RED HERRING PROSPECTUS

Dated September 10, 2010

Please read Section 60B of the Companies Act, 1956
100% Book Building Issue

MICROSEC FINANCIAL SERVICES LIMITED

(The Company was incorporated as “Satyam Fiscal Services Private Limited” on June 6, 1989 as a private limited company under the Companies Act, 1956. For details of changes in our name and
our registered office, see “History and Certain Corporate Matters” on page 82 of this Red Herring Prospectus.)

Registered Office: Shivam Chambers, 1st floor, 53 Syed Amir Ali Avenue, Kolkata700 019.
Tel: (91 33) 3051 2100; Fax: (91 33) 3051 2020.
Corporate Office: Azimganj House, 2nd floor, 7 Camac Street, Kolkata 700 017
Contact Person: Biplab Kumar Mani, Company Secretary and Compliance Officer
Tel: (91 33) 2282 9330; Fax: (91 33) 2282 9335; Email: [email protected]; Website: www.microsec.in

PROMOTERS OF THE COMPANY: BANWARI LAL MITTAL AND RAVI KANT SHARMA

PUBLIC ISSUE OF 12,500,000 EQUITY SHARES OF Rs. 10 EACH OF MICROSEC FINANCIAL SERVICES LIMITED (THE “COMPANY” OR THE “ISSUER” OR “MFSL”)
FOR CASH AT A PRICE OF Rs. [yy] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF Rs. [●] PER EQUITY SHARE) AGGREGATING TO Rs. [y] MILLION (THE
“ISSUE”). THE ISSUE WILL CONSTITUTE 39.30% OF THE POST ISSUE PAID UP CAPITAL OF THE COMPANY.

THE FACE VALUE OF EQUITY SHARES IS Rs. 10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT WILL BE DECIDED BY THE
COMPANY IN CONSULTATION WITH THE BRLM AND ADVERTISED AT LEAST TWO WORKING DAYS PRIOR TO THE BID/ISSUE OPENING DATE.

In case of any revision to the Price Band, the Bid/Issue Period will be extended by three additional working days after such revision of the Price Band, subject to the Bid/Issue Period not exceeding
10 working days. Any revision in the Price Band and the revised Bid/Issue Period, will be widely disseminated by notification to the National Stock Exchange of India Limited (“NSE”) and the
Bombay Stock Exchange Limited (“BSE”), by issuing a press release, and also by indicating the change on the website of the Book Running Lead Manager (“BRLM”) and at the terminals of the
other members of the Syndicate.

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall be available for allocation on a proportionate basis to Qualified Institutional Buyers
(“QIBs”). 5% of the QIB Portion (excluding Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder shall be available for
allocation on a proportionate basis to all QIB Bidders, including Mutual Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue will be
available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders,
subject to valid Bids being received at or above the Issue Price. Up to 30% of the QIB Portion may be allocated by the Company to Anchor Investors on a discretionary basis. One-third of the
Anchor Investor Portion shall be reserved for allocation to domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Issue Price

Potential investors, other than Anchor Investors, may participate in this Issue through an Application Supported by Blocked Amount (“ASBA”) providing details about the bank account which will
be blocked by the Self Certified Syndicate Bank for the same. For details see “Issue Procedure” on page 272 of this Red Herring Prospectus.
RISK IN RELATION TO THE FIRST ISSUE
This being the first public issue of the Company, there has been no formal market for the securities of the Issuer. The face value of the Equity Shares is Rs.10 and the Issue Price is [●] times of the
face value. The Issue Price (has been determined and justified by the BRLM and the Company as stated under the paragraph on “Basis for Issue Price” on page 43 of this Red Herring Prospectus)
should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity
Shares of the Company nor regarding the price at which the Equity Shares will be traded after listing.
IPO GRADING
This Issue has been graded by CRISIL as 2/5, indicating that the fundamentals of the Issue are below average relative to other listed equity securities in India, through its letter dated July 26, 2010.
For details, see “General Information” on page 16 of this Red Herring Prospectus.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment.
Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. In taking an investment decision, investors must rely on their own examination of the
Company and the Issue, including the risks 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 SEBI guarantee the accuracy or adequacy of the contents of this Red Herring Prospectus. Specific attention of the investors is invited to “Risk Factors” on page x of this Red Herring
Prospectus.
ISSUER’S ABSOLUTE RESPONSIBILITY
The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus 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 Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect,
that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which make this Red Herring Prospectus as a whole or any of such information
or the expression of any such opinions or intentions misleading in any material respect.
LISTING
The Equity Shares offered through this Red Herring Prospectus are proposed to be listed on the NSE and the BSE. We have received an ‘in-principle’ approval from each of the NSE and the BSE
for the listing of the Equity Shares pursuant to letters dated May 25, 2010 and April 27, 2010, respectively. For the purposes of the Issue, the Designated Stock Exchange shall be the BSE.
BOOK RUNNING LEAD MANAGER REGISTRAR TO THE ISSUE

SBI Capital Markets Limited Link Intime India Private Limited

202, Maker Tower ‘E’ C-13, Pannalal Silk Mills Compound,
Cuffe Parade LBS Road, Bhandup West,
Mumbai 400 005 Mumbai 400 078
Tel: (91 22) 2217 8300 Tel: (91 22) 2596 0320
Fax: (91 22) 2218 8332 Fax: (91 22) 2596 0329
E-mail ID: [email protected] Investor grievance e-mail: [email protected]
Investor Grievance Id: [email protected] Website: www.linkintime.co.in
Website: www.sbicaps.com Contact Person: Chetan Shinde
Contact Person: Murtuza Patrawala/ Sandeep Onkar SEBI Registration No.: INR000004058
SEBI Registration Number: INM000003531

BID/ISSUE PROGRAMME*
BID/ISSUE OPENS ON SEPTEMBER 17, 2010* BID/ISSUE CLOSES ON SEPTEMBER 21, 2010
* The Company may consider participation by Anchor Investors. Anchor Investor Bid/ Issue Period shall be one working day prior to the Bid/ Issue Opening Date
 TABLE OF CONTENTS

SECTION I: GENERAL .......................................................................................................................................I

DEFINITIONS AND ABBREVIATIONS ......................................................................................................... I
PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ..................................................VIII
FORWARD LOOKING STATEMENTS......................................................................................................... IX
SECTION II: RISK FACTORS ......................................................................................................................... X
SECTION III: INTRODUCTION ...................................................................................................................... 1
SUMMARY OF INDUSTRY ............................................................................................................................ 1
SUMMARY OF OUR BUSINESS .................................................................................................................... 3
SUMMARY FINANCIAL INFORMATION .................................................................................................... 7
THE ISSUE ...................................................................................................................................................... 15
GENERAL INFORMATION .......................................................................................................................... 16
CAPITAL STRUCTURE ................................................................................................................................ 25
OBJECTS OF THE ISSUE .............................................................................................................................. 37
BASIS FOR ISSUE PRICE .............................................................................................................................. 43
STATEMENT OF TAX BENEFITS ............................................................................................................... 45
SECTION IV: ABOUT THE COMPANY ....................................................................................................... 53
INDUSTRY OVERVIEW ............................................................................................................................... 53
OUR BUSINESS ............................................................................................................................................. 59
REGULATIONS AND POLICIES .................................................................................................................. 73
HISTORY AND CERTAIN CORPORATE MATTERS ................................................................................. 82
MANAGEMENT............................................................................................................................................. 91
OUR SUBSIDIARIES ................................................................................................................................... 105
OUR PROMOTERS AND GROUP COMPANIES ....................................................................................... 109
RELATED PARTY TRANSACTIONS ........................................................................................................ 114
DIVIDEND POLICY ..................................................................................................................................... 115
SECTION V: FINANCIAL INFORMATION ............................................................................................... 116
FINANCIAL STATEMENTS ....................................................................................................................... 116
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION ................................................................................................................................................. 209
FINANCIAL INDEBTEDNESS ................................................................................................................... 226
SECTION VI: LEGAL AND OTHER INFORMATION ............................................................................. 229
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS .................................................... 229
GOVERNMENT APPROVALS ................................................................................................................... 244
OTHER REGULATORY AND STATUTORY DISCLOSURES ................................................................. 257
SECTION VII: ISSUE INFORMATION ....................................................................................................... 266
TERMS OF THE ISSUE ................................................................................................................................ 266
ISSUE STRUCTURE .................................................................................................................................... 269
ISSUE PROCEDURE .................................................................................................................................... 272
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES ............................................... 300
SECTION VIII: MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION .................................. 301
SECTION IX: OTHER INFORMATION ..................................................................................................... 323
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ....................................................... 323
DECLARATION ........................................................................................................................................... 325
ANNEXURE ................................................................................................................................................. 326
 SECTION I: GENERAL

DEFINITIONS AND ABBREVIATIONS

General/ Company Related Terms

Term Description
“the Company”, the Unless the context otherwise requires, refers to Microsec Financial
“Issuer”, “MFSL” Services Limited, a company incorporated under the Companies Act and
having its registered office at Shivam Chambers, 1 st floor, 53 Syed Amir
Ali Avenue, Kolkata 700 019
“We”, “our”, “us”, Unless the context otherwise requires, refers to the Company and its
“Microsec Group”, “the Subsidiaries, on a consolidated basis
Group”
Articles/Articles of The Articles of Association of the Company
Association
Auditors The statutory auditors of the Company, namely, S. R. Batliboi & Co.
Board/Board of Directors The Board of Directors of the Company
Business Associates Persons, including remisiers and sub-brokers registered with SEBI, with
whom we have entered into arrangements for services, including
introduction of customers to our services
Directors Directors of the Company, unless otherwise specified
Financing Offering loans against shares to our clients, secured by liquid and
marketable securities at appropriate margin levels
Group Companies The companies, firms and ventures promoted by the Promoters, and
enumerated in “Our Promoters and Group Companies – Group
Companies” on page 111 of this Red Herring Prospectus
LKPL Luv-Kush Projects Limited
MCap Microsec Capital Limited
MCL Microsec Commerze Limited
Memorandum/ The Memorandum of Association of the Company
Memorandum of
Association
MIBL Microsec Insurance Brokers Limited
Micro Resources Micro Resources Private Limited
MRPL Microsec Resources Private Limited
MTL Microsec Technologies Limited
Promoter Group The persons and entities constituting the promoter group of the Company
in terms of Regulation 2(zb) of the SEBI Regulations and enumerated in
“Our Promoters and Group Companies – Promoter Group” on page 111 of
this Red Herring Prospectus
Promoters Banwari Lal Mittal and Ravi Kant Sharma
PRP PRP Technologies Limited
Registered Office The registered office of the Company at Shivam Chambers, 1st Floor, 53
Syed Amir Ali Avenue, Kolkata 700 019
Subsidiaries The subsidiaries of the Company, namely, MCap, MRPL, MTL, MIBL,
MCL and PRP

Issue Related Terms

Term Description
Allotment/Allot/Allotted Unless the context otherwise requires, refers to the allotment of Equity
Shares pursuant to this Issue to the successful Bidders
Allottee A successful Bidder to whom the Equity Shares are Allotted
Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor
Portion with a minimum Bid Amount of Rs. 100 million
Anchor Investor Allocation Notice or intimation of allocation of Equity Shares sent to Anchor
Notice Investors who have been allocated Equity Shares after discovery of the
Issue Price if the Issue Price is higher than the Anchor Investor Issue Price

i
 Term Description
Anchor Investor Bid/Issue The day, one working day prior to the Bid/Issue Opening Date, on which
Period Bids by Anchor Investors shall be submitted and allocation to Anchor
Investors shall be completed
Anchor Investor Issue Price The final price at which Equity Shares will be issued and Allotted to
Anchor Investors in terms of the Red Herring Prospectus and the
Prospectus, which price will be equal to or higher than the Issue Price but
not higher than the Cap Price. The Anchor Investor Issue Price will be
determined by the Company in consultation with the Book Running Lead
Manager
Anchor Investor Portion Up to 30% of the QIB Portion which may be allocated by the Company to
Anchor Investors on a discretionary basis. One-third of the Anchor
Investor Portion shall be reserved for domestic mutual funds, subject to
valid Bids being received from domestic mutual funds at or above the
price at which is allocation is being done to Anchor Investors
Application Supported by An application, whether physical or electronic, used by all Bidders other
Blocked Amount/ ASBA than Anchor Investors to make a Bid authorising an SCSB to block the
Bid Amount in their ASBA account maintained with the SCSB
ASBA Account An account maintained by the ASBA Bidders with the SCSB and
specified in the ASBA Bid cum Application Form for blocking an amount
mentioned in the ASBA Bid cum Application Form
ASBA Bid cum Application The form, whether physical or electronic, used by a Bidder (other than
Form Anchor Investor) to make a Bid through ASBA process, which contains
an authorisation to block the Bid Amount in an ASBA Account and will
be considered as the application for Allotment for the purposes of the Red
Herring Prospectus and the Prospectus
ASBA Bidder Prospective investors other than Anchor Investors in this Issue who intend
to Bid through ASBA
ASBA Revision Form The form used by the ASBA Bidders to modify the quantity of Equity
Shares or the Bid Amount in any of their ASBA Bid cum Application Forms
or any previous ASBA Revision Form(s)
Banker(s) to the The banks which are clearing members and registered with SEBI as
Issue/Escrow Collection Bankers to the Issue and with whom the Escrow Account will be opened,
Bank(s) in this case being Axis Bank Limited, HDFC Bank Limited, ICICI Bank
Limited, Indusind Bank Limited and State Bank of India
Basis of Allotment The basis on which Equity Shares will be Allotted to successful Bidders
under the Issue and which is described under “Issue Procedure – Basis of
Allotment” on page 294 of this Red Herring Prospectus.
Bid An indication to make an offer during the Bid/Issue Period by a Bidder
pursuant to submission of the Bid cum Application Form, or during the
Anchor Investor Bid/Issue Period by the Anchor Investors, to subscribe to
the Equity Shares of the Company at a price within the Price Band,
including all revisions and modifications thereto.
Bid Amount The highest value of the optional Bids indicated in the Bid cum
Application Form.
Bid cum Application Form The form used by a Bidder (which, unless expressly provided, includes
the ASBA Bid cum Application Form by an ASBA Bidder, as applicable)
to make a Bid and which will be considered as the application for
Allotment for the purposes of the Red Herring Prospectus and the
Prospectus
Bid/Issue Closing Date Except in relation to any Bids received from Anchor Investors, the date
after which the Syndicate and the Designated Branches of SCSB will not
accept any Bids for the Issue, which shall be notified in an English
newspaper, a hindi newspaper and a Bengali newspaper, each with wide
circulation
Bid/Issue Opening Date Except in relation to any Bids received from Anchor Investors, the date
on which the Syndicate and the SCSB shall start accepting Bids for the
Issue, which shall be notified in an English newspaper, a hindi newspaper
and a Bengali newspaper, each with wide circulation

ii
 Term Description
Bid/Issue Period The period between the Bid/Issue Opening Date and the Bid/Issue
Closing Date, inclusive of both days, during which prospective Bidders
can submit their Bids, including any revisions thereof
Bidder Any prospective investor who makes a Bid pursuant to the terms of the
Red Herring Prospectus and the Bid cum Application Form
Book Building Process/ Book building process, as provided in Schedule XI of the SEBI
Method Regulations, in terms of which this Issue is being made
Book Running Lead Manager/ Book Running Lead Manager to the Issue, in this case being SBI Capital
BRLM Markets Limited
Business Day Any day on which commercial banks in Mumbai are open for business
CAN/Confirmation of Note or advice or intimation of Allotment sent to the Bidders who have
Allotment Note been Allotted Equity Shares after Basis of Allotment has been approved
by the Designated Stock Exchange
Cap Price The higher end of the Price Band, above which the Issue Price will not be
finalized and above which no Bids will be accepted
Controlling Branches/CBs Such branches of the SCSB which coordinate with the BRLM, the
Registrar and the Stock Exchanges
Cut-Off Price Issue Price finalised by the Company in consultation with the BRLM.
Only Retail Individual Bidders are entitled to Bid at the Cut-off Price, for
a Bid Amount not exceeding Rs. 100,000. QIBs and Non-Institutional
Bidders are not entitled to Bid at the Cut-off Price
Designated Branches/ DBs Such branches of SCSBs which shall collect the ASBA Bid cum
Application Forms and a list of which is available on
http://www.sebi.gov.in
Designated Date The date on which funds are transferred from the Escrow Account or the
amount blocked by SCSB is transferred from ASBA Account, as the case
may be, to the Public Issue Account or the Refund Account, as
appropriate, after the Prospectus is filed with the RoC, following which
the Board of Directors shall Allot Equity Shares to successful Bidders
Designated Stock Exchange BSE
Draft Red Herring Prospectus The Draft Red Herring Prospectus dated March 20, 2010 issued in
or DRHP accordance with Section 60B of the Companies Act and SEBI
Regulations, filed with SEBI and which does not contain complete
particulars of the price at which the Equity Shares will be issued and the
size of the Issue
Eligible NRIs NRIs from jurisdictions outside India where it is not unlawful to make an
issue or invitation under the Issue and in relation to whom the Red
Herring Prospectus constitutes an invitation to subscribe to the Equity
Shares
Equity Shares Equity shares of the Company of Rs. 10 each fully paid up unless
otherwise specified
Escrow Account Account opened with the Escrow Collection Bank(s) for the Issue and in
whose favour the Bidder (excluding the ASBA Bidders) will issue
cheques or demand drafts for the Bid Amount, when submitting a Bid
Escrow Agreement Agreement dated [●] entered into between the Company, the Registrar to
the Issue, BRLM, the Syndicate Members and the Escrow Collection
Bank and Refund Bank for collection of the Bid Amounts from, and
where applicable, payment of refunds of the amount collected to, the
Bidders (excluding the ASBA Bidders) on the terms and conditions
thereof
First Bidder The Bidder whose name appears first in the Bid cum Application Form or
the Revision Form or the ASBA Bid cum Application Form or the ASBA
Revision Form
Floor Price The lower end of the Price Band, at or above which the Issue Price will be
finalized and below which no Bids will be accepted

iii
 Term Description
Issue The public issue of 12,500,000 Equity Shares of Rs. 10 each of the
Company for cash at a price of Rs. [●] each aggregating to Rs. [●]
million.
Issue Agreement The agreement dated March 20, 2010 between the Company and the
BRLM, pursuant to which certain arrangements are agreed to in relation
to the Issue.
Issue Price The final price at which Equity Shares will be issued and Allotted in
terms of the Red Herring Prospectus. The Issue Price will be determined
by the Company in consultation with the BRLM on the Pricing Date
Issue Proceeds The proceeds of the Issue
Mutual Fund Portion 5% of the QIB Portion (excluding the Anchor Investor Portion), or
312,500 Equity Shares available for allocation to Mutual Funds only, out
of the QIB Portion (excluding the Anchor Investor Portion)
Mutual Funds A mutual fund registered with SEBI under the SEBI (Mutual Funds)
Regulations, 1996
Net Proceeds The Issue Proceeds less the Issue expenses that are available to the
Company. For further information, see “Objects of the Issue” on page 37
of this Red Herring Prospectus.
Non Resident A person resident outside India, as defined under FEMA and includes a
non Resident Indian
Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders and who have
Bid for Equity Shares for an amount more than Rs. 100,000 (but not
including NRIs other than Eligible NRIs)
Non-Institutional Portion The portion of the Issue being not less than 1,875,000 Equity Shares
available for allocation to Non-Institutional Bidders
Price Band Price band of a minimum price of Rs. [●] (Floor Price) and the maximum
price of Rs. [●] (Cap Price) and includes revisions thereof. The Price
Band and the minimum Bid lot size for the Issue will be decided by the
Company in consultation with the BRLM and advertised, at least two
working days prior to the Bid/ Issue Opening Date, in all editions of
Business Standard in English language, all editions of Prathkal in Hindi
language and all editions of Kalantar Patrika in Bengali language
Pricing Date The date on which the Company, in consultation with the BRLM,
finalizes the Issue Price
Prospectus The Prospectus to be filed with the RoC in accordance with Section 60 of
the Companies Act, containing, inter alia, the Issue Price that is
determined at the end of the Book Building Process, the size of the Issue
and certain other information
Public Issue Account Account opened with the Bankers to the Issue to receive monies from the
Escrow Account and from the SCSBs on the Designated Date
QIB Portion The portion of the Issue being not more than 6,250,000 Equity Shares of
Rs. 10 each available for allocation to QIB Bidders
Qualified Institutional Buyers Public financial institutions as specified in Section 4A of the Companies
or QIBs Act, scheduled commercial banks, mutual fund registered with SEBI, FIIs
and sub-account registered with SEBI, other than a sub-account which is
a foreign corporate or foreign individual, multilateral and bilateral
development financial institution, venture capital fund registered with
SEBI, foreign venture capital investor registered with SEBI, state
industrial development corporation, insurance company registered with
IRDA, provident fund with minimum corpus of Rs. 250 million, pension
fund with minimum corpus of Rs. 250 million, National Investment Fund
set up by Government of India, and insurance funds set up and managed
by the army, navy or air force of the Union of India.

In terms of the FVCI Regulations and the VCF Regulations, FVCIs and
VCFs are not eligible to participate in the issue.
Refund Account The account opened with the Escrow Collection Bank(s), from which
refunds, if any, of the whole or part of the Bid Amount (excluding to the

iv
 Term Description
ASBA Bidders) shall be made
Refund Bank HDFC Bank Limited
Refunds through electronic Refunds through NECS, Direct Credit, RTGS or NEFT, as applicable
transfer of funds
Registrar to the Issue/ Registrar to the Issue, in this case being Link Intime India Private Limited
Registrar
Restated Financial Statements The audited standalone and consolidated financial statements of the
Company, prepared in accordance with Indian GAAP and the Companies
Act, 1956 and restated in accordance with the SEBI Regulations. The
Restated Financial Statements are included in this Red Herring
Prospectus.
Retail Individual Bidder(s) Individual Bidders (including HUFs applying through their karta,
Eligible NRIs and Resident Retail Individual Bidders) who have Bid for
Equity Shares for an amount not more than Rs. 100,000 in any of the
bidding options in the Issue
Retail Portion The portion of the Issue being not less than 4,375,000 Equity Shares of
Rs. 10 each available for allocation to Retail Individual Bidders
Revision Form The form used by the Bidders (which unless expressly provided, includes
the ASBA Revision Form), to modify the quantity of Equity Shares or the
Bid Amount in any of their Bid cum Application Forms or any previous
Revision Form(s)
RHP or Red Herring This Red Herring Prospectus issued in accordance with Section 60B of
Prospectus the Companies Act, which does not have complete particulars of the price
at which the Equity Shares are offered and the size of the Issue. The Red
Herring Prospectus will be filed with the RoC at least three days before
the Bid Opening Date and will become a Prospectus upon filing with the
RoC after the Pricing Date
SBI Caps SBI Capital Markets Limited
Self Certified Syndicate A banker to the Issue registered with SEBI, which offers the facility of
Bank(s) or SCSB(s) ASBA and a list of which is available on http://www.sebi.gov.in
Stock Exchanges The NSE and the BSE
Syndicate Agreement The agreement dated [●] entered into between the Syndicate and the
Company in relation to the collection of Bids in this Issue (excluding Bids
from Bidders applying through ASBA process)
Syndicate Members SBICAP Securities Limited, Enam Securities Private Limited, JM Financial
Services Private Limited and Reliance Securities Limited
Syndicate/Member of the The BRLM and the Syndicate Members
Syndicate
TRS/Transaction Registration The slip or document issued by the Syndicate or the SCSB (only on
Slip demand), as the case may be, to the Bidder as proof of registration of the
Bid
Underwriters The BRLM and the Syndicate Members
Underwriting Agreement The agreement among the Underwriter and the Company to be entered
into on or after the Pricing Date
Working Days All days excluding Sundays and bank holidays in Mumbai

Technical/ Industry Related Terms

Term Description
AMFI Association of Mutual Funds in India
F&O Futures and Options
FMC Forward Markets Commission
IRDA Insurance Regulatory and Development Authority
MCX Multi Commodity Exchange of India Limited
NCDEX National Commodity and Derivative Exchange Limited
Nifty National Stock Exchange Sensitive Index
NMCE National Multi-Commodity Exchange of India Limited

v
 Term Description
SENSEX Bombay Stock Exchange Sensitive Index
STT Securities Transaction Tax
VSAT Very Small Aperture Terminal

Conventional and General Terms/ Abbreviations

Term Description
Act or Companies Act The Companies Act, 1956, as amended from time to time.
AGM Annual General Meeting
AS Accounting Standards issued by the Institute of Chartered Accountants of
India
BSE Bombay Stock Exchange Limited
CDSL Central Depository Services (India) Limited
CRISIL CRISIL Limited
CRR Cash Reserve Ratio
Depositories NSDL and CDSL
Depositories Act The Depositories Act, 1996, as amended from time to time
DIN Director Identification Number
DP/ Depository Participant A depository participant as defined under the Depositories Act, 1996
DP ID Depository Participant’s Identification
ECB External Commercial Borrowing
EGM Extraordinary General Meeting
EPS Earnings Per Share i.e., profit after tax for a fiscal year divided by the
weighted average outstanding number of equity shares at the end of that
fiscal year
FCNR Foreign Currency Non Resident
FDI Foreign Direct Investment
FEMA Foreign Exchange Management Act, 1999 read with rules and regulations
thereunder and amendments thereto
FEMA Regulations FEMA (Transfer or Issue of Security by a Person Resident Outside India)
Regulations 2000, as amended from time to time
FII(s) Foreign Institutional Investors as defined under SEBI (Foreign Institutional
Investor) Regulations, 1995 and registered with SEBI under applicable laws
in India
Financial Year/ Fiscal Year Unless stated otherwise, the period of 12 months ending March 31 of that
particular year
FVCI Foreign Venture Capital Investor registered under the SEBI (Foreign
Venture Capital Investor) Regulations, 2000
GoI/Government Government of India
HNI High Net Worth Individual
HUF Hindu Undivided Family
I.T. Act The Income Tax Act, 1961, as amended from time to time
IFRS International Financial Reporting Standards
Indian GAAP Generally Accepted Accounting Principles in India
IPO Initial Public Offering
LAS Loan against shares
MAT Minimum Alternative Tax
Mn / mn Million
NA/ n.a. Not Applicable
NAV Net Asset Value being the paid up equity share capital plus free reserves
(excluding reserves created out of revaluation) less deferred expenditure not
written off (including miscellaneous expenses not written off) and debit
balance of profit and loss account, divided by number of issued equity shares
NBFC Non Banking Financial Company as defined under the Reserve Bank of
India Act, 1934 and regulations promulgated thereunder, as amended from
time to time
NBFC-D Deposit taking NBFC

vi
 Term Description
NBFC-ND Non-deposit taking NBFC
NBFC-ND-SI Systemically Important Non-deposit taking NBFC
NECS National Electronic Clearing Service
NEFT National Electronic Fund Transfer
NR Non-resident
NRE Account Non Resident External Account
NRI Non Resident Indian, being a person resident outside India, as defined under
FEMA and the FEMA (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000
NRO Account Non Resident Ordinary Account
NSCCL National Securities Clearing Corporation Limited
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OCB A company, partnership, society or other corporate body owned directly or
indirectly to the extent of at least 60% by NRIs including overseas trusts, in
which not less than 60% of beneficial interest is irrevocably held by NRIs
directly or indirectly as defined under Foreign Exchange Management
(Transfer or Issue of Foreign Security by a Person resident outside India)
Regulations, 2000. OCBs are not allowed to invest in this Issue
p.a. Per annum
P/E Ratio Price/Earnings Ratio
PAN Permanent Account Number allotted under the Income Tax Act, 1961
PAT Profit after tax
RBI The Reserve Bank of India
RoC The Registrar of Companies, West Bengal located at Nizam Place, 2nd Floor,
M.S.O Building, 2nd Floor, 234/4 A.J.C Bose Road, Kolkata 700 020
Rs. Indian Rupees
RTGS Real Time Gross Settlement
SCRA Securities Contracts (Regulation) Act, 1956, as amended from time to time
SEBI The Securities and Exchange Board of India constituted under the SEBI Act,
1992, as amended from time to time
SEBI Act Securities and Exchange Board of India Act 1992, as amended from time to
time
SEBI Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as
amended from time to time
SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997, as amended from time to time
SIDBI Small Industries Development Bank of India
SLR Statutory Liquidity Ratio
State Government The government of a state of the Union of India
US / USA United States of America
US GAAP Generally Accepted Accounting Principles in the United States of America
US$ United States Dollars

vii
 PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

Financial Data

Unless stated otherwise, the financial data in this Red Herring Prospectus is derived from the audited standalone
financial statements of the Company and audited consolidated financial statements of the Group, prepared in
accordance with Indian GAAP and the Companies Act, 1956 and restated in accordance with the SEBI
Regulations (the “Restated Financial Statements”). The Restated Financial Statements have been included in
this Red Herring Prospectus.

There are significant differences between Indian GAAP, US GAAP and IFRS. We do not provide reconciliation
of our Restated Financial Statements to IFRS or US GAAP financial statements. We have not attempted to
explain those differences or quantify their impact on the financial data included herein, and we urge you to
consult your own advisors regarding such differences and their impact on our financial data. Accordingly, the
degree to which the Restated Financial Statements included in this Red Herring Prospectus will provide
meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting
practices. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures
presented in this Red Herring Prospectus should accordingly be limited.

Our Fiscal year commences on April 1 and ends on March 31 of the next year, so all references to particular
Fiscal year, unless stated otherwise, are to the 12 months period ended on March 31 of that year.

All numbers in this Red Herring Prospectus have been represented in million or in whole numbers, where the
numbers have been too small to present in million. Any discrepancies in any table between the total and the
sums of the amounts listed are due to rounding off. All decimals have been rounded off to two decimals points.

Currency of Presentation

All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. All
references to “US$” or “US Dollars” are to United States Dollars, the official currency of the United States of
America.

Industry and Market Data

Unless stated otherwise, industry and market data used in this Red Herring Prospectus has been obtained or
derived from publicly available information as well as industry publications and sources. 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.
Accordingly, no investment decision should be made on the basis of such information. Although industry data
used in this Red Herring Prospectus is reliable, it has not been independently verified by the Company or the
Underwriters. Similarly, internal Company reports, while believed by us to be reliable, have not been verified by
any independent sources.

The extent to which the market and industry data used in this Red Herring Prospectus is meaningful depends on
the reader’s familiarity with and understanding of the methodologies used in compiling such data.

viii
 FORWARD LOOKING STATEMENTS

This Red Herring Prospectus contains certain “forward-looking statements”. All statements that are not
statements of historical fact are forward-looking statements. These forward-looking statements generally can be
identified by words or phrases such as “aim”, “anticipate”, “believe”, “expect”, “estimate”, “intend”,
“objective”, “plan”, “project”, “shall”, “will”, “will continue”, “will pursue” or other words or phrases of similar
import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward-looking
statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us that
could cause actual results and property valuations to differ materially from those contemplated by the relevant
statement.

Actual results may differ materially from those suggested by the forward looking statements due to risks or
uncertainties associated with our expectations with respect to, but not limited to, regulatory changes pertaining
to the industries in India in which we have our businesses and our ability to respond to them, our ability to
successfully implement our strategy, our growth and expansion, technological changes, our exposure to market
risks, general economic and political conditions in India which have an impact on our business activities or
investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest
rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in
India and globally, changes in domestic laws, regulations and taxes and changes in competition in our industry.
Important factors that could cause actual results to differ materially from our expectations include, but are not
limited to, the following:

x Our ability to comply with extensive securities regulations as well as changes in the regulations and
varying interpretation of these regulations;
x Our ability to obtain approvals and periodic renewals for conducting our business;
x Our failure to expand our operations whether through branches or Business Associates or otherwise;
x Any revision in our funds requirement and deployment of Net Proceeds;
x Our ability to obtain or enforce our trademark on our trade name and/ or logo;
x Our ability to manage our risk exposure, the performance of our risk management systems and our
ability to manage our exposure to unanticipated risks; and
x Our ability to manage the risks associated with providing loans against shares in our lending business
and particularly to successfully limit our losses due to bad debts.

For further discussion of factors that could cause our actual results to differ from our expectations, see “Risk
Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” on pages x, 59 and 209, respectively of this Red Herring Prospectus. By their nature, certain market
risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a
result, actual gains or losses could materially differ from those that have been estimated.

Forward-looking statements speak only as of the date of this Red Herring Prospectus. Neither the Company, the
Directors, the Underwriters nor any of their respective affiliates have any obligation to update or otherwise
revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of
underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI
requirements the Company and the BRLM will ensure that investors in India are informed of material
developments until the time of the grant of listing and trading permission by the Stock Exchanges.

ix
 SECTION II: RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all of the
information in this Red Herring Prospectus, including the risks and uncertainties described below, before
making an investment in the Equity Shares. You should also pay particular attention to the fact that we are
governed in India by a legal and regulatory environment which in some material respects may be different from
that which prevails in other countries. If any of the following risks, or other risks that are not currently known
or are now deemed immaterial, actually occur, our business, results of operations and financial condition could
suffer, the price of the Equity Shares could decline, and you may lose all or part of your investment. The
financial and other implications of material impact of risks concerned, wherever quantifiable, have been
disclosed in the risk factors mentioned below. There are, however, a few risk factors where the impact is not
quantifiable and hence the impact has not been disclosed in such risk factors.

Unless otherwise indicated, the financial information of the Group used in this section is derived from the
Group’s audited consolidated financial statements prepared in accordance with Indian GAAP and restated in
accordance with the SEBI Regulations.

INTERNAL RISK FACTORS

1. There is outstanding litigation against the Company, its Subsidiaries and our Group Company.

The Company, Subsidiaries and Group Companies are involved in disputes with various parties arising
from their operations from time to time. Our legal proceedings are pending at different levels of
adjudication before various courts and tribunals. Should any new developments arise, such as a change
in law or rulings against the Company or its Subsidiaries by appellate courts or tribunals, the Company
or its Subsidiaries may need to make provisions in its financial statements, which could adversely
impact its business results. Furthermore, if significant claims are determined against the Company and
it is required to pay all or a portion of the disputed amounts, there could be a material adverse effect on
the Company’s business and profitability.

The summary details of litigation against the Company are given below:

Particulars No. of Details Aggregate amount

Cases involved, where
ascertainable
(Rs. in million)

Civil 1 Company petition filed by Kohinoor Foods -

proceedings Limited alleging acquisition of its shares by the
Company and others, which is alleged to be in
violation of the SEBI Takeover Regulations.
Company has filed an application for its name
to be stricken out from the list of respondents.
The matter is currently pending before the
Company Law Board.
Tax proceedings 2 The Company received notices under section -
115 WE (2) and 143(2) of the I.T. Act for the
assessment year 2009-10, from the assessing
officer, Income Tax department, directing the
Company to appear before the assessing officer
and provide information in relation to the
return of income filed by the Company.

The summary details of litigation against the Subsidiaries are given below:

x
 Particulars No. of Details Aggregate Status
Cases amount involved,
where
ascertainable
(Rs. in million)

MCap
Civil 1 Kohinoor Foods Limited filed - The matter is
proceedings a petition for impleadment of pending
MCap in the civil proceedings
pending against the Company.
It was alleged that MCap
being a broker of Temptation
Foods Limited was acting in
concert with the Company.
Company has filed an
application for its name to be
stricken out from the list of
respondents
Arbitration 1 Arbitration application filed The arbitrator and MCap filed an
proceedings by customer with BSE, the BSE has appeal before
alleging execution of certain directed MCap to Bombay High
unauthorized transactions in pay a sum of Court against
securities by MCap. approximately Rs. the order of the
0.67 million along BSE
with interest to
the customer.
Complaints from 121 Alleged minor administrative -
customers infractions
Trademark 1 Opposition filed in relation to - The matter is
opposition the use of the trademark currently
‘MICROSEC- MICRO pending before
FOCUS. MEGA WEALTH’. the Registrar of
Trade Marks.
MTL
Notice from 1 Alleged contravention of the 1.07 The matter is
Service Tax provisions of the Finance Act, pending
Commissioner 1994 and a non-payment of
service tax, education cess and
higher education cess.
MRPL
Notice from 3 Alleged concealment of 6.32 In one of the
Income Tax particulars of income for matters, appeal
Department assessment year 2005-2006. filed by Income
Tax Department
Alleged wrongful claim of is pending
certain expenditures for before the High
assessment year 2003-2004 Court of
and 2006-2007 Calcutta.

Two matters
are pending
before Income
Tax Appellate
Tribunal
MCL
Notice from 1 Disallowed expenses of Rs. - -
Income Tax 39,009 alleging failure to
Department deduct tax at source on certain
payments.

xi
 Particulars No. of Details Aggregate Status
Cases amount involved,
where
ascertainable
(Rs. in million)

MIBL
Notice from 1 IRDA alleged non compliance IRDA had MIBL has paid
IRDA of provisions of the IRDA rejected MIBL’s the penalty and
(Insurance Brokers) application for its registration
Regulations, 2002 by MIBL. renewal of its as a direct
registration as a broker has been
direct broker for renewed by
non compliance of IRDA
Regulation 32 (2)
of the IRDA
(Insurance
Brokers)
Regulations, 2002
and imposed a
penalty of Rs. 0.5
million

The summary details of litigation against our Group Company are given below:

Particulars No. of Details Aggregate Status

Cases amount involved,
where
ascertainable
(Rs. in million)

LKPL
Notice from 1 Alleged claim of excessive 0.27 Appeal filed by
Income Tax and unrelated expenses in the LKPL against
Department profit and loss account for the order and
assessment year 2007-2008. demand notice
is pending
before the
Commissioner
of Income Tax
(Appeals)

For further details regarding outstanding litigation involving the Company and the Directors, the
Subsidiaries and Group Companies see “Outstanding Litigation and Material Developments” on page
229 of this Red Herring Prospectus.

2. Our funding requirements and the deployment of the Net Proceeds are based on management
estimates and may be revised from time to time, which may adversely affect our results of operations.

Our funding requirements and the deployment of the Net Proceeds are based on management estimates
and have not been appraised by any bank, financial institution or any other independent institution.
Substantial part of the funds raised through this Issue is proposed to be used for the financing activities
of the Company. In Fiscal 2010, the financing activity contributed approximately 26% of our stand-
alone revenues, but since this activity has been commenced recently since May 2005, our results may
differ substantially going forward. Further, in view of the highly competitive nature of the industry in
which we operate, we may revise our management estimates from time to time and consequently our
funding requirements may also change. This may result in the rescheduling of our funds deployment
and a change in our proposed expenditure for a particular object which may adversely affect our results
of operations.

xii
3. The RBI previously has issued guidelines which if made applicable to the Company may impose
certain restrictions on our lending and investment activities which may adversely affect the business
of the Company.

In terms of guidelines issued by the RBI, a systemically important NBFC, i.e. a NBFC having an asset
size of Rs. 1,000 million or more is governed by the provisions of the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 2007. A systemically important NBFC is
restricted from investing in excess of 15% of its owned funds in shares of a company and in excess of
25% of its owned funds in shares of a single group of companies. Further, a systemically important
NBFC is also restricted from lending to a single borrower in excess of 15% of its owned funds and to
single group of borrowers in excess of 25% of its owned funds. For further details, see “Regulations
and Policies” on page 73 of this Red Herring Prospectus.

The Company is currently not a systemically important NBFC. After the Issue but before the balance
sheet for the year ended March 31, 2011 is audited, our asset base may exceed Rs. 1,000 million. Upon
becoming a systemically important NBFC, the Company will be allowed to do business subject to
maximum ceilings as provided under the provisions of the Non-Banking Financial Companies
Prudential Norms (Reserve Bank) Directions, 2007. For further details, see “Regulations and Policies”
on page 73 of this Red Herring Prospectus. Currently, there is no proposed lending and/or investment
by the Company which would exceed the aforesaid limits.

4. We have obtained short term credit facilities of Rs.60 million from Citicorp Finance India Limited
and Rs. 100 million from Aditya Birla Finance Limited, which are repayable on demand. Our
profitability will be adversely affected if we have to repay these facilities on demand.

We have been sanctioned credit facilities of Rs. 60 million and Rs. 100 million from Citicorp Finance
India Limited and Aditya Birla Finance Limited, respectively, against the pledge of certain securities
(obtained as margin from borrowers) by the Company. The facility from Citicorp Finance India
Limited has a term of three years and the facility from Aditya Birla Finance Limited has a term of one
year. For further details see “Financial Indebtedness” on page 226 of this Red Herring Prospectus.
These facilities are repayable on demand. If we are required to repay any or all of these facilities before
its maturity, our profitability will be adversely affected. Further, on the occurrence of an event of
default, any enforcement by the lender of the pledges created over the securities possessed by us may
adversely affect our operations and profitability.

5. Our Registered Office has been mortgaged in favour of HDFC Bank Limited as security for certain
facilities granted by HDFC Bank Limited to MCap.

Our Registered Office has been mortgaged in favour of HDFC Bank Limited, Mumbai as security for
certain facilities granted by HDFC Bank Limited to MCap, our Subsidiary. For further details see,
“Financial Indebtedness” on page 226 of this Red Herring Prospectus. Upon occurrence of an event of
default, any enforcement by HDFC Bank Limited of the security may adversely affect our operations.

6. Our profitability for the fiscal year ended March 31, 2009 decreased significantly from the prior
fiscal year and we cannot assure that such decrease in profitability will not occur in future and this
may adversely affect our business and operations in the future.

Our consolidated profit for the fiscal year ended March 31, 2009 decreased by 46.07% to Rs. 87.01
million from Rs. 161.35 million for the prior fiscal year. This was primarily due to decrease in our
income from operations owing to depressed market conditions. For additional discussion of the causes
for our decrease in profitability for the fiscal year ended March 31, 2009, see “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” on page 209 of this Red
Herring Prospectus. We cannot assure you that going forward, our profitability will improve, nor can
we assure that such decrease in profitability will not occur in future, both of which depend upon a
variety of factors including our expenses, market conditions and our ability to manage any risks that
may arise from these factors. Any inability to manage such risks may adversely affect our business,
financial condition and results of operations.

7. Our contingent liabilities, which have not been provided for, could adversely affect our financial
condition.

xiii
 As of March 31, 2010 our contingent liabilities as per our consolidated Restated Financial Statements
were Rs. 396.67 million. In the event the Company is called upon to pay some or all of such liabilities,
its financial position and results of operations could be adversely affected. Set forth below is a table
that summarizes our contingent liabilities as of March 31, 2010:
(Rs. in million)
Particulars March 31, 2010
Guarantees in favour of banks against facilities granted to subsidiary 295.00
companies
Credit facilities availed against the above as on March 31, 2010 – Rs.
40.08 million
Claims against the Company not acknowledged as debts 3.24
Bank guarantees outstanding in favour of stock/ commodity exchanges 83.50
Counter guarantee in favour of a bank for guarantees issued by the bank 7.50
on behalf of a subsidiary company
Disputed Income tax demand in Appeal 6.32
Disputed Service Tax 1.07
Bank Guarantees outstanding in favour of West Bengal Sales Tax 0.04
Department
Total 396.67

For further details, see “Financial Statements – Consolidated Financial Statements - Notes on Accounts
- The year wise break up of contingent liabilities” on page 173 of this Red Herring Prospectus.

8. We have entered into a number of related party transactions for an absolute numerical amounts
aggregating to Rs. 9.49 million for the year ended March 31, 2010

We have entered into a number of related party transactions for an absolute numerical amounts
aggregating to Rs. 9.49 million for the year ended March 31, 2010. The aggregate value of transactions,
in brief, item-wise for the year ended March 31, 2006, 2007, 2008, 2009 and 2010 is set forth in the
table below:

(in Rs. million)

Particulars For the Years ended March 31, Total
2006 2007 2008 2009 2010
Remuneration 1.38 3.69 8.77 8.50 7.94 30.28
Brokerage & Related
Income 0.41 0.63 0.74 0.45 0.65 2.88
Loans & Advances
Received 2.18 - 1.09 14.35 0.57 18.19
Loans & Advances Given 0.03 0.08 0.16 15.43 0.33 16.03
Purchase of Shares 3.44 - - - - 3.44
Sale of Shares 2.67 - - - - 2.67
Share Application Money
Received 153.04 2.99 52.00 - - 208.03
Share Application Money
Refunded 1.24 - 52.00 - - 53.24
Equity Share Capital
Issued (Including
Premium) 178.27 - 71.56 - - 249.83
Preference Share Capital
Issued - 27.00 - - - 27.00
Preference Share Capital
Redeemed - - 27.00 - - 27.00
Dividend Paid - 20.45 10.00 - - 30.45
Balance Receivable - 0.01 0.01 0.19 - 0.21
Balance Payable - - 1.00 0.05 - 1.05

Such transactions or any future transactions with our related parties may potentially involve conflict of
interest and impose certain liabilities on the Company. There can be no assurance that such
transactions, individually or in the aggregate, will not have an adverse effect on the Company’s

xiv
 financial condition and results of operations. Furthermore, it is likely that Company will continue to
enter into related party transactions in the future. For further details, see “Related Party Transactions”
on page 114 of this Red Herring Prospectus.

9. Failure to operate as an integrated business, as a result of events that are wholly or partially beyond
our control, may affect the results of our operations.

We operate as an integrated group, providing various financial products and services to various clients.
Our Company and its Subsidiaries offer loans against shares, range of merchant banking, corporate
advisory (including research) and debt syndication services, broking services for our clients in equities,
derivatives, commodities and currencies on stock exchanges and commodity exchanges as well as
depository services. We are able to offer loans against shares, which secured by liquid and marketable
securities to our brokerage clients. Further, the Company also utilizes MCap’s network of branches for
its business operations. Our integrated service platform allows us to leverage relationships across lines
of business and our industry and product knowledge by providing multi-channel delivery systems to
our client base, thereby increasing our ability to cross-sell our products services. Failure to operate as
an integrated business, as a result of events that are wholly or partially beyond our control, may
adversely affect the results of our operations.

10. The Company has provided advances to its Subsidiaries.

The Company has provided advances to its Subsidiaries and as such there are debts due from the
Subsidiaries to the Company. The details of advances given by the Company to its subsidiaries are set
forth in the table below:
(Rs. in million)
Particulars As at March 31,
2006 2007 2008 2009 2010
Microsec Capital Limited 5.03 - 53.15 5.58 -
Microsec Resources Private Limited 1.93 - 0.05 - -
Microsec Insurance Brokers Limited - - 0.45 0.30 -
Microsec Technologies Limited - - 1.50 14.54 -
Microsec Commerze Limited - - 0.50 - -
PRP Technologies Limited - - - 0.50 -
Total 6.96 - 55.65 20.92 -

11. We extend loans against shares, or margin loans, to our clients, and any default by a client coupled
with a downturn in the stock markets could result in substantial losses for us.

We (through the Company and MRPL) extend ‘loans against shares’ or margin loans, which are
secured by liquid and marketable securities at appropriate or pre-determined margin levels and propose
to continue our LAS operations. We require our clients to deposit a minimum initial margin. The
Company and MRPL, at times, also extend significant credit to clients at specified interest rates for the
purchase of shares. In the case of highly volatile stock market or adverse movements in stock price,
clients may not be able to repay their loans, and the collateral securing the loans may have decreased
significantly in value, resulting in losses we may not be able to support. For instance, in fiscal 2010 an
amount aggregating to Rs. 11.27 million was written off as loss on assignment of receivables, in the
books of the Company, in respect of three clients. For further details see, “Financial Statements” on
page 116 of this Red Herring Prospectus. Such failure on the part of our clients to repay the debt for
such or other reasons would be detrimental to our business and profitability.

We follow our internal risk management guidelines while extending credit, including limits on
leverage, quality of collateral, diversification, pre-determined margin call thresholds and pre-
determined thresholds to liquidate collateral. No assurance can be given that if the financial markets
witnessed a significant single-day or general downturn, our financial condition and results of operations
would not be adversely affected. Further, these risk management guidelines require frequent reviews
and updation, and at times may be inadequate. In addition, there may be risk due to concentration of
exposure to a few clients.

12. Possible Conflict of Interest with our Subsidiary, MRPL may affect implementation of business
strategy of the Company.

xv
 MRPL, a Subsidiary of the Company is engaged in business of providing loans against shares and
making investments and to that extent there may be a conflict of interest with respect to business
strategies of the Company.

13. Possible Conflict of Interest with our Group Company, LKPL may affect implementation of our
business strategy.

LKPL, our Group Company is an NBFC primarily engaged in business of making investments and to
that extent there may be a conflict of interest with respect to business strategies of the Company. Also
see “Promoters and Group Companies – Group Companies – Luv-Kush Projects Limited” on page 112
of this Red Herring Prospectus.

14. We have been penalised / have received several notices in relation to our businesses from the SEBI,
NSE, BSE, NSDL, NCDEX, MCX and the IRDA.

We have received notices from the SEBI for not exercising proper due diligence as a merchant banker
and the NSE for various non-compliances including for certain alleged violations related to trading in
the capital market and the futures and options segments. We have also received notices from the NSE
and the BSE for inspection of our books of accounts and other documents and in respect of arbitration
applications filed against MCap by its customers. NSDL has also imposed penalties against us for
various infractions including, inter alia lapses pertaining to opening of accounts, non-submission/
delay in submission of internal reports, entering incorrect PAN numbers, debiting clients account
without proper authorisation and for failure to take database back-up. Certain of these notices were
pursued by the relevant regulatory authorities and penalties imposed or warnings issued. Details of
such penalties and notices have been set forth in the table below:

Particulars No. of Details Penalty imposed/ warnings issued

Cases

MCap
Notices from 2 Alleging irregularities SEBI has, in relation to one of the
SEBI pertaining to due diligence notices, warned MCap to exercise
conducted as a merchant banker proper due diligence in the future
in respect of an IPO/ open offer
1 Alleged irregularities and SEBI has warned MCap not to
violations in the operation as a repeat such irregularities in future
broker and depository and to ensure strict compliance of all
participant. the rules and regulations issued by
SEBI and the stock exchanges.
Notices from the 2 Alleged violations related to Rs. 150,000
NSE trading in the futures and
options segment
1 Alleged violations related to NSE has advised MCap to ensure
trading in the capital market non-recurrence of the violation and
segment to ensure compliance with the
regulations of NSE.
1 Alleged violations related to NSE has advised MCap to ensure
trading in the futures and non-recurrence of the violation and
options segment to ensure compliance with the
regulations of NSE.
2 Inspection of the books of NSE, in relation to the inspections,
accounts and other documents has imposed a penalty of
aggregating to Rs. 20,000.

NSE, in relation to one of the

inspections, has directed MCap to
remove, from client registration

xvi
 Particulars No. of Details Penalty imposed/ warnings issued
Cases

documents, such clauses which are

contravention of applicable stock
exchange rules and regulations.

NSE also directed MCap to ensure

non-recurrence of deviations from
procedural requirements.
1 Show cause notice served to -
MCap in relation to explain
failure to acquire approval from
NSE for change in directors.
2 Arbitration application filed by -
customer with NSE, alleging
execution of certain
unauthorized transactions in
securities by MCap.
Notice from the 3 Inspection of the books of BSE, in relation to one of the
BSE accounts and other documents inspection, has advised MCap to
ensure that client funds are routed
through the designated client bank
accounts only. Further, BSE has also
directed MCap to submit a
compliance certificate within 30
days.

BSE has warned MCap that non

compliance of recommendations of
BSE and/ or non-submission of
compliance report to BSE within 30
days will be subject to necessary fine
as may be imposed by BSE.
Correspondence 9 Alleged administrative NSDL has, in relation to three
with NSDL irregularities in the capacity as letters, imposed a penalty of Rs.
a depository participant 31,000 on MCap.

9 Various infractions which inter 19,000

alia include entering incorrect
PAN numbers of certain
account holders, debiting
clients account without proper
authorization, failure to take
proper back up and inadequate
control over issuance and/or
acceptance of instruction slips.

Correspondence 2 Inspection of the books of CDSL in relation to one of the

with CDSL accounts and other documents inspections have imposed a penalty
of Rs. 4,500 for failure to obtain
proof of identity and address as
prescribed by SEBI and CDSL
MCL
Correspondence 6 Alleged administrative -
with NCDEX irregularities
Correspondence 2 Submission of compliance -

xvii
 Particulars No. of Details Penalty imposed/ warnings issued
Cases

with MCX report in relation to certain non

compliances
1 Failure to maintain written 6,000
consent of client in respect of
order placement/ modification/
cancellation, failure to issue
trade confirmation slips on
execution of trade and failure to
issue contract notes in format
prescribed by the exchange
1 Submission of certificate -
confirming non-recurrence of
violations.
MIBL
Notice from 1 Alleged non compliance of IRDA has warned MIBL to be
IRDA provisions of the IRDA diligent in its activities as an
(Insurance Brokers) insurance broker
Regulations, 2002

For further details, see “Outstanding Litigations and Material Developments” on page 229 of this Red
Herring Prospectus.

15. MCap and MCL have been penalised with penalties/ fine for minor administrative infractions.

A number of insubstantial penalties/ fines have been imposed on us for minor administrative
infractions, the details of which have been set forth below:

A. MCap

Penalties for administrative infractions

Penalties have been imposed on MCap by the Stock Exchanges and NSCCL for administrative
infractions. The details of such penalties paid by MCap in Fiscal 2006, 2007, 2008, 2009, 2010 and the
period ended June 30, 2010 are set forth below:

Nature of Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 June 30, 2010
infraction No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.)
cases cases cases cases cases cases
Wrong/non- 13 52,945 20 1,42,424 15 38,324 19 5,245 28 12,900 5 1,000
upload of
UCI/UCC/
CTCL/margin
report
Violation of 1 20,000 4 55,000 4 40,000 5 23,311 - - - -
intra day
trade/gross
exposure
limits
Delay in - - 2 3,900 1 1,000 1 100 - - 2 2,000
reporting of
client funding
Late - - - - 2 1,800 - - - - - -
submission of
margin
trading
certificate
Total 14 72,945 26 201,324 22 81,124 25 28,656 28 12,900 7 3,000

xviii
B. MCL

Penalties for administrative infractions

Penalties have been imposed on MCL by NCDEX and MCX for administrative infractions. The details
of such penalties paid by MCL in Fiscal 2006, 2007, 2008, 2009 and 2010 are set forth below:

Nature of Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010
infraction No. Amount No. Amount No. Amount No. Amount No. Amount
of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.)
cases cases cases cases cases
NCDEX
Wrong/non- 4 3,890 4 690 4 1100 - - - -
upload of
UCC
Modification - - 2 3,000 2 4,000 - - - -
of executed
trades
Exceeding 2 1,694 - - 3 3,736 - - 1 10,000
margin/
position limits
Failure to raise - - 1 5,000 - - - - - -
invoices for
executed
trades
Non/late - - - - - - 2 200 - -
submission of
client
information

MCX
Wrong/non- - - 5 2,500 1 400 1 100 - -
upload of
UCC
Modification - - - - 5 2,500 - - - -
of executed
trades
Failure to raise - - 1 2,143 2 20,000 2 8,700 - -
invoices for
executed
trades
Total 6 5,584 13 13,333 17 31,736 5 9,000 1 10,000

For further details, see “Outstanding Litigation and Material Developments” on page 229 of this Red
Herring Prospectus.

16. Our inability to foreclose on collateral in the event of a default may result in failure to recover the
expected value of the collateral. Additionally, the value of the collateral on loans may decrease, or
we may experience delays in enforcing collateral when borrowers default on their obligations.

In relation to our secured loans, changes in the underlying asset prices, particularly marketable
securities, may cause the value of our collateral to decline, and we may not be able to realize the full
value of the collateral as a result of delays in bankruptcy and foreclosure proceedings, inability to
foreclose, defects in the perfection of collateral, fraudulent transfers by borrowers and other factors,
including legislative changes and judicial pronouncements. Failure to recover the expected value of
collateral could expose us to losses and, in turn, adversely affect our business and financial
performance.

17. Our applications for registration of labels ‘MICROSEC-MICRO FOCUS. MEGA WEALTH’ and
‘MICRO FOCUS. MEGA WEALTH’ before the Trade Mark Registry have been opposed and any
failure to obtain the registration may affect our goodwill.

xix
 We use the trade name and logo ‘Microsec’ and its associated logos and invest our resources in
building our brand. The trade name ‘MICROSEC’ is a registered trademark of MCap. However, we
have filed other applications with the registry for trade mark and copyright registration of various
labels/ product names that we use in our business under various classes. All our trade mark applications
are made through the Subsidiaries. As of the date of this Red Herring Prospectus, most of these
applications are pending before the Trade Mark Registry. For further details, see section ‘Government
and Other Approvals – Intellectual Property Related Approvals – Pending Approvals’ on page 251 of
this Red Herring Prospectus. Our applications for registration of labels ‘MICROSEC –MICRO
FOCUS. MEGA WEALTH’ and ‘MICRO FOCUS. MEGA WEALTH’ before the Trade Mark
Registry have been opposed. For further details, see “Outstanding Litigation and Material
Developments” on page 229 of this Red Herring Prospectus.

We operate in a competitive environment where generating and maintaining brand recognition is a

significant element of our business strategy. If the legal proceedings are decided against us or if we fail
to obtain or enforce our aforementioned labels or if we are restricted from using the same, we may be
required to amend or change the labels. Any such change could have a material adverse effect on our
business, results of operations, financial condition and prospects.

18. We had consolidated negative cash flow for fiscal 2010. Any negative cash flows in the future could
adversely affect our results of operations and financial conditions.

We had a consolidated negative cash flow aggregating to Rs. 21.24 million for fiscal 2010 due to buy-
back of equity shares of Rs. 125 million during fiscal 2010. For further details see, “Capital Structure-
Share Capital History of the Company” on page 26 of this Red Herring Prospectus. Any negative cash
flows in the future could adversely affect our results of operations and financial conditions.

19. We are subject to extensive securities regulation and any failure to comply with these regulations
could subject us to penalties or sanctions.

The securities market and our business are subject to extensive regulation including by the SEBI, RBI,
the FMC and other governmental/ regulatory authorities. Additionally, we are also regulated by
industry self-regulatory organizations, including stock exchanges and commodities exchanges. The
regulatory environment in which we operate is also subject to change and we may be adversely affected
as a result of new or revised legislation or regulations imposed by the SEBI, other governmental
regulatory authorities or self-regulatory organizations. We may also be adversely affected by changes
in the interpretation or enforcement of existing laws and rules by these governmental authorities and
self-regulatory organisations. Our Subsidiary, MCap, is registered with the SEBI as a stock-broker and
is a member of the NSE and the BSE. Stock-brokers are subject to regulations which cover all aspects
of the securities business, including sales methods and supervision; trading practices among broker-
dealers and the conduct of directors, officers and employees of broker-dealers.

Compliance with many of the regulations applicable to us involves a number of risks, particularly in
areas where applicable regulations may be subject to varying interpretation. The requirements imposed
by securities regulators are designed to ensure the integrity of the financial markets and to protect
customers and other third parties who deal with us. Consequently, these regulations often serve to limit
our activities, including through capital adequacy, credit concentration and market conduct
requirements. If we are found to have violated an applicable regulation, administrative or judicial
proceedings may be initiated against us that may result in trading bans, censures, fines, de-registration
or suspension of our brokerage activities, the suspension or disqualification of our officers or
employees, or other adverse consequences. The imposition of any of these or other penalties could have
a material adverse effect on our business, reputation, financial condition and results of operations.

We also are subject generally to changes in Indian law, as well as to changes in regulations and
accounting principles. There can be no assurance that the laws governing the Indian financial services
sector will not change in the future or that such changes would not adversely affect our business and
future financial performance.

20. Our operations are significantly concentrated in the eastern and north eastern regions, and failure
to expand our operations may restrict our growth and adversely affect our business.

xx
 Historically, our operations have been focused on the eastern and north eastern regions of the country.
Accordingly, a very substantial part of our revenues are generated from operations in eastern and north-
eastern India.

As at June 30, 2010, we have established some branches outside eastern India, including at Delhi,
Indore, Jaipur, Mumbai, Pune, Raipur, Shimla, Srinagar, Surat and Varanasi. Failure to expand our
operations either through branches or Business Associates or otherwise may restrict our growth
potential and adversely affect our business plan. This will adversely affect our business operations and
growth of our business.

21. Lack of effectiveness of our risk management systems and procedures may leave us exposed to
unidentified risks or unanticipated levels of risk.

We have established a variety of separate but complementary financial, credit, operational, compliance
and legal reporting systems based on mandatory regulatory requirements as well as our business needs.
However, the policies and procedures we employ to identify, monitor and manage risks may not be
fully effective. Our risk management systems are based among other considerations on the use of
observed historical market behaviour, information regarding clients, monitoring of trading and
extrapolation there-from. Consequently, these methods may not predict future risk exposures, which
could be significantly greater than what the historical measures indicate. Further, the information
available to us may not be accurate, complete, up-to-date or properly evaluated. The effectiveness,
therefore, of our ability to manage risk exposure cannot be completely or accurately predicted or fully
assured. For example, unexpectedly large or rapid movements or disruptions in one or more markets or
other unforeseen developments could have a material adverse effect on our results of operations and
financial condition.

Management of operational, legal and regulatory risk requires, among other things, policies and
procedures to properly record and verify a large number of transactions and events. There can be no
assurance that our policies and procedures will effectively and accurately record and verify this
information. Failure of our risk management systems or exposure to unanticipated risks could lead to
losses due to adverse changes in inventory values, decrease in the liquidity of trading positions, higher
volatility in earnings, increase in our credit risk to customers as well as to third parties and increase in
general systemic risk.

22. Our business is heavily dependent on technological systems and any interruptions in such systems
could lead to decline in our sales and profits. A failure in our operational systems or infrastructure,
or those of third parties, could impair our liquidity and absence of comprehensive business
continuity and disaster recovery plan may lead to a temporary disruption of our business operations
and damage our reputation and cause losses.

We are dependent on our technology systems to perform the critical function of gathering, processing
and communicating information efficiently, securely and without interruptions and our ability to
process, on a daily basis, a large number of transactions. Our financial, accounting, data processing or
other operating systems and facilities may fail to operate properly or become disabled as a result of
events that are wholly or partially beyond our control, adversely affecting our ability to process these
transactions. Additionally, rapid increases in client demand may strain our ability to enhance our
technology and expand our operating capacity. The inability of our systems to accommodate an
increasing volume of transactions could constrain our ability to expand our businesses and could lead
to liability to clients and/or regulatory intervention.

At the core of our on-line trading system is an application based on VSAT, which has a direct
connection with the NSE and the BSE and allows investors to trade securities on-line. The VSAT-
based network allows us to provide investors with real-time market data such as streaming quotes from
each market due to better connectivity. A breakdown or interruption in the Indian domestic satellite
system could have a material adverse effect on our business and client base.

Our operations are highly dependent on the integrity of our technology systems and our success
depends, in part, on our ability to make timely enhancements and additions to our technology in
anticipation of client demands. We have invested heavily in a new data centre, network components,
application infrastructure and back-up. However, we have not implemented a comprehensive disaster

xxi
 recovery plan which may lead to a temporary disruption in connectivity with the Exchanges and
between our data centre and our business locations affecting our business.

We face risks arising from failures in our systems control processes, information system disruptions,
communication systems failure and data interception during transmission through external
communication channels and networks on which our ability to manage our business depends. We also
face operational risk arising from mistakes made in the confirmation, punching or settlement of
transactions or from transactions not being properly booked, evaluated or accounted for, system
interruptions, errors or downtime (which could result from a variety of causes, including changes in
client use patterns, technological failure, changes to systems, linkages with third-party systems, and
equipment and power failures). We maintain back up of our records at our various offices in Kolkata
and Mumbai. We are exposed to risks in case of natural or man-made disasters or other such
circumstances which are beyond our control. Any unforeseen events or circumstances beyond our
control at these offices could result in loss of data and records and adversely affect our results of
operations and possibly leading to loss of revenue, financial losses and damage to our reputation.

23. Our Objects of the Issue do not contemplate creation of major fixed assets.

The objects of this Issue are to (a) expand our financing business; (b) expand MCap’s domestic
operations and network of branches; (c) enhance MCap’s existing technological capacity and (d)
enhance our visibility; and (e) achieve the benefits of listing the Equity Shares of the Company on the
Stock Exchanges. As a result, Rs. 1,130 million out of the proceeds of the Issue shall not be utilized for
the creation of major fixed assets. For more information on the use of proceeds, see “Objects of the
Issue” on page 37 of this Red Herring Prospectus.

24. We estimate a capital expenditure of Rs. 75 million towards equipment or machinery, orders in
respect of which are yet to be placed.

We propose to utilize Rs. 75 million out of the proceeds of this Issue towards enhancement of our
technological capability. For details of equipment that we need to purchase see section “Objects of the
Issue” on page 37 of this Red Herring Prospectus. For the above estimates, the machinery or equipment
is yet to be ordered. The Company has not yet made a decision to finalize the suppliers for the same.
The figures in the Company’s capital expenditure plans are based on management estimates and have
not been appraised by an independent organization. In addition, the Company’s capital expenditure
plans are subject to a number of variables, including possible cost overruns or defects and changes in
the management’s view of the desirability of the current plans, among others.

25. We intend to use a portion of our Net Proceeds towards investment in an unlisted Subsidiary and
cannot assure returns pursuant to such investments.

In terms of the objects of this Issue, out of the amount being raised for the purpose of establishment of
additional offices and acquisition of office infrastructure is being raised exclusively for our Subsidiary,
MCap. For further details, see “Objects of the Issue” on page 37 of this Red Herring Prospectus. These
funds would be utilized as according to the discretion of the management of MCap. MCap is an
unlisted company and its activities and records are not subject to public scrutiny. Further, the Company
is not assured of any dividends pursuant to such investments.

26. We could be exposed to risks arising from misconduct, fraud and trading errors by our employees
and Business Associates.

Our employees execute trades on behalf of our clients on their instructions. Frauds or other
delinquencies by employees could include indulging in transactions that exceed authorized limits or
present unacceptable risks to us; hiding unauthorized or unsuccessful trading activities from us; or the
improper use of confidential information. Such misconduct could result in unacceptable business risks,
losses, invite regulatory sanctions and seriously harm our reputation and could even lead to litigation.
Furthermore, while our Business Associates work under our general supervision and control, each of
their clients is directly registered with us on a revenue sharing basis. Our Business Associates are
typically managed by an independent entrepreneur and not by us. We have significantly less control
over the activities of our Business Associates than over our employees and the precautions we take to
prevent and detect these activities may not be effective. Any delinquencies or trading errors on the part

xxii
 of our employees or Business Associates could materially affect our business operations, financial
position and/or reputation.

27. The deployment of the net proceeds is entirely at our discretion and is not subject to any monitoring
by any independent agency.

We intend to use the net proceeds of the Issue as described in the “Objects of the Issue” on page 37 of
this Red Herring Prospectus. The purposes for which the net proceeds of the Issue are to be utilized
have not been appraised by any independent entity and are based on our estimates and on third party
quotations. Our management will have the discretion to revise our business plan from time to time and
consequently our funding requirements and deployment of funds may also change. Further, our Board
shall monitor the utilization of the net proceeds of the Issue, which shall not be subject to any
monitoring by any independent agency.

28. We are exposed to risks attributable to derivatives trading by clients.

We offer our clients the facility to trade in derivative instruments in the commodities and securities
markets, as permitted by applicable laws. Since these derivative instruments involve taking leveraged
positions on the underlying assets, these are more risky to deal with compared to the other financial
instruments. Our Subsidiaries are exposed to greater risk in dealing with derivative instruments since
they deal with such instruments on behalf of their clients. We may face financial losses if we fail to
manage risks associated with their clients’ dealings in derivative instruments, particularly due to price
and market volatility.

29. Substantial part of our income and profits are highly volatile in nature, which may make it difficult
for us to achieve steady earnings growth on a quarterly basis and may cause the price of our Equity
Shares to decline

Our historical financial statements may have included profits or gains on account of security profits, or
fees determinable based on security profits. These profits might have arisen due to upswing in the
capital market, and may be volatile in the future. Hence, our past profits may not provide a basis for
assessing or forecasting our future performance.

We generally derive revenue from a limited number of engagements in our business that generates
significant fees at key transaction milestones, such as closing, the timing of which is outside of our
control. As a result, our financial results will likely fluctuate from quarter to quarter based on the
timing of when those fees are earned. It may be difficult for us to achieve steady earnings growth on a
quarterly basis, which could, in turn, lead to large adverse movements in the price of our Equity Shares
or increased volatility in our stock price generally. We earn a significant portion of our revenue from
investment banking and consulting, and, in many cases, we are not paid fully until the successful
consummation of the underlying assignment. As a result, our investment banking and consulting
activities are highly dependent on market conditions and the decisions and actions of our clients,
interested third parties and governmental authorities. For example, a client could delay or terminate a
transaction because of a failure to agree upon final terms with the counterparty, failure to obtain
necessary regulatory consents or board or stockholder approvals, failure to secure necessary financing,
adverse market conditions or because the target’s business is experiencing unexpected operating or
financial problems. In these circumstances, we often do not receive full advisory fees or the
reimbursement of certain out-of-pocket expenses, despite the fact that we have devoted considerable
resources to these transactions.

30. We face risks associated with potential acquisitions, investments, strategic partnerships or other
ventures that could adversely affect our results of operations.

We propose to pursue strategic acquisition opportunities to enhance our capabilities and to capitalise on
specific industry opportunities. Towards this end, we may acquire or make investments in
complementary businesses, technology, services or products or enter into strategic partnerships with
parties who can provide access to those assets, if appropriate opportunities arise. The general trend
towards consolidation in the brokerage services industry increases the importance of our ability to
successfully complete such acquisitions and investments. While acquisitions are not a pre-requisite for
our future growth, inability to identify suitable acquisition targets, investment or strategic partnership

xxiii
 or complete those transactions on commercially acceptable terms or at all, may affect our growth
prospects. In the event we acquire another company or business, we may face difficulties in integrating
the operations including the personnel, technology and software. In addition, the key personnel of the
acquired company may choose not to work for us. In the event that we are unable to successfully
integrate new acquisitions, we may need to invest heavily in the reorganization of our operations,
which may lead to lower operating profits. Any of the foregoing could have a material adverse effect
on our business, results of operations, financial condition and prospects.

31. Our insurance coverage may not adequately protect us against certain operating hazards and this
may have an adverse effect on our business.

In compliance with requirements of the Indian stock exchanges, we maintain stock brokers’ indemnity
policies that provide coverage against incomplete transactions and cyber crimes. In addition, we
maintain voluntary insurance coverage against general risks. There can be no assurance that any
claim under the insurance policies maintained by us will be honoured fully, in part or on time. To the
extent that we suffer any loss or damage that is not covered by insurance or exceeds our insurance
coverage, our results of operations and cash flow could be adversely affected. Further, the Company
does not maintain business interruption insurance and Directors’ liability insurance.

Further, we are exposed to potential liability risks that are inherent in the provision of financial
services. Such liabilities may exceed our available insurance coverage or arise from claims outside the
scope of our insurance coverage. If our arrangements for insurance or indemnification are not adequate
to cover claims, including in the case of claims exceeding policy aggregate limitations or exceeding the
resources of the indemnifying party, we may be required to make substantial payments and
our financial condition and results of operations may be adversely affected.

32. Our inability to attract and retain skilled personnel and significant competition for professional
employees could adversely affect our business.

We are a professionally managed company and are governed by our Board of Directors. We have, over
time, built a strong team of experienced professionals to oversee the operations and growth of our
businesses. We operate in a sector wherein professionals with diverse expertise are required and our
ability to meet future business challenges depends on our ability to attract and recruit skilled personnel
for our operations, and we face strong competition to recruit and retain skilled and professionally
qualified staff. The loss of key personnel, particularly a senior professional or any inability to manage
the attrition levels in different employee categories could adversely impact our business, growth plans
and control over various business functions.

33. Our business requires substantial capital, and any disruption in funding sources and access to
capital markets would have a material adverse effect on our liquidity and financial conditions.

As we are a ‘non-deposit accepting’ NBFC and do not have access to deposits, our liquidity and
ongoing profitability are, in large part, dependent upon our timely access to, and the cost associated
with raising capital. We may need to raise additional capital from time to time, which we may not be
able to procure. Additional capital requirements imposed due to changes in the regulatory regime, new
guidelines or significant depletion in our existing capital base due to unusual operating losses or margin
pressure from our securities-backed lending activities also may drive demand for additional financing.
Our funding requirements historically have been met from a combination of borrowings, sales of our
loans to other lenders such as banks and NBFCs. Thus our business depends and will continue to
depend on our ability to access diversified funding sources. It should be noted that any issuances we
make of equity securities, such as the Issue, will dilute the shareholding of our then-existing
shareholders.

Our funding strategy was adversely affected by the ongoing stress in the global credit markets that
began in mid – 2007. The capital and lending markets remain highly volatile and access to liquidity has
been significantly reduced. These conditions have resulted in increased borrowing costs. Additional
funds may not be available on attractive terms. In addition, it could become more difficult to procure or
renew loan and facilities as many potential lenders and counterparties also are facing liquidity and
capital concerns as a result of the stress in the financial markets. Our inability to procure additional
funds to support our activities could have an adverse effect on our results of operations.

xxiv
34. Any inability to manage our recent rapid growth could adversely affect our business and financial
results.

Our consolidated revenues have grown from Rs. 70.61 million in Fiscal 2006 to Rs. 584.73 million in
fiscal 2010, at a CAGR of approximately 69.64%. There can be no assurance that comparable levels of
growth will continue, particularly in view of the non-recurring nature of certain income items.
Moreover, our ability to sustain our rate of growth depends significantly upon our ability to manage
key issues such as selecting and retaining key managerial personnel, maintaining effective risk
management policies, continuing to offer products which are relevant to our target base of clients,
developing managerial experience to address emerging challenges and ensuring a high standard of
client service. Going forward, we may not have adequate processes and systems such as credit
appraisal and risk management to sustain this growth. We may not be able to execute our strategy of
increasing our client base in the future as well as effectively service our clients’ requirements at the
same level as before. Any failure on our part to scale our infrastructure, financial control and
management capabilities to meet the challenges of rapid growth could adversely affect our business and
financial results and could be detrimental to our long-term business outlook and reputation.

35. We may not be able to maintain our current levels of profitability due to increased costs or reduced
spreads.

Our business strategy involves a relatively high level of ongoing interaction with our clients. We
believe that this involvement is an important part of developing our relationship with our clients,
identifying new cross-selling opportunities and monitoring our performance. However, this level of
involvement also entails higher levels of costs as compared to for example, advancing loans only from
our branch offices, and also requires a relatively higher gross spread, or margin, on the consumer
lending products we offer in order to maintain profitability. There can be no assurance that we will be
able to maintain our current levels of profitability if the gross spreads on our consumer lending
products were to reduce substantially, which could adversely affect our results of operations.

36. We operate on owned as well as leased premises and we may lose possession of leased properties and
related buildings and other improvements.

We propose to substantially expand our business. Presently, we operate from owned as well as leased
properties. On increasing the scale of our operations, we may in the future enter into lease agreements.
Any adverse impact on the title, ownership rights and/or development rights of the owners from whose
premises we operate, or breaches of the contractual terms of such lease agreements and/or leave and
license agreements including delay in payment of annual rent, usage of the property other than for the
purpose for which it was allotted, or transfer or assignment of land without prior consent of the lessor,
may impede our operations. In the event such leases or licenses are not renewed, our operations and in
turn profitability will be adversely impacted.

37. Our Group Companies have incurred losses in the past.

Our Group Companies, LKPL and Micro Resources have incurred losses in the last three fiscal years.
The profit/ (loss) figures for LKPL and Micro Resources are set forth below:
Rs. in million
Name of the company Fiscal 2008 Fiscal 2009 Fiscal 2010
LKPL 8.66 (10.08) 7.20
Micro Resources (0.13) 0.02 (0.06)

For further details, see “Our Promoters and Group Companies” on page 109 of this Red Herring
Prospectus.

38. In the last six months, Equity Shares of the Company has been transferred to our Promoter Group
Company, LKPL.

Details of transfer of Equity Shares to LKPL during the six months immediately preceding the date of
the Draft Red Herring Prospectus are as follows:

xxv
 Name of Promoter Date of purchase Price at which shares Number of Equity
Group Company purchased (in Rs.) Shares
LKPL September 22, 2009 125 968,033

For further details, please see “Capital Structure” on page 25 of this Red Herring Prospectus.

39. The Promoters will continue to hold a majority of post-Issue paid-up capital and can therefore
determine the outcome of shareholder voting and influence our operations.

Subsequent to the completion of the Issue, our Promoters along with our Promoter Group will own an
aggregate of 54.78% of our issued and paid-up Equity Share capital. They will, therefore, be able to
exercise a significant degree of influence over us and will be able to control the outcome of any
proposal that can be passed with a majority shareholder vote. This will include the ability to appoint
directors to our Board and the right to approve significant actions at shareholders’ meetings, including
the issue of Equity Shares and dividend payments, business plans, mergers and acquisitions, any
consolidation or joint venture, any amendment to our Memorandum and Articles of Association

Our Promoters will also be able to cause us to take actions that are not in, or may conflict with, our
interests and/or the interests of our minority shareholders, and there can be no assurance that such
actions will not have an adverse effect on our business operations, financial performance and the price
of our Equity Shares. For further details, see “Capital Structure” on page 25 of this Red Herring
Prospectus.

40. Our decision to enter into the businesses of portfolio management service, institutional broking and
financial planning advisory exposes us to additional risks. Further, our growth will depend on our
ability to develop our brand and failure to do so will have a negative impact on our ability to compete
in this industry.

We, through MCap, are expanding our business offerings to include portfolio management service,
institutional broking and financial planning advisory and these additional product offerings may expose
us to new business risks. We have little or no operating experience with these businesses, and you
should consider the risks and difficulties we may encounter by entering into new lines of business,
including the following:

x New businesses will require significant capital investments and commitments of time from our
senior management, and there often is little or no prospect of earnings in a new business for
several years. Moreover, there is no assurance any new business we develop or enter will
commence in accordance with our timelines, if at all, which could result in additional costs and
time commitments from our senior management. There also can be no assurance that our
management will be able to develop the skills necessary to successfully manage these new
business areas.

x We may not be able to leverage our current business relationships effectively to succeed in these
new businesses.

x In each of the portfolio management services, institutional broking and financial planning advisory
industries, there are extensive regulations. Any failure to comply with applicable rules and
regulations, such as minimum capital requirements, as well as any failure to obtain required
regulatory approvals could subject us to penalties, sanctions and possible suspensions of our
business activities.

x Our portfolio management service, institutional broking and financial planning advisory business
will be heavily dependent upon technology systems to perform critical information processing.
Such business also will be dependent upon technology systems to gather and process information
about prospective clients. Any interruptions or failures in our technology systems, as well as any
security breaches resulting in loss of client data, could have a material and adverse effect on the
operations of these businesses and cause significant reputational damage to us.

x Each of the portfolio management service, institutional broking and financial planning advisory
businesses in India has many established competitors who have several years of experience within

xxvi
 the given industry and greater resources than we do. Our inability to grow our new businesses in
these industries in light of these competitors could adversely affect our results of operations.

In addition, our inability to effectively manage any of the above issues could materially and adversely
affect our business and impact our future financial performance.

We believe that continuing to build our brand, particularly in our new businesses, like portfolio
management service, institutional broking and financial planning advisory will be critical to achieving
marketable recognition of our services. Promoting and positioning our brand will depend largely on the
success of our marketing efforts and our ability to provide high quality services. Brand promotion
activities may not yield increased revenues, and even if they do, any increased revenues may not offset
the expenses we incur in building our brand. If we fail to promote and maintain our brand, our
business, financial condition and results of operations could be adversely affected.

41. We are subject to risks relating to termination of contractual arrangements in relation to our
Business Associates and our dependency on third parties exposes us to losses and reputational risks
caused by defaults in obligations and or deficiency in services in respect of our distribution of third
party products.

We deliver our products and services through business locations operated by us and by our Business
Associates. We provide a strong support system in the form of marketing support, training, back office
process, as well as the ability to use the ‘Microsec’ brand name to our Business Associates. The
Company has a dedicated team that disseminates research ideas to our Business Associates. MFSL
enters into a long-term contractual arrangement with each Business Associate. In the event of
termination of the agreements with any of these Business Associates for any reasons whatsoever, we
could lose of the business handled through the Business Associates. In addition, the Company may
suffer reputational damage if a Business Associate was not to conduct its business in accordance with
good practice.

We are exposed to the risk that third parties that owe us money or have other obligations to us, or on
whose systems we rely for transaction execution, may not perform. These parties include stock and
commodity exchanges, clearing houses and other intermediaries. If any of these parties default on their
obligations to us due to bankruptcy, lack of liquidity, operational failure or for other reasons, we may
suffer a material adverse effect on our business and results of operations. Further, we distribute
financial products and services of third parties including mutual funds and insurance. Whilst we are not
contractually liable for the performance of such third parties and their products, in the event of any
deficiency in service by such third party and/or non-performance of some of their products, the persons
who avail of such products may incur losses. We may be subject to reputational risks in such instances
and management time and costs may be incurred to address the situation.

42. Our business is dependent on the relationships formed by our relationship managers with our
clients. Any events jeopardizing these relationships including the loss of our relationship managers
will lead to a decline in our sales and profits.

Our business is dependent on our team of relationship managers who directly manage client
relationships. We encourage dedicated relationship managers to service specific clients since we
believe that this leads to long-term client relationships, a trust based business environment and over
time, better cross-selling opportunities. Our business and profits would suffer materially if a substantial
number of relationship managers either became ineffective or left the organization.

43. We may require further equity issuances to satisfy our capital needs, which we may not be able to
procure. Further such issuances may lead to a dilution of investors’ shareholding and may affect the
market price of the Equity Shares.

We may need to raise additional capital from time to time, dependent on business requirements. Some
of the factors that may require us to raise additional capital include (i) business growth beyond what the
current balance sheet can sustain, (ii) additional capital requirements imposed due to changes in
regulatory regime or new guidelines, and (iii) significant depletion in our existing capital base due to
unusual operating losses. We may not be able to raise such additional capital at the time it is needed or
on terms and conditions favourable to us or to the existing shareholders. Further, any future issuances

xxvii
 of Equity Shares by the Company may dilute shareholding of investors in the Company; adversely
affect the trading price of the Company’s Equity Shares and its ability to raise capital through an issue
of its securities. In addition, any perception by investors that such issuances or sales might occur could
also affect the trading price of the Company’s Equity Shares. Additionally the disposal, pledge or
encumbrance of Equity Shares by any of the Company’s major shareholders, or the perception that
such transactions may occur may affect the trading price of the Equity Shares. No assurances may be
given that the Company will not issue Equity Shares or that such shareholders will not dispose of,
pledge or encumber their Equity Shares in the future.

44. NSE has imposed certain restrictive conditions on the Company and the Subsidiary, MCap.

The NSE and the BSE have granted approval to MCap for change in shareholding pattern of the
Company pursuant to the Issue. In terms of the approval dated June 22, 2010 granted by NSE:

x shareholding of Banwari Lal Mittal, our Promoter, in the Company is not allowed to go below
26% of the share capital pursuant to listing of the Company on the Stock Exchanges;
x changes in the shareholding pattern of the Company and MCap shall be subject to prior
approval of NSE; and
x shareholding of the Company, in MCap is not allowed to go below 51% of the total paid up
share capital of MCap

For further details, see section “Government Approvals” on page 244 of this Red Herring Prospectus.

45. A significant percentage of our client base is comprised of individual borrowers who generally are
more likely to be affected by declining economic conditions than larger corporate borrowers.

Individual borrowers generally are less financially resilient than larger corporate borrowers, and, as a
result, they can be more adversely affected by declining economic conditions. Moreover, unlike several
developed economies, a nationwide credit bureau has only recently become operational in India, so
there is less financial information available about individuals, and, in turn, it is difficult to carry out
precise credit risk analyses on them. Although we believe that our risk management controls are
sufficient, we cannot be certain that they will continue to be sufficient or that additional risk
management policies for individual borrowers will not be required. Failure to maintain sufficient credit
assessment policies, particularly for individual borrowers, could adversely affect our credit portfolio
which could have a material and adverse effect on our results of operations and financial condition.

46. We will be required to prepare our financial statements in accordance with IFRS effective from
April 1, 2014 or April 1, 2013, as the case may be. There can be no assurance that our adoption of
IFRS will not adversely affect our reported results of operations or financial condition and any
failure to successfully adopt IFRS by April 1, 2014, or April 1, 2013, as the case may be, could have
an adverse effect on the price of the Equity Shares.

Based on current timeline announced for IFRS convergence for Indian companies, the Company
estimates that the earliest that it would need to prepare annual and interim financial statements under
IFRS by financial period commencing from April 1, 2014. The Company is currently not a
systematically important NBFC. After the Issue but before the balance sheet for the year ended March
31, 2011 is audited, our asset base may exceed Rs. 1,000 million. Upon becoming a systematically
important NBFC, the Company would need to prepare annual and interim financial statements under
IFRS by financial period commencing from April 1, 2013.

There is currently a significant lack of clarity on the adoption of and convergence with IFRS and we
currently do not have a set of established practices on which to draw on in forming judgments
regarding its implementation and application, we have not determined with any degree of certainty the
impact that such adoption will have on our financial reporting. There can be no assurance that our
financial condition, results of operations, cash flows or changes in shareholders’ equity will not appear
materially worse under IFRS than under Indian GAAP. As we transition to IFRS reporting, we may
encounter difficulties in the ongoing process of implementing and enhancing our management
information systems. Moreover, there is increasing competition for the small number of IFRS-
experienced accounting personnel as more Indian companies begin to prepare IFRS financial
statements. There can be no assurance that our adoption of IFRS will not adversely affect our reported

xxviii
 results of operations or financial condition and any failure to successfully adopt IFRS by April 2013 or
April 2014, as the case may be could have an adverse effect on the price of the Equity Shares.

47. The Equity Shares issued pursuant to the Issue may not be listed on the NSE and the BSE in a
timely manner, or at all.

In accordance with the Indian law and practice, permission for listing and trading of Equity Shares
issued pursuant to the Issue will not be granted until after the Equity Shares have been issued and
allotted. Approval for listing and trading will require all relevant documents authorising the issuing of
Equity Shares to be submitted and there could therefore be a failure or delay in listing the Equity
Shares on the NSE and the BSE. Any failure or delay in obtaining such approval would restrict your
ability to dispose of your Equity Shares.

48. There are restrictions on daily movements in the price of the Equity Shares, which may adversely
affect a shareholder’s ability to sell, or the price at which it can sell, the Equity Shares at a
particular point in time.

The price of our Equity Shares will be subject to a daily circuit breaker imposed by all stock exchanges
in India which does not allow transactions beyond a certain level of volatility in the price of the Equity
Shares. This circuit breaker operates independently of the index-based market-wide circuit breakers
generally imposed by the SEBI on Indian stock exchanges. The percentage limit on our circuit breaker
is set by the stock exchanges based on the historical volatility in the price and trading volume of the
Equity Shares. The stock exchanges do not inform us of the percentage limit of the circuit breaker from
time to time, and may change it without our knowledge. This circuit breaker effectively limits upward
and downward movements in the price of the Equity Shares. As a result, shareholders’ ability to sell the
Equity Shares, or the price at which they can sell the Equity Shares, may be adversely affected at a
particular point in time.

49. You will not be able to sell immediately on any Stock Exchange any of the Equity Shares you
purchase in the Issue.

The Equity Shares will be listed on the BSE and the NSE. Pursuant to Indian regulations, certain
requirements must be fulfilled before the Equity Shares can be listed and trading may commence.
Investors’ book entry, or “demat”, accounts with depository participants in India are expected to be
credited within two working days of the date on which the basis of allotment is approved by the BSE
and NSE. Thereafter, upon receipt of final approval from the BSE and the NSE, trading in the Equity
Shares is expected to commence within four working days of the date on which the basis of allotment
is approved by the Designated Stock Exchange. We cannot assure you that the Equity Shares will be
credited to investors’ demat accounts, or that trading in the Equity Shares will commence, within the
time periods specified above.

50. There has been no public market for the Equity Shares prior to this Issue so the Issue Price may not
be indicative of the value of the Equity Shares.

Prior to this Issue, there has been no public market for the Equity Shares of the Company in India or
elsewhere. After this Issue, there will be no public market for the Equity Shares in any country other
than India. The Issue Price will be determined by the Company in consultation with the BRLM and
could differ significantly from the price at which the Equity Shares will trade subsequent to completion
of this Issue. We cannot assure you that even after the Equity Shares have been approved for listing on
the Stock Exchanges, any active trading market for the Equity Shares will develop or be sustained after
this Issue, or that the offering price will correspond to the price at which the Equity Shares will trade in
the Indian public market subsequent to this Issue. Although we currently intend that the Equity Shares
will remain listed on the NSE and the BSE, there is no guarantee of the continued listing of the Equity
Shares. Failure to maintain our listing on the NSE and the BSE or other securities markets could
adversely affect the market value of the Equity Shares.

EXTERNAL RISK FACTORS

xxix
51. We require certain regulatory approvals and periodical renewals for conducting our business and
failure to obtain or retain them in a timely manner, or at all, may adversely affect our operations.

We require certain approvals, licenses, registrations and permissions under various regulations,
guidelines, circulars and statutes regulated by authorities such as the SEBI, the RBI, the Stock
Exchanges, the FMC and certain other regulatory and government authorities, for operating our
business. In particular, we are required to obtain a certificate of registration for carrying on each of our
business activities from SEBI and other regulatory authorities that are subject to various conditions. If
we fail to maintain such registrations and licenses or to comply with applicable conditions of such
licenses, or a regulator claims we have not complied with such conditions, our certificate of registration
for carrying on a particular activity may be suspended and/or cancelled and we will not then be able to
carry on such activity. This will materially and adversely affect our business, financial condition and
results of operations.

For example, registration of business organisation under Bombay Shops and Organisation Act, 1948
issued to a branch of MCap by Government of Maharashtra have expired and as at the date of this Red
Herring Prospectus no application for renewal of the same has been made.

We cannot assure you that we will be able to obtain approvals or renewals in respect of any application
made by us, in a timely manner or at all. For further details, see “Regulations and Policies” and
“Government Approvals” on pages 73 and 244 of this Red Herring Prospectus, respectively.

52. Commodity futures trading may be illiquid. In addition, reduction in commodities volumes or
suspensions/disruptions of market trading in the commodities markets and related futures markets
may adversely affect our commodities brokerage business.

The commodity futures markets are subject to temporary distortions or other disruptions due to various
factors, including the lack of liquidity, congestion, disorderly markets, limitations on deliverable
supplies, strikes by transporters, the participation of speculators, government regulation and
intervention, technical and operational or system failures, nuclear accident, terrorism, riots and natural
catastrophes. In addition, commodity exchanges, including the MCX, NCDEX and NMCE are
relatively new and have regulations that limit the amount of fluctuation in futures contract prices that
may occur during a single business day. Limit prices may have the effect of precluding trading in a
particular contract or forcing the liquidation of contracts at disadvantageous times or prices,
consequently affecting the value of the commodities traded and the results and operations of the
Company. Further, changes in the public policy due to change in the government or a major fluctuation
in the commodity supply and demand may lead to a adverse changes in the guidelines and / or contract
governing the commodity futures market. Also, a decline in overall volumes in commodities would
affect the future growth of revenues from our commodities business.

53. We are subject to uncertainties associated with the securities market and to fluctuating revenues.

As a financial services company, we are subject to uncertainties that are common in the securities
market. These include the volatility of domestic and international financial, bond and stock markets;
extensive governmental regulation; litigation; intense competition; substantial fluctuations in the
volume and price level of securities; and dependence on the solvency of various third parties. As a
result, our revenues and earnings may vary significantly from quarter to quarter and from year to year.
In periods of low trading volume, profitability is impaired because certain expenses remain relatively
fixed. We are much smaller and have much less capital than many competitors in the securities industry
and our revenues are likely to decline in such circumstances. If we are unable to correspondingly
reduce expenses, our profit margins would erode. In addition, we have investments in mutual funds and
other investments, which may be subject to erosion in value due to adverse market movements.

54. Our results of operations have been, and may continue to be, adversely affected by Indian and
international financial market and economic conditions.

Our business has been, and in the future could continue to be, materially and adversely affected by
Indian and international market and economic conditions. Such conditions in India include war; acts of
terrorism; natural catastrophes; sudden changes in economic and financial policies; fluctuations in
interest rates; and corporate or other scandals. International markets and economic conditions include

xxx
 the liquidity of global financial markets, the level and volatility of debt and equity prices and interest
rates; investor sentiment; inflation; the availability and cost of capital and credit; and the degree to
which the international economies are expanding or experiencing recessionary pressures. The
independent and/or collective fluctuation of these conditions could affect confidence in the financial
markets leading to decline in investor interest and can directly and indirectly affect demand for our
lending finance and financial products.

During 2008 and 2009, global financial markets were extremely volatile and were materially and
adversely affected by a significant lack of liquidity, decreased confidence in the financial sector,
disruptions in the credit markets and reduced business activity. These factors contributed to adversely
affecting our business, financial condition and results of operations for the fiscal year ended March 31,
2009. The securities markets are the primary source of our revenue, particularly through our investment
banking activities. We earn fees in our investment banking business as a percentage of the amount
raised in the offerings. Any downturn or disruption in the securities markets \including a decline in the
numbers and size of transactions may adversely affect our results of operations.

55. Security breaches could adversely impact our business.

Our computer systems and network infrastructure may be exposed to physical break-ins as well as
security breaches and other disruptive problems caused by our increased internet connectivity. There is
no assurance that the security systems and security measures employed by us, including firewalls
designed to minimize the risk of security breaches are adequate. Breaches of our security measures
could affect the security of information stored in and transmitted through these computer systems and
network infrastructure. A failure in security measures could have a material adverse effect on our
business and our future financial performance.

56. Any trading closure at the NSE and the BSE may adversely affect the trading price of our Equity
Shares.

The regulation and monitoring of Indian securities markets and the activities of investors, brokers and
other participants differ, in some cases significantly, from those in Europe and the U.S. The NSE and
the BSE have in the past experienced problems, including temporary exchange closures, broker
defaults, settlements delays and strikes by brokerage firm employees, which, if continuing or recurring,
could affect the market price and liquidity of the securities of Indian companies, including the Equity
Shares, in both domestic and international markets. A closure of, or trading stoppage on, either of the
NSE and the BSE could adversely affect the trading price of the Equity Shares.

57. Intense competition from existing and new entities may adversely affect our revenues and
profitability.

The financial services industry is rapidly evolving, intensely competitive and has few barriers to entry.
We expect competition to continue and intensify in the future. We face significant competition from
companies seeking to attract clients’ financial assets, including traditional and online brokerage firms,
mutual fund companies and institutional players, having wide presence and a strong brand name. Many
of our competitors are larger institutions, which may have much larger customer bases and, in turn,
lower costs of funds, larger branch networks and more capital than we do. In addition, some of our
competitors also offer a wider range of services and financial products than we do. Some of the banks
with which we compete may be more flexible and better-positioned to take advantage of market
opportunities. In particular, private banks in India and many of our competitors outside of India may
have operational advantages in implementing new technologies and rationalising branches. These
competitors may be able to respond more quickly to new or changing opportunities, technologies and
client requirements. They may also be able to undertake more extensive promotional activities, offer
more attractive terms to clients, and adopt more aggressive pricing policies. These competitive
pressures affect the industry in which we operate as a whole, and our future success will depend in
large part on our ability to respond in an effective and timely manner to these competitive pressures.

As we enter newer markets and launch new products and services, we are likely to face additional
competition from those who may be better capitalized, have longer operating history, have greater retail
and brand presence, and better management than us. If we are unable to manage our business it might
impede our competitive position and profitability.

xxxi
 We may not be able to compete effectively with current or future competitors and competitive
pressures faced by us may harm our business.

58. Our industry is experiencing consolidation that may intensify competition.

The financial services industry, both domestically and internationally, is undergoing change that has
resulted in increasing consolidation and a proliferation of strategic transactions. This consolidation
among our competitors could put us at a competitive disadvantage, which could cause us to lose
customers, revenue and market share. They could force us to expend greater resources to meet new or
additional competitive threats, which could harm our financial condition and operating results.

59. Financial services firms are subject to increased scrutiny concerning perceived conflicts of interest
that increase the risk of financial liability and reputational harm resulting from adverse regulatory
actions.

Financial services firms are subject to numerous actual or perceived conflicts of interest and regulators
may impose increased regulatory requirements for such firms to deal with potential conflicts of interest.
Dealing appropriately with conflicts of interest is complex and difficult and our reputation could be
damaged if we fail, or appear to fail, to deal appropriately with such conflicts. Our policies and
procedures to address conflicts may also result in increased costs and the need for additional
operational personnel. Failure to adhere to these policies and procedures may result in regulatory
sanctions or client litigation. The research areas of investment banks are subject to heightened
regulatory scrutiny that has led to increased restrictions on the interaction between equity research
analysts and investment banking personnel.

60. Political instability or changes in the Government could adversely affect economic conditions in
India and consequently our business.

The Government has traditionally exercised and continues to exercise a significant influence over many
aspects of the economy. Our business and the business of certain of our subsidiaries, and the market
price and liquidity of the Equity Shares may be affected by change in interest rates, changes in
government policy, taxation, social and civil unrest and political, economic or other developments in or
affecting India.

Since 1991, the Government has pursued policies of economic and financial sector liberalization and
deregulation. The previous coalition-led Government implemented policies and took initiatives that
supported the economic liberalisation policies that had been pursued by prior government. The new
Government, which has came to power in May 2009 has announced policies and taken initiatives that
support the economic liberalisation program pursued by previous governments. The policy of the new
Government may change the rate of economic liberations, the specific laws and policies affecting
financial services companies, foreign investment and other matters affecting investment in Equity
Shares. While the new Government is expected to continue the liberalisation of India’s economic and
financial sectors and deregulation policies, there can be no assurance that such policies will be
continued.

A significant change in the Government’s policies could affect business and economic conditions in
India and could also adversely affect our business.

61. Our ability to raise foreign capital may be constrained by Indian law.

As an Indian company, we are subject to exchange controls that regulate borrowing in foreign
currencies. Such regulatory restrictions limit our financing sources and hence could constrain our
ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, we
cannot assure you that the required approvals will be granted to us without onerous conditions, if at all.
Limitations on raising foreign debt may have an adverse effect on our business.

62. Foreign investors are subject to foreign investment restrictions under Indian law.

xxxii
 Under foreign exchange regulations currently in force in India, transfer of shares between non-residents
and residents are freely permitted (subject to certain exceptions) if they comply with the pricing
guidelines and reporting requirements specified by the RBI. If the transfer of shares is not in
compliance with such pricing guidelines or reporting requirements or fall under any of the exceptions,
then the prior approval of the RBI will be required. Additionally, shareholders who seek to convert the
Rupee proceeds from a sale of shares in India into foreign currency and repatriate that foreign currency
from India will require a no objection or a tax clearance certificate from the income tax authority. We
cannot assure you that any required approval from RBI or any other Government agency can be
obtained on any particular terms or at all.

63. Our business and financial performance is particularly vulnerable to interest rate risk.

Our business is vulnerable to interest rate risk as it affects our net interest income in our financing
business, as well as the willingness of our customers to borrow and invest their funds with us generally.
Any adverse movement in interest rates could materially and adversely affect our business and
financial condition. Any increase in the interest rates applicable to our liabilities, without a
corresponding increase in the interest rates applicable to our assets, will result in a decline in net
interest income. Further, in the event of rising interest rates, borrowers may not be willing to pay us
correspondingly higher interest rates on their borrowings and may choose to repay their loans if they
are able to switch to more competitively priced loans offered by other players. Any inability on our part
to retain customers as a result of rising interest rates may adversely impact our earnings in future
periods, which could have an adverse effect our business, prospects, financial condition and results of
operations.

64. Difficulties faced by other financial institutions or the Indian financial sector generally could cause
our business to suffer and the price of the Equity Shares to decline.

We are exposed to the risks consequent to being part of the Indian financial sector. This sector in turn
may be affected by financial difficulties and other problems faced by Indian financial institutions.
Certain Indian financial institutions have experienced difficulties during recent years, and some co-
operative banks have also faced serious financial and liquidity difficulties. Any major difficulty or
instability experienced by the Indian financial sector could create adverse market perception, which in
turn could adversely affect our business and financial performance and the price of the Equity Shares.

65. A slowdown in economic growth in India could adversely impact our business.

We derive all of our revenues from operations in India and consequently, our performance and growth
is dependent on the state of the Indian economy. The Annual Policy Statement of the Reserve Bank of
India released in April 2009 placed real GDP growth for the fiscal 2009 at approximately 7.1% as
compared to 9.0% in fiscal year 2008 following the downturn precipitated by the global financial crisis.
Any slowdown in the Indian economy or in the growth of industries to which we provide financing to
or future volatility in global commodity prices could adversely affect our borrowers and contractual
counter parties. This in turn could adversely affect our business and financial performance and the price
of the Equity Shares.

66. Terrorist attacks or war or conflicts involving countries in which we operate or where our customers
are located could adversely affect the financial markets and adversely affect our business.

Terrorist attacks and other acts of violence, war or conflicts, particularly those involving India, as well
as the U.S. and the European Union, may adversely affect Indian and worldwide financial markets.
India recently witnessed a major terrorist attack in Mumbai on November 26, 2008, which led to an
escalation of political tensions between India and Pakistan. Such acts may negatively impact business
sentiment, which could adversely affect our business and profitability. India has from time to time
experienced, and continues to experience, social and civil unrest, terrorist attacks and hostilities with
neighbouring countries. Also, some of India’s neighbouring countries have experienced, or are
currently experiencing internal unrest. Such social or civil unrest or hostilities could disrupt
communications and adversely affect the economy of such countries. Such events could also create a
perception that investments in companies such as ours involve a higher degree of risk than investments
in companies in other countries. This, in turn, could have a material adverse effect on the market for
securities of such companies, including our Equity Shares. The consequences of any armed conflicts

xxxiii
 are unpredictable, and we may not be able to foresee events that could have an adverse effect on our
business.

67. Natural calamities could have a negative impact on the Indian and other economies and harm our
business.

India, Bangladesh, Indonesia and other Asian countries have experienced natural calamities such as
earthquakes, floods, droughts and a tsunami in recent years. Some of these countries have also
experienced pandemics, including the outbreak of avian flu. The extent and severity of these natural
disasters and pandemics determines their impact on these economies. Prolonged spells of abnormal
weather and other natural calamities could have an adverse impact on the economies in which we have
operations, which could adversely affect our business and the price of our Equity Shares.

68. An outbreak of an infectious disease or any other serious public health concerns in Asia or
elsewhere could adversely affect our business.

The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concern,
such as swine influenza, could have a negative impact on the global economy, financial markets and
business activities worldwide, which could adversely affect our business. Although, we have not been
adversely affected by such outbreaks in the past, we can give you no assurance that a future outbreak of
an infectious disease among humans or animals or any other serious public health concern will not have
a material adverse effect on our business.

69. Fluctuations in operating results and other factors may result in decreases in our Equity Share
price.

Stock markets have experienced extreme volatility that has often been unrelated to the operating
performance of particular companies. These broad market fluctuations may adversely affect the trading
price of our Equity Shares. There may be significant volatility in the market price of our Equity Shares.
If we are unable to operate profitably or as profitably as we have in the past, investors could sell our
Equity Shares when it becomes apparent that the expectations of the market may not be realized,
resulting in a decrease in the market price of our Equity Shares.

In addition to our operating results, the operating results of other financial services companies, changes
in financial estimates or recommendations by analysts, governmental investigations and litigation,
speculation in the press or investment community, the possible effects of a war, terrorist and other
hostilities, adverse weather conditions, changes in general conditions in the economy or the financial
markets, or other developments affecting the financial services industry, could cause the market price
of our Equity Shares to fluctuate substantially.

70. Currency exchange rate fluctuations may affect the value of the Equity Shares.

The exchange rate between the Indian Rupee and the U.S. Dollar has changed substantially in recent
years and may fluctuate substantially in the future. Fluctuations in the exchange rate between the U.S.
Dollar and the Rupee may affect the value of your investment in our Equity Shares. Specifically, if
there is a change in relative value of the Rupee to the U.S. Dollar, each of the following values will
also be affected:

x The U.S. Dollar equivalent of the Indian Rupee trading price of our Equity Shares in India;

x The U.S. Dollar equivalent of the proceeds that you would receive upon the sale in India of
any of our Equity Shares; and

x The U.S. Dollar equivalent of cash dividends, if any, on our Equity Shares, which will be paid
only in Indian Rupees.

You may be unable to convert Rupee proceeds into U.S. Dollars or any other currency or the rate at
which any such conversion could occur could fluctuate. In addition, our market valuation could be
seriously harmed by the devaluation of the Rupee if U.S. investors analyze our value based on the U.S.
Dollar equivalent of our financial condition and results of operations.

xxxiv
Prominent Notes

x This is a public issue of 12,500,000 Equity Shares for cash at a price of Rs. 10 each including a share
premium of Rs. [●] per Equity Share aggregating to Rs. [●]. The Issue would constitute 39.30% of the
post Issue paid-up capital of the Company.

x Under subscription, if any, in any of these categories, the unsubscribed portion may be added to one of
the other categories at the discretion of the Company, in consultation with the BRLM and the
Designated Stock Exchange.

x Our net worth as of March 31, 2010, was Rs. 915.67 million on a consolidated basis, as per our
Restated Consolidated Financial Statements.

x The average cost of acquisition of equity shares (on ‘first in first out’ basis) by each of our Promoters,
is as set out below:

Name of the Promoter No. of Equity Shares held Average Price per share (In
Rs.)
Banwari Lal Mittal 10,814,400 0.64
Ravi Kant Sharma 876,800 29.48

For further details, see “Capital Structure - History of Equity Share Capital held by Promoter” on page
25 of this Red Herring Prospectus.

x The net asset value/book value per Equity Share of Rs. 10 each, on a consolidated basis, was Rs. 47.42
and on a standalone basis was Rs. 29.00, as on March 31, 2010, as per our restated consolidated
financial statements and restated stand alone financial statements, respectively.

x The Promoters, Directors and key managerial personnel are interested in the Company to the extent of
remuneration and the Equity Shares held by them or their relatives and associates or held by the
companies, firms and trusts in which they are interested as directors, member, partner and/or trustee
and to the extent of the benefits arising out of such shareholding, if any, in the Company. For further
details, see “Capital Structure”, “Our Promoters and Group Companies” and “Management” on pages
25, 109 and 91, respectively.

x There are no financing arrangements whereby the Promoter Group, the Directors or their relatives have
financed the purchase by any other person of securities of the Company other than in the normal course
of the business of the financing entity during the period of six months immediately preceding the date
of filing draft offer document with SEBI.

x The Company was incorporated as ‘Satyam Fiscal Services Private Limited’ on June 6, 1989 as a
private limited company under the Companies Act, 1956. The name of the Company was changed to
‘Microsec Financial Services Private Limited’ and a fresh certificate of incorporation dated October 17,
2005 was issued by the Registrar of Companies, West Bengal at Kolkata. The name of the Company
was further changed to Microsec Financial Services Limited consequent upon the conversion of the
Company to a public limited company and a fresh certificate of incorporation dated October 21, 2005
was issued by the Registrar of Companies, West Bengal at Kolkata. For further details, see “History
and Certain Corporate Matters” on page 82 of this Red Herring Prospectus.

x For details of all the loans and advances made to any persons or companies in whom Directors are
interested, refer to “Financial Statements” on page 116 of this Red Herring Prospectus.

x Trading in Equity Shares of the Company for all investors shall be in dematerialized form only. For
further details, see “Issue Procedure” on page 272 of this Red Herring Prospectus.

x Investors may note that in case of over-subscription in the Issue, Allotment to QIBs, Non-Institutional
Bidders and Retail Individual Bidders shall be on a proportionate basis. For further details, see “Issue
Procedure – Basis of Allotment” on page 294 of this Red Herring Prospectus.

xxxv
x Any clarification or information relating to the Issue shall be made available by the BRLM or the
Company to the investors at large and no selective or additional information would be available for
investors in any manner whatsoever. Investors may contact the BRLM and the Syndicate Members for
any complaints pertaining to the Issue.

x For further details pertaining to our related party transactions, refer to the schedule of related party
transactions in restated consolidated financial statements of the Company on pages 182 to 187 of this
Red Herring Prospectus.

x For the interests of our Group Companies in the Company, see “Related Party Transactions” on page
114 of this Red Herring Prospectus.

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 SECTION III: INTRODUCTION

SUMMARY OF INDUSTRY

Overview of Global and Indian Economy

The fiscal 2008-09 has been a difficult year for the global economy and for India in its efforts to sustain the new
found growth momentum of its economy. (Source: Annual Report 2008-09, Ministry of Finance, Government of
India). The economy is on the path of recovery in 2009-10. As per the latest information (Advance Estimates) of
National Income for 2009-10 (at constant 2004-2005 prices), released by the Central Statistical Organization the
growth of Gross Domestic Product (“GDP”) at factor cost is estimated at 7.2 percent in 2009-10. (Source:
Annual Report 2009-10, Ministry of Finance, Government of India). The pace and shape of recovery, however,
remain uncertain. The IMF forecasts published earlier this month, suggested that global growth would be
marginally higher than their April 2010 projection. While most of that would come from emerging market
economies (EMEs), the advanced economies would hold steady. However, in the aftermath of the Greek
sovereign debt crisis and other visible soft spots in Europe and the US, there is renewed uncertainty about the
sustainability of the recovery. (Source: First Quarter Review of Monetary Policy 2010 -11, RBI)

The Indian economy posted a growth of 6.1% for the first quarter of 2009-10 (see table below). This is higher
than the expansion of 5.8% in last quarter of 2008-2009, but lower than the expansion of 7.8% in the
corresponding first quarter of 2008-09. (Source: Second Quarter Review of Monetary Policy 2009 -10, RBI).
The momentum was particularly pronounced in Q4 of 2009-10 with growth at 8.6 per cent as compared with 6.5
per cent in the previous quarter. (Source: First Quarter Review of Monetary Policy 2010 -11, RBI)

Indian Financial Services Sector

Domestic drivers of growth are robust. However, if the global recovery slows down, it will affect all EMEs,
including India, through the usual exports, financing and confidence channels. (Source: First Quarter Review of
Monetary Policy 2010 -11, RBI). To mitigate the impact of global financial crisis on India several steps have
been taken by RBI and Government in the last few months to improve the liquidity and credit delivery.

