed Assets
Fixed Assets are capitalised at cost inclusive of installation charges, interest & other
financial charges on borrowings and other expenses for acquisition of such fixed assets till
they are made operational.
f.
Depreciation
Depreciation on fixed assets is provided using the straight-line method at the rates
prescribed under the Schedule XIV of the Indian Companies Act, 1956. However, Plant &
Machinery is being depreciated @ 33.33%. Assets costing less than Rs.5000/- are
depreciated in full in the year of purchase. Depreciation on additions due to realignment
of rupee value of foreign currency loan or fixed assets has been charged proportionately
on the productive life of the assets. Significant purchased application software that is an
integral part of the computer system expected to provide lasting benefits is capitalised and
amortised in three years.
g. Investments
Current Investments are valued at lower of cost or market value. Long term Investments
are valued at cost. Provision for diminution is made to recognize the decline, other than
temporary, in the value of investments, such reduction being determined and made for
each investment individually. Changes in carrying amount of investments are charged or
credited to the Profit and Loss Account.
h. Miscellaneous Expenditure
Share Issue Expenses are being written off in ten equal annual installments. Deferred
Marketing expenses are being written off in a period of eighteen months.
i.
Foreign Currency Translation
Foreign Currency transactions are recorded at exchange rate prevailing on the dates of
respective transactions. Exchange difference arising on settlement is included in Profit &
Loss Account. Revenue items of the Foreign Branch are converted in equivalent Indian
Rupees at the buying rate prevailing at the end of the month. Monetary items are
translated using the closing rate. Non-monetary items other than inventories and fixed
assets should be translated using the exchange rate at the date of the transaction. Fixed
98
assets should be translated using the exchange rate at the date of the transaction. The
effect of exchange rate fluctuation in respect of payment of liability relating to fixed assets
is adjusted with the historical cost of the respective assets. Investment in subsidiary
Company is being valued at carrying cost adjusted by any non-temporary decline in their
value according to the requirements of statute.
j.
Spares and Consumables
Computer spares, accessories and stationery are charged to revenue in the year they are
purchased.
k. Income Tax
The Company computes income tax liability under the “Tax Payable” method after taking
credit for allowances and exemptions under section 10B of the Income Tax Act, 1961 for
the Export Oriented Unit with the assumption that realization from debtors in convertible
foreign exchange shall be within a period of six months from the end of the previous year
or any extended period by competent authority.
Deferred Tax is accounted for by computing the tax effect of timing differences, which
arise during the year and reverse in subsequent periods.
l.
Employee Benefits
Contribution of Employers share to Employees’ Provident Fund and ESI are worked on
accrual basis and charged to Profit & Loss Account. The Company also provides for
gratuity and leave encashment based on actuarial valuation made by an independent
actuary.
2. Details of Contingent Liabilities
(In Rs. lacs)
As on
As on
As on
As on
As on
Sl.
Particulars
31-03-02
31-03-03
31-03-04
31-03-05
30-09-05
No.
1.
Bank Guarantees
33.00
20.12
20.46
20.46
20.46
Outstanding
2.
Liabilities in respect
1133.97
696.68
559.00
571.57
846.26
of bills discounted
3.
Income tax
demands pending
with Income Tax
authorities
A. Y. 1997 – 98
2.38
2.38
244.25
218.05
A. Y. 1998 – 99
260.32
260.32
A. Y. 2000 – 01
1.19
1.19
1.19
1.19
A. Y. 2001– 02
44.77
44.77
44.77
4.
Estimated amounts
20.82
20.82
of contracts
remaining to be
executed on Capital
accounts not
provided for
5.
Advances paid on
2.08
2.08
above items
6.
Arrear dividend on
Upto
Upto
Upto
14.6% cumulative
31-0331-0331-03redeemable
2002
2003
2004
preference share
Rs. 65.60
Rs.138.60
Rs.211.60
3. For the financial year 2004-2005, debit in Interest and Finance Charges Account includes
Interest to Banks and Financial Institutions Rs. 71,437,154, Interest on delayed payment
of TDS of earlier years Rs. 1,920,900 and to Others Rs 5,043 and Bank charges Rs
99
298,886. Other Income includes Profit on sale of assets Rs. 196,152, Interest received –
Rs. 236,151 and Miscellaneous Receipts Rs. 16,869.
4. For the financial year 2003-2004, debit in Interest and Finance Charges Account includes
Interest to Banks and Financial Institutions Rs. 68,630,101 and to Others Rs 1,164,276
and Bank charges Rs 1,126,884. Other Income includes liabilities no longer required
written back - Rs 289,411, Profit on sale of assets Rs. 35,000 and Interest received – Rs.
67,418.
5.
For the financial year 2002-2003, debit in Interest account includes Interest to Banks
and Financial Institutions Rs. 72,559,229 and to others Rs. 1,288,785. Other Income
includes liabilities no longer required written back Rs. 623,600 and Interest received
Rs 2,73,143.
6.
For the financial year 2001-2002, debit in Interest account includes factoring fees Rs
1,406,921, Interest to Banks and Financial Institutions Rs. 51,752,827 and to others
Rs. 1,228,415. Other Income includes liabilities no longer required written back Rs.
1,845,631, Profit on sale of assets Rs. 8,03,197 and Interest received Rs 1,47,301 and
tax deducted at source on interest income Rs 13,870.
7.
Stock Option
The Shareholders of the Company in the Extra Ordinary General Meeting held on May
6, 2000 approved 5,00,000 options under Employees Stock Option Scheme which
were to be granted to the Employees over a period of 3 years starting from fiscal year
2000 – 2001. 124 employees were allotted in total 1,63900 options @ Rs. 206/- per
option. None of the Option Grantees had exercised the options at the said price. The
Shareholders of the Company approved renewal of Employees Stock Option Scheme
earlier on May 6, 2005 and granted 5,00,000 options for a period of 3 years starting
1st April 2004 as per SEBI Guidelines. Eligible employees were allotted 165000 options
@ Rs. 15.35 per option. 24,280 No. of options have been exercised till date and the
money received towards exercise of options have been included in share capital and
share premium accounts respectively. The Company has applied to the Stock
Exchanges for the In – Principle Approval as per Clause 24A of the Listing Agreement
for allotting equity shares to the employees who have exercised their options.
8.
Related Party Disclosures:
a) Enterprises where control exists:
Wholly Owned Subsidiaries:
Percentage of holding
i) Responsive Solutions Inc
ii) RS Software UK Limited
100%
100%
b) Key Management Personnel:
Mr. K S Bhatnagar
Mr. R R Jain
Maj Gen A Balasubramanian
Mr. S K Jain
Mr. Debasis Pal
Dr. P K Basu
-
Mr. S. Khasnobis
Mrs. S Jain
-
Country of Incorporation
United States of America
United Kingdom
Chairman
Vice Chairman and Managing Director in
Parent and Director in Subsidiary
Director (till 30.10.2002)
Director
Nominee Director – ICICI (till 27.08.2002)
Nominee Director – ICICI (from 27.08.2002 –
29.01.2005)
Nominee Director – ICICI (w. e. f 26.04.2005)
Director in Parent and Subsidiary
100
Mr K Sen
Mr C K Lambart
c)
-
Director in Subsidiary
Director in Subsidiary
Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on September 30, 2005:
Key Management
Personnel
(Rs in lakhs)
1.
Remuneration to Key Personnel:
Directors
Managing Director
1.20
9.82
e) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March 31, 2005:
Key Management
Personnel
(Rs in lakhs)
1.
f)
Remuneration to Key Personnel:
Directors
Managing Director
2.35
20.94
Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March 31, 2004:
Key Management
Personnel
Rs in lakhs)
1.
Remuneration to Key Personnel:
Directors
Managing Director
1.85
21.01
g) Disclosure of transactions between the Company and Related Parties and
the status of outstanding balances as on March 31, 2003:
Key Management
Personnel
1.
g)
Remuneration to Key Personnel:
Directors
Managing Director
1.47
16.64
Disclosure of transactions between the Company and Related Parties
and the status of outstanding balances as on March, 31, 2002:
Rs . in Lakhs
Wholly Owned
Subsidiaries
101
Key
Management
Personnel
Associates
1
Advances given
-
2.
Sales
2.38
3.
Remuneration to Key
Personnel
Directors
Managing Director
Dues to
4.
5.
6.
9.
Maximum
balance
outstanding during the
year
Advance given
Debtors
Provision for Bad and
Doubtful debts
1.55
15.66
1.28
-----
13.30
-
549.73
14.6% Cumulative Redeemable Preference Shares (CRPS) amounting to Rs.
50,000,000 issued to IDBI were due to be redeemed on May 31,2004 but have not
been redeemed. The Company had filed a proposal to IDBI for restructuring. IDBI in
principle are agreeable for restructuring vide their letter dated April 20,2005 on the
following terms and conditions:
a)
Roll over of Rs. 500 lacs of CRPS to be redeemed in three installments in October
2005, November 2007 and November 2008,
b) Conversion of entire unpaid dividend of Rs. 264 lacs (accrued upto May 2005)
along with unpaid interest of Rs. 25 lacs on defaulted dividend totaling Rs. 289
lacs (subject to reconciliation) as Non Convertible Debentures redeemable in two
equal yearly installments in November 2007 and November 2008,
c)
Reduction in dividend rate from 14.6% p.a. to 12.5% p.a. on CRPS and at 12.5%
on proposed converted portion of NCD (Rs. 201 lacs)
d) Waiver of entire unpaid overdue liquidated damages of Rs. 32 Lacs after Company
deposits atleast Rs. 200 lacs in FD/ICD with IDBI, against which the Company has
already deposited Rs. 40 lacs,
The above terms are subject to acceptance of the above terms by the Company hence
effect of the above has not been provided by the Company in its Accounts. Due to
losses incurred by the Company no amount has been transferred to Preference Shares
Redemption Reserve.
10.
Salary and Other employee benefits include
a) For the half year ended September 30, 2005, Contribution to Employees’ Provident
Fund Rs 43,97,617 and Subcontracting Charges Rs. 6,73,93,954.
b) The salary for the Managing Directors Remuneration include:
Period ending September 30, 2005
(Rs.)
Salaries
9,00,000
Other Benefits
17,593
Contribution to Provident Fund
72,000
9,89,593
11.
During the financial year 2001-2002, out of the payment of Rs 40 million made to
ICICI Bank towards principal and interest, the company had adjusted Rs 36, 642,277
102
towards principal and Rs 16,00,000 as interest. During the financial year 2002-2003,
ICICI Bank had adjusted Rs. 9,682,913 out of the above amount towards principal and
Rs 30,317,087 towards interest. Accordingly, during the financial year 2002-2003, the
Company had made adjustments due to which the principal loan had increased by Rs.
36,659,488 and interest by Rs. 8,099,786 on principal adjusted in financial year 20012002.
12.
Subsequent to the letter dated January 03,2003 issued on the Company by Allahabad
Bank under Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 calling upon to discharge Rs. 28,904,161 (including
interest) on Bill Discounting facility and Guarantees, the Bank has been paid a sum of
Rs. 1,09,30,763 till the end of the half year. The Company is negotiating with the
Bank Authorities for extension of time to settle the dues.
13.
As per available information with the company, there were no dues to small-scale
industrial undertakings.
14.
Additional Information pursuant to provisions of the Para 3 and 4 of Part II Schedule
VI for the Companies Act, 1956:The Company is engaged in the business of development & maintenance of computer
software and other related services. The production and sale of such software services
are not capable of being expressed in generic terms.
(Amount in Rs)
Imports on
CIF basis:
Capital
Goods
Expenditure
in Foreign
Currency
Earning in
Foreign
Currency
15.
2001-02
2002-03
2003-04
2004-05
Half
year
ended
30.09.2005
144300000
71891700
8281674
14536691
Nil
420918797
340396682
365211584
496306408
288054680
578725316
560110308
550052116
782924646
445592947
The unabsorbed depreciation and losses under the tax laws resulting in timing
differences, which warrant the recognition of deferred tax assets, have not been so
recognized due to considerations of prudence.
103
16. Segment wise Revenue, Results And Capital Employed
PARTICULARS
Segment Revenue ( net sale/
income from each segment
a. SEGMENT - A (USA)
b. SEGMENT - B (ROW)
TOTAL
Less: Inter Segment Revenue
Net Sales/Income from Operations
Segment Result Profit/ (Loss)
before tax and interest from
each segment
a. SEGMENT - A (USA)
b. SEGMENT - B (ROW)
TOTAL
Less: I) Interest & Finance
Charges
II) Depreciation
III) Provision for dimunition
in the value of investments
IV) Share issue expenses
w/off
V) Deferred marketing
expenses w/off
VI) Selling, General &
Administrative Expenses
VII) Provision for Doubtful
Debts
Total Profit/(Loss) before Tax
Capital Employed
Total Assets
Total Liabilities
2001-02
( Rs. in lacs)
2002-03
2003-04
4805.78
1153.43
5959.21
0.00
5959.21
4263.26
1817.01
6080.27
0.00
6080.27
4443.55
1536.80
5980.35
0.00
5980.35
6695.49
1558.93
8254.42
0.00
8254.42
3804.00
894.00
4698.00
0.00
4698.00
666.94
620.78
1287.72
1100.82
879.94
1980.76
847.54
468.36
1315.90
1894.74
643.39
2538.13
974.00
372.00
1346.00
543.88
265.12
738.48
692.71
709.21
868.79
736.62
952.26
351.00
258.00
0.00
64.48
15.67
18.70
0.00
6.72
6.72
6.72
0.00
0.00
818.41
1636.82
0.00
0.00
0.00
1474.52
805.95
614.71
997.89
535.00
612.96
(2433.89)
3.49
(1967.89)
0.00
(899.20)
0.00
(167.34)
0.00
202.00
6109.71
6109.71
5392.74
5392.74
5305.50
5305.50
4912.52
4912.52
4694.18
4694.18
17.Details of Secured Loans
PARTICULARS
1. ICICI Ltd. Term Loan
2. ICICI Ltd. Corporate Loan
3. Bank Overdraft with ICICI Bank
4. Advance against bills
purchased by bank
Half year
ended 30th
Sept 05
2004-05
(Rs.in Lacs)
2001 - 02
2002 - 03
2003 - 04
2004 - 05
30-09-05
674.49
824.95
824.95
701.02
618.71
1549.61
1765.75
1765.75
1500.89
1324.81
0.00
0.00
780.89
750.94
810.87
337.45
158.03
126.41
91.64
78.33
5. ABN AMRO Bank Car Loan
5.84
1.85
0.59
0.00
0.00
6. Interest Accrued and Due
0.00
262.12
92.97
193.04
190.18
2567.39
3012.70
3591.56
3237.53
3022.90
TOTAL
104
18.Details of loans and Advances
PARTICULARS
Loans
Advances to Staff
Other Advances
Deposits
Total
2001 - 02
( Rs. in lacs)
2002 - 03
2003 - 05
2004 - 05
ended 30-09-2005
0.00
0.00
0.00
0.00
0.00
65.49
9.74
14.88
18.83
26.08
192.50
92.70
83.92
78.75
103.19
76.5
88.81
111.49
124.88
131.73
334.49
191.25
210.29
222.46
261.00
19.Details of Reserves & Surplus
PARTICULARS
2001-02
Capital Reserve
2002-03
2003-04
(Rs.in Lacs)
Half year
ended
2004-05 30.09.05
1125.73
0.00
0.00
0.00
155.92
Securities Premium
371.25
371.25
371.68
373.08
373.08
General Reserve
660.03
0.28
0.00
0.27
0.00
Pref. Share Redemption Reserve
135.00
135.00
135.00
135.00
135.00
Profit & Loss A/c.