Although banks dominate the Indian financial spectrum, NBFCs play an important role in financial markets.
With their unique strengths, the stronger NBFCs could complement banks as innovators and partners. The core
strength of NBFCs lies in their strong customer relationships, good understanding of regional dynamics, service
orientation and ability to reach out to customers who would otherwise be ignored by banks, which makes such
entities effective conduits of financial inclusion. The recent global financial turmoil has highlighted the impact
on systemic stability through OFIs which, in India, operate as NBFCs. In India, there are two broad categories
of NBFCs, viz., NBFCs-D and NBFCs-ND. The recent growth in the NBFC sector is due primarily to NBFCs-
ND. Systemically important NBFCs – ND are growing at a rapid pace. The sector has been witnessing a
significant improvement in financial health and is characterised by low and reducing NPAs and high RoA.
(Source: Report on Trend and Progress of Banking in India 2008-09, RBI)

In Fiscal 2009, financial services recorded steep decline mainly due to significant correction in the capital
market, following the international trends, heightened economic uncertainties and market expectations of a
sluggish performance by corporates.(Source: Economic Review; RBI Annual Report 2008-09)

Indian Capital Markets

In India, capital inflows have revived. Activity in the primary capital market has picked up and funding from
non-bank domestic sources has eased. The wide array of supportive central bank actions and pronouncements
have aided in the easing of money markets. BSE Sensex closed at 17,700.90 on June 30, 2010, as against
16,944.60 on May 31, 2010, registering an increase of 756.30 points (4.50%). During June 2010, Sensex
recorded a high of 17,919.60 on June 21, 2010 and a low of 16, 318.40 on June 1, 2010. S&P CNX Nifty closed
at 5,312.50 on May 31, 2010, comparing with 5,086.30 on May 31, 2010, indicating a increase of 226.20 points
(4.4%). During June 2010, Nifty recorded a high of 5,366.8 on June 21, 2010 and a low of 4961.10 on June 1,
2010 (see table below). (Source: Number 7, Volume 8, July 2010, SEBI Bulletin)

The market capitalization ratio is defined as market capitalisation of stocks divided by GDP. It is used as a
measure to denote the importance of equity markets relative to the GDP. It is of economic significance since
market is positively correlated with the ability to mobilize capital and diversify risk. The All- India market

1
capitalization ratio increased to 109.26 % in 2007-08 from 86.02 % in 2006-07. Currently the market
capitatlisation is 9.16 times the GDP at current prices. (Source: Annual Report 2009-10, Ministry of Finance,
Government of India)

Equity Markets: Equity markets exhibited volatile conditions during the current financial year, although they
have firmed up in recent weeks. Resource mobilisation by the corporates through public issues in the primary
segment of the capital market continued its uptrend. (First Quarter Review of Monetary Policy 2010-11, RBI)
During June 2010, there were 3 public issues which mobilized Rs. 3248.00 million and 4 rights issues which
mobilized Rs. 26,370.00 million in the primary market.

Investment Banking: With the Indian economy maturing, Indian companies are also evaluating different means
to raise capital in the equity and debt capital markets. With increase in the activity and entry of foreign
investment banks in India, the competition has intensified.

Equity Brokerage: The market share of the top five brokers on NSE has decreased from 14.57% in fiscal 2008
to approximately 13.56% in fiscal 2009. The market share of the top ten brokers on the NSE has reduced from
approximately 25.71% in fiscal 2008 to 23.62% in fiscal 2009. (Source: Fact book 2009, NSE)

Internet Trading: During the year 2008-09 10.58% of the trading value in the capital market segment of NSE
(Rs. 5,820,700 million) was routed and executed through internet. (Source: Fact Book 2009, NSE)

Mutual Funds: The resource mobilisation by mutual funds was, however, lower due to tight liquidity
conditions and subdued stock markets. During 2009-10, mobilisation of resources by corporates through private
placement (Rs. 3,424,450 million) was higher by 67.8 per cent. (Source: Macroeconomic and Monetary
Developments, First Quarter Review, 2010-11, RBI)

Insurance Sector: During the current year, the life insurance industry has reported growth of 22.10% in new
business premium underwritten during April – November 2009 as against growth of 1.44% in April-November,
2008. During the year, the non-life industry reported growth of 9.40% in Gross Direct Premium as against
12.63% in 2007-08. (Source: Annual Report 2009-10, Ministry of Finance, Government of India)

Commodity Broking: The volume of trading at commodity exchanges has increased rapidly since their
inception. Some of the commodities where trading takes place are inter alia gold, silver, copper, caster seed,
gram, soya oil, sugar and rubber.

2
 SUMMARY OF OUR BUSINESS

Unless otherwise indicated, the financial information of the Group used in this section is derived from the
Group’s audited unconsolidated and consolidated financial statements under Indian GAAP and restated in
accordance with the SEBI Regulations.

Business Overview of the Issuer

The Issuer, MFSL, is a non-banking financial company registered with the RBI and it is engaged in the business
of financing, which primarily comprises giving loans against shares, and making investments.

The Company was originally incorporated as ‘Satyam Fiscal Services Private Limited’ and the name was
changed to ‘Microsec Financial Services Limited’ on October 21, 2005. It is also the ultimate holding company
of the Microsec Group. The Promoters acquired the entire shareholding of the Company from the previous
shareholders. Prior to its acquisition by the current Promoters on August 1, 2005, the Company was a financial
services company and was engaged in the business of financing and investment management. The Registered
Office of the Company is situated in Kolkata and the Company operates its LAS business from its Registered
Office. As at June 30, 2010, the Company had 15 employees. As of the date of this Red Herring Prospectus, six
employees of the Company are employed towards LAS activity. The Company’s total income, on an
unconsolidated basis, was Rs. 142.40 million and Rs. 180.98 million, for fiscal 2009 and fiscal 2010,
respectively. Our profit after taxation, on an unconsolidated basis, was Rs. 56.96 million and Rs. 110.20 million
for fiscal 2009 and fiscal 2010, respectively.

In its financing and investment business, MFSL offers loans against shares to its clients, secured by liquid and
marketable securities at appropriate margin levels. Its LAS business helps our clients leverage their equity
market positions to take increased exposure. MFSL uses the trade name/ logo ‘Microsec’ and its associated
logos in the course of its business. The trade name/ logo ‘Microsec’ is registered in the name of its Subsidiary,
MCap.

MFSL is engaged in the financing and investment business of the Microsec Group, which primarily comprises
giving loans against shares, and making investments. In its financing and investment business, MFSL offers
loans against shares to its clients, secured by liquid and marketable securities at appropriate margin levels. Its
LAS business helps our clients leverage their equity market positions to take increased exposure.

MFSL offers loans to clients, including brokerage clients of MCap and MCL, against specified securities which
fall within the ‘approved list’ of the Microsec Group. Only a certain percentage of the market value of the
securities is advanced as loan, and this helps to provide for market fluctuations in the value of the security. The
client is required to deposit and maintain a appropriate margin and is responsible for infusing additional funds in
case the margin falls below the prescribed limit, failing which MFSL has the power to sell the securities to the
extent that would be required in order to maintain the required margin. Margin levels of exposure can be
monitored on a real-time basis as the selling price of the securities securing the loan are usually transparent and
easily accessible on a stock exchange.

As at March 31, 2010, 27 clients of MFSL maintained a margin of 50% or more and the loan amounts
outstanding in respect of such clients aggregated to approximately Rs. 140.94 million; 44 clients maintained a
margin between 25% to 50% and the loan amounts outstanding in respect of such clients aggregated to
approximately Rs. 155.83 million; one client maintained a margin below 25% and the loan amounts outstanding
in respect of such client aggregated to approximately Rs. 8.35 million. In the event the margin placed by a client
falls below 25%, steps are initiated for the purposes of replenishment of margin by way of additional securities,
liquidation of loan partially or sale of securities, with due notice to the clients.

MFSL had no non-performing assets as on March 31, 2010. Until Fiscal 2009, no material amount was written
off on account of bad debts. However, MFSL paid Rs. 39.50 million as liability for early recall of loans during
the Fiscal 2009. MFSL assigned receivables of certain loan accounts and incurred a loss of Rs. 11.27 million in
such assignment during fiscal, 2010.

As of the date of this Red Herring Prospectus, six employees of the Company are employed towards LAS
activity. The Company operates its LAS business from its Registered Office. As on March 31, 2006, MFSL had
15 clients and nil outstanding loan in our LAS business. As on March 31, 2010, MFSL had 72 clients in the
LAS business and an outstanding loan amount of Rs. 305.12 million.

3
Business Overview of the Microsec Group

The Microsec Group operates as an integrated group in providing its various financial products and services to
its target client base of retail investors, high net worth individuals, companies and institutions. We are a
financial services company engaged in businesses of (a) financing and investment; (b) investment banking and
related services; (c) brokerage and related services; and (d) wealth management, insurance broking, financial
planning and related services, as shown in the table below:

Company Business
MFSL x Financing and investment
x Advisory services
MCap x Investment banking and related services
x Brokerage (equity and currency) and related services
x Wealth management, financial planning and related services
MRPL x Financing
MTL x Consultancy (equity research)
x Technology support services
MIBL x Insurance broking
MCL x Broking (commodities)
PRP x Support Services to Distribution, Financial Planning and other related services

Our core values

The Microsec Group believes in four core values – knowledge, commitment, transparency and partnership. We
believe that these values are key to the growth of business operations of the Microsec Group.

Business Strengths

x Integrated business model: The Microsec Group operates as an integrated group, providing various
financial products and services to its target client base. The Group operates through the Company and
its Subsidiaries, MCap, MRPL, MTL, MIBL, MCL and PRP, as shown in the table above. In our
financing and investment business, we offer loans against shares. In our investment banking business,
we offer our clients a range of merchant banking and corporate advisory services. We execute third-
party trades for our clients in equities, derivatives, commodities and currencies on stock exchanges and
commodity exchanges as well as depository services. Our integrated service platform allows us to
leverage relationships across lines of business and our industry and product knowledge by providing
multi-channel delivery systems to our client base, thereby increasing our ability to cross-sell our
products services.

x Experienced senior management and “people partnership” model: Our senior management
comprises qualified and experienced professionals with a successful track record. Both our Promoters
are also directors of the Company and are actively involved in the day-to-day management of our
business. Our senior management is supported by a team of qualified professionals with requisite
experience in our businesses. We focus on employee welfare and a partnership culture with our
professionals. A trust settled by our Promoter Mr. B.L. Mittal for the benefit of our employees holds
approximately 9.24% of our share capital. We have introduced a revenue sharing model for a
significant number of our channel partners across our various business segments. We believe that our
revenue sharing model and this partnership culture with focus on performance enable us to recruit
talented professionals and reduce employee attrition.

x Strong regional base with emerging pan India presence: We believe that the Microsec Group enjoys a
strong presence in eastern India. As at June 30, 2010, we had a network of 239 branches, out of which
178 branches were located in West Bengal. We have 26 branches in states other than eastern states and
intend to strengthen our pan-India presence, we believe our presence in eastern India provides us with a
competitive advantage and presents us an attractive opportunity to grow our client base and revenues.

x Brand recognition and strong relationships: We believe that success in the financial services industry
is derived from brand recognition and client relationships. We believe that ‘Microsec’ (registered in the

4
 name of our Subsidiary, MCap) is a well-recognized brand, especially in eastern India. We also believe
that our clients associate the ‘Microsec’ brand with differentiated and quality services, solutions to
strategic and financial challenges and execution of our clients’ transactions. We focus on nurturing
long-term relationships with our corporate, institutional and high net-worth individual clients. We
believe that these relationships provide us with an advantage in attracting deal flow and securing
transactions and enable us to offer our clients diversified products and services and increase our
revenues per client.

x Adequate internal controls and risk management system: We believe we have adequate internal
controls and risk management systems to assess and monitor risks across our various businesses. Our
risk management system functions through our accounts and operations departments, risk control
software and a dedicated centralized risk management team.

x Research and knowledge based organisation: We have adequate base of research with delivery
capabilities. Our research reports are covered by print and electronic media at pan India level. We
benchmark our research calls against relative index which provides accountability to research. We have
started a research based retail distribution channel namely “Club Kautilya” through MCap.

Business Strategies

x Geographic expansion: As at June 30, 2010, we had a network of 239 branches (which includes 237
branches of MCap and 2 branches of MCL), out of which 99 branches were located in Kolkata. In
addition, 79 branches were located in West Bengal, excluding Kolkata. We also earn a substantial
portion of our total income from this region. We propose to expand our branch network and intend to
establish a pan-India presence. We plan to expand our operations into smaller cities and towns that we
believe are under-serviced by financial services companies or where we believe we can develop our
business. We may also consider, from time to time, growth opportunities through the inorganic route.
Whilst we propose to offer our range of products and services across our businesses through our
expanded network, we also plan to set up 200 exclusive outlets of ‘Club Kautilya’ within a period of
two years. We also plan to set up a network of ‘Microsec Enterprises’ (a network of entrepreneurs as
channel partners for distribution of financial products) and ‘Microsec Network Services’ (a network of
professionals, such as Chartered Accountants, as channel partners for distribution of multiple financial
products) through a combination of the Issuer and its Subsidiaries, throughout India.

x Strengthen research capabilities and continue to develop client relationships: We believe that we
have adequate research capabilities in MCap that complement the business if Microsec Group,
particularly our brokerage business. We intend to develop our research division as a separate profit
centre to provide research services to our clients, including our brokerage clients. We propose to
enlarge our team of research analysts and advisors and dealers to strengthen relationships with our
clients. We propose to expand our business by increasing the number of our client relationships in the
Issuer and its Subsidiaries. We believe that increased client relationships will add stability to our
business.

x Expand internet based platform for our financial services and products: We are currently in the
process of setting up an internet-based platform through MCap for providing our products and services
to our clients, particularly our brokerage clients. We believe that internet based services are cost
effective, less risky and transparent. We also propose to offer wealth management, insurance broking,
financial planning and related services through our internet-based platform. We have acquired PRP
Technologies Limited, company which launched an internet-based personal resource planning
application to provide information management services to individuals. We believe that an internet
based, easily scalable product delivery model will enable us to respond effectively to the competitive
challenges of discount equity brokerages.

x Strengthening institutional business: We have already set up desk through MCap for servicing the
institutional business. We have filed applications for empanelment to several institutions. We have
already been granted empanelment by nine institutions out of which five have started business. We plan
to establish and scale the broking business with institutions. The institutional desk will also provide
additional support to our investment banking business.

x Maintain strict risk management policies for our loan portfolios: We are focussed on building a large

5
loan portfolio under the Issuer and MRPL with minimum delinquency risk. We will continue to
maintain strict risk management standards to reduce delinquency risks and promote a robust recovery
process.

6
 SUMMARY FINANCIAL INFORMATION

The following tables set forth summary information on our restated unconsolidated assets and liabilities as of
March 31, 2010, 2009, 2008, 2007 and 2006 and our restated unconsolidated profits and losses and cash flows
for the years ended March 31, 2010 2009, 2008, 2007 and 2006 and our restated consolidated assets and
liabilities as of March 31, 2010, 2009, 2008, 2007 and 2006 and our restated consolidated profits and losses and
cash flows for the years ended March 31, 2010, 2009, 2008, 2007 and 2006. This summary information should
be read in conjunction with our Restated Financial Statements and the notes thereto and the section
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 209 of this
Red Herring Prospectus.

Unconsolidated Restated Summary Data of Assets and Liabilities

(Rs. in Million)
Particulars As at 31st March
Application of Funds 2006 2007 2008 2009 2010
A. Fixed Assets
Gross Block 30.46 61.35 73.75 124.53 125.56
Less: Accumulated Depreciation/Amortization 0.54 4.60 12.04 18.87 28.96
Net Block 29.92 56.75 61.71 105.66 96.60

B. Investments 131.05 128.16 195.32 205.46 159.51

C. Deferred Tax Asset (Net) 4.07 0.19 - - -

D. Current Assets, Loans and Advances

Sundry Debtors 5.05 0.77 63.78 41.04 2.48
Cash & Bank Balances 0.24 6.92 0.70 5.62 5.19
Loans and Advances 7.15 7.37 290.83 238.15 308.89
Total 12.44 15.06 355.31 284.81 316.56
E Total Assets (A+B+C+D) 177.48 200.16 612.34 595.93 572.67

F Liabilities & Provisions

Secured loans - - 81.25 - -

Unsecured loans 8.70 17.70 - - -
Current Liabilities 0.10 2.26 2.63 7.96 6.54
Provisions 11.46 3.21 0.14 0.06 0.06

Deferred Tax Liability (Net) - - 1.11 3.75 6.09

Total 20.26 23.17 85.13 11.77 12.69

G Net Worth (E-F) 157.22 176.99 527.21 584.16 559.98

Represented by:
Shareholders' Funds:
a Equity Share Capital 100.00 100.00 203.11 203.11 193.11
b Preference Share Capital - 27.00 - - -
c Share Application Money (Pending Allotment) 24.02 - - - -
d Reserves & Surplus 33.20 49.99 324.10 381.05 376.25
Total 157.22 176.99 527.21 584.16 569.36
Less: Miscellaneous expenditure (to the extent not - - - - 9.38
written off or adjusted)
Net Worth 157.22 176.99 527.21 584.16 559.98
Notes :
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Unconsolidated Financial Statements as appearing in Annexure 5.

7
2. Necessary adjustments have been made to the audited financial statements in accordance with the
requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2009.

8
 Unconsolidated Restated Summary Data of Profits and Losses
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
Income
Income from Operations 17.03 39.54 127.77 142.40 180.81
Other Income - - - - 0.17
Total Income 17.03 39.54 127.77 142.40 180.98

Expenditure

Staff Cost 0.14 0.43 4.44 8.87 8.17

Administrative and Other Expenses 0.35 1.40 14.62 46.58 17.73
Interest - - 5.80 11.36 7.23
Depreciation/Amortization 0.54 4.06 7.45 6.83 10.09
Total Expenditure 1.03 5.89 32.31 73.64 43.22

Net Profit before tax 16.00 33.65 95.46 68.76 137.76

Provision for taxation:
Current Tax 1.36 4.11 17.11 9.99 25.22
Deferred Tax Charge/(Credit) (4.07) 3.88 1.30 2.64 2.34
Fringe Benefit Tax - 0.01 0.02 0.07 -
MAT Credit Entitlement - (3.21) - (0.90) -
Net Profit after tax 18.71 28.86 77.03 56.96 110.20

Balance Brought Forward 0.02 4.40 11.76 27.69 74.55

Profit available for Appropriation 18.73 33.26 88.79 84.65 184.75

Appropriations:
Dividend on Equity Shares 10.00 10.00 10.00 - -
Dividend on Preference Shares - 0.45 - - -
Tax on Dividends 1.40 1.48 1.70 - -
Transfer to reserve under section 45-IC of the Reserve Bank of 2.93 9.57 17.40 10.10 22.20
India Act,1934
Transfer to Capital Redemption Reserve - - 27.00 - 10.00
Amount utilised for Issue of Bonus Share - - 5.00 - -
Surplus carried to Balance Sheet 4.40 11.76 27.69 74.55 152.55
Notes:
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Unconsolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited financial statements in accordance with the
requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2009.

9
 Unconsolidated Restated Summary Data of Cash Flow
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
A. Cash Flow from Operating Activities
Net Profit before tax 16.00 33.65 95.46 68.76 137.76
Adjustments for :
Depreciation/amortization 0.54 4.06 7.45 6.83 10.09
Preliminary Expenses Written off 0.04 - - - -
Irrecoverable debts/advances written off - - - 0.61 0.23
Loss on assignment of receivables - - - - 11.27

Operating profit before working capital 16.58 37.71 102.91 76.20 159.35
changes

(Increase)/Decrease in Debtors (5.05) 4.28 (63.01) 22.13 38.46

(Increase)/Decrease in Loans & Advances (7.15) 3.00 (280.48) 55.13 (84.62)
(Increase)/Decrease in Investments (110.76) 2.89 (67.16) (10.14) 45.95
Increase/(Decrease) in Current Liabilities & 0.10 2.16 4.93 0.82 (5.49)
Provisions

Cash generated from/(used in) operations (106.28) 50.04 (302.81) 144.14 153.65
Direct Taxes Paid (1.30) (0.97) (23.29) (11.61) (22.75)

Net cash generated from/(used in) operating (107.58) 49.07 (326.10) 132.53 130.90
activities

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (30.46) (30.89) (12.40) (50.78) (1.03)

Net cash generated from/(used in) investing (30.46) (30.89) (12.40) (50.78) (1.03)
activities

C. Cash Flow from Financing Activities

Proceeds from Issue of Equity Share including 106.00 - 312.98 - -
Securities Premium
Buy Back of Equity Shares - - - - (125.00)
Proceeds from Issue of Preference Share including - 2.98 - - -
Securities Premium
Share Application Money 24.02 - - - -
Share Issue Expense (0.47) (0.15) (1.12) - -
Redemption of Preference Shares - - (27.00) - -
Proceeds from Borrowings 8.70 17.70 485.64 384.55 1,708.90
Repayment of Borrowings - (8.70) (426.52) (461.38) (1,708.90)
Dividend Paid - (20.45) (10.00) - -
Dividend tax Paid - (2.88) (1.70) - -
IPO Related expenses - - - - (5.30)

Net cash generated from/(used in) financing 138.25 (11.50) 332.28 (76.83) (130.30)
activities

D. Net change in cash and cash equivalents 0.21 6.68 (6.22) 4.92 (0.43)
(A+B+C)

E. Cash and Cash equivalents - Opening Balance 0.03 0.24 6.92 0.70 5.62

F. Cash and Cash equivalents - Closing Balance 0.24 6.92 0.70 5.62 5.19

10
 Consolidated Restated Summary Data of Assets and Liabilities
(Rs. in Million)
Particulars As at 31st March
Application of Funds 2006 2007 2008 2009 2010
A. Fixed Assets
Gross Block 115.33 183.13 242.56 336.82 311.40
Less: Accumulated Depreciation/Amortisation 22.43 40.80 65.36 94.74 99.64
Net Block 92.90 142.33 177.20 242.08 211.76
Capital Work in Progress including Capital Advances - - - 19.91 23.53
Total 92.90 142.33 177.20 261.99 235.29

B. Investments 21.55 48.16 75.86 150.14 86.91

C. Deferred Tax Asset (Net) - 3.06 - - -

D. Current Assets, Loans and Advances

Inventories 0.06 2.06 6.57 - -
Sundry Debtors 54.25 28.37 230.54 76.98 89.24
Cash & Bank Balances 25.39 40.84 130.30 160.88 193.10
Other Current Assets 0.43 1.13 4.69 3.02 8.07
Loans and Advances 122.32 135.08 495.96 341.90 561.25
Total 202.45 207.48 868.06 582.78 851.66
E Total Assets (A+B+C+D) 316.90 401.03 1,121.12 994.91 1,173.86

F Liabilities & Provisions

Secured loans 1.49 0.96 145.44 3.80 40.11

Unsecured loans 8.70 17.70 - - -
Current Liabilities 88.54 96.54 248.57 168.18 196.05
Provisions 11.40 1.79 1.07 0.71 0.97

Deferred Tax Liability (Net) 3.17 - 7.47 16.68 21.06

Total 113.30 116.99 402.55 189.37 258.19

G Net Worth (E-F) 203.60 284.04 718.57 805.54 915.67

Represented by:
Shareholders' Funds:
a Equity Share Capital 100.00 100.00 203.11 203.11 193.11
b Preference Share Capital - 27.00 - - -
c Share Application Money (Pending Allotment) 24.02 - - - -
d Reserves & Surplus 79.58 157.04 515.46 602.43 731.94

Total 203.60 284.04 718.57 805.54 925.05

Less: Miscellaneous expenditure (to the extent not - - - - 9.38
written off or adjusted)
Net Worth 203.60 284.04 718.57 805.54 915.67
Notes:
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Consolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited consolidated financial statements in accordance
with the requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

11
 Consolidated Restated Summary Data of Profits & Losses
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
Income
Income from Operations 69.53 192.45 411.11 378.74 570.91
Other Income 1.08 2.57 15.27 10.59 13.82
Total Income 70.61 195.02 426.38 389.33 584.73

Expenditure
Operating Expenses 4.29 9.35 15.84 14.91 13.87
Staff Cost 5.61 25.33 63.99 100.58 121.14
Administrative and Other Expenses 16.68 56.28 102.57 114.35 99.82
Interest 0.25 0.13 10.12 14.84 12.67
Depreciation/Amortisation 3.10 18.52 24.59 30.07 28.84
Total Expenditure 29.93 109.61 217.11 274.75 276.34

Net Profit before tax 40.68 85.41 209.27 114.58 308.39

Provision for taxation:
Current Tax 1.45 7.77 34.35 18.38 59.51
Deferred Tax Charge/(Credit) 1.94 (6.23) 10.53 9.21 4.38
Fringe Benefit Tax 0.11 0.30 0.50 0.67 -
MAT Credit Entitlement - (5.96) 2.54 (0.69) -
Net Profit after tax 37.18 89.53 161.35 87.01 244.50

Balance Brought Forward 24.28 47.00 113.83 205.35 281.63

Profit available for Appropriation 61.46 136.53 275.18 292.36 526.13

Appropriations:
Dividend on Equity Shares 10.00 10.00 10.00 - -
Dividend on Preference Shares - 0.45 - - -
Tax on Dividends 1.40 1.48 1.70 - -
Transfer to reserve under section 45-IC of the Reserve Bank of 2.93 9.57 19.50 10.18 23.35
India Act,1934
Transfer to Debenture Redemption Reserve 0.13 1.20 6.63 0.55 1.25
Transfer to Capital Redemption Reserve - - 27.00 - 10.00
Amount utilised for Issue of Bonus Share - - 5.00 - -
Surplus carried to Balance Sheet 47.00 113.83 205.35 281.63 491.53
Notes:
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Consolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited consolidated financial statements in accordance
with the requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

12
 Consolidated Restated Summary Data of Cash Flows
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
A. Cash Flow from Operating Activities
Net Profit before tax 40.68 85.41 209.27 114.58 308.39
Adjustments for :
Depreciation/Amortization 3.10 18.52 24.59 30.07 28.84
Interest Expenses 0.05 0.13 4.30 3.47 5.44
Preliminary Expenses Written off 0.04 - - - -
(Profit)/Loss on sale/discard of Fixed Assets - 0.12 0.01 0.05 (2.04)
Irrecoverable debts/advances written off 0.40 0.11 2.90 8.07 6.68
Loss on assignment of receivables - - - - 11.27

Operating profit before working capital 44.27 104.29 241.07 156.24 358.58
changes

(Increase)/Decrease in Inventories - (2.00) (4.51) 6.57 -

(Increase)/Decrease in Trade & Other Receivables (3.07) 25.07 (208.62) 147.16 (22.28)
(Increase)/Decrease in Loans & Advances (22.55) (8.00) (361.87) 160.82 (232.97)
(Increase)/Decrease in Investments (99.60) (26.61) (27.70) (74.28) 63.23
Increase/(Decrease) in Current Liabilities & (37.45) 8.06 157.46 (85.17) 23.77
Provisions

Cash generated from/(used in) operations (118.40) 100.81 (204.17) 311.34 190.33

Income Tax Paid (net of refunds) (1.54) (5.12) (38.14) (25.17) (58.85)

Net cash generated from/(used in) operating (119.94) 95.69 (242.31) 286.17 131.48
activities

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (34.00) (68.33) (59.44) (115.59) (15.95)
Proceeds from sale of Fixed Assets - 0.25 - 0.69 15.84
Investments in Fixed Deposits (0.03) (15.22) (55.01) (0.17) (73.99)
Encashment of Fixed Deposits - - - 16.30 20.53
Net cash (used in) investing activities (34.03) (83.30) (114.45) (98.77) (53.57)

C. Cash Flow from Financing Activities

Proceeds from Issue of Equity Share including 106.00 - 312.98 - -
Securities Premium
Buy Back of Equity Shares - - - - (125.00)
Proceeds from Issue of Preference Share including - 2.98 - - -
Securities Premium
Share Application Money 24.02 - - - -
Share Issue Expense (0.47) (0.15) (1.12) - -
Redemption of Preference Shares - - (27.00) - -
Proceeds from Borrowings 8.70 18.45 549.63 388.05 1,748.90
Repayment of Borrowings (0.16) (9.98) (427.28) (525.30) (1,712.59)
Interest Paid (0.05) (0.13) (4.30) (3.44) (5.16)
Dividend Paid - (20.45) (10.00) - -
Dividend tax Paid - (2.88) (1.70) - -
IPO Related Expenses - - - - (5.30)

Net cash generated from/(used in) financing 138.04 (12.16) 391.21 (140.69) (99.15)
activities

13
 Particulars For the years ended 31st March
2006 2007 2008 2009 2010
D. Net change in cash and cash equivalents (15.93) 0.23 34.45 46.71 (21.24)
(A+B+C)

E. Cash and Cash equivalents - Opening Balance 0.03 15.76 15.99 50.44 97.15
#
Opening Cash and Cash equivalents of the 31.66 - - - -
Subsidiary Companies *
F. Cash and Cash equivalents - Closing Balance # 15.76 15.99 50.44 97.15 75.91

* Represents cash and cash equivalents of the subsidiary Companies on the date on which they got consolidated
with Holding Company.

# Excludes Fixed Deposits as per table below:

Fixed Deposits with Banks with restricted use or for 9.63 24.85 79.86 63.73 117.19
more than three months.

14
 THE ISSUE

Issue of Equity Shares 12,500,000 Equity Shares

Issue to the Public

Of which:
A) Qualified Institutional Buyers (QIBs) Portion* Up to 6,250,000 Equity Shares
of which
Available for allocation to Mutual
312,500 Equity Shares
Fund (5% of the QIB Portion) only
Balance of QIBs including Mutual 5,937,500 Equity Shares
Funds
B) Non-Institutional Portion* Not less than 1,875,000 Equity Shares
C) Retail Portion* Not less than 4,375,000 Equity Shares
Pre and post-Issue Equity Shares
Equity Shares outstanding prior to the Issue 19,310,500 Equity Shares
Equity Shares outstanding after the Issue 31,810,500 Equity Shares
Use of Issue Proceeds See “Objects of the Issue” on page 37 of this Red
Herring Prospectus.

Allocation to all categories, except the Anchor Investor Portion, if any, shall be made on a proportionate basis.

The Company may allocate up to 30% of the QIB Portion to Anchor Investors on a discretionary basis. One-third of the
Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid Bids being received from domestic
Mutual Funds at or above the price at which allocation is being done to Anchor Investors.

In the event of under-subscription in the mutual fund portion only, the unsubscribed portion would be added to the balance
of the QIB Portion to be allocated on a proportionate basis to all QIB Bidders, including Mutual Funds. For further details,
please see “Issue Procedure” on page 272 of this Red Herring Prospectus.

*Under subscription, if any, in any of these categories, the unsubscribed portion may be added to one of the other categories
at the discretion of the Company, in consultation with the BRLM and the Designated Stock Exchange.

15
 GENERAL INFORMATION

Registered Office Corporate Office

Shivam Chambers, Azimganj House,

1st floor, 53 Syed Amir Ali Avenue, 2nd floor, 7 Camac Street
Kolkata 700 019 Kolkata 700 017
Tel: (91 33) 30512100 Tel: (91 33) 2282 9330
Fax: (91 33) 30512020 Fax: (91 33) 2282 9335

Email: [email protected]
Website: www.microsec.in
RoC Registration Number: 21-47002
Company Identification Number:
U65993WB1989PLC047002

Address of Registrar of Companies

Registrar of Companies
Nizam Palace, 2nd M.S.O. Building,
2nd floor, 234/4, A.J.C Bose Road,
Kolkata 700 020, West Bengal

Board of Directors

The Board comprises the following:

Name, Designation and Occupation Age (Years) DIN Address

Banwari Lal Mittal 42 00365809 25D, 3rd Floor,
Chairman and Managing Director Flat No.3A & B,
Harish Mukherjee Road,
(Promoter Director of the Company) Kolkata 700 025

Occupation: Business

Ravi Kant Sharma 36 00364066 Block 10, Flat 3L,

Non-Executive Director Space Town Housing Complex,
VIP Road Raghunathpur,
(Promoter Director of the Company) Kolkata 700 052

Occupation: Business

Parimal Kumar Chattaraj 64 00893963 3H, Singhi Park,

Independent Director 48/3 Gariahat Road,
Kolkata 700 019
Occupation: Management Consultant
and Advocate

Raj Narain Bhardwaj 65 01571764 402, Moksh Apartments, Upper

Independent Director Govind Nagar, Malad (East)
Mumbai 400 097
Occupation: Management Consultant

Deba Prasad Roy 68 00049269 APT, 505 Nestle I.B. Wing,

Independent Director Pandurang Bhdhkar Marg,
Mumbai 400 013
Occupation: Financial Consultant
and Arbitrator

16
For further details of the Directors, see “Management” on page 91 of this Red Herring Prospectus.

Company Secretary and Compliance Officer

Biplab Kumar Mani

Shivam Chambers,
1st Floor, 53 Syed Amir Ali Avenue,
Kolkata 700 019
Tel: (91 33) 3051 2100
Fax: (91 33) 3051 2020
Email: [email protected]

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

Auditors to the Company

S.R. Batliboi & Co.
22 Camac Street,
Block C, 3rd floor,
Kolkata 700 016
Tel: (033) 66153400
Fax: (033) 22817750
E-mail ID: [email protected]
Firm Registration No. 301003E

Book Running Lead Manager

SBI Capital Markets Limited

202, Maker Tower ‘E’
Cuffe Parade
Mumbai 400 005
Tel: (9122) 2217 8300
Fax: (91 22) 2218 8332
E-mail ID: [email protected]
Investor Grievance Id: [email protected]
Website: www.sbicaps.com
Contact Person: Murtuza Patrawala/ Sandeep Onkar
SEBI Registration Number: INM000003531

Legal Advisor to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & Co.

5th Floor, Peninsula Chambers
Peninsula Corporate Park
Ganpatrao Kadam Marg, Lower Parel
Mumbai 400 013
Tel: (91 22) 2496 4455
Fax: (91 22) 2496 3666

Syndicate Members

SBICAP Securities Limited Enam Securities Private Limited

191, Maker Tower, ‘F’ Cuffe Parade 801, Dalamal Tower,
Mumbai 400 005, Maharashtra Nariman Point,
Contact Person: Archana Dedhia Mumbai 400 021
Tel: (91 22) 3047 8591 Contact Person: Ajay Sheth/Vinay Ketkar
Fax: (91 22) 3046 8670 Tel: (91 22) 6638 1800
Investor Grievance Email: Fax: (91 22) 2284 8824
[email protected] Investor Grievance Email: [email protected]

17
 Website: www.sbicapsec.com Website: www.enam.com
SEBI Registration Number: NSE - INB230152938 SEBI Registration Number: INM000006856
BSE - INB11053031

JM Financial Services Private Limited Reliance Securities Limited

141, Maker Chambers III R Tech Park, 11th Floor,
Nariman Point Nirlon Compound, Behind HUB Mall,
Mumbai 400 021 Western Express Highway, Goregaon East,
Contact Person: Deepak Vaidya/T.N. Kumar Mumbai 400 063
Tel: (91 22) 6704 3184/ 6704 3185 Tel: (91 22) 3059 1234
Fax: (91 22) 6654 1511 Fax: (91 22) 3059 1555
Investor Grievance Email: [email protected]/ Investor Grievance Email:
[email protected] [email protected]
Website: www.jmfinancial.in Website: www.reliancemoney.com
Registration number: NSE – INB/F/E 231054835 SEBI Registration Number: NSE - INB 231234833;
BSE – INB/F011054831 BSE - INB 011234839

IPO Grading Agency

This Issue has been graded by CRISIL as 2/5, indicating that the fundamentals of the Issue are below average
relative to other equity securities in India. The report of CRISIL in respect of the IPO grading of this Issue is
annexed to this Red Herring Prospectus.

Experts

Except the report of CRISIL in respect of the IPO grading of this Issue annexed herewith, the Company has not
obtained any expert opinions.

Registrar to the Issue

Link Intime India Private Limited

C-13, Pannalal Silk Mills Compound
LBS Marg, Bhandup (W),
Mumbai 400 078
Tel: (91 22) 2596 0320
Fax: (91 22) 2596 0329
E-mail: [email protected]
Website: www.linkintime.co.in
Contact Person: Chetan Shinde
SEBI Registration No.: INR000004058

Bankers to the Issue and Escrow Collection Banks

Axis Bank Limited HDFC Bank Limited

7, Shakeaspeare Sarani, Bank House, 3A,
Kolkata 700 071 Gurusaday Road,
Tel: (91 33) 2282 9836/ 9837/ 2933/5189/4961 Kolkata 700 019
Fax: (91 33) 2282 7611 Tel: (91 33) 3057 8212/18
E-mail: [email protected] Fax: (91 33) 2283 6922
[email protected] E-mail id: [email protected]
Website: www.axisbank.com Website: www.hdfcbank.com
Contact Persons:Debashis Sarkar, Shraddha Agarwal SEBI Registration No.: INBI00000063
SEBI Registration No.: INBI00000017

ICICI Bank Limited Indusind Bank Limited

Capital Market Division, Cash Management Services (CMS), IBL House,
30, Mumbai Samachar Marg, 1st floor, Cross ‘B’ Road,
Mumbai 400 001 MIDC, J. B. Nagar, off Andheri-Kurla Road,
Tel: (91 22) 6631 0311/312 Andheri (East)
Fax: (91 22) 2261 1138/ 6631 0350 Mumbai 400 059

18
 E-mail: [email protected] Tel: (91 22) 6772 8721
Website: www.icicibank.com Fax: (91 22) 6641 2349
Contact Person: Viral Bharani E-mail: [email protected]
SEBI Registration No.: INBI00000004 [email protected]
Website: www.indusind.com
Contact Persons: Suresh Esaki, Harpal Singh
SEBI Registration No. INBI00000002
State Bank of India
Capital Market Branch,
Videocon Heritage (Killic House),
Ground Floor, Charanjit Rai Marg,
Mumbai 400 001
Tel: (91 22) 2209 4932/4927
Fax: (91 22) 2209 4921/4922
Email: [email protected]; [email protected]
Contact person: Surekha Shinde
SEBI Registration No.: INBI00000038

Self Certified Syndicate Banks

The list of banks that have been notified by SEBI to act as SCSB for the ASBA process are provided on
www.sebi.gov.in and for details on Designated Branches of SCSB collecting as per Bid cum Application Form,
please refer to above-mentioned link.

Bankers to the Company

HDFC Bank Limited ICICI Bank Limited

3A Gurusaday Road Rasoi Court,
Kolkata 700 019 20 Sir R.N. Mukherjee Road,
Tel: (91 33) 3057 8217 Kolkata 700 001
Fax: (91 33) 2283 6922 Tel: (91 33) 4002 4382
Email: [email protected] Fax: (91 33) 2242 9083
Website: www.hdfcbank.com Email: [email protected]
Website: www.icicibank.com
Indusind Bank Limited
Savitri Tower, 3A Upper Wood Street
Kolkata 700 017
Tel: (91 33) 3021 2400
Fax: (91 33) 2289 6206
Email: [email protected]
Website: www.indusind.com

Monitoring Agency

In accordance with Regulation 16 of the SEBI Regulations, as this Issue is less than Rs. 5,000 million, there is
no requirement for appointment of a monitoring agency.

Statement of Responsibilities of the BRLM

The following table sets forth the statement of responsibilities for various activities of the BRLM for the Issue:

Activity Responsibility Co-

ordinati
on
1. Capital structuring with relative components and formalities such as type SBI Caps SBI Caps
of instruments, etc.
2. Due diligence of Company’s operations/ management/ business plans/ SBI Caps SBI Caps
legal etc. Drafting and design of Red Herring Prospectus and of statutory
advertisement including memorandum containing salient features of the

19
 Activity Responsibility Co-
ordinati
on
Prospectus. The BRLM shall ensure compliance with stipulated
requirements and completion of prescribed formalities with the Stock
Exchanges, RoC and SEBI including finalisation of Prospectus and RoC
filing
3. Drafting and approval of all statutory advertisement SBI Caps SBI Caps
4. Drafting and approval of all publicity material other than statutory SBI Caps SBI Caps
advertisement as mentioned in (2) above including corporate
advertisement, brochure, etc.
5. Appointment of other intermediaries, i.e., Registrar(s), Printers, SBI Caps SBI Caps
Advertising Agency and Bankers to the Issue
6. Preparation of road show presentations SBI Caps SBI Caps
7. International Institutional Marketing strategy SBI Caps SBI Caps
x Finalise the list and division of investors for one to one meetings, in
consultation with the Company; and
x Finalizing the International road show schedule and investor meeting
schedules
8. Domestic institutions / banks / mutual funds marketing strategy SBI Caps SBI Caps
x Finalise the list and division of investors for one to one meetings,
institutional allocation in consultation with the Company;
x Finalizing the list and division of investors for one to one meetings;
and
x Finalizing investor meeting schedules
9. Non-Institutional and Retail Marketing of the Issue, which will cover, SBI Caps SBI Caps
inter alia,
x Formulating marketing strategies, preparation of publicity budget
x Finalise Media and PR strategy
x Finalising centres for holding conferences for press and brokers
x Follow-up on distribution of publicity and Issuer material including
form, prospectus and deciding on the quantum of the Issue material
x Finalize collection centres
9. Co-ordination with Stock Exchanges for Book Building Software, SBI Caps SBI Caps
bidding terminals and mock trading
10. Finalisation of Pricing, in consultation with the Company SBI Caps SBI Caps
11. The post bidding activities including management of escrow accounts, SBI Caps SBI Caps
co-ordination of non-institutional allocation, intimation of allocation and
dispatch of refunds to bidders etc. The post Issue activities for the Issue
involving essential follow up steps, which include the finalisation of
trading and dealing of instruments and demat of delivery of shares, with
the various agencies connected with the work such as the Registrar(s) to
the Issue and Bankers to the Issue and the bank handling refund business.
The merchant banker shall be responsible for ensuring that these agencies
fulfill their functions and enable it to discharge this responsibility through
suitable agreements with the Company

Credit Rating

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

20
Trustees

As the Issue is of Equity Shares, the appointment of trustees is not required.

Book Building Process

Book building, with reference to the Issue, refers to the process of collection of Bids on the basis of the Red
Herring Prospectus within the Price Band, which will be decided by the Company in consultation with the
BRLM and advertised at least two days prior to the Bid/Issue Opening Date. The Issue Price is finalized after
the Bid / Issue Closing Date. The principal parties involved in the Book Building Process are:

x The Company;
x the BRLM;
x Syndicate Members who is an intermediary registered with SEBI or registered as brokers with NSE/BSE
and eligible to act as Underwriters. The Syndicate Members is appointed by the BRLM;
x SCSBs;
x Registrar to the Issue; and
x Escrow Collection Banks.

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall
be available for allocation on a proportionate basis to QIB Bidders. 5% of the QIB Portion (excluding the
Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the
remainder shall be available for allocation on a proportionate basis to all QIB Bidders, including Mutual Funds,
subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue will be
available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue
will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Issue Price.

In accordance with the SEBI Regulations, QIBs bidding in the QIB Portion are not allowed to withdraw
their Bid(s) after the Bid/Issue Closing Date. For further details, see “Terms of the Issue” on page 266 of this
Red Herring Prospectus.

We will comply with the SEBI Regulations and any other ancillary directions issued by SEBI for this Issue. In
this regard, we have appointed the BRLM to manage the Issue and procure subscriptions to the Issue.

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

Illustration of Book Building and Price Discovery Process (Investors should note that this example is solely
for illustrative purposes and is not specific to the Issue; it also excludes bidding by Anchor Investors or under
the ASBA process.)

Bidders can bid at any price within the price band. For instance, assume a price band of Rs. 20 to Rs. 24 per
share, issue size of 3,000 equity shares and receipt of five bids from bidders, details of which are shown in the
table below. A graphical representation of the consolidated demand and price would be made available at the
bidding centres during the bidding period. The illustrative book below shows the demand for the shares of the
issuer company at various prices and is collated from bids received from various investors.

Bid Quantity Bid Price (Rs.) Cumulative Quantity Subscription

500 24 500 16.67%
1,000 23 1,500 50.00%
1,500 22 3,000 100.00%
2,000 21 5,000 166.67%
2,500 20 7,500 250.00%

The price discovery is a function of demand at various prices. The highest price at which the issuer is able to

21
issue the desired number of shares is the price at which the book cuts off, i.e., Rs. 22 in the above example. The
issuer, in consultation with the book running lead managers, will finalise the issue price at or below such cut-off
price, i.e., at or below Rs. 22. All bids at or above this issue price and cut-off bids are valid bids and are
considered for allocation in the respective categories.

Steps to be taken by the Bidders for Bidding:

1. Check eligibility for making a Bid (see “Issue Procedure – Who Can Bid?” on page 273 this Red Herring
Prospectus);

2. Ensure that you have a demat account and the demat account details are correctly mentioned in the Bid cum
Application Form;

3. Ensure that you have mentioned your PAN. In accordance with the SEBI Regulations, the PAN would be
the sole identification number for participants transacting in the securities market, irrespective of the
amount of the transaction. (see “Issue Procedure” on page 272 of this Red Herring Prospectus);

4. Ensure that the Bid cum Application Form is duly completed as per instructions given in this Red Herring
Prospectus and in the Bid cum Application Form or the ASBA Bid cum Application Form; and

5. Bids by QIBs will only have to be submitted to the BRLM and/or its affiliates or to Enam Securities Private
Limited.

Withdrawal of the Issue

The Company, in consultation with the BRLM, reserve the right not to proceed with the Issue anytime after the
Bid/Issue Opening Date. In such an event the Company would issue a public notice in the newspapers, in which
the pre-Issue advertisements were published, within two days of the Bid/ Issue Closing Date, providing reasons
for not proceeding with the Issue. The BRLM, through the Registrar to the Issue, shall notify the SCSBs to
unblock the bank accounts of the ASBA Bidders within one day from the day of receipt of such notification.
The Company shall also inform the same to Stock Exchanges on which the Equity Shares are proposed to be
listed.

Any further issuances by the Company shall be undertaken in accordance with applicable law.

Bid/Issue Programme

BID/ISSUE OPENS ON SEPTEMBER 17, 2010*

BID/ISSUE CLOSES ON SEPTEMBER 21, 2010
*The Company may consider participation by Anchor Investors. The Anchor Investor Bid/ Issue Period shall be working one day prior to
the Bid/ Issue Opening Date.

Bids and any revision in Bids shall be accepted only between 10.00 a.m. and 3.00 p.m. (IST) during the
Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form. On the
Bid/Issue Closing Date, Bids (excluding the ASBA Bidders) shall be uploaded until (i) 4.00 p.m. (IST) in case of
Bids by QIB Bidders, Non-Institutional Bidders where the Bid Amount is in excess of Rs. 100,000; and (ii) until
5.00 p.m. (IST) in case of Bids by Retail Individual Bidders where the Bid Amount is up to Rs. 100,000. It is
clarified that Bids not uploaded in the book, would be rejected. Bids by ASBA Bidders shall be uploaded by the
SCSB in the electronic system to be provided by the NSE and the BSE.

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

Due to limitation of time available for uploading the Bids on the Bid/Issue Closing date, the bidders are advised
to submit their Bids one day prior to the Bid/Issue Closing Date and, in any case, no later than the times
mentioned above on the Bid/Issue Closing Date. All times mentioned in the Red Herring Prospectus are IST.
Bidders are cautioned that in the event a large number of Bids are received on the Bid/Issue Closing Date, as is

22
typically experienced in public offerings, some Bids may not get uploaded due to lack of sufficient time. Such
Bids that cannot be uploaded will not be considered for allocation under the Issue. If such Bids are not uploaded,
the Issuer, the BRLM, Syndicate Members and the SCSBs will not be responsible. Bids will be accepted only on
Business Days, i.e., Monday to Friday (excluding any public holidays).

On the Bid/Issue Closing Date, extension of time will be granted by the Stock Exchanges only for uploading the
Bids received by Retail Bidders after taking into account the total number of Bids received up to the closure of
the time period for acceptance of Bid-cum-Application Forms as stated herein and reported by the BRLM to the
Stock Exchange within half an hour of such closure.

The Company, in consultation with the BRLM, reserves the right to revise the Price Band during the Bid/Issue
Period in accordance with the SEBI Regulations provided that the Cap Price is less than or equal to 120% of the
Floor Price and the Floor Price cannot be less than the face value of the Equity Shares. The Floor Price can be
revised up or down to a maximum of 20% of the Floor Price advertised at least two days before the Bid /Issue
Opening Date.

In case of revision of the Price Band, the Issue Period will be extended for three additional Working Days
after revision of the Price Band subject to the total Bid /Issue Period not exceeding 10 Working Days. Any
revision in the Price Band and the revised Bid/Issue, if applicable, will be widely disseminated by
notification to the NSE and the BSE, by issuing a press release and also by indicating the changes on the
web sites of the BRLM and at the terminals of the Syndicate. In the event of any revision in the Price Band,
whether upwards or downwards, the minimum application size shall remain [●] Equity Shares irrespective of
whether the Bid Amount payable on such minimum application is not in the range of Rs. 5,000 to Rs. 7,000.

Underwriting Agreement

After the determination of the Issue Price and allocation of the Equity Shares, but prior to the filing of the
Prospectus with the RoC, the Company will enter into an Underwriting Agreement with the Underwriters for the
Equity Shares proposed to be offered through the Issue. It is proposed that pursuant to the terms of the
Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that
the Syndicate Members do not fulfil their underwriting obligations. The Underwriting Agreement is dated [x].

The Underwriters have indicated their intention to underwrite the following number of Equity Shares:

This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the RoC.

Name and Address of the Underwriters Indicated Number Amount

of Equity Shares to Underwritten
be Underwritten (Rs. in million)
SBI Capital Markets Limited [●] [●]
202, Maker Tower ‘E’
Cuffe Parade
Mumbai 400 005
SBICAP Securities Limited [●] [●]
191, Maker Tower, ‘F’
Cuffe Parade
Mumbai 400 005
Enam Securities Private Limited [●] [●]
801, Dalamal Tower,
Nariman Point,
Mumbai 400 021
JM Financial Services Private Limited [●] [●]
141, Maker Chambers III
Nariman Point
Mumbai 400 021
Reliance Securities Limited [●] [●]
R Tech Park, 11th Floor,

23
 Name and Address of the Underwriters Indicated Number Amount
of Equity Shares to Underwritten
be Underwritten (Rs. in million)
Nirlon Compound, Behind HUB Mall,
Western Express Highway, Goregaon East,
Mumbai 400 063

The above-mentioned is indicative underwriting and this will be finalized after the pricing and actual allocation.

In the opinion of the Board of Directors (based on a certificate given by the Underwriters), the resources of the
above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting
obligations in full. The abovementioned Underwriters are registered with SEBI under Section 12(1) of the SEBI
Act or registered as brokers with the Stock Exchange(s). The Board of Directors / Committee of Directors, at its
meeting held on [●], has accepted and entered into the Underwriting Agreement mentioned above on behalf of
the Company.

Notwithstanding the above table, the BRLM and the Syndicate Members shall be responsible for ensuring
payment with respect to Equity Shares allocated to investors procured by them. In the event of any default in
payment, the respective Underwriter, in addition to other obligations defined in the underwriting agreement, will
also be required to procure/subscribe to Equity Shares to the extent of the defaulted amount.

24
 CAPITAL STRUCTURE

The Equity Share capital as of the date of this Red Herring Prospectus is set forth below:

Aggregate Aggregate Value

Nominal Value at Issue Price
A) Authorised Share Capital
35,000,000 Equity Shares 350,000,000

B) Issued, Subscribed and Paid up Share Capital before the Issue

19,310,500 fully paid up Equity Shares 193,105,000 [●]

C) Present Issue in terms of this Red Herring Prospectus

12,500,000 Equity Shares of face value of Rs. 10 each 125,000,000 [●]

D) Issued, Subscribed and Paid up Capital after the Issue

31,810,500 Equity Shares 318,105,000 [●]

E) Share Premium Account

Before the Issue 151,500,500 [●]
After the Issue [●] [●]
The present Issue has been authorised by the Board of Directors pursuant to their resolutions dated Septmber 5, 2009 and
September 3, 2010 and the shareholders, pursuant to their resolutions dated September 30, 2009 and September 4, 2010.

Changes in Authorised Share Capital

(i) The initial authorized share capital of Rs. 300,000 divided into 30,000 Equity Shares of Rs. 10 each
was increased to Rs. 5,000,000 divided into 500,000 Equity Shares of Rs. 10 each pursuant to a
resolution of the shareholders at an EGM held on March 22, 1995.

(ii) The authorised share capital of Rs. 5,000,000 divided into 500,000 Equity Shares of Rs. 10 each was
increased to Rs. 6,000,000 divided into 600,000 Equity Shares of Rs. 10 each pursuant to a resolution
of the shareholders at the EGM dated March 30, 2002.

(iii) The authorised capital of Rs. 6,000,000 divided into 600,000 Equity Shares of Rs. 10 each was
increased to Rs. 7,500,000 divided into 750,000 Equity Shares of Rs 10 each pursuant to a resolution of
the shareholders at the EGM dated March 31, 2003.

(iv) The authorised capital of Rs. 7,500,000 divided into 750,000 Equity Shares of Rs. 10 each was
increased to Rs. 8,100,000 divided into 810,000 Equity Shares of Rs. 10 each pursuant to a resolution
of the shareholders at the EGM dated March 30, 2004.

(v) The authorised capital of Rs. 8,100,000 divided into 810,000 Equity Shares of Rs. 10 each was
increased to Rs. 100,000,000 divided into 10,000,000 Equity Shares of Rs. 10 each pursuant to a
resolution of the shareholders at the EGM dated October 19, 2005.

(vi) The authorised capital of Rs. 100,000,000 divided into 10,000,000 Equity Shares of Rs. 10 each was
increased to Rs. 127,000,000 divided into 10,000,000 Equity Shares and 2,700,000 preference shares of
Rs. 10 each pursuant to a resolution of the shareholders at the EGM dated November 10, 2006.

(vii) The authorised capital of the Company has been restructured by converting the Rs. 27,000,000
preference shares capital to Equity shares capital pursuant to a resolution of the shareholders at the
EGM dated June 27, 2007.

(viii) The authorised capital of Rs. 127,000,000 divided into 12,700,000 Equity Shares of Rs. 10 each was
increased to Rs. 250,000,000 divided into 25,000,000 Equity Shares of Rs. 10 each pursuant to a
resolution of the shareholders at the EGM dated June 30, 2007.

(ix) The authorised capital of Rs. 250,000,000 divided into 25,000,000 Equity Shares of Rs. 10 each was
increased to Rs. 350,000,000 divided into 35,000,000 Equity Shares of Rs. 10 each pursuant to a
resolution of the shareholders at the EGM dated July 30, 2007.

25
Notes to Capital Structure

1. Share Capital History of the Company

(a) The following is the history of the equity share capital of the Company:

Date of No. of Face Issue Consideration Reasons for Cumulative Cumulative Cumulative
allotment equity Value Price allotment no. of paid-up share premium
of equity shares (Rs.) (Rs.) equity equity
shares shares capital
(Rs.)
June 6, 200 10 10 Cash Initial subscription 200 2,000 Nil
1989 to memorandum of
association
March 12, 9,300 10 10 Cash Preferential 9,500 95,000 Nil
1990 allotment to Sunil
Kumar Sharma,
Arun Kumar
Khaitan, Surya
Prasad Agarwal,
Kishan Kumar
Agarwal, Binod
Kumar Sharma,
Kamal Kumar
Bagaria, Arvind
Kumar Sharma,
Rajesh, Butolia,
Ardhendu Kumar
Pande, Rupali Bose
and Pulin Das
April 20, 5,400 10 10 Cash Preferential 14,900 149,000 Nil
1990 allotment to S.K.
Panday, Bhupendra
Patel, Ashok Butolia,
Atma Pande,
Ramkishor Sharma,
K.M. Sharma, Prem
Lata Rathi, Rakesh
Rathi, Sanjeev Jain
and Tapan Pande
June 11, 12,500 10 10 Cash Preferential 27,400 274,000 Nil
1991 allotment to Suman
Bose, Bikash Gaur,
Vinod Kumar
Sharma, Himani
Shoparna, Sushma
Kumari Sharma,
Mahesh Kaushik and
Raj Kumar Sharma
March 27, 325,600 10 10 Cash Preferential 353,000 3,530,000 Nil
1995 allotment to Sushma
Kumari Sharma,
Adarsh Kumari
Sharma, Shakuntala
Sharma, Binesh
Kumar Sharma,
Mahesh Kaushik,
Bhagwati Butolia,
Anil Kumar
Agarwal, Nidhi
Shoparna, Abhishek
Shoparna, Anil
Agarwal, Rajesh
Butolia, Sunil Kumar
Agarwal, Neetu
Agarwal, Shoparna
Bros Private
Limited, Savitri
Agarwal, RLA
Consultancy
Services Private
Limited, Fancy Lane
Management

26
 Date of No. of Face Issue Consideration Reasons for Cumulative Cumulative Cumulative
allotment equity Value Price allotment no. of paid-up share premium
of equity shares (Rs.) (Rs.) equity equity
shares shares capital
(Rs.)
Services Private
Limited, Kamal
Kumar Agarwal,
Ashok Haldar,
Sambhu Haldar,
Mongola Haldar,
Subir Das, Somnath
Das, Sanjoy
Mukherjee, Arun
Kumar Sharma,
Soumay Ash, Durga
Devi Sharma, Kirti
Thakkar, Ashok
Butolia, Suman
Bose, K.M. Sharma,
Atma Panday,
Arvind Kumar
Sharma, Durga Devi
Sharma, Sunil
Kumar Sharma, Rita
Sharma, Simmi Gaur
and Krishna Mondal
July 17, 145,000 10 10 Cash Preferential 498,000 4,980,000 Nil
1995 allotment to Fancy
Lane Management
Services Private
Limited and Sunil
Kumar Sharma
March 30, 79,100 10 50 Cash Preferential 577,100 5,771,000 3,164,000
2002 allotment to
Shoparna Bros
Private Limited,
Radhika Trading
Company Private
Limited and Rita
Sharma
March 31, 113,240 10 50 Cash Preferential 690,340 6,903,400 7,693,600
2003 allotment to
Chakrapani Viniyog
Private Limited,
Radhika Trading
Company Private
Limited, Narain
Resources Private
Limited, Rajesh
Butolia, Uma Putrya
Estate Private
Limited, Bengal Poly
Sacks Private
Limited, Sunil
Kumar Sharma and
Suman Bose
March 30, 115,000 10 50 Cash Preferential 805,340 8,053,400 12,293,600
2004 allotment to
Shoparna Bros
Private Limited,
Durga Devi Sharma,
Rita Sharma, Rajesh
Butolia, Sunil Kumar
Sharma, Naranjan
Resources Private
Limited and Gourav
Kutir and Nivesh
Private Limited
October 160,000 10 500 Cash Preferential 965,340 9,653,400 90,693,600
24, 2005 allotment to Luv-
Kush
October 8,688,060 - - Capitalization Bonus issue in the 9,653,400 96,534,000 3,813,000
26, 2005 of Reserves ratio of 9:1
and Surplus

27
 Date of No. of Face Issue Consideration Reasons for Cumulative Cumulative Cumulative
allotment equity Value Price allotment no. of paid-up share premium
of equity shares (Rs.) (Rs.) equity equity
shares shares capital
(Rs.)
March 30, 346,600 10 75 Cash Preferential 10,000,000 100,000,000 25,873,000(2)
2006 allotment to Luv-
Kush
December 5,700,000 - - Capitalization Bonus issue in the 15,700,000 157,000,000 738,000(3)
18, 2007 of Reserves ratio of 57:100
and Surplus
December 2,625,000 10 30 Cash Preferential 18,325,000 183,250,000 53,238,000
31, 2007 allotment to the
Promoters, Promoter
Group and certain
employees(1)
December 280,000 10 75 Cash Preferential 18,605,000 186,050,000 71,438,000
31, 2007 allotment to certain
(1)
individuals
December 1,660,500 10 125 Cash Preferential 20,265,500 202,655,000 262,395,500
31, 2007 allotment to certain
individuals and
bodies corporate(1)
December 45,000 10 126 Cash Preferential 20,310,500 203,105,000 266,500,500(4)
31, 2007 allotment to certain
individuals(1)
May 20, (1,000,000) 10 125 Cash Buy-back of Equity 19,310,500 193,105,000 151,500,500(5)
2009 Shares on
Proportionate basis
from shareholders
(other than Promoter
and Promoter Group)
(1)
The Company allotted 4,610,500 Equity Shares to 105 allottees including Promoter, persons forming part of Promoter
Group, certain employees, other individuals and bodies corporate, through a preferential allotment. For details of the
names of allottees who were allotted Equity Shares of the Company on December 31, 2007 and the corresponding number
of Equity Shares allotted, see “List of Shareholders who were allotted Equity Shares on December 31, 2007” in “Material
Contracts and Documents for Inspection”.

The net asset value per Equity Share of the Company, on a consolidated basis, as at September 30, 2007 was Rs. 30.31.
Accordingly, the Company allotted 2,625,000 Equity Shares to the Promoters, to certain members of the Promoter Group
and to certain key employees of the Company at an issue price of Rs. 30 per Equity Share. The Company allotted 280,000
Equity Shares to nine individuals and bodies corporate at an issue price of Rs. 75 per Equity Share; 1,660,500 Equity
Shares to 78 individuals and bodies corporate at an issue price of Rs. 125 per Equity Share; and 45,000 Equity Shares to
five individuals at Rs. 126 per Equity Share. In each case, the issue price was determined on the basis of commercial
understanding between the Company and the allottees.
(2)
This accounts for issue expenses of Rs. 469,000.
(3)
Share premium of Rs. 25,000,000 was utilised towards the bonus issue.
(3)
This also accounts for issue related expenses of Rs. 135,000.
(4)
Share premium of Rs. 1,115,000 was utilised towards expenses in relation to issue of shares, being the amount paid as fees
to the Registrar of Companies, West Bengal for increase in authorized share capital.
(5)
Share premium of Rs. 115,000,000 was utilised towards buy-back of shares.

(b) Following is the history of preference share capital of the Company

Date of Number Issue price Reasons for Consideration Date of redemption

allotment of per allotment (cash or other than
preference preference cash.)
shares share (in
Rs.)
November 28, 2,700,000 10 Fresh issue Cash June 30th, 2007(1)
2006
(1)
Redemption was funded out of available profits the Company.

(c) Details of equity shares issued for consideration other than cash:

28
Date of Allotment Number of Face value Issue price Reason for allotment
of equity shares equity shares
October 26, 2005 8,688,060 10 - Bonus issue in the ratio of 9:1
December 18, 2007 5,700,000 10 - Bonus issue in the ratio of 57:100

2. History of Equity Share Capital held by Promoter

a) Details of the build up of the Promoters’ shareholding in the Company:

Date of Nature of Nature of No. of Face Issue/ Cumulative

Allotment/Transfer Transaction consideration Equity Value Acquisition no. of Equity
Shares Price (Rs.) Shares
Banwari Lal Mittal
August 1, 2005 Transferred from Cash 800,000 10 10 800,000
Nigolice Trading
Private Limited,
Deevee
Commercial
Limited and Arion
Commercial Private
Limited
October 26, 2005 Bonus Shares - 7,200,000 10 - 8,000,000

December 18, 2007 Bonus Shares - 4,560,000 10 - 12,560,000

December 31, 2007 Transferred to Gift (1,200,000) 10 - 11,360,000
Laxmi Narayan
Mandhana, Sumit
Kumar Agarwal
and Manish Kumar
Agarwal as
Trustees of
‘Microsec Vision
(Employees) Trust’
September 29, Transferred to Gift (577,000) 10 - 10,783,000
2009 Laxmi Narayan
Mandhana, Pankaj
Harlalka and
Manish Kumar
Agarwal as
Trustees of
Microsec Vision (
Employees) Trust
November 11, 2009 Transferred from Gift 15,700 10 - 10,798,700
Sushila Devi
Khaitan
November 11, 2009 Transferred from Gift 15,700 10 - 10,814,400
Prabhu Dayal
Khaitan
Ravi Kant Sharma
October 1, 2005 Transferred from Cash 1,000 10 10 1,000
Nigolice Trading
Private Limited
October 26, 2005 Bonus Shares - 9,000 10 - 10,000
December 18, 2007 Bonus Shares - 5,700 10 - 15,700
December 31, 2007 Allotment of shares Cash 867,500 10 30 883,200
on preferential
basis to Ravi Kant
Sharma
December 31, 2007 Transferred to Gift (6,400) 10 - 876,800

29
 Date of Nature of Nature of No. of Face Issue/ Cumulative
Allotment/Transfer Transaction consideration Equity Value Acquisition no. of Equity
Shares Price (Rs.) Shares
Laxmi Narayan
Mandhana, Sumit
Kumar Agarwal
and Manish Kumar
Agarwal as
Trustees of
‘Microsec Vision
(Employees) Trust’

3. Details of transactions in Equity Shares by the Directors, Promoters and Promoter Group entities
during the six months preceding the filing of the Draft Red Herring Prospectus with SEBI

S No. Name of Director/ Date of No. of Transaction Nature of

Promoter/ Promoter Transaction Equity Price (Rs.) Transaction
Group Shares
Promoters and Directors
1. Banwari Lal Mittal November 11, 15,700 - Gift
2009
November 11, 15,700 - Gift
2009
September 29, (577,000) - Gift
2009
Promoter Group
1. LKPL September 22, 968,033 125 Transfer
2009

4. Details of Promoters’ Contribution and Lock-in:

The Equity Shares, which are being locked-in, are not ineligible for computation of Promoter’s contribution
under the SEBI Regulations. Equity Shares offered by the Promoter for the minimum Promoter’s
contribution are not subject to pledge.

(a) Details of Promoters contribution locked in for three years

Pursuant to the SEBI Regulations, an aggregate of 20% of the fully diluted post-Issue capital of the
Company (i.e. 6,362,100 Equity Shares) held by our Promoter, Banwari Lal Mittal, shall be locked in for a
period of three years from the date of Allotment of Equity Shares in the Issue. The details of such lock-in
are set forth in the table below:

Sr. Date of Nature of Nature of No. of Face Issue/Acquisition Percentage Percentage

No. Acquisition Allotment/Transfer consideration Equity Value Price (Rs.) of Pre- of Post-
and when Shares Issue Paid- Issue Paid-
made fully locked in up Capital up Capital
paid-up
Banwari Lal Mittal
1. August 1, Transferred from Cash 223,000 10 10 1.15% 0.70%
2005 Nigolice Trading
Private Limited,
Deevee
Commercial
Limited and Arion
Commercial Private
Limited.
2. October Bonus shares(1) N/A 6,139,100 - - 31.79% 19.30%
26, 2005
Total - 6,362,100 32.94% 20.00%
(1)
The bonus shares, which has been considered for Promoters’ contribution to be locked in for a period of 3 years
are eligible under Regulation 33 of the SEBI (ICDR) Regulations, 2009

30
 The minimum Promoter’s contribution has been brought to the extent of not less than the specified
minimum lot and from persons defined as Promoter’s under the SEBI Regulations. The Promoter,
Banwari Lal Mittal, has through letter dated March 20, 2010 granted consent for the lock-in of 20% of
the post-issue paid up Equity Share capital of the Company, held by him, for three years from the date
of Allotment and lock in of the balance pre-issue Equity Share capital of the Company, held by him for
a period of one year from the date of Allotment.

Any Equity Shares allotted to Anchor Investors in the Anchor Investor Portion shall be locked-in for a
period of 30 days from the date of Allotment of Equity Shares in the Issue.

(b) Details of share capital locked in for one year

In addition to 20% of the post-Issue shareholding of the Company held by the Promoters and locked in
for three years as specified above, the entire pre-Issue share capital of the Company will be locked in
for a period of one year from the date of Allotment in this Issue.

(c) Other Requirements in respect of lock-in

The Equity Shares held by persons other than the Promoters prior to the Issue may be transferred to any
other person holding the Equity Shares which are locked-in along with the Equity Shares proposed to
be transferred, subject to continuation of the lock-in in the hands of the transferees for the remaining
period and compliance with the Takeover Code as applicable.

Equity Shares held by the Promoters may be transferred to any other Promoter or to any other person of
the Promoter Group or to a new promoter or person in control of the Company, subject to continuation
of the lock-in in the hands of the transferees for the remaining period and compliance with the
Takeover Code as applicable.

The Equity Shares held by the Promoters, which are locked-in for a period of three years from the date
of Allotment in the Issue can be pledged with any scheduled commercial bank or public financial
institution as collateral security for loans granted by such banks or financial institutions, provided that
the pledge of the Equity Shares can be created when the loan has been granted by such banks or
financial institutions for financing one or more of the objects of the Issue and pledge of Equity Shares
is one of the terms of sanction of the loan.

The Equity Shares held by the Promoters which are locked-in for a period of one year from the date of
Allotment in the Issue can be pledged with any scheduled commercial bank or public financial
institution as collateral security for loans granted by such bank or financial institution, provided that
pledge of Equity Shares is one of the terms of sanction of the loan.

5. The shareholding pattern

The table below presents the shareholding pattern of the Company before the proposed Issue and as
adjusted for the Issue:

Category of No. of Pre-Issue Shareholding Post – Issue Shareholding# Shares pledged or

Shareholder Sharehol otherwise
ders encumbered
Total No. Total No. of Total Total No. Total Shareholding Number As a
of Shares Shares held in Shareholding as a of Shares as a % of total No. of % of
Dematerialized % of total No. of of Shares shares Total
Form Shares No. of
Share
s
As a As a % As a % As a %
% of of of of
(A+B) (A+B+C) (A+B) (A+B+C)
(A) Shareholding of
Promoter and
Promoter Group
(1) Indian
Individuals / Hindu
Undivided Family
Banwari Lal Mittal 10,814,400 - 56.00 56.00 10,814,400 34.00 34.00 Nil Nil
Ravi Kant Sharma 876,800 - 4.54 4.54 876,800 2.75 2.75 Nil Nil

31
 Category of No. of Pre-Issue Shareholding Post – Issue Shareholding# Shares pledged or
Shareholder Sharehol otherwise
ders encumbered
Total No. Total No. of Total Total No. Total Shareholding Number As a
of Shares Shares held in Shareholding as a of Shares as a % of total No. of % of
Dematerialized % of total No. of of Shares shares Total
Form Shares No. of
Share
s
As a As a % As a % As a %
% of of of of
(A+B) (A+B+C) (A+B) (A+B+C)
Abha Mittal 15,700 5,700 0.08 0.08 15,700 0.05 0.05 Nil Nil
Bharati Sharma 323, 200 5700 1.67 1.67 323, 200 1.02 1.02 Nil Nil
Total (Individuals / 4 12,030,100 11,400 62.29 62.29 12,030,100 37.82 37.82 Nil Nil
Hindu Undivided
Family)
Central Government/ 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
State Governments
Bodies Corporate 1 4,197,533 2,336,033 21.74 21.74 4,197,533 13.20 13.20 Nil Nil
(Luv-Kush Projects
Limited)
Financial Institutions/ 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
Banks
Any other (Trusts) 1 1,200,000 - 6.22 6.22 1,200,000 3.76 3.76 Nil Nil
Ravi Kant Sharma
jointly with Luv-
Kush Projects
Limited (as trustees
of Microsec Vision
Trust One)
Sub Total (1) 6 17,427,633 2,347,433 90.25 90.25 17,427,633 54.78 54.78 - -
(2) Foreign
Individuals (Non- 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
Resident Individuals/
Foreign Individuals)
Bodies Corporate 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
Institutions 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
Any other (specify) 0 0 0 0.00 0.00 0 0.00 0.00 Nil Nil
Sub Total (2) 0 0 0 0.00 0.00 0 0.00 0.00 - -
Total shareholding 6 17,427,633 2,347,433 90.25 90.25 17,427,633 54.78 54.78 - -
of Promoter and
Promoter Group (A)
= (A)(1) + (A) (2)

(B) Public
Shareholding
(1) Institutions
Mutual Funds / UTI 0 0 0 0.00 0.00 0 0.00 0.00 - -
Financial Institutions 0 0 0 0.00 0.00 0 0.00 0.00 - -
/ Banks
Central Government / 0 0 0 0.00 0.00 0 0.00 0.00 - -
State Government(s)
Venture Capital 0 0 0 0.00 0.00 0 0.00 0.00 - -
Funds
Insurance Companies 0 0 0 0.00 0.00 0 0.00 0.00
Foreign Institutional 0 0 0 0.00 0.00 0 0.00 0.00 - -
Investors
Foreign Venture 0 0 0 0.00 0.00 0 0.00 0.00 - -
Capital Investors
Any other (specify) 0 0 0 0.00 0.00 0 0.00 0.00 - -
Sub Total (1) 0 0 0 0.00 0.00 0 0.00 0.00 - -
(2) Non-Institutions
Bodies Corporate 2 55,575 55,575 0.29 0.29 55,575 0.17 0.17 - -
Individuals
Individual 4 28,892 28,892 0.15 0.15 28,892 0.09 0.09 - -
shareholders holding
nominal share capital
up to Rs. 1 lakh
Individual 1 15,000 15,000 0.07 0.07 15,000 0.04 0.04 - -
shareholders
holding nominal
share capital in
excess of Rs. 1
lakh
Any Others
(Specify)
Trust (Pankaj 1 1,783,400 0 9.24 9.24 1,783,400 5.61 5.61 - -
Harlalka, Manish
Kumar Agarwal and
Giridhar Dhelia as
trustees of Microsec
Vision (Employees)
Trust)

32
 Category of No. of Pre-Issue Shareholding Post – Issue Shareholding# Shares pledged or
Shareholder Sharehol otherwise
ders encumbered
Total No. Total No. of Total Total No. Total Shareholding Number As a
of Shares Shares held in Shareholding as a of Shares as a % of total No. of % of
Dematerialized % of total No. of of Shares shares Total
Form Shares No. of
Share
s
As a As a % As a % As a %
% of of of of
(A+B) (A+B+C) (A+B) (A+B+C)
Non Resident Indians 0 0 0 0.00 0.00 0 0.00 0.00 - -
Sub Total (2) 8 1,882,867 99,467 9.75 9.75 1,882,867 5.91 5.91 - -
Total Public 8 1,882,867 99,467 9.75 9.75 1,882,867 5.91 5.91 - -
shareholding (B) =
(B)(1) + (B)(2)

Total (A)+(B) 14 19,310,500 2,458,300 100.00 100.00 31,810,500 100.00## 100.00## - -

##

(C) Shares held by 0 0 0 0.00 0.00 0 0.00 0.00 - -

Custodians and
against which
Depository Receipts
have been issued
Total (A)+(B)+(C) 14 19,310,500 2,458,300 100.00 100.00 31,810,500 100.00 100.00 - -
##

#
On the assumption that the non-Promoter Group shareholders do not apply for, and are not allotted Equity Shares in terms of the Issue. As
stated in note 30 below, none of the Promoters or the Promoter Group will participate in the Issue.
##
Including 12,500,000 Equity Shares to be issued and Allotted pursuant to the Issue.

6. Top Ten Shareholders:

The list of top ten shareholders of the Company and the number of Equity Shares held by them is as under:

(a) As on the date of this Red Herring Prospectus:

S. Shareholder No. of Equity Percentage

No. Shares held
1. Banwari Lal Mittal 10,814,400 56.00%

2. LKPL 4,197,533 21.74%

3. Pankaj Harlalka, Manish Kumar Agarwal and Giridhar 1,783,400 9.24%
Dhelia as Trustees of Microsec Vision ( Employees) Trust
4. Ravi Kant Sharma jointly with LKPL as Trustees of 1,200,000 6.22%
Microsec Vision Trust One
5. Ravi Kant Sharma 876,800 4.54%
6. Bharati Sharma 323,200 1.67%
7. Peeramadi Tracon Private Limited 44,460 0.23%
8. Abha Mittal 15,700 0.08%
9. Rani Agarwal 15,000 0.07%
10. Naman Vincom Private Limited 11,115 0.06%

(b) As of 10 days prior to the date of this Red Herring Prospectus

S.No. Shareholder No. of Equity Percentage

Shares held
1. Banwari Lal Mittal 10,814,400 56.00%
2. LKPL 4,197,533 21.74%
3. Pankaj Harlalka, Manish Kumar Agarwal and Giridhar 1,783,400 9.24%
Dhelia as Trustees of Microsec Vision ( Employees) Trust
4. Ravi Kant Sharma jointly with LKPL as Trustees of 1,200,000 6.22%
Microsec Vision Trust One
5. Ravi Kant Sharma 876,800 4.54%
6. Bharati Sharma 323,200 1.67%
7. Peeramadi Tracon Private Limited 44,460 0.23%
8. Abha Mittal 15,700 0.08%

33
 S.No. Shareholder No. of Equity Percentage
Shares held
9. Rani Agarwal 15,000 0.07%
10. Naman Vincom Private Limited 11,115 0.06%

(c) Two years prior to the date of this Red Herring Prospectus

S.No. Shareholder No. of Equity Percentage

Shares held
1. Banwari Lal Mittal 11,360,000 55.93%
2. Laxmi Narayan Mandhana, Sumit Kumar Agarwal and 1,206,400
Manish Kumar Agarwal as Trustees of Microsec Vision
(Employees) Trust 5.94%
3. Ravi Kant Sharma jointly with Luv-Kush Projects Limited
as Trustees of Microsec Vision Trust One
1,200,000 5.91%
4. Rakesh Sony Jointly with Luv-Kush Projects Limited as
Trustees of Microsec Vision Trust Two
1,200,000 5.91%
5. Ravi Kant Sharma 876,800 4.32%
6. Luv-Kush Projects Limited 661,500 3.26%
7. Rakesh Sony 600,000 2.95%
8. Kavita Sony 600,000 2.95%
9. Maa Sarda Consultants Private Limited 600,000 2.95%
10. Bharati Sharma 323,200 1.59%

7. Buy Back of Equity Shares:

In terms of resolution passed by the shareholders of the Company at the EGM held on March 28, 2009
authorising the Company to buy back its own equity shares under buy back programme, the Company has
bought back 1,000,000 equity shares of Rs. 10 each fully paid representing 4.92% of its paid up equity
share at a price of Rs. 125 per equity share on a proportionate basis. The buy back was through a tender
offer in compliance with the Companies Act and the Private Limited Company and Unlisted Public
Company (Buy-back of Securities) Rules, 1999 to all the shareholders of the Company except its
Promoters, Promoter Group and the Employees.

8. Currently, about 9.24% of pre issue capital is owned by ‘Microsec Vision (Employees) Trust’ with
employees of the Company and its Subsidiaries as its beneficiaries and Banwari Lal Mittal as the settler of
the trust. The consideration received by the Microsec Vision (Employees) Trust is utilised for the benefit
and welfare of the employees. For further details see “History and Certain Corporate Matters – Trusts” on
page 88 of this Red Herring Prospectus.

9. The Company has not issued any Equity Shares under any employee stock option scheme or employee
stock purchase scheme. Certain employees of the Company and subsidiaries were granted employee stock
options under Microsec Employee Stock Option Plan 2007. By agreement dated August 17, 2009 between
the Company and such employees, we have terminated the Microsec Employee Stock Option Plan 2007
whereby all options granted to such employees were cancelled. For further details see “Financial
Statements” on page 116 of this Red Herring Prospectus.

10. The Company, the Directors, Promoters, Promoter Group, their respective directors and the BRLM have not
entered into any buy-back for the purchase of Equity Shares from any person.

11. Except as stated in section titled “Management” on page 91 of this Red Herring Prospectus, none of the
Directors or key managerial personnel hold any Equity Shares in the Company.

12. Except as stated above, Promoters, Directors and Promoters Group have not purchased or sold any Equity
Shares during a period of six months preceding the date of filing the Draft Red Herring Prospectus with
SEBI.

34
13. A Bidder cannot make a Bid for more than the number of Equity Shares offered through the Issue, subject
to the maximum limit of investment prescribed under relevant laws applicable to each category of investor.

14. No person connected with the Issue shall offer any incentive, whether direct or indirect, in any manner,
whether in cash, kind, services or otherwise, to any Bidder.

15. There are no outstanding financial instruments or any other rights which would entitle the existing
promoters or shareholders or any other person any option to acquire the Equity Shares after the Issue.

16. The Company has not raised any bridge loan against the proceeds of the Issue. For details on use of
proceeds, see “Objects of the Issue” on page 37 of this Red Herring Prospectus.

17. There will be no further issue of Equity Shares, whether by way of issue of bonus shares, preferential
allotment, rights issue or in any other manner during the period commencing from submission of the Draft
Red Herring Prospectus with SEBI until the Equity Shares have been listed.

18. The Company presently does not have any intention to or proposal to alter the capital structure by way of
split or consolidation of the denomination of the Equity Shares, or issue Equity Shares on a preferential
basis or issue of bonus or rights or further public issue of Equity Shares (including issue of securities
convertible into or exchangeable, directly or indirectly for Equity Shares) or qualified institutions
placement, within a period of six months from the date of opening of the Issue.

19. There shall be only one denomination of Equity Shares, unless otherwise permitted by law. The Company
shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.

20. The Equity Shares will be fully paid up at the time of Allotment.

21. The Company has 14 members as of the date of this Red Herring Prospectus.

22. The Company is a non banking financial company and in terms of the second proviso to Section 67 (3) of
the Companies Act, 1956, the first proviso to Section 67 (3) is not applicable to the Company. The
Company has not made an offer or invitation to offer to the public within the meaning of Section 67 of the
Companies Act and accordingly the Company is compliant with the provisions of Section 67 at the time of
making the allotments disclosed in “Capital Structure” on page 25 of this Red Herring Prospectus.

23. The Company has not issued any Equity Shares out of revaluation reserves. Except as disclosed in “Capital
Structure – Notes to Capital Structure” on page 26 of this Red Herring Prospectus, the Company has not
issued any Equity Shares for consideration other than cash.

24. As per the RBI regulations, OCBs are not allowed to participate in the Issue.

25. The Company, Directors, Promoters or Promoter Group shall not make any payments direct or indirect,
discounts, commissions, allowances or otherwise under this Issue.

26. The Equity Shares held by the Promoters are not subject to any pledge.

27. The Company has not issued or allotted any Equity Shares in terms of any scheme approved under sections
391-394 of the Companies Act, 1956.

28. The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue
shall be available for allocation on a proportionate basis to QIB Bidders. 5% of the QIB Portion (excluding
the Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only,
and the remainder shall be available for allocation on a proportionate basis to all QIBs, including Mutual
Funds, subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the
Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than
35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders,
subject to valid Bids being received at or above the Issue Price.

Under-subscription, if any, in any of category will be allowed to be met with spill over from any other
category at the discretion of the Company, in consultation with the BRLM.

35
29. An oversubscription to the extent of 10% of the Issue can be retained for the purpose of rounding off while
finalizing the basis of Allotment.

30. Our Promoters and members of our Promoter group will not participate in the Issue.

31. There are no financing arrangements whereby the Promoter Group, the Directors of the Company and their
relatives have financed the purchase by any other person of securities of the Company other than in the
normal course of the business of the financing entity during the period of six months immediately preceding
the date of filing the Draft Red Herring Prospectus with the Board.

32. As on the date of the Red Herring Prospectus, the BRLM and its associates do not hold any Equity Shares
in the Company.

36
 OBJECTS OF THE ISSUE

The objects of this Issue are to:

1. Expand our Financing business;

2. Expand MCap’s domestic operations by increasing network of branches;
3. Enhance MCap’s existing technological capacity;
4. General corporate purposes; and
5. Enhance our visibility and achieve the benefits of listing the Equity Shares on the Stock Exchanges.

The main objects and objects incidental or ancillary to the main objects set out in our Memorandum of
Association enable us to undertake our existing and proposed activities/ expansion for which funds are being
raised by us through the issue. Further, we confirm that the activities of the Company has been carrying out until
now are in accordance with the objects clause of its Memorandum of Association.

Requirement of Funds

The details of the proceeds of the Issue are summarized in the table below:
(Rs. in Million)
Particulars Amount
Gross proceeds of the Issue [●]
Issue related expenses [●]
Net proceeds of the Issue (“Net Proceeds”)* [●]
*To be finalized upon determination of Issue Price.

Utilisation of the Net Proceeds

The intended use of utilization of Net Proceeds is summarized in table below:

(Rs. in Million)
Particulars Amount
Expansion of financing business of the Company 1,130.00
Expansion of MCap’s domestic operations by increasing network of branches 80.00
Enhance MCap’s existing technological capacity 75.00
General Corporate Purposes* [●]
* The amount to be deployed towards general corporate purposes will be decided after finalization of Issue
Price.

The entire requirements of the objects detailed above are intended to be funded from the proceeds of the issue.
Accordingly, we confirm that there is no requirement for us to make firm arrangements of finance through
verifiable means towards at least 75% of the stated means of finance, excluding the amount to be raised from the
issue.

Deployment of Net Proceeds:

The details of application of Net Proceeds towards the abovementioned objects and the proposed schedule of
deployment of funds are set out below.
(Rs. in Million)
Objects Amount Estimated schedule of
deployment of funds

Fiscal year 2011

Expansion of financing business of the Company 1,130.00 1,130.00
Expansion of MCap’s domestic operations by increasing
80.00 80.00
network of branches
Enhance MCap’s existing technological capacity 75.00 75.00
General Corporate Purposes* [●] [●]
Total* [●] [●]

37
* The amount to be deployed towards general corporate purposes will be decided after finalization of Issue
Price.

The fund requirement in the table above is based on our current business plan. In view of the competitive and
dynamic nature of the industry in which we operate, we may have to revise our business plan from time to time
and consequently our fund requirement and deployment of funds may also change. This may, subject to
compliance with applicable laws and regulations, also include rescheduling the proposed utilization of Net
Proceeds and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net
Proceeds at the discretion of our management. In case of any increase in the actual utilization of funds
earmarked for the above activities, such additional fund for a particular activity will be met from a combination
of internal accruals or debt infusion. If the actual utilization towards any of the aforesaid objectives is higher
than what is stated above, such increased fund requirements be financed by surplus funds, if any, available in
respect of the other purposes. If the actual utilization towards any of the aforesaid objectives is lower than what
is stated above, such balance will be used for future growth opportunities. In the event of a shortfall, the fund
requirements will be met from internal accruals. In the event any surplus is left out of the Issue Proceeds after
meeting all the aforesaid objectives, such surplus proceedings be used for general corporate purposes including
for meeting future growth opportunities.

Details of Objects

Certain part of the objects of the Issue is proposed to be utilized towards investment in Subsidiaries through
equity. We believe that such investments will provide scope for further growth in the business of the Subsidiary
by helping it increase its net worth to do larger volume of business. Any growth in the business of our
Subsidiaries will bring in larger dividends or higher valuation of the equity investments of the Company.

I. Expansion of Financing Business of the Company

The Company intends to utilize approximately Rs. 1,130 million from the Net Proceeds towards the
expansion of the financing business.

As on June 30, 2010 we have 459 registered clients in the LAS business of the Company. We believe that
the financing facility offered by us enables our customers to leverage their equity market positions to
increase their exposure to the capital markets.

Our business of providing loans against shares is complementary to our broking business as we believe we
understand equity markets better than entities that are purely into the lending business. We have more than
26,000 clients registered with us for our broking services as on June 30, 2010. Our revenues from the equity
broking and related services for the years ended March 31, 2009 and 2010 were Rs.156.20 million and Rs.
194.75 million respectively. We believe that we can draw on this broking business by cross-selling our
financing services. We also intend to provide financing services through loans against shares to customers
who may not be clients of our brokerage services.

The restated consolidated deployment in LAS as on March 31, 2009 and 2010 was Rs.142.93 million and
Rs. 405.39 million respectively. As on March 31, 2010 out of restated consolidated deployment in LAS of
Rs. 405.39 million Rs. 305.12 million was in MFSL among 72 clients availing LAS facility, which works
out to an average lending per client of Rs. 4.24 million. We estimate a total LAS deployment of Rs.
1,946.16 on the basis of 459 clients registered with the Company as on March 31, 2010 in relation to our
LAS services with an average lending rate per client of Rs. 4.24 million as calculated in the table below.
This results in an additional requirement of Rs. 1,641.04 million in comparison to Rs. 305.12 million as on
March 31, 2010 by the Company. This incremental requirement of Rs. 1,641.04 million will be met partly
by Net Proceeds of the issue and balance through internal accruals. The table below sets forth the basis of
estimation of the total requirement towards the Company’s LAS business:

Amount/ No. of
Particulars Clients
Standalone deployment in LAS business as on 31.03.2010 (A) Rs. 305.12 million
No. of clients availing the LAS facility as on 31.03.2010 (B) 72 clients
Average LAS amount per client (C = A/B) Rs. 4.24 million
No. of registered clients as on 31.03.2010 (D) 459 clients

38
 Amount/ No. of
Particulars Clients
Expected deployment in LAS business (E = C*D) Rs. 1,946.16 million
Net Incremental Requirement towards LAS business by 31.03.2011 (E-A) Rs. 1,641.04 million
Net Incremental Requirement to be met through Net Proceeds from the Issue Rs. 1,130.00 million
Net Incremental Requirement to be met through Internal Accruals Rs. 511.04 million

We provide the loans against appropriate margin of liquid and marketable securities. We provide loans
against shares mentioned in the approved list which is reviewed periodically by the senior management
team of our risk management department and by our Board. We have established effective risk management
system & tools to monitor the financing provided to the customers. For further details see “Our Business”.

Rs. 1,130 million out of the Net Proceeds would be utilised towards loan against shares business of the
Company. No portion of the amount earmarked towards this object will be utilised by any Subsidiary of the
Company. This is based on our management’s estimates and no projections for the same are available. The
requirement of funds for our financing activities is primarily driven by the growth in the number of
customers registered for LAS facility and broking facility.

II. Expanding MCap’s Domestic Operations by Increasing the Network of Branches

At present, we have a network of 237 business locations/ branches in 16 states in India, which are run by
our Subsidiary, MCap. Consistent with our strategy to expand our domestic operations and network of
branches, we propose to establish another 30 branches out of the Net Proceeds. We intend to set up these
branches in various parts of India by funding our Subsidiary MCap through an infusion of funds. The
Company and its Subsidiaries operate as an integrated business group, and the Company utilizes MCap’s
network of branches for its business operations. Accordingly, as a result of the investment, the Company
expects to be able to expand its geographical presence and be able to cross-sell its products and services to
clients of MCap.

Although we do not believe that we will receive regular dividend inflows pursuant to such investments,
since MCap will utilise all available resources into its business operations, we believe that such investments
in the said subsidiaries is in line with the strategy of expanding our geographical presence. Further, as
MCap is a wholly owned subsidiary of the Company, growth of MCap will contribute in capitalization of
value of investment.

The estimated cost for establishment of the branches primarily comprises advance rent and deposit for
lease/license arrangements, expenditures on furniture and fixtures, installation of computers, network-
connectivity etc. Since the required equipments are standard in nature, the estimated costs remain largely
the same for similar sized branches, irrespective of the location of the branch. However, the rents and
deposits for lease/license arrangements and expenses towards furnishing may vary based on location, size
and several other factors.

Based on the above factors and our experience in establishing branches so far, we expect to incur, on an
average, Rs. 1.5 million in establishing one branch.
(Rupees in million)
Particulars Estimated cost of establishing one
branch of
Microsec Capital Limited
Deposits / Advance Rentals 0.30
Furniture and Fixtures 0.80
IT and Other office Equipment 0.30
Incidental and miscellaneous costs such as business 0.10
promotion items
Total estimated costs 1.50

The above estimates are based on quotations dated February 1, 2010 received from Adwise India

39
 Further, based on our past experience, the time taken to establish a branch may take up to 90 days from the
date of identification of the location of the prospective branch. Since the time required in establishing a
branch is relatively short, currently we have not made any prior arrangements for establishment of any of
these branches. Further, no second-hand equipment and instruments are proposed to be purchased from the
Net Proceeds. We expect to incur a total cost of Rs. 45 million towards setting up of our 30 branches.

In addition our branches, we propose to set up regional offices in South (Chennai and Bangalore), North
(Delhi) and West (Ahmedabad). These offices are proposed to be set up for the purposes of administration
and control of our branches in the aforementioned regions. We expect to incur, on an average, Rs. 8.75
million in establishing one regional office.
(Rupees in million)
Particulars Estimated cost of establishing one
branch of
Microsec Capital Limited
Deposits / Advance Rentals 2.00
Furniture and Fixtures 3.50
IT and Other office Equipment 2.75
Incidental and miscellaneous costs such as business 0.50
promotion items
Total estimated costs 8.75

The above estimates are based on quotations dated February 1, 2010 received from Design & U. We expect
to incur total cost of Rs. 35 million for setting up our regional offices in aforementioned regions.

The schedule for deployment of funds for setting up our branches and regional offices is set forth in the
table below:

Particulars Fund requirement Fund deployment in

(Rs. million) Fiscal 2011 (Rs. million)
Setting up of branches 45.00 45.00
Setting up of regional offices 35.00 35.00
Total estimated cost for expansion of MCap’s 80.00 80.00
domestic operations by increasing network of
branches

We propose to fund MCap through capital infusion as equity. We estimate that Rs. 80.00 million will be
required by our Subsidiary, MCap towards establishment of additional branches and regional offices. \

For details regarding the business of MCap, see ‘Our Business’ on page 59 of this Red Herring Prospectus.

III. Enhance MCap’s Existing Technological Capacity

In order to further improve our service offering and to meet our technological needs due to expansion in our
business lines, we are required to spend on our technology platforms and systems. The expenditure in
technology will be towards (a) acquisition of additional infrastructure, hardware/ software, server, ‘disaster
recovery site’ (b) CRM and integrated multi-channel portal and (c) development of a ‘business continuity
plan’. This is expected to ensure availability of trading and service platforms at an alternate location and
will include trading, back office, depository, customer service, networks and exchange connectivity. We
have projected a capital expenditure of Rs. 75 million based on our future requirements as estimated by the
management. The details of the equipment that we intend to purchase and their estimated costs, including
the costs of associated spares, attachments and other accessories, are specified in the following capital
expenditure plan:

Sr. Particulars Name of Date of Amount (in Rs.

No. Vendor Quotation million)
1. Setup of Disaster recovery Site, Diamond Feb 3, 2010 59.50
acquisition of additional servers, infotech Pvt
virtualisation, consolidation Ltd
2. CRM, Integrated multi channel portal, Talisma Feb 8,2010 15.50

40
 Sr. Particulars Name of Date of Amount (in Rs.
No. Vendor Quotation million)
back office software Corporation
Pvt Ltd,
Accord fintech Jan 12,2010
Bennett Dec 5,2009
Technlogies
Pvt Ltd
Total 75.00

As of the date of this Red Herring Prospectus, the Company has not deployed any funds towards this object.

For the above estimates, most of the equipment of machinery or equipment is yet to be ordered and the
Company has relied upon the quotations specified above as well as past experience. The Company has not
yet made a decision to finalize the suppliers for the above equipment.

The figures in the Company’s capital expenditure plans are based on management estimates and have not
been appraised by an independent organization. In addition, the Company’s capital expenditure plans are
subject to a number of variables, including possible cost overruns or defects and changes in the
management’s view of the desirability of the current plans, among others.

We intend to enhance our technological capacities by funding our Subsidiary MCap. Infusion of funds in
MCap will be in the form of investment in shares. Although we do not believe that we will receive regular
dividend inflows pursuant to such investments we believe that such investments in the said subsidiaries is in
line with the strategy of expanding our geographical presence.

IV. Fund expenditure for general corporate purposes

The Net Proceeds will be first utilised towards the aforesaid items and the balance is proposed to be utilized
for general corporate purposes including but not restricted to expenses towards strategic initiatives, brand
building exercises and strengthening of our marketing capabilities, which the Company in the ordinary
course of its business may face, or any other purpose as may be approved by the Board.

Our management, in response to the competitive and dynamic nature of the industry, will have the
discretion to revise its business plan from time to time and consequently our funding requirement and
deployment of funds may also change. This may also include rescheduling the proposed utilization of Net
Proceeds and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net
Proceeds. In case of a shortfall in the Net Proceeds of the Issue, our management may explore a range of
options including utilizing our internal accruals or seeking debt from future lenders. Our management
expects that such alternate arrangements would be available to fund any such shortfall. Our management,
in accordance with the policies of our Board, will have flexibility in utilizing the proceeds earmarked for
general corporate purposes.

Bridge Financing Facilities

We have not entered into any bridge loan facility that will be repaid from the Net Proceeds of the Issue.

Issue Related Expenses

The estimated Issue related expenses are as follows:

Activity Expenses* Percentage of Percentage of

(Rs. in million) the Issue the Issue size*
Expenses*
Lead manager fee and underwriting [●] [●] [●]
expenses (including commission to SCSBs
for ASBA Applications)*
Registrar to the Issue [●] [●] [●]
Advertising and marketing expenses [●] [●] [●]
Printing and stationery [●] [●] [●]

41
 Activity Expenses* Percentage of Percentage of
(Rs. in million) the Issue the Issue size*
Expenses*
Bankers to the Issue [●] [●] [●]
Others (SEBI filing fees, IPO grading [●] [●] [●]
expenses, legal fees, etc.)
Total estimated Issue expenses [●] [●] [●]
* To be incorporated after finalization of the Issue price.

Interim use of funds

The Company intends to use the proceeds of the Issue to meet all or any of the uses of funds described
above. Pending utilization for the purposes described above, the Company intends to invest the funds in
high quality interest bearing liquid instruments including money market mutual funds, deposits with banks,
for the necessary duration or reducing overdrafts. Such investments would be in accordance with
investment policies approved by the Board from time to time.

Monitoring Utilization of Funds

Our Board will monitor the utilization of the proceeds of the Issue. We will disclose the utilization of the
proceeds of the Issue under a separate head along with details, for all such proceeds of the Issue that have
not been utilized. We will indicate investments, if any, of unutilized proceeds of the Issue in our balance
sheet for the relevant financial years subsequent to our listing.

Pursuant to clause 49 of the Listing Agreement, we shall on a quarterly basis disclose to the Audit
Committee the uses and applications of the proceeds of the Issue. On an annual basis, we shall prepare a
statement of funds utilized for purposes other than those stated in this Red Herring Prospectus and place it
before the Audit Committee. Such disclosure shall be made only until such time that all the proceeds of the
Issue have been utilized in full. The statement will be certified by the statutory auditors of the Company.

We shall be required to inform material deviations in the utilization of Issue proceeds to the stock
exchanges and shall also be required to simultaneously make the material deviations/ adverse comments of
the Audit committee/monitoring agency public through advertisement in newspapers.

No part of the proceeds from the Issue will be paid by us as consideration to our Promoters, Promoter group
companies, our Directors, group companies or key managerial employees, except in the normal course of
our business.

42
 BASIS FOR ISSUE PRICE

The Issue Price will be determined by the Company in consultation with the BRLM on the basis of the
assessment of market demand for the offered Equity Shares by the book building process. The face value of the
Equity Shares of the Company is Rs. 10 each and the Issue Price is [●] times of the face value at the lower end
of the Price Band and [●] times the face value at the higher end of the Price Band.

Qualitative Factors

x Integrated business model

x Experienced senior management and “people partnership” model

x Strong regional base with emerging pan India presence

x Brand recognition and strong relationships

x Adequate internal controls and risk management system

x Research and knowledge based organisation

For more details on qualitative factors, refer to section titled “Our Business - Business Strengths” on page 67 of
this Red Herring Prospectus.

Quantitative Factors

1. Basic and Diluted Earnings per share (EPS)- Standalone

Year ended March 31 Basic and Diluted EPS (Rs.) Weight

2010 5.67 3
2009 2.80 2
2008 4.57 1
Weighted Average 4.53

2. Basic and Diluted Earnings per share (EPS)- Consolidated

Year ended March 31 Basic and Diluted EPS (Rs.) Weight

2010 12.58 3
2009 4.28 2
2008 9.57 1
Weighted Average 9.31

3. Price Earnings Ratio (P/E) in relation to the Issue price of Rs. [●] per share

a. P/E based on Basic and Diluted EPS (Standalone) for the year ended March 31, 2010: [●] times
b. P/E based on Basic and Diluted EPS (Consolidated) for the year ended March 31, 2010: [●] times
c. Industry P/E
a. Highest : 279.4
b. Lowest : 0.9
c. Industry Composite : 24.1

Source: Capital Market Volume XXV/12-Aug 09-22, 2010, Category: Finance & Investment

4. Return on Networth (RoNW) - Standalone

Year ended March 31 RoNW (%) Weight

2010 19.68 3
2009 9.75 2
2008 14.61 1

43
 Year ended March 31 RoNW (%) Weight
Weighted Average 15.53

5. Return on Networth (RoNW) - Consolidated

Year ended March 31 RoNW (%) Weight

2010 26.70 3
2009 10.80 2
2008 22.45 1
Weighted Average 20.69

6. Minimum Return on Total Net Worth after Issue needed to maintain Pre-Issue Basic EPS for the year
ended March 31, 2010 is [●]

7. Net Asset Value

NAV (Consolidated) as at March 31, 2010 : Rs. 47.42 per Equity Share
NAV (Standalone) as at March 31, 2010 : Rs. 29.00 per Equity Share

Issue price : Rs. [●] per Equity Share

NAV (Consolidated) after the Issue : Rs. [●] per Equity Share
NAV (Standalone) after the Issue : Rs. [●] per Equity Share

8. Comparison with Industry peers

Face value EPS (Rs.) P/E RoNW (%) Book Value

(Rs.) as at For the year Ratio For the year Per share
March 31, ended March ended March (Rs.)
2010 31, 2010 31, 2010 As at March
31, 2010
1. Motilal Oswal 1 2.9 53.1 9.35 32.8
2. Edelweiss 1 0.51 97.94 2.57 17.4
3. India Infoline 2 4.7 20.1 14.1 38.2
4. IndiaBulls 2 7.3 18.8 7.22 130.7
5. Religare 10 4.0 115.5 2.02 198.2
6. MFSL(1) 10 12.58 - 26.70 47.42
Peer Group Average - 3.88 61.088 7.052 83.46
(1)
On consolidated basis as at and for the year ended March 31, 2010, as restated

Note: The EPS, RoNW and NAV figures for peer group companies are based on the latest audited
statements for the year ended March 31, 2010 for the respective companies and P/E is based on trailing
12 months (TTM) and market data.

Source: www.capitalmarket.com, Category: Finance & Investment, as on August 30, 2010

The Issue price will be [●] times of the face value of the Equity Shares. The BRLM believes that the Issue Price
of Rs. [●] is justified in view of the above qualitative and quantitative parameters.

44
 STATEMENT OF TAX BENEFITS

To,
The Board of Directors
M/s Microsec Financial Services Limited,
Kolkata

Dear Sirs,

Statement of Possible Tax Benefits Available to the Company and its shareholders

We hereby report that the enclosed statement provides the possible tax benefits available to the Company and to
the shareholders of the Company under the Income tax Act, 1961 and Wealth Tax Act, 1957 presently in force
in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions
prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to
derive the tax benefits is dependent upon fulfilling such conditions, which based on the business imperatives,
the Company faces in the future, the Company may or may not choose to fulfill.

The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide
general information to the investors and is neither designed nor intended to be a substitute for professional tax-
advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is
advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their
participation in the issue.

We do not express any opinion or provide any assurance as to whether:

(i) Company or its shareholders will continue to obtain these benefits in future; or
(ii) The conditions prescribed for availing the benefits has been/ would be met with.

The contents of the enclosed statement are based on information, explanations and representations obtained
from the Company and on the basis of our understanding of the business activities and operations of the
Company.

For S.R. Batliboi & Co.

Firm Registration Number: 301003E
Chartered Accountants

Place: Kolkata
Date: August 14, 2010
Per R.K. Agrawal
Partner
Membership No. 16667

45
STATEMENT OF TAX BENEFITS

(i) SPECIAL TAX BENEFITS

1. SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY

There are no special tax benefits available to the Company.

2. SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE

COMPANY
There are no special tax benefits available to the shareholders of the Company.

(ii) GENERAL TAX BENEFITS

The Income Tax Act, 1961 and Wealth Tax Act, 1957 presently in force in India, make available the
following general tax benefits to companies and to their shareholders. Several of these benefits are
dependant on the companies or their shareholders fulfilling the conditions prescribed under the relevant
provisions of the statute.

I. BENEFITS TO THE COMPANY UNDER THE INCOME TAX ACT, 1961 (“THE ACT”):
The Company will be entitled to deduction under the sections mentioned hereunder from its total
income chargeable to Income Tax.

1. As per Section 10(34) of the Act, income earned by the Company by way of dividend income from
another domestic company referred to in section 115-O of the act is exempt from tax.

2. As per section 10(35) of the Acts, the following income will be exempt from tax in the hands of
the Company:

a. Income received in respect of the units of a Mutual Fund specified under section 10(23D); or

b. Income received in respect of units from the Administrator of the specified undertaking; or

c. Income received in respect of units from the specified company:

3. As per section 10(38) of the Act, long term capital gains arising to the Company from the transfer
of a long term capital asset being an equity share in a company or a unit of an equity oriented fund,
where such transaction is chargeable to securities transaction tax, will be exempt in the hands of
the Company. However, income by way of long term capital gain shall not be reduced in
computing the book profits for the purposes of computation of minimum alternate tax (“MAT”)
under section 115JB of the I.T. Act.

4. Under section 32 of the Act, the Company is entitled to claim depreciation subject to the
conditions specified therein, at the prescribed rates on its specified assets used for its business.

5. As per section 54EC of the Act and subject to the conditions and to the extent specified therein,
long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the
transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a
“long term specified asset” within a period of six months after the date of such transfer, subject to
the limit of Rupees Fifty lacs in a year.

6. As per section 111A of the Act, short term capital gains arising to the Company from the sale of
equity shares or units of an equity oriented mutual fund transacted through a recognized stock
exchange in India, where such transaction is chargeable to securities transaction tax, will be
taxable at the rate of 15%(plus applicable surcharge and education cess). Further, short term
gains as computed above that are not liable to STT would be subject to tax at a rate of
30% (plus applicable surcharge and education cess) in case of a company.

7. In accordance with section 112 of the Act, the tax on capital gains on transfer of listed securities or
units or zero coupon bonds where the transaction is not chargeable to securities transaction tax,
held as long term capital assets will be the lower of: -

46
 a. 20% of the capital gains as computed after indexation of the cost; or

b. 10% of the capital gains as computed without indexation.

8. The amount of tax paid under section 115 JB by the Company for any assessment year beginning
on or after 1st April, 2010 will be available as credit to the extent specified in section 115 JAA for
ten years succeeding the assessment year in which MAT credit becomes allowable in accordance
with the provisions of Section 115 JAA.

9. Unabsorbed depreciation, if any, for an assessment year can be carried forward and set off against
income from any other source in the subsequent assessment years as per section 32(2) subject to
the provisions of section 72(2) and section 73(3) of the Act.

10. Under Section 35 (1) (ii) and (iii) of the Act, in respect of any sum paid to a scientific research
association which has as its object the undertaking of scientific research, or to any approved
university, College or other institution to be used for scientific research or for research in social
sciences or statistical scientific research to the extent of a sum equal to one and one fourth times
the sum so paid. Under Section 35 (1) (iia) of the Act, any sum paid to a company, which is
registered in India and which has as its main object the scientific research and development, and
being approved by the prescribed authority and such other conditions as may be prescribed, shall
also qualify for a deduction of one and one fourth times the amount so paid.

11. Under Section 36 (1) (xv) of the Act, the amount of Securities Transaction Tax paid by an assessee
in respect of taxable securities transactions offered to tax as “Profits and gains of Business or
profession” shall be allowable as a deduction against such Business Income.

12. As per the provisions of section 90, for taxes on income paid in Foreign Countries with which
India has entered into Double Taxation Avoidance Agreements (Tax Treaties from
projects/activities undertaken thereat), the Company will be entitled to the deduction from the
India Income-tax of a sum calculated on such doubly taxed income to the extent of taxes paid in
Foreign Countries. Further, the company as a tax resident of India would be entitled to the benefits
of such Tax Treaties in respect of income derived by it in foreign countries. In such cases the
provisions of the Income tax Act shall apply to the extent they are more beneficial to the company.
Section 91 provides for unilateral relief in respect of taxes paid in foreign countries.

II. TO MEMBERS

A. RESIDENT MEMBERS

1. As per section 10(34) of the Act, income earned by the resident member by way of dividend
income from the domestic company referred to in section 115-O of the act is exempt from tax.

2. 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 exempted from tax to the extent of Rs.1,500/- per
minor child.

3. As per section 10(38) of the Act, long term capital gains arising to the resident member from the
transfer of a long term capital asset being an equity share in a company or a unit of an equity
oriented fund, where such transaction is chargeable to securities transaction tax, will be exempt in
the hands of such members.

4. As per section 111A of the Act, short term capital gains arising to the resident members from the
sale of equity shares or units of an equity oriented mutual fund transacted through a recognized
stock exchange in India, where such transaction is chargeable to securities transaction tax, will be
taxable at the rate of 15%.

47
 5. In accordance with section 112 of the Act, the tax on capital gains on transfer of listed securities or
units or zero coupon bonds where the transaction is not chargeable to securities transaction tax,
held as long term capital assets will be the lower of: -

a. 20% of the capital gains as computed after indexation of the cost; or

b. 10% of the capital gains as computed without indexation.

6. As per section 54EC of the Act and subject to the conditions and to the extent specified therein,
long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the
transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a
“long term specified asset” within a period of six months after the date of such transfer, subject to
the limit of Rupees Fifty lacs in a year.

7. As per the provisions of section 54F of the Act and subject to the conditions specified therein, long
term capital gains (in cases not covered under section 10(38)) arising on the transfer of the shares
of the Company held by an individual or Hindu Undivided Family will be exempt from tax if the
net consideration is utilised, within a period of one year before, or two years after the date of
transfer, in the purchase of a residential house, or for construction of a residential house within
three years.

8. Under Section 36 (1) (xv) of the Act, the amount of Securities Transaction Tax paid by an assessee
in respect of taxable securities transactions offered to tax as “Profits and gains of Business or
profession” shall be allowable as a deduction against such Business Income.

9. The assessee is not entitled to a deduction in respect of the Security Transaction Tax
(‘STT’) paid by him against the income chargeable under the head ‘Capital Gains’.

10. No income tax is deductible at source from income by way of capital gains under the present
provisions of the Act in case of residents

B. Non-Resident Indian MEMBERS

1. As per section 10(34) of the Act, income earned by way of dividend income from the domestic
company referred to in section 115-O of the act is exempt from tax.

2. 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 exempted from tax to the extent of Rs.1,500/- per
minor child.

3. As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term
capital asset being an equity share in a company or a unit of an equity oriented fund, where such
transaction is chargeable to securities transaction tax, will be exempt.

4. As per section 111A of the Act, short term capital gains arising from the sale of equity shares or
units of an equity oriented mutual fund transacted through a recognized stock exchange in India,
where such transaction is chargeable to securities transaction tax, will be taxable at the rate of
15%.

5. In accordance with section 112 of the Act, the tax on capital gains on transfer of listed securities or
units or zero coupon bonds, acquired in Indian currency, where the transaction is not chargeable to
securities transaction tax, held as long term capital assets will be lower of :-.

a) 20% of the capital gains as computed after indexation of the cost;

b) 10% of the capital gains as computed without indexation.

6. As per the first proviso to section 48 of the Act, in case of a non resident shareholder, the capital
gain/loss arising from transfer of shares of the Company, acquired in convertible foreign exchange,
will be computed by converting the cost of acquisition, sales consideration and expenditure

48
 incurred wholly and exclusively incurred in connection with such transfer, into the same foreign
currency which was initially utilized in the purchase of shares. Cost indexation benefit will not be
available in such a case.

7. As per section 54EC of the Act and subject to the conditions and to the extent specified therein,
long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the
transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a
“long term specified asset” within a period of six months after the date of such transfer, subject to
the limit of Rupees Fifty lacs in a year.

8. As per the provisions of section 54F of the Act, long term capital gains (in cases not covered
under section 10(38))and subject to the condition specified therein arising on the transfer of the
shares of the Company held by an individual or Hindu Undivided Family will be exempt from tax
if the net consideration is utilised, within a period of one year before, or two years after the date of
transfer, in the purchase of a residential house, or for construction of a residential house within
three years.

9. In accordance with section 115E, income from investment or income from long- term capital gains
on transfer of assets other than specified asset shall be taxable at the rate of 20%. Income by way
of long term capital gains in respect of a specified asset (as defined in section 115C (f) of the act),
shall be chargeable at 10%.

10. In accordance with section 115F, subject to the conditions and to the extent specified therein, long-
term capital gain arising from transfer of shares of the company acquired out of convertible foreign
exchange, and on which securities transaction tax is not payable, shall be exempt from capital
gains tax, if the net consideration is invested within six months of the date of transfer in any
specified asset.

11. In accordance with section 115G, it is not necessary for a Non resident Indian to file a return of
income under section 139(1), if his total income consists only of investment income earned on
shares of the company acquired out of convertible foreign exchange or income by way of long
term capital gains earned on transfer of shares of the company acquired out of convertible foreign
exchange, and the tax has been deducted at source from such income under the provisions of
Chapter XVII-B of the Income-tax Act.

12. In accordance with section 115-I, where a Non Resident Indian opts not to be governed by the
provision of chapter XII-A for any assessment year, his total income for that assessment year
(including income arising from investment in the company) will be computed and tax will be
charged according to the other provisions of the Income-tax Act.

13. As per section 115H of the Act, where a 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 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.

14. Under Section 36 (1) (xv) of the Act, the amount of Securities Transaction Tax paid by an assessee
in respect of taxable securities transactions offered to tax as “Profits and gains of Business or
profession” shall be allowable as a deduction against such Business Income.

15. Under the provisions of Section 195 of the Income Tax Act, any income (not being an income
chargeable under the head ‘Salaries’), payable to non residents, may be eligible to the provisions of
withholding tax, subject to the tax treaty. Accordingly income tax may have to be deducted at
source in the case of a non-resident at the rate under the domestic tax laws or under the tax treaty,
whichever is beneficial to the assessee unless a lower withholding tax certificate is obtained from
the tax authorities.

16. The tax rates and consequent taxation mentioned above will be further subject to any benefits
available under the Tax Treaty, if any, between India and the country in which the non-resident has
fiscal domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would

49
 prevail over the provisions of the Tax Treaty to the extent they are more beneficial to the non-
resident.

C. OTHER NON-RESIDENT SHAREHOLDERS (OTHER THAN FIIS AND FOREIGN

VENTURE CAPITAL INVESTORS):

1. Under section 10 (34) of the Act, income earned by way of dividend (Interim or final) from
domestic Company referred to in section 115-O of the Act is exempt from income tax in the hands
of the shareholders.

2. 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 exempted from tax to the extent of Rs.1,500/- per
minor child.

3. As per section 111A of the Act, short term capital gains arising from the sale of equity shares or
units of an equity oriented mutual fund transacted through a recognized stock exchange in India,
where such transaction is chargeable to securities transaction tax, will be taxable at the rate of
15%.

4. In accordance with section 112 of the Act, the tax on capital gains on transfer of listed securities or
units or zero coupon bonds, acquired in Indian currency, where the transaction is not chargeable to
securities transaction tax, held as long term capital assets will be lower of:-
.
a) 20% of the capital gains as computed after indexation of the cost;

b) 10% of the capital gains as computed without indexation.

5. As per the first proviso to section 48 of the Act, in case of a non resident shareholder, the capital
gain/loss arising from transfer of shares of the Company, acquired in convertible foreign exchange,
will be computed by converting the cost of acquisition, sales consideration and expenditure
incurred wholly and exclusively incurred in connection with such transfer, into the same foreign
currency which was initially utilized in the purchase of shares. Cost indexation benefit will not be
available in such a case.

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

7. As per section 54EC of the Act and subject to the conditions and to the extent specified therein,
long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the
transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a
“long term specified asset” within a period of six months after the date of such transfer, subject to
the limit of Rupees fifty lacs in a year.

8. As per the provisions of section 54F of the Act, long term capital gains (in cases not covered under
section 10(38)) arising on the transfer of the shares of the Company held by an individual or Hindu
Undivided Family will be exempt from tax if the net consideration is utilised, within a period of
one year before, or two years after the date of transfer, in the purchase of a residential house, or for
construction of a residential house within three years.

9. Under Section 36 (1) (xv) of the Act, the amount of Securities Transaction Tax paid by an assessee
in respect of taxable securities transactions offered to tax as “Profits and gains of Business or
profession” shall be allowable as a deduction against such Business Income.

10. 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.

11. Under the provisions of Section 195 of the Income Tax Act, any income (not being an income
chargeable under the head ‘salaries’) which is chargeable under the provisions of the Act payable

50
 to non residents, is subject to withholding tax as per the prescribed rate in force. Accordingly
income tax may have to be deducted at source in the case of a non-resident at the rate under the
domestic tax laws or under the tax treaty, whichever is beneficial to the assessee unless a lower
withholding tax certificate is obtained from the tax authorities.

D. FOREIGN INSTITUTIONAL INVESTORS (FII’S)

1. As per section 10(34) of the Act, income earned by way of dividend income from the domestic
company referred to in section 115-O of the act is exempt from tax.

2. As per section 10(38) of the Act, long term capital gains arising from the transfer of a long term
capital asset being an equity share in a company or a unit of an equity oriented fund, where such
transaction is chargeable to securities transaction tax, will be exempt.

3. As per section 115AD read with section 111A of the Act, short term capital gains arising from the
sale of equity shares of the Company transacted through a recognized stock exchange in India,
where such transaction is chargeable to securities transaction tax, will be taxable at the rate of
15%.

4. As per section 115AD of the Act, FIIs will be taxed on the capital gains that are not exempt under
the provisions of section 10(38) of the Act at the following rates:

Nature of income Rate of tax (%)

Long term capital gains 10
Short term capital gains (other than referred to in section 111A) 30

5. In case of long term capital gains, (in cases not covered under section 10(38) of the Act), the tax is
levied on the capital gains computed without considering the cost indexation and without
considering foreign exchange fluctuation.
6. The tax rates and consequent taxation mentioned above will be further subject to any benefits
available under the Tax Treaty, if any between India and the country in which the FII has fiscal
domicile. As per the provisions of section 90(2) of the Act, the provisions of the Act would prevail
over the provisions of the Tax Treaty to the extent they are more beneficial to the FII.

7. As per section 54EC of the Act and subject to the conditions and to the extent specified therein,
long-term capital gains (in cases not covered under section 10(38) of the Act) arising on the
transfer of a long-term capital asset will be exempt from tax if the capital gains are invested in a
“long term specified asset” within a period of six months after the date of such transfer, subject to
the limit of Rupees Fifty lacs in a year.

E. BENEFITS AVAILABLE TO MUTUAL FUNDS

As per the provisions of section 10(23D) of the Act, any income of Mutual Funds registered under the
Securities and Exchange Board of India Act, 1992 or regulations made there under, Mutual Funds set
up by public sector banks or public financial institutions or authorized by the Reserve Bank of India,
would be exempt from income tax subject to the conditions as the Central Government may notify.
However, the mutual funds shall be liable to pay tax on distributed income to unit holders under section
115R of the Act.

F. BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES/ FUNDS

As per the provisions of section 10(23FB) of the Act, any income of Venture Capital Companies /
Funds (set up to raise funds for investment in a venture capital undertaking registered and notified in
this behalf) registered with the Securities and Exchange Board of India, would be exempt from income
tax, subject to the conditions specified therein. However, the exemption is restricted to the Venture
Capital Company and Venture Capital Fund set up to raise funds for investment in a Venture Capital
Undertaking, which is engaged in the business as specified under section 10(23FB)(c). However, the
income distributed by the Venture Capital Companies/ Funds to its investors would be taxable in the
hands of the recipients.

51
G. BENEFITS AVAILABLE UNDER THE WEALTH-TAX ACT, 1957

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

NOTES:

i) In the above statement only basic tax rates have been enumerated and the same is subject to
surcharge and education cess, wherever applicable.

ii) The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a
summary manner only and is not a complete analysis or listing of all potential tax consequences
of the purchase, ownership and disposal of equity shares.

iii) All the above benefits are as per the current tax laws (including amendments made by the
Finance Act 2010), legislation, its judicial interpretation and the policies of the regulatory
authorities are subject to change from time to time, and these may have a bearing on the benefits
listed above. Accordingly, any change or amendment in the law or relevant regulations would
necessitate a review of the above.

iv) Several of these benefits are dependent on the company and its shareholders fulfilling the
conditions prescribed under the provisions of the relevant sections under the relevant tax laws.

v) This statement is only extended to provide general information to the investors and is neither
designed nor intended to be a substitute for Professional Tax Advice. In view of the individual
nature of tax consequences, being based on all the facts, in totality, of the investors, each
investor is advised to consult his/her/its own tax advisor with respect to specific tax
consequences of his/her/its investments in the shares of the Company.

52
 SECTION IV: ABOUT THE COMPANY

INDUSTRY OVERVIEW

The information in this section is derived from a combination of various official and unofficial publicly
available materials and sources of information. It has not been independently verified by the Company, the Lead
Managers or their respective legal or financial advisors, and no representations is made as to the accuracy of
this information, which may be inconsistent with information available or compiled from other sources.

Overview of Global and Indian Economy

The fiscal 2008-09 has been a difficult year for the global economy and for India in its efforts to sustain the new
found growth momentum of its economy. In the second half of the year, a crisis of unprecedented magnitude hit
the financial markets in the industrialized economies, eventually pushing them into a recession. Most emerging
market slowed down significantly and India has also been affected. (Source: Annual Report 2008-09, Ministry
of Finance, Government of India). The economy is on the path of recovery in 2009-10. As per the latest
information (Advance Estimates) of National Income for 2009-10 (at constant 2004-2005 prices), released by
the Central Statistical Organization the growth of Gross Domestic Product (“GDP”) at factor cost is estimated at
7.2 percent in 2009-10. (Source: Annual Report 2009-10, Ministry of Finance, Government of India)

The global economy has begun to recover from the deep recession set off by the financial crisis. This recovery is
underpinned by output expansion in emerging market economies (“EMEs”), particularly those in Asia. The pace
and shape of recovery, however, remain uncertain. The global economic outlook presents a mixed picture.
(Source: Second Quarter Review of Monetary Policy 2009 -10, RBI). This was reinforced by the IMF forecasts
published earlier this month, which suggested that global growth would be marginally higher than their April
2010 projection. While most of that would come from emerging market economies (EMEs), the advanced
economies would hold steady. However, in the aftermath of the Greek sovereign debt crisis and other visible
soft spots in Europe and the US, there is renewed uncertainty about the sustainability of the recovery. (Source:
First Quarter Review of Monetary Policy 2010 -11, RBI)

The Indian economy, which slowed down significantly during the second half of 2008-09, largely due to the
knock-on effect of the global financial crisis, has begun to stabilize. Both domestic and external financing
conditions are on the upturn. Capital inflows have revived. The Indian economy posted a growth of 6.1% for the
first quarter of 2009-10 (see table below). This is higher than the expansion of 5.8% in last quarter of 2008-
2009, but lower than the expansion of 7.8% in the corresponding first quarter of 2008-09. The year-on-year
deceleration in growth was broad based covering all the three major sectors viz. agriculture, industry and
services. (Source: Second Quarter Review of Monetary Policy 2009 -10, RBI). The momentum was particularly
pronounced in Q4 of 2009-10 with growth at 8.6 per cent as compared with 6.5 per cent in the previous quarter.
At constant market prices, the pick-up in Q4 growth was even sharper at 11.2 per cent, reflecting a significant
turnaround in indirect tax collections. (Source: First Quarter Review of Monetary Policy 2010 -11, RBI)

Sector Financial Year Quarterly Growth Rates (year-on-year)

2007-08 2008-09 2008-09 2009-10
Q1 Q4 Q1
Agriculture 4.9 1.6 3.0 2.7 2.4
Industry 7.4 2.6 5.1 (-)0.5 4.2
Services 10.8 9.4 10.0 8.4 7.7
Overall GDP 9.0 6.7 7.8 5.8 6.1
(Source: Second Quarter Review of Monetary Policy 2009 -10, RBI)

Indian Financial Services Sector

Domestic drivers of growth are robust. However, if the global recovery slows down, it will affect all EMEs,
including India, through the usual exports, financing and confidence channels. (Source: First Quarter Review of
Monetary Policy 2010 -11, RBI). To mitigate the impact of global financial crisis on India several steps have
been taken by RBI and Government in the last few months to improve the liquidity and credit delivery. These,
inter alia, include reduction of policy rates, reduction in SLR and CRR requirements, creation of special
window under LAF to assist mutual funds and NBFCs, relaxation of ECB Policy, increase in the FCNR (B) and
NR(E) RA deposit rates, relaxation of capital risk weights and provisioning requirements on standard assets for
certain sectors including real estate, allowing special lines of credit to NHB and SIDBI, allowing more resource

53
raising for infrastructure and NBFC sector and ensuring dollar liquidity. The focus on ensuring adequate flow of
credit to agriculture, small, medium and micro industries, minorities and weaker sections continued with greater
focus on financial inclusion. A number of policy initiatives on strengthening the cooperative credit structure and
ensuring credit to agriculture and rural infrastructure and housing sector were initiated/ continued in 2008-2009
also. (Source: Annual Report 2008-09, Ministry of Finance, Government of India).

There has been a considerable broadening and deepening of the Indian financial markets due to various financial
market reforms undertaken by the regulators, the introduction of innovative financial instruments in the recent
years and the entry of sophisticated domestic and international players. Sectors such as banking, asset
management and brokerage have been liberalised to allow private sector involvement, which has contributed to
the development and modernization of the financial services sector. This is particularly evident in the non-
banking financial services sector, such as equities, derivatives and commodities brokerage, residential mortgage
and insurance services, where new products and expanding delivery channels have helped these sectors achieve
high growth rates.

Although banks dominate the Indian financial spectrum, NBFCs play an important role in financial markets.
With their unique strengths, the stronger NBFCs could complement banks as innovators and partners. The core
strength of NBFCs lies in their strong customer relationships, good understanding of regional dynamics, service
orientation and ability to reach out to customers who would otherwise be ignored by banks, which makes such
entities effective conduits of financial inclusion. The recent global financial turmoil has highlighted the impact
on systemic stability through OFIs which, in India, operate as NBFCs. In India, there are two broad categories
of NBFCs, viz., NBFCs-D and NBFCs-ND. The recent growth in the NBFC sector is due primarily to NBFCs-
ND. Systemically important NBFCs – ND are growing at a rapid pace. The sector has been witnessing a
significant improvement in financial health and is characterised by low and reducing NPAs and high RoA.
(Source: Report on Trend and Progress of Banking in India 2008-09, RBI)

In Fiscal 2009, financial services recorded steep decline mainly due to significant correction in the capital
market, following the international trends, heightened economic uncertainties and market expectations of a
sluggish performance by corporates.(Source: Economic Review; RBI Annual Report 2008-09)

Indian Capital Markets

On account of global financial crisis Sensex touched its bottom in March 2009 compared to when it peaked in
January 2008. Due to comprehensive domestic stimulus measures and accompanied by recovery in corporate
performance, securities markets have started yielding positive returns. As on December 15, 2009 Sensex closed
at 16,913,an increase of 8,753 points or 107.27% as compared to 8,160 as on March 9, 2009 when it touched its
lowest, since September 2008. Since April 2009 the net investments by Foreign Institutional Investors have also
been positive. The calendar year from January 2009, upto November 2009 end, has brought in FII investments
to the tune of US$ 19.12 billion as against an outflow of US $7.8 billion during the corresponding period last
year. The combined market capitalization of BSE and NSE as on December 15, 2009 is Rs. 113,500,130
million. The market capitalization ratio is defined as market capitalisation of stocks divided by GDP. It is used
as a measure to denote the importance of equity markets relative to the GDP. It is of economic significance
since market is positively correlated with the ability to mobilize capital and diversify risk. The All- India market
capitalization ratio increased to 109.26 % in 2007-08 from 86.02 % in 2006-07. Currently the market
capitatlisation is 9.16 times the GDP at current prices. (Source: Annual Report 2009-10, Ministry of Finance,
Government of India)

In India, capital inflows have revived. Activity in the primary capital market has picked up and funding from
non-bank domestic sources has eased. The wide array of supportive central bank actions and pronouncements
have aided in the easing of money markets. Keeping in view both international and domestic initiatives in the
financial sector, the annual policy statement of April 2009 indicated setting up of financial stability unit (“FSU”)
in the Reserve Bank of India. Accordingly, the FSU was constituted in July 2009 drawing upon inter-
disciplinary expertise from the regulatory, supervisory, statistics, economics and financial markets departments
of the Reserve Bank of India. (Source: Second Quarter Review of Monetary Policy 2009 -10, RBI)

BSE Sensex closed at 17,700.90 on June 30, 2010, as against 16,944.60 on May 31, 2010, registering an
increase of 756.30 points (4.50%). During June 2010, Sensex recorded a high of 17,919.60 on June 21, 2010 and
a low of 16, 318.40 on June 1, 2010. S&P CNX Nifty closed at 5,312.50 on May 31, 2010, comparing with
5,086.30 on May 31, 2010, indicating a increase of 226.20 points (4.4%). During June 2010, Nifty recorded a

54
high of 5,366.8 on June 21, 2010 and a low of 4961.10 on June 1, 2010 (see table below). (Source: Number 7,
Volume 8, July 2010, SEBI Bulletin)

(Source: Number 7, Volume 8, July 2010, SEBI Bulletin)

As of March 31, 2009, there were 1432 companies listed on the NSE. (Source: Fact book 2009, NSE)

Equity Markets

The activity in the primary segment of the domestic capital market displayed signs of revival in Q1 of 2010-11.
Resources raised through public issues increased considerably. The resource mobilisation by mutual funds was,
however, lower, due to tight liquidity conditions and subdued stock markets. During 2009-10, mobilisation of
resources by corporates through private placement (Rs. 3,424,450 million) was higher by 67.8 per cent.
(Source: Macroeconomic and Monetary Developments, First Quarter Review, 2010-11, RBI)

The global economy recovered faster than expected, led by robust growth in Emerging Market Economies
(EMEs). Global output increased by over 5 per cent in Q1 of 2010 but it has hit a soft patch thereafter due to
concerns stemming from the sovereign debt situation in the euro area. EMEs are expected to continue the
process of normalisation of monetary policy in view of their stronger recovery, emerging inflationary pressures,
and risks of asset price build-up. Advanced economies, on the other hand, may further delay monetary exit, due
to the emergence of new risks to recovery, as also their well anchored inflation expectations. (Source:
Macroeconomic and Monetary Developments First Quarter Review 2010-11, RBI). Equity markets exhibited
volatile conditions during the current financial year, although they have firmed up in recent weeks. Resource
mobilisation by the corporates through public issues in the primary segment of the capital market continued its
uptrend. (First Quarter Review of Monetary Policy 2010-11, RBI)

During June 2010, there were 3 public issues which mobilized Rs. 3248.00 million and 4 rights issues which
mobilized Rs. 26,370.00 million in the primary market.

During June 2010 Rs. 29,618 million was mobilized in the primary market through seven issues as compared to
Rs. 29,868 million mobilized through two issues in May 2010. During 2010-11, so far, there were 15 issues
which mobilized Rs. 99,272 million where as Rs. 3,368 million was mobilized through five issues during the
corresponding period in 2009-10. There was a total of Rs. 420 million raised through two QIPs listed at BSE
and NSE during June 2010 as compared to Rs.15,930 million raised through seven QIPs during May 2010. Both
the QIPs of Rs.4,210 million in June 2010 were listed on NSE and BSE as compared to six QIPs of Rs.14,860
million in May 2010. There were 59 preferential allotments (Rs. 35,070 million) listed at BSE and NSE during
June 2010 as Compared 37 allotments (Rs. 10,670 million) in May 2010. Nine preferential allotments (Rs. 4,080
million) were listed at both BSE and NSE. In the corporate debt market, Rs. 208,560 million raised through 138
issues by the way of private placement listed at BSE and NSE during June 2010, as compared Rs. 239,740
million was raised through 112 issues in May 2010. (Source: Number 7, Volume 8,July 2010, SEBI Bulletin)

55
Items June-10 May-10 2010-11 $ 2009-10
No. of Amount No. of Amount No. of Amount No. of Amount
Issues (Rs. Issues (Rs. Issues (Rs. Issues (Rs.
million) million) million) million)
1 2 3 4 5 6 7 8 9
a) Public Issues (i) 3 3,248 2 29,868 11 72,900 47 492,645
+ (ii)
i) Public issue 3 3,248 1 24,868 10 67,902 44 467,365

(Equity/PCD/FCD) 0 0
out of which 3 3,248 1 24,868 10 67,902 39 246,961
IPOs 0 0 0 0 0 0 5 200,410
FPOs
ii) Public Issue 0 0 1 5,000 1 5,000 3 25,000
(Bond/NCD)
b) Rights Issues 4 26,370 0 0 4 26,370 29 83,186
Total (a + b) 7 29,618 2 29,868 15 99,272 76 575,831
Note: PCD implies Partly Convertible Debenture, FCD implies Fully Convertible Debenture.
IPOs imply Initial Public Offers, FPO imply Follow on Public Offers.
NCD implies Non Convertible Debenture
$
As on June 30, 2010

The growth of volume traded in secondary market (NSE) is set forth in the table below:

Particulars Unit Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009
Capital Market
Number of 856 928 1,114 1,244 1,277
companies
traded
Traded quantity In million 79,768.5 84,448.6 85,545.6 149,846.9 142,635.5
Trading value Rs. million 11,400,720 15,695,580 19,452,870 35,510,380 27,520,230
Average daily Rs. million 45,060 62,530 78,120 141,480 113,250
trading value

Wholesale debt
market
Number of 124,308 61,891 19,575 16,179 16,129
trades
Trading volume Rs. million 8,872,940 4,755,230 2,191,060 2,823,170 3,359,520
Average daily Rs. million 30,280 17,550 8,980 11,380 14,120
trading value

Derivates
Number of 77,017,185 157,619,271 216,883,573 425,013,200 657,390,497
contracts
Turnover Rs. million 25,470,530 48,242,500 73,562,710 130,904,780 110,104,820
Average daily Rs. million 100,670 192,200 295,430 521,530 453,110
value
(Source: Fact book 2009, NSE)

Investment Banking

With the Indian economy maturing, Indian companies are also evaluating different means to raise capital in the
equity and debt capital markets. The pursuit of value creation is leading Indian companies to constantly evaluate
alternatives which held achieve strategic objectives. With increase in the activity and entry of foreign
investment banks in India, the competition has intensified.

56
Equity Brokerage

As the Indian capital markets continue to evolve, they are undergoing rapid consolidation driven by increased
trading volumes, increased regulation, customer sophistication, availability of better technology and increased
back-office requirements. As a result, significant changes have been introduced to strengthen risk management
systems.

The market share of the top five brokers on NSE has decreased from 14.57% in fiscal 2008 to approximately
13.56% in fiscal 2009. The market share of the top ten brokers on the NSE has reduced from approximately
25.71% in fiscal 2008 to 23.62% in fiscal 2009. The following table illustrates the trading volume on the NSE
and the percentage traded by the top brokers from fiscal 2005 to fiscal 2009.

Percentage volume by top brokers

Number of brokers 5 10 25 50 100
Fiscal 2005 13.52% 20.20% 34.97% 49.01% 65.09%
Fiscal 2006 14.62% 22.57% 38.17% 52.57% 38.45%
Fiscal 2007 14.72% 24.27% 42.61% 56.71% 71.22%
Fiscal 2008 14.57% 25.71% 44.70% 60.11% 73.90%
Fiscal 2009 13.56% 23.62% 43.55% 61.21% 75.42%
(Source: Fact book 2009, NSE)

Internet Trading

During the year 2008-09 10.58% of the trading value in the capital market segment of NSE (Rs. 5,820,700
million) was routed and executed through internet. The table below shows the growth of internet trading from
the fiscal year 2007-08 and 2008-09:

Year Enabled Registered Internet Internet % of total

Members* Clients* trading volume trading volume trading volume
(in Rs. million) (US$ million)
2007-08 305 4,404,134 6,496,580 162,536 9.15
2008-09 349 5,627,789 5,820,700 114,243 10.58
*at the end of the financial year
(Source: Fact Book 2009, NSE)

Mutual Funds

The mutual fund sector can broadly be divided based on the nature of the schemes launched by the mutual
funds. The fixed income asset class, which comprises income, liquid, gilt and money market schemes,
comprises a major share of total funds under management. The other two asset classes are equity and balanced
schemes. The following table illustrates the assets under management by mutual funds:
(In Rs. million)
Particulars Fiscal 2005 Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 April –July
2010
Income/ debt 1,062,496.2 1,249,127.7 2,276,177.4 3,406,412.0 3,779,448.1 5,267825.6 4,374,438.0
oriented
schemes
Growth/ equity 384,838.4 994,562.9 1,223,786.6 1,776,840.7 1,010,307.7 1,976,251.2 2,042,605.6
oriented
schemes
Balanced 48,669.5 74,934.1 90,044.9 166,550.5 101,972.0 175,290.0 180,413.5
schemes
Exchange - 35,280.0 14,809.8 26,612.6 32,146.0
Traded Fund
Fund of funds - - 26,316.8 29,275.9 26,071.3
investing
overseas
Total 1,496,004.1 2,318,624.7 3,590,008.8 5,385,081.8 4,932,854.5 7,475,255.3 6,655,674.4
(Source: SEBI website)

57
As a consequence of global liquidity squeeze, corporate withdrew their investments from domestic money
market mutual fund, putting redemption pressure on mutual funds. While the mutual funds promised immediate
redemption, their assets were relatively illiquid. Maturity mismatches between assets and liabilities of mutual
funds further aggravated the problem. (Source: Report on Trend and Progress of Banking in India 2008-09,
RBI). The resource mobilisation by mutual funds was, however, lower due to tight liquidity conditions and
subdued stock markets. During 2009-10, mobilisation of resources by corporates through private placement (Rs.
3,424,450 million) was higher by 67.8 per cent. (Source: Macroeconomic and Monetary Developments, First
Quarter Review, 2010-11, RBI)

Resource Mobilisation from Capital Market

(in Rs. million)
Category 2008-09 2009-10 2009-10 2010-11
April – March April-March April-June April-June
1 2 3 4 5
Private Sector -340,170 549,280 814,560 141,090
Public Sector* 57,210 281,520 189,470 -105,620
Total (Mutual Fund Mobilisation -282,960 830,800 1,004,030 35,470
(nct@)
@
Net of redemption. #Including UTI Mutual Fund
(Source: Macroeconomic and Monetary Developments, First Quarter Review, 2010-11, RBI)

During June 2010, mutual funds redeemed Rs. 1,194,490 million (of which Rs. 903,280 million were redeemed
by private sector mutual funds and Rs. 291,210 million were redeemed by public sector mutual funds) as
compared to Rs. 629,600 million redeemed during May 2010. The market value of asset under management
stood Rs. 6,301,850 million as on June 30, 2010 as compared to Rs. 7,431,160 million as on May 31, 2010,
indicating a decrease of 15.2 percent. (Source: Number 7, Volume 8,July 2010, SEBI Bulletin)

Insurance Sector

The insurance sector was opened up to private participation with the enactment of the Insurance Regulatory and
Development Authority Act, 1999. The core functions of the Authority include (i) licensing of insurers and
insurance intermediaries; (ii) financial and regulatory supervision; (iii) protection of the interest of the
policyholders. With a view to facilitating development of the insurance sector, IRDA has issued regulations on
protection of the interest of policyholders; obligations towards the rural and social sectors; micro insurance and
licensing of agents, corporate agents, brokers and third party administrators. This is in addition to the regulatory
framework provided for registration of insurance companies, maintenance of solvency margin, investments and
financial reporting requirements. (Source: Annual Report 2008-09, Ministry of Finance, Government of India)
Since opening up, the number of participants in the industry has gone up from six insurers (four public sector
general insurers and General Insurance Corporation as the National Re-insurer) in the year 2000, to 45 insurers
as on November 2009 operating in the life, non-life and re-insurance segments (including specialized insurers).
Two of the general insurance companies function as standalone health insurance companies. Of the twenty two
life insurance companies which have set up operations in the life segment post opening up of the sector,
nineteen are in joint venture with foreign partners. Of the fifteen that have commenced operations in the non-life
segment, fourteen had been set up in collaboration with the foreign partners. Thus, thirty-seven insurance
companies in the private sector are operating in the country in collaboration with established foreign insurance
companies from across the globe. (Source: Annual Report 2009-10, Ministry of Finance, Government of India)

During the current year, the life insurance industry has reported growth of 22.10% in new business premium
underwritten during April – November 2009 as against growth of 1.44% in April-November, 2008. During the
year, the non-life industry reported growth of 9.40% in Gross Direct Premium as against 12.63% in 2007-08.
(Source: Annual Report 2009-10, Ministry of Finance, Government of India)

Commodity Broking

The emergence of three nationwide exchanges, namely, MCX, NCDEX and NMCE, has increased the
awareness of commodities trading. The volume in these exchanges has increased rapidly since their inception.
Some of the commodities where trading takes place are inter alia gold, silver, copper, caster seed, gram, soya
oil, sugar and rubber.

58
 OUR BUSINESS

Unless otherwise indicated, the financial information of the Group used in this section is derived from the
Group’s audited unconsolidated and consolidated financial statements under Indian GAAP and restated in
accordance with the SEBI Regulations.

The Issuer, MFSL, is a non-banking financial company registered with the RBI. MFSL is the ultimate holding
company of the Microsec Group. The Company was incorporated as “Satyam Fiscal Services Private Limited”
on June 6, 1989 and the name of the Company was changed to Microsec Financial Services Limited with effect
from October 21, 2005.

The Promoters acquired the entire shareholding of the Company from the previous shareholders. On August 1,
2005, 800,000 Equity Shares were transferred to Banwari Lal Mittal, and on October 1, 2005, 5,340 Equity
Shares were transferred to LKPL, Abha Mittal, Prabhu Dayal Khaitan, Bharati Sharma, Ravi Kant Sharma and
Sushila Devi Khaitan.

Prior to its acquisition by the current Promoters on August 1, 2005, the Company was a financial services
company and was engaged in the business of financing and investment management. The Company was
registered with the RBI as a NBFC since January 29, 2003, but did not have significant operations.

The Registered Office of the Company is situated in Kolkata. As at June 30, 2010, the Company had 15
employees. The Company’s total income, on an unconsolidated basis, was Rs. 142.40 million and Rs. 180.98
million, for fiscal 2009 and fiscal 2010, respectively. Our profit after taxation, on an unconsolidated basis, was
Rs. 56.96 million and Rs. 110.20 million for fiscal 2009 and fiscal 2010, respectively.

Business operations of the Issuer

MFSL is engaged in the financing and investment business which primarily comprises giving loans against
shares, and making investments. In its financing and investment business, MFSL offers loans against shares to
its clients, secured by liquid and marketable securities at appropriate margin levels. Its LAS business helps our
clients leverage their equity market positions to take increased exposure.

MFSL offers loans to clients, including brokerage clients of MCap and MCL, against specified securities which
fall within the ‘approved list’ of the Microsec Group. Only a certain percentage of the market value of the
securities is advanced as loan, and this helps to provide for market fluctuations in the value of the security. The
client is required to deposit and maintain a appropriate margin and is responsible for infusing additional funds in
case the margin falls below the prescribed limit, failing which MFSL has the power to sell the securities to the
extent that would be required in order to maintain the required margin. Margin levels of exposure can be
monitored on a real-time basis as the selling price of the securities securing the loan are usually transparent and
easily accessible on a stock exchange.

As at March 31, 2010, 27 clients of MFSL maintained a margin of 50% or more and the loan amounts
outstanding in respect of such clients aggregated to approximately Rs. 140.94 million; 44 clients maintained a
margin between 25% to 50% and the loan amounts outstanding in respect of such clients aggregated to
approximately Rs. 155.83 million; one client maintained a margin below 25% and the loan amounts outstanding
in respect of such client aggregated to approximately Rs. 8.35 million. In the event the margin placed by a client
falls below 25%, steps are initiated for the purposes of replenishment of margin by way of additional securities,
liquidation of loan partially or sale of securities, with due notice to the clients.

MFSL had no non-performing assets as on March 31, 2010. Until Fiscal 2009, no material amount was written
off on account of bad debts. However, MFSL paid Rs. 39.50 million as liability for early recall of loans during
the Fiscal 2009. MFSL assigned receivables of certain loan accounts and incurred a loss of Rs. 11.27 million in
such assignment during fiscal, 2010.

As of the date of this Red Herring Prospectus, six employees of the Company are employed towards LAS
activity. The Company operates its LAS business from its Registered Office. As on March 31, 2006, MFSL had
15 clients and nil outstanding loan in our LAS business. As on March 31, 2010, MFSL had 72 clients in the
LAS business and an outstanding loan amount of Rs. 305.12 million.

59
Support Systems of the Issuer

Risk Management

MFSL seeks to monitor and control the risk exposure through a variety of separate but complementary financial,
credit, operational, compliance and legal reporting systems based on mandatory regulatory requirements as well
as its business needs. Our Board of Directors has overall responsibility for monitoring enterprise-wide risk.
Credit risk related to loans against shares business is monitored by the risk management committee. Market risk
in the case of MFSL arises out of unfavourable movements in the prices of our investments and shares received
as collateral against loans and it is monitored by our risk management team in accordance with our risk
management policies.

Legal risk arising out of compliances under various laws is being monitored by the respective whole-time
director with his compliance team supplemented by the Chief Financial Officer and the Company Secretary, in
consultation with domain experts from time to time.

MFSL has well-documented policies and guidelines for compliance and risk management in respect of its LAS
activities, which are consistent with the risk management policy of the Microsec Group. The risk management
policy includes a three tier system of ‘sanction’, ‘monitoring’ and ‘risk management’. The risk management
system is designed to divide the portfolio in four parts and the monitoring being done in the following manner:

Category Type of Client Funding Amount* Sanctioning Authority

I Retail – general Upto Rs. 1 million President, risk management
II HNI – general > Rs. 1 million to Rs. 2.5 million Chief Executive Office
III HNI – specific** > Rs. 2.5 million to Rs. 20 million Risk management
committee
IV HNI – special** > Rs. 20 million Board of directors
* Borrowers are allocated into categories on the basis of funding amount
** In case of category III and IV borrowers, equal weightage is given to collateral securities as well as the
credit worthiness of the client.

The risk management system includes margin systems, documented processes and approved list of acceptable
securities. The client’s past business/ payment track record with the Microsec Group is also considered. The
policy also considers the credit worthiness of the client in terms of its ability to repay the loan.

Technology

MFSL shares its technology platform with the Microsec Group. For further details, see “ – Business Operations
of the Microsec Group – Support Systems – Technology”.

Receivable management

Client receivables are closely monitored to ensure timely collection together with the other entities in the
Microsec Group. For further details, see “ – Business Operations of the Microsec Group – Support Systems –
Receivable Management”.

Audit and inspection

MFSL actively reviews our existing concurrent audit and inspection procedures to enhance their effectiveness,
usefulness and timeliness. The report of the internal auditor is reviewed by the Board. The audit committee of
the Board will take further measures for ensuring effective internal audit systems.

Security and disaster recovery

MFSL shares its security and disaster recovery systems with the Microsec Group. For further details, see “ –
Business Operations of the Microsec Group – Support Systems – Security and Disaster Recovery”.

60
Human Resources

As at June 30, 2010, MFSL employed 15 employees who are all permanent employees. The Company’s
permanent employees include personnel engaged in management, administration, operations, maintenance,
auditing, finance, sales and marketing functions. The table below sets forth employee details in various
segments:

Segment No. of employees

Managers/ Management 8
Staff 7
Total 15

Intellectual Property

MFSL uses the trade name/ logo ‘Microsec’ and its associated logos in the course of its business. The trade
name/ logo ‘Microsec’ is registered in the name of its Subsidiary, MCap. MFSL acquired certain intellectual
property rights in brand name “PRP” pursuant to the arrangement with Gulmohar Advisors Private Limited. See
“History and Certain Corporate Matters – Other Agreements” on page 89 of this Red Herring Prospectus. These
tradenames over PRP are registered in the name of the seller. MFSL has submitted our application for transfer in
its name.

Insurance

The Company currently maintains insurance cover on building, electronic equipments covering servers, switch
and modems, digiset. The Company also has a group mediclaim insurance policy covering the employees. The
Company’s insurance policies cover physical loss or damage to its property arising from a number of specified
risks including burglary, fire and other perils. The Company has incurred an expense of Rs. 0.07 million in
fiscal 2010 towards insurance premiums. The Company maintains insurance on personnel, equipment and
property in amounts believed to be consistent with industry practices. Notwithstanding the insurance coverage
that the Company carries, the occurrence of an events/ accident that causes losses in excess of limits specified
under the relevant policy, or losses arising from events not covered by insurance policies, could materially affect
the Company’s financial condition and future operating results.

Competition

MFSL faces competition in the LAS business from several players in the financial services sector, including,
Indiabulls Financial Services Limited, India Infoline, Motilal Oswal Financial Services Limited, Religare
Enterprises Limited and Sharekhan.

Property

The Company own offices in Kolkata admeasuring more than 15,500 sq. ft. in area (including a basement).

Business operations of the Microsec Group

The Microsec Group is headquartered in Kolkata. As at June 30, 2010, the Microsec Group had 813 employees,
which includes 15 employees of the Company, 636 employees of MCap, 129 employees of MTL and 33
employees of other Subsidiaries. The Microsec Group operates in 16 states through a network of 239 branches,
which includes 237 branches of MCap and 2 branches of MCL. There is a higher concentration of our branches
in eastern India. Our total income, on a consolidated basis, was Rs. 389.33 million and Rs. 584.73 million for
fiscal 2009 and fiscal 2010, respectively. Our profit after taxation, on a consolidated basis, was Rs. 87.01
million and Rs. 244.50 million for fiscal 2009 and fiscal 2010, respectively.

The Microsec Group is a financial services Group engaged in businesses of (a) financing and investment; (b)
investment banking and related services; (c) brokerage and related services; and (d) wealth management,
insurance broking, financial planning and related services. The Group operates through the Issuer, Microsec
Financial Services Limited (“MFSL”), and its Subsidiaries, Microsec Capital Limited (“MCap”), Microsec
Resources Private Limited (“MRPL”), Microsec Technologies Limited (“MTL”), Microsec Insurance Brokers
Limited (“MIBL”), Microsec Commerze Limited (“MCL”) and PRP Technologies Limited (“PRP”), as shown
in the table below:

61
 Company Business Shareholding
MFSL x Financing and investment See “Capital Structure – Notes to
x Advisory services Capital Structure – The
Shareholding Pattern” on page 31
of this Red Herring Prospectus
MCap x Investment banking and related services MFSL: 100.00%
x Brokerage (equity and currency) and
related services
x Wealth management, financial planning
and related services
MRPL x Financing MFSL: 100.00%
MTL x Consultancy (equity research) MFSL: 80.00%
x Technology support services MCap: 20.00%
MIBL x Insurance broking MCap: 100.00%
MCL x Broking (commodities) MCap: 100.00%
PRP x Support Services to Distribution, MTL: 100.00%
Financial Planning and other related
services

We operate as an integrated group in providing our financial products and services. We have divided our
products and services offering into the following four broad categories:

Our products and services are provided through the Issuer, MFSL, and its Subsidiaries, Microsec Capital
Limited (“MCap”), Microsec Resources Private Limited (“MRPL”), Microsec Technologies Limited (“MTL”),
Microsec Insurance Brokers Limited (“MIBL”), Microsec Commerze Limited (“MCL”) and PRP Technologies
Limited (“PRP”). MFSL is engaged in the financing and investment business of the Microsec Group, which
primarily comprises giving loans against shares, and making investments. It is also the ultimate holding
company of the Microsec Group.

Microsec Capital Limited manages the group’s investment banking and equity broking business. MCap is
registered with SEBI as a stock broker, a merchant banker, a depository participant and a portfolio manager. It is
also in the business of distribution of financial products and services and is registered with AMFI.

Microsec Resources Private Limited is an RBI registered NBFC and provides ‘loan against shares’ facility to
the clients including broking clients of the group. MRPL is engaged in business similar to that of the Company.

Microsec Technologies Limited is engaged in providing consultancy services. It also provides technological
support and research support to its clients as well as to the Microsec Group.

PRP Technologies Limited is engaged in the business of providing web-based solutions through portals. PRP
has recently launched a personal resource planning portal, which enables its individual clients to plan their
resources in terms of finance, accounting and maintain and update such information.

Microsec Insurance Brokers Limited is registered with IRDA and offers insurance broking services. It
distributes products of both life insurance and non life insurance companies.

Microsec Commerze Limited is registered as a member of MCX and NCDEX and offers services in the
commodities market. We trade for our clients in a wide variety of commodities, including agricultural products,
bullion, industrial products, oil and oil seeds and energy products.

62
Financing and Investment

The financing and investment business is operated through the Issuer, MFSL and its Subsidiary, MRPL. In our
financing and investment business, we offer loans against shares to our clients, secured by liquid and marketable
securities at appropriate margin levels. Our LAS business helps our clients leverage their equity market
positions to take increased exposure.

We commenced our financing and investment business in May 2005 through MRPL. We offer loans to clients,
including our brokerage clients, against specified securities which fall within our ‘approved list’. Only a certain
percentage of the market value of the securities is advanced as loan, and this helps to provide for market
fluctuations in the value of the security. The client is required to deposit and maintain a appropriate margin and
is responsible for infusing additional funds in case the margin falls below the prescribed limit, failing which we
have the power to sell the securities to the extent that would be required in order to maintain the required
margin. Margin levels of exposure can be monitored on a real-time basis as the selling price of the securities
securing the loan are usually transparent and easily accessible on a stock exchange.

As at March 31, 2010, 29 clients maintained a margin of 50% or more and the loan amounts outstanding in
respect of such clients aggregated to approximately Rs. 175.52 million; 44 clients maintained a margin between
25% to 50% and the loan amounts outstanding in respect of such clients aggregated to approximately Rs. 155.83
million; two clients maintained a margin below 25% and the loan amounts outstanding in respect of such client
aggregated to approximately Rs. 74.04 million. In the event the margin placed by a client falls below 25%, steps
are initiated for the purposes of replenishment of margin by way of additional securities, liquidation of loan
partially or sale of securities, with due notice to the clients.

We had no non-performing assets as on March 31, 2010. Until Fiscal 2009, no material amount was written off
on account of bad debts. However, we paid Rs. 39.50 million as liability for early recall of loans during the
Fiscal 2009. We assigned receivables of certain loan accounts and incurred a loss of Rs. 11.27 million in such
assignment during fiscal, 2010.

As of the date of this Red Herring Prospectus, six employees of the Company and one employee of MRPL are
employed towards LAS activity of our group The Company operates its LAS business from its Registered
Office. As on March 31, 2006, we had 15 clients and nil outstanding loan amount in our LAS business. As on
March 31, 2010, we had 75 clients in our LAS business and an outstanding loan amount of Rs. 405.39 million.

63
Apart from MFSL, its Subsidiary, MRPL is also engaged in the LAS business. We face competition in our LAS
business from several players in the financial services sector, including, Indiabulls Financial Services Limited,
India Infoline, Motilal Oswal Financial Services Limited, Religare Enterprises Limited and Sharekhan.

Investment banking and related services

Our investment banking and related services business is operated through MCap, a Subsidiary of the Issuer. Our
investment banking business provides a wide spectrum of services including capital market transactions, debt
syndication, mergers and acquisitions and corporate advisory services. MCap, is registered with SEBI as a
Category I Merchant Banker.

Capital Market Transactions

As of June 30, 2010, MCap has managed 12 equity capital market offerings aggregating to Rs. 3,860 million.
Further, we have also undertaken 2 rights issues, 4 delisting and 10 takeover assignments. We provide broad
range of services from transaction structuring to product placement and possess extensive product knowledge
and efficient execution capability. Currently, we have a number of assignments in the pipeline, including IPOs
and rights issues. We earn a fee as a percentage of the value of transaction, with the fee being dependent on
successful completion of the transaction.

Debt Syndication

Our desk syndication desk focuses on arranging finances for the corporate through various sources of financing
at competitive interest rates, making strategies for client for interest rate optimization and other advisory
services related to debt.

Mergers and Acquisition Advisory and other Corporate Advisory

Our advisory team provides clients financial advice pertaining to mergers, acquisitions, takeovers, tender offers,
divestments, restructuring, joint ventures and strategic alliances and de-mergers. Our services encompass
strategy formulation, identification of buyers or targets, valuation, negotiations and bidding, capital structuring,
transaction structuring and execution. We earn a fee as a percentage of the value of transaction, with the fee
being dependent on successful completion of the transaction. Our advisory team comprises a skilled team of
professionals with experience and understanding of the Indian regulatory, legal and financial framework.

Our investment banking business is primarily driven by the strength of our corporate relationships backed by
our strong focus and understanding of the growth oriented mid market companies, which we leverage for
origination of new assignments.

Our consolidated income from investment banking and related services was Rs. 115.70 million during fiscal
2009 and Rs. 149.96 million during fiscal 2010.

The mandate book size for our investment banking business was Rs. 182.56 million as on June 30, 2010.

Brokerage and related services

Our consolidated brokerage and related revenue in fiscal 2009 was Rs. 161.56 million while in fiscal 2010 the
revenue was Rs. 212.51 million.

Equity Broking

Our equity broking and depository participant business is operated by MCap. MCap’s share in the aggregate
turn over of the cash market segments of the NSE and the BSE was approximately 0.21% in fiscal 2009 and
0.19% in fiscal 2010. MCap’s share in the aggregate turn over of the futures and options segments of the NSE
and the BSE was approximately 0.04% in fiscal 2009 and 0.04% in fiscal 2010.

Retail broking

Our retail broking business is operated by MCap. Our retail broking business primarily covers secondary market
equity broking. As of June 30, 2010, we had more than 26,000 clients registered with MCap. We operate our

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equity broking business from 231 business locations. Our ability to provide and share real-time information,
backed by personalised customer care has enabled us to increase our customer base. To service our clients’
trading information needs, we have a team of technical and fundamental research analysts and our model
combines a dedicated relationship and dealing team behind each client to ensure that our services continuously
grow not only in terms of revenue but also in terms of number of clients. While the dealing teams continuously
keep equity trading clients updated with market information and are responsible for execution of trades, the
relationship team continues to acquire and enroll new clients for our services.

We propose to further strengthen the research function, which is also one of our future strategies. Our
consolidated revenue from brokerage (equity, commodities and currency including depository services) and
related services was Rs. 212.51 million during the Fiscal 2010 out of which Rs. 194.75 million was related to
equity brokerage.

Priority client broking

Our priority client broking is operated by MCap. Our priority client broking is mainly targeted at high networth
individuals, who participate in the secondary equity market and require priority services with customized
research and advisory support. The Priority Client Group (PCG) team actively advises clients, aided by our
dedicated research team.

Institutional broking

Our institutional equities business is operated by MCap. We have, recently, commenced initiatives for providing
institutional equity services. Our institutional broking desk provides services to primarily corporate and
institutions. We have started our activities of institutional brokerage.

We have applied for empanelment as an equity broker to several institutions and have recently received
approvals from nine institutions, out of which five have started transactions with us. We have set up a dedicated
institutional broking team in Mumbai comprising three skilled personnel for servicing institutional clients and
have taken up separate office space for this service. We believe that the institutional broking business will
provide us with more visibility.

Online Equity Portal

Our online equity trading portal ‘Microclick’, operated by MCap, was launched in April, 2007. We offer online
trading facilities to our customers, where they can have access to real time quotes, charting and market
information. The portal has been designed by Asian CERC Information Technology Limited and offers several
beneficial features, including low cost transaction execution and less human interference. The portal has been
designed in a manner to provide different products to the clients tailored to meet their specified requirements -
fixed as well as variable brokerage models.

MCap has more than 1,700 registered clients as on June 30, 2010 on its internet trading platform.

Depository Participant Services

Our depository participant services are provided through MCap. Depository participant services also form part
of our integrated offering to our equity broking and other clients. As on June 30, 2010, we had 25,227
depository accounts with NSDL holding securities aggregating to Rs. 21,702.76 million in value and 1,815
depository accounts with CDSL holding securities aggregating to Rs. 43.05 million in value.

Since we provide both equity broking and depository services through MCap, we are able to provide these
services in an efficient manner, reducing transaction time. Additionally, offering equity broking services
simultaneously with depository participant services ensures efficient monitoring of margining requirement prior
to conducting any sales of shares.

Commodity and Currency Broking

Since Fiscal 2003, our commodity broking and related advisory operations are managed by MCL. Commodity
broking gives investors the opportunity to hedge risks of capital in commodity and currency market fluctuations.
The commodities segment has emerged as an additional class of investment for investors in recent times. Out of

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our equity trading clients, we are targeting corporate houses for our commodity broking business, including
investment, trading and hedging in globally-traded commodities. Our commodity broking business covers
commodities such as metals (both precious metals and industrial metals), oil and gas, agro commodities (such as
oils, seeds, grains, pulses, and spices) and also industrial commodities (such as plastic, cotton and jute).

We provide commodity broking services at 30 locations. We employ experienced commodity dealers, who
support trading for existing commodity broking clients, in addition to the equity relationship manager. The
research team formulates trading strategies depending on the risk-return profile of the client. The relationship
manager team provides support to our commodities team. We provide expert research and analysis to our clients
in various commodities, listed in NCDEX and MCX. We also provide technical analysis through trained and
qualified analysts. As of June 30, 2010, the number of commodity dealers and relationship managers was five
and three respectively.

As at June 30, 2010, we had 323 clients for our commodity broking business. Our income from commodity
brokerage was Rs. 5.37 million during fiscal 2009 and Rs. 17.75 million during fiscal 2010.

Our currency brokering services are offered by MCap.

Foreign currency future contracts were launched by Indian exchanges in fiscal 2009 and the volumes have
grown consistently over time. Forex futures are used by corporates and other market participants for hedging
and speculative purposes. We focus on providing advisory services to corporate clients and suggest them on
their hedging needs. Exporters and importers hedge their forex risk by transacting in currency future contracts.

Wealth management, insurance broking, financial planning, distribution and related services

Insurance Broking

We conduct the insurance brokerage business since Fiscal 2003 through MIBL. MIBL offers consultancy and
guidance to its clients in the insurance spectrum and deals with insurance companies in India, both in the life
and the non-life segments. We offer risk management services and customised insurance solutions for mitigation
of personal as well as corporate risks after understanding specific requirements and risk appetite of our clients.
We analyze the insurance requirement, conduct insurance audit and risk inspection where necessary and
recommend suitable insurance solution for our customers.

As at June 30, 2010, MIBL had approximately 2,430 clients. Our consolidated income from insurance broking
was Rs. 7.87 million during fiscal 2009 and Rs. 13.74 million during fiscal 2010.

Distribution of Mutual Funds and other Financial Products

As part of the wealth management services, we focus on the distribution of mutual funds to
institutions/corporate and retail investors through MCap. We offer distribution of personal financial products,
mutual fund schemes, tax savings instruments, bonds, debentures, fixed deposits and other saving products.

For the purposes of providing services relating to financial planning, we have set up a ‘financial planning
division’ in August, 2008. Based on the financial commitments and financial requirements of our clients vis-à-
vis their financial resources, our financial planning division advises our clients on financial planning and devise
investment strategies to enable the client to optimize its financial requirements vis-à-vis financial resources
through savings and investments. The financial planning division also provides advisory services pertaining to
insurance portfolio. The Company expects advisory based revenue out of this activity and proposes to facilitate
this financial planning to individuals through a chain of representatives or distribution networks appointed
/employed by the Company and designated as ‘Microsec Enterprises’ or ‘Microsec Network Services’.

We believe that multi product distribution networks for the distribution of multi products, which are briefly set
forth below:

x Microsec Enterprises – we have individual channel partners on revenue sharing basis;

x Microsec Network Services – we have a network of chartered accountants, company secretaries and
independent finance professionals;
x Branches of the Microsec Group; and
x Internet based marketing through online portal

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This function is supported by the retail and institutional sales and distribution network of the Microsec Group.
The retail distribution network is used in distribution of new issues at the retail level and the institutional
equities group helps in the private placement and placement of new issues with the institutions.

Portfolio Management Services

We offer portfolio management services through MCap, which is registered with SEBI as a portfolio manager.
As a portfolio manager, MCap provides investment advisory and planning services to high net worth
individuals. MCap has designed various portfolio management schemes and structures. The requisite software
for portfolio management service has been obtained and the Company has recently started operations in this
segment.

Club Kautilya

‘Club Kautilya’ is an initiative of Microsec Group formed with the motive of providing financial planning
services to our individual clients and operated through MCap. We provide services to corporate executives,
government employees, self employed professionals and self employed entrepreneurs. Currently, we operate
from Kolkata. We also plan to set up 200 exclusive outlets of ‘Club Kautilya’ within a period of two years. See
“Our Business – Business Strategies – Geographic Expansion” on page 69 of this Red Herring Prospectus.

Personal Resource Planning

We recognize that with the spread of use of internet and due to technological evolution, it is essential to provide
online value added services. We acquired PRP Technologies Limited in fiscal 2009, which launched a web
based personal resource planning application to provide information management services to individuals. PRP
has developed an online portal for personal resource planning (an information management service for
individuals), wherein an individual can update and plan his terms of finance, accounting and personal details.

Our consolidated gross revenue for wealth management, insurance broking, financial planning and related
services for fiscal 2009 was Rs. 8.17 million while for fiscal 2010 was Rs. 55.54 million.

Our core values

The Microsec Group believes in four core values – knowledge, commitment, transparency and partnership. We
believe that these values are key to the growth of business operations of the Microsec Group.

Business Strengths

Our business is characterized by the following key strengths:

Integrated business model

The Microsec Group operates as an integrated group, providing various financial products and services to its
target client base of retail investors, high net worth individuals, companies and institutions. The Group operates
through the Company and its Subsidiaries, MCap, MRPL, MTL, MIBL, MCL and PRP, as shown in the table
under “– Business operations of the Microsec Group” on page 62 of this Red Herring Prospectus. In our
financing and investment business, we offer loans against shares to our clients, secured by liquid and marketable
securities at appropriate margin levels. In our investment banking business, we offer our clients a range of
merchant banking, corporate advisory (including research) and debt syndication services. In our brokerage
business, we execute third-party trades for our clients in equities, derivatives, commodities and currencies on
stock exchanges and commodity exchanges as well as depository services. In our wealth management, insurance
broking and financial planning business, we distribute third party insurance and mutual fund products and offer
wealth management and financial planning services. Our integrated service platform allows us to leverage
relationships across lines of business and our industry and product knowledge by providing multi-channel
delivery systems to our client base, thereby increasing our ability to cross-sell our products services. For
instance, we are able to offer loans against shares, which are secured by liquid and marketable securities to our
brokerage clients.

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Experienced senior management and “people partnership” model

Our senior management comprises qualified and experienced professionals with a successful track record. Both
our Promoters are executive directors and are actively involved in the day-to-day management of our business.
Mr. B.L. Mittal is an executive director in MFSL and is in overall charge of our business and focuses
specifically on the financing and investing business. Mr. Ravi Kant Sharma is an executive director in MCap
and heads the brokerage and wealth management, insurance broking and financial planning businesses. Mr.
Pankaj Harlalka is an executive director in MCap and heads our investment banking business.

Our senior management is supported by a team of qualified professionals with requisite experience in our
businesses. We focus on employee welfare and a partnership culture with our professionals. As at the date of
this Red Herring Prospectus, approximately 9.24% of our share capital is held by Microsec Vision (Employees)
Trust, a trust settled by our Promoter Mr. B.L. Mittal for the benefit of our employees. Further, we have
introduced a revenue sharing model for a significant number of our channel partners in our brokerage business
and for our employees in our wealth management, insurance broking and financial planning business. We
believe that our revenue sharing model incentivizes performance of our channel partners and employees and
fosters a partnership culture with our professionals. We believe that this partnership culture with focus on
performance, with appropriate training and continuous education, enable us to recruit talented professionals and
reduce employee attrition.

We believe that the experience and financial acumen of our management and professionals combined with our
internal controls and risk management measures help us in implementing our business strategies.

Strong regional base with emerging pan India presence

We believe that we enjoy a strong presence in eastern India. As at June 30, 2010, we had a network of 239
branches, out of which 99 branches were located in Kolkata (where we also have our headquarters). In addition,
79 branches were located in West Bengal, excluding Kolkata. We have 35 branches in eastern states other than
West Bengal. Other than in eastern states, we have 26 branches spread in different parts of India including
locations at Delhi, Indore, Jaipur, Mumbai, Pune, Raipur, Shimla, Srinagar, Surat and Varanasi. In aggregate,
we operate in different locations in 16 states. Whilst we are expanding our branch network and intend to
strengthen our pan-India presence, we believe our presence in eastern India provides us with a competitive
advantage and presents us an attractive opportunity to grow our client base and revenues.

Brand recognition and strong relationships

We believe that success in the financial services industry is derived from brand recognition and client
relationships. We believe that ‘Microsec’ is a well-recognized brand, especially in eastern India, where we have
a strong presence. We also believe that our clients associate the ‘Microsec’ brand with differentiated and quality
services, solutions to strategic and financial challenges and execution of our clients’ transactions. We leverage
our brand awareness to grow our business, build relationships and to attract and retain the services of talented
individuals. We expect that our network of 239 branches across India will further enhance our brand recognition
with our existing and potential clients.

We focus on nurturing long-term relationships with our corporate, institutional and high net-worth individual
clients. In the case of our corporate clients, we focus on middle market companies and serving these companies
throughout the course of their growth. We believe that this focus has enabled us to form strong relationships
with these corporate clients. In the case of institutional and high net-worth individual clients, we focus on client
coverage and providing ongoing and innovative solutions. We believe that such focus has enabled us to form
strong relationships with these clients. We believe that these relationships provide us with an advantage in
attracting deal flow and securing transactions and enable us to offer our clients diversified products and services
and increase our revenues per client.

Adequate internal controls and risk management system

We believe we have adequate internal controls and risk management systems to assess and monitor risks across
our various businesses. Our risk management system functions through our accounts and operations
departments, risk control software and a dedicated centralized risk management team. We seek to monitor and
control our risk exposure through a variety of separate but complementary financial, credit and operational

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reporting systems. We believe that we have effective procedures for evaluating and managing market, credit and
other risks to which we are exposed.

Research and knowledge based organisation

We have adequate base of research with delivery capabilities. Our research reports are covered by print and
electronic media at pan India level. We have effective systems to make and deliver knowledge through various
reports across all section of our customers.

We benchmark our research calls against relative index which provides accountability to research. We have
started a research based retail distribution channel namely “Club Kautilya” through MCap.

Business Strategies

Geographic expansion

As at June 30, 2010, we had a network of 239 branches (which includes 237 branches of MCap and 2 branches
of MCL), out of which 99 branches (which includes 97 branches of MCap and 2 branches of MCL) were located
in Kolkata (where we also have our headquarters). In addition, 79 branches of MCap were located in West
Bengal, excluding Kolkata. We also earn a substantial portion of our total income from this region. We propose
to expand our branch network and intend to establish a pan-India presence. We plan to expand the operations of
the Company and its Subsidiaries into smaller cities and towns that we believe are under-serviced by financial
services companies or where we believe we can develop our business. In the first phase of this expansion, we
will expand our presence in western India. We have already set up an office of MCap in Mumbai and
commenced operations. In the second phase, we will expand our presence in northern and southern India. As we
do not have significant operations in these regions, we believe that these regions will offer opportunities for
growth and expansion. We propose to expand by increasing the network of our branches and business
associates. We also propose to continue our expansion in eastern India. We may also consider, from time to
time, growth opportunities through the inorganic route. Whilst we propose to offer our range of products and
services across our businesses through our expanded network, we also plan to set up 200 exclusive outlets of
‘Club Kautilya’ within a period of two years. We also plan to set up a network of ‘Microsec Enterprises’ (a
network of entrepreneurs as channel partners for distribution of financial products) and ‘Microsec Network
Services’ (a network of professionals, such as Chartered Accountants, as channel partners for distribution of
multiple financial products) through a combination of the Issuer and its Subsidiaries, throughout India. We
believe that our proposed expansion complemented by our client-focused relationship management, will allow
us to increase our client base and help us increase our market share.

Strengthen research capabilities and continue to develop client relationships

We believe that we have adequate research capabilities in MCap that complement the business of the Microsec
Group, particularly our brokerage business. We intend to develop our research division as a separate profit
centre to provide research services to our clients, including our brokerage clients. We propose to enlarge our
team of research analysts and advisors and dealers to strengthen relationships with our clients. We also propose
develop our research division as a separate knowledge process outsourcing unit. MTL has been allotted a plot of
land by WBHIDCO, a Government enterprise in the Knowledge Corridor at Rajarhat in Kolkata, which we
propose to develop as a hub for our centralized operations, including research.

We propose to expand our business by increasing the number of our client relationships in the Issuer and its
Subsidiaries. We believe that increased client relationships will add stability to our business. We seek to develop
our existing client relationships and also focus on increasing our client base. We believe our strengthened
research capabilities will help us develop our client relationships. We expect the growth of small and medium
enterprises to provide us an opportunity to offer our products and services to this class of clients. We also intend
to cross-sell our various products and services to our clients and increase our revenues per client.

Expand internet based platform for our financial services and products

We are currently in the process of setting up an internet-based platform through MCap for providing our
products and services to our clients, particularly our brokerage clients. We plan to establish online trading
capabilities to complement our products and services. We believe that internet based services are cost effective,
less risky and transparent. We have established a dedicated advisory desk for on-line services. We believe that

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we have technological platform and systems in place to accommodate and service significant increase in on-line
trading accounts and clients. We also propose to offer wealth management, insurance broking, financial
planning and related services through our internet-based platform. We have acquired PRP Technologies
Limited, company which launched an internet-based personal resource planning application to provide
information management services to individuals.

We believe that an internet based, easily scalable product delivery model will enable us to respond effectively to
the competitive challenges of discount equity brokerages.

Strengthening institutional business

We have already set up desk through MCap for servicing the institutional business. We have filed applications
for empanelment to several institutions. We have already been granted empanelment by nine institutions out of
which five have started business. We plan to establish and scale the broking business with institutions. Our
seamless transaction capabilities along with adequate research will provide support to this initiative. The
institutional desk will also provide additional support to our investment banking business.

Maintain strict risk management policies for our loan portfolios.

We are focussed on building a large loan portfolio under the Issuer and MRPL with minimum delinquency risk.
We will continue to maintain strict risk management standards to reduce delinquency risks and promote a robust
recovery process.

Support Systems of Microsec Group

Risk Management

We believe that effective risk management is of primary importance to the success of our operations.
Accordingly, we have risk management processes to monitor, evaluate and manage the principal risks we
assume in conducting our activities. These risks include market, credit, liquidity, operational, legal and
reputational risks.

We seek to monitor and control our risk exposure through a variety of separate but complementary financial,
credit, operational, compliance and legal reporting systems based on mandatory regulatory requirements as well
as our business needs. Our Board of Directors has overall responsibility for monitoring enterprise-wide risk.
Credit risk related to loans against shares business and the book debts of share broking, commodities broking
and derivatives business on behalf of clients is monitored by the risk management committee. Market risk in our
case arises out of unfavourable movements in the prices of our investments and shares received as collateral
against loans and it is monitored by our risk management team in accordance with our risk management
policies. Legal risk arising out of compliances under various laws is being monitored by the respective whole-
time director with his compliance team supplemented by the Chief Financial Officer and the Company
Secretary, in consultation with domain experts from time to time. We have well-documented policies and
guidelines for compliance and risk management. In order to mitigate business risk, the risk management policies
are decided by our risk management committee comprising of Chairman and Managing director of MFSL,
Managing Director and CEO of MCap, CFO and Head Financial Risk Management. In order to mitigate
business risk, the risk management policies are reviewed regularly by the risk management committee and are
regularly updated to take care of changing market dynamics.

Our ‘risk management system’ monitors our market exposure on the basis of the total margin collected from
clients, the total margin deposited with the exchanges and the lines of credit available from the banks. Our risk
management department analyses this data in conjunction with our risk management policies and takes
appropriate action wherever necessary to minimize risk. As part of our regulatory obligation, we use technology
for the monitoring of circular trading (manipulation of stock), the positions of traders, the impact of volatility
and any concentration of position in a few scrips.

Technology

We recognise the need to have a sophisticated technology network in place to meet our customer needs as well
as to maintain a robust risk management system. To that end, we have set up a dedicated data centre at our
office at Kolkata and have invested in high-performance trading software. Our technology infrastructure is

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aimed at ensuring that our trading and information systems are reliable and performance-enhancing and that the
client data is protected.

The highlights of our technology infrastructure and system include:

x A well-balanced technology team comprising managerial personnel, engineering graduates, software

engineers, application support managers, network and hardware managers managing our IT
infrastructure across our business locations;
x Managing a complex multi-product/multi-architecture system serving the needs of our retail, online
broking, institutional and wealth management customers;
x Balanced in-house/outsourcing approach to IT combined with a quick response to business needs;
x Scalable platforms for order-management and risk management requiring minimal human intervention;
x Sophisticated server and network infrastructure;
x Redundancy (alternate connectivity) for network;
x 24 x 7 x 365 connectivity with high data speed;
x Data back-up is taken on an incremental basis on tape drives and sent to another location.
x Use of both VSAT / leased lines;
x Power back up

Receivable management

Client receivables are closely monitored to ensure timely collection. Business locations ensure that client
cheques are deposited into the designated account after making an entry in the system. In order to facilitate an
easy flow of funds, and to prepare for a ‘T+1’ environment, we have a centralised collection management
system in place. The accounts are reconciled at periodic intervals. The system alerts us to any bounced cheques
so that appropriate action can be taken.

Audit and inspection

We actively review our existing concurrent audit and inspection procedures to enhance their effectiveness,
usefulness and timeliness. The report of the Internal Auditor is reviewed by Board. The audit committee of the
Board will take further measures for ensuring effective internal audit systems.

Security and disaster recovery

The organisation has a comprehensive information security policy and conducts periodic systems and network
penetration tests to review the vulnerability of our infrastructure. The organisation continues to verify the
robustness of its IT processes to achieve a comprehensive control. We have also established a site at Mumbai
where our entire data back-up is maintained.

Human Resources

As at June 30, 2010, we employed approximately 813 employees in the Group who are all permanent
employees. The permanent employees include personnel engaged in management, administration, operations,
maintenance, auditing, finance, sales and marketing functions. The table below sets forth employee details in
various segments:

Microsec Group No. of employees

MFSL 15
MCap 636
MTL 129
PRP 12
MCL 11
MIBL 9
MRPL 1
Total 813

We believe that our ability to grow depends to a significant extent on our ability to attract and retain the best
talent in the market place. The key elements of our human resource strategy include:

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x Objectively set performance based reward and recognition mechanism;
x Work culture designed and evolved around the principles of ownership and accountability;
x Creating a second line support for all key positions through employee career planning process;
x Regular on and off site training programs for skill enhancement

Intellectual Property

We use the trade name/ logo ‘Microsec’ and its associated logos and invest our resources in building our brand.
Our trade name/ logo ‘Microsec’ is registered in the name of our Subsidiary, MCap. Another principal trade
name ‘CLUB KAUTILYA’ is also registered in the name of our MCap. We acquired certain intellectual
property rights in brand name “PRP” pursuant to our arrangement with Gulmohar Advisors Private Limited. See
“History and Certain Corporate Matters – Other Agreements” on page 89 of this Red Herring Prospectus. These
tradename over PRP are registered in the name of the seller. We have submitted our application for transfer in
our name. Further, we have filed applications with the registry for trade mark and copyright registration of
various product names that we use in our business under various classes. As of the date of this Red Herring
Prospectus, most of our applications for trade mark registration are pending before the Registry of Trade Marks.

We have faced opposition in relation to certain applications filed before the Trade Mark Registry for registration
of labels, ‘MICRO FOCUS. – MEGA WEALTH’ and ‘MICROSEC, MICRO FOCUS. MEGA WEALTH’. For
further details, see “Outstanding Litigation and Material Developments” on page 229 and “Risk Factors” on
page x of this Red Herring Prospectus.

Insurance

The Companies currently maintain insurance cover on building, electronic equipments covering servers, switch
and modems, digiset. The Group also has a group mediclaim insurance policy covering the employees of the
group. The Companies insurance policies cover physical loss or damage to its property arising from a number of
specified risks including burglary, fire and other perils. The Group has incurred expense of Rs. 0.45 million in
fiscal 2010 towards insurance premiums.

Competition

We face stiff competition in all of our main business lines of investment banking and equity broking. Our
primary competitors differ in each respective business and include both domestic and foreign institutions. Some
of our regional competitors include Indiabulls Financial Services Limited, India Infoline Limited and Motilal
Oswal Securities Limited.

Property

The Company and MTL, a Subsidiary, own offices in Kolkata admeasuring more than 18,000 sq. ft. in area
(including a basement) and MCap, a Subsidiary, owns offices at Mumbai admeasuring more than 1,400 sq. ft. in
area, which have been given on mortgage to HDFC Bank Limited for availing credit facilities granted to MCap.
In terms of the secured term loan granted by HDFC Bank Limited, MCap has been sanctioned various fund
based and non fund based facilities including inter alia, bank guarantees, short terms loans, overdraft against
fixed deposit and property. For further details, see “Financial Indebtedness” on page 226 of this Red Herring
Prospectus.

Most of our marketing and sales offices are on rental agreement. The Group has incurred expense towards rent
during the year ended March 31, 2010 of Rs. 4.39 million.

We are in the process of constructing an independent building having floor space admeasuring approximately
30,000 sq. ft in our subsidiary, MTL, at the Knowledge Hub at New Town, Rajarhat in Kolkata. The land has
been mortgaged to State Bank of India.

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 REGULATIONS AND POLICIES

The following description is a summary of certain laws and regulations, which are relevant for our business.
The information detailed in this chapter has been obtained from publications available in the public domain.
The regulations set out below may not be exhaustive, and are only intended to provide general information to
the investors and are neither designed nor intended to be a substitute for professional legal advice.

We are engaged in the business of providing varied financial services, including investment banking, retail and
institutional equity broking and research, commodities broking and research, asset management, merchant
banking, depository services, financial services, wealth management, portfolio management services, mutual
fund distribution services, risk analysis and distribution of life and non-life insurance products. We may be
required to obtain licenses and approvals depending upon the prevailing laws and regulations as applicable. For
details of such approvals, please see “Government Approvals” on page 244 of this Red Herring Prospectus.

NBFC Regulations

The Reserve Bank of India Act, 1934

The RBI is entrusted with the responsibility of regulating and supervising activities of NBFCs by virtue of the
power vested in it under Chapter III B of the Reserve Bank of India Act of 1934 (“RBI Act”). The RBI Act
defines an NBFC under Section 45-I (f) as:
“
(i) a financial institution which is a company;
(ii) a non-banking institution which is a company and which has as its principal business the receiving of
deposits, under any scheme or arrangement or in any other manner, or lending in any manner;
(iii) such other non-banking institution or class of such institutions as the RBI may, with the previous
approval of the Central Government and by notification in the Official Gazette, specify.”

A “financial institution” and a “non- banking institution” have been defined under sections 45-I(c) and 45-I (e)
of the RBI Act, respectively.

The RBI has clarified through a press release (Ref. No. 1998-99/1269) dated April 8, 1999, that in order to
identify a particular company as an NBFC, it will consider both the assets and the income pattern as evidenced
from the last audited balance sheet of the company to decide its principal business. The company will be treated
as an NBFC (a) if its financial assets are more than 50% of its total assets (netted off by intangible assets);
and (b) income from financial assets should be more than 50% of the gross income. Both these tests are required
to be satisfied as the determinant factor for principal business of a company.

The RBI Act mandates that no NBFC shall commence or carry on the business of a non-banking financial
institution without obtaining a certificate of registration. In case an NBFC does not accept deposits from the
public (“NBFC-ND”), it shall obtain a certificate of registration without authorisation to accept public deposits.
The NBFC must also have a net owned fund of at least Rs. 2.5 million but not exceeding Rs. 20 million.

Under Section 45 – IC of the RBI Act, every NBFC must create a reserve fund and transfer thereto a sum not
less than 20% of its net profit every year, as disclosed in the profit and loss account and before any dividend is
declared. Such a fund is to be created by every NBFC irrespective of whether it is an NBFC not accepting public
deposit (“NBFC-ND”). Further, no appropriation can be made from the fund by the NBFC except for the
purposes specified by the RBI periodically and every such appropriation shall be reported to RBI within 21 days
from the date of withdrawal.

Public Deposit Regulations

As per the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998
(Notification No.DFC.118/DG(SPT)-98) dated January 31, 1998 (as amended from time to time and last
amended on July 01, 2010) (“Public Deposit Regulations”), an NBFC-ND is entitled to certain exemptions from
the norms and conditions stipulated on NBFCs taking deposits. In order to benefit from these exemptions, the
board of directors of the NBFC-ND must pass within 30 days from the issue of these directions and thereafter
with 30 days of the commencement of each subsequent financial year, a resolution to the effect that the
company has invested or would invest/hold its investments in the shares/securities of its
group/holding/subsidiary companies of not less than 90 per cent of its assets and (name of each company to be

73
specified), that it would not trade in such shares/securities and that it has neither accepted nor would accept any
public deposit during the year.

Certain financial companies, including inter alia insurance companies, companies doing business as a stock
broker or sub-broker, merchant banking companies, housing finance companies, venture capital fund
companies, are exempt from the requirement of obtaining a certificate of registration or complying with the
Public Deposit Regulations.

Prudential Norms

As per the Non Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve
Bank) Directions, 2007 as amended by notification no. DNBS (PD) CC No.178/03.02.001/2010-2011 dated July
1, 2010 (the “Prudential Norms Directions”), which contain detailed directions on prudential norms for NBFCs-
NDs. The Prudential Norms Directions, inter alia, prescribe guidelines on income recognition, asset
classification and provisioning requirements applicable to NBFCs, exposure norms, constitution of audit
committee, disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments in land
and building and unquoted shares. The Prudential Norms Directions are not applicable to NBFCs-ND holding
investments in the securities of its group/holding/ subsidiary companies where the book value of such holding is
not less than 90% of its total assets and where such NBFC-ND is not trading in such securities and is not a
systemically important NBFC-ND.

Systemically Important NBFCs-ND

All NBFCs – ND with an asset size of Rs. 1,000 million or more as per the last audited balance sheet will be
considered as a systemically important NBFC – ND (“NBFC-ND-SI”). All NBFCs–ND–SI are required to
maintain a minimum Capital to Risk-weighted Assets Ratio (“CRAR”) of 10%. An NBFC–ND–SI is not
allowed to:

(a) Lend to
(i) Any single borrower exceeding 15% of its owned fund; and
(ii) Any single group of borrowers exceeding 25% of its owned fund;
(b) Invest in
(i) The shares of another company exceeding 15% of its owned fund; and
(ii) The shares of a single group of companies exceeding 25% of its owned fund;
(c) Lend and invest (loans/investments taken together) exceeding
(i) 25% of its owned fund to a single party; and
(ii) 40% of its owned fund to a single group of parties.

Pursuant to its Notification dated August 1, 2008, the RBI has issued guidelines with respect to non-deposit
taking NBFCs with asset size of Rs. 1,000 million, which pertain to capital adequacy, liquidity and disclosure
norms. Vide (Notification No. DNBS. 206 / CGM(ASR)-2009 dated May 26, 2009 ) NBFCs are advised to
achieve 12% CRAR by March 31, 2010 and 15% CRAR by March 31, 2011. Further additional disclosures
pertaining to CRAR, exposure to real estate sector (both direct and indirect) and maturity pattern of assets and
liabilities are required to be made in their balance sheet from the year ending March 31, 2009.

Furthermore, the RBI issued a clarification (Notification No. RBI/2008-09/491dated June 4, 2009) that the
NBFC-ND-SI regulation will apply to an NBFC-ND at the moment it reaches an asset size of 1,000 million,
even if such assets were not present at the time of when the last balance sheet was produced.

Additionally, the RBI has decided (Notification No. RBI /2008-09 /253 dated October 29, 2008) that NBFC-
ND-SI can issue Perpetual Debt Instruments, which will not be treated as ‘public deposits’ for the purpose of the
Public Deposit Regulations.

A NBFC-ND is required to make provisions against sub-standard assets, doubtful assets and loss assets in the
manner provided for in the Prudential Norms Directions.

Know Your Customer Guidelines

The RBI has extended the Know Your Customer (“KYC”) guidelines to NBFCs and advised all NBFCs to adopt
the same with suitable modifications depending upon the activity undertaken by them and ensure that a proper

74
policy framework of anti-money laundering measures is put in place. The KYC policies are required to have
certain key elements, including inter alia customer acceptance policy, customer identification procedures,
monitoring of transactions and risk management, adherence to KYC guidelines and the exercise of due diligence
by persons authorized by the NBFC, including its brokers and agents.

Corporate Governance Guidelines

Pursuant to an RBI Circular dated May 8, 2007, all NBFC-ND-SIs are required to adhere to certain corporate
governance norms including constitution of an audit committee, a nomination committee, a risk management
committee and certain other norms in connection with disclosure and transparency and connected lending.

Guidelines on Fair Practices Code:

The RBI has prescribed guidelines on fair practices (the “Fair Practices Code”) that should be framed and
approved by the Board of Directors of all NBFCs. The Fair Practices Code further requires that it should be
published and disseminated on the website of the NBFC. The Fair Practices Code should include, amongst
others inclusion of necessary information affecting the interest of the borrower in the loan application form,
devising a mechanism to acknowledge receipt of loan applications and establishing a time frame within which
such loan applications shall be disposed and conveying, in writing, to the borrower the loan sanctioned and
terms thereof. The acceptance of terms should be kept in its record by the NBFC.

Norms for excessive interest rates

In addition, the RBI has recently introduced (RBI/2006-07/414 dated May 24, 2007) whereby the RBI has
requested all NBFCs to put in place appropriate internal principles and procedures in determining interest rates
and processing and other charges. Furthermore, the RBI has recently directed NBFCs (Notification No. DNBS.
204 / CGM (ASR)-2009 dated January 2, 2009) to annualise interest rates and to adopt an interest rate model
that takes into account factors such as cost of funds and margin of risk premium. Additionally, NBFC are
required to disclose to borrowers the rate of interest, approach for gradation of risk and rationale for adoption of
such an approach in the application form.

Monitoring of non-deposit taking NBFCs

The RBI has directed (Notification No. RBI/2008-09/194 dated September 24, 2008) non deposit taking NBFCs
with an asset size between Rs. 500 million and Rs. 1000 million to file quarterly returns with basic information
concerning the business of the NBFC.

Rating of NBFC

The RBI now mandates vide (Notification No. RBI /2008-09 /372 dated February 04, 2009) that all NBFCs
(both deposit taking and non-deposit taking) with asset size of Rs 1,000 million and above will furnish
information to the RBI, about downgrading / upgrading of assigned rating of any financial product issued by
them, within fifteen days of such a change in rating.

Dealing in Securities

Securities regulation in India takes place under the provisions of the SCRA, SEBI Act, the Depositories Act,
1996 and the rules and regulations promulgated thereunder.

Securities Contracts Regulations Act, 1956

The SCRA seeks to prevent undesirable transactions in securities by regulating the business of dealing in
securities and other related matters. The SCRA provides for grant of recognition for stock exchanges by the
Central Government. Every recognized stock exchange is required to have in place a set of rules relating to
its constitution and bye-laws for the regulation and control of contracts.

The bye-laws normally provide inter alia for:

(i) the opening and closing of markets and the regulation of the hours of trade;
(ii) the fixing, altering or postponing of days for settlements;

75
(iii) the determination and declaration of market rates, including the opening, closing highest and lowest
rates for securities;
(iv) the terms, conditions and incidents of contracts, including the prescription of margin requirements, if
any, and conditions relating thereto, and the forms of contracts in writing;
(v) the regulation of the entering into, making, performance, recession and termination of contracts,
including contracts between members or between a member and his constituent.

The Securities and Exchange Board of India Act, 1992

Pursuant to Section 12 of the SEBI Act, and the rules, regulations and guidelines issued by SEBI, a stockbroker,
sub-broker and depository participant or any other intermediary associated with the securities market, may buy,
sell or deal in securities only after obtaining a valid certificate of registration from SEBI in accordance with the
applicable regulations.

Stock Broker Regulations

The Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, as amended
from time to time (“Stock Broker Regulations”) provides that no person shall carry on activity as a stock broker
unless he holds a certificate granted by SEBI under the Stock Broker Regulations.

Further, the Stock Broker Regulations provides the eligibility criteria and conditions required to be satisfied in
order to obtain the certificate of registration. They further provide the procedure for obtaining the certificate of
registration to carry on business as a stock broker and/or a sub-broker who is required to be affiliated to a stock
broker registered under the aforesaid regulations. On registration, the stockbroker and sub-broker are required to
adhere to a code of conduct prescribed under the Stock Broker Regulations. In addition, a stock broker and/or a
sub-broker is required to abide by the rules, regulations and bye-laws of the stock exchange or stock exchanges
of which it is a member. Further, in case of any change in its status or constitution, the stock broker and/or the
sub-broker are required to obtain the prior permission of SEBI in order to continue to buy, sell or deal in
securities in any stock exchange.

Apart from the registration of stockbrokers and sub-brokers, the Stock Broker Regulations provide for
registration of trading and clearing members. A trading member is a member of the derivatives exchange or
derivatives segment of a stock exchange and who settles the trade in the clearing corporation or clearing house
through a clearing member. A clearing member is a member of a clearing corporation or clearing house of the
derivative exchange or derivatives segment of an exchange, which clears and settles transactions in securities.

The minimum net worth for clearing members is Rs. 100 million and they are required to deposit a sum of at
least Rs. 5.00 million with the clearing corporation or clearing house of the derivatives exchange or derivatives
segment of an exchange, as applicable. The code of conduct specified for stock brokers is applicable mutatis
mutandis to the trading and clearing members.

In terms of a Notification dated August 22, 2008, issued by SEBI, stock brokers/ clearing members, are required
to conduct complete internal audit on half yearly basis by a independent qualified chartered accountants, which
shall cover, inter alia, the existence, scope and efficiency of internal control system, compliance with SEBI Act,
SCRA and the KYC requirements and data security and insurance in respect of their operations. Furthermore,
through a Notification dated June 29, 2009, SEBI has amended the Stock Broker Regulations regarding fees
payable for the sale and purchase of securities other than debt securities from 0.0002% to 0.0001% (Rs.10 per
crore) and for the sale and purchase in debt securities from 0.00005 to 0.000025 (Rs. 2.5 per crore) of the price
at which securities are purchased.

Internet Trading

Internet based trading was approved by SEBI through its Circular No. SMDRP/POLICY/CIR-06/2000 dated
January 31, 2000. The circular provides that SEBI registered stock brokers interested in providing internet based
trading services must obtain formal permission of the concerned stock exchange. The stock exchange, before
giving permission must ensure the fulfillment of certain minimum conditions such as a minimum net worth of
Rs. 500 million, the system used by the broker has provision for security, reliability and confidentiality of data
through use of encryption technology and has adequate backup systems and data storage capacity. The broker’s
web site providing the internet based trading facility should contain information meant for investor protection.
Certain mandatory security features are also prescribed in the circular for all internet based trading systems.

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Depository Regulation

The Depositories Act, 1996

The Depositories Act, 1996 (as amended from time to time) provides for regulation of depositories in securities
and other related matters. Every person subscribing to securities offered by an issuer has the option either to
receive the security certificates or hold securities with a depository. A depository after obtaining a certificate of
commencement of business from SEBI can enter into an agreement with one or more participants as its agent.
Any person, through a participant, may enter into an agreement with any depository for availing its services.

Depository Regulations

SEBI framed the Securities and Exchange Board of India (Depositories and Participants) Rules and Regulations,
1996 which provide inter alia, for the formation of such depositories, the registration of participants as well as
the rights and obligations of the depositories, participants, companies and beneficial owners.

Merchant Banking

Merchant Banker Regulations

No merchant banking activities can be carried out by any person as a Merchant Banker unless he holds a
certificate granted by SEBI under the Securities and Exchange Board of India (Merchant Bankers) Regulations,
1992, as amended from time to time (“Merchant Banker Regulations”). Further, the Merchant Banker
Regulations provides the eligibility criteria, procedure for obtaining the certificate of registration to carry on
business as a Merchant Banker. Based on the satisfaction of the specified capital adequacy requirements, SEBI
grants registration for merchant banking activities.

According to the category identified, the Merchant Bankers are permitted to carry out certain activities as are
prescribed in the Merchant Banker Regulations. Further, the Merchant Bankers are required to adhere to a code
of conduct prescribed under the Merchant Banker Regulations.

Mutual Funds

Mutual Funds Regulations

The SEBI (Mutual Funds) Regulations, 1996 (the “Mutual Fund Regulations”) govern the law pertaining to the
business of mutual funds in India. In terms of Regulation 9 of SEBI (Mutual Fund) Regulations 1996, SEBI may
grant a certificate of registration to a mutual fund, subject to terms and conditions as laid down in Regulation 10
and subject to compliance of all directives, guidelines and/or circulars issued by SEBI from time to time. SEBI
has vide Circular SEBI/IMD/CIR No. 1/122201/08 dated April 3, has reduced the registration fee from Rs. 5
million to Rs. 2.5 million. Additionally, pursuant to an amendment notified on June 5, 2009, SEBI has directed
that mutual funds cannot invest more than 30% of their net assets in the money market instruments of an issuer..
The SEBI, with a view to improving professional standards, has made it mandatory for all mutual funds to
appoint agents/distributors who have obtained certification from the AMFI. In case of firms/companies, the
requirement of certification is made applicable to the persons engaged in sales and marketing.

The AMFI has issued guidelines in consonance with the various circulars issued by SEBI in this regard. The
primary objective of these guidelines is to ensure that mutual funds do not use unethical means to sell, market or
induce any Investor to buy units of their scheme(s) and mobilize funds on the strength of professional fund
management and practice as well as sound risk management policies. These guidelines are mandatory. Mutual
funds are required to ensure compliance with these guidelines both by intermediaries distributing their products
and through the sub-brokers acting on behalf of such intermediaries.

Mutual Fund distribution by NBFCs

In order to strengthen the NBFC sector, the RBI vide its circular RBI/2006-07/195 DNBS (PD) CC No.
84/03.10.27/2006-07 allowed NBFC to diversify in their business. The NBFCs maintaining minimum net owned
fund of Rs. 1,000 million, earning net profit as per the last two years audited balance sheet, maintaining CRAR
of 10% (in the case of NBFC-ND) and the percentage of net NPA to net advances of the NBFCs are not more

77
than 3% are eligible to apply to market and distribute mutual fund products, as agents of mutual funds, with the
prior approval of the RBI for an initial period of two years and a review thereafter. From the operational
perspective the NBFCs are required to adhere with the SEBI guidelines/regulations, including their code of
conduct, for distribution of mutual fund products.

There are other aspects of mutual fund distribution which must be complied with, such as adherence to KYC
guidelines and the provisions of the Prevention of Money Laundering Act, 2000. Moreover, the company must
comply with Public Deposit Regulations and the Prudential Norms and any other instructions/ provisions of the
RBI Act, to the extent applicable.

Insurance Broking

Insurance Act, 1938

The Insurance Act, 1938 (“Insurance Act”) embodies the law relating to the business of insurance in India.
Under the provisions of the Insurance Act, no person shall pay or contract to pay any remuneration or reward
whether by way of commission or otherwise, for soliciting or procuring insurance business in India to any
person except an insurance agent, licensed under the provisions of the Insurance Act. The Insurance Regulatory
Development Authority (“IRDA”), established under the Insurance Regulatory and Development Authority Act,
1991 (“IRDA Act”), is authorized to issue to any person making an application in the manner determined by the
regulations, a license to act as an insurance agent for the purpose of soliciting or procuring insurance business.
The IRDA was constituted, inter alia, with the objective of protecting the interests of holders of insurance
policies, regulating, promoting and ensuring the orderly growth of the insurance industry.

Insurance Broker Regulations

The Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002, as amended from
time to time (“Insurance Broker Regulations”) provide inter alia for licensing and capital requirements for
persons who are insurance brokers. These regulations require that a company interested in entering the business
of dealing in insurance or reinsurance to apply to the IRDA for a license and also prescribe a ‘Code of Conduct
for Insurance Brokers’ to follow.

Commodities Regulation under Forward Contracts (Regulation) Act, 1952

Commodities trading, is governed by the Forward Contracts (Regulation) Act, 1952 (“FCRA”) and the Forward
Contracts (Regulation) Rules, 1954 (“FCRR”). The FCRA provides, inter alia, for the establishment of the
Forward Markets Commission. Associations interested in dealing with forward contracts, such as commodity
exchanges like the MCX and NCDEX must make applications in the prescribed format as provided under the
FCRR.

A trading-cum-clearing member or an institutional clearing member of such an exchange is a person who has
the right to clear transactions in contracts that are executed in the trading system of the exchange. A trading-
cum-clearing member is therefore subject to the rules and bye-laws framed by the exchanges in order to govern
the trade in commodities. In case of difference between the provisions of any rules, the regulations or bye-laws
of the exchange and the provisions of FCRA or FCRR, the provisions of the FCRA or FCRR shall prevail,
except where the FCRA or FCRR allows the application or enforcement of the rules, articles, bye-laws or
regulations of the exchange.

Portfolio Management Services

Portfolio Manager Regulations

The Securities and Exchange Board of India (Portfolio Managers) Regulation, 1993 (“Portfolio Manager
Regulations”) provide that no person shall carry on activity as a Portfolio Manager unless he holds a certificate
granted by SEBI under the Portfolio Manger Regulations. A Portfolio Manager has been defined as a person
who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client
(whether as a discretionary Portfolio Manager or otherwise) the management or administration of a portfolio of
securities or the funds of the client.

The Portfolio Manger Regulations lay down inter alia the eligibility criteria, conditions for grant of certificate to

78
a Portfolio Manager and their general responsibilities. Further, the Portfolio Manager Regulations prescribe a
code of conduct which shall be followed by every Portfolio Manager. A Portfolio Manager must fulfill the
prescribed capital adequacy requirement of net worth of not less than Rupees twenty million. In terms of the
SEBI Notification dated August 11, 2008, the minimum net worth requirement for a portfolio manager has been
increased from Rs. 5 million to Rs. 20 million. Further, it provides that existing managers have to raise their net
worth to not less than Rs. 10 million within six months from August 11, 2008 and to not less than Rs. 20 million
within six months thereafter.

Intermediaries Regulations

SEBI (Intermediaries) Regulations, 2008

With the objective of providing a single comprehensive regulation, SEBI through its notification dated May 26,
2008 notified the SEBI (Intermediaries) Regulations, 2008 (the “Intermediaries Regulations”). These regulations
will apply to all intermediaries and will deal with common requirements pertaining to grant of registration,
general obligations, code of conduct. In terms of the Intermediaries Regulations, these regulations shall come
into force in relation to different classes of intermediaries on such dates as SEBI may be notification in the
Official Gazette may appoint.

Further, in terms of the Intermediaries Regulations, provisions relating to chapter V (action in case of default
and manner of suspension or cancellation of certificate) and chapter VI (miscellaneous provisions) have come
into force with effect from May 26, 2008. Pursuant to this, the following regulations have been repealed with
effect from May 26, 2008

1. The SEBI (Criteria for Fit and Proper Persons) Regulations, 2004; and
2. SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002.

The notifications also provides, that, any reference to The SEBI (Criteria for Fit and Proper Persons)
Regulations, 2004 in any regulation, guidelines, circulars shall be deemed to be reference to chapter V and
Schedule II of the Intermediaries Regulations. Further, any action undertaken including an enquiry commenced
or notice issued under the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty)
Regulations, 2002, prior to publication of the Intermediaries Regulations in the Official Gazette, shall be
deemed to have been done or taken or commenced under the corresponding provisions of the Intermediaries
Regulations.

Investment Advisory Services

Draft SEBI (Investment Advisory) Regulations, 2007

The SEBI has framed draft SEBI (Investment Advisers) Regulations, 2007 (“Draft Regulations”) to bring
investment advisers under the regulatory framework. In terms of Draft Regulations, an investment adviser is any
person who for consideration is engaged in the business of providing investment advice to others and as part of
regular business, issues or publishes reports or analyses containing investment advice The Draft Regulations
provide inter alia the eligibility criteria and the procedure for obtaining a certificate of registration to carry on
investment advisory services. It requires investment advisors to be members of a self-regulatory organization as
defined therein. With regard to the general obligations and responsibilities as laid out in the Draft Regulations,
an investment advisor would also be required to comply with certain disclosure norms and disclose inter alia all
material information about itself and its business to a prospective client.

Insider Trading

Insider Trading Regulations

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended
from time to time (“Insider Trading Regulations”) govern the law with respect to insider trading in India. The
Insider Trading Regulations inter alia prohibit all insiders from dealing in securities of a listed company when
the insider is in possession of unpublished price sensitive information (“UPSI”). It further prohibits an insider
from communicating, counselling or procuring, directly or indirectly, any UPSI to any person who while in
possession of such UPSI is likely to deal in such securities.

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Information is said to be price sensitive if it is likely to materially affect the price of the securities of the
company to which it relates. Under the Insider Trading Regulations, the concept of an “insider” is related to
those of a connected person and a deemed connected person. A person is said to be connected to a company
when he or she is a director, employee or officer in the company or stands in a professional or business
relationship with the company and when he or she may reasonably be expected to have access to UPSI and
includes inter alia market intermediaries, Merchant Bankers, share transfer agents, registrars to an issue,
debenture trustees, brokers, Portfolio Managers, investment advisors.

The Insider Trading Regulations further provide that all listed companies and organisations associated with the
securities market including inter alia intermediaries as defined under the SEBI Act, asset management
companies, trustees of mutual funds etc. should frame a code of internal procedures and conduct based on the
Model Code of Conduct specified under the Insider Trading Regulations.

Foreign Investment in NBFCs

FDI in an Indian company is governed by the provisions of the FEMA read with the FEMA Regulations and the
Consolidated FDI Policy issued in April 2010 (“FDI Policy”) by the DIPP

FDI is permitted (except in the prohibited sectors) in Indian companies either through the automatic route or the
approval route, depending upon the sector in which FDI is sought to be made. Under the automatic route, no
prior Government approval is required for the issue of securities by Indian companies/ acquisition of securities
of Indian companies, subject to the sectoral caps and other prescribed conditions. Investors are required to file
the required documentation with the RBI within 30 days of such issue/acquisition of securities.

Under the approval route, prior approval from the FIPB or RBI is required. FDI for the items/activities that
cannot be brought in under the automatic route may be brought in through the approval route. Approvals are
accorded on the recommendation of the FIPB, which is chaired by the Secretary, DIPP, with the Union Finance
Secretary, Commerce Secretary and other key Secretaries of the Government of India as its members.

As per the sector specific guidelines of the Government of India, the following relevant caps are presently
applicable for FDI in NBFCs:

(a) FDI/NRI investments is allowed under the automatic route in the following NBFC activities:

i) Merchant banking;
ii) Underwriting;
iii) Portfolio Management Services;
iv) Investment Advisory Services;
v) Financial Consultancy;
vi) Stock Broking;
vii) Asset Management;
viii) Venture Capital;
ix) Custodial Services;
x) Factoring;
xi) Credit rating Agencies;
xii) Leasing & Finance;
xiii) Housing Finance;
xiv) Forex Broking;
xv) Credit card business;
xvi) Money changing Business;
xvii) Micro Credit; and
xviii) Rural Credit.

(b) Minimum Capitalisation Norms for fund based NBFCs:

i) For FDI up to 51% - US$ 0.5 million to be brought upfront

ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront
iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million to be
brought upfront and the balance in 24 months

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 (c) Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted non-fund
based NBFCs with foreign investment

(d) Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum
of 25% of its equity to Indian entities, subject to bringing in US$ 50 million as at (b) (iii) above
(without any restriction on number of operating subsidiaries without bringing in additional capital)

(e) Joint Venture operating NBFC’s that have 75% or less than 75% foreign investment will also be
allowed to set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also
complying with the applicable minimum capital inflow i.e. (b)(i) and (b)(ii) above.

(f) FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the RBI in
this regard. RBI would issue appropriate guidelines in this regard.

Where FDI is allowed on an automatic basis without FIPB approval, the RBI would continue to be the primary
agency for the purposes of monitoring and regulating foreign investment. In cases where FIPB approval is
obtained, no approval of the RBI is required except with respect to fixing the issuance price, although a
declaration in the prescribed form, detailing the foreign investment, must be filed with the RBI once the foreign
investment is made in the Indian company. The foregoing description applies only to an issuance of shares by,
and not to a transfer of shares of, Indian companies. Every Indian company issuing shares or convertible
debentures in accordance with the RBI regulations is required to submit a report to the RBI within 30 days of
receipt of the consideration and another report within 30 days from the date of issue of the shares to the non-
resident purchaser.

FII Regulations

FIIs including institutions such as pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional Portfolio Managers, are allowed to make portfolio investments in all
securities of listed and unlisted companies in India. Investments by registered FIIs or non-resident Indians made
through a stock exchange are known as portfolio investments. Foreign investors wishing to invest and trade in
Indian securities in India under the portfolio investment route are required to register with the SEBI under the
Securities and Exchange Board of India (Foreign Institutional Investors) Regulations 1995 (‘‘FII Regulations’’).
Foreign investors are not necessarily required to register with the SEBI under the FII Regulations, as FIIs may
invest in securities of Indian companies pursuant to the FDI route discussed above.

FIIs that are registered with SEBI are required to comply with the provisions of the FII Regulations. A
registered FII may buy, subject to certain ownership restrictions, and sell freely securities issued by any Indian
company (excluding companies in certain sectors). The total holding of each FII/SEBI approved sub-account
shall not exceed 10% of the total paid-up capital of an Indian company and the total holdings of all FII/sub-
accounts of FIIs aggregated shall not exceed 24% of the paid-up capital. The threshold of 24% can be increased
to the sectoral cap or statutory limit applicable to the Indian company concerned by resolution of such
company’s board of directors followed by the passing of a special resolution by such company.

Laws relating to Employment

Shops and Establishments legislations in various states

The provisions of various Shops and Establishments legislations, as applicable, regulate the conditions of work
and employment in shops and commercial establishments and generally prescribe obligations in respect of inter
alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety
measures and wages for overtime work.

Labour Laws

Various labour laws may be applicable, including the Contract Labour (Regulation and Abolition) Act, 1970,
the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, the Payment of Wages Act, 1936, the
Payment of Gratuity Act, 1972, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

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 HISTORY AND CERTAIN CORPORATE MATTERS

Brief History of the Company

The Company was incorporated as “Satyam Fiscal Services Private Limited” on June 6, 1989 as a private
limited company under the Companies Act, 1956. The name of the Company was changed to “Microsec
Financial Services Private Limited” and a fresh certificate of incorporation dated October 17, 2005 was issued
by the Registrar of Companies, West Bengal at Kolkata. The name of the Company was further changed to
Microsec Financial Services Limited consequent upon the conversion of the Company to a public limited
company and a fresh certificate of incorporation dated October 21, 2005 was issued by the Registrar of
Companies, West Bengal at Kolkata. The aforesaid changes in the name were made to reflect the nature of the
business.

Prior to its acquisition by the current Promoters on August 1, 2005, the Company was a financial services
company and was engaged in the business of financing and investment management. The Company was
registered with the RBI as a NBFC since January 29, 2003, but did not have significant operations.

As a part of the financing activities, the Company was engaged in the business of providing loans. As at March
31, 2005 (the date of the last audited financing statements prior to acquisition by the current Promoters) and at
March 31, 2004 respectively, the loans and advances of the Company were Rs. 8,176 and Rs. 6,189,182.
Further, for the fiscal years ended March 31, 2005 and March 31, 2004, respectively, the Company earned an
aggregate income of Rs. Nil and Rs. 27,000 respectively from this business.

As a part of the investment management activities, the Company was engaged in the business of trading in
securities. For the fiscal years ended March 31, 2005 and March 31, 2004, respectively, the Company earned an
aggregate income of Rs. 35,000 and Rs. 6,000 respectively from this business.

The profit before tax of the Company for the fiscal years ended March 31, 2005 and March 31, 2004,
respectively, was Rs. 1,000 and Rs. 2,179, respectively.

The Promoters acquired the entire shareholding of the Company from the previous shareholders. On August 1,
2005, 800,000 Equity Shares were transferred to Banwari Lal Mittal, and on October 1, 2005, 5,340 Equity
Shares were transferred to LKPL, Abha Mittal, Prabhu Dayal Khaitan, Bharati Sharma, Ravi Kant Sharma and
Sushila Devi Khaitan. The previous shareholders do not hold Equity Shares of the Company. The Company also
held the entire shareholding of Microsec Capital Limited (“MCap”) on November 24, 2005 and Microsec
Resources Private Limited (“MRPL”) on February 1, 2006. Since MCap, prior to its acquisition by the
Company, held the entire equity share capital of Microsec Commerze Limited (“MCL”) and Microsec Risk
Management Limited (as it then was), on acquisition by the Company, MCL and Microsec Risk Management
Limited (now Microsec Insurance Brokers Limited) became the indirect subsidiaries of the Company.

Further, MIL Technologies Limited (now renamed Microsec Technologies Limited as on March 17, 2008) held
the entire shareholding of erstwhile Microsec Technologies Limited as on October 1, 2005 and the entire share
capital of MIL Technologies Limited (now Microsec Technologies Limited) were held by the Company on
March 30, 2006 respectively. The erstwhile Microsec Technologies Limited was merged with MIL
Technologies Limited (now known as Microsec Technologies Limited) Microsec Technologies Limited
(“MTL”) acquired the entire shareholding of PRP Technologies Limited on February 9, 2009. On acquisition by
the MTL, PRP Technologies became the indirect subsidiary of the Company. For further details, see section
“History and Certain Corporate Matters – Schemes of Amalgamation” on page 85 of this Red Herring
Prospectus.

Shringar Vinimay Private Limited (“SVPL”) became a wholly owned subsidiary of the Company with effect
from February 26, 2009. Subsequently, on March 1, 2009, SVPL was merged with the Company. For further
details see “History and Certain Corporate Matters – Scheme of Amalgamations - Scheme of Amalgamation of
SVPL with the Company” on page 85 of this Red Herring Prospectus.

The Company and Debashish Ghoshal have formed a limited liability partnership i.e. Microsec Invictus
Advisors LLP on July 19, 2010 to carry on the business of professional and consultancy services. Since
Microsec Invictus Advisors LLP has been incorporated on July, 2010, no financial information of the same is
available.

82
The Microsec Group operates in the financial services sector since fiscal 2000 through Microsec Capital Limited
(then known as Microsec India Limited). Microsec Capital Limited, Microsec Resources Private Limited, MIL
Technologies Limited (now Microsec Technologies Limited), Microsec Insurance Brokers Limited and
Microsec Commerze Limited became Subsidiaries of the Company pursuant to the acquisition of the Company
by the Promoters and the subsequent reorganization of the business of investment banking, equity and
commodities brokerage, depository participant, wealth management, insurance financial advisory, financing
services, wealth management and insurance broking under a consolidated entity.

Changes in Registered Office

The details of changes in the registered office of the Company are set forth below:

Date of Change Changes in Address of the Registered Office

March 28, 2005 Change in registered office from 8/1 Lal Bazar Street, Bikaner Building, Block-B,
Kolkata 700 001 to 25D Harish Mukherjee Rd.,1E 1st floor, Kolkata 700 025
May 30, 2005 Change in registered office from 25D Harish Mukherjee Rd.,1E First Floor, Kolkata
700 025 to Azimganj House, 2nd floor, 7 Camac Street, Kolkata 700 017
December 11, 2006 Change in registered office from Azimganj House, 2nd floor, 7 Camac Street, Kolkata
700 017 to Shivam Chambers, 1st floor, 53 Syed Amir Ali Avenue, Kolkata 700 019

The changes mentioned above were made to enable greater operational efficiency.

Main Objects

The main objects as contained in the Company’s Memorandum of Association are:

1. To promote, form or acquire any company and to take or otherwise acquire, hold and dispose off or
otherwise deal in and invest in any shares, debentures and other securities in or of any company or
companies;

2. To carry on the business of financing, lending, leasing, hire purchase arrangements and
providing assets on rent;

3. To carry on the business of investment, finance and to acquire by purchase or otherwise, buy,
underwrite, subscribe, exchange, hold, sell, transfer, hypothecate, deal in and dispose of any shares,
bonds, stocks, obligations, securities, debentures, debenture stocks, bonds, properties & certificates;

4. To provide all kinds of consultancy and advisory services;

5. To promote, run and operate mutual funds, venture capital fund, portfolio management services subject
to required regulatory licenses;

6. To carry on business of information technology & information technology enabled services including
hardware, software, process management, facility management, e- commerce and internet services.

The main objects as contained in the Memorandum of Association enable the Company to carry on the business
presently carried out as well as business proposed to be carried out and the activities proposed to be undertaken
pursuant to the Objects of the Issue.

Amendments to the Memorandum of Association

Date of Nature of Amendment

shareholders’
resolution
March 22, 1995 The initial authorized share capital of Rs.300,000 divided into 30,000 Equity Shares of
Rs. 10 each was increased to Rs. 5,000,000 divided into 500,000 Equity Shares of Rs.
10 each.
March 30, 2002 The authorised share capital of Rs. 5,000,000 divided into 500,000 Equity Shares of
Rs. 10 each was increased to Rs. 6,000,000 divided into 600,000 Equity Shares of Rs.