Total
0.00
0.00
0.00
0.00
0.00
2292.01
506.53
506.68
508.35
664.00
20.Statement Showing Agewise analysis of Sundry Debtors.
( Rs.in Lacs)
PARTICULARS
Over 6 months
Other debts
Total
2001 - 02
2002- 03
1188.46
2003 - 04
568.19
649.40
2004 - 05
623.53
30-09-05
601.86
1069.20
365.37
765.16
892.24
1021.14
2257.66
933.56
1414.56
1515.77
1623.00
2257.66
930.07
1414.56
1515.77
1623.00
Considered
Good
Doubtful
Total
Less: Provision
Total
0.00
3.49
0.00
0.00
0.00
2257.66
920.62
1414.56
1515.77
1623.00
612.96
3.49
0.00
0.00
0.00
1644.70
930.07
1414.56
1515.77
1623.00
21. The previous tears figures have been recast /restated, wherever necessary to the current
years’ classification.
22.Financial figures have been rounded off to the nearest rupee.
105
29. ANNEXURE - N
Responsive Solutions Incorporation, U.S.A
STATEMENT OF PROFITS AND LOSSES
PARTICULARS
2000-01
(Amount in US Dollars)
2001-02
2002-03
2003-04
Half year
ended 30th
September,
2005
2004-05
Income
Sales
Other Income
191390.00
72890.00
86240.00
92292.00
203896.00
95690.00
0.00
5.00
3.00
2.00
1.00
2.00
191390.00
72895.00
86243.00
92294.00
203897.00
95692.00
90072.00
91539.00
91651.00
93141.00
229838.00
129092.00
79492.00
18972.00
41132.00
17062.00
16489.00
7869.00
169564.00
110511.00
132783.00
110203.00
246327.00
136961.00
21826.00
(37616.00)
(46540.00)
(17909.00)
(42430.00)
(41269.00)
0.00
0.00
0.00
0.00
0.00
0.00
21826.00
(37616.00)
(46540.00)
(17909.00)
(42430.00)
(41269.00)
Expenditure
Payroll
Operating Expenses
Profit before Tax
Provision for Taxation
Profit after Tax
BALANCE SHEET OF LAST FIVE YEARS AND HALF YEAR ENDED 30TH EPTEMBER,2005
(Amount in US Dollars)
PARTICULARS
2000-01
2001-02
2002-03
2003-04
2004-05
Half year
ended 30th
September,
2005
Sources of Funds
Shareholders' Funds
Share Capital
Share Premium
Advances
TOTAL OF SOURCES
5.00
5.00
5.00
500000.00
500000.00
499995.00
499995.00
499995.00
0.00
0.00
500000.00
0.00
5230338.00
0.00
0.00
45500.00
0.00
51600.00
5730338.00
500000.00
500000.00
545500.00
500000.00
30655.00
30655.00
30655.00
30655.00
30655.00
30655.00
0.00
0.00
15328.00
17648.00
19729.00
19729.00
30655.00
30655.00
15327.00
13007.00
10926.00
10926.00
0.00
0.00
0.00
0.00
0.00
0.00
551600.0
Application of Funds
Fixed Assets
Less: Depreciation
Net Fixed Assets
Investments
Current Assets,
Loans & Advances
Sundry Debtors
46440.00
31694.00
27024.00
38501.00
84741.00
149245.00
Cash & Bank Balances
Current Assets, Loans
and Advances
Less: Current
Liabilities
737834.00
741.00
1199.00
1134.00
5349.00
6296.00
4707657.00
191542.00
181542.00
183042.00
183042.00
184042.00
0.00
0.00
17000.00
0.00
136305.00
192426.00
Net Current Assets
5491931.00
223977.00
192765.00
222677.00
136827.00
147157.00
207752.00
245368.00
291908.00
309816.00
352246.00
393517.00
5730338.00
500000.00
500000.00
545500.00
500000.00
551600.00
Profit & Loss Account
TOTAL OF
APPLICATION
106
Annexure-O
R.S.Software (UK) Ltd
Figures in Pounds
PARTICULARS
Income
Sales
Other Income
Total Income
Expenditure
Sub-contracting
Charges
Administrative
Expenses
Total Expenditure
Profit before Tax
Provision for Taxation
Profit after Tax
2000-01
2001-02
2002-03
2003-04
2004-05
Half year ended
30th
September,2005
22450.00
0.00
22450.00
4530.00
0.00
4530.00
0.00
2.00
2.00
0.00
23.00
23.00
0.00
38.00
38.00
0.00
4.00
4.00
17960.00
3596.00
0.00
0.00
0.00
0.00
0.00
17960.00
4490.00
0.00
4490.00
4121.00
7717.00
(3187.00)
0.00
(3187.00)
29.00
29.00
(27.00)
0.00
(27.00)
52.00
52.00
(29.00)
0.00
(29.00)
59.00
59.00
(21.00)
0.00
(21.00)
29.00
29.00
(25.00)
0.00
(25.00)
Balance Sheet
PARTICULARS
SOURCES OF FUNDS
Shareholders' Funds
Share Capital
Reserves & Surplus
Advances
Total Sources
APPLICATION OF FUNDS
Current Assets, Loans &
Advances
Sundry Debtors
Cash & Bank
Less: Current Liabilities
Net Current Assets
Miscellaneous Expenditure
Total Application
2000-01
2001-02
2002-03
2003-04
2004-05
30.09.2005
1.00
4491.00
174.76
4666.76
1.00
405.00
0.00
406.00
1.00
378.00
0.00
379.00
1.00
349.00
0.00
350.00
1.00
328.00
0.00
329.00
1.00
303.00
0.00
304.00
12502.25
12338.50
20348.75
4492.00
174.76
4666.76
2013.00
751.00
2358.00
406.00
0.00
406.00
2013.00
724.00
2358.00
379.00
0.00
379.00
0.00
2361.00
2011.00
350.00
0.00
350.00
0.00
329.00
0.00
329.00
0.00
329.00
0.00
304.00
0.00
304.00
0.00
304.00
107
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS
Comparison of significant items of income and expenditure of RS Software (India)
Limited for the past three years is as follows:
PARTICULARS
2001-02
2002-03
2003-04
Half year
ended 30th
2004-05
September,
2005
Income
Sales
5,902.44
6069.96
5976.42
8249.90
56.78
10.31
3.93
4.52
4.00
5,959.22
6080.27
5980.35
8254.42
4698.00
4,261.52
3577.49
3705.95
5384.60
3163.00
399.84
250.44
289.15
182.04
69.00
655.00
Other Income
Total Income
4694.00
Expenditure
Salary &other employee benefits
Sales & marketing expenses
Administrative & other expenses
1,484.66
1070.24
1275.20
1146.64
Miscellaneous Expenses written off
825.13
1643.54
6.72
0.00
Interest & finance charges
543.88
738.48
709.21
736.62
351.00
Depreciation & amortization
265.12
699.99
869.81
953.17
258.00
Provision for Doubtful debts
612.96
3.49
0.00
0.00
0.00
Provision for Diminution in the value of
investments
Total Expenditure
Profit /(Loss) before tax & extraordinary
items
0.00
64.48
15.67
18.70
0.00
8,393.11
8048.15
6871.71
8421.77
4496.00
(2,433.89) (1967.88)
(891.36)
(167.35)
202.00
6.05
0.00
0.00
Prior period items
105.25
10.20
0.00
0.00
0.00
0.00
0.00
(2,328.64) (1957.68)
(885.31)
(167.35)
202.00
Minority interest adjustment
Profit /(Loss) before tax
Provision for taxation
Profit / (Loss) after tax
0.00
0.00
0.00
6.00
(2,328.64) (1957.68)
0.00
(885.31)
(167.35)
196.00
Factors that may affect the results of the operations
There are several factors that may affect the results of operations, financial condition and
cash flow of the Company such as:
General economic conditions in India and large global markets, particularly the United
States.
Changes in the demand for IT products and services.
Fluctuations in the rate of exchange between the Rupee and major foreign currencies,
especially U.S. dollar.
Pricing pressures for both the product and services businesses, due to continued
competition from other IT product and service companies.
Changes in interest rates; and changes in net working capital including the funding of the
working capital requirements.
Capital expenditures and related financings, including for product development.
Competition in hiring and retaining skilled IT personnel.
Gain or loss of significant customers.
New strategic partnerships or mergers/acquisitions.
108
Comparison of FY2005 over period ended 30th Sept 2005.
i. Sales Revenue
During the half year ended 30th September 2005,the total revenue achieved was Rs. 4656
Lacs and for the year ended 31st March 2005 revenue earned was Rs. 8165 Lacs. 96% of
the total income was derived from offshore exports and 4% was from the domestic sales
during both the period stated above. The company is projecting an overall 13% increase in
Revenue for the year ending 31st March 2006 from all the geographical segments.
ii. Total Expenditure
The total expenditure was only 95% of the total revenue during the period ended 30th Sept
2005 whereas the total expenditure for the year ended 31st March 2005 was 115% of
Revenue. This was due to better margins, higher utilization levels of employees and
improved turnover.
iii. Profit After Tax
In proportion with the increase in revenues, the Company recorded an increase in the profit
after tax of about 5 % during the period ended 30th Sept’05 in comparison to the previous
year ended 31st March 2005 where the Company has incurred a negative profit of Rs. 148
Lacs.The Company has projected an overall 6% margin on the revenue for the year ended
31st March 2006. This is mainly due more shift towards offshore, strategic cost
Management and effective utilization of overall resources.
Comparison of FY2005 over FY 2004
i. Sales Revenue
During the year 2004 – 2005 the sales revenues increased by about 37% due to the
increase in revenue from all the geographical segments.96% of the total income was
derived from offshore exports and 4% was from the domestic sales.
ii. Total Expenditure
The total expenditure was only 102% of the total revenue, when compared to the previous
years total expenditure of 115% of the total revenue due to improved turnover and higher
utilization levels of employees.
iii. Profit After Tax
In proportion with the increase in revenues, the Company recorded a significant decrease in
the negative profit after tax of about 2% of the total revenue when compared to 15% of the
total revenue in the previous year. This was mainly due to better margins in realization, and
increased turnover.
Comparison of FY2004 over FY 2003
i. Sales Revenue
There was a marginal decrease of 2% in the sales revenue when compared to the previous
year due to the industry continuing to be in downturn mode especially in the US. Also
though there was increase in terms of dollar sales in FY2004 over FY2003 the same was not
adequately reflected in the rupee revenues on account of fall in the value of the
average dollar value by approximately 5% on an average.
109
ii. Total Expenditure
The total expenditure as a percentage of the total revenue during the year was decreased
to 115% from 132% of the previous year due to effective utilization of Company Resources.
iii. Profit After Tax
The Company registered a significant decrease in the negative profit of 15% of the total
revenue in 2003-04 when compared to 32% of the total revenue of the previous year,
which is mainly on account of the improvement in export turnover and better utilization of
Company Resources.
INFORMATION REQUIRED AS PER CLAUSE 6.10.5.5 (A) OF SEBI DIP GUIDELINES
Unusual or infrequent events or transactions
There are no major unusual or infrequent events or transactions known to the company
that could have a material affect on its revenues or operations except global economic
growth dynamics, revolutionary trends like. com.
Significant economic changes
RS’s leadership has seen an upsurge in demand for the kind of quality IT services offered
by the Company. Subsequent to the events like the terrorist attacks in US on Sep 11,2001
and the dotcom bubble burst the American economy has started recovering after 2003,
and thereafter global need for outsourced IT services has grown considerably.
Known trends or uncertainties that have had or are expected to have a material
adverse impact on income from operations
There are several external factors like 9/11 attacks, terrorism concerns, Iraq war, that
tend to have a wide impact on business sentiments and affect the industry as a whole.
Large players dominate the industry. Therefore, the SME segment has to operate under a
competitive environment. It is however predicted that companies of RS size have to
operate in focused Niche areas to get necessary competitive advantage.
Changes in relationship between costs and revenues
Since the Company is in a high value services industry any changes in labor of
infrastructure cost will have an insignificant impact on the financial performance. Going
forward the Company will have greater utilisation of infrastructure and management
bandwidth and assume economies of scale, which would help to improve margins further.
Moreover with the revenues being more offshore centric there would be greater profit
margins.
Extent to which material increases in revenues are due to increased volumes,
introduction of new projects.
The Company has not introduced any new segments of business.
Total revenue of the industry segment in the which the Company operates.
A NASSCOM-KPMG report published in 2004 indicated that the total Indian IT services and
IT-enabled services export market was nearly $10 billion in 2003 and is projected to grow
to $49 billion by 2009, representing a CAGR of approximately 30%. It has to be noted that
software services exports from India in FY2005 (excluding BPO exports) stood at US$ 12
billion while ITES-BPO exports stood at US$ 5.2 billion. This was a strong 30.4% and
44.4% growth respectively from FY2004 Global IT spending has been estimated between
US$600 billion - US$660 billion in 2004 by analyst firms like Gartner and International
110
Data Corporation that gives India an approximate 2% of the global market share and this
share is expected to increase in the coming years as off shoring is becoming more and
more mainstream. and organizations worldwide resort to outsourcing IT &ITES related
work to India in some form or the other.
Seasonality of business
The Company is involved in the IT & IT related industries which are not influenced by
seasonal changes.
Dependence on single or few suppliers/customers
There is dependence on a single client. Dependency exists, but the relationship with the
client goes back 12 years back and is thus very stable. The client’s stake is also very high,
as it has invested a lot in RS. RS is also involved in executing plenty of mission critical
projects. This trend is very dominant in IT services industry globally, and most companies
including very many Tier I companies from India have also had such dependencies till few
years ago.
Competitive Conditions
RS Software is unique in having its largest revenue stream for 14 years from one single
vertical business domain and that is Payment systems. While there are few more
companies in this space from India, but none of them have this unique distinction. This
does give certain amount of competitive advantage to R S Software; the company is
focused on leveraging these strengths and consolidating them to maintain leadership in
this space. There are only about 10 companies from India in this space, out of a total of
3000 companies in the software export business. The core competence built over the last
14 years coupled with Robust process architecture & technology bandwidth from the
legacy systems to the current technologies are distinguishers positioned to give RS
Software the necessary impetus for growth higher than companies of its size, year on
year. Major clients have shown confidence and have been with RS software even during
the slowdown of the industry.
The knowledge bandwidth along with committed senior management and an extremely
focused Sales organization has been put in place to scale new heights.
111
XII.
LEGAL & OTHER INFORMATION
Outstanding litigations and material developments
There are no contingent liabilities not provided for, outstanding litigations, proceedings,
disputes, non payment of statutory dues including disputed/contested tax liabilities of any
nature including government claims, overdues to banks/ financial institutions, defaults
including those against banks/ financial institutions, defaults in dues towards instrument
holders like debenture holders, fixed deposits, and arrears on cumulative preference shares
issued by the Company or the companies/firms promoted by the Company, defaults in
creation of full security as per terms of issue/ other liabilities, proceedings initiated for
economic/ civil/ any other offences (including past cases where penalties may or may not have
been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of
Schedule XIII of the Companies Act, 1956) against RS Software (India) Limited save and
except the following:
1. Contingent liabilities not provided: (As on 30.09.2005)
Sl.
No.
1.
2.
3.