83
 Date of Nature of Amendment
shareholders’
resolution
10 each.
March 31, 2003 The authorised capital of Rs. 6,000,000 divided into 600,000 Equity Shares of Rs. 10
each was increased to Rs. 7,500,000 divided into 750,000 Equity Shares of Rs 10 each.
March 30, 2004 The authorised capital of Rs. 7,500,000 divided into 750,000 Equity Shares of Rs. 10
each was increased to Rs. 8,100,000 divided into 810,000 Equity Shares of Rs. 10 each.
July 4, 2005 Change of name of the Company from “Satyam Fiscal Services Private Limited” to
“Microsec Financial Services Private Limited”
October 19, 2005 The authorised capital of Rs. 8,100,000 divided into 810,000 Equity Shares of Rs. 10
each was increased to Rs. 100,000,000 divided into 10,000,000 Equity Shares of Rs. 10
each.
October 19, 2005 Change of main object by substitution existing of clauses 1 and 2 by new clauses 1 to 5
and by addition of new clause 32 and 33 in the ancillary of the main object.
October 19, 2005 Upon the conversion of the Company to a public limited company, the name of the
Company was changed to “Microsec Financial Services Limited”
November 10, 2006 The authorised capital of Rs. 100,000,000 divided into 10,000,000 Equity Shares of Rs.
10 each was increased to Rs. 127,000,000 divided into 10,000,000 Equity Shares and
2,700,000 preference shares of Rs. 10 each
November 10, 2006 Addition of clause 6 to the existing main object clause.
June 27, 2007 The authorized capital of the Company has been restructured by converting the Rs.
27,000,000 preference shares capital to Equity shares capital
June 30, 2007 The authorised capital of Rs.127,000,000 divided into 12,700,000 Equity Shares of Rs.
10 each was increased to Rs. 250,000,000 divided into 25,000,000 Equity Shares of Rs.
10 each.
July 30, 2007 The authorised capital of Rs. 250,000,000 divided into 25,000,000 Equity Shares of Rs.
10 each was increased to Rs. 350,000,000 divided into 35,000,000 Equity Shares of Rs.
10 each.

Key Events and Milestones

Following are the major events of the Company:

Year Event
2003 The Company was registered as an NBFC (not accepting public deposit) with RBI
2006 Ravindra Shelter Limited was merged with the Company.
2009 Shringar Vinimay Private Limited was merged with the Company.

Following are certain key events and milestones achieved by our Subsidiaries:

Year Event
2003 MCL was registered as a trading-cum-clearing member with NCDEX
2003 MIBL was registered as a insurance broker with IRDA
2003 MCap was registered as a mutual fund advisor with AMFI
2003 MCap was registered as a merchant banker in the category-I with SEBI
2004 MCap was registered as a member of future and option segment with NSE
2004 MCL was registered as a trading-cum-clearing member with MCX
2005 MCap was registered as a stock broker with BSE
2005 MCap was registered as a depositor participant with NSDL
2005 Amalgamation of MTL with MIL Technologies Limited
2006 MRPL was registered as a non banking financial institution not accepting public deposit
with RBI
2006 MCap was registered as a self clearing member with NSE
2006 Amalgamation of Kautilya Advisory Private Limited with MCap
2007 MCap was registered as a member of future and options segment with BSE
2007 MTL was registered as a 100% export oriented unit with the Software Technology Park,
Kolkata
2007 MCap was registered as a depository participant with CDSL

84
 Year Event
2007 MCap was registered as a portfolio manager with SEBI
2007 MCap was certified as ISO 9001:200 company by Moody International Certification
Limited
2008 MCap was registered as a trading member with NSE in respect of currency derivative
segment/ clearing corporation/ clearing house
2009 MCap was registered as a trading member with MCX Stock Exchange Limited

Our Corporate Structure

The Corporate Structure of the Company is set forth below:

Microsec Financial
Services Limited

Microsec Capital Microsec Resources Microsec Technologies

Limited Private Limited Limited

Microsec Insurance Microsec Commerze PRP Technologies

Brokers Limited Limited Limited

Subsidiaries

The Company has six subsidiaries. For details regarding the Subsidiaries of the Company please see “Our
Subsidiaries” on page 105 of this Red Herring Prospectus.

Schemes of Amalgamation:

1. Scheme of Amalgamation of Shringar Vinimay Private Limited (“SVPL”) with the Company
(hereinafter referred to as “Scheme A”)

The High Court of Calcutta in Company Petition No. 274 of 2009 and Company Application No. 281
of 2009 sanctioned the scheme of amalgamation of SVPL with the Company. The same was declared
to be binding from with effect from March 1, 2009 by the High Court of Calcutta by its order dated
August 24, 2009. SVPL was engaged in the business of Consultancy. As per terms of Scheme A, the
entire business and undertaking including all assets, liabilities and properties of SVPL vested in the
Company along with all books of accounts and documents and records relating thereto, was transferred
to the Company. Since SVPL was a wholly owned subsidiary of MFSL, no shares were issued or
allotted and accordingly all equity shares held by the MFSL in the SVPL were cancelled.

The diagrammatic representation of the actual amounts of assets and liabilities which were transferred
on account of amalgamation of SVPL with the Company is set forth below:

85
 Assets taken over: (in Rs.)
Fixed Assets - Shringar Vinimay
Investments 7,594,381 Private Limited
(Transferor)
Cash & Bank Balances 358,257
Debtors 36,000
Loans & Advances 40,000,000 Net consideration
against this, of Rs.
Total 47,988,638 2,01,35,000 satisfied by
extinguishment of shares
Less: Liabilities taken of Shringar Vinimay
over Pvt. Limited held by the
Transferee Company.
Provisions 27,846,100

Other Current Liabilities 7,538 Microsec Financial

Total Services Limited
27,853,638
(Transferee)

Net assets taken over 20,135,000

The amalgamating companies did not obtain independent valuation reports at the time of amalgamation
of erstwhile SVPL with the Company.

2. Scheme of Amalgamation of Ravindra Shelter Limited (“RSL”) with the Company (hereinafter referred
to as “Scheme B”)

The High Court of Calcutta in Company Petition No. 16 of 2006 and Company Application No. 760 of
2005 sanctioned the scheme of amalgamation of RSL with the Company. The same was declared to be
binding from December 1, 2005 by High Court of Calcutta by its order dated April 5, 2006. Scheme B
was declared to be binding on MFSL and its shareholders and RSL and its shareholders. Leave was
granted to RSL to apply for dissolution and all its properties, rights, interests, liabilities, duties,
proceedings, suits or appeals pending against were transferred to the Company. The Company was
instructed to obtain approval from the RBI if necessary and all other approvals required under the
applicable law. The amalgamation was undertaken for better and efficient management of the business
and to obtain economies of scale as both the companies were engaged in the business of financial
services and RSL was a wholly owned subsidiary of the Company. Since RSL was a wholly owned
subsidiary of the Company, no shares were issued or allotted and accordingly all equity shares held by
the Company in RSL were cancelled.

The diagrammatic representation of the actual amounts of assets and liabilities which were transferred
on account of amalgamation of RSL with the Company is set forth below:

Ravindra Shelter Limited

(Transferor)

Assets taken over (in Rs.)

Investments 8,797,090
Computer
Software 3,283,530
Cash & Bank
Balances 57,595 Net consideration of Rs. 8,667,600
Loans & Advances 1,010,739 satisfied by extinguishment of shares
Total 13,148,954 of Ravindra Shelter Limited held by
Less: Liabilities taken Microsec Financial Services Limited
over
Sundry Creditors 1,102
Provisions 252
Other current
liabilities 4,480,000
4,481,354
Net assets taken over 8,667,600

Microsec Financial Services

Limited
(Transferee)

86
 The amalgamating companies did not obtain independent valuation reports at the time of amalgamation
of erstwhile RSL with the Company.

3. Scheme of Amalgamation of Microsec Technologies Limited with MIL Technologies Limited (now
renamed as Microsec Technologies Limited with effect from March 17, 2008)

The High Court of Calcutta sanctioned the scheme of amalgamation of MIL Technologies Limited and
Microsec Technologies Limited. The scheme was declared to be binding from April 1, 2005 on MIL
Technologies Limited and its shareholders and the Microsec Technologies Limited and its
shareholders. Leave was granted to Microsec Technologies Limited to apply for dissolution and all its
properties, rights, interests, liabilities, duties, proceedings, suits or appeals pending against were
transferred to MIL Technologies. The amalgamation was undertaken for better and efficient
management of the business and to obtain economies of scale as Microsec Technologies was engaged
in the business of information technology services and software development and MIL Technologies
Limited was engaged in the business of data processing services. Since Microsec Technologies was a
wholly owned subsidiary of MIL Technologies Limited, no shares were issued or allotted and
accordingly all equity shares held by MIL Technologies Limited in Microsec Technologies were
cancelled.

The diagrammatic representation of the actual amounts of assets and liabilities which were transferred
on account of the amalgamation of Microsec Technologies Limited with MIL Technologies Limited is
set forth below:

Microsec Technologies Limited

(Transferor)
Assets taken over (in Rs.)
Fixed Assets 2,145,344
Investments 1,404
Cash & Bank
Balances 325,995
Loans & Advances 522,199 Net consideration against this, of Rs.
Misc. Exp. 8,040 500,000 satisfied by extinguishment
Total 3,002,982 of shares of Microsec Technologies
Less: Liabilities taken Limited held by the Transferee
over Company resulting in a reserve of
Current Liabilities 930,018 Rs. 1,093,634 in the hands of the
Provisions 44,708 Transferee Company
Deferred Tax
Liabilities 434,622
1,409,348
Net assets taken over 1,593,634

MIL Technologies Limited

(Transferee)
(MIL Technologies Limited has been
renamed as Microsec Technologies
Limited with effect from March 17, 2008)

The amalgamating companies did not obtain independent valuation reports at the time of amalgamation
of erstwhile Microsec Technologies Limited with MIL Technologies Limited.

4. Scheme of Amalgamation of Kautilya Advisory Private Limited (KAPL) with Microsec Capital Limited

The High Court of Calcutta sanctioned the scheme of amalgamation of KAPL with MCap. The scheme
was declared to be binding from September 1, 2006, on MCap and its shareholders and KAPL and its
shareholders. Leave was granted to KAPL to apply for dissolution and all its properties, rights,
interests, liabilities, duties, proceedings, suits or appeals pending against were transferred to MCap.
The amalgamation was undertaken for better and efficient management of the business and to obtain

87
 economies of scale as KAPL was engaged in the business of consultancy services and MCap is
engaged in the business of financial services. Since KAPL was a wholly owned subsidiary of MCap, no
shares were issued or allotted and accordingly all equity shares held by MCap in KAPL were cancelled.

The diagrammatic representation of the actual amounts of assets and liabilities which were transferred
on account of amalgamation KAPL with MCap is as follows:

Kautilya Advisory Private Limited

(Transferor)

Assets taken over (in Rs.)

Business Rights
3,515,579
Computer
Software 2,349,093
Cash & Bank Net consideration of Rs. 1,989,700
Balances 10,909 satisfied by extinguishment of shares
Investments 1,314,681 of Kautilya Advisory Private Limited
Total 7,190,262 held by Microsec Capital Limited
Less: Liabilities taken
over
Sundry Creditors 562
Advances from
parties 5,200,000
5,200,562
T Net assets taken over 1,989,700
h
e
Microsec Capital Limited
a
(Transferee)
m

The amalgamating companies did not obtain independent valuation reports at the time of amalgamation of
erstwhile KAPL with MCap.

Trusts:

Microsec Vision Trust One

Luv-Kush Projects Limited, our Group Company, has, in terms of a declaration of trust dated December 29,
2007 (the “Vision Trust Deed”) settled the Microsec Vision Trust One for the benefit of itself and Sushila Devi
Khaitan. In terms of the Vision Trust Deed, the main objects of the Microsec Vision Trust One are:

1. To own, deal with and dispose off the Equity Shares held by the trust in accordance with the provisions
of the Vision Trust Deed or any agreement that be executed by Luv-Kush Projects Limited and exercise
all rights accruing to Luv-Kush Projects Limited, as the legal owners of the Equity Shares;
2. Subject to the Articles of Association of the Company and applicable law, to exercise all rights,
accruing as shareholder of the Company, including but not limited to receiving bonus shares and
dividends and received and renouncing entitlements under rights issue.

The trustees of the Microsec Vision Trust One are Ravi Kant Sharma and Luv-Kush Projects Limited.

On December 31, 2007 Luv-Kush Projects Limited transferred 1,200,000 Equity Shares of the Company to the
Microsec Vision Trust One. These Equity Shares constitute the only trust property of the Microsec Vision Trust
One and the trust has, as of the date of this letter, not availed of funds from any source. The Microsec Vision
Trust One continues to hold, through its trustees, 1,200,000 Equity Shares, representing 6.22 per cent of the pre-
Issue paid up equity share capital of the Company. Also see “Capital Structure - The shareholding pattern” on
page 31 of this Red Herring Prospectus. Voting rights in respect of these Equity Shares vest with the trustees,
who may, in accordance with the provisions of the Vision Trust Deed, exercise the same for the benefit of the
beneficiaries of the trust.

88
Microsec Vision (Employees) Trust

Banwari Lal Mittal, one of our Promoters, has, in terms of a trust deed dated December 29, 2007 (the
“Employees Trust Deed”), settled the Microsec Vision (Employees) Trust for the benefit of (i) permanent
employees of the Company or any of its Subsidiaries, or any of its associate company/entity; and (ii) business
constituents and associates of the Company or of any of its Subsidiaries, or of any of its associate
company/entity, who are, in each case in the opinion of the trustees are contributing satisfactorily in the business
of the Company or such other business entities. The beneficiaries of the Microsec Vision (Employees) Trust
does not include any Promoters of the Company, relative of such Promoter, person(s) acting in concert with the
Promoter or any other person within the Promoter Group. The trustees are responsible for the functioning of the
trust and, in terms of the Employees Trust Deed, the Promoters have no powers in the functioning of the trust,
save that Banwari Lal Mittal has, in his capacity as the settlor, the power to settle any dispute or
misunderstanding in relation to the functioning of the trust.

In terms of the Employees Trust Deed, the main objects of the Microsec Vision (Employees) Trust are:

1. To carry on welfare activities for the benefit of the beneficiaries of the trust;
2. To carry on activities where the interest of the beneficiaries is involved;
3. To deal in shares and other securities for the benefit of the beneficiaries;
4. To carry on transaction of buying and selling, providing options of shares, securities and other
properties;
5. To represent beneficiaries as group or individually; and
6. Such other objects for the cause of beneficiaries as advised by Banwari Lal Mittal.

The trustees of Microsec Vision (Employees) Trust are Giridhar Dhelia, Pankaj Harlalka and Manish Kumar
Agarwal. Giridhar Dhelia is permanent employee of the Company and Pankaj Harlalka and Manish Kumar
Agarwal are permanent employees of our subsidiaries Microsec Capital Limited and Microsec Insurance
Brokers Limited, respectively. None of the trustees are related to the Promoters or any member of the Promoter
Group.

The Microsec Vision (Employees) Trust was initially settled with a corpus of Rs. 10,000. Subsequently, on
December 31, 2007 and September 29, 2009, the Promoters of the Company transferred a total of 1,783,400
Equity Shares of the Company, by way of gifts, to the Microsec Vision (Employees) Trust. The aforesaid funds
and Equity Shares constitute the only trust property of the Microsec Vision (Employees) Trust and the trust has,
as of the date of this letter, not availed of funds from any source. The Microsec Vision (Employees) Trust
continues to hold, through its trustees, 1,783,400 Equity Shares, representing 9.24 per cent of pre-Issue paid up
equity share capital of the Company. Also see “Capital Structure - The shareholding pattern” on page 31 of this
Red Herring Prospectus. Voting rights in respect of these Equity Shares vest with the trustees, who may, in
accordance with the provisions of the Employees Trust Deed, exercise the same for the benefit of the
beneficiaries of the trust.

Other Agreements

1. Agreement between the Company and Gulmohar Advisors Private Limited (“Gulmohar”) dated
March 30, 2009 (the “Business Rights Agreement”)

Gulmohar Advisors Private Limited has for a consideration of Rs. 1,000 transferred certain business
rights and interest to the Company. The business rights and interest transferred to the Company
includes (a) trademark of the words ‘Personal Resource Planning’ and ‘PRP’, in respect of which
Gulmohar had filed application for registration as a trademark before the Trade Mark Registry.; and (b)
registered website domain names, such as www.prpsolutions.com; www.prpsolutions.in;
www.prpsolutions.net; www.ourprp.com; www.ourprp.in; www.myprp.in; www.prpclub.com;
www.prpclub.in; www.prpsolution.com; and www.prpsolution.in. Further, in terms of an Agreement
dated October 30, 2008 between Gulmohar and PRP Technologies Limited (“PRP”), PRP is required to
pay a royalty of 10% of the revenues earned through sell or service of software or website by PRP for
each financial year ended March 31 of each year. Pursuant to the Business Rights Agreement,
Gulmohar has also transferred the business right to receive royalty from PRP to the Company.

89
2. Agreement between the Company and Gulmohar Advisors Private Limited (“Gulmohar”) dated
March 28, 2009

An application for registration of copyright on ‘PRP Concept’ and ‘PRP-SRS’ for the PRP software
and website was made by Gulmohar. In terms of the agreement, the Company acquired all rights and
interest in the above-mentioned copyrights. Gulmohar had availed a short term loan of Rs. 50 million
from the Company. Due to inability of Gulmohar to repay the short term loan, Gulmohar transferred all
rights and interest in the above-mentioned copyrights to the Company. In terms of the agreement, the
Company will adjust the amount of the loan against the consideration for the above-mentioned
copyrights.

3. Limited liability partnership Agreement between the Company and Debashish Ghoshal dated June
15, 2010 (the “LLP Agreement”)

In term of the LLP Agreement, the Company and Debashish Ghoshal (the “Founder Partners”) have
formed a limited liability partnership in the name and style of ‘Microsec Invictus Advisors LLP) (the
“Microsec LLP”) to carry on the business of ‘professional and consultancy services’ or such other
businesses as the Founder Partners may decide from time to time. Debashish Ghoshal shall be the
managing partner of the LLP (the “Managing Partner”). In terms of the LLP Agreement, the Company
shall be deemed owner of all the assets and properties in the Microsec LLP. The designated partner as
appointed by the Founder Partners shall be responsible for the doing of all acts, matters required to be
done by Microsec LLP.

In terms of the LLP Agreement, a national, regional and city partners will be further admitted to the
Microsec LLP. National partner shall include the Managing Partner and another partner. Except the
Company, no partner shall during his association with Microsec LLP or for a period of 2 years
thereafter, carry on any business competing with the business of the Microsec LLP. In terms of the LLP
Agreement, the profit shall be shared based upon the concept of ‘profit/loss centre’ based on a three tier
structure as set forth below:

Particulars Tier Sharing of Profit and Loss

City Office Tier – 3 Loss: Loss, if any, at city level will be accumulated to that particular city office.
Profit: 50% of the profit (after adjustment of accumulated loss) shall be divided
among city partners as per their respective shares in the city partnership of the
LLP and balance 50% shall be added to the profit of the respective regional
office.
Regional Tier – 2 Loss: Loss, if any of the particular regional office including loss of city office,
Office shall be accumulated to that particular regional office
Profit: 50% of the Profit (including profit derived from city office and after
adjustments of accumulated loss) shall be divided among regional partners as per
their respective shares in the regional partnership of the LLP and balance 50%
shall be added to the profit of the national office
National Office Tier – 1 Loss: Net loss, if any, shall be accumulated and funded for the purposes of cash
flow management by the Company
Profit: 50% of the Profit (after adjustment of accumulated loss) shall be divided
among the national partners as per their respective shares and the balance 50%
shall be added to the profit of the Company

In terms of the LLP Agreement, there shall be no office or place of business of the Microsec LLP in the
Kolkata, where the Company has operations such that the same is not in any way interfered with. In the
event any partner desires to transfer or assign his interest in the Microsec LLP, he shall be obliged to
first offer the same to the Company. Microsec LLP shall have perpetual succession and shall continue
to operate unless terminated by consent of the Company and such termination shall be effected by a
dissolution deed providing for realisation of assets, meeting of liabilities, if any and sharing of profits
of the LLP.

90
 MANAGEMENT

The Board of Directors

Under the Articles of Association the Company is required to have not less than three Directors and not more
than 12 directors. We currently have five directors on the Board.

The following table sets forth details regarding the Board of Directors as of the date of filing the Red Herring
Prospectus:

Name, Designation, Father’s Age Address Other Directorships

Name, Occupation, Nationality, (Years)
Term and DIN
Banwari Lal Mittal 42 25D, 3rd Floor, 1. Microsec Capital Limited
Chairman and Managing Director Flat No.3A & B, 2. Microsec Commerze Limited
Harish Mukherjee Road, 3. Microsec Resources Private
(Promoter Director of the
Kolkata 700 025 Limited
Company)
4. Microsec Technologies
(S/o Late Sanwar Mal Mittal) Limited
5. Microsec Insurance Brokers
Occupation: Business Limited
6. Luv-Kush Projects Limited
Nationality: Indian

Term: Five years from July 1,

2010

DIN: 00365809

Ravi Kant Sharma 36 Block 10, Flat 3L, 1. Microsec Capital Limited
Non-Executive Director Space Town Housing 2. Microsec Insurance Brokers
(Promoter Director of the Complex, Limited
Company) VIP Road 3. Microsec Commerze Limited
(S/o Sajjan Kumar Sharma) Raghunathpur, 4. Microsec Technologies
Kolkata 700 052 Limited
Occupation: Business 5. Microsec Resources Private
Limited
Nationality: Indian 6. PRP Technologies Limited

Term: Liable to retire by rotation

DIN: 00364066

Parimal Kumar Chattaraj 64 3H, Singhi Park, 1. Tantia Constructions Limited

Independent Director 48/3 Gariahat Road, 2. BMW Industries Limited
(S/o Late Basant Kumar Chattaraj) Kolkata 700 019
3. Microsec Capital Limited
Occupation: Management 4. Microsec Resources Private
Consultant and Advocate Limited
5. Microsec Technologies
Nationality: Indian Limited
6. Microsec Insurance Brokers
Term: Liable to retire by rotation Limited
7. Microsec Commerze Limited
DIN: 00893963

Raj Narain Bhardwaj 65 402 Moksh Apartments, 1. Reliance Infratel Limited

Independent Director Upper Govind Nagar, 2. Jaiprakash Associates

91
 Name, Designation, Father’s Age Address Other Directorships
Name, Occupation, Nationality, (Years)
Term and DIN
(S/o Late Murarilal) Malad (East) Limited
Mumbai 400 097 3. Money Matter Financial
Occupation: Management Services Limited
Consultant 4. Jaiprakash Power Ventures
Limited
Nationality: Indian 5. SREI Venture Capital
Limited
Term: Liable to retire by rotation 6. Religare Trustee Company
Limited
DIN: 01571764 7. Milestone Religare
Investment Advisors Private
Limited
8. Indian Railway Catering and
Tourism Corporation Limited
9. IIT Insurance Broking and
Risk Management Private
Limited
10. Invent Asset Securitization
and Reconstruction Private
Limited
11. Samvridhi Advisors Private
Limited
12. Singhi Advisors Private
Limited
13. Capstone Capital Services
Private Limited
14. ILFS Milestone Realty
Advisors Private Limited
15. Milestone Capital Advisors
Limited
16. Jaypee Infratech Limited
17. Money Matters Securities
Private Limited
18. Dhunseri Petrochem & Tea
Limited

Deba Prasad Roy 68 APT, 505 Nestle I.B. 1. Petronet LNG Limited
Independent Director Wing, 2. Artheon Finance Limited
(S/o Sudhirendu Nath Roy) Pandurang Budhkar 3. ITD Cementation India
Marg, Mumbai 400 013 Limited
Occupation: Financial Consultant 4. Escorts Investment Trust
and Arbitrator Limited
5. ICRA Management
Term: Liable to retire by rotation Consulting Services Limited
6. Singhi Advisors Private
DIN: 00049269 Limited
7. SMC Global Securities
Limited

None of the Directors of the Company are related to each other.

Brief Profile of the Directors

Banwari Lal Mittal is the Chairman and Managing Director and is also a Promoter of the Company. He is the
founder of Microsec Group. He holds a bachelor’s degree in commerce from Calcutta University. He is a fellow
member of the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the
Institute of Costs and Works Accountants of India. He has 17 years of experience in different fields including

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investment banking, wealth management and corporate advisory. Banwari Lal Mittal has in the past worked
with the M.P. Birla Group in a managerial position for about eight years.

Ravi Kant Sharma is a non-executive Director of the Company. Ravi Kant Sharma is the co-founder of the
Microsec Group and is associated with it since 1999. He holds a bachelor’s degree in commerce from Calcutta
University and is a fellow member of the Institute of Chartered Accountants of India. He has an experience of
more than 12 years in wealth management and capital market operations. He is also the Managing Director and
Chief Executive Officer of the brokerage and wealth management business of MCap.

Parimal Kumar Chattaraj is an independent Director of the Company. He holds a bachelor’s degree in science
from Burdwan University, a post graduate diploma in management from Calcutta University and a bachelor’s
degree in law from Ranchi University. Parimal Kumar Chattaraj has also specialised in organization behaviour
from National Institute of Management, Delhi. He is the founder of Vertex Consulting (Organization and HR
Solutions). He has also worked in management positions in India and abroad contributing to business strategy,
aligning employee skill to business, creating learning organization & leadership development. He has over 30
years of experience and was associated with management institutes and business schools including IIM Kolkata,
XLRI Jamshedpur and XISS, Ranchi. He is also enrolled as an advocate with the Bar Council of High Court of
Calcutta and provides legal advice to corporate houses and selective clients. P. K. Chattaraj was appointed as an
additional director of the Company on April 2, 2007. Subsequently, in the Annual General Meeting of the
Company held on September 28, 2007 he was appointed as a Director of the Company.

Raj Narain Bhardwaj is an independent Director of the Company. He holds a post graduate degree in
economics from the Delhi School of Economics and a Diploma in Industrial Relations and Personnel
Management from Punjabi University, Patiala. He has over 37 years of experience with the Life Insurance
Corporation of India and has served in various positions including managing director and chairman of Life
Insurance Corporation of India. Raj Narain Bhardwaj has also served as a member of the Securities Appellate
Tribunal (SAT) for two years. He was appointed as an additional director of the Company on September 5,
2009. Subsequently, in the Annual General Meeting of the Company held on September 30, 2009 he was
appointed as a Director of the Company.

Deba Prasad Roy is an independent Director of the Company. He holds a post graduate degree in science
(Chemistry) from Jadavpur University, Kolkata. He is also certified associate of Indian Institute of Bankers and
a fellow of Indian Council of Arbitration. He has over 35 years of experience in corporate, international and
investment banking sectors. He is on the advisory committee of Central Bank of India and currently engaged as
an arbitrator in various arbitration proceedings in NSE, MCX and ICA. He was previously associated with State
Bank of India and has held senior and managerial posts such as deputy managing director and group executive
(international banking), president and chief executive officer (New York) and country manager (USA) and
manager of SBI London. Deba Prasab Roy is ex-chairman of SBI Capital Markets Limited. He was appointed as
an additional director of the Company on October 12, 2009. Subsequently, in the Annual General Meeting of
the Company held on July 15, 2010 he was appointed as a Director of the Company.

Borrowing Powers of the Board

In terms of the Articles, the Board may, from time to time, at its discretion raise or borrow any sum or sums of
money for the purposes of the Company. However, if the moneys sought to be borrowed (apart from temporary
loans obtained from the Company’s bankers in the ordinary course of business) should exceed the aggregate of
the paid-up capital of the Company and its free reserves (not being reserves set apart for any specific purpose),
the Board is required to obtain the sanction of the Company in general meeting. Subject to the above, the
Directors may raise moneys.

On September 29, 2008 the shareholders passed an ordinary resolution empowering the Board to borrow monies
which together with monies already borrowed might exceed the paid up share capital and free reserves of the
Company then existing, but in the aggregate not exceeding Rs. 4,000 million at any one time.

Remuneration of Directors

Executive Director

The remuneration of Banwari Lal Mittal is as per the terms of appointment contained below:

93
Banwari Lal Mittal, Chairman and Managing Director

Banwari Lal Mittal was re-appointed as the Managing Director of the Company under the Companies Act, 1956,
for a period of five years effective from July 1, 2010, pursuant to a Agreement dated June 15, 2010 and
shareholders’ resolution dated July 15, 2010. The terms of his employment and remuneration include the
following:

Particulars Remuneration
Salary (a) Rs. 247,240 per month and further in the range of Rs. 247,240 to 800,000 excluding
perquisites (with liberty to the Board or any committee thereof in its absolute discretion
to fix within the above salary limit)

Perquisites (a) Reimbursement: B.L. Mittal will be entitled to reimburse medical expenses in
accordance with rules specified by the Company

(b) Insurance Benefit: Provision of premium towards ‘accident guard’ insurance for self.

(c) Use of Car: Provision of car for official duties and reimbursement of expenses incurred
for running and maintenance of the car including the salary of the driver.

(d) Telephone and other communication facilities: The Company will provide/ reimburse
expenses in respect of cellular phone with STD and ISD facilities for official use.

(e) Gratuity payable at the rate of half month’s salary for each completed year of service
with a service of six months or more being treated as a full year.

(f) Encashment of leave at the end of every year as per the policy of the Company

(g) Entitlement for ex-gratia in accordance with the rules of the Company

(h) Leave travel allowance equivalent to half month’s basic pay every year.

The aggregate of the salary, special pay, allowances and perquisites in any Financial Year shall be subject to the
limits prescribed from time to time under section 198, 309 and other applicable provisions of the Companies
Act, read with Schedule XIII thereof. In the event, that in any fiscal, the profits of the Company are inadequate,
the foregoing amount of remuneration and benefits will be paid or given to the Managing Director in accordance
with the applicable provisions of Schedule XIII of the Companies Act.

Banwari Lal Mittal has been paid Rs. 2.61 million as remuneration by the Company for fiscal 2010.

The Articles of Association of the Company provide for sitting fees and commission for the Directors as
determined by the Board. Except Ravi Kant Sharma, pursuant to the Board resolution dated November 3, 2007
the Company pays sitting fees of Rs. 12,500 to the non-executive directors (“NEDs”) for attending the meeting
of Board of Directors, Rs. 7,500 for attending meeting of the Audit Committee. The Company pays sitting fees
of Rs. 5,000 per meeting to NEDs for attending the other committee meetings of the Company.

The following table sets forth the sitting fees and commission paid to the Directors during the fiscal 2010:

Name of the Director Sitting fees Commission Total

(Rs.) (Rs.) (Rs.)
Parimal Kumar Chattaraj 90,000 Nil 90,000
Raj Narain Bhardwaj 25,000 Nil 25,000
Deba Prasad Roy 32,500 Nil 32,500
Ravi Kant Sharma Nil Nil Nil

Ravi Kant Sharma was paid remuneration of Rs. 2.60 million by MCap in fiscal 2010 in his capacity as a
managing director of MCap.

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Corporate Governance

The provisions of the Listing Agreement to be entered into with the Stock Exchanges with respect to corporate
governance will be applicable to the Company immediately upon the listing of the Equity Shares on the Stock
Exchanges. We believe we are in compliance with the requirements of the applicable regulations, including the
Listing Agreement with the Stock Exchanges and the SEBI Regulations, in respect of corporate governance
including constitution of the Board and committees thereof. The corporate governance framework is based on an
effective independent Board, separation of Board’s supervisory role from the executive management team and
constitution of the Board Committees, as required under law. In addition, the Company has adopted a code of
conduct for corporate governance.

We have a Board of Directors constituted in compliance with the Companies Act and Listing Agreement to be
entered into with Stock Exchanges and in accordance with best practices in corporate governance. The Board
functions either as a full Board or through various committees constituted to oversee specific operational areas.
The executive management of the Company provides the Board detailed reports on its performance periodically.

The Board of Directors consists of a total of five directors of which three are independent directors (as defined
under Clause 49). This is in compliance with the requirements of Clause 49.

The Board functions through the following committees:

Audit Committee

The members of the Audit Committee are:

1. Parimal Kumar Chattaraj, chairman;

2. D.P. Roy;
3. R. N. Bhardwaj; and
4. Ravi Kant Sharma.

The Audit Committee was constituted by a meeting of the Board held on April 2, 2007 and re-constituted on
February 11, 2010. The scope and functions of the Audit Committee and its terms of reference are set forth
below:

The terms of reference of the Audit Committee include:

1) To investigate any activity within its terms of reference.

2) To seek information from any employee.

3) To obtain outside legal or other professional advice.

4) To secure attendance of outsiders with relevant expertise, if it considers necessary.

The role of the Audit Committee shall include the following:

1) Oversight of the Company’s financial reporting process and the disclosure of its financial information
to ensure that the financial statement is correct, sufficient and credible.

2) Recommending to the Board, the appointment, re-appointment and, if required, the replacement or
removal of the statutory auditor and the fixation of audit fees.

3) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

4) Reviewing, with the management, the annual financial statements before submission to the board for
approval, with particular reference to:

a. Matters required to be included in the director’s responsibility statement to be included in the

95
 Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956

b. Changes, if any, in accounting policies and practices and reasons for the same

c. Major accounting entries involving estimates based on the exercise of judgment by

management

d. Significant adjustments made in the financial statements arising out of audit findings

e. Compliance with listing and other legal requirements relating to financial statements

f. Disclosure of any related party transactions

g. Qualifications in the draft audit report.

5) Reviewing, with the management, the quarterly financial statements before submission to the board for
approval

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

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

8) Discussion with internal auditors any significant findings and follow up thereon.

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

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

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

12) To review the functioning of the Whistle Blower mechanism, in case the same is existing.

13) Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

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

15) The Audit Committee shall mandatory review the following information:

a. Management discussion and analysis of financial condition and results of operations;

b. Statement of significant related party transactions, periodically submitted by management;

c. Management letters or the letters of internal control weaknesses issued by the statutory
auditors;

d. Internal audit reports relating to internal control weaknesses; and

e. The appointment, removal and terms of remuneration of the Chief internal auditor shall be

96
 subject to review by the Audit Committee

In fiscal 2010 the Audit Committee met two times.

Shareholders’/Investors’ Grievance and Share Transfer Committee

The Shareholders’/ Investors’ Grievance and Share Transfer Committee was constituted on November 3, 2007
and re-constituted on December 19, 2009. The members of the Shareholders’/ Investors’ Grievance and Share
Transfer Committee are:

1. R. N. Bhardwaj, chairman;
2. Banwari Lal Mittal; and
3. Parimal Kumar Chattaraj.

The function of the Shareholders’/ Invetsors’ Grievance and Share Transfer Committee is to supervise share
transfer and also to redress the grievances of the shareholders/investors, if any.

The terms of reference of the Shareholders’/ Invetsors’ Grievance and Share Transfer Committee are as follows:

1. Redressing complaints from shareholders such as non-receipt of dividends, annual report, transfer of
Equity Shares and issue of duplicate share certificates.

2. To approve and ratify the action taken by the authorised Officers of the Company in compliance with
the request received from the shareholder/investors for issue of duplicate/ replacement/ consolidation/
subdivision share certificates and other purposes for the shares, debentures and securities of the
Company.

3. To monitor and expedite the status and process of dematerialisation and dematerialisation of shares,
debentures and securities of the Company.

4. To approve allotment of shares, debentures and other securities as per the authority conferred/ to be
conferred to the Committee by the Board of Directors from time to time.

5. To monitor, under the supervision of the Company Secretary, the complaints received by the Company
from SEBI, Stock Exchanges, Department of Company Affairs, RoC and the Share/ Debentures/
Security holders of the Company etc., and the action taken for redressal of the same.

6. The committee oversees performance of the registrars and transfer agents of the Company and
recommends measures for overall improvement in the quality of investor services.

No meetings of the Shareholders’/ Invetsors’ Grievance and Share Transfer Committee were held in fiscal 2010.

Remuneration Committee

The members of the Remuneration Committee are:

1. Parimal Kumar Chattaraj, chairman;

2. R.N. Bhardwaj; and
3. Deba Prasad Roy.

The Remuneration Committee was constituted on November 3, 2007 and re-constituted by a meeting of the
Board held on October 12, 2009. The functions of the remuneration committee are to determine on behalf of the
Board and on behalf of the shareholders with agreed terms of reference, the Company’s policy on specific
remuneration packages for executive directors including pension rights and compensation payment, if any.

The terms of reference/ scope of the Committee are as follows:

The Remuneration Committee shall determine on behalf of the Board, the Company’s policy on specific
remuneration package for Executive Directors including pension rights and any compensation payment.

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No meetings of the Remuneration Committee were held in fiscal 2010.

Policy on Disclosures and Internal Procedure for Prevention of Insider Trading

The Company has adopted a code of conduct for prevention of insider trading. The provisions of Regulation 12
(1) of the SEBI (Prohibition of Insider Trading) Regulations, 1992 will be applicable to the Company
immediately upon the listing of its Equity Shares on the Stock Exchanges. We shall comply with the
requirements of the SEBI (Prohibition of Insider Trading) Regulations, 1992 on listing of the Equity Shares.

Shareholding of Directors in the Company

The Directors are not required to hold any qualification shares under the terms of the Articles of Association.
The list of Directors holding Equity Shares as of the date of this Red Herring Prospectus is set forth below:

S.No. Name of the No. of Equity Pre-Issue Percentage Post-Issue

Shareholder Shares Shareholding Percentage
Shareholding
1. Banwari Lal Mittal 10,814,400 56.00% 34.00%
2. Ravi Kant Sharma 876,800 4.54% 2.75%
Total 11,691,200 60.54% 36.75%

Interest of the Directors

Two of our Directors are also Promoters of the Company.

All of the Directors of the Company may be deemed to be interested to the extent of fees payable to them if any,
for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and
reimbursement of expenses payable to them, if any under the Articles of Association, and to the extent of
remuneration paid to them, if any for services rendered as an officer or employee of the Company.

The Directors may also be regarded as interested in the Equity Shares, if any, held by them or by the
companies/firms/ventures promoted by them or that may be subscribed by or allotted to the companies, firms,
trusts, in which they are interested as Directors, members, partners, trustees and Promoter, pursuant to this Issue.
All of the Directors may also be deemed to be interested to the extent of any dividend payable to them and other
distributions in respect of the said Equity Shares.

The Directors have no interest in any property acquired by the Company within two years of the date of this Red
Herring Prospectus.

Except as stated in “Related Party Transactions” on page 114 of this Red Herring Prospectus and to the extent of
shareholding in the Company, the Directors do not have any other interest in the business of the Company.

The Company has not entered into any service contracts with the Directors.

Changes in the Board of Directors in the last three years

The following changes have occurred in Board of Directors of the Company in the last three years:

Name of Director Date of Cessation Date of Appointment / Re-appointment Reason

Rakesh Sony October 7, 2008 September 27, 2005 Resignation
Dr. Bidhubhushan Samal November 7, 2008 November 3, 2007 Resignation
Vinod Kumar Kothari November 7, 2008 November 3, 2007 Resignation
Raj Narain Bhardwaj - September 5, 2009 Appointment
Deba Prasad Roy - October 12, 2009 Appointment
Manoj Banthia December 19, 2009 September 5, 2009 Resignation

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Management Organisation Structure

The management organisation chart of the Company is set forth below:

Board of Directors

B.L. Mittal
Chairman & Managing
Director

Corporate Advisory Services

Pankaj Kumar Kedia Giridhar Dhelia

Chief Financial Officer Head- Corporate Consultancy
Vice President

Biplab Kumar Mani

Company Secretary

Birendra Kumar Sethia

Associate Vice President
(Corporate)

Rohit Kumar Sinha

Head – HRD & Corporate
Communication
Group – HR Head

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The management organisation chart of the Subsidiaries is set forth below:

Board of Directors

B.L. Mittal
Chairman*

Ravi Kant Sharma

Managing Director & CEO**

Corporate Investment Banking Brokerage & Wealth Financial Planning and

Management Distribution

Bajrang Lal Agarwal Pankaj Harlalka Yogesh Parasrampuria, Sambhu Sengupta,

Head –Financial Risk Executive Director – Head – Retail Brokerage, Head – Insurance Corporate
Management Investment Banking Senior Vice President – President (Insurance
Senior Vice President (Business Development) Broking)

Sougata Sengupta
Manish Agarwal Head – Investment Arindam Chakraborty,
Head – Compliance Banking (Mumbai) - Ajay Jaiswal, Head – Retail Insurance -
Risk Management Head – PMS and President
President
President Research – President

Dipak Agarwal,
Manav Goenka Head - Equity – PCG,
Head – Merchant Senior Vice President
Banking - Vice
Shamik Bose,
President Head – Commodity
Brokerage and Currency Nishi Kant Mehta,
Futures – Executive Head – Mutual Funds, IPO
Director and treasury products
Dr. Suvendu Bose Senior Vice President
Head – Corporate
Finance – Director
(Non Board position)
Ajai Agrawal,
Head – PRP – Managing
Director

*Except PRP Technologies Limited, B.L. Mittal is the chairman of all the Subsidiaries.
**Ravi Kant Sharma is the Managing Director of MCap, the wholly owned subsidiary of the Company.

Key Managerial Personnel

Details of the key managerial personnel permanently employed by the Company are set out below.

Biplab Kumar Mani, aged 34 years, is the company secretary of the Company. He is a qualified company
secretary and also holds a bachelor degree in commerce from Calcutta University. He has been working with the
Company from February 19, 2007. Prior to joining the Company, he was associated with B. K. Group of
Companies. He has experience of more than six years in the area of corporate law, stock exchange compliances
and other statutory matters. He is responsible for managing the process concerning company legislation and
regulations. In fiscal 2010, Biplab Kumar Mani was paid a remuneration of Rs. 0.38 million by the Company.

Birendra Kumar Sethia, aged 30 years, is the associate vice president (corporate) of the Company. He is a
qualified chartered accountant. He has been working with the Company from July 7, 2009. Prior to joining the
Company, he was associated with ACC group of companies and Reliance Industries group of companies. He has
a post qualification experience of more than six years in preparation of Project report, budgeting and corporate
accounts. In fiscal 2010, Birendra Kumar Sethia was paid a remuneration of Rs. 0.58 million by the Company.

100
Giridhar Dhelia, aged 27 years, is the vice president (corporate consultancy) of the Company. He is a qualified
chartered accountant and company secretary. He has been working with the Company from April 1, 2008. Prior
to joining the Company, he was a practicing chartered accountant. He has more than six years of work
experience in the areas of mergers and acquisitions, direct tax and corporate law. He was also a co-opted
member of the student committee of Eastern India Regional Council of the Institute of Chartered Accountants of
India. In fiscal 2010, Giridhar Dhelia was paid a remuneration of Rs. 0.56 million by the Company.

Pankaj Kumar Kedia, aged 41 years, is the chief financial officer of the Company. He is a qualified chartered
accountant with rank and company secretary. He has been working with the Company from November 11, 2009.
Prior to joining the Company, he was associated with IFB Industries Limited. He has experience of more than
eighteen years in the field of finance, tax and project activities. He is in-charge of the financial and corporate
functions of the Company. In fiscal 2010, Pankaj Kumar Kedia was paid a remuneration of Rs. 0.34 million by
the Company.

Rohit Kumar Sinha, aged 37 years, is the human resources-head of the Company and is heading the human
resource division of the Microsec Group. He holds a post graduate diploma in personnel management from
XISS, Ranchi. He has been working with the Company since May 6, 2010. Prior to this, he was working as
deputy director (human resources) with Labvantage Solution Private Limited. He has been previously associated
with various companies engaged in manufacturing, export house, telecom, IT and ITES industry and has more
than 12 years of experience in the role of general human resources as a role including more than 6 years in
leadership role. In fiscal 2010, Rohit Kumar Sinha was not paid any remuneration by the Company.

Details of the key managerial personnel permanently employed by our Subsidiaries are set out below:

Ajai Kumar Agrawal, aged 48 years, is the managing director in PRP. He is a qualified cost and works
accountant and also holds a bachelor degree in science. Prior to joining the group, he was associated with Birla
Corporation Limited, SWIL Limited and Electrosteel Castings Limited. He has a post qualification experience
of nineteen years in methods and procedures of cost accounting and formulation of operating strategy,
investment feasibility analysis. His write-ups are also published in the ICWAI Journal - “The Management
Accountant. He was awarded with a special appreciation letter for the outstanding performance effecting cost
saving in Birla Corporation Limited. In fiscal 2010, Ajay Kumar Agrawal was paid a remuneration of Rs. 0.48
million by PRP.

Ajay Jaiswal, aged 40 years, is the president (investment strategies) in MTL. He holds a bachelor degree in
commerce. He Joined MCap on April 8, 2008, as a president (research and investment strategies) and was later
transferred to MTL on November 1, 2008. Prior to joining the group he was associated with Angel Broking
Limited as investment strategist for two years, with Lohia Securities Limited as head of research for six years,
with CD Research as research analyst for three years. He has more than fifteen years of experience in stock
markets, fundamental research of stocks, commodity and currency markets. In fiscal 2010, Ajay Jaiswal was
paid a remuneration of Rs. 1.47 million by MTL.

Anurag Goyal, aged 30 years, is the associate vice president (investment banking) in MCap. He is a qualified
chartered accountant. He joined MCap on April 1, 2006. Prior to joining the group he was associated with
Provogue India Limited. He has experience of more than five years in preparation of project report, capex
structure and business plan. He is instrumental in setting up the Mumbai office of the group. In fiscal 2010,
Anurag Goyal was paid a remuneration of Rs. 0.86 million by MCap.

Arindam Chakraborty, aged 37 years, is the president (insurance – retail) in MIBL. He holds a bachelor
degree in computer science from Pune University. He joined MIBL on March 4, 2009. Prior to joining Microsec
Group, he was associated with IMRS Financial Services as the director (operations) and also with ING Vysya
Life. He has experience of more than fourteen years in driving operational growth, maximizing business
opportunities and ensuring compliance with legal and regulatory requirements. In fiscal 2010, Arindam
Chakraborty was paid a remuneration of Rs. 1.32 million by MIBL.

Arup Roy Chowdhury, aged 39 years, is the vice president (business development) in MCap. He is a graduate
in commerce from Calcutta University and is has more than 19 years of experience in financial markets. He
joined MCap on July 1, 2007. Prior to joining MCap, he was associated with LKP Securities. In fiscal 2010,
Arup Roy Chowdhury was paid a remuneration of Rs. 0.60 million by MCap.

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Atanu Ghosh, aged 31 years, is the head (technology) in MTL. He holds a diploma in computer science, a
CISCO certified network assistant and is also a Microsoft Certified Professional. He joined MCap on May 8,
2006 and thereafter he was transferred to MTL on August 1, 2008. Prior to joining the group he was associated
with Infrotonix Channels. He has experience of more than seven years in network administration, IT
infrastructure planning and implementation. In fiscal 2010, Atanu Ghosh was paid a remuneration of Rs. 0.24
million by MTL.

Bajrang Lal Agarwal, aged 35 years, is the senior vice president (financial risk management) in MCap. He is a
qualified chartered accountant. He joined MCap on November 1, 2006. Prior to joining the group, he was
associated with Lohia Securities Limited. He has experience of more than six years in the capital markets and
risk management. In fiscal 2010, Bajrang Lal Agarwal was paid a remuneration of Rs. 0.76 million by MCap.

Dr. Suvendu Bose, aged 42 years, is the director (corporate finance and advisory) in MCap. He has a post
graduate degree in science from Jadavpur University and MBA (finance specialization) from Kolkata University
and a Ph.D, in mergers and acquisition. He joined MCap on April 1, 2010. Prior to joining MCap he had served
for different companies like INDAL, CESC, PwC, SBICAP and ICRA Management Consulting. He has around
19 years of working experience in power and mining industry, management consulting and investment banking.
Dr. Suvendu Bose has worked for various projects funded by multi-lateral agencies such as World Bank, ADB,
DfID. In fiscal 2010, Dr. Suvendu Bose was not paid any remuneration by MCap.

Dipak Agarwal, aged 41 years is the senior vice president (private client group) in MCap. He is an executive
MBA from IIM, Kolkata and is has over 15 years experience in financial markets. He joined MCap on March
14, 2010. Prior to joining MCap, he was working for HSBC Investdirect Limited as regional head – NBFC. In
fiscal 2010, Dipak Agarwal was paid a remuneration of Rs. 0.06 million by MCap.

Mahendra Kumar Yadav, aged 31 years, is the associate vice president (account and taxation) in MRPL. He is
a qualified chartered accountant. He joined MFSL on February 12, 2007. He joined MRPL on November 3,
2009. Prior to joining the group, he was associated with Mayur Ply Private Limited. He has experience of more
than seven years in the field of accounts, audit and taxation. In fiscal 2010, Mahendra Kumar Yadav was paid a
remuneration of Rs. 0.37 million by MRPL.

Manav Goenka, aged 30 years, is the vice president (investment banking) in MCap. He holds a master of
business administration in finance from Globsyn Business School. He joined MCap on April 11, 2005. He has
more than five years of experience in capital market offerings, merger & acquisition, valuations and SEBI laws.
In fiscal 2010, Manav Goenka was a remuneration of Rs. 0.87 million by MCap.

Manish Kumar Agarwal, aged 34 years, is the president (compliance risk management) in MIBL. He is a
qualified chartered accountant and company secretary. He joined MIBL on July 1, 2005. Prior to joining MIBL,
he was associated with Bachhawat group. He has experience of more than eight years in the field of finance and
equity broking. In fiscal 2010, Manish Kumar Agarwal was paid a remuneration of Rs. 0.94 million by MIBL.

Naveen Vyas, aged 30 years, is the associate vice president (fundamental research) in MCap. He holds a master
of business administration in finance from Visvesvaraya Technological University. He joined MCap on October
4, 2005. Prior to joining the Microsec Group, he was associated with Hall & Anderson Limited. He has
experience of more than five years in the analysis of financial strength and valuation of companies. In fiscal
2009, Naveen Vyas was paid a remuneration of Rs. 0.52 million by MCap.

Nishi Kant Mehta, aged 39 years, is the senior vice president (channel sales distribution) in MCap. He is a
qualified chartered accountant, cost & works accountant and is has 15 years of experience in financial products
distribution. He joined MCap on March 15, 2010. Prior to joining MCap, he was working as assistant vice
president - corporate investment and as regional manager – East (investments) for HSBC Investdirect Limited
(formerly known as IL&FS Investment Securities Limited). In fiscal 2010, Nishi Kant Mehta was paid a
remuneration of Rs. 0.06 million by MCap.

Pankaj Harlalka, aged 36 years, is the executive director (investment banking) in MCap. He is a company
secretary and has a more than 10 years experience in dealing with corporates. He joined MCap on November 7,
2003 and has played a major role in the execution of major assignments handled in the merchant banking
division. He now provides leadership to his team and is nurturing relationships with Corporates and Investors.
Prior to joining the Microsec Group, he was an independent practicing company secretary. In fiscal 2010,
Pankaj Harlalka was paid a remuneration of Rs. 1.32 million by MCap.

102
Sambhu Sengupta, aged 78 years, is the president (insurance broking) in MIBL. He is an associate of
Chartered Insurance Institute, London. He joined MIBL on July 1, 2003. Prior to joining the group, he was
associated with Birla Technical Services. He has experience of more than four decades in the field of insurance
and has a deep knowledge of risk management in insurance business. He was also held the positions of ex-
regional head of the New India Assurance Company Limited and ex-chairman of the Fire Sub-Committee of
Calcutta Regional Committee of Tariff Advisory Committee. In fiscal 2010, Sambhu Sengupta was paid a
remuneration of Rs. 0.45 million by MIBL.

Shainav Gupta, aged 27 years, is the senior manager - investment banking in MCap. He holds masters of
business administration in finance from ICFAI Business School. He joined MCap on May 17, 2010. Prior to
joining the group, he was associated with DE Shaw India Software Private Limited and ASP Research Service
Private Limited. He has more than four years of experience in capital markets and financial research. In fiscal
2010, Shainav Gupta was not paid any remuneration by MCap.

Shamik Bhose, aged 46 years, is the executive director (commodity markets) in MCL. He is a master in
economics from Calcutta University. He joined MCL on May 2, 2007. Prior to joining the group, he was
associated with Adani Exports Limited. He has experience of more than twenty three years in Commodities and
related Markets. He has been a nominee member at world trade bodies like Grain and Feed Trade Association
(GAFTA) and Federation of Oils, Seeds and Fats (FOSFA), Indian trade bodies like Bombay Oils & Oilseeds
Exchange, a founding committee member of Coffee Futures Exchange of India - Bangalore (COFEI ) and has
also been a speaker and panelist in conferences organized by Forward Market Commission ( FMC), Associated
Chambers of Commerce and Industry of India (ASSOCHAM) and Indian Chamber of Commerce (ICC) on
development of the commodity futures market and warehouse receipt finance in India. He has also been advisor
to some well known companies, commodity exchanges like MCX and was also a member of Product Committee
of NCDEX as a general manager and as a director with Commodity World Trade.Com. In fiscal 2010, Shamik
Bhose was paid a remuneration of Rs. 0.58 million by MCL.

Sougata Sengupta, aged 35 years, is the president (investment banking) in MCap. He is a qualified company
secretary and a master of business administration in finance from IMT Gaziabad. He joined MCap on July 1,
2009. Prior to joining the group, he was associated with Adhunik Group as company secretary and associate
vice president (legal). He has experience of more than fifteen years in handling finance function and monitoring
secretarial compliance, setting up joint ventures, finalization of business acquisitions, handling IPO, private
equity and private placement of convertible debenture through FDI route. He has good exposure and knowledge
of company law and SEBI regulations. In fiscal 2010, Sougata Sengupta was paid a remuneration of Rs. 1.24
million by MCap.

Soumesh Tripathi, aged 30 years, is the associate vice president (business development) in MCL. He is a
graduate in commerce and also holds a diploma in computer software applications from NIIT. He joined MCL
on July 1, 2004. Prior to joining the Microsec Group, he was associated with Micro Network Systems. He has
experience of more than five years in corporate hedging in the future market specifically in metal sector (steel,
copper, aluminium and zinc). In fiscal 2010, Soumesh Tripathi was paid a remuneration of Rs. 0.31 million by
MCL.

Sumanta Samaddar, aged 31 years is the associate vice president (business development) in MCap. He is a
graduate in commerce and holds NCFM certification in cash market module. He joined MCap on September 4,
2007. Prior to joining the group, he was associated with IL & FS, Motilal Oswal and UTI Securities. He has
experience of more than ten years in Capital Markets. In fiscal 2010, Sumata Samaddar was paid a remuneration
of Rs. 0.74 million by MCap.

Vinit Pagaria, aged 29 years, is the vice president (investment strategies) in MCap. He is a qualified chartered
accountant and is a certified financial risk manager from Global Association of Risk Professional, USA. He also
holds a diploma in investment management and NSE’s certifications in financial markets. He joined MCap on
December 20, 2006. Prior to joining the group, he was employed with Kotak Securities Limited. He has more
than five years of experience in capital markets and specializes in integrating fundamental and technical
research. His reports are also covered in the Economic Times. In fiscal 2010, Vinit Pagaria was paid a
remuneration of Rs. 0.47 million by MCap.

Yogesh Parasrampuria, aged 28 years, is the senior vice president (business development) in MCap. He is a
graduate in commerce from Calcutta University and has completed a professional course in network centric

103
computing. He joined MCap on May 7, 2005. Prior to joining the group he was associated with Vedicka
Securities Private Limited, Kotak Securities Limited, J M Morgan Stanley and ICICI Bank-LAS Services He
has experience of more than nine years in equity broking and related services. In fiscal 2010, Yogesh
Parasrampuria was paid a remuneration of Rs. 0.73 million by MCap.

Changes in Key Management Personnel during the last three years

The changes in key managerial personnel of the Company during the last three years is as follows:

Name Designation Date of change Reason

Laxmi Narayan Mandhana Chief Financial Officer September 11, 2007 Appointment
Ashok Dalmia Senior Vice President Finance & February 1, 2008 Appointment
Accounts
Giridhar Dhelia Vice President – Finance April 1, 2008 Appointment
Ashok Dalmia Senior Vice President Finance & February 19,2009 Resignation
Accounts
Mahendra Kumar Yadav Manager – Finance May 4,2009 Resignation

Birendra Kumar Sethia Assistant Vice President – Corporate July 7, 2009 Appointment
Pankaj Kumar Kedia Chief Financial Officer November 11, 2009 Appointment
Laxmi Narayan Mandhana Chief Financial Officer November 20, 2009 Resignation
Rohit Kumar Sinha Head – Human Resource May 6, 2010 Appointment

Interest of Key Managerial Personnel of The Company

Other than our Promoters, none of the key managerial personnel of the Company hold any Equity Shares in the
Company. 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 including in their capacity
as nominee directors of our Subsidiaries. The employees of the Company including the key managerial
personnel are entitled to superannuation and gratuity benefits. As at the date of this Red Herring Prospectus,
approximately 9.24% of our share capital is held by Microsec Vision (Employees) Trust, a trust settled by our
Promoter Mr. B.L. Mittal for the benefit of our employees.

Except as disclosed in “Management – Payment or Benefit to officers of the Company (non – salary related)” on
page 104 of this Red Herring Prospectus, none of the key managerial personnel have been paid any
consideration of any nature from the Company other than their remuneration.

The Directors and the key managerial personnel have not taken any loan from the Company.

None of the beneficiaries of loans and advances and sundry debtors are related to the Directors.

Bonus or Profit Sharing Plan for the Key Managerial Personnel

The Company does not have any profit sharing plan with its Directors or its key managerial personnel. The
Company awards performance linked bonuses, as part of remuneration, to its key managerial personnel.

Payment or Benefit to officers of the Company (non – salary related)

No amount or benefit has been paid or given to any officer of the Company within the two preceding years from
the date of filing of this Red Herring Prospectus or is intended to be paid, other than in the ordinary course of
their employment.

104
 OUR SUBSIDIARIES

The Company has 3 direct subsidiaries and 3 indirect subsidiaries. None of our Subsidiaries has made any
public or rights issue in the last three years and have not become sick companies under the meaning of SICA
and are not under winding up.

The Subsidiaries of the Company were acquired by, and became the subsidiaries of, the Company at the dates
set forth below:

S Name of the Subsidiary Nature of Shareholding of the Date of becoming a

No. Company Subsidiary
1. Microsec Capital Limited Direct October 24, 2005(1)
2. Microsec Resources Private Direct February 1, 2006
Limited
3. Microsec Technologies Limited Direct March 30, 2006
(2)

4. Microsec Commerze Limited(3) Indirect October 24, 2005

5. Microsec Insurance Brokers Indirect October 24, 2005
Limited(4)
6. PRP Technologies Limited(5) Indirect February 9, 2009
(1)
Microsec Capital Limited became a wholly owned subsidiary of the Company on November 24, 2005.
(2)
Microsec Technologies Limited was earlier known as MIL Technologies Limited.
(3)
Microsec Commerze Limited has been a subsidiary of Microsec Capital Limited since October 1, 2005 and became an
indirect subsidiary of the Company with effect from October 24, 2005 consequent to the Company acquiring the
shareholding of Microsec Capital Limited.
(4)
Microsec Insurance Brokers Limited has been a subsidiary of Microsec Capital Limited since October 9, 2002 and
became an indirect subsidiary of the Company with effect from October 24, 2005 consequent to the Company acquiring
the shareholding of Microsec Capital Limited.
(5)
PRP Technologies Limited is a wholly owned subsidiary of Microsec Technologies Limited since February 9, 2009. It
became an indirect subsidiary of the Company consequent to MTL acquiring the shareholding of PRP Technologies
Limited.

The significant details of our Subsidiaries are as provided below:

Interest of the Subsidiaries in the Company

Except as stated in “Related Party Transactions” on page 114, our Subsidiaries do not have any other interest in
the Company’s business.

Direct Subsidiaries

1. Microsec Capital Limited

Corporate Information:

Microsec Capital Limited (“MCap”) was incorporated as ‘Lokpriya Mercantile Private Limited’ on
July 14, 1995 as a private limited company under the Companies Act, 1956. The name was changed to
‘Lokpriya Mercantile Limited’ upon conversion from a private limited company to a public limited
company on February 2, 2000. The name was further changed to ‘Microsec India Limited’ on February
16, 2000 and to ‘Microsec Capital Limited’ on October 24, 2005. It is a wholly owned subsidiary of the
Company. MCap is registered with the SEBI as a stock broker, a Category I Merchant Banker, a
depository participant and a Portfolio Manager.

Capital Structure and Shareholding Pattern:

The authorised share capital of MCap is Rs. 30,000,000 divided into 3,000,000 equity shares of face
value of Rs. 10 each and the paid up capital is Rs. 14,885,610 divided into 1,488,561 equity shares of
face value of Rs. 10 each.

The shareholding pattern of MCap is as follows:

105
 S. Name of the Shareholder No. of equity shares of Percentage of total of equity
No. Rs. 10 each holding (%)
1. Microsec Financial Services
Limited 1,488,561* 100.00
Total 1,488,561 100.00
*includes six shares held by six individuals as representatives of MFSL

2. Microsec Resources Private Limited

Corporate Information:

Microsec Resources Private Limited (“MRPL”) was incorporated as Godrey Agencies Private Limited
under the Companies Act, 1956 on December 12, 1994. The name was changed to Keshav Resources
Private Limited on August 4, 1999. The name was further changed to Microsec Resources Private
Limited as on February 22, 2006. It is a non-banking finance company registered with the Reserve
Bank of India and is presently engaged in the business of providing loans including loans against
shares.

Capital Structure and Shareholding Pattern:

The authorised share capital of MRPL is Rs. 10,100,000 divided into 1,010,000 equity shares of face
value of Rs. 10 each and the paid up capital is Rs. 3,200,000 divided into 320,000 equity shares of face
value of Rs. 10 each.

Deep Discount Debentures

To meet its long term commitments and its business requirement MRPL has issued deep discounts
debentures to the different corporate bodies. All these debentures are currently held by MCL. These
deep discount debentures are of different maturity value and at different discount prices. The terms and
conditions of the deep discounts debentures are:
Amount in Rupees.
S. Face Maturity Discount Issue date Maturity date Period
No. Value Value Value
1. 50,00,000 100,000,000 95,000,000 June 1, 1999 May 31, 2019 20 Years
2. 10,000,000 75,000,000 65,000,000 December December 12, 20 Years
13, 2001 2021
3. 10,000,000 75,000,000 65,000,000 December December 16, 20 Years
17, 2001 2021

The shareholding pattern of MRPL is as follows:

S. Name of the Shareholder No. of Equity Percentage of total of equity

No. Shares holding (%)
1. Microsec Financial Services 320,000* 100.00
Limited
Total 320,000 100.00
* includes one share held by Banwari Lal Mittal as a representative of MFSL.

3. Microsec Technologies Limited

Corporate Information:

Microsec Technologies Limited (“MTL”) was incorporated as MIL Technologies Limited under the
Companies Act, 1956, on May 10, 2002. MTL received its certificate of commencement of business on
May 27, 2002. The name ‘MIL Technologies Limited’ was changed to ‘Microsec Technologies
Limited’ pursuant to a fresh certificate of incorporation issued by the Registrar of Companies, West
Bengal at Kolkata, dated March 17, 2008. It is engaged in the business of software development,
related consultancy and data processing.

106
 Capital Structure and Shareholding Pattern:

The authorised share capital of MTL is Rs. 2,000,000 divided into 100,000 equity shares of face value
of Rs. 10 each and 100,000 5% redeemable optionally convertible cumulative preference shares. The
paid up equity capital is Rs. 627,000 divided into 62,700 equity shares of face value of Rs. 10 each.

Preference Share:

MTL has issued 38,000 redeemable optionally convertible cumulative preference shares to MCap.

The shareholding pattern of MTL is as follows:

S. Name of the Shareholder No. of Equity Percentage of total of equity

No. Shares holding (%)
1. Microsec Financial Services 50,000* 79.74
Limited
2. Microsec Capital Limited 12,700 20.26
Total 62,700 100.00
* includes 600 shares held by six individuals as representatives of MFSL.

Indirect Subsidiaries

1. Microsec Insurance Brokers Limited

Corporate Information:

Microsec Insurance Brokers Limited (“MIBL”) was incorporated as Microsec Risk Management
Limited under the Companies Act, 1956, on October 9, 2002 and received the certificate of
commencement of business on October 21, 2002. The name was changed to Microsec Insurance
Brokers Limited on August 24, 2007.

Capital Structure and Shareholding Pattern:

The authorised share capital of MIBL is Rs. 5,200,000 divided into 520,000 equity shares of face value
of Rs. 10 each and the paid up capital is Rs. 5,160,600 divided into 516,060 equity shares of face value
of Rs. 10 each.

The shareholding pattern of MIBL is as follows:

S. Name of the No. of Equity Percentage of total of equity holding

No. Shareholder Shares (%)
1. Microsec Capital Limited 516,060 100.00
Total 516,060 100.00
* includes six shares held by six individuals as representatives of MCap

2. Microsec Commerze Limited

Corporate Information:

Microsec Commerze Limited (“MCL”) was incorporated as Mittal Management & Tax Consultants
Private Limited under the Companies Act, 1956, on December 7, 1994. The name was changed to
Mittal Management Private Limited on September 19, 1997. Further, the name was changed to Mittal
Management Limited upon conversion from private limited company to public limited company on
March 27, 2002. Subsequently, the name was changed to Microsec Commerze Limited on September
9, 2003.

It is engaged in the business of commodity derivative broking.

107
 Capital Structure and Shareholding Pattern:

The authorised share capital of MCL is Rs. 16,100,000 divided into 1,610,000 equity shares of face
value of Rs. 10 each and the paid up capital is Rs. 16,029,500 divided into 1,602,950 equity shares of
face value of Rs. 10 each.

The shareholding pattern of MCL is as follows:

S. Name of the No. of Equity Percentage of total of equity holding

No. Shareholder Shares (%)
1. Microsec Capital Limited 1,602,950* 100.00
Total 1,602,950 100.00
* includes six shares held by six individuals as representatives of MCap

3. PRP Technologies Limited

Corporate Information:

PRP Technologies Limited (“PRP”) was incorporated under the Companies Act, 1956, on October 16,
2007 and received its certificate of commencement of business on December 5, 2007.

It is engaged in the business of providing web-based solutions through portals. PRP has recently
launched a personal resource planning portal by the name of ‘PRP’.

Capital Structure and Shareholding Pattern:

The authorised share capital of PRP is Rs. 1,000,000 divided into 100,000 equity shares of face value
of Rs. 10 each and the paid up capital is Rs. 1,000,000 divided into 100,000 equity shares of face value
of Rs. 10 each.

The shareholding pattern of PRP is as follows:

S. Name of the No. of Equity Percentage of total of equity holding

No. Shareholder Shares (%)
1. MTL 100,000* 100.00
Total 100,000 100.00
* includes six shares held by six individuals as representatives of MTL

Common Pursuits

The Company and MRPL may have common pursuits. Since MRPL is engaged in business similar to that of the
Company, this may result in a conflict of interest with respect to business strategies of the Company. MRPL is
into LAS business since May, 2005. As on June 30, 2010 we have 516 registered clients in the LAS business out
of which 459 are registered with MFSL and 57 are registered with MRPL. The consolidated deployment in LAS
as on March 31, 2009 and 2010, as restated, was Rs.142.93 million and Rs. 405.39 million respectively. As on
March 31, 2010 Rs. 305.12 million was deployed towards LAS by MFSL and that of Rs. 100.27 million was
deployed by MRPL.

We shall adopt necessary procedures and practices as permitted by law to address any conflict situations, as and
when they may arise. For further details on related party transactions, to the extent of which the Company is
involved, see “Related Party Transactions” on page 114 of this Red Herring Prospectus.

108
 OUR PROMOTERS AND GROUP COMPANIES

Our Promoters

The Promoters of the Company are Banwari Lal Mittal and Ravi Kant Sharma.

Banwari Lal Mittal

Identification Particular De ails

Age 42
PAN ADMPM065G
Passport No. F4841742
Voter ID Number HZG3561545
Driving License Number WB-012007452760
Bank Account Number 00081840000086 – HDFC Bank Limited,
Stephen House, Kolkata.

Ravi Kant Sharma

Identification Particulars Details

Age 36
PAN AIWPS1830J
Passport No. F6213987
Voter ID Number WB/21/143/255140
Driving License Number WB-012005202176
Bank Account Number 840592, Royal Bank of Scotland, Camac Street
Branch

For other details relating to the Promoters, including their brief profile, addresses, terms of appointment as
Directors and details of their other directorships, see “Management – The Board of Directors” on page 91 of this
Red Herring Prospectus.

The Company confirms that the permanent account number, bank account number and the passport number of
Banwari Lal Mittal and Ravi Kant Sharma has been submitted to the Stock Exchanges at the time of filing the
Draft Red Herring Prospectus.

Interest of Promoters and Common Pursuits

The aforementioned Promoters of the Company are interested to the extent of their shareholding in the
Company. Further, the Promoters who are also the Directors of the Company may be deemed to be interested to
the extent of fees, if any, payable to them for attending meetings of the Board or a Committee thereof as well as
to the extent of other remuneration and reimbursement of expenses payable to them. For shareholding of the
Promoter, see “Capital Structure” on page 25 of this Red Herring Prospectus.

Except as stated otherwise in this Red Herring Prospectus, we have not entered into any contract, agreements or
arrangements during the preceding two years from the date of this Red Herring Prospectus in which the
Promoters are directly or indirectly interested and no payments have been made to them in respect of the
contracts, agreements or arrangements which are proposed to be made with them including the properties
purchased by the Company other than in the normal course of business.

Our promoters do not hold any interest in any of the properties purchased by the company in the preceding two
years.

Except for LKPL, which is also an NBFC registered with the RBI and is largely into the business of making
investments in shares and providing loan facilities, the Promoters and the Promoter Group entities do not have
any interest in any venture that is involved in any activities similar to those conducted by us.

109
Payment of benefits to the Promoters

Except as stated otherwise in the “Related Party Transactions” and “ – Interest of Promoters and Common
Pursuits” on pages 114 and 109 respectively of this Red Herring Prospectus, there has been no payment or
benefits to the Promoters during the two years prior to the filing of this Red Herring Prospectus.

Other Confirmations

Further, none of the Promoters has been declared as a wilful defaulter by the RBI or any other governmental
authority and there are no violations of securities laws committed by the Promoters in the past or are pending
against them.

Additionally, none of the Promoters have been debarred from dealing in securities or have been restrained from
accessing the capital markets for any reasons by the SEBI or any other authorities.

Except as stated in the “Related Party Transactions” on page 114 of this Red Herring Prospectus, there have
been no transactions with the Promoters and Group Companies.

Disassociation of Promoters

Rakesh Sony resigned as a Director of the Company with effect from October 7, 2008. Rakesh Sony for other
professional pursuits discontinued his association with the Company.

Rakesh Sony was one of the initial promoters of the Company and was associated with the Company for six
years. The build up of shareholding of Rakesh Sony and his spouse Kavita Sony in the Company is set forth in
the table below:

Date of allotment/ Nature of Number of Face value Issue Cumulative no.

transfer Transaction shares price/acquisitio of equity shares
n price (in Rs.
per share)
Rakesh Sony
December 31, 2007 Allotment 6,00,000 10 30 6,00,000
Kavita Sony
December 31, 2007 Allotment 6,00,000 10 30 6,00,000

In terms of the Supplement Agreement dated October 2, 2008 to Share Subscription cum Shareholders’
Agreement dated December 29, 2007 between the Company, LKPL, Rakesh Sony and Kavita Sony, Rakesh
Sony and Kavita Sony transferred their entire shareholding aggregating to 12,00,000 Equity Shares in the
Company to LKPL. Pursuant to these developments, Rakesh Sony has ceased to be a promoter of the Company.

Further, LKPL on December 31, 2007 had transferred 1,200,000 equity shares of the Company to Rakesh Sony
jointly with LKPL as trustees of Microsec Vision Trust Two. Upon disassociation of Rakesh Sony as promoter
of the Company, as per Declaration of Trust dated December 29 2007, 1,200,000 equity shares held by Rakesh
Sony jointly with LKPL as trustees of Microsec Vision Trust Two were transferred to LKPL on October 7,
2008.

Rakesh Sony neither directly nor indirectly has any interest in the Company.

Except as mentioned above, the Promoters have not disassociated from the Company or any other company/
firm during preceding three years from the date of the Red Herring Prospectus.

Companies with which the Promoters have disassociated in the last three years

The promoters have not disassociated themselves from any company/ firm during the preceding three years.

110
Promoter Group

Relatives of Promoters

The natural persons who are part of the Promoter Group (due to their relationship with each of the Promoters),
other than the Promoters are as follows:

Name of the Person Relationship with the Promoter

Banwari Lal Mittal
Gomti Devi Mittal Mother
Abha Mittal Wife
Saloni Mittal (Minor) Daughter
Vidhi Mittal (Minor) Daughter
Krishna Mittal (Minor) Son
Sushila Devi Khaitan Sister
Arjun Mittal Brother
Narsingh Mittal Brother
Bhagwati Agarwal Sister
Deepika Agarwal Sister
Govind Ram Bhimrajka Father of the spouse
Prabha Bhimrajka Mother of the spouse
Vikash Bhimrajka Brother of the spouse
Priti Bhimrajka Sister of the spouse

Ravi Kant Sharma

Sajjan Kumar Sharma Father
Kanta Devi Sharma Mother
Bharati Sharma Wife
Mohit Sharma (Minor) Son
Stuti Sharma (Minor) Daughter
Rajiv Sharma Brother
Girdhari Lal Mishra Father of the spouse
Rekha Mishra Mother of the spouse
Ravi Mishra Brother of the spouse
Renuka Mishra Sister of the spouse

Promoter Group Companies:

In accordance with Regulation 2 (zb) of the SEBI Regulations, following is the list of the Promoter Group
companies:

1. Luv-Kush Projects Limited

2. Micro Resources Private Limited
3. Longrange Management Services Private Limited. This is a 100% subsidiary of LKPL.
4. Top View Enclaves LLP

Group Companies:

In accordance with Schedule VIII Part A, the following is the list of Group Companies:

1. Luv-Kush Projects Limited

2. Micro Resources Private Limited; and
3. Top View Enclaves LLP

Unless otherwise stated none of the companies forming part of Group Companies is a sick company under the
meaning of SICA and none of them are under winding up. None of the group companies have been struck from
the records of the RoC during the preceding three years.

111
1. Luv-Kush Projects Limited

Corporate Information

LKPL is a NBFC registered with the RBI, and was incorporated on March 9, 1989.

LKPL has not made any public or rights issues in the preceding three years. LKPL is not a listed
company.

Interest of the Promoter

Banwari Lal Mittal and Abha Mittal are the directors of LKPL and hold 609,965 and 449,950 equity
shares respectively of LKPL. Collectively they hold more than 50% of the total paid up capital of
LKPL.

Shareholding

The shareholding pattern of LKPL is as follows:

Name of the shareholder No of equity shares Percentage (%)

Banwari Lal Mittal 609,965 29.18
Banwari Lal Mittal (HUF) 550,020 26.32
Abha Mittal 449,950 21.53
Maa Sarda Consultants Private 480,000 22.97
Limited
Others 65 0.00
Total 2,090,000 100%

Financial Information

The brief financial details of LKPL derived from its audited financial statements for the past three years
are set forth below:
(In Rs. million, except share data)
Particulars Fiscal 2010 Fiscal 2009 Fiscal 2008
Equity Capital 20.90 16.10 12.50
Reserves (excluding revaluation reserves) 456.62 334.25 266.92
and surplus
Income (including other income) 9.76 3.44 12.91
Profit After Tax 7.20 (10.08) 8.66
Earning Per Share (face value 10 each) 3.98 - 6.93
Net asset value per share 228.48 217.59 223.52

LKPL is also engaged in the business of making investment in shares and providing loans and to that
extent there may be a conflict of interest with respect to business strategies of the Company. There are
no transactions between the Company and LKPL. However, MCap, in its capacity as an equity broker,
executes transactions of sale and purchase of shares on behalf of LKPL, for which it earns a brokerage.
For fiscal 2006, 2007, 2008, 2009 and 2010 MCap has earned a brokerage of Rs. 0.06 million, Rs. 0.54
million, Rs. 0.41 million, Rs. 0.37 million and Rs. 0.56 million, respectively. MCL, in its capacity as a
commodity broker, executes transactions on behalf of LKPL, for which it earns a brokerage. For fiscal
2006, 2007, 2008, 2009 and fiscal 2010 MCL has earned a brokerage of Rs. Nil million, Rs. 0.03
million, Rs. 0.17 million, Rs. 0.01 million and Rs. 0.01 million respectively. We shall adopt necessary
procedures and practices as permitted by law to address any conflict situations with the Company, as
and when they may arise. The details of the aforesaid transactions have been included in the schedule
of Related Party Transactions in the restated consolidated financial statements of the Company on
pages 182 to 187 of this Red Herring Prospectus.

2. Micro Resources Private Limited (“Micro Resources”)

Corporate Information

112
 Micro Resources was incorporated on March 27, 2000 under the Companies Act. Micro Resources is
engaged in the business of Consultancy.

Micro Resources has not made any public or rights issues in the preceding three years and is not a
listed company.

Interest of the Promoter

Banwari Lal Mittal holds 10,100 equity shares of Rs. 10 each of class A and 1,985 equity shares of Rs,
1,000 each of class B and Abha Mittal holds 100 equity shares of Rs. 10 each of class A of Micro
Resources, which constitutes 99 % and 1% of the total paid up capital of Micro Resources.

Financial Information

The brief financial details of Micro Resources derived from its audited financial statements for the past
three years are set forth below:
(In Rs. million, except share data)
Particulars Fiscal 2010 Fiscal 2009 Fiscal 2008
Equity Capital 2.09 2.09 2.09
Reserves (excluding revaluation reserves) 0.82 0.82 0.82
and surplus
Income (including other income) 0.22 0.19 0.02
Profit After Tax (0.06) 0.02 (0.13)
Earning Per Share (face value Rs. 10each) (0.30) 0.09 -
Net asset value per share 10.49 10.79 10.70

3. Top View Enclaves LLP

Corporate Information

Top View Enclaves LLP was formed by Abha Mittal and Micro Resources Private Limited on May 4,
2010. In terms of the arrangement for the limited liability partnership between Abha Mittal and Micro
Resources, Top View Enclaves LLP shall provide real estate advisory services or such other services as
may be mutually agreed between the partners of the LLP.

Interest of the Promoter

The partners of Top View Enclaves LLP are (i) Abha Mittal, spouse of Banwari Lal Mittal, our
Promoter and (ii) Micro Resources, which promoted by Banwari Lal Mittal.

Financial Information

Since Top View Enclaves LLP has been incorporated in May, 2010, no financial information of the
same is available.

Business interest of Group Companies and Subsidiaries in the Company

None of the Group Companies and Subsidiaries has any business interest in the Company.

113
 RELATED PARTY TRANSACTIONS

See page 133 and 182 of this Red Herring Prospectus for a description of the related party transactions.

114
 DIVIDEND POLICY

The declaration and payment of dividends will be recommended by the Board and approved by the shareholders
of the Company, at their discretion and will depend on a number of factors, including but not limited to our
profits and overall financial condition. The Board may also from time to time pay interim dividends.
In addition, the ability of the Company to pay dividends may be impacted by a number of factors, including
restrictive covenants under the loan or financing arrangements we may enter into. The dividend declared by the
Company during the last five fiscal years has been presented below:

Particulars Fiscal Fiscal Fiscal Fiscal Fiscal

2010 2009 2008 2007 2006
Face Value of Equity Shares (Rs) - - 10 10 10
Interim dividend on each Equity Shares - - 1 1 -
(Rs.)
Final dividend on each Equity Share (Rs.) - - - - 1
Dividend Rate (%) - - 10% 10% 10%

The amounts paid as dividend in the past are not necessarily indicative of the dividend policy of the Company or
dividend amounts, if any, in the future.

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 SECTION V: FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Auditors’ Report

To
The Board of Directors
Microsec Financial Services Limited
Kolkata.

Dear Sirs,

1. We have examined the Unconsolidated Restated Summary Statement of Assets and Liabilities of
Microsec Financial Services Limited (‘the Company’) as at 31 st March 2006, 2007, 2008, 2009 and 2010
and the related Unconsolidated Restated Summary Statement of Profits and Losses and Unconsolidated
Restated Summary Statement of Cash Flows, for the years ended 31st March 2006, 2007, 2008, 2009 and
2010 (collectively, the Unconsolidated Restated Summary Statements”). These Unconsolidated Restated
Summary Statements have been prepared by the Company and approved by the Board of Directors for
the proposed Initial Public Offer (referred to as the “Offer”) in accordance with the requirements of :

a. paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and

b. The SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations 2009 issued
by Securities and Exchange Board of India ('SEBI'), on August 26, 2009 in pursuance of Section
30 of the Securities and Exchange Board of India Act, 1992 (the “SEBI Regulations”).

2. We have examined such Unconsolidated Restated Summary Statements taking into consideration:

a. Revised Guidance Note on Reports in Company Prospectuses issued by the Institute of Chartered
Accountants of India (the “ICAI”) and

b. The respective terms of reference dated 10th May, 2010 received from the Company, requesting us
to carry out the assignment, in connection with the Offer Document being issued by the Company
for its proposed Initial Public Offer.

The Management has informed us that the Company proposes to make an offer of fresh issue of
12,500,000 equity shares, having a face value of Rs. 10 each, at an issue price to be arrived at by the
book building process.

Unconsolidated Restated Summary Statements as per Audited Financial Statements:

3. The Unconsolidated Restated Summary Statements of the Company have been extracted by the
management from the Unconsolidated Financial Statements of the Company for the years ended 31 st
March 2006, 2007, 2008, 2009 and 2010 which have been approved by the Board of Directors. The audit
of the accounts for the financial years ended 31st March, 2006, 2007, 2008 and 2009 was conducted by
Vidya & Co., Chartered Accountants (Registration No.308022E) and these accounts were signed by their
partner Mr. Jitendra Nagar (Membership No.055659).

This report, in so far as it relates to the amounts included for the financial years ended
31st March, 2006, 2007, 2008 and 2009, is based on the Unconsolidated Audited Financial Statements of
the Company which were audited by the above auditors and their audit reports have been relied upon by
us for the said years.

4. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI
Regulations and the terms of our engagement agreed with you, we further report that:

i) The Unconsolidated Restated Summary Statements of the Company, including as at and for the
years ended 31st March, 2006, 2007, 2008 and 2009 based on the audited financial statements of
the Company which were audited by other auditors as stated in Para 3 above and on which

116
 reliance has been placed by us and as at and for the year ended 31 st March, 2010 based on the
audited financial statements of the Company audited by us, as set out in Annexures 1, 2 & 3 to
this report are after making such adjustments and regroupings as in our opinion were appropriate
and more fully described in Statement of Adjustments and Significant Accounting Policies &
Notes (Refer Annexures 4 & 5).

ii) Based on the above, and as per the reliance placed by us on the reports issued by other auditors for
the respective years as stated above, we are of the opinion that

(a) the Unconsolidated Restated Summary Statements have been made, after incorporating :

(i) The impact arising on account of changes in accounting policies adopted by the
Company as at and for the year ended 31st March, 2010 applied with retrospective
effect in the Unconsolidated Restated Summary Statements;

(ii) Adjustments for the material amounts in the respective financial years to which
they relate.

(b) There are no extraordinary items which need to be disclosed separately in the
Unconsolidated Restated Summary Statements; and

(c) There are no qualifications in the auditors’ reports, which require any adjustments to the
Unconsolidated Restated Summary Statements.

Further, the statement on matters specified in the Companies (Auditors’ Report) Order, 2003, annexed to the
auditors’ reports on the financial statements for the years ended 31 st March 2006, 31st March 2007, 31st March
2009 and 31st March 2010, included, certain qualified statements which do not require any corrective
adjustments in the restated financial statements. Such statements are included in Note B (1) of Annexure 5.

Other Unconsolidated Restated Financial Information:

5. At the Company’s request, we have examined the following other Unconsolidated Financial Information,
as restated, proposed to be included in the Offer Document, prepared by the management and approved
by the Board of Directors of the Company and annexed to this report relating to the Company, as at and
for the years ended 31st March, 2006, 2007, 2008, 2009 and 2010. In respect of the years ended 31 st
March, 2006, 2007, 2008 & 2009 these information have been included based on the Audited Financial
Statements which were audited by other auditors as stated in para 3 above and whose auditors’ reports
have been relied upon by us.

i. Statement of accounting ratios based on the adjusted profits relating to earning per share, net
assets value, return on net worth enclosed as Annexure- 6.

ii. Statement of Related Party Transactions enclosed as Annexure -7.

iii. Statement of Segment Reporting enclosed as Annexure-8.

iv. Statement of Dividend Paid enclosed as Annexure-9.

v. Statement of Tax Shelter enclosed as Annexure-10.

vi. Capitalisation Statement as at 31st March 2010 enclosed as Annexure 11.

vii. Statement of Earning per Share enclosed as -Annexure 12A.

viii. Statement of Fixed Assets enclosed as Annexure -12B.

ix. Statement of Investments enclosed as Annexure -12C.

x. Statement of Debtors enclosed as Annexure -12D.

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 xi. Statement of Cash & Bank Balances enclosed as Annexure -12E.

xii. Statement of Loans & Advances enclosed as Annexure -12F.

xiii. Statement of Secured & Unsecured Loans enclosed as Annexure -12G & 12H.

xiv. Statement of Current Liabilities & Provisions enclosed as Annexure- 12I.

xv. Statement of Share Capital enclosed as Annexure -12J.

xvi. Statement of Reserves & Surplus enclosed as Annexure- 12K.

xvii. Statement of Income from Operations enclosed as Annexure 12L.

xviii. Statement of Staff cost enclosed as Annexure 12M.

xix. Statement of Administrative & Other expenses enclosed as Annexure 12N.

xx. Statement of Interest expenses enclosed as Annexure 12O.

6. In our opinion, other Unconsolidated Restated Financial Information, contained in the Annexures to this
report as referred to above, read along with the Significant Accounting Policies & Notes as set out in
Annexure 5 have been prepared after making adjustments and regroupings as considered appropriate, in
accordance with SEBI Regulations.

Others

7. We have not audited any financial statements of the Company as of any date or for any period
subsequent to March 31, 2010. Accordingly, we express no opinion on the financial position, results of
operations or cash flows of the Company as of any date or for any period subsequent to March 31, 2010.

8. This report should not be in any way construed as a reissuance or redating of any of the previous audit
reports issued by us or by other auditors, nor should this report be construed as a new opinion on any of
the financial statements referred to herein.

9. We have no responsibility to update our report for events and circumstances occurring after the date of
the report.

10. This report is intended solely for your information and for inclusion in the Offer Document in connection
with the proposed initial public offer of the Company, and is not to be used, referred to or distributed for
any other purpose without our prior written consent.

For S.R. BATLIBOI & CO.

Firm Registration Number: 301003E
CHARTERED ACCOUNTANTS

per R. K. AGRAWAL
Partner
Membership No. 16667

Place: Kolkata.

Date : August 14, 2010

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Unconsolidated Restated Summary Statement of Assets and Liabilities – Annexure – 1
(Rs. in Million)
Particulars As at 31st March
Application of Funds 2006 2007 2008 2009 2010
A. Fixed Assets
Gross Block 30.46 61.35 73.75 124.53 125.56
Less: Accumulated Depreciation/Amortization 0.54 4.60 12.04 18.87 28.96
Net Block 29.92 56.75 61.71 105.66 96.60

B. Investments 131.05 128.16 195.32 205.46 159.51

C. Deferred Tax Asset (Net) 4.07 0.19 - - -

D. Current Assets,Loans and Advances

Sundry Debtors 5.05 0.77 63.78 41.04 2.48
Cash & Bank Balances 0.24 6.92 0.70 5.62 5.19
Loans and Advances 7.15 7.37 290.83 238.15 308.89
Total 12.44 15.06 355.31 284.81 316.56
E Total Assets (A+B+C+D) 177.48 200.16 612.34 595.93 572.67

F Liabilities & Provisions

Secured loans - - 81.25 - -

Unsecured loans 8.70 17.70 - - -
Current Liabilities 0.10 2.26 2.63 7.96 6.54
Provisions 11.46 3.21 0.14 0.06 0.06

Deferred Tax Liability (Net) - - 1.11 3.75 6.09

Total 20.26 23.17 85.13 11.77 12.69

G Net Worth (E-F) 157.22 176.99 527.21 584.16 559.98

Represented by:
Shareholders' Funds:
a Equity Share Capital 100.00 100.00 203.11 203.11 193.11
b Preference Share Capital - 27.00 - - -
c Share Application Money (Pending Allotment) 24.02 - - - -
d Reserves & Surplus 33.20 49.99 324.10 381.05 376.25
Total 157.22 176.99 527.21 584.16 569.36
Less: Miscellaneous expenditure (to the extent not - - - - 9.38
written off or adjusted)
Net Worth 157.22 176.99 527.21 584.16 559.98

Notes :

1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Unconsolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited financial statements in accordance with the
requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2009.

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Unconsolidated Restated Summary Statement of Profits and Losses – Annexure – 2
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
Income
Income from Operations 17.03 39.54 127.77 142.40 180.81
Other Income - - - - 0.17
Total Income 17.03 39.54 127.77 142.40 180.98

Expenditure

Staff Cost 0.14 0.43 4.44 8.87 8.17

Administrative and Other Expenses 0.35 1.40 14.62 46.58 17.73
Interest - - 5.80 11.36 7.23
Depreciation/Amortization 0.54 4.06 7.45 6.83 10.09
Total Expenditure 1.03 5.89 32.31 73.64 43.22

Net Profit before tax 16.00 33.65 95.46 68.76 137.76

Provision for taxation:
Current Tax 1.36 4.11 17.11 9.99 25.22
Deferred Tax Charge/(Credit) (4.07) 3.88 1.30 2.64 2.34
Fringe Benefit Tax - 0.01 0.02 0.07 -
MAT Credit Entitlement - (3.21) - (0.90) -
Net Profit after tax 18.71 28.86 77.03 56.96 110.20

Balance Brought Forward 0.02 4.40 11.76 27.69 74.55

Profit available for Appropriation 18.73 33.26 88.79 84.65 184.75

Appropriations:
Dividend on Equity Shares 10.00 10.00 10.00 - -
Dividend on Preference Shares - 0.45 - - -
Tax on Dividends 1.40 1.48 1.70 - -
Transfer to reserve under section 45-IC of the Reserve Bank of 2.93 9.57 17.40 10.10 22.20
India Act,1934
Transfer to Capital Redemption Reserve - - 27.00 - 10.00
Amount utilised for Issue of Bonus Share - - 5.00 - -
Surplus carried to Balance Sheet 4.40 11.76 27.69 74.55 152.55

Notes :

1 The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Unconsolidated Financial Statements as appearing in Annexure 5.

2 Necessary adjustments have been made to the audited financial statements in accordance with the
requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2009.

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Unconsolidated Restated Summary Statement of Cash Flow – Annexure – 3
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
A. Cash Flow from Operating Activities
Net Profit before tax 16.00 33.65 95.46 68.76 137.76
Adjustments for :
Depreciation/amortization 0.54 4.06 7.45 6.83 10.09
Preliminary Expenses Written off 0.04 - - - -
Irrecoverable debts/advances written off - - - 0.61 0.23
Loss on assignment of receivables - - - - 11.27

Operating profit before working capital 16.58 37.71 102.91 76.20 159.35
changes

(Increase)/Decrease in Debtors (5.05) 4.28 (63.01) 22.13 38.46

(Increase)/Decrease in Loans & Advances (7.15) 3.00 (280.48) 55.13 (84.62)
(Increase)/Decrease in Investments (110.76) 2.89 (67.16) (10.14) 45.95
Increase/(Decrease) in Current Liabilities & 0.10 2.16 4.93 0.82 (5.49)
Provisions

Cash generated from/(used in) operations (106.28) 50.04 (302.81) 144.14 153.65
Direct Taxes Paid (1.30) (0.97) (23.29) (11.61) (22.75)

Net cash generated from/(used in) operating (107.58) 49.07 (326.10) 132.53 130.90
activities

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (30.46) (30.89) (12.40) (50.78) (1.03)

Net cash generated from/(used in) investing (30.46) (30.89) (12.40) (50.78) (1.03)
activities

C. Cash Flow from Financing Activities

Proceeds from Issue of Equity Share including 106.00 - 312.98 - -
Securities Premium
Buy Back of Equity Shares - - - - (125.00)
Proceeds from Issue of Preference Share including - 2.98 - - -
Securities Premium
Share Application Money 24.02 - - - -
Share Issue Expense (0.47) (0.15) (1.12) - -
Redemption of Preference Shares - - (27.00) - -
Proceeds from Borrowings 8.70 17.70 485.64 384.55 1,708.90
Repayment of Borrowings - (8.70) (426.52) (461.38) (1,708.90)
Dividend Paid - (20.45) (10.00) - -
Dividend tax Paid - (2.88) (1.70) - -
IPO Related expenses - - - - (5.30)

Net cash generated from/(used in) financing 138.25 (11.50) 332.28 (76.83) (130.30)
activities

D. Net change in cash and cash equivalents 0.21 6.68 (6.22) 4.92 (0.43)
(A+B+C)

E. Cash and Cash equivalents - Opening Balance 0.03 0.24 6.92 0.70 5.62

F. Cash and Cash equivalents - Closing Balance * 0.24 6.92 0.70 5.62 5.19
* represents Cash and Bank balances as indicated in Annexure 12E.

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Unconsolidated Statement of adjustments made to the Audited Financial Statements – Annexure 4
(Rs. in Millions)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Net Profit after tax as per Audited Profit and Loss Account 14.64 29.88 86.72 49.61 110.91
Adjustments on account of :
Provision for Gratuity - - 0.10 (0.01) (0.09)
Provision for Leave - - 0.02 (0.03) 0.01
Expenses relating to earlier years (refer note below) - - (10.28) 9.85 0.43
Total adjustments before tax - - (10.16) 9.81 0.35
Adjustments for taxation
Provision for Current Income Tax - (0.35) 0.61 (3.33) (1.04)
MAT Credit Entitlement - 3.21 - 0.90 -
Deferred Tax 4.07 (3.88) (0.14) (0.03) (0.02)
Total adjustments for taxation 4.07 (1.02) 0.47 (2.46) (1.06)
Net adjustments 4.07 (1.02) (9.69) 7.35 (0.71)
Restated Net Profit after tax 18.71 28.86 77.03 56.96 110.20
Note:
The break up and nature of expenses relating to earlier years is as
follows:
Legal & Professional Fees - - (7.31) 7.31 -
Rates & Taxes - - (2.93) 2.50 0.43
Travelling & Conveyance - - (0.04) 0.04 -
Total - - (10.28) 9.85 0.43

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Statement of Significant Accounting Policies and Notes to the Restated Financial Statements:
Annexure – 5

A. SIGNIFICANT ACCOUNTING POLICIES

i) Basis of preparation

The financial statements have been prepared to comply in all material aspects with the
Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 (as
amended) and the relevant provisions of the Companies Act, 1956 and the directives as
prescribed by the Reserve Bank of India for Non Banking Financial Companies. The financial
statements have been prepared under the historical cost convention on an accrual basis.
However, income is not recognized and also provision is made in respect of non- performing
assets as per the prudential norms prescribed by the Reserve Bank of India.

ii) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at the date of financial
statements and the results of operations during the reporting year end. Although these
estimates are based upon the management’s best knowledge of current events and actions,
actual results could differ from these estimates.

iii) Revenue Recognition

a) Fees from Investment Banking activities which include issue Management, Mergers
& Acquisitions, Investment and other advisory services are recognized as and when
the services are rendered to the customers and when there is reasonable certainty of
its ultimate realisation/collection.

b) Interest income is recognized on a time proportion basis taking into account the
amount outstanding and the rate applicable.

c) Dividend income is recognized when the shareholder’s right to receive payment is

established by the balance sheet date. Dividend from the Subsidiaries is recognised
even if the same are declared after the Balance Sheet date but pertain to the period on
or before the date of Balance Sheet, as per the requirement of Schedule VI of the
Companies Act, 1956.

d) Income from Royalty is recognised on an accrual basis in accordance with the terms
of the relevant agreement.

iv) Fixed Assets

Fixed assets are stated at cost less accumulated depreciation and impairment, if any. Cost
comprises the purchase price inclusive of duties (net of cenvat credit), taxes and incidental
expenses, etc. up to the date, the asset is ready for its intended use.

v) Depreciation/Amortisation

a) Depreciation on fixed assets is provided on written down value method at the rates
specified in schedule XIV to the Companies Act, 1956.
b) Depreciation on Fixed Assets added/disposed off during the year is provided on
prorata basis with reference to the date of addition/disposal.
c) In case of impairment, if any, depreciation is provided on the revised carrying
amount of the assets over their remaining useful life.
d) Copyrights are amortized on straight-line basis over a period of ten years from the
date the assets become available for use.

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 e) Softwares are amortized on straight line basis over a period of three years from the
date the assets become available for use.

vi) Impairment of Assets:

The carrying amounts of assets are reviewed at each balance sheet date to determine whether
there is any indication of impairment based on external/internal factors. An impairment loss is
recognized wherever the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ‘Value in use’ of the assets. The estimated
future cash flows considered for determining the value in use, are discounted to their present
value at the weighted average cost of capital.

vii) Borrowing Costs:

Borrowing costs relating to acquisition / construction of qualifying assets are capitalized until
the time all substantial activities necessary to prepare the qualifying assets for their intended
use are complete. A qualifying asset is one that necessarily takes substantial period of time to
get ready for its intended use. All other borrowing costs are charged to revenue.

viii) Investments

Investments that are readily realisable and intended to be held for not more than a year are
classified as Current Investments. All other Investments are classified as Long term
Investments. Current Investments are stated at lower of cost and market rate on an individual
investment basis. Long term investments are considered “at cost” on individual investment
basis, unless there is a decline other than temporary in the value, in which case adequate
provision is made against such diminution in the value of investments.

ix) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event
and it is probable that an outflow of resources will be required to settle the obligation, in
respect of which a reliable estimate can be made. Provisions made in terms of Accounting
Standard 29 are not discounted to its present value and are determined based on management
estimate required to settle the obligation, at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current management estimates.

x) Contingencies

Liabilities which are material and whose future outcome cannot be ascertained with reasonable
certainty are treated as contingent and disclosed by way of notes to the accounts.

xi) Taxation

Tax expense comprises of current, deferred and Fringe Benefit tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in accordance with the
Income Tax Act, 1961. Deferred Income tax reflects the impact of current year timing
differences between taxable income and accounting income for the year and reversal of timing
differences of earlier years.

The deferred tax for timing differences between the book and tax profit for the year is
accounted for using the tax rates and laws that have been substantively enacted as of the
Balance Sheet date. Deferred tax asset is recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available against which such deferred
tax asset can be realised. If the Company has carry forward unabsorbed depreciation and tax
losses, deferred tax asset is recognised only to the extent that there is virtual certainty
supported by convincing evidence that sufficient taxable income will be available in future
against which such deferred tax asset can be realised.

The carrying amount of deferred tax asset is reviewed at each Balance Sheet date. The

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 company writes down the carrying amount of a Deferred Tax Asset to the extent that it is no
longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be realised. Any such write-
down is reversed to the extent that it becomes reasonably certain or virtually certain, as the
case may be, that sufficient future taxable income will be available.

At each Balance Sheet date, the company recognizes the unrecognized deferred tax asset to
the extent that it has become reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such deferred tax asset can be
realized.

Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent
there is convincing evidence that the company will pay normal income tax during the
specified period. In the year in which the MAT credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in the guidance note issued by the
Institute of Chartered Accountants of India, the said asset is created by way of a credit to the
profit and loss account and shown as MAT Credit Entitlement. The Company reviews the
same at each balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the effect that the
Company will pay normal Income Tax during the specified period.

xii) Segment Reporting:

a) Identification of Segments :

The Company has identified that its business segments are the primary segments. The
Company’s operating businesses are organized and managed separately according to
the nature of products/services provided, with each segment representing a strategic
business unit that offers different products/services and serves different markets. The
analysis of geographical segments is based on the areas in which the customers of the
Company are located.

b) Allocation of Common Costs:

Common allocable costs are allocated to each segment on case to case basis applying
the ratio, appropriate to each relevant case. Revenue and expenses which relate to the
enterprise as a whole and are not allocable to segments on a reasonable basis are
included under the head “Unallocated –Common”.

The accounting policies adopted for segment reporting are in line with those of the
Company.

xiii) Retirement and other employees benefits

(a) Gratuity liability being a defined benefit obligation is provided for on the basis of
actuarial valuation on projected unit credit method at the end of each year.

(b) Long term compensated absences are provided for based on actuarial valuation on
projected unit credit method at the end of each year.

(c) Actuarial gains / losses are immediately taken to profit and loss account and are not
deferred.

xiv) Earnings per Share

Earnings per share is calculated by dividing the net profit or loss for the period attributable to
equity shareholders, by the weighted average number of equity shares outstanding during the
period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period

125
 attributable to equity shareholders and weighted average number of shares outstanding during
the period are adjusted for the effects of all dilutive potential equity shares.

xv) Employee Stock Compensation Cost

Measurement and disclosure of the employee share-based payment plans is done in accordance
with the guidance note on accounting for employee share-based payment, issued by the Institute
of Chartered Accountants of India. The Company measures compensation cost relating to
employee stock options using the intrinsic value method. The compensation expense is
amortised over the vesting period of the options on a straight line basis.

xvi) Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise of cash at bank and
Cash/Cheque in hand and short-term investments with an original maturity of three months or
less.

NOTES ON ACCOUNTS:

1) Auditor’s qualification (Not requiring any adjustments in the financial statements)

CARO Report

Financial year ended 31st March 2010

During the year 2009-10, the Company has been regular in depositing undisputed statutory dues
including investor education and protection fund, income-tax, wealth-tax, service-tax, custom duty,
excise duty, cess and other material statutory dues with the appropriate authorities, though there has
been delays in few cases.

Financial year ended 31st March 2009

During the year 2008-09, certain parties from whom unsecured loans aggregating to Rs. 52.03 Millions
were outstanding and, along with certain other persons, fraudulently misrepresented to the Company
and there was an element of both civil and criminal offences by the said parties and accordingly the
Company had initiated necessary proceedings both civil and criminal against the said parties.

However, the said loans have been assigned during the year ended 31st March 2010 in favour of
another Company and necessary adjustments thereof, have been made in the accounts as indicated in
note 7 below.

Financial year ended 31st March 2006 & 2007

On the basis of overall examination of the balance sheet of the Company, certain short term funds to
the tune of Rs. 7.81 Millions and Rs. 10.98 Millions in the financial year ended 31 st March, 2006 and
31st March, 2007 respectively have been used for long term investments.

2) During the year ended 31st March, 2010, the Company has incurred Rs. 9.38 millions as detailed below,
in connection with its proposed initial public offer of equity shares. The above amount has been carried
forward under the head “Miscellaneous Expenditure to the extent not written off or adjusted” in the
Balance Sheet and it would be adjusted against Securities Premium after the proposed issue of equity
shares, as permitted under section 78 of the Companies Act, 1956.

Particulars Rs. in Million

i) Legal & Professional Fees 4.60
ii) Exchange & Regulator Fees 2.11
iii) Auditors’ Fees 2.59
iv) Other Expenses 0.08
Total 9.38

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3) The year wise break up of Contingent Liabilities is as under:

(Rs. in Millions)
Particulars As at 31st As at 31st As at 31st As at 31st As at 31st
March, March March March, March,
2006 ,2007 ,2008 2009 2010
Guarantee in favour of Banks
against facilities granted to - 60.00 150.00 275.00 275.00
Subsidiary Companies
Credit facilities availed
against the above as on the - - - 3.50 40.08
Balance Sheet date.

4) Based on the information / documents available with the Company, no creditor is covered under Micro,
Small and Medium Enterprise Development Act, 2006. As a result, no interest provision/payments
have been made by the Company to such creditors, if any, and no disclosures thereof are made in these
accounts.

5) During the year ended 31st March, 2010, the company has bought back 10,00,000 equity shares from
the existing shareholders at a price of Rs. 125 per share (including premium of Rs. 115 per share) on
proportionate basis, u/s 77A of the Companies Act, 1956, pursuant to the letter of offer dated 25 th April
2009. The aforesaid buy back of shares has been approved by the board at its meeting held on 2 nd
March 2009 and by the shareholders at the extraordinary general meeting held on 28 th March 2009. The
said shares stand extinguished after their buy back. Accordingly, a sum of Rs. 10 millions representing
the face value has been reduced from the Share Capital and an equal amount has been transferred to
Capital Redemption Reserve and Rs. 115 millions has been adjusted against Securities Premium
Account.

6) During the year ended 31st March, 2008, the Company, under the Employees Stock Option Scheme,
2007 (The Scheme), had granted options for 6,22,805 shares exercisable only after listing of the shares
of the Company at National Stock Exchange and/or Bombay Stock Exchange. By an agreement dated
17.08.2009, between the Company and the respective employees, the said options have been
terminated.

The details of the above Employee Stock Option Scheme is as under:

Date of grant 21.01.2008

Date of Board Approval 03.09.2007
Date of Shareholder’s approval 28.09.2007
Number of options granted 622805
Method of Settlement (Cash/Equity) Equity
Vesting Period 15 Days from the date of grant letter
Vesting Condition Continued employment with the company and/or its
subsidiary at the date of vesting.
Exercise Period Maximum of 6 years from the date of grant.
Outstanding at the beginning of the year 622805
Granted during the year Nil
Terminated during the year 622805
Exercised during the year Nil
Expired during the year Nil
Outstanding at the end of the year Nil
Exercisable at the end of the year Nil
Weighted average remaining Not Applicable
contractual life (in years)
Weighted average fair value of options Not Applicable
granted

7) During the year ended 31st March, 2010, the Company has entered into agreements with Mandpam
Commercial Limited for assignment of receivables from certain parties at a total consideration of Rs.

127
 49.28 Millions as against loan receivables of Rs. 60.55 Millions from the said parties. The above
arrangement has resulted into a loss of Rs. 11.27 Millions for the Company which has been charged to
profit and loss account.

8) During the year 2005-06, the Company’s wholly owned subsidiary namely Ravindra Shelter Limited (a
Consultancy & Advisory Services Company) was amalgamated with the Company with effect from 1st
December, 2005 in terms of the scheme of amalgamation u/s 391 & 394 of the Companies Act, 1956
approved by Hon’ble Kolkata High Court vide its order dated 5 th April 2006. Pursuant to the said
scheme of amalgamation, assets and liabilities of the amalgamating company as on the date of
amalgamation were incorporated in the Company’s books in accordance with the Accounting Standard
14 notified by Companies Accounting Standard Rules, 2006 by applying the “purchase method” at a
purchase consideration of Rs. 8.67 millions. Cash, Bank Balances and net current assets were recorded
at the book values and the balance of the Company’s investments in the shares of the said
amalgamating Company was allocated to the remaining assets on proportionate basis.

9) During the year 2008-09, the Company’s wholly owned subsidiary namely Shringar Vinimay Private
Limited (a Consultancy Services Company) was amalgamated with the Company with effect from 1 st
March, 2009 in terms of the scheme of amalgamation u/s 391 & 394 of the Companies Act, 1956
approved by Hon’ble Kolkata High Court vide its order dated 24 th August 2009. Pursuant to the said
scheme of amalgamation, assets and liabilities of the amalgamating company as on the date of
amalgamation were incorporated in the Company’s books in accordance with the Accounting Standard
14 notified by Companies Accounting Standard Rules, 2006 by applying the “purchase method” at a
purchase consideration of Rs. 20.14 millions. Cash, Bank Balances, net current assets and part of
investments were recorded at the book values and the balance of the Company’s investments in the
shares of the said amalgamating Company was allocated to the remaining assets on proportionate basis.

10) The Company has provided gratuity liabilities with effect from 1st April, 2009 as per Actuarial
Valuation on the basis of Accounting Standard 15 (Revised) - “Employee Benefits” notified by the
Companies Accounting Standard Rules, 2006, as against the past practice of providing the same on the
basis of amount demanded by LIC for the covered employees as per group Gratuity Scheme taken by
the Company. The effect of above compliance has now been given in the accounts of respective
financial years and duly disclosed vide Annexure 4.

11) The Company has provided leave liabilities with effect from 1 st April, 2009 as per Actuarial Valuation
on the basis of Accounting Standard 15 (Revised) - “Employee Benefits” notified by the Companies
Accounting Standard Rules, 2006, as against the past practice of providing the same on management
estimate. The effect of above compliance has now been given in the accounts of the respective financial
years and duly disclosed vide Annexure 4.

12) Gratuity – Defined Benefit Plan

The Company has a defined benefit gratuity plan. Every employee, who has completed five years or
more of services, is entitled to gratuity on terms not less favorable than the provisions of the payment
of Gratuity Act, 1972. The scheme is funded with an insurance Company.

The following tables summarise the components of gratuity expenses recognised in the Restated Profit
& Loss Account and the funded status and amounts recognized in the Restated Assets and Liabilities.