(Rs. in lacs)
Amount
Particulars
Bank Guarantees Outstanding
Liabilities in respect of bills discounted
Income tax demands pending with Income Tax
authorities.
A. Y. 1997 – 98
A. Y. 1998 – 99
A. Y. 2001– 02
TOTAL
20.46
846.26
218.05
260.32
44.77
1389.86
2. Litigation involving Criminal Offences: Nil
3. Litigation/Disputes involving Securities Related Offences, including penalties imposed by
SEBI or any other securities market regulator in India or abroad: Nil
4. Litigation involving Statutory and other offences, including penalties imposed by any
regulatory authority in India or abroad (Present or past): Nil
5. Litigation involving Civil and Economic Offences: Nil.
6. Cases filed by the Company: Nil
7. Cases filed against the Company: Nil
8. Litigation in relation to labour laws, and employee related cases: Nil
9. Litigation in the nature of winding up petitions/ liquidation/ bankruptcy / closure filed by /
against the company: Nil
10. Other Litigation: Nil
11. Non payment of statutory dues or dues to Banks / Institutions:
Allahabad Bank has served a notice upon the company to discharge Rs. 28,904,161
(including interest) on Bill Discounting facility and Guarantees granted to the company.
The company has already paid a sum of Rs. 1,09,30,763 till the end of the current halfyear to the bank as a part of the pending dues. Negotiations are on with the Bank
Authorities for extension of time to settle the dues.
112
12. Overdue interest / principal as on current date: Nil
There are no pending litigations, defaults, non-payment of statutory dues, proceedings
initiated for economic offences/ civil offences (including the past cases, if found guilty).
Further, no disciplinary action was taken by the SEBI/ stock exchanges against the
promoters and their other business ventures (irrespective of the fact whether they are
companies under the same management with the issuer company as per section 370 (1B)
of the Companies Act, 1956).
13. Litigation against Directors:
There are no pending litigations against the directors involving violation of statutory
regulations or alleging criminal offence. There are no pending proceedings initiated for
economic offences against the directors. There are no past cases in which penalties were
imposed by the concerned authorities on the issuer company or its directors. There are no
pending litigations, defaults, non payment of statutory dues, proceedings initiated for
economic offences/ civil offences (including the past cases, if found guilty), any
disciplinary action taken by the SEBI / stock exchanges against the issuer company or its
Directors.
14. Litigation against Group Company/ Associate Concerns: Nil.
Material Developments
Other than those mentioned below there are no material developments after the date of the
last audited balance sheet as on 30th September 2005, which may materially affect the
performance, or prospects of the Company.
In pursuance of the order of the Learned Income Tax Appellate Tribunal the office of the
Assistant Commissioner of Income Tax by an order dated 24/10/05 allowed the company
an additional exemption of Rs. 2,82,13,540 for the purpose of Section 10B of the Income
Tax Act.
As per the opinion of the Directors, no circumstances have arisen since the date of last
financial statement disclosed in the Draft Letter of Offer that materially and adversely affect or
are likely to affect the trading or profitability of the company, the value of its assets, or its
ability to pay the liabilities within the next twelve months.
113
GOVERNMENT APPROVALS
The Company has received all the necessary permissions and approvals from the Government
and various non- Government agencies for conducting business. No further approvals from
any Government Authority are required by the Company to undertake the activities save and
except those approvals, which may be required to be taken in the normal course of business
from time to time. It must be understood that in granting approvals, the Government of India
and Reserve Bank of India does not undertake any responsibility for the financial soundness of
the undertaking or for the correctness of any of the statements made or opinions expressed in
this regard.
The following statement sets out the details of licenses, permissions and approvals taken by
the Company under various Central and State Laws for carrying out its business.
Sl.
No.
1
2
3
4
Issuing Authority
Registrar of Companies,
Assistant Commissioner of
Customs, Kolkata
Office of Chief Commissioner
of Exports & Imports
Ministry of Commerce &
Industry
License/ Registration
No.
43375 of 1987
39/04(100% EOU/STP)
0289004128
30/09/90
S(15)/78-EP
31.12.1980
dated
dated
5
Green Card
Green Card No: 19
6
Service Tax Code Number
AABCR7813GST001
7
Service
Number
141/ST/R-5/TILJALA/KOL5/04
8
Registration under Employees
State Insurance Act, 1948.
Tax
Registration
41-22385-102
114
Nature
of
License/
Registration
Certificate of Incorporation
License for private bonded
warehouse
Certificate of Import- Export
Code
SIA
Approval
for
manufacturing of Computer
Software
Office of the Development
Commissioner Falta Special
Economic Zone, Ministry of
Commerce.
Office of the Assistant
Commisioner
of
Central
Excise,
Tiljala
Divn,
KolkataV Commisionerate.
Office of Superintendent of
Central Excise, Range V,
Tiljala Division, Kolkata.
Employee State Insurance
Corporation.
XIII. OTHER REGULATORY AND STATUTORY DISCLOSURES
Authority For the Issue
Pursuant to the resolution passed by the shareholders of the Company at the Extra ordinary
General Meeting held on 23rd December 2005 and the subsequent approval of the Rights issue
Committee on 27th December 2005 it has been decided to make the following offer to the
Equity shareholders of the company, with a right to renounce.
Prohibition by SEBI
The Company, its Subsidiaries, its Directors, its Promoters, other companies/entities promoted
by the Promoter and companies/entities with which the Company’s Directors are associated as
Directors have not been prohibited from accessing/operating in the capital markets under any
order or direction passed by SEBI. None of the Company’s Directors or the persons in control
of the Company has been prohibited from accessing the capital markets under any order or
direction passed by SEBI.
Eligibility of the Company to come out with the Issue
The Company's shares are listed on the BSE, ASE, CSE, DSE and NSE. This Issue, being a
Rights Issue, is exempt from the eligibility norms in terms of Clause 2.4.1 (iv) of the SEBI
(Disclosure and Investor Protection) Guidelines, 2000, and amendments thereto.
Statutory Declaration
i. The Issuer Company accepts full responsibility for the accuracy of the information given in
this Draft LoO and confirms that to the best of its knowledge and belief, there are no other
facts, the omission of which make any statement in this Draft LoO misleading and further
confirm that they have made all reasonable inquiries to ascertain such facts. The Issuer
further declares that the Stock Exchange to which an application for listing has been made
do not take any responsibility for the financial soundness of this Offer or for the price at
which the equity shares are offered, or for the correctness of the statements made or
opinions expressed in this Draft LoO.
ii. In the opinion of the Directors of the Company, there are no circumstances that have arisen
since the date of the last financial statement disclosed in the Draft LoO, that materially or
adversely affect or are likely to affect the performance or profitability of the Company or
value of its assets or its ability to pay its liabilities, within the next twelve months.
iii. The funds received against the Rights Issue will be kept in separate bank account(s) and the
Company will not have any access to such funds unless it satisfies the BSE with suitable
documentary evidence that the minimum subscription of 90 per cent of the Issue has been
received by the Company.
DISCLAIMER CLAUSE
AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO
SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE DRAFT
LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED / 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 ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE
LETTER OF OFFER. THE LEAD MANAGER, ASHIKA CAPITAL LIMITED HAS CERTIFIED
THAT THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE GENERALLY
ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR
PROTECTION) GUIDELINES IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS
115
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 IS
PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF
ALL RELEVANT INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGER
IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY
DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS
THIS PURPOSE, THE LEAD MANAGER, ASHIKA CAPITAL LIMITED HAS FURNISHED TO
SEBI A DUE DILIGENCE CERTIFICATE DATED 16th January, 2006 IN ACCORDANCE
WITH SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS
FOLLOWS:
1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO
LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH
COLLABORATORS ETC., AND OTHER MATERIALS IN CONNECTION WITH THE
FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID
ISSUE;
2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE
COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES,
INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS
OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE
CONTENTS OF THE DOCUMENTS AND OTHER PAPERS FURNISHED BY THE
COMPANY,
WE CONFIRM THAT:
A)
THE DRAFT LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY
WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE
ISSUE;
B)
ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS
ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE
GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF
HAVE BEEN DULY COMPLIED WITH;
C)
THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE,
FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL
INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE;
AND
D)
WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE
UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS.
3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN
THE DRAFT LETTER OF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH
REGISTRATION IS VALID.
THE FILING OF THE DRAFT LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE
COMPANY FROM ANY LIABILITIES UNDER SECTION 63 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 MANAGER ANY IRREGULARITIES OR LAPSES IN THE DRAFT LETTER OF
OFFER.
116
The Board of Directors declare and confirm that no information/material likely to have a
bearing on the decision of investors in respect of the shares/debentures/securities offered in
terms of this Draft LoO has been suppressed/withheld and/or incorporated in the manner that
would amount to mis-statement/mis-representation and in the event of its transpiring at any
point of time allotment/refund, as the case may be, that any information/material has been
suppressed/withheld and/or amounts to a misstatement/ mis-representation, the
Promoters/Directors undertake to refund the entire application monies to all the subscribers
within 7 days thereafter without prejudice to the provisions of Section 63 of the Companies
Act, 1956.
CAUTION
The Company and the Lead Manager accept no responsibility for any statements made
otherwise than in the Draft LoO or in the advertisement or any other material issued by or at
the instance of the Company and that anyone placing reliance on any other source of
information would be doing so at his own risk.
All information shall be made available by the Lead Manager and the Issuer to the
shareholders and no selective or additional information would be made available for a section
of the shareholders or investors in any manner whatsoever including at presentations,
research or sales reports, etc.
The Lead Manager and the Company shall keep the shareholders informed of any material
changes till the listing and trading commencement.
Disclaimer in Respect of Jurisdiction
This Rights Issue is made in India subject to Indian laws. Any dispute arising out of this Offer
will be subject to the jurisdiction of appropriate court(s) in Kolkata only.
Disclaimer Clause of NSE
NSE has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to the Company. NSE has given its permission vide its letter
dated ……………… 2006 to this Company to use the Exchange’s name in this Draft LoO as the
Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange
has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company.
NSE does not in any manner (a) warrant, certify, or endorse the correctness or completeness
of any of the contents of this Draft LoO, or (b) warrant that the Company’s securities will be
listed or will continue to be listed on the Exchange or (c) take any responsibility for the
financial or other soundness of this Company, its Promoters, its Management, or any scheme,
or project of this Company.
It should not, for any reason, be deemed or construed that the Draft LoO has been cleared or
approved by NSE. Every person who desires to apply for or otherwise acquire any securities of
this Company may do so pursuant to independent inquiry, investigation and analysis and shall
not have any claim against the NSE 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 BSE
BSE has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to the Company. BSE has given its permission vide its letter
dated ……………… 2006 to this Company to use the Exchange’s name in this Draft LoO as the
Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange
117
has scrutinised this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company.
BSE does not in any manner (a) warrant, certify, or endorse the correctness or completeness
of any of the contents of this Draft LoO, or (b) warrant that the Company’s securities will be
listed or will continue to be listed on the Exchange or (c) take any responsibility for the
financial or other soundness of this Company, its Promoters, its Management, or any scheme,
or project of this Company.
It should not, for any reason, be deemed or construed that the Draft LoO has been cleared or
approved by BSE. Every person who desires to apply for or otherwise acquire any securities of
this Company may do so pursuant to independent inquiry, investigation and analysis and shall
not have any claim against the BSE 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 DSE
DSE has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to the Company. DSE has given its permission vide its letter
dated ……………… 2006 to this Company to use the Exchange’s name in this Draft LoO as the
Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange
has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company.
DSE does not in any manner (a) warrant, certify, or endorse the correctness or completeness
of any of the contents of this Draft LoO, or (b) warrant that the Company’s securities will be
listed or will continue to be listed on the Exchange or (c) take any responsibility for the
financial or other soundness of this Company, its Promoters, its Management, or any scheme,
or project of this Company.
It should not, for any reason, be deemed or construed that the Draft LoO has been cleared or
approved by DSE. Every person who desires to apply for or otherwise acquire any securities of
this Company may do so pursuant to independent inquiry, investigation and analysis and shall
not have any claim against the DSE 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 ASE
ASE has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to the Company. ASE has given its permission vide its letter
dated ……………… 2006 to this Company to use the Exchange’s name in this Draft LoO as the
Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange
has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company.
ASE does not in any manner (a) warrant, certify, or endorse the correctness or completeness
of any of the contents of this Draft LoO, or (b) warrant that the Company’s securities will be
listed or will continue to be listed on the Exchange or (c) take any responsibility for the
financial or other soundness of this Company, its Promoters, its Management, or any scheme,
or project of this Company.
It should not, for any reason, be deemed or construed that the Draft LoO has been cleared or
approved by ASE. Every person who desires to apply for or otherwise acquire any securities of
this Company may do so pursuant to independent inquiry, investigation and analysis and shall
not have any claim against the ASE whatsoever by reason of any loss which may be suffered
118
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 CSE
CSE has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to the Company. CSE has given its permission vide its letter
dated ……………… 2006 to this Company to use the Exchange’s name in this Draft LoO as the
Stock Exchange on which this Company’s securities are proposed to be listed. The Exchange
has scrutinized this Draft LoO for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Company.
CSE does not in any manner (a) warrant, certify, or endorse the correctness or completeness
of any of the contents of this Draft LoO, or (b) warrant that the Company’s securities will be
listed or will continue to be listed on the Exchange or (c) take any responsibility for the
financial or other soundness of this Company, its Promoters, its Management, or any scheme,
or project of this Company.
It should not, for any reason, be deemed or construed that the Draft LoO has been cleared or
approved by CSE. Every person who desires to apply for or otherwise acquire any securities of
this Company may do so pursuant to independent inquiry, investigation and analysis and shall
not have any claim against the CSE 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.
Filing
A copy of the draft LoO has been filed with the Securities and Exchange Board of India at
Kolkalta.
Listing
The Company’s existing equity shares are listed on NSE, BSE, ASE, DSE and CSE.
In case the permission to deal in and for an official quotation of the equity shares now being
offered by the Company through this draft LoO is not granted by any of the stock exchanges,
the Company shall forthwith repay without interest all monies received from applicants in
pursuance of the LoO and if any such money is not repaid within eight days after the Company
is liable to repay (i.e., 42 days from the closure of the issue), the Company will pay interest as
prescribed under Section 73 (2)/(2A) of the Companies Act, 1956.
Consequent to the Rights Issue and if Promoters of the Company subscribe to the
unsubscribed portion of rights offer, the non-Promoter holding will not fall below the minimum
requirement stipulated under Clause 40A of the listing agreement.
The Company has complied with the provisions of listing agreement more particularly
Corporate Governance.
Consents
Consents in writing of the Auditors of the Company, Lead Manager to the Issue, Legal
Advisors, Registrar to the Issue, Bankers to the Company (except Allahabad bank), and
Banker to the Issue to act in their respective capacities have been obtained and filed with
SEBI, along with a copy of the Draft Letter of Offer and such consents have not been
withdrawn up to the time of delivery of this Letter of Offer for registration with the stock
exchanges.
M/s Chaturvedi & Co. of the Company have given their written consent for the inclusion of
their Report in the form and content as appearing in this Draft Letter of Offer and such
119
consents and reports have not been withdrawn up to the time of delivery of this Draft Letter of
Offer to Stock Exchanges.
M/s Chaturvedi & Co., Auditors have given their written consent for inclusion of tax benefits in
the form and content as appearing in this Draft Letter of Offer, available to the Company and
its members.
Expert Opinion
The Company has not obtained any expert opinions except that of M/s. Chaturvedi &
Company, Chartered Accountants who have given the tax benefit certificate.