(Rs. in Million)
2009-10 2008- 2007- 2006- 2005-
09 08 07 06
(i) Net Employee Expense/(benefit)
Current service cost 0.09 0.09 0.11 - -
Interest cost on benefit obligation 0.01 0.01 - - -
Expected return on plan assets 0.02 - - - -
Net Actuarial (gain) /loss recognised 0.01 (0.07) 0.01 - -
in the year.
Total employer (income)/expense 0.09 0.03 0.12 - -
recognised in Profit and Loss Account

128
 2009-10 2008- 2007- 2006- 2005-
09 08 07 06
(ii) Actual return on plan assets 0.02 0.01 - - -

(iii) Benefit Asset/(Liability)

Defined benefit obligation 0.27 0.16 0.12 - -
Fair value of Plan Assets 0.26 0.23 - - -
Benefit Asset/(Liability) (0.01) 0.07 (0.12) - -

(vi) Movement in benefit liability

Opening defined benefit obligation 0.16 0.12 - - -
Interest cost 0.01 0.01 - - -
Current service cost 0.09 0.09 0.11 - -
Benefits paid - - - - -
Actuarial (gains)/losses on obligation 0.01 (0.06) 0.01 - -
Closing benefit obligation 0.27 0.16 0.12 - -

(v) Movement in fair value of plan

assets
Opening fair value of plan assets 0.23 - - - -
Return on plan assets 0.02 - - - -
Contributions by employer 0.01 0.22 - - -
Benefits paid - - - - -
Actuarial (gains)/losses on plan assets - (0.01) - - -
Closing fair value of plan assets 0.26 0.23 - - -

(vi) The major categories of plan assets

as a percentage of the fair value of
total plan assets
Investments with insurance managed 100% 100% 100% 100% 100%
fund

(vii) The principal actuarial

assumptions are as follows
Discount Rate 8.00% 7.50% 7.50% 7.50% 7.50%
Expected rate of return on plan assets 8.00% 8.00% 8.00% 8.00% 8.00%
Salary increase 5.00% 5.00% 5.00% 5.00% 5.00%
Withdrawal rates 1.00% 1.00% 1.00% 1.00% 1.00%

(viii) Amount incurred as expense for

defined contribution plans
Contribution to Provident / Pension Not Applicable
fund

(ix) The estimates of future salary

increases considered in actuarial
valuation, take account of inflation,
seniority, promotion and other
relevant factors, such as supply and
demand in the employment market.
(x) The overall expected rate of return on
assets is determined based on the
market prices prevailing on that date,
applicable to the period over which
the obligation is to be settled.
(xi) The Company expects to contribute
Rs. 0.25 Millions to Gratuity fund
during April 2010-March 2011.

129
 2009-10 2008- 2007- 2006- 2005-
09 08 07 06
(xii) Amounts for the current period are
as follows:
Gratuity
Defined Benefit Obligation 0.27 0.16 0.12 - -
Plan Assets 0.26 0.23 - - -
Surplus / ( Deficit ) (0.01) 0.07 (0.12) - -
Experience adjustments on plan 0.01 Not Available*
liabilities
Experience adjustments on plan assets - Not Available*
*The management has relied on the overall actuarial valuation conducted by the actuary. However,
experience adjustments on plan liabilities and plan assets are not readily available and hence not
disclosed.

13) The year wise break-up of net deferred tax liability/(assets) is as under:
(Rs. in Millions)
Particulars As at 31 As at 31 As at 31 As at 31 As at 31
March, March, March, March, March,
2006 2007 2008 2009 2010
Deferred Tax Liability
Timing Difference in Depreciable assets - - 1.16 3.77 6.11
Sub Total (A) - - 1.16 3.77 6.11

Deferred Tax Asset

Timing Difference in Depreciable assets 4.07 0.19 - - -

Expenses Allowable against taxable income - - 0.05 0.02 0.02

in future years
Sub Total (B) 4.07 0.19 0.05 0.02 0.02
Net Deferred Tax (Assets)/Liability (A-B) (4.07) (0.19) 1.11 3.75 6.09

14) Minimum Alternate Tax (MAT) credit entitlement of Rs. 0.77 Millions as on 31 st March, 2010,
although being available as tax credit for set off in future years as per Income Tax Act, 1961, has not
been accounted for in view of accounting policy specified in note no. A (xi) above.

15) In the audited financial statements, MAT credit entitlement for earlier years was adjusted against the
current taxes in the year in which normal tax was payable. For the purpose of restated unconsolidated
financial statements, the same has been restated and adjusted in the respective year to which they
relate.

16) The Company has pledged equity shares valuing Rs. 80.50 millions and Rs. 33.59 millions (received
from the borrowers as margin money) with Aditya Birla Finance Limited and Citi Corp Finance
Limited respectively. However, there is no loan outstanding for the aforesaid parties as at 31st March,
2010.

17) In the audited financial statements for the years ended 31 st March, 2006, 2007, 2008, 2009 and 2010,
certain deferred tax for earlier years were recorded in the subsequent years. For the purpose of restated
unconsolidated financial statements, the same has been restated and adjusted in the respective year to
which they relate.

18) For the financial years ended 31st March 2006, 2007, 2008 and 2009, the accounts were audited by
Vidya & Co., Chartered Accountants.

19) In the financial year 2005-06, the name of the Company was changed from “Satyam Fiscal Services
Private Limited” to “Microsec Financial Services Limited”.

130
20) During the year 2005-06, the Company had transferred the Opening inventories amounting to Rs. 20.29
millions to investments at its book value as on 1st April, 2005.

21) Since, the figures are given in millions, figures less than Rs. 5000/- have not been disclosed in these
restated financial statements.

131
Unconsolidated Statement of Adjusted Accounting Ratios - Annexure – 6

Accounting Ratios For the years ended 31st March,

2006 2007 2008 2009 2010

Basic & Diluted Earning per Share (Rs.) 1.25 1.81 4.57 2.80 5.67
(Nominal Value Rs.10 Per Share)

Net Asset Value per Share (Rs.) 13.32 15.00 25.96 28.76 29.00

Return on Net Worth (%) 14.05% 18.90% 14.61% 9.75% 19.68%

The impact on Earnings per share on account of issue of

Bonus Shares is as follows:

Basic & Diluted Earning per Share (Rs.) (0.71) (1.02) - - -

Net Asset Value per share after adjustment of Bonus Shares:

Net Asset Value per Share (Rs.) 13.32 15.00 25.96 28.76 29.00

NOTES:
Definition of ratios:

a) Earning per share ( EPS) Restated Profit after tax as per statement of Restated Profit & Loss, as reduced
by preference dividend for the year(including dividend tax), divided by the
weighted average number of outstanding equity shares during the year.

b) Net Asset Value per share Net worth as per statement of Restated Assets and Liabilities, as reduced by
Preference Share Capital/Preference Share Application money, divided by the
number of outstanding equity shares as at year end.

c) Return on net worth (%) Restated Profit after tax as per statement of Restated Profit and Loss as reduced
by preference dividend for the year (including dividend tax), divided by net
worth, as reduced by Preference Share Capital/Preference Share Application
money.

132
Unconsolidated Statement of Aggregated Related Party Transactions as per Accounting Standard 18 for
the Reporting Period – Annexure - 7

Names of the Related Parties

Subsidiary Companies Microsec Capital Limited (From 24th November, 2005)

Microsec Commerze Limited (From 24th November, 2005)
Microsec Insurance Brokers Limited ( Formerly Microsec
Risk Management Limited) (From 24th November, 2005)
Microsec Resources Private Limited (From 1st February,
2006)
Microsec Technologies Limited (Formerely MIL
Technologies Limited) (From 30th March, 2006)

PRP Technologies Limited (From 8th February, 2009)

Key Management Personnel B.L.Mittal (Chairman & Managing Director)

Ravi Kant Sharma (Director)
Rakesh Sony (Director) *
L.N.Mandhana (Chief Financial Officer) #
Pankaj Kumar Kedia (Chief Financial Officer) @

Relatives of Key Management Personnel Mrs. Abha Mittal (Wife of Mr.Banwari Lal Mittal)
Mr. Narsingh Mittal (Brother of Mr.Banwari Lal Mittal)
Mr. Rajiv Sharma (Brother of Mr.Ravi Kant Sharma)
Mr. Sajjan Kumar Sharma (Father of Mr.Ravi Kant Sharma)
Mrs. Bharati Sharma (Wife of Mr.Ravi Kant Sharma)
Mrs.Sangita Mandhana (Wife of Mr.L.N.Mandhana) #

Enterprise in which Key Management Luv-Kush Projects Limited

Personnel Exercise a Significant Micro Resources Private Limited
Influence B. L. Mittal (HUF)

* upto 7th October, 2008

# resigned with effect from 20th November,
2009
@ appointed with effect from 11th November, 2009

(Rs. in Million)
Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
Remuneration
Mr.Rajiv Sharma 2006-07 0.12 0.12

133
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
2005-06 0.07 0.07

Mr. B. L. Mittal 2009-10 2.61 2.61

2008-09 2.61 2.61
2007-08 1.85 1.85

Mr. L. N. 2009-10 0.72 0.72

Mandhana
2008-09 1.10 1.10
2007-08 0.60 0.60

Mr. Pankaj 2009-10 0.35 0.35

Kumar Kedia

Refund of Loans
& Advances
Microsec Capital 2009-10 51.45 51.45
Ltd.
2008-09 1,254.23 1,254.23
2007-08 744.64 744.64
2006-07 51.19 51.19
2005-06 39.92 39.92

Microsec 2009-10 55.68 55.68

Resources Pvt.
Ltd.
2008-09 160.79 160.79
2007-08 143.85 143.85
2006-07 35.17 35.17
2005-06 15.48 15.48

Microsec 2009-10 27.82 27.82

Technologies
Ltd.
2008-09 3.08 3.08
2007-08 3.55 3.55

Luv Kush 2009-10 - -

Projects Limited
2008-09 14.00 14.00

Others 2009-10 6.97 0.19 7.16

2008-09 2.37 - 2.37
2007-08 4.85 - 4.85
2006-07 - - -
2005-06 2.67 - 0.14 2.81

Loans &
Advances Given
Microsec Capital 2009-10 45.87 45.87

134
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
Ltd.
2008-09 1,206.67 1,206.67
2007-08 797.78 797.78
2006-07 46.17 46.17
2005-06 25.34 25.34

Microsec 2009-10 55.68 55.68

Resources Pvt.
Ltd.
2008-09 160.74 160.74
2007-08 143.90 143.90
2006-07 33.23 33.23
2005-06 0.02 0.02

Microsec 2009-10 13.28 13.28

Technologies
Ltd.
2008-09 16.13 16.13
2007-08 5.05 5.05

Luv Kush 2009-10 - -

Projects Limited
2008-09 14.00 14.00

Others 2009-10 6.17 - - 6.17

2008-09 2.24 0.19 - 2.43
2007-08 5.80 - 5.80
2006-07 - - -
2005-06 0.68 0.14 0.82

Service Charges
Microsec Capital 2009-10 0.03 0.03
Ltd.
2008-09 0.06 0.06
2007-08 0.04 0.04

Interest Income
Microsec 2009-10 - -
Resources Pvt.
Ltd.
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 0.79 0.79

Royalty
Received
PRP 2009-10 4.18 4.18
Technologies Ltd
2008-09 0.03 0.03
Purchase of

135
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
Shares (Refer
note below)
Mr. B. L. Mittal 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 1.04 1.04

Abha Mittal 2009-10 - -

2008-09 - -
2007-08 - -
2006-07 - -
2005-06 2.34 2.34

Others 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 0.06 0.06

Share
Application
Money Received
Luv Kush 2009-10 - -
Projects Limited
2008-09 - -
2007-08 52.00 52.00
2006-07 2.99 2.99
2005-06 152.75 152.75

Others 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 0.29 0.29

Share
Application
Money
Refunded
Luv Kush 2009-10 - -
Projects Limited
2008-09 - -
2007-08 52.00 52.00
2006-07 - -
2005-06 0.95 0.95

Others 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 - -

136
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
2005-06 0.29 0.29

Equity Share
Capital Issued
(Including
Premium)
Luv Kush 2009-10 - -
Projects Limited
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 106.00 106.00

Rakesh Sony 2009-10 - -

2008-09 - -
2007-08 18.00 18.00

Ravi Kant 2009-10 - -

Sharma
2008-09 - -
2007-08 26.03 26.03

B.L.Mittal 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 - -
2005-06 72.00 72.00

Kavita Sony 2009-10 - -

2008-09 - -
2007-08 18.00 18.00

Bharati Sharma 2009-10 - -

2008-09 - -
2007-08 9.23 9.23

Others 2009-10 - - -
2008-09 - - -
2007-08 0.30 - 0.30
2006-07 - - -
2005-06 0.09 0.18 0.27

Preference
Share Capital
Issued
Luv Kush 2009-10 - -
Projects Limited
2008-09 - -
2007-08 - -
2006-07 27.00 27.00

137
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
Preference
Share Capital
Redeemed
Luv Kush 2009-10 - -
Projects Ltd
2008-09 - -
2007-08 27.00 27.00

Dividend Paid
Mr. B. L. Mittal 2009-10 - -
2008-09 - -
2007-08 8.00 8.00
2006-07 16.00 16.00

Luv Kush 2009-10 - -

Projects Limited
2008-09 - -
2007-08 1.95 1.95
2006-07 4.35 4.35

Others 2009-10 - - -
2008-09 - - -
2007-08 0.01 0.04 0.05
2006-07 0.02 0.08 0.10

Investment in
Equity Shares
Microsec 2009-10 - -
Resources Pvt
Ltd
2008-09 - -
2007-08 10.00 10.00

Security Deposit
Received
Microsec Capital 2009-10 - -
Ltd.
2008-09 - -
2007-08 - -
2006-07 1.02 1.02

Security Deposit
Refunded
Microsec Capital 2009-10 - -
Ltd.
2008-09 - -
2007-08 - -
2006-07 1.02 1.02
Corporate
Guarantee given

138
 Particulars Time Subsidiary Key Relatives of Enterprises in TOTAL
Period Companies Management Key which Key
Personnel Management Management
Personnel personnel
exercises
significant
influence
Microsec Capital 2009-10 150.00 150.00
Ltd.
2008-09 150.00 150.00
2007-08 150.00 150.00
2006-07 60.00 60.00

Microsec 2009-10 125.00 125.00

Technologies Ltd
2008-09 125.00 125.00

Balances
Receivable
Microsec Capital 31-Mar- - -
Ltd. 10
31-Mar- 5.58 5.58
09
31-Mar- 53.15 53.15
08
31-Mar- - -
07
31-Mar- 5.03 5.03
06
Microsec 31-Mar- - -
Technologies Ltd 10
31-Mar- 14.54 14.54
09
31-Mar- 1.50 1.50
08

Microsec 31-Mar- - -
Resources Pvt. 10
Ltd.
31-Mar- - -
09
31-Mar- 0.05 0.05
08
31-Mar- - -
07
31-Mar- 1.93 1.93
06

Others 31-Mar- - - -
10
31-Mar- 0.80 0.19 0.99
09
31-Mar- 0.95 0.95
08
Note:
Purchase of Shares relates to Purchase of Shares of Microsec Capital Limited (Previously known as Micorsec
India Limited), Microsec Resources Private Limited (Previously known as Keshav Resources Private Limited)
and Microsec Technologies Limited (Previously known as MIL Technologies Limited) by the Company from
Mr. B. L. Mittal, Mrs. Abha Mittal and Mr. Ravi Kant Sharma.

139
Unconsolidated Restated Statement of Segment Information as per Accounting Standard 17 for the Reporting Periods – Annexure – 8

Particulars Financing & Investment Investment Banking & Related Total

Services
2005- 2006- 2007- 2008- 2009- 2005- 2006- 2007- 2008- 2009- 2005- 2006- 2007- 2008- 2009-
0 0 08 09 10 0 0 0 0 1 06 07 08 09 10
6 7 6 7 8 9 0

Segment Revenue 5.49 21.50 57.41 80.77 111.40 11.54 18.04 70.36 61.63 69.41 17.03 39.54 127.77 142.40 180.81

Segment Results 5.02 18.58 39.35 20.99 78.13 11.07 15.17 58.19 50.68 63.73 16.09 33.75 97.54 71.67 141.86

Less: Unallocated expenses net 0.09 0.10 2.08 2.91 4.10

of unallocated income

Profit Before Tax 16.00 33.65 95.46 68.76 137.76

Less : Provision for Taxation

Current Tax 1.36 4.11 17.11 9.99 25.22
Deferred Tax charge/(credit) (4.07) 3.88 1.30 2.64 2.34
Fringe Benefit Tax - 0.01 0.02 0.07 -
MAT Credit Entitlement - (3.21) - (0.90) -
Net Profit after Tax 18.71 28.86 77.03 56.96 110.20

Segment Assets 23.91 38.25 387.84 402.38 409.12 19.85 29.14 31.89 28.44 22.85 43.76 67.39 419.73 430.82 431.97
Unallocated Corporate Assets 133.72 132.77 192.61 165.11 140.70*
Total Assets 177.48 200.16 612.34 595.93 572.67

Segment Liabilities 8.70 17.70 81.94 6.75 0.28 - 0.05 0.28 0.35 0.34 8.70 17.75 82.22 7.10 0.62
Unallocated Corporate Liabilities 11.56 5.42 2.91 4.67 12.07
Total Liabilities 20.26 23.17 85.13 11.77 12.69

Capital Expenditure 15.23 15.44 6.20 50.35 0.64 15.23 15.45 6.20 0.43 0.39 30.46 30.89 12.40 50.78 1.03

Net Capital Employed 15.21 20.55 305.90 395.63 408.84 19.85 29.09 31.61 28.09 22.51 35.06 49.64 337.51 423.72 431.35

Depreciation/Amortization 0.27 2.03 3.72 3.48 8.14 0.27 2.03 3.73 3.35 1.95 0.54 4.06 7.45 6.83 10.09

140
 Particulars Financing & Investment Investment Banking & Related Total
Services
2005- 2006- 2007- 2008- 2009- 2005- 2006- 2007- 2008- 2009- 2005- 2006- 2007- 2008- 2009-
0 0 08 09 10 0 0 0 0 1 06 07 08 09 10
6 7 6 7 8 9 0

Non-cash expenses included in - - - - 11.40 - - 0.04 0.61 0.10 - - 0.04 0.61 11.50
segment expenses for
arriving at segment results
* excluding Miscellaneous Expenditure (to the extent not written off or adjusted) amounting to Rs. 9.38 millions.

Notes:

i) Business Segments: - The business segment has been identified on the basis of the services of the Company. Accordingly, the Company has identified “Financing &
Investment” and “Investment Banking & related Services” as business segments.

Financing & Investment – consists of financing of loans and investments in shares & securities and Income from Royalty.

Investment Banking & related Services – consists of financial consultancy and debt syndication.

ii) Geographical Segments:- The Company operates in only one geographical segment i.e. ‘Within India’ and no separate information for geographical segment has been
given.

141
Unconsolidated Statement of Dividend Paid – Annexure – 9

EQUITY CAPITAL For the years ended 31st March

2006 2007 2008 2009 2010

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 2,03,10,500 2,03,10,500 1,93,10,500

Rate of Dividend (%) 10% 10% 10% - -

Dividend Paid (Rs. in Millions)

Proposed Dividend 10.00 - - - -
Interim Dividend - 10.00 10.00 - -
Tax on Proposed Dividend 1.40 - - - -
Tax on Interim Dividend - 1.41 1.70 - -
Total 11.40 11.41 11.70 - -

PREFERENCE CAPITAL For the years ended 31st March

2006 2007 2008 2009 2010

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

Rate of Dividend (%) - 5.00% - - -

Dividend Paid (Rs. in Millions)

Amount of Dividend - 0.45 - - -
Tax on Dividend - 0.07 - - -
Total - 0.52 - - -

142
Unconsolidated Tax Shelter Statement – Annexure – 10
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
Tax Rate including surcharge and cess (%) 33.66 33.66 33.99 33.99 33.99
% % % % %
Tax Rate as per MAT u/s 115JB including surcharge and 8.42% 11.22 11.33 11.33 17.00
cess (%) % % % %
A Profit Before Tax as Restated 16.00 33.65 95.46 68.76 137.76
Tax at notional rates 5.39 11.33 32.45 23.37 46.83
Adjustments
Permanent Differences
Profit on Sale of Investments 3.80 20.42 31.56 31.22 58.32
Securities Transaction Tax (0.04) - (0.08) - -
Dividend exempt u/s 10 (34) - 0.03 - 0.28 0.43
Interest and Finance Charges - - 8.04 - -
Other Adjustments - - 0.29 - -
B Total Permanent Differences 3.76 20.45 39.81 31.50 58.75
Timing Differences
Difference between Tax and Book Depreciation 7.86 11.53 3.95 7.68 7.28
43B expenses - - 0.13 0.08 -
Other Adjustments - expenses related to earlier years - - (10.28 9.85 0.43
)
Difference in Short Term Capital Gain/(Loss) - (0.11) - (0.07) -
C Total Timing Differences 7.86 11.42 (6.20) 17.54 7.71
Net Adjustments (B+C) 11.62 31.87 33.61 49.04 66.46
Tax Savings thereon 3.91 10.73 11.42 16.67 22.59
Tax Saving On STCG and LTCG 0.12 - 0.49 1.76 0.29
Total Tax Savings 4.03 10.73 11.91 18.43 22.88
Brought Forward Loss adjusted - - 1.43 - -
Tax payable for the year 1.36 3.77 20.54 6.65 24.17
Less: MAT Credit set off - - 3.21 - 0.90
Net Tax payable for the year 1.36 3.77 17.33 6.65 23.27
Interest u/s 234B and 234C 0.03 0.34 0.07 - 0.62
Total Tax as per return 1.39 4.11 17.40 6.65 -

Notes:

1. The company has paid Minimum Alternate Tax (MAT) in the Financial Year 2006-07 and 2008-
09, being higher than the normal tax.

2. The Tax return for the financial year 2009-10, would be filed within due date after completion of
the tax audit.

143
Unconsolidated Capitalization Statement – Annexure – 11
(Rs. in Million)

Particulars As at 31st Adjusted for the Public

March, 2010 Issue
Pre-issue
Borrowings
Short-Term -
Long-Term -
Total -
Shareholders' Funds
Share Capital 193.11
Reserves & Surplus 376.25 *
See note below
Less: Miscellaneous expenditure (to the extent not 9.38
written off or adjusted)
Networth 559.98
Long-term Debt/Equity ratio -

*Restated Reserves

Note:

Share Capital and Reserves & Surplus post issue can be calculated only on conclusion of the book building
process.

144
Unconsolidated Statement of Restated Earning Per Share - Annexure – 12A
(Rs. in Million)
For the years ended 31st March
2006 2007 2008 2009 2010

Restated Profit/(Loss) after Tax 18.71 28.86 77.03 56.96 110.20

Less: Preference dividend for the - 0.52 - - -
year (including dividend tax)
Profit available for Equity 18.71 28.34 77.03 56.96 110.20
Shareholders
Weighted average number of 1,50,17,047* 1,57,00,000* 1,68,58,923 2,03,10,500 1,94,28,308
outstanding equity Shares
during the year
Nominal Value of Equity Shares 10 10 10 10 10
(Rs.)
Basic / Diluted Earning per share 1.25 1.81 4.57 2.80 5.67
(Rs.)
* Adjusted for Bonus Shares issued in the subsequent year.

145
Unconsolidated Restated Statement of Fixed Assets – Annexure – 12B
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
A. Tangible Assets
Office Premises 26.90 34.50 46.05 46.40 46.40
Computers 0.28 4.60 4.80 5.01 5.35
Furniture & Fixtures - 12.33 12.33 12.34 12.35
Office Equipments - 6.62 6.77 6.85 6.98
Vehicles - - 0.50 0.50 1.05
Total 27.18 58.05 70.45 71.10 72.13
B. Intangible Assets
Software 3.28 3.30 3.30 3.43 3.43
Copy Rights - - - 50.00 50.00
- Right on Web Application Portal -
Personal Resource Planning
Total 3.28 3.30 3.30 53.43 53.43
Gross Block (A+B) 30.46 61.35 73.75 124.53 125.56
Less : Accumulated Depreciation/Amortization 0.54 4.60 12.04 18.87 28.96
Net Block 29.92 56.75 61.71 105.66 96.60

146
Unconsolidated Restated Statement of Investments – Annexure – 12C
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Unquoted Investments

Equity Shares
In Subsidiary Companies 122.25 122.25 132.25 132.25 132.25
Others 7.88 4.61 - 15.70 13.61
Units in Mutual Funds - 1.30 - 26.35 -

Total 130.13 128.16 132.25 174.30 145.86

Quoted Investments
Equity Shares 0.92 - 63.07 31.16 13.65

Grand Total 131.05 128.16 195.32 205.46 159.51

Market Value of Quoted Investments 0.62 - 69.80 12.70 13.45

Aggregate NAV of Units of Mutual Funds - 1.33 - 26.44 -

147
Unconsolidated Restated Statement of Debtors – Annexure – 12D
(Rs. in Million)
Age wise Break-up As at 31st March
2006 2007 2008 2009 2010
Unsecured, Considered good

Debts outstanding for a period exceeding six months - - - - -

Other Debts 5.05 0.77 63.78 41.04 2.48

Total 5.05 0.77 63.78 41.04 2.48

The above includes the following debts due from the Subsidiary Companies:

Particulars As at 31st March

2006 2007 2008 2009 2010

Debts outstanding for a period exceeding six months - - - - -

Other Debts
Microsec Capital Limited 0.17 - 0.05 - -
PRP Technologies Limited - - - 0.03 -
Sub Total 0.17 - 0.05 0.03 -

Total 0.17 - 0.05 0.03 -

148
Unconsolidated Restated Statement of Cash & Bank Balances – Annexure – 12E
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

Cash in Hand 0.05 0.05 0.01 0.32 -

Cheques in Hand - - - - 0.01

Balances with Scheduled Banks

On Current Accounts 0.19 6.87 0.69 5.30 5.18

Total 0.24 6.92 0.70 5.62 5.19

149
Unconsolidated Restated Statement of Loans & Advances – Annexure – 12F
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Considered good

Loans (Bearing Interest)

-Secured - 3.96 207.32 110.88 305.12
-Unsecured - - 23.86 100.05 -

Sub-Total - 3.96 231.18 210.93 305.12

Advances - (Unsecured)
Advances recoverable in cash or in kind or for - 0.01 0.83 0.68 0.62
value to be received or pending adjustments
Advances to Subsidiary Companies 6.96 - 55.65 20.92 -
Advance Payment of Income Tax & Tax Deducted - - 2.98 4.51 2.96
at Source (Net of Provision)
Advance Fringe Benefit Tax (Net of Provisions) - - - 0.02 -
MAT Credit Entitlement - 3.21 - 0.90 -
Deposits with Government Authorities and others 0.19 0.19 0.19 0.19 0.19
Sub-Total 7.15 3.41 59.65 27.22 3.77

Total 7.15 7.37 290.83 238.15 308.89

Details of Advances to Subsidiary Companies

Particulars As at 31st March

2006 2007 2008 2009 2010

Microsec Capital Limited 5.03 - 53.15 5.58 -

Microsec Resources Private Ltd 1.93 - 0.05 - -
Microsec Insurance Brokers Ltd - - 0.45 0.30 -
Microsec Technologies Ltd. - - 1.50 14.54 -
Microsec Commerze Ltd - - 0.50 - -
PRP Technologies Limited - - - 0.50 -

Total 6.96 - 55.65 20.92 -

150
Unconsolidated Restated Statement of Secured Loans– Annexure – 12G
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Term Loans

Infrastructure Leasing & Financial Services Ltd - - 16.83 - -

DSP Merrill Lynch Limited - - 60.00 - -
Interest accrued and due - - 4.42 - -

Total - - 81.25 - -

151
Unconsolidated Restated Statement of Unsecured Loans– Annexure – 12H
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

From Body Corporates 8.70 17.70 - - -

Total 8.70 17.70 - - -

152
Unconsolidated Restated Statement of Current Liabilities & Provisions– Annexure – 12I
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Current Liabilities
Sundry Creditors for goods, services, expenses etc.

Due to Micro and Small Enterprises - - - - -

Dues to Others 0.10 2.19 1.49 7.65 5.81

Other Liabilities - 0.07 1.14 0.31 0.73

Sub Total 0.10 2.26 2.63 7.96 6.54

Provisions
Taxation (Net of Advance Payments) 0.06 3.21 - - -
Fringe Benefit Tax (Net of Advance Tax) - - 0.01 - -
Leave Encashment - - 0.01 0.06 0.05
Gratuity - - 0.12 - 0.01
Proposed Dividend 10.00 - - - -
Tax on Proposed Dividends 1.40 - - - -

Sub Total 11.46 3.21 0.14 0.06 0.06

Total 11.56 5.47 2.77 8.02 6.60

153
Unconsolidated Restated Statement of Share Capital – Annexure – 12J
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

Authorised Share Capital

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 3,50,00,000 3,50,00,000 3,50,00,000

Equity Share Capital (Rs. in Million) 100.00 100.00 350.00 350.00 350.00

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

Preference Share Capital (Rs. in - 27.00 - - -
Million)

Total Authorised Capital (Rs. in 100.00 127.00 350.00 350.00 350.00

Million)

Issued, Subscribed and Paid-up

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 2,03,10,500 2,03,10,500 1,93,10,500
(fully paid)

Equity Share Capital (Rs. in Million) 100.00 100.00 203.11 203.11 193.11

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

(fully paid)

Preference Share Capital (Rs. in - 27.00 - - -

Million)

Total Issued, Subscribed and Paid- 100.00 127.00 203.11 203.11 193.11
up Capital (Rs. in Million)

154
Unconsolidated Restated Statement of Reserves & Surplus – Annexure – 12K
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

Securities Premium Account 25.87 25.73 266.50 266.50 151.50

Capital Redemption Reserve - - - - 10.00

Reserve under Section 45-IC of the 2.93 12.50 29.91 40.00 62.20
Reserve Bank of India Act,1934

Surplus as per Profit and Loss Account 4.40 11.76 27.69 74.55 152.55

Total 33.20 49.99 324.10 381.05 376.25

155
Unconsolidated Restated Statement of Income from Operation – Annexure – 12L
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Interest on Loans 0.88 0.92 16.38 43.91 46.74

Investment Banking Revenue 11.54 18.04 70.36 61.63 69.41

Profit on Sale/Redemption of Investments (Net) 4.61 20.58 41.03 36.55 60.05

Dividend from Investments - - - 0.28 0.43

Income from Royalty - - - 0.03 4.18

Total 17.03 39.54 127.77 142.40 180.81

156
Unconsolidated Restated Statement of Staff Cost – Annexure – 12M
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Salary, Bonus etc. 0.14 0.40 4.26 8.68 8.00

Gratuity - - 0.12 0.03 0.09
Employees' welfare expenses - 0.03 0.06 0.16 0.08

0.14 0.43 4.44 8.87 8.17

157
Unconsolidated Restated Statement of Administrative & Other Expenses – Annexure – 12N
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Advertisement & Publicity 0.01 0.06 1.10 0.64 0.08

Communication Expenses - 0.07 0.04 0.14 0.15
Repairs & Maintenance - Others 0.01 0.11 0.11 0.31 0.40
Rates & Taxes 0.10 0.21 3.22 0.07 0.32
Filing Fees - - 0.05 - 0.07
Insurance Premium - 0.02 0.05 0.07 0.07
Printing & stationery 0.02 0.01 0.11 0.61 0.12
Bank & Demat charges - 0.01 0.08 0.06 0.02
Travelling & Conveyance - 0.01 0.19 0.82 0.34
Legal & Professional fees 0.06 0.02 8.49 1.71 1.38
Irrecoverable debts/advances written off - - - 0.61 0.23
Penal Charges - - - 39.50 -
Loss on assignment of receivables - - - - 11.27
Director Sitting Fees - - 0.13 0.15 0.15
Motor Car Expenses - - 0.10 0.40 0.35
Auditors Remuneration
As Auditors
- Audit Fees 0.07 0.08 0.08 0.09 0.85
- Tax Audit 0.02 0.02 0.02 0.02 -
- In other capacity for Certificates and other services 0.01 - - - 0.65
- Out of Pocket Expenses - - - - 0.01
Commission Paid - - - 0.04 -
Miscellaneous expenses 0.01 0.21 0.10 0.35 1.27
Service Charges - 0.45 0.73 0.91 -
Electricity Charges - 0.12 - - -
Software Expenses - - 0.02 0.08 -
Miscellaneous expenditure written off 0.04 - - - -
0.35 1.40 14.62 46.58 17.73

158
Unconsolidated Restated Statement of Interest Expenses – Annexure – 12O
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

On Fixed Loans - - 5.80 11.36 2.21

On Other Loans - - - - 4.32
Miscellaneous - - - - 0.70

Total - - 5.80 11.36 7.23

159
 Auditors’ Report

To
The Board of Directors
Microsec Financial Services Limited
Kolkata.

Dear Sirs,

1. We have examined the Consolidated Restated Summary Statement of Assets and Liabilities of Microsec
Financial Services Limited (“the Company”) and its subsidiaries as stated in paragraph 3(b) below,
(collectively referred to as the “Group”) as at 31st March 2006, 2007, 2008, 2009 and 2010 and the
related Consolidated Restated Summary Statement of Profits and Losses and Consolidated Restated
Summary Statement of Cash Flows, for the years ended 31 st March 2006, 2007, 2008, 2009 and 2010
(collectively, the “Consolidated Restated Summary Statements”). These Consolidated Restated Summary
Statements have been prepared by the Group and approved by the Board of Directors for the proposed
Initial Public Offer (referred to as the “Offer”) in accordance with the requirements of:

c. paragraph B(1) of Part II of Schedule II to the Companies Act, 1956 ('the Act') and

d. The SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations 2009 issued
by Securities and Exchange Board of India ('SEBI'), on August 26, 2009 in pursuance of Section
30 of the Securities and Exchange Board of India Act, 1992 (the “SEBI Regulations”).

2. We have examined such Consolidated Restated Summary Statements taking into consideration:

a. Revised Guidance Note on Reports in Company Prospectuses issued by the Institute of Chartered
Accountants of India (the “ICAI”) and

b. The respective terms of reference dated 10th May, 2010 received from the Company, requesting us
to carry out the assignment, in connection with the Offer Document being issued by the Company
for its proposed Initial Public Offer.

The Management has informed that the Company proposes to make an offer of fresh issue of 12,500,000
equity shares, having a face value of Rs. 10 each, at an issue price to be arrived at by the book building
process.

Consolidated Restated Summary Statements as per audited Consolidated Financial Statements:

3. (a) The Consolidated Restated Summary Statements of the Group have been extracted by the
management from the Consolidated Financial Statements of the Group for the years ended 31 st
March 2006, 2007, 2008, 2009 and 2010 which have been approved by the Board of Directors.
The audit of the Consolidated Financial Statements for the financial years ended 31st March,
2006, 2007, 2008 and 2009 was conducted by Vidya & Co., Chartered Accountants (Registration
No.308022E) and these accounts were signed by their partner Mr. Jitendra Nagar (Membership
No.055659).

This report, in so far as it relates to the amounts included for the financial years ended 31 st March,
2006, 2007, 2008 and 2009, is based on the Consolidated Audited Financial Statements of the
Group which were audited by the above auditors and their audit reports have been relied upon by
us for the said years.

(b) We did not audit the financial statements of the subsidiaries, namely Microsec Capital Limited
(MCAP), Microsec Commerze Limited (MCL), Microsec Insurance Brokers Limited (MIBL),
Microsec Technologies Limited (MTL), Microsec Resources Private Limited (MRPL) and PRP
Technologies Limited (PRP) for the financial years as set out below. These financial statements
have been solely audited by other auditors.

160
 This report in so far as it relates to the amounts of the subsidiaries included in the Consolidated
Restated Summary Statements for the financial years as set out below except stated otherwise, are
based on the audited financial statements of the subsidiaries audited solely by other auditors and whose
reports have been relied upon by us for the said years.
In Rs. million
Year MCAP MCL MIBL MTL MRPL PRP
ended Total Total Total Total Total Total Total Total Total Total Total Total
Assets Reve Assets Reve Assets Reve Assets Reve Assets Reve Assets Revenue
nue nue nue nue nue
March * * 109.26 22.80 20.91 8.99 85.18 22.65 96.47 8.53 20.09 15.33
31, 2010
March 389.84 215.21 81.99 5.84 15.79 8.80 64.09 8.29 89.58 8.51 3.91 0.31
31, 2009
March 551.73 245.09 100.32 16.50 13.37 4.53 23.19 12.47 83.74 20.03 Not Not
31, 2008 Appli Appli
cable cable
March 252.67 110.78 60.59 25.45 12.03 4.00 28.77 6.70 59.71 8.54 Not Not
31, 2007 Appli Appli
cable cable
March 218.21 46.87 45.61 4.20 13.69 1.19 27.15 - 52.46 1.31 Not Not
31,2006 Appli Appli
cable cable
*Audited by us.

4. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI
Regulations and the terms of our engagement agreed with you, we further report that:

i) The Consolidated Restated Summary Statements of the Group, including as at and for the years
ended 31st March, 2006, 2007, 2008 and 2009 which are based on the audited consolidated
financial statements of the Group, audited by other auditors as stated in Para 3 above and on
which reliance has been placed by us and as at and for the year ended 31 st March 2010 based on
the audited consolidated financial statements of the Group audited by us, as set out in Annexures
1, 2 & 3 to this report are after making such adjustments and regroupings as in our opinion were
appropriate and more fully described in the Statement of Adjustments and Statement of
Significant Accounting Policies & Notes (Refer Annexures 4 & 5).

ii) Based on the above, and as per the reliance placed by us on the reports issued by other auditors for
the respective years as stated above, we are of the opinion that

(d) the Consolidated Restated Summary Statements have been made, after incorporating :

(iii) The impact arising on account of changes in accounting policies adopted by the
Group as at and for the year ended 31st March 2010 applied with retrospective effect
in the Consolidated Restated Summary Statements;

(iv) Adjustments for the material amounts in the respective financial years to which they
relate.

(e) There are no extraordinary items which need to be disclosed separately in the Consolidated
Restated Summary Statements; and

(f) There are no qualifications in the auditors’ reports, which require any adjustments to the
Consolidated Restated Summary Statements.

Other Consolidated Restated Financial Information:

5. At the Company’s request, we have examined the following other Consolidated Financial Information, as
restated, proposed to be included in the Offer Document, prepared by the management and approved by
the Board of Directors of the Company and annexed to this report relating to the Group, as at and for the
years ended 31st March, 2006, 2007, 2008, 2009 and 2010. In respect of the years ended 31st March,
2006, 2007, 2008 & 2009 these information have been included based on the Audited Consolidated
Financial Statements of the Group which were audited by other auditors as stated in para 3 above and

161
 whose auditors’ reports have been relied upon by us. The financial information relating to the
subsidiaries included in the consolidated financial information are based on the audited financial
statements of the subsidiaries audited by other auditors and relied upon by us as given in paragraph 3(b)
above:

xxi. Statement of Consolidated accounting ratios based on the adjusted profits relating to earning per
share, net assets value, return on net worth enclosed as Annexure- 6.

xxii. Statement of Consolidated Related Party Transactions enclosed as Annexure -7.

xxiii. Statement of Consolidated Segment Reporting enclosed as Annexure-8.

xxiv. Statement of Dividend Paid enclosed as Annexure-9.

xxv. Capitalisation Statement as at 31st March 2010 enclosed as Annexure 10.

xxvi. Statement of Consolidated Earnings per Share enclosed as -Annexure 11A.

xxvii. Statement of Consolidated Fixed Assets enclosed as Annexure -11B.

xxviii. Statement of Consolidated Investments enclosed as Annexure -11C.

xxix. Statement of Consolidated Debtors enclosed as Annexure -11D.

xxx. Statement of Consolidated Cash & Bank Balances enclosed as Annexure -11E.

xxxi. Statement of Consolidated Loans & Advances enclosed as Annexure -11F.

xxxii. Statement of Consolidated Secured & Unsecured Loans enclosed as Annexures -11G & 11H.

xxxiii. Statement of Consolidated Current Liabilities & Provisions enclosed as Annexure- 11I.

xxxiv. Statement of Share Capital enclosed as Annexure -11J.

xxxv. Statement of Consolidated Reserves & Surplus enclosed as Annexure- 11K.

xxxvi. Statement of Consolidated Income from Operations enclosed as Annexure 11L.

xxxvii.Statement of Consolidated Other Income enclosed as Annexure 11M.

xxxviii. Statement of Consolidated Operating Expenses enclosed as Annexure 11N.

xxxix. Statement of Consolidated Staff cost enclosed as Annexure 11O.

xl. Statement of Consolidated Administrative & Other expenses enclosed as Annexure 11P.

xli. Statement of Consolidated Interest expenses enclosed as Annexure 11Q.

6. In our opinion, other Consolidated Restated Financial Information, contained in the Annexures to this
report as referred to above, read along with the Significant Accounting Policies & Notes as set out in
Annexure 5 have been prepared after making such adjustments and regroupings as were considered
appropriate, in accordance with SEBI Regulations.

Others

7. We have not audited any consolidated financial statements of the Group or any of its subsidiaries as of
any date or for any period subsequent to March 31, 2010. Accordingly, we express no opinion on the
financial position, results of operations or cash flows of the Company or its subsidiaries as of any date or
for any period subsequent to March 31, 2010.

162
8. This report should not be in any way construed as a reissuance or redating of any of the previous audit
reports issued by us or by other auditors, nor should this report be construed as a new opinion on any of
the financial statements referred to herein.

10. We have no responsibility to update our report for events and circumstances occurring after the date of
the report.
10. This report is intended solely for your information and for inclusion in the Offer Document in connection
with the proposed initial public offer of the Company, and is not to be used, referred to or distributed for
any other purpose without our prior written consent.

For S.R. BATLIBOI & CO.

Firm Registration Number: 301003E
CHARTERED ACCOUNTANTS

per R. K. AGRAWAL
Partner
Membership No. 16667

Place : Kolkata.

Date : August 14, 2010

163
Consolidated Restated Summary Statement of Assets and Liabilities – Annexure – 1
(Rs. in Million)
Particulars As at 31st March
Application of Funds 2006 2007 2008 2009 2010
A. Fixed Assets
Gross Block 115.33 183.13 242.56 336.82 311.40
Less: Accumulated Depreciation/Amortisation 22.43 40.80 65.36 94.74 99.64
Net Block 92.90 142.33 177.20 242.08 211.76
Capital Work in Progress including Capital Advances - - - 19.91 23.53
Total 92.90 142.33 177.20 261.99 235.29

B. Investments 21.55 48.16 75.86 150.14 86.91

C. Deferred Tax Asset (Net) - 3.06 - - -

D. Current Assets,Loans and Advances

Inventories 0.06 2.06 6.57 - -
Sundry Debtors 54.25 28.37 230.54 76.98 89.24
Cash & Bank Balances 25.39 40.84 130.30 160.88 193.10
Other Current Assets 0.43 1.13 4.69 3.02 8.07
Loans and Advances 122.32 135.08 495.96 341.90 561.25
Total 202.45 207.48 868.06 582.78 851.66
E Total Assets (A+B+C+D) 316.90 401.03 1,121.12 994.91 1,173.86

F Liabilities & Provisions

Secured loans 1.49 0.96 145.44 3.80 40.11

Unsecured loans 8.70 17.70 - - -
Current Liabilities 88.54 96.54 248.57 168.18 196.05
Provisions 11.40 1.79 1.07 0.71 0.97

Deferred Tax Liability (Net) 3.17 - 7.47 16.68 21.06

Total 113.30 116.99 402.55 189.37 258.19

G Net Worth (E-F) 203.60 284.04 718.57 805.54 915.67

Represented by:
Shareholders' Funds:
a Equity Share Capital 100.00 100.00 203.11 203.11 193.11
b Preference Share Capital - 27.00 - - -
c Share Application Money (Pending Allotment) 24.02 - - - -
d Reserves & Surplus 79.58 157.04 515.46 602.43 731.94

Total 203.60 284.04 718.57 805.54 925.05

Less: Miscellaneous expenditure (to the extent not - - - - 9.38
written off or adjusted)
Net Worth 203.60 284.04 718.57 805.54 915.67

Notes:
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Consolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited consolidated financial statements in accordance
with the requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

164
Consolidated Restated Summary Statement of Profits & Losses – Annexure – 2
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
Income
Income from Operations 69.53 192.45 411.11 378.74 570.91
Other Income 1.08 2.57 15.27 10.59 13.82
Total Income 70.61 195.02 426.38 389.33 584.73

Expenditure
Operating Expenses 4.29 9.35 15.84 14.91 13.87
Staff Cost 5.61 25.33 63.99 100.58 121.14
Administrative and Other Expenses 16.68 56.28 102.57 114.35 99.82
Interest 0.25 0.13 10.12 14.84 12.67
Depreciation/Amortisation 3.10 18.52 24.59 30.07 28.84
Total Expenditure 29.93 109.61 217.11 274.75 276.34

Net Profit before tax 40.68 85.41 209.27 114.58 308.39

Provision for taxation:
Current Tax 1.45 7.77 34.35 18.38 59.51
Deferred Tax Charge/(Credit) 1.94 (6.23) 10.53 9.21 4.38
Fringe Benefit Tax 0.11 0.30 0.50 0.67 -
MAT Credit Entitlement - (5.96) 2.54 (0.69) -
Net Profit after tax 37.18 89.53 161.35 87.01 244.50

Balance Brought Forward 24.28 47.00 113.83 205.35 281.63

Profit available for Appropriation 61.46 136.53 275.18 292.36 526.13

Appropriations:
Dividend on Equity Shares 10.00 10.00 10.00 - -
Dividend on Preference Shares - 0.45 - - -
Tax on Dividends 1.40 1.48 1.70 - -
Transfer to reserve under section 45-IC of the Reserve Bank of 2.93 9.57 19.50 10.18 23.35
India Act,1934
Transfer to Debenture Redemption Reserve 0.13 1.20 6.63 0.55 1.25
Transfer to Capital Redemption Reserve - - 27.00 - 10.00
Amount utilised for Issue of Bonus Share - - 5.00 - -
Surplus carried to Balance Sheet 47.00 113.83 205.35 281.63 491.53

Notes:
1. The above figures should be read along with the Statement of Significant Accounting Policies and
Notes to the Restated Consolidated Financial Statements as appearing in Annexure 5.

2. Necessary adjustments have been made to the audited consolidated financial statements in accordance
with the requirements of Schedule VIII Part A Para IX(B) of The Securities & Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

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Consolidated Restated Summary Statement of Cash Flows – Annexure – 3
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010
A. Cash Flow from Operating Activities
Net Profit before tax 40.68 85.41 209.27 114.58 308.39
Adjustments for :
Depreciation/Amortization 3.10 18.52 24.59 30.07 28.84
Interest Expenses 0.05 0.13 4.30 3.47 5.44
Preliminary Expenses Written off 0.04 - - - -
(Profit)/Loss on sale/discard of Fixed Assets - 0.12 0.01 0.05 (2.04)
Irrecoverable debts/advances written off 0.40 0.11 2.90 8.07 6.68
Loss on assignment of receivables - - - - 11.27

Operating profit before working capital 44.27 104.29 241.07 156.24 358.58
changes

(Increase)/Decrease in Inventories - (2.00) (4.51) 6.57 -

(Increase)/Decrease in Trade & Other Receivables (3.07) 25.07 (208.62) 147.16 (22.28)
(Increase)/Decrease in Loans & Advances (22.55) (8.00) (361.87) 160.82 (232.97)
(Increase)/Decrease in Investments (99.60) (26.61) (27.70) (74.28) 63.23
Increase/(Decrease) in Current Liabilities & (37.45) 8.06 157.46 (85.17) 23.77
Provisions

Cash generated from/(used in) operations (118.40) 100.81 (204.17) 311.34 190.33

Income Tax Paid (net of refunds) (1.54) (5.12) (38.14) (25.17) (58.85)

Net cash generated from/(used in) operating (119.94) 95.69 (242.31) 286.17 131.48
activities

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (34.00) (68.33) (59.44) (115.59) (15.95)
Proceeds from sale of Fixed Assets - 0.25 - 0.69 15.84
Investments in Fixed Deposits (0.03) (15.22) (55.01) (0.17) (73.99)
Encashment of Fixed Deposits - - - 16.30 20.53
Net cash (used in) investing activities (34.03) (83.30) (114.45) (98.77) (53.57)

C. Cash Flow from Financing Activities

Proceeds from Issue of Equity Share including 106.00 - 312.98 - -
Securities Premium
Buy Back of Equity Shares - - - - (125.00)
Proceeds from Issue of Preference Share including - 2.98 - - -
Securities Premium
Share Application Money 24.02 - - - -
Share Issue Expense (0.47) (0.15) (1.12) - -
Redemption of Preference Shares - - (27.00) - -
Proceeds from Borrowings 8.70 18.45 549.63 388.05 1,748.90
Repayment of Borrowings (0.16) (9.98) (427.28) (525.30) (1,712.59)
Interest Paid (0.05) (0.13) (4.30) (3.44) (5.16)
Dividend Paid - (20.45) (10.00) - -
Dividend tax Paid - (2.88) (1.70) - -
IPO Related Expenses - - - - (5.30)

Net cash generated from/(used in) financing 138.04 (12.16) 391.21 (140.69) (99.15)
activities

166
 Particulars For the years ended 31st March
2006 2007 2008 2009 2010
D. Net change in cash and cash equivalents (15.93) 0.23 34.45 46.71 (21.24)
(A+B+C)

E. Cash and Cash equivalents - Opening Balance 0.03 15.76 15.99 50.44 97.15
#
Opening Cash and Cash equivalents of the 31.66 - - - -
Subsidiary Companies *
F. Cash and Cash equivalents - Closing Balance # 15.76 15.99 50.44 97.15 75.91

* Represents cash and cash equivalents of the subsidiary Companies on the date on which they got consolidated
with Holding Company.

# represents Cash and Bank balances as indicated in Annexure 11E but excludes Fixed Deposits as per the table
shown below:

Fixed Deposits with Banks with restricted use or for 9.63 24.85 79.86 63.73 117.19
more than three months.

167
Statement of adjustments made to the Audited Consolidated Financial Statements – Annexure – 4
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Net Profit after tax as per Audited Profit and Loss Account 42.64 76.34 183.12 78.71 243.48
Adjustments on account of :
Provision for Gratuity (0.04) 0.01 (0.10) (0.08) 0.10
Provision for Leave - - 0.25 0.06 (0.31)
Liabilities no longer required, written back 0.03 - - - -
Provision for ESI - (0.07) (0.23) (0.32) 0.62
Miscellaneous Expenditure written off - 0.05 - - -
Depreciation/Amortisation (1.16) (4.00) 0.19 2.33 2.38
Expenses relating to earlier years. (refer note below) (1.82) 1.82 (10.28) 9.85 0.43
Total adjustments before tax (2.99) (2.19) (10.17) 11.84 3.22
Adjustments for taxation
Provision for Current Income Tax 0.02 (0.28) 0.53 (3.36) (1.02)
MAT Credit Entitlement - 5.96 (2.51) 0.66 -
Deferred Tax 2.30 9.70 (9.62) (0.84) (1.18)
Total adjustments for taxation 2.32 15.38 (11.60) (3.54) (2.20)
Adjustments towards pre-acquisition profit for earlier years (4.79) - - - -
Net adjustments (5.46) 13.19 (21.77) 8.30 1.02
Restated Net Profit after tax 37.18 89.53 161.35 87.01 244.50
Note: The break up and nature of expenses relating to earlier years
is as follows:
Legal & Professional Fees - - (7.31) 7.31 -
Rates & Taxes - - (2.93) 2.50 0.43
Travelling & Conveyance - - (0.04) 0.04 -
SEBI Turnover Fees (1.82) 1.82 - - -
Total (1.82) 1.82 (10.28) 9.85 0.43

168
Microsec Financial Services Limited and its Subsidiaries

Annexure – 5:

Statement of Significant Accounting Policies and Notes to the Restated Consolidated Financial
Statements:

A BASIS OF CONSOLIDATION:

The Consolidated Financial Statements which relate to Microsec Financial Services Ltd. (the
Company) and its subsidiaries have been prepared on the following basis:

a) The financial Statements of the Company and its subsidiaries have been consolidated in terms
of Accounting Standard – 21, “Consolidated Financial Statements” notified by the Companies
Accounting Standard Rules, 2006, on a line-by-line basis by adding together the book values
of like items of assets, liabilities, income and expenditure after fully eliminating intra group
balances, intra group transactions and any unrealized profit/loss included therein.

b) The excess/shortfall of cost to the Company of its investment over equity in the subsidiary
companies as on the date of investment is recognized in the financial statements as goodwill /
capital reserve as the case may be.

c) The consolidated financial statements have been prepared using uniform accounting policies,
for like transactions and are presented to the extent possible, in the same manner as the
Company’s separate financial statements.

d) The Subsidiary Companies considered in the financial statements, are as under:

Name Country of % of Voting Power/Ownership Interest as at

Incorporat 31st 31st 31st 31st 31st
ion Ma Ma Ma Ma Ma
rch, rch, rch, rch, rch,
200 200 200 200 201
6 7 8 9 0
Microsec India 100 100 100 100 100
Capital Ltd
Microsec India 100 100 100 100 100
Commerze Ltd
Microsec India 100 100 100 100 100
Insurance
Brokers Ltd
Microsec India 100 100 100 100 100
Technologies
Ltd
Microsec India 100 100 100 100 100
Resources
Private Ltd
PRP India - - - 100 100
Technologies
Ltd

B SIGNIFICANT ACCOUNTING POLICIES:

i) Basis of preparation

The financial statements have been prepared to comply in all material aspects with the
Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 (as
amended) and the relevant provisions of the Companies Act, 1956 and the directives as
prescribed by the Reserve Bank of India for Non Banking Financial Companies. The financial

169
 statements have been prepared under the historical cost convention on an accrual basis.
However, income is not recognized and also provision is made in respect of non- performing
assets as per the prudential norms prescribed by the Reserve Bank of India.

ii) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at the date of financial
statements and the results of operations during the reporting year end. Although these
estimates are based upon the management’s best knowledge of current events and actions,
actual results could differ from these estimates.

iii) Revenue Recognition

x Revenue from share brokerage activities is accounted for on trade date basis and
excludes service tax and Securities Transaction Tax.
x Fees from Investment Banking activities which include issue Management, Mergers
& Acquisitions, Investment and other advisory services etc. are recognised as and
when the services are rendered to the customers and when there is reasonable
certainty of its ultimate realisation/collection.
x Commission on insurance policies sold is recognized, when an insurance policy sold
by the Company is accepted by the principal insurance company.
x Commission and Incentive income on primary market activities, included in
Investment Banking revenue, is recognized on receipt of confirmation from the
concerned party after completion of the public issue.
x Dividend income is recognized when the shareholder’s right to receive payment is
established by the balance sheet date.
x Interest income is recognized on a time proportion basis taking into account the
amount outstanding and the rate applicable.
x Penal Charges for delayed receipt of dues from the clients are credited on accrual
basis, as per management’s judgment, as to the reasonable certainty in realisation
thereof.
x Service Charges is recognised when there is a reasonable certainty for its ultimate
realisation/collection.

iv) Fixed Assets

Fixed Assets are stated at cost, less accumulated depreciation and impairment losses if any.
Cost comprises the purchase price inclusive of duties (net of cenvat), taxes and incidental
expenses, etc. up to the date, the asset is ready for its intended use.

v) Depreciation/Amortisation

x Depreciation on fixed assets is provided on written down value method at the rates
specified in schedule XIV to the Companies Act, 1956.
x Depreciation on Fixed Assets added/disposed off during the year is provided on
prorata basis with reference to the date of addition/disposal.
x In case of impairment, if any, depreciation is provided on the revised carrying
amount of the assets over their remaining useful life.
x Copyrights are amortized on straight-line basis over a period of ten years from the
date the assets become available for use.
x Other Intangible assets are amortized on straight line basis over a period of three/five
years from the date the assets become available for use.

vi) Impairment of Fixed Assets

The carrying amounts of assets are reviewed at each balance sheet date to determine whether
there is any indication of impairment based on external/internal factors. An impairment loss is

170
 recognized wherever the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ‘Value in use’ of the assets. The estimated
future cash flows considered for determining the value in use, are discounted to their present
value at the weighted average cost of capital.

vii) Borrowing Costs

Borrowing costs relating to acquisition / construction of qualifying assets are capitalized until
the time all substantial activities necessary to prepare the qualifying assets for their intended
use are complete. A qualifying asset is one that necessarily takes substantial period of time to
get ready for its intended use. All other borrowing costs are charged to revenue.

viii) Investments

Investments that are readily realisable and intended to be held for not more than a year are
classified as Current Investments. All other Investments are classified as Long term
Investments. Current Investments are stated at lower of cost and market rate on an individual
investment basis. Long term investments are considered “at cost” on individual investment
basis, unless there is a decline other than temporary in the value, in which case adequate
provision is made against such diminution in the value of investments.

ix) Fixed Assets Acquired under lease

Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of the
ownership of the leasehold assets are classified as operating leases. Operating lease payments
are recognised as an expense in the profit and loss account.

Finance Lease:

Assets acquired under lease agreements which effectively transfer to the Company
substantially all the risks and benefits incidental to ownership of the leased items, are
capitalized at the lower of the fair value and present value of the minimum lease payments at
the inception of the lease term and disclosed as leased assets. Lease payments are apportioned
between the finance charges and the reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of their liability. Finance charges are charged directly
to expenses account.

x) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event
and it is probable that an outflow of resources will be required to settle the obligation, in
respect of which a reliable estimate can be made. Provisions made in terms of Accounting
Standard 29 are not discounted to its present value and are determined based on management
estimate required to settle the obligation, at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current management estimates.

xi) Contingencies

Liabilities which are material and whose future outcome cannot be ascertained with
reasonable certainty are treated as contingent and disclosed by way of notes to the accounts.

xii) Taxation

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in accordance with the
Income Tax Act, 1961. Deferred Income tax reflects the impact of current year timing
differences between taxable income and accounting income for the year and reversal of timing
differences of earlier years.

171
 The deferred tax for timing differences between the book and tax profit for the year is
accounted for using the tax rates and laws that have been substantively enacted as of the
Balance Sheet date. Deferred tax asset is recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available against which such deferred
tax asset can be realised. If the Company has carry forward unabsorbed depreciation and tax
losses, deferred tax asset is recognised only to the extent that there is virtual certainty
supported by convincing evidence that sufficient taxable income will be available in future
against which such deferred tax asset can be realised.

The carrying amount of deferred tax asset is reviewed at each Balance Sheet date. The
company writes down the carrying amount of a Deferred Tax Asset to the extent that it is no
longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be realised. Any such write-
down is reversed to the extent that it becomes reasonably certain or virtually certain, as the
case may be, that sufficient future taxable income will be available.

At each Balance Sheet date, the company recognizes the unrecognized deferred tax asset to
the extent that it has become reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such deferred tax asset can be
realized.
Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent
there is convincing evidence that the company will pay normal income tax during the
specified period. In the year in which the MAT credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in the guidance note issued by the
Institute of Chartered Accountants of India, the said asset is created by way of a credit to the
profit and loss account and shown as MAT Credit Entitlement. The Company reviews the
same at each balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the effect that the
Company will pay normal Income Tax during the specified period.

xiii) Employee Stock Compensation Cost

Measurement and disclosure of the employee share-based payment plans is done in

accordance with the guidance note on accounting for employee share-based payment, issued
by the Institute of Chartered Accountants of India. The Company measures compensation cost
relating to employee stock options using the intrinsic value method. The compensation
expense is amortised over the vesting period of the options on a straight line basis.

xiv) Segment Reporting:

a) Identification of Segments :

The Company has identified that its business segments are the primary segments. The
Company’s operating businesses are organized and managed separately according to
the nature of products/services provided, with each segment representing a strategic
business unit that offers different products/services and serves different markets. The
analysis of geographical segments is based on the areas in which the customers of the
Company are located.

b) Allocation of Common Costs :

Common allocable costs are allocated to each segment on case to case basis applying
the ratio, appropriate to each relevant case. Revenue and expenses which relate to the
enterprise as a whole and are not allocable to segments on a reasonable basis are
included under the head “Unallocated –Common”.

The accounting policies adopted for segment reporting are in line with those of the
Company.

172
 xv) Retirement and other employees benefits

a) Gratuity liability being a defined benefit obligation is provided for on the basis of
actuarial valuation on projected unit credit method at the end of each year.

b) Long term compensated absences are provided for based on actuarial valuation on
projected unit credit method at the end of each year.

c) Actuarial gains / losses are immediately taken to profit and loss account and are not
deferred.

xvi) Earnings per Share

Earnings per share is calculated by dividing the net profit or loss for the period attributable to
equity shareholders, by the weighted average number of equity shares outstanding during the
period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders and weighted average number of shares outstanding during
the period are adjusted for the effects of all dilutive potential equity shares.

xvii) Cash and Cash equivalents

Cash and cash equivalents in the cash flow statement comprise of cash at bank and
Cash/Cheque in hand and short-term investments with an original maturity of three months or
less.

C NOTES ON ACCOUNTS:

i. During the year ended 31st March, 2010, the Company has incurred Rs. 9.38 millions as
detailed below, in connection with its proposed initial public offer of equity shares. The above
amount has been carried forward under the head “Miscellaneous Expenditure to the extent not
written off or adjusted” in the Balance Sheet and it would be adjusted against Securities
Premium after the proposed issue of equity shares, as permitted under section 78 of the
Companies Act, 1956.

Particulars Rs. in Millions

i) Legal & Professional Fees 4.60
ii) Exchange & Regulator Fees 2.11
iii) Auditors’ Fees 2.59
iv) Other Expenses 0.08
Total 9.38

ii. The year wise break up of contingent liabilities is as under:

(Rs. in Millions)
Particulars As at 31st As at 31st As at 31st As at 31st As at 31st
Mar Mar Mar Mar Mar
ch, ch, ch, ch, ch,
2006 2007 2008 2009 2010
a) i) Guarantees in favour of - 60.00 170.00 295.00 295.00
Banks against facilities
granted to Subsidiary
Companies.
ii) Credit facilities availed - - 12.50 3.50 40.08
against the above as on the
Balance Sheet date
b) Claims against the - - - 11.31 3.24
company not acknowledged
as debts*
c) Bank Guarantees 15.00 20.00 64.50 71.00 83.50

173
 Particulars As at 31st As at 31st As at 31st As at 31st As at 31st
Mar Mar Mar Mar Mar
ch, ch, ch, ch, ch,
2006 2007 2008 2009 2010
outstanding in favour of
stock/Commodity exchanges
d) Counter Guarantee in 5.00 5.00 7.50 7.50 7.50
favour of a Bank for
guarantees issued by the bank
on behalf of a subsidiary
company.
e) Disputed Income Tax - - 2.05 6.32 6.32
demands in Appeal*
f) Disputed Service Tax * - - - - 1.07
g) Bank Guarantees - - - - 0.04
outstanding in favour of West
Bengal Sales Tax
Department.

*The management believes that the company has a good chance of success in above
mentioned cases and hence no provision thereagainst is considered necessary.

iii. The year wise break up of Fixed Deposits pledged is as follows:

(Rs. in Millions)
Pledged with As at 31st As at 31st As at 31st As at 31st As at 31st
March, March, March, March, March,
2006 2007 2008 2009 2010
National Securities - - 19.90 5.26 40.00
Clearing Corporation
Ltd.
Bombay Stock - - 9.90 5.26 -
Exchange Ltd.
National Stock - - - 0.80 0.80
Exchange of India
Ltd.
East India Securities 0.80 0.80 0.80 - -
Ltd. (Clearing
Member)
HDFC Bank Ltd. (As 7.68 17.78 33.31 21.32 43.87
security against Credit
facilities / Bank
Guarantees)
United Bank of India 1.15 1.15 5.95 3.83 6.17
(As security against
Bank Guarantees/Lien
as per IRDA
Regulation 22)
Indusind Bank Ltd. - - 10.00 10.00 20.00
(As security against
Bank Guarantees)
MCX Stock Exchange - - - - 0.80
Ltd.
Axis Bank Ltd. (As - - - - 0.05
security against Bank
Guarantees)

iv. Based on the information / documents available with the Company, no creditor is covered
under Micro, Small and Medium Enterprise Development Act, 2006. As a result, no interest
provision/payments have been made by the Company to such creditors, if any, and no

174
 disclosures thereof are made in these accounts.

v. During the year ended 31st March, 2010, the Company has bought back 10,00,000 equity
shares from the existing shareholders at a price of Rs. 125 per share (including premium of
Rs. 115 per share) on proportionate basis, u/s 77A of the Companies Act, 1956, pursuant to
the letter of offer dated 25th April 2009. The aforesaid buy back of shares has been approved
by the board at its meeting held on 2nd March 2009 and by the shareholders at the
extraordinary general meeting held on 28 th March 2009. The said shares stand extinguished
after their buy back. Accordingly, a sum of Rs. 10 millions representing the face value has
been reduced from the Share Capital and an equal amount has been transferred to Capital
Redemption Reserve and Rs. 115 millions has been adjusted against Securities Premium
Account.

vi. During the year ended 31st March, 2008, the Company, under the Employees Stock Option
Scheme, 2007 (The Scheme), had granted options for 6,22,805 shares exercisable only after
listing of the shares of the Company at National Stock Exchange and/or Bombay Stock
Exchange. By an agreement dated 17.08.2009, between the Company and the respective
employees, the said options have been terminated.

The details of the above Employee Stock Option Scheme is as under:

Date of grant 21.01.2008

Date of Board Approval 03.09.2007
Date of Shareholder’s approval 28.09.2007
Number of options granted 622805
Method of Settlement (Cash/Equity) Equity
Vesting Period 15 Days from the date of grant letter
Vesting Condition Continued employment with the company and/or its
subsidiary at the date of vesting.
ercise Period Maximum of 6 years from the date of grant.

Outstanding at the beginning of the 622805

year
Granted during the year Nil
Terminated during the year 622805
Exercised during the year Nil
Expired during the year Nil
Outstanding at the end of the year Nil
Exercisable at the end of the year Nil
Weighted average remaining Not Applicable
contractual life (in years)
Weighted average fair value of Not Applicable
options granted

vii. During the year ended 31st March, 2010, the Company has entered into agreements with
Mandpam Commercial Limited for assignment of receivables from certain parties at a total
consideration of Rs. 49.28 millions as against loan receivables of Rs. 60.55 millions from the
said parties. The above arrangement has resulted into a loss of Rs. 11.27 millions for the
Company which has been charged to profit and loss account.

viii. During the reporting periods, the following companies were amalgamated with the
Company/its subsidiaries, as per terms of scheme of amalgamation under section 391 & 394
of The Companies Act, 1956, approved by Hon’ble Kolkata High Court:

175
Amalgamating Amalgamated Amalgamated Date of Method applied Accounting treatment as
Company Company with appro for per Scheme of
effect val by Amalgamat Amalgamation
from Hon’b ion
le
Kolka
ta
High
Court
Ravindra Shelter Microsec 1st December, 5th April, Purchase Cash, Bank Balances and net
Limited Financial 2005 2006 Method* current assets were recorded
(a Consultancy Services Purchase at the book values and the
and Advisory Limited Consideration – balance of the Company’s
Services Rs. 8.67 investments in the shares of
Company) millions the said amalgamating
Company was allocated to the
remaining assets on a
proportionate basis.
Shringar Microsec 1st March, 24th Purchase Cash, Bank Balances, net
Vinimay Private Financial 2009 August Method* current assets and part of
Limited Services 2009 Purchase investments were recorded at
(a Consultancy Limited Consideration – the book values and the
Services Rs. 20.14 balance of the Company’s
Company) millions investments in the shares of
the said amalgamating
Company was allocated to the
remaining assets on a
proportionate basis.
Kautilya Microsec 1st September, 26th March Purchase Cash, Bank Balances, net
Advisory Pvt. Capital 2006 2007 Method* current assets and
Ltd. Limited Purchase investments were recorded at
(a Consultancy Consideration – the book values and the
and Advisory Rs. 1.99 balance of the Company’s
Services millions investments in the shares of
Company) the said amalgamating
Company was allocated to the
remaining assets on a
proportionate basis
Microsec MIL 01st April, 22nd March Pooling of All the assets and liabilities of
Technologies Technologies 2005 2006 Interest the amalgamating company
Limited Limited Method* were recorded at the book
(a Technology value.
Company)
* As per Accounting Standard 14 notified by The Companies Accounting Standard Rules,
2006.

ix. In terms of letter no. N/41-38793-101/Ins-I dated 04/09/2009 received from Employees State
Insurance Corporation for retrospective applicability of the provisions of the Employee State
Insurance Act, 1948 Microsec Capital Limited, a Subsidiary Company, has paid Rs. 0.97
million during the year ended 31st March, 2010 towards the statutory dues (both Employer’s &
Employee’s contribution) and the same has been charged to Profit & Loss Account. The effect
of the above has been given in these accounts in respective financial years and duly disclosed
vide Annexure – 4.

x. The Company and its Subsidiaries have provided gratuity liabilities with effect from 1 st April,
2009 as per Actuarial Valuation on the basis of Accounting Standard 15 (Revised) -
“Employee Benefits” notified by the Companies Accounting Standard Rules, 2006, as against
the past practice of providing the same on the basis of amount demanded by LIC for the
covered employees as per group Gratuity Scheme taken by the Company. The effect of above
compliance has now been given in the accounts of respective financial years and duly
disclosed vide Annexure – 4.

xi. The Company and its subsidiaries have provided leave liabilities with effect from 1st April,
2009 as per Actuarial Valuation on the basis of Accounting Standard 15 (Revised) -

176
 “Employee Benefits” notified by the Companies Accounting Standard Rules, 2006, as against
the past practice of providing the same on management estimate. The effect of above
compliance has now been given in the accounts of the respective financial years and duly
disclosed vide Annexure 4.

xii. Gratuity - Defined Benefit Plan:

The Company has a defined benefit gratuity plan. Every employee, who has completed five
years or more of services, is entitled to gratuity on terms not less favorable than the provisions
of the payment of Gratuity Act, 1972. The scheme is funded with an insurance Company.

The following tables summarise the components of gratuity expenses recognised in the
Restated Profit & Loss Account and the funded status and amounts recognized in the Restated
Assets and Liabilities.
(Rs. in Millions)
2005- 2006- 2007- 2008- 2009-
0 0 0 0 1
6 7 8 9 0
(i) Net Employee Expense /(benefit)
Current service cost 0.26 0.33 1.06 1.14 1.77
Interest cost on benefit obligation 0.01 0.03 0.04 0.12 0.17
Expected return on plan assets 0.01 0.04 0.04 0.05 0.13
Net Actuarial (gain) /loss recognised (0.01) (0.24) (0.09) (0.81) (0.60)
in the year
Total employer (income)/expense 0.25 0.08 0.97 0.40 1.21
recognised in Profit and Loss Account

(ii) Actual return on plan assets 0.01 0.04 0.05 0.10 0.17

(iii) Benefit Asset/(Liability)

Defined benefit obligation 0.45 0.57 1.59 2.09 3.47
Fair value of Plan Assets 0.47 0.51 0.65 1.66 2.86
Benefit Asset/(Liability) 0.02 (0.06) (0.94) (0.43) (0.61)

(iv) Movement in benefit liability

Opening defined benefit obligation 0.19 0.45 0.57 1.59 2.09
Interest cost 0.01 0.03 0.04 0.12 0.17
Current service cost 0.26 0.33 1.06 1.14 1.77
Benefits paid - - - - -
Actuarial (gains)/losses on obligation (0.01) (0.24) (0.08) (0.76) (0.56)
Closing benefit obligation 0.45 0.57 1.59 2.09 3.47

(v) Movement in fair value of plan

assets
Opening fair value of plan assets 0.12 0.47 0.51 0.65 1.66
Return on plan assets 0.01 0.04 0.04 0.05 0.13
Contributions by employer 0.34 - 0.09 0.91 1.03
Benefits paid - - - - -
Actuarial (gains)/losses on plan assets - - (0.01) (0.05) (0.04)
Closing fair value of plan assets 0.47 0.51 0.65 1.66 2.86

(vi) The major categories of plan assets

as a percentage of the fair value of
total plan assets
Investments in insurance managed 100% 100% 100% 100% 100%
fund

(vii) The principal actuarial assumptions

are as follows

177
 2005- 2006- 2007- 2008- 2009-
0 0 0 0 1
6 7 8 9 0
Discount Rate 7.50% 7.50% 7.50% 7.50% 8.00%
Expected rate of return on plan assets 8.00% 8.00% 8.00% 8.00% 8.00%
Salary increase 5.00% 5.00% 5.00% 5.00% 5.00%
Withdrawal rates 1.00% 1.00% 1.00% 1.00% 1.00%

(viii) Amount incurred as expense for

defined contribution plans
Contribution to Provident / Pension Not Applicable
fund
Contribution to Employees State - 0.07 0.23 0.32 0.34
Insurance
(ix) The estimates of future salary
increases considered in actuarial
valuation, take account of inflation,
seniority, promotion and other
relevant factor, such as supply and
demand in the employment market.
(x) The overall expected rate of return on
assets is determined based on the
market prices prevailing on that date,
applicable to the period over which
the obligation is to be settled.
(xi) The Company expects to contribute
Rs. 1.05 Millions to Gratuity fund
during April 2010-March 2011.
(xii) Amounts for the current period are as
follows :
Gratuity
Defined Benefit Obligation 0.45 0.57 1.59 2.09 3.47
Plan Assets 0.47 0.51 0.65 1.66 2.86
Surplus / ( Deficit ) 0.02 (0.06) (0.94) (0.43) (0.61)
Experience adjustments on plan Not available* 0.53
liabilities
Experience adjustments on plan assets Not available* 0.04

*The management has relied on the overall actuarial valuation conducted by the actuary.
However, experience adjustments on plan liabilities and plan assets are not readily available
and hence not disclosed.

xiii. The year wise break-up of net deferred tax liability/(assets) is as under:
(Rs. in Millions)
Particulars As at 31st As at 31st As at 31st As at 31st As at 31st
Marc Marc Marc Marc Marc
h, h, h, h, h,
2006 2007 2008 2009 2010
Deferred Tax Liability
Timing Difference in - - - 4.02 5.96
Depreciable assets
Discount on Deep 6.59 8.45 10.66 13.06 15.42
Discount Debentures
Sub Total (A) 6.59 8.45 10.66 17.08 21.38
Deferred Tax Asset
Timing Difference in 3.41 11.48 3.02 - -
Depreciable assets
Short Term Capital Loss - - - 0.19 -

178
 Particulars As at 31st As at 31st As at 31st As at 31st As at 31st
Marc Marc Marc Marc Marc
h, h, h, h, h,
2006 2007 2008 2009 2010
Expenses Allowable 0.01 0.03 0.17 0.21 0.32
against taxable income in
future years
Sub Total (B) 3.42 11.51 3.19 0.40 0.32
Net Deferred Tax 3.17 (3.06) 7.47 16.68 21.06
(Assets)/Liability (A-B)

xiv. Finance Lease:

Fixed Assets includes certain Vehicles obtained on finance lease. The lease term is for 3 years
after which the Company has the option to purchase the asset. There is no escalation clause in
the agreement. There are no sub-leases. There is no escalation clause in the agreement. The
year-wise break-up and future obligation towards minimum lease payment of Rs 0.03 million
consisting of present value of lease payments and finance charges of Rs. 0.03 million and Rs.
357 respectively under the respective agreements as on 31st March, 2010 is given below:

articulars Not later than 1 year Later than 1 year but not later than
5 years
Minimum Present value as Minimum Present value as
Lease on 31st March, Lease on 31st March,
payments 2010 payments 2010
Finance 0.03 0.03 Nil Nil
Lease *

The Gross Book Value and the Written Down Value of assets taken on finance lease is Rs.
0.90 million and Rs. 0.38 million respectively.
* Rate of interest 11.48% – 12.48%

xv. Operating Lease:

Certain office premises are obtained on operating lease. The initial lease term is for 1 to 3
years and renewable for a further period either mutually or at the option of the Company.
There is no escalation clause in the lease agreement. There are no restrictions imposed by
lease arrangements. There are no sub-leases. The leases are cancellable.

Particulars 2005- 2006- 2007- 2008- 2009-

06 07 08 09 10

Lease payments made for the period 0.18 1.36 2.51 3.02 4.39
Contingent rent recognised in Profit and - - - - -
Loss Account

xvi. Minimum Alternate Tax (MAT) credit entitlement of Rs. 13.99 Millions as on 31 st March,
2010, although being available as tax credit for set off in future years as per Income Tax Act,
1961, has not been accounted for in view of the accounting policy specified in note no. B (xii)
above.

xvii. In the consolidated audited financial statements, MAT credit entitlement for earlier years was
adjusted against the current taxes in the year in which normal tax was payable. For the
purpose of restated consolidated financial statements, the same has been restated and adjusted
in the respective year to which they relate.

xviii. In the consolidated audited financial statements for the years ended 31 st March, 2006, 2007,
2008, 2009 and 2010, certain deferred tax for earlier years were recorded in the subsequent
years. For the purpose of restated consolidated financial statements, the same has been
restated and adjusted in the respective year to which they relate.

179
xix. One of the Company’s subsidiary has invested in deep discount Bonds redeemable after a
period of 20 years issued by another fellow subsidiary company. The investor company has
not accounted for income on such deep discount bonds whereas the investee company has
accounted for interest expense in its books. As per policy consistently followed, the investor
company will account for such interest income at the time of redemption of the bonds in their
books. However, at the time of consolidation, to follow uniform accounting policies for like
transactions, income accrued on such bonds has been duly considered as a consolidated
adjustment and eliminated with the corresponding expenses recognised by another subsidiary.
The consequential deferred tax liability of Rs. 15.42 millions on such interest income as at 31 st
March, 2010, has also been considered in these restated consolidated financial statements.

xx. In the consolidated financial statements, as at and for the year ended 31 st March 2009,
goodwill and capital reserve arisen on consolidation were inadvertently short computed by Rs.
23.18 millions and Rs. 3.65 millions respectively and the net impact was adjusted with the
Profit & Loss Account Balance. The above error has been rectified in consolidated financial
statements and the above amount of goodwill and Capital Reserve have been accordingly
restated at the rectified figures in each of the years ended 31st March, 2006, 2007, 2008 and
2009.

xxi. The Company has pledged equity shares valuing Rs. 80.50 millions and Rs. 33.59 millions
(received from the borrowers as margin money) with Aditya Birla Finance Limited and Citi
Corp Finance India Limited respectively. However, there is no loan outstanding for the
aforesaid parties as at 31st March, 2010.

xxii. In the financial year 2005-06, the name of holding company was changed from “Satyam
Fiscal Services Private Limited” to “Microsec Financial Services Limited”.

Further, the names of the following subsidiary companies were changed as given below:

a) In the financial year 2005-06, Keshav Resource Private Limited was changed to
Microsec Resource Private Limited.

b) In the financial year 2007-08, Microsec Risk Management Limited was changed to
Microsec Insurance Brokers Limited.

c) In the financial year 2008-09, MIL Technologies Limited was changed to Microsec
Technologies Limited.

xxiii. During the year 2005-06, the company had transferred the opening inventories amounting to
Rs. 20.29 million to investments at its book value as on 1 st April, 2005.

xxiv. For the financial years ended 31st March, 2006, 2007, 2008 and 2009, the accounts of the
holding company, Microsec Financial Services Limited and a subsidiary namely, Microsec
Capital Ltd. were audited by Vidya & Co., Chartered Accountants. The accounts of other
subsidiaries for the financial year ended 31 st March 2006, 2007, 2008, 2009 and 2010, were
audited by firms of Chartered Accountants other than S.R. Batliboi & Co.

xxv. Since the figures are given in millions, figures less than Rs. 5,000 have not been disclosed in
these restated consolidated financial statements.

180
Consolidated Statement of Adjusted Accounting Ratios – Annexure – 6

Accounting Ratios For the years ended 31st March

2006 2007 2008 2009 2010

Basic & Diluted Earning per Share (Rs.) 2.48 5.67 9.57 4.28 12.58
(Nominal Value Rs.10 Per Share)

Net Asset Value per Share (Rs.) 17.96 25.70 35.38 39.66 47.42

Return on Net Worth (%) 20.70% 34.63% 22.45% 10.80% 26.70%

The impact on Earnings per share on account of issue of Bonus Shares is as follows:

Basic & Diluted Earning per Share (Rs.) (1.41) (3.23) - - -

Net Asset Value per share after adjustment of Bonus Shares:

Net Asset Value per Share (Rs.) 17.96 25.70 35.38 39.66 47.42

NOTES:
Definition of ratios:

a) Earning per share ( EPS) Restated Profit after tax as per statement of Restated Profit & Loss, as reduced
by preference dividend for the year (including dividend tax), divided by the
weighted average number of outstanding equity shares during the year.

b) Net Asset Value per share Net worth as per statement of Restated Assets and Liabilities, as reduced by
Preference Share Capital/Preference Share Application money, divided by the
outstanding equity shares as at year end.

c) Return on net worth (%) Restated Profit after tax as per statement of Restated Profit and Loss as reduced
by preference dividend for the year (including dividend tax), divided by net
worth, as reduced by Preference Share Capital/Preference Share Application
money.

181
Statement of Aggregated Related Party Transaction as per Accounting Standard 18 for the Reporting
Period – Annexure -7

Related Party Disclosures

Names of the Related Parties

Key Management Personnel Mr. B. L. Mittal (Chairman & Managing Director)

Mr. Ravi Kant Sharma (Director)
Mr. Rakesh Sony (Director) *
Mr. Ajai Kumar Agrawal (Director in PRP
Technologies Ltd.)
Mr. Shamik Bhose (Executive Director in Microsec
Commerze Ltd.) **
Mr. Pankaj Harlalka (Executive Director in Microsec
Capital Ltd.) ***
Mr. L.N.Mandhana (Chief Financial Officer in
Microsec Financial Services Ltd.) #
Mr. Pankaj Kumar Kedia (Chief Financial Officer in
Microsec Financial Services Ltd.) @

Relatives of Key Management Personnel Mrs. Abha Mittal (Wife of Mr.B. L.Mittal)
Mr. Narsingh Mittal (Brother of Mr.B. L.Mittal)
Mr. Rajiv Sharma (Brother of Mr.Ravi Kant Sharma)
Mr. Sajjan Kumar Sharma (Father of Mr.Ravi Kant
Sharma)
Mrs. Bharati Sharma (Wife of Mr.Ravi Kant Sharma)
Mrs.Sangita Mandhana (Wife of Mr.L.N.Mandhana) #
Mrs. Kavita Sony (Wife of Mr. Rakesh Sony) *
Mr. Sunil Sony (Brother of Mr. Rakesh Sony) *
Mrs. Rashmi Harlalka (Wife of Mr. Pankaj Harlalka)
***
Mr. Manmohan Harlalka (Father of Mr. Pankaj
Harlalka) ***
Mrs. Sushila Devi Khaitan (Sister of Mr. B. L.Mittal)
Mr. Arjun Mittal (Brother of Mr.B. L.Mittal)
Mr. Niraj Harlalka (Brother of Mr.Pankaj Harlalka)
***
Mrs. Kanta Harlalka ( Mother of Mr.Pankaj Harlalka)
***
Mrs. Kanta Devi Sharma (Mother of Mr.Ravi Kant
Sharma)
Mr. Vikash Bhimrajka (Brother-in-Law of Mr.
Banwari Lal Mittal)
Mrs. Prabha Devi Bhimrajka (Mother-in-Law of Mr.
Banwari Lal Mittal)

Enterprise in which Key Management Personnel Luv-Kush Projects Limited

Exercise a Significant Influence
Micro Resources Private Limited
B. L. Mittal (HUF)

* upto 7th October, 2008

** with effect from 6th August, 2009
*** with effect from 22nd September, 2009
# resigned with effect from 20th November, 2009

182
@ with effect from 11th November, 2009

(Rs. in Million)
Particulars Time Key Relatives of Key Enterprises in which TOTAL
Period Manageme Management Key Management
nt Personnel personnel exercises
Personnel significant influence
Remuneration

Mr. B. L. Mittal 2009-10 2.61 2.61

2008-09 2.61 2.61
2007-08 2.15 2.15
2006-07 1.19 1.19
2005-06 0.36 0.36

Mr. L. N. Mandhana 2009-10 0.72 0.72

2008-09 1.10 1.10
2007-08 0.60 0.60

Mr. Ravi Kant 2009-10 2.60 2.60

Sharma
2008-09 2.60 2.60
2007-08 2.60 2.60
2006-07 1.20 1.20
2005-06 0.35 0.35

Mr. Rakesh Sony 2008-09 1.59 1.59

2007-08 2.60 2.60
2006-07 1.18 1.18
2005-06 0.34 0.34

Mr. Shamik Bhose 2009-10 0.59 0.59

2008-09 0.60 0.60
2007-08 0.82 0.82

Mr. Pankaj Harlalka 2009-10 0.70 0.70

Mr. Ajai Kumar 2009-10 0.38 0.38

Agrawal

Mr. Pankaj Kumar 2009-10 0.34 0.34

Kedia

Mrs. Abha Mittal 2005-06 0.26 0.26

Others 2009-10 - -
2008-09 - -
2007-08 - -
2006-07 0.12 0.12
2005-06 0.07 0.07

Brokerage &
Related Income
Mr. Ravi Kant 2009-10 - -

183
 Particulars Time Key Relatives of Key Enterprises in which TOTAL
Period Manageme Management Key Management
nt Personnel personnel exercises
Personnel significant influence
Sharma
2008-09 - -
2007-08 - -
2006-07 0.01 0.01
2005-06 0.07 0.07

Mr. Sajjan Kumar 2009-10 - -

Sharma
2008-09 0.02 0.02
2007-08 0.03 0.03
2006-07 0.01 0.01
2005-06 0.11 0.11

Bharti Sharma 2009-10 - -

2008-09 0.02 0.02
2007-08 0.05 0.05
2006-07 - -
2005-06 0.14 0.14

Luv Kush Projects 2009-10 0.57 0.57

Ltd
2008-09 0.38 0.38
2007-08 0.58 0.58
2006-07 0.56 0.56
2005-06 0.06 0.06

Others 2009-10 0.01 0.07 - 0.08

2008-09 0.01 0.02 - 0.03
2007-08 0.03 0.05 - 0.08
2006-07 0.03 0.02 - 0.05
2005-06 0.01 0.02 - 0.03

Loans & Advances

Received

Mr. B.L.Mittal 2009-10 - -

2008-09 0.10 0.10
2007-08 0.35 0.35

Mr. Rakesh Sony 2008-09 0.10 0.10

2007-08 0.01 0.01
2006-07 - -
2005-06 2.02 2.02

Mr. Pankaj Harlalka 2009-10 0.34 0.34

Mrs. Abha Mittal 2007-08 0.30 0.30

B.L.Mittal (HUF) 2007-08 0.35 0.35

Luv Kush Projects 2008-09 14.00 14.00

Limited

184
 Particulars Time Key Relatives of Key Enterprises in which TOTAL
Period Manageme Management Key Management
nt Personnel personnel exercises
Personnel significant influence
Mr. L.N.Mandhana 2009-10 0.19 0.19

Others 2009-10 0.03 0.01 0.04

2008-09 - 0.15 0.15
2007-08 0.08 - 0.08
2005-06 0.16 - 0.16

Loans & Advances

Given

Mr. B.L.Mittal 2009-10 - -

2008-09 0.32 0.32
2007-08 0.12 0.12

Mr. Ravi Kant 2006-07 0.08 0.08

Sharma
2005-06 0.01 0.01

Mr. Rakesh Sony 2008-09 0.12 0.12

2007-08 0.04 0.04
2006-07 - -
2005-06 0.02 0.02

Mr. Pankaj Harlalka 2009-10 0.29 0.29

Luv Kush Projects 2008-09 14.00 14.00

Limited

Others 2009-10 0.03 0.01 - 0.04

2008-09 0.19 0.45 0.35 0.99

Purchase of Shares
(refer note below)
Mr. B. L. Mittal 2005-06 1.04 1.04

Mrs. Abha Mittal 2005-06 2.34 2.34

Others 2005-06 0.06 0.06

Sale of Shares

Luv Kush Projects 2005-06 2.65 2.65

Limited

Others 2005-06 0.02 0.02

Share Application
Money Received
Luv Kush Projects 2007-08 52.00 52.00
Limited
2006-07 2.99 2.99
2005-06 152.75 152.75

185
 Particulars Time Key Relatives of Key Enterprises in which TOTAL
Period Manageme Management Key Management
nt Personnel personnel exercises
Personnel significant influence
Others 2005-06 0.29 0.29

Share Application
Money Refunded
Luv Kush Projects 2007-08 52.00 52.00
Limited
2006-07 - -
2005-06 0.95 0.95

Mr. Ravi Kant 2005-06 0.29 0.29

Sharma

Equity Share
Capital Issued
(Including
Premium)
Luv Kush Projects 2005-06 106.00 106.00
Limited

Mr. Rakesh Sony 2007-08 18.00 18.00

Mr. Ravi Kant 2007-08 26.03 26.03

Sharma
2006-07 - -

Mr. B.L.Mittal 2005-06 72.00 72.00

Mrs. Kavita Sony 2007-08 18.00 18.00

Mrs. Bharati Sharma 2007-08 9.23 9.23

Others 2007-08 0.30 0.30

2006-07 - -
2005-06 0.09 0.18 0.27

Preference Share
Capital Issued
Luv Kush Projects 2006-07 27.00 27.00
Limited

Preference Share
Capital Redeemed
Luv Kush Projects 2007-08 27.00 27.00
Ltd

Dividend Paid
Mr. B. L. Mittal 2007-08 8.00 8.00
2006-07 16.00 16.00

Luv Kush Projects 2007-08 1.95 1.95

Limited
2006-07 4.35 4.35

186
 Particulars Time Key Relatives of Key Enterprises in which TOTAL
Period Manageme Management Key Management
nt Personnel personnel exercises
Personnel significant influence
Others 2007-08 0.01 0.04 0.05
2006-07 0.02 0.08 0.10

Balance Receivable

Mr. L.N.Mandhana 31-Mar- 0.19 0.19

09

Luv Kush Projects 31-Mar- - -

Ltd. 10
31-Mar- - -
08
31-Mar- 0.01 0.01
07
31-Mar- - -
06

Others 31-Mar- - - - -
10
31-Mar- - - - -
09
31-Mar- - 0.01 - 0.01
08
31-Mar- - - - -
07
31-Mar- - - - -
06

Balance Payable

Mr. B.L.Mittal 31-Mar- 0.37 0.37

08

Mr. Rakesh Sony 31-Mar- 0.05 0.05

09
31-Mar- 0.03 0.03
08

Mrs. Abha Mittal 31-Mar- 0.30 0.30

08

B.L.Mittal (HUF) 31-Mar- 0.30 0.30

08

Note:

Purchase of Shares relates to Purchase of Shares of Microsec Capital Limited (Previously known as Micorsec
India Limited), Microsec Resources Private Limited (Previously known as Keshav Resources Private Limited)
and Microsec Technologies Limited (Previously known as MIL Technologies Limited) by the Company from
Mr. B. L. Mittal, Mrs. Abha Mittal and Mr. Ravi Kant Sharma.

187
Restated Statement of Consolidated Segment Information as per Accounting Standard 17 for the Reporting Period – Annexure – 8
(Rs. in Million)
Particulars Financing & Investment Investment Banking & Related Services Brokerage (Equity, Commodities, Currency including Wealth Management, Insurance Broking, Financial Total
Depository Services) & related services, Planning, Distribution and related services
2005- 2006- 2007- 2008 2009 2005 2006- 2007- 2008- 2009 2005 2006 2007 2008 2009 2005- 2006- 2007- 2008- 2009 2005 2006 2007 2008 2009
06 07 08 -09 -10 -06 07 08 09 -10 06 -07 -08 -09 -10 06 07 08 09 -10 -06 -07 -08 -09 -10

Segment Revenue 27.97 49.59 104.40 93.31 152.90 18.97 72.49 113.8 115.7 149.9 21.64 66.61 188.72 161.56 212.51 0.95 3.76 4.16 8.17 55.54 69.53 192.45 411.11 378.74 570.91
3 0 6

Segment Results 27.29 46.46 80.99 29.24 118.81 11.29 35.71 63.81 67.63 104.4 1.72 4.35 52.62 10.04 45.84 (0.63) (1.92) 0.61 2.03 38.22 39.67 84.60 198.03 108.94 307.28

Add: Unallocated Income

net of unallocated 1.01 0.81 11.24 5.64 1.11
expenses

Profit Before Tax 40.68 85.41 209.27 114.58 308.39

Less : Provision for

Taxation
Current Tax 1.45 7.77 34.35 18.38 59.51
Deferred Tax 1.94 (6.23) 10.53 9.21 4.38
charge/(credit)
Fringe Benefit Tax 0.11 0.30 0.50 0.67 -
MAT Credit Entitlement - (5.96) 2.54 (0.69) -

Net Profit after Tax 37.18 89.53 161.35 87.01 244.50

Segment Assets 87.47 139.6 494.21 526.1 681.35 66.56 80.57 98.71 103.2 90.55 122.35 109.21 406.41 221.09 247.66 4.47 3.12 2.16 8.38 10.07 280.85 332.51 1,001.49 858.94 1,029.63
9 8
Unallocated Corporate 36.05 68.52 119.63 135.97 144.23*
Assets

Total Assets 316.90 401.03 1,121.12 994.91 1,173.86

Segment Liabilities 9.48 19.94 83.74 7.06 0.29 9.75 1.21 3.40 2.23 1.74 83.39 90.57 241.18 155.63 186.88 0.02 0.13 0.17 2.71 0.73 102.64 111.85 328.49 167.63 189.64
Unallocated Corporate 10.66 5.14 74.06 21.74 68.55
Liabilities
Total Liabilities 113.30 116.99 402.55 189.37 258.19

Capital Expenditure 15.23 17.68 6.23 50.35 0.64 15.58 27.32 28.27 20.95 2.74 2.67 14.44 24.94 14.67 9.81 0.52 1.89 - 6.47 2.76 34.00 61.33 59.44 92.44 15.95
Unallocated Capital - 7.00 - 23.15 -
Expenditure

Total Capital Expenditure 34.00 68.33 59.44 115.59 15.95

Net Capital Employed 77.99 119.6 410.47 519.1 681.06 56.81 79.36 95.31 101.0 88.81 38.96 18.64 165.23 65.46 60.78 4.45 2.99 1.99 5.67 9.34 178.21 220.66 673.00 691.31 839.99
7 3 5

188
 Particulars Financing & Investment Investment Banking & Related Services Brokerage (Equity, Commodities, Currency including Wealth Management, Insurance Broking, Financial Total
Depository Services) & related services, Planning, Distribution and related services
2005- 2006- 2007- 2008 2009 2005 2006- 2007- 2008- 2009 2005 2006 2007 2008 2009 2005- 2006- 2007- 2008- 2009 2005 2006 2007 2008 2009
06 07 08 -09 -10 -06 07 08 09 -10 06 -07 -08 -09 -10 06 07 08 09 -10 -06 -07 -08 -09 -10

Depreciation/Amortization 0.27 2.11 4.62 4.02 8.46 0.94 7.83 10.43 10.02 8.54 0.81 4.03 7.52 13.28 8.72 1.08 3.64 0.91 1.85 2.81 3.10 17.61 23.48 29.17 28.53
Unallocated Depreciation - 0.91 1.11 0.90 0.31
Total Depreciation 3.10 18.52 24.59 30.07 28.84

Non-cash expenses 0.04 0.12 0.03 0.05 11.42 - - 2.44 2.62 3.16 0.27 0.11 0.10 5.44 3.07 0.13 - 0.34 0.01 0.30 0.44 0.23 2.91 8.12 17.95
included in
segment expenses
for arriving at
segment results

* excluding Miscellaneous Expenditure (to the extent not written off or adjusted) amounting to Rs. 9.38 million.
Notes:

i) Business Segments: - The business segment has been identified on the basis of the services of the group. Accordingly, the group has identified “Financing & Investment”,
“Investment Banking & related Services”, “ Brokerage (Equity, Commodities & Currency including Depository Services) & related services,” and “Wealth Management,
Insurance Broking, Financial Planning, Distribution and related Services” as business segments

Financing & Investment: consists of financing of loans and investments in shares and securities

Investment Banking & related services: consists of financial consultancy, professional fees and debt syndication.

Brokerage (Equity, Commodities & Currency including Depository Services) & related services: Consists of Brokerage and related Services

Wealth Management, Insurance Broking, Financial Planning, Distribution and related services: Consists of Brokerage from Insurance activities, distribution and Financial
planning Services.

ii) Geographical Segments: - The Company operates in only one geographical segment i.e. ‘Within India’ and no separate information for geographical segment has been
given.

189
Consolidated Statement of Dividend Paid – Annexure – 9

EQUITY CAPITAL For the years ended 31st March

2006 2007 2008 2009 2010

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 2,03,10,500 2,03,10,500 1,93,10,500

Rate of Dividend (%) 10% 10% 10% - -

Dividend Paid (Rs. in Million)

Proposed Dividend 10.00 - - - -
Interim Dividend - 10.00 10.00 - -
Tax on Proposed Dividend 1.40 - - - -
Tax on Interim Dividend - 1.41 1.70 - -
Total 11.40 11.41 11.70 - -

PREFERENCE CAPITAL For the years ended 31st March

2006 2007 2008 2009 2010

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

Rate of Dividend (%) - 5.00% - - -

Dividend Paid (Rs. in Million)

Amount of Dividend - 0.45 - - -
Tax on Dividend - 0.07 - - -
Total - 0.52 - - -

190
Capitalization Statement – Annexure -10
(Rs. in Million)

Particulars As at 31st
March, 2010
Pre-issue Adjusted for the Public
Issue
Borrowings
Short-Term* 0.06
Long-Term 40.05
Total 40.11
Shareholders' Funds
Share Capital 193.11
Reserves & Surplus 731.94 **
See note below
S
Less: Miscellaneous expenditure (to the extent not 9.38
written off or adjusted)
Total 915.67
Long-term Debt/Equity ratio 0.04:1
* Represents interest accrued & due and deferred payment credit under Hire Purchase from a Scheduled Bank.
**Restated Reserves
Note:
Share Capital and Reserves & Surplus post issue can be calculated only on conclusion of the book building
process.

191
Consolidated Statement of Restated Earning Per Share – Annexure – 11A
(Rs. in Million)
For the years ended 31st March
2006 2007 2008 2009 2010

Restated Profit/(Loss) after Tax 37.18 89.53 161.35 87.01 244.50

Less: Preference dividend for the - 0.52 - - -
year (including dividend tax)
Profit available for Equity 37.18 89.01 161.35 87.01 244.50
Shareholders
Weighted average number of 1,50,17,047* 1,57,00,000* 1,68,58,923 2,03,10,500 1,94,28,308
outstanding equity Shares
during the year
Nominal Value of Equity shares 10 10 10 10 10
(Rs.)
Basic / diluted Earning per share 2.48 5.67 9.57 4.28 12.58
(Rs.)
* Adjusted for Bonus Shares issued in the subsequent year.

192
Consolidated Statement of Restated Fixed Assets – Annexure – 11B
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

A. Tangible Assets
Land 3.78 4.02 4.02 4.02 4.02
Office Premises 45.34 54.84 86.07 86.82 87.39
Computers 7.06 21.72 28.94 43.02 30.04
Furniture & Fixtures 5.60 31.63 34.56 34.81 30.51
Office Equipments 3.11 11.67 15.29 16.54 18.43
Vehicles 3.09 3.44 4.84 3.97 3.82
Total 67.98 127.32 173.72 189.18 174.21

B. Intangible Assets
Goodwill on Consolidation 23.18 23.18 23.18 46.33 46.33
Software 23.67 28.61 41.64 44.45 32.15
Business Rights 0.50 4.02 4.02 4.52 4.52
Web Application Portal - - - 2.34 4.19
Copy Rights - - - 50.00 50.00
- Right on Web Application Portal -
Personal Resource Planning
Total 47.35 55.81 68.84 147.64 137.19

Gross Block (A+B) 115.33 183.13 242.56 336.82 311.40

Less : Accumulated Depreciation/Amortisation 22.43 40.80 65.36 94.74 99.64

Net Block 92.90 142.33 177.20 242.08 211.76

Add : Capital Work in Progress (including Capital Advances) - - - 19.91 23.53

Total 92.90 142.33 177.20 261.99 235.29

193
Consolidated Statement of Restated Investments – Annexure – 11C
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Unquoted Investments

Equity Shares 8.40 4.71 - 15.70 13.61

Units in Mutual Funds 9.29 9.73 6.93 71.55 0.34
Preference Shares - - 0.12 0.12 -
Others 1.73 31.73 4.73 1.73 1.73

Total 19.42 46.17 11.78 89.10 15.68

Quoted Investments

Equity Shares 2.13 1.99 64.08 61.04 71.23

Grand Total 21.55 48.16 75.86 150.14 86.91

Market Value of Quoted Investments 3.01 2.70 71.90 28.87 71.36

Aggregate NAV of Units of Mutual Funds 9.40 9.77 7.10 71.69 0.34

194
Consolidated Statement of Restated Debtors – Annexure – 11D
(Rs. in Million)
Age wise Break-up As at 31st March
2006 2007 2008 2009 2010
Considered good

Debts outstanding for a period

exceeding six months
Secured 0.09 0.17 - 0.88 0.02
Unsecured 1.07 5.96 3.29 8.98 1.40

Sub Total 1.16 6.13 3.29 9.86 1.42

Other Debts
Secured 26.59 16.21 101.73 15.31 77.73
Unsecured 26.50 6.03 125.52 51.81 10.09

Sub Total 53.09 22.24 227.25 67.12 87.82

Total 54.25 28.37 230.54 76.98 89.24

195
Consolidated Statement of Restated Cash & Bank Balances – Annexure – 11E
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

Cash in Hand 0.58 0.78 0.17 0.48 0.17

Cheques in Hand - - - - 0.01

Balances with Scheduled Banks

On Current Accounts 15.18 15.21 50.27 96.67 75.73
On Fixed Deposits 9.63 24.85 79.86 63.73 117.19

Total 25.39 40.84 130.30 160.88 193.10

196
Consolidated Statement of Restated Loans & Advances – Annexure – 11F
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Considered good

Loans (Bearing Interest)

-Secured - 3.96 280.30 142.93 471.71
-Unsecured 45.65 54.61 23.86 110.39 -
Sub-Total 45.65 58.57 304.16 253.32 471.71

Advances - (Unsecured)
Advances recoverable in cash or in kind or for value to 20.51 3.43 7.05 26.73 6.01
be received or pending adjustments
Advance Payment of Income Tax & Tax Deducted at 1.20 - 4.83 10.81 11.09
Source (Net of Provision)
Advance Fringe Benefit Tax (Net of Provisions) - - - 0.02 -
MAT Credit Entitlement - 5.96 0.15 0.90 -
Deposits with Government Authorities and others 54.96 67.12 179.77 50.12 72.44
Sub-Total 76.67 76.51 191.80 88.58 89.54

Total 122.32 135.08 495.96 341.90 561.25

197
Consolidated Statement of Restated Secured Loans– Annexure – 11G
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Term Loans

From Scheduled Banks - - 63.36 3.50 40.05

Infrastructure Leasing & Financial Services Ltd - - 16.83 - -
DSP Merrill Lynch Limited - - 60.00 - -
Interest accrued and due - - 4.42 0.04 0.03
Deferred payment credit under hire purchase from a 1.49 0.96 0.83 0.26 0.03
scheduled Bank

Total 1.49 0.96 145.44 3.80 40.11

Details of terms & conditions of Secured Loans outstanding as on 31st March, 2010:

Name of Sanctioned Outstanding Rate of Repayment Nature of

Lender Amount as on Interest Terms Securities
31st March
2010

Scheduled
Banks

HDFC 50.00 40.00 8.50% 12 months Partly secured by pledge of Fixed

Bank* deposits receipts of Rs. 20 Millions
by Microsec Capital Limited,
Personal guarantee of two directors
namely Mr. B. L. Mittal and Mr.
Ravi Kant Sharma of Microsec
Capital Limited who are also the
directors of the holding company
and Corporate guarantee of the
holding Company.

State Bank 125.00 0.08 12.00% 5 years Mortgage of Land & Building of
of India** Microsec Technologies Limited.

Deferred 0.63 0.03 11.48% 3 years Motor Car

payment -
credit 12.4
8%

Total 40.11
* Loan has been taken for the purpose of giving margin to The National Stock Exchange.
** For the purpose of construction of office building of Microsec Technologies Limited.

198
Consolidated Statement of Restated Unsecured Loans– Annexure – 11H
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

From Body Corporates 8.70 17.70 - - -

Total 8.70 17.70 - - -

199
Consolidated Statement of Restated Current Liabilities & Provisions– Annexure – 11I
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010
Current Liabilities
Sundry Creditors for goods, services, expenses etc.

Dues to Micro and Small Enterprises - - - - -

Dues to Others 12.85 11.37 32.64 13.90 10.39

Margin from Clients 38.06 62.53 87.50 57.20 75.86

Amount Payable to Clients 15.30 11.78 101.11 72.18 97.14

Amount Payable to Stock Exchanges 15.15 - - - 1.58

Security Deposits 1.29 2.56 5.47 7.82 8.43

Other liabilities 2.13 1.45 5.45 3.38 2.65

Temporary Book overdraft from Scheduled Banks 3.76 6.85 16.40 13.70 -

Sub Total 88.54 96.54 248.57 168.18 196.05

Provisions
Taxation (Net of Advance Payments) - 1.73 - - -
Leave Encashment - - 0.13 0.28 0.36
Gratuity - 0.06 0.94 0.43 0.61
Proposed Dividend 10.00 - - - -
Tax on Proposed Dividends 1.40 - - - -

Sub Total 11.40 1.79 1.07 0.71 0.97

Total 99.94 98.33 249.64 168.89 197.02

200
Restated Statement of Share Capital – Annexure – 11J

Particulars As at 31st March

2006 2007 2008 2009 2010

Authorised Share Capital

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 3,50,00,000 3,50,00,000 3,50,00,000

Equity Share Capital (Rs. in Millions) 100.00 100.00 350.00 350.00 350.00

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

Preference Share Capital (Rs. in - 27.00 - - -
Millions)

Total Authorised Capital (Rs. in 100.00 127.00 350.00 350.00 350.00

Millions)

Issued, Subscribed and Paid-up

No. of Equity Shares of Rs. 10 each 1,00,00,000 1,00,00,000 2,03,10,500 2,03,10,500 1,93,10,500
(fully paid)

Equity Share Capital (Rs. in Millions) 100.00 100.00 203.11 203.11 193.11

No. of Preference Shares of Rs. 10 each - 27,00,000 - - -

(fully paid)

Preference Share Capital (Rs. in - 27.00 - - -

Millions)

Total Issued, Subscribed and Paid- 100.00 127.00 203.11 203.11 193.11
up Capital (Rs. in Millions)

201
Consolidated Statement of Restated Reserves & Surplus– Annexure – 11K
(Rs. in Million)
Particulars As at 31st March
2006 2007 2008 2009 2010

Securities Premium Account 25.87 25.73 266.50 266.46 151.47

Capital Reserve on Consolidation 3.65 3.65 3.65 3.65 3.65

Capital Redemption Reserve - - - - 10.00

Debenture Redemption Reserve 0.13 1.33 7.96 8.51 9.76

Reserve under Section 45-IC of the 2.93 12.50 32.00 42.18 65.53
Reserve Bank of India Act,1934

Surplus as per Profit and Loss Account 47.00 113.83 205.35 281.63 491.53

Total 79.58 157.04 515.46 602.43 731.94

202
Consolidated Statement of Restated Income from Operations– Annexure – 11L
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Brokerage & Related Income 21.64 65.34 182.01 148.93 201.20

Insurance Brokerage Income 0.95 3.76 4.16 7.87 13.74

Interest on Loans 2.19 2.83 41.37 57.02 65.23

Investment Banking Revenue 18.97 72.49 113.83 115.70 149.96

Profit on Sale/Redemption of Investments (Net) 25.82 40.84 66.24 35.90 86.18

Dividend from Investments - 0.28 0.04 0.83 1.19

Service Charges - - - 0.30 41.80

Income/(Loss) from Trading in Securities (0.04) 5.64 (3.25) (0.44) 0.30

Penal Charges Collected from clients - 1.27 6.71 12.63 11.31

Total 69.53 192.45 411.11 378.74 570.91

203
Consolidated Statement of Restated Other Income– Annexure – 11M
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Interest on Bank Deposits etc. 0.56 2.51 12.59 10.25 11.27

Unspent liabilities no longer required, written back 0.03 - 0.01 0.05 0.51
Profit on sale/discard of Fixed Assets (net) - - - - 2.04
Miscellaneous Income 0.49 0.06 2.67 0.29 -

1.08 2.57 15.27 10.59 13.82

Note:
All the items of Other Income as given above are generally recurring in nature and are related to the business
activity carried out by the Company and its subsidiaries.

204
Consolidated Statement of Restated Operating Expenses– Annexure – 11N
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Depository Transaction charges 0.99 1.37 2.23 1.92 2.37

Membership Fees and Subscription 0.35 0.47 0.69 0.84 1.35
Software Maintenance charges 1.19 2.94 1.37 7.25 3.62
Stock Exchange charges 0.87 4.31 10.05 4.64 6.31
SEBI Turnover Fees 0.89 0.26 1.50 0.26 0.22

4.29 9.35 15.84 14.91 13.87

205
Consolidated Statement of Restated Staff Cost– Annexure – 11O
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Salary, Bonus etc. 4.68 23.70 60.81 95.20 115.54

Gratuity 0.25 0.08 0.97 0.40 1.21
Employees' welfare expenses 0.68 1.48 1.98 4.66 4.05
Contribution to ESI - 0.07 0.23 0.32 0.34

5.61 25.33 63.99 100.58 121.14

206
Consolidated Statement of Restated Administrative & Other Expenses– Annexure – 11P
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

Advertisement & Publicity 0.15 2.14 6.27 4.74 1.93

Communication Expenses 0.84 3.33 6.49 7.15 6.95
Repairs & Maintenance - Others 0.96 2.92 3.57 4.60 4.10
Repairs & Maintenance - Buildings - 0.14 0.17 0.08 -
Rates & Taxes 0.15 0.43 3.93 0.58 0.83
Rent 0.18 1.36 2.51 3.02 4.39
Insurance Premium 0.01 0.41 0.39 0.57 0.45
Printing & stationery 0.43 2.90 4.24 2.64 3.42
Bank & Demat charges 0.21 1.04 1.38 1.27 0.75
Travelling & Conveyance 0.42 1.82 2.91 3.95 4.07
Legal & Professional fees 0.15 2.13 10.03 2.69 4.42
Irrecoverable debts/advances written off 0.40 0.11 2.90 8.07 6.68
Filing Fees - 0.01 0.05 0.01 0.08
Penal Charges - - - 39.50 0.50
Loss on assignment of receivables - - - - 11.27
Director Sitting Fees - - 0.13 0.15 0.15
Postage & Courier Expenses 0.11 0.49 1.89 1.93 1.89
Motor Car Expenses - - 0.10 0.40 0.35
Loss on Sale of Fixed Assets - 0.12 0.01 0.05 -
Licence Fees - - - 0.05 0.04
Auditors' Remuneration - - - - -
As Auditors - - - - -
- Audit Fees 0.15 0.25 0.25 0.27 1.63
- Tax Audit 0.03 0.05 0.05 0.05 0.03
- In other capacity for Certificates and other services 0.02 - - - 1.07
- Out of Pocket Expenses - - - - 0.02
Commission Paid - - - 0.04 -
Research & Knowledge Processing Charges - 0.33 - - -
Miscellaneous expenses 0.36 2.22 1.49 1.49 2.41
Service Charges
- Market Research & Analysis services 10.78 30.00 48.13 23.28 31.91
- Facility Services etc. 1.12 2.76 3.41 4.93 7.35
Electricity Charges 0.17 1.32 2.25 2.73 3.11
Membership Fees - - - 0.03 0.02
Software Expenses - - 0.02 0.08 -
Miscellaneous expenditure written off 0.04 - - - -

16.68 56.28 102.57 114.35 99.82

207
Consolidated Statement of Restated Interest Expenses– Annexure – 11Q
(Rs. in Million)
Particulars For the years ended 31st March
2006 2007 2008 2009 2010

On Fixed Loans 0.25 0.11 6.47 12.16 5.00

On Working Capital Facilities and other Loans - - 2.81 2.63 6.84
Miscellaneous - 0.02 0.84 0.05 0.83

Total 0.25 0.13 10.12 14.84 12.67

208
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION

The following discussion and analysis of our financial condition and results of operations is based upon, and
should be read in conjunction with, our restated consolidated financial statements as of and for years ended
March 31, 2006, 2007, 2008, 2009 and 2010, including the schedules, annexures and notes thereto and the
reports thereon, in “Financial Statements” on page 116 of this Red Herring Prospectus. These financial
statements are based on our audited consolidated financial statements and are restated in accordance with
paragraph B(1) of Part II of Schedule II of the Companies Act and the SEBI Regulations.

The audit committee of the Board of MFSL was constituted on November 3, 2007. The financial statements of
MFSL or any of the subsidiaries have been approved by their respective Boards, and where applicable, by the
earlier audit committee. Our Subsidiary Microsec Capital Limited has two wholly-owned subsidiaries –
Microsec Insurance Brokers Limited and Microsec Commerze Limited on and from Fiscal 2003 and Fiscal
2006 respectively. Our Subsidiary Microsec Technologies Limited acquired PRP Technologies Limited with
effect from February 9, 2009 and is a wholly owned subsidiary of MTL on and from Fiscal 2009.

The following discussion and analysis contains forward-looking statements that reflect our current views with
respect to future events and financial performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of any number of factors, including those set forth in
“Forward Looking Statements” and “Risk Factors” on pages ix and x of this Red Herring Prospectus
respectively.

BUSINESS OVERVIEW

We are a well-diversified financial services company providing an array of services including investment
banking, retail brokerage, wealth management, insurance broking, Depository-participant and financing services
to corporate / institutional / high net worth individual clients. We are headquartered in Kolkata and our products
and services are distributed through 239 business locations spread across 16 states.

The Microsec Group operate through Microsec Financial Services Limited (“MFSL”) and its Subsidiaries.
MFSL, the ultimate holding company of all the Subsidiaries, is an NBFC, registered with the RBI and its main
business includes giving loans against shares and rendering advisory services to clients. Our Subsidiaries are
Microsec Capital Limited (“MCap”), Microsec Resources Private Limited (“MRPL”), Microsec Technologies
Limited (“MTL”), Microsec Insurance Brokers Limited (“MIBL”), Microsec Commerze Limited (“MCL”) and
PRP Technologies Limited (“PRP”).

The Microsec Group operates through Microsec Financial Services Limited and it’s Subsidiaries. MCap and
MRPL are wholly owned subsidiaries of MFSL. Further, MIBL and MCL are wholly owned subsidiaries of
MCap. 80% of the shareholding in MTL is held by MFSL and MCap holds 20% of MTL. PRP Technologies
Limited is a wholly owned subsidiary of MTL.

The Microsec Group employs approximately 813 employees as of June 30, 2010. In Fiscal 2009 and 2010, our
consolidated total income was Rs. 389.33 million and Rs. 584.73 million respectively. In Fiscal 2009 and 2010,
our consolidated profit after taxation was Rs. 87.01 million and Rs. 244.50 million respectively.

Our group-wise results of operations for the year ended March 31, 2010 is outlined below.
(In Rs. million)
Entity Gross Revenue Profit After Tax
MFSL 180.98 110.20
MCap 233.99 26.80
MRPL 17.08 5.62
MCL 44.15 29.12
MIBL 14.51 1.47
MTL 54.03 36.93
PRP 44.18 28.72
Total 588.92 238.86

209
The following table summarizes our revenues from each of the Company and its subsidiaries for the fiscal years
ended March 31, 2010 2009 and 2008.
Rs. in Million
2008 2009 2010

Revenue % PAT % Revenue % PAT % Revenue % PAT %

MFSL 127.77 29.97% 77.03 48.96% 142.40 36.57% 56.96 69.19% 180.98 30.73% 110.20 46.14%

MCAP 245.09 57.48% 57.68 36.67% 215.21 55.27% 20.98 25.49% 233.99 39.73% 26.80 11.22%

MRPL 20.02 4.70% 8.34 5.30% 8.51 2.19% 0.40 0.49% 17.08 2.90% 5.62 2.35%

MCL 16.50 3.87% 9.68 6.15% 5.84 1.50% 0.13 0.16% 44.15 7.50% 29.12 12.19%

MIBL 4.53 1.06% 0.82 0.52% 8.80 2.26% 2.03 2.46% 14.51 2.46% 1.47 0.62%

MTL 12.47 2.92% 3.77 2.40% 8.29 2.13% 1.79 2.17% 54.03 9.18% 36.93 15.46%

PRP - - - - 0.31 0.08% 0.03 0.04% 44.18 7.50% 28.72 12.02%

426.38* 157.32* 389.36* 82.32* 588.92* 238.86

* Without inter company adjustments

The following table summarizes our revenues from each of our business activities for the fiscal years ended
March 31, 2010, 2009 and 2008.

Particulars Fiscal Year Ended March 31,

2010 2009 2008
Rs. % Rs. % Rs. %
(millions) (millions) (millions)
Financing and Investment 152.90 26.78 93.31 24.64 104.40 25.39
Investment banking and related services 149.96 26.27 115.70 30.55 113.83 27.69
Brokerage (equity, commodity and 212.51 37.22 161.56 42.66 188.72 45.90
currency including depository services)
and related services
Wealth management, insurance broking, 55.54 9.73 8.17 2.15 4.16 1.02
financial planning, distribution and
related services
Total 570.91 100.00 378.74 100.00 411.11 100.00

FACTORS AFFECTING RESULTS OF OPERATIONS

Our financial condition and results of operations are affected by numerous factors. We believe the following are
of importance.

The income from brokerage services is driven principally by the number of active clients and the volume of
business done by them. Client growth has been a significant driver of revenue growth in our broking business.
Growth in total client numbers has been driven primarily by our increased geographical presence, and enhanced
skilled and competent trade and execution teams aided by well structured research team.

Dependence on the income of MFSL

The Company is into business of providing loans against shares (LAS) and advisory services. The LAS business
is dependent upon the resource availability with the Company both through its own capital and borrowed
capital. The leverage of borrowed capital is very important to the bottom line of the Company as the borrowed
resources offer an opportunity for interest arbitrage. The revenue stream from advisory service depends upon
our ability to successfully execute the assignments.

Dependence on the business of MCap

MCap carries on the business of, equity broking, consultancy and depositories, merchant banking and other
investment banking activities. MCap contributed 57.48%, 55.27% and 39.73% of our total consolidated
revenues for the year ended March 31, 2008, March 31, 2009 and March 31, 2010 respectively. We are
substantially dependent on the business of MCap and any increase or decrease in MCap’s revenues and profit

210
margins may cause our consolidated results to increase or decrease sizably. In addition, our results are also
dependent on our equity brokerage business, where market volatility at times affects the business volumes. In
other words, the business of MCap is to a large extent dependant upon the given state of capital markets in
India. Our strategy is to actively grow our other lines of businesses also so that any decline in our capital market
business should therefore not affect our overall financial condition and operating results. The increased thrust on
fund-based activity shall provide us a large insulation from capital market fluctuations in our business.

Competition

We face significant competition from other Indian and foreign brokerage houses, investment banks, and public
and private sector commercial banks operating in the markets in which we operate. In recent years, international
banks have also entered these markets. Some of these firms have greater resources, a longer operating history
(than in case of our business) and / or a more widely recognised brand than us, which may give them a
competitive advantage. Our ability to grow our revenues will depend on demand for our products and services in
preference to those of our competitors. We can always differentiate ourselves favourably from our competitors
only on our unique customer segmentation, product capabilities and our service conditions to clients.

Stock market trends

The merchant banking and equity broking business in the Microsec Group is dependent on favourable capital
market conditions and other factors that affect the volume of stock trading in India. In recent years, the Indian
and world securities markets have fluctuated considerably. The Indian stock markets witnessed a strong
declining trend in the Fiscal 2009. There are many factors outside our control which may offset future increases
or result in a decline in equity-broking volumes. However, the increasing thrust of the Microsec Group on fund-
based activities should provide adequate guard from any decline in capital-market related revenues.

Growth in the Indian economy

General economic conditions in India have a significant impact on our consolidated results of operations. Fiscal
2009 has been a difficult year for the global economy and for India in its efforts to sustain the new found growth
momentum of its economy. In the second half of the year, a crisis hit the financial markets in the industrialized
economies, eventually pushing them into a recession. Most emerging market slowed down significantly and
India has also been affected. However, the Indian economy has begun to stabilize. The second quarter
improvement is essentially the outcome of policy induced stimulus. Both domestic and external financing
conditions are on the upturn. Capital inflows have revived. Liquidity conditions have remained easy and interest
rates have softened in the money and credit markets. At the same time, there are several negative indications.
There are concerns that the recovery is fragile. Private consumption demand is yet to pick up. Services sector
growth remains below trend. We believe growth in the overall economy has driven, and will drive, the
underlying demand for investment products and services both in terms of the availability of capital for
investment and the availability of such products and services.

Geographical expansion and new branch openings

We deliver our products and services through multiple business locations. As at June 30, 2010, we had 239
business locations spread across 16 states. Our increased geographical spread has contributed to increased net
revenues.

Regulatory developments

We are regulated by the Companies Act and some of our activities are subject to supervision and regulation by
statutory and regulatory authorities including the SEBI, FMC, RBI, CDSL, NSDL, IRDA and Stock and
Commodity exchanges. For more information, see “Regulations and Policies” on page 73 of this Red Herring
Prospectus. We are therefore subject to changes in Indian law, as well as to changes in regulations, government
policies and accounting principles.

Recruitment and retention of employees

We are dependent on our Directors, senior management and other key personnel. There is high demand in the
Indian financial services industry for senior management and qualified employees and we must reward
employees in line with the market to remain competitive and to retain as well as attract well-qualified

211
individuals. In addition, our employee base has increased as our network has grown and as we have entered into
new business areas, including distribution business which requires hiring of a number of qualified personnel.

New business products

We have recently expanded our business offerings to include wider areas of corporate consultancy, Portfolio
Management Service and distribution of third party savings products. The competitive edge of the organisation
can be maintained only if it comes out with innovative financial products that the market may demand at any
given point of time. This offers a major challenge which our organisation would like to meet through its
professional acumen.

Technology

We recognise the need to have adequate technology in place across our whole network to allow customers to
avail of advanced trading systems, real time information and access to research reports online. We expect that
advances in technology will enable us to provide a more efficient trade execution and ancillary services to our
customers, which is expected to have a positive impact on our revenues, although this may be partially offset by
initial capital investment costs.

For further details, see “Risk Factors”, “Our Business” and “Industry Overview” on page x, 59, and 53
respectively of this Red Herring Prospectus.

DISCUSSION ON RESULTS OF OPERATIONS

The following table sets forth select financial data from our restated consolidated profit and loss accounts, for
the year ended March 31, 2006, 2007, 2008, 2009 and 2010. Our historical results presented below are not
necessarily indicative of the results that may be expected for any other future period.

( Rs. in million, except for percentages)

Year ended March 31,

2006 2007 2008 2009 2010

Rs. % of Rs. % of Rs. % of Rs. % of Rs. % of Total
Total Total Total Total Income
Income Income Income Income
Income
Financing and 27.97 39.61 49.59 25.42 104.40 24.49 93.31 23.96 152.90 26.15
investment
Investment 18.97 26.87 72.49 37.17 113.83 26.70 115.70 29.72 149.96 25.65
banking and
related services
Brokerage 21.64 30.65 66.61 34.16 188.72 44.26 161.56 41.50 212.51 36.34
(equity,
commodities &
currency
including
depository
services) and
related services
Wealth 0.95 1.34 3.76 1.93 4.16 0.97 8.17 2.10 55.54 9.50
management,
insurance
broking,
financial
planning,
distribution
and related
services
Income from 69.53 98.47 192.45 98.68 411.11 96.42 378.74 97.28 570.91 97.64
operation
Other income 1.08 1.53 2.57 1.32 15.27 3.58 10.59 2.72 13.82 2.36
Total income 70.61 100.00 195.02 100.00 426.38 100.00 389.33 100.00 584.73 100.00

212
 Year ended March 31,

2006 2007 2008 2009 2010

Rs. % of Rs. % of Rs. % of Rs. % of Rs. % of Total
Total Total Total Total Income
Income Income Income Income
Expenditure
Operating 4.29 6.07 9.35 4.80 15.84 3.71 14.91 3.83 13.87 2.37
expenses
Staff cost 5.61 7.95 25.33 12.99 63.99 15.01 100.58 25.84 121.14 20.72
Administrative 16.68 23.62 56.28 28.86 102.57 24.06 114.35 29.37 99.82 17.07
and other
Expenses
Interest 0.25 0.35 0.13 0.06 10.12 2.37 14.84 3.81 12.67 2.17
Depreciation / 3.10 4.39 18.52 9.50 24.59 5.77 30.07 7.72 28.84 4.93
Amortization
Total 29.93 42.38 109.61 56.21 217.11 50.92 274.75 70.57 276.34 47.26

Net Profit 40.68 57.62 85.41 43.79 209.27 49.08 114.58 29.43 308.39 52.74
before tax
Provision for
taxation:
Current tax 1.45 2.05 7.77 3.98 34.35 8.06 18.38 4.72 59.51 10.18
Deferred tax 1.94 2.75 (6.23) (3.20) 10.53 2.46 9.21 2.37 4.38 0.75
charge/ (credit)
Fringe benefit 0.11 0.16 0.30 0.15 0.50 0.12 0.67 0.17 - -
tax
MAT credit - - (5.96) (3.05) 2.54 0.60 (0.69) (0.18) - -
entitlement
Net Profit 37.18 52.66 89.53 45.91 161.35 37.84 87.01 22.35 244.50 41.81
after tax

Revenues

Our revenues consist of income from operations and other income.

Income from Operations

Our income from operations consists principally of income from financing and investment, investment banking
and related services, brokerage (equity, commodity and currency, including depository services) and related
services and wealth management, insurance broking financial planning, distribution and related services.

Financing and Investment

Our income from financing and investment activities consists of interest income from loans and income from
investments in shares and securities. Interest income is earned from providing finance, including to our broking
customers through loans against shares. Our income from investments in shares and securities includes income
from the sale of such investments and dividend income.

Investment Banking and Related Services

Our income from investment banking and related services includes fee-based income from merchant banking,
corporate advisory (including research services), debt syndication services and professional fees.

Brokerage (Equity, Commodity and Currency, Including Depository Services) and Related Services

Our income from brokerage and related services includes income through our execution of third party trades in
equities, commodities and currencies on the exchanges and income from depository services. Our income from
broking services is derived as a percentage of the traded volume of equities, commodities and currencies. Our

213
income from depository services includes an annual maintenance fee and a transaction-based charge for
transactions undertaken by our depository clients.

Wealth Management, Insurance Broking, Financial Planning, Distribution and Related Services

Our income from wealth management, insurance broking, financial planning, distribution and related services
includes income from distribution of third-party insurance and mutual fund products and fees for wealth
management and financial planning services.

Other Income

Other income consists primarily of interest earned on bank deposits and subsidies received by our Subsidiary,
MTL.

Expenditure

Our expenditure primarily consists of operating expenses, staff costs, administrative and other expenses, interest
and depreciation/amortization.

Operating expenses

Our operating expenses primarily include charges for transactions on stock exchanges and commodity
exchanges, depository transaction charges payable to NSDL and CDSL and software maintenance charges,
including for technology upgradation.

Staff Costs

Our staff costs include salaries, bonuses, ex-gratia payments, directors’ remuneration, contributions to
applicable statutory funds and training costs.

Administrative and other expenses

The principal components of administrative expenses relate to costs associated with services charges for
marketing and other related supports, bank charges, advertisement, telephones, electricity, repairs, rent, rates
and taxes, printing and stationery, travelling, legal and professional fees, marketing expenses and audit fees.

Interest Expenses

Our interest expenses principally include interest and other fees charged by banks and financial institutions in
respect of credit facilities availed by us, including on our overdraft facilities.

Depreciation/Amortization

We provide for depreciation/amortization on our tangible and intangible assets.

Taxation

Current tax: Current tax is the provision made for income tax liability on the profits for the applicable financial
period in accordance with applicable tax laws.

Deferred tax: Deferred tax arises from timing differences between book profits (accounting) and taxable profits
that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is
measured using tax rates and laws that have been enacted or substantially enacted as of the date of our balance
sheet.

Fringe benefit tax: The Company, in accordance with applicable laws, had to pay fringe benefit tax until fiscal
2009.

MAT: MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the
Company will pay normal income tax.

214
COMPARISON OF FINANCIAL PERFORMANCE IN RECENT YEARS ON THE MAJOR HEADS
OF THE PROFIT AND LOSS ACCOUNT

Comparison of financial performance for the financial year ended March 31, 2010 with the financial year
ended March 31, 2009

Income from operations

Our income from operations increased by 50.74% from Rs.378.74 million during fiscal 2009 to Rs.570.91
million during fiscal 2010. The increase was primarily due to increase in our income from brokerage and related
services and investment banking services.

Financing and Investment

Our income from financing and investment increased by 63.86% from Rs. 93.31 million during fiscal 2009 to
Rs. 152.90 million during fiscal 2010. This increase was primarily due to increase in our profit from sale of
investment.

Investment Banking and Related Services

Our income from investment banking and related services increased by 29.61% from Rs.115.70 million during
fiscal 2009 to Rs. 149.96 million during fiscal 2010. This increase was due to an increase in fee based income
from corporate advisory services.

Brokerage (Equity, Commodity and Currency, Including Depository Services) and Related Services

Our income from brokerage and related services increased by 31.54% from Rs.161.56 million during fiscal 2009
to Rs. 212.51 million during fiscal 2010. This increase was primarily on account of increase in the volume of
brokerage transactions during this period.

Wealth Management, Insurance Broking, Financial Planning, Distribution and Related Services

Our income from wealth management, insurance broking, financial planning, distribution and related services
increased by 579.80% from Rs. 8.17 million during fiscal 2009 to Rs. 55.54 million during fiscal 2010. This
increase was primarily on account of increase in the distribution of insurance products and service charges.

Other income

Other income increased by 30.50% from Rs. 10.59 million during fiscal 2009 to Rs.13.82 million during fiscal
2010. This increase in other income was on account of increase in the amount invested in fixed deposits with
banks.

Expenditure

Our total expenditure increased marginally by 0.58% from Rs. 274.75 million during fiscal 2009 to Rs. 276.34
million during fiscal 2010.

Operating expenses

Our operating expenses decreased by 6.98% from Rs. 14.91 million during fiscal 2009 to Rs. 13.87 million
during fiscal 2010. The decrease in operating expenses was primarily on account of decrease in Software
Maintenance Charges.

Staff costs

Our staff costs increased by 20.44% from Rs. 100.58 million during fiscal 2009 to Rs. 121.14 million during
fiscal 2010. The increase in staff costs was on account of an increase in our employee strength from 352 as at
March 31, 2009 to 743 as at March 31, 2010. We recruited new employees during this period to service new
branches set up by us started by us during this period.

215
Administrative and other expenses

Our administrative and other expenses decreased by 12.71% from Rs. 114.35 million during fiscal 2009 to Rs.
99.82 million during fiscal 2010. The reason being a one-time penal charge of Rs. 39.50 million paid to a
customer for pre-calling a loan given to such customer in the fiscal 2009.

Interest Expenses

Our interest expenses decreased by 14.63% from Rs. 14.84 million during fiscal 2009 to Rs. 12.67 million
during fiscal 2010 due to repayment of loans availed of by us during this period.

Depreciation and Amortization

Our depreciation and amortization expenses decreased by 4.09% from Rs. 30.07 million during fiscal 2009 to
Rs. 28.84 million during fiscal 2010 due to sale of some fixed assets by us.

Net Profit Before Tax

Our net profit before tax increased by 169.15% from Rs. 114.58 million during fiscal 2009 to Rs. 308.39 million
during fiscal 2010. The increase in our net profit before tax primarily reflects increase in our income from
operations whereas the expenditure increased marginally.

Provision for taxation

Our provision for taxation, including deferred tax, fringe benefit tax and MAT, increased by 131.74% from Rs.
27.57 million during fiscal 2009 to Rs. 63.89 million during fiscal 2010, which was primarily on account of
increase in net taxable profit.

Profit After Tax

Our net profit after tax increased by 181.00% from Rs. 87.01 million during fiscal 2009 to Rs. 244.50 million
during fiscal 2010. The increase in our profit after tax primarily reflects the substantial increase in our income
from operations whereas the expenditure increased marginally.

Impact of Global Credit Crisis for the Fiscal Year Ended March 31, 2009

Fiscal 2009 was characterized by extremely volatile global financial markets, a significant lack of liquidity, loss
of confidence in the financial sector and disruptions in the credit markets. In light of these circumstances, our
management focused on consolidation of all business activities. We believe the above measures, together with
better risk management and recovery processes, helped to minimize our exposure during the global financial
crisis.

Comparison of financial performance for the financial year ended March 31, 2009 with the financial year
ended March 31, 2008

Income from operations

Our income from operations decreased by 7.87% from Rs.411.11 million during fiscal 2008 to Rs.378.74
Million during fiscal 2009. The decrease was primarily due to a reduction in our income from brokerage and
related services.

Financing and Investment

Our income from financing and investment decreased by 10.62% from Rs. 104.40 million during fiscal 2008 to
Rs. 93.31 million during fiscal 2009. This decrease was primarily due to a reduction in our loans against shares
business.

Investment Banking and Related Services

216
Our income from investment banking and related services increased by 1.64% from Rs.113.83 million during
fiscal 2008 to Rs. 115.70 million during fiscal 2009. This increase was due to an increase in fee based income
from corporate advisory services.

Brokerage (Equity, Commodity and Currency, Including Depository Services) and Related Services

Our income from brokerage and related services decreased by 14.39% from Rs.188.72 million during fiscal
2008 to Rs. 161.56 million during fiscal 2009. This reduction was primarily on account of reduction in the
volume of brokerage transactions during this period.

Wealth Management, Insurance Broking, Financial Planning, Distribution and Related Services

Our income from wealth management, insurance broking, financial planning, distribution and related services
increased by 96.39% from Rs. 4.16 million during fiscal 2008 to Rs. 8.17 million during fiscal 2009. This
increase was primarily on account of increase in the distribution of insurance products.

Other income

Other income decreased by 30.65% from Rs. 15.27 million during fiscal 2008 to Rs.10.59 million during fiscal
2009. This decrease in other income was on account of a reduction in the amount invested in fixed deposits with
banks.

Expenditure

Our total expenditure increased by 26.55% from Rs. 217.11 million during fiscal 2008 to Rs. 274.75 million
during fiscal 2009. This increase was primarily on account of increase in staff costs.

Operating expenses

Our operating expenses decreased by 5.87% from Rs. 15.84 million during fiscal 2008 to Rs. 14.91 million
during fiscal 2009. The decrease in operating expenses was primarily on account of decrease in revenues from
brokerage related services.

Staff costs

Our staff costs increased significantly by 57.18% from Rs. 63.99 million during fiscal 2008 to Rs. 100.58
million during fiscal 2009. The increase in staff costs was on account of an increase in our employee strength
from 331 as at March 31, 2008 to 352 as at March 31, 2009. We recruited new employees during this period to
service new branches set up by us started by us during this period.

Administrative and other expenses

Our administrative and other expenses increased by 11.48% from Rs. 102.57 million during fiscal 2008 to Rs.
114.35 million during fiscal 2009. The increase in administrative and other expenses was on account of a one-
time penal charge of Rs. 39.50 million paid to a customer for pre-calling a loan given to such customer.

Interest Expenses

Our interest expenses increased by 46.64% from Rs. 10.12 million during fiscal 2008 to Rs. 14.84 million
during fiscal 2009 due to an increase in the amount of loans availed of by us during this period.

Depreciation and Amortization

Our depreciation and amortization expenses increased by 22.29% from Rs. 24.59 million during fiscal 2008 to
Rs. 30.07 million during fiscal 2009 due to acquisition of new fixed assets by us.

Net Profit Before Tax

Our net profit before tax decreased by 45.25% from Rs. 209.27 million during fiscal 2008 to Rs. 114.58 million
during fiscal 2009. The reduction in our net profit before tax primarily reflected the decrease in our income from

217
operations and increase in staff costs.

Provision for taxation

Our provision for taxation, including deferred tax, fringe benefit tax and MAT, decreased by 42.47% from Rs.
47.92 million during fiscal 2008 to Rs. 27.57 million during fiscal 2009, which was primarily on account of
reduction in net taxable profit.

Profit After Tax

Our net profit after tax decreased by 46.07% from Rs. 161.35 million during fiscal 2008 to Rs. 87.01 million
during fiscal 2009. The reduction in our profit after tax primarily reflected the decrease in our income from
operations and increase in staff costs.

Comparison of financial performance for the financial year ended March 31, 2007 with the financial year
ended March 31, 2008

Income from operations

Our income from operations increased by 113.62% from Rs. 192.45 million during fiscal 2007 to Rs.411.11
million during fiscal 2008. The increase was primarily due to an increase in our interest on loans and income
from brokerage and related services.

Financing and Investment

Our income from financing and investment increased by 110.53% from Rs. 49.59 million during fiscal 2007 to
Rs. 104.40 million during fiscal 2008. This increase was primarily due to an increase in our loans against shares
business.

Investment Banking and Related Services

Our income from investment banking and related services increased by 57.03% from Rs.72.49 million during
fiscal 2007 to Rs.113.83 million during fiscal 2008. This increase was due to an increase in fee based income
from corporate advisory and debt syndication services.

Brokerage (Equity, Commodity and Currency, Including Depository Services) and Related Services

Our income from brokerage and related services increased by 183.32% from Rs.66.61 million during fiscal 2007
to Rs.188.72 million during fiscal 2008. This increase was primarily on account of an increase in the volume of
brokerage transactions during this period.

Wealth Management, Insurance Broking, Financial Planning, Distribution and Related Services

Our income from wealth management, insurance broking, financial planning, distribution and related services
increased by 10.64% from Rs. 3.76 million during fiscal 2007 to Rs. 4.16 million during fiscal 2008. This
increase was primarily on account of an increase in the distribution of insurance products.

Other income

Other income increased by 494.16% from Rs. 2.57 million during fiscal 2007 to Rs. 15.27 million during fiscal
2008. This increase in other income was on account of an increase in the amount invested in fixed deposits with
banks.

Expenditure

Our total expenditure increased by 98.07% from Rs. 109.61 million during fiscal 2007 to Rs. 217.11 million
during fiscal 2008. This increase was primarily on account of a significant increase in our interest expenses and
staff costs.

Operating expenses

218
Our operating expenses increased by 69.41% from Rs. 9.35 million during fiscal 2007 to Rs. 15.84 million
during fiscal 2008. The increase in operating expenses was primarily on account of increase in charges payable
to stock exchanges and commodity exchanges from Rs. 4.31 million during fiscal 2007 to Rs. 10.05 million
during fiscal 2008, as result of increase in the volume of brokerage transactions during this period.

Staff costs

Our staff costs increased significantly by 152.63% from Rs. 25.33 million during fiscal 2007 to Rs. 63.99
million during fiscal 2008. The increase in staff costs was on account of an increase in our employee strength
from 160 as at March 31, 2007 to 331 as at March 31, 2008. We recruited new employees during this period to
service new branches set up by us started by us during this period.

Administrative and other expenses

Our administrative and other expenses increased by 82.25% from Rs. 56.28 million during fiscal 2007 to Rs.
102.57 million during fiscal 2008. The increase in administrative and other expenses was on account of increase
in revenues of the Company and owing to legal and professional fees incurred towards the proposed initial
public offer of the Company.

Interest Expenses

Our interest expenses increased from Rs.0.13 million during fiscal 2007 to Rs. 10.12 million during fiscal 2008
due to an increase in the amount of loans availed of by us during this period.

Depreciation and Amortization

Our depreciation and amortization expenses increased by 32.78% from Rs.18.52 million during fiscal 2007 to
Rs. 24.59 million during fiscal 2008 due to acquisition of new fixed assets by us.

Net Profit Before Tax

Our net profit before tax increased by 145.02% from Rs.85.41 million during fiscal 2007 to Rs. 209.27 million
during fiscal 2008. The increase in our net profit before tax primarily reflected the increase in our income from
operations, which was partially offset by an increase in our staff costs and administrative expenses.

Provision for taxation

Our provision for taxation, including deferred tax, fringe benefit tax and MAT, increased from Rs. (4.12)
million during fiscal 2007 to Rs. 47.92 million during fiscal 2008. Our provision for taxation was negative, as
depicted in brackets above, during fiscal 2007, as we had recognized a MAT credit of Rs. 5.96 million and we
had a deferred tax credit of Rs. 6.23 million.

Profit After Tax

Our net profit after tax increased by 80.22% from Rs. 89.53 million during fiscal 2007 to Rs. 161.35 million
during fiscal 2008. The increase in our profit after tax primarily reflected the increase in our income.

Further, our profit after tax during fiscal 2007 was greater than our profit before tax for the same period, on
account of recognition of MAT credit and deferred tax credit, given effect during that year.

FINANCIAL CONDITION
(Rs. in Million)
Particulars As at March 31
2006 2007 2008 2009 2010

Fixed Assets
Gross Block 115.33 183.13 242.56 336.82 311.40
Less: Accumulated 22.43 40.80 65.36 94.74 99.64
depreciation/Amortization

219
 Particulars As at March 31
2006 2007 2008 2009 2010

Net Block 92.90 142.33 177.20 242.08 211.76

Capital Work in progress - - - 19.91 23.53
Total 92.90 142.33 177.20 261.99 235.29

Investments 21.55 48.16 75.86 150.14 86.91

Deferred Tax Assets (Net) - 3.06 - - -

Current Assets, Loans and

Advances
Inventories 0.06 2.06 6.57 - -
Sundry Debtors 54.25 28.37 230.54 76.98 89.24
Cash & Bank Balances 25.39 40.84 130.30 160.88 193.10
Other Current Assets 0.43 1.13 4.69 3.02 8.07
Loans and Advances 122.32 135.08 495.96 341.90 561.25
Total 202.45 207.48 868.06 582.78 851.66
Total Assets 316.90 401.03 1,121.12 994.91 1,173.86

Liabilities & Provisions

Secured Loans 1.49 0.96 145.44 3.80 40.11

Unsecured Loans 8.70 17.70 - - -
Current Liabilities 88.54 96.54 248.57 168.18 196.05
Provisions 11.40 1.79 1.07 0.71 0.97

Deferred Tax Liability 3.17 - 7.47 16.68 21.06

(Net)

Total Liabilities 113.30 116.99 402.55 189.37 258.19

Comparison of our financial condition as at March 31, 2010 with our financial condition as at March 31,
2009

Fixed Assets –The Gross Block of Fixed Assets decreased from Rs.336.82 million in fiscal 2009 to Rs. 311.40
million in fiscal 2010. The difference was mainly for following reasons:

x The decrease pertains to sale of Computer hardware and other assets.

Besides, one of Company’s Subsidiary, MTL, incurred capital expenditure of Rs. 21.27 million towards
construction of office premises in Kolkata. MCap also incurred capital expenditure of Rs. 2.26 million towards
fixed assets.

Investments –The investment decreased from Rs.150.14 million in fiscal 2009 to Rs.86.91 million in fiscal
2010. The difference was mainly on account of following reasons:

x Sale of investment in Mutual Funds by Rs.71.21million.

x This was set off by purchase of Equity Share (net) of Rs 10.19 million.

Current Assets, Loans & Advances - It increased from Rs.582.78 million to Rs.851.66 million. The difference
is mainly due to following reasons:

x Sundry debtors increased by Rs.12.26 million on account of increase in the business.

x Net increase in Cash & Bank Balances by Rs.32.22 million (refer cash flow).

220
 x Loans and advances increased by Rs.219.35 million mainly on account of increase in the disbursement
in loan against shares business. Deposits with Government and other Authorities increased by Rs.22.32
million.

Secured Loan – It increased by Rs.36.31 million on account of credit facility availed from Banks and Financial
Institutions, either on demand or as per payment terms.

Current Liabilities & Provisions – It increased from Rs.168.89 million to Rs.197.02 million. This is mainly
due to increase in margin money received from clients and also other dues payable to them.

Comparison of our financial condition as at March 31, 2009 with our financial condition as at March 31,
2008

Fixed Assets –The Gross Block of Fixed Assets increased from Rs.242.56 million in fiscal 2008 to Rs. 336.82
million in fiscal 2009. The difference was mainly for following reasons:

x We accounted for Goodwill of Rs.23.15 million which arose on acquisition of subsidiary - PRP
Technologies Limited.
x Acquisition of copyrights of Personal Resource Planning software for Rs.50 million
x Balance pertains to purchase of Computer hardware, software and other assets.

Besides, one of our subsidiary, MTL, incurred capital expenditure of Rs. 19.91 million towards construction of
office premises in Kolkata.

Investments –The investment increased from Rs.75.86 million in fiscal 2008 to Rs.150.14 million in fiscal
2009. The difference was mainly on account of following reasons:

x Acquisition of unquoted equity shares of Shringar Vinimay Private Limited, of Rs.15.70 million as a
result of amalgamation;
x Increase in investment in Mutual Funds by Rs.64.62 million.
x This was set off by sale of investment (net) of Rs 6.04 million.

Current Assets, Loans & Advances - It decreased from Rs.868.06 million to Rs.582.78 million. The difference
is mainly due to following reasons:

x Closing Inventory of 2007-08 of Rs.6.57 million sold during the year 2008-09.
x Sundry debtors decreased by Rs.153.56 million on account of receipt of payment.
x Net increase in Cash & Bank Balances by Rs.30.58 million (refer cash flow).
x Loans decreased by Rs.50.84 million on account of repayment demanded by us. Deposits with
Government & other Authorities decreased by Rs.129.65 million on account of release of margin
money from Stock exchanges.

Secured Loan – It decreased by Rs.141.64 million on account of repayment to Banks and Financial Institutions,
either on demand or as per payment terms.

Current Liabilities & Provisions – It decreased from Rs.249.64 million to Rs.168.89 million. This is mainly
due to decrease in margin money received from clients and also other dues payable to them.

Comparison of our financial condition as at March 31, 2008 with our financial condition as at March 31,
2007

Fixed Assets –The Gross Block of Fixed Assets increased from Rs.183.13 million to Rs.242.56 million. The
difference is mainly for following reasons:

x Purchase of Office Premises for Rs.31.23 million at Kolkata and Mumbai.

x Balance pertains to purchase of Software and other assets.

Investments – The investment increased from Rs.48.16 million to Rs.75.86 million. The difference is mainly
for following reasons:

221
 x Net increase in investment of Rs.62.09 million in quoted Equity Shares.
x This was set off by redemption of investments of Rs.27.00 million.

Current Assets, Loans & Advances - It increased from Rs.207.48 million to Rs.868.06 million. The difference
is mainly for following reasons:

x Inventory increased by Rs. 4.51 million.

x Sundry debtors increased by Rs. 202.17 million on account of increase in brokerage business.
x Net increase in Cash & Bank Balances by Rs.89.46 million (refer cash flow)
x Loans increased by Rs.245.59 million on account of increase in loans against shares.

Secured Loan – It increased by Rs.144.48 million on account of loan taken from Banks and Financial
Institutions for providing loan against shares to clients.

Unsecured Loan – It decreased by Rs.17.70 million due to repayment to Body corporate.

Current Liabilities & Provisions – It increased from Rs.98.33 million to Rs.249.64 million. This is mainly due
to increase in margin money received from clients and also other dues payable to them.

Non-Performing Assets

The table below sets forth our Gross NPA, Net NPA, amounts written off and provision made for the period
indicated.
(Rs. in Million)
Particulars As at March 31
2006 2007 2008 2009 2010

Gross NPA - - - - -
Net NPA - - - - -
Amount 0.40 0.11 2.90 8.07 17.95
written off
Provision - - - - -
made

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary liquidity requirements have been to extend loans, finance our own working capital needs and
capital expenditure. We require working capital to meet our requirement for funds in connection with our
payments in the ordinary course of our business. The need for having appropriate levels of trading exposure
fluctuates on a regular basis depending on the trading needs. To fund these costs, we currently rely principally
on our own cash flows from operations. As at March 31, 2010, MFSL had a consolidated Net-worth of Rs.
915.67 million, which was majorly deployed in fixed assets and giving of loans. As per the needs, we also
access short-term credit or overdraft facilities to meet margin requirements to fund short term working capital.

Cash Flows

The following table presents our restated consolidated cash flows for the year ended March 31, 2008, March 31,
2009 and March 31, 2010:
(Rs. in million)
Particulars Year ended Year ended Year ended
March 31, 2008 March 31, 2009 March 31, 2010
Net Cash generated from/ (used in) Operating (242.31) 286.17 131.48
Activities
Net Cash from generated from/ (used in) (114.45) (98.77) (53.57)
Investing Activities
Net Cash from generated from/ (used in) 391.21 (140.69) (99.15)
Financing Activities

222
Cash & Cash equivalent –Opening Balance 15.99 50.44 97.15
Cash & Cash equivalent –Closing Balance 50.44 97.15 75.91

Cash Flow from Operating Activities

During fiscal 2010, cash flow generated from Operating Activities was Rs.131.48 million. The cash flow
generated from operation was Rs.358.58 million before changes in working capital. This was further decreased
by Rs.168.25 million due to change in working capital and by income tax paid of Rs.58.85million. The decrease
in working capital was primarily due to increase in Sundry Debtors & Other receivables and Loans & Advances
by Rs.22.28 million & Rs.232.97 million respectively. The increase in current liabilities resulted in cash inflow
of Rs.23.77 million.

During fiscal 2009, cash flow generated from Operating Activities was Rs. 286.17 million. The cash flow
generated from operation was Rs. 156.24 million before changes in working capital. This was further increased
by Rs. 155.10 million due to change in working capital and offset by income tax paid of Rs.25.17 million. The
increase in working capital was primarily due to decrease in Sundry Debtors & Other Receivables and Loans &
Advances by Rs.147.16 million & Rs.160.82 million respectively. The decrease in current liabilities resulted in
cash outflow of Rs. 85.17 million.

During fiscal 2008, cash flow used in Operating activities was Rs. 242.31 million. We generated the positive
cash flow from operation of Rs. 241.07 million before changes in working capital. This was further decreased
by Rs. 445.23 million due to decrease in working capital and by Rs. 38.14 million due to income tax paid. The
decrease in working capital was primarily due to increase in Sundry Debtors & Other Receivables and Loans &
Advances by Rs. 208.62 million & Rs.361.87 million respectively. However, increase in current liabilities &
provisions contributed to cash inflow of Rs. 157.46 million.

Cash Flow from Investing Activities

Our cash flow used in investing activities was Rs.53.57 million during fiscal 2010. This was primarily due to
increase in the investment of Rs. 73.99 million in fixed deposits which was offset by Rs. 20.53 million due to
encashment of fixed deposits.

Our cash flow used in investing activities was Rs.98.77 million during fiscal 2009. This was primarily due to
acquisition of assets. We also encashed an investment of Rs. 16.30 million in fixed deposits.

Our cash flow used in investing activities was Rs.114.45 million during fiscal 2008. This was primarily due to
purchase of fixed assets and investment in Fixed Deposits of Rs.59.44 million and Rs.55.01 million
respectively.

Cash Flow from Financing Activities

Our cash flow used in financing activity was Rs.99.15 million in fiscal 2010. This primarily comprised of
buyback of Equity shares of Rs. 125.00 million and repayment of borrowings of Rs.1,712.59 million offset by
proceeds from borrowing Rs.1,748.90 million availed from time to time. We also paid finance charges of Rs.
5.16 million and IPO related expenses of Rs. 5.30 million during the period.

Our cash flow used in financing activity was Rs. 140.69 million in fiscal 2009. This primarily comprised of
repayment of borrowings of Rs.525.30 million offset by proceeds from borrowing Rs.388.05 million. We also
paid finance charges of Rs. 3.44 million during the period.

Our cash flow generated from financing activity was Rs. 391.21 million during fiscal 2008. The inflow
comprised of proceeds from fresh issue of shares Rs 312.98 million and borrowing of Rs.549.63 million
whereas the outflow was due to redemption of preference shares Rs.27 million, repayment of borrowings
Rs.427.28 million, payment of dividend (including tax on dividend) Rs.11.70 million and payment of finance
charges of Rs. 4.30 million during the period.

Contingent Obligations

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Our principal contingent obligations relate to guarantees given to the Exchanges and Regulatory Authorities by
banks in the ordinary course on our behalf for meeting, daily margin and other contractual commitments, against
which we have provided some counter-guarantees. The level of guarantees fluctuates on a regular basis in
connection with our trading and broking activity and the related requirements in respect thereof.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Unusual or infrequent events or transactions

Other than as described in this Red Herring Prospectus, particularly in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” the Company believes, there are no events that may be
described as unusual or infrequent events and transactions.

Significant economic/regulatory changes

The Group’s business is highly dependent on the regulatory environment. Most of the activities carried out by
the Group are regulated by SEBI, IRDA, RBI and other regulatory authorities and require prior registration in
most of the cases. The operations are regulated and are subject to periodic review/ inspection from regulatory
agencies and stock exchanges. Since the level of operations is dependent on the general economic conditions,
any changes in the economic conditions may affect the revenues and profitability of the Company. Other than as
described in this Red Herring Prospectus, particularly in “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, the Company believes, there are no significant
economic / regulatory changes that materially affect or are likely to affect the income from continuing
operations.

Known trends and uncertainties

Other than as described in this Red Herring Prospectus, in “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, the Company believes, there are no trends or
uncertainties that have or had or are expected to have a material adverse impact on revenues or income of the
Company from continuing operations.

Future relationship between costs and income

Other than as described in this Red Herring Prospectus, particularly in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations”, the Company believes, there are no known factors, which
will have a material adverse impact on the operation and finances of the Company and its subsidiaries, taken as
a whole.

New Products or business segments

Other than as described in this Red Herring Prospectus, particularly in “Our Business”, the Company is not
planning as of date for introducing any new products or business segments.

Seasonality of business

Our business to some extent is dependent on the state of capital markets, level of activity in the primary and
secondary market and overall economic conditions prevailing both locally and globally. The level of our
operations, income and profitability may be affected by such factors. However, the organisation is continuously
growing successfully its income from non-capital-market segment. In Fiscal 2010, non-capital-market income
constituted 61.11% of the Microsec Group’s consolidated revenues.

Dependence on single or few suppliers / customers

Our operations are not significantly dependent on a single or a few suppliers or customers.

Competitive Conditions

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We expect competition to intensify for existing and potential new customers. For further details, see “ – Factors
affecting results of operations” on page 210 of this Red Herring Prospectus, “Risk Factors” on page x of this
Red Herring Prospectus and “Our Business” on page 59 of this Red Herring Prospectus.

FINANCIAL INDEBTEDNESS

The Microsec Group, as on March 31, 2010, had consolidated secured outstanding loans from Banks/Financial
Institutions for Rs. 40.11 million in the business of the organisation.

Borrowings by the Subsidiaries:

The Stock Exchanges require MCap and Commodity Exchanges require MCL to maintain margin deposits in
the form of cash deposits, bank guarantees, FDRs or shares or any combination thereof as prescribed which are
suitable for the Microsec Group as well as the exchanges for exposure purposes. For the said purpose and also
for the purpose of meeting its working capital requirements, we have availed of certain facilities: Set forth
below is a brief summary of our aggregate borrowings, in addition to the facilities referred to above.

Category of Borrowing Outstanding Amount (Rs. in Millions) availed of as on March 31, 2010

The borrowing outstanding amount as on March 31, 2010 consists of the following:

Overdraft Facilities: Nil

For details, see “Financial Indebtedness” on page 226 of this Red Herring Prospectus.

SIGNIFICANT DEVELOPMENTS AFTER MARCH 31, 2010 THAT MAY AFFECT FUTURE
OPERATIONS

Except as stated elsewhere in the Red Herring Prospectus, to our knowledge no circumstances have arisen since
the date of the last financial statements as disclosed in the Red Herring Prospectus which materially and
adversely affects or is likely to affect, our operations or profitability, or the value of our assets or our ability to
pay our material liabilities within the next 12 months.

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 FINANCIAL INDEBTEDNESS

Details of Secured Loans

The details of our secured loans as of March 31, 2010 are as follows:

Sl. Name of Nature of Amount Amount Interest Tenure Security

No. the Borrowing Sanctioned as outstanding as (in %
Lenders of March 31, of March 31, p.a.)
2010 (in Rs. 2010
million) (in Rs. million)

MFSL
1. Citicorp Revolving loan 60.00 Nil 14.50% 3 years Refer to
Finance facility cum Note 1
India pledge agreement
Limited dated January 21,
2009 as amended
by letter dated
October 5, 2009
2. Aditya Sanction letter 100.00 Nil 9.50% 1 year Refer
Birla dated March 5, Note 2
Finance 2010 and loan-
Limited cum-pledge
agreement dated
February 8, 2010
MCap
3. HDFC Bank guarantee 0.04 0.04 - Operative months Refer to
Bank - fully secured - 12 Note 3 (a)
Limited (non fund based
facility)
Bank guarantees 48.50 48.50 - Operative months Refer to
– partially - 12 Note 3
secured (non fun (b)
based facilities)
Overdraft against 2.36 Nil FD + On demand Refer to
fixed deposit by 1.50% Note 3 (c)
letter dated May
22, 2009 (fund
based facility)
Overdraft against 55.52 Nil 12% On demand Refer to
property by letter Note 3
dated July 13, (d)
2009 (fund based
facility)
Short term loan in 50.00* 40.00 8.50% Operative months Refer to
lieu of bank - 12 Note 3 (e)
guarantee dated
May 22, 2009
(fund based
facility)
4. Indusind Bank guarantee 20.00 20.00 - Operative months Refer to
Bank (non fund based - 12 Note 4
Limited facility)
5. Indusind Overdraft against 9.00 Nil 12.00% On demand Refer 5
Bank fixed deposit by
Limited its sanction letter
dated July 15,
2009(fund based
facility)
6. United Bank guarantees 7.50 7.50 - Operative months Refer to
Bank of (non fund based - 12 Note 6
India facilities)
MCL
7. HDFC Bank guarantees 7.50 7.50 - Operative months Refer to

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Sl. Name of Nature of Amount Amount Interest Tenure Security
No. the Borrowing Sanctioned as outstanding as (in %
Lenders of March 31, of March 31, p.a.)
2010 (in Rs. 2010
million) (in Rs. million)

Bank –partially secured - 12 Note 7

Limited (non fund based
facilities)
MTL
8. State Bank Term loan – 125.00 0.08 12% 5 years Refer to
of India sanction letter Note 8
dated September
18, 2008
*Loan has been taken for the purpose of giving margin to NSE

Note 1:

1. Secured by pledge of securities obtained as margin from borrowers.

Note 2:

1. Secured by pledge of securities obtained as margin from borrowers.

Note 3 (a):

1. Fixed deposit of Rs. 0.04 million

Note 3 (b):

1. 50% cash margin/ (cash margin: minimum 25% fixed deposit; security margin: maximum 25% by way of
approved shares in demat form, after 50% haircut and as per LAS norms;
2. Personal guarantee of Ravi Kant Sharma and Banwari Lal Mittal; and
3. Corporate guarantee of MFSL

Note 3 (c):

1. Fixed deposit

Note 3 (d):

1. Property owned by:

a. MTL (at Azimganj House, 2nd floor, 7, Camac Street, Kolkata – 700 019);
b. MFSL (at Shivam Chambers, Mittal Towers, 1st floor, unit 1A, 1B, 1C, 1D, 1E, 1F, 1G, and 1H, 53,
Syed Amir Ali Avenue, Kolkata – 700 019 and Shivam Chamber Basement Floor (Northern Side –
C/p Area) 53, Syed Amir Ali Avenue, Kolkata – 700 019); and
c. MCap (at office premise no. 74, Mittal Towers, A wing, 7 th floor of building no. 10 of Mittal Towers
Premises Co-operative Housing Society Limited)
2. Corporate guarantee of MFSL and MTL.

Note 3 (e)

1. 50% cash margin in the form of fixed deposit;

2. Personal guarantee of Ravi Kant Sharma and Banwari Lal Mittal; and
3. Corporate guarantee of MFSL

Note 4:

1. Fixed deposit of Rs. 10 million.

2. Personal guarantee of Banwari Lal Mittal and Ravi Kant Sharma; and
3. Corporate guarantee of MFSL

227
Note 5:

1. Fixed deposit of Rs. 10 million.

Note 6:

1. Fixed deposit of Rs. 4.75 million; and

2. Charge against debts and moveable assets.

Note 7:

1. 50% cash margin/ security in the form of fixed deposits;

2. Personal guarantees of Ravi Kant Sharma and Banwari Lal Mittal; and
3. Corporate guarantee of MCap.

Note 8:

1. Secured by mortgage of land and building located at the ‘Knowledge Hub’ at New Town, Rajarhat at
Kolkata, having floor space admeasuring approximately 30,000 sq. ft. by MTL

Corporate Actions

Corporate actions, for which MFSL requires the prior written approval of the lenders, include:

1. Financing of any takeover or acquisition related activity.

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 SECTION VI: LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

Except as stated below there are no outstanding litigation, suits, criminal or civil prosecutions, proceedings or
tax liabilities against the Company, the Directors, Subsidiaries, the Promoters and the Group Companies and
there are no defaults, non-payment of statutory dues, over-dues to banks/financial institutions, defaults against
banks/financial institutions, defaults in dues payable to holders of any debenture, bonds and fixed deposits and
arrears of preference shares issue by the Company and its Subsidiaries, 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) other than unclaimed liabilities of the Company
and its Subsidiaries, Directors, Promoters, Promoters and Group Companies and no disciplinary action has
been taken by SEBI or any stock exchanges against the Company, its Subsidiaries its Promoters, Group
Companies, Directors. The Company, its Subsidiaries, the Directors, Promoters and Group Companies have not
been detained as wilful defaulters by the RBI or any government authority and there have been no violation of
securities laws in the past or pending against them.

The Company does not owe any small scale industries any amounts exceeding Rs. 100,000.

For details of contingent liabilities of the Company and its Subsidiaries, refer to the Restated Consolidated
Financial Statements on page 160 of this Red Herring Prospectus.

Cases involving the Company

Litigation against the Company

Civil Proceedings

1. On June 19, 2008 Kohinoor Foods Limited (“KFL”) filed a petition (C.A. No.1&2 of 2008/ Company
Petition No. 12/111A (ND) of 2008) before the Company Law Board (“CLB”), New Delhi against the
Company, Temptation Foods Limited (“TFL”) and others alleging that the shares of KFL were
acquired in violation of the SEBI Takeover Regulations. On January 5, 2009, KFL also filed an
application (No.C.A 1 and 2 of 2009) before the CLB, New Delhi seeking an ex-parte ad interim stay
to restrain the Company and others from acquiring any further shares of KFL and for suspension of
voting rights with respect to the acquired shares. Subsequently, on January 19, 2009 KFL filed an
application (No. C.A. No.3 of 2009) alleging that the Company sold its entire shareholding of KFL to
certain other entities during the pendency of the petition. The Company filed its reply dated February 3,
2009 stating inter alia, that the Company received KFLs’s shares as a collateral security against the
loan provided to TFL and that such shares were subsequently transferred to certain other entities for the
purpose of re-financing. On February 12, 2009 KFL filed an application before the CLB, New Delhi
for impleadment of MCap in the matter, alleging that MCap being a broker of TFL was acting in
concert with the Company. KFL in its reply dated March 8, 2009 stated that the responses of the
Company in its reply dated February 3, 2009 are misleading and devoid of any merit. The Company on
March 23, 2009 filed its reply before CLB. Subsequently, the Company on July 21, 2010 filed an
application before CLB for striking out the name of the Company from the list of respondents and the
petition C.P. No. 12/111A/(ND) of 2008 and all orders passed in this regard against the Company be
recalled or set aside. The matter is currently pending before CLB.

Direct Tax

1. The Company has received two notices dated August 19, 2010 under section 115 WE (2) and 143(2) of
the I.T. Act for the assessment year 2009-10 from the assessing officer, Income Tax department in
relation to the return of income filed by the Company on October 19, 2009. For the purposes of seeking
certain additional information, the Company has been asked to appear before the assessing officer on
September 20, 2010 and produce relevant documents relied on by the Company in relation to the return
filed by the Company.

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Litigation filed by the Company

Criminal Proceedings

1. On May 21, 2009 the Company filed a complaint (Compliant No. C 22545 of 2009) before the Chief
Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act, 1881 against
its client, Ramamurat Singh alleging dishonour of cheque. It was alleged that the cheque was issued by
Ramamurat Singh towards discharge of certain amounts payable to the Company, in respect of finance
availed from the Company by Ramamurat Singh for trading/ investing in certain securities. The amount
involved in the matter is Rs. one million. The matter is currently pending before 8 th Metropolitan
Magistrate, at Calcutta.

Cases involving our Subsidiaries

A. Microsec Capital Limited

Litigation against MCap

Notices from SEBI

1. SEBI through its letter dated January 5, 2004 asked MCap to show cause why action should not be
taken against them for not exercising proper due diligence as a Merchant Banker as incorrect
information had been provided in the prospectus and application form for the initial public offering of
Jai Balaji Sponge Limited. MCap replied to the same and SEBI through its letter dated February 10,
2004 has warned MCap to exercise proper due diligence in the future.

2. SEBI through its letter dated March 29, 2007 has advised MCap to exercise adequate and proper due
diligence as MCap had omitted to sign the letter dated February 14, 2007, due diligence certificate and
the enclosures thereto in the transaction pertaining to the open offer to the shareholders of Dunlop India
Limited in accordance with the Takeover Code. MCap replied to the same through its letter dated April
3, 2007. SEBI has not initiated any further action in this regard.

3. Pursuant to notice of inspection dated November 3, 2008 an inspection of the books of accounts of
MCap was conducted during December 1, 2008 to December 4, 2008 by a team of SEBI officials. The
SEBI by an inspection report dated May 19, 2009 highlighted certain irregularities and violations in the
operations of MCap as a broker and depository participant, which includes inter alia, failure to
properly maintain client agreements and registration forms, fines and penalties levied by stock
exchanges on several occasions for violation of margin and other prescribed limits, delay in forwarding
demat requests forms to issuer company or RTA and failure to record correct PAN numbers and
thereby violating provisions of SEBI (Stock Broker and Sub-Brokers) Regulation 1992, SEBI
(Depositories and Participants) Regulations, 1996 and relevant circulars issued by SEBI in relation
thereto. MCap was directed to file explanation in respect of the each of the violations within fourteen
days of receipt of the inspection report dated May 19, 2009. MCap has filed its reply dated June 3,
2009. SEBI through its letter dated July 18, 2009 issued a warning to MCap not to repeat such
irregularities in future and also to ensure strict compliance of all the rules and regulations issued by
SEBI and the stock exchanges.

Notices from the Stock Exchanges

1. The NSE through its letter dated May 8, 2006, made certain observations regarding some violation
pursuant to the trades executed during February 14, 2006 to March 10, 2006, by MCap in the F&O
segment. MCap replied to the NSE through its letter dated May 15, 2006. The NSE has, by its letter
dated January 23, 2007 imposed a penalty of Rs. 50,000, and also advised MCap to ensure non-
recurrence of the violations and to ensure compliance with the regulations of the NSE and the National
Securities Clearing Corporation.

2. The NSE through its letter dated May 18, 2007 made certain observations regarding some violation
pursuant to the trades executed during March 1, 2007 to March 31, 2007, by MCap in the F&O
segment. MCap replied to the NSE through its letter June 5, 2007. The NSE has, by its letter dated
November 20, 2007 imposed a penalty of Rs. 100,000 and also advised MCap to ensure non-recurrence

230
 of the violations and to ensure compliance with the regulations of the NSE.

3. The NSE through its letter dated August 13, 2007, requested MCap to furnish certain information
within seven days from the date of the letter in respect of certain alleged violations related to trading in
the capital market segment. The allegations inter alia include failure to issue the electronic contract
notes in the prescribed format and failure to review client information on a periodically basis. The letter
was sent pursuant to an inspection undertaken by a team of officers of the NSE during January 2007.
Further, MCap was advised to immediately stop the violations and report the same as a part of their
reply. The same was without prejudice to the disciplinary proceedings / actions that the NSE may
initiate. MCap through a letter dated August 20, 2007, replied to the specific allegations and stating that
the observations had been noted and implemented. The NSE has, by its letter dated January 18, 2008,
advised MCap to ensure non-recurrence of the violations and to ensure compliance with the regulations
of NSE. The NSE has not initiated any further action in this regard.

4. The NSE through its letter dated August 27, 2007, requested MCap to furnish certain information
within seven days from the date of the letter in respect of certain alleged violations related to trading in
the futures and options segment. The allegations inter alia failure to issue the contract notes in the
prescribed format and incorrect reporting of the margin collected. The letter was sent pursuant to an
inspection undertaken by a team of officers of the NSE on December 27, 2006, January 2, 2007 and
January 3, 2007. Further, MCap was advised to immediately stop the violations and report the same as
a part of their reply. The same was without prejudice to the disciplinary proceedings / actions that the
NSE may initiate. MCap through a letter dated September 3, 2007, replied to the specific allegations
and stated that the observations had been noted and implemented. The NSE has, by its letter dated
January 18, 2008, advised MCap to ensure non-recurrence of the violations and to ensure compliance
with the regulations of NSE. The NSE has not initiated any further action in this regard.

5. The BSE, through its letter dated November 23, 2007, undertook an inspection of the books of accounts
and other documents of MCap on January 25, 2008. The BSE pursuant to the inspection of books of
accounts and other documents for the period commencing from November 2006 to October 2007,
through its letter dated July 24, 2008 has alleged certain lapses such as failure to route clients’ funds
through designated client bank accounts, usage of client’s funds for other clients or towards MCap’s
own purpose, failure to provide to its clients a 16 digit code that facilitates internet trading and failure
to designate exclusive e-mail address for investor complaints. BSE requested MCap to submit
clarifications towards the above-mentioned allegations. MCap replied to the same through its letter
dated August 8, 2008. BSE through its letter dated October 14, 2008 warned MCap that client funds
must be routed through the designated client bank accounts, failure of which will entail penalty as per
Exchange Notice No. 20080307-8 dated March 7, 2008. BSE also directed MCap to obtain a
compliance certificate either from a compliance officer or a chartered accountant and submit the same
within 30 days and further warned MCap that failure to submit the same/ or submitting a wrong
compliance certificate will also be subject to necessary fine as may be imposed by the BSE. MCap
through its letter dated November 11, 2008, submitted the compliance certificate to the BSE and also
confirmed compliance to the observations made by the BSE.

6. The NSE, through a notice dated May 22, 2008, undertook an inspection of the books of accounts and
other documents in accordance with Chapter 7 of National Stock Exchange (Futures and Options
Segment) Trading Regulations. Pursuant to submission of reply dated October 6, 2008 to NSE’s
preliminary observation sheet by MCap and pursuant to the inspection conducted by NSE, NSE
through its letter dated October 13, 2008 furnished its observations alleging certain irregularities
including inter alia incorrect reporting of margin collected from clients, failure to broadcast NSE feed
to such terminals enabled for trading only. NSE directed MCap to file a reply in relation to the same.
MCap by it letter dated October 17, 2008 replied to the same. Subsequently NSE, after considering the
observations and submissions made by MCap, through its letter dated November 17, 2008 levied a fine
of Rs. 10,000 against MCap in this regard, and which was duly paid by MCap. The NSE acknowledged
the receipt of the same by its penalty receipt dated December 1, 2008.

7. NSE through its letter dated September 11, 2008 informed MCap that Ankit Bimal Deorah, a client of
MCap, filed an arbitration application against MCap alleging that MCap had executed certain
unauthorised transactions in securities in respect of Ankit Deorah’s account. MCap through its letter
dated September 26, 2008 replied to same. Ankit Bimal Deorah, filed arbitration proceedings
(Arbitration Matter No. F&O/ M-0869 of 2008) against MCap before an arbitrator appointed by NSE.

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 Ankit Deorah has claimed an amount of Rs. 1.90 million along with interest at the rate of 18% per
annum. The arbitrator by its order dated June 1, 2009 rejected the claim on the ground that Ankit
Deorah was required to maintain sufficient margin money to avoid squaring off open positions by
trading members to ensure compliance with applicable regulations. Subsequently, Ankit Deroah has
filed an arbitration petition No. 645/2009 before the High Court of Judicature at Mumbai under section
34 of the Arbitration and Conciliation Act, 1996 against the order dated June 1, 2009. The matter is
currently pending before the High Court of Judicature at Mumbai.

8. BSE through its letter dated May 4, 2009 informed MCap that Harish Manohar Kalra filed arbitration
proceedings (Arbitration Reference No. 234 of 2009) against MCap before an arbitrator appointed by
BSE. Harish Manohar Kalra alleged that MCap executed certain unauthorised transaction in securities
in respect of Harish Kalra’s account. Harish Kalra has claimed an amount of approximately Rs. 0.67
million along with interest at the rate of 18% per annum against MCap. The arbitrator by its order
dated January 14, 2010 directed MCap to pay a sum of approximately Rs. 0.67 million along with
interest at the rate of 8% to Harish Kalra. MCap filed an appeal before the appellate bench of the BSE
against the order passed dated January 14, 2010 by the arbitrator appointed by the BSE. BSE by its
award dated May 7, 2010 rejected MCap’s appeal allowing the claim of Harish Kalra. Subsequently,
MCap on August 16, 2010 filed an application before Bombay High Court against the award of BSE
dated May 7, 2010. The matter is currently pending before the Bombay High Court.

9. Pursuant to BSE’s letter dated June 17, 2009, an inspection of books of accounts and records of MCap
was undertaken by a team of officers of BSE on July 7, 2009. The inspection was undertaken in respect
of books of accounts and other documents from February 2009 to May 2009. Subsequently, MCap by
its letter dated July 10, 2009 has submitted certain documents with BSE in relation to the inspection.
BSE by its letter dated September 7, 2009 acknowledged conclusion of inspection. BSE has not taken
any further action in this regard.

10. MCap by letter dated October 13, 2008 intimated NSE in relation to resignation of Rakesh Sony as a
director of MCap. The NSE issued a show cause notice dated May 7, 2009 to MCap, requiring MCap
to explain failure to acquire approval of NSE for change in directors. Subsequently, MCap by letter
dated May 14, 2009 replied to the same explaining that Rakesh Sony was not a designated director.
NSE has not initiated any further action in this regard.

11. The NSE, through its letter dated January 27, 2010, undertook an inspection of the books of accounts
and other documents of MCap on February 18, 2010. The inspection was in relation to the cash and
futures and options segment for the period from January 1, 2009 to December 12, 2009. The NSE,
through its letter dated February 25, 2010 issued certain observation which inter alia include
contravening clauses in the client registration kit, execution of trades in minor’s account, allotment of
more than one client code for single PAN, discrepancy in taking record of email addresses of the
clients and identification of clients of special category. MCap has filed its reply to the NSE through a
letter dated March 4, 2010. Subsequently, on May 21, 2010, NSE levied a monetary fine of Rs. 10,000
on the ground that certain clauses included in the client registration documents and the power of
attorneys obtained from the clients were in contravention of Stock Exchange rules, regulations,
circulars. In this regard, NSE also directed MCap to remove the contravening clauses and intimate the
same to its clients. NSE further directed MCap to issue contact notes and other documents to email ids
created/provided by its clients. NSE also directed MCap to ensure non-recurrence of deviation from
procedural requirements including inter alia uploading of multiple client codes for a single client,
execution of trades in the accounts of minors, failure to maintain a system for identification of clients
of special category.

12. BSE by its letter dated July 20, 2010, has informed MCap regarding proposed inspection on August 16,
2010 of books of accounts and records of MCap for cash segment covering period August 2009 to July
2010. The Company submitted its response to the inspection report to BSE on August 9, 2010.

13. NSE through its letter dated July 16, 2010 informed MCap that Samrendra Das, a client of MCap, filed
an arbitration application against MCap alleging that MCap had executed certain unauthorised
transactions in securities in respect of Samrendra Das’s account and misappropriation of shares and has
claimed an award of Rs. 0.39 million. MCap through its letter dated July 29, 2010 replied to NSE. NSE
by its letter dated August 4, 2010 has informed the parties that an arbitrator has been appointed. The
matter is currently pending.

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Correspondences with the NSDL

1. The NSDL pursuant to their visit to MCap on June 29, 2005, made a number of observations pertaining
to the activities of the company in its capacity as a depository participant. The observations inter alia
include that the Net BUEI protocol was not installed on the server. MCap replied to the same through a
letter dated July 4, 2005. Through letters dated July 21, 2005 and August 4, 2005, NSDL made further
observations requiring compliance. Subsequent to MCap’s confirmation through its letter dated August
8, 2005, that it has complied with such further observations, NSDL has not initiated any further action
in this regard.

2. The NSDL pursuant to their visit to MCap on December 2, 2005, made a number of observations
pertaining to the activities of the company in its capacity as a depository participant. The observations
inter alia pertaining to opening an account, non collection of ID proof of directors in cases of corporate
accounts and sending the statement of transactions. NSDL stated that compliance was expected within
a week. MCap through its letter dated December 9, 2005 replied to the same. Subsequently, through a
letter dated February 6, 2006, NSDL stated that such deviations in the future were liable to attract
penalty. Furthermore, NSDL through its letter dated January 6, 2006, requested MCap to confirm
compliance with the observations. MCap has through its letter dated January 20, 2006, confirmed
compliance with the observations. NSDL has not initiated any further action in this regard.

3. The NSDL pursuant to their visit to MCap on June 6, 2006, made a number of observations pertaining
to the activities of the company in its capacity as a depository participant. The observations inter alia
pertaining to opening of accounts including incorrect name. MCap replied through its letter dated June
12, 2006. NSDL has not initiated any further action in this regard.

4. The NSDL, pursuant to their visit to MCap on December 7, 2006, made a number of observations
pertaining to the activities of the company in its capacity as a depository participant. Majority of the
observations inter alia pertaining to opening of accounts including incorrect name and address
mismatch. MCap replied through its letter dated December 16, 2006. NSDL, through its letter dated
February 3, 2007, levied a penalty of Rs. 5,000 under the provisions of chapter 18 of Business Rule of
NSDL for debiting client’s account without proper authorization from the clients. NSDL has not
initiated any further action in this regard.

5. NSDL, through its letter dated March 16, 2007, levied a penalty of Rs. 2,000 for entering incorrect
PAN number of the account holders. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

6. NSDL, through its letter dated May 11, 2007, levied a penalty of Rs. 1,500 for entering incorrect PAN
number of the account holders. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

7. The NSDL, pursuant to their visit to MCap on June 11, 2007, made a number of observations
pertaining to the activities of the company in its capacity as a depository participant. The observations
inter alia pertaining to opening an account including capturing of multiple signatures, absence of
introductions and proper verification and the non submission of the internal audit report. MCap replied
through its letter dated June 18, 2007. Subsequently, through a letter dated August 8, 2007, NSDL
made certain further observations such as keeping NSDL informed about the status of specific client
and submission of a revised Form B, which were required to be complied with by MCap by August 28,
2007 and levied a penalty of Rs. 20,000 under the provisions of chapter 18 of Business Rule of NSDL.
MCap through its letter dated August 25, 2007, replied to the same. NSDL has not initiated any further
action in this regard.

8. NSDL, through its letter dated June 16, 2007, levied a penalty of Rs. 500 for entering incorrect PAN
number of the account holder. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

9. NSDL, through its letter dated August 22, 2007, levied a penalty of Rs. 1,000 for entering incorrect
PAN number of the account holders. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

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10. NSDL, through its letter dated October 30, 2007, levied a penalty of Rs. 1,000 for entering incorrect
PAN number of the account holders. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

11. NSDL, through its letter dated November 22, 2007, levied a penalty of Rs. 500 for entering PAN
number of the account holder. Further, NSDL advised MCap to ensure non-recurrence of such
deviations.

12. The NSDL, pursuant to their visit to MCap on December 11, 2007, made a number of observations
pertaining to the activities of the company in its capacity as a depository participant. The observations
inter alia pertain to inconsistencies regarding signature and date of birth, delay in submission of
internal audit reports, delay in dispatch of DRF’s in few cases and failure to make certain technical
updations. MCap replied through its letter dated December 18, 2007. Subsequently, NSDL through its
letter dated January 21, 2008 further advised MCap to ensure correct dates are noted, an operations
manual is prepared and certified by MCap’s internal auditors. NSDL through its letter dated February
8, 2008 observed further irregularities, including inter alia, delay in dispatch of demat request and
inconsistencies regarding signature and date of birth and warned MCap that that similar deviations/
non-compliance may attract monetary penalty.

13. The NSDL pursuant to, its letter dated May 9, 2008 undertook a review of the depository operations of
MCap on June 16, 2008 and made a number of observations pertaining to the activities of the company
in its capacity as a depository participant. The observations inter alia pertain to opening an account
including capturing of multiple signature and mode of operation of account. NSDL stated that
compliance was expected within a week. MCap through its letter dated June 20, 2008 replied to the
same. NSDL, through its letter dated August 11, 2008, directed MCap to submit revised Form B to
NSDL with respect the LAN hub. Further, NSDL also directed MCap to report compliance of
observations made during the visit by August 30, 2008. MCap through its letter dated August 27, 2008
has submitted the revised Form B and report compliance of observations as directed. NSDL has not
taken any further action in this regard.

14. NSDL, through its letter dated August 5, 2008, levied a penalty of Rs. 5,000 under the provisions of
chapter 18 of Business Rules of NSDL for failure to take the database back-up of June 28, 2008.
Additionally, NSDL made observations of certain deviations, inter alia, opening of accounts without
obtaining adequate proof of address, delay in process of demat requests and usage of forms which are
not in conformity with the NSDL prescribed format. No penalties were levied in respect of these
observations, however, NSDL advised MCap to ensure non-recurrence of such deviations.

15. NSDL in its inspection report dated December 3, 2008 made certain observations pertaining to inter
alia, failure to take adequate address proof to open client accounts, failure to show details of corporate
action in the back office. MCap submitted a reply dated December 8, 2008. Subsequently, NSDL by its
letter dated January 13, 2009 advised and directed MCap to comply with instructions pertaining to inter
alia, adherence to prescribed guidelines pertaining to closure/ transmission of accounts, modification of
MCap’s back office software to reflect correct details of corporate action narration, periodic
submission of investor grievance report. Pursuant to MCap’s reply dated January 30, 2009 to NSDL’s
directions, NSDL by its letter dated February 6, 2009 made further observations pertaining to certain
irregularities pertaining to inter alia, inadequate control over issuance and/or acceptance of instruction
slips, failure to conduct transmission as per prescribed procedure and further imposed a penalty of Rs.
6000 against MCap in this regard under Chapter 18 of the Business Rules of NSDL.

16. NSDL, through its letter dated June 4, 2009, levied a penalty of Rs. 5,000 under the provisions of
chapter 18 of Business Rules of NSDL for failure to take database back-up of April 25, 2009. Further,
NSDL advised MCap to ensure non-recurrence of such deviations.

17. NSDL in its inspection report dated June 16, 2009 made certain observations pertaining to inter alia,
failure to capture mode of operation, failure to acquire signature of first holder of certain securities,
inadequate narration on transaction statement from the back office, failure to configure back office to
display mode of operation for corporate accounts. MCap filed its reply dated June 24, 2009
Subsequently, NSDL by its letter dated July 17, 2009 advised and directed MCap to comply with
instructions pertaining to inter alia, modification of MCap’s back office software to reflect correct

234
 details of corporate action narration and ensure that the back office software shows the mode of
operation captured in the DP Manager. Further, MCap by its letter dated August 3, 2009 informed
NSDL that narration on transaction statements generated from back office has been rectified and
sought clarification from NSDL in relation to display mode of operation in DPM. NSDL has not taken
any further action in this regard.

18. NSDL upon inspection conducted upon April 22, 2010, made certain observations pertaining to certain
deviations including inter alia inadequate control over issuance and/or acceptance of instruction slips
and loss/misplacing delivery instruction slips. MCap replied by its letter dated April 29, 2010. NSDL
by its letter dated July 8, 2010 imposed a penalty against MCap of Rs. 2,500.

Correspondence with CDSL

1. CDSL by its letter dated January 28, 2009 issued its inspection report for the period January 1, 2008 to
October 31, 2008 to MCap. CDSL has not taken any further action in this regard.

2. Pursuant to submission of the MCap’s reply to CDSL’s inspection report for the period November 1,
2008 to April 30, 2009, CDSL by its letter dated January 27, 2010, made certain observations
pertaining to certain deviations including inter alia, failure to maintain proper records of clients in
relation to information pertaining address, relevant declaration, necessary documents prescribed by
CDSL and failure to obtain witnesses’ signature on nomination form. The Company replied by its letter
dated February 10, 2010. Subsequently, CDSL by its letter dated February 16, 2010 imposed a penalty
of Rs. 4,500 against MCap for failure to obtain proof of identity and address as prescribed by SEBI and
CDSL and without complying with relevant procedures.

Complaints from Customers

1. MCap has received approximately 121 complaints from customers, either directly or through the NSE,
through which such customers have alleged minor administrative infractions on the part of MCap
including inter alia, suspension of client’s trading account without obtaining prior intimation, executing
transactions pertaining to certain securities without obtaining prior consent of the client, failure to
provide periodic updates, charging higher brokerage than the amount agreed upon. The company has
replied to each of these complaints. The financial implications of these complaints cannot be computed.

Penalties for administrative infractions

Penalties have been imposed on MCap by the Stock Exchanges and NSCCL for administrative
infractions. The details of such penalties paid by MCap in Fiscal 2006, 2007, 2008, 2009, 2010 and
three months period ended June 30, 2010 are set forth below:

Nature of Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 June 30, 2010
infraction No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount
of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.)
cases cases cases cases cases cases
Wrong/non- 13 52,945 20 1,42,424 15 38,324 19 5,245 28 12,900 5 1,000
upload of
UCI/UCC/
CTCL/margin
report
Violation of 1 20,000 4 55,000 4 40,000 5 23,311 - - - -
intra day
trade/gross
exposure
limits
Delay in - - 2 3,900 1 1,000 1 100 - - 2 2,000
reporting of
client funding
Late - - - - 2 1,800 - - - - - -
submission of
margin
trading
certificate
Total 14 72,945 26 201,324 22 81,124 25 28,656 28 12,900 7 3,000

235
 Intellectual Property Proceedings

1. Micro Focus (IP) Limited, a Company organised under the laws of England and Wales, filed a notice of
opposition (No. CAL-727590) dated June 30, 2008 before the Registrar of Trade Marks, Trade Mark
Registry, Kolkata, under section 21(1), 64, 66 and 73 of the Trade Marks Act, 1999 denying alleged
use of mark ‘MICROSEC-MICRO FOCUS. MEGA WEALTH’ by MCap since 1999. Micro Focus
(IP) Limited alleged inter alia, bad faith on the part of MCap on the ground that the impugned mark is
deceptively similar to their trade mark ‘MICRO FOCUS’ and other ‘MICRO FOCUS’ formative marks
and that the registration of impugned mark is contrary to various provisions of the Trade Marks Act,
1999. Further, it was also alleged that since the mark is associated to the products and services of
Micro Focus (IP) Limited, the application for registration of impugned trade mark by MCap should be
refused and MCap be directed to delete the words ‘MICRO FOCUS’ from the impugned mark. On
January 13, 2009 MCap filed a counterstatement denying all allegations of Micro Focus (IP) Limited
on various grounds, including, that the impugned mark is being used by MCap, since 1999, in different
field of service and that the adoption of the mark by MCap is honest and bona fide. MCap, in its
counter-statement has requested the registry to dismiss the opposition and allow MCap to register the
impugned mark. An affidavit of director of Micro Focus (IP) Limited was filed as evidence in support
of opposition under Rule 50 was filed on October 29, 2009. The matter is currently pending before the
Registrar of Trade Marks.

Civil Proceedings

1. On June 19, 2008, Kohinoor Foods Limited (“KFL”) filed a petition (C.A. No.1&2 of 2008/ Company
Petition No. 12/111A (ND) of 2008) before the Company Law Board (“CLB”), New Delhi against the
Company, Temptation Foods Limited (“TFL”) and others alleging that the shares of KFL were
acquired in violation of the SEBI Takeover Regulations. MCap filed its reply before the Company Law
Board, New Delhi. KFL also filed an application (No.C.A 1 and 2 of 2009) before the CLB, New Delhi
seeking an ex-parte ad interim stay to restrain the Company and others from acquiring any further
shares of KFL and for suspension of voting rights with respect to the acquired shares. Subsequently, on
January 19, 2009, KFL filed an application (No. C.A. No.3 of 2009) alleging that the Company sold its
entire shareholding of KFL to certain other entities during the pendency of the petition. The Company
filed its reply dated February 3, 2009 stating inter alia, that the Company received KFLs’s shares as a
collateral security against the loan provided to TFL and that such shares were subsequently transferred
to certain other entities for the purpose of re-financing. On February 12, 2009, KFL filed an application
before the CLB, New Delhi for impleadment of MCap in the matter, alleging that MCap being a broker
of TFL was acting in concert with the Company. KFL in its reply dated March 8, 2009 stated that the
responses of the Company in its reply dated February 3, 2009 are misleading and devoid of any merit.
The Company on March 23, 2009 filed its reply before CLB. Subsequently, MCap on July 21, 2010
filed an application before CLB for striking out the name of MCap from the list of respondents and the
petition C.P. No. 12/111A/(ND) of 2008 and all orders passed in this regard against the Company be
recalled or set aside. The matter is currently pending before CLB.

Litigation filed by MCap

Criminal Proceedings

1. On September 24, 2008 MCap filed a complaint (Compliant No. c 1051 of 2008) before the Additional
Chief Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act against
its client, Ashok Kumar Daga alleging dishonour of cheque. It was alleged that the cheque was issued
by Ashok Kumar Daga towards discharge of certain amounts payable to MCap, in respect of execution
of certain transactions in securities by MCap on behalf of Ashok Kumar Daga. The amount involved in
the matter is approximately Rs. 0.10 million. The matter is currently pending before the 12th
Metropolitan Magistrate, Calcutta.

2. On February 16, 2009 MCap filed a complaint (Complaint no. c 7201 of 2009) before the Chief
Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act against its
client, Arshad Hussain Kadri alleging dishonour of cheque. It was alleged that the cheque was issued
by Arshad towards discharge of certain amounts payable to MCap, in respect of execution of certain
transactions in securities by MCap on behalf of Arshad Hussain Kadiri. The amount involved in the
matter is approximately Rs. 0.31 million. The matter is currently pending before the 17th Metropolitan

236
 Magistrate, Calcutta.

3. On June 21, 2008 MCap filed a complaint (Compliant No. c 17095 of 08) before the Chief
Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act against its
client, Md. Arif Sadique alleging dishonour of cheque. It was alleged that the cheque was issued by
Arif Sadique towards discharge of certain amounts payable to MCap, in respect of execution of certain
transactions in securities by MCap on behalf of Arif Sadique. The amount involved in the matter is
approximately Rs.0.04 million. The matter is currently pending before the 17th Metropolitan
Magistrate, Calcutta.

4. On June 21, 2008 MCap filed a complaint (Complaint No. c 17096 of 08) before the Chief
Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act against its
client, Mintu Biswas alleging dishonour of cheque. It was alleged that the cheque was issued by Mintu
Biswas towards discharge of certain amounts payable to MCap, in respect of execution of certain
transactions in securities by MCap on behalf of Mintu Biswas. The amount involved in the matter is
Rs. 0.10 million. The matter is currently pending before the 14th Metropolitan Magistrate, Calcutta.

5. On December 23, 2008 MCap filed two complaints (Compliant No. c 38612 of 2008 and Complaint
No. c 38613 of 2008) before the Chief Metropolitan Magistrate, at Calcutta under section 138 of the
Negotiable Instruments Act against its client, Radha Mundhra alleging dishonour of cheque. It was
alleged that the cheques were issued by Radha Mundhra towards discharge of certain amounts payable
to MCap, in respect of execution of certain transactions in securities by MCap on behalf of Radha
Mundhra. The amount involved in the matter is Rs. 0.20 million. The matters are currently pending
before the 14th Metropolitan Magistrate, Calcutta.

6. On February 17, 2009 MCap filed a complaint (Complaint No. c 891 of 09) before the Chief Judicial
Magistrate, at Alipore under section 138 of the Negotiable Instruments Act against its client, Prahlad
Bhowmick alleging dishonour of cheque. It was alleged that the cheque was issued by Prahlad
Bhowmick towards discharge of certain amounts payable to MCap, in respect of execution of certain
transactions in securities by MCap on behalf of Prahlad Bhowmick. The amount involved in the matter
is approximately Rs. 0.24. The matter is currently pending before 5th Judicial Magistrate, Alipore.

7. On July 6, 2009 MCap filed a complaint (Compliant No. c 42668 of 2009) before the Chief
Metropolitan Magistrate, at Calcutta under section 138 of the Negotiable Instruments Act against its
client, Rishav Bhojnagarwala alleging dishonour of cheque. It was alleged that the cheque was issued
by Rishav Bhojnagarwala towards discharge of certain amounts payable to MCap, in respect of
execution of certain transactions in securities by MCap on behalf of Rishav Bhojnagarwala. The
amount involved in the matter is approximately Rs. 0.07 million. The matter is currently pending
before 14th Metropolitan Magistrate, Calcutta.

Intellectual Property Proceedings

1. On March 31, 2010, MCap filed a notice of opposition (No. CAL - 759197) to application (No.
1456382) for registration of trade mark ‘MICRO FOCUS SERVER’ in class 35 by Micro Focus (IP)
Limited before the Registrar of Trade Marks, Trade Marks Registry, Kolkata under section 21 (1) of
the Trade Marks Act, 1999 requesting for refusal of the application for registration. MCap has alleged
inter alia that the trade mark applied for registration is devoid of any distinctive character and is
identical to registered trade mark of MCap. MCap has also alleged that the trade mark application is in
violation of section 11(2) and (3) of the Trade Marks Act, 1999. The matter is currently pending before
the Registrar of Trade Marks.

2. On March 31, 2010, MCap filed a notice of opposition (No. CAL-759198) to application (No.
1456382) for registration of trade mark ‘MICRO FOCUS SERVER’ in class 41 by Micro Focus (IP)
Limited before the Registrar of Trade Marks, Trade Marks Registry, Kolkata under section 21 (1) of
the Trade Marks Act, 1999 requesting for refusal of the application for registration. MCap has alleged
inter alia that the trade mark applied for registration is devoid of any distinctive character and is
identical to registered trade mark of MCap. MCap has also alleged that the trade mark application is in
violation of section 11(2) and (3) of the Trade Marks Act, 1999. The matter is currently pending before
the Registrar of Trade Marks.

237
3. On March 31, 2010, MCap filed a notice of opposition (No. CAL -759199) to application (No.
1456382) for registration of trade mark ‘MICRO FOCUS SERVER’ in class 42 by Micro Focus (IP)
Limited before the Registrar of Trade Marks, Trade Marks Registry, Kolkata under section 21 (1) of
the Trade Marks Act, 1999 requesting for refusal of the application for registration. MCap has alleged
inter alia that the trade mark applied for registration is devoid of any distinctive character and is
identical to registered trade mark of MCap. MCap has also alleged that the trade mark application is in
violation of section 11(2) and (3) of the Trade Marks Act, 1999. The matter is currently pending before
the Registrar of Trade Marks.

4. On July 30, 2010, MCap filed a notice of opposition (No. 764174) to application (No. 1735455) for
registration of trade mark ‘KAUTILYA’ in class 35 by Ranganna Lakshmamma Charitable Trust
before the Registrar of Trade Marks, Trade Marks Registry, Chennai under section 21 (1) of the Trade
Marks Act, 1999 requesting for refusal of the application for registration. MCap has alleged inter alia
that the trade mark applied for registration is devoid of any distinctive character and is identical to
registered trade mark of MCap. MCap has also alleged that the trade mark application is in violation of
section 11(2) and (3) of the Trade Marks Act, 1999. The matter is currently pending before the
Registrar of Trade Marks.

5. On August 2, 2010, MCap filed a notice of opposition (No. 764204) to application (No. 1821661) for
registration of trade mark ‘KAUTILYA’ in class 35 by Kautilya Fin-Con and Wel-Man Services
Private Limited before the Registrar of Trade Marks, Trade Marks Registry, Mumbai under section 21
(1) of the Trade Marks Act, 1999 requesting for refusal of the application for registration. MCap has
alleged inter alia that the trade mark applied for registration is devoid of any distinctive character and
is identical to registered trade mark of MCap. MCap has also alleged that the trade mark application is
in violation of section 11(2) and (3) of the Trade Marks Act, 1999. The matter is currently pending
before the Registrar of Trade Marks.

Arbitration Proceedings

1. On July 14, 2008, MCap filed arbitration proceedings (A.M.No.FO/K-0133/2008) before an arbitrator
appointed by the NSE its client, Uttam Kumar Bali. MCap claimed an amount of approximately Rs.
58,350 in lieu of outstanding debit balance in the account of Uttam Kumar Bali. Uttam Kumar Bali
filed his reply on January 21, 2009 and alleged certain irregularities in his trading account with MCap.
The arbitrator by its order dated February 9, 2009 directed Uttam Bali to make a payment of Rs. 40,000
to MCap by February 28, 2009. Subsequently, on April 27, 2009 MCap filed a petition (M.Ex 17/2009)
before the Court of District Judge at Alipore under section 151 of CPC for the execution of the award
and also seeking attachment of certain shares laying in the depository account of Uttam Kumar Bali.
On November 3, 2009 the Court of District Judge ordered MCap to sell certain shares laying in the
depository account of Uttam Kumar Bali and to submit all the documents relating to the sales proceeds
along with an affidavit on November 30, 2009. The matter is currently pending before the Court of
District Judge at Alipore.

2. On August 10, 2008, MCap had initiated an arbitration proceeding (Reference No. 386/2008) before an
arbitrator appointed by the BSE against its client, Jatin Bimal Deorah. MCap claimed an amount of
approximately Rs. 0.52 million including interest, in lieu of outstanding debit balance in the account of
Jatin Bimal Deorah. The arbitrator by its order dated April 1, 2009 rejected the claim of approximately
Rs. 0.48 million made by MCap. MCap filed an appeal before the appellate bench of the BSE against
the order passed dated April 1, 2009 by the arbitrator appointed by the BSE. The appellate bench by its
order dated August 28, 2009 dismissed the appeal. Subsequently, on November 30, 2009, MCap has
filed an appeal in the High Court of Judicature, at Bombay under Section 34 of the Arbitration and
Conciliation Act, 1996, for setting aside the impugned award dated August 28, 2009 passed by the
appellant bench of the BSE and the arbitration award dated April 1, 2009 passed by the sole arbitrator
appointed by the BSE. The matter is currently pending before the High Court of Judicature, at Bombay.

3. Shio Sankar Agarwalla the judgment debtor, had entered into an agreement dated August 14, 2007
with MCap for engaging the services of the MCap in relation to stock broking services. MCap invoked
the arbitration clause under the agreement dated August 14, 2007 alleging that the judgement debtor
has defaulted in making certain payments due to MCap pursuant to repeated reminders. Consequent to
the arbitration proceedings, the sole arbitrator, by his order date July 21, 2009, held that the judgment
debtor shall pay the MCap Rs. 0.29 million within 15 days, failing which an interest at the rate of 15%

238
 per annum shall be imposed. This order was sent to the judgment debtor on July 31, 2009. However,
the judgment debtor has not made any payments since and the MCap has filed a money execution case
no. 1275 on August 7, 2010 before the City Civil Court, Kolkata. The MCap has sought an interim stay
preventing the judgment debtor form accessing his bank account (No. 000605002010) held with ICICI
Bank, transferring or alienating the shares held in his name from any of the depository accounts and
preventing the judgment debtor from alienating or encumbering any of his movable or immovable
assets. The matter is pending.

B. Microsec Technologies Limited

Litigation against MTL

1. The Service Tax Commissionerate, Kolkata, issued a show cause notice to MTL dated October 20,
2009, alleging contravention of the provisions of the Finance Act, 1994 and a non payment of service
tax, education cess and H.E. Cess totalling to approximately Rs. 1.07 million. MTL has by its letters
dated November 18, 2009 and December 20, 2009, has sought an extension of up to January 20, 2010
for the submission of the reply to the show cause notice. On January 19, 2010 MTL filed its reply and
denied the charges and have requested the Service Tax Commissionerate, to withdraw the matter.
Subsequently, the Commissioner of Service Tax by its letter dated July 29, 2010, requested MTL to
appear for a personal hearing to be held on August 18, 2010. MTL by its letter dated August 16, 2010
to the Superintendent (Adjn.) of Service Tax has requested for extension of time for personal hearing.
The matter is currently pending.

Litigation filed by MTL

Nil

C. Microsec Resources Private Limited

Litigation against MRPL

Direct Tax

1. MRPL received an assessment order dated December 31, 2007 from the Income Tax Office under
Sections 274 read with Section 271 of the Income Tax Act, 1961 alleging that MRPL had concealed
particulars of its income for the assessment year 2005-2006 alleging inter alia, wrongful claim of
expenditure terms as ‘discount on deep discount debentures written off’. It was alleged that MRPL and
MCL are sister concerns, working in the same premises in such an arrangement resulting in evasion of
tax in addition to evasion of tax by deleting the addition of discount on deep discount debentures issued
by MRPL. A demand notice dated December 31, 2007 for approximately Rs. 2.05 million was issued
against MRPL in this regard. On January 18, 2008 MRPL filed an appeal (no.540/XII/10(2)07-08)
before the Commissioner of Income Tax (Appeals), Kolkata, against the assessment order and demand
notice dated December 31, 2007. Commissioner of Income Tax (Appeals) by its Order dated April 28,
2008 allowed the appeal filed by MRPL. Subsequently, the Income Tax Department filed an appeal (IT
Appeal No. 1321/ KOL/ 08) against the order dated April 28, 2008 before the Income Tax Tribunal ‘C’
Bench, Kolkata. Income Tax Tribunal, by its Order dated February 13, 2009 rejected the appeal and
upheld the order dated April 28, 2008 delivered by the Commissioner of Income Tax (Appeals). The
Income Tax Department has filed an appeal (I.T.A.No. 248/2009) in the High Court of Calcutta against
the order dated February 13, 2009 and the matter is currently pending.

2. MRPL received a notice dated March 12, 2008 from the Income Tax Office under Sections 148 of the
Income Tax Act, 1961 alleging that income of MRPL for the assessment year 2003-2004 has escaped
assessment within the meaning of section 147 of the Income Tax Act, 1961 directing MRPL to deliver
a return of the income of MRPL for the assessment year 2003-2004 in the prescribed format within
thirty days from the date. MRPL has replied to the same vide its letter dated April 16, 2008. The
Income Tax Office on September 26, 2008 served a notice under Section 142 of the Income Tax Act,
1961 pursuant to which a hearing was conducted on December 2, 2008 and December 19, 2008.
Subsequently, MRPL received an assessment order dated December 30, 2008 under section 143 (3) and
147 of the Income Tax Act, 1961 from assessment officer, Income Tax Office, alleging inter alia,
wrongful claim of expenditure terms as ‘discount on deep discount debentures written off’ in addition

239
 to claim of excessive and unrelated expenses in the profit and loss account in respect of assessment
year 2003-2004. A demand notice dated December 30, 2008 for approximately Rs. 2.05 million was
also issued against MRPL. On January 20, 2009, MRPL filed an appeal (no. 279/XII/10(2)/08-09)
before the Commissioner of Income Tax (Appeal) under section 246 A of the Income Tax Act, 1961
against the order and demand notice dated December 30, 2008. The appeal was allowed on January 28,
2010 by the Commissioner of Income Tax (Appeal). Subsequently on April 1, 2010 the income tax
department filed an appeal against the order of the Commissioner of Income Tax (Appeal) before
Income Tax Appellate Tribunal. The matter is currently pending before the Income Tax Appellate
Tribunal.

3. MRPL received an assessment order dated December 30, 2008 under section 143 (3) of the Income Tax
Act, 1961 from assessment officer, Income Tax Office, alleging inter alia, wrongful claim of
expenditure terms as ‘discount on deep discount debentures written off’ in addition to claim of
excessive and unrelated expenses in the profit and loss account in respect of assessment year 2006-
2007. A demand notice dated December 30, 2008 for approximately Rs. 2.21 million was also issued
against MRPL. On January 20, 2009, MRPL filed an appeal (no. 280/XII/10(2)/08-09) before the
Commissioner of Income Tax (Appeal) under section 246 A of the Income Tax Act, 1961 against the
order and demand notice dated December 30, 2008. The appeal was allowed on January 28, 2010 by
the Commissioner of Income Tax (Appeal). Subsequently on April 1, 2010 the income tax department
filed an appeal against the order of the Commissioner of Income Tax (Appeal) before Income Tax
Appellate Tribunal. The matter is currently pending before the Income Tax Appellate Tribunal.

D. Microsec Commerze Limited

Litigation against MCL

Correspondences with the NCDEX

1. NCDEX through its letter dated August 24, 2007, requested MCL to rectify certain deficiencies /
irregularities. The deficiencies inter alia include non-receipt in writing of the order cancellation /
modification slips. The said letter was issued pursuant to an inspection undertaken on August 21, 2007
and MCL was also advised to immediately stop the violations and report the same as a part of their
reply by September 10, 2007. The same was without prejudice to the disciplinary actions that NCDEX
may initiate. MCL replied through a letter dated September 6, 2007. NCDEX has not initiated any
further action in this regard.

2. MCL through its letter dated June 14, 2007, submitted its compliance report for the period ended
March 31, 2007 to NCDEX which also points out certain non compliances of MCL. NCDEX has not
initiated any further action in this regard.

3. NCDEX through its letter dated April 28, 2007, stated that MCL has not entered PAN numbers of
certain account holders. There has been no further correspondence by NCDEX in this regard.

4. NCDEX through its letter dated March 8, 2007, stated that MCL had not submitted PAN details of the
directors prior to November 25, 2006. MCL replied to the same. NCDEX has not initiated any further
action in this regard.

5. NCDEX through its letter dated April 29, 2005, stated that the net worth computation submitted by
MCL as on March 31, 2004, was not in accordance with the rules of NCDEX. There has been no
further correspondence by NCDEX in this regard.

6. NCDEX through its letter dated December 20, 2004, requested MCL to rectify certain deficiencies /
irregularities. The deficiencies inter alia include incomplete client registration forms. The letter was
sent pursuant to an inspection undertaken on December 16, 2004, and also stated that without prejudice
to the disciplinary actions that NCDEX may take, MCL was advised to immediately stop the violations
and report the same as a part of their reply. MCL replied through a letter dated December 31, 2004.
NCDEX has not initiated any further action in this regard.

7. MCL through its letter dated July 25, 2008 submitted its compliance report for the period ended March
31, 2008 to NCDEX. NCDEX has not initiated any further action in this regard.

240
8. On November 11, 2008 NCDEX pursuant to its letter dated November 7, 2008 conducted an inspection
on a sample basis of MCL’s operations, books and records. On November 25, 2008 MCL submitted its
replies to an inspection questionnaire issued by NCDEX along with its reply to an inspection checklist
to NCDEX. NCDEX has not initiated any further action in this regard.

Correspondences with the Multi Commodity Exchange of India Limited

1. MCL through its letter dated August 24, 2007, submitted its compliance report 2006-2007 to MCX
which also points out certain non compliances of MCL. MCX has not initiated any further action in this
regard.

2. MCX, pursuant to its letter dated January 29, 2008 undertook an inspection of the books of accounts
and other documents of MCL. Thereafter, MCX through its letter dated May 21, 2008 alleged certain
irregularities, administrative lapses/ violations and non-compliances such as failure to provide trade
confirmation slips to client on execution of the trade, failure to issue contract notes in format prescribed
by the exchange and failure to maintain copies of written consent of client in respect of for order
modification, order cancellation and trade cancellation. MCX had advised MCL to submit their reply
within 15 days from the date of their letter. MCL through its letter dated May 28, 2008 replied to the
same. Subsequently, MCX through its letter dated June 26, 2008 imposed a penalty of Rs. 6,000 for the
violations mentioned in their letter dated May 21, 2008 and further advised MCL not to repeat these
violations.

3. MCX through its letter dated June 26, 2008 directed MCL to submit a certificate confirming non-
recurrence of violations in respect of inspection conducted for the financial year 2006 - 07. Due to
failure of the Company to comply with the same, MCX again by its letter dated December 12, 2008
directed MCL to submit the certificate confirming non-recurrence of violations by December 26, 2008.
Subsequently, MCL by its letter dated December 18, 2008 submitted a certificate confirming non-
recurrence of violations. MCX has not initiated any further action in this regard.

4. MCL through its letter dated June 27, 2008, submitted its Compliance Report 2007-2008 to MCX.
MCX through its letter dated December 29, 2008 issued observations pertaining to MCL’s dealings
with the sub-brokers, membership requirements, office management and internet trading. MCL filed
its reply dated January 12, 2009 to MCX submitting the explanations. MCX has not initiated any
further action in this regard.

Tax cases

1. MCL received a notice dated May 5, 2009 from the Income Tax Office under Section 148 of the
Income Tax Act, 1961 alleging that income of MCL for the assessment year 2005-2006 has escaped
assessment within the meaning of Section 147 of the Income Tax Act, 1961 directing MCL to deliver a
return of the income of MCL for the assessment year 2005-2006 in the prescribed format within thirty
days from the date. MCL has replied to the same vide its letter dated June 2, 2009. Subsequently, on
May 26, 2010, the Income Tax Department issued an assessment order disallowing expenses of Rs.
39,009 under section 40a(ia) of the I.T. Act alleging failure to deduct tax at source on certain
payments. The Income Tax Department has not taken any further action in this regard.

Penalties for administrative infractions

Penalties have been imposed on MCL by NCDEX and MCX for administrative infractions. The details
of such penalties paid by MCL in Fiscal 2006, 2007, 2008, 2009 and 2010 are set forth below:

Nature of Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010
infraction No. Amount No. Amount No. Amount No. Amount No. Amount
of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.)
cases cases cases cases cases
NCDEX
Wrong/non- 4 3,890 4 690 4 1100 - - - -
upload of
UCC
Modification - - 2 3,000 2 4,000 - - - -

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 Nature of Fiscal 2006 Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010
infraction No. Amount No. Amount No. Amount No. Amount No. Amount
of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.) of (in Rs.)
cases cases cases cases cases
of executed
trades
Exceeding 2 1,694 - - 3 3,736 - - 1 10,000
margin/
position limits
Failure to raise - - 1 5,000 - - - - - -
invoices for
executed
trades
Non/late - - - - - - 2 200 - -
submission of
client
information

MCX
Wrong/non- - - 5 2,500 1 400 1 100 - -
upload of
UCC
Modification - - - - 5 2,500 - - - -
of executed
trades
Failure to raise - - 1 2,143 2 20,000 2 8,700 - -
invoices for
executed
trades
Total 6 5,584 13 13,333 17 31,736 5 9,000 1 10,000

E. Microsec Insurance Brokers Limited

Litigation against MIBL

Notices by IRDA

1. IRDA by its letter dated January 7, 2004 informed MIBL about non-compliance of the Regulation 22
and 26 of IRDA (Insurance Brokers) Regulations, 2002 and required MIBL to submit an un-audited
half yearly accounts as of September 30, 2004 to IRDA. Upon failure to comply with the same, IRDA
issued a SCN dated April 21, 2004, pursuant to which MIBL submitted a reply dated April 29, 2004
along with the half yearly unaudited accounts as of September 30, 2004. Subsequently, IRDA by its
letter dated June 8, 2004 issued a warning to MIBL, requiring MIBL to be diligent in future regarding
its activities as an insurance broker. MIBL by its letter dated June 14, 2004 acknowledged the warning
letter. IRDA has not initiated any further action in this regard.

2. Pursuant to an application made by MIBL for renewal of its insurance broking license, IRDA issued a
SCN dated October 12, 2009 to MIBL, alleging diversion of funds within the group companies or
associates in violation of IRDA (Insurance Brokers) Regulations, 2002. It was alleged that pledge of
certain bonds for obtaining bank guarantee for MCap and pledge of fixed deposits for availing
overdraft facility for MCL was in violation of Regulation 18 (2) and 34 (2). Further, in this regard
IRDA extended MIBL’s insurance broking license for one year from March 20, 2009 instead of three
years. MIBL has submitted its reply dated October 22, 2009 indicating that the aforementioned
violations have been rectified and requested IRDA to extend its insurance broking license for a term of
three years from March 20, 2009. IRDA through its letter dated November 25, 2009 observed that
MIBL has failed to adhere to the applicable and relevant regulations for carrying the activities as
insurance broker and hence rejected the renewal application filed by MIBL and also revoked the
previous license granted vide letter dated October 12, 2009. MIBL by its letter dated December 12,
2009, addressed to the Chairman of IRDA, requested for the reconsideration for the renewal of the
license for the period of three years. IRDA through its letter dated January 15, 2010 imposed a penalty
of Rs. 0.5 million regarding the non compliance of Regulation 32 (2) of the IRDA (Insurance Brokers)
Regulations, 2002, by MIBL. MIBL by its letter dated January 22, 2010, has confirmed to comply with

242
 the directions of IRDA and has requested to grant the renewal of license for a period of three years.
MIBL has paid the penalty and IRDA has, by its letter dated March 2, 2010 granted renewal of the
license for a period of three years.

Cases involving Group Companies

(b) LKPL

Litigation filed against LKPL

1. LKPL received an assessment order dated October 26, 2009 under section 143 (3) of the Income Tax
Act, 1961 from assessing officer, Income Tax Office, disallowing certain expenses in respect of
assessment year 2007-2008. A demand notice of dated September 26, 2009 for approximately Rs. 0.27
million was also issued against LKPL. On November 25, 2009, LKPL filed an appeal (no. 737/CIT(A)-
VI/09-10/W-6(2)/Kol) before the Commissioner of Income Tax (Appeal) under section 246 A of the
Income Tax Act, 1961 against the order and demand notice dated October 26, 2009. LKPL received a
notice of the hearing under section 250 of the Income Tax Act, 1961, for appearance on January 18,
2010 before the Commissioner of Income Tax (Appeal). LKPL by its letter dated May 7, 2010 has
requested the Commissioner of Income Tax (Appeal) for adjournment of the hearing on the ground
that the subject matter of appeal is already pending before various appellate authority. The matter is
pending before the Commissioner of Income Tax (Appeals).

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 GOVERNMENT APPROVALS

The Company has received the necessary consents, licenses, permissions and approvals from the Government
and various governmental agencies required for its present business and except as mentioned below, no further
approvals are required for carrying on the Company’s present business.

In view of the approvals listed below, the Company can undertake this Issue and its current business activities
and no further major approvals from any governmental or regulatory authority or any other entity are required to
undertake the Issue or continue its business activities. Certain approvals have elapsed in their normal course and
the Company has either made an application to the appropriate authorities for renewal of such licenses and/or
approvals or is in the process of making such applications.

Approvals for the Issue

1. The Board of Directors have, pursuant to a resolution dated September 5, 2009 and September 3, 2010
authorised the Issue, subject to the approval by the shareholders of the Company under Section 81(1A)
of the Companies Act.

2. The shareholders have, pursuant to a resolution dated September 30, 2009 and September 4, 2010
under Section 81(1A) of the Companies Act, authorised the Issue.

3. In - principle approval from the NSE dated May 25, 2010.

4. In - principle approval from the BSE dated April 27, 2010.

Approvals obtained by our Subsidiaries for change in shareholding pattern of the Company pursuant to the
Issue

1 MCap has received the following approvals for change in shareholding pattern, the details of which are
set forth below:

(a) NSE by its letter (Reference No. NSE/MEM/FC/1902/EA/SHP/613945/22062010002) dated

June 22, 2010 approved changes to shareholding pattern of the Company pursuant to listing of
the Company on the NSE. The approval for change in shareholding of the Company is valid
till December 31, 2010. In terms of the approval granted by NSE, Banwari Lal Mittal’s
shareholding in the Company is not allowed to go below 26% of the share capital pursuant to
listing of the Company on the Stock Exchanges.

(b) MCap by its letter dated September 4, 2009 informed BSE in relation to change in
shareholding of the Company pursuant to the Issue. BSE by its letter (Reference No.
MSD/MM/AK/PB/6708/2009) dated September 10, 2009 has noted the same.

(c) MCap by its letter dated August 28, 2009 informed Inter-connected Stock Exchange of India
Limited in relation to change in shareholding of the Company pursuant to the Issue. The Inter-
connected Stock Exchange of India Limited by its letter (Reference No. 09-10/ISE/1029/GK)
dated January 18, 2010 has noted the same.

Approvals for the Company’s business

1. PAN of the Company issued by Income Tax Department: AADCS7147N

2. Tax Deduction Account Number issued by the Income Tax Department: CALM07541C

3. Certificate of Registration dated January 24, 2007 issued by Assistant Commissioner, Service Tax
Department, Kolkata under section 69 of the Finance Act, 1994. The Company was granted service tax
code AADCS7147NST001.

4. Certificate of Registration B-05.05346 (in lieu of certificate number B-05-05346 dated January 29,
2003) dated November 9, 2005 issued by Department of Non-Banking Supervision, RBI to the
Company to commence business of NBFC without accepting public deposits.

244
5. Certificate of Registration (No. Kol/Kar/P-II/42730) dated October 12, 2007 issued by the Registering
Authority under the West Bengal Shops & Establishment Act, 1963 to the Company. The registration is
granted in respect of 1st Floor, 53, Syed Amir Ali Avenue as a ‘commercial establishment’. The
registration is valid till October 11, 2010.

6. Renewal of Certificate of Enlistment (Trade License) No. 002851006636 issued by the Kolkata
Municipal Corporation. The license is valid till March 31, 2011.

Approvals for the business of our Subsidiaries

A. Microsec Capital Limited

1. PAN of MCap issued by Income Tax Department: AAACL6332R

2. Tax Deduction Account Number issued by the Income Tax Department: CALM04995E

3. Certificate of Registration dated January 22, 2007 issued by Assistant Commissioner, Service
Tax Department, Kolkata under section 69 of the Finance Act, 1994. MCap was granted
service tax code AAACL6332RST001.

4. Certificate of Registration (No. INB011115939) dated August 12, 2005 issued by SEBI under
regulation 6 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992. MCap is registered
as a stock broker (member of BSE) in respect of carrying on the activities of buying, selling or
dealing in securities and carrying on such other activities as are permitted by such stock
exchanges. The registration is valid up till suspension or cancellation.

5. Certificate of Registration (No. INB231115933) dated September 9, 2004 issued by SEBI

under regulation 6 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992. MCap is
registered as a stock broker (member of NSE) in respect of carrying on the activities of
buying, selling or dealing in securities and carrying on such other activities as are permitted
by such stock exchanges. The registration is valid up till suspension or cancellation.

6. Certificate of Registration (No. INF011115939) dated May 24, 2007 issued by SEBI under
regulation 16 D of SEBI (Stock brokers and Sub-brokers) Regulations, 1992. MCap is
registered as a trading member of BSE in derivative (futures and options) segment. The
registration is valid up till suspension or cancellation.