Issue Expenses
The issue expenses are estimated at Rs. [••] comprising of fees and expenses payable to the
Lead Managers to the issue, Bankers to the issue, Registrar to the issue, printing and
stationery expenses, advertising expenses and marketing expenses and all other expenses for
listing the Equity Shares on the Stock Exchanges.
(Rs. in lakhs)
Sl No
Particulars
Amount
[••]
1.
Lead Managers Fees & other intermediary fees and out
pocket expenses
[••]
2.
Auditors, Legal counsel, Registrars Fees & expenses
[••]
3.
Advertisement, Printing & despatch costs
[••]
4.
Other costs including contingencies
[••]
Total
Previous rights and public issue if any (during the last five years)
The Company has not made any rights or public issue in the last five years.
Previous issue of shares for consideration other than cash
The Company has not made any issue of shares for consideration other than cash.
Commission and brokerage on previous issues
The company has not made any rights or public issue in the last five years.
Bonus Issue of Shares
The Company has not issued any bonus shares.
Particulars of the issuer company and the Listed Companies under the same
management as defined under section 370 (1) (B) of the Companies Act 1956, that
made any capital Issue during the last three years.
The issuer company and no listed company under the same management has made public
issue during the last three Years.
120
Promises Vs Performance
The Company came out with a public offer of 25,50,500 shares of Rs.10/- each for cash at a
premium of Rs.10/- each aggregating to Rs.510.10 lakhs. The issue opened on 7th March 1994
and closed on 16th March 1994.
The Company’s promises made in the initial public issue and the performance were
as under:
(Rs.in Lacs)
Year Ended 31st March
PARTICULARS
Total Income
1993 - 94
1994 - 95
1995 - 96
Projected Actual Projected Actual
1005 1039
1996 - 97
Projected Actual Projected Actual
1416
1150
1955 1731
1995
2440
1415 1399
Total Cost of Production
771
793
1003
913
1415
1991
Profit before interest depreciation
234
246
413
237
540
332
540
449
Interest
60
60
54
29
43
98
34
175
Depreciation
81
88
138
94
140
103
143
112
Deferred Revenue Expenditure
13
13
13
13
13
13
13
20
PBT (Profit Before Tax)
80
84
208
100
344
118
350
142
Tax
PAT (Profit After Tax)
Earning Per Share (Rs.) (EPS)
Cash Accruals
Dividend (proposed)
0
0
0
0
0
0
0
0
80
84
208
100
344
118
350
142
4.45
4.66
4.78
2.29
7.91
2.72
8.04
3.27
174
185
359
207
497
235
506
274
23
27
62
82
109
43
131
43
Dividend (%)
15
15
20
20
25
10
30
10
Equity Capital
180
180
435
435
435
435
435
435
Reserves
247
315
671
583
902
652
1117
733
25.22 27.51
25.42
22.38
30.73 25.00
35.68
26.84
Book Value (Rs.)
Explanation
The period 1994 to 1997 was of early adoption of IT offshore outsourcing by the global market
place. The offering from India was more of a concept as compared today to IT offshore
outsourcing being mainstream activity. Under these situations, the company in the best case
met almost 125% of its projections, and in the worst case met 83% of its projections. The
largest impact however was the significant underestimation of cost of production, both in
terms of delivery costs and business development costs. There was a lot of learning in the
concept years of new market offering.
121
STOCK MARKET DATA
The Equity Shares of RS are listed on the BSE, NSE, DSE, ASE & CSE. As the Company’s
shares are actively traded on the BSE and NSE, the Company’s stock market data have been
given separate for each of these Stock Exchanges.
The details of the share prices on the BSE during the last 3 years are as follows:
Year
Ended
March 31
High
Date of high
(Rs.)
Volume
on date
of high
(No. of
Shares)
Low
(Rs.)
Date of
Volume
on date
of low
(No. of
Shares)
Low
Average
Price for
the Year
(Rs.)
2003
54.50
09/05/02
89102
19.85
31/03/03
1500
37.18
2004
32.15
29/12/03
33625
13.60
25/03/04
4100
22.88
2005
49.40
13/12/04
76444
12.90
17/05/04
700
31.15
111.05
23/12/05
710025
41.10
01/4/05
2550
76.08
April 1,
2005
Till
26/12/05
Source: Bombay Stock Exchange India Limited, official website: www.bseindia.com)
*Average calculated as mean of high and low of the closing prices.
The details of the share prices on the NSE during the last 3 years are as follows:
Year
Ended
March
31
High
(Rs.)
Date
High
of
Volume
on date
of High
(No. of
Shares)
249881
123807
208649
450552
Low
(Rs.)
Date
Low
of
Volume
on date
of Low
(No. of
Shares)
6138
8172
5140
10675
Average
Price for
the Year
(Rs.)
2003
55.05
09/05/2002
19.35
31/03/2003
37.20
2004
31.35
02/01/2004
13.85
25/03/2004
22.60
2005
49.65
13/12/2004
12.45
17/05/2004
31.05
April1,
110.55 23/12/2005
40.95
01/04/2005
75.75
2005 till
26/12/05
(Source: National Stock Exchange of India Limited, official website: www.nseindia.com)
*Average calculated as mean of high and low of the closing prices.
122
The details of the share prices on the CSE during the last 3 years are as follows:
Year
Ended
March 31
High
(Rs.)
Date of high Volume
on date
of high
(No. of
Shares)
Low
(Rs.)
Date of
Low
Volume
on date
of low
(No. of
Shares)
Average
Price for
the Year
(Rs.)
2003
45.50
18/4/02
-
24.00
14/8/02
-
34.75
2004
31.70
30/12/03
-
18.20
4/3/04
-
24.95
2005
45.15
16/2/05
-
12.45
18/5/04
-
28.80
Apr1’ 05
Till Jul
92.80
19/7/05
-
40.95
1/4/05
-
66.88
DSE
The equity shares of the company have not been traded on the DSE and no information is
available in this behalf.
ASE
The equity shares of the company have not been traded on the ASE and no information is
available in this behalf.
The high and low prices and volume of Equity Shares traded on the respective dates
during the last six months is as follows:
NSE
Year
Ended
March 31
December
2005*
November
2005
October
2005
September
2005
August
2005
July 2005
June 2005
* Updated till
High
(Rs.)
Date
High
114.85
of
Low
(Rs.)
Date
Low
26/12/2005
Volume
on date
of High
(No. of
Shares)
164782
86.15
96.25
28/11/2005
29083
89.55
05/10/2005
105.00
106.00
01/12/2005
Volume
on date
of Low
(No. of
Shares)
15668
Average
Price
for the
Year
(Rs.)
100.50
74.10
02/11/2005
9650
85.18
7475
68.00
21/10/2005
9121
78.78
01/09/2005
42153
80.25
26/09/2005
17138
92.63
18/08/2005
83540
76.00
01/08/2005
15437
91.00
33618
532030
78.00
68.40
27/07/2005
01/06/2005
19310
503595
86.98
80.65
95.95
18/07/2005
92.90
15/06/2005
28/12/05
123
of
BSE
Month
December
2005*
High
(Rs.)
Date of
High
115.00 26/12/05
Volume
on date
of high
(No. of
Shares)
126633
Low
(Rs.)
Date of
Low
15/12/05
Volume
on date
of low
(No. of
Shares)
7895
Average
Price
for the
Year
(Rs.)
99.25
83.50
November
2005
97.00
29/11/05
13594
75.00
02/11/05
4819
86.00
October
2005
88.50
05/10/05
7524
67.50
21/10/05
9085
78.00
19445
81.00
26/09/05
12140
93.00
120547
19218
75.00
78.00
01/08/05
27/07/05
7611
9533
92.50
86.83
Volume
on date
of low
(No. of
Shares)
Average
Price for
the Year
(Rs.)
September
2005
105.00 02/09/05
August 2005 110.00 18/08/05
July 2005
95.65 18/07/05
* Updated till 28/12/05
CSE
Month
High
(Rs.)
Date of
high
Volume
on date
of high
(No. of
Shares)
Low
(Rs.)
Date of
Low
December
2005 *
-
-
-
-
-
-
-
November
2005
-
-
-
-
-
-
-
October
2005
-
-
-
-
-
-
-
September
2005
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92.80
19/7/05
-
78.55
28/7/05
-
85.68
August
2005
July 2005
DSE
The equity shares of the company have not been traded on the DSE and no information is
available in this behalf.
ASE
The equity shares of the company have not been traded on the ASE and no information is
available in this behalf.
The market price was Rs.105.70 on BSE on 28th December 2005, the trading day immediately
following the day on which Board Committee meeting was held to finalize the issue.
The market price was Rs.106.10 on NSE on 28TH December 2005, the trading day immediately
following the day on which Board Committee meeting was held to finalize the issue.
124
The Ordinary Shares of the Company are actively traded on NSE and BSE.
Weekend closing prices for the last four weeks on NSE and BSE are as follows
Weekend on
Price per Share on NSE
(Rs.)
89.90
89.00
86.70
110.55
2.12.05
9.12.05
16.12.05
23.12.05
Price per Share on BSE
(Rs.)
89.55
89.95
86.65
111.05
The closing price of the equity shares of the Company as on 28th Dec 2005, on NSE was
Rs.106.10/- and on BSE was Rs.105.70/The highest and the lowest of the prices of the equity shares during the period of last four
weeks on NSE and BSE are:
NSE
Highest Price
Lowest Price
Price (Rs.)
110.55
84.70
BSE
Date
23.12.05
14.12.05
Price (Rs.)
111.05
84.25
Date
23.12.05
15.12.05
Procedure for Handling Investor Complaints and Investor Grievances
The Company has qualified and experienced staff in its Secretarial Department which closely
monitors and co-ordinates with its RTA, for attending to and resolving the complaints of its
shareholders. The Company attempts or uses its best endeavors jointly with the RTA, to
ensure that complaints are minimal and that all complaints are resolved satisfactorily. The
Company ordinarily attempts to dispose the complaints within four weeks of receipt of
complaints. The Company Secretary supervises the process of redressal of grievances. The
Company’s name has never appeared in the press release issued by SEBI regarding maximum
number of complaints received from investors.
C.B. Management Services (P) Limited will be acting as Registrar to the Issue with whom the
Company has made arrangements for attending to the investor’s complaints. However,
investors can also address their grievances to the Company Secretary and Compliance Officer
of the Company, who will coordinate all matters related to the investors’ grievances
expeditiously with the Registrars & Transfer Agents. The Company would make all efforts to
deal with and redress investors’ complaints within 30 days of their receipt.
Complaint letters should be either typewritten or legibly handwritten quoting folio number,
application number, number of equity shares applied for, name and address of the first
applicant, name and address of the Bank, branch where application was submitted with date
thereof, and the date of receipt by the Registrars to the Issue in case application was sent by
post. The Company has appointed Mr. Kunal Sen Company Secretary, as the Compliance
Officer. Envelopes containing the complaints should be addressed to:
Mr. Kunal Sen
Company Secretary & Compliance officer
A-2, FMC Fortuna,
234/3A,A.J.C.Bose Road, Kolkata-700020
Tel: +91-33-22810106/07 Fax: 91-33 -2287 6256
Web site: www.rssoftware.com
E-Mail: [email protected]
All the complaints received subsequent to making document public will be dealt with suitably.
There are no investor complaints pending with the Company as on the date of Draft LoO.
125
There are no listed companies under the same management within the meaning of section
370(1B) of the Companies Act 1956.
Changes in Auditors in the Last Three Years
There has been no change in the auditors of the company during the period of last three
years.
Capitalization of reserves or profits
The Company has not capitalized any of its reserves or profits till date.
Revaluation of assets
There has been no revaluation of assets of the company in last five years.
126
XIV.
OFFERING INFORMATION
TERMS OF THE PRESENT ISSUE
Principal Terms of the Offer
The equity shares now being offered are subject to the terms of this Draft LoO, the CAF, the
Memorandum and Articles of the Company, approvals under the Foreign Direct Investment
Scheme of Government of India, FEMA, if applicable, Guidelines issued by SEBI, the Act, the
guidelines, notifications and regulations for the issue of capital and for the listing of securities
issued by the Government, RBI and/or other statutory authorities and bodies from time to
time and such terms and conditions as may be incorporated in the Letter of Allotment/Share
Certificate or any deed or document executed by the Company regarding the Rights Issue. The
principal terms and conditions of the Offer are as follows:
Ranking of equity shares: The equity shares allotted pursuant to this LoO shall rank paripassu in all respects with the existing equity shares of the Company including in respect of
dividend, if any, declared by the Company.
Present Issue: The present Issue of equity shares of Rs. 10/- each for cash at a premium of
Rs. 55/- per share are being offered on Rights basis in the ratio of 1 equity share for every 2
equity share held in terms of the Draft LoO.
Face Value: Each equity share shall have the face value of Rs.10 /-.
Issue Price: Each equity share is being offered at Rs.65/- per Share (including premium of
Rs. 55/-)
Terms of Payment:
Entire amount of Rs.65/- per equity share will be payable on application.
Listing: The equity shares allotted pursuant to the Rights Issue are proposed to be listed on
NSE, BSE, ASE, and DSEand CSE.
Denomination of shares
The present denomination of the equity shares of the Company is Rs 10/- and the Company
undertakes that at any given time there will be only one denomination for the equity shares of
the Company.
Rights of the equity shareholders
The holders of the equity shares arising out of the present Issue shall be entitled to the
following Rights:
i. Right to receive dividend, if declared.
ii. Right to attend general meeting and exercise voting rights, unless prohibited by laws; and
iii. Right to vote either personally or through proxy.
Note: Only the registered equity shareholders or in case of joint holders, the one whose name
appears first in the Register of equity shareholders shall be entitled to the above mentioned
rights. The shares issued in the Rights Issue shall be pari-passu with the existing shares in all
respects.
127
iv. The equity shares shall be transferable and transmittable in the same manner and to the
same extent and be subject to the same restrictions and limitations as applicable to the
existing equity shares of the Company. The provisions relating to the transfer and
transmission and other related matters in respect of the shares of the Company contained in
the Articles and the Act shall apply mutatis mutandis to these equity shares also.
v. Only the registered equity shareholders or in the case of joint-holders, those shareholders
whose name(s) appear first in the Register of equity shareholders shall be entitled to vote
in respect of such equity share, either in person or through proxy, at any meeting of the
concerned equity shareholders and every such holder shall be entitled to one vote on a show
of hands and on a poll, his/her voting rights shall be in proportion to the paid up value of the
equity shares held by him/her on every resolution placed before such meeting of the equity
shareholders.
vi. Save as otherwise provided in this Draft LoO, the provisions contained in Annexure C and/or
Annexure D to the Companies (Central Government's) General Rules and Forms, 1956 as
prevailing and to the extent applicable, will apply to any meeting of the equity shareholders,
in relation to matters not otherwise provided for in terms of the Issue of the equity share.
vii. The equity shareholders will be entitled to their equity Share free from encumbrances and/or
cross claims by the Company against the original or any intermediate holders thereof.
Market Lot / Disposal of Odd lots
As per the directives from SEBI, the trading of the equity shares of the Company is in demat
mode only. The market lot for the equity shares of the Company is one. The investors opting
to receive certificates in physical form would be issued one consolidated certificate for all the
equity shares allotted under physical mode. Upon request from the shareholders, the
Company will arrange for splitting of share certificates without any charges, within 7 days of
receipt of the request.
Fractional Allotment
Fractional Allotment, if any, to be rounded of to the next higher integer.
Nomination Facility
In terms of Section 109A of the Act, nomination facility is available in case of equity shares.
The applicant can nominate any person by filling the relevant details in the CAF in the space
provided for this purpose.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the entire
subscription shall be refunded to the applicants within forty-two days from the date of closure
of the Issue. If there is delay in the refund of subscription by more than 8 days after the
Company becomes liable to repay the subscription amount (i.e. forty two days after closure of
the Issue), the Company will pay interest for the delayed period, at prescribed rates in subsections (2) and (2A) of Section 73 of the Companies Act, 1956.
The Issue will become under-subscribed, if the number of shares applied for falls short of the
number of shares offered, after considering the number of shares applied for as per the
entitlement plus additional shares. The under-subscribed portion can be applied for only after
the close of the Issue. The Promoters can subscribe to such under-subscribed portion as per
relevant provisions of law. If any person presently in control of the Company desires to
subscribe to such under-subscribed portion and if disclosure is made pursuant to SEBI
(Substantial Acquisition of Shares and Takeover) Regulations, 1997, such allotment of the
under-subscribed portion will be governed by the provisions of the SEBI (Substantial
Acquisition of Shares and Takeover) Regulations, 1997.
128
The above is subject to the terms mentioned under the “Basis of Allotment” on Page 139 of
this Draft LoO.
Some members of the promoter group intend to subscribe to additional shares beyond their
entitlement if the issue is undersubscribed. The acquisition of additional securities in such an
event shall be exempt from making an open offer in terms of proviso to Regulation 3(1)(b)(ii)
of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Further this
acquisition will not result in change of control of the management of the Company.
Option to subscribe
Other than the present Rights Issue, the Company has not given any option to subscribe for
any equity shares of the Company.
Option to subscribe in dematerialised form
The Investors have an option to subscribe to the shares of the Company either in the physical
form or dematerialised form. The application form contains space for indicating number of
shares subscribed for in demats or physical shares.
Option to receive the Rights equity shares in Dematerialised form
Applicants have the option to hold the equity shares of the Company in the electronic form
under the Depository System. The Company has signed agreements with National Securities
Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), which
enable an investor to hold and trade in securities in dematerialized (Electronic) form, instead
of holding equity shares in the form of physical certificates.
In the Rights Issue, an option is being provided to the shareholders to receive their Rights
equity shares in the form of an electronic credit to their beneficiary account with any of the
depository participant (NSDL/CDSL) instead of receiving these equity shares in the form of
physical certificates. Investor can opt for this facility by filling up the relevant particulars in the
CAF.
Trading in Dematerialized Form
The equity shares of the Company have been under compulsory dematerialized trading for all
investors. The Company has an agreement with National Securities Depository Limited (NSDL)
and Central Depository Services (India) Limited (CDSL) and its equity shares bear the ISIN
No.INE165B01011. Trading of securities upon listing shall only be in dematerialized form.
However, the investors have an option to hold the shares in physical form or demat form.
Applicants may note that they have the option to subscribe to the Rights equity shares in
demat or physical form. However, the investors may note that the equity shares of the
Company can be traded on the Stock Exchanges only in demat form.
Procedure for opting for this facility for allotment of equity shares arising out of this Issue in
electronic form is as under.
i.
Open a Beneficiary Account with any Depository Participant (Care should be taken
that the Beneficiary Account should carry the name of the holder in the same
manner as is exhibited in the records of the Company. In case of joint holding, the
129
Beneficiary Account should be opened carrying the names of the holders in the
same order as with the Company. In case of investors having various folios in the
Company with different joint holders, the investor will have to open separate
accounts for such holdings. This step need not be adhered to by those
shareholders who have already opened such Beneficiary Account(s).
ii.
For holding shares in dematerialised form as on the record date, the beneficiary
account number shall be printed on the CAF. For those who open accounts later or
those who change their accounts and wish to receive their Right equity shares by
way of credit to such account, the necessary details of their Beneficiary Account
should be filled in the space provided in the CAF. It may be noted that the
allotment of equity shares arising out this Issue can be received in a
Dematerialized Form even if the original equity shares of the Company are not
dematerialized. Nonetheless, it should be ensured that the Depository Account is
in the name(s) of the equity shareholder and the names are in the same order as
in the records of the Company.
iii.
Responsibility for correctness of applicant's age and other details given in the CAF
vis-à-vis those with the Applicant’s Depository Participant would rest with the
Applicants. Applicants should ensure that the names of the sole/all the applicants
and the order in which they appear in CAF should be same as registered with the
Applicant's Depository Participant.
iv.
If incomplete/incorrect Beneficiary Account details are given in the CAF or where
the investor does not opt for the option to receive the Rights equity shares in
dematerialized form, the Company will issue equity shares in the form of physical
certificate(s)
v.
The Rights equity shares allotted to investor opting for dematerialized form, would
be directly credited to the Beneficiary Accounts as given in the CAF after
verification. Allotment Advice/Refund Order (if any) would be sent directly to the
Applicant by the Registrars to the Issue. The confirmation of the credit of the Right
equity shares to the Applicant’s Depository Account will be provided to the
Applicant by the Applicant's Depository Participant.
vi.
Renouncees can also exercise the option to receive equity shares in the
dematerialized form by indicating in the relevant space and providing the
necessary details about the beneficiary accounts.
No separate application for demat and physical is to be made. If such applications are made,
the application for physical shares will be treated as multiple applications and rejected
accordingly.
Few reasons for technical rejections
a.
b.
c.
d.
e.
f.
g.
If the signature is not matching with the signatures already registered with the Company;
In case of joint holders, if the signatures are not made in the same order as registered
with the Company.
If cash of Rs.20,000/- or more is remitted toward share application money;
PAN/GIR No. is not mentioned if the value of the application is more than Rs.50,000/-;
Amount paid does not tally with the amount payable for;
Bank account details are not given;
Applications not duly signed by sole/joint applicants.
130
Consolidated Share Certificate
Shareholders opting to receive equity shares in physical mode will be issued a consolidated
equity Share certificate for all the equity shares allotted to them in this Offer. Upon request
from the Shareholders, the Company will arrange for splitting of the share certificates without
any charges, within 7 days of receipt of the request
Instructions for the shareholders for making valid Applications
How to Apply
The enclosed CAF for equity shares should be completed in all respects in its entirety before
submission to the Bankers to the Issue or their designated branches as they appear in the
CAF. The forms of the CAF should not be detached under any circumstances otherwise the
application is liable to be rejected.
A
B
C
D
E
OPTIONS
ACTIONS REQUIRED
Accept your entitlement to
all
the
equity
shares
offered to you
Accept your entitlement to
all
the
equity
shares
offered to you and apply
for additional shares
Accept only a part of your
entitlement of the equity
shares offered to you
(without renouncing the
balance)
Renounce
your
full
entitlement of the equity
shares offered to you to
one person (renouncee)
(Joint
Renouncees
not
exceeding
three
are
considered
as
one
Renouncee)
Fill and sign ‘ Part A’ of the CAF (All joint holders must
sign)
Accept a part of your
entitlement of the equity
shares offered to you and
then renounce the balance
to one Renouncee
Fill and sign ‘Part A’ of the CAF after indicating in Block
IV the number of additional equity shares applied for
Fill and sign ‘Part A’ of the CAF. Mention in column
No. III the number of shares applied for.
Fill and sign ‘Part B’ of the CAF indicating the number
of equity shares renounced and hand over the entire
CAF to the renouncee. The renouncee must fill and
sign Part ’ C’ of the CAF
Fill and sign ‘Part D’ of the CAF for Split Forms after
indicating the required number of Split Application
Forms and send the entire CAF to the Registrar to the
Issue so as to reach them on or before the last date
for receiving requests for Split Forms indicated in the
CAF. On receipt of the Split Forms take action as
indicated below:
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(i)
(ii)
(iii)
For the equity shares, if any, which you
want to accept fill in and sign ‘Part A’ of
one Split
Composite Application Form
For the equity shares you want to
renounce, fill
in and sign ‘Part B’ in the
required number of
Split Composite
Application Forms indicating the
number
of equity shares renounced to each
renouncee
Each of the renounces should then fill in
and
sign ‘Part C’ of the respective Split
Composite
Application Form for the
equity shares accepted by the renouncee.
F
Renounce your entitlement
of
the
equity
shares
offered to you, to more
than one Renouncee
Follow the procedure stated in (E) above for obtaining
the required number of Split Composite Application
Forms and on receipt of Split Composite Application
Forms follow the procedure as stated in (E) (ii) and
(iii) above.
G.
Introduce a joint holder or
change the sequence of
joint holders
This will be treated as a renunciation. Fill in and sign
Part B and the renouncees must fill in and sign Part C.
Notes:
Part A of the CAF must not be used by any person(s) in whose favour this entitlement has
been renounced.
While applying for or renouncing equity shares joint holders must sign in the same order
and as per the specimen signatures registered with the Company.
Procedure for Application on Plain Paper
Where the shareholders have neither received the original CAF nor are in a position to obtain a
duplicate CAF, they may apply on plain paper giving particulars such as:
i. Name of the company
ii. Name in full (including names of joint-holders in the same order as the records of the
Company)
iii. Address of Sole/First Holder
iv. DP ID No.
v.
Client ID No.
vi. Registered Folio Number
vii. Number of shares held on the Record Date i.e. …………………….
viii. Distinctive Numbers & Share certificate numbers (if held in physical form)
ix. Number of equity shares to which entitled
x.
Number of additional equity shares applied for, if any.
xi. Total number of equity shares applied for and total amount paid on application.
xii. Particulars of Cheque/ Demand Draft
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xiii. Permanent Account No./GIR No. and Income-tax Circle / Ward / District in case
applications for equity shares for value of Rs 50,000/- or more for the applicant and for
each applicant in case of joint names.
xiv.
xv.
xvi.
Bank Account No. and Name of Bank and Branch for refund purposes.
In case of the Non-Resident Shareholder(s) the details of the NRE/FCNR/NRO account
along with the name and address of the Bank and branch.
Such applicants should send the application signed by all the holders of the shares in the
same sequence and order as they appear in the Register of Members of the Company by
Registered Post along with the Cheques/ Demand Drafts net of demand draft and postal
charges payable at Kolkata only to the Registrar to the Issue at the under mentioned
address to reach on or before the last date for submission of the CAF. The Company and
the Registrar to the Issue shall not be responsible for any postal delay or loss in transit.
The Cheque/Demand Draft should be drawn in favour of “Name of the Bank – RS
Software - Rights Issue” and crossed "A/c Payee only".
In case the original CAF is not received or is misplaced, the Registrar may issue duplicate, on
the request of the applicant and subject to such terms and conditions as may be decided by
the Board from time to time in conformity with the Companies Act, 1956.
Attention of the shareholders is drawn to the fact that the Shareholders making application
otherwise than on the CAF shall not be entitled to renounce their Rights and should not utilize
CAF for any purpose including renunciation even if it is received subsequently. In case both
the original and duplicate CAF are lodged or if any shareholder violates any of these
requirements, the Company will have the absolute right to reject any one or both the
applications and refund the application money received.
However, the Company is not liable to pay any interest whatsoever on amount refunded.
Mode of Payment
Section 269SS of the Income-tax Act, 1961
Having regard to the provisions of Section 269SS of the Income-tax Act, 1961, payment
against application should not be made in cash if the amount payable is Rs.20,000 or more. In
case the payment is made in contravention of this, the application is liable to be rejected and
the amount will be returned without interest.
i.
Resident Shareholders
a. Payment should be made in cash or by cheque or by bank draft. Money orders/
postal orders/outstation/post-dated cheques or outstation demand drafts will not be
accepted. Only one mode of payment should be used per CAF.
b.
Cheques or bank drafts should be drawn on any bank (including a co-operative
bank) which is situated at and is a member or sub-member of the Bankers Clearing
House located at particular place(s) where the applications are submitted and which
is participating in the clearing at the time of submission.
c.
All cheques or bank drafts must be made payable to the Bankers to the Issue
mentioned in the CAF marked “Name of the Bank- RS Software - Rights Issue” and
crossed "A/c payee only".
d.
A separate cheque or bank draft must accompany each application form.
e.
All application forms duly completed together with cash/cheque/demand draft for
the amount payable on application at Rs.65/-per equity Share must be submitted
before the close of the Subscription List to the Bankers to the Issue named herein or
133
to any of their branches mentioned on the reverse of the CAF and NOT to the
Company, the Lead Managers to the Issue or the Registrars to the Issue.
However, only the plain paper application and application by post (in case there is
no branch of the issuing Bank at the place of submitting the application) may be
submitted to the Registrars to the Issue. Applicants should indicate the Folio number
and CAF number on the reverse of the cheque/demand draft through which the
payment is made.
ii.
f.
No receipt will be issued for the application money. However, the Bankers to the
Issue and/or their branches receiving the applications will acknowledge receipt of
the application by stamping and returning to the applicant the acknowledgement slip
at the bottom of each CAF.
g.
Where an application is for allotment of equity shares for a total value of
Rs.50,000/- or more, i.e. the total number of equity shares applied for multiplied by
the Issue price, is Rs.50,000/- or more, the applicant or in the case of applications in
joint names, each of the applicants, should mention his/her permanent account
number allotted under the Income-tax Act, 1961 or where the same has not been
allotted the GIR number and the Income tax Circle/Ward/District. In case where
neither the permanent account number nor the GIR number has been allotted, the
fact of non-allotment should be mentioned in the Application Forms without which
this information will be considered incomplete and the Applications are liable to be
rejected.
h.
The applicant should provide information in the CAF as to his/her savings/current
bank account number and the name of the bank with whom such account is held, in
the space provided for the said purpose, to enable the Registrars to the Issue to
print the said details on the refund orders, if any, after the name of the applicants.
This has been made mandatory and applications not containing such details are
liable to be rejected.
i.
Applicants in centers not covered by the branches of collecting banks can send their
CAF along with the Demand Draft net of demand draft and postal charges payable at
Kolkata to the Registrars to the Issue by Registered Post.
j.
For further instructions the investors are requested to read the CAF carefully while
applying for the equity shares
Non-Resident Shareholders
Applications received from Non-Resident Indians/ persons of Indian origin resident
abroad, for allotment of equity shares shall be, inter alia, subject to the conditions
imposed from time to time by the Reserve Bank of India, if any under the FEMA on the
matter of refund of application moneys, allotment of equity shares, Issue of Letters of
Allotment/share certificate(s), payment of interest, dividends, etc.
General permission has been granted to any person resident outside India to purchase
shares offered on rights basis by an Indian Company in terms of FEMA.
In terms of Regulation No.6 of notification No.20/2000-RBI dated 3 May, 2000, the
existing non-resident shareholders may apply for equity shares on right basis and also
for additional equity shares above their rights entitlements subject to the condition that
the overall issue of shares to non-residents in the total paid-up capital of the Company
does not exceed the sectoral cap, if any.
134
The Board of Directors may at its absolute discretion, agree to such terms and
conditions as may be stipulated by RBI while approving the allotment of equity shares,
payment of dividend etc., to the NR Shareholders.