7. Certificate of Registration (No. INF231115933) dated October 12, 2006 issued by SEBI under
regulation 16 D of SEBI (Stock brokers and Sub-brokers) Regulations, 1992. MCap is
registered as a self-clearing member of NSE in respect of derivatives exchange/ derivatives
segment/ clearing corporation/ clearing house as trading/ clearing member for carrying on the
activities of dealing in derivatives/ clearing & settlement of derivatives trades and for carrying
on such other activities as are permitted from time to time by such exchanges/ segments/
clearing corporation/ clearing house. The registration is valid up till suspension or
cancellation.

8. Certificate of Registration (No. INB241115931) dated July 11, 2000 issued by SEBI under
regulation 6 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992. MCap is registered
as a stock broker (as a dealer of Inter-Connected Stock Exchange of India Limited) in respect
of carrying on the activities of buying, selling or dealing in securities and carrying on such
other activities as are permitted by the such stock exchanges. The registration is valid up till
suspension or cancellation.

9. Certificate of Registration (No. IN-DP-NSDL-245-2005) dated March 26, 2010 issued by

SEBI under regulation 20 SEBI (Depositories and Participants) Regulations 1996. MCap is
registered as a depository participant with NSDL. The registration is valid till February 23,
2015.

10. Certificate of Registration (No. IN-DP-CDSL-424-2007) dated September 27, 2007 issued by

245
 SEBI under regulation 20 of SEBI (Depositories and Participants) Regulations, 1996. MCap is
registered as a depository participant with CDSL. The registration is valid till September 26,
2012.

11. Renewal of Certificate of Conditional Registration (No. INM000010791) dated November 26,
2009 issued by SEBI under regulation 8 of the SEBI (Merchant Bankers) Regulations, 1992.
MCap is registered as a merchant banker (category – I). The registration is valid till March 15,
2012.

12. Certificate of Registration (No. ARN-3087) dated March 19, 2008 issued by AMFI. MCap is
registered as a mutual fund advisor with AMFI. The registration is valid till March 18, 2013.

13. Certificate of Registration (No. INF231115933) dated October 14, 2004 issued by SEBI under
SEBI (Stock Brokers and Sub Brokers) Regulations, 1992. MCap is registered as a stock
broker (member of NSE) in futures and options segment. The registration is valid up till
suspension or cancellation.

14. Certificate of Registration (No. INE261115933) dated October 20, 2009 issued by SEBI under
Regulation 16M of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992. MCap is
registered as a Trading Member of MCX Stock Exchange Limited in currency derivative
segment/ clearing corporation/ clearing house as trading/ clearing member for carrying on the
activities of dealing in currency derivatives/ clearing & settlement of currency derivatives
trades. The registration is valid till suspension or cancellation.

15. Certificate of Registration (No. INE231115931) dated October 24, 2008 issued by SEBI under
Regulation 16M of SEBI (Stock brokers and Sub-brokers) Regulations, 1992. MCap is
registered as a trading member of NSE in respect of currency derivatives segment/ clearing
corporation/ clearing house as trading/ clearing member for carrying on the activities of
dealing in currency derivatives/ clearing & settlement of currency derivatives trades and for
carrying on such other activities as are permitted by such exchanges/segments/clearing
corporation/clearing house. The registration is valid up till suspension or cancellation.

16. Certificate of Registration (No. INF231115933) dated October 14, 2004 issued by SEBI under
regulation 16D of SEBI (Stock brokers and Sub-brokers) Regulations, 1992. MCap is
registered as a trading member of NSE in respect of derivatives exchange/ derivatives
segment/ clearing corporation/ clearing house as trading/ clearing member for carrying on the
activities of dealing in derivatives/ clearing & settlement of derivatives trades and for carrying
on such other activities as are permitted from time to time by such exchanges/ segments/
clearing corporation/ clearing house. The registration is valid up till suspension or
cancellation.

17. Certificate of Registration (No. IKT-0203.07) dated November 5, 2007 issued by Moody
International Certification Limited to MCap for the quality management system of MCap in
compliance with the requirements of ISO 9001:2000. The registration is granted in respect of
providing broking services both online and offline, depository services and distribution
services. The registration is valid till November 4, 2010.

18. Certificate of Registration (No. Kol/Kar/P-II/42747) dated October 15, 2007 issued by the
Registering Authority under the West Bengal Shops & Establishment Act, 1963 to MCap. The
registration is granted in respect of the 1st Floor, 53, Syed Amir Ali Avenue as a Commercial
Establishment. The registration is valid till October 14, 2010.

19. Employees State Insurance Corporation by its letter (No. 41.Z.17/20/2009-EDP (Project
Panchdeep)) dated September 29, 2009 allotted code no. 41000387930001001 to MCap for
factory/ establishment under section 2 A of the Employees State Insurance Act, 1948.

20. Renewal of Certificate of Enlistment (Trade License) (No. 002891006630) issued by the
Kolkata Municipal Corporation for trade as ‘office of accounts’. The license is valid till March
31, 2011.

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B. Microsec Resources Private Limited

1. PAN of MRPL issued by Income Tax Department: AABCG2396M

2. Tax Deduction Account Number issued by Income Tax Department: CALK02830C

3. Certificate of Registration B-05.06241 (in lieu of certificate number B-05-06241 dated March
10, 2004) dated April 21, 2006 issued by Department of Non-Banking Supervision, RBI to
MRPL to commence business of NBFC without accepting public deposits.

4. Certificate of Registration (No. Kol/Park/P-II/42500/07) dated August 28, 2007 issued by the
Registering Authority under the West Bengal Shops & Establishment Act, 1963 to MRPL.
The registration is granted in respect of the 2nd Floor, 7, Camac Street, Kolkata-17 as a
Commercial Establishment. The registration is valid till August 27, 2013

5. Renewal of Certificate of Enlistment (Trade Certificate) (No. 407114000772) issued by the

Kolkata Municipal Corporation for trade as ‘Office of – Accounts and Administration’. The
licence is valid till March 31, 2011.

C. Microsec Technologies Limited

1. PAN of MTL issued by Income Tax Department: AADCM4151G

2. Tax Deduction Account Number issued by Income Tax Department: CALM03919G

3. Certificate of Registration dated April 13, 2006 issued by Assistant Commissioner, Service
Tax Department, Kolkata under section 69 of the Finance Act, 1994. MIL Technologies
Limited (now MTL) was granted service tax code AADCM4151GST001.

4. License (No. STPK: DIR:488:2006-07) dated February 16, 2007 granted by Ministry of
Communication and Information Technology under Software Technologies Park. The license
is valid till February 16, 2012.

5. Certificate of Registration (No. Kol/Park/P-II/42231/07) dated July 12, 2007 issued by the
Registering Authority under the West Bengal Shops & Establishment Act, 1963 to MTL. The
registration is granted in respect of the 2 nd Floor, 7, Camac Street, Kolkata-17 as a
Commercial Establishment. The registration is valid till July 11, 2013.

6. Renewal of Certificate of Enlistment (Trade Certificate) No 306306003412 issued by the

Kolkata Municipal Corporation for trade as ‘Professionals (with office) – Software
Developers and Data Processor’. The licence is valid till March 31, 2011.

D. Microsec Commerze Limited

1. PAN of MCL issued by Income Tax Department: AACCM2612B

2. Tax Deduction Account Number issued by Income Tax Department: CALM04718A

3. Certificate of Registration dated January 22, 2007 issued by Assistant Commissioner, Service
Tax Department, Kolkata under section 69 of the Finance Act, 1994. MCL was granted
service tax code AACCM2612BST001.

4. Certificate of membership (NCDEX-CO-03-00089) dated February 12, 2007 issued by

NCDEX, to MCL under rule 5.2 (11) NCDEX Rules, whereby MCL was admitted as trading-
cum-clearing member of NCDEX with effect from December 26, 2003. The registration is
valid up till suspension of membership.

5. Certificate of membership (No. 28025) dated December 17, 2004 issued by MCX, to MCL,
whereby MCL was admitted as trading-cum-clearing member of MCX with effect from
December 12, 2004. The registration is valid up till suspension of membership.

247
 6. MCL was allotted Unique Membership Code NCDEX/TCM/CORP/0026 by FMC on
December 20, 2005.

7. MCL was allotted Unique Membership Code MCX/TCM/CORP/0687 by FMC on December

22, 2005.

8. Certificate of Registration (No. Kol/Kar/P-II/42746) dated October 15, 2007 issued by the
Registering Authority under the West Bengal Shops & Establishment Act, 1963 to MCL. The
registration is granted in respect of the 1st Floor, 53, Syed Amir Ali Avenue as a Commercial
Establishment. The registration is valid till October 14, 2010.

9. Renewal of Certificate of Enlistment (Trade License) (No. 407114000243) dated August 20,
2010 issued by the Kolkata Municipal Corporation to MCL for trade as ‘dealer of non-food
items – shares (ID-2805/MCEI)’. The licence is valid till March 31, 2011.

E. Microsec Insurance Brokers Limited

1. PAN of MIBL issued by Income Tax Department: AADCM3059K

2. Tax Deduction Account Number issued by Income Tax Department: CALM04188C

3. Certificate of Renewal of License dated March 2, 2010 issued by the Insurance Regulatory
and Development Authority issued to MIBL, renewing MIBL’s license as a direct broker for
the period from March 20, 2009 to March 19, 2012.

4. Certificate of Registration dated November 24, 2008 issued by Assistant Commissioner,

Service Tax Department, Kolkata under section 69 of the Finance Act, 1994. MIBL was
granted service tax code AADCM3059KST001.

5. Certificate of Registration (No. Kol/Kar/P-II/42728) dated October 11, 2007 issued by the
Registering Authority under the West Bengal Shops & Establishment Act, 1963 to MIBL. The
registration is granted in respect of the 1st Floor, 53, Syed Amir Ali Avenue as a Commercial
Establishment. The registration is valid till October 10, 2010.

6. Renewal of Certificate of Enlistment (Trade Licence) (No. 306306003434) dated August 19,
2010 by Kolkata Municipal Corporation to Microsec Risk Management Limited (now MIBL)
for trade as a ‘broker of non-food items – insurance’. The licence is valid till March 31, 2011.

F. PRP Technologies Limited

1. PAN of PRP Technologies Limited issued by Income Tax Department: AAECP4235F

2. Tax Deduction Account Number issued by Income Tax Department: CALP07894F

3. Certificate of Registration dated November 17, 2008 issued by Assistant Commissioner,

Service Tax Department, Kolkata under section 69 of the Finance Act, 1994. PRP was granted
service tax code AAECP4235FST001

4. Allotment of incubation facility dated May 24, 2010 issued by the Assistant Director & OIC,
Software Technology Park of India, Dheradun. PRP has been allotted an area of 200 sq. ft. and
facility of two personal computers at the Incubation centre, IT Park Sahastradhara Road,
Dheradun. The facility is valid with effect from June 1, 2010 up till May 23, 2011.

5. Renewal of Certificate of Enlistment (Trade License) No. 001191014853 issued by the

Kolkata Municipal Corporation to PRP for its trade as ‘office of – software and hardware’.
The license is valid till March 31, 2011.

Intellectual Property Related Approvals

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A. Microsec Financial Services Limited

Copyrights

1. Registration (No. L-32079/2009) dated February 20, 2009 was granted to the Company by
Deputy Registrar of Copyrights, for copyright of title of literary work being ‘Financial
Planning Check-Up’. The author of the literary work is Banwari Lal Mittal.

2. Registration (No. L-31951/2009) dated January 20, 2009 was granted to Gulmohar Advisors
Private Limited by Deputy Registrar of Copyrights, for copyright of title of literary work
being ‘Personal Resource Planning’. The author of the literary work is Amit Sharma. The
Deputy Registrar of Copyrights as per certificate dated April 30, 2010 registered the same in
the name of Microsec Financial Services Limited*.

3. Registration (No. L-32298/2009) dated March 12, 2009 was granted to Gulmohar Advisors
Private Limited by Deputy Registrar of Copyrights, for copyright of title of literary work
being ‘Personal Resource Planning (Software Requirement Specifications)’. The author of the
literary work is Anidita Ghosh. The Deputy Registrar of Copyrights as per certificate dated
April 30, 2010 registered the same in the name of Microsec Financial Services Limited*.

*For further details see “History and Certain Corporate Matters – Other Agreements – Agreement
between the Company and Gulmohar Advisors Private Limited dated March 28, 2009” on page 89 of
this Red Herring Prospectus.

B. Microsec Capital Limited

Copyrights

1. Registration (No. A-73950/2005) dated June 3, 2005 was granted to Microsec India Limited
(now MCap) by Deputy Registrar of Copyrights, for copyright of title of artistic work being
‘CLUB KAUTILYA’. The author of the artistic work is R.K. Sharma

Trade Marks

1. Microsec India Limited (now MCap) was granted Trade Mark No. 1244386 in respect of
‘MICROSEC-PARTNERS IN GROWTH’ by Certificate No. 607740 dated February 17, 2007
by Trade Mark Registry under Trade Marks Act, 1999 in respect of insurance, financial affairs
and monetary affairs included in class 36 with effect from October 20, 2003. The registration
is valid up till October 19, 2013.

2. Microsec India Limited (now MCap) was granted Trade Mark No. 1140472 in respect of
‘MICROSEC-PARTNERS IN GROWTH’ by Certificate No. 372366 dated May 17, 2005 by
Trade Mark Registry under Trade Marks Act, 1999 in respect of newsletters, periodicals,
journals, various printed materials related to financial, insurance, consultancy advisory, legal,
accounting, data processing software and LT. enable services and other products included in
class 16 with effect from October 3, 2003. The registration is valid up till October 2, 2013.

3. Microsec India Limited (now MCap) was granted Trade Mark No. 1278243 in respect of
‘INSURING SUCCESS’ by Certificate No. 460053 dated November 9, 2005 by Trade Mark
Registry under Trade Marks Act, 1999 in respect of insurance, insurance risk, financial and
taxation services included in class 36 with effect from April 12, 2004. The registration is valid
up till April 11, 2014.

4. Microsec India Limited (now MCap) was granted Trade Mark No. 1244385 in respect of
‘MICROSEC-PARTNERS IN GROWTH’ by Certificate No. 675491 dated February 20, 2008
by Trade Mark Registry under Trade Marks Act, 1999 in respect of business management,
business administration and office functions included in class 35 with effect from October 20,
2003. The registration is valid up till October 19, 2013.

5. Microsec India Limited (now MCap) was granted Trade Mark No. 1239946 in respect of
‘Club Kautilya’ by Certificate No. 438448 dated October 6, 2005 by Trade Mark Registry

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 under Trade Marks Act, 1999 in respect of financial insurance and taxation services included
in class 36 with effect from September 26, 2003. The registration is valid up till September 25,
2013.

6. MCap was granted Trade Mark No.1340444 in respect of ‘FINANCIAL DOCTOR’ by Trade
Mark Registry under Trade Marks Act, 1999 with effect from February 23, 2005 in respect of
financial insurance and taxation service included in class 36. The registration is valid up till
February 22, 2015.

7. MCap is granted Trade Mark No. 1407968 in respect of ‘MICROSEC BUYING SHARE IS
NOT BUYING POTATO’ by Trade Mark Registry under Trade Marks Act, 1999 with effect
from December 22, 2005 in respect of services relating to insurance, financial affairs,
monetary affairs and share brokers included in class 36. The registration is valid up till
December 21, 2015.

8. MCap was granted Trade Mark No. 1407967 in respect of ‘SAUDA SAMAJH KE’ by Trade
Mark Registry under Trade Marks Act, 1999 with effect from December 22, 2005 in respect
of services relating to insurance, financial affairs, monetary affairs and share brokers included
in class 36. The registration is valid up till December 21, 2015.

9. MCap is granted Trade Mark No. 1499057 in respect of ‘Microsec’ by Certificate No. 745068
dated August 8, 2008 by Trade Mark Registry under Trade Marks Act, 1999 in respect of
services relating to insurance, financial affairs, monetary affairs and share brokers included in
class 36 with effect from October 25, 2006. The registration is valid up till October 24, 2016.

10. MCap is granted Trade Mark No. 1499059 in respect of ‘Microsec Viewpoint’ by Certificate
No. 745073 dated August 8, 2008 by Trade Mark Registry under Trade Marks Act, 1999 in
respect of service relating to insurance, financial affairs, monetary affairs and share brokers
included in class 36 with effect from October 25, 2006. The registration is valid up till
October 24, 2016.

11. MCap is granted Trade Mark No. 1506102 in respect of ‘I LISTEN TO MICROSEC
BECAUSE MICROSEC LISTENS TO ME.’ by Trade Mark Registry under Trade Marks Act,
1999 with effect from November 21, 2006 in respect of services relating to insurance,
financial affairs, monetary affairs and share brokers included in class 36. The registration is
valid up till November 20, 2016.

12. MCap is granted Trade Mark No. 1499056 in respect of ‘I SEND MY MONEY TO WORK’
by Trade Mark Registry under Trade Marks Act, 1999 with effect from October 25, 2006 in
respect of services relating to insurance, financial affairs, monetary affairs and share brokers
included in class 36. The registration is valid up till October 24, 2016.

13. MCap is granted Trade Mark No. 1499060 in respect of ‘PERSONAL – PRUDENT –
PROACTIVE’ by Trade Mark Registry under Trade Marks Act, 1999 with effect from
October 25, 2006 in respect of services relating to insurance, financial affairs, monetary affairs
and share brokers included in class 36. The registration is valid up till October 24, 2016.

14. MCap is granted Trade Mark No. 1499058 in respect of label ‘SMALL THINGS MATTER’
by Trade Mark Registry under Trade Marks Act, 1999 with effect from October 25, 2006 in
respect of services relating to insurance, financial affairs, monetary affairs and share brokers
included in class 36. The registration is valid up till October 24, 2016.

15. MCap is granted Trade Mark No. 1529593 in respect of label ‘CALENDAR OF WEALTH
CREATORS’ by Trade Mark Registry under Trade Marks Act, 1999 with effect from
February 9, 2007 in respect of services relating to insurance, financial affairs, monetary affairs
and share brokers included in class 36 as specified under fourth schedule of the Trade Marks
Rules, 2002. The registration is valid up till February 8, 2017.

16. MCap is granted Trade Mark No. 1709854 in respect of label ‘Mirco Care. Mega Wealth’ by
Trade Mark Registry under Trade Marks Act, 1999 with effect from July 11, 2008 in respect

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 of services relating to insurance, financial affairs, monetary affairs and share brokers included
in class 36 as specified under fourth schedule of the Trade Marks Rules, 2002. The
registration is valid up till July 10, 2018.

C. Microsec Insurance Brokers Limited

Trade Marks

1. Microsec Risk Management Limited (now MIBL) was granted Trade Mark No. 1188670 in
respect of ‘INSURING SUCCESS’ by Certificate No. 442079 dated October 13, 2005 by
Trade Mark Registry under Trade Marks Act, 1999 in respect of printed matters, literature,
letter head and other material relating to insurance risk service included in class 16 with effect
from April 1, 2003. The registration is valid up till March 31, 2013.

2. Microsec Risk Management (now MIBL) was granted Trade Mark No. 1212280 in respect of
‘FOUR PILLAR STRATEGY’ by Certificate No. 442743 dated October 14, 2005 by Trade
Mark Registry under Trade Marks Act, 1999 in respect of printed matters, literature, other
material relating to financial insurance and taxation services included in class 16 with effect
from July 7, 2003. The registration is valid up till July 6, 2013.

3. Microsec Risk Management Limited (now MIBL) was granted Trade Mark No. 1212281 in
respect of ‘CLUB KAUTILYA’ by Certificate No. 442737 dated October 14, 2005 by Trade
Mark Registry under Trade Marks Act, 1999 in respect of printed matters, literature, other
materials relating to financial insurance and taxation services included in class 16 with effect
from July 7, 2003. The registration is valid up till July 6, 2013.

Pending Approvals:

A. Microsec Financial Services Limited

Trade Marks

1. Trade Mark No. 1611165 in respect of ‘PRP’ by Certificate No. 804952 dated March 31, 2009
was granted to Gulmohar Advisors Private Limited by Trade Mark Registry under Trade
Marks Act, 1999 in respect of human resource management included in class 35 with effect
from October 12, 2007. The Company has filed a trade mark form No. 24 on October 26,
2009 to the Trade Mark Registry, Kolkata to register the name of the Company in the Register
of Trade Marks as the proprietor of the Trade Mark Application No. 1611165 filed in respect
of mark ‘PRP’ in class 35. For further details see “History and Certain Corporate Matters –
Other Agreements” on page 89 of this Red Herring Prospectus.

2. The Company has filed a trade mark form No. 16 on October 26, 2009 to Trade Mark
Registry, Kolkata for amendment of the name and address mentioned in the Application No.
1611166 filed in respect of ‘Personal Resource Planning’ in class 35 and to record its name
and address as the subsequent proprietor of the above-mentioned trade mark application. For
further details see “History and Certain Corporate Matters – Other Agreements” on page 89 of
this Red Herring Prospectus.

3. The Company has made an application (No. 1850988) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of advertising; business management; business administration; office
functions; economic consultancy services; economic forecasting services; business
organisation consultancy services; economic information services for business purposes;
preparation of economic reports; retail services; the bringing together, for the benefit of
others, of variety of goods/ and or various offerings of services and/or different kinds of
businesses, included in class 35 specified under fourth schedule of the Trade Marks Rules,
2002.

4. The Company has made an application (No. 1850989) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of financial

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 consultancy services; securities investment and management services; securities investment
services for personal investors; valuation of portfolios of securities; foreign exchange
transaction; investment custody (demat); financial advisory services relating to assets
management; tax planning and legal; financial assets management; financial planning for all
kinds of loans through banks; software for personalised planning; insurance – life and non
life; investment in mutual funds; commodities market; research data related to equity,
commodity included in class 36 specified under fourth schedule of the Trade Marks Rules,
2002.

5. The Company has made an application (No. 1850990) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Recourse
Planning’ in respect of financial consultancy services; securities investment and management
services; securities investment services for personal investors; valuation of portfolios of
securities; foreign exchange transaction; investment custody (demat); financial advisory
services relating to assets management; tax planning and legal; financial assets management;
financial planning for all kinds of loans through banks; software for personalised planning;
insurance – life and non life; investment in mutual funds; commodities market; research data
related to equity, commodity included in class 36 specified under fourth schedule of the Trade
Marks Rules, 2002.

6. The Company has made an application (No. 1850991) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of assembling,
repairing, altering, maintain of lighting systems, consumer appliances, industrial goods,
construction and building materials and sanitary products, software and hardware products,
office automation equipments, office automation and data processing equipment and
information technology and surveillance system; vehicle maintenance and repair services;
service stations for vehicles included in class 37 specified under fourth schedule of the Trade
Marks Rules, 2002.

7. The Company has made an application (No. 1850992) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of assembling, repairing, altering, maintain of lighting systems, consumer
appliances, industrial goods, construction and building materials and sanitary products,
software and hardware products, office automation equipments, office automation and data
processing equipment and information technology and surveillance system; vehicle
maintenance and repair services; service stations for vehicles included in class 37 specified
under fourth schedule of the Trade Marks Rules, 2002.

8. The Company has made an application (No. 1850993) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of
telecommunication services, telecommunication, television and radio broadcasting services
including cable and satellite electronic mail, cellular, wireless, communications by computer
terminals and fibre optic networks, computer aided recording, storage and transmission of
sound, message, images, data and documents, internet communication services, services by
telegrams, message delivery and sending news agencies, telex services provision of website to
enable physicians, healthcare workers and other caregivers remote connections to patient
monitors thereof included in class 38 specified under fourth schedule of the Trade Marks
Rules, 2002.

9. The Company has made an application (No. 1850994) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of telecommunication services, telecommunication, television and radio
broadcasting services including cable and satellite electronic mail, cellular, wireless,
communications by computer terminals and fibre optic networks, computer aided recording,
storage and transmission of sound, message, images, data and documents, internet
communication services, services by telegrams, message delivery and sending news agencies,
telex services provision of website to enable physicians, healthcare workers and other
caregivers remote connections to patient monitors thereof included in class 38 specified under
fourth schedule of the Trade Marks Rules, 2002.

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10. The Company has made an application (No. 1850995) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of hotel
booking, ticket booking and tours, travel arrangement services, packaging, storage of goods,
train cargo, air freight, sea freight and clearing agent IATA agent, custom house agent and
multi model transport operators, freight forwarding services, logistics, cargo management
services, transportation services, warehousing, distribution and value added services, supply
chain services, customs brokerage services, tour operators, travel consultants, car rental,
arranging of tours, agencies and trades, travels included in class 39 specified under fourth
schedule of the Trade Marks Rules, 2002.

11. The Company has made an application (No. 1850996) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of hotel booking, ticket booking and tours, travel arrangement services,
packaging, storage of goods, train cargo, air freight, sea freight and clearing agent IATA
agent, custom house agent and multi model transport operators, freight forwarding services,
logistics, cargo management services, transportation services, warehousing, distribution and
value added services, supply chain services, customs brokerage services, tour operators, travel
consultants, car rental, arranging of tours, agencies and trades, travels included in class 39
specified under fourth schedule of the Trade Marks Rules, 2002.

12. The Company has made an application (No. 1850997) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of treatment of
materials, film processing, key duplicating, photographic film developing services,
photographic film developing services, rental and leasing of photographic processing and
printing apparatus, provision of the aforesaid services via a global computer network, utilising
electronic settlement system (electronic commerce); recycling of computer printer parts and
computer components, rechargeable batteries and printer cartridges for printer thereof
included in class 40 specified under fourth schedule of the Trade Marks Rules, 2002.

13. The Company has made an application (No. 1850998) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of treatment of materials, film processing, key duplicating, photographic
film developing services, photographic film developing services, rental and leasing of
photographic processing and printing apparatus, provision of the aforesaid services via a
global computer network, utilising electronic settlement system (electronic commerce);
recycling of computer printer parts and computer components, rechargeable batteries and
printer cartridges for printer thereof included in class 40 specified under fourth schedule of the
Trade Marks Rules, 2002.

14. The Company has made an application (No. 1850999) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of education;
providing of training; entertainment; sporting and cultural activities; libraries; physical
education; seminars; personality and career development courses; services on diet, health,
fitness; publication of newspaper, books, magazines, journals, periodicals, reports, manuals,
texts, electronic books; journals online, multimedia and electronic recordings, film production,
animated motion pictures; waterfalls, recreation parks, clubs, resorts, restaurants included in
class 41 specified under fourth schedule of the Trade Marks Rules, 2002.

15. The Company has made an application (No. 1851000) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of education; providing of training; entertainment; sporting and cultural
activities; libraries; physical education; seminars; personality and career development courses;
services on diet, health, fitness; publication of newspaper, books, magazines, journals,
periodicals, reports, manuals, texts, electronic books; journals online, multimedia and
electronic recordings, film production, animated motion pictures; waterfalls, recreation parks,
clubs, resorts, restaurants included in class 41 specified under fourth schedule of the Trade
Marks Rules, 2002.

16. The Company has made an application (No. 1851001) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP’ in respect of information

253
 technology enabling services, providing of food and drink, temporary accommodation,
medical hygienic and beauty care, veterinary, agricultural services, scientific and industrial
research, computer programming, servicing, resell of desk jet and laser printer cartridges,
sweetmeats, snacks, cafes and cafeterias, resorts and lodging services, rental of temporary
accommodation; rental of meeting rooms; tourist homes, inns; canteen, hotel and restaurants;
rental of tents, transportable buildings included in class 42 specified under fourth schedule of
the Trade Marks Rules, 2002.

17. The Company has made an application (No. 1851002) dated August 17, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘PRP-Personal Resource
Planning’ in respect of information technology enabling services, providing of food and drink,
temporary accommodation, medical hygienic and beauty care, veterinary, agricultural
services, scientific and industrial research, computer programming, servicing, resell of desk jet
and laser printer cartridges, sweetmeats, snacks, cafes and cafeterias, resorts and lodging
services, rental of temporary accommodation; rental of meeting rooms; tourist homes, inns;
canteen, hotel and restaurants; rental of tents, transportable buildings included in class 42
specified under fourth schedule of the Trade Marks Rules, 2002.

18. The Company has made an application (No. 1862507) dated September 14, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘Life on a Better and Large Scale’
in respect of financial consultancy services; securities investment and management services;
securities investment services for personal investors; valuation of portfolios of securities;
foreign exchange transaction; investment custody (demat); financial advisory services relating
to assets management; tax planning and legal; financial assets management; financial planning
for all kinds of loans through banks; software for personalised planning; insurance – life and
non life; investment in mutual funds; commodities market; research data related to equity,
commodity included in class 36 specified under fourth schedule of the Trade Marks Rules,
2002.

19. The Company has made an application (No. 1862508) dated September 14, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘Life on a Better and Large Scale’
in respect of information technology enabling services, providing of food and drink,
temporary accommodation, medical hygienic and beauty care, veterinary, agricultural
services, scientific and industrial research, computer programming, servicing, resell of desk jet
and laser printer cartridges, sweetmeats, snacks, cafes and cafeterias, resorts and lodging
services, rental of temporary accommodation; rental of meeting rooms; tourist homes, inns;
canteen, hotel and restaurants; rental of tents, transportable buildings included in class 42
specified under fourth schedule of the Trade Marks Rules, 2002.

20. The Company has made an application (No. 1853382) dated August 21, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘Club Kautilya’ in respect of
financial consultancy services; securities investment and management services; securities
investment services for personal investors; valuation of portfolios of securities; foreign
exchange transaction; investment custody (demat); financial advisory services relating to
assets management; tax planning and legal; financial assets management; financial planning
for all kinds of loans home, car, business, personal through banks; software for personalised
planning; insurance – life and non life; investment in mutual funds; commodities market;
research data related to equity, commodity currency and bond markets included in class 36
specified under fourth schedule of the Trade Marks Rules, 2002.

21. The Company has made an application (No. 1853383) dated August 21, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘Club Kautilya’ in respect of
financial consultancy services; securities investment and management services; securities
investment services for personal investors; valuation of portfolios of securities; foreign
exchange transaction; investment custody (demat); financial advisory services relating to
assets management; tax planning and legal; financial assets management; financial planning
for loans – home, car, business, personal through banks; software for personalised planning;
insurance – life and non life; investment in mutual funds; commodities market; research data
related to equity, commodity currency and bond markets included in class 36 specified under
fourth schedule of the Trade Marks Rules, 2002.

254
 22. The Company has made an application (No. 1853384) dated August 21, 2009 to the Trade
Mark Registry, Kolkata for registration of trade name/ mark ‘Club Kautilya’ in respect of
financial consultancy services; securities investment and management services; securities
investment services for personal investors; valuation of portfolios of securities; foreign
exchange transaction; investment custody (demat); financial advisory services relating to
assets management; tax planning and legal; financial assets management; financial planning
for loans – home, car, business, personal through banks; software for personalised planning;
insurance – life and non life; investment in mutual funds; commodities market; research data
related to equity, commodity currency and bond markets included in class 36 specified under
fourth schedule of the Trade Marks Rules, 2002.

23. The Company has made an application (No. 1995491) dated July 19, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘Club Kautilya’ in respect of
advertising, business management, business administration & office functions included in
class 35 specified under fourth schedule of the Trade Marks Rules, 2002.

24. The Company has made an application (No.1997238) dated July 22, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘STRIKING THE RIGHT BALANCE’
in respect of services relating to insurance, financial affairs, monetary affairs, real estate
affairs and share brokers included in class 36 specified under fourth schedule of the Trade
Marks Rules, 2002.

B. Microsec Capital Limited

1. MCap has made an application on May 28, 2010 before SEBI for renewal of registration in
relation to portfolio management services.

Trade Marks

1. MCap has made an application (No. 1499055) dated October 25, 2006 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘MICROSEC – MICRO FOCUS
MEGA WEALTH’ in respect of consultant and advisor included in class 36 as specified
under fourth schedule of the Trade Marks Rules, 2002.

2. MCap has made an application (No. 1499054) dated October 25, 2006 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘MICRO FOCUS. MEGA WEALTH’
in respect of service relating to insurance, financial affairs, monetary affairs and share brokers
included in class 36 as specified under fourth schedule of the Trade Marks Rules, 2002.

3. MCap has made an application (No. 1718709) dated August 6, 2008 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘MICRO INSIGHT. MEGA
WEALTH’ in respect of service relating to insurance, financial affairs, monetary affairs and
real estate affairs included in class 36 as specified under fourth schedule of the Trade Marks
Rules, 2002. The application has been approved by the Registrar and advertised in the Trade
Mark Journal.

4. MCap has made an application (No. 1718710) dated August 6, 2008 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘MICROSEC - YOU ASPIRE. WE
EMPOWER’ in respect of service relating to insurance, financial affairs, monetary affairs and
real estate affairs included in class 36 as specified under fourth schedule of the Trade Marks
Rules, 2002. The application has been approved by the Registrar and advertised in the Trade
Mark Journal.

5. MCap has made an application (No. 2010248) dated August 16, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘Benchmarking of Research’ in respect
of service relating to insurance, financial affairs, monetary affairs, real estate affairs and share
brokers included in class 36 as specified under fourth schedule of the Trade Marks Rules,
2002.

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C. Microsec Technologies Limited

Trade Marks

1. MTL has made an application (No. 1931092) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘INDIAN NOBLE SCHOOL’ in
respect of educational; providing of training, entertainment, sporting and cultural activities
included in class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

2. MTL has made an application (No. 1931089) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘INDIAN NOBEL SCHOOL’ in
respect of educational; providing of training, entertainment, sporting and cultural activities
included in class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

3. MTL has made an application (No. 1931091) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘NOBLE SCHOOL’ in respect of
educational; providing of training, entertainment, sporting and cultural activities included in
class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

4. MTL has made an application (No. 1931090) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘NOBLE INSTITUTE’ in respect of
educational; providing of training, entertainment, sporting and cultural activities included in
class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

5. MTL has made an application (No. 1931087) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘NOBLE EDUCATION’ in respect of
educational; providing of training, entertainment, sporting and cultural activities included in
class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

6. MTL has made an application (No. 1931093) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘NOBLE’ in respect of educational;
providing of training, entertainment, sporting and cultural activities included in class 41 as
specified under fourth schedule of the Trade Marks Rules, 2002.

7. MTL has made an application (No. 1931088) dated March 5, 2010 to the Trade Mark
Registry, Kolkata for registration of trade name/ mark ‘NOBLE EDUBUDDY’ in respect of
educational; providing of training, entertainment, sporting and cultural activities included in
class 41 as specified under fourth schedule of the Trade Marks Rules, 2002.

256
 OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

The Issue has been authorised by a resolution of the Board of Directors passed at their meeting held on
September 5, 2009 and September 3, 2010, subject to the approval by the shareholders of the Company under
Section 81 (1A) of the Companies Act.

The shareholders have authorised the Issue by a special resolution passed pursuant to Section 81(1A) of the
Companies Act, passed at the shareholders’ meeting held on September 30, 2009 and September 4, 2010.

Prohibition by SEBI and RBI

The Company, Promoters, Promoter Group, Directors, Group Entities, natural persons in control of our
corporate promoters, have not been prohibited from accessing or operating in the capital markets or restrained
from buying, selling or dealing in securities under any order or direction passed by SEBI or any other
authorities.

Details of the entities that the Directors are associated with, which are engaged in securities market related
business and are registered with SEBI for the same have been provided to SEBI.

Prohibition by RBI

The Company, the Promoters or their relatives (as defined in the Companies Act) and, Group Companies, have
not been identified as willful defaulters by the RBI or any other government authority. There are no violations of
securities laws committed by any of them in the past or pending against them.

Eligibility for the Issue

We are eligible for the Issue in accordance with Regulation 26 (1) of the SEBI Regulations as explained under
the eligibility criteria calculated in accordance with financial statements under Indian GAAP:

x The Company has net tangible assets of at least Rs. 30 million in each of the preceding three full years
(of 12 months each), of which not more than 50% are held in monetary assets.

x The Company has a track record of distributable profits in accordance with Section 205 of the
Companies Act, for at least three of immediately preceding five years.

x The Company has a net worth of at least Rs. 10 million in each of the three preceding full years (of 12
months each);

x The aggregate of the proposed Issue and all previous issues made in the same financial years in terms
of the issue size is not expected to exceed five times the pre-Issue net worth of the Company; and

x The Company has not changed its name in the last fiscal year.

The Company’s net profit, dividend, net worth, net tangible assets and monetary assets derived from the
Unconsolidated Restated Financial Statements included in this Red Herring Prospectus as at, and for the last five
years ended Fiscal 2010 are set forth below:
(Rs. million)
Particulars Fiscal 2010 Fiscal 2009 Fiscal 2008 Fiscal 2007 Fiscal
2006
Net tangible assets(1) 521.20 537.14 604.41 174.96 150.23
Monetary assets(2) 5.19 5.62 0.70 6.92 0.24
Net worth(3) 559.98 584.16 527.21 149.99 133.20
Restated Net Profit After Tax 110.20 56.96 77.03 28.86 18.71
Dividend on Equity Shares - - 10.00 10.00 10.00
Monetary assets as a percentage of 1.00 1.05 0.12 3.96 0.16
the net tangible assets

257
(1)
“Net tangible asset” means the sum of fixed assets, investment, current assets, loans and advances (excluding deferred tax assets) less
current liabilities and provisions (excluding deferred tax liabilities and long term loans), short term unsecured loan and interest accrued
and due excluding ‘intangible assets’, as defined in Accounting Standard 26 (AS-26) issued by the Institute of Chartered Accountants of
India.
(2)
Monetary assets comprise of cash and bank balances.
(3)
‘Net Worth’ means the sum of equity share capital, reserves and surplus (excluding revaluation reserve) less miscellaneous expenditure
to the extent not written off. The above networth excludes the effect of contingent liabilities as disclosed in the restated unconsolidated
accounts, the impact whereof is presently not ascertainable.

Further, we shall ensure that the number of prospective allottees to whom the Equity Shares will be allotted shall
not be less than 1,000; otherwise the entire application money will be refunded forthwith. In case of delay, if
any, in refund the Company shall pay interest on the application money at the rate of 15% per annum for the
period of delay.

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall
be available for allocation on a proportionate basis to QIB Bidders. 5% of the QIB Portion (excluding the
Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the
remainder shall be available for allocation on a proportionate basis to all QIB Bidders, including Mutual Funds,
subject to valid Bids being received at or above the Issue Price. Further, not less than 15% of the Issue will be
available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue
will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being
received at or above the Issue Price.

Disclaimer Clause of SEBI

AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED
TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED
HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED
THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY
RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE
PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS
OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE DRAFT RED HERRING
PROSPECTUS. THE BOOK RUNNING LEAD MANAGER, SBI CAPITAL MARKETS LIMITED,
HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING
PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE
OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 IN FORCE FOR THE
TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED
DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY

RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT
INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD
MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE
COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND
TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGERS, HAVE FURNISHED TO
SEBI, A DUE DILIGENCE CERTIFICATE DATED MARCH 20, 2010 WHICH READS AS
FOLLOWS:

WE, THE LEAD MERCHANT BANKER(S) TO THE ABOVE MENTIONED FORTHCOMING ISSUE,
STATE AND CONFIRM AS FOLLOWS:

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO

LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH
COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE
FINALISATION OF THE DRAFT RED HERRING PROSPECTUS (IN CASE OF A BOOK
BUILT ISSUE) / DRAFT PROSPECTUS (IN CASE OF A FIXED PRICE ISSUE) / LETTER OF
OFFER (IN CASE OF A RIGHTS ISSUE) PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE ISSUER, ITS
DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND INDEPENDENT
VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE,

258
 PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS AND OTHER
PAPERS FURNISHED BY THE ISSUER, WE CONFIRM THAT:

(A) THE DRAFT RED HERRING PROSPECTUS FILED WITH THE BOARD IS IN
CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT
TO THE ISSUE;

(B) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE
REGULATIONS GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY THE
BOARD, THE CENTRAL GOVERNMENT AND ANY OTHER COMPETENT
AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND

(C) THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE
TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL
INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND
SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF
THE COMPANIES ACT, 1956, THE SECURITIES AND EXCHANGE BOARD OF
INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2009 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

3. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE

DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH THE BOARD AND THAT
TILL DATE SUCH REGISTRATION IS VALID.

4. WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE UNDERWRITERS

TO FULFIL THEIR UNDERWRITING COMMITMENTS.

5. WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED

FOR INCLUSION OF THEIR SPECIFIED SECURITIES AS PART OF PROMOTERS’
CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED
TO FORM PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN SHALL NOT
BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD
STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS
WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS
STATED IN THE DRAFT RED HERRING PROSPECTUS.

6. WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF

INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,
WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION OF
PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE
DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION HAVE BEEN MADE
IN THE DRAFT RED HERRING PROSPECTUS/DRAFT PROSPECTUS.

7. WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C)

AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM THAT
ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION
SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE. WE
UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY
SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE
BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN
ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE
RELEASED TO THE ISSUER ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE. NOT
APPLICABLE.

8. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE
FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN
OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION
OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN

259
 CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS
MEMORANDUM OF ASSOCIATION.

9. WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE

THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE
BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 73 OF THE
COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID
BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES
MENTIONED IN THE PROSPECTUS. WE FURTHER CONFIRM THAT THE AGREEMENT
ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER
SPECIFICALLY CONTAINS THIS CONDITION. NOTED FOR COMPLIANCE.

10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT RED HERRING
PROSPECTUS THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE
SHARES IN DEMAT OR PHYSICAL MODE. NOT APPLICABLE.

AS THE OFFER SIZE IS MORE THAN 10 CRORES, HENCE UNDER SECTION 68B OF THE
COMPANIES ACT, 1956, THE EQUITY SHARES ARE TO BE ISSUED IN DEMAT ONLY.

11. WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE

SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO
DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE
INVESTOR TO MAKE A WELL INFORMED DECISION.

12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE
DRAFT RED HERRING PROSPECTUS:

(A) AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME, THERE
SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE
ISSUER AND

(B) AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH
DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM
TIME TO TIME.

13. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO

ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA
(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE
MAKING THE ISSUE.

14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS
BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS
BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS
STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE, ETC.

15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH

THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF
INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,
CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE
STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT RED HERRING
PROSPECTUS WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR
COMMENTS, IF ANY.

The filing of the Red Herring Prospectus does not, however, absolve the Company from any liabilities
under Section 63 or Section 68 of the Companies Act or from the requirement of obtaining such statutory
and/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 Book Running Lead Manager, any irregularities or
lapses in the Red Herring Prospectus.

260
All legal requirements pertaining to the issue will be complied with at the time of filing of the Red
Herring Prospectus with the Registrar of Companies, West Bengal at Kolkata, in terms of Section 56,
Section 60 and Section 60B of the Companies Act.

Caution - Disclaimer from the Company, the BRLM

The Company, the Directors, the BRLM accept no responsibility for statements made otherwise than in this Red
Herring Prospectus or in the advertisements or any other material issued by or at our instance and anyone
placing reliance on any other source of information, including our web site www.microsec.in, would be doing so
at his or her own risk.

The BRLM accept no responsibility, save to the limited extent as provided in the Issue Agreement entered into
between the BRLM and us and the Underwriting Agreement to be entered into between the Underwriters and
the Company.

All information shall be made available by us, the BRLM to the public and investors at large and no selective or
additional information would be available for a section of the investors in any manner whatsoever including at
road show presentations, in research or sales reports, at bidding centres or elsewhere.

Neither us nor the Syndicate is liable for any failure in downloading the Bids due to faults in any
software/hardware system or otherwise.

Investors that bid in the Issue will be required to confirm and will be deemed to have represented to the
Company, the Underwriters and their respective directors, officers, agents, affiliates, and representatives that
they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares
of the Company and will not Issue, sell, pledge, or transfer the Equity Shares of the Company to any person who
is not eligible under any applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of
the Company. The Company, the Underwriters and their respective directors, officers, agents, affiliates, and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible
to acquire Equity Shares of the Company.

The BRLM and its associates and affiliates may engage in transactions with, and perform services for, the
Company and their respective group companies, affiliates or associates or third parties in the ordinary course of
business and have engaged, or may in future engage, in commercial banking and investment banking
transactions with the Company and their respective group companies, affiliates or associates or third parties, for
which they have received, and may in future receive, compensation.

Disclaimer in respect of Jurisdiction

This Issue is being made in India to persons resident in India (including Indian nationals resident in India who
are not minors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India
and authorised to invest in shares, Indian Mutual Funds registered with SEBI, Indian financial institutions,
commercial banks, regional rural banks, co-operative banks (subject to RBI permission), or trusts under
applicable trust law and who are authorised under their constitution to hold and invest in shares, permitted
insurance companies and pension funds) and to FIIs, eligible NRIs and other eligible foreign investors (viz.
FVCIs, multilateral and bilateral development financial institutions). This Red Herring Prospectus does not,
however, constitute an invitation to purchase shares offered hereby in any jurisdiction other than India to any
person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose
possession this Red Herring Prospectus comes is required to inform himself or herself about, and to observe, any
such restrictions. Any dispute arising out of this Issue will be subject to the jurisdiction of appropriate court(s)
in Kolkata, India only.

No action has been, or will be, taken to permit a public offering in any jurisdiction where action would be
required for that purpose, except that this Red Herring Prospectus has been filed with SEBI for its observations
and SEBI shall give its observations in due course. Accordingly, the Equity Shares represented thereby may not
be offered or sold, directly or indirectly, and this Red Herring Prospectus may not be distributed, in any
jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the
delivery of this Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to this date.

261
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any
such jurisdiction, except in compliance with the applicable laws of such jurisdiction.

The Equity Shares have not been and will not be registered under the US Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered or sold within the United States (as defined in
Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. The Equity Shares are being offered and
sold only outside the United States in offshore transactions in compliance with Regulation S under the
Securities Act and the applicable laws of the jurisdictions whose those offers and sales occur.

Disclaimer Clause of BSE

BSE has given vide its letter dated April 27, 2010, permission to us to use BSE’s name in this Red Herring
Prospectus and the Prospectus as one of the stock exchanges on which the Company’s securities are proposed to
be listed. BSE has scrutinised the Draft Red Herring Prospectus for its limited internal purpose of deciding on
the matter of granting the aforesaid permission to the Company. BSE does not in any manner:

x warrant, certify or endorse the correctness or completeness of any of the contents of the Red Herring
Prospectus or Prospectus; or
x warrant that the Company’s securities will be listed or will continue to be listed on BSE; or
x take any responsibility for the financial or other soundness of the Company, its promoter, its
management or any scheme or project of the Company;

and it should not for any reason be deemed or construed to mean that this Red Herring Prospectus or Prospectus
has been cleared or approved by BSE. Every Person who desires to apply for or otherwise acquires any
securities of the Company may do so pursuant to independent inquiry, investigation and analysis and shall not
have any claim against 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 for any other reason whatsoever.

Disclaimer Clause of the NSE

As required, a copy of the Draft Red Herring Prospectus has been submitted to NSE. NSE has given vide its
letter ref.: NSE/LIST/138582-Q dated May 25, 2010, permission to the Company to use NSE’s name in the Red
Herring Prospectus and the Prospectus as one of the stock exchanges on which the Company’s securitiesare
proposed to be listed. The NSE has scrutinised the Draft Red Herring Prospectus for its limited internal purpose
of deciding on the matter of granting the aforesaid permission to the Company. It is to be distinctly understood
that the aforesaid permission given by NSE should not in any way be deemed or construed that the Draft Red
Herring Prospectus has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse
the correctness or completeness of any of the contents of the Draft Red Herring Prospectus; nor does it warrant
that the Company’s securities will be listed or will continue to be listed on the NSE; nor does it take any
responsibility for the financial or other soundness of the Company, its promoter, its management or any scheme
or project of the Company.

Every person who desires to apply for or otherwise acquires any of the Company’s securities 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.

Filing

A copy of the Red Herring Prospectus has been filed with SEBI at Corporation Finance Department, Plot
No.C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051.

A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the
Companies Act, would be delivered for registration to the RoC and a copy of the Prospectus to be filed under
Section 60 of the Companies Act would be delivered for registration with RoC at the Office of the Registrar of

262
Companies, West Bengal at Nizam Palace, 2nd M.S.O. Building, 2nd Floor, 234/4, A.J.C Bose Road, Kolkata 700
020

Listing

Applications have been made to the NSE and the BSE for permission to deal in and for an official quotation of
the Equity Shares. BSE will be the Designated Stock Exchange with which the Basis of Allotment will be
finalized.

If the permissions to deal in and for an official quotation of the Equity Shares are not granted by any of the
Stock Exchanges mentioned above, the Company will forthwith repay, without interest, all moneys received
from the applicants in pursuance of this Red Herring Prospectus. If such money is not repaid within eight days
after the Company becomes liable to repay it, i.e. from the date of refusal or within 70 days from the Bid/Issue
Closing Date, whichever is earlier, then the Company and every Director of the Company who is an officer in
default shall, on and from such expiry of 8 days, be liable to repay the money, with interest at the rate of 15%
per annum on application money, as prescribed under Section 73 of the Companies Act.

The Company shall ensure that all steps for the completion of the necessary formalities for listing and
commencement of trading at all the Stock Exchanges mentioned above are taken within 7 working days of
finalisation of the Basis of Allotment for the Issue.

Impersonation

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A 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.”

Consents

Consents in writing of: (a) the Directors, the Company Secretary and Compliance Officer, the legal advisors,
Bankers to the Company and Bankers to the Issue; and (b) Book Running Lead Manager and Syndicate
Members, Escrow Collection Bankers, Registrar to the Issue, Legal Advisor to Issue, to act in their respective
capacities, will be obtained and will be filed along with a copy of the Red Herring Prospectus with the RoC, as
required under Sections 60 and 60B of the Companies Act and such consents shall not be withdrawn up to the
time of delivery of the Red Herring Prospectus for registration with the RoC.

In accordance with the Companies Act and SEBI Regulations, S.R. Batliboi & Co., statutory auditors of the
Company, have given their written consent to the inclusion of their report dated August 14, 2010 and statement
of the tax benefits dated August 14, 2010 in the form and context in which it appears in this Red Herring
Prospectus and such consent has not be withdrawn up to the time of submission of the Red Herring Prospectus.

Expert to the Issue

Except as stated below, the Company has not obtained any expert opinions:

The Issue has been graded by CRISIL. The report of CRISIL in respect of the IPO Grading of the Issue has been
annexed with the Red Herring Prospectus.

Expenses of the Issue

The total expenses of the Issue are estimated to be approximately Rs. [x] million. The expenses of this Issue

263
include, among others, underwriting and management fees, selling commission, printing and distribution
expenses, legal fees, statutory advertisement expenses and listing fees.

The estimated Issue expenses are as under:

Activity Expenses* Percentage of Percentage of
(Rs. in million) the Issue the Issue size*
Expenses*
Lead manager fee and underwriting expenses (including [●] [●] [●]
commission to SCSBs for ASBA Applications)*
Registrar to the Issue [●] [●] [●]
Advertising and marketing expenses [●] [●] [●]
Printing and stationery [●] [●] [●]
Bankers to the Issue [●] [●] [●]
Others (SEBI filing fees, IPO grading expenses, legal fees, etc.) [●] [●] [●]
Total estimated Issue expenses [●] [●] [●]
* To be incorporated after finalization of the Issue price.

Fees Payable to the Book Running Lead Manager and Syndicate

The total fees payable to the BRLM and the Syndicate (including underwriting commission and selling
commission) will be as per their engagement letter issued by the Company, a copy of which is available for
inspection at the Registered Office at Shivam Chambers, 1st Floor, 53 Syed Amir Ali Avenue, Kolkata 700 019.

Fees Payable to the Registrar to the Issue

The fees payable by the Company to the Registrar to the Issue for processing of application, data entry, printing
of CAN/refund order, preparation of refund data on magnetic tape, printing of bulk mailing register will be as
the per the Agreement between the Company and the Registrar to the Issue dated February 9, 2010, a copy of
which is available for inspection the Registered Office.

The Registrar to the Issue will be reimbursed for all out of pocket expenses including cost of stationery, postage,
stamp duty, and communication expenses. Adequate funds will be provided to the Registrar to the Issue to
enable them to send refund orders or Allotment advice by registered post/speed post/under certificate of posting.

Underwriting commission, brokerage and selling commission on Previous Issues

Since this is the initial public offer of the Company, no sum has been paid or has been payable as commission or
brokerage for subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares since
the inception of the Company.

Previous capital issue during the previous three years by listed Group Companies and Subsidiaries of the
Company

None of the Group Companies and Subsidiaries of the Company are listed on any stock exchange.

Promise vis-à-vis objects – Public/ Rights Issue of the Company and/ or listed group companies,
subsidiaries and associates of the Company

The Company has not undertaken any previous public or rights issue.

Previous issues of shares otherwise than for cash

Except as stated in section “Capital Structure - Details of equity shares issued for consideration other than cash”
on pages 28 and 29 of this Red Herring Prospectus, the Company has not issued Equity Shares for consideration
otherwise than for cash.

Outstanding Debentures, Bond Issues, or Preference Shares

The Company does not have any outstanding debentures or bonds or preference shares as of the date of filing of
this Red Herring Prospectus. For more details in relation to the same, see “Capital Structure” on page 25 of this
Red Herring Prospectus.

264
Stock Market Data for the Equity Shares

This being an initial public offering of the Company, the Equity Shares of the Company are not listed on any
stock exchange.

Mechanism for Redressal of Investor Grievances

The agreement between the Registrar to the Issue and the Company will provide for retention of records with
the Registrar to the Issue for a period of at least one year from the last date of despatch of the letters of
allotment, demat credit and refund orders to enable the investors to approach the Registrar to the Issue for
redressal of their grievances.

All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as
name, address of the applicant, number of Equity Shares applied for, amount paid on application and the bank
branch or collection centre where the application was submitted.

All grievances relating to ASBA process may be addressed by SCSB, giving full details such as name, address
of applicant, application number, number of Equity Shares applied for, amount paid on application and
Designated Branch or the collection centre of the SCSB where the ASBA Bid cum Application Form was
submitted by the ASBA Bidders.

Disposal of Investor Grievances

The Company estimates that the average time required by the Company, or the Registrar to the Issue or the
SCSB in case of ASBA Bidders for the redressal of routine investor grievances shall be 10 working days from
the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies
are involved, the Company will seek to redress these complaints as expeditiously as possible.

The Company has appointed an Investors’ Grievance Committee comprising R.N. Bhardwaj as Chairman and Mr.
P.K. Chattaraj and Banwari Lal Mittal as members.

We have also appointed Biplab Kumar Mani, Company Secretary of the Company as the Compliance Officer
for this Issue and he may be contacted in case of any pre-Issue or post-Issue related problems, at the following
address:

Biplab Kumar Mani

Shivam Chambers, 1st Floor,
53 Syed Amir Ali Avenue,
Kolkata 700 019,
Tel: (91 33) 30512100
Fax: (91 33) 30512020
Email: [email protected]

Changes in Auditors in the last three years

The changes in auditors of the Company in the last three years are set forth below:

Date Name of Auditor Reason for Change

September 30, 2009 S. R. Batliboi & Co. Appointment as statutory auditors
September 6, 2009 Vidya & Co. Resigned as statutory auditors

Capitalisation of Reserves or Profits

The Company has not capitalised our reserves or profits during the last five years, except as stated in “Capital
Structure” on page 25 of this Red Herring Prospectus.

Revaluation of Assets

The Company has not revalued its assets in the last five years.

265
 SECTION VII: ISSUE INFORMATION

TERMS OF THE ISSUE

The Equity Shares being issued are subject to the provisions of the Companies Act, the Memorandum and
Articles of Association, the terms of this Red Herring Prospectus, the Red Herring Prospectus and the
Prospectus, Bid cum Application Form, the Revision Form, the CAN and other terms and conditions as may be
incorporated in the Allotment advices and other documents/ certificates that may be executed in respect of the
Issue. The Equity Shares shall also be subject to laws, guidelines, notifications and regulations relating to the
issue of capital and listing of securities issued from time to time by SEBI, the Government of India, Stock
Exchanges, RoC, RBI and/or other authorities, as in force on the date of the Issue and to the extent applicable.

Ranking of Equity Shares

The Equity Shares being issued shall be subject to the provisions of the Memorandum and Articles of
Association and shall rank pari-passu with the existing Equity Shares of the Company including rights in respect
of dividend. The Allotees in receipt of Allotment of Equity Shares under this Issue will be entitled to dividends
and other corporate benefits, if any, declared by the Company after the date of Allotment. For further details,
please see “Main Provisions of the Articles of Association” on page 301 of this Red Herring Prospectus.

Mode of Payment of Dividend

The Company shall pay dividends to its shareholders in accordance with the provisions of the Companies Act
the Articles and the provision of the Lisitng Agreement.

Face Value and Issue Price

The face value of the Equity Shares is Rs. 10 each and the Issue Price is Rs. [●] per Equity Share. The Anchor
Investor Issue Price is Rs. [●] per Equity Share.

At any given point of time there shall be only one denomination for the Equity Shares.

Compliance with SEBI Regulations

The Company shall comply with all disclosure and accounting norms as specified by SEBI from time to time.

Rights of the Equity Shareholder

Subject to applicable laws, the equity shareholders shall have the following rights:

x Right to receive dividend, if declared;

x Right to attend general meetings and exercise voting powers, unless prohibited by law;

x Right to vote on a poll either in person or by proxy;

x Right to receive offers for rights shares and be allotted bonus shares, if announced;

x Right to receive surplus on liquidation;

x Right of free transferability; and

x Such other rights, as may be available to a shareholder of a listed public company under the Companies
Act, the terms of the listing agreement executed with the Stock Exchanges, and the Company’s
Memorandum and Articles of Association.

For a detailed description of the main provisions of the Articles relating to voting rights, dividend, forfeiture and
lien and/or consolidation/splitting, please see “Main Provisions of the Articles of Association” on page 301 of

266
this Red Herring Prospectus.

Market Lot and Trading Lot

In terms of Section 68B of the Companies Act, the Equity Shares shall be allotted only in dematerialised form.
As per the SEBI Regulations, the trading of the Equity Shares shall only be in dematerialised form. Since
trading of the Equity Shares is in dematerialised form, the tradable lot is one Equity Share. Allotment in this
Issue will be only in electronic form in multiples of one (1) Equity Share subject to a minimum Allotment of [●]
Equity Shares.

The Price Band and the minimum Bid Lot size for the Issue will be decided by the Company in consultation
with the BRLM and advertised in all editions of Business Standard in English language, all editions of Prathkal
in Hindi language and all editions of Kalantar Patrika in Bengali language at least two days prior to the Bid/
Issue Opening Date.

Jurisdiction

Exclusive jurisdiction for the purpose of this Issue is with the competent courts/authorities in Kolkata.

Nomination Facility to Investor

In accordance with Section 109A of the Companies Act, the sole or first Bidder, along with other joint Bidders,
may nominate any one person in whom, in the event of the death of sole Bidder or in case of joint Bidders, death
of all the Bidders, as the case may be, the Equity Shares allotted, if any, shall vest. A person, being a nominee,
entitled to the Equity Shares by reason of the death of the original holder(s), shall in accordance with Section
109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she
were the registered holder of the Equity Share(s). Where the nominee is a minor, the holder(s) may make a
nomination to appoint, in the prescribed manner, any person to become entitled to Equity Share(s) in the event
of his or her death during the minority. A nomination shall stand rescinded upon a sale of equity share(s) by the
person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh
nomination can be made only on the prescribed form available on request at the Registered Office/ Corporate
Office of the Company or to the Registrar and Transfer Agents of the Company.

In accordance with Section 109B of the Companies Act, any Person who becomes a nominee by virtue of
Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the
Board, elect either:

x To register himself or herself as the holder of the Equity Shares; or

x To make such transfer of the Equity Shares, as the deceased holder could have made.

Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself
or herself or to transfer the Equity Shares, and if the notice is not complied with within a period of ninety days,
the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the
Equity Shares, until the requirements of the notice have been complied with.

Since the Allotment of Equity Shares in the Issue will be made only in dematerialised form, there is no need to
make a separate nomination with the Company. Nominations registered with respective depository participant of
the applicant would prevail. If the investors require changing their nomination, they are requested to inform
their respective depository participant.

Minimum Subscription

If the Company does not receive the minimum subscription of 90% of the Issue, including devolvement of
underwriters within 60 days from the Bid/Issue Closing Date, the Company shall forthwith refund the entire
subscription amount received. If there is a delay beyond eight days after the Company becomes liable to pay the
amount, the Company shall pay interest prescribed under Section 73 of the Companies Act.

Further, the Company shall ensure that the number of prospective allotees to whom Equity Shares will be
allotted shall not be less than 1,000.

267
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any
such jurisdiction.

Arrangement for disposal of Odd Lots

There are no arrangements for disposal of odd lots.

Restriction on transfer of shares

Except for lock-in of the pre-Issue Equity Shares and Promoters’ minimum contribution in the Issue as detailed
in “Capital Structure” on page 25 of this Red Herring Prospectus, and except as provided in the Articles of
Association, there are no restrictions on transfers of Equity Shares. There are no restrictions on transfers of
debentures except as provided in the Articles of Association. There are no restrictions on transmission of shares/
debentures and on their consolidation/ splitting except as provided in the Articles of Association. Please see
“Main Provisions of the Articles of Association” on page 301 of this Red Herring Prospectus.

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 ISSUE STRUCTURE

Issue of 12,500,000 Equity Shares for cash at a price of Rs. [●] per Equity Share (including share premium of
Rs. [●] per Equity Share) aggregating to Rs. [●] million. The Issue will constitute 39.30% of the post-Issue
paid-up capital of the Company.

The Issue is being made through the 100% Book Building Process.

QIBs(1) Non-Institutional Retail Individual

Bidders Bidders
Number of Equity Up to 6,250,000 Equity Shares Not less than Not less than
Shares(2) 1,875,000 Equity 4,375,000 Equity
Shares available for Shares available for
allocation or Issue allocation or Issue
less allocation to QIB less allocation to
Bidders and Retail QIB Bidders and
Individual Bidders. Non-Institutional
Bidders.
Percentage of Issue Not more than 50% of the Issue Not less than 15% of Not less than 35% of
Size available for Size being allocated. However, 5% Issue or the Issue less the Issue or the Issue
Allotment/allocation of the QIB Portion (excluding the allocation to QIB less allocation to
Anchor Investor Portion) shall be Bidders and Retail QIB Bidders and
available for allocation Individual Bidders. Non-Institutional
proportionately to Mutual Funds Bidders.
only.
Basis of Proportionate as follows: Proportionate Proportionate
Allotment/Allocation (a) 312,500 Equity Shares shall be
if respective category allocated on a proportionate basis to
is oversubscribed Mutual Funds; and
(b) 5,937,000 Equity Shares shall
be allotted on a proportionate basis
to all QIBs including Mutual Funds
receiving allocation as per (a)
above.
Minimum Bid Such number of Equity Shares that Such number of [●] Equity Shares
the Bid Amount exceeds Rs. Equity Shares that and in multiples of
100,000 and in multiples of [●] the Bid Amount [●] Equity Shares
Equity Shares thereafter. exceeds Rs. 100,000 thereafter
and in multiples of
[●] Equity Shares
thereafter.
Maximum Bid Such number of Equity Shares not Such number of Such number of
exceeding the Issue, subject to Equity Shares not Equity Shares
applicable limits. exceeding the Issue whereby the Bid
subject to applicable Amount does not
limits. exceed Rs. 100,000.
Mode of Allotment Compulsorily in dematerialised Compulsorily in Compulsorily in
form. dematerialised form. dematerialised form.
Bid Lot [●] Equity Shares and in multiples [●] Equity Shares and [●] Equity Shares
of [●] Equity Shares thereafter. in multiples of [●] and in multiples of
Equity Shares [●] Equity Shares
thereafter. thereafter.
Allotment Lot [●] Equity Shares and in multiples [●] Equity Shares and [●] Equity Shares
of one Equity Share thereafter. in multiples of one and in multiples of
Equity Share one Equity Share
thereafter. thereafter.
Trading Lot One Equity Share One Equity Share One Equity Share
Who can Apply(3) Public financial institutions as Resident Indian Resident Indian

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 QIBs(1) Non-Institutional Retail Individual
Bidders Bidders
specified in Section 4A of the individuals, Eligible individuals, Eligible
Companies Act, scheduled NRIs, HUF (in the NRIs and HUF (in
commercial banks, mutual funds name of Karta), the name of Karta)
registered with SEBI, FIIs and sub- companies, corporate
accounts registered with SEBI, bodies, scientific
other than a sub-account which is a institutions societies
foreign corporate or foreign and trusts,
individual, multilateral and bilateral sub-accounts of FIIs
development financial institutions, registered with SEBI,
venture capital funds registered with which are foreign
SEBI, foreign venture capital corporates or foreign
investors registered with SEBI, state individuals.
industrial development
corporations, insurance companies
registered with Insurance
Regulatory and Development
Authority, provident funds (subject
to applicable law) with minimum
corpus of Rs. 250 million, pension
funds with minimum corpus of Rs.
250 million and National
Investment Fund set up by
Government of India and insurance
funds set up and managed by the
army, navy or air force of the Union
of India.
Terms of Payment Amount shall be payable at the time Amount shall be Amount shall be
of submission of Bid cum payable at the time of payable at the time
Application Form to the Syndicate submission of Bid of submission of Bid
Members.(4) (except for Anchor cum Application cum Application
Investors) Form.(4) Form.(4)
Margin Amount Full Bid Amount on bidding Full Bid Amount on Full Bid Amount on
bidding bidding
(1)
The Company may allocate up to 30% of the QIB Portion to Anchor Investors on a discretionary basis. One-third
of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid Bids being received
from domestic Mutual Funds at or above the price at which allocation is being done to Anchor Investors. For
further details, please see “Issue Procedure” on page 272 of this Red Herring Prospectus.

(2)
The Issue is being made through the 100% Book Building Process wherein not more than 50% of the
Issue shall be allocated to QIB Bidders on a proportionate basis. 5% of the QIB Portion (excluding the
Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds
only, and the remainder shall be available for allotment on a proportionate basis to all QIBs, including
Mutual Funds, subject to valid bids being received at or above the Issue Price. However, if the
aggregate demand from Mutual Funds is less than 312,500 Equity Shares, the balance Equity Shares
available for allocation in the Mutual Fund Portion will be added to the QIB Portion and allocated
proportionately to the QIB Bidders in proportion to their Bids. Further, not less than 15% of the Issue
will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than
35% of the Issue will be available for allocation on a proportionate basis to Retail Individual Bidders,
subject to valid bids being received at or above the Issue Price.

Under-subscription, if any, in any of category will be allowed to be met with spill over from any other
category at the discretion of the Company, in consultation with the BRLM.
(3)
In case the Bid cum Application Form is submitted in joint names, the Bidders should ensure that the
demat account is also held in the same joint names and are in the same sequence in which they appear
in the Bid cum Application Form.
(4)
In cases of ASBA Bidders, the SCSB shall be authorised to block such funds in the bank account of the

270
 ASBA Bidders that are specified in the ASBA Bid cum Application Form.

Withdrawal of the Issue

The Company, in consultation with the BRLM, reserves the right not to proceed with the Issue anytime after the
Bid/Issue Opening Date. In such an event the Company would issue a public notice in the newspapers, in which
the pre-Issue advertisements were published, within two days of the Bid/ Issue Closing Date, providing reasons
for not proceeding with the Issue. The BRLM, through the Registrar to the Issue, shall notify the SCSBs to
unblock the bank accounts of the ASBA Bidders within one day from the day of receipt of such notification.
The Company shall also inform the same to Stock Exchanges on which the Equity Shares are proposed to be
listed.

Any further issue of Equity Shares by the Company shall be in compliance with applicable laws.

Bid/ Issue Programme

BID/ISSUE OPENS ON SEPTEMBER 17, 2010*

BID/ISSUE CLOSES ON SEPTEMBER 21, 2010
*
The Company may consider participation by Anchor Investors. The Anchor Investor Bid/ Issue Period shall be one working day prior to
the Bid/ Issue Opening Date.

Bids and any revision in Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time)
during the Bid/ Issue Period as mentioned above at the bidding centres mentioned on the Bid cum Application
Form. On the Bid / Issue Closing Date, the Bids (excluding the ASBA Bidders) shall be uploaded until (i) 4.00
p.m. in case of Bids by QIB Bidders, Non-Institutional Bidders and (ii) until 5.00 p.m. or such extended time as
permitted by the Stock Exchanges, in case of Bids by Retail Individual Bidders. It is clarified that the Bids not
uploaded in the book would be rejected. Bids by the ASBA Bidders shall be uploaded by the SCSB in the
electronic system to be provided by the Stock Exchanges.

In case of discrepancy in the data entered in the electronic book vis-à-vis the data contained in the physical Bid
cum Application Form, for a particular Bidder, the details as per the physical Bid cum Application Form of the
Bidder may be taken as the final data for the purpose of Allotment.

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

On the Bid/ Issue Closing Date, extension of time will be granted by the Stock Exchanges only for uploading
the Bids received by Retail Individual Bidders after taking into account the total number of Bids received up to
the closure of time period for acceptance of Bid cum Application Forms as stated herein and reported by the
BRLM to the Stock Exchanges within half an hour of such closure.

The Company, in consultation with the BRLM, reserves the right to revise the Price Band during the Bid/ Issue
Period, provided that the Cap Price shall be less than or equal to 120% of the Floor Price and the Floor Price
shall not be less than the face value of the Equity Shares. The revision in Price Band shall not exceed 20% on
the either side i.e. the floor price can move up or down to the extent of 20% of the floor price and the Cap Price
will be revised accordingly.

In case of revision of the Price Band, the Bid/ Issue Period will be extended for three additional Working
Days after revision of Price Band subject to the Bid/ Issue Period not exceeding 10 Working Days. Any
revision in the Price Band and the revised Bid/ Issue Period, if applicable, will be widely disseminated by
notification to the Stock Exchanges, by issuing a press release and also by indicating the changes on the
website of the BRLM and at the terminals of the Syndicate.

271
 ISSUE PROCEDURE

This section applies to all Bidders. Please note that all Bidders other than Anchor Investors can participate in the
Issue through the ASBA process. ASBA Bidders should note that the ASBA process involves application
procedures that are different from the procedure applicable to Bidders other than the ASBA Bidders. Bidders
applying through the ASBA process should carefully read the provisions applicable to such applications before
making their application through the ASBA process. Please note that all the Bidders are required to make
payment of the full Bid Amount along with the Bid cum Application Form.

Book Building Procedure

The Issue is being made through the 100% Book Building Process wherein not more than 50% of the Issue shall
be allocated to QIB on a proportionate basis. Out of the QIB Portion (excluding the Anchor Investor Portion),
5% shall be available for allocation on a proportionate basis to Mutual Funds only. The remainder shall be
available for allocation on a proportionate basis to QIBs and Mutual Funds, subject to valid Bids being received
from them at or above the Issue Price. Further, not less than 15% of the Issue will be available for allocation on
a proportionate basis to Non-Institutional Bidders and not less than 35% of the Issue will be available for
allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above
the Issue Price. Allocation to Anchor Investors shall be on a discretionary basis and not on a proportionate basis.

All Bidders other than the ASBA Bidders are required to submit their Bids through the Syndicate. ASBA
Bidders are required to submit their Bids to the SCSBs.

Bidders should note that the Equity Shares will be Allotted to all successful Bidders only in dematerialised
form. The Bid cum Application Forms which do not have the details of the Bidders’ depository account shall be
treated as incomplete and rejected. Bidders will not have the option of being Allotted Equity Shares in physical
form. The Equity Shares on Allotment shall be traded only in the dematerialised segment of the Stock
Exchanges.

Bid cum Application Form

The prescribed colour of the Bid cum Application Form for the various categories is as follows:

Category Colour of Bid cum

Application Form
Resident Indians and Eligible NRIs applying on a non-repatriation basis (ASBA as White
well as non ASBA Bidders)
Eligible NRIs and FIIs applying on a repatriation basis (ASBA as well as non Blue
ASBA Bidders
Anchor Investors* White
*Bid cum Application forms for Anchor Investors have been made available at the office of the BRLM.

Bidders (other than ASBA Bidders) are required to submit their Bids through the Syndicate. Such Bidders shall
only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the
purpose of making a Bid in terms of the Red Herring Prospectus. The Bidder shall have the option to make a
maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple
Bids.

ASBA Bidders shall submit an ASBA Bid cum Application Form either in physical or electronic form to the
SCSB authorising blocking of funds that are available in the bank account specified in the ASBA Bid cum
Application Form only. Only QIBs can participate in the Anchor Investor Portion and such Anchor Investors
cannot submit their Bids through the ASBA process.

Upon the filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the
Application Form. Upon completion and submission of the Bid cum Application Form to the Syndicate or the
SCSB, the Bidder or the ASBA Bidder is deemed to have authorised the Company to make the necessary
changes in the Red Herring Prospectus as would be required for filing the Prospectus with the RoC and as would
be required by RoC after such filing, without prior or subsequent notice of such changes to the Bidder or the
ASBA Bidder.

272
Who can Bid?

x Indian nationals resident in India, who are not minors, in single or joint names (not more than three);

x Hindu Undivided Families or HUFs, in the individual name of the Karta. The Bidder should specify
that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: “Name
of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name
of the Karta”. Bids by HUFs would be considered at par with those from individuals;

x Companies, corporate bodies and societies registered under the applicable laws in India and authorised
to invest in equity shares;

x Mutual Funds registered with SEBI;

x Eligible NRIs on a repatriation basis or on a non repatriation basis subject to applicable laws. NRIs
other than eligible NRIs are not eligible to participate in this issue;

x Indian financial institutions, commercial banks (excluding foreign banks), regional rural banks, co-
operative banks (subject to RBI regulations and the SEBI Regulations and other laws, as applicable);

x FIIs and sub-accounts registered with SEBI, other than a sub-account which is a foreign corporate or
foreign individual;

x Sub-accounts of FIIs registered with SEBI, which are foreign corporates or foreign individuals only
under the Non-Institutional Bidders category.

x Multilateral and bilateral development financial institutions;

x State Industrial Development Corporations;

x Trusts/societies registered under the Societies Registration Act, 1860, as amended, or under any other
law relating to trusts/societies and who are authorised under their respective constitution to hold and
invest in equity shares;

x Scientific and/or industrial research organisations authorised to invest in equity shares;

x Insurance Companies registered with Insurance Regulatory and Development Authority;

x Provident Funds with a minimum corpus of Rs. 250 million and who are authorised under their
constitution to hold and invest in equity shares;

x Pension Funds with a minimum corpus of Rs. 250 million and who are authorised under their
constitution to hold and invest in equity shares;

x National Investment Fund; and

x Insurance funds set up and managed by the army, navy or air force of the Union of India.

As per the existing regulations, OCBs cannot participate in this Issue. Further in terms of the FVCI Regulations
and the VCF Regulations, FVCIs and VCFs are not eligible to participate in the issue.

Participation by associates and affiliates of BRLM and Syndicate Members

The BRLM and the Syndicate Members shall not be allowed to subscribe to this Issue in any manner except
towards fulfilling their underwriting obligations. However, the associates and affiliates of the BRLM and
Syndicate Members may subscribe to or purchase Equity Shares in the Issue, either in the QIB Portion or in the
Non-Institutional Portion as may be applicable to such Bidders, where the allocation is on a proportionate basis.

273
The BRLM and any persons related to the BRLM, the Promoters and the Promoter Group of the Company
cannot apply in the Issue under the Anchor Investor Portion.

Bids by Mutual Funds

An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the Mutual Fund
Portion. In the event that the demand is greater than 312,500 Equity Shares, allocation shall be made to Mutual
Funds proportionately, to the extent of the Mutual Fund Portion. The remaining demand by the Mutual Funds
shall, as part of the aggregate demand by QIBs, be available for allocation proportionately out of the remainder
of the QIB Portion, after excluding the allocation in the Mutual Fund Portion.

One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to valid Bids
being received from domestic Mutual Funds at or above the price at which allocation is being done to other
Anchor Investors.

In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund
registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund will not be
treated as multiple Bids provided that the Bids clearly indicate the scheme concerned for which the Bid
has been made.

No mutual fund scheme shall invest more than 10% of its net asset value in the equity shares or equity
related instruments of any single company provided that the limit of 10% shall not be applicable for
investments in index funds or sector or industry specific funds. No Mutual Fund under all its schemes
should own more than 10% of any company’s paid-up share capital carrying voting rights.

Bids by Eligible NRIs

1. Bid cum Application Forms have been made available for Eligible NRIs at the Registered Office of the
Company, the members of the Syndicate and the Registrar to the Issue.

2. Eligible NRI applicants may please note that only such applications as are accompanied by payment in
free foreign exchange shall be considered for Allotment. The Eligible NRIs who intend to make
payment through Non-Resident Ordinary (NRO) accounts shall use the form meant for Resident
Indians.

Bids by FIIs

As per the current regulations, the following restrictions are applicable for investments by FIIs:

The issue of Equity Shares to a single FII should not exceed 10% of the total post-Issue paid-up share capital the
Company (i.e. 10% of 3,181,050 Equity Shares). In respect of an FII investing in the Equity Shares on behalf of
its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of the total paid-up share
capital or 5% of the total paid-up share capital of the Company in case such sub-account is a foreign corporate
or an individual. As of now, the aggregate FII holding in the Company cannot exceed 24% of the total issued
capital of the Company. With the approval of the board and the shareholders by way of a special resolution, the
aggregate FII holding can go up to 100%. The Company has not obtained board or shareholders approval to
increase the FII limit to more than 24%.

Subject to compliance with all applicable Indian laws, rules, regulations guidelines and approvals in terms of
regulation 15A(1) of the Securities Exchange Board of India (Foreign Institutional Investors) Regulations 1995,
as amended (the “SEBI FII Regulations”), an FII, as defined in the SEBI FII Regulations, deal or hold, off shore
derivative instruments (as defined under the SEBI FII Regulations as any instrument, by whatever name called,
which is issued overseas by a FII against securities held by it that are listed or proposed to be listed on any
recognised stock exchange in India, as its underlying) directly or indirectly, only in the event (i) such offshore
derivative instruments are issued only to persons who are regulated by an appropriate regulatory authority; and
(ii) such offshore derivative instruments are issued after compliance with ‘know your client’ norms. An FII is
also required to ensure that no further issue or transfer of any offshore derivative instrument issued made by or
on behalf of it to any persons that are not regulated by an appropriate foreign regulatory authority as defined
under the SEBI Regulations. Associates and affiliates of the underwriters including the BRLM and the

274
Syndicate Members that are FIIs may issue offshore derivative instruments against Equity Shares Allotted to
them in the Issue. Any such Offshore Derivative Instrument does not constitute any obligation or claim or claim
on or an interest in the Company.

Bids by SEBI registered Venture Capital Funds and Foreign Venture Capital Investors

As per the current regulations, the following restrictions are applicable for SEBI Registered Venture Capital
Funds and Foreign Venture Capital Investors:

The SEBI (Venture Capital) Regulations, 1996 and the SEBI (Foreign Venture Capital Investor) Regulation,
2000 prescribe investment restrictions on venture capital funds and foreign venture capital investors registered
with SEBI.

Accordingly, whilst the holding by any individual venture capital fund registered with SEBI in one company
should not exceed 25% of the corpus of the venture capital fund, a Foreign Venture Capital Investor can invest
its entire funds committed for investments into India in one company. Further, Venture Capital Funds and
Foreign Venture Capital Investors can invest only up 33.33% of the investible funds by way of subscription to
an initial public offer.

The above information is given for the benefit of the Bidders. The Company and the BRLM are not liable
for any amendments or modification or changes in applicable laws or regulations, which may occur after
the date of this Red Herring Prospectus. Bidders are advised to make their independent investigations
and ensure that the number of Equity Shares Bid for do not exceed the applicable limits under laws or
regulations.

Maximum and Minimum Bid Size

(a) For Retail Individual Bidders: The Bid must be for a minimum of [x] Equity Shares and in multiples
of [x] Equity Share thereafter, so as to ensure that the Bid Amount payable by the Bidder does not
exceed Rs. 100,000. In case of revision of Bids, the Retail Individual Bidders have to ensure that the
Bid Amount does not exceed Rs. 100,000. In case the Bid Amount is over Rs. 100,000 due to revision
of the Bid or revision of the Price Band or on exercise of Cut-off Price option, the Bid would be
considered for allocation under the Non-Institutional Portion. The Cut-off Price option is an option
given only to the Retail Individual Bidders indicating their agreement to Bid and purchase at the final
Issue Price as determined at the end of the Book Building Process.

(b) For Other Bidders (Non-Institutional Bidders and QIBs): The Bid must be for a minimum of such
number of Equity Shares such that the Bid Amount exceeds Rs. 100,000 and in multiples of [x] Equity
Shares thereafter. A Bid cannot be submitted for more than the Issue Size. However, the maximum Bid
by a QIB Bidder should not exceed the investment limits prescribed for them by applicable laws. A
QIB Bidder cannot withdraw its Bid after the Bid/Issue Closing Date and is required to pay the
Bid Amount upon submission of the Bid.

In case of revision in Bids, the Non-Institutional Bidders, who are individuals, have to ensure that the
Bid Amount is greater than Rs. 100,000 for being considered for allocation in the Non-Institutional
Portion. In case the Bid Amount reduces to Rs. 100,000 or less due to a revision in Bids or revision of
the Price Band, Bids by Non-Institutional Bidders who are eligible for allocation in the Retail Portion
would be considered for allocation under the Retail Portion. Non-Institutional Bidders and QIBs are not
allowed to Bid at ‘Cut-off’ Price.

(c) For Bidders in the Anchor Investor Portion: The Bid must be for a minimum of such number of
Equity Shares such that the Bid Amount exceeds Rs. 100 million and in multiples of [x] Equity Shares
thereafter. Bids by Anchor Investors under the Anchor Investor Portion and the QIB Portion shall not
be considered as multiple Bids. A Bid cannot be submitted for more than 30% of the QIB Portion under
the Anchor Investor Portion. Anchor Investors cannot withdraw their Bids after the Anchor
Investor Bid/ Issue Period. and are required to pay the Bid Amount at the time of submission of
the Bid. In case the Anchor Investor Issue Price is lower than the Issue Price, the balance amount
shall be payable as per the pay-in date mentioned in the revised Anchor Investor Allocation
Notice.

275
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable law or regulation or as
specified in this Red Herring Prospectus.

Information for the Bidders

(a) The Company and the BRLM shall declare the Bid/Issue Opening Date, Bid/Issue Closing Date in the
Red Herring Prospectus to be registered with the RoC and also publish the same in two national
newspapers (one each in English and Hindi) and in one Bengali newspaper with wide circulation. This
advertisement shall be in the prescribed format.

(b) The Company will file the Red Herring Prospectus with the RoC at least three days before the
Bid/Issue Opening Date.

(c) Copies of the Bid cum Application Form and, at the request of potential Bidders, copies of the Red
Herring Prospectus will be available with the Syndicate and the SCSBs.

(d) Copies of the ASBA Bid cum Application forms will be available for downloading and printing from
websites of the Stock Exchanges (which provide electronic interface for ASBA facility), at least one
day prior to the Bid/Issue Opening Date. A unique application number will be generated for every
ASBA Bid cum Application Form downloaded and provided from the websites of the Stock Exchange.
The BRLM and the SCSBs shall provide a hyperlink to the website of the Stock Exchanges for this
facility.

(e) Any Bidder (who is eligible to invest in the Equity Shares) who would like to obtain the Red Herring
Prospectus and/ or the Bid cum Application Form can obtain the same from the Registered Office of
the Company.

(f) Eligible Bidders who are interested in subscribing for the Equity Shares should approach any of the
BRLM or Syndicate Members or their authorised agent(s) to register their Bids. Bidders (other than
ASBA Bidders) who wish to use the ASBA process should approach the Designated Branches of the
SCSBs to register their Bids.

(g) The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application
Forms (other than ASBA Bid cum Application Forms) should bear the stamp of the members of the
Syndicate, otherwise they will be rejected. Bids by ASBA Bidders shall be accepted by the Designated
Branches of the SCSBs in accordance with the SEBI Regulations and any circulars issued by SEBI in
this regard. Bidders (other than Anchor Investors) applying through the ASBA process also have an
option to submit the ASBA Bid cum Application Form in electronic form.

The applicants may note that in case the DP ID and Client ID and PAN mentioned in the Bid cum
Application Form and entered into the electronic bidding system of the Stock Exchanges by the Syndicate
do not match with the DP ID and Client ID and PAN available in the Settlement Depository database, the
application is liable to be rejected.

With effect from August 16, 2010, the demat accounts for Bidders for which PAN details have not been
verified shall be “suspended credit” and no credit of Equity Shares pursuant to the Issue shall be made
into accounts of such Bidders.

Method and Process of Bidding

(a) The Company in consultation with the BRLM will decide the Price Band and the minimum Bid Lot
size for the Issue and the same shall be advertised in all editions of Business Standard in English
language, all editions of Prathkal in Hindi language and all editions of Kalantar Patrika in Bengali
language at least two Working Days prior to the Bid/ Issue Opening Date. The Syndicate and the
SCSBs shall accept Bids from the Bidders during the Bid/ Issue Period.

(b) The Bid/Issue Period shall be for a minimum of three Working Days and shall not exceed 10 Working
Days. The Bid/ Issue Period maybe extended, if required, by an additional three Working Days, subject
to the total Bid/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the

276
 revised Bid/ Issue Period, if applicable, will be published in two national newspapers (one each in
English and Hindi) and Bengali newspaper with wide circulation and also by indicating the change on
the websites of the BRLM and at the terminals of the Syndicate.

(c) During the Bid/Issue Period, Bidders, other than QIBs, who are interested in subscribing for the Equity
Shares should approach Syndicate or their authorised agents to register their Bid. The Syndicate shall
accept Bids from all other Bidders and have the right to vet the Bids during the Bid/ Issue Period in
accordance with the terms of the Red Herring Prospectus. Bidders (other than Anchor Investors) who
wish to use the ASBA process should approach the Designated Branches of the SCSBs to register their
Bids.

(d) Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices
(for details refer to the paragraph entitled “Bids at Different Price Levels” below) within the Price
Band and specify the demand (i.e., the number of Equity Shares Bid for) in each option. The price and
demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional
demands from the Bidder and will not be cumulated. After determination of the Issue Price, the
maximum number of Equity Shares Bid for by a Bidder at or above the Issue Price will be considered
for allocation/Allotment and the rest of the Bid(s), irrespective of the Bid Amount, will become
automatically invalid.

(e) The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application
Form have been submitted to any member of the Syndicate or SCSBs. Submission of a second Bid cum
Application Form to either the same or to another member of the Syndicate or SCSBs will be treated as
multiple Bids and is liable to be rejected either before entering the Bid into the electronic bidding
system, or at any point of time prior to the allocation or Allotment of Equity Shares in this Issue.
However, the Bidder can revise the Bid through the Revision Form, the procedure for which is detailed
under the paragraph titled “Build up of the Book and Revision of Bids”.

(f) Except in relation to Bids received from the Anchor Investors, the members of the Syndicate will enter
each Bid option into the electronic bidding system as a separate Bid and generate a Transaction
Registration Slip, (“TRS”), for each price and demand option and give the same to the Bidder.
Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form.

(g) The BRLM and Enam Securities Private Limited shall accept Bids from the Anchor Investors during
the Anchor Investor Bid/ Issue Period i.e. one Working Day prior to the Bid/ Issue Opening Date. Bids
by Anchor Investors under the Anchor Investor Portion and the QIB Portion shall not be considered as
multiple Bids.

(h) Along with the Bid cum Application Form, all Bidders (other than ASBA Bidders) will make payment
in the manner described in the section entitled “-Escrow Mechanism, Terms of payment and payment
into the Escrow Accounts” on page 278 of the Red Herring Prospectus.

(i) Upon receipt of the ASBA Bid cum Application Form, submitted whether in physical or electronic
mode, the Designated Branch of the SCSB shall verify if sufficient funds equal to the Bid Amount are
available in the ASBA Account, as mentioned in the ASBA Bid cum Application Form, prior to
uploading such Bids with the Stock Exchanges.

(j) If sufficient funds are not available in the ASBA Account, the Designated Branch of the SCSB shall
reject such Bids and shall not upload such Bids with the Stock Exchanges.

(k) If sufficient funds are available in the ASBA Account, the SCSB shall block an amount equivalent to
the Bid Amount mentioned in the ASBA Bid cum Application Form and will enter each Bid option into
the electronic bidding system as a separate Bid and generate a TRS for each price and demand option.
The TRS shall be furnished to the ASBA Bidder on request.

(l) The Bid Amount shall remain blocked in the aforesaid ASBA Account until finalisation of the Basis of
Allotment and consequent transfer of the Bid Amount against the Allotted Equity Shares to the Public
Issue Account, or until withdrawal/failure of the Issue or until withdrawal/rejection of the ASBA Bid
cum Application Form, as the case may be. Once the Basis of Allotment is finalized, the Registrar to

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 the Issue shall send an appropriate request to the Controlling Branch of the SCSB for unblocking the
relevant ASBA Accounts and for transferring the amount allocable to the successful Bidders to the
Public Issue Account. In case of withdrawal/failure of the Issue, the blocked amount shall be unblocked
on receipt of such information from the Registrar to the Issue.

Bids at Different Price Levels and Revision of Bids

(a) The Company, in consultation with the BRLM and without the prior approval of, or intimation, to the
Bidders, reserves the right to revise the Price Band during the Bid/ Issue Period, provided that the Cap
Price shall be less than or equal to 120% of the Floor Price and the Floor Price shall not be less than the
face value of the Equity Shares. The revision in Price Band shall not exceed 20% on the either side i.e.
the floor price can move up or down to the extent of 20% of the floor price disclosed at least two days
prior to the Bid/ Issue Opening Date and the Cap Price will be revised accordingly.

(b) The Company, in consultation with the BRLM will finalise the Issue Price within the Price Band in
accordance with this clause, without the prior approval of, or intimation, to the Bidders.

(c) The Company, in consultation with the BRLM, can finalise the Anchor Investor Issue Price within the
Price Band in accordance with this clause, without the prior approval of, or intimation, to the Anchor
Investors.

(d) The Bidders can bid at any price within the Price Band. The Bidder has to bid for the desired number of
Equity Shares at a specific price. Retail Individual Bidders may bid at the Cut-off Price. However,
bidding at Cut-off Price is prohibited for QIB and Non-Institutional Bidders and such Bids from QIB
and Non-Institutional Bidders shall be rejected.

(e) Retail Individual Bidders, who Bid at Cut-off Price agree that they shall purchase the Equity Shares at
any price within the Price Band. Retail Individual Bidders shall submit the Bid cum Application Form
along with a cheque/demand draft for the Bid Amount based on the Cap Price Band with the members
of the Syndicate. In case of ASBA Bidders (excluding Non-Institutional Bidders and QIB Bidders)
bidding at Cut-off Price, the ASBA Bidders shall instruct the SCSBs to block an amount based on the
Cap Price Band.

Escrow mechanism, terms of payment and payment into the Escrow Accounts

For details of the escrow mechanism and payment instructions, please refer to the section entitled “Issue
Procedure - Payment Instructions” on page 286 of this Red Herring Prospectus.

Electronic Registration of Bids

(a) The Syndicate and the SCSBs will register the Bids using the on-line facilities of the Stock Exchanges.

(b) The Syndicate and SCSBs will undertake modification of the selected fields in the Bids details already
uploaded within one Working Day from the Bid/ Issue Closing Date

(c) There will be at least one on-line connectivity facility in each city, where a stock exchange is located in
India and where Bids are being accepted. The Syndicate Members and/or SCSBs shall be responsible
for any acts, mistakes or errors or omission and commissions in relation to, (i) the Bids accepted by the
Syndicate Members and the SCSBs, (ii) the Bids uploaded by the Syndicate Members and the SCSBs,
(iii) the Bids accepted but not uploaded by the Syndicate Members and the SCSBs or (iv) with respect
to the Bids of the ASBA Bidders, Bids accepted and uploaded without blocking funds in the ASBA
Accounts. It shall be presumed that for Bids uploaded by the SCSBs, the Bid Amount has been blocked
in the relevant ASBA Account.

(d) The Stock Exchanges will offer an electronic facility for registering Bids for the Issue. This facility will
be available with the Syndicate and their authorised agents and the SCSBs during the Bid/ Issue Period.
The Syndicate Members and the Designated Branches of the SCSBs can also set up facilities for off-
line electronic registration of Bids subject to the condition that they will subsequently upload the off-
line data file into the on-line facilities for Book Building on a regular basis. On the Bid/ Issue Closing
Date, the members of the Syndicate and the Designated Branches of the SCSBs shall upload the Bids

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 till such time as may be permitted by the Stock Exchanges. This information will be available with the
BRLM on a regular basis.

(e) Based on the aggregate demand and price for Bids registered on the electronic facilities of the BSE and
the NSE, a graphical representation of consolidated demand and price as available on the websites of
the Stock Exchanges would be made available at the bidding centres during the Bid/Issue Period.

(f) At the time of registering each Bid other than the ASBA Bids, the members of the Syndicate shall enter
the following details of the Bidders in the on-line system:

x Name of the Bidder: Bidders should ensure that the name given in the Bid cum Application
Form is exactly the same as the name in which the Depositary Account is held. In case the Bid
cum Application Form is submitted in joint names, Bidders should ensure that the Depository
Account is also held in the same joint names and are in the same sequence in which they
appear in the Bid cum Application Form.
x Investor Category – Individual, Corporate, FII, NRI, Mutual Fund, etc.
x Numbers of Equity Shares bid for.
x Bid Amount.
x Details of cheque
x Bid cum Application Form number.
x DP ID and client identification number of the beneficiary account of the Bidder
x PAN

With respect to ASBA Bids, at the time of registering such Bids, the Designated Branches of the
SCSBs shall enter the following information pertaining to the ASBA Bidders into the online bidding
system:

x Name of the ASBA Bidder(s).

x Application Number.
x PAN (of First ASBA Bidder, in case of more than one ASBA Bidder);
x Investor Category and Sub-Category: Number of Equity Shares Bid for.

Retail Non- Institutional QIB

(No sub 1. Individual 1. Mutual Funds
category) 2. Corporate 2. Financial Institutions
3. Others 3. Insurance companies
4. Foreign Institutional
investors other than
corporate and
individual sub-
accounts
5. Others

x Employee/shareholder (if reservation)

x DP ID and client identification number
x Beneficiary account number of Equity Shares Bid for
x Quantity
x Bid Amount
x Bank account number

(g) A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding
options. It is the Bidder’s responsibility to obtain the TRS from the members of the Syndicate or the
Designated Branches. The registration of the Bid by the member of the Syndicate or the Designated
Branches does not guarantee that the Equity Shares shall be allocated/Allotted either by the members of
the Syndicate or the Company.

(h) Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

(i) In case of QIB Bidders, only the BRLM, its Affiliates Syndicate members and Enam Securities Private

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 Limited have the right to accept the bid or reject it. However, such rejection should be made at the time
of receiving the bid and only after assigning a reason for such rejection in writing. In case of Non-
Institutional Bidders and Retail Individual Bidders, Bids would not be rejected except on the technical
grounds listed on page 290 of this Red Herring Prospectus. The Members of the Syndicate may also
reject Bids if all the information required is not provided and the Bid cum Application Form is
incomplete in any respect. The SCSBs shall have no right to reject Bids, except on technical grounds.

(j) The permission given by BSE and NSE to use their network and software of the Online IPO system
should not in any way be deemed or construed to mean that the compliance with various statutory and
other requirements by the Company and/or the BRLM are cleared or approved by BSE and NSE; nor
does it in any manner warrant, certify or endorse the correctness or completeness of any of the
compliance with the statutory and other requirements nor does it take any responsibility for the
financial or other soundness of the Company, the Promoter of the Company, the management or any
scheme or project of the Company; nor does it in any manner warrant, certify or endorse the
correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it warrant
that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges.

(k) Only Bids that are uploaded on the online IPO system of the Stock Exchanges shall be considered for
allocation/ Allotment. Members of the Syndicate will be given up to one day after the Bid/Issue
Closing Date to verify DP ID and Client ID uploaded in the online IPO system during the Bid/Issue
Period after which the Registrar to the Issue will receive this data from the Stock Exchanges and will
validate the electronic bid details with depositories records.

(l) Details of Bids in the Anchor Investor Portion will not be registered on the on-line facilities of
electronic facilities of BSE and NSE.

Build up of the book and revision of Bids

(a) Bids received from various Bidders through the members of the Syndicate and the SCSBs shall be
electronically uploaded to the Stock Exchanges’ mainframe on a regular basis.

(b) The book gets built up at various price levels. This information will be available with the BRLM at the
end of the Bid/issue Period.

(c) During the Bid/Issue Period, any Bidder who has registered his or her interest in the Equity Shares at a
particular price level is free to revise his or her Bid within the Price Band using the printed Revision
Form, which is a part of the Bid cum Application Form.

(d) Revisions can be made in both the desired number of Equity Shares and the Bid Amount by using the
Revision Form. Apart from mentioning the revised options in the Revision Form, the Bidder must also
mention the details of all the options in his or her Bid cum Application Form or earlier Revision Form.
For example, if a Bidder has Bid for three options in the Bid cum Application Form and such Bidder is
changing only one of the options in the Revision Form, he must still fill the details of the other two
options that are not being revised, in the Revision Form. The members of the Syndicate and the
Designated Branches will not accept incomplete or inaccurate Revision Forms.

(e) The Bidder can make this revision any number of times during the Bid/Issue Period. However, for any
revision(s) in the Bid, the Bidders will have to use the services of the same member of the Syndicate or
the SCSB through whom such Bidder had placed the original Bid. Bidders are advised to retain copies
of the blank Revision Form and the revised Bid must be made only in such Revision Form or copies
thereof.

(f) In case of an upward revision in the Price Band announced as above, Retail Individual Bidders who
had Bid at Cut-off Price could either (i) revise their Bid or (ii) shall make additional payment based on
the cap of the revised Price Band (such that the total amount i.e., original Bid Amount plus additional
payment does not exceed Rs. 100,000 if the Bidder wants to continue to Bid at Cut-off Price), with the
members of the Syndicate to whom the original Bid was submitted. In case the total amount (i.e.,
original Bid Amount plus additional payment) exceeds Rs. 100,000, the Bid will be considered for
allocation under the Non-Institutional Portion in terms of this Red Herring Prospectus. If, however, the
Bidder does not either revise the Bid or make additional payment and the Issue Price is higher than the

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 cap of the Price Band prior to revision, the number of Equity Shares Bid for shall be adjusted
downwards for the purpose of allocation, such that no additional payment would be required from the
Bidder and the Bidder is deemed to have approved such revised Bid at Cut-off Price.

(g) In case of a downward revision in the Price Band, announced as above, Retail Individual Bidders, who
have bid at Cut-off Price could either revise their Bid or the excess amount paid at the time of bidding
would be refunded from the Escrow Account.

(h) The Company, in consultation with BRLM, shall decide the minimum number of Equity Shares for
each Bid to ensure that the minimum application value is within the range of Rs. 5,000 to Rs. 7,000.

(i) Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft for
the incremental amount, if any, to be paid on account of the upward revision of the Bid. With respect to
the ASBA Bids, if revision of the Bids results in an incremental amount, the relevant SCSB shall block
the additional Bid amount. In case of the Bids, other than ASBA Bids, the members of the Syndicate
shall collect the payment in the form of cheque or demand draft if any, to be paid on account of the
upward revision of the Bid at the time of one or more revisions by the QIB Bidders. In such cases, the
Syndicate will revise the earlier Bids details with the revised Bid and provide the cheque or demand
draft number of the new payment instrument in the electronic book. The Registrar will reconcile the
Bid data and consider the revised Bid data for preparing the Basis of Allotment.

(j) When a Bidder revises his or her Bid, he or she shall surrender the earlier TRS and may get a revised
TRS from the members of the Syndicate or the SCSB, as applicable. It is the responsibility of the
Bidder to request for and obtain the revised TRS, which will act as proof of his or her having revised
the previous Bid.

Price Discovery and Allocation

(a) Based on the demand generated at various price levels, the Company in consultation with the BRLM
shall finalise the Issue Price.

(b) Under-subscription, if any, in any of category will be allowed to be met with spill over from any other
category or combination of categories at the discretion of the Company, in consultation with the
BRLM.

(c) Allocation to Non-Residents, including Eligible NRIs and FIIs registered with SEBI, applying on
repatriation basis will be subject to applicable law, rules, regulations, guidelines and approvals.

(d) Allocation to Anchor Investors shall be at the discretion of the Company in consultation with the
BRLM, subject to the compliance with the SEBI Regulations.

(e) QIB Bidders shall not be allowed to withdraw their Bid after the Bid/Issue Closing Date. Further the
Anchor Investors shall not be allowed to withdraw their Bids after the Anchor Investor Bid/Issue
Period.

(f) The Basis of Allotment shall be put up on the website of the Registrar to the Issue.

Signing of Underwriting Agreement and RoC Filing

(a) The Company, the BRLM and the Syndicate Members shall enter into an Underwriting Agreement on
or immediately after the finalisation of the Issue Price.

(b) After signing the Underwriting Agreement, the Company will update and file the updated Red Herring
Prospectus with the RoC in accordance with the applicable law, which then would be termed
‘Prospectus’. The Prospectus would have details of the Issue Price, Issue size, underwriting
arrangements and would be complete in all material respects.

Pre-Issue Advertisement

Subject to Section 66 of the Companies Act, the Company shall, after registering the Red Herring Prospectus

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with the RoC, publish a pre-Issue advertisement, in the form prescribed by the SEBI Regulations, in one English
language national daily newspaper; one Hindi language national daily newspaper and one regional language
daily newspaper, each with wide circulation.

Advertisement regarding Issue Price and Prospectus

The Company will issue a statutory advertisement after the filing of the Prospectus with the RoC. This
advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate
the Issue Price and the Anchor Investor Issue Price. Any material updates between the date of the Red Herring
Prospectus and the date of Prospectus will be included in such statutory advertisement.

Issuance of Confirmation of Allotment Note (“CAN”)

(a) Upon approval of the Basis of Allotment by the Designated Stock Exchange, the Registrar shall send to
the members of the Syndicate a list of the Bidders who have been Allotted Equity Shares in the Issue.

(b) The Registrar will then dispatch a CAN to the Bidders who have been Allotted Equity Shares in the
Issue. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder.

(c) The Issuance of CAN is subject to “Notice to Anchor Investors Allotment Reconciliation and Revised
CANs” as set forth under the section “Issue Procedure” on page 272 of this Red Herring Prospectus.

Notice to Anchor Investors: Allotment Reconciliation and Revised CANs

A physical book will be prepared by the Registrar on the basis of the Bid cum Application Forms received from
Anchor Investors. Based on the physical book and at the discretion of the Company and the BRLM, selected
Anchor Investors will be sent an Anchor Investor Allocation Notice and/or a revised Anchor Investor Allocation
Notice, as the case may be. All Anchor Investors will be sent Anchor Investor Allocation Notice post Anchor
Investor Bidding Period and in the event that the Issue Price is higher than the Anchor Investor Issue Price, the
Anchor Investors will be sent a revised Anchor Investor Allocation Notice within one day of the Pricing Date
indicating the number of Equity Shares allocated to such Anchor Investor and the pay-in date for payment of the
balance amount. Anchor Investors should note that they shall be required to pay any additional amounts, being
the difference between the Issue Price and the Anchor Investor Issue Price, as indicated in the revised Anchor
Investor Allocation Notice within the pay-in date referred to in the revised Anchor Investor Allocation Notice.
The revised Anchor Investor Allocation Notice will constitute a valid, binding and irrevocable contract (subject
to the issue of a CAN) for the Anchor Investor to pay the difference between the Issue Price and the Anchor
Investor Issue Price and accordingly the CAN will be issued to such Anchor Investors. In the event the Issue
Price is lower than the Anchor Investor Issue Price, the Anchor Investors who have been Allotted Equity Shares
will directly receive CAN. The dispatch of CAN shall be deemed a valid, binding and irrevocable contract for
the Allotment of Equity Shares to such Anchor Investor.

The final allocation is subject to the physical application being valid in all respect along with receipt of
stipulated documents, the Issue Price being finalised at a price not higher than the Anchor Investor Issue Price
and Allotment by the Board of Directors.

Designated Date and Allotment of Equity Shares

(a) The Company will ensure that (i) the Allotment of Equity Shares and (ii) credit to successful bidder’s
depository account will be completed with 12 Working Days of the Bid/Issue Closing Date. After the
funds are transferred from the Escrow Account to the Public Issue Account on the Designated Date, the
Company would ensure the credit to the successful Bidders depository account within two Working
Days of the date of Allotment.

(b) In accordance with the SEBI Regulations, Equity Shares will be issued and Allotment shall be made
only in the dematerialised form to the Allottees.

(c) Allottees will have the option to re-materialise the Equity Shares so Allotted as per the provisions of
the Companies Act and the Depositories Act.

Bidders are advised to instruct their Depository Participant to accept the Equity Shares that may be

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allocated/ Allotted to them pursuant to this Issue.

GENERAL INSTRUCTIONS

Do’s:

(a) Check if you are eligible to apply;

(b) Ensure that you have Bid within the Price Band;

(c) Read all the instructions carefully and complete the Bid cum Application Form;

(d) Ensure that the details about the Depository Participant and beneficiary account are correct as
Allotment of Equity Shares will be in the dematerialised form only;

(e) Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member
of the Syndicate or with respect to ASBA Bidders ensure that your Bid is submitted at a Designated
Branch of the SCSB where the ASBA Bidder or the person whose bank account will be utilized by the
ASBA Bidder for bidding has a bank account;

(f) With respect to ASBA Bids ensure that the ASBA Bid cum Application Form is signed by the account
holder in case the applicant is not the account holder. Ensure that you have mentioned the correct bank
account number in the ASBA Bid cum Application Form;

(g) Ensure that request for and receive a TRS for all your Bid options;

(h) Ensure that you have funds equal to the Bid Amount in your bank account maintained with the SCSB
before submitting the ASBA Bid cum Application Form to the respective Designated Branch of the
SCSB;
(i)
(j) Ensure that the full Bid Amount is paid for the Bids submitted to the Syndicate and funds equivalent to
the Bid Amount are blocked in case of any Bids submitted though the SCSBs;

(k) Instruct your respective banks to not release the funds blocked in the bank account under the ASBA
process;

(l) Submit revised Bids to the same member of the Syndicate through whom the original Bid was placed
and obtain a revised TRS;

(m) Except for Bids submitted on behalf of the Central Government or the State Government and officials
appointed by a court and Sikkim residents, all Bidders should mention their PAN allotted under the IT
Act;

(n) Ensure that the Demographic Details (as defined herein below) are updated, true and correct in all
respects;

(o) Ensure that the name(s) given in the Bid cum Application Form is exactly the same as the name(s) in
which the beneficiary account is held with the Depository Participant. In case the Bid cum Application
Form is submitted in joint names, ensure that the beneficiary account is also held in same joint names
and such names are in the same sequence in which they appear in the Bid cum Application Form.

Don’ts:

(a) Do not Bid for lower than the minimum Bid size;

(b) Do not Bid/ revise Bid Amount to less than the lower end of the Price Band or higher than the higher
end of the Price Band;

(c) Do not Bid on another Bid cum Application Form after you have submitted a Bid to the members of the
Syndicate or the SCSB, as applicable;

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(d) Do not pay the Bid Amount in cash, by money order or by postal order or by stock-invest;

(e) Do not send Bid cum Application Forms by post; instead submit the same to a member of the
Syndicate or the SCSBs only;

(f) Do not bid at Cut-off Price (for QIB Bidders and Non-Institutional Bidders, for bid amount in excess of
Rs. 100,000);

(g) Do not Bid for a Bid Amount exceeding Rs. 100,000 (for Bids by Retail Individual Bidders);

(h) Do not fill up the Bid cum Application Form such that the Equity Shares bid for exceeds the Issue Size
and/ or investment limit or maximum number of Equity Shares that can be held under the applicable
laws or regulations or maximum amount permissible under the applicable regulations;

(i) Do not submit the GIR number instead of the PAN as the Bid is liable to be rejected on this ground;
and

(j) Do not submit the Bids without the full Bid Amount.

INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM

Bids must be:

(a) Made only in the prescribed Bid cum Application Form or Revision Form, as applicable.

(b) Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions
contained herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum
Application Forms or Revision Forms are liable to be rejected. Bidders should note that the Syndicate
and / or the SCSBs, as appropriate, will not be liable for errors in data entry due to incomplete or
illegible Bid cum Application Forms or Revision Forms.

(c) Information provided by the Bidders will be uploaded in the online IPO system by the Syndicate and
the SCSBs, as the case may be, and the electronic data will be used to make allocation/ Allotment. The
Bidders should ensure that the details are correct and legible

(d) For Retail Individual Bidders, the Bid must be for a minimum of [y] Equity Shares and in multiples of
[y] thereafter subject to a maximum Bid Amount of Rs. 100,000.

(e) For Non-Institutional Bidders and QIB Bidders, Bids must be for a minimum of such number of Equity
Shares that the Bid Amount exceeds or equal to Rs. 100,000 and in multiples of [y] Equity Shares
thereafter. Bids cannot be made for more than the Issue size. Bidders are advised to ensure that a single
Bid from them should not exceed the investment limits or maximum number of shares that can be held
by them under the applicable laws or regulations.

(f) For Anchor Investors, Bids must be for a minimum of such number of Equity Shares that the Bid
Amount exceeds or equal to Rs. 100 million and in multiples of [y] Equity Shares thereafter.