Mode of payment by NR shareholders will depend on whether the equity shares are on
repatriation or non-repatriation basis.
a) On Repatriation basis
Payments are to be made by such NRIs in any of the following modes:
i. Indian Rupee Draft purchased from abroad and made payable at Kolkata or funds
remitted from abroad (submitted along with Foreign Inward Remittance
Certificate);or
ii. Cheques drawn on Non-Resident External Account (NRE Account) with any bank in
India and payable at Kolkata
iii. Indian Rupee Draft purchased out of NRE/FCNR accounts maintained anywhere in
India and payable at Kolkata.
iv. In case of NRIs who remit their application money through Indian Rupee drafts from
abroad, refunds, payment of interest and other disbursements, if any will be made in
the relevant foreign currencies at the rate of the exchange prevailing at such time
subject to the permission of Reserve Bank of India, if any. The Company will not be
liable for any loss on account of exchange fluctuations for converting their Rupee
amount in any foreign currency. In case of those NRIs who remit their application
money from funds in NRE/FCNR accounts, refund, payment of interest and other
disbursements, if any, shall be credited to such accounts. The details of such
accounts should be furnished in the appropriate column of the CAF.
v.
Cheque/Draft purchased out of funds held in Foreign Institutional Investors special
non-resident rupee account.
vi. Applicants seeking allotment of the equity shares on repatriation basis should note
that the payments for such allotment have to be made through external source only
and that the payments through NRO accounts shall not be permitted.
b) On Non-Repatriation basis
Payments are to be made by such NRIs by Cheque drawn on a Non-Resident Ordinary
Account (NRO Account) at Kolkata or Rupee Draft purchased out of NRO Account
maintained anywhere in India but payable at Kolkata In such cases, refund, interest and
other disbursement, if any, will be payable in Indian Rupees only. The CAF should be
accompanied by a non-repatriation undertaking as per the forms prescribed by RBI, if
applicable.
Whether the application is being made for the equity shares is on repatriation/nonrepatriation basis, a separate cheque/demand draft must accompany each CAF. All
instruments must be crossed "Account Payee Only" and drawn in favour of the collecting
bank specified on the reverse of the CAF and marked "Name of the Bank– RS Software Rights Issue – Non-Residents". You are requested to mention the folio number and the
CAF number on the reverse of the cheque/demand draft.
An account debit certificate from the bank issuing the draft confirming that the draft net
of demand draft and postal charges has been issued by debiting FCNR/NRE/NRO Account
must be attached in all cases where drafts have been purchased from FCNR/NRE/NRO
Accounts or Foreign Inward Remittance Certificate (FIRC) from the Authorised Dealers
135
along with the CAF otherwise the application may be considered incomplete and liable
for rejection. Payment by way of cash shall not be accepted.
In no circumstances should the CAF be delivered to the Lead Manager to the Issue or to
the Company.
NRI Applicants can also obtain application forms from the collection centre at Kolkata
specified on the reverse of the CAF.
Joint Applications
An application may be made in single name or jointly with any other person(s) (upto 2). In the
case of a joint application, refund orders (if any) and interest/dividend warrants, etc. will be
made out in favour of the first applicant and all communications will be addressed to the
applicant whose name appears first and at his/her address stated in the CAF.
Applications under Power of Attorney
In case of applications made under a Power of Attorney or by a Limited Company or a Body
Corporate or Registered Society or Mutual Fund or Trusts, the relevant Power of Attorney or
the relevant resolution or authority to make the application, as the case may be, together with
the certified true copy thereof along with the certified copy of the Memorandum and Articles of
Association and/or Bye-Laws as the case may be must be attached to the CAF or lodged for
scrutiny separately, quoting the serial number of the CAF and the bank’s branch where the
application has been submitted, at the office of the Registrar to the Issue after submission of
the CAF to the Banker to the Issue or any of the designated branches as mentioned on the
reverse of the CAF, failing which the applications are liable to be rejected. Such authority
received by the Registrar to the Issue after closure of the offer may not be considered.
Acceptance of Offer
You may accept and apply for the equity shares hereby offered to you wholly or in part by
filling Part A of the enclosed CAF and submit the same along with the application money to the
Bankers to the Issue or to any of their designated branches as mentioned on the reverse of
the CAF before the close of business hours on ______________ 2006. The Board or
Committee of Directors authorised in this behalf by the Board of Directors will have the power
to extend the last date for receipt and acceptance of the CAF for such period as it may deem
fit but in no case will the Offer for subscribing to the Issue be kept open for more than 60
(sixty) days.
If for any reason whatsoever, the CAF together with the amount payable is not received by the
Bankers to the Issue or by any of their designated branches as mentioned on the reverse of
the CAF on or before the close of business hours on ___________________2006 or such
extended date as may be determined by the Board or Committee of Directors authorised in
this behalf by the Board of Directors, the Offer contained in the LoO shall be deemed to have
been declined.
The Company will not be liable for any postal delays and any application received by mail after
closure of the Issue date will be returned to the applicants. The date of mailing by the
applicant will not be the criteria for acceptance.
Applicants in centers not covered by the branches of collecting banks can send their CAF along
with the cheque/demand draft drawn on a local bank at Kolkata (net of demand draft and
postal charges) payable at Kolkata to the Registrars to the Issue by Registered Post.
136
Additional equity shares
You are also eligible to apply for additional equity shares over and above the number of equity
shares offered to you provided you have applied for all the equity shares offered to you
without renouncing them in whole or in part in favour of any other person(s). In case of nonresident shareholders, the allotment of additional equity shares shall be subject to the
approval of the Reserve Bank of India, if any.
The application for additional equity shares shall be considered and allotment shall be made at
the absolute discretion of the Board or Committee of Directors authorised in this behalf by the
Board having the power to reject any such application for additional equity shares without
assigning any reasons and in the event of over subscription, the allotment will be subject to
the clause mentioned under ‘Basis of Allotment’ and if necessary shall be made in consultation
with BSE (The Designated Stock Exchange). The allotment of additional equity shares will be
made as far as possible on an equitable basis with reference to the number of equity shares
held by you on the Record Date.
If you desire to apply for additional equity shares, please indicate your requirement by filling
in the number of additional equity shares in Block IV of Part A of the enclosed CAF.
Renunciation
This Issue shall be deemed to include a right exercisable by you to renounce the Equity Shares
offered to you either in full or in part in favour of any other person or persons subject to the
approval of the Board. Such renouncees can only be Indian Nationals (including minor through
their natural/legal guardian)/limited companies incorporated under and governed by the Act,
statutory corporations/institutions, trusts (registered under the Indian Trust Act), societies
(registered under the Societies Registration Act, 1860 or any other applicable laws) provided
that such trust/society is authorized under its constitution/bye laws to hold equity shares in a
company and cannot be a partnership firm, foreign nationals or nominees of any of them
(unless approved by RBI or other relevant authorities) or to any person situated or having
jurisdiction where the offering in terms of this Draft Letter of Offer could be illegal or require
compliance with securities laws of such jurisdiction or any other persons not approved by the
Board.
Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from NonResident Indian Shareholder(s) to other Non-Resident Indian(s) or from Non-Resident Indian
Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/renouncee(s) obtaining the
approval of the FIPB and/ or necessary permission of the RBI under the Foreign Exchange
Management Act, 1999 (FEMA) and other applicable laws and such permissions should be
attached to the CAF. Applications not accompanied by the aforesaid approval are liable to be
rejected.
By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas
Corporate Bodies (“OCBs”) have been derecognized as an eligible class of investors and the
RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General
Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, the existing
Equity Shareholders of the Company who do not wish to subscribe to the Equity Shares being
offered but wish to renounce the same in favour of renounces shall not renounce the same
(whether for consideration or otherwise) in favour of OCB(s).
Your attention is drawn to the fact that the Company shall not allot and/or register any Equity
Shares in favour of:
•
•
•
•
More than three persons including joint holders
Partnership firm(s) or their nominee(s)
Minors
Hindu Undivided Family
137
• Any Trust or Society (unless the same is registered under the Societies Registration Act,
1860 or any other applicable Trust laws and is authorized under its Constitutions to hold
Equity Shares of a Company)
The right of renunciation is subject to the express condition that the Board/
Committee of Directors shall be entitled in its absolute discretion to reject the
request for allotment to renouncee(s) without assigning any reason thereof.
Part A of the CAF must not be used by any person(s) other than those in whose favour this
Offer has been made. If used, this will render the application invalid. Submission of the
enclosed CAF to the Bankers to the Issue at their Collection Centres specified on the reverse of
the CAF with the Form of Renunciation (Part B of the CAF) duly filled in, shall be conclusive
evidence in favour of the Company, of the person(s) applying for the equity shares in part C to
receive allotment of such equity shares. Part A must not be used by the renouncee(s) as this
will render the application invalid.
Renouncee(s) will have no further right to renounce any equity shares in favour of any other
person.
a.
To renounce in whole: If you wish to renounce this Offer in whole, please complete Part
B of the CAF. In case of joint holdings, all joint holders must sign this part of CAF in the
same order as per the specimen signatures recorded with the Company. The renouncee
i.e. the person in whose favour this Offer has been renounced, should complete and sign
Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of
CAF.
b.
To renounce in part: If you wish to accept this Offer in part and renounce the balance or
renounce the entire Offer in favour of one or more renouncees, the CAF must first be split
by applying to the Registrars to the Issue. Please indicate your requirement for the split
forms in the space provided for this purpose in Part D of the CAF and return the entire CAF
to the Registrars to the Issue so as to reach them on or before ______________2006. On
receipt of the required number of split forms from the Registrar, the procedure as
mentioned in the Para (a) above should be followed.
c.
Change and/or introduction of additional holders: If you wish to apply for equity
shares jointly with any other person(s) (upto 2), who is/are not already joint holder(s)
with the applicant, it would amount to renunciation. Even a change in the sequence of the
joint holders shall amount to renunciation and the procedure for renunciation as stated
above would apply viz. Parts B and C of the CAF will have to be filled in.
d.
Renouncee(s): The person(s) in whose favour the equity shares are renounced should fill
in and sign Part C of the CAF and submit the same to the Bankers to the issue on or
before the issue closing date along with the application money.
Split Forms
Split forms cannot be re-split;
Only the person to whom the Offer is made and not the renouncee(s) shall be entitled to
obtain split forms;
Requests for split forms should be sent to the Registrars to the Issue, not later than
______ 2006 by filling in Part D of the CAF;
The Registrar shall process the requests for split forms and issue the split forms
immediately on the receipt of request for split;
Disposal of Applications and Application Money
i. The Board of the Company or Committee of Directors authorised in this behalf by the Board
of the Company reserves its full, unqualified and absolute right to accept or reject any
138
application in whole or in part in consultation with BSE (Designated Stock Exchange) without
assigning any reason thereof. If any application is rejected in full the entire application
money will be refunded to the applicant in accordance with the provisions of Section 73 of
the Companies Act, 1956. Where the applicant is allotted in part, the balance of the
application money, will be refunded to the applicant in accordance with the provisions of
Section 73 of the Companies Act, 1956.
ii. Refund cheques/pay orders to non-allottees i.e. those who had applied for more than the
eligible limit or where applications have been rejected or partially allotted, above the value
of Rs1500/- or more and Letters of Allotment)/share certificate(s) together with refund
cheques/ pay orders, if any, to allottees will be sent by Registered Post at the applicant’s
sole risk at his registered address within six weeks of closure of the subscription list. Refund
cheques/ pay orders upto Rs. 1500/- will be sent under postal certificate at the applicant’s
sole risk at his registered address.
iii. Refund will be made by cheques/ pay orders drawn on refund bankers and bank charges, if
any, for encashing such cheques or pay orders will be payable by the applicant. Such
cheques or pay orders will however, be payable at par at the branches of the refund bankers
located at all places where applications are accepted or such places as may be approved by
BSE.
iv. Allotment of equity shares and export of Letters of Allotment/share certificate(s) to
NRI/OCB/Non-Residents would be subject to the approval of the Reserve Bank of India
under the FEMA, if required.
v.
The Company shall provide adequate funds to the Registrar to the Issue for complying with
requirement of dispatch of refund cheques/Letter(s) of Allotment / share certificate(s) by
registered post/under postal certificate.
Fictitious Applications
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section
68A of the Companies Act, 1956 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."
Basis of Allotment
The basis of allotment shall be finalised by the Board of the Company or Committee of
Directors of the Company authorised in this behalf by the Board of the Company. The Board of
the Company or the Committee of Directors as the case may be, will proceed to allot the
equity Share in consultation with BSE in the following order of priority.
a) Full allotment to the equity shareholders who have applied for their Rights entitlement
either in full or in part and also to the renouncees who have applied for equity shares
renounced in their favour either in full or in part (subject to other provisions contained
under the paragraph titled "Renunciation").
b) Allotment to the equity shareholders who having applied for their full Rights entitlement of
equity Share offered to them and have applied for additional equity shares, provided there
is surplus available after full allotment under (i) above and shall be at the absolute
discretion of the Board of the Company or the Committee of the Directors authorised in
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this behalf by the Board of the Company and the decision of the Board of the Company or
the Committee of the Directors shall be final and binding. The allotment of such additional
equity shares will be made as far as possible on an equitable basis with reference to the
number of equity shares held by them on the Record Date in consultation with the BSE
(Designated Stock Exchange).
c)
Allotment to the renouncees who, having applied for equity shares, renounced in their
favour have also applied for additional equity shares, provided there is an undersubscribed portion after making full allotment in i and ii above. The allotment of such
additional equity shares will be made on a proportionate basis at the absolute discretion of
the Board/committee of Directors authorized by the Board in this behalf, in consultation
with the BSE (Designated Stock Exchange).
d) The Company shall not retain any over-subscription.
e) The issue will become under-subscribed after considering the number of shares applied as
per entitlement plus additional shares. The under-subscribed portion can be applied for
only after the close of the issue. The Promoters can subscribe to such undersubscribed
portion as per the relevant provisions of the law. If any person presently in control of the
Company desires to subscribe to such under-subscribed portion and if disclosure is made
pursuant to SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997,
such allotment of the under-subscribed portion will be governed by the provisions of the
SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
f)
Allotment to Promoters of any un-subscribed portion over and above their entitlement will
be done in compliance with Clause 40A of the Listing Agreement.
g) The allotment to the renouncee(s) in whose favour the renunciation has been exercised
shall be subject to the condition that the Board of the Company or Committee of Directors
shall have the discretion to reject such request without assigning any reasons thereof. In
the event of over subscription, allotment will be made only within the overall size of the
Rights Issue.
Unsubscribed equity shares
The unsubscribed portion, if any of the equity shares offered to the shareholders, after
considering the application for Rights/Renunciation and additional equity shares, as above,
shall be disposed by the Board of the Company or Committee of Directors authorised in this
behalf by the Board of the Company at their full discretion and absolute authority, in such
manner as they think most beneficial to the Company and the decision of the Board of the
Company or Committee of Directors in this regard shall be final and binding.
Issue of Letter of Allotment
In case the Company issues Letter(s) of Allotment, the relative Share Certificate(s) will be
kept ready within 3 months from the date of allotment thereof or such extended time as may
be approved by the Company Law Board or other applicable provisions, if any.
Allottees are requested to preserve such Letters of Allotment, which would be exchanged later
for Share Certificate(s).
Allotment and Refund Orders
Letters of Allotment/Share Certificates and/or regret letters together with the refund orders, if
any, will be despatched at the applicant’s sole risk to the sole/first applicant within 6 weeks
from the date of closure of the Issue. The Company shall ensure despatch of refund orders of
value of upto Rs.1,500/- under certificate of posting and share certificate/allotment advice and
/or regret letters together with refund orders over Rs.1,500/- by Registered Post only and
adequate funds will be made available to the Registrars to the Issue. The Company, as far as
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possible, will allot the equity shares within 42 days from the date of closure of the issue and
shall pay interest @ 15% per annum, if the allotment of the equity shares has not been made
and/or the refund orders have not been despatched to the investors within 42 days, for the
period of delay beyond 42 days.
The Company will issue and despatch letters of allotment/securities certificates and or regret
letters along with refund orders or credit the allotted securities to the respective beneficiary
accounts, if any, within a period of 6 weeks from the date of closure of the issue. If any
monies required to be refunded to any equity shareholder are not repaid within 8 days from
the day the Company becomes liable to pay it i.e.,42 days after the issue closing date, the
Company shall pay interest as stipulated under section 73(2) and 73 (2A) of the Act.
The Company undertakes to despatch share certificates/refund orders, complete demat credits
and submit the allotment and listing documents to the Stock Exchange within 2 working days
of the finalisation of the basis of allotment. Further, the Company undertakes to ensure that
all steps for completion of the necessary formalities for listing and commencement of trading
at the Stock Exchange where the securities are to be listed are taken within 7 working days of
finalisation of basis of allotment.
The Company will make available adequate funds to the Registrars to the Issue for the
purpose of despatch of Letters of Allotment/Share Certificates/Refund Orders as stated above.
Interest in case of delay on Allotment/Despatch
The Company will issue and despatch Letter(s) of Allotment/Share Certificate(s) and/or
Letter(s) of Regret along with the Refund Orders, if any, credit the allotted securities to the
beneficiary account within a period of 6 weeks from the date of closure of the subscription list.
Such refund orders, in the form of MICR warrants/cheque/pay order, marked “Account payee”
would be drawn in the name of a sole/first applicant and will be payable at par at all the
centers where the applications were originally accepted. If such money is not repaid within 8
days from the day the Company becomes liable to pay it, the Company shall, as stipulated
under Section 73 (2) / (2A) of the Companies Act, 1956, pay that money with interest at the
rate of 15% p.a. Letter(s) of Allotment/Refund Order(s) above the value of will be despatched
by Registered Post to the sole/first applicant’s address. However, Refund orders for values not
exceeding Rs.1,500/- shall be sent to the applicants under Certificate of Posting at the
applicant’s sole risk at his address. The Company would make adequate funds available to the
Registrar to the Issue for this purpose.
Undertaking by the Company
The Company undertakes that:
a.
The complaints received in respect of the Issue shall be attended to by the Company
expeditiously and satisfactorily;
b.
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 seven
working days of finalisation of basis of allotment;
c.
Funds required for dispatch of refund orders/allotment letters/certificates by registered
post shall be made available to the Registrar to the Issue by the Company.
d.
Certificates of securities/refund orders of the Non-Resident/Non Resident Indians shall be
dispatched within the specified time subject to receipt of approval from RBI/FIPB, if
required.
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e.
No further issue of shares shall be made till the shares offered through this Draft LoO are
listed or till the application moneys are refunded on account of non-listing, undersubscription, etc.,
Utilisation of Issue Proceeds
The Board of Directors declare that:
a)
All monies received out of the issue of shares to the investors shall be transferred to a
separate bank account other than the bank account referred to in sub-section (3) of
Section 73 of the Act;
b)
Details of all monies utilised out of the Issue shall be disclosed under an appropriate
separate head in the balance sheet of the Company indicating the purpose for which
such monies has been utilised and
c)
Details of all unutilised monies out of the Issue of shares, if any, 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 funds received against this Issue will be kept in a separate bank account and the
Company will not have any access to such funds unless it satisfies the BSE (Designated Stock
Exchange) with suitable documentary evidence that the minimum subscription (including
underwriting devolvement and/or from other sources) of 90 per cent of the Issue has been
received by the Company.
No Further Issue of Securities
The Company undertakes that there shall be no further issue of capital whether by way of
issue of bonus shares, preferential allotment, Rights Issue or public issue or in any other
manner, during the period commencing from the submission of the Draft LoO to SEBI for
Rights Issue till the securities referred in the Draft LoO have been listed or application moneys
refunded on account of failure of Issue.
GENERAL
i. Please read the instructions printed overleaf on the enclosed CAF carefully.
ii. A CAF found incomplete with regard to any of the particulars required to be given therein,
and or which is not completed in conformity with the terms of the Draft LoO are liable to
be rejected and the money paid, if any, in respect thereof will be refunded without interest
and after deduction of bank commission and other charges, if any.
iii. The CAF must be filled in English and the names of all the applicants, details of
occupation, address, father’s/husband’s name must be filled in block letters.
iv. For a total value of Rs.50,000/- or more, i.e. the total number of securities applied for
multiplied by the issue price, is Rs. 50,000/- or more the applicant or in the case of
application in joint names, each of the applicants, should mention his/her Permanent
Account Number (PAN) allotted under the Income-tax Act, 1961 or where the same has
not been allotted, the GIR number and the Income-tax Circle/Ward/District. In case where
neither the PAN nor the GIR number has been allotted, the fact of non-allotment should be
mentioned in the application forms. Application forms without this information will be
considered incomplete and will be liable to be rejected.
v. Thumb impressions and signatures other than in English, Hindi or any other language
specified in the 8th Schedule to the Constitution of India, must be attested by a Magistrate
or a Notary Public or a Special Executive Magistrate under his/her official seal.
vi. In case of an application under Power of Attorney or by a Body Corporate or by a Society,
a certified true copy of the relevant Power of Attorney or relevant resolution or authority
to make investment and sign the application along with the copy of the Memorandum &
Articles of Association and/or bye laws must be lodged with the Registrars to the Issue
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vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.
xvi.
giving reference of the serial number of the CAF before closure of the Issue. In case the
above referred documents are already registered with the Company, the same need not be
furnished again; however, the serial number of registration or reference of the letter, vide
which these papers were lodged with the Company must be mentioned just below the
signature(s) on the application. In no case should these papers be attached to the
application submitted to the Bankers to the Issue.
In case of joint holders, all joint holders must sign the relevant part of the CAF in the
same order and as per the specimen signature(s) recorded with the Company. Further, in
case of joint applicants who are renouncees, the number of applicants should not exceed
three.
In case of joint applicants, reference, if any, will be made in the first applicant’s name and
all communication will be addressed to the first applicant.
The shareholders must sign the CAF as per the specimen signatures recorded with the
Company.
Application(s) received from Non-Residents, or Persons of Indian origin residing abroad for
allotment of equity shares shall, inter alia, be subject to conditions, as may be imposed
from time to time by the RBI under FEMA in the matter of refund of application money,
allotment of securities, subsequent issue and allotment of securities, payment of dividend
or interest on securities, export of the securities certificates, etc. In case a Non-Resident
Shareholder has specific approval from the RBI, in connection with his/ her shareholding,
the person should enclose a copy of such approval with the CAF.
All communication in connection with application for the equity shares, including any
change in address of the Shareholders should be addressed to the Registrar to the Issue
quoting the name of the first/sole applicant Shareholder, folio numbers and CAF number.
Split forms cannot be re-split.
Only the person or persons to whom equity shares have been offered shall be entitled to
obtain split forms. Renouncee(s) shall not be entitled to obtain split forms.
It is mandatory for the applicant to mention the applicant’s savings bank/current account
number and name of the bank with whom such account is held in the space provided in
the CAF, to enable the registrars to the Issue, to print the said details in the refund orders
after the name of the payees. Such applications not containing the above details are liable
to be rejected.
The CAF together with cheque/demand draft should be sent to the Bankers to the Issue or
any of their branches as listed in the CAF or to the Registrar to the Issue and NOT to the
Lead Manager to the Issue. Applicants residing at places other than cities of the branches
of the Bankers to the Issue will have to make payment by Demand Draft payable at
Kolkata and should send their application forms to the Registrar to the Issue BY
REGISTERED POST. If any portion(s) of the CAF is/are detached or separated, such
application is liable to be rejected.
Investors will not have facility of applying through stock invest instrument in the issue as
RBI
has
withdrawn
the
stock
invest
scheme
vide
notification
no.DBOD.NO.FSC.BC.42/24.47.001/2003-04 dated 5/11/2003.
Last date for submission of CAF
The last date for receipt of the CAFs by the Banker to the Issue/Registrar to the Issue with the
amount payable is _______ 2006. The Board will, however, have the power to extend the
same for such a period as it may determine from time to time, subject to the issue not
remaining open for subscription beyond sixty days. If the CAFs together with the amount
payable are not received by the Bankers to the Issue on or before the close of banking hours
on _________ 2006 or such extended date as may be determined by the Board of Directors,
the Offer contained in this Letter shall be deemed to have been declined.
The CAF duly completed should be forwarded to the Bankers to the Issue or any of their
branches as listed in the CAF. Application will NOT be accepted directly by the Company or
Lead Managers to the Issue.
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General Declaration
The Company has made all payments/refunds on fixed deposits, has paid interest on fixed
deposits and has paid all institutional dues up-to-date other than those remaining unclaimed.
MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION
Pursuant to Schedule II of the Companies Act, 1956 and SEBI Guidelines, the main provisions
of the Articles of Association of the Company are set forth below.
SHARES
Article 4 provides that the shares shall be under the control of the Board who may classify,
allot or otherwise dispose of the same to such persons on such terms and conditions and
either at a premium or at par or subject to the provisions of the Act at a discount and at such
times as the Board think fit and with full power to make call for the allotment of any share
either at par or at a premium or at a discount and for such time and for such consideration as
the Directors may think fit. The right attached to different classes of shares may be varied in
accordance with the provisions of the sections 106 & 107 of the Companies Act. Provided that
prior sanction of the company in the General Meeting will be required in case any option or
right is given to any person to collect and receive any money payable on shares by way of call
or otherwise.
Article 5 provides the joint holders of shares shall severally as well as jointly be liable for
payment of all instalments and calls due in respect of such shares.
SHARE CERTIFICATES
Article 6 provides that the certificates of title to the shares shall be issued under the seal of
the Company in the manner prescribed under the rules framed under the Act. The Company
shall comply with the provisions of such rules.
Article 7 that every member shall be entitled to one certificate for the shares registered in his
names or if the Board so approves, upon paying such fees as the Board may from time to time
determine, to several certificates, for one or more of such shares.
Article 8 provides that the certificate of shares registered in the name of two or more persons
shall be delivered to the first named person in the register, and this shall be a sufficient
delivery to all such holders.
Article 9 provides that if any certificate is worn out or defaced, then upon production thereof
to the Board, it may order the same to be cancelled and may issue a new certificate in lieu
thereof; and if any certificate be lost or destroyed then upon proof to the satisfaction of the
Board and on such indemnity as the Board deems adequate being given, a new certificate in
lieu thereof will be given to the party entitled to such lost or destroyed certificate. The
Company shall be reimbursed for all expenses incurred in investigating evidence of loss
including advertisement charges for such loss.
CALLS
Article 10 provides that the Board may, from time to time, make such calls on uniform basis,
as it thinks fit, upon the members in respect of all moneys unpaid on the shares (whether on
account of the nominal value of the shares or by way of premium) held by them respectively
and not by the conditions of allotment thereof made payable at fixed time and each such
member shall pay the amount of every call so made on him to the person and at the time
and places appointed by the Board. A call may be made payable by instalments.
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Article 11 provides that fourteen (14) day’s clear notice of any call shall be given specifying
the time and place of payment and the person to whom such call shall be paid.
Article 12 provides that if by the terms of issue of any share or otherwise any amount is made
payable at any fixed time or by instalments at fixed times, whether on account of the amount
of the shares or by way of premium, every such amount of instalment shall be payable as if it
were a call duly made by the Board and of which due notice had been given and all provisions
herein contained in respect of calls relate to such amount or instalment accordingly.
Article 13 provides that if the sum payable in respect of any call or instalment be not paid on
or before the day appointed for payment thereof the holder for the time being of the share in
respect of which the call shall have been made or the instalment shall be due, shall pay
interest for the same at the Twelve (12) per cent per annum (or such other rate as the Board
may determine) from the day appointed for the payment thereof to the time of actual
payment, but the Board shall be at liberty to waive payment of the interest wholly or in part.
Article 14 provides that the Directors may, if they think fit, receive from any member willing to
advance the same, all or any part of the money due upon the shares held by him beyond the
sums actually called for and upon the money so paid in advance, or so much thereof , as from
time to time exceeds the amount of the calls then made upon the shares in respect of which
such advance has been made, the Company may pay interest at pay interest at such rate
not exceeding Six (6) per cent per annum or as the member paying such sum in advance and
the Directors agree upon. Money so paid in excess of the amount of calls while carrying
interest shall not rank for dividends. Money so paid in excess of the amount of call until
appropriated towards satisfaction of any call shall be treated as advance to the Company and
not part of capital but shall not be repayable.
FORFEITURE OF SHARE
Article 15 provides that if any member fails to pay the whole or any part of any call or
instalment or any money due in respect of any shares either by way of Principal or interest on
or before the day appointed for the payment of the same the Directors may at any time
thereafter during such time as the call or instalment or other money remains unpaid, serve a
notice on such member, requiring him to pay the same together with any interest that may
have accrued and all the expenses that may have been incurred by the Company by reasons
of such non-payment.
Article 16 provides that the notice shall name a further day (not being less than 14 days from
the date of notice) and a place on and at which such call or instalment and such interest and
expenses as aforesaid are to be paid. The notice shall also state that in the event of nonpayment at the place appointed, the share in respect of which such call was made or
instalment is payable will be liable to be forfeited.
Article 17 provides that if the requirements of any such notice as aforesaid are not complied
with, any shares in respect of which such notice has been given may at any time thereafter,
before payments of calls or instalment, interest and expenses due in respect thereof, be
forfeited by a resolution of the Board to that effect and the forfeiture shall be recorded in the
Directors’ Minute Book. Such forfeiture shall include all dividends declared in respect of the
forfeited shares and not actually paid before the forfeiture subject to the provisions of the act.
Article 18 provides that when any share shall have been so forfeited notice of the resolution
shall be given to the members in whose name it stood immediately prior to the forfeiture and
entry of the forfeiture with date thereof shall forthwith be made in the register of the
members.
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Article19 provides that any share so forfeited shall be deemed to be the property of the
company and the directors may sell, re-allot or otherwise dispose of the same in such manner
as they think fit.
Article 20 provides that any member whose shares have been forfeited shall cease to be a
member of the Company in respect of the forfeited shares, but shall notwithstanding the
forfeiture, remain liable to pay to the Company all calls instalments, interests and expenses
owing upon or in respect of such shares at the date of the forfeiture, together with interest
thereon from the time of forfeiture, until payment at the rate of nine (9) percent per annum
ad the Directors may enforce the payment thereof, if they think fit.
Article 21 provides that the forfeiture of share shall involve the extinction of all interest in and
also of 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 Articles are expressly
saved.
Article 22 provides that a duly verified declaration in writing that the declarant is a Director or
Managing Director, and that certain shares in the Company have duly been forfeited 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 shares, and such declaration and the receipt of the
Company for the consideration, if any, given for the share on the sale or disposition thereof
shall constitute a good title to such shares and the person to whom the shares are sold shall
be registered as holder thereof and shall not be bound to see the application of the purchase
money, nor shall his title to such shares be effected by any irregularity or invalidity in the
proceedings in reference to such forfeiture, sale or disposition.
LIEN ON SHARES
Article 23 provides that the fully paid shares shall be free from all lien. In case of partly paid
shares the company shall have first and paramount lien only to the extent of monies called up
in such shares and remaining unpaid and such lien shall extent to all dividends declared in
respect of such shares.
Article 24 provides that no member shall exercise voting rights in respect of any shares
registered in his name on which calls or other sums presently payable by him, have not been
paid or in regard to which the Company has exercised any right of lien.