(g) In single name or in joint names (not more than three, and in the same order as their Depository
Participant details).

(h) Thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the
Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive
Magistrate under official seal.

Bidder’s PAN Depository Account and Bank Account Details

Bidders should note that on the basis of PAN of the Bidders, DP IDs and beneficiary account number
provided by them in the Bid cum Application Form, the Registrar will obtain from the Depository the
demographic details including address, Bidders bank account details, MICR code and occupation

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(hereinafter referred to as “Demographic Details”). These bank account details would be used for giving
refunds (including through physical refund warrants, direct credit, NECS, NEFT and RTGS) or
unblocking of ASBA Account. Hence, Bidders are advised to immediately update their Bank Account
details as appearing on the records of the Depository Participant. Please note that failure to do so could
result in delays in despatch/ credit of refunds to Bidders or unblocking of the ASBA Account at the
Bidders sole risk and neither the BRLM or the Registrar or the Escrow Collection Banks or the SCSBs
nor the Company shall have any responsibility and undertake any liability for the same. Hence, Bidders
should carefully fill in their Depository Account details in the Bid cum Application Form.

IT IS MANDATORY FOR ALL THE BIDDERS TO GET THEIR EQUITY SHARES IN

DEMATERIALISED FORM. ALL BIDDERS SHOULD MENTION THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION FORM. BIDDERS MUST
ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION FORM IS EXACTLY THE
SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE BID
CUM APPLICATION FORM IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT
THE DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE
SAME SEQUENCE IN WHICH THEY APPEAR IN THE BID CUM APPLICATION FORM.

These Demographic Details would be used for all correspondence with the Bidders including mailing of the
CANs/allocation advice and printing of bank particulars on the refund orders or for refunds through electronic
transfer of funds, as applicable. The Demographic Details given by Bidders in the Bid cum Application Form
would not be used for any other purpose by the Registrar to the Issue.

By signing the Bid cum Application Form, the Bidder would be deemed to have authorised the depositories to
provide, upon request, to the Registrar to the Issue, the required Demographic Details as available on its records.

Refund orders/ CANs would be mailed at the address of the Bidder as per the Demographic Details
received from the Depositories. Bidders may note that delivery of refund orders/CANs may get delayed if
the same once sent to the address obtained from the depositories are returned undelivered. In such an
event, the address and other details given by the Bidder (other than the ASBA Bidders) in the Bid cum
Application Form would be used only to ensure dispatch of refund orders. Please note that any such delay
shall be at the Bidders sole risk and neither the Company, the Escrow Collection Banks, the Registrar nor
the BRLM shall be liable to compensate the Bidder for any losses caused to the Bidder due to any such
delay or liable to pay any interest for such delay.

In case no corresponding record is available with the Depositories, which matches the three parameters, namely,
PAN of the sole/first Bidder, the DP ID and the beneficiary’s identity, then such Bids are liable to be rejected.

Bids by Non Residents including NRIs, FIIs and Foreign Venture Capital Funds registered with SEBI on
a repatriation basis

Bids and revision to Bids must be made in the following manner:

1. On the Bid cum Application Form or the Revision Form, as applicable (blue in colour), and completed
in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein.

2. In a single name or joint names (not more than three and in the same order as their Depositary
Participant Details).

3. Bids on a repatriation basis shall be in the names of individuals, or in the name of FIIs but not in the
names of minors, OCBs, firms or partnerships, foreign nationals (excluding NRIs) or their nominees.

Bids by Eligible NRIs for a Bid Amount of up to Rs. 100,000 would be considered under the Retail Portion for
the purposes of allocation and Bids for a Bid Amount of more than Rs. 100,000 would be considered under
Non-Institutional Portion for the purposes of allocation.

Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank
charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts
purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely

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convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of
remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their
NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum
Application Form. The Company will not be responsible for loss, if any, incurred by the Bidder on
account of conversion of foreign currency.

There is no reservation for Eligible NRIs and FIIs and all Bidders will be treated on the same basis with
other categories for the purpose of allocation.

Bids under Power of Attorney

In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered
societies, FIIs, Mutual Funds, insurance companies and provident funds with a minimum corpus of Rs. 250
million (subject to applicable law) and pension funds with a minimum corpus of Rs. 250 million a certified copy
of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of
the Memorandum of Association and Articles of Association and/or bye laws must be lodged along with the Bid
cum Application Form. Failing this, the Company reserves the right to accept or reject any Bid in whole or in
part, in either case, without assigning any reason therefor.

In addition to the above, certain additional documents are required to be submitted by the following entities:

a. With respect to Bids by FIIs and Mutual Funds, a certified copy of their SEBI registration
certificate must be lodged along with the Bid cum Application Form.

b. With respect to Bids by insurance companies registered with the Insurance Regulatory and
Development Authority, in addition to the above, a certified copy the of certificate of registration
issued by the Insurance Regulatory and Development Authority must be lodged along with the Bid
cum Application Form.

c. With respect to Bids made by provident funds with minimum corpus of Rs. 250 million (subject to
applicable law) and pension funds with a minimum corpus of Rs. 250 million, a certified copy of
certificate from a chartered accountant certifying the corpus of the provident fund/ pension fund
must be lodged along with the Bid cum Application Form.

The Company in its absolute discretion, reserves the right to relax the above condition of simultaneous lodging
of the power of attorney along with the Bid cum Application form, subject to such terms and conditions that the
Company and the BRLM may deem fit.

PAYMENT INSTRUCTIONS

Escrow Mechanism for Bidders other than the ASBA Bidders

The Company and the Syndicate shall open Escrow Accounts with one or more Escrow Collection Bank(s) in
whose favour the Bidders shall make out the cheque or demand draft in respect of his or her Bid and/or revision
of the Bid. Cheques or demand drafts received for the full Bid Amount from Bidders in a certain category would
be deposited in the Escrow Account.

The Escrow Collection Banks will act in terms of the Red Herring Prospectus and the Escrow Agreement. The
Escrow Collection Banks for and on behalf of the Bidders shall maintain the monies in the Escrow Account
until the Designated Date. The Escrow Collection Banks shall not exercise any lien whatsoever over the monies
deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow
Collection Banks shall transfer the funds represented by allocation of Equity Shares (other than ASBA funds
with the SCSBs) from the Escrow Account, as per the terms of the Escrow Agreement, into the Public Issue
Account with the Bankers to the Issue. The balance amount after transfer to the Public Issue Account shall be
transferred to the Refund Account. Payments of refund to the Bidders shall also be made from the Refund
Account are per the terms of the Escrow Agreement and the Red Herring Prospectus.

The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an
arrangement between the Company, the Syndicate, the Escrow Collection Banks and the Registrar to the Issue
to facilitate collections from the Bidders.

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Payment mechanism for ASBA Bidders

The ASBA Bidders shall specify the bank account number in the ASBA Bid cum Application Form and the
SCSB shall block an amount equivalent to the Bid Amount in the bank account specified in the ASBA Bid cum
Application Form. The SCSB shall keep the Bid Amount in the relevant bank account blocked until withdrawal/
rejection of the ASBA Bid or receipt of instructions from the Registrar to unblock the Bid Amount. In the event
of withdrawal or rejection of ASBA Bid cum Application Form or for unsuccessful ASBA Bid cum Application
Forms, the Registrar shall give instructions to the SCSB to unblock the application money in the relevant bank
account within one day of receipt of such instruction. The Bid Amount shall remain blocked in the ASBA
Account until finalisation of the Basis of Allotment in the Issue and consequent transfer of the Bid Amount to
the Public Issue Account, or until withdrawal/ failure of the Issue or until rejection of the Bid by ASBA Bidder,
as the case may be.

Payment into Escrow Account for Bidders other than ASBA Bidders

Each Bidder shall draw a cheque or demand draft or (for Anchor Investor) remit the funds electronically through
the RTGS mechanism for the BID Amount payable on the Bid as per the following terms:

1. All Bidders would be required to pay the full Bid Amount at the time of the submission of the Bid cum
Application Form.

2. The Bidders shall, with the submission of the Bid cum Application Form, draw a payment instrument
for the Bid Amount in favour of the Escrow Account and submit the same to the Syndicate. If the
payment is not made favouring the Escrow Account along with the Bid cum Application Form, the Bid
of the Bidder shall be rejected.

3. The payment instruments for payment into the Escrow Account should be drawn in favour of:

(a) In case of Resident QIB Bidders: “MFSL Public Issue – Escrow Account – QIB – R”

(b) In case of Non Resident QIB Bidders: “MFSL Public Issue – Escrow Account – QIB – NR”

(c) In case of Resident Retail and Non-Institutional Bidders: “MFSL Public Issue – Escrow
Account –R”

(d) In case of Non-Resident Retail and Non-Institutional Bidders: “MFSL Public Issue – Escrow
Account –NR”

4. Anchor Investors would be required to pay the Bid Amount at the time of submission of the Bid cum
Application Form. In the event of the Issue Price being higher than the price at which allocation is
made to Anchor Investors, the Anchor Investors shall be required to pay such additional amount to the
extent of shortfall between the price at which allocation is made to them and the Issue Price as per the
pay-in date mentioned in the revised Anchor Investor Allocation Notice. If the Issue Price is lower than
the price at which allocation is made to Anchor Investors, the amount in excess of the Issue Price paid
by Anchor Investors shall not be refunded to them.

5. For Anchor Investors, the payment instruments for payment into the Escrow Account should be drawn
in favour of:

(a) In case of resident Anchor Investors: “MFSL Public Issue – Escrow Account – Anchor
Investor – R”

(b) In case of non-resident Anchor Investors: “MFSL Public Issue – Escrow Account – Anchor
Investor – NR”

6. In case of Bids by NRIs applying on repatriation basis, the payments must be made through Indian
Rupee drafts purchased abroad or cheques or bank drafts, for the amount payable on application
remitted through normal banking channels or out of funds held in Non-Resident External (NRE)
Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to
deal in foreign exchange in India, along with documentary evidence in support of the remittance.

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 Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident Bidder
bidding on a repatriation basis. Payment by drafts should be accompanied by bank certificate
confirming that the draft has been issued by debiting to NRE Account or FCNR Account.

7. In case of Bids by NRIs applying on non-repatriation basis, the payments must be made through Indian
Rupee Drafts purchased abroad or cheques or bank drafts, for the amount payable on application
remitted through normal banking channels or out of funds held in Non-Resident External (NRE)
Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to
deal in foreign exchange in India, along with documentary evidence in support of the remittance or out
of a Non-Resident Ordinary (NRO) Account of a Non-Resident Bidder bidding on a non-repatriation
basis. Payment by drafts should be accompanied by a bank certificate confirming that the draft has
been issued by debiting an NRE or FCNR or NRO Account.

8. In case of Bids by FIIs, the payment should be made out of funds held in a Special Rupee Account
along with documentary evidence in support of the remittance. Payment by drafts should be
accompanied by a bank certificate confirming that the draft has been issued by debiting the Special
Rupee Account.

9. The monies deposited in the Escrow Account will be held for the benefit of the Bidders (other than
ASBA Bidders) till the Designated Date.

10. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow
Account as per the terms of the Escrow Agreement into the Public Issue Account with the Bankers to
the Issue.

11. On the Designated Date and no later than 10 Working Days from the Bid/Issue Closing Date, the
Escrow Collection Bank shall also refund all amounts payable to unsuccessful Bidders (other than
ASBA Bidders) and also the excess amount paid on bidding, if any, after adjusting for
allocation/Allotment to such Bidders.

12. Payments should be made by cheque, or demand draft drawn on any Bank (including a Co-operative
Bank), which is situated at, and is a member of or sub-member of the bankers’ clearing house located
at the centre where the Bid cum Application Form is submitted. Outstation cheques/bank drafts drawn
on banks not participating in the clearing process will not be accepted and applications accompanied by
such cheques or bank drafts are liable to be rejected. Cash/ money order/ postal orders will not be
accepted.

Payment by cash/ money order

Payment through cash / money order shall not be accepted in this Issue.

Submission of Bid cum Application Form

All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques
or drafts shall be submitted to the members of the Syndicate at the time of submission of the Bid. With respect
to ASBA Bidders, the ASBA Bid cum Application Form or the ASBA Revision Form shall be submitted to the
Designated Branches.

No separate receipts shall be issued for the money payable on the submission of Bid cum Application Form or
Revision Form. However, the collection centre of the members of the Syndicate will acknowledge the receipt of
the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the
acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form
for the records of the Bidder.

OTHER INSTRUCTIONS

Joint Bids in the case of Individuals

Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be
made out in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form.

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All communications will be addressed to the First Bidder and will be dispatched to his or her address as per the
Demographic Details received from the Depository.

Multiple Bids

A Bidder should submit only one Bid (and not more than one) for the total number of Equity Shares required.
Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same.

In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered
with SEBI and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple
Bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. Bids by
QIBs under the Anchor Investor Portion and QIB Portion (excluding Anchor Investor Portion) will not be
considered as multiple Bids.

The Company reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all
categories. In this regard, the procedures which would be followed by the Registrar to detect multiple Bids are
given below:

1. All Bids will be checked for common PAN and will be accumulated and taken to a separate process file
which would serve as a multiple master.

2. In this master, a check will be carried out for the same PAN. In cases where the PAN is different, the
same will be deleted from this master.

3. The Registrar to the Issue will obtain, from the depositories, details of the applicant’s address based on
the DP ID and Beneficiary Account Number provided in the Bid data and create an address master.

4. The addresses of all the applications in the multiple master will be strung from the address master. This
involves putting the addresses in a single line after deleting non-alpha and non-numeric characters i.e.
commas, full stops, hash etc. Sometimes, the name, the first line of address and pin code will be
converted into a string for each application received and a photo match will be carried out amongst all
the applications processed. A print-out of the addresses will be taken to check for common names. The
Bids with same name and same address will be treated as multiple applications

5. The Bids will be scrutinised for DP ID and Beneficiary Account Numbers. In case applications bear the
same DP ID and Beneficiary Account Numbers, these will be treated as multiple applications.

Permanent Account Number or PAN

Except for Bids on behalf of the Central or State Government and the officials appointed by the courts, the
Bidders, should mention his/ her PAN allotted under the Income Tax Act. In accordance with the SEBI
Regulations, the PAN would be the sole identification number for participants transacting in the securities market,
irrespective of the amount of transaction. Any Bid cum Application Form without the PAN is liable to be
rejected. It is to be specifically noted that Bidders should not submit the GIR number instead of the PAN
as the Bid is liable to be rejected on this ground. With effect from August 16, 2010, the demat account for
Bidders for which PAN details have not been verified shall be “suspended credit” and no credit of Equity
Shares pursuant to the Issue shall be made into accounts of Bidders.

REJECTION OF BIDS

In case of QIB Bidders, the Company in consultation with the BRLM may reject Bids provided that the reasons
for rejecting the same shall be provided to such Bidders in writing. In case of Non-Institutional Bidders and
Retail Individual Bidders, the Company has a right to reject Bids based on technical grounds. Consequent
refunds shall be made by RTGS/NEFT/NES/Direct Credit/cheque or pay order or draft and will be sent to the
Bidder’s address at the Bidder’s risk. With respect to Bids by ASBA Bidders, the Designated Branches of the
SCSBs shall have the right to reject Bids by ASBA Bidders if at the time of blocking the Bid Amount in the
Bidder’s bank account, the respective Designated Branch of the SCSB ascertains that sufficient funds are not
available in the Bidder’s bank account maintained with the SCSB. Subsequent to the acceptance of the ASBA
Bid by the SCSB, the Company would have a right to reject the ASBA Bids only on technical grounds.

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Grounds for Technical Rejections

Bidders are advised to note that Bids are liable to be rejected inter alia on the following technical grounds:

x Amount paid does not tally with the amount payable for the highest value of Equity Shares Bid for.
With respect to Bids by ASBA Bidders, the amounts mentioned in the ASBA Bid cum Application
Form does not tally with the amount payable for the value of the Equity Shares Bid for;

x Age of First Bidder not given;

x In case of partnership firms, Equity Shares may be registered in the names of the individual partners
and no firm as such shall be entitled to apply;

x Bid by persons not competent to contract under the Indian Contract Act, 1872 including minors, insane
persons;

x PAN not mentioned in the Bid cum Application Form;

x GIR number furnished instead of PAN;

x Bids for lower number of Equity Shares than specified for that category of investors;

x Bids at a price less than Floor Price;

x Bids at a price more than the Cap Price;

x Signature of sole/or joint Bidders missing

x Submission of more than five ASBA Bid cum Application Forms per bank account;

x Submission of Bids by Anchor Investors through ASBA process;

x Bids at Cut-off Price by Non-Institutional and QIB Bidders.

x Bids for number of Equity Shares which are not in multiples of [x];

x Category not ticked;

x Multiple Bids as defined in this Red Herring Prospectus;

x In case of Bids under power of attorney or by limited companies, corporate, trust etc., relevant
documents are not submitted;

x Bids accompanied by money order/postal order/cash;

x Bid cum Application Forms does not have the stamp of the BRLM or Syndicate Members or the SCSB;

x Bid cum Application Forms does not have Bidder’s depository account details;

x Bid cum Application Forms are not delivered by the Bidders within the time prescribed as per the Bid
cum Application Forms, Bid/Issue Opening Date advertisement and the Red Herring Prospectus and as
per the instructions in the Red Herring Prospectus and the Bid cum Application Forms;

x In case no corresponding record is available with the Depositories that matches three parameters
namely, names of the Bidders (including the order of names of joint holders), the Depositary
Participant’s identity (DP ID) and the beneficiary’s account number;

x With respect to Bids by ASBA Bidders, inadequate funds in the bank account to block the Bid Amount
specified in the ASBA Bid cum Application Form at the time of blocking such Bid Amount in the bank

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 account;

x Bids for amounts greater than the maximum permissible amounts prescribed by the regulations;

x Bids where clear funds are not available in Escrow Accounts as per final certificate from the Escrow
Collection Banks;

x Bids by QIBs not submitted through the BRLM or Enam Securities Private Limited or in case of ASBA
Bids for QIBs (other than Anchor Investors) not intimated to the BRLM;

x Bids by U.S. residents other than in reliance on Regulation S under the Securities Act;

x Bids by any person outside India if not in compliance with applicable foreign and Indian Laws;

x Bids not uploaded on the terminals of the Stock Exchanges; and

x Bids by persons prohibited from buying, selling or dealing in the shares directly or indirectly by SEBI
or any other regulatory authority.

EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL

As per the provisions of Section 68B of the Companies Act, the Allotment of Equity Shares in this Issue shall be
only in a de-materialised form, (i.e., not in the form of physical certificates but be fungible and be represented
by the statement issued through the electronic mode).

In this context, two agreements have been signed among the Company, the respective Depositories and the
Registrar to the Issue:

x Agreement dated January 23, 2008, between NSDL, the Company and the Registrar to the Issue;

x Agreement dated January 18, 2008, between CDSL, the Company and the Registrar to the Issue.

All Bidders can seek Allotment only in dematerialised mode. Bids from any Bidder without relevant details of
his or her depository account are liable to be rejected.

(a) A Bidder applying for Equity Shares must have at least one beneficiary account with either of the
Depository Participants of either NSDL or CDSL prior to making the Bid.

(b) The Bidder must necessarily fill in the details (including the Beneficiary Account Number and
Depository Participant’s identification number) appearing in the Bid cum Application Form or
Revision Form.

(c) Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account
(with the Depository Participant) of the Bidder

(d) Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the
account details in the Depository. In case of joint holders, the names should necessarily be in the same
sequence as they appear in the account details in the Depository.

(e) If incomplete or incorrect details are given under the heading ‘Bidders Depository Account Details’ in
the Bid cum Application Form or Revision Form, it is liable to be rejected.

(f) The Bidder is responsible for the correctness of his or her Demographic Details given in the Bid cum
Application Form vis-à-vis those with his or her Depository Participant.

(g) Equity Shares in electronic form can be traded only on the Stock Exchanges having electronic
connectivity with NSDL and CDSL. All the Stock Exchanges where the Equity Shares are proposed to
be listed have electronic connectivity with CDSL and NSDL.

(h) The trading of the Equity Shares of the Company would be in dematerialised form only for all Bidders

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 in the demat segment of the respective Stock Exchanges.

Communications

All future communications in connection with Bids made in this Issue should be addressed to the Registrar to
the Issue quoting the full name of the sole or First Bidder, Bid cum Application Form number, Bidders
Depository Account Details, number of Equity Shares applied for, date of Bid form, name and address of the
member of the Syndicate or the Designated Branch of the SCSBs where the Bid was submitted and cheque or
draft number and issuing bank thereof or with respect to ASBA Bids, bank account number in which the amount
equivalent to the Bid Amount was blocked.

Bidders can contact the Compliance Officer or the Registrar to the Issue in case of any pre-Issue or post-
Issue related problems such as non-receipt of letters of Allotment, credit of Allotted shares in the
respective beneficiary accounts, refund orders etc. In case of ASBA Bids submitted to the Designated
Branches of the SCSBs, the Bidders can contact the Designated Branches of the SCSBs.

PAYMENT OF REFUND

Bidders other than ASBA Bidders must note that on the basis of the names of the Bidders, Depository
Participant’s name, DP ID, beneficiary account number provided by them in the Bid cum Application Form, the
Registrar to the Issue will obtain, from the Depositories, the Bidders’ bank account details, including the nine
digit Magnetic Ink Character Recognition (“MICR”) code as appearing on a cheque leaf. Hence Bidders are
advised to immediately update their bank account details as appearing on the records of the Depository
Participant. Please note that failure to do so could result in delays in despatch of refund order or refunds through
electronic transfer of funds, as applicable, and any such delay shall be at the Bidders’ sole risk and neither the
Company, the Registrar to the Issue, Escrow Collection Bank(s), Bankers to the Issue nor the BRLM shall be
liable to compensate the Bidders for any losses caused to the Bidder due to any such delay or liable to pay any
interest for such delay.

Mode of making refunds for Bidders other than ASBA Bidders

The payment of refund, if any, for Bidders other than ASBA Bidders would be done through various modes in
the following order of preference:

1. NECS – Payment of refund would be done through NECS for applicants having an account at any of the
centres where such facility has been made available. This mode of payment of refunds would be subject
to availability of complete bank account details including the MICR code as appearing on a cheque leaf,
from the Depositories. The payment of refunds is mandatory for applicants having a bank account at
any of the centres where such facility is made available, except where the applicant, being eligible, opts
to receive refund through direct credit or RTGS.

2. Direct Credit – Applicants having bank accounts with the Refund Bank (s), as mentioned in the Bid cum
Application Form, shall be eligible to receive refunds through direct credit. Charges, if any, levied by
the Refund Bank(s) for the same would be borne by the Company.

3. RTGS – Applicants having a bank account at any of the centres where such facility is available and
whose refund amount exceeds Rs. 1 million, has the option to receive refund through RTGS. Such
eligible applicants who indicate their preference to receive refund through RTGS are required to provide
the IFSC code in the Bid cum Application Form. In the event the same is not provided, refund shall be
made through NECS. Charges, if any, levied by the Refund Bank(s) for the same would be borne by the
Company. Charges, if any, levied by the applicant’s bank receiving the credit would be borne by the
applicant.

4. NEFT – Payment of refund shall be undertaken through NEFT wherever the applicants’ bank has been
assigned the Indian Financial System Code (IFSC), which can be linked to a Magnetic Ink Character
Recognition (MICR), if any, available to that particular bank branch. IFSC Code will be obtained from
the website of RBI as on a date immediately prior to the date of payment of refund, duly mapped with
MICR numbers. Wherever the applicants have registered their nine digit MICR number and their bank
account number while opening and operating the demat account, the same will be duly mapped with the
IFSC Code of that particular bank branch and the payment of refund will be made to the applicants

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 through this method. The process flow in respect of refunds by way of NEFT is at an evolving stage and
hence use of NEFT is subject to operational feasibility, cost and process efficiency. The process flow in
respect of refunds by way of NEFT is at an evolving stage, hence use of NEFT is subject to operational
feasibility, cost and process efficiency. In the event that NEFT is not operationally feasible, the payment
of refunds would be made through any one of the other modes as discussed in the sections.

5. For all other applicants, including those who have not updated their bank particulars with the MICR
code, the refund orders will be despatched under certificate of posting for value upto Rs. 1,500 and
through Speed Post/ Registered Post for refund orders of Rs. 1,500 and above. Such refunds will be
made by cheques, pay orders or demand drafts drawn on the Escrow Collection Banks and payable at
par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or
demand drafts at other centres will be payable by the Bidders.

Mode of making refunds for ASBA Bidders

In case of ASBA Bidders, the Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the
relevant ASBA Account to the extent of the Bid Amount specified in the ASBA Bid cum Application Forms for
withdrawn, rejected or unsuccessful or partially successful ASBA Bids within 12 Working Days of the
Bid/Issue Closing Date.

DISPOSAL OF APPLICATIONS AND APPLICATION MONEYS AND INTEREST IN CASE OF

DELAY

With respect to Bidders other than ASBA Bidders, the Company shall ensure dispatch of Allotment advice,
refund orders (except for Bidders who receive refunds through electronic transfer of funds) and give benefit to
the beneficiary account with Depository Participants and submit the documents pertaining to the Allotment to
the Stock Exchanges within two Working Days of date of Allotment of Equity Shares.

In case of applicants who receive refunds through NECS, direct credit or RTGS, the refund instructions will be
given to the clearing system within 12 Working Days from the Bid/ Issue Closing Date. A suitable
communication shall be sent to the Bidders receiving refunds through this mode within 12 Working Days of
Bid/Issue Closing Date, giving details of the bank where refunds shall be credited along with amount and
expected date of electronic credit of refund.

The Company shall use best efforts to ensure that all steps for completion of the necessary formalities for listing
and commencement of trading at all the Stock Exchanges where the Equity Shares are proposed to be listed, are
taken within 12 Working Days of the Bid/Issue Closing Date.

In accordance with the Companies Act, the requirements of the Stock Exchanges and the SEBI Regulations, the
Company further undertakes that:

x Allotment of Equity Shares shall be made only in dematerialised form within 12 Working Days of the
Bid/Issue Closing Date; and

x With respect to Bidders other than ASBA Bidders, dispatch of refund orders or in a case where the
refund or portion thereof is made in electronic manner, the refund instructions are given to the clearing
system within 12 Working Days of the Bid/Issue Closing Date would be ensured With respect to the
ASBA Bidders’ instructions for unblocking of the ASBA Bidder’s Bank Account shall be made within
12 Working Days from the Bid/Issue Closing Date;

The Company shall pay interest at 15% per annum for any delay beyond the 15 days from the Bid/Issue Closing
Date as mentioned above, if Allotment is not made and refund orders are not dispatched or if, in a case where
the refund or portion thereof is made in electronic manner, the refund instructions have not been given to the
clearing system in the disclosed manner and/or demat credits are not made to investors within 12 Working Days
prescribed above. If such money is not repaid within eight days from the day the Company becomes liable to
repay, the Company and every Director of the Company who is an officer in default shall, on and from expiry of
eight days, be jointly and severally liable to repay the money with interest as prescribed under the applicable
law.

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IMPERSONATION

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the
Companies Act, which is reproduced below:

“Any person who:

(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares
therein, or

(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other
person in a fictitious name,

shall be punishable with imprisonment for a term which may extend to five years.”

BASIS OF ALLOTMENT

A. For Retail Individual Bidders

x Bids received from the Retail Individual Bidders at or above the Issue Price shall be grouped
together to determine the total demand under this category. The Allotment to all the successful
Retail Individual Bidders will be made at the Issue Price.

x The Issue size less Allotment to Non-Institutional and QIB Bidders shall be available for
Allotment to Retail Individual Bidders who have bid in the Issue at a price that is equal to or
greater than the Issue Price.

x If the aggregate demand in this category is less than or equal to 4,375,000 Equity Shares at or
above the Issue Price, full Allotment shall be made to the Retail Individual Bidders to the
extent of their valid Bids.

x If the aggregate demand in this category is greater than 4,375,000 Equity Shares at or above
the Issue Price, the Allotment shall be made on a proportionate basis up to a minimum of [x]
Equity Shares. For the method of proportionate Basis of Allotment, refer below.

B. For Non-Institutional Bidders

x Bids received from Non-Institutional Bidders at or above the Issue Price shall be grouped
together to determine the total demand under this category. The Allotment to all successful
Non-Institutional Bidders will be made at the Issue Price.

x The Issue size less Allotment to QIBs and Retail Portion shall be available for Allotment to
Non-Institutional Bidders who have Bid in the Issue at a price that is equal to or greater than
the Issue Price.

x If the aggregate demand in this category is less than or equal to 1,875,000 Equity Shares at or
above the Issue Price, full Allotment shall be made to Non-Institutional Bidders to the extent
of their demand.

x In case the aggregate demand in this category is greater than 1,875,000 Equity Shares at or
above the Issue Price, Allotment shall be made on a proportionate basis up to a minimum of
[●] Equity Shares. For the method of proportionate Basis of Allotment refer below.

C. For QIBs (other than Anchor Investors)

x Bids received from the QIB Bidders at or above the Issue Price shall be grouped together to
determine the total demand under this portion. The Allotment to all the successful QIB
Bidders will be made at the Issue Price.

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 x The QIB Portion shall be available for Allotment to QIB Bidders who have Bid in the Issue at
a price that is equal to or greater than the Issue Price.

x Allotment shall be undertaken in the following manner:

(a) In the first instance allocation to Mutual Funds for up to 5% of the QIB Portion
(excluding Anchor Investor Portion) shall be determined as follows:

(i) In the event that Bids by Mutual Fund exceeds 5% of the QIB Portion
(excluding Anchor Investor Portion), allocation to Mutual Funds shall be
done on a proportionate basis for up to 5% of the QIB Portion (excluding
Anchor Investor Portion).

(ii) In the event that the aggregate demand from Mutual Funds is less than 5%
of the QIB Portion (excluding Anchor Investor Portion) then all Mutual
Funds shall get full Allotment to the extent of valid Bids received above the
Issue Price.

(iii) Equity Shares remaining unsubscribed, if any, not allocated to Mutual Funds
shall be available for Allotment to all QIB Bidders as set out in (b) below;

(b) In the second instance Allotment to all QIBs shall be determined as follows:

(i) In the event that the oversubscription in the QIB Portion (excluding Anchor
Investor Portion), all QIB Bidders who have submitted Bids above the Issue
Price shall be Allotted Equity Shares on a proportionate basis for up to 95%
of the QIB Portion.

(ii) Mutual Funds, who have received allocation as per (a) above, for less than
the number of Equity Shares Bid for by them, are eligible to receive Equity
Shares on a proportionate basis along with other QIB Bidders (excluding
Anchor Investor Portion).

(iii) Under-subscription below 5% of the QIB Portion (excluding Anchor

Investor Portion), if any, from Mutual Funds, would be included for
allocation to the remaining QIB Bidders on a proportionate basis.

x The aggregate Allotment to QIB Bidders shall not be more than 6,250,000 Equity Shares

D. For Anchor Investor Portion

x Allocation of Equity Shares to Anchor Investors at the Anchor Investor Issue Price will be at
the discretion of the Company, in consultation with the BRLM, subject to compliance with the
following requirements:

a. not more than 30% of the QIB Portion will be allocated to Anchor Investors;

b. one-third of the Anchor Investor Portion shall be reserved for domestic Mutual
Funds, subject to valid Bids being received from domestic Mutual Funds at or above
the price at which allocation is being done to other Anchor Investors;

c. allocation to Anchor Investors shall be on a discretionary basis and subject to a

minimum number of two Anchor Investors for allocation upto Rs. 2,500 million and
minimum number of five Anchor Investors for allocation more than Rs. 2,500
million.

x The number of Equity Shares Allotted to Anchor Investors and the Anchor Investor Issue
Price, shall be made available in the public domain by the BRLM before the Bid/ Issue

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 Opening Date by intimating the same to the Stock Exchanges.

Method of Proportionate Basis of Allotment in the Issue

Except in relation to Anchor Investors, in the event of the Issue being over-subscribed, the Company shall
finalise the Basis of Allotment in consultation with the Designated Stock Exchange. The executive director (or
any other senior official nominated by them) of the Designated Stock Exchange along with the BRLM and the
Registrar to the Issue shall be responsible for ensuring that the Basis of Allotment is finalised in a fair and
proper manner.

The Allotment shall be made in marketable lots, on a proportionate basis as explained below:

a) Bidders will be categorised according to the number of Equity Shares applied for.

b) The total number of Equity Shares to be Allotted to each category as a whole shall be arrived at on a
proportionate basis, which is the total number of Equity Shares applied for in that category (number of
Bidders in the category multiplied by the number of Equity Shares applied for) multiplied by the
inverse of the over-subscription ratio.

c) Number of Equity Shares to be Allotted to the successful Bidders will be arrived at on a proportionate
basis, which is total number of Equity Shares applied for by each Bidder in that category multiplied by
the inverse of the over-subscription ratio.

d) In all Bids where the proportionate Allotment is less than [x] Equity Shares per Bidder, the Allotment
shall be made as follows:

x The successful Bidders out of the total Bidders for a category shall be determined by draw of
lots in a manner such that the total number of Equity Shares Allotted in that category is equal
to the number of Equity Shares calculated in accordance with (b) above; and

x Each successful Bidder shall be Allotted a minimum of [x] Equity Shares.

e) If the proportionate Allotment to a Bidder is a number that is more than [x] but is not a multiple of one
(which is the marketable lot), the decimal would be rounded off to the higher whole number if that
decimal is 0.5 or higher. If that number is lower than 0.5 it would be rounded off to the lower whole
number. Allotment to all in such categories would be arrived at after such rounding off.

f) If the Equity Shares allocated on a proportionate basis to any category are more than the Equity Shares
Allotted to the Bidders in that category, the remaining Equity Shares available for Allotment shall be
first adjusted against any other category, where the Allotted Equity Shares are not sufficient for
proportionate Allotment to the successful Bidders in that category. The balance Equity Shares, if any,
remaining after such adjustment will be added to the category comprising Bidders applying for
minimum number of Equity Shares.

g) Subject to valid Bids being received, allocation of Equity Shares to Anchor Investors shall be at the
sole discretion of the Company, in consultation with the BRLM.

Illustration of Allotment to QIBs and Mutual Funds (“MF”)

A. Issue Details

Sr. No. Particulars Issue details

1. Issue size 200 million equity shares
2. Allocation to QIB* (60%) 120 million equity shares
3. Anchor Investor Portion 36 million equity shares
4. Portion available to QIBs other than Anchor 84 million equity shares
Investors [(2) minus (3)]
Of which:

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 Sr. No. Particulars Issue details
a. Allocation to MF (5%) 4.20 million equity shares
b. Balance for all QIBs including MFs 79.8 million equity shares
3 No. of QIB applicants 10
4 No. of shares applied for 500 million equity shares

B. Details of QIB Bids

Sr. No. Type of QIB bidders# No. of shares bid for (in million)
1 A1 50
2 A2 20
3 A3 130
4 A4 50
5 A5 50
6 MF1 40
7 MF2 40
8 MF3 80
9 MF4 20
10 MF5 20
Total 500
# A1-A5: (QIB bidders other than MFs), MF1-MF5 ( QIB bidders which are Mutual Funds)

C. Details of Allotment to QIB Bidders/ Applicants

(Number of equity shares in million)

Type of Shares Allocation of 4.20 million Allocation of balance 79.80 Aggregate
QIB bid for Equity Shares to MF million Equity Shares to allocation to
bidders proportionately (please see QIBs proportionately MFs
note 2 below) (please see note 4 below)
(I) (II) (III) (IV) (V)
A1 50 0 8.05 0
A2 20 0 3.22 0
A3 130 0 20.92 0
A4 50 0 8.05 0
A5 50 0 8.05 0
MF1 40 0.84 6.30 7.14
MF2 40 0.84 6.30 7.14
MF3 80 1.68 12.61 14.29
MF4 20 0.42 3.15 3.57
MF5 20 0.42 3.15 3.57
500 4.20 79.80 35.71

Please note:

1. The illustration presumes compliance with the requirements specified in this Red Herring
Prospectus in the section entitled “Issue Structure” on page 269 of the Red Herring
Prospectus.

2. Out of 84 million equity shares allocated to QIBs, 4.2 million (i.e. 5%) will be allocated on
proportionate basis among five Mutual Fund applicants who applied for 200 million equity
shares in QIB category.

3. The balance 79.80 million equity shares (i.e. 84 – 4.2 (available for MFs)) will be allocated on
proportionate basis among 10 QIB applicants who applied for 500 million equity shares
(including five MF applicants who applied for 200 million equity shares).

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 4. The figures in the fourth column entitled “Allocation of balance 79.80 million Equity Shares
to QIBs proportionately” in the above illustration are arrived as under:

x For QIBs other than Mutual Funds (A1 to A5)= No. of shares bid for (i.e. in column
II) X 79.80 / 495.80.

x For Mutual Funds (MF1 to MF5)= [(No. of shares bid for (i.e. in column II of the
table above) less Equity Shares allotted ( i.e., column III of the table above)] X
79.80/ 495.80.

x The numerator and denominator for arriving at allocation of 84 million shares to the
10 QIBs are reduced by 4.2 million shares, which have already been allotted to
Mutual Funds in the manner specified in column III of the table above.

Letters of Allotment or Refund Orders or instructions to the SCSBs

The Company shall give credit to the beneficiary account with depository participants within 12 Working Days
from the date of the Bid/Issue Closing Date. Applicants residing at the centres where clearing houses are
managed by the RBI, will get refunds through NECS only except where applicant is otherwise disclosed as
eligible to get refunds through direct credit and RTGS. The Company shall ensure dispatch of refund orders, if
any, of value up to Rs. 1,500, by “Under Certificate of Posting”, and shall dispatch refund orders above Rs.
1,500, if any, by registered post or speed post at the sole or first Bidder’s sole risk within 12 Working Days of
the Bid/Issue Closing Date. Bidders to whom refunds are made through electronic transfer of funds will be sent
a letter through ordinary post, intimating them about the mode of credit of refund within 12 Working Days of
the Bid / Issue Closing Date. In case of ASBA Bidders, the Registrar to the Issue shall instruct the relevant
SCSBs to unblock the funds in the relevant ASBA Account to the extent of the Bid Amount specified in the
ASBA Bid cum Application Forms for withdrawn, rejected or unsuccessful or partially successful ASBA Bids
within 12 Working Days of the Bid/Issue Closing Date.

Interest in case of delay in despatch of Allotment Letters or Refund Orders/ instruction to SCSBs by the
Registrar to the Issue

The Company agrees that (i) Allotment of Equity Shares and (ii) credit to successful Bidders’ depository
accounts will be completed within 12 Working Days of the Bid/ Issue Closing Date. The Company further
agrees that it shall pay interest at the rate of 15% p.a. if the Allotment letters or refund orders have not been
despatched to the applicants or if, in a case where the refund or portion thereof is made in electronic manner, the
refund instructions have not been given in the disclosed manner within 15 days from the Bid/ Issue Closing
Date.

The Company will provide adequate funds required for dispatch of refund orders or Allotment advice to the
Registrar to the Issue.

Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by the Company as a
Refund Bank and payable at par at places where Bids are received. Bank charges, if any, for encashing such
cheques, pay orders or demand drafts at other centres will be payable by the Bidders.

UNDERTAKINGS BY THE COMPANY

The Company undertakes the following:

x That the complaints received in respect of this Issue shall be attended to by the Company expeditiously
and satisfactorily;

x That all steps for completion of the necessary formalities for listing and commencement of trading at
all the Stock Exchanges where the Equity Shares are proposed to be listed within 12 Working Days of
finalisation of the Bid/Issue Closing Date;

x That funds required for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be

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 made available to the Registrar to the Issue by the Issuer;

x That where refunds are made through electronic transfer of funds, a suitable communication shall be
sent to the applicant within 15 days of the Bid/ Issue Closing Date, as the case may be, giving details of
the bank where refunds shall be credited along with amount and expected date of electronic credit of
refund;

x That the Promoters’ contribution in full has already been brought in;

x That the certificates of the securities/ refund orders to Eligible NRIs shall be despatched within
specified time;

x That no further issue of Equity Shares shall be made till the Equity Shares offered through the Red
Herring Prospectus are listed or until the Bid monies are refunded on account of non-listing, under-
subscription etc.; and

x That adequate arrangements shall be made to collect all ASBA Bid cum Application Forms and to
consider them similar to non-ASBA applications while finalizing the Basis of Allotment

The Company shall not have recourse to the Issue proceeds until the final approval for listing and trading of the
Equity Shares from all the Stock Exchanges where listing is sought has been received.

Withdrawal of the Issue

The Company, in consultation with the BRLM, reserves the right not to proceed with the Issue anytime after the
Bid/Issue Opening Date but before the Allotment of Equity Shares. In such an event, the Company would issue
a public notice in the newspapers, in which the pre-Issue advertisements were published, within two days of the
Bid/ Issue Closing Date, providing reasons for not proceeding with the Issue. The Company shall also inform
the same to Stock Exchanges on which the Equity Shares are proposed to be listed.

Any further issue of Equity Shares by the Company shall be in compliance with applicable laws.

Utilisation of Issue proceeds

The Board of Directors certify that:

x All monies received out of the Issue shall be credited/transferred to a separate bank account other than
the bank account referred to in sub-section (3) of Section 73 of the Companies Act;

x Details of all monies utilised out of the Issue shall be disclosed, and continue to be disclosed till the
time any part of the issue proceeds remains unutilised, under an appropriate head in the balance sheet
of the Company indicating the purpose for which such monies have been utilised;

x Details of all unutilised monies out of the Issue, if any shall be disclosed under an appropriate separate
head in the balance sheet indicating the form in which such unutilised monies have been invested;

x the utilisation of monies received under Promoters’ contribution shall be disclosed, and continue to be
disclosed till the time any part of the Issue proceeds remains unutilised, under an appropriate head in
the balance sheet of the Company indicating the purpose for which such monies have been utilised ;
and

x the details of all unutilised monies out of the funds received under Promoters’ contribution shall be
disclosed under a separate head in the balance sheet of the issuer indicating the form in which such
unutilised monies have been invested.

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 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the GoI, as notified
through press notes and press releases issued from time to time, and FEMA and circulars and notifications
issued thereunder. While the Industrial Policy, 1991 prescribes the limits and the conditions subject to which
foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner
in which such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign
investment is freely permitted in all sectors of the Indian economy up to any extent and without any prior
approvals, but the foreign investor is required to follow certain prescribed procedures and reporting
requirements for making such investment. The government bodies responsible for granting foreign investment
approvals are FIPB and the RBI.

Subscription by foreign investors (NRIs/FIIs)

FIIs are permitted to subscribe to shares of an Indian company in a public offer without the prior approval of the
RBI, so long as the price of the shares is not less than the price at which the shares are issued to residents.

The transfer of shares between an Indian resident and a non-resident does not require the prior approval of the
FIPB or the RBI, provided that (i) the activities of the investee company are under the automatic route under the
FDI Policy and transfer does not attract the provisions of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, as amended; (ii) the non-resident shareholding is within the sectoral limits under
the FDI policy; and (iii) the pricing is in accordance with the guidelines prescribed by the SEBI/RBI.

As per the existing policy of the Government of India, OCBs cannot participate in this Issue.

The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other
jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any
such jurisdiction, except in compliance with the applicable laws of such jurisdiction.

The Equity Shares have not been and will not be registered under the US Securities Act of 1933 (the
“Securities Act”) and may not be offered or sold within the United States (as defined in Regulation S
under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered
outside the United States in offshore transactions in compliance with Regulation S under the Securities
Act and the applicable laws of the jurisdiction where those offers and sales occur.

The above information is given for the benefit of the Bidders. The Company and the BRLM are not liable
for any amendments or modification or changes in applicable laws or regulations, which may occur after
the date of this Red Herring Prospectus. Bidders are advised to make their independent investigations
and ensure that the Bids are not in violation of laws or regulations applicable to them.

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 SECTION VIII: MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION

Capitalized terms used in this section have the meaning that has been given to such terms in the Articles of
Association of the Company. Pursuant to Schedule II of the Companies Act and the SEBI Regulations, the main
provisions of the Articles of Association of the Company are detailed below:

Table “A” Not to Apply

The Regulations contained in Table “A” in Schedule I of the Companies Act shall not apply to the Company,
except in so far as the same are repeated, contained or expressly made applicable in these Articles of
Association by the Companies Act.

Capital and Increase and Reduction of Capital

Amount of Capital

Article 3 provides that, “The Authorised Share Capital of the company shall be the capital as specified in Clause
V of the Memorandum of Association, with power to increase and reduce the Share Capital of the company and
to divide the shares in the Capital for the time being into several classes as permissible in law and to attach
thereto respectively such preferential, deferred, qualified or special rights, privileges or conditions as may be
determined by or in accordance with the Articles of Association of the Company to vary, modify, amalgamate or
abrogate any such rights, privileges or conditions in such manner as may for time being be provided in the
Articles of Association.”

Increase of Capital by the Company and How Carried in to Effect

Article 4 provides that, “The Company in General Meeting may, from time to time, increase the Capital by the
creation of new Shares. Such increase to be of such aggregate amount and to be divided into such shares of such
respective amounts as the resolution shall prescribe. Subject to the provisions of the Act, any shares of the
original or increased capital shall be issued upon such terms and conditions and with such rights and privileges
annexed thereto, as the General Meeting resolving upon the creation thereof, shall direct, and if no direction be
given, as the Directors shall determine, and in particular, such shares may be issued with a preferential or
qualified right to dividends, or otherwise and in the distribution of assets of the Company, and with a right of
voting at general meetings of the Company in conformity with Section 87 of the Act. Whenever the Capital of
the Company has been increased under the provisions of this Article, the Directors shall comply with the
provisions of Section 97 of the Act.”

Redeemable Preference Shares

Article 6 provides that, “Subject to the provisions of Section 80 of the Act, the Company shall have the power to
issue Preference Shares which at or at the option of the Company are liable to be redeemed and the resolution
authorising such issue shall prescribe the manner, terms and conditions of redemption.”

Provision applicable on the Issue Redeemable Preference shares

Article 7 provides that, “On the issue of Redeemable Preference Shares under the provisions of Article 6 hereof,
the following provisions shall take effect:

(a) no such shares shall be redeemed except out of the profits of the Company which would otherwise be
available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of the
redemption.

(b) no such shares shall be redeemed unless they are fully paid.

(c) Where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out
of the profits which would otherwise have been available for dividend, be transferred to a reserve fund,
to be called the “Capital Redemption Reserve Account” a sum equal to the nominal amount of the
shares redeemed and the provisions of the Act relating to the reduction of the share capital of the
Company shall, excepts as provided in Section 80 of the Act, apply as if the Capital Redemption
Reserve Account were paid up share capital of the Company.”

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Reduction of Capital

Aricle 8 provides that, “The Company may (subject to the Provisions of Section 78, 80, 100 to 105 both
inclusive, of the Act) from time to time by Special Resolution reduce its capital, any Capital Redemption
Reserve Account or Share Premium Account in any manner for the time being authorised by law, and in
particular, capital may be paid off on the footing that it may be called upon again or otherwise. This Article is
not to derogate from any power the Company would have if the were omitted.”

Sub-division Consolidation and Cancellation of Shares

Article 9 provides that, “Subject to the provisions of Section 94 of the Act, the Company in General Meeting
may from time to time sub-divide consolidate its shares, or any of them, and the resolution whereby any share is
sub-divided, may determine that, as between the holders of the shares resulting from such sub-division one or
more of such shares shall have some preference or special advantage as regards dividend, capital or otherwise
over or as compared with the other or others. Subject as aforesaid, the Company in General Meeting may also
cancel shares which have not been taken or agreed to be taken by any person and diminish the amount of its
share capital by the amount of the shares so cancelled.”

Modification of Rights

Article 10 provides that, “Whenever the Capital is divided into different classes of shares all or any of the rights
and privileges attached to each class may, subject to the provisions of Sections 106 and 107 of the Act, be
modified, commuted, affected or abrogated or dealt with by agreement between the Company and any person
purporting to contract on behalf of that class, provided such agreement is ratified in writing by holders of at least
three-fourths of nominal value of the issued shares of the class or is confirmed by a Resolution passed at a
separate General Meeting of the holders of shares of that class and supported by the votes of the holders of at
least three-fourths of those shares, and all the provisions hereinafter contained as to General Meetings shall
mutatis mutandis apply to every such Meeting, but so that the quorum thereof shall be members present in
person or by proxy and holding three-fourths of the nominal amount of the issued shares of the class. This
Article is not to derogate from any power the Company would have if it were omitted.”

Shares and Certificates

Register and Index of Members

Article 11 provides that, “The Company shall cause to be kept a Register and index of Members in accordance
with Sections 150 and 151 of the Act. The Company shall be entitled to keep in any State or country outside
India a branch Register of Members resident in that State or country.”

Shares to be Numbered Progressively And no Share to be Subdivided

Article 12 provides that, “The shares in the Capital shall be numbered progressively according to their several
denominations, and except in the manner hereinbefore mentioned, no share shall be sub-divided. Every forfeited
or surrendered share shall continue to bear the number by which the same was originally distinguished.”

Further Issue of Capital

Article 13 provides as follows,

“(1) Where at the time after the expiry of two years from the formation of the Company or at any time after
the expiry of one year from the allotment of shares in the Company made for the first time after its
formation, whichever is earlier, it is proposed to increase the subscribed capital of the Company by
allotment of further shares, then:

a. Such further shares shall be offered to the persons who on the date of the offer, are holders of
the equity shares of the Company, in proportion as near as circumstances admit, to the capital
paid-up on those shares at the date.

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 b. Such offer shall be made by a notice specifying the number of shares offered and limiting a
time not being less than fifteen days from the date of the offer and the offer, if not accepted,
will be deemed to have been declined.

c. The offer aforesaid shall be deemed to include a right exercisable by the person concerned to
renounce the shares offered to them in favour of any other person and the notice referred to in
sub clause (b) hereof shall contain a statement of this right.

d. After the expiry of the time specified in the aforesaid notice or on receipt of earlier intimation
from the person to whom such notice is given that he declines to accept the shares offered, the
Board may dispose of them in such manner as they are most beneficial to the company.

(2) Notwithstanding anything contained in the sub-clause (1) thereof, the further shares aforesaid may be
offered to any persons (whether or not those persons include the persons referred to in clause (a) of sub
clause (1) hereof) in any manner whatsoever.

(i) if a special resolution to that effect is passed by the company in general meeting; or

(ii) where no such special resolution is passed, if the votes cast (whether on a show of hands or on
a poll, as the case may be) in favour of the proposal contained in the resolution moved in the
general meeting (including the casting vote, if any, of. The Chairman) by members who, being
entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes if
any, cast against the proposal by members so entitled to voting and the Central Government is
satisfied on an application made by the Board of Directors in this behalf, that the proposal is
most beneficial to the Company.

(3) Nothing in sub-clause (c) of (1) hereof shall be deemed;

(a) To extend the time within which the offer should be accepted; or

(b) To authorise any person to exercise the right of renunciation for a second time on the ground
that the person in whose favour the renunciation was first made has declined to take the shares
comprised in the renunciation.

(4) Nothing in this article shall apply to the increase of the subscribed capital of the company caused by
the exercise of an option attached to the debenture issued by the company:

(i) To convert such debentures or loans into shares in the company; or

(ii) To subscribe for shares in the company.

Provided that the terms of issue of such debentures or the terms of such loans include a term providing
for such option and such term:

1. Either has been approved by the Central Government before the issue of the debentures or the
raising of the loans or is in conformity with rules, if any, made by that government in this
behalf; and

2. in the case of debentures or loans or other than debentures issued to or loans obtained from
government or any institution specified by the Central Government in this behalf, has also
been approved by a special resolution passed by the company in general meeting before the
issue of the debentures or raising of the loans.”

Shares at the disposal of the Directors’

Article 14 provides that, “Subject to the provisions of section 81 of the act and these Articles, the shares in the
capital of the company for the time being shall be under the control of the directors who may issue, allot or
otherwise dispose of the same or any of them such persons, in such proportion and on such terms and conditions
and either at a premium or at par or (subject to the compliance with the provision of section 79 of the act) at
discount and at such time as they may from time to time think fit and with the sanction of the company in the

303
 general meeting to give to any persons the option or right to call for any shares either at par or premium during
such time and for such consideration as the directors think fit, and may issue and allot shares in the capital of the
company on payment in full or part of any property sold and transferred or for any services rendered to the
company in the conduct of its business and any shares which may so be allotted may be issued as fully paid up
shares and if so issued, shall be deemed to be fully paid shares. Provided that option or right to call of shares
shall not be given to any persons without the sanction of the company in the general meeting.”

The power also to company in general meeting to authorize issue of shares

Article 15 provides that, “In addition to and without derogating from the powers for the purpose conferred on
the Board under Articles 13 and 14, the Company in General Meeting may, subject to the provisions of Section
81 of the Act, determine that any shares (whether forming part of the original capital or of any increased capital
of the Company) shall be offered to such persons whether (members or not) in such proportion and on such
terms and conditions and either (subject to compliance with the provisions of Sections 78 and 79 of the Act) at a
premium or at a discount as such General Meeting shall determine and with full power to give any person
(whether a member or not) the option to call for or be allotted shares of any class of the Company, either
(subject to compliance with the provisions of Sections 78 and 79 of the Act) at a premium or at par or at a
discount as such General Meeting shall determine and with full power to give any person (whether a member or
not) the option being exercisable at such times and for such consideration as may be directed by such General
Meeting of the Company and the General Meeting may make any other provisions whatsoever for the issue,
allotment or disposal of any shares.”

Deposit and call to be a debt payable immediately

Article 17 provides that, “The money (if any) which the Board shall, on the allotment of any share being made
by them require or direct to be paid by way of deposit, call or otherwise in respect of any shares allotted by them
shall immediately on the insertion of the name of the allottee in the Register of Members as the name of the
holder of such shares, become a debt due to and recoverable by the Company from the allottee thereof, and shall
be paid by him accordingly.”

Liability of Members

Article 18 provides that, “Every member, or his heirs, executors or administrators shall pay to the Company the
portion of the capital represented by his share or shares which may, for the time being, remain unpaid thereon,
in such amounts, at such time or times, and in such manner as the Board shall, from time to time in accordance
with the Company’s regulations, require or fix for the payment thereof.”

Limitation of time for issue of certificates

. Article 19 provides that, “Every member shall be entitled, without payment, to one or more certificates in
marketable lots, for all the shares of each class or denomination registered in his name, or if the directors so
approve (upon paying such fee as the directors may from time to time determine)to several certificates each for
one or more of such shares and the company shall complete and have ready for delivery of such certificates
within 3 month from the date of allotment, unless the conditions of issue thereof otherwise provide or within 2
month of the receipt of application of registration of transfer, transmission, subdivision, consolidation or
renewal of any of its shares as the case may be. Every certificates of shares shall be under the seal of the
company and shall specify the no. and distinctive nos. of shares in respect of which it is issued and the amount
Paid-up thereon and shall be in such form as the directors may prescribe or approve, provided that in respect of a
share or shares held jointly by several persons, the company shall not be bound to issue more than one
certificate and delivery of a certificate of shares to one of several joint holders shall be sufficient delivery to all
such holders.”

Issue of New Certificate in Place of One Defaced, lost or Destroyed

Article 20 provides that, “If any certificate be worn out, defaced, mutilated or torn or if there be no further space
on the back thereof for endorsement of transfer, then upon production and surrender thereof to the company, a
new certificate may be issued in lieu thereof, and if any certificate lost or destroyed then upon proof thereof to
the satisfaction of the company and on execution of such indemnity as the company deem adequate, being
given, a new certificate in lieu thereof shall be given to the party entitled to such lost or destroyed certificate.
Every certificate under the article shall be issued without payment of fees if the directors so decide, or on

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payment of such fees (not exceeding Rs.2 for each certificate) as the directors shall prescribe, provided that no
fee shall be charged for issue of new certificates in replacement of those which are old, defaced, worn out.”

The first named joint holder deemed to be sole holder

Article 21 provides that, “If any share stands in the names of two or more persons, the person first named in the
register shall, as regards receipt of dividends or bonus or service of notice and all or any earlier matter
connected with the Company, except voting at meetings, be deemed the sole holder thereof, but the joint holders
of a share shall be severally as well as jointly liable for the payment of all installments and calls due in respect
of such shares for all incidents thereof according to the Company’s regulations.”

Company not bound to recognize any interest in share other than that of registered holder

Article 22 provides that, “Except as ordered by a Court of competent jurisdiction, or as by law required, the
Company shall not be bound to recognize any equitable, contingent, future or partial interest in any share, or
(except provided) any right in respect of a share other than an absolute right thereto, in accordance with these
Articles, in the person from time to time registered as the holder thereof; but the

Board shall be at liberty at their sole discretion to register any share in the joint names of any two or more
persons or the survivor or survivors of them.”

Buy back of Securities by the Company

Article 23 provides that, “The Company shall have power, subject to and in accordance with all the applicable
provisions of the Act and the rules made thereunder, to purchase any of its own fully paid shares or other
specified securities whether or not they are redeemable and may make a payment out of its free reserves or
securities premium account of the Company or proceeds of any shares or other specified securities provided that
no buy back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier
issue of the same kind of shares or same kind of other specified securities or from such other sources as may be
permitted by Law on such terms, conditions and in such manner as may be prescribed by the Law from time to
time in respect of such purchase.”

Article 24 provides that, “Any debentures, debenture-stock or other securities may be issued at a discount,
premium or otherwise and may be issued on the condition that they shall be convertible into shares of any
denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of share,
attending (but not voting) at the general meeting, appointment of directors and otherwise. Debentures with the
right to conversion into or allotment of shares shall be is sued only with the consent of the company in the
general meeting by a special resolution.”

Buy Back of Securities by the Company

Article 23 provides that, “The Company shall have power, subject to and in accordance with all the applicable
provisions of the Act and the rules made thereunder, to purchase any of its own fully paid shares or other
specified securities whether or not they are redeemable and may make a payment out of its free reserves or
securities premium account of the Company or proceeds of any shares or other specified securities provided that
no buy back of any kind of shares or other specified securities shall be made out of the proceeds of an earlier
issue of the same kind of shares or same kind of other specified securities or from such other sources as may be
permitted by Law on such terms, conditions and in such manner as may be prescribed by the Law from time to
time in respect of such purchase.”

Article 24 provides that, “Any debentures, debenture-stock or other securities may be issued at a discount,
premium or otherwise and may be issued on the condition that they shall be convertible into shares of any
denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of share,
attending (but not voting) at the general meeting, appointment of directors and otherwise. Debentures with the
right to conversion into or allotment of shares shall be is sued only with the consent of the company in the
general meeting by a special resolution.”

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UNDERWRITING AND BROKERAGE

Commission may be paid

Article 25 provides that, “Subject to the provisions of Section 76 of the Act, the Company may at any time pay a
commission to any person in consideration of his subscribing or agreeing to subscribe (whether absolutely on
conditionally) for any shares in or debentures of the Company, but so that the commission shall not exceed in
the case of shares, five per cent of the price at which the shares are issued, and in the case of debentures, two
and a half per cent of the price at which the debentures are issued. Such commission may be satisfied by
payment of cash or by allotment of fully or partly paid shares or partIy in one way and partly in the other.”

Brokerage

Article 26 provides that, “The Company may pay a reasonable sum for brokerage.”

Interest Out of Capital

Article 27 provides that, “Where any shares are issued for the purpose of raising money to defray the expenses
of the Construction of any work or building, or the provision of any plant, which cannot be made profitable for a
lengthy period, the Company may pay interest on so much of that share capital as is for the time being paid-up,
for the period, at the rate and subject to the conditions and restrictions provided by Section 208 of the Act and
may charge the same to capital as part of the cost of construction of the work or building, or the provision of
plant.”

Calls

Directors may make calls

Article 28 provides as follows,

“(a) The Board may, from time to time and subject to the terms on which any shares have been issued and
subject to the conditions of allotment, by a resolution passed at a meeting of the Board (and not by
circular resolution) make such call as it thinks fit upon the members in respect of all moneys unpaid on
the shares held by them respectively, and each member shall pay the amount of every call so made on
him to the person or persons and at the times and places appointed by the Board. A call may be made
payable by installments.

(b) That option or right to call of shares shall not be given to any person except with the sanction of the
issuer in general meetings.”

Directors may extend time

Article 34 provides that, “The Board may, from time to time at its discretion, extend the time fixed for the
payment of any call, and may extend such time as to all or any of the members who from residence at a distance
or other cause, the Board may deem fairly entitled to such extension, but no member shall be entitled to such
extension save as a member of grace and favour.”

Calls to carry interest

Article 35 provides that, “If any member fails to pay any call due from him on the day appointed for. Payment
thereof, or any such extension thereof as aforesaid, he shall be liable to pay interest of the same from the day
appointed for the payment thereof to the time of actual payment at such rate as shall from time to time be fixed
by the Board, but nothing in this Article shall render it obligatory for the Board to demand or recover any
interest from any such member.”

Calls in advance

Article 39 provides that, “The directors may, if they think fit, subject to the provisions of section 92 of the Act,
agree to and receive from any member willing to advance the same whole or any part of the moneys dup upon
the shares held by him beyond the sums actually called for, and upon the amount so paid or satisfied in advance,

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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 such rate, as the member paying such sum
in advance and the directors agree upon provided that money paid in advance of calls shall not confer a right to
participate in profits or dividend. The directors may at any time repay the amount so advanced. The members
shall not be entitled to any voting rights in respect of the moneys so paid by him until the same would but for
such payment, become presently payable. The provisions of these Articles shall mutatis mutandis apply to the
calls on debenture of the company.”

Lien

Company to have lien on shares

Article 40 provides that, “The Company shall have a first and paramount lien upon all the shares/ debentures
(other than fully paid-up shares/debentures) registered in the name of each member (whether solely or jointly
with others) and upon the proceeds of sale thereof, for all moneys (whether presently payable or not) called or
payable at a fixed time in respect of such shares/debentures and no equitable interest in any shares shall be
created except upon the footing, and upon the condition that that this Article will have full effect and any such
lien shall extend to all dividends and bonuses from time to time declared in respect of such shares. Unless
otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the Company’s lien, if any,
on such shares/debentures. The directors may at any time declare any shares/ debentures wholly or in part to be
exempt from the provision of this clause”

As to Enforcing Lien by Sale

Article 41 provides that, “For the purpose of enforcing such lien, the Board may sell the shares subject thereto in
such manner as they shall think fit, and for that purpose may cause to be issued a duplicate certificate in respect
of such shares and may authorise one of their member to execute a transfer thereof on behalf of and in the name
of such member. No sale shall be made until such period as aforesaid shall have arrived, and until notice in
writing of the intention to sell shall have been served on such member or his representatives and default shall
have been made by him or them in payment, fulfillment, or discharge of such debts, liabilities or engagements
for fourteen days after such notice.”

Forfeiture of Share

If call or installment not paid notice may be given

Article 43 provides that, “If any member fails to pay any call or installment on or before the day appointed for
the payment of the same the Board may at any time thereafter during such time as the call or installment remains
unpaid, serve notice on such member requiring him to pay the same, together with any interest that may have
accrued and all expenses that may have been incurred by the Company by reason of such non payment.”

If notice not complied with shares may be forfeited

Article 45 provides that, “If the requisitions of any such notice as aforesaid be not complied with, any shares in
respect of which such notice has been given may, at any time thereafter, before payment of all calls or
installments, interest and expenses, due in respect thereof, be forfeited by a resolution of the Board to that effect.
Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before
the forfeiture.”

Forfeited share to become property of the company

Article 47 provides that, “Any share so forfeited shall be deemed to be the property of the Company, and the
Board may sell, re allot or otherwise dispose of the same in such manner as think fit”

Power to annul forfeiture

Article 48 provides that, “The Board may, at any time before any share so forfeited shall have been sold, re-
allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as it thinks fit.”

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ADRs/GDRs

Article 52 A provides that, “The Company shall, subject to the provisions of the Act, compliance with all
applicable laws, rules and regulations, have power to issue ADRs or GDRs on such terms and in such manner as
the Board deems fit including their conversion and repayment. Such terms may include, at the discretion of the

Board, limitations on voting by holders of ADRs or GDRs, including without limitation, exercise of voting
rights in accordance with the directions of the Board or otherwise.”

Employees Stock Options

Article 52 B provides that, “Subject to the provisions of section 81 of the Act and the applicable law, the
Company may issue options to the whole-time directors, officers, or employees of the Company, its subsidiaries
or its parent, which would give such directors, officers or employees, the benefit or right to purchase or
subscribe at a future date, the securities offered by the Company at a predetermined price, in terms of schemes
of employee stock options or employees share purchase or both.”

Variation of Share Holder’s Rights

Article 52 C provides that, “If at any time the share capital is divided into different classes of shares, all or any
of the rights and privileges attached to any class (unless otherwise prohibited by the terms of issue of the shares
of that class) may, subject to the provisions of sections 106 and 107 of the Act, whether or not the Company is
being wound up, be modified, commuted, affected, abrogated, varied or dealt with by the consent in writing of
the holders of not less than three fourths of the issued shares of that class or with the sanction of a special
resolution passed at a separate meeting of the holders of three fourths of the issued shares of that class. To every
such separate meeting the provisions of these regulations relating to general meeting shall mutatis mutandis
apply but so that necessary quorum shall be five members or all the members holding or represented by proxy of
the entire issued share of the class in the question.”

Power to Issue Shares with Differential Voting Rights

Article 52 D provides that, “The Company shall have the power to issue Shares with such differential rights as
to dividend, voting or otherwise, subject to the compliance with requirements as provided for in the Companies
(Issue of Share Capital with Differential Voting Rights) Rules, 2001, or any other law as may be applicable.”

Power to Issue Share Warrants

Article 52 E provides that, “The Company may issue share warrants subject to and in accordance with the
provisions of Sections 114 and 115, and accordingly, the Board may in its discretion, with respect to any share
which is fully paid up on an application in writing signed by the person registered as holder of the share, and
authenticated by such evidence (if any) as the Board may from time to time require as to the identity of the
persons signing the application, and on receiving the certificate (if any) of the share and the amount of the stamp
duty on the warrant and such fee as the Board may from time to time require, issue a share warrant.”

Transfer and Transmission of Shares

Register of transfers

Article 53 provides that, “The Company shall keep a book to be called the “Register of Transfers”, and therein
shall be fairly and directly entered particulars of every transfer or transmission of any share.”

Instruments of transfer

Article 54 provides that, “The instrument of transfer shall be in writing and all provision of section 108 of the
Companies Act, 1956 and statutory modification there of for the time being shall be duly complied with in
respect of all transfer of shares and registration thereof.”

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To be executed by transferor and transferee

Article 55 provides that, “Every such instrument of transfer shall be executed both by transferor and the
transferee and the transferor shall be deemed to remain the holder of such share until the name of the transferee
shall have been entered in the Register of Members in respect thereof. The Board shall not issue or register a
transfer of any share in favour of a minor (except in cases when they are fully paid up).”

Transfer books when closed

Article 56 provides that, “The Board shall have power on giving seven days’ previous notice by advertisement
in some newspaper circulating in the district in which the Office of the Company is situated to close the transfer
books, the Register of Members or Register of Debenture holders at such time or times and for such period or
periods, not exceeding thirty days at a time and not exceeding in the aggregate forty-five days in each year, as it
may deem expedient.”

Directors may refuse to register transfer

Article 57 provides that, “Subject to the provisions of section 111A, these Articles and other applicable
provisions of the Act or any other law for the time being in force, the Board may refuse whether in pursuance of
any power of the Company under these Articles or otherwise to register the transfer of, or the transmission by
operation of law of the right to, any shares or interest of a member in or debentures of the Company. The
Company shall within one month from the date on which the instrument of transfer, or the intimation of such
transmission, as the case may be, was delivered to the Company, send notice of the refusal to the transferee and
the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for
such refusal. Provided that the registration of a transfer shall not be refused on the ground of the transferor being
either alone or jointly with any other person or persons indebted to the Company on any account whatsoever
except where the Company has a lien on shares.”

Nomination

Article 58 provides that, “Every holder of shares in, or Debentures of the Company may at any time nominate,
in the manner prescribed under the Act, a person to whom his Shares in or Debentures of the Company shall
vest in the event of death of such holder.

Where the Shares in, or Debentures of the Company are held by more than one person jointly, the joint holders
may together nominate, in the prescribed manner, a person to whom all the rights in the Shares or Debentures of
the Company, as the case may be, held by them shall vest in the event of death of all joint holders.

Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether
testamentary or otherwise, or in these Articles, in respect of such Shares in or Debentures of the Company,
where a nomination made in the prescribed manner purports to confer on any person the right to vest the Shares
in, or Debentures of the Company, the nominee shall, on the death of the Shareholders or holder of Debentures
of the Company or, as the case may be, on the death of all the joint holders become entitled to all the rights in
the Shares or Debentures of the Company to the exclusion of all other persons, unless the nomination is varied
or cancelled in the prescribed manner under the provisions of the Act.

Where the nominee is a minor, it shall be lawful for the holder of the Shares or holder of Debentures to make the
nomination to appoint, in the prescribed manner under the provisions of the Act, any person to become entitled
to the Shares in or Debentures of the Company, in the event of his death, during the minority.”

Transmission in the name of nominee

Article 59 provides that, “Any person who becomes a nominee by virtue of the provision of the above Article,
upon production of such evidence as may be required by the Board and subject as hereinafter provided, elect,
either:

a) to be registered himself as holder of the shares or debentures, as the case may be; or

b) to make such transfer of the shares or debentures, as the case may be, as the deceased shareholder or
debenture holder, as the case may be, could have made.

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If the nominee, so becoming entitled, elects himself to be registered as holder of the Shares or Debentures, as
the case may be, he shall deliver or send to the Company a notice in writing signed by him stating that he so
elects and such notice shall be accompanied with death certificate of the deceased shareholder or debenture
holder and the certificate(s) of Shares or Debentures, as the case may be, held by the deceased in the Company.

Subject to the provisions of Section 109B (3) of the Act and these Articles, the Board may register the relevant
Shares or Debentures in the name of the nominee of the transferee as if the death of the registered holder of the
Shares or Debentures had not occurred and the notice or transfer were a transfer signed by that shareholder or
debenture holder, as the case may be.

A nominee on becoming entitled to Shares or Debentures by reason of the death of the holder. or joint holders
shall be entitled to the same dividend and other advantages to which he would be entitled if he were the
registered holder of the Share or Debenture, except that he shall not before being registered as holder of such
Shares or Debentures, be entitled in respect of them to exercise any right conferred on a member or Debenture
holder in relation to meetings of the Company.

The Board may, at any time, give notice requiring any such person to elect either to be registered himself or to
transfer the Shares or Debentures, and if the notice is not complied with within ninety days, the Board may
thereafter withhold payment of all dividends, bonus, interest or other moneys payable or rights accrued or
accruing in respect of the relevant Shares or Debentures, until the requirements of the notice have been
complied with.”

Registration of persons entitled to shares otherwise than by transfer (The transmission article)

Article 61 provides that, “Subject to the provisions of articles 56 and 57, any person becoming entitled to shares
in consequence of the death, lunacy, bankruptcy or insolvency of any member, or the marriage of a female
member, or by any lawful means other than by a transfer in accordance with these presents, may with the
consent of the Board of Directors (which it shall not be under any obligation to give) upon producing such
evidence that he sustains the character in respects of which he proposes to act under this article of his title, as the
holder of the shares or elect to have some person nominated by him and approved by the Board of Directors,
registered as such holder, provided nevertheless, that if such person shall elect to have his nominee registered he
shall testify the election by executing to his nominee an instrument of transfer in accordance with the provisions
herein contained and until he does so, he shall not be freed from any liability in respect of the shares. This
Article is referred to in these Articles as the Transmission Article.”

Transfer to be presented with evidence of title

Article 63 provides that, “Every instrument of transfer shall be presented to the Company duly stamped for
registration accompanied by such evidence as the Board of Directors may require to prove the title of the
transferor, his right to transfer the shares and generally under and subject to such conditions and regulations as
the Board of Directors shall from time to time prescribe, and every registered instrument of transfer shall remain
in the custody of the Company until destroyed by order of the Board of Directors.”

Fee on transfer or transmission

Article 65 provides that, “No fee shall be charged for registration of transfer, transmission, probate, succession
certificate and letters of administration, certificate of death or marriage, power of attorney or similar other
document.”

Company not liable for disregards of a notice in prohibiting registration of transfer

Article 66 provides that, “The Company shall incur no liability or responsibility whatsoever in consequence of
its registering or giving effort to any transfer of shares made or purporting to be made by any apparent legal
owner thereof (as shown or appearing in the Register of Members) to the Prejudice of persons having or
claiming any equitable right, title or interest to or in the said shares, notwithstanding that the Company may
have had notice of such equitable right, title or interest or notice prohibiting registration of such transfer, and
may have entered such notice, or deferred thereto, in any book of the Company, and the Company shall not be
bound or required to regard or attend or give effect to any notice which may be given to it of any equitable right
title or interest, or be under any liability whatsoever for refusing or neglecting so to do, though it may have been

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entered or referred to in some book of the Company; but the Company shall nevertheless be at liberty to regard
and attend to any such notice and give effect thereto, if the Board of Directors shall so think fit.”

Dematerialisation of Securities

Definitions

Article 67 provides that, “The provisions of this Article shall apply notwithstanding anything to the contrary
contained in any other Articles.

1. For the purpose of this Article

‘Beneficial Owner’ means a person or persons whose name is recorded as such with a depository’
‘SEBI’ means the Securities & Exchange Board of India; established under Section 3 of the Securities
& Exchange Board of India Act, 1992 and

‘Depository’ means a company formed and registered under the Companies Act, 1956, and which has
been granted a certificate of registration to act as depository under Securities & Exchange Board of
India Act, 1992; and wherein the securities of the Company are dealt With in accordance with the
provisions of the Depositories Act, 1996.

2. Dematerialization of Securities

The Company shall be entitled to dematerialize securities and to offer securities in a dematerialized
form pursuant to the Depositories Act, 1996.

3. Options for investors

Every holder of or subscriber to securities of the Company shall have the option to receive certificates
for such securities or to hold the securities with a Depository. Such a person who is the beneficial
owner of the securities can at any time opt out of a depository, if permitted bylaw, in respect of any
securities in the manner provided by the Depositories Act, 1996 and the Company shall, in the manner
and within the time prescribed, issue to the beneficial owner the required certificates for the Securities.

If a person opts to hold his Securities with the depository, the Company shall intimate such depository
the details of allotment of the Securities, and on receipt of the information, the depository shall enter in
its record the name of the allottee as the beneficial owner of the Securities

4. Securities in depositories to be in fungible form

All securities held by a depository shall be dematerialized and be in fungible form. Nothing contained
in Sections 153, 153A, 153B, 187B, 187C and 372A of the Act shall apply to a depository in respect of
the securities held by on behalf of the beneficial owners.

5. Rights of Depositories and beneficial owners

(a) Notwithstanding anything to the contrary contained in the Act or these Articles, a depository
shall be deemed to be the registered owner for the purposes of effecting transfer of ownership
of securities of the Company on behalf of the beneficial owner.

(b) Save as otherwise provided in (a) above, the depository as the registered owner of the
securities shall not have any voting rights or any other rights in respect of the securities held
by it.

(c) Every person holding securities of the Company and whose name is entered as the beneficial
owner of securities in the record of the depository shall be entitled to all the rights and benefits
and be subject to all the liabilities in respect of the securities which are held by a depository
and shall be deemed to be a Member of the Company.

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6. Service of Documents

Notwithstanding anything contained in the Act or these Articles to the contrary, where securities of the
Company are held in a depository, the records of the beneficiary ownership may be served by such
depository on the Company by means of electronic mode or by delivery of floppies or discs.

7. Transfer of securities

Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of securities
effected by a transferor and transferee both of whom are entered as beneficial owners in the records of
a depository.

8. Allotment of securities dealt with in a depository

Notwithstanding anything contained in the Act or these Articles, where securities are dealt with by a
depository, the Company shall intimate the details thereof to the depository immediately on allotment
of such securities

9. Distinctive number of securities held in a Depository

Nothing contained in the Act or these Articles regarding the necessity of having distinctive numbers for
securities issued by the Company shall apply to securities held with a depository.

10. Register and index of Beneficial Owners

The Register and Index of beneficial owners maintained by a depository under the Depositories Act,
1996 shall be deemed to be the Register and Index of Members and Security holders for the purposes
of these Articles.”

Borrowing Powers

Power to borrow

Article 69 provides that, “The Board may, from time to time, at its discretion subject to the provisions of Section
292 of the Act, 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; provided that the Board shall not without the sanction of the
Company in General Meeting borrow any sum of money which together with money borrowed by the Company
(apart from temporary loans obtained from the Company’s bankers in the ordinary course of business) exceed
the aggregate for the time being of the paid up capital of the Company and its free reserves, that is to say,
reserves not set aside for any specific purpose.”

Conditions on which money may be borrowed

Article 70 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 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.”

Conversion of Shares in to Stock and Reconversion

Shares may be converted to stock

Article 76 provides that, “The Company in General Meeting may convert any paid-up shares into stock; and
when any shares shall have been converted into stock, the several holders of such stock may henceforth transfer
their respective interest therein, or any part of such interest, in the same manner and subject to the same
regulations as, and subject to which the shares from which the stock arose might have been transferred, if no
such conversion had taken place or as near thereto as circumstances will admit. The Company may at any time
re-convert any stock into paid-up shares of any denomination.”

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Meeting of Members

Annual General Meeting Summary

Article 78 provides that, “The company shall in each year hold a General Meeting as its Annual General
Meeting in addition to any other meetings in that year. All General Meetings other than Annual General
Meeting shall be Extraordinary General Meetings. The first Annual General Meeting shall be held within
eighteen months from the date of incorporation of the company and the next Annual General Meeting shall be
held within six months after the expiry of the financial year in which the first Annual General Meeting was held
and thereafter an Annual General Meeting of the Company shall be held within six months after the expiry of
each financial year, provided that not more than fifteen months shall elapse between the date of one Annual
General Meeting and that of the next Nothing contained in the foregoing provisions shall be taken as affecting
the right conferred upon the Registar under the provisions of Section 166(1) of the Act to extend the time
within which any Annual General Meeting may be held. Every Annual General Meeting shall be called for on a
time during business hours, on a day that is not a public holiday, and shall be held in the office of the company
or at some other place within the city in which the office of the Company is situated as the Board may determine
and the Notices calling the Meeting shall specify it as the Annual General Meeting. The Company may in
anyone Annual General Meeting fix the time for its subsequent Annual General Meeting. Every member of the
Company shall be entitled to attend either in person or by proxy and the Auditor of the Company shall be
entitled to attend and to be heard at any General Meeting which he attends on any part of the business, concerns
him as Auditor. At every Annual General Meeting of the Company there shall be laid on the table the Directors’
Report (if not already attached in the Audited statement of Accounts) the proxy Register with proxies and the
Register of Directors’ Share holdings of which latter Register shall remain open and accessible during the
continuance of the meeting. The Board shall cause to be prepared the Annual List of Members, summary of the
Share Capital, Balance Sheet and Profit and Loss Account and forward the same to the Registrar in accordance
with Sections 159, 161 and 220 of the Act.”

Extraordinary General Meeting

Article 79 provides that, “The Board may, whenever it thinks fit, call an Extraordinary General Meeting and it
shall do so upon a requisition in writing by any member or members holding in the aggregate not less than one-
tenth of such of the paid-up capital as at the date carries the right of voting in regard to the matter in respect of
which the requisition has been made.”

Quorum of General Meeting

Article 87 provides that, “A body corporate being a member shall be deemed to be personally present if it is
represented in accordance with Section 187 of the Act.”

If quorum not present meeting to be dissolved or adjourned

Article 88 provides that, “If, at the expiration of half an hour from the time appointed for holding a meeting of
the Company, a quorum shall not be present, the meeting, if convened by or upon the requisition of members
shall stand dissolved, but in any other case the meeting shall stand adjourned to the same day in the next week
or, if that day is a public holiday, until the next succeeding day, which is not a public holiday, at the same time
and place, or to such other day and at such oilier time and place in the city or town in which the office of the
Company is for the time being situate as the Board may determine and if at such adjourned meeting a quorum is
not present at the expiration of half an hour from the time appointed for holding the meeting, the members
present shall be quorum and may transact the business for which the meeting was called.”

Chairman of general meeting

Article 89 provides that, “The Chairman (if any) of the Board shall be entitled to take the chair at every General
Meeting, whether Annual or Extraordinary. If there be no such Chairman of the Board, or if at any meeting he
shall not be present within fifteen minutes of the time appointed for holding such meeting, or if he shall be
unable or unwilling to take the Chair, then the directors present may choose one of their member to be the
Chairman of the meeting. If no director be present or if all the directors present decline to take the chair, then the
Members present shall elect one of their number to be Chairman.”

Article 90 provides that, “No business shall be discussed at any General Meeting except the election of a

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Chairman, while the chair is vacant.”

Questions at general meeting decided

Article 92 provides that, “At any General Meeting a resolution put to vote at the meeting shall be decided on a
show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by at
least five members having the right to vote on the resolution and present in person or by proxy, or by the
Chairman of the Meeting or by any member or members holding not less than one-tenth of the total voting
power in respect of the resolution or by any member or members present in person or by proxy and holding
shares in the Company conferring a right to vote on the resolution, being shares on which an aggregate sum has
been paid-up on all the shares conferring that right, and unless a poll is demanded, a declaration by the
Chairman that a resolution has on a show of hands, been carried unanimously, or by a particular majority, or
lost, and an entry to that effect in the Minute Book of the Company shall be conclusive evidence of the fact,
without proof of the number or proportion of the votes recorded in favour of or against the resolution.”

Poll if be taken if demanded

Article 94 provides that, “If a poll is demanded as aforesaid, the same shall, subject to Article 89 be taken at
such time (not later than forty-eight hours from the time when the demand was made) and place in the city or
town in which the Office of the Company is for the time being situate and either by open voting or by ballot, as
the Chairman shall direct, and either at once or after an interval or adjournment or otherwise, and the result of
the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand for a
poll may be withdrawn at any time by the person or person who made the demand.”

Scrutinizers at poll

Article 95 provides that, “Where a poll is to be taken, the Chairman of the meeting shall appoint two scrutineers
to scrutinize the vote given on the poll and to report thereon to him. One of the scrutinizers so appointed shall
always be a member (not being an officer or employee of the Company) present at the meeting provided such
member is available and willing to be appointed. The Chairman shall have power at any time before the result of
the poll is declared to remove a Scrutinizer from office and fill vacancies in the office of Scrutinizer from such
removal or from any other cause.”

Vote of Members

Members in arrears not to vote

Article 98 provides that, “No member shall be entitled to vote either personally or by proxy, at any General
Meeting or Meeting of a class of shareholders, either upon a show of hands or upon a poll in respect of any
shares registered in his name on which any calls or other sums presently payable by him have not been paid or,
in regard to which the Company has, and has exercised any right of lien.”

Voting in person or by proxy

Article 103 provides that, “Subject to the provisions of these Articles, votes may be given either personally or
by proxy. A body corporate being a member may vote either by a proxy or by a representative duly authorised in
accordance with Section 187 of the Act, and such representative shall be entitled to exercise the same rights and
powers (including the rights to vote by proxy) on behalf of the body corporate which he represents as the body
could exercise if it were an individual member.”

Votes in respect of shares of deceased and insolvent members

Article 104 provides that, “Any person entitled under Article 60, to transfer any share may vote at any General
Meeting in respect thereof in the same manner, as if he were the registered holder of such shares, provided that
forty eight hours at least before the time of holding the meeting or adjourned meeting, as the case may be at
which he proposes to vote he shall satisfy the Directors of his right to transfer such shares and give such
indemnity (if any) as the Directors may require or the Directors shall have previously admitted his right to vote
at such meeting in respect thereof.”

Appointment of proxy

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Article 105 provides that, “Every proxy (whether a member or not) shall be appointed in writing under the hand
of the appointer or his attorney, or if such appointer is a corporation under the common seal of such corporation,
or be signed by an officer or any attorney duly authorised by it, and any Committee or guardian may appoint
such proxy. The proxy so appointed shall not have any right to speak at the meeting.”

Passing of resolution by postal ballot

Article 112 provides that, “Notwithstanding any thing contained in the foregoing, the company shall transact
such business, as may be specified by the Central Government from time to time, through the means of postal
ballot. In case of resolutions to be passed by postal ballot, no meeting need to be held at a specified time and
space requiring physical presence of members to form a quorum. Where a resolution will be passed by postal
ballot the company shall, in addition to the requirements of giving requisite clear days notice, send to all the
members the following:

i) Draft resolution and relevant explanatory statement clearly explaining the reasons thereof.

ii) Postal ballot for giving assent or dissent, in writing by members; and

iii) Postage prepaid envelope (by Registered Post) for communicating assents or dissents on the postal
ballot to the company with a request to the members to send their communications within 30 days from
the date of dispatch of Notice

The Company shall also follow such procedure, for conducting vote by postal ballot and for ascertaining the
assent or dissent, as may be prescribed by the Act and the relevant Rules made there under.”

Chairman of meeting to be the judge of validity of any vote

Article 113 provides that, “The Chairman of any meeting shall be the sole judge of the validity of every vote
tendered at such meeting. The Chairman present at the taking of a poll shall be the sole judge of the validity of
every vote tendered at such poll.”

Directors

Article 115 provides as follows,

“1. Until otherwise determined by a General Meeting of the Company and subject to the provisions of
Section 252 of the Act, the number of Directors (excluding Debenture and Alternate Directors, (if any)
shall not be less than three nor more than twelve.

2. The first Directors of the Company were the following:

i) Mr. Arun Kumar Khetan

ii) Mr. Sunil Kumar Sharma”

Power to appoint ex-officio directors

Article 116 provides that, “If at any time the Company obtains any loan or any assistance in connection there
with by way of guarantee or otherwise from any person, firm, body corporate, local authority or public body
(hereinafter called “the institution”) or if at any time the Company issues any shares, debentures and enters into
any contract or arrangement with the institution, whereby the institution subscribes for or underwrites the issue
of the Company’s shares or debentures or provides any assistance to the Company in any manner and it is a term
of the relative loan, assistance, contract or agreement that the institution shall have the right to appoint one or
more directors to the Board of the Company, then subject to the provisions of Section 225 of the Act and subject
to the terms and conditions of such loan, assistance, contract or arrangement, the institution shall be entitled to
appoint one or more director or Directors, as the case may be, to the Board of the Company and to remove from
office any director so appointed and to appoint another in his place or in the place of Director so appointed who
resigns or otherwise vacates his office, Any such appointment or removal shall be made in writing and shall be
served at the office of the Company. The director or directors so appointed shall neither be required to hold any
qualification share nor be liable to retire by rotation and shall continue in the office for so long as the relative

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loan, assistance, contract or arrangement, as the case may be, subsists.”

Article 117 provides that, “If it is provided by the Trust Deed, securing or otherwise in connection with any
issue of debentures of the Company, that any person or persons shall have power to nominate a Director of the
Company, then in the case of any and every such issue of debenture, the person or persons having such power
may exercise such power from time to time and appoint a Director accordingly. Any Director so appointed is
herein referred to as Debenture Director. A Debenture Director may be removed from office at any time by the
person or persons in whom for the time being is vested the power under which he was appointed and another
Director maybe appointed in his place. A Debenture Director shall not be allowed to hold any qualification
share.”

Appointment of alternate directors

Article 119 provides that, “The Board may appoint an Alternate Director to act for a Director (hereinafter called
“the Original Director”) during his absence for a period of not less than three months from the State in which the
meetings of the Board are ordinarily held. An Alternate Director appointed under this Article shall not hold
office for a period longer than that permissible to the Original director in whose place he has been appointed and
shall vacate the office of the Original Director when he returns to that State. If the terms of office of the Original
Director are determined before he so returns to that state, any provisions in the Act or in these Articles for the
automatic reappointment of any retiring Director in default of another appointment shall apply to the Original
Director and not to the Alternate Director.”

Remuneration of Directors

Article 124 provides as follows,

(1) “Subject to the provisions of the Act, a Managing Director, or Managing Directors or Director who
is/are in the whole-time employment of the Company may be paid remuneration either by way of a
monthly payment or at a specified percentage of the net profits of the Company or partly by one way
and partly by the other.

(2) Subject to the provisions of the Act, a Director who is neither in the whole-time employment nor a
Managing Director, may be paid remuneration either:

i) by way of monthly, quarterly or annual payment or

ii) by way of commission if the Company by a special resolution authorised such payment.

(3) The fees payable to a Director (including a Managing or whole-time Director, if any), for attending a
Meeting of the Board or Committee thereof may be in accordance with and subject to the provisions of
Section 309 of the Act or such other sum as the Company in Genera1 Meeting may from time to time
determine.”

Director may contract with company

Article 128 provides as follows,

1. “A Director or his relative, a firm in which such Director or relative is a partner, or any other partner in
such firm or a private company of which the Director is a member or a private company of which the
Company is a member or director, may enter into any contract with Company for the sale, purchase or
supply of any goods, materials, or services or for underwriting the subscription of any shares in, or
debentures of the Company, provided that the sanction of the Board is obtained before or within three
months of the date on which the contract is entered into in accordance with Section 297 of the Act.

2. No sanction shall, however, be necessary for :

a) any purchase of goods and materials from the Company, or the sale of the goods or materials
to the Company, by any such director, relative, firms partner or private company as aforesaid
for cash at prevailing market prices; or

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 b) any contract or contracts between the Company on one side and any such Director, relative,
firm, partner or private company on the other side for sale, purchase or supply of any goods,
materials and services in which either the Company or the director, relative, firm, partner or
private company, as the case may be, regularly trades or does business, where the value of the
goods and materials or the, cost of such services does not exceed Rs. 5,000/- Rupees Five
Thousand only) in the aggregate in any year comprised in the period of the contract or
contracts.

Provided that in the circumstances of urgent necessity, a Director, relative, firm, partner or private company as
aforesaid may ‘without obtaining the consent of the Board enter into any such contract with the Company for
the sale, purchase or supply of any goods, materials or services even if the value of such goods or the cost of
such services exceeds Rs.5,000/- Rupees Five Thousand only) in the aggregate in any year comprised in the
period of the contract and the consent of the Board shall be obtained to such contract or contracts at a meeting
within three months of the date on which the contract was entered into.”

Managing Directors

Board may appoint Managing Director or Managing Directors

Article 143 provides that, “Subject to the provisions of the Act and of these Articles, the Board shall have power
to appoint from time to time any of its member or members as Managing Director or Managing Directors of the
Company for fixed term not exceeding five years at a time and upon such terms and conditions as the Board
thinks fit and subject to the provisions of Article 140, the Board may by resolution vest in such Managing
Director or Managing Directors such of the powers hereby vested in the Board generally as it thinks fit, and
such powers may be made exercisable for such period or periods and upon such conditions and subject to such
restrictions as it may determine. The remuneration of a Managing Director may be by way of monthly payment,
fee for each meeting or participation in profits, or by any or all these modes, or any other mode not expressly
prohibited by the Act.”

Proceedings of the Board of Directors

Meetings of Directors

Article 147 provides that, “The Directors may meet together as a Board for the dispatch of business from time to
time, and shall so meet at least once in every three months and at least four such meetings shall be held in every
year. The Directors may adjourn and otherwise regulate their meetings as they think fit.”

Notice of Meeting

Article 148 provides that, “Notice of every meeting of the Board shall be given in writing to every Director for
the time being in India, and at his usual address in India; to every other Director.”

Quorum

Article 151 provides that, “The quorum for a meeting of the Board shall be determined from time to time in
accordance with the provisions of the Section 287 of the Act. If a quorum shall not be present within fifteen
minutes from the time appointed for holding a meeting of the Board it shall be adjourned until such date and
time as the Chairman of the Board shall appoint.”

Exercise of powers to be valid in meetings where quorum is present

Article 152 provides that, “A meeting of the Board of which a quorum be present shall be competent to exercise
all or any of the authorities, powers and discretions by or under these Articles for the time being vested in or
exercisable by the Board.”

Power to appoint committee and a delegate

Article 154 provides that, “The Board may subject to the provisions of the Act, from time to time and at any
time delegate any of its powers to a committee consisting of such Director or Directors as it thinks fit, and may
from time to time revoke such delegation. Any committee so formed shall, in the exercise of the powers so

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delegated, conform to any regulation that may from time to time be imposed upon it by the Board.”

Absolute powers of Board in certain cases

Article 160 provides that, “Without prejudice to the general powers conferred by the last preceding Article and
so as not in any way to limit or restrict those powers, and without prejudice to the other powers conferred by
these Articles, but subject to the restrictions contained in the last preceding Article, it is hereby declared that the
Directors shall have the following powers; that is to say, power:

1) To pay the costs, charges and expenses preliminary and incidental to the promotion, formation,
establishment and registration of the Company.

2) To pay any charge to the capital account of the Company and Commission or interest lawfully payable
there out under the provisions of Sections 76 and 208 of the Act.

3) Subject to Sections 292 and 297 of the Act to purchase or otherwise acquire for the Company any
property, rights or privileges which the Company is authorised to acquire, at or for such price or
consideration and generally on such terms and conditions as they may think fit and in any such
purchase or other acquisition to accept such title as the Directors may believe or may be advised to be
reasonably satisfactory.

4) At their discretion and subject to the provisions of the Act to pay for any property, rights or privileges
acquired by or services rendered to the Company, either wholly or partially, in shares, bonds,
debentures, mortgages, or other securities of the Company, and such shares may be issued either as
fully paid up or with such amount credited as paid up thereon as may be agreed upon all or any part of
the property of the Company and its uncalled capital or not so charged;

5) To secure the fulfillment of any contracts or engagement entered into by the Company by mortgage or
charge of all or any of the property of the Company and its uncalled capital for the firm being or in
such manner as they may think fit;

6) To accept from any member, as far as may be permissible by law, a surrender of his shares or any part
thereof, on such terms and conditions as shall be agreed;

7) To appoint any person to accept and hold in trust for the Company and property belonging to the
Company, in which it is interested, or for any other purposes; and execute such deeds and do all such
things as may be required in relation to any trust, and to provide for the remuneration of such trustee or
trustees;

8) To institute, conduct, defend, compound or abandon any legal proceedings by or against the Company
or its officers, or otherwise concerning the affairs of the Company, and also to compound and allow
time for payment or satisfaction of any debts due, and of any claim or demands by or against the
Company and to refer any differences to arbitration, and observe and, perform any awards made
thereon;

9) To act on behalf of the Company in all matters relating to bankrupts and insolvents;

10) To make and give receipts, releases and other discharges for moneys payable to the Company and for
the claims and demands of the Company.

11) Subject to the provisions of Sections 292, 295, 370 and 372 of the Act, to invest and deal with any
moneys of the Company not immediately required for the purpose thereof upon such security (not
being shares of this Company), or without security and in such manner as they think fit, and from time
to time to vary the size of such investments. Save as provided in Section 49 of the Act, all investments
shall be made and held in the Company’s own name;

12) To execute in the name and on behalf of the Company in favour of any Director or other person who
may incur or be about to incur any personal liability whether as principal or surety, for the benefit of
the Company, such mortgages of the Company’s property (present or future) as they think fit, and any
such mortgage may contain a power of sale and such other powers, provisions, covenants and

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 agreements as shall be agreed upon.

13) To determine from time to time who shall be entitled to sign, on the Company’s behalf, bills, notes,
receipts, acceptances, endorsements, cheques, dividends, warrants, releases, contracts and documents
and to give the necessary authority for such purpose;

14) To distribute by way of bonus amongst the staff of the Company, share or shares in the profits of the
Company, and to give to any officer or other person employed by the Company a commission on the
profits of any particular business or transaction; and to charge such bonus or commission as part of the
working expenses of the Company;

15) To provide for the welfare of Directors or ex-Directors or employees or ex-employees of the Company
and their wives, widows and families or the dependents or connections of such persons by building or
contributing to the building of houses, dwellings or by grants of money, pension, gratuities, allowances,
bonus or other payments, or by creating and from time to time subscribing or contributing to provident
and other associations, institutions; funds or trusts and by providing or subscribing or contributing
towards places of instructions and recreation, hospitals and dispensaries, medical and other attendance
and other assistance as the Board shall think fit; and to subscribe or contribute or otherwise to assist or
to guarantee money to charitable, benevolent, religious, scientific, national or other institutions or
objects which shall have any moral or other claim to support or aid by the Company, either by reason
of locality of operation, or of public and general utility or otherwise;

16) Before recommending any dividend, to set aside out of the profits of the Company such sums as they
may think proper for depreciation or to Depreciation Fund, or to an Insurance Fund, or as a Reserve
Fund, or Sinking fund, or any Special Fund to meet contingencies or to repay Debentures or Debenture
stock, or for special dividends or for equalized dividends or for repairing, improving, extending and
maintaining any of the property of the Company or for such other purpose (including the purposes
referred to in the preceding clause), as the Board may, in their absolute discretion, think conducive to
the interest of the Company, and subject to Section 292 of the Act, to invest the several sums so set
aside or so much thereof as required to be invested upon such investments(other than shares of the
Company) as they may think fit, and from time to time to deal with and vary such investments and
dispose of and apply and expand all or any part thereof for the benefit of the Company, in such manner
and for such purpose as the Board in their absolute discretion think conducive to the interest of the
Company, notwithstanding that the matters to which the Board apply or upon which they expend the
same, or any part thereof, may be matters to or upon which the capital moneys of the Company might
rightly be applied or expended; and to divide the Reserve Fund into such special Funds as the Board
may think fit, with. full power to transfer the whole, or any portion of a Reserve Fund or division of a
Reserve Fund to another Reserve Fund or division, of a Reserve Fund and with full power to employ
the assets constituting all or any of the above Funds, including the Depreciation Fund, in the business
of the Company or in the purchase or repayment of Debentures or debenture stock, and without being
bound to keep the same, separate from the other assets, and without being bound to pay interest on the
same with power, however, to the Board at their discretion to pay or allow to the credit of such funds
interest at such rate as the Board may think proper.

17) Subject to the provisions of the Act to appoint, and at their discretion remove or suspend such general
managers, managers, secretaries, assistants, supervisor, clerks, agents and servants of permanent,
temporary or special services as they may for time to time think fit, and to determine their powers and
duties and fix their salaries or emoluments or remuneration, and to require security in such instances
and to such amount as they may think fit also from time to time provide for the management and
transaction of the affairs of the Company in any specified locality in India, or elsewhere in such
manner as they think fit; and the provisions contained in the four next following subclauses shall be
without prejudice to the general powers conferred by this sub-clause.

18) To comply with the requirements of any local law which in their opinion it shall, in the interest of the
Company, be necessary of expedient of comply with;

19) From time to time and at any time to establish any Local Board for managing any of the affairs of the
Company in any specified locality in India or elsewhere and to appoint any persons to the members of
such Local Boards and to fix their remuneration.

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20) Subject to Section 292 & 293 of the Act from time to time and at any time, delegate to any person so
appointed any of the powers, authorities and discretion for the time being vested in the Board, other
than their power to make calls or to make loans or borrow or moneys, and to authorise the Members for
the time being of any such Local Board, or any of them to fill up any vacancies therein and to act
notwithstanding vacancies, and any such appointment or delegation may be made on such terms and
subject to such conditions as the Board may think fit, and the Board may at any time remove any
person so appointed, and may annul or vary any such delegation.

21) At any time and from time to time by Power of Attorney under the Seal of the Company, to appoint any
person or persons to be the Attorney or Attorneys of the Company, for such purposes and with such
powers, authorities and discretion (not exceeding those vested in or exercisable by the Board under
these presents and excluding the powers to make calls and excluding also, except in their limits
authorised by the Board, the power to make loans and borrow money’) and for’ such period and subject
to such conditions as the Board may from time to time think fit; and any such appointment may (if the
Board thinks fit) be made in favour of the members or any of the Members of any Local Board,
established as aforesaid or in favour of any company, or the share hoIders, directors, nominees or
managers of any company or firm or otherwise in favour of any fluctuating body of persons whether
nominated directly by the Board and any such power of Attorney may contain such powers for the
protection or convenience of persons dealing with such attorneys as the Board may think fit and may
contain powers enabling any such delegates or attorneys as aforesaid to sub-delegate all or any of the
powers, authorities and discretions for the time being vested in them;

22) Subject to Sections 294, 294A, 297 and 301 of the Act, for or in relation to any of the matters aforesaid
or otherwise for the purposes of the Company to enter into all such contracts, and to execute and do all
such acts, deeds and things in the name and on behalf of the Company as they may consider expedient;

23) Subject to the provisions of Companies Act, 1956, the Board may pay such remuneration to
Chairman/Vice Chairman of the Board upon such conditions as they may think fit.”

The Company in general meeting may declare a dividend

Article 165 provides that, “The Company in General Meeting may declare dividends to be paid to members
according to their respective rights, but no dividend shall exceed thee amount recommended by the Board, but
the company in general meeting may declare a smaller dividend.”

Dividend only to be paid out of profits

Article 166 provides that, “No dividend shall be declared or paid otherwise than out of the profits of the
financial year arrived at after providing for depreciation in accordance, with the provisions of Section 205 of the
Act or out of the profits of the Company for any previous financial year or years arrived at after providing for
depreciation in accordance with these provisions and remaining undistributed or out of both, provided that;

a) if the Company has not provided for depreciation for any previous financial year or years, it shall,
before declaring or paying a dividend for any financial year, provide for such depreciation out of the
profits of the financial year or years.

b) if the Company has incurred any loss in any previous financial year or years, the amount of the loss or
any amount which is equal to the amount provided for depreciation for that year or those years
whichever is less, shall be set off against the profits of the company for the year for which the dividend
is proposed to be declared or paid or against the profits of the Company for any previous financial year
or years arrived at in both cases after providing for depreciation in accordance with the provisions of
sub-section (2) of Section 205 of the Act, or against both.”

Interim Dividend

Article 167 provides that, “The Board may, from time to time, pay to the Members such interim dividend as in
their judgment, the position of the Company justifies.”

Deduction of money owned to the company

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Article 172 provides that, “No member shall be entitled to receive payments of any interest or dividend in
respect of his share or shares, while any money may be due or owing from him to the Company in respect of
such share or shares or otherwise howsoever, either alone or jointly with any other person or persons and the
Board may deduct from the interest or dividend payable to any member all sums of money so due from him to
the Company.”

Article 177 provides that, “Where the company has declared a dividend but which has not been paid or claimed
within 30 days from the date of the declaration, transfer the total amount of dividend which remains unpaid or
unclaimed within the said period of 30 days to a special account to be opened by the Company in that behalf in
any scheduled bank to be called “Unpaid dividend of Microsec Financial Services Limited”. Any money
transferred to the unpaid dividend account of the Company which remains unpaid/unclaimed for a period of 7
years from the date of such transfer, shall be transferred by the Company to the Investor Education and
Protection Fund established under the sub section (1) of section 205C of the Act.

No unclaimed dividend or unpaid dividend shall be forfeited by the Board.”

Capitalisation of Reserves

Issue of Bonus Shares

Article 178 provides that, “Any General Meeting may resolve that any moneys, investments, or other assets
forming part of undivided profits of the Company standing to the credit of the Reserves, or any Capital
Redemption Reserve Fund, in the hands of the company and available for dividend or representing premiums
received on the issue of shares and standing to the credit of the Share Premium Account be capitalised and
distributed amongst such of the members as would be entitled to receive the same if distributed by way of
dividend all in the same proportions on the footing that they become entitled thereto as capital and that all or any
part of such capitalised fund be applied on behalf of such members in paying up in full any un issued shares,
debentures, or debenture-stock of the Company which shall be distributed accordingly or in or towards payment
of the uncalled liability on any issued shares, all that such distribution or payment shall be accepted by such
members in full satisfaction of their interest in the said capitalised sum. Provided that any sum standing to the
credit of a Share Premium Account or a Capital Redemption Reserve Fund may, for the purposes of this Article,
only be applied in the paying up of un issued shares to be issued to members of the Company as fully paid
bonus shares.”

Utilization of undistributed capital profits

Article 179 provides that, “A General Meeting may resolve that any surplus money arising from the realisation
of any capital asset of the Company or any investments representing the same, or any other undistributed profits
of the Company not subject to charge for income tax, be distributed among the members on the footing that they
receive the same as capital.”

Resolving issues of fractional certificates

Article 180 provides that, “For the purpose of giving effect to any resolution under the two last preceding
articles hereof the Board may settle any difficulty which may arise in regard the distribution as it thinks
expedient and in particular may issue fractional certificates, and may fix the value of distribution of any specific
assets, and may determine that cash payment shall be made to any members upon the footing of the value so
fixed in order to adjust the rights of all parties and may vest such cash or specific assets in trustees upon such
trusts for the persons entitled to the Board. Where requisite, a proper contract shall be filed in accordance with
Section 75 of the Act, and the Board may appoint any person to sign such contract on behalf of the person
entitled to the dividend or capital fund, and such appointment shall be effective.”

Winding Up

Liquidators powers

Article 195 provides that, “The Liquidator on any winding-up (whether voluntary, under supervision or
compulsory) may, with the sanction of a Special Resolution but subject to the rights attached to any preference
share capital, divide among the contributories in specie any part of the assets of the Company and may with the
like sanction vest any part of the assets of the Company in trustees upon such trusts for the benefit of the

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contributories as the Liquidator, with the like sanction shall think fit.”

Indemnity and Responsibility

Person when to be indemnified by the company

Article 196 provides that, “Every officer or agent for the time being of the Company shall be indemnified out of
the assets of the Company against all liability incurred by him in defending any proceeding, whether civil or
criminal in which judgment is given in his favour or in which he is acquitted or discharged or in connection with
any application under Section 633 of Act, in which relief is granted to him by the Court.”

Secrecy

No members to enter the premises of the company without permission

Artricle 197 provides that, “Subject to the provisions of these Articles and the Act no member, or other person
(not being a Director) shall be entitled to enter the property of the Company or to inspect or examine the
Company’s premises or properties of the Company without the permission of the Directors or to require
discovery of or any information respecting any detail of the Company’s trading or any matter which is or may
be in the nature or a trade secret, mystery of trade, or secret process or of any matter whatsoever which may
relate to the conduct of the business of the Company and which in the opinion of the Directors will be
inexpedient in the interest of the Company to communicate.”

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 SECTION IX: OTHER INFORMATION

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts which are or may be deemed material have been entered into or will be entered into by
the Company. These contracts, copies of which have been attached to the copy of this Red Herring Prospectus,
will be delivered to the Registrar of Companies for registration and also the documents for inspection referred to
hereunder, will be available for inspection at the Registered office of the Company situated at Shivam
Chambers, 1st Floor, 53 Syed Amir Ali Avenue, Kolkata - 700 019, from 10.00 am to 4.00 pm on working days
from the date of this Red Herring Prospectus until the Bid/Issue Closing Date.

Material Contracts to the Issue

1. Issue Agreement between the Company and the BRLM dated March 20, 2010.

2. Memorandum of Understanding between the Company and the Registrar to the Issue dated February 9,
2010.

3. Escrow Agreement dated [●] between the Company, the BRLM, the Escrow Banks and the Registrar to
the Issue.

4. Syndicate Agreement dated [●] between the Company, the BRLM and the Syndicate Members.

5. Underwriting Agreement dated [●] between the Company, the BRLM and the Syndicate Members.

Material Documents

1. The Memorandum and Articles of Association of the Company as amended.

2. The certificate of incorporation of the Company.

3. Board resolutions in relation to the Issue.

4. Shareholders’ resolutions in relation to the Issue.

5. List of Shareholders who were allotted Equity Shares on December 31, 2007.

6. Shareholders’ Resolutions of the general body for appointment and remuneration of the whole-time
Directors of the Company.

7. Agreement dated June 15, 2010 between the Company and Banwari Lal Mittal.

8. Trust deed dated December 29, 2007 for Microsec Vision (Employees) Trust

9. Statement of Tax Benefits from, S. R. Batliboi & Co., Chartered Accountants dated August 14, 2010.

10. Copies of annual reports of the Company for the years ended March 31, 2006, 2007, 2008 2009 and
2010.

11. Consent of S.R. Batliboi & Co., the Auditors of the Company for inclusion of their examination reports
on restated financial statements and statement of tax benefits in the form and context in which they
appear in the Red Herring Prospectus.

12. Consents of Bankers to the Company, BRLMs, Syndicate Members, Registrar to the Issue, Escrow
Collection Bank(s), Bankers to the Issue, Legal Advisors to the Issue, IPO Grading Agency, Directors
of the Company, Company Secretary and Compliance Officer, as referred to, in their respective
capacities.

13. Business Rights Agreement dated March 30, 2009 between the Company and Gulmohar Advisors
Private Limited.

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14. Agreement dated March 28, 2009 between the Company and Gulmohar Advisors Private Limited.

15. Limited Liability Partnership Agreement dated June 15, 2010 between the Company and Debashish
Ghoshal.

16. Initial listing applications dated March 29, 2010 filed with BSE and NSE respectively.

17. In-principle listing approval dated May 25, 2010 and April 27, 2010 from NSE and BSE respectively.

18. Tripartite Agreement between NSDL, the Company and the Registrar to the Issue dated January 23,
2008

19. Tripartite Agreement between CDSL, the Company and the Registrar to the Issue dated January 18,
2008

20. Due diligence certificate dated March 20, 2010 to SEBI from the BRLM.

21. SEBI observation letter No. CFD/DIL/ISSUES/SP/RG/OW/15104/2010 dated August 5, 2010.

22. IPO Grading Report dated July 26, 2010 by CRSIL.

Any of the contracts or documents mentioned in this Red Herring Prospectus 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

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ANNEXURE