TRANSFER AND TRANSMISSION
Clause 1 of Article 32 provides that a common for of transfer as may be prescribed from time
to time by the Stock Exchange where the shares of the Company are listed or any statutory
authority shall be used for transfer of shares.
Clause 2 of Article 32 provides that registration of transfer of any shares shall not be refused
on the ground that transferor is either alone or jointly with any other person is undefted to the
Company.
Article 33 provides that on the death of a member the survivor or survivors where the
member was a joint holder, and his nominee where he was a sole holder and in absence of
any nomination his legal representative and his heir shall be the only person recognised by the
Company as having any title to his interest in the shares.
Article 34 provides that no transfer shall be made or registered without the previous sanction
of the Directors. Notwithstanding anything herein contained any shares that may be held by
way of direct subscription by and shares pledged with Risk Capital & Technology Finance
Corpn. Ltd., a company registered under the Companies Act, 1956 and having its Registered
Office at Scope Complex, Core V 3rd Floor, 7, Lodi Road, New Delhi 110 003 (hereinafter
146
called RCTC which expression shall include its successors and * assigns) may be transferred
by RCTC in favour of any of its nominee, person(s), or body corporate, not necessarily being a
member, at RCTC’s absolute discretion without any restriction, as such price at RCTC may
determine. No notice for sale/transfer of such shares will be required to be given to the Board
of Directors and the Company or any member of the Board of directors will have no right to
refuse such transferees.
Article 37 provides that the Transfer Book and Register of Members be closed in such manner
and to such extent as may be required under the rules & regulations of Stock Exchange where
shares of the company are listed subject to statutory provisions of section 154 of the
Companies Act, 1956 or any statutory modification thereof.
ALTERATION IN CAPITAL
Article 38 provides that the Company in General Meeting may from time to time by ordinary
resolution increase the Share capital by such sum and to be divided into shares of such
amount as may be specified in the resolution.
Clause (a) of Article 39 provides that the company may by ordinary resolution consolidate or
divide all or any of its Share Capital into shares of smaller or larger amount than its existing
shares.
Clause (b) of Article 39 provides that the company may by ordinary resolution sub-divide its
existing shares, or any of them into shares of smaller amount than is fixed by the
memorandum, subject nevertheless, to the provisions of clause (d) of subsection (1) of
section 94 of the Act.
Article 40 provides that the Company by special resolution may reduce in any manner subject
to the requirements of Law :(a) Its Share Capital;
(b) any capital redemption reserve account; or
(c) any share premium account.
GENERAL MEETING
Article 41 provides that all general meetings other than the Annual General Meeting Shall be
called Extra- Ordinary general meeting. Any business to be transacted at any Extra- Ordinary
general meeting shall be special business. Proceedings of the meeting shall be governed by
Companies Act. The company shall hold meeting and Annual General Meeting as provided
under section 166 of the Act.
Article 41A provides the Provisions of Section 171 to 186 of The Companies Act, 1956 shall
apply to this Company in regard to meetings.
Article 42 provides that the board of Directors may, whenever they think fit, call an Extra
Ordinary General Meeting, subject to the provisions of the Companies Act, 1956.
Article 43 provides that if any time there are not within India, directors capable of acting, who
are sufficient in number to form a quorum, any director or any two members of the Company
may call an Extra Ordinary General Meeting in the same manner, or as nearly as possible, as
that in which such a meeting may be called by the Board.
147
Article 44 provides that on a show of hands every member present in person shall have one
vote and upon a poll the voting rights of members shall be in proportion to share of the paid
up capital of the Company carrying voting rights.
Provided that a member holding preference shares shall have no right to vote on any
resolution or matter placed before the Company in General Meeting except on resolution or
matters which directly effect the rights attached to his preference shares.
Article 45 provides that members not personally present shall not be entitled to vote on a
show of hands unless such member is a corporation present by a representative duly
authorised under section 187 of the Act.
Article 46 provides that where there are joint registered holders of any shares, any one of
such holders may vote at such meeting either personally or by proxy, in respect of such share
as if he was solely entitled there to and if more than one of such share-holder be present at
any meeting personally or by proxy then one of the said persons so present whose name
stands first on the register in respect of such shares alone be entitled to vote in respect
thereof. Where there are several executors or administrators of the deceased member in his
sole name any share stands, any such executors or administrators may vote in respect of such
shares unless any other or such executors or administrators present at the meeting at which
such a vote is tendered objects to the votes in which case the executors or administrators
whose name stands first on the register shall be entitled to vote.
Article 47 provides that Votes may be given either personally or by proxy on poll or in case of
a company by a representative duly authorised as aforesaid.
Article 48 provides that no member shall be entitled to be present or to vote on any question
either personally or by proxy or as proxy of another member at any General Meeting or upon a
poll or be reckoned in a quorum while any call or other sums be due or payable to the
Company in respect of such members.
DIRECTORS, BORROWING POWERS AND GENERAL PROVISIONS
Clause (a) of Article 49 provides that the number of Director shall not be less than Two and
unless otherwise determined by the Company in General Meeting be not more than Ten.
Directors are not required to hold any shares in the Company as qualification shares.
Clause (b) of Article 49 provides that The person here-in-after named shall be the first
Directors of the company.
1. Mr. Rajnit Rai Jain
2. Mr. Sanjay Bose
Article 50 provides that each Director shall receive out of the funds of company remuneration
for his services a fee of Rs. 200/- or such other amount as the Board may fix, for each
meeting of the Directors attended by him. The Board may pay all reasonable traveling and
other expenses incurred by any Director to attend any meeting of the Board. The Company in
General Meeting may by passing a special resolution under section 314 of the Act, provide for
payments of any percentage of net profits of the Company to the Directors or any Director by
way of remuneration in addition to or in lieu of the fee payable to them or him.
Article 51 provides that if any Director, being willing, is called upon to perform extra services
or to make any special exertion in going or residing away for any of the purposes of the
Company as or in giving special attention to the business of the Company as a member of the
Committee of Directors or otherwise the company may, subject to the provisions of the Act,
provide for remuneration to the Directors so doing and such remuneration may be either in
addition to or in substitution of his share in the remuneration from time to time provided for
the Directors.
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Article 52 provides that the Company may in General Meeting elect any person to be a
Director and subject to the provisions of any agreement for the time being in force the
Company may by Ordinary Resolution remove any Director.
Article 53 provides that the Board of Directors at a meeting of the Board or by passing a
resolution by circulation shall have power at any time to appoint any other person to be a
Director of the Company either to fill a casual vacancy or as an addition to the Board or as an
alternate Director in pursuant of the section 313, but the total number of the Directors shall
not in any time exceed the maximum number fixed under these articles.
Clause (1) of Article 54 provides that the Board may from time to time at their discretion,
subject to the provisions of the Act, raise or borrow money either from the Bankers, Directors
or from elsewhere and secure the payment of any such sum or sums of money for the
purposes of the Company.
Clause (2) of Article 54 provides that the Board may raise or secure the repayment of such
sum or sums in such manner and upon such terms and conditions in all respects as they think
fit, and in particular, by the issue of bonds perpetual and redeemable, debentures, or any
mortgage, charge or other security on the undertaking or the whole or any part of the
property of the Company (both present and future), including its uncalled capital for the time
being.
Clause (3) of Article 54 provides that quorum for the Directors meeting shall be two Directors
or one-third of the total strength any fraction contained in that one- third is being rounded as
whichever be higher.
Clause (4) of Article 54 provides that the Board of Directors may delegate any of its powers
subject to and in accordance with the provisions of the section 292, to any Managing director,
Manager or other principal officer of the Company or Committee of Directors to such extent
and manner as the Board may deem fit. Any power so delegated may be revoked at any time
or made to confirm to any condition or regulation as may be required by the Board from time
to time.
Article 55 provides that a Managing Director or Managing Directors may be appointed by a
Resolution of the Company or of the Board for such period and with such powers and
remuneration (whether by way of salary, perquisites, commission or participation in profits or
partly in one way and partly in another) as may be determined.
Article 56 provides that if it is provided by any agreement, deed or other document securing
or otherwise in connection with any loan taken by the Company or in connection with taking of
any shares by any person, firm or Company that any person or persons shall have power to
nominate a Director on the Board of Directors of the Company then and in case of taking of
any such loan or shares or entering into such agreement the person or persons having such
powers may exercise his power from time to time and appoint a Director accordingly. Such
Director maybe removed from Office at any time by the person or persons in whom the power
under which he was appointed is vested and another Director may be appointed in his place
but while holding such office he shall not be liable to retire by rotation nor hold any
qualification shares.
COMMON SEAL
Article 57 provides that the Board shall provide for safe custody of the Seal, the Seal of the
company shall not be affixed to any instrument except by the authority of a resolution of the
Board or of a committee of the Board authorised by it in that behalf and except in the
presence of one Director or the Managing Director or such other person as the Board may
appoint for the purpose who shall sign every instrument to which the Seal of the Company is
so affixed in his presence.
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DIVIDEND
Article 58 provides that the profits of the Company shall be divisible among the members in
proportion to the amount of capital paid up on the share held by them respectively at the date
of declaration of the dividend.
Article 59 provides that The Company in Annual General Meeting may declare a dividend to be
paid to the members but no dividend shall exceed the amount recommended by the Directors.
No dividend shall be payable except out of the profits of the financial year or any other
undistributed profit and no dividend shall carry interest as against the Company.
Article 60 provides that the Directors may from time to time pay the members such interim
dividends as in their judgement the position of the Company justifies.
Article 61 provides that the Directors may retain and apply any dividend declared and due in
respect of partly paid shares to the extent any money called by the company remains unpaid
and on which the company has exercised lien. Provided that their shall be no forfeiture of
unclaimed dividends before the claim become barred by law.
Article 62 provides that any one of several persons who are registered as the joint holders of
any share may give effectual receipts for all dividends and payments on account of dividends
in respect of such shares.
Article 63 provides that subject to section 205A of the Act the Directors may retain the
dividends payable upon shares in respect of which any person, under the transmission clause,
is entitled to become a member or in respect of which any person, under that clause is entitled
to transfer until such person shall become a member in respect thereof or shall duly transfer
the same.
Article 64 provides that all the dividends on any share not having a registered owner entitled
to require payments of and competent to give a valid receipt for the same shall remain in
suspense until some competent person is registers as the holder of the share and all the
dividend remaining unpaid shall be dealt with in the manner as provided under section205A of
the Companies Act, 1956.
CAPITALISATION OF PROFITS
Article 65 provides that the Company in General Meeting may upon the recommendation of
the Board, resolve subject to the provisions of the Act:(a)
(b)
(i)
that it is desirable to capitalize any part of the amount for the time being standing
to the credit of any of the Company’s reserve accounts, or to the credit of the
Profit and Loss Account or otherwise available for distribution;
(ii)
that such sum be accordingly set free for distribution in the manner specified in
clause (b) among the members who would have been entitled thereto, if
distributed by way of dividend and in the same proportion.
The sum aforesaid shall not be paid in cash but shall be applied, subject to the
provisions contained in the Act, whether in or towards:(i)
paying up any amounts for the time being unpaid on any shares held by such
members respectively.
(ii)
partly in the way specified in clause (i) and partly in that specified in sub-clause
(iii) below.
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(iii)
Paying up in full, un issued shares of the Company to be allotted and distributed,
and credited as fully paid up, to and amongst such members in the proportion
aforesaid.
INDEMNITY
Article 68 provides that every Director, Manager, Auditor or Officer of the Company or any
person (whether an officer of the Company or not) employed by the Company shall be
indemnified out of the funds of the Company against any liability incurred by him as such
Director, Manager, Auditor or Employee in defending any proceedings whether civil or criminal
in which judgement is given in his favour or in which he is acquitted or in connection with any
application under section 633 of the Act in which relief is granted to him by the Court.
151
XV.
OTHER INFORMATION
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONS
The following contracts mentioned below (not being contracts entered into in the ordinary
course of business carried on by the Company) are or may be deemed to be material
contracts. Copies of these contracts along with documents referred below may be inspected at
the Registered Office of the Company between 10.00 a.m. and 1.00 p.m. on any working day
until the closing of the subscription list.
Material Contracts
i. Memorandum of Understanding dated December 27, 2005 signed between the Company
and Ashika Capital Limited for acting as Lead Managers to the Issue.
ii. Memorandum of Understanding dated December 23, 2005 signed between the Company
and C.B.Management Services Limited for acting as Lead Managers to the Issue.
iii. Underwriting Agreement dated December 27, 2005 between the Company and SMIFS
Capital Markets Limited.
Material Documents
i. Memorandum and Articles of Association of the Company as amended from time to time.
ii. Certificate of Incorporation of the Company dated 2nd December 1987.
iii. Resolutions passed at the Extra Ordinary General Meeting of the Company dated on
December 23, 2005 approving the Issue.
iv.
Resolution passed by the Committee of Board of Directors at their meeting held on
December 27, 2005 approving the Issue.
v. Letter of Appointment of C.B.Management Services Limited as Registrar to the Issue.
vi. Letter dated December 19,2005 from M/s. Chaturvedi & Company, Chartered Accountants,
the Auditors of the Company, regarding the tax benefits available to the Company and its
members.
vii. Letter
dated
30th
September,2005 from M/s. Chaturvedi & Company, Chartered
Accountants, the Auditors of the Company regarding financial performance for the past
five years adjusted as per SEBI guidelines.
viii. Copies of Annual reports of RS Software (India) Limited for the year ended 31st March
2001, 2002, 2003, 2004 and 2005 and Audit Report for the half-year ended September
30th 2005.
ix. Consents from the Directors, Auditors, Lead Manager, Registrar, Compliance Officer,
Bankers to the Issue, Bankers to the Company, Legal Advisors as referred to in their
respective capacities.
x. In principle approval dated [•] from NSE for listing of the securities offered in this issue.
xi. In principle approval dated [•] from BSE for listing of the securities offered in this issue.
xii. In principle approval dated [•] from DSE for listing of the securities offered in this issue.
xiii. In principle approval dated [•] from ASE for listing of the securities offered in this issue.
152
xiv. In principle approval dated [•] from CSE for listing of the securities offered in this issue.
xv. Due-diligence certificate dated [•] submitted by Ashika Capital Limited to SEBI.
xvi. SEBI observation letter dated [•].
Any of the contracts or documents mentioned in this Draft Letter of Offer may be amended or
modified at any time if so required in the interest of the 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.
153
DECLARATION
NO STATEMENT MADE IN THIS DRAFT LETTER OF OFFER CONTRAVENES ANY OF THE
PROVISIONS OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER. ALL
THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC., ISSUED BY SEBI, GOVERNMENT AND ANY OTHER
COMPETENT AUTHORITIES IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH.
The Directors and the Company Secretary of the Issuer Company certify that all the disclosures
made in the Draft Letter of Offer are true and correct.
Signed by the Directors
Mr. K. S. Bhatnagar
Chairman
Mr. Rajnit Rai Jain*
Managing Director
Maj. Gen. A. Balasubramanian(Retd)*
Director
Mr. Shital Kumar Jain
Non Executive Director
Mr. S. Khasnobis
Nominee Director
Mr. Jonathan Kalman*
Director
Mrs. Sarita Jain*
Director
(*Through their constituted attorney Mr. Kunal Sen)
Mr. Kunal Sen
VP(Finance), Company Secretary & Compliance Officer
Place: Kolkata
Date:
Encl: Composite Application Form ('CAF')
